SUBSTAINABLE DEVELOPMENT GOALS

2016 to 2030

Billion to Trillion

FROM BILLIONS TO TRILLIONS:

MDB Contributions to Financing for Development

In 2015, the international community is due to agree on a new set of comprehensive and universal sustainable

development goals (SDGs) that bring together economic, social and environmental priorities. These goals are ambitious,

and they demand equal ambition in using the “billions” in ODA and in available development resources to attract,

leverage, and mobilize “trillions” in investments of all kinds: public and private, national and global, in both capital and

capacity. This will require making the best possible use of each dollar from every source, drawing in and increasing

available public resources as well as private sector finance and investment. In every country, regionally and at the global

level, we must work together to generate the resources needed to realize the transformative vision of the proposed

SDGs.

In April 2015, the African Development Bank (AfDB), Asian Development Bank (AsDB), European Bank for

Reconstruction and Development (EBRD), European Investment Bank (EIB), Inter- American Development Bank Group

(IDBG), and the World Bank Group (WBG), together known as the MDBs, and the International Monetary Fund (IMF)

presented a joint vision of what we can do, within our respective institutional mandates, to support and finance

achievement of the SDGs. We are now demonstrating what that vision means in practice as the MDBs and the IMF,

collectively and individually, are committed to build upon and scale up financial support, technical assistance and policy

advice to enhance the total contribution that we can make to global development.

IDEAS TO ACTION: Through collective and individual actions, initiatives and additional steps to enhance extensive work

already underway in our organizations, the MDBs and the IMF will help countries, partners, investors, and the global

community move from billions to trillions as we take up the challenge of achieving the SDGs

From Billions to Trillions: Transforming Development Finance

To meet the investment needs of the Sustainable Development Goals, the global community

needs to move the discussion from “Billions” in ODA to “Trillions” in investments of all

kinds: public and private, national and global, in both capital and capacity.

Globally, achieving the proposed SDGs will require the best possible use of each grant

dollar, beginning with some US$ 135 billion in ODA. Yet flows for development include

philanthropy, remittances, South-South flows and other official assistance, and foreign

direct investment—together these sources amount to nearly US$ 1 trillion that needs to be

used just as effectively.

The most substantial development spending happens at the national level in the form of

public resources, while the largest potential is from private sector business, finance and

investment. This is the trajectory from billions to trillions, which each country and the global

community must support together to finance and achieve the transformative vision of the

SDGs.

“Billions to trillions” is shorthand for the realization that achieving the SDGs will require

more than money. It needs a global change of mindsets, approaches and accountabilities to

reflect and transform the new reality of a developing world with highly varied country

contexts.

THE MDBS AND THE IMF ARE ENGINES OF FINANCING FOR DEVELOPMENT

As financial institutions, the MDBs and the IMF multiply the capital, subscriptions and contributions invested with us to

provide a range of financial support and products to our partner countries. On average, when our shareholders invest 1

dollar once, MDBs are able to commit 2-5 dollars in new financing every year.

During the 15-year effort to reach the Millennium Development Goals (MDGs), MDB support has grown from $50 billion

to $127 billion annually in grants, concessional and non-concessional loans, risk-sharing instruments, guarantees and

equity investment. As public institutions with a mandate to support development over the medium and long term, we also

play a critical countercyclical role. At the peak of the most recent global economic crisis, the MDBs and the IMF were

able to quickly ramp up our annual financial support by 30-50%.

Going forward, the MDBs are working to continue increasing the level of financing available to support our partner

country efforts to achieve the SDGs. During the first three years of the SDG period (2016 to 2018), the MDBs plan

financial support of over $400 billion. Beyond these three-year plans, we aim to continue to use capital and resources at

our disposal as efficiently as possible. We are also ready to put any additional resources allocated to us to multiply MDB

efforts even further.

Catalyzing, mobilizing and crowding in: Even more important than the direct financial assistance provided by MDBs is

how this assistance is used to catalyze, mobilize and crowd in both public and private sources of funds for development.

Through policy advice, technical assistance and capacity building, MDBs and the IMF support government efforts to

increase available resources and spend them effectively; through MDB policy support loans and IMF-supported

programs, the institutions help countries meet budgetary and balance of payments needs, supporting macroeconomic

stability and growth. This includes domestic public resource mobilization, deepening of local financial and capital

markets, and creating a conducive climate for private investment, both local and international. MDB investments and IMF

loans also directly catalyze private sector flows.

