Multi-stakeholder Consultations on Financing for Development:

1. Multi-stakeholder Consultations on Financing for Development: “Rethinking the Role of National Development Banks in Africa” (Johannesburg, South Africa, 22-23 November 2006) Alex Trepelkov Deputy Director, Financing for Development Office Department of Economic and Social Affairs United Nations Financing for Development Office

2. Output and Follow-up Mandate Mandate Multi-stakeholder Consultations Expert Group Meeting PROJECT Financing for Development Office

3. Mandate (1/2) In resolution its 58/230 of 23 December 2003, entitled “Follow-up to and implementation of the outcome of the International Conference on Financing for Development”, the UN General Assembly requested the Financing for Development Office to: “organize workshops and multi-stakeholder consultations, including experts from the official and private sectors, as well as academia and civil society, to examine issues related to the mobilization of resources for financing development and poverty eradication” and “convene activities involving various stakeholders … to promote best practices and exchange information on the implementation of the commitments made and agreements reached at the International Conference on Financing for Development”. Financing for Development Office

4. Mandate (2/2) In its resolution 60/188 of 22 December 2005, the General Assembly “recognizes the work of the Financing for Development Office of the Secretariat in organizing, within its mandate, workshops, multi-stakeholder consultations, panel discussions and other activities aimed at better enabling member countries to implement their commitments as agreed in the Monterrey Consensus, and requests the Office, in collaboration with experts from the public and private sectors, academia and civil society, to continue its work in this area”. Financing for Development Office

5. Expert Group Meeting Output and Follow-up Mandate Expert Group Meeting Consultations Financing for Development Office

6. Expert Group Meeting • Goal: How to enhance the role of National Development Banks (NDBs) in promoting economic and social development ? • First step: Expert Group Meeting on “Rethinking the Role of National Development Banks” (New York, 1-2 December 2005): • Launched a series of “multi-stakeholder consultations”, organized by the Financing for Development Office of UN-DESA in cooperation with NDBs, International Financial Institutions (IFIs), Regional Development Banks (RDBs), UN regional commissions and other interested parties; • Agreed on a draft model agenda to serve as a framework for the proposed series of follow-up regional meetings; • Discussed a tentative calendar of regional consultations in various parts of the world, with a final conference to be held at the Center for International Development at Harvard University’s Kennedy School of Government. • Outcome: This project is expected to produce a publication on the role of NDBs as a renewed tool of development finance. Financing for Development Office

7. Draft Model Agenda • I. THE EVOLVING ROLE OF NDBs • Setting the Stage: Evolution of Development Banking • Addressing Market Failures and Development Gaps • Relationship with Other Development Institutions and the Private Sector • Defining the Rationale and Missions of NDBs • II. FILLING THE GAPS: FUNCTIONS AND INSTRUMENTS OF NDBs • Providing Effective Financing Mechanisms • Assisting Financial Sector Development • Supporting the Local Business Sector • Facilitating Regional Cooperation and Integration • III. ENHANCING THE EFFECTIVENESS OF NDBs • Rating, Regulation and Supervision • Governance, Management and Skills • Measuring and Monitoring Results • Sustainability and Funding Financing for Development Office

8. Background document (1/3) • Background Document on “Rethinking the Role of National Development Banks” aims to: • Provide a possible framework for analyses at follow-up regional meetings, with a view to deriving conclusions and recommendations. • Offer a number of examples and specific cases – from best practices to failures – that may serve as points of reference in the envisaged discussions and further analyses. Financing for Development Office

9. Background document (2/3) • Overview of National Development Banking • An NDB can be defined as a “Financial institution primarily concerned with offering long-term capital finance to projects generating positive externalities and hence underfinanced by private creditors”. • NDBs often design and implement their objectives through: • Appraising economic and social impacts of projects that seek financing; • Accompanying investors over the long run through long-term loans; • Assisting sectors that are key to growth through technical assistance; • Attracting investors by playing a role of catalyst for large operations; and • Alleviating the negative impact of financial crises through counter-cyclical financing by offering loans even during downturns. • Lines of activity evolved significantly since the 1990s, as a result of deeper global integration and a reshuffle of national development banking strategies. Financing for Development Office

10. A Pyramid of National Development Banking Financing for Development Office

11. The Five A’s of National Development Banking Financing for Development Office

12. Background document (3/3) • The Evolving Role of National Development Banks • A. Filling Gaps in Financial Sector Development • Providing Long-term Financing • Providing Other Financial Products for Development • Building Inclusive Financial Sectors • B. Improving the Business Climate • Promoting and Supporting SME development • Reducing Volatility • Acting as a Catalyst • C. Capacity-Building of NDBs • Improving Prudential Regulation and Supervision • Enhancing Governance and Management • Measuring and Monitoring Results Financing for Development Office

13. Process Spring 2006 Fall 2007 2008 December 2005 1 2 3 Group Meeting Consultations Output and Follow-up Group Meeting Consultations Output and Follow-up • Focus on Latin America (Lima, Peru) • Focus on Africa (Paris, France & Johannesburg, South Africa) • Focus on the Middle East (Cairo, Egypt) • Focus on Asia and the Pacific (India) • Final meeting (Cambridge, USA) Financing for Development Office

