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INTERNATIONAL POLICY AND ENVIRONMENTAL FINANCIAL FLOWS

The PHILIPPINES, on behalf of the G-77 and China, emphasized his group's growing disillusionment with the changing external environment. While the estimates of the funding needs are US$600 billion, only US$125 billion was to come from the North. He stated that: (1) re-inventing new ideas on resources mobilization are good, but they cannot replace commitments to realize ODA targets; (2) in spite of donor fatigue, ODA has to be realized; (3) developing countries shall be competitive in world markets as long as they are open to them; and (4) while international institutions are necessary, the COPs and the CSD should call the shots.

CHINA reminded delegates of the difficult negotiations of Chapter 33 of Agenda 21 and noted that the paragraph that took the longest time to negotiate dealt with ODA. According to the OECD's Development Assistance Committee (DAC), in 1990, average ODA was 0.35%. Since Rio, however, ODA has not increased but has declined and the 1993 average was 0.29%. Two years and nine months have now elapsed since Rio and regrettably the "new global partnership" is far from becoming a reality. To establish this partnership, it is necessary to: (1) earnestly implement the commitments made at UNCED; (2) adhere to the principle of common but differentiated responsibilities with the developed countries bearing the main responsibility; and (3) join hands to check the harmful tendency of containing the socio-economic development of the developing countries in the name of "environmental protection." While new mechanisms need exploring, they should not replace honoring ODA commitments.

FRANCE noted that: (1) the integration of economic systems and markets has led to an interdependence of nations necessitating new cooperation for development. Thus, partnerships are not just a question of moral obligation but one of mutual interest, which requires the participation of all sectors, including governments, NGOs and the private sector. (2) Some of the developing countries from the middle-income bracket have GNPs that are equal to those of some of the developed countries. This gives rise to the need to consider the role of private investors.

The US said that the focus of this meeting should be on improving the use of existing resources and considering innovative financial mechanisms. The CSD should recognize that the private sector is the largest source of financial flows and that governments can encourage private sector flows by adopting and enforcing environmental regulations, providing a stable and predictable economic environment, and providing adequate technical training to use environmentally sound technologies. Since available resources for foreign assistance are limited, the CSD should look at how to make better use of existing resources through: refocusing bilateral assistance to give priority emphasis to sustainable economic growth and development; encouraging sound multilateral and bilateral policies; enhancing donor coordination; supporting national sustainable development strategies; and promoting environmentally-oriented debt relief programmes.

MALAYSIA noted that since Rio lamenting about ODA commitments has been reiterated at each CSD meeting. He stated the need for: developed countries to articulate their plans on how to increase ODA; undertaking an in-depth review of ODA and exploring new approaches and mechanisms that would enable progress; changing the mindset that repeated calls from developing countries are calls for sympathy; paying attention to the problems in developing countries, especially those related to structural adjustment programmes (SAPs); encouraging discussion on debt, trade and other macro-economic policies in an integrated manner; encouraging the international financial institutions to incorporate social, economic and environmental goals for sustainable development.

DENMARK reiterated her government's commitment to ODA, which is currently at 1% of GNP. Denmark has set a target of an additional 0.5% by the year 2002. The CSD should perform its mandate to implement the Agenda 21 commitments and try to meet the ODA target.

PAKISTAN noted that ODA is crucial for the least developed countries and it is necessary to look beyond the question of political will to other reasons that impede the attainment of UN targets. In spite of macro-economic problems, including the recession and the diversion of resources to the countries with economies in transition, it is necessary to ensure resources get to developing countries. He offered four strategies to accomplish this: (1) build consensus in developed countries to increase ODA, not as a matter of altruism or sympathy, but out of mutual interest; (2) developed countries should recognize and highlight the fact that their ODA does not go to waste and use this approach to generate political commitment; (3) although the Secretary-General's report highlights the Bretton Woods institutions as one of the structures, it is necessary to provide a critique of whether such structures are operating, highlighting whether they have succeeded in realizing sustainable development; and (4) while the ad hoc Working Group was asked to provide an analysis on the interrelationship between the CSD and the Bretton Woods institutions, these institutions should have presented papers and provided an opportunity for interactive discussion on the issues.

NORWAY pointed out that ODA is a safety net for the least developed countries. To maintain high ODA levels takes serious political work. These goals cannot be achieved without using economic instruments and restructuring taxes. He expressed disappointment that the Conventions on Climate Change and Biodiversity have not taken decisions on the permanency of the GEF. The GEF is replenished, restructured and ready to take on these tasks.

COLOMBIA said ODA is in crisis and new political will is needed to carry out commitments. He drew attention to the speculative nature of financial flows to developing countries. The problem of concentration of resources in a small group of countries and sectors has been compounded by greater volatility, as demonstrated recently in Latin America. The instability and volatile nature of capital should be studied. The subject of debt conversion should also receive more attention from the CSD. Despite the euphoria after the completion of the Uruguay Round, there are still dangers to its successful implementation. This Working Group should explore mechanisms to ensure greater effect and avoid duplication of the work done by the UN, the Bretton Woods institutions and national governments.

The REPUBLIC OF KOREA noted the serious need to address mobilization of financial resources. He noted that private sector resources will be limited since their effect has mainly been felt in the middle-income developing countries, hence ODA will play a vital role in the least developing countries. The CSD should promote discussion on the interrelationship between trade and international resource flows.

