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COMMITTEE OF THE WHOLE

AGENDA ITEM 6.2 - INSTITUTIONAL STRUCTURE TO OPERATE THE FINANCIAL MECHANISM UNDER THE CONVENTION:

The Chair of the GEF, Mohamed T. El-Ashry, opened Tuesday’s Committee of the Whole with an address emphasizing the urgency of a decision from the COP on the GEF’s role as the institutional structure for the financial mechanism. Delegates responded with repeated questions about the balance of decision-making authority between the GEF and the COP on financial matters. Several delegations expressed concern over whether the COP’s authority and priorities would be carried out by the GEF, and how the two institutions’ scientific advisory bodies would interact. El-Ashry said the GEF is ready and waiting to serve as the permanent financial mechanism for the Convention. He said a significant portion of the $2 billion pledged to the new GEF was intended to finance activities under the Biodiversity Convention. He said that the GEF Council had approved a two-track programme of work to develop a strategy for funding work related to biodiversity. The first track is for an overarching strategy by July 1995, and the second is to follow interim 1995 guidelines approved by the Council in early November. The guidelines provide resources for enabling activities, preferential projects, and ozone phase-out in countries not eligible for funds under the Montreal Protocol. El-Ashry cautioned, however, that the GEF would not be able to allocate financial resources to biodiversity at its January meeting unless it receives guidance from the COP on policies, strategies, programme priorities and eligibility criteria for activities to be funded under the Convention. He said that the GEF Implementing Agencies have been instructed to designate an $80 million programme of work for consideration by the Council in January. El-Ashry said that the restructured GEF is striving toward universal participation and democratic governance. Since the restructuring, 138 countries have joined the GEF. In support of the GEF’s candidacy as the financial mechanism, El-Ashry also mentioned the collaborative relationship between the GEF and Secretariats of the related conventions, and the extensive negotiations of ICCBD-2 to designate the GEF as the interim financial mechanism. He also noted that the $315 million that was allocated to 57 biodiversity projects during the GEF pilot phase is a solid foundation for continued work under the Convention. Following El-Ashry’s speech, Austria, Brazil, Uganda, Cameroon, Malaysia and Malawi questioned whether the authority and priorities of the COP would be reflected in financial allocations by the GEF. Brazil said that the determination of resources would be made jointly by the GEF and the Convention Secretariat, but asked how the GEF would respond to the COP’s decision on the need for funding. Malaysia and Malawi asked if the GEF was prepared to accept the authority and supremacy of the COP under Article 21 of the Convention. Cameroon asked whether other implementing agencies’ priorities might interfere with those of the COP and the GEF. El-Ashry responded that it was the COP’s responsibility to provide programme priorities, strategy and other policy guidance. He said that the GEF would translate the guidance into its funding and operations, and that the GEF Council would have final approval of projects. Mauritania said it represents 9 of the poorer GEF members as a GEF Council member, and that the GEF is accountable to decisions of the COP regarding the Convention. Chile, Brazil and Kenya requested clarification on the relationship between the GEF Science and Technical Advisory Panel (STAP) and the SBSTTA. Chile asked how work would be divided between the two scientific bodies. Brazil asked whether the STAP would scrutinize the SBSTTA and said it did not believe SBSTTA’s recommendations should be reviewed by the STAP. Kenya said that SBSTTA’s decisions should not be reviewed by the STAP. El-Ashry said the role of the STAP within the GEF had changed since the pilot phase, when it reviewed all projects. He said the STAP would be smaller and more strategic in the GEF activities, and that the GEF had no intention for the STAP to duplicate the SBSTTA’s work. Chile and Mauritius questioned El-Ashry on the need for funds beyond the resources provided by the GEF. Mauritius asked whether the need for additional funds meant that the COP would have to establish an additional financial mechanism. Chile asked how the GEF would determine what percentage of its resources would be applied to biodiversity, and whether particular funds would be allocated for countries with economies in transition. El-Ashry said there would be no earmarking for regional groups or countries with economies in transition. He said the need for additional funds could be addressed by using GEF funding to leverage contributions from other donors and the private sector. Slovakia, speaking on behalf of Albania, Armenia, Belarus, the Czech Republic, Estonia, Hungary, Kazakhstan, the Slovak Republic and Romania, fully supported the GEF as the financial mechanism. She said the GEF should be recognized as the permanent financial mechanism. El- Ashry said that while the GEF was prepared to serve as the permanent mechanism, the Convention permitted the COP to choose a different mechanism in the future if it was not satisfied with the GEF. He said that a permanent designation was preferable, noting that it would send a signal of certainty. Since many delegations did not have the document UNEP/CBD/COP/1/6/Add.1 in the morning it was agreed that the Committee would consider this issue in the afternoon. Algeria, on behalf of G-77 and China said that given the late distribution of the document more time was needed for consultation. He said the earlier discussions on the GEF were useful and noted the particular importance of Article 20, especially the issue of “new and additional financial resources” for developing countries. He said the financial mechanism in every case should operate in a system of governance that is democratic and transparent and which is  accountable to the COP. He asked the Committee for the use of the Conference room in the late afternoon so that the G-77 could consult further. An NGO statement was presented on behalf of a number of NGOs. Jesper Grolin of Greenpeace Denmark, said that under Article 21, the financial mechanism must function under the authority and guidance of, and be accountable to, the COP. He noted that the GEF Instrument only mentions guidance and accountability and hence there is clearly some incompatibility on the issue of authority. He also noted that paragraph 3 of the draft Memorandum of Understanding (MOU) states that the decisions of the COP shall guide the institutional structure in the operation of the financial mechanism. In paragraph 5, the COP can only ask the institutional structure to reconsider any funding decision but cannot truly exert authority over the institutional structure. He suggested that there were three options before the COP: amendment of the GEF; amendment of Article 21; and establishment of an independent funding mechanism. Germany, on behalf of the EU, stated that the concerns of many governments had been alleviated by the newly restructured GEF, which is now transparent, democratic and consistent with Article 21. He noted that all country parties to the Convention are now represented in the GEF. He said that the MOU is clear and helpful except for paragraph 5.2. A quick decision on the financial mechanism was requested. Australia supported the GEF as the appropriate permanent institution, especially given the possibility of review not less than two years after the Convention has entered into force and the fact that the GEF is now fully operational with funding for the next three years. Australia and other donors have committed to new and additional resource replenishment on the basis that the GEF would be the permanent institution. She also supported the survey of other financial institutions as reflected in paragraph 11 of the Secretariat document. Slovakia, on behalf of the Eastern European Group, indicated support for the EU and Australia and called for the GEF to be designated as the permanent institution. The US fully supported the EU and Australia regarding the GEF as the institutional structure for the financial mechanism. He noted that the restructuring has ensured more transparency, new and additional resources, and predictability, not to mention the fact that the use of GEF resources are expected to be in conformity with the criteria established by the COP. Austria noted that the GEF will use its replenished funds (for the next three years at least) regardless of whether the COP decides to use it as the financial mechanism. He urged that efforts be directed towards defining the programme priorities. He also noted the efforts of the GEF to draw on additional funds from outside the GEF, such as the World Bank and other regional banks. Norway cited several reasons for supporting the newly-structured GEF as the institutional structure for the financial mechanism: if the COP is to implement the Convention quickly, this crucial part of the process must be clarified; the GEF stands a better chance at resource mobilization from other sources; and all the different players can be activated more expediently if this decision is settled sooner rather than later. Finland also supported the EU and said that this COP should take a first step forward in implementing the Convention and that the selection of the GEF would be a move in the right direction. Japan also supported the GEF as the permanent financial institution, but urged against any hasty decisions in this regard, calling for more detailed discussions. New Zealand supported Australia, the EU and Norway and reminded delegates of its original reservations about the GEF during the pilot phase. However, New Zealand fully supported adoption of the restructured GEF as the institutional structure noting its full accordance with Article 21 of the Convention. He noted the role of the GEF in ensuring the effective functioning of the Convention. On the question of arrangements of the financial mechanism, he welcomed the Secretariat’s MOU as a good basis for future discussions. Sweden highlighted the fact that the longer uncertainty lingers about use of the GEF, the harder it will be to build broad-based support to mobilizing funds for any further replenishment of the GEF. He noted the lengthy and difficult process of restructuring, as well as the replenishment of the GEF’s $ 2 billion budget. Further replenishment will be difficult as long as the GEF’s future vis-�-vis the Convention remains uncertain. He noted that attempts to develop alternatives to the GEF are not viable.

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