The global financial crisis and its potential impact

The global financial crisis and its potential impact for multilateralism and UNESCO Presentation by Hans d’Orville, ADG/BSP DIGE 12 January 2009

A quadruple global crisis unfolds w In the prime of globalization, we are experiencing an accumulation of four interrelated crises, mutually feeding on each other: w Climate change crisis w oil and energy (price) crisis w Food (and hunger) crisis Financial and economic crisis

A quadruple crisis unfolds w The consequences of these crisis individually and even more so combined - for development can be devastating and hence there is an urgent need to develop effective counter-strategies

The new global s(l)(h)owdown w Profound and deepening financial and economic crisis affecting all countries - a true impact of global interdependency -, requiring injection of (hundreds of) billions of US$ by Governments into banking sector to maintain liquidity of banks and uphold their ability to provide credit - and to provide economic stimulus programmes of a Keynesian nature w Real estate/housing market meltdown - with many foreclosures and personal bankruptcies w Stock market crash (“krach”) as a result of anxieties and shrinking confidence/trust depleting investments and collateral as well as jeopardizing pensions

The new global s(l)(h)owdown 2 w Deep and long global economic recession looms - with high unemployment, shrinking tax receipts, lower exports and trade, gyration of currencies, decreasing tourism, less consumption and ultimately the specter of deflation w Oil and commodity prices are in a steep fall, affecting the income of many oil-producing (developing) countries - while lessening the burden for the majority of the developing countries, which had absorbed in many African countries all ODA inflows

The new global s(l)(h)owdown 3 w All these pressures reduce the manoeuvrability of Governments in industrialised and developing countries alike, as their budget deficits are rising again (in the EU likely above the 3% Maastricht mark) w Governments are forced to revisit their budgets and make cuts to reach as balanced a budget as possible, especially if they require IMF standby credits w The return of the virtue of deficit spending w Moral hazard: Need for more equity in policymaking and allocation of public funds

The consequences w Developing countries, the most defenseless - and often times “innocent bystanders” - face a perfect storm (WB) and for them the crisis may translate into w lower government budget allocations to social AND productive sectors; w Less (discretionary) funds for activities in ED, SC, CLT and CI w Lesser prospects for attainment of IADGs/MDGs by 2015 w rising poverty levels w More demand for official development assistance (ODA) and foreign direct investment (FDI), i. e. private sector flows w More demand for multilateral and NGO/foundation funding w More recourse to South-South cooperation

The consequences 2 w For industrialised countries, this may translate into w Lower ODA earmarking and allocations, abandoning commitments made only recently (especially for doublig aid to Africa by 2010) - overall, more pronounced trend towards lower ODA w Kofi Annan recently denounced as “incredibly short-sighted - as well as immoral for wealthy countries to use this financial crisis to drop promises to help the poorest“ (IHT) w Less ODA for select sectors like education, which are not protected by specific international pledges or agreements w Doubtful realisation of summit commitments (i. e. G-8 Gleneagles commitment for Africa) - at present US$ 30 billion short of 2005 G-8 Gleneagles Summit commitments w Less discretionary funds and hence lower/stagnant levels of extrabudgetary contributions to multilateral organisations w Lack of desire for new multilateral initiatives

The consequences 3 w For the private sector, this may translate into w Lower economic growth w Less trade with developing countries irrespective of trade barriers and custom levels w Lower levels of FDI flows w Less loans for investment and trade in developing countries w Lack of interest in new public-private partnerships requiring private sector funding w Overall, reduced confidence in market forces w Lower volume of donations to NGOs and charities (as corporate donors in both developed and developing countries slash social responsibility budgets, such as in China with a 2008 record US$ 14. 5 billion donations of which 70% is due to corporations) w Lower programme funds earmarked by foundations?

