My thanks and appreciation to the organizers of this forum for gathering us all here to discuss a topic which is absolutely critical if we are to meet the SDGs by 2030 –on Starting Strong: The First 1000 Days of the SDGs.
We all agree that the global agreement to set the SDGs in motion was a monumental political achievement. In a moment I’m going to talk a bit about how we will attempt to do this. But first we need to talk about the challenging environment in which we must operate.
First, let’s look at the global growth context, which will affect everyone’s ability to mobilize resources for the implementation of the SDGs. Economic growth remains the most important driver of poverty reduction. This underscores the critical priority of pursuing growth-enhancing policies:
Global growth this year is projected at 2.4 percent, unchanged from the disappointing pace of 2015, and 0.5 percentage point below January 2016 forecasts. Advanced economies are projected to expand by 1.7 percent this year, 0.5 percentage point slower than expected in January. Aggregate growth for emerging market and developing economies (EMDEs) is projected at 3.5 percent for 2016, just above the post-crisis low in 2015. However, the aggregate forecast masks a marked divergence between commodity exporters and importers.
While there are broader global economic headwinds, there is great diversity in individual and regional challenges and opportunities. There is just as much, if not more diversity on a regional scale. In Latin America and the Caribbean, GDP/capita ranges from approximately $800 to $15,000.
Regarding growth, the Latin America and Caribbean region, on average, is contracting but there is considerable divergence.
The region is forecast to contract by 1.3 percent in 2016 after a 0.7 percent decline in 2015, the first back-to-back years of recession in more than 30 years. However, it is projected to begin expanding again in 2017, gradually gaining momentum to around 2 percent in 2018. The continent is particularly hard hit because three large economies – Argentina, Brazil, and Venezuela -- are in recession. Other South American countries, including Bolivia, Chile, and Colombia, have also slowed.
In contrast, the Mexico and Central America sub-region has registered relatively stronger growth due to their close economic ties to a steadily growing United States. These economies have benefitted from competitiveness gains due to currency depreciation and more robust consumption supported by falling unemployment and moderating inflation. Similarly, the Caribbean, which also enjoys close ties to the United States, is being lifted by a booming tourism sector. Brazil is forecast to contract by 4 percent in 2016 amid attempts at policy tightening, rising unemployment, shrinking real incomes, and policy uncertainty.
As a result of ongoing macroeconomic adjustments and structural reforms, activity in Argentina is expected to decline modestly in 2016, before picking up on a firmer basis in 2017-18. In addition to many of the economic headwinds faced by the world and the region, there are some risks to quickly take note of which may further affect growth:
While the Zika virus outbreak poses a substantial downside risk, tourism is expected to continue to expand and support growth. Should commodity prices drop further, falling fiscal and export revenues are likely to trigger additional policy tightening and weigh on growth. External debt across the region has been increasing, much of it denominated in foreign currency, particularly USD. Further increases in debt ratios could lead to sovereign credit downgrades. Recessions in Brazil and Venezuela could last longer than expected, and there’s the risk they may spill over to other countries.
However, over the past decade, annual economic growth among the bottom 40 percent of the population averaged 5.2 percent, eclipsing the performance of that group in every other region in the world.
But as we transition to the SDGs, the question is: How do we achieve the goals, given our resources, and constraints?
We have a history to learn from, from implementing the MDGs. And the experience gives us an idea of the effectiveness of service delivery. Performance was mixed.
On the positive side: The poverty MDG was met. Poverty ($1.90/day) declined from 18 percent in 1990 to 6 percent in 2012 (compared with global rate of 37 percent in 1990 and 13 percent in 2012). Undernourishment was cut in half (from 12 percent to 5 percent). Child mortality rates are the lowest in the developing world (at 19/1000 live births). Access to sanitation increased from 66 percent in 1990 to 81 percent in 2012. All of the MDGs, except for maternal mortality, were met or extremely close to being met.
