PARIS CONFERENCE ON INNOVATIVE FINANCING FOR

UNCLAS SECTION 01 OF 04 PARIS 001304 SIPDIS SENSITIVE SIPDIS STATE FOR EB, EUR, AF, WHA, SA, NEA, EAP AND OES STATE PASS USAID E.O. 12958: N/A TAGS: EAID EFIN EIND FR SUBJECT: PARIS CONFERENCE ON INNOVATIVE FINANCING FOR DEVELOPMENT REF: A. STATE 31158 ¶B. MERTEN-BALL E-MAILS 24 FEBRUARY AND PREVIOUS NOT FOR INTERNET DISTRIBUTION ¶1. (SBU) Summary. President Chirac can call his "Conference on Innovative Financing for Development" a success, at least by the standards the GOF had very likely set at the outset: during the Conference, eleven countries announced their intention to follow the French example and institute a tax on international air tickets, the proceeds of which will go to development. A larger group of countries, including these eleven, will form a "Leading Group on Solidarity Levies" the purpose of which was left vague. Also, Britain and France announced their intention to work together on an International Financing Facility (funded by air ticket taxes),the proceeds of which would go to health and education. Perhaps most importantly for the GOF and President Chirac, the event was a public relations success providing the president with an opportunity to chair an event in which he cast himself as developing countries' strongest advocate in the G-8 club. UNSYG Kofi Annan along with participating heads of state, ministers and NGO leaders lavished praise on President Chirac for his courage, foresight, and leadership in enacting the tax and in hosting the conference. Despite that, it is unclear whether there will be any concrete follow-up other than by those countries that announced they will implement an air ticket tax. End Summary. ¶2. (SBU) On 28 February, UNSYG Kofi Annan and President Chirac opened the International Conference on New Development Financing Mechanisms. Also present were Presidents Sassou Nguesso of Congo (Brazzaville) and Toure of Mali as well as Brazilian Foreign Minister Carlos Amorim. Many developing countries sent either a foreign or finance minister. Those that did not were represented by their local embassies. NGO's were well represented. The USG was accorded status as "observer" (along with Canada, and at the last minute, Japan, and others) and was represented by Embassy Econ Counselor and Financial Affairs Officer. Delegates with whom Emboffs spoke seemed surprised that the USG was present at the conference at all as our position on the airline ticket tax is well known. Nevertheless, most delegates were pleased that the USG did not "ignore" the conference. ¶3. (U) In his opening remarks, President Chirac spoke about how states have been unable to capture and channel the economic growth brought about by globalization. He urged other countries to join France and the UK -- and soon, Brazil -- in applying such a tax and asked all participants to reflect on other ways to fund long-term sustainable development, particularly health initiatives. To "enhance health systems" in the poorest countries, Chirac noted that he would be proposing an initiative for the St. Petersburg G-8 Summit to "accelerate the introduction of health insurance mechanisms that are adapted to the economic and social realities of the poorest countries." ¶4. (U) UK Chancellor Gordon Brown made a brief appearance and spoke about the UK's support for France's initiative on the air travel tax. He said the UK and France had "agreed today (28 February) to implement" an international financing facility (IFF) for immunization to be funded by proceeds from the air travel tax and to establish a working group to report back before the September 2006 Bank/Fund meetings. (Note: The UK is not imposing a new tax but will "hypothecate" a portion of their existing airline ticket tax for development purposes.) ¶5. (U) After Brown's announcement, the conference continued with brief presentations on "New Resources for Fairer Globalization" from French Trade Minister Christine Lagarde (sitting in for Thierry Breton),German Economic Cooperation Minister Wieczorek-Zeul, China's Deputy Finance Minister Yong Li, the FAO's Jacques Diouf, the World Bank's Geoff Lamb, and Henri Rouille d'Orfeuil from the NGO "Coordination Sud." A second session on "Financing for Public Health" featured: Jonas Ghar Store, Norwegian Foreign Minister (who welcomed the French tax initiative as a first concrete step toward a PARIS 00001304 002 OF 004 global tax regime),Ignacio Walker, Chilean FM, Benjamin Radavidson, Finance Minister from Madagascar, Arnad Sharma, Minister of State for Foreign Affairs from India, Jong Wook Lee, Dir-Gen WHO, Peter Piot, Director UNAIDS, and Richard Feachem, from the Global Fund to Fight AIDA, Tuberculosis and Malaria. ¶6. (U) The second day (morning only) featured concurrent workshops on IFF and IFFM, co-development and the role of remittances, taxation of financial transactions and combating tax evasion, and public/private partnerships, local and charity initiatives in innovative development financing. Econ Couns attended the workshops on remittances (overall conclusions: remittances are private money and should not be considered as development assistance; remittances are nevertheless extremely important to developing countries and transmittal should be made cheaper and more efficient; embassies and consulates representing immigrant receiving countries should make their visa issuance information more broadly available to researchers and other government agencies to improve the study of immigrants and remittance flow) and taxation of financial transactions (overall conclusions: IMF rep concluded that taxing financial transactions risked causing dislocations and inefficiencies in domestic financial systems, despite the rel ative success of the system in Brazil; other panelists explained that the financial services industries had made tremendous profits from globalization and contributed nothing to those left behind, a small tax on foreign exchange transactions (especially) could be an excellent source for development funding; capital flight from developing countries is the most pernicious problem facing those countries, unless something is done to combat the causes of capital flight, increasing aid is of questionable value). Foreign Minister Douste-Blazy concluded the conference with the statement repeated in para 7. ¶7. (U) Chair's conclusion as presented by French Foreign Minister Douste-Blazy (he noted that the conclusions were not approved by all the participants in the conference and only represented the conclusions as understood by the host, the GOF): Begin Text: Ninety-three states met in Paris on 28 February and 1 March 2006 on the occasion of the ministerial conference on Innovative Financing for Development organized at the initiative