The multiplier effect of MDB financing on domestic public resource mobilization is significant but difficult to measure.

With respect to direct private sector investment, for every 1 dollar invested directly by MDBs in private sector operations,

some 2-5 dollars are mobilized in additional private investment. This adds an estimated $40 to $100 billion to

development flows every year.

.

SUSTAINABLE DEVELOPMENT GOALS

• GOAL 1 End poverty in all its forms everywhere

• GOAL 2 End hunger, achieve food security and improved nutrition and promote sustainable agriculture

• GOAL 3 Ensure healthy lives and promote well-being for all at all ages

• GOAL 4 Ensure inclusive and equitable quality education and promote lifelong learning

• opportunities for all

• GOAL 5 Achieve gender equality and empower all women and girls

• GOAL 6 Ensure availability and sustainable management of water and sanitation for all

• GOAL 7 Ensure access to affordable, reliable, sustainable and modern energy for all

• GOAL 8 Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all

• GOAL 9 Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation

• GOAL 10 Reduce inequality within and among countries

• GOAL 11 Make cities and human settlements inclusive, safe, resilient and sustainable

• GOAL 12 Ensure sustainable consumption and production patterns

• GOAL 13 Take urgent action to combat climate change and its impacts*

• GOAL 14 Conserve and sustainably use the oceans, seas and marine resources for sustainable development

• GOAL 15 Protect, restore and promote sustainable use of terrestrial ecosystems, sustainably manage forests, combat desertification, and halt and reverse land degradation and halt biodiversity loss

• GOAL 16 Promote peaceful and inclusive societies for sustainable development, provide access to justice for all and build effective, accountable and inclusive institutions at all levels

• GOAL 17 Strengthen the means of implementation and revitalize the global partnership for sustainable development

SDGs) bring together economic, social and environmental priorities

Economic, Social and Environmental priorities goals are ambitious. These goals demand equal ambition in using the

“billions” in ODA and in available development resources to attract, leverage, and mobilize “trillions” in investments of all

kinds: public, private, national and global.

What is Development?

Development means so much, both for the world and for the individual human being. Development is a life in peace.

Development is a life without poverty and without inequalities. Development is respect of human rights, and the belief in

governance and in good and strong institutions. So in this world today, there is no peace without development. There is no

development without peace, and none of the above without respect of human rights. So what we need to understand is that

we have to bring all factors together at the same time and realize that we have a common agenda across peace,

development, and human rights. And if we attach ourselves to that philosophy then we can make a difference. That's what

we have to do now, this period of 2015 to 2030.

What is Financing Development?

This story begins 15 years ago in 2000 when the eight millennium development goals, or MDGs, were adopted. Countries

and development institutions and NGOs increased the focus of their efforts on reaching the MDGs, and part of the financing

for development response was then that the world created a number of MDG specific funds for education, for the

environment, especially for health. Three of the MDGs relate to health.

The New Framework for Financing Development

• Eradicate poverty by 2030 • Create millions of jobs.

• Create the conditions for the private sector and the public sector to work hand-in-hand in finance development?

Sustainable agriculture Overview Persistently high levels of hunger and malnutrition – 795 million chronically hungry people in the world in 2014–2016 – and unsustainable human activity on the earth’s carrying capacity present a major challenge for agriculture. To meet the growing food demand of the over nine billion people who will exist by 2050 and the expected dietary changes, agriculture will need to produce 60 percent more food globally and 100 percent more in the developing countries. At the same time, roughly one-third of food produced – 1.3 billion tonnes per year – is lost or wasted globally throughout the supply chain, with enormous financial and environmental costs. A striking link exists between growth in agriculture and the eradication of hunger and poverty. Agriculture broadly understood –crop and livestock production, fisheries, and forestry – provides income, jobs, food and other goods and services for the majority of people now living in poverty. As a result, overall GDP growth originating in agriculture is, on average, at least twice as effective in reducing poverty as growth generated in non-agriculture sectors, and up to five times more effective than other sectors in resource-poor low-income countries. Key challenges The current trajectory of growth in agricultural production is unsustainable because of its negative impacts on natural resources and the environment. One-third of farm land is degraded, up to 75 percent of crop genetic diversity