The multilateral fallout w Global “collisions” and contradictions, which are difficult to resolve - e. g. , lower budget allocations by developing countries makes them look towards UN agencies which by themselves my be hit by lower budgets - or promote trade while credit dries up w doing more with less: demand by developing countries for assistance will increase while contributions to agencies are likely to decrease (zng or worse) w It may also mean more focus on upstream advice

The multilateral fallout 2 w Can there be additionality even for (UN) reform frameworks and how long will current commitments hold (e. g. MDG-F and its new windows; support to One UN Funds; no country left behind in EFA who has a credible national plan)? w How will IMF loans and the related conditionalities affect UNDAFs and One Programmes/Funds (e. g. Pakistan)? w Will UN reform efforts at the country level be affected - if additional donor funds are not forthcoming?

The multilateral fallout 3 w Will governments and multilateral agencies be able to maintain their professed commitment to fight climate change and environmental degradation - or will that be sacrificed for straightforward economic survival action and other more immediate priorities? ? w Which (sectoral) priorities will be sacrificed or pushed back? w Overall - will there be a need to redefine multilateralism - towards more collaboration? w Danger: excessive focus on new, more transparent and accountable financial architecture, without regard to the level of real needs of people and infrastructure needs

G-20 Summit Washington 15 November 2008 - signal of hope? w The G-20 Declaration of the Summit on Financial Markets and the World Economy on 15 November 2008 outlined a roadmap for future action to stabilise and reform financial markets, to preserve an open global economy, to promote trade, to provide credit and liquidity and to restart economic growth and overcome recession w Major focus was on strengthening transparency and accountability curbing speculation in currency, financial and commodity markets; enhancing sound regulation nationally and internationally; promoting integrity in financial markets; and reinforcing international cooperation w But the summit also emphasized in the concluding section on a “commitment to an open global economy” - though almost as an afterthought and with rather weak and little compelling language or conviction - on:

G-20 summit - a signal of hope? w A commitment to free market principles which are essential to economic growth and prosperity and have lifted millions out of poverty; w The importance of rejecting protectionism and not turning inward in times of financial uncertainty; w The impact of the crisis on developing countries, particularly the most vulnerable; w The importance of the MDGs, the development assistance commitments the participants have made w Urge both developed and emerging countries to undertake commitments consistent with their capacities and roles in the global economy w Reaffirm the development principles agreed at the 2002 Monterrey Conference on Financing for Development, which emphasized country ownership and mobilizing all sources of financing for development.

The lacunae in the G-20 message Sadly, no word about preventing a rollback in the volume of development finance, the need for investment in education and health precisely at the present juncture to build the foundations for future development and prosperity, or underlining the critical role of and providing the necessary resources to other multilateral organisations than the Bretton Woods institutions…. . We are left simply with a statement that the summitteers are confident that through coordinated partnership, cooperation and multilateralism (of an undefined type), the world will overcome the challenges before it and restory stability and prosperity in the world economy.

World Bank calls for aid boost w The World Bank President called on donors to boost financial aid to developing nations which find themselves at the mercy of a crisis that “is not of their making” w Empowering developing and emerging countries and economies is imperative w Helping nations pursue economic development and long-term prosperity should be the goal of development finance.

Doha Follow-up International Conference to the Monterrey Consensus 28 November - 2 December 2008 It adopted a voluminous Outcome Document containing the Doha Declaration on Financing for Development, now to be submitted to the UN General Assembly for endorsement. Highlights of this Declaration: a) the reconfirmation by and large of the Monterrey Consensus (insofar not breaking any new ground); b) the emphasis, especially at the insistence of developing countries, on the need to remain committed to the current ODA targets, irrespective of the fallout of the present crisis; c) in addition to the traditional supply side concerns of domestic resource mobilization, ODA, debt relief and trade a strong focus on innovative financing approaches;

Doha - cont’d d) a strong section on gender equality and the economics of gender; e) an explicit focus on social investment, including education not least driven and inspired by UNESCO’s successful High-level event; and f) a decision to hold a UN conference at the highest level on the impact of the current financial and economic crisis on development. g) On the margins of the Conference, the President of the General Assembly also launched a Commission of Experts on Reforms of the International Monetary and Financial System. h) If anything, the continued absence of scientific, cultural and communication issues on the agendas and the outcome documents of conferences like the one in Doha is a source of dissatisfaction and we may need to reflect how to remedy this deficiency.

