PARIS CONFERENCE ON INNOVATIVE FINANCING FOR

UNCLAS SECTION 01 OF 04 PARIS 001304

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SUBJECT: PARIS CONFERENCE ON INNOVATIVE FINANCING FOR
DEVELOPMENT

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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

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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.


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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.


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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.







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