Remarks by Associate Administrator Eric Postel at the Center for Strategic and International Studies (CSIS) Panel Discussion on Domestic Resource Mobilization's Changing Global Landscape

Friday, December 16, 2016

Good morning, everyone. First of all, I’d like to thank CSIS and Dan (Runde) for organizing today’s event on a very important topic: Domestic Resource Mobilization (DRM), the wonky phrase for a set of activities which can be characterized as countries collecting more tax revenues through better administration, and spending those funds better – more efficiently and transparently.   

Two weeks ago I led the US delegation that went to Nairobi to attend the Second High-Level Meeting of the Global Partnership for Effective Development Cooperation meetings.  While there, among other duties I moderated a panel discussion on DRM with some of the leading players and then signed a document on DRM with the Minister of Finance of Liberia and the Commissioner General of the Liberia Revenue Authority.  

Dan asked me to give you an update on those meetings, but first, to set the stage, let’s go back a few years – to 2011 when I attended the aid effectiveness conference in Busan, South Korea in 2011.  Support for DRM was barely discussed. There was only one meeting on the last day in the last time slot highlighting DRM, and there were only a few dozen of us there.  

By the time the delegations went to the Third International Conference on Financing for Development in Addis in 2015, a dramatic shift on DRM was underway.  At that meeting about 120 of the 151 speeches by the countries in attendance discussed DRM.

It is clear the global community is coalescing around the importance of DRM as a transitional bridge – for a nation to receive international aid assistance so that it can sustainably support itself. DRM is now recognized as a key component of development financing.

It has been a long journey but DRM is now an official part of the main development conversations.  For example, I know there are two NGOs in the room today who since Nairobi have told colleagues they want to raise their profiles as active proponents of DRM in the coming year – because they see its practical worth in development financing.

If the development community is serious achieving the SDGs by 2030, it will require mobilizing all sources of development finance, especially DRM along with private investment and foreign assistance.  Domestic resources in particular are often the fastest growing source of development finance in a country, and are unequivocally the bulk of the resources that countries bring to bear on their own development.  

The current USG annual DRM baseline of expenditures is $26 million – one of the largest commitments.  USAID, for its part, currently spends around $21 million per year on DRM activities in at least 14 partner countries, spanning Africa, Southeast Asia, Central America, and Europe and Eurasia.  Going forward, an estimated six additional missions plan to initiate new activities in the next 12 to 18 months. And the numbers are expected to grow. These include missions in Guatemala, Honduras, Tanzania, and Tunisia.

With strong host country commitment, this work can succeed.  El Salvador is a place where revenue raising efforts have been particularly successful.  USAID assistance enabled El Salvador to increase its revenues by $350 million per year.  With sustained USAID support to improve tax collection, the government of El Salvador has been able to double per-capita spending on health, education, and social protection in the country since the 1990s, reducing extreme poverty by nearly 25 percent.

While this assistance helps these countries to generate sustainable increases in domestic revenue, it is important to impress that DRM also fosters more transparent, fair, and business-friendly tax systems.

At ATI’s launch last year, more than 30 countries and international organizations joined the USG and pledged to substantially increase support for DRM.  Today, we are up to 40+ countries and international organizations (including the Gates Foundation) have signed onto the ATI.  Support and enthusiasm for the DRM agenda continues to expand.

At the Nairobi meetings, Paragraph 15 of the outcome document recognized that the top funding source for work on the SDGs is domestic resources.  Paragraph 20 called out the Addis Tax Initiative, work on BEPS, and other efforts.  And in numerous conversations in Nairobi, donors committed to supporting this work, and a number of developing countries were making requests for assistance.  

I am pleased to look back to Busan, South Korea where DRM was placed at the bottom of an agenda…and then today to a room like this today …where no longer is there a need to explain what the acronym DRM stands for – and where most in this room are support the path to do more to help developing countries mobilize their own domestic resources and spur investments from the private sector.

Thank you.  I look forward to joining the panel discussion.