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Interview with Trevor Manuel and Heidemarie…

„Doha is about preventive action“

by Heidemarie Wieczorek-Zeul, Trevor Manuel
At a UN conference in Doha in late November, the international community will take stock of what happened since the Financing for Development summit in Monterrey, Mexico in March 2002. The “Monterrey Consensus” included several ideas for raising funds for development. Most commonly known is the rich nations’ re-commitment to the goal of spending 0.7 % of GNP on official development assistance (ODA). Trevor Manuel, the finance minister of South Africa, and Heidemarie Wieczorek-Zeul are UN General-Secretary Ban Ki-moon’s special envoys for the review conference. In an interview with Hans Dembowski, they discussed their expectations.

The Monterrey summit was held shortly after the terror attacks of 9/11. There was a sense of the world trying to unite at that time, but that was lost due to the Iraq war. Will there be a desire for togetherness in Doha?
Trevor Manuel (TM): I think there is such a desire, and it will become even more apparent once the presidential elections in the USA are over. With regard to Washington, I think there will be much more content. Issues of unfairness are evident, and so is failure in Iraq. I am quite sure there is a good chance to discuss global matters in a different way.

You do not know who will win the elections – do you think that either an Obama presidency or a McCain presidency will mean a different approach taken by the US?

TM: The short answer is yes, though in an interesting kind of way. You see, Newt Gingrich, the right-wing Republican who was very influential in the 1990s, was one of the best friends Africa ever had in Washington. It is not well known, but Gingrich did his PhD on Africa, and he understands the development dynamics of the continent. There are Republicans who take interest, though in general they do not know us well. Barack Obama, of course, has personal ties to Africa.

Heidemarie Wieczorek-Zeul (HWZ): I think recent trends like higher commodity prices, higher food prices and higher fuel prices will help to focus minds. There is a real risk of more instability in many countries. Moreover, we all know that climate change is happening. Confrontation will never solve problems; we need cooperation and dialogue. I hope that everyone realises that the tendency to more confrontation – as recently became evident in Georgia, for instance – is destructive. In Europe, we certainly know that we have to live up to our promises, and that if we do not manage to help to shape globalisation, the result will only be a new world disorder. By the way, at the High-Level Forum on Aid Effectiveness in Accra lately, there was a strong sense of no one wanting the summit to fail the way the WTO talks had failed in Geneva in summer.

To judge by western media, the main issue of development finance is the decades-old 0.7 % pledge by rich nations. Is that really the key issue?

TM: Don’t forget that the Millennium Summit in September 2000 and the Monterrey finance summit of early 2002 were interrelated. The events of 9/11 certainly contributed to Monterrey succeeding, but we had witnessed considerable momentum before – thanks to the Millennium Development Goals (MDGs) that had resulted from the Millennium Summit. We really only have two choices. We will either make serious progress in terms of the MDGs, or we will drown in mediocrity. That is the challenge the leaders of the world must rise to.

How important are innovative finance instruments?

HWZ: Along with the 0.7 % pledge and other ODA commitments, they are key elements of the Monterrey Consensus, and so are foreign direct investment and the mobilisation of funds. On innovative finance, however, there has been little progress. In Monterrey, we discussed taxes on cross-border financial transactions. Then there was debate on taxing airline tickets. What has changed in the meantime is that we actually have such an instrument today. The auctioning of carbon emission rights links development finance to climate change. In Germany, we are already using that instrument as a source of funding international climate progress for mitigation and adaptation, and other rich nations should do so too.

These issues are interrelated. Obviously, a country like Bangladesh needs a development strategy that factors in climate change. Otherwise the development strategy doesn’t make sense.

HWZ: And besides strategy, funding matters too. If we don’t live up to our development promises, there will be huge resentment. We need success in Doha to make progress in climate talks.

Doesn’t climate change imply that the 0.7% pledge must be raised to 1.0 % or even 1.2 %? After all, adaptation to climate change comes on top of development, without the need for development becoming any less.

HWZ: That is the way some developing countries argue, and so do some industrialised countries. For Germany, I can only say that we are doing our best to reach 0.7 % by 2015 – and 0,51 % by 2010. Those are the targets the long-established EU members have set themselves. Let us get there, before discussing further aspirations.

TM: As far as climate change is concerned, the world will have to come up with something completely new, I think. We don’t have it yet, and I don’t know what it will be. But there is really a lot of pressure. Bear in mind that one of the proposals on climate change was a carbon tax on fuel consumption; and what we have witnessed in price hikes is actually considerably higher than any such carbon-tax rate would have been. Unfortunately, that money isn’t necessarily channelled into useful programmes. But it is obvious that money can be raised.

HWZ: In Accra, I felt a sense of impatience among delegates from developing countries. Many people are feeling the squeeze of food and fuel prices, and they are getting impatient. Their frustration may be exploited by populist politicians who emphasise religious belief systems, ethnic identities and similar issues. If the international community does not tackle the very real problems of poverty and climate change. we will not only have to repair these damages. We will also have to deal with extremism and terrorism. Doha is really about preventive action.

Since the early 1980s, there has been an international trend to cut taxes. Leaders like Ronald Reagan and Margaret Thatcher spread the notion that there is something fundamentally wrong with taxes. Is that changing?

TM: Well, even if John McCain wins in the USA, it will be hard for him to maintain the system where the rich get massive tax relief, while basic infrastructure and public services are in serious decline. Of course, people do not want to be taxed too heavily, but they do not want to be treated unfairly either. In the light of the Liechtenstein experiences and other cases of tax evasion, people are saying: “Why have culprits been allowed to get away with it? We all have responsibilities, we all pay taxes, no one should be exempt.” That is how good people think everywhere, and responsible political leadership must ensure that that is also the way people behave. Therefore, we have to deal with tax havens and related issues.

HWZ: I agree, and this topic deserves more attention in Doha than it got in Monterrey. It would make sense to shape a global compact to fight tax evasion. Such a compact would involve not only governments, but also private- sector companies. We know that tax evasion and tax flight hurt developing countries and rich nations alike. A study commissioned by our Ministry shows a loss of about $ 500 billion every year for developing countries. The figure for rich nations is another $ 500 billion. Summed up, that is ten times the current total of ODA. If that money was in the national budgets, that would solve many problems…

…not least in terms of developing countries raising their own funds.

HWZ: Precisely, yes. You see, we talked to staff of the internal revenue service in Ghana. One of them said: “If we want our government to be responsible to us citizens, we have to make them less dependent on foreign aid.” That idea is not new, but I was impressed to hear it stated so clearly by a government officer in Africa.

It makes sense to turn around the phrase “No taxation without representation”, the historic slogan of the American revolution. Where there is no taxation, there normally is no democratic representation either.

TM: This issue is very important, and governments throughout Africa are aware of it. We know we have to focus on tax collection and improve matters. To promote that cause, we already have an agreement to establish an African Tax Institute, which will be funded by the OECD.

HWZ: The point really is that to rely on a county’s domestic resources is evidence of good governance and ownership. But that is a long-term goal, we have to cooperate internationally to achieve it everywhere.