But despite much progress, LAC’s performance also showed large challenges still remain. Out of 26 countries, none met the maternal mortality MDG – worst regional progress in the world (even worse than FCS). Only 8 countries met the goal on reducing child mortality. Less than half the countries in LAC met the MDG on primary completion. 4 countries have no poverty data.
The countries of the region experienced a wide diversity of MDG outcomes. But this gives us a snapshot of some of the areas which perhaps require additional work or provides us with some lessons of what worked as we transition to the era of the SDGs.
Latin America’s social transformation of the past decade is being threatened by a downturn that is proving to be far more stubborn than previously anticipated. Mindful of this unique set of circumstances, we are supporting our clients with a multipronged approach designed to help them rekindle growth and secure their hard-won social gains.
Our work in the region addresses the following core areas:
· Shared prosperity
· Increased productivity
· Better education
· Access to quality public services
· Inclusive and green growth
So what does all of this mean for achieving the SDGs? How will we mobilize sufficient resources to meet these goals, how can the WBG and international community support these country efforts, and what else needs to be done? This can be outlined along three lines: finance, data, and implementation:
Regarding Finance: We all know that official development assistance, or ODA – which was $131 billion dollars in 2015 – is not enough to fund our ambitious 2030 agenda. We need to use every dollar more efficiently, unlock new resources, and leverage official development assistance to attract additional investment of all kinds -- both public and private.
One important aspect of unlocking resources for development is Domestic Resource Mobilization, or DRM. Why is it so important? ODA accounts for approximately six-tenths-of-one-percent (0.6 percent) of developing countries’ GDP. Yet many experts say countries could increase their taxes to GDP ratios by 2 percent through better DRM – which would be triple the amount of ODA now going to developing countries.
We think this is possible because tax-to-GDP ratios are between 10 to 20 percent in low-income countries, compared to 30 to 40 percent in OECD countries. And in LAC, it ranges from 11 to 27 percent, with the average at 14 percent. And 12 countries don’t report on this (including some of the largest ones). There is significant capacity for growth on this front.
Today we’ll discuss concrete measures to support domestic resource mobilization. Further to the work under the Financing for Development agenda, and as the means of implementation for the SDGs, the Bank is furthering our DRM initiatives through the Platform for Collaboration on Tax, the Joint Bank-Fund Initiative for Strengthening Tax Systems in Developing Countries, the inclusive framework for BEPS implementation, and the Addis Tax Initiative.
Efficient mobilization and management of public resources allows governments to be more inclusive and comprehensive in delivering services. It is also critical for achieving sustainable development. Last year we pledged to provide direct technical support to countries to improve their tax systems. We are moving forward with this work and will soon launch two Tax Administration Diagnostic Assessment missions -- one of the first will be in Comoros. We are also working with the OECD and IMF on better coordination of tax policy and administrative issues.
The second and related area in DRM is illicit financial flows, which reduce government revenue and thus the resources available for development. These illicit financial flows include fraud, tax evasion, and the illegal exploitation of natural resources. The Bank is helping countries measure illicit flows, prevent the behaviors that generate illicit funds, stop the flow of illicit funds, and recover stolen assets. These illicit flows are symptomatic of other institutional weaknesses, such as vested interests and weak transparency and accountability. Curbing these flows requires strong international cooperation by all governments, in partnership with the private sector and civil society.
With the Base Erosion and Profit Shifting (BEPS) agenda, we are continuing to increase transparency in order to eliminate safe havens for stolen money, and increase transparency regarding who is paying taxes and where.
Given the urgent global needs related to poverty, inequality, climate change, and forced displacement, we need additional revenue; we need to prevent waste, fraud, and abuse; and we need to use these resources wisely, and efficiently. This will give the global community the necessary tools to help millions of people to lift themselves out of poverty.
Another important player in this story is the private sector. Our research shows that over the past decade, 90 percent of jobs in developing nations were created by the private sector – and good jobs are by far the most effective way to help people escape poverty.
