SPEECH BY VINCENZO VISCO, ITALIAN FINANCE MINISTERTO THE LUNCH OF THE CHILD POVERTY CONFERENCE
Ladies and Gentlemen.
It is an honour to speak today at the Children’s conference in front of such a distinguished audience. I would like to share with you the views of the G7 Presidency on the fundamental issues of development and the fight against poverty that will be one of the main themes of the Genoa Summit this July.
The meeting we had in Palermo last week showed that the Finance Ministers intend to make a substantial contribution to addressing this problem.
I will not dwell today on the evidence of poverty in the developing world. The figures we have been confronted with this morning are a powerful and compelling reminder to us all of the desperate conditions in which a large part of the world population is still living.
The message I would like to bring to your attention is its urgency. The greatest risk in addressing the issue of poverty is to think that time is on our side. The International Development Goals, that we all share and are committed to, set objectives for 2015. This looks a long way ahead. But I would also like to recall that these goals were set 5 years ago. Five years - one fourth of the time we gave ourselves in 1996 - have already elapsed and little progress has been achieved. We need to catch up, and quickly.
Progress has been made with debt forgiveness. The enhanced HIPC initiative has led 22 countries to reach the Decision Point. The Governments of the G7 countries have agreed to provide 100 per cent debt cancellation to these countries in the context of the Paris Club. In Palermo, we called upon other bilateral creditors, public and private, to grant full cancellation too. Countries will receive the full benefit of the cancellation under the initiative at the Completion Point.
Overall, the implementation of the initiative will lead to 34 billion dollars of debt relief, reducing the debt of these countries on average by two-thirds.
Several countries have not yet benefited from the initiative, because they are still affected by conflicts. We need to help these countries to break out of their state of conflict so that they can also benefit from the initiative. Cancelling their debt before they stop fighting would be counterproductive. It would encourage the continuation of war.
The UK Government, supported by the Canadian Government, has recently proposed to channel the debt service payments received from these countries in dedicated Trusts, and to give back these funds to the countries themselves, as soon as they end war. I strongly support this proposal and invite the other G7 and European countries to implement it.
We also need to pay due consideration to the group of very poor countries that have not benefited at all from the initiative, simply because, despite being very poor, they have avoided falling into an unsustainable debt situation. We should recognize that paradoxically the heavily indebted poor countries have been rewarded in the form of debt cancellation but not those poor countries that have behaved well and have refrained from accumulating an excessive debt.
The explanation for this discrimination underscores the fact that the HIPC Initiative is primarily aimed at ensuring debt sustainability. However, this is not necessarily the only rationale with which debt forgiveness should be approached.
In fact, debt restructuring is already envisaged for the very poor countries, in the context of the Paris Club. Today, the 20 IDA-only countries that are not eligible to the HIPC Initiative, in the context of the Paris Club, can be granted a cancellation of 67 per cent of their bilateral official debt. The remaining 33 per cent is rescheduled over 30 to 40 years. These are the so-called Naples Terms, agreed seven years ago at the Naples G7 Summit. No further facilities have been worked out for these countries since then.
Let’s be frank! For us creditors, the net present value of the remaining part of the debt owed by these countries is largely symbolic. For the debtors, though, it remains a burden. Italy is therefore proposing to increase the share of ODA and commercial debt that can be cancelled by 67 per cent to 90 and more. We expect the other G7 and European countries to support this initiative as part of the action plan for fostering development and fighting poverty in preparation for the Genoa Summit.
Debt relief alone is not, however, enough to fight poverty. These countries need to set in motion a sustained, broad-based growth process. We share the responsibility for removing existing obstacles to growth in these countries.
A first area of action is trade. The poorest countries face significant obstacles represented by tariffs and other types of protection against their exports imposed by the industrial countries. We must eliminate these as soon as possible.
Ideally, this objective would have to be pursued in the context of a new multilateral trade negotiation launched under the aegis of the WTO. But if this takes up too much time, the industrial countries, the G7 and other Europeans in particular, should be ready to act unilaterally and expeditiously to remove these barriers – I would suggest by the end of this year. The G7 Heads of State should commit themselves to attain this objective at the Genoa Summit. The European Union should set the example in this field.
The World Bank has estimated that such a measure would increase exports by the poorest countries by about 14 per cent and raise GDP by over 1 per cent. The impact on some countries would be significantly larger than the amount of aid they currently receive. Trade diversion from other developing countries would be very limited. The overall costs to the industrial countries would be negligible.
Every year that goes by without action being taken to remove trade barriers is a year lost in the common endeavour to give the poorest countries a chance to benefit from globalisation. There is no point in providing aid to the poor counties if such aid cannot be put to good use through raising the production of goods that can be sold to the outside world. If this is not done, we are just protracting the poor countries’ dependency on aid forever.
