Archived - e-2 (16 Sep - 27 Sep ): Development Finance

We thank all participants and moderators for their contributions.Read all comments about the discourse on development finance by scrolling down to the bottom of the page. If you like to comment or react to some of the comments this is still possible. The discussion has however officially ended and will not be closely moderated anymore.

Please Note: We would like to encourage an open practitioners’ exchange. Please feel free to express your individual views. This means that you are not necessarily bound to represent the official position of your organizations in this space, but to share your own, professional views on the questions you find below.

1.What should the specific niche of the Global Partnership be in relation to domestic resource mobilisation?
2. What is unique about the difficulties that low-income countries have in raising tax compared to other countries?  What are some of the possible solutions?
3. What role can the Global Partnership play in efforts to curb illicit financial flows?

e-discussion 1

e-discussion 2

e-discussion 3

e-discussion 4 

e-discussion 5

Development Cooperation with
Actors from the
Global South


Private Sector Engagement

Inclusive Development

  Progress Since Busan

  • Knowledge Sharing
  • South South and triangular cooperation
  • Development in middle income countries
  • Domestic resource
    mobilization / Tax reform / Illicit flows

  • Engaging the private sector
  • Inclusive Development /
  • Implementing the
    Busan Commitments

9 Sep - 20 Sep

16 Sep - 27 Sep16 Sep - 27 Sep

25 Sep - 11 Oct

25 Sep - 11 Oct



Post a response or go back to the home page of "e-discussion on Global Partnership for Effective Development Cooperation". 



Gail Hurley

Policy Specialist on Development Finance and Inclusive Globalization



Ellen Kelly

Policy Officer, Development Effectiveness, European Commission,

Directorate-General for Development and Cooperation


Timo Wilkki

Policy Officer, Development Effectiveness, European Commission

Directorate-General for Development and Cooperation


Michael Sudarkasa


Africa Business Group


Reinout van Santen Mon, September 30,2013

We thank all participants and moderators for their contributions. This e-discussion has ended and a summary of the discourse will be available shortly.  Read comments by scrolling down below.

Michael Sudarkasa
Tue, September 17,2013
Dear Colleagues, I would like to also welcome you to this e-discussion about a very important subject in the African development sphere - specifically, how can the continent mobilize the growing pool of capital that is available internally - through taxes, pension fund monies, and even by extension from remittances from the diaspora - to address the continental economic agenda. As facilitator/ moderator of this discussion, on behalf of the AU/ NEPAD who are partners within the Global Partnership, I want to point out that this is a priority subject among the member states as they feel increasingly emboldened to fund their development strategies as tax receipts grow from the expanding middle class and emerging private sector on the continent. As an economic development practitioner based in South Africa, I witness the import of domestic resources in address social issues in the country on a daily basis. Over the next few weeks, I hope that you'll share with us your views on this subject, challenges that must be overcome, and strategies that can be undertaken to improve the state of DRM in Africa today. Sincerely, Michael Sudarkasa, Africa Business Group
Gail Margaret Louise HURLEY
Mon, September 16,2013
Dear colleagues, I am excited to welcome you to this Global Partnership e-discussion on domestic resource mobilization/tax reform/illicit flows (16-27 September). Until September 27, I encourage you to seize this unique opportunity to help shape the debate for the Fourth Steering Committee Meeting of the Global Partnership and Ministerial-level meeting in 2014. The results of this conversation will directly influence the thematic concept notes to be presented at the Ministerial-level meeting. As experts, researchers, policy-makers and practitioners in this field, your opinion on these topics are essential. We want to hear your thoughts, want to learn from your experiences and expertise, especially from those contributors based in the Global South. The 3 questions we want your views on are as follows: 1.What should the specific niche of the Global Partnership be in relation to domestic resource mobilization? 2. What is unique about the difficulties that low-income countries have in raising tax compared to other countries? What are some of the possible solutions? 3. What role can the Global Partnership play in efforts to curb illicit financial flows? Feel free to share your opinion openly in this discussion, and please encourage your colleagues or contacts from other networks to join. Should you have any questions, please feel free to reach out to us moderators at any time. To post responses, register below (Hit "reply" and you'll be prompted to log in or sign up). Complete your profile with your information so that we can recognize you for your contributions. Hurry to make your voice heard - you have until September 27! Please feel free to share any questions you may have in the online discussion and we will respond to them in a timely manner. We are hoping for a constructive, stimulating and informative discussion - let the debate begin! Best regards, Gail Hurley, UNDP
Hannah Ryder
Mon, September 30,2013

Dear Colleagues

Before this discussion wraps up I just wanted to draw your attention to an e-chat that was held by the Guardian Development Professionals network just over a week ago (19 September) - where there were 123 comments all about how to make tax work for development.  You can find the link to the discussion here:

Although the chat did not explore specifically what the role of the Partnership could be, it has some very interesting debates that we might also incorporate in our e-debate summary, for instance:

- there was a big division over whether the solution is technical or political. Some participants felt that it is essential to continue improving tax administration in developing countries.  Others thought that this was important but not enough - governments also need advice and assistance around tax policy/reform - e.g. what level to tax extractives, how progressive/regressive different tax policies are, the pros of green taxes versus other types of taxation, etc.  I found this a very interesting question. 

Does anyone know if there has been analysis of how much development cooperation is put towards tax administration versus tax policy?

- another hotly debated point was whether public country-by-country reporting by multinationals is an important part of the solution - especially as it was part of the package of international reform measures recently advocated by the G8

Michael Sudarkasa
Sat, September 28,2013

Dear Colleagues,


As we will be wrapping up our discussion soon, I just wanted to say thank you to everyone for their thoughful and informative contributions.  This is a subject area that will only grow in importance - on the continent of Africa and throughout the developing regions of the world.  Indeed the areas that we have been discussion are all important parts of the process of economic growth, expansion and evolution on the road toward development.

