International efforts to increase social accountability
Regarding advocacy efforts aimed at addressing accountability deficits in the global aid, trade and financial architecture that were neglected under the MDGs, today there are many important citizens’ initiatives underway which are seeking to address these shortfalls, and these efforts must inform any post-2015 global development framework.
Among these, for example, are the networks of advocacy groups working on the need to prevent future debt crises in borrowing countries, avoid theft and illegal diversion of foreign aid funds into the secret offshore bank accounts of corrupt rulers, and efforts aimed at improving the quality of future foreign aid lending in the post-2015 context. Such efforts were in evidence at the recent UNCTAD XIII Conference in Doha, Qatar, where the new Principles on Responsible Lending and Borrowing were discussed. Under discussion since 2009, the principles seek to reform future lending and borrowing to increase transparency and accountability and ensure that loans are used effectively to finance development. The principles are forward-looking and symmetrically cover issues on both the lender and borrower sides; they are comprehensive, in contrast to other existing ad-hoc single-issue-focused initiatives; and they take a soft-law approach with a view to build consensus. Most importantly, these principles emphasize full information disclosure by lenders and borrowers as a means of enforcing accountability and discipline in lending and borrowing.
Any post-2015 development framework must acknowledge these new UN principles, as well as other calls by CSOs which have proposed contractual changes to foreign aid loans and private foreign investment contracts, such as the “Charter on Responsible Financing” proposed by CSOs in the European Network on Debt and Development (Eurodad). Like the UN principles, these changes aim to help improve the quality of lending and foreign direct investments (FDI) in developing countries, and prevent illegitimate and unsustainable debt, along with the harmful impacts of foreign investment, in the future. The Charter covers standards that should apply to external lending and foreign investments in developing countries that have a developmental purpose.
Regarding efforts to better regulate business impacts on human rights, advocates such EarthRights International and the International Network for Economic, Social and Cultural Rights are attempting to address the issue of corporate accountability through the use of to human rights legal obligations. In an important step forward for this work, the United Nations Human Rights Council in June 2011 welcomed the “Guiding Principles on Business and Human Rights” after a six-year process lead by Professor John Ruggie, UN Special Representative on business and human rights. The Guiding Principles set out clear expectations of what governments and enterprises should do to ensure that human rights are not harmed by business activities. Although they represent an important step forward, critics note the guidelines are voluntary and depend on the goodwill of implementing governments and companies, and thus fall far short of addressing the need for effective legal obligations and enforcement. More importantly, the Guiding Principles fail to tackle fundamental questions about the legal status of companies’ obligations and responsibilities to comply with human rights. They do establish broad consensus however that at a very minimum companies must respect all human rights—including economic, social and worker’s rights—in all countries of the world, regardless of their size or sector.
Regarding the need for heavily-indebted countries to have access to a fair international arbitration mechanism that can provide bankruptcy protection and negotiate settlements with creditors, CSO advocacy networks and UN agencies have been pushing for the establishment a Fair and Transparent Sovereign Debt Work-Out Procedure, which could, like debt audits mentioned above, help countries deal objectively with allegations of illegitimate debt. Such an international mechanism would allow debtor countries in difficulty to declare a unilateral “standstill” on debt payments, with creditors having to abide by the terms for debt restructuring decided by a fair and independent debt workout procedure for sovereign nations. More fundamentally, civil society groups are calling for a rethink of current debt sustainability criteria that would not be based on debt-to-export ratios, but on sustainable development criteria and based in human rights principles.
The UN Independent Expert on the effects of foreign debt and other related international financial obligations of States on the full enjoyment of all human rights has been leading an international consultation process for developing the “UN Guiding Principles on Foreign Debt and Human Rights”. These were submitted to and endorsed by the UN Human Rights Council in June 2012, with Norway being the first country to undertake a review of its lending to developing countries in accordance with the Guidelines.
International tax justice advocates such as the Tax Justice Network which are seeking to close tax loopholes and limit tax-evasion scored an important victory in June 2012 when the OECD, the club of rich countries, issued a statement acknowledging for the first time the utility of “automatic exchange of information” between tax reporting systems of different countries. Previously the OECD had promoted its flawed alternative system of “on request” information exchange, in which regulators in other countries must already know what they are looking for before making requests, thus creating an undue burden and undermining transparency and accountability. The new statement suggests that tax justice advocates are increasingly shifting the international consensus in the direction of “automatic exchange of information” tax reporting systems.
On a related note, in August 2012 the UK parliament called for the inclusion of intensified efforts to help poor countries improve tax collection as a key element in the UK’s foreign aid strategy. While Parliament noted that an efficient and transparent tax system was of “fundamental importance” to a country's economic and social development, the MPs expressed concern that recent changes to tax rules affecting UK-owned companies operating exclusively abroad could make it easier for them to use tax havens and reduce their tax liability in developing countries. Aid agencies have estimated this could cost developing countries billions in lost tax revenues and the committee said the government should consider reversing the changes “as a matter of urgency”. Some MPs are calling for the introduction of rules requiring companies to publish financial information on a country-by-country basis so as to discourage cross-border tax evasion.
Additionally, certain governments in developed countries where stolen wealth is amassed have shown goodwill recently in freezing some of the assets in the wake of the fall of the regimes in Tunisia, Libya and Egypt. For example, the government of Switzerland blocked €48.7 million belonging to Tunisian former ruling family and is cooperating with the Tunisian government in tracking down illicit wealth. Belgium has declared that it will cancel all the debts that are found to be odious following the debt audit in Tunisia. And European Union Deputies have called for a moratorium on debt payment and an immediate audit of Tunisian debts.
Regarding financial regulation, any post-2015 framework for global development must acknowledge there is a need to counterbalance the role of speculation within finance and bring financial services back in the direction of supporting productive investments in the real economy. CESR has joined with the Center for Concern and other civil society organizations in calling for “A Bottom Up Approach to Righting Financial Regulation”, in which people mobilize to participate in building new financial regulations through an inclusive and participatory approach, with input from a broad array of social groups (consumer, labor, women, environment, indigenous people, and others). Human rights principles and standards—including participation, transparency, equality and non-discrimination and, above all, accountability—must form the cornerstone of financial regulatory efforts from the design to implementation to monitoring stages.
One aspect of such regulation is the regulation of capital flows in and out of countries. A new report by a commission of experts has found that there is an emerging consensus in favour of the legitimate use by countries of various types of regulations on capital inflows and outflows in order to effectively regulate the stability of domestic financial markets. However, the ability of countries to adopt such financial regulations is in many cases in direct conflict with WTO rules and agreements thanks to a number of current and pending free trade agreements (FTAs) and bilateral investment treaties (BITs), which advocates argue must now be restructured.
The views expressed in this article are those of the author and do not necessarily reflect the institutional position of CESR