The Need for a 'Global Partnership'

Just as the nature of environmental problems is global so too is the need for the response to be a global one. It must be a 'global partnership', in which all countries work together to resolve problems that affect all of us, and have their roots in activities that take place all over the globe. While the Rio Summit and its aftermath focused attention on multilateral initiatives, we must not lose sight of the need for all countries to implement 'sustainable development' at a national and local level. There is a need to integrate local, national and international initiatives, and to incorporate environmental and development considerations in all activities. The multilateral institutions (the UN, the IBRD, the IMF and regional groupings such as the EC) and national governments must ensure that their policies take full cognisance of environmental concerns. Discussions at the Rio Summit did not ignore this, and indeed stressed the importance of each country producing strategies for national 'sustainable development' strategies. As Under-Secretary-General Nitin Desai told the Commission for Sustainable Development in June 1993, if UNCED's decisions are forgotten at a national level they will lose their force at the international level. (ENV/DEV/193)

The Rio Summit promised much, but it was not without its problems. Many issues are still in contention, and progress since the Summit has been disappointing. Unfortunately, the response so far has been characterised by a North-South divide, where the North's concerns are principally related to the environment, and the Southern countries, not surprisingly, with development. There remains a tension between the two, and it will be a crucial task for the future to fully integrate them, to the benefit of both.

Financial Questions

At the base of disagreements over the implications of the Rio Summit and its legacy there is the question of resources. The costs of implementing Agenda 21 are large, though undoubtedly the cost of inaction would be even greater. According to the Agenda 21 estimates, the cost of implementation to developing countries totals US$561.5bn per annum between 1993 and the year 2000. Of this the international community would need to provide US$141.9bn in concessional funding. It was estimated that around $15bn of that concessional funding was already being provided.

The failure of the Rio Summit to put any figures on the likely cost for industrial countries of implementation was of concern in itself, as the need for industrial countries to adjust their behaviour is just as crucial for a successful outcome, if not more so, than that of the developing countries. Whether developing countries are in any position to provide the two-thirds of finance that Agenda 21 demands for the implementation of its proposals is open to question, most crucially if the debt crisis, falling terms of trade, and other economic issues that constrain the South's development are not addressed.

The 1992 UNDP Human Development Report calculated that there was a net flow of $50bn from South to North in 1989 due to the debt crisis, and that $60bn worth of potential income is foregone by the South due to unfair trade restrictions and barriers in the Northern countries. The resolution of these problems would do more than an increase in aid to help resolve environmental and developmental problems in the South. The impact of structural adjustment has aggravated many environmental problems as social safety nets have been reduced, forcing people to exploit scarce resources in order to survive. However, at the Rio Summit industrial countries failed to pledge anything like the resources needed in concessional finance. While commitments were made to increase resource flows to the South, they were not backed up by concrete figures or target dates, beyond vague commitments to reach the long-standing UN target of 0.7% of GNP for ODA. Together industrial countries pledged only around US$2.5-3bn per annum in new resources at the Summit. Since the Summit ODA from many countries has actually fallen. Thus the resources already pledged are clearly inadequate for the task that faces the international community. Such a commitment must be taken seriously by the North, and concrete dates must be set for the achievement of the UN target.

Four areas specifically need to be addressed so that developing countries can devote the necessary resources to achieving 'sustainable development':

(1) Open and competitive markets are needed for trade expansion, as well as supportive trade rules;

(2) The debt crisis is far from resolved. One possible method would be to transform sizeable portions of debts into investments for priority 'sustainable development' objectives (for example clean water supplies, sanitation systems, etc.);

(3) Defence spending and other large-scale projects could be reviewed in light of the need to reorientate priorities towards sustainable development. This could be done as part of a country's formulation of sustainable development strategies aimed at achieving maximum efficiency in the use of both domestic and external resources. The Rio Summit called on all countries to formulate such strategies, and some countries, such as the US have already begun to do so. (The Presidential Council on Sustainable Development was established on 14 June, 1993.);

(4) The mobilisation of increased multilateral funding for an expanded environmental financing mechanism.

There is clearly a need to adopt a longer-term view of the development process and to place people at its centre. Longer term commitments to development from both the North and the South could take the form of Development Contracts. There will continue to be a need for multilateral and bilateral assistance, however, to build capacity in the South, to fund technology transfer, national sustainable development strategy plans, and to ensure that the poorest are not marginalised. While improved economic prospects for the South must be the cornerstone of sustainable development, there is no guarantee that such prospects will apply uniformly across the South, and aid will be needed to assist those who do not benefit fully.

Implementing Bodies

The `global partnership' needed to address the environmental challenges must be constructed. It cannot be left to chance. There is a danger that rather than such a partnership we will see a reversion to the 'donor-recipient' relationship which has come to dominate the multilateral development institutions' activities in the 1980s. The moral arguments for such a partnership are unassailable. The industrial countries have contributed disproportionately to the pollution of the global commons. They cannot now refuse the developing countries the right to use their natural resources as they wish simply because industrial countries have already polluted the commons to near capacity. As a matter of equity it is the developed countries that are looked to for abatements that will make room for growth in the South without precipitating environmental disaster. However it is clear that continued 'environmental vandalism', as Vice-President Al Gore put it, will be detrimental to us all. A global response must take account of these factors and requires complementary actions from all states. This is particularly true in response to the Climate Change Convention. While many countries have agreed to the Convention, the challenge now is to implement it. The US, initially lukewarm about the Convention, has now committed itself to reducing greenhouse gas emissions to 1990 levels by the year 2000.

Unfortunately, the principal existing administrative mechanism for the distribution of these funds (the Global Environmental Facility (GEF)) exhibits the potential for reverting to a 'donor-recipient' relationship. While the GEF is formally a partnership between the World Bank, the United Nations Development Programme (UNDP) and the United Nations Environment Programme (UNEP), it is dominated by the