As economies grow it becomes increasingly important that domestic resources can be harnesed to support the national agenda and public good(s).  Given the progress that Africa has made economically over the past decade and the forecast for the future, improving governance, institutional capacity, and developing more ophisticated instruments  to harness increased financial flows through the economy generally (such as diaspora remittances), and into state coffers specifically ( via tax receipts for example) will be of ever increasing importance.  The Global Partnership  - through the provision of capacity development support to continentally active African institutions can play a very important role in ensuring that the reforms that are made are sustainable and that technology provided through development partner programmes becomes technology comprehensively transferred  - so that the benefits gained are sustainable . . . and become African owned and African led.

Thanks again for what I hope will be seen as a useful dialogue and  beneficial input for future Global Partnership deliberations.



Mereseini BOWER
Fri, September 27,2013

Curbing leakages from the Balance of Payments (BoP) or losses from trade mispricing could unleash additional and significant amounts of domestic revenue for Low Income Countries (LICs) and Least Developed Countries (LDCs). The additional domestic resources mobilized could lead to greater investments in national and millennium development goals (MDGs) – social, economic, and environmental for LICs/LDCs and therefore improving their quality of life.

This contribution focuses mainly on the Low Income Countries from the Asia-Pacific region. We first respond to Question 2 by outlining the unique difficulties that LICs in the Asia-Pacific region have in raising tax and discuss some possible solutions. We then address Question 3 by proposing some options in terms of the potential role the Global Partnership can play in curbing IFFs. Finally we address Question 1 by suggesting a possible niche for the Global Partnership in relation to domestic resource mobilization. 

A Prevue into Asia-Pacific LICs – drivers of IFFs

Based on the World Bank’s List of 214 Economies (July 2013), 36 countries fall under the Low Income Classification, often referred to as Low Income Countries (LICs). Eight of these LICs are from the Asia-Pacific region: Afghanistan, Bangladesh, Cambodia, Democratic Republic of Korea (DPK), Kyrgyzstan, Myanmar, Nepal, and Tajikistan.

At the same time, 5 (Afghanistan, Bangladesh, Cambodia, Myanmar, and Nepal) are also classified by the United Nations as Least Developed Countries (LDCs). According to a study by UNDP (2011), three key factors and their interconnections drive illicit financial outflows in LDCs:

1) unstable macroeconomic policies;

2) structural issues; and

3) poor governance.

Macroeconomic drivers of illicit financial outflows (IFFs) include fiscal deficits, high and variable inflation, overvalued real effective exchange rate (REER), negative real rates of return, real GDP growth, and external debt. Where structural issues exist, these are characterised by non-inclusive growth and rising income inequality where the Gini-coefficient is worsening, increasing trade openness without oversight, and reform without regulation and proper enforcement. Political instability, an underground economy, and corruption are governance-related drivers.

The study asserts that where developing countries have a relatively narrow tax base and weaker or more corrupt tax collection agencies exist, illicit financial outflows (IFFs) tend to be high. In small islands states their trade openness makes them vulnerable. For landlocked countries that trade heavily with neighbouring countries, trade mispricing abounds where weak customs administration operate in remote and porous borders. In countries that are neither small island states or landlocked, an even distribution between trade mispricing and balance of payments leakages are observed.

For LDCs in particular, the limited diversification of their economies and revenue dependence on single commodities that are vulnerable to fluctuating global market prices make them susceptible to tax tariff revenue and therefore tax evasion. Where developing countries have limited fiscal space and fiscal deficits are high, these may trigger the tax evasion component of illicit financial flows because higher deficits may be seen by private markets and high net worth individuals as potential imminence of higher taxes, therefore may lead to larger tax evasion through illicit financial flows from developing countries into tax havens. 

The study highlights that trade mispricing accounts for the largest share of illicit financial flows (IFFFs) and a positive correlating propensity with increasing external trade. Its estimates are made by using a modified version of the World Bank Residual model (adjusted for trade mispricing) where illicit inflows are not netted out of outflows and where higher and lower estimates of illicit flows for each of the countries in the study was derived corresponding, respectively, to those that did not meet certain conditions and those that did (UNDP 2011: 8). 

In the case of the 5 Asia-Pacific LICs that are also LDCs (2 are landlocked and 3 neither landlocked nor small island states) the cumulative IFF for the period 1990-2008 was US$56.17 billion while cumulative Official Development Assistance (ODA) for these same countries and for the same period was lower (US$42.34 billion). In 3 of these countries (Bangladesh, Myanmar and Nepal), IFFs is a lot higher than ODA received in the same period. Bangladesh, neither landlocked nor a small island state, not only had the highest in this group of five Asia-Pacific LICs/LDCs but also the highest (US$34.79B) for all 39 LDCs that were ranked and included in the study. Nepal (US$9.13B) and Myanmar (US$8.54B) were also in the top ten highest for LDCs while Afghanistan (US$2.06B) and Cambodia (US$1.66B) were at the lower end, albeit largely due to having partial data available. Illicit financial outflows (as a % of GDP, average for 1990-2008) is highest for Myanmar (9.13%), followed by Nepal (8.07%), Bangladesh (3.41%) and Cambodia (3.3%).

Taking a mix of macroeconomic (fiscal policies, fiscal deficits, high and variable inflation, and real GDP growth) structural (rising income inequality where the Gini-coefficient is worsening) and governance factors (political instability) into account and looking at the 5 Asia-Pacific LICs/LDCs, one can draw out common elements but not necessarily unique to LICs.

