OECD Session on Development and Gender
Secretary of State
SECRETARY CLINTON: Good morning, and let me tell you what a pleasure it is for me to be with all of you today as we chart a new way forward in our efforts to expand prosperity and opportunity around the world. I want to thank the secretary general for his leadership at the OECD and I look forward to hearing his opening comments.
But today is a day for us to really focus on the meeting of the OECD vision statement adopted yesterday, which reflects an important consensus about development that while aid is essential, aid alone is not enough; that to help people reach their full potential, we must also promote sustainable and inclusive economic growth, and that we need to continue to remake the relationship between donors and development countries. And that requires working in partnership, not patronage. So developing nations will define their needs and chart their futures while becoming less dependent on aid and ultimately ending their need for aid altogether.
This consensus is reflected in the work that we have done in the Obama Administration over the last two-plus years. Guided by the President’s Directive on Global Development, we are placing a new emphasis on accountability, country ownership, and sustainable, broad-based growth. I commissioned the first-ever Quadrennial Diplomacy and Development Review in our government, which we released last fall. It lays out a plan for putting these principles into action. And it is a joint effort between the State Department and USAID, whose administrator, Dr. Rajiv Shah, is here today and will discuss the important role that USAID is playing in this new policy on development.
But I have to say that for all of us, making this shift requires hard work. And there are many urgent issues we could discuss today, but I want to focus on two. First, partnering with developing countries on reforms in three interconnected areas – taxes, transparency, and corruption – because focusing on these three will give us the tools needed to enable more countries to fund more of their own development. And second, doing more to support women as drivers of sustainable economic growth.
Let me begin with the reforms. This is a very high priority for me. I have been working in development for now many years – (laughter) – and I look around this table and I see familiar faces, including Brian Atwood, with whom I worked back in the ‘90s. And I’ve spoken about the importance of countries and international organizations like the OECD working together on taxes, transparency, and corruption many times in many places, from Pakistan to Ecuador.
Why? Because corruption, lack of transparency, and poorly functioning tax systems are major barriers to long-term growth in many developing countries. Corruption stifles entrepreneurship and it siphons funding away from critical services, hurting the people who rely on those services. Poor transparency makes it difficult if not impossible to determine how governments raise and spend their funds, and therefore, how to hold governments accountable. And weak tax systems rob states and citizens of the resources needed. Why? Either because the taxes are not levied at all, or because it’s very easy for people to avoid paying them. Nobody likes paying taxes, but the countries around this table represented know that in the absence of funding public services, it’s very difficult to achieve the kind of outcomes for prosperity, growth, opportunity that we seek.
And let’s be very clear – many wealthy people in low-income countries avoid taxes by hiding their money offshore, an outflow that by some estimates comes to more than $1 trillion a year. Now, to some degree, it is logical that low-income countries would raise less revenue internally than others. After all, some of the most common sources of income in developing countries are very difficult to tax, and building strong public institutions is a challenge for any nation. But we also have to acknowledge that wealthy countries share responsibility, so that is why, for instance, the United States is making it easy for other governments to know when their citizens are keeping money in American accounts.
We all have an interest in solving these problems together, to empower governments to collect precious revenues they use to build roads and power lines, to open schools and train teachers, to provide healthcare and invest in all the other drivers in economic activity. Corruption, lack of transparency, and poorly functioning tax systems not only deprive government of revenues; they inflict a quieter and in some ways an even more dangerous cost as well, because they corrode citizens’ trust in each other and in their government. And when those bonds of trust crumble, it becomes much more difficult for communities and countries to make progress.
And finally, corruption in poorly functioning tax systems put a strain on our partnerships with developing countries. All of us here are supporting development. We’re committed to doing so. And the United States will continue to lead the world in providing assistance. But let me say very openly it is difficult to ask American taxpayers to spend money abroad when the elites in the countries themselves turn their backs on their own people, especially at a time of difficult budgetary decisions. It is not hard to imagine that an unemployed worker or a struggling business somewhere in my country would wonder why we would offer our hard-earned tax dollars to help those who will not reach the social consensus to help themselves.
As donor countries make our assistance more effective, recipient countries must do their part as well. When a country makes reforms in taxation, transparency, and fighting corruption, it ignites a virtuous cycle. Taxpayers see what they’re getting for their money and they can no longer rely on the old excuses for not paying their share. Higher revenues means that the government can provide better services and pay decent wages to public employees. And so these reforms, in turn, create a more attractive climate for foreign investors and they strengthen the case we can make to our own citizens for continuing to support development programs. So if we partner with developing countries to break the vicious cycle and instead catalyze the virtuous cycle, we can not only help them provide more for their own people, but actually get on the path to self-sufficiency.
Now, there are many examples of countries that have made commendable progress; I will just mention three. El Salvador has now broadened its tax base and made its system more equitable. South Africa has fought corruption and made its budget more transparent. Tanzania has introduced new systems to track taxpayers and payments and modernized its customs department. And each of these nations has seen its tax revenues climb significantly as a percentage of GDP.