The third area where urgent action is needed is aid. There is a risk that aid is dispersed, which makes it ineffective.
I be1ieve that we need to concentrate our action on the development of human capital. Without improved human capital, there can be no growth in these countries. We must invest in this resource, especially at a time when it is being seriously threatened. Health and education are the two key sectors to which efforts for improving living conditions in the very poor countries and ensuring that they can engineer self-sustained, inclusive growth should be directed.
I will address health issues first. Again, I do not need to come back to the numbers showing the extent of the devastation that is taking place in some countries, particularly in Africa. We need to act promptly, by concentrating on such key problems as the provision of vaccines against the major infectious diseases. This is not to say that we should forget other diseases or areas of action, to which I will come back later. But the speed at which the damage is being done is such that we need an urgent and substantive response.
We have proposed, for the Heads of Governments to consider in Genoa, the creation of a special Trust Fund for health, managed by the World Bank, in coordination with other international institutions and bilateral donors. We call on the 1000 largest corporations in the world to contribute a minimum donation of 500 thousand dollars each, industrial countries’ governments would commit themselves to match these private donations, dollar by dollar, with the view to achieving an overall target of 1 billion dollars. The resources mobilized through the Trust Fund would ensure that decisive action is undertaken in the next months to make vaccines more affordable to these countries and to introduce widespread preventive and curative treatments. In this way we would also encourage effective cooperation between the main groups of actors — the developed countries, multilateral institutions and private business. NGOs, and the developing countries themselves, as clearly identified in the programme of this Conference — towards the achievement of the International Development Goals, such as the reduction by three-fourth of the maternal mortality and by two-thirds of the mortality rate of children under 5 years, and access by all to primary health care. I am glad to have been provided the opportunity, by addressing the participants to this Children Conference, to underline the importance of this initiative.
Of course, we are all aware that a strategy for substantially improving health conditions in the poor countries requires a longer-term view. We need to provide appropriate incentives, including tax credits and subsidies, to encourage a stronger commitment by the pharmaceutical companies to make medicine available at cheaper prices in these countries, and to intensify research to develop vaccines to fight incurable diseases. To this end, resources can also be made available from the Trust Fund I have just mentioned. Closer coordination is required between the international institutions in the UN family, Governments and private donors, within the framework of country-owned Poverty Reduction Strategy Plans, to enhance the effectiveness of aid provided from various sources.
I will turn now to education. Aid also needs to be more effective in this very important field. Without improved access to education, the poorest countries cannot succeed in enhancing their growth performance and benefiting from technological innovations.
I recall the commitments included in the International Development Goals to achieve universal primary education in all countries, and eliminate gender disparity in primary and secondary education.
A main target for assistance from the international community should be to strengthen institutions in the poor countries that have a crucial role to play in financing basic education, investing in infrastructures, and training. Multilateral development banks should focus on providing support to the poor countries that plan to achieve free and compulsory primary education.
Child labour must not stand in the way of education. The poor countries should make a clear and verifiable commitment to reducing child labour exploitation by a given deadline, in exchange for enhanced assistance. Monitoring the results of policies and programmes to fight child labour can help to highlight ways to address the obstacles to the effective implementation of the ILO Conventions against child labour.
Improving in education standards must not of course be limited to children, but needs to be extended to fight adult illiteracy, particularly for women. This is a key challenge for the coming years. Investment in quality education for girls is an essential step towards achieving gender equality and provides multiple social benefits, including better health for their children and more opportunity and life choices for women. We need to focus our action on addressing obstacles to girls’ school enrolment, improving the quality of basic education, reforming education systems to make them more gender-sensitive, based on the premise of national partners’ leadership. In this context, the G7 countries should lend their support to the global Girls Education Initiative, led by UNICEF on behalf of the UN system, to bring all the partners concerned together under a coherent and national programme, consistently with the Dakar framework for Action. Additional resources will therefore be provided to countries where funding is a major obstacle to achieving universal primary education and gender equality by the agreed target years.
To be specific, we need to set benchmarks and intermediate targets for our action in the near future. We must plan a path towards achieving the internationally agreed goals. We call on international organisations to set appropriate targets and to develop a monitoring process, to be able to assess the progress made in the next few years.
Ladies and Gentlemen. Time is running out for the poorest countries. The fight against poverty becomes ever more difficult as time goes by. The technological divide is widening the distance between the rich and the poorest nations, day after day. We need focused and quick action to set the conditions for closing this gap and to eliminate the obstacles to faster integration of the poorest countries in the global economy. There cannot be a better future for us unless there is a better one for the poorest people. The solution can no longer be to transfer minimal parts of our wealth to these countries, for most of this wealth is bound to evaporate. The solution is to commit ourselves actively, now.