In an analysis of macroeconomic policies, in particular fiscal policies over the period 1990 to 2000 in seven countries[1] in Asia which included Bangladesh, Cambodia, and Nepal, Roy and Weeks (2004) found that all three had worsening Gini-coefficients therefore rising inequality. Poverty in Nepal and Cambodia had increased. While Bangladesh’s fiscal policy is counter-cyclical and growth enhancing, the fiscal policy in Cambodia, and Nepal were passive with low or slow growth observed. Fiscal deficit increased from 4 to 5 per cent for Bangladesh, around 4 per cent for Nepal, and around 7 per cent for Cambodia. Inflation was at 6 per cent for Bangladesh but varied for Nepal from 10 per cent (1990s) to 2 per cent (2000-02) and Cambodia from 5 per cent (1990) to negative levels (2000-01). Revenue levels were considered low and income inelastic in the case of Bangladesh, weak revenue collection in Nepal and low possibility of revenue increases in Cambodia.

On the expenditure side, however, an area that may be unique to LICs that contributes to corruption is the absence of sound procurement systems or where they exist are weak and manually administered making it easy for corrupt practices in the award of government importing contracts as well as poor expenditure practices and controls.    

Possible Solutions:

1. Political stability, leadership, and ownership are established as these are paramount for any of the three drivers of IFFs to be effectively addressed. This would ensure implementation of reforms is sustained, over the long-term.

2. Addressing unstable macroeconomic policies and structural issues would largely depend on the key causes of the IFF – trade mispricing or BoP leakages.

  • Where improved macroeconomic policies are necessary, careful analysis and understanding of constraints to fiscal intervention for inclusive growth, redistribution, and poverty reduction will be key for LICs in the Asia-Pacific region and more broadly. The Ministries of Finance and National Planning have a key role to play in the design, management, and delivery of active fiscal policies where public investment programmes are robust and situated within the broader policies and functions of fiscal planning, budgeting, and implementation.
  • Total reliance on counter-cyclical interventions, progressive taxation, and redistributive expenditure, is to be avoided as many LICs and LDCs lack the capacity including administrative capacity of the public sector to implement these. On average, the tax revenue is close to 38 per cent of GDP in high income countries (HICs), 25 per cent in MICs, while less than 20 per cent in low income countries (LICs). For the 5 Asia-Pacific LICs tax revenue (as a % of GDP) for the period 2003-2011 (where data is available) fall below global averages for all 5 LICs, however is increasing, and was above 13 per cent in 2010 and 2011 for Nepal.
  • Prioritize customs reform if trade mispricing is where IFFs occurs the most in a LIC.

3. Legal reform and the effective and timely enforcement of the rule of law in private markets and civil service.

4. Strengthen government expenditure through increased transparency in government contracting and expenditures. LIC governments could increase transparency of contract awards and rules and may even consider open bidding. It could also improve controls and implement best practices. This would include developing procurement systems that draw on good practices and appropriate for the human resource capacity in LICs as well as manageable given its recurrent resources over the medium to long-term.

5. Make economic growth more inclusive through better targeted subsidies and penalties for abuse, reducing the gap or inequalities in the access of basic services between rural and urban areas in terms of education, health, water, and affordable and clean energy, as well as improved sanitation.

Potential Role for the Global Partnership in efforts to curb illicit financial flows

1. Support LICs to improve the systematic exchange of tax information between governments on non-resident individuals and corporations.

2. Support the design and implementation of robust public investment programmes and where needed implementation of best/good practice in the area of tax reforms through funding and facilitation of knowledge sharing and South-South Cooperation (SSC) and Triangular Development Cooperation (TDC) for LICs.

3. Support the development of an international accounting standard requiring that all Multi-National Corporations (MNCs) report sales, profits, and taxes paid in all jurisdictions in their audited annual reports and tax returns.

4. Multilateral institutions to work closely with LICs in the compilation of data on trade in services on a bilateral level.

5. Development partners that provide aid for trade to help with curbing trade mispricing. In doing so, develop country tailored policy, regulation, and oversight where the near-simultaneity of the generation and transmission of illicit funds in trade mispricing are addressed and measures including capacity for real time monitoring of transaction prices are implemented.

Specific niche of the Global Partnership be in relation to domestic resource mobilization?

1. Domestic resources can be mobilized through taxes and public revenues generated by governments, profits and net earnings by firms, and savings generated by households. The Global Partnership, given its expanded partnership commitment could assist LICs/LDCs through research and development of appropriate Public-Private Partnerships for development that could leverage all three sources of domestic resources that enable public-private investment programmes and through which ODA can play a catalytic role. This form of PPP needs to be focused on the local private sector and to go beyond the usual PPP definition. The Global Partnership can help establish some practical principles and guide on how development partners or cooperation providers participating or supporting PPP so that it is not about enhancing businesses from their own countries through opportunities in the partner country.[2] 

2. The Global Partnership through its global survey indicators could include the tracking of IFFs as part of the set of ten indicators. For example, as part of Indicator 3 on Private Sector Engagement and improving the business environment, also improving compliance by businesses to curb IFFs. This would include improving the data on trade in merchandise goods in LICs or LDCs where data is not available or partially available as well as starting the compilation of data on trade in services.

3.  Drawing on the tracking of IFFs the Global Partnership could regularly report on IFFs in LICs/LDCs and hold regular (annual or biennial) dialogues with the private sector and LICs/LDCs governments on curbing IFFs and the positive impact on domestic resource mobilization.  

Mereseini Bower

[1] Bangladesh, Cambodia, China, Indonesia, Mongolia, Nepal, and Vietnam 

[2] Callan M., and Davies, R. 2013. When business meets aid: analyzing public-private partnerships for international development, Australian National University, Development Policy Centre, Crawford School, Discussion Paper 28.

Inka Pibilova
Thu, September 26,2013

Dear All,let me underline the potential of Global Partnership and its various members to raise awareness about tax polices or concrete measures to be taken, including their justification. Besides governments, civil society organisations play a big role here - they can help in educating the public using easy-to-understand language and reflecting local conditions, e.g. explaining any (further) austerity measures especially to vulnerable groups. Moreover, advocacy activities of civil society organisations can be coordinated well at the Global Partnership level. Useful resources and contacts should be shared and made public (on-line).

