Notes Eurodad Aid & Private Finance Strategy Meeting – 20-22 January 2014, Brussels
Participants: Jeroen Kwakkenbos (Eurodad), Mathieu Vervynckt (Eurodad), Maria José Romero (Eurodad), Jesse
Griffiths (Eurodad), Jan Van de Poel (Eurodad), Nina Schneider (Alliance Sud), Penny Davies (Diakonia), Minna
Havunen (Kepa), Antonio Tricarico (Recommon), Carlos Villota (Concord), Xavier Sol (Counter Balance), Zuzana
Sladkova (Concord), Antonio Gambini (CNCD-11.11.11), Rachel De Plaen (CNCD-11.11.11), Matti Kohonen
(Oxfam International), Clare Coffey (ActionAid), Peter Chowla (Bretton Woods Project), Javier Pereira
(ActionAid), Isabelle Brachet (ActionAid), Meja Vitalice (Reality of Aid Africa), Tarcicious Mufundisi (AFRODAD),
Lidy Nacpil (Jubilee South), Adhemar Mineiro (Rebrip), Luisa Gil Payno (Plataforma 2015),
Main outcomes:


We can develop a framework based on Busan principles: private sectors and governments
needs to implement these principles, can’t just pick and choose.
→ These principles could be incorporated into a political narrative
We need a method for information sharing and analysis among different groups:
→ Different work areas are willing to incorporate joint messages but need to be
informed of ongoing discussions.
→ Simple documents outlining key policy asks could be used to structure messaging.
→ Eurodad can facilitate this: providing relevant documentation through Google Drive.
→ Commitment to use tool strategically and efficiently:
 Sharing and analysing relevant info in simple language.
 In case of publication of report: develop and share PPT, blog, etc.
 Google spreadsheet on current and future research members/partners.
 DFI mailing list could be very useful tool if treated strategically.
→ Contact members and partners for existing documentation, e.g. already useful
studies on DFIs and tax havens.
Political narrative:
In two group discussions we assessed how to develop a political narrative based on principles and
identified research gaps that need to be filled in. There were many complementary elements
identified by the two groups. The discussions are outlined in the table below:
Group 1: Aid and Private Sector
Key tool: Busan principles
 Develop framework for political
narrative, cannot pick and choose
principles.
 Expand upon principles to drive
discussion.
 Demonstrate relevance to groups
working in other areas (climate finance,
FFD etc…)
Research gaps:
 How PS activities measure up to Busan
principles.
Group 2: Financial Intermediaries, private
finance
Objectives:
 Create space inclusive enough to
develop a systemic criticism on FI
lending
 Work on principles for guidance on FI
lending, promoting healthy
domestic/international financial sector
 Reach out to other groups
Research gaps:
 Case studies on tax, FI and DFI
 Discussion papers

Case studies on implementation of PS
activities.
Processes to target (short term):
 ODA reform
 HLM in Mexico
Process/milestones:
 Spring meetings IMF/WB
 Policy forum
 BRICS Summit
 Annual meetings WB/IMF
Detailed notes:
Day 1: introductory day



Eurodad Aid workplan 2014:
o ODA reform, public procurement (incorporation social and environmental criteria
and CSO demands).
o 2 reports: one for European Parliament (Committee on Development), one on state
of development, focussing on different financial flows.
Similar work on these issues from partners/members:
o Recommon: public financing for private (financial) sector, financial intermediaries,
privatisation of public ownership, export credit agencies, DFIs.
o Economistas sin Fronteras: internationalisation of Spanish companies, tax reform in
Spain, Spanish public instruments supporting private sector.
o Alliance Sud: watchdog role for Swiss government, increase parliamentary support to
push ministries of Foreign Affairs and Economic Affairs. Use aid effectiveness agenda
to discuss financial terms of post-2015 agenda.
o Kepa: CSR, role of private sector in Finnish development.
o Counter Balance: EIB and EBRD, public money to private financial sector, FIs, PPPs,
role in blending at EU level.
o Reality of Aid Africa: criteria of private sector involved in blending mechanisms,
inclusiveness, equality and equity, energy sector in East African region, trade
interests versus development interests in private sector.
o ActionAid: land grabs, private investments in Africa, domestic resource mobilization
(DRM), monitoring and evaluation, accountability.
o AFRODAD: private finance flows in Zambia, Tanzania and Ethiopia, role of CSOs in
enabling positive impacts, PPPs, Domestic Resource Mobilisation (DRM), impact of
aid in BRICS, advocacy campaigning in Kenya and Cameroon.
o Rebrip: G20, Brazilian Cooperation (working together with Oxfam and organisations
in Mozambique), development finance and PPPs (which are mainly public-public in
Brazil).
o Diakonia:
 Topics: tax, transparency and accountability, development impact and who
benefits, using ODA to leverage private finance.
 Processes and institutions: Swedfund, report with Amnesty, policies for
ensuring development impact, general elections in Sweden.
Overlapping issues:
→ Forms of financing, their meaning and impact
→
→
→
→
Additionality of these flows
Accountability: who is accountable, how is the private sector accountable, how do
we keep accountability aspects and development priorities a main thing in
investments?
Financial intermediaries, data collection
Conditions under which flows operate: monitoring and evaluation mechanisms, DFIs
and operations through tax havens
Day 2: Information and analysis sharing; capacity building
Thematic session 1: instruments and modalities


