Opening speech at the presentation of Asian Development Outlook 2014

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Let me first thank ADB (Asian Development Bank) and NUPI, for giving me the opportunity to speak this morning. The topic for this event is of great importance in our efforts to enable inclusive growth and fight poverty.

The world map is changing, and we must navigate accordingly.

In 1980, the US economy was ten times the size of China’s.

Today, three decades later, the US economy is “only” twice the size of China’s.

Sometime in the next decade, if this trend continues, China’s economy is likely to be number 1.

In addition, the value of world trade has increased eight-fold - since China had Mao as its leader.

We also now have the “BRICS” (Brazil, Russia, India, China and South Africa) and we have the “MINT” economies (Mexico, Indonesia, Nigeria and Turkey).

The world’s economy is eight times bigger than it was in 1970.

These developments provide us with great opportunities, but it also presents us with significant challenges.

I would like to thank the ADB for keeping us up-to-date on the developments in Asia and the Pacific. Your analytical capacity and knowledge sharing is highly appreciated.

Thank you also for informing us that the world’s financial risks are easing and appears manageable. This is good news.

Not so good news though is that the widening of income gaps in Asia is continuing, as the poorest are left behind, undermining the growth that has had on lifting millions out of poverty.  This trend must be reversed.

Norway supports the findings of the Asian Development Bank in the Outlook.

Firstly, financial resources as well as sound fiscal management and policy are needed to tackle the challenges ahead and enable inclusive growth.  

Secondly, efforts aimed at fostering equality and inclusive growth must be strengthened.

Thirdly, access to education and health is of crucial importance in order to secure inclusive growth. This is why the Norwegian government gives education and health, the highest priority in our development cooperation.

(We agree with Nelson Mandela who once said that “education is the most powerful weapon you can use to change the world”. Governments, multilateral organisations, bilateral donors, civil society and the private sector must once again unite around common goals to achieve education and learning for all. This is urgent, and it is of utmost importance for our future.)

There are also additional challenges:

The recently published report from the UN Intergovernmental Panel on Climate Change (IPCC) reminds us about the serious threats our world faces from a changing climate.

We are ill-prepared, and we must find the required political will to meet these threats and to support green growth.

So how can we mobilise the large pool of existing assets more effectively to meet the social, economic and environmental development needs?

We know that domestic mobilisation of public resources will not be sufficient and that the contribution of Official Development Assistance is likely to continue to decrease as the economic development takes hold in the poorer countries. The size of the aid budgets themselves are insignificant compared to other financial flows like private investments, trade, and remittances. Not to mention the potential that might be released by curbing illicit financial flows out of developing countries. We must be creative when planning how future sustainable development goals shall be financed.

A broad and comprehensive financing framework is needed. This is recognized in the follow-up of the Monterrey Consensus. And it is recognized in the follow-up of Rio +20 discussions on sustainable development goals and the financing of these goals. Norway has taken a role as co-facilitator in preparation for the third UN conference on financing for development. It is our hope that this conference will bring together related processes and provide the basis for future development financing.

The underlying premise of the Monterrey Consensus is that each country has the primary responsibility for its own economic and social development.

Public resource mobilisation has increased dramatically since the turn of the millennium. Government tax revenue in emerging markets and developing countries has increased more than fivefold since 2000, with tax revenues as a percentage of GDP from around 13 per cent in 2000 to around 18 per cent in 2011.

Nevertheless there is still a significant gap between developed and developing countries in their capacity to raise public revenues. According to a UN-Task force on the post-2015 development agenda, tax to GDP ratios are 13 per cent in low income countries compared to 35,4 per cent in OECD countries.  As the ADB rightly highlight in the Outlook, there is a need to strengthen many countries financial policies including revenue collection and tax systems.

Financial secrecy resulting in illicit capital flows and the services of tax havens also needs to be tackled. According to Global Financial Integrity, an amount 10 times the value of official development assistance is siphoned from developing countries every year through illicit financial flows. According to a recent OECD publication, more than half of these illicit financial flows were in or from Asia.

Illicit capital flows and the use of tax havens may have grave consequences. When such money is used to finance criminal or terrorist activities, political and social stability – and, eventually, democracy itself – might be at risk.

If these flows are stemmed, affected countries would significantly improve the potential to finance most of their own development needs.  Illicit financial flows seriously stimulate inequality and undermine stability. 

The level of taxation in a country should be made in an open and democratic process. But lack of capacity, corruption and exploitation often stands in the way of a fair and equitable system of taxation. 

Transparency and capacity building are therefore fundamental enablers of sound financial policies.

I am grateful for the work the bank is doing to draw attention to the need for sound financial policies to secure inclusive growth. We all thank you for sharing your findings here in Norway and look forward to your presentation.

Thank you