Financing Education in Conflict. Affected Areas to Achieve EFA Goals w From UNESCO’s perspective, most significant was the High level Side Event: Financing Education in Conflict Affected Areas to Achieve the Education for All Goals. It was organized by ED and NYLO and held under the auspices of First Lady Sheikha Mozah. The list of participants further included the UN Secretary-General, the President of Burundi, the Vice-President of El Salvador, the President of the UN General Assembly, numerous Development Cooperation Ministers and Heads of bilateral agencies (e. g. Netherlands, USA) as well as senior officials, NGO leaders and senior colleagues from the UN system (World Bank, UNICEF, UNFPA) and regional development

Education in Conflict-Affected Areas cont’d w The discussion resulted in the Doha Statement on Financing Education in Conflict Affected Areas. This event laid an excellent foundation for the upcoming spring 2009 discussion by the UN General Assembly on the very subject.

High-level Group on EFA, 8 th Meeting - 16 -18 Dec 2008, Oslo The OSLO DECLARATION “ACTING TOGETHER”, was adopted by the participating Ministers, leading officials of multilateral and bilateral agencies, senior representatives of civil society and private sector organisations, gathered at the invitation of the Director-General of UNESCO and of the Minister of Environment and International Development of Norway

Oslo Declaration - cont’d The HLG noted that it took place in the context of a global economic slowdown spurred by a financial crisis unprecedented since the 1930 s. The Declaration stated that “It will be imperative to protect and insulate the world’s poorest children, youth and adults from the worst effects of the crisis, as they carry the least responsibility for these events. The crisis should not serve as justification for any reduction in national spending and international aid to education. Instead, steadfast support for achieving the internationally agreed development goals, including the EFA and Millennium Development Goals (MDGs), is more vital than it was before the crisis. ”

Oslo Declaration - cont’d Reaffirming the centrality of education for development w (3. ) … we reaffirm that education is a fundamental human right, to be respected at all times. It is one of the most effective tools for achieving inclusive and sustainable economic growth and recovery, reducing poverty, hunger and child labour, improving health, incomes and livelihoods, for promoting peace, democracy and environmental awareness. Education empowers individuals with the knowledge, values and skills they need to make choices and shape their future. Universal access to quality basic education and better learning outcomes are the drivers to achieve the IADGs, including the MDGs. As reaffirmed at the September 2008 United Nations MDGs summit, sustained investment in education and health is essential for reaching the MDGs.

Oslo Declaration - cont’d w (4. ) We therefore agree to better plan and coordinate global advocacy efforts for all six EFA goals. We task the EFA convening agencies and interested EFA partners to further develop a joint EFA advocacy plan of action and present its first results to the next meeting…. w (5. ) Educational strategies need to be integrated within broader antipoverty and national development policy frameworks. The fact that child malnutrition and ill health remain a major obstacle to educational access and achievement for the poor highlights the intricate connections among education, health and social conditions. It underscores the need for stronger inter-sectoral policy coordination. w (6. ) We request the EFA convening agencies, to engage with relevant UN agencies such as the WHO and the WFP as well as interested EFA partners in order to better coordinate education, health and nutrition initiatives in integrated programmes, targeting young children in poor communities in countries far from EFA. We commit to support such initiatives that should be country driven and backed by development partners.

The UNESCO perspective w As exemplified by the Oslo Declaration, critical need for specific and effective advocacy for maintaining or increasing ODA flows in time of financial downturn with all relevant partners (education, climate change). w Multi-sectoral coordination, especially at the country level, will be essential to attain IADGs w Concentration+prioritisation in the face of lower resource prospects and growing needs w Need for even more sharpened and resultsoriented 35 C/5

The UNESCO perspective 2 w Need for more imagination and creativity in delivery: focus on less costly initiatives - and reorientation towards (cheaper but effective) upstream initiatives - enhanced visibility w Whither the UNESCO budget level: can zrg be obtained for the 35 C/5? How can we preserve current levels of extrabudgetary resources critical for outreach and impact? w Need for a revision of 34 C/4? ?