Jennifer del Rosario-Malonzo
Thu, September 26,2013

Just to add to the discussion on raising taxes, I would like to point out the potentials of adopting taxation regimes that serve as both revenue generators and as regulatory tools to promote sustainable development. An example is for developing country governments to effectively tax extractive industries such as mining, energy, forestry, and fisheries by imposing or increasing taxes, royalties, duties and fees, contributions for communities, etc. on private corporations involved in resource extraction. Another is taxation to penalize polluting industries based on the polluter pays principle.


These of course require improved tax policy and administration to combat tax evasion and illicit outflows. A huge leap for developing countries’ interest in terms of economic and environmental policy, such domestic resource mobilization schemes need courage, political will and international cooperation to pursue. The Global Partnership can be a venue to facilitate discussion and cooperation for such options, especially with its broad multi-stakeholder character. Putting this on the agenda as a sound option to generate financing for public investments in the upcoming Ministerial is a step towards effective development.

Gail Margaret Louise HURLEY
Tue, September 24,2013

Thank you for our first week of debate and for your substantive and thoughtful contributions. I’ve put together a summary of the e-discussion thus far, which might be helpful if you’re only joining the debate now. Some of the follow-up questions below are aimed at teasing out some of the key points that appear to be emerging in the debate.

Hurry and make your contribution to the discussion before it closes on September 27!

On the topic of illicit financial flows, a theme that is emerging is the need for a concerted and combined effort at the domestic/national level as well as the international level.

Esther argued that in order for efforts aimed at curbing illicit financial flows to be successful, the capacity of developing countries to detect and respond to illicit flows must be strengthened, e.g. through the OECD’s ‘Tax Inspector’s Without Borders’ initiative or through the African Tax Administration Forum.

I argued that the international community must also support developing countries by ensuring that they are able to take full advantage of important new policy commitments, e.g. on automatic exchange of tax information between countries. The international community should also be urged to consider additional policy measures (e.g. on country by country reporting and tightening rules on beneficial ownership).

Another theme that is emerging is the possible tension between enforcement or policing mechanisms and efforts to dissuade possible offenders such as tax evaders.

Follow-up questions:

**What do you think can be done to strengthen national capacities to combat illicit financial flows?

** What is the balance between efforts at the national level and international level to curtail illict financial flows?

**How should efforts at enforcement/policing be balanced with efforts at education/socialization with regard to offenders or prospective offenders?

Also on the topic of illicit financial flows, Michael brought to the group’s attention the work of the High Level Panel on Illicit Financial Flows from Africa. Michael suggests that the Global Partnership could help feed into the report that will be proposed by the High Level Panel in March 2014.

I pointed to the gaps in data and research in the area of illicit financial flows, calling for a push for data-collection and dissemination in a post-2015 agreement and a greater degree of analysis of the country-level drivers of illicit financial flows.

On domestic resource mobilization, one contributor, Nora, pointed to the role of community foundations in channelling local and diaspora resources and establish an infrastructure for philanthropy. Michael pointed to the increasing flow of pension funds and the presence of private equity vehicles that are investing in developing countries, including in Africa. Michael also spoke of the important role that remittances can play as a source of resources for development and highlighted the great potential of the recently launched African Institute for Remittances (AIR).

Follow-up questions:

**What do you think are the implications of pension funds and other private investment vehicles for mobilizing more resources for development in developing countries?

**While we have heard about strengthening capacities in tax administrations, we haven’t yet heard about the specific difficulties of developing countries in raising tax. What are these and what are the solutions?

**We’ve had several inputs on domestic resource mobilization, but no thoughts yet on what value the Global Partnership could add to these issues. What could the Global Partnership’s niche be?

Nora Lester Murad
Thu, September 26,2013

Hi Gail. How can the Global Partnership add to domestic resource mobilization efforts such as community foundations? So much! First, international actors must come to agreement that strengthening local institutions is the top priority of "aid." That means that all civil society funding should go through local NGOs except when they don't have capacity (defined as capacity to develop local communities, not defined as capacity to write logframes). Funding of INGOs should be a last resort, and should require INGOs to respect local leadership as much as possible, and build capacity with the objective of getting out. This is not what's happening. INGOs are undermining local NGOs in many ways and building huge infrastructures that further marginalize local actors. Second, international actors must prioritize advocacy, with a focus on their own countries' policies. It is hypocritical for a country to engage in unfair trade, for example, then throw some aid money at the victims of these unfair policies. This requires far more than "policy coherence" -- we need to talk honestly about the causes of the problems that we are ostensibly trying to address. This will help domestic resource mobilization because there will be more domestic resources to mobilize. Lastly, for those donors and INGOs that want to support community foundations specifically, I think that long-term, core support (but not too much!) can make a big difference as CFs do the long-term work on the ground to counter the culture of deficit and hopelessness that is all too pervasive and makes local people think they can't give.

Jacqueline Wood
Wed, September 25,2013

Joining this e-discussion a bit late, I'd like to express appreciation for the contribution on the role of community foundations in domestic resource mobilization. Indeed, civil society more broadly has a role to play in domestic resource mobilization as well as in helping to stem illicit flows. 

