Finances are necessary for development, but they are not sufficient

Does money still make the world go round? That’s one of several key questions emerging from the 3rd International Conference on Financing for Development (FfD3), recently concluded in Addis Ababa. On the whole, the answer seems to be yes – resources are needed to allow the right things to happen in development, just as in other domains of human activity. That said, the right things won’t always happen just because there are adequate resources.

The FfD3 conference generated mixed reviews. On the one hand, the meeting of 6,000 or so representatives of governments, civil society and the business sector has been praised as an important step towards securing the finances needed to implement a new sustainable development agenda post-2015. For example, the European Union’s Commissioner for International Cooperation and Development (Neven Mimica) used social media to write: “Great night in #Addis – we have an agreement for our world, our dignity, our future!”[1] The United Nations Secretary-General, Ban Ki-moon, was similarly effusive, noting that the meeting was “a major step forward in building a world of prosperity and dignity for all.”[2] Such fine sentiments are rarely associated with a conference.

On the other hand, many people have expressed disappointment. A different Secretary-General — Danny Sriskandarajah, who heads up Civicus (the world’s largest network of civil society organizations) — noted that despite the rhetoric, no new resources or binding commitments had been brought to the table.[3] Others point specifically to the lack of agreement on new mechanisms to generate funding, such as modified tax regimes or the reallocation of public budgets away from defense spending.[4]

A major concern, among those critical of the Addis Agenda, is that low income countries will simply not be able to afford the bill attached to the Sustainable Development Goals (SDGs), and that therefore the risk of failure will be high from the start. A recent report from the Overseas Development Institute argues that “the tax capacity of the world’s poorest countries falls far short of the scale of public investment required.”^[5]

What does the SDG bill come to? Although the SDG framework will only be finalized later in 2015, there are already some estimates. The UN’s World Investment Report of 2014, for instance, calculated that the investment needs for achieving all 17 SDGs (in developing countries alone) would range from US$3.3 trillion to US$4.5 trillion per year; a total of roughly US$37.5 trillion between now and 2030.[6] Those sums are needed, the report argues, for expanding and maintaining basic infrastructure (roads, rail and ports, water and sanitation), achieving food security (raising agricultural output and reducing poverty), climate change mitigation and adaptation, as well as health and education. That’s an average of around US$2.5 trillion per annum. Even if low income states were able to effectively collect more local taxes and use them efficiently, it would be challenging for them to come up with that figure. What is more, current levels of foreign aid –roughly $135 billion in 2014 – wouldn’t make up the difference.[7]

What, then, are the implications for the SDG goal focused on improving nutrition? SDG no. 2 seeks to ‘end hunger, achieve food security and improved nutrition, and promote sustainable agriculture’. The element of “improved nutrition” is particularly ambitious; the target is to end all forms of malnutrition by 2030, including “internationally agreed targets on stunting.”[8] The latter refers to the World Health Assembly’s endorsement of a target of reducing stunting among children under 5 years of age by 40% by the year 2025.[9] In preparation for the FfD3 meeting, the World Bank and others calculated the cost of achieving that particular target. It comes to a total of US$49.6 billion between 2016 and 2025, or approximately US$8.50 per child per year (see Figure 1).[10]

Source: http://thousanddays.org/wp-content/uploads/2015/07/FfD-Financing-Growth-Summary-Costing-Financing1.pdf

Those statistics are both impressively high (almost US$50 billion over a decade) and comfortingly small (only US$8.50 per child per year). They cover needs in all low income countries, not just the three dozen or so nations that account for 85% of the world’s burden of stunting, and they include not only targeted nutrition interventions, like the promotion of exclusive breastfeeding and micronutrient supplementation, but also nutrition-sensitive actions, such as improvements in food availability and quality of diets, women’s health, and girls’ education, all of which address underlying determinants of undernutrition.

The average annual additional cost of achieving the 40% reduction target (74 million fewer children stunted by 2025) is around US$5 billion. This is lower that the Scaling Up Nutrition (SUN) estimate from 2008 of US$11.8 billion per year[11], and also lower than the US$9.6 billion per year proposed in the 2013 Lancet Series on nutrition (for nutrition-specific interventions only).[12] The difference may be due, at least in part, to the declining trend in stunting globally. But it is also likely to be linked to improved understanding of the real costs of doing business, new resource flows from donors towards nutrition since 2008, and rising national commitments to spending on nutrition actions. The contribution of domestic (government) resources to meeting the total cost needs to grow from US$2.9 billion per annum to US$6.2 billion by 2025, according to those latest World Bank estimates. That is slightly more than double current inadequately low levels. In the context of the average annual bill of US$3.7 billion to achieve all of the SDGs it is small change for what are indisputably cost-effective investments in nutrition.

But of course making those resources available won’t suffice. Development doesn’t automatically stem from a flow of financial inputs. There are three other key facets of development that have to be brought into play: first, appropriate policies to enable public and private sector activity to flourish. Positive development outcomes can only grow in the context of effective resource use within a conducive policy environment.[13] To achieve improved nutrition, policies need to be framed through a food systems lens that links appropriate investments in agricultural productivity with those across the marketing and trade, food processing, retail and consumer choice domains.[14]

Second, the private sector plays a key role which needs to be more fully incorporated in the setting of targets and calculations of the cost of doing business. Private companies of many kinds make major investments in the food and health sectors, but these are typically left out of estimates of global financing gaps. Enhanced dietary quality requires appropriate engagement with, and commitments from, industry to be part of the solution. The food system is a complex place where governments and consumers engage daily with businesses that intermediate between policies and consumer preferences.  As poverty declines globally and dietary patterns shift over the coming decade the role of industry cannot be left outside the calculus of possibilities.

Finally, principles. Public and private investments are crucially important to allow families to engage with, and contribute to, the global agenda. Infrastructure, human services, protection from risk – these are all elements of what ODI calls a ‘global social contract’.[15] But such a contract is not built on finances alone. Global engagements involve principles, such as the defense of human rights in international courts or securing humanitarian access to vulnerable civilians in armed conflicts. The principle of nurturing children to achieve their growth and well-being lies at the heart of the entire SDG agenda. These have to be clearly defined, articulated and understood by all.

Which begs two questions: Is US$8.50 per year really too much to ask to reduce child stunting? And, after all, is an end to malnutrition in all its forms by 2030 too much for the world to demand?

By Patrick Webb, Policy and Evidence Adviser for the Global Panel

Photo credit: United Nations