EU blending:
o Focus on infrastructure and energy
o Lack of transparency, accountability and development impact
o EU definition only makes distinction between grant and non-grant component. EU
claims everything that is non-grant is being mobilised and additional.
→ Unclear who’s really leveraging who: is grant leveraging non-grant
component or vice versa?
o IFC makes distinction between public money and private investments (non-grant is
only private component). Still unclear who’s leveraging who:
→ ODA grant leverages DFI money? (public \ public)
→ DFI leverages ODA grant? (public \ public)
→ ODA grant leverages private money? (public \ private)
→ Private investor leverages DFI money? (private \ public)
→ ...
o Financial and non-financial additionality unclear. What does “additionality” mean?
What kind of private sector?
o Lidy Nacpil: in what development projects would we like to have private sector
involved? Only then leveraging becomes an important tool. Example: private sector
involvement under qualified standards in energy sector. Need for more regulation to
avoid harmful practices, but we can’t just oppose the private sector.
o Adhemar Mineiro: no need to leverage money in international markets except in the
case of dealing in foreign currency. Need for thinking about domestic private sector
development and national leveraging.
o Meja Vitalice: what is the motivation of the private sector, and is this applicable in
context of development?
Thematic session 2: Resources and principles

ODA reform:
o ODA reporting outdated; need for revised ODA definition.
o EU very divided. Donors are pushing their own political agendas to include specific
financial flows (e.g. anti-terrorist activities, student loans, refugee support, etc.)
o Very technical discussion: CSOs should avoid getting lost in technicalities and focus
on political aspect instead.
o
Financial instruments being discussed are often risk-based with unclear development
impact1:
 Guarantees:
 Currently not counted as ODA because no flow involved.
 Donors are pushing to count all resources mobilised by guarantees
as ODA.
 How should the guarantee be structured?
 Mezzanine finance:
 Risk mechanism, loan issued in partnership with public agency
 In case of default, private sector first to be repaid
 Unclear development impact and additionality
 Equity:
 Currently counted as net flow. Increased push by donors for gross
counting.
 Donors argue that they create market confidence by investing in
companies and attract other investors; CSOs question additionality
and argue that public participation could crowd out private
investors.
 Unclear development impact
 Concessional loans:
 Current reporting system is outdated and incentivises donors to
issue profit-making loans.
 Concessionality requirements do not reflect donor effort.
 “Concessional in character”: donors have to lend below market
rates.
→ Who’s market rates?
→ Return on investment: donors can borrow on their capital
market and subsequently issue loans below market rates of
the capital market recipient countries have access to.
→ Developing countries are desperate for cash, but risk
indebtedness.
→ Interest repaid not deducted from ODA.
Thematic session 3: Implementation

1
Risks and opportunities of PPPs:
o PPPs attractive for private sector, but very expensive and inevitably risky for
governments. If companies involved fail, government has to take over.
o The way in which PPPs have been implemented thus far is problematic.
o Big infrastructure projects are essential services, no need for PPPs.
o Challenges for CSOs:
 What are PPPs really? Distinction between different types of PPPs needed.
For more information on the pros and cons of different financing instruments, please check p. 13-15 of
Eurodad’s report “Private Profit for Public Good”: http://www.eurodad.org/files/pdf/520a35cb666a7.pdf

o
2
How to ensure that PPPs are done in a framework which is accountable and
in line with Busan principles? What role does the state have in determining
development impact of PPPs?
Brazilian agencies involved in PPPs:
 Brazilian Cooperation Agency (ABC)
 Mercosur “structural compensation fund”
 Banco del Sur
 Brazilian National Development Bank