  • Over time civil society can be a significant source of domestic resources provided there is an enabling environment. In developed countries, the civil society sector contributes on average 5 percent of Gross Domestic Product (Salamon et al. 2007, pp. 4, 6).  
  • Resource generation includes through CSOs’ income-generating activities, as well as through the collection of charitable donations. Both types of resource mobilization require an enabling environment, including regulations that allow CSOs to generate income in support of their organizational mandates, as well as regulations that provide tax incentives to encourage charitable contributions.
  • Civil society has a role to play in stemming the illicit flows that reduce the domestic resource base in many low-income countries. This includes both a role as responsible and accountable partner in the implementation of development programs, as well as a role in monitoring national budgets and private sector investment.
Nora Lester Murad
Thu, September 26,2013

In Palestine we piloted and refined a methodology we call "community controlled grantmaking, " which means that communities allocate funds and monitor them, and that makes grantees accountable back to the community. Dalia Association's role is not that of a donor, but while the community controls the grants, the community foundation controls the process. Our two rules are that decisions must be transparent and they must be collective. Because of local social pressure, this is enough to keep dishonest people from taking advantage, and the real, committed community-minded people can emerge to help their own communities. Also, when there is a poor decision made, there is collective responsibility for it, which means that people can learn.

Michael Sudarkasa
Thu, September 26,2013

Jacqueline, thanks for this contribution. A question that arose as I was reading your comments about the role that CSOs can play as both development programme implementer and as a watchdog or fiduciary of public (and to some degree) private funds intended for development ends,is how can the Global Partnership better support capacity development among CSOs to improve their abilities to play the important roles you have identified.

As I have tried to create a common theme in my remarks on the potential utility of the Global Partnership making it a prioriity to support and develop on going African institutions that can play constructive roles in reducing illicit financial flows and in mobilizing domestic resources, I believe it could be catalytic of the Global Partnership endeavored to work with the African Union's Economic, Social and Cultural  Council of the African Union (ECOSOCC).  ECOSOCC is a constellation of continental CSOs established in 2005 to support the work of the African Union.  To date, the organ of the African Union has supported the Africa-European Union Partnership and established, for example,  a CSO Joint Africa- Europe Strategy Committee to contribute to the bilateral cooperative framework being developed between Africa and Europe. Within this context, there might indeed be a role for CSOs to play in advocating for anti-illicit financial flow initiatives - but how to negotiate,  implement, monitor and evaluate such activity would most likely require capacity development support - and this is where, potentially, stakeholders within the Global Partnership could play an important role.

Michael Sudarkasa
Tue, September 24,2013

In a very interesting blog, Prof. Mahamadou Sagna of Princeton University and Mr. Ibrahim Sagna, a private equity fund manager and investor suggest that African pension funds may hold significant benefit for African economic development - "African Pension Funds: The Missing Link to African Development?".

The two authors point out that historically Africans have saved using community savings structures and have been slow to adopt modern saving institutions. However, the point out that this is changing - with the input of diasporans and forward thinking countries who are launching Sovereign Funds and Diaspora Funds to mobilize domoestic funds and funds held by nationals/ former nationals (i.e. diasporans) that can be channeled into programmes that support domestic economic development.

As the GPEDC moves forward in exploring ways to support domstic resource mobilization, support of the development of national sovereign funds in Africa and diaspora investment funds focused on Africa would be a constructive area to focus on.  Additionally, supporting improvement in the financial policy and regulatory environments to encourage pension fund development and the deployment of already aggregated pension funds toward development activities on the continent, would also be very useful.

Fiona Stewart and Juan Yermo support the abovementioned conclusion in their more scholarly publication entitled Pensions in Africa produced as part of the OECDs Working Papers on Insurance and Private Pensions series (2009,No. 30).  Calling for pension sector reform and development, Stewart and Yermo suggest that improved pension fudn structures on the continent could potentially have a very catalytic impact on the economies of the continent.  But technical assistace help is and will be needed to achieve this . . . and that's where the GPEDC comes in. 


Michael Sudarkasa
Sun, September 22,2013

While tax collection, illicit financial flow abatement and pension fund related resource mobilization are the key levers that dominant current discussions on domestic resource mobilization, how to harness diaspora remittances toward use in formally supporting the continent's development agenda is an emerging topic of discussion. 

At the OECD High Level Summit on Development Effectiveness in Busan, a number of panelists and key note speakers noted the benefit that remittances were making in helping spur economic growth in Africa - by bolstering consumer demand and domestic real estate markets.

In considering how the Global Partnership can support efforts to mobilize diaspora financial flows to Africa through funds and various bonds, one very tangible way of moving forward would be for GPEDC stakeholders to commit to working with the African Union's African Institute for Remittances (AIR) project (see recent May 2013 European Union launch captured on YouTube - ) .  This project is led by the African Union with current support from the World Bank and the European Commission, and in cooperation with the African Development Bank and the International Organisation for Migration.
The core objectives of the African Institute Remittances project are to:

(a) Facilitate the process leading to the creation of the Institute; and

(b) Build the capacity of the Member States of the African Union, remittance senders and recipients and other stakeholders to develop and implement concrete strategies and operational instruments to use remittances as development tools for poverty reduction.

The overriding purpose of these consultations is to involve the broadest possible spectrum of stakeholders from Africa and the Diaspora in a discussion on remittances and how they are sent and used.

The AIR project intends to work on implementing the following activities:

  • providing technical assistance to government institutions (central banks, Ministries, financial and non-financial institutions) on establishing and operating the necessary regulatory frameworks;

  • carrying out required training and capacity building programmes of relevant institutions and organisations (e.g. national statistical services departments);


  • studying remittances flows within Africa (including North Africa);


  • conducting policy research and dialogue and sharing information on how remittances can better contribute to the development of African countries;


  • developing content and technology platforms for country-based payment and settlement systems for remittances;


  • developing partnerships between African central banks and remittance service providers and non-bank correspondent agencies to improve financial access; and


  • Disseminating data and research findings on good practices through annual reports, conferences and workshops for stakeholders as well as meetings with the region’s policy makers.



Michael Sudarkasa
Sat, September 21,2013

Colleagues, as we have been talking about the subject of illicit financial flows in Africa, parallel to our e-discussion,  it is fitting to note that there is a real-time on-going initiative that  is expected to result in the development of a comprehensive report on the subject - with concrete recommendations on how to curb illicit financial flows in Africa. 