Production systems and the policies and institutions that underpin global food security are increasingly inadequate. ■ Sustainable agriculture must nurture healthy ecosystems and support the sustainable management of land, water and natural resources, while ensuring world food security. ■ To be sustainable, agriculture must meet the needs of present and future generations for its products and services, while ensuring profitability, environmental health and social and economic equity. ■ The global transition to sustainable food and agriculture will require major improvements in the efficiency of resource use, in environmental protection and in systems resilience. ■ Sustainable agriculture requires a system of global governance that promotes food security concerns in trade regimes and trade policies, and revisits agricultural policies to promote local and regional agricultural markets.

Sustainable agriculture

Innovative Finance for Development Solutions

What is Innovative Finance?

Innovative Finance can mean different things to different people. At the World Bank Group, we

include under this heading any financing approach that helps to:

• Generate additional development funds by tapping new funding

sources (that is, by looking beyond conventional mechanisms such as budget outlays from

established donors and bonds from traditional international financial institutions) or by engaging

new partners (such as emerging donors and actors in the private sector).

• Enhance the efficiency of financial flows, by reducing delivery time and/or costs, especially

for emergency needs and in crisis situations.

• Make financial flows more results-oriented, by explicitly linking

funding flows to measurable performance on the ground. Most Innovative Finance involves

combining available financial instruments into a new package or using them in a new context or

setting, such as a new sector, country, or region. In some cases, the driving force behind the new

financial mechanism is two-fold:

INNOVATIVE FINANCE For Development Solutions

INITIATIVES OF THE WORLD BANK GROUP

Linking funds to results • Results-Based Financing • Advance Market Commitments

Making funds more efficient • Local-currency bonds • Frontloading of development aid • Index-based risk financing • Partial Risk Guarantees

Generating additional funds • Emerging donors • Socially responsible investing • Solidarity taxes • Carbon finance

Roles of Innovative Finance Instruments:

Some Key Examples

INNOVATIVE FINANCE For Development Solutions

INITIATIVES OF THE WORLD BANK GROUP

The Role of Public Sector Financing in Development

Reducing Illicit Financial Flows By: Ngozi Okonjo-Iweala

A study shows that up to $50 to 60 billion in enlisted financial flows, leave the continent. We followed it up in

Nigeria by commissioning a study with the help of the African development bank, that has just been completed, to

also look at our own particular situation in terms of . . . what is the size, what are the sources. And it shows that to

lose about a billion dollars a year in these illicit flows. What's the main source? Straight mis-pricing on their

invoicing and over invoicing. And therefore this is an area that we all need to do a critical amount of work.

There's also of course . . . this in means of tax evasion, exporting capital illegally and so on. But I want to

commend the work that is now being done under the auspices of OECD on base erosion and profit shifting.

Because that will certainly help us. One of the problems that developing countries have is the . . . what I'll call an

asymmetry of knowledge. Because large corporations and those who evade taxes have a lot of expertise, that

enables them to do these practices. Sometimes they just exploit gaps in the tax laws of the countries because

they have the expertise to do that. That's so, that's legal but it still shifts profits out of the... and erodes the tax

base in the country.

They have the legal flows, you know where, with a lot of clever help, the ways and means can be found . . . loop

holes to export capital and evade taxes. So I think we really need to do that. Then you have the stolen assets out

of countries. Where I think, much more progress needs to be made by receiving countries to help developing

countries get their monies back. The pace is still too slow. I think Nigeria has been one of those countries that has

been quite successful in getting money back over the past years. But it's taking 14 to 20 years to be able to get

resources back from countries that have held this in Europe, and in various other jurisdictions.

I think that for developing countries, when you have sources of finance of that magnitude lying outside, it would

behoove the international community to do so much more, to keep the sender's resources back or keep them

from escaping. Because, in many cases, they are more than equal to the aid received by many of these countries.