Financial intermediaries:
o Compliance Advisor/Ombudsman:
 IFC devotes almost 50% of portfolio to financial sector, but doesn’t know
what happens with investments in terms of environmental and social impact.
 Lack of transparency, accountability or clear development impact, despite
use of public money.
o IFC focusses mostly on “low-hanging fruit”, where additionality is suspect. No room
for frontier financing.
o Most DFIs follow this pattern:
 Claim lack of capacity to invest directly in SMEs in developing countries
 Claim developing countries lack access to credit
→ Antonio Tricarico: although development rationale to use FIs is weak,
CSOs cannot deny lack of access to credit for developing countries.
→ Both CSOs and DFIs are not talking about real issue: use of FIs is
neither a case of lack of access to credit, nor of transparency and
accountability.
→ Alternative way for CSOs to approach discussion on FIs?
 Most DFIs cannot demonstrate positive development impacts.

DFIs and tax havens:
o DFIs claim lack of legal taxation framework in developing countries
o Several attempts to mainstream tax justice in DFI work
 EIB: tax havens policy dates back to 2010, time for revision.
 EBRD: new statement on tax havens2.
http://www.ebrd.com/downloads/policies/sector/domiciliation-policy.pdf
 Bilateral DFIs under pressure, e.g. recent BIO reforms.
 IFC resistant to review its policy.
o Try to introduce anti-money laundering directive (AMLD) and country-by-country
reporting (CBCR) in EIB operations, but legislation process is stuck (either in
European Parliament or Council).
o Discussion on DFIs and tax havens has a lot of potential for CSOs. How should CSOs
approach the discussion?
Eurodad blog post on EBRD reforms: http://eurodad.org/Entries/view/1546143/2014/01/31/Is-the-newEBRD-policy-a-turning-point-for-the-acceptability-of-tax-havens-in-development-finance


Blacklisting difficult: some tax havens are grey + many pension funds and
sovereign wealth funds refuse to invest if they have to pay tax in the country
where they are economically active. How should CSOs respond to this?
Need to stick to essential point:
→ Developing countries miss out on trillions of dollars as a result of
illicit financial flows.
→ Useful precedent (e.g. BIO reform) to push other DFIs:
→ Swedfund promised CBCR in next reports.
→ IFC has a list of countries where they should not invest
through, yet unclear to what extent this policy is being
implemented.
Thematic session 4: Institutional focus

Institutions and processes to target: bilateral, regional (BRICS bank, Asian Development Bank,
Inter-American Development Bank, etc.) and international DFIs (IFC); EU institutions, Green
Climate Fund, World Bank, UN Intergovernmental Committee of Experts on Sustainable
Development, High-level Ministerial in Mexico, African Union, Brazilian Cooperation, Export
Credit Agencies (ECAs), UNCTAD, GPEDC, Financing for Development workstream.
Day 3: Strategy discussion
Assess thematic and/or institutional approach:

Need for political narrative that can guide our respective activities until 2015 and in the
different levels we engage in.
o Two-tier approach: core message to general public and in-debt technical policy work
to support this core message.
o Consensus on: private sector tax evasion and avoidance, accountability,
transparency, more responsibility in public sector, more CSO engagement.
o No consensus or lack of capacity to agree on and push social agenda.
Group discussions:
Group 1: Aid
Key tool: Busan principles
 Develop framework for political
narrative, cannot pick and choose
 Expand upon principles to drive
discussion
 Demonstrate relevance to other groups
Research gaps:
 How PS activities measure up to
principles
 Case studies on implementation of PS
activities
Processes (short term):
Group 2: FIs, finance
Objectives:
 Create space inclusive enough to
develop a systemic criticism on FI
lending
 Work on principles for guidance on FI
lending, promoting healthy
domestic/international financial sector
 Reach out to other groups
Research gaps:
 Case studies on tax, FI and DFI
 Discussion papers
Process/milestones:


ODA reform
HLM in Mexico




Spring meetings IMF/WB
Policy forum
BRICS Summit
Annual meetings WB/IMF