Specifically, the High Level Panel (HLP) on Illicit Financial Flows from Africa was established by the United Nations Economic Commission for Africa (UNECA) and the African Union (AU) and inaugurated in February 2012 to address the debilitating problem of illicit financial outflows from Africa - estimated at more than US $50 billion a year.  

The idea of setting up the HLP was hatched in Addis Ababa in March 2011 during the 4th Joint Annual Meeting of the Africa Union Conference of African Ministers of Economy and Finance and Economic Commission for Africa’s Conference of African Ministers of Finance, Planning and Economic Development. The two institutions were given the mandate to coordinate the mission of the Panel, which started full-fledged work on 5 February 2012. The Panel’s overall mission, which is to make clear recommendations on curbing illicit financial flows from Africa, is considered crucial given current estimates that the continent now loses more funds to illicit financial flows than it receives annually from  Official Development Assistance (ODA.

The HLP is chaired by President Mbeki, former president of South Africa, and composed of nine other distinguished personalities from within and outside Africa. The 10-member High Level Panel on Illicit Financial Flows from Africa is also supported by a Technical Committee (which executes the major guidelines of the Panel) and a Secretariat (which supports the work of the Technical Committee and provides secretariat assistance to the Panel).

To carry out its mission, the Panel lobbies Governments and key actors to build a coalition against illicit financial flows from Africa, carries out regional consultations with both Governments and the general public, organizes follow-up workshops to prepare reports on the data collected from consultations and produces knowledge products on curbing the flows.

The long-term objective of the Panel is to examine the factors underlying illicit financial flows from Africa and prod the G-20 to improve transparency measures and strengthen the auditing of banks and international financial centers as well as offshore financial centers that absorb such flows. In addition, it will mobilize the necessary political support from African governments, regional and international organizations, civil society, the private sector and other stakeholders to enforce the necessary measures that would help curb the phenomenon.

In the context of the investigative work of the HLP, Illicit financial flows constitute, among others, undocumented commercial transactions and criminal activities characterized by over pricing, tax evasion and false declarations facilitated by some 60 international tax havens and secrecy jurisdictions that enable creating and operating of millions of disguised corporations, shell companies, anonymous trust accounts, and fake charitable foundations.  Other techniques used include money laundering, transfer pricing and corruption.  

While illicit financial flows are a global problem, their impact on the continent is monumental thereby representing a significant threat to Africa’s governance and economic development. Current evidence shows that Africa lost over US$ 854 billion in illicit financial flows between 1970 and 2008 corresponding to a yearly average of about US$ 22 billion. The trend has been increasing over time and especially in the last decade, with an annual average illicit financial flow of US$ 50 billion between 2000 and 2008.

However, these estimates may well be short of reality as they exclude such other forms of illicit financial flows as proceeds from smuggling andmispricing of services.  The level of illicit financial  outflows from Africa exceeds the official development assistance to the continent, which stood at US$46.1 billion in 2012.

Some of the effects of illicit financial outflows are the draining of foreign exchange reserves, reduced tax collection, canceling out of investment inflows and a worsening of poverty.  Such outflows also undermine the rule of law, stifle trade and worsen macroeconomic conditions.

Since its launch, the HLP has visited a number of African nations and held High Level talks with African heads of state and governments on the problems and potential solutions in regard to stemming illicit financial flows. The Panel has already worked in Nigeria, Algeria, Zambia, the Democratic Republic of Congo and just this past Thursday and Friday, September 19-20, 2013, Panel Chair Thabo Mbeki held meetings with Mozambican President Armando Guebuza to discuss illicit financial flows from the country. 

One of the key ways in which the GPEDC can support efforts to curb illicit financial flows in Africa will be to explore how development partners can fund and provide technical support toward the implementation of the solutions that will be pro-offered in forthcoming March 2014  Report from the High Level Panel.

Nora Lester Murad
Fri, September 20,2013

Community foundations can play a very important role in helping developing societies achieve self-sustaining civil societies, which is crucial to independence and accountability. They mobilize and value local and diaspora resources, support civil society in many ways, and ensure civil societies sustainability for the long term by providing an infrastructure for philanthropy.

Michael Sudarkasa
Fri, September 20,2013

Nora, this is intriguiging, do you have any examples of where (countries/ regions) community foundations have been successful? Also, any guidance to offer on how to establish sustainable community foundations - i.e. what are the components of strong,inclusive community foundations?  Your comment about diaspora contributions is also useful as many studies over the past 5 years have pointed out the importance of diaspora remittances -globally,and particularly in Africa,as a catalyst of economic growth on the continent.  Far more is written about foreign foundations - Rockefeller, Ford, Gates - that are active in Africa and as such your contribution about community foundations is quite valuable - how we can grow their presence is the key . . .

Nora Lester Murad
Thu, September 26,2013

Hi Michael. Community foundations are proliferating in developing contexts, partly in response to the increasing control international donors have, and the need for local people to control their own resources. Dalia Association in Palestine (where I volunteer) started in 2007. We know about many community foundations around the world through the Global Fund for Community Foundations based in South Africa, which provides resources and support and networking. I think the most important components of a strong, inclusive community foundation are local credibility, which is built over time by working honestly, and endurance, which requires resources (though not a lot) that are sometimes hard to come by. If there is local credibility, local people will keep the community foundation afloat during hard times, but for real impact, the CF needs to be able to benefit local civil society and local, diaspora and private sector givers.

Esther Shubert
Thu, September 19,2013

Following Gail’s response, I would also like to emphasize that international-level efforts to curb illicit financial flows need to be complemented by domestic-level efforts in developing countries which are more limited in their ability to respond to IFFs but which are far more greatly affected by them.

