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CHAPTER 33: FINANCIAL RESOURCES AND MECHANISMS
At the conclusion of PrepCom IV, the negotiations on financial resources and mechanisms had broken down during informal-informal consultations. These talks, conducted by Amb. Andr‚s Rosenthal of Mexico, produced a draft text that, through seemingly mysterious means, emerged from the UN Conference Services system the week following PrepCom IV as PC/L.75. As negotiations around this document had failed, the G-77 demanded that negotiations on this crucial issue resume on the previous G-77 text, L.41/Rev.1, on which the negotiators led by John Bell of Canada had reached impasse during the fourth week of PrepCom. There was very little likelihood that any real progress could have been made on that document and observers close to the negotiations commented that for any real progress, compromise text needed to emerge quickly in Rio.
On 3 June, during the first session of the Main Committee the Chair, Tommy Koh, announced that Rubens Ric£pero, the Brazilian Ambassador to the United States, would coordinate discussions on this topic at UNCED. On 4 June, Ric£pero presented a Chair's draft for consideration. While many thought this paper emerged too soon in the negotiations, the timing proved crucial and forced the group to consider a formulation that reflected a blending of North-South considerations and provided a realistic "starting-point".
The Chair's draft contained the following points: special efforts must be made to meet the full incremental costs for developing countries; economic conditions for free trade are essential; developed countries should "reaffirm" commitments to reach 0.7% of GNP for ODA (with no mention of a target date); mechanisms and sources of funds should include multilateral development banks and such funds as the IDA replenishment; multilateral institutions for capacity-building and technical cooperation; strengthening of bilateral assistance programmes; debt relief; private funding and private investment; innovative financing; a transparent and accountable GEF; funding for incremental costs of Agenda 21 activities, and; review and monitoring of Agenda 21 financing.
When the Ric£pero document was tabled, the primary question was whether the G-77 would accept this text as the basis of negotiations. Since more than three-quarters of the discussion at past two PrepCom meetings on this matter had been devoted to the decision as to which text would be used for negotiations, many felt that a quick decision to use the Chair's draft text would considerably advance debate.
On Friday, 5 June, the G-77 returned with their statement of position on financial resources. This document cited a series of principles from L.41/Rev.1 and, in light of these principles, placed a series of issues before the discussion. The most significant fact in its statement was that it did not reject the Brazilian Chair's text. The issues it noted included: credible assurances for new and additional funding; commitments to reach 0.7% of GNP for ODA by the year 2000; a pledging conference to be called at the next UNGA; a monitoring mechanism for financial flows to developing countries; and the importance of a supportive international economic climate.
In response, on 6 June Ric£pero issued a revised Chair's draft. This text incorporated the concerns of the G-77 and it: identified economic growth, social development and poverty eradication as priorities; stated that the cost of inaction would outweigh the financial costs of Agenda 21; and noted that global and local environmental issues are interrelated. The GEF language remained basically unchanged from previous draft. In the "Means of Implementation" section it called the Secretariat figure of $125 billion for implementation of Agenda 21 an "estimate" and stated that actual costs would depend on the strategies and programmes implemented. It also stated that financial commitments for Agenda 21 should be made by developed countries at UNGA-47 and that financial review and monitoring would be dealt with in the chapter on institutions.
One of the more interesting aspects of this text was the wording of the "Activities" section related to the setting of targets and timetables for countries to reach the established United Nations goal of 0.7% of GNP for ODA by the year 2000. The formulation of the paragraph on ODA created three different categories of countries: those that would "reaffirm" their commitment to this goal; other countries; and those that are making the transition to market economies. Although this paragraph underwent substantial revision during the following two weeks, the wording was crucial to the successful outcome of the negotiations. Since all countries but the US and Switzerland had affirmed a commitment to reaching the UN target of 0.7% of GNP for ODA by the year 2000, the first formulation that required countries to "reaffirm" their commitment, did not apply to the them. They fell into the second category of countries that would "make their best efforts to increase their level of ODA so as to contribute to the common effort to make available the substantive additional resources that have to be mobilized." This wording, effectively, provided the US the opportunity to avoid setting any timetable or target for development assistance, neutralizing them as a complicating factor in the difficult negotiations that ensued on this subject over the following two weeks.
