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 InternationalDevelopment Research (UNU-WIDER) explores how developing country governmentscan 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 oninformation and ideas
• drawing on all potential allies in business,research foundations, and charities
• picking on likely targets such as those wherethere is a common interest with developed countries
• being prepared tobargain over the objectives of each side.

Public support and understanding may be increased bydividing aid funds into those for emergencies, for longer-run humanitarianpurposes, and for supporting growth. Professional but honest public-relationsactivities for development finance may also help.

In order to make an international strategy for developmentpossible, there is particular value in funds raised by internationalinstitutions, from activities that are international in nature, or throughspecial taxes imposed globally by common agreement. These funds are availableinternationally but it is necessary that there should be agreed arrangements forallocating and using them.

So, the report proposes a procedure for reaching an agreedscheme to allocate the funds raised in these ways. The authors argue that, toinspire general trust and to be recognised as legitimate, the procedure and thearrangement reached should involve both the United Nations (UN) organisationand 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 taxreduction
• measures to maintain the value of the fundsmigrants 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 developingcountries, favouring monetary stability; and also transfer of unwanted SDRsfrom the richer countries for development use
• coordinated taxes onaircraft fuel, carbon emissions, or currency transactions, of which the lasthas the advantage that it is necessarily coordinated internationally in itsmanner of collection and that its burden falls across the world, so that theproceeds cannot be justly claimed by individual countries.