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A BRIEF ANALYSIS OF THE MEETING

The second meeting of the CSD ad hoc working group on finance received mixed reviews. While, on the one hand, delegates discussed alternative measures for raising the necessary financial resources for implementing Agenda 21, there is still a fear of the use of innovative measures and a constant return to the familiar territory of the call for achieving the target of 0.7% GNP for ODA.

There was a tendency for developing countries to focus on their need for external funding, in particular ODA commitments, while the developed countries gravitated towards the use of domestic economic instruments. Yet both sides did go one step further and actually discuss other economic instruments and innovative measures for financing sustainable development, and these discussions were not always polarized along North-South lines.

A stimulus for the advancement of the debate was the presentation on the "matrix approach" to resource generation by Dr. Panayotou. Although the Matrix was criticized for its shortcomings, it nevertheless proved to be strategic in various ways. First, it was an enlightening presentation of a broad range of economic instruments through which resources can be generated. The willingness of decision-makers, especially in donor countries, to employ these instruments in order to generate the much debated "new and additional resources" or, at the very least, increase and fulfill ODA commitments, will be a demonstration of their goodwill and determination to realize sustainable development. Second, the wide range of alternative economic instruments is welcome news, especially for the developing countries, as they provide all nations with at least one choice or a mix of instruments that they can tailor to their specific economic, social and political situations to generate resources.

Another positive sign was the call by the Working Group for further studies on the various proposals both within and independent of the Matrix. While there is consensus that subsidizing lifestyles, both in the North and the South, are central to environmental degradation and must be redressed, additional studies may point out that some of the suggested alternatives are not applicable in the South. Neutral revenue taxation is a good strategy that protects industry from collapse, but might lead to a vicious cycle in developing countries. Shifting corporate taxes for use in environmental conservation, no matter how small the portion diverted, will deprive developing country governments of one of their few sources of income.

Another advantage of these studies is that they will demonstrate the appropriateness and applicability of the various economic instruments. Although the scarcity of resources means that not all the proposals can be studied in countries with different social, legal and economic frameworks, the studies will nevertheless provide further understanding of their cost-effectiveness.

Despite the benefits of such studies, there is still the risk that they might function as a delaying tactic. What politicians know is ODA and both developed and developing countries are afraid to take steps forward. For the developing countries, as long as the accepted ODA targets are not met, all other options to generate domestic resource will not receive attention. For the developed countries, as long as studies are being undertaken on innovative instruments for generating new and additional resources, they do not have to provide these resources.

Another problem that was raised, but not adequately addressed, is the CSD's work programme, particularly in view of the fact that it is nearly three years since Rio. As one delegate pointed out, the CSD may only have "discussions" to show for its work by the 1997 five-year review. If the CSD endorses the proposals of the Working Group, the main activity for the next year will be the studies, for which reports will be presented in 1996. Only then can the CSD be expected to promote some options, which means that even by 1997, there may hardly be any concrete activity on the implementation of Chapters 33 and 34 of Agenda 21. The CSD must go at least beyond the call for studies to an examination of areas where pilot projects can be initiated for evaluation in 1997. This, however, depends on the willingness of some developed and developing countries to undertake joint pilot programmes.

The introduction of new economic instruments also raised concern among the developing countries who see these instruments as providing a shift from the provision of resources by the developed countries, to suggesting that funding for Agenda 21 will come from domestic funds. Developing countries also harbor the fear that the emphasis on universal application of these instruments is a tactic by developed countries to tie their ODA commitments to the use of innovative mechanisms. On their part, developed countries emphasize that no country can escape the use of innovative instruments since it was recognized in Rio that financing for the implementation of Agenda 21 will come from a country's own public and private funds. While these arguments seem to polarize the debate, they are nevertheless the best indicators of governments' commitments to realize sustainable development. The instruments provide developed countries with a mechanism to generate more funds to enable them to increase their ODA. On the other hand, developing countries can generate supplemental resources, since external resources alone will be inadequate to attain sustainable development.

Another shortcoming of the session was the failure to closely examine how to resolve the problem of subsidies, both in the North and the South. Developing countries are faced with the conflict of how to eliminate subsidies while attracting foreign and private investors. Providing various forms of subsidies, such as tax exemptions, as well as turning a blind eye to sub-standard technologies, is their way of creating an enabling environment for technology transfer. The mushrooming of Export Processing Zones in developing countries, often at great costs to the environment, are the embodiment of this paradox. But developed countries are faced with the situation where some sectors have to be subsidized in order to survive and generate employment. However, the extent that the issue of subsidies keeps popping up in all other sectors, but especially in financial matters, necessitates consideration.

Finally, perhaps there would have been more progress in the examination of options for resource mobilization if more technical experts participated. What little success there was can be largely attributed to the presence of few, effective government technical experts —either officers from the finance ministries, other practitioners or economic theorists. Too many countries still rely on their New York-based diplomatic staff to attend these "expert" meetings. While this session served to educate members of the UN's Second Committee, it barely advanced the technical aspects of the finance debate. If governments are serious about finding the "new and additional resources" needed to implement Agenda 21 and ensure that sustainable development becomes a reality, perhaps it is time for them to take the CSD seriously and send their finance experts, along with their diplomats, to participate in the future work of the CSD.

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