The United States has made this a priority for a wide range of initiatives. The State Department, USAID, and our Treasury Department have supported many countries in their efforts to broaden their tax base, strengthen enforcement, simplify the payment of taxes, and improve the management of public funds. For example, with assistance from USAID, the Afghan Government is expanding its work to pay police officers by cell phone. This helps cut down on fraudulent payments and prevents corrupt officials from skimming from their workers’ salaries.
And I want to commend the OECD for the crucial role you play in supporting reform. The Anti-Bribery Convention commits countries to tackle the bribery of foreign officials, and the new Global Forum on Transparency is working to reduce tax evasion. The United States is proud to support the recently launched tax and development program and the OECD-NEPAD Africa Investment Initiative, two excellent programs for sharing best practices that have already benefitted the South Sudan, Tanzania, and others.
Other institutions including the G-20, the IMF, the World Bank, and civil society organizations like Oxfam and Transparency International have lent their expertise as well. And all of these efforts are critical and they should continue, but in the end, success will depend on more than funding and sharing expert technical solutions. It will depend on building the political will to implement them. Any kind of change will take hard work, but these reforms will also take courage. Elected leaders will have to look their most powerful supporters right in the eye and tell them, “You need to pay your fair share for the good of your country.” Budget officials will have to make their decisions public, even if it subjects them to tough criticism. And tax collectors will have to speak out against bribery and corruption. In short, behind every success story, there will be a committed group of people who refuse to accept the status quo, who stand up to entrenched interests and take on tough reforms. Without this essential leadership, technical solutions will remain necessary but unfortunately insufficient.
Building that political will is the goal of an effort we’re calling domestic finance for development. We aim to raise these issues from the technical realm to the political realm, not just how to implement the reforms but how to spark leadership and action. And in the coming weeks, I will issue policy guidance instructing every diplomat and every development officer at the State Department and USAID to elevate corruption as a focus of their work with other countries. We are also establishing an innovation fund to create incentives and boost political support for anticorruption efforts and tax reform. And we will launch a pilot project to support a small number of countries in their efforts to make comprehensive, integrated reform in all three areas. Working with countries that have a demonstrated commitment to change, we will help them identify areas for improvement, design solutions, and measure their progress in delivering results. Ultimately, our goal is to reinforce these countries and to create models of success.
And finally, in July, the United States will host a meeting of the Open Government Partnership, which will bring together partners from many countries and sectors to support governments’ efforts to become more transparent, accountable, and participatory. The meeting will pave the way for heads of state to participate in a summit on the sidelines of this year’s United Nations General Assembly.
And I thank the OECD for the important contributions it continues to make. With the framework for a strategy for development, the OECD marries its two core strengths – world class policy research and cooperation on development work. In the past, these two capabilities have been largely separate. The policy research benefitted mainly member countries. Now with this framework, the OECD as a whole will expand its policy expertise for the benefit of the developing countries as well. The framework also provides a new opportunity for developed countries to learn from developing ones. And as OECD expands your efforts, I hope you will put a particular focus on taxation, transparency, and corruption, because these issues are a perfect match for the expertise you already have.
We are taking an important step today by endorsing the framework, but I think we can do more. We can galvanize action. I want to urge the OECD to develop the strategy for executing the framework in time to present it at the OECD Council Meeting in January. This will be an opportunity for the OECD to take action and help deliver results for millions of people, and we should make the most of it. And the upcoming High Level Forum in Busan, South Korea will greatly benefit from the OECD’s contributions.
And this brings me to the second area I wish to discuss. The role of girls and women in creating sustained economic development has been a cause of a lifetime, and again, I see around this table, like Ambassador Melanne Verveer and others, those who have committed so much of themselves to this. The logic is compelling. Women and girls are a powerful engine for creating jobs and spurring economic growth. There are more than 200 million entrepreneurs who happen to be women worldwide today. And when a woman prospers, the benefits don’t stop with her. We have reams of research which shows that women actually invest what they earn back into their families, and then the benefits multiply throughout her community and across generations.
But even after all the progress we have made together, there are still many barriers that stand in the way of economic progress for women. Too few women can get a good education, find a job, own property, or open their own businesses in too many countries around the world. To study these barriers and identify solutions, the United States supported the launch of the OECD’s Gender Initiative early this year. The initiative will create indicators for measuring women’s economic empowerment and create a toolbox of policy options for countries to unleash the potential of millions of women through education, employment, and entrepreneurship. And the OECD is piloting this approach with its Women’s Business Network for the Middle East and North Africa, which is co-chaired by the United States and Jordan.
Today marks the first milestone in the initiative. We are receiving its interim report. And I ask the ministers here to welcome the report, to affirm its statement that women’s economic empowerment is critical to stronger, fairer economic growth, and to call on the secretary general to take the measures necessary to complete this project in time for the ministerial meeting next year.
There is one other step we should take. As I will discuss later today at UNESCO, if we’re going to improve outcomes for girls and women and make the best case for more investment, we’ll need better data and we need to coordinate our efforts to make sure we get it. So I call on organizations focused on these issues to work together on a plan to make all the data that’s collected on women more comparable and useful, and to identify a list of common indicators for future data collection. And I’m pleased to announce that the OECD, the World Bank, and UN Women have already agreed to collaborate on this project in time for the High Level Forum in Busan. I hope others will join them.
With this, I would like to now ask the secretary general to make his opening remarks.