The G-77, after informal meetings on Sunday and during Monday morning, had formulated a list of amendments to the Saturday afternoon draft. Observers commented, at this point in the negotiations, that the G-77 seemed unwilling, or unable, as a group to present a coherent set of amendments. The more than 40 proposed changes to the Chair's text reflected a fragmentation of interests within the G-77 and allowed, according to those close to the process, an advantage to the industrialized countries. Some of the more important amendments were: economic and social development and poverty eradication as the first and overriding priorities of the developing countries; access to new and additional financial resources on grant and concessional basis without any new conditionality; a call for a more equitable and non-discriminatory multilateral trading system; and the removal of the clause especially created for the US regarding ODA.
With the limited time available for negotiations, a decision was taken to reduce the number of participants in the discussions to eight negotiators from the industrialized countries and eight from the developing countries. At 4:30 in the morning on Wednesday, after a marathon negotiating session, the negotiators emerged with a new "Chair's draft" that contained only four bracketed paragraphs. By comparing Monday's draft text (including the proposed G-77 amendments) with the results of Tuesday's closed-door all-night session, compromise was reached in the following areas:
- In the "basis for action" section, paragraph 4 in the new text now states, "The cost of inaction could outweigh the financial costs of implementing Agenda 21. Inaction will narrow the choices of future generations." This modified version of the "precautionary principle" was a G-77 amendment.
- The phrases "free trade" and "access to markets" were retained.
- Wording that deals with implementation of Agenda 21 included the phrase "will require the provision to developing countries of substantial new and additional financial resources, including on grant or concessional terms and according to sound and equitable criteria and indicators."
- The costs of Agenda 21 were clearly stated to be estimates.
- Developing countries will begin to prepare national plans for sustainable development.
- There will be no "pledging" conference however governments will report back to the 47th session of UN General Assembly with their plans and commitments.
- ODA For Agenda 21: The problem with paragraph 15 pertains to the target and timetable for developed countries to meet the UN target of 0.7% of GNP for ODA.
- IDA Replenishment Levels: Paragraph 16(a)(i) dealt with the replenishment of the IDA, one of the various existing funding sources and mechanisms used in particular for the poorest of developing countries. The ninth funding replenishment (IDA-9) was set at US$15.5 billion. To adjust for expansion of the world economy and inflation, it has been estimated that IDA-10 would have to be increased by approximately US$2 billion. There is discussion regarding a possible increase to the IDA over and above the correction in real terms that would increase it by US$5 billion, otherwise known as the "Earth Increment". Of this money, US$1.5 billion would come from the World Bank's interest income with US$3.5 expected to come from developed country donors.
- The GEF and Conditionality: The remaining brackets in the Chair's text were related to the changes in governance in the Global Environmental Facility (GEF).
The Main Committee then turned to the 100-plus "financial" paragraphs scattered throughout Agenda 21 in the "Means of Implementation" section of each chapter. These paragraphs have been uniformly modified to reflect the fact that costs associated with the chapter activities are order of magnitude estimates only and the actual value depends on the strategies and programmes implemented. These paragraphs were adopted with minor amendments.
