A Final project artifact on Financing For Development

1. Vulture funds
SPOTLIGHT ON THE PARADOX OF ILLICIT FINANCIAL OUTFLOWS
IN THIS NEW DEVELOPMENT AGE

2. THE PROBLEM
THE PARADOX
$443 billion lost to (&
mostly STOLEN from) Sub-Saharan
Africa....by 2004 as ‘capital flight’. Also
known as Illicit Financial Flows (IFFs)*
$400 billion- to be mobilized
in next 3 years (2016-2018) for
Sustainable Development goals in Sub-
Saharan Africa & the rest of the
developing world.**

3. Illicit financial
flows (IFFs)are
also called
VULTURE funds *
IN JULY 2015, THE THIRD INTERNATIONAL CONFERENCE ON FINANCING FOR
DEVELOPMENT PRODUCED A SET OF AGREEMENTS CALLED THE ADDIS ABABA
ACTION AGENDA (AAAA)**

4. The July 2015 Agenda provides the foundation for a new global
financing framework aimed at:
 Supporting the Post 2015 development goals - the Sustainable
Development Goals (SDGs)
 Aligning financial flows and policies with clearly defined global priorities of
the SDGs
 Including over 100 concrete measures which ‘draw upon finance,
technology, innovation, trade, debt and data’*.
 E. g. Africa 50 - an infrastructure financing plan of the African Development
Bank to bridge Africa’s annual financing gap of $50 billion**
 IFFs issues are hardly addressed - limited to poor governance, inadequate
regulations, rule of law, tax structure of developing countries

5. On Illicit Financial Flows.......
 The AAA Agenda has this to say:
 To commit to substantially reduce IFFs by 2030 with a view to eliminating
them over time including combatting tax evasion and corruption both
through strengthened national regulations and international cooperation....
 Notably the agenda also: ‘Invites appropriate international institutions to
publish estimates of IFFs volume and compostion...[as well as] develop
good practices on asset return....
 AND ‘Countries further commit to strive to eliminate safe havens...for the
transfer of stolen assets’

6. Africa’s CURRENT LOSSES to IFFs or
Vulture funds are in excess of $50bn:
 $50-60 billion EVERY YEAR*.....
 ANNUALLY....
 RELENTLESSLY...
45
50
55
60
65
Vulture
capital
Financing gap
The Vulture fund paradox
$ billions

7. Decades of relentless IFFs means that....
 Sub- Saharan Africa...
the poorest region in the world. Is effectively a
NET CREDITOR to the REST of the World.
 By 2004 Sub-Saharan Africa (SSA) had a total debt stock of $195 billion*
given capital flight of $443bn (1970-2004)

8. Who drives this IFF and transfer of
stolen assets?
 Private actors – companies and/or individuals making
‘portfolio choices’ (Collier, Paul et al, 2004) by trade
mis-pricing, tax evasion or plain stealing of public
assets *
 Public authorities - i.e corrupt public officers often
with cooperation of private actors in poorly regulated,
unstable, poor governance environments

9. The Result
is....
1. Loss of public/government revenue
2. EROSION of tax base and financing
available for development*
3. REDUCTION in private investment
Poor Governance
+
= CAPITAL FLIGHT
SAFE HAVENS

10. Profit and Ethics can go together
 So... The new global agenda is about economic returns being able to co-
exist with social returns...*
 The idea that morality or ethical action and business are not mutually
exclusive activities... This is the new international thinking.
 Inter-generational justice requires that the same instruments, ethics and
regulations aimed at developing country institutions should be directed at
all actors who drive IFFs

11. It is no longer only about current annual $135billion in Official
Development Assistance (ODA) flows but rather about crowding in,
leveraging and pooling in finance from other sources. Already Remittances
alone are almost 3 times the flow of ODA**
YET......
ODA Remittances FDI What about
capital that
'flies'?
$ billions

12. BEPS - Base Erosion and Profit
Shifting- framework provides a good starting point.
This Organization for Economic
Cooperation and Development (OECD)
mechanism known as the Base Erosion
and Profit Shifting framework is aimed at
reducing the secrecy – information
asymmetry- that has allowed IFFs to thrive
in the most developed capitals and shores
of international finance.
Translation:
Base erosion – public sector
revenue theft
Profit shifting– transfer of
illicit funds through taz
evasion, under-invoicing
etc...
Criminal /Illegal activity that
has contributed to human
suffering should not be
given such consideration.