If you are an East African citizen or policy maker, you will be forgiven if you have never heard of this group, given that no East African Country was a member of the group in its founding in 2006 (except Ethiopia , if that counts). This group has since met 11 times, twice in Africa , and was to meet next in Abuja, Nigeria , on Friday last week. The Leading Group on the Innovative Financing of Development ( The Leading Group ) was the brainchild of former French President Jacques Chirac , who convened a ministerial Conference in 2006 in Paris in which 93 Countries and all the leading development organisations, including the then UN Secretary- General, Kofi Annan and the then Chairman of the African Union , Denis Sassou Nguesso, President of the Congo Republic , attended. The Paris Forum was Chirac's answer to Prime Minister Tony Blair and then Treasury Secretary Gordon Brown's big do at Gleneagles, a year before when the duo used the UK hosting of the G8 Summit to launch a development strategy for Africa , and from which the most elaborate aid strategy was launched – the Gleneagles Plan of action. The latter sought to tie down the G8 and the subsequently the OECD to a time plan to deliver their aid commitments as part of their commitment to the Millennium Development Goals (MDGs). The Innovative Finance initiative can be traced back to 2002 when a Heads of State summit was held in Monterrey, Uruguay to consider strategies to finance development, including the MDGs. The Monterrey Consensus on the Financing of Development, included a statement calling for innovative mechanisms to raise money. A Technical Group on the subject presented its report in 2004. In the same year, Brazilian President Luiz Inacio Lula da Silva , hosted a United Nations meeting of World Leaders on "Action against Hunger and Poverty", which also called for innovative sources of finance and a Declaration to that effect was subsequently signed by 79 countries in 2005. The Paris Forum was the first substantive global gathering on the subject, where a Leading Group of 40 countries was established to promote the idea. What qualifies as "innovative sources of financing"? Is this the same as "financial innovation"? No, if the latter refers to the creative means by which investment bankers made money by manipulating money without necessarily lending to the real sector of the economy. That strategy crashed in 2007/8 and the world is still paying the price for it. "Innovative Sources of Financing" as promoted by the Leading Group refers to specific mechanisms to raise money for projects which are outside the traditional forms of tax-based aid or traditional forms of private capital flows, whether debt, equity, portfolio capital or FDI They are innovative because the instruments are entirely new but that old instruments such as taxation, or debt, or corporate investments, or market-based climate financing tools are used differently to projects largely in the social sectors of which healthcare has been the leading sector. The innovative instruments so far explored include small taxes on airline tickets deducted by the state to support UNITAID, a global health initiative that funds, medicines, diagnostics and prevention against HIV/Aids, Malaria and TB. Opportunity also exists in instituting a financial transaction tax (0,02 to 0,2 per cent) applicable to securities and high frequency trading in the money markets. The Financial Transaction Tax was originally conceived as a mechanism to avoid global financial instability but was subsequently promoted by NGOs as a means of plugging aid gaps. The European Union is now considering it as a means of plugging its own fiscal gaps. So far, there is a small percentage of the revenues from the European Emission Trading Scheme (ETS) that is allocated to a Special Fund for Energy and Climate and is expected to raise 3.2 billion Euros by 2015. Belgium has moved a step further and allocated a small percentage of lottery money for agriculture. Whilst there is no doubt that these resources have helped to plug important development gaps, in terms of the scale of resources needed – (at least $100 billion for Africa to pay for climate adaptation costs and additional infrastructure needs per annum alone) – this is drop in the ocean. The writer is the regional director of the United Nations Millennium Campaign. The views expressed are his own.
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