INDIA noted three issues that need to be addressed. (1) Increasing ODA requires addressing how it can be realized for the OECD countries' self interest. (2) Although private sector resources are increasing, they involve volatility and risk, not only in the developing countries where the investments are made, but in developed countries as well, and for similar reasons, including monetary interest and political factors. This requires addressing volatility in the North. (3) Two aspects of the relationship between infrastructural development and sustainable development should be addressed: there is a gap between private loans, which are short-term (5-10 years) and the often utilized medium- to long-term (15-20 years) loans for developing countries; and appropriateness of user charges, since they cannot cover all infrastructural costs.

SWEDEN said that sustainable development requires international and national, private and government assistance through both established channels and innovative means. The commitment of 0.7% of GNP for ODA should be honored. ODA should be directed to the poorest countries and towards poverty alleviation. There is need for an equitable distribution of resources between and within countries. She noted the multiple fora where financing development is under discussion and stressed the need to address financing in an integrated manner.

The NETHERLANDS regretted the tendency to downplay ODA. He underscored the need to: address the problem of debt; avoid conditionalities when funding sustainable development programmes; and ensure that funding sustainable development is based on the needs of the receiving country. He agreed with the "polluter-pays" principle, but stressed that developed countries are not responsible for all the environmental problems.

The UK said that the spirit of constructive partnership requires efforts on both sides to help achieve the 0.7% target as soon as politically possible. It is up to the taxpayers to determine the amount of new and additional resources that will be made available. Part of the consensus required to increase these resources is proof of the cost effectiveness of those resources. This proof cannot come only from the donor side, but from both sides. He did not share the view that there has been an effort to downgrade the importance of ODA. Rather, there has been a conspiracy of silence on the fact that the net resource flows to developing countries have never been higher and greater efforts are underway to alleviate the debt burden of the poorest countries. There has also been little attention to the fact that in the last few years, the rate of growth in developing countries has been strong.

UGANDA said social and economic progress and the alleviation of poverty are integral to the attainment of sustainable development. He lamented the decline in ODA levels and the growth of the debt burden. Africa still has some "well-founded pessimism" about the outcomes of the Uruguay Round. This Commission must deliberate in a positive way or it risks creating the appearance that it is conspiring against sustainable development.

AUSTRALIA agreed that ODA has an important role to play in achieving sustainable development, however, ODA is only one aspect of the partnership — we need improved effectiveness of all financial flows. It would be helpful if there were some estimate of how resources have been reallocated for sustainable development. Trade liberalization can be a positive force in achieving sustainable development. A priority should be the removal of environmentally damaging subsidies on production and consumption.

JAPAN stated that contrary to the Secretary-General's report, his country has increased its ODA. The CSD should be addressing how to stimulate ODA rather than cite numerical targets. He then outlined the basic principles his government is using to raise domestic support: environment and development are pursued in tandem; ODA is not used for the production of missiles or products of mass destruction, or to accelerate conflicts; and democratization, human rights and trade are enhanced.

GERMANY stressed that there is no reneging on ODA. He noted that official and private financial flows can only be generated in the context of confidence and trust. The German public and parliament adhere to the fact that ODA supplements self-help actions. Thus, contributions from developed countries can only provide an impetus to domestic funds. Other necessary measures that are needed in developing countries include: the promotion of domestic savings, repatriation of capital flight, and promoting participatory development and good governance. According to the World Bank, capital flight in 1990 amounted to US$700 billion, 55% of the foreign debt of developing countries. The OECD principles for ODA are closely linked to participation, accountability, local self government and respect for human rights, all of which provide a good environment for investment.

POLAND thought that this Working Group could be of help in designing economic instruments to finance sustainable development. He questioned whether the Secretary-General has the mandate to assess the work of the Bretton Woods institutions. He called for the IMF and the World Bank to brief this Working Group.

BANGLADESH noted that while developing countries are primarily responsible for their sustainable development and the implementation of Agenda 21, results cannot be expected unless external assistance supplements their efforts. He urged immediate debt cancellation, along the lines of the recommendation of the non-aligned movement experts meeting, but stated that debt-for-nature swaps can serve as debt-reduction strategies. He raised concern about the emphasis on private sources due to distribution problems and added there are no guarantees that their resources will get to those who need them the most, or even that they would be directed to environmentally sustainable activities.

The IMF representative said that the IMF and the World Bank should not be lumped together simply because they have the same birthplace and are housed in the same city; there are major differences between the two institutions. The IMF is not a development institution. It does not have a development paradigm and has no mega-projects or any projects at all. The IMF is a monetary institution. Its main objectives are domestic monetary stability in member countries and international exchange stability. The IMF also gives balance of payments support and support for adjustment. The use of these funds is left to sovereign States. The IMF cannot redirect its own resources towards sustainable development because its mandate does not allow it to. Yet, in an indirect way, the IMF has become more sensitive to environmental issues in member countries.

MEXICO said it is disturbing to note the decrease in ODA flows. It is indispensable for the international community to act together and find a solution to environmental problems. Close cooperation between the CSD and international institutions is a basic requirement to achieve the commitments adopted and contained in Agenda 21 and to avoid duplication of efforts.

SRI LANKA reminded delegates that some of the proposed financial mechanisms are not feasible in some developing countries. Subsidies are safety nets for the poor that cannot be eliminated. Likewise, taxation of industries, which are few and are at an embryonic stage, would realize minimal resources, which would be a self-defeating venture. Therefore, in the short-term, increasing ODA and addressing the debt problem are essential.

CHINA said that he found it a bit bizarre that one delegate says his government's ODA will not be given to a country that expands its military expenditures. What about the need to offset the effect of inflation rates? China's national defense budget is US$6 per head — one of the lowest in the world. We need to work as global partners in the spirit of Rio and oppose irrational conditionalities.

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