In a time of disruption, we still have prospects

Achim Steiner interviewed by Eva-Maria Verfürth

Mr. Steiner, development policy is in upheaval: In recent years, many OECD members have reallocated their development funding and spent more on Ukraine or refugees in their own countries. In Germany, the purpose of development cooperation is increasingly being called into question. How are you experiencing our current moment?

We are living in a time of great uncertainty. Nobody can precisely predict what the coming months or years will bring. At the same time, geopolitical tensions are growing; there are more conflicts and greater instability. The question is: Will we be able to face these crises together?

Many people are probably asking themselves that right now. What needs to happen in order for that to succeed?

We must cooperate. Multilateralism is not simply a credo; it is the platform that allows us to jointly invest in the future despite all our differences. Global challenges like pandemics, cybercrime and climate change can only be overcome together. I find it very concerning that international cooperation is being devalued and placed at the mercy of national debates. We have not experienced this to such an extent for a long time. Moreover, we have neglected our international institutions for years. In the 1990s and 2000s, the world appeared so stable that multilateral structures seemed less necessary. Now we are going to realise how indispensable they are and how central the role of development cooperation is.

Even before the USA put itself on a collision course with multilateralism, cooperation was not always easy. At COP29, the EU and USA called on China to contribute more to climate financing. Were they right to do so?

In principle, yes – though many fail to appreciate that China is already a key player in the global energy transformation and has made it possible for many developing countries to transition to solar and wind power. In the last 20 years, the country has expanded its production and lowered the cost of renewable energy worldwide. As a result, the cost per kilowatt hour in Africa is now 80 % lower than it was ten years ago. China also achieved a market breakthrough with affordable electric cars. It invests billions in developing countries and pledged to continue doing so at COP29 in Baku. China has become indispensable to the global energy and mobility transformation.

China acts primarily in its own interests and has gained significant influence in African countries. Shouldn’t its expansion be countered?

Every country has the right to pursue its national interests. As an export nation, Germany also has a vested interest in promoting stable and growing markets. Through initiatives like the Global Gateway, Europe and the USA already offer developing countries financing sources that are a clear alternative to Chinese financing. Such competition doesn’t have to be destructive; it can also promote innovation. The important thing is to keep competition fair, aim for the right goals and maintain the ability to cooperate constructively. For example, a clear set of criteria could help encourage transparency and greater mutual reliability.

India and the Gulf states have also become important investors. How can cooperation with these countries look like?

Saudi Arabia, Qatar and the United Arab Emirates invest massively in green energy technologies. It is important to work together to shape international financial investment and increase the lending volume of multilateral development banks. The World Bank’s IDA21 capital replenishment in December 2024 was a first step in this direction.

In June, the Fourth International Conference on Financing for Development (FfD4) will take place in Seville. Let’s take a look back: What has been accomplished since the last FfD conference in Addis Ababa ten years ago?

At first there was a lot of momentum, and official development assistance (ODA) expenditures, measured in ODA grant equivalents, grew to over $ 200 billion a year. Additionally, the importance of the private sector has become increasingly clear, and we have achieved meaningful successes with green bonds on capital markets. While it’s true that our initial hopes have only partially been met, private funding has had an enormous impact on climate financing. For 2024, global investments in new electricity generating infrastructure are estimated to be about $ 3 trillion, two-thirds of which goes to clean energy sources. But less than two percent of these investments were invested on the African continent, where the need for financing and new energy infrastructure is greatest. We must also consider the debt crisis. Therefore, while some countries have been able to effectively mobilise financial resources, the majority of the poorest countries are experiencing stagnation.

Why is it so difficult to reach the poorest countries in particular?

Poor countries are more susceptible to external shocks and have fewer resources to react to them. During the Covid-19 pandemic, rich nations could cushion economic shocks using taxes, bonds or debt, whereas poorer countries lacked the means to do so. They had to pay extremely high interest rates on bonds. Because of the debt crisis, many poor countries spend more on interest payments for international debt than on education or healthcare. Moreover, they lack stable institutions, transparency in capital markets and established stock exchanges. International investors steer clear of many of these countries because they want to avoid risk, particularly in times of crisis.

