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During the first meeting of Working Group II, Chair H.L. de Silva (Sri Lanka) presented the Bureau's proposal to split the group into two subgroups to consider the draft Statement of Principles and Commitments and the Global Plan of Action (A/CONF.165/PC.3/4). Delegates accepted an amended G-77 and China proposal that Subgroup A consider paragraphs 1-35 and 143-162 (preamble, goals and principles, commitments, international cooperation and coordination, and implementation and follow-up). Subgroup B was to consider the remaining sections in paragraphs 36-142 (introduction to Global Plan of Action, adequate shelter for all, sustainable human settlements, and capacity building). Delegates nominated Glynn Khonje (Zambia) as Chair of Subgroup A and Edmundo Hermosilla (Chile) as Chair of Subgroup B. On Thursday, 8 February, Subgroup C was created, chaired by John Zetter (UK), to help consider text that had been assigned to Subgroup B. On Friday, 9 February, Chair Hermosilla returned to Chile and Gaston Ibanez (Peru) was selected to chair Subgroup B during the second week. All of the groups worked on the basis of texts that included a compilation of government and UN agency amendments, and a parallel text that contained a compilation of NGO amendments.

In addition to debating the Preamble's content, Subgroup A also debated the participation of NGOs and local authorities. Some delegations welcomed NGO participation, but others insisted on clarification of the rules on their level of involvement and complained of the "privatization" of diplomacy. Some delegates also expressed dismay that NGO proposals for the Preamble had been distributed by the Secretariat despite UN budgetary constraints. Chair N'Dow reminded delegates of the essential role NGOs and local authorities will play in implementation, but continuing disagreement brought the meeting to a halt. The expanded Bureau decided that NGOs could express their views in oral and written form and work through national delegations, but they could not negotiate directly with governments while the compilation texts were under review.

After discussions began in Subgroup A, many delegates noted the degree of discrepancy between proposals and the difficulty of deliberating in their assigned conference room. Delegates spent a notable amount of time debating the need for drafting groups, as well as their number, size, composition, location and scope. They eventually convened a single drafting group, which produced much of the agreed text of this Subgroup. Additional specialized groups for paragraphs related to sustainable development and financial resources (chaired by Amb. Richard Butler (Australia)) and a right to housing (chaired by Marcela Nicodemus (Brazil)) were convened during the second week.

Negotiations in Subgroups B and C were conducted primarily by the whole negotiating body, although a small group of delegates informally negotiated text for Subgroup B during the final days. Some noted that, while Subgroup A was negotiating the political aspects of the Habitat Agenda, Subgroups B and C concentrated on the technical aspects of the Global Plan of Action relevant to implementation, over which there was less disagreement. Negotiations added substantially to the quantity, and according to some participants, the quality of the text. Time constraints towards the close of the PrepCom forced delegates in Subgroup C to place a number of brackets around text, including a new section on population and the environment introduced by Canada. A significant amount of Subgroup B's work was not adopted by Working Group II and the Plenary, due to time constraints, and therefore remains in brackets.

The Subgroups reported to Working Group II during the final days of PrepCom III. During Working Group II's considerations, a lengthy debate unfolded on the use of brackets. Delegates discussed whether brackets around previously agreed language from other UN conferences indicated a delegation's intent to re-open the debate on that issue, or only questioned the inclusion of that language in the paragraph. When Guatemala bracketed "various forms of the family exist," several delegations noted that the group had agreed to refrain from bracketing previously agreed language. The Chair noted Guatemala's reservation, but did not bracket the text. Guatemala insisted it had the "sovereign right" to bracket text. The Holy See noted another paragraph in which previously agreed language had been bracketed, but other delegations said those brackets did not question the content of the language, but the placement. Some delegations said brackets cannot be applied selectively and noted that "reservations" should be used for the final output of the conference, not during the preparatory stage. Delegations continued to volley the issue, until the Chair stated that while the group had adopted a "rule of convenience," delegates with fundamental objections may place paragraphs in brackets. Working Group II did not complete consideration of all the Subgroups' work. The remainder was therefore sent to Istanbul in brackets.

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