As the Main Committee had officially ended early Thursday morning, 11 June, responsibility for the resolution of the outstanding problems was passed to the Chair of the Plenary, the Brazilian President Fernando Collor de Mello and his ex officio vice president, Celso Lafer, the Brazilian Foreign Minister. Amb. Ric£pero was asked to continue as the coordinator of ministerial level consultations on the issues of the GEF, IDA, the word "including" and new problems that emerged over the paragraph on "debt relief". Paragraph 16(e), which dealt with debt relief, emerged as an issue on June 12, after the Main Committee had passed on the text to the Plenary. Particularly problematic, for some developed countries, was the phrase "further measures and eligible countries should be kept under review." Some countries felt that this might expand the list of countries available for special debt relief consideration beyond the list of the poorest heavily indebted countries under an expanded definition of the Trinidad agreement of December 1991. By late Friday afternoon, text was being circulated privately among governments.
In his progress report to the General Committee (members of the Bureaus of both the Plenary and the Main Committee) at noon on Friday, 13 June, Amb. Ric£pero announced that after informal consultations, consensus had been reached on several paragraphs:
- In paragraph 10, the sentence that deals with the provision of new and additional resources, and includes the word "including", was broken into two parts. The first sentence now only deals with the fact that the implementation of Agenda 21 requires new and additional resources. The second sentence now deals with the terms on which these resources will be provided.
- In paragraph 16(a)(iii), on the GEF, the problem pertained to the word "conditionality." The compromise language agreed to was, "Ensure access to and disbursement of the funds under mutually agreed criteria without introducing new forms of conditionality."
The Plenary session that was scheduled for Friday night at 11:00 pm was postponed and met briefly at 12:45 am on Saturday morning. Ric£pero reported that compromise had been reached on paragraph 16(e) on debt relief. The agreed text adds the sentence, "Measures to address the continuing debt problems of low and middle income countries should be kept under review."; and replaces the original text with, "debt relief measures should be kept under review so as to address the continuing difficulties of those countries."
Ric£pero then reported that after extensive negotiations, they had reached a formulation on paragraph 16(a)(i) on the IDA. The new text removes any specific reference to the "Earth Increment" and directs the IDA Deputies to give special consideration to World Bank President Lewis Preston's statement to the UNCED Plenary, "in order to help poorer countries meet their sustainable development objectives as contained in Agenda 21." On 4 June, Preston proposed an additional volume of resources for the IDA-10 replenishment (1993-95) in order to maintain IDA-9 funding in real terms and, if donors support such an initiative, re-allocate part of the IBRD's net income to the Earth Increment for national environmental issues (US$1.5 billion).
Lafer then announced that consultations on the only outstanding matter relating to finance (ODA targets) were proceeding.
The G-77 met Saturday morning, 13 June, to discuss the new text for IDA replenishment. Although not all G-77 members were satisfied with the text, they agreed that this may be the best available compromise. Meanwhile, consultations continued on targets and timetables for ODA. As of Saturday morning, the document under discussion contained five formulations of the sentence that applies to those countries that have already affirmed a target of 0.7% of GNP for ODA by the year 2000. One of the problems faced in these consultations was the lack of finance ministers present in Rio. One of the major sticking points was the inability of the EC to reach consensus. While the Netherlands, Denmark and France support 0.7% of GNP for ODA by the year 2000, Great Britain and Germany do not.
At 3:30 pm, the closed door of the ministerial negotiations opened and the participants emerged with an agreed text. After consultations with the regional groups, it was apparent that further consultations were necessary. Just before 7:00 pm agreement was reached. The new text reads: "Developed countries reaffirm their commitments to reach the accepted UN target of 0.7% of GNP for ODA and, to the extent that they have not yet achieved that target, agree to augment their aid programmes in order to reach that target as soon as possible and to ensure a prompt and effective implementation of Agenda 21. Some countries agreed or had agreed to reach the target by the year 2000. It was decided that the Commission on Sustainable Development will regularly review and monitor progress towards this target. This review process should systematically combine the monitoring of the implementation of Agenda 21 with a review of the financial resources available." The paragraph then resumes with the existing text beginning with "Those which have already reached the target are to be commended and encouraged..."
Chapter 33 of Agenda 21, "Financial Resources and Mechanisms" was now free of brackets and was adopted by the informal session of the Plenary.