Sources of Development Finance A. Strengthening Domestic Resource Mobilization and Public Expenditures • For most countries, DRM is the largest resource available to fund their national development plans. A country’s ability to mobilize domestic resources and spend them effectively—at the national, sub-national and municipal levels—lies at the crux of financing for development. Countries must lead in mobilizing and spending their domestic resources. Effective domestic public policy helps increase equity (including gender) through poverty eradication, providing public goods and services, and, at the national level, managing macroeconomic stability. It also reinforces a country’s ownership of public policies, reduces aid dependency and can raise creditworthiness. However, measures to improve DRM and public expenditures can vary across countries, and their implementation may be beset by political economy constraints. • Experience has shown that the combination of technical assistance and increased financing for capacity building can play a vital role in strengthening DRM and increase public expenditure efficiency and effectiveness. As countries commit to strengthening their efforts in these areas, it is important that the MDBs and the IMF, in line with their differing expertise and experience, be in a position to support them. Key engagement tools include policy lending and technical advice, institutional capacity building,

coordination and research.

Engaging and Incentivizing Private Finance

• The private sector will play a pivotal role in financing the post-2015 development agenda. As recognized in the Monterrey Consensus, private investment underpins economic growth, know-how and technology transfer, job creation, and productivity gains. Ultimately, functioning, self-sustaining private sector markets that respond to economic demands are central to the sustainability of development gains. • The drivers of private finance are distinctly different from the motivations of domestic public finance. Private sector firms seek investment opportunities based on risk-return considerations. To be effective, public sector measures to encourage private investment need either to decrease perceived risk or increase anticipated returns. Governments play a critical role in providing a conducive investment climate through supportive governance structures, competition policy, hard and soft infrastructure and instruments that foster healthy, commercially sustainable markets. • At the same time, businesses realize that unmet societal needs, not just economic needs, define markets. Consequently, business success occurs alongside societal progress. Risk-return considerations increasingly take into account, for instance, the need to ensure sustainability throughout supply chains, and the benefits of increasing the customer base to include unserved customers at the base of the pyramid. More and more examples of business solutions to development challenges are

Financial leverage: The financial structure and financing capabilities of the MDBs and the

IMF enable them to leverage their capital to provide finance in many forms (from grants to

“blended” concessional finance to loans to guarantees to equity investment) and purposes. The non concessional

institutions/windows of the MDBs are funded efficiently by small amounts of paid in capital, in many cases backed

by callable capital. 3 Leveraging these amounts, the banking model of the MDBs mobilizes substantial resources

from the capital markets at interest rates reflecting their strong financial structure and high ratings. In addition,

grant and concessional funding from shareholders and other development partners supports concessional

financing for the poorest, fragile and conflict-affected states. The MDBs received inflows from their shareholders

of around US$ 38 billion in 2012.4 These flows allowed the MDBs to make public and private disbursements of

US$ 99 billion in developing countries in 2013, and to approve new commitments for US$ 173 billion.5

Private finance and investment: Private resources move in directions determined by risk-reward

considerations, which in turn are driven by public policies in both host and source countries. Shifting the allocation

of investable funds to better meet development needs is thus an issue of “getting policies right” – whether at the

national or international level. Much of the work of the MDBs engaged in policy-based lending, and of the IMF in

its country engagement, focuses on getting domestic policies right. In addition, MDBs are innovators,

intermediaries and co-investors, acting as honest brokers between public and private actors and able to leverage

and crowd in essential private finance and investment and to support the efforts of governments to strengthen

investment climates. Several MDBs have specific mandates focused on private sector engagement, others have

private sector “windows” and work streams that demonstrate that private investments in developing economies

can be profitable, and that incentivize and build market solutions. MDB investment and financing attracts and

mobilizes private capital to invest alongside the MDBs

The MDBs and the IMF will work with clients and development partners to help translate

the SDGs into country level targets, policies and programs and to finance their implementation,

committing to: 1) Explore increasing available financial resources: Each of the MDBs can explore how to

make best use of its specific financial model and circumstances to increase available funds, including by

supplementing scarce concessional assistance to the Lower Middle Income Countries (LMICs) with additional

development financing at non-concessional terms. MDBs can explore new or different uses of their balance

sheets, such as leveraging the concessional windows in innovative ways; assessing whether any existing financial

capacity could be re-deployed; freeing up financial capacity by mitigating risks (including increasing analysis of

concentration risks and how they are managed); or adjusting or exchanging existing exposure to increase

“headroom” capacity for countries where lending is currently limited. In due course and in response to client

demand, additional capital would allow these institutions to do more.

