New Airline Tax Set to Help Developing World
Sunday, 20 Sep, 2009
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Many airline travelers, already irritated by compulsory surcharges may simply ignore it. But behind this call for a voluntary contribution is an unprecedented worldwide effort to make up a shortfall in official government aid to poor countries
The scheme, the idea of a small U.N. agency, is backed by the travel industry and heavyweights of international aid such as the William J. Clinton Foundation and the Bill and Melinda Gates Foundation.
It will be formally announced in New York City on Sept. 23 on the fringes of the U.N. General Assembly, and accompanied by a marketing blitz. British Prime Minister Gordon Brown and the head of the World Bank, Robert Zoellick, are expected to participate in the launch, as well as the chief executives of the three companies that have made it technically possible: Amadeus, Sabre and Travelport/Galileo,
Barring any last-minute technical or legal hitches, the scheme will roll out in late January in the U.S. and several European countries, including Britain, Germany, Spain and Switzerland.
The initiative is the brainchild of Philippe Douste-Blazy, a former French Foreign Minister who is now a U.N. Under Secretary charged with finding innovative ways to finance projects. He runs an agency called UNITAID that is attached to the World Health Organization and already channels funds to fight disease in poor countries.
UNITAID’s $400 million annual budget is funded by Britain, France, Norway, Brazil and Chile. Douste-Blazy is now trying to turbo-charge those efforts by bringing in private donations. He’s set up a foundation linked to UNITAID that will collect the voluntary airline-ticket levy and distribute it to key players in the field of medical assistance in Africa and elsewhere. Recipients will include the U.N. children’s agency UNICEF, and the Clinton and Gates foundations. As well as targeting HIV/AIDS, tuberculosis and malaria, the money will also be spent on improving maternal health and reducing child mortality.
But of the $150 billion development assistance pledged by governments for MDG’s, just $104 billion has been provided. Douste-Blazy believes that only individual philanthropy will be able to make up the shortfall. "The architecture of development is changing," Douste-Blazy tells TIME.
The world financial crisis has made such change a necessity, says Bjorn Skogno, a senior official in the Norwegian ForeignMinistry, who is a board member of the Millennium Foundation, the entity set up by UNITAID to collect and distribute the private donations. Overseas development aid "is likely to go down because of the crisis, so there’s a need to be innovative to find new sources of funds," Skogno says.
Consulting firm McKinsey & Co estimates that the levy could raise as much as $1 billion a year, although Douste-Blazy cautions that it will take several years to reach that goal. He promises that administrative expenses will remain extremely light, especially by U.N. standards — less than 5% of the money raised.
"Travel is already taxed pretty highly," says Gordon Wilson, the CEO of Travelport GDS, which runs two big reservation systems, Galileo and Worldspan. But asking people if they are willing to donate is a different issue: "The overall response is that it makes people feel good about travel but also embraces responsibility," Wilson says.
The Sept. 23 U.N. meeting will kick off a marketing campaign that seeks to win over consumers. And the travel industry has been busy making sure the technology works perfectly before launch. "It’s all a question of how it’s presented to the consumer," Wilson says. Travel agents will be automatically given the prompt to ask for the donation as they process an order. Online, a new box will show up in the shopping cart just before customers are asked for their credit-card details.
Consumers in nations that already have such official taxes won’t be included in the first phase of the voluntary contribution. If the initiative proves successful, though, expect it to expand. As for the size of the suggested contribution, Douste-Blazy says it was kept at a modest $2 so as not to take funds away from UNICEF and other aid organizations that rely on donations. If the initiative does take off, is there a risk that governments will view it as an excuse to spend even less on international aid? Douste-Blazy is firm: "It’s an addition, not an alternative."
Source Time Warner
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