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PANEL ON FINANCE

Roberto De Ocampo, Finance Minister (Philippines), recounted national progress made toward sustainable development as a result of policy changes that promote economic liberalization and empowerment, ensure sound infrastructure, and streamline bureaucracy. Recent economic targets were exceeded. James Michel, OECD Development Assistance Committee, stated that the volume of ODA has remained constant over the last decade, but it is not keeping pace with the growth in the OECD countries, which suggests a lower priority. He noted that political support for ODA is linked to development education and a convincing vision of the importance of sustainable development is needed. ODA should build the capacity of developing countries to receive private sector flows.

Andrew Steer, Director of the World Bank Environment Department, stressed the need for long-term consistent policies and risk management, and for reshaping private finance policy in recipient countries. He also noted that careful analysis of cost assessments can substantially lower the cost of environmental measures. Responding to questions, he acknowledged that government decisions to implement sustainability often require political courage and forward planning, harnessing new constituencies with the assistance of NGOs. Regarding debt relief, he said there is a framework established for identifying countries that are “debt stressed,” i.e. with no prospective work out period over 5 to 10 years.

Fridrik Sophusson, Finance Minister (Iceland), noted that, while market economies are well suited to the provision of goods and services, government action is often needed to redirect patterns of consumption and production to further sustainable development. In Iceland, the shift from oil to geothermal energy was initiated by the government. On economic instruments, he said Nordic taxation policies have been sensitive to impacts where levels are already high. At a time when ODA flow is diminishing a new international tax warrants consideration. Luise Diogo, Deputy Finance Minister (Mozambique), described the need to link financial help for sustainability and debt relief in poorer countries. She said it will be difficult to reverse low ODA and there should be a focus on increased efficiency. Substantial progress has been made in the uses of aid. Developing countries should involve the private sector in deciding policies to take account of social impacts.

Ved Gandhi, Assistant Director, Fiscal Affairs Department, International Monetary Fund, underscored: the reliance of foreign investment on sound national economic and social policies; reducing environmentally-damaging subsidies; and encouraging the IMF and World Bank to study the technical issues of sustainable development. The IMF will: perform further technical work on taxes, subsidies and user prices; ensure that its advice does not curtail institutional capacity; help with countries’ macroeconomic stability; and involve finance ministers in decision-making on sustainable development.

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