Many of the international policy initiatives that are already underway (or at least under discussion)—automatic exchange of information, country-by-country reporting, globally consistent transfer pricing rules—will result in making more financial information available to governments. This is a necessary step for reducing illicit financial flows but is insufficient insofar as developing countries’ technical and administrative capacities are not adequate for both implementing these measures (as Gail mentions) but also effectively using the resulting information. International efforts in developing these policies should therefore be complemented by international efforts to help build up the local infrastructure needed to successfully detect illicit behaviour and undertake effective enforcement actions against it, e.g. holding MNCs accountable for transfer mispricing. Strengthening the capacities of developing countries in both respects should be a priority for the international community.

Another thought regarding the more limited capacity of developing countries to counter IFFs is to frame financial regulations in such a way that the default benefit is in the developing countries’ favour. For example, automatic exchange of information (instead of information upon request) achieves this by making certain kinds of helpful financial information available to governments with less effort. Other reforms along these lines that could be especially helpful to developing countries include withholding taxes/electronic invoicing that would allow authorities to collect a certain level of taxes upfront (especially from MNCs), some of which can then be refunded if justified by the taxpayer. This, and other similar kinds of regulations, could be a useful area of investigation by the international community, as well.



Michael Sudarkasa
Fri, September 20,2013

Esther, I think you have made a perfect case of the relevance of ATAF which I mentioned earlier and the capacity development work that they are doing - and which is why the support that development partners such as GIZ are providing is so critical.  This should be supported further . . . I also believe that efforts toestablish communities of practice among African financial sector regulators and revenue collectors  - through continental tools such as the AU/ NPCA's Africa Platform for Development or APDev ( should also be supported as these "home grown" knowledge sharing platforms can be sustainable in a way(s) that "projects" often cannot be - even well intentioned ones.

Gail Margaret Louise HURLEY
Thu, September 19,2013

Many thanks for the contributions received so far. I would like to weigh in on the topic of illicit financial flows. Specifically, what role can the Global Partnership play in efforts to curb illicit financial flows?

This is an issue which until very recently was the exclusive preserve of civil society activists and some researchers. It has now become much more mainstream within the international development community and policymakers. Indeed the G20 and G8 have made important pronouncements on the issue recently. The report of the UN Secretary-General’s High Level Panel on Post-2015 also emphasizes the importance of challenging illicit financial flows, including losses to tax evasion and aggressive tax avoidance by multinational corporations.

In practical terms however, what policy measures may make the biggest difference in our collective efforts to reduce losses through illicit financial flows. And where can the Global Partnership step in most effectively? Below are a couple of thoughts and suggestions from my side (although these are by no means exhaustive and I would welcome others’ views):

  • A two-pronged approach is clearly needed. Progress is only possible when policy measures at the national level (such as customs reforms, improved administrative capacities and good governance) are combined with policy measures at the international level (such as improved automatic exchange of tax information, publication of the beneficial owners of companies, trusts and foundations and country-by-country reporting on multinationals’ sales, profits and taxes paid in different jurisdictions). Providing assistance to developing nations as they work to implement automatic exchange of tax information, as recently agreed by the G20, will be a major contribution that wealthier nations can make to the developing world.


  • Development co-operation in support of tax administrations in developing countries should be scaled-up – especially within the Least Developed Countries and small countries – to enable them to strengthen their capacities to tackle illicit outflows and increase tax collection. The OECD is developing a ‘Tax Inspectors Without Borders’ initiative. OECD research has shown that the return on investment on ODA targeted towards capacity development of developing countries’ tax administrations is very high yet currently, only a fraction of ODA is dedicated to this purpose. The issue of capacity building on these issues will be critical to many countries’ efforts to successfully address illicit financial flows.


  • Research has been repeatedly hampered by a lack of high-quality, internationally comparable data. An agenda for research and for data collection and dissemination could be defined in a post-2015 agreement that would allow greater certainty of the scale of the impact of illicit financial flows on development.


  • Going forward, more work needs to be channeled into country level studies which aim to understand more – at the country level – about the principal sources of and drivers behind illicit financial flows. This is an area dominated so far by CSO research, however academics, donors, developing country governments and multilateral organisations all need to be brought more actively on board. The main causes of (and therefore solutions to) illicit financial flows will differ from one country to the next. For instance, the extractives sector may be a main driver of illicit financial flows in one country whereas in another, the underground economy (e.g. drugs etc.) will be the major problem. Also, as trade in services becomes more and more important, we need to think about how best to capture this our research. This is why UNDP is working with local researchers in 5 Sub-Saharan African countries to help build analytical capacity and awareness of these issues at the national level. More resources need to be channeled into these types of efforts.


  • The Global Partnership could provide a space for developed and developing countries to exchange experiences, policy initiatives and information on ways to curtail illicit financial flows (e.g. what has worked and what has not in different contexts, where there has been progress and where it remains slow etc.). Groups of like-minded countries could come together to develop common policy positions on specific issues with a view to advocating for political change. They could also develop common work programmes and/or develop shared targets for making progress in a specific area.


Anyway, just some food for thought from my side! The fact that this issue has gained political traction over recent years is very encouraging. The post-2015 process also provides a valuable window of opportunity to think about how this agenda could best be incorporated (for instance could there be specific goal(s) or target(s) on illicit financial flows and if so, what should they look like?