14. Consultations Output and Follow-up Mandate Consultations Expert Group Meeting Financing for Development Office

15. First Regional Consultation: Highlights First Regional Consultation on “Challenges of National Development Banks in Latin America” (Lima, Peru, 12-13 June 2006) • Organized by the Latin American Association of Development Financing Institutions (ALIDE) and Corporación Financiera de Desarrollo (COFIDE). • Co-chaired by José Antonio Ocampo, Under-Secretary-General for Economic and Social Affairs, United Nations; Rommel Acevedo, Secretary-General of ALIDE; and Daniel Schydlowsky, President of COFIDE. • Attended by some 80 representatives from NDBs in Latin America, Asia, and Africa, international organizations (ECLAC, CAF, CAN, IMF, IADB, GTZ), academics and civil society. Financing for Development Office

16. First Regional Consultation: Conclusions There is no single development banking model. Each country adopts its own model depending on its own situation and needs. Regardless of their ownership (public, private or mixed), public service is central to NDBs’ mission and, as such, should be supported and enhanced. In the area of development finance, NDBs should provide leadership, but should also be innovative and pioneering in playing a complementary role. Subsidies can be granted, if necessary, for undertakings that require public action, but they should be duly budgeted and clearly transparent. Financing for Development Office

17. First Regional Consultation: Conclusions (continued) NDBs should, whenever possible, develop cooperation with multilateral development banks, in order to diversify and reduce risks and facilitate resource mobilization. It can also increase effectiveness of financial intermediation through long-term instruments, guarantee funds, securitization and venture capital. The problem of development finance is not that of cost or lack of resources, but rather of access to finance, especially for SMEs. Activities of NDBs in financial markets can have positive counter-cyclical effects. NDBs should act as public policy instruments that have a specific function, which should not be distorted to serve political interests. Financing for Development Office

18. First Regional Consultation: Action-oriented Proposals • Three action-oriented proposals have emerged: • Create a “think tank” to pursue technical analysis • Enhance exchange of information on NDBs between the United Nations system and regional associations of DFIs • Disseminate information on best practices and lessons learnt Financing for Development Office

19. Second Regional Consultation: Highlights Second Regional Consultation on “The Role of National and Regional Development Banks in Africa” (Paris, France, 27-28 June 2006) • Organized by Agence Française de Développement (AFD) in collaboration with KfW (Germany) and the European Investment Bank (EIB). • Co-chaired by Jean-Michel Severino, CEO, AFD; Jomo Kwame Sundaram, Assistant Secretary-General for Economic Development, United Nations; Bruno Wenn, First Vice-President for Sub-Saharian Africa, KfW; and Daniel Ottolenghi, Chief Economist for Development, EIB. • Attended by some 100 representatives from NDBs in Africa and Europe, international organizations (World Bank), bilateral aid agencies, academics and civil society. Financing for Development Office

20. Second Regional Consultation: Discussion Points The meeting addressed: • Evolution of development banking • Case studies: how to address market failures? • Roles and instruments • Tools, governance and monitoring of results • Role of ODA and PPPs Major discussion points: • Reasons for decline in development banking • Role of the State • Utility and use of subventions • Roles of development and commercial banks • Banking legislation Financing for Development Office

21. Second Regional Consultation: Conclusions The role of DFIs deserves special attention and should be defined based on holistic andfunctional rather than institutional approach (even if institutions matter). DFIs’ raison-d’être is to bring finance to specific clients or projects that lack access to credit, particularly in the medium and long term. Thus, DFIs should fill development gaps and both market and State failures (e.g., in infrastructure). DFIs provide not only financial instruments (grants, loans, credits, guarantees, etc.) but also non-financial services (policy advice, technical assistance and capacity-building). Financing for Development Office

22. Second Regional Consultation: Conclusions (continued) Resources are needed to build financial instruments. There is no lack of liquidity in Africa. When DFIs are banks, they have access to resources through clients and government deposits, but banking legislation imposes restrictions on the use of funds. When DFIs are not banks, it is harder to mobilize resources, but DFIs have greater flexibility how to use them. DFIs often have a complex structure of knowledge-based organization capable to perform multiple functions (finance, advice, partnership) and to play the role of catalyst/facilitator. How to coordinate commercial and development activities (single organization or separate entities)? Different models exist and seem viable. DFIs must guarantee their own durability and can be profitable! In general, DFIs are state-owned institutions. In order to avoid government interference, DFIs must have independent governance and high standards of professionalism. Financing for Development Office

23. Second Regional Consultation: Action-oriented Proposals • Five action-oriented proposals have emerged: • Make an inventory of DFIs’ success stories and lessons learnt • Organize sub-regional consultations • Promote the exchange of information on standards and best practices among DFIs • Liaise with other fora on corporate governance • Set up a working group on legislation for DFIs Financing for Development Office

24. Outcome and Follow-up Mandate Output and Follow-up Consultations Expert Group Meeting Financing for Development Office

25. Build on the outcome of this meeting for future consultations and final publication Outcome and Follow-up 2007 Consultations in Latin America, Europe, Africa, Western Asia and USA Regional reports, Case studies and Publication Presentation to UN General Assembly: HLD on FFD and Follow-up Financing for Development Office

26. Thank you! More information: www.un.org/esa/ffd Financing for Development Office