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Germany

Credit Crunch Casts Pall Over Development Conference

With talk of falling markets and a looming recession worldwide hanging in the background, leaders from around the globe met in Doha this week for a UN conference on financing for economic development.

French President Nicolas Sarkozy giving a speech in front of a podium with four speakers

French President Nicolas Sarkozy reaffirmed the EU's commitment to development aid goals

The conference, which ended Tuesday, was hailed by UN General Assembly President Miguel d’Escoto Brockman in his closing remarks as a summit that would pave the way for “people-centered development to replace profit-centered development.”

DW-WORLD caught up with one of the attendees and a specialist in aid for developing countries, Jens Martens, Director of the Global Policy Forum Europe, to find out just how dark a cloud the credit crunch is casting over emerging economies.

Deutsche Welle: Was there anything in the conference that indicated how the financial crisis might impact development aid in the coming years?

Jens Martens: The financial crisis was mentioned in the outcome document of the proceedings as an extreme and grave problem for the developing countries. And a lot of people -- government representatives, researchers, civil societies -- expressed their fear that the financial crisis will have grave consequences for the developing countries and official development assistance.

But in the official documents and in the speeches of the governments you will not see any turning away from this commitment. The German government and the European Union, for instance, recommitted themselves to their own timetable to increase development aid to 0.7 percent of Gross National Product by 2015.

Do you think in any case that those fears are valid?

If the German government wants to really implement its own commitment from 2005 – which means increasing German aid to 0.51% by 2010 -- then they have to increase the German aid budget by 1.6 billion euros every year. Right now, we expect an increase in the development budget for 2009, but an increase which is not high enough to really implement what the government promised before. The danger is not that German development aid will go down, but that it won’t increase adequately and in line with its own commitments.

What else would you like to see the governments doing to assist emerging economies?

Woman using pump to draw water

Some have worried that aid to developing countries would be cut because of the credit crisis

The quality and quantity of aid is only one relatively small element in the whole debate about how to improve financing for development. Other elements like the question of debt relief, improvement of trade relations and trade cooperation are even more important. One extremely important question which was also discussed in Doha was how to improve domestic resource mobilization and really fight against the outflow of capital from developing countries because this equals probably somewhere between $500 and 900 billion each year.

On the one hand, when we talk about aid, we talk about $100 billion per year, all inclusive. On the other hand, you have $500-900 billion that goes out of these countries due to tax evasion, tax avoidance and other forms of illegal capital transfer from south to north. In this regard, it’s a much more important issue and this was emphasized in Doha.

Where do we go from here?

There are several rows to hoe now. There’s this German initiative for an international tax compact and we expect the German government, particularly the German development minister will take the next step and properly invite countries, governments, who are interested in this tax compact now to a conference next year. We know, for instance, that Chile, Uganda, South Africa and Norway and other countries are interested in it. And in this process, they will discuss and consider what to do against tax evasion, tax avoidance and international tax cooperation at the global level.

So that’s one step. Then there’s the international conference on the financial crisis and its impact on development to be held next year. It will be probably be the major event at the UN level with regard to financing for development. We have to wait until March to see what will be on the agenda but I expect that all these, particularly the systemic questions, including the roles of developing countries and the international institutions like the World Bank, the IMF will be on the agenda. But there will be other questions as well, especially with regard to the losses of the developing countries due to the financial crisis.

The hope is also that when (US president-elect) Obama comes into office that this will bring a new dynamic into the international negotiations. We are hoping now that the conference next year can benefit from the political shift in the US.

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