Michael Sudarkasa
Fri, September 20,2013

Gail,thanks for this contribution. I have a query though - what do you think that the Global Partnership can do through its influence on the companies involved with the Global Compact and initiatives like Business Fights Poverty and Business Call to Action to establish and promote global corporate best practices that encourage transnational companies to voluntarily become more transparent with their tax treatment and on issues such as  transfer pricing.  The majority of the suggestions you raise strike me as policing efforts and it seems to me there should also be energy spent rehabilitating and disuading offenders and/or prospective offenders.  A compact of forward think shared-value oriented global corporates to be better world business citizens on issues related to illicit capital flows - particularly if studies might be commissioned to show what the benefits can be for compliance - would provide a two pronged way to address this challenge: 1) improve the capacity of the countries to set and administer fair tax regimes and 2) encourage those most likely (and capable because of their access to savvy auditors and tax advisors) to try and flout the laws in emerging markets in the world to adopt different practices toward the aim of contributing fairly to the development of the countries where they do business via their tax spend.  Do you think such an initiative would work, be practical, or is such already being developed?

Michael Sudarkasa
Thu, September 19,2013

Another important trend to note in regard to Domestic Resource Mobilization in Africa is the increasing flow of pension funds on the continent into the growing number of private equity funding vehicles that are being established to invest in a variety of Africa focused ventures in fields such as agriculture, mining, retail, infrastructure, finance and manufacturing enterprises - and that are furthering economic development and private sector gowth in Africa.

Commenting on this development in South Africa, which has the continent's largest, or one of its largest, pension fund and asset management communities, professional services firm Ernst & Young noted that:

"While overall data is not yet available for the 2012 calendar year, significant recent fundraising activity within South Africa included the following:

  1. In November 2012, the Public Investment Corporation, manager of the main South African government employees’ pension fund, announced that it had earmarked up to 50 billion rand [roughly US$5 billion in today's value] of its assets under management for investment in African countries other than South Africa.
  2. In March 2012, Vantage Risk Capital closed Mezzanine Fund II – which has a pan-African investment focus (with a 35 per cent allocation to opportunities outside South Africa) and can make investments up to 300 million rand in a single transaction – secured 1.9 billion rand [ US$1.9 billion] of commitments from 14 pension funds, three charitable endowments, two development finance institutions and a family office.
  3. In January 2013, Ethos Private Equity raised US$800 million in its latest fund, Fund VI. The investor base spans four continents, and includes more corporate pension and sovereign wealth funds, and fund of funds, than Ethos’ prior funds. Fund VI’s investment strategy will focus on investing alongside experienced management teams into medium-to-large businesses. Fund VI will invest predominantly in South Africa and selectively into sub-Saharan Africa."

E & Y further noted that "In [their] experience, the fundraising process in South Africa can take between four months to a year, and the main factor determining the speed of the fundraising process is whether the fund management firm or the key individuals of the firm have an established track record in the industry."

See for more of the article.

Hannah Ryder
Wed, September 18,2013
Hi Michael! Thanks for mentioning the ATAF. Through the ATAF have you become aware of any case-studies of major improvements in a country in terms of tax raising, and how that came about? Was it just hard work or something quite unusual done? It would be great to read something like this. Hannah
Michael Sudarkasa
Thu, September 19,2013

Dear Hannah, I will look into the subject of case studies that can be traced to ATAF support but as the organization is a relatively new one my thought would be that this is something that will be easier to identify in a few years as in aggregate improvement in effective revenue collection and growth in voluntary compliance is a recent phenomenon.  One thing though that ATAF is doing to help prepare professionals engaged in this area is to offer an online training and train-the-trainers program.

Launched earlier this year,  ATAF’s pilot online course on “Tax Audit”  attracted over 100 registrations from 17 Anglophone, Francophone and Lusophone ATAF Member States, who signed up to study the  course’s eight lessons. Topics covered included “Tax Audit Fundamentals”, “Case Selection & Assignment”, “Audit Planning & Preparation”, or “Audit Techniques for SME's”.

The course was specifically customized for entry-level tax auditors from across the continent and offered a range of case study exercises, helpful guidelines for the day-to-day work and many African country cases with challenging pitfalls. Participants gained a solid understanding of the fundamentals of tax auditing and the feedback was very positive. Since there was both an offline and online version available, ATAF  made sure that all Member States regardless of internet bandwidth could access the course material. Besides, participants could follow the lessons in an entirely self-paced manner. The course was meant to be “ suitable to busy auditors who besides the e-learning course were doing other professional programs to enhance their capabilities” said Moffat M, a satisfied client of ATAF’s first online course.

The online course ran from 15 April until 15 July and was developed by ATAF with support and funding from the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH as part of its project to support the establishment of ATAF on behalf of the German Ministry of Economic Cooperation and Development (BMZ).  As such this was also a concrete example of development partners supporting Domestic Resource Mobilization.

More information about the course for those interested in future training, including a short demo video, can be found on or by contacting .

Michael Sudarkasa
Tue, September 17,2013

One of the important things that the Global Partnership can do to support domestic resources mobilization on the continent is to support continental institutions that have been established to promote DRM - such as the African Tax Administration Forum -

The African Tax Administration Forum (ATAF) is a platform to promote and facilitate mutual co-operation among African Tax Administrations (and other relevant and interested stakeholders) with the aim of improving the efficacy of their tax legislation and administrations.

The Forum brings together Heads of African Tax Administrations and their representatives to discuss the progress made, challenges faced and possible new direction for African tax policy and administration in the 21st Century. ATAF works towards state building, governance, political economy and revenue mobilization.
ATAF is an African programme reflecting African needs and strategies.  The work and programme priorities of the Forum will be driven and managed by African countries, with the support of donor agencies, other tax administrations and international organisations.

Type forum
Date Created Fri, September 13,2013
Created By Reinout van Santen
Original Space Global Partnership for Effective Development Cooperation Community
Cross posted in Global Partnership for Effective Development Cooperation Community
Reinout van Santen
# of Teamworks Views 6078
# of Teamworks Recommendations 2
Visibility Agency Only
Domain of origin UNDP
Topics Capacity Development, Poverty Reduction and MDG Achievement, Development Finance and Aid Effectiveness, Capacity Development, Poverty Reduction and MDG Achievement, Development Finance and Aid Effecti