Post 2015: Global Action for an Inclusive and Sustainable Future

CHApTER SEvEn
ODA is still a
primary source of
revenue for LICs,
and the near
stagnation and
volatility of other
external flows
suggest it will
continue to be
important, at least
in the medium
term.
108
in many donor countries. nevertheless, oDa is still
a primary source of revenue for lIcs, and the near
stagnation and volatility of other external flows
in these countries suggest that it will continue to
be important, at least in the medium term. the
larger volumes of remittances and FDI in mIcs are
expected to play a growing role in financing their
development.
It is difficult to establish precisely how far
development finance does in fact contribute to
development. While development is by definition
what oDa seeks to promote, this is not necessarily
the case for FDI and portfolio investment, which are
driven by financial returns. the current environment
leaves no doubt, however, that external and domestic
financial resources need to be increased to tackle the
development challenges ahead.
this chapter explores a range of flows and
mechanisms that could contribute to development
that is both economically and ecologically
sustainable. the discussion concentrates on those
that seem to have the most potential. For domestic
resources, the chapter focuses on mobilising
finance through taxation as opposed to savings.
this is due to increasing attention paid to taxation
in recent policy discussions and because equitable
and transparent tax systems underpin national
development. looking at external flows, the chapter
explores the potential for increased South–South
cooperation (SSc), which is gaining in economic
and political importance. the chapter also explores
approaches that could increase the contribution
of oDa. the roles of FDI and remittances are
discussed in chapters 8 and 9.
to assess the effectiveness of the different flows in
fostering development, the chapter pays particular
attention to three criteria that the country case
studies suggest developing countries find important:
EuropEan rEport on DEvElopmEnt 2013
• Volume: What level of resources can potentially
be raised?
• Predictability: How sensitive is the flow to
political, social, economic or environmental
fluctuations?
• Policy space: How much room for decisionmaking
and manoeuvre does the flow give to
developing countries?
based on these three criteria, this chapter
first examines how to increase the potential
development contribution of a number of flows,
either by raising their volumes or being allocated
more efficiently. the extent to which financial
resources can contribute to the development of lIcs
and mIcs also depends on enhanced international
cooperation. the chapter therefore considers
ways in which collective action could reform the
international financial system in order to enhance
the impact that financial flows can make on
development. the final section draws conclusions
for a post-2015 global framework.
7.2 Domestic resource mobilisation
through taxation
the 2002 International conference on Financing for
Development in monterrey, stressed the importance
of a holistic approach to raising development
finance in support of the mDG agenda, and
recognised that within this, creating the conditions
for mobilising domestic financial resources was a
critical challenge for development (un DESa,
2003). the main impetus for domestic resource
mobilisation of course comes from developing
countries themselves, but since monterrey, the
international community has also promoted
domestic resource mobilisation as a major source of
development finance, 73 although much of the mDG
funding effort has focused on oDa. However, the
73 the Eu, for instance, acknowledges that for most countries the biggest source of development finance is government revenue and that oDa
can only complement or catalyse other financial flows (com, 2012).