Challenges. Many of the challenges developing countries face in boosting revenues are long established. These include: compliance problems in dealing with the hard-to-tax (not only small businesses but also, for instance, professionals); reduced tariff revenues due to trade liberalization, including regional integration; weak revenue administrations, low taxpayer morale and poor governance (corruption indicators are strongly associated with low revenue); and shallow use of financial institutions, potentially a valuable source of tax-relevant information. 20. Another set of challenges—far from new, but now more widely recognized—is posed by tax avoidance activities of international corporations. These are the subject of the ambitious G20-OECD Action Plan on ‘Base Erosion and Profit Shifting’ (BEPS), which is intended to bolster the international tax system. These challenges are no less important for developing countries than for advanced economies: the former are, if anything, more reliant on CIT revenue (Figure 4). Single tax cases can represent a significant proportion of all tax revenue; and the evidence points to the importance of spillovers from tax policy measures in other countries.13 It is critical that the avenues now being developed by the OECD and others for the direct participation of developing countries in the BEPS process are fully exploited, and that the shaping of the international tax system is sensitive to their particular circumstances and capacities. Finally, even a successful outcome to the BEPS process, in terms of addressing some of the most egregious forms of tax avoidance, may not address the deeper challenges to revenue collection posed by international tax competition.

The Way Ahead. Reform efforts should follow key principles, including a) using targeted

rather than across-the-board spending cuts, and b) for social spending, replacing generalized transfers (e.g., price subsidies) with targeted income transfers, accompanied by improvements in the core area of budget execution. This includes cash and treasury management to avoid cash bottlenecks and lower funding costs. Other important areas include:

Developing evidence-based public programs, policies and public sector performance metrics (and investing in country data and national statistical systems);

Enhancing public investment management capacity; Reducing and eliminating energy subsidies, and setting prices that internalize the

environmental harm of energy use; Strengthening independent oversight arrangements, including in the areas of citizen

participation, supreme audit institutions and parliaments; Strengthening public sector pay, performance and ethics; Developing nationwide fiscal responsibility laws that address inter alia frameworks for

sustainable sub-national borrowing (relevant to section 3 on subnational finance); and Improving gender targeting of public expenditures.

Providing new and expanded channels to enhance private sector flows and expertise towards development

The private sector can be a source of significant financial flows and expertise that MDBs can

help channel towards development goals. MDBs also have a range of investment, advisory and

convening capabilities that make them a strong partner for leveraging the private sector. They are

increasing resources and efforts to promote development through private sector channels. Looking

ahead, there are a number of opportunities for MDBs to enhance their support:

Building upon substantial MDB direct private sector investments - Direct private sector

investments in developing countries by MDBs have more than doubled over the last ten years, to

over US$ 30 billion in 2013 (not including syndications and other mobilization);

MDBs strategy to expand their support for the private sector - The MDBs have or are putting in

place strategies to expand their focus on the private sector, and are in the process of strengthening

their capabilities both to provide investment climate advice and interventions (including technical

assistance at the client level), and to invest directly in the private sector;

Enhancing MDBs capabilities and operating model for greater impact - The MDBs are changing

the way they do business and the structure of their operations in order to focus more on the private

sector and to enhance the integration of public and private approaches for greater development

impact; and

Playing an honest public-private broker role at the country-level and on the global stage – MDBs

are well positioned to design public-private investment solutions.

CLIMATE CHANGE

INNOVATION

Power saving & Environment :Smart motor

New innovation, new design a new way to move

http://tridenttricar.com/

OECD DAC Definition of ODA at http://www.oecd.org/dac/OECD%20DAC%20HLM%20Communique.pdf

Sustanableddevelopment.un.org/sdgsproposal

Post-2015 and SDGS nourishing people, nurturing the planet on pdf dated May 2015

www.coursea.com

www.aidflow.org

www.worldbank.org

DC2015-0002 April 2, 2015 DEVELOPMENT COMMITTEE (Joint Ministerial Committee of the

Boards of Governors of the Bank and the Fund on the Transfer of Real Resources to Developing Countries)

From Billions to Trillions: MDB Contributions to Financing for Development July 2015

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