Specific action by UNESCO w Urgent need for sustained monitoring of trends in the spheres of competence of UNESCO: w In developing countries as regards budget allocations to education, the sciences, culture and communication and information and continuation of multi-donor programmes and projects w In industrialized countries, flows of ODA, sectorally broken down (data by OECD), and of extrabudgetary resources to UNESCO and other multilateral organizations w In case of negative trends, launch global alerts and design proactive counter-strategies

Specific action by UNESCO 2 w Strengthen critical areas where UNESCO can make a difference: w Advocacy for EFA and preservation of national budget allocations to education w Accelerate education for sustainable development - in creative and effective ways to induce behavioral changes with long-term effects w Build capacities for operating national scientific knowledge basis w Inure policy initiatives and investments in strategically important sectors like education, science, culture as well as communication and innovation w Preserve resources for culture as a critical element of sustainable development and education

Specific action by UNESCO 3 w We must mobilise our efforts in packaging and sharing knowledge and information as well as policy advice that can help countries to cope with the multiple crises w Paradoxically, this will also need an immediate infusion of resources - not a cutback w It is not charity, it is investment in the world’s immediate future w Action in the social sectors is critical for future global stability and prosperity

The crises: moment for global reflection and stocktaking w Almost exclusive emphasis on macroeconomics and on supply side of development: ODA flows, FDI, debt relief w Insufficient focus on sectoral demand side, like resources required for EFA, SC, CLT, CI or agriculture, health, industrial development, labor w No effort is apparent to link supply and demand sides of the equation - need for closer coordination between Bretton Woods institutions and UN system organizations

A moment for stocktaking and action w This might change if there were solid strategies and calculations for the various sectoral areas - this could be a challenge but might also be a survival necessity/opportunity for UNESCO w Even the only available current estimate of US$ 11 billion annually for EFA may well be outdated and too low, as it was produced some 10 years ago

Next UNESCO initiatives: sensitisation - awareness advocacy - building new coalitions w On 27 January 2009, there will be a “ 60 minutes to convince” session focusing on the global financial and economic crisis and their potential fallout for the UN and UNESCO - ADG/BSP and ADG/ED to speak w CEB/HLCP will - with UNESCO part. -discuss the issue at its next session 26 -27 February 2009, Geneva w As agreed by the Intersectoral Platform for Anticipation and Foresight, on 2 March 2009, BSP/FOR (Foresight Programme) will organize a daylong workshop session on the “The Global Financial and Economic crisis – its parameters and

Workshop - 2 March 2009 The Director-General will open the conference, at which several well-known international experts will speak on the following four panel subjects: w THE IMPACT OF THE GLOBAL FINANCIAL AND ECONOMIC CRISIS ON DEVELOPING COUNTRIES, IN PARTICULAR IN AFRICA, AND THE PROSPECTS FOR ATTAINING THE INTERNATIONALLY AGREED DEVELOPMENT GOALS, INCLUDING THE MDGs w INVESTING OUT OF THE CRISIS – IN EDUCATION, SOCIAL SERVICES, SCIENCE AND KNOWLEDGE w THE POTENTIAL IMPACT OF THE GLOBAL FINANCIAL AND ECONOMIC CRISIS ON WOMEN AND GENDER EQUALITY w WHAT IMPACT OF THE GLOBAL FINANCIAL AND ECONOMIC CRISIS ON CLIMATE CHANGE AND PROSPECTS FOR A GREEN ECONOMY?

We will remain in the eye of the storm Calm inside Heavy storm outside Debris all around us And then: what will be the fallout for us? How can we react and counter any potential negative impact? w How can we anticipate the expectation of Member States, the needs of developing countries and proactively deliver? w w w