LAC has the highest net FDI inflows as percent of GDP. There is significantly potential to scale this up and provide an enabling environment for private sector participation.
Another component of private sector engagement is remittances. Consider the potential for private remittances to support growth. In 2014, remittances brought in 106.5 billion $. For some countries, particularly those in Central America and the Caribbean, this comprises between 10 and 23 percent of their GDP.
All these efforts combined will significantly scale up the resources available to support SDG attainment. Not only will they provide resources, but they will directly impact the SDGs, such as through job creation and equitable growth.
However, resource mobilization is insufficient on its own. It needs to be supported by corresponding policies and institutions which ensure that it is inclusive and equitable.
Regarding data: Ensuring proper implementation of the SDGs will require substantive efforts in collecting data, developing the right indicators, and ensuring quality and timely reporting.
Data will be critical to help design the policies and programs that will be needed to meet the SDG targets. Traditional data sources are very important, but new opportunities must be taken, especially those presented by the use of technology.
The WBG is especially active in three areas:
- Ensuring availability of household budget surveys: the WBG has specifically committed to ensuring a Household Budget Survey is taken every three years in the 78 poorest countries by 2020.
- Harnessing the data revolution: together with the Global Partnership for Sustainable Development Data, the WBG is launching a $100m trust fund to support both innovations in technology and innovations in how we work to trigger lasting changes in data production, accessibility, and use.
Statistical capacity building: WBG technical and financial support to improve production of key statistics
- Regarding implementation: The SDGs are global, yet the challenges to achieving them are country specific, and hence engagement will have to take place at the country level as the primary means through which one can support the 2030 Agenda.
The WBG institutional structure is set up to facilitate the flow of knowledge and mobilization of cross-sectoral teams. It seeks to leverage an approach which draws on the strengths of the entire WBG, including the private sector arm, the International Finance Corporation (IFC) and the political risk insurance arm, the Multilateral Investment Guarantee Agency (MIGA).
At the analytical level, the enhanced country engagement model enables the SDGs (when data is available) to inform the diagnostic of key development challenges. At the programmatic level, it enables selectivity in focusing on areas identified as part of the country’s development priorities and in line with the WBG comparative advantage. Long-term country-level engagement is at the core of the operational model and through field offices, the WBG has a presence on the ground in almost every country.
For example, as part of the WBG’s country-level engagement on the MDGs, we have worked in partnership with UNDP on the MDG Acceleration Reviews of the United Nations System Chief Executives Board for Coordination (CEB) which strongly advocated for cross-sectoral and cross-institutional thinking within the UN system to find solutions to accelerate progress on off-track MDG targets. Sixteen countries and 1 sub-region were analyzed for acceleration of a specific MDG, of which two were in LAC, Colombia, on poverty reduction for internally displaced peoples, El Salvador, on maternal and neonatal mortality
Another example of country-level engagement is through our “Trajectories” work, which is essentially a framework through which the ability of countries to achieve the new goals could be assessed, given their current level of progress and spending. Two countries from LAC were analyzed: Jamaica, Peru.
Despite the efforts of countries, development banks, the private sector, and other partners, much work will need to be done if countries are to meet the SDGs. Today 700 million people still live in extreme poverty, and many hundreds of millions could fall back into extreme poverty because of the loss of a job, of a major illness, or because of any number of constraints that so many of us take for granted.
This will not be possible without working in partnership. The definition of an effective partnership – in the development context – is that it demonstrably improves the lives of people. Partnerships are an instrument for effective implementation of the SDGs, which codify our commitment to improve the lives of people. Governments have to deliver on the SDGs, but they will need our support, and the support of many partners.
We each have to change our style of working. Each of us, no matter the institutional constraints we have -- no matter the sectoral silos or university degrees and work history which have artificially separated -- we have to reach across these barriers – through partnerships -- to achieve a common purpose.