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Better Policies for Development 2014

Policy Coherence and Illicit Financial Flows

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This edition of Better Policies for Development focuses on illicit financial flows and their detrimental effects on development and growth. Every year, huge sums of money are transferred out of developing countries illegally. The numbers are disputed, but illicit financial flows are often cited as outstripping official development aid and inward investment. These flows strip resources from developing countries that could be used to finance much-needed public services, such as health care and education.

This report defines policy coherence for development as a global tool for creating enabling environments for development in a post-2015 context. It shows that coherent policies in OECD countries in areas such as tax evasion, anti-bribery and money laundering can contribute to reducing illicit financial flows from developing countries. It also provides an update on OECD efforts to develop a monitoring matrix for policy coherence for development, based upon existing OECD indicators of ‘policy effort’. The report also includes contributions from member states. Most illustrate national processes to deal with policy coherence for development beyond 2015.

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Executive Summary

This publication outlines a broader approach to policy coherence for development (PCD), as called for by the OECD Strategy on Development. The world has changed dramatically since the early 1990s, when the concept of PCD first emerged in discussions among donors. At that time, OECD countries were the drivers of the world economy and their policies impacted strongly on the prospects for developing and lower-income countries. Today, the global economic centre has shifted towards the south and the east, with non-OECD members being the main sources of economic growth. This, in turn, has moved the policy coherence debate away from an emphasis on the negative impacts of non-aid policies (“do no harm”) towards more proactive, synergistic approaches.

English

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