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Opening remarks by IFAD President at the Introduction to emerging trends in mobilising concessional resources for IFIs and the importance of exchange of expertise

Où: Rome

10 mai 2015

The cost of neglect:  Agricultural research, development and rural transformation

Fellow development experts, 
Esteemed colleagues, 
Ladies and gentlemen,

Allow me to warmly welcome you to IFAD. 
I would like to extend particular thanks to the speakers and participants who have journeyed from afar to share their experience and expertise with us. 
As you know, the world in which we work is changing rapidly.  The global financial crisis is reshaping development funding. It has been clear for some time that ODA in the 21st Century would be very different from the ODA of ten or twenty years ago.

 Of course, ODA is not the only thing that is changing on the development funding landscape. Today's Middle Income Countries, which were once key recipients of development financing, are now important donors themselves.

South-South Cooperation is also gaining momentum as an effective mechanism for brokering expertise and investments amongst like-minded developing countries.  We have seen this happen successfully among the BRICS  [Brazil, Russia, India, China and South Africa], and are now starting to also see it among the MINTS [Mexico, Indonesia, Nigeria and Turkey].

Although many Middle Income Countries still receive a significant amount of ODA to address persistent domestic challenges -- including, in particular, hunger and poverty -- it is the lower income countries, as well as fragile states that are particularly dependent on ODA. 

Today, they are feeling the pinch of reductions in ODA to LDCs, particularly since they generally have a very weak or non-existent domestic tax base or lack sufficient volume of foreign investment to compensate. 
Of course, it is important that countries at all income levels contribute to transforming their own economies and societies. And in recent years, domestic resources for development have risen to US$7.7 billion in 2012, from only US$1.7 twelve years earlier.

However, current levels of ODA, even when combined with domestic resource mobilisation, are not likely to be sufficient to meet the post-2015 Sustainable Development Goals. 
The scope of the SDGs is ambitious. We have yet to find out their price tag, but it is safe to say that dramatic and long-lasting changes do not come cheap. 
The MDGs set out to tackle central development issues of poverty, hunger and gender inequality. The proposed SDGs are more ambitious, intending not only to finish what the MDGs started but to create peaceful and inclusive societies and to address income inequality, environmental degradation and climate change. They aim for nothing less than development of human societies in a way that is sustainable for not just humanity, but the earth itself.

At a time of bold development plans by the international community and developing nations alike, it is no coincidence that we at IFAD are seeing more demand for our services.

But there has not been a commensurate increase in funding from our traditional donors and development partners because of the on-going economic uncertainty.

So, how is the development community going to meet this increasing demand for our support and services in a world of competing demand for a limited amount of ODA?

The Financing for Development meeting in Addis this July should provide some of the answers, but this is a question that many of us in this room started asking some years ago. Over the course of the next few days, we will share our experiences, and you will hear in detail some of the steps IFAD has taken to bridge the funding gap, but I would like to highlight a few of the most important.

We started by establishing a stand-alone Financial Operations Department and creating the post of CFO.  Next, we experimented with stand-alone dedicated funds such as the Spanish Trust Fund, the first sovereign loan in IFAD's history that we managed as a trust fund. More recently, we introduced the Adaptation for Smallholder Agriculture Programme (ASAP), a multi-donor Trust Fund. This is a fully integrated grant-financing programme that channels climate finance directly to smallholder famers and is the largest fund of its kind globally.

These initiatives have allowed IFAD to expand its programme of work to meet growing demand from Member States. At the same time, we have also built our own internal capacities in the area of development financing.  Nevertheless, these approaches do not always generate the loan reflows that would support the sustainable growth of the Fund. 

In recent years we have started to think even further outside of the box and venture into the world of concessional partner loans. We have recently entered into an innovative financing agreement with the KfW Development Bank of Germany that will allow IFAD to borrow up to EUR 400 million.

And just last month our Executive Board approved a Sovereign Borrowing Framework. This new ability to get resources through sovereign sources will make it possible for us to leverage resources and manage them more flexibly in the future.

Of course, there are many other avenues to explore. New sources of financing such as foreign direct investment, South-South flows, and remittances are still to be fully exploited. And there are also new players in development such as emerging economies, philanthropic organizations, and the private sector. 
Remittances alone are expected to surpass US$2.5 trillion over the next five years. If they are channelled into investment in development they could stimulate local economies, and foster stability in fragile states and post-conflict countries. And remittances also offer the potential for innovative partnerships and public-private financing.

 There is also room to capitalise on public-private producer partnerships. The public sector gains from private-sector experience and know-how; the private sector gains from public sector infrastructure. Yet in agriculture, we have come to realise that the traditional 3P concept does not recognise the important role of producers, so at IFAD we talk about the 4Ps – public, private and producers partnerships.

Farmers benefit from these arrangement by having links to secure markets and access to technology, services, innovation and knowledge. The private sector gains on the supply side.  At IFAD, we have numerous examples of these partnerships in the projects we support, and we know that they work, provided they are mutually beneficial.

This provision is critical.  As we explore new avenues and partnerships for financing, we must ensure that our constituency – the women and men who are working hard to emerge from poverty and hunger – are included as equal partners and not side-lined or excluded by more powerful forces.

While there will continue to be a role for private partners and foreign donors to help finance development in the years ahead, the concept of country ownership requires that countries invest in their own development. To do this successfully, countries will need to improve their fiscal management, strengthen and enforce regulations, and ensure that domestic and foreign companies alike pay their fair share of taxes.

In Africa, the potential for development financing from domestic resource mobilization – particularly from effective management of the extractive sector in many countries -- is huge.  Illicit outflows cost the continent an estimated $50 billion, according to the Africa Progress Report. This is money that should be building the future of Africa.

Ladies and Gentlemen, 
If we want to have the greatest impact and to be relevant in the post-2015 era, we must be willing to adapt. This is one of the reasons we have convened this roundtable. The exchange of knowledge and expertise between members of the IFI community, development experts and key players such as our Member States, is of vital importance.  Only in this way can we hope to develop the financing that will allow us to meet the demand for our services which is not only growing, but likely to increase further under the post-2015 sustainable development agenda.

I know that each of us here today shares a strong and abiding commitment to development. The fact that so many of you have travelled to participate in this roundtable – some from as far away as Cote d'Ivoire, the Philippines, and the United States -- is testament to that dedication. Let us work together, as a community, to learn from each other so that together we can ensure that the SDGs are a resounding – and sustainable -- success.

Thank you.

11 May 2015