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Increasing funds for development: international strategy and tactics

Development funds made available through inter-government action come in a number of forms, from increases in government revenue in developing countries to finance available from international institutions. There is much potential support for increasing funding for development, but there are also political obstacles and questions over how to manage such funds.

This paper from the World Institute for International Development Research (UNU-WIDER) explores how developing country governments can make full use of the support available for additional finance.

Governments can do this by:

forming alliances for assertive negotiation, with agreed representatives
running a high-level secretariat for briefing on information and ideas
drawing on all potential allies in business, research foundations, and charities
picking on likely targets such as those where there is a common interest with developed countries
being prepared to bargain over the objectives of each side.

Public support and understanding may be increased by dividing aid funds into those for emergencies, for longer-run humanitarian purposes, and for supporting growth. Professional but honest public-relations activities for development finance may also help.

In order to make an international strategy for development possible, there is particular value in funds raised by international institutions, from activities that are international in nature, or through special taxes imposed globally by common agreement. These funds are available internationally but it is necessary that there should be agreed arrangements for allocating and using them.

So, the report proposes a procedure for reaching an agreed scheme to allocate the funds raised in these ways. The authors argue that, to inspire general trust and to be recognised as legitimate, the procedure and the arrangement reached should involve both the United Nations (UN) organisation and the World Bank (WB), with a role also for the International Monetary Fund (IMF).

Among possible innovative sources of development finance, the authors argue for:

international tax cooperation to block tax evasion, tax avoidance through transfer-pricing, and incentives for competitive tax reduction
measures to maintain the value of the funds migrants send home by reducing the costs of transfer
regular issue of Special Drawing Rights (SDRs) from the IMF, which reduces the cost of international reserves for developing countries, favouring monetary stability; and also transfer of unwanted SDRs from the richer countries for development use
coordinated taxes on aircraft fuel, carbon emissions, or currency transactions, of which the last has the advantage that it is necessarily coordinated internationally in its manner of collection and that its burden falls across the world, so that the proceeds cannot be justly claimed by individual countries.

Source(s):
‘Political Economy of Additional Development Finance’, Discussion Paper No.2006/09, UNU-WIDER: Helsinki, by Anthony Clunies-Ross and John Langmore, 2006 (PDF) Full document.

Funded by: Royal Ministry of Foreign Affairs, Denmark; Ministry for Foreign Affairs, Finland; Royal Ministry of Foreign Affairs, Norway; Swedish International Development Cooperation Agency (SIDA); United Kingdom Department for International Development (DfID)

id21 Research Highlight: 19 December 2007

Further Information:
John Langmore
The School of Political Science, Criminology & Sociology
The University of Melbourne
Victoria 3010
Australia

Tel: + 61 3 9486 5331
Fax: + 31 3 8344 7906
Contact the contributor: langmore@unimelb.edu.au

University of Melbourne, Australia

Anthony Clunies-Ross
Department of Economics
Sir William Duncan Building
University of Strathclyde
130 Rottenrow
Glasgow G4 0GE
Scotland
UK

Tel: + 44 (0)141 548 3842
Fax: +44 (0)141 548 4445
Contact the contributor: economics@strath.ac.uk

University of Strathclyde, UK

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