of the President of the French Republic, Mr. Jacques Chirac, with Mr. Denis Sassou Ngesso, President of the Congo Republic, Chairman of the African Union, Mr. Toumani Toure, President of the Republic of Mali, Mr. Kofi Annan, Secretary General of the Organization of United Nations, and Mrs. Graca Machel in attendance. International and non-governmental organizations were involved in this event and are listed in the annex. This conference marks a new step towards rallying the support of the international community for innovative financing for development. It follows the World Leaaders' Meeting for Action against Hunger and Poverty organized by the United Nations at the initiative of Brazilian President Luiz Inacio Lula da Silva in September 2004 and the subsequent signing of the Declaration of Innovative Sources of Financing for Dev elopment by 79 countries in September 2005. The idea of innovative financing for development is now an issue on the agenda of all major international forums and its principle has gained broad support on the part of the international community. Substantive technical work has provided solid bases for action, as shown by the Report of the Technical Group on Innovative Financing Mechanism presented in New York in September 2004. Participants recalled that the Millennium Development Goals (MDGs) cannot be achieved in 2015 unless globalization becomes more equitable. In addition to the commitments that have already been made, official development assistance (ODA) must be increased and made more predictable. Innovative financing sources supplementing traditional ODA will help finance over the long term recurrent expenditure that is needed to achieve the MDGs. PARIS 00001304 003 OF 004 Participants reviewed the different options for Innovative Financing for Development sources and noted that it was essential to continue discussions at an international level on several issues including international solidarity levies, the International Finance Facility (IFF) and its pilot applied to immunization (IFFIm) in particular, contributing to reduce tax evasion and taxing financial transactions, facilitating and lowering remittance costs for migrant workers, a humanitarian lottery, initiatives on the part of local governments, and voluntary contributions from individuals and companies such as the recently announced "RED" initiative for combating HIV/AIDS. These issues were debated in workshops on March 1, 2006. The intention expressed by Brazil, Chile, Congo, Cyprus, Ivory Coast, France, Jordan, Luxemburg, Madagascar, Mauritius, Nicaragua and Norway to implement the international air-ticket solidarity contribution was welcomed. Other countries are set to follow suit. France and the United Kingdom, which have already implemented an air ticket solidarity levy, had the opportunity during the conference to publish a joint communiqu on innovative financing mechanisms. Participants noted that several innovative sources were particularly well adapted to financing health-related development programs, although this is not the only sector in which they can be applied. They stressed that the fight against HIV/AIDS, tuberculosis and malaria must be carried out via the strengthening of developing countries' health systems. National authorities with the help of cooperation agencies must take strong and sustainable action to this end. However more efforts must be made at an international level to improve access to low-cost drugs if the goal of universal access to HIV/AIDS treatments is to be achieved by 2010. With this in mind, participants reviewed the proposal to create an International Drug Purchase Facility (IDPF). Participants would like innovative financing for development to remain on the agenda of the United Nations and other major international forums and will take an active part in future discussions on this issue. They agreed to meet again in 2007 at a "Forum on Innovative Financing for Development Sources" to build on the momentum created in New York in September 2004, renewed in September 2005 and continued during this conference. Participants have welcomed the creation of the Leading Group on Solidarity Levies to fund development which includes the following countries: Algeria, Austria, Belgium, Benin, Burundi, Brazil, Cambodia, Cameroon, Cape Verde, Chile, Congo, Cyprus, Ethiopia, France, Gabon, Germany, Guinea-Conakry, Haiti, India, Ivory Coast, Jordan, Lebanon, Luxemburg, Madagascar, Mali, Mauritania, Mauritius, Mexico, Morocco, Mozambique, Namibia, Nicaragua, Niger, Norway, Spain, South Africa, South Korea, and the United Kingdom. End Text ¶8. (U) We also repeat the announcement which accompanied UK Chancellor Gordon Brown's announcement: Begin text: UK/France Communique on Innovative Financing Mechanisms France and the UK have now been working hand in hand for over two years in order to put forward the issue of innovative financing mechanisms on the international agenda and convince as many countries as possible to support these mechanisms. In the context of the coming international conference on innovative financing mechanisms that will be held in Paris next week with almost 100 participating countries, we are committed to move forward together. France will contribute to the IFFIm for an average of $100 million a year during 20 years. PARIS 00001304 004 OF 004 The UK will sign up to the Leading Group on solidarity levies. The UK is committed to the achievement of the objectives set at Gleneagles regarding the fight against the three pandemics, in particular universal access to drugs against HIV/AIDS by 2010 and is committed to spend ?billion on HIV/AIDS over the next three years, including for the purchase of drugs. It expects at least this level of spending to continue over the long-term. The UK recognizes the importance of long-term predictable finance on a significant scale to meet the challenge of the purchase of drugs, supports the International Drug Purchase Facility (IDPF),agrees to work with France on the details as a co-sponsor of the initiative and is prepared to make a long-term financial contribution. The UK will also hypothecate part of the revenue from its existing Air Passenger Duty to provide a long-term stream of finance to the IFFIm and the IFF. France and the UK will jointly establish a working group to consider the implementation of an IFF going to health and education and funded by an air ticket levy as well as by other revenues from the Landau report. This working group should report back in advance of the September IMF/WB meetings. France and the UK will use their best efforts to persuade others to join this group. End text. Please visit Paris' Classified Website at: http://www.state.sgov.gov/p/eur/paris/index.c fm Stapleton