What are some approaches to supporting the least developed countries despite these challenges?

Success stories from East Asia, China and Latin America show that when the state provides conditions like a public electricity supply and digital infrastructure, new markets can emerge very quickly. We sometimes underestimate how much development cooperation can do to minimise risks and mobilise private capital using tools like export credit financing, or supporting reforms to make tax systems more efficient. For example, UNDP has worked with the OECD to launch the “Tax Inspectors Without Borders” programme. We advise countries on how to prevent tax evasion by international companies. Even though the programme is small, it has already secured over $ 2 billion in tax revenue that otherwise would not have been collected.

When important donor countries withdraw, what becomes of the poorest countries?

We can observe that already. Some experience serious setbacks in poverty reduction or food security. Natural disasters like the flooding in Pakistan can set an economy back decades, feeding political tension and extremism. Sri Lanka’s state bankruptcy, for example, led to mass protests and a political crisis. It is in the world’s best interest to minimise such risks.

You mentioned that you have had good experiences with government bonds. How do they work?

We advise a whole range of countries on issuing sovereign bonds. Uruguay’s “Sustainability-Linked Performance Bonds”, which we supported together with the Inter-American Development Bank, were groundbreaking. The country committed to reducing its CO₂ emissions and expanding its forest area. Success leads to lower interest rates, failure to higher interest rates. The bond was launched at $ 1.5 billion and oversubscribed three times. This model is attracting a great deal of attention, which shows that the market for sustainable financing is constantly growing. But the precondition for such an approach is an economy that can invest capital productively and generate returns.

A central goal of the FfD process was to provide the necessary financing for the 17 Sustainable Development Goals (SDGs). They will probably not be reached by 2030. Have the SDGs failed?

Many may think so because so far only 17 percent of the SDG targets and indicators worldwide are on track to be achieved. But that view overlooks how much has been achieved at the national level. And it overlooks the importance of the SDGs as a guideline: The agenda gave us a framework – a common orientation – to move forward together, even in turbulent times.

What specifically has been achieved so far?

Global food production is now sufficient for the world’s 8 billion people, life expectancy is increasing and more and more children are going to school longer all over the globe. Latin America and the Caribbean derive 60 % of their electricity from renewables – double the world average – and in some African countries, the share is as high as 90 %. There has also been immense technological change: In 1995, only 16 million people had internet access, compared to almost 6 billion today. A UNDP study showed that 70 % of SDGs can be implemented more quickly and effectively through digitalisation. Public digital infrastructure is a central driver of development.

What conclusions do you draw from that?

All of that shows that we are not living in a time without prospects! The conditions for making significant progress have never been so good. It is therefore all the more important that politics bring greater calm into public discussions. Instead of setting people against each other, politicians should make them aware of how much we depend on each other and how much potential that creates.

The FfD4 is scheduled to take place this summer, in Seville, in a rapidly changing global climate. What are your expectations for the international meeting?

The conference is first and foremost an opportunity to come together again. Four things will be important:

• The question should not only be how much money can be provided, but how we can invest in the future together. Wealthy countries need to realise the significant contribution developing countries are already making. They are investing many times more than what international climate financing provides. International payments are not handouts.
• Second, we have to confront the precarious situation of the poorest countries. These states are at risk of falling further and further behind.
• Third, we have to find a way to convince more private investors and financial markets to invest in developing countries. When capital markets withdraw, billions of people are excluded from urgently needed financing opportunities.
• Fourth, I hope that in Seville we can agree, once again, that we want to cooperate despite our geopolitical differences and conflicts over competition.

The new draft of the Seville outcome document is an attempt to find a common denominator in the midst of global tectonic shifts. One thing was underestimated at COP29: At an international conference, you cannot expect a last-minute compromise to emerge from thin air. If a breakthrough cannot be achieved now, we should at least develop strategies to make it possible later. The goal in Seville must be to find a constructive way forward.

Achim Steiner is the Administrator of the United Nations Development Programme (UNDP).   
https://www.undp.org/