In eradicating poverty, people may point to improving education – planting more schools and raising teaching standards. Others may point to building economic infrastructure – improving transportation, communication and energy supply systems.
These development projects are brilliant. But a more fundamental question is where the money to finance these development projects comes from? Most of the money, of course, would come from the government – known as 'public financing', along with foreign direct investment (FDI) and official development assistance (ODA). However, much of the money would simply never come, because it has been lost in illicit capital outflows.
Illicit financial flows (IFFs) are illegal movements of money from one country to another. The money may be illegally earned, transferred or spent. This money is intended to disappear from any record in the country of origin. It is an important factor of corruption that so often undermines development.
The issue of illicit financial flows is staggering in developing countries. It is stealing money money from where it is needed the most. The Nation newspaper reported on 17 December on two global studies, both of which rank Thailand in the top 10 countries with most serious illicit financial outflows. The following is an excerpt.
“One 2012 study involved 24 other countries that saw a record US$991.2 billion lost to crime, corruption and tax evasion. The other showed $6.6 trillion stolen from 25 countries in the developing world from 2003-12, according to Washington-based Global Financial Integrity (GFI).”
“These outflows – already greater than the combined sum of all FDI [foreign direct investment] and ODA [official development assistance] flowing into these countries – are sapping roughly a trillion dollars per year from the world's poor and middle-income economies.”
“It is simply impossible to achieve sustainable global development unless world leaders agree to address this issue head-on. That's why it is essential for the United Nations to include a specific target next year to halve all trade-related illicit flows by 2030 as part of the post-2015 Sustainable Development Agenda.”
There are countless brilliant development projects, and countless more brilliant ideas are waiting in the pipeline. What is nevertheless lacking is sufficient finance – something that would never come if the fundamental issue of illicit financial flows is not yet curbed.
As the old year is coming to an end, I hope to see that the old issue of poverty too comes to an end. NGOs around the world, in developed and developing world, are doing brilliant development projects and the results have been impressive. But to really eradicate poverty – to end it once and for all, the issue is more than just development projects. It is also about how to sufficiently finance the projects so that they reach their maximal potential of impact.
Curbing illicit financial flows, I believe, will be beginning to the end of poverty.