6:16 AM Mar 2, 1994
FINANCING SUSTAINABLE DEVELOPMENT PROGRAMMES
New York 1 March (TWN/Chin Oy Sim) -- A three-day meeting of the UN Commission on Sustainable Development's Working Group on finance is debating action proposals for financing Agenda 21 programmes for sustainable development, and whether these should focus international or domestic policies. The discussions, largely along North-South lines, seek to clarify whether international policies should concentrate on aid, debt relief and terms of trade, or on domestic policies and "innovative financial mechanisms" such as environmental taxes, debt-for-nature swaps and tradeable permits. In his opening speech yesterday, UN Under-Secretary General Nitin Desai said it was time to "look beyond aid" for financing sustainable development. "When we say there is a shortage of financial resources, we also mean that there is a deficit in savings. The counterpart of this is overconsumption. Thus there must be a redirecting of consumption patterns, and the changing of lifestyles also has an impact on the issue of financial resources." Desai added that the lack of finance and the need to change economic policy are part of the same problem. "Patterns of production and consumption must be geared towards saving resources," he said. A Secretariat paper prepared for the meeting noted that whilst total ODA from OECD countries rose by 5.8% in nominal terms in 1992 to $59.9 billion, it actually fell in real terms by 0.3% due to changes in prices and exchange rates vis-a-vis the US dollar. Although contributions to multilateral agencies rose by 19%, bilateral ODA in contrast declined 6% in real terms and, in particular, bilateral grants fell by 12%. In the area of debt, the paper stated that despite some positive developments, the economic outlook is discouraging in the poorest countries, as in sub-Saharan Africa. Debt obligations are still well beyond their ability to meet service payments, and there is little foreign exchange left for other purposes. The paper also pointed out that real commodity prices have been declining almost continuously since the early 1980s, and real non-oil commodity prices have fallen by 45% since 1984. Another aspect which the paper addressed was national policies to finance sustainable development. It recommended moving towards increased use of economic instruments (such as environmental taxation, tradeable permits and clarification of property rights), and a shift in public expenditures by reducing military spending and removing environmentally damaging subsidies on water, pesticides, fossil fuels, agriculture and electricity. The paper also proposed innovative financing mechanisms such as debt-for-nature swaps, environmental investment funds, internationally tradeable permits, international taxes and a venture capital fund. In the discussions of the past two days there was a discernible division of opinion on whether the Working Group should primarily call for improving the larger macroeconomic situation (aid, terms of trade and debt) or for the use of domestic and innovative measures. Thierry Rommel of the European Community said ODA should be increased but enormous mileage of economic efficiency and environmental protection can be obtained through appropriate domestic policies. Regarding aid, he said, the question had to be asked, "What have you been doing with these funds? To what good use have they been put?" He added that some citizens of donor countries who travel around the world question the effectiveness of aid which their governments provided, and thus this issue had to be addressed. He also said the Working Group should highlight the great benefit the conclusion of the Uruguay Round would bring. The German delegate said that ODA was not the most important factor for development, and trade was more critical. The concluded Uruguay Round would raise world income by 1% of GNP per year, or $200-300 billion annually, of which the developing countries would get one-third or $70-100 billion, compared to the $60 billion of ODA, the delegate said. The figures cited are from estimates, based on various assumptions, in a World Bank/OECD development centre study, and projects such a world income gain after ten years (ie. in 2005). The same report though has also identified sub-Sahara Africa as net losers. Several developing country delegates stressed the central importance of ODA and debt relief for financing sustainable development, and said that the need for domestic policy reforms should not deflect attention from this point. Pedro Motta of Brazil said it was "a delusion" to assume the financing of Agenda 21 programmes for sustainable development could be solved mainly on the basis of pursuing national policies through economic instruments. "Most developing countries," he said, "are already doing this, but we should guard against relying only on domestic economic instruments. This is not the fundamental solution although it may be part of the solution." He stressed that ODA was fundamental. "We agree we must have better quality in ODA but we must also insist that there must be an increase." The Cuban delegate said developing countries could not achieve sustainable development unless adequate external flows were available, and thus donors must live up to their ODA commitments. Chile's representative said that two years after Rio the accomplishments of the Earth Summit may be lost unless the concept of partnership was resurrected. In 1993 in Latin America, resources fell far short of what was needed for sustainable development. Australia said that it might be "inappropriate to prematurely wipe ODA off as a useful mechanism". ODA still had a role to play, although a small one, within a partnership concept rather than a donor-recipient relationship. Egypt's Dr. Mostafa Tolba agreed that ODA must not be marginalised or sidelined as there is no alternative for it. He added that grants are extremely important if properly used. China concurred that "non-marginalisation of aid" is crucial. Norway also commented that the role of ODA was central. Several delegates pointed out that debt-for-nature swaps proposed in the Secretariat paper had drawbacks. Egypt said in the past eight years such swaps totalled only $500 million, which he described as "peanuts" and Uganda stressed that they should not substitute for a longterm strategy to eradicate debt through debt cancellation. There was also a lively discussion on the uses and limitations of removing subsidies and imposing environmental taxes. The United States delegate cautioned against changing from income tax (which was progressive) to environmental taxes. User fees were usually regressive and whilst environmental taxes were useful they were not a panacea. The Canadian delegate also stressed that taxes on consumption were regressive. Whilst prices should be set right, amenities should not be priced out of the reach of the poor. The Uganda delegate said that for many developing countries it was ironic to talk about imposing user fees for services. "Firstly we have to provide these services and this needs capital, and this is where ODA is needed. And secondly it is the duty of governments to provide services, so we cannot charge so much that the poor cannot afford them." Representatives of two NGOs, Martin Khor of Third World Network and Barbara Bramble of the US National Wildlife Federation made separate presentations that stressed on the need for debt relief, reform to the content of structural adjustment policies, new commodity agreements to raise the prices to commodities to reflect their ecological costs, and a higher quality and volume of aid. They said although domestic policies, taxes and economic instruments were important, these must be accompanied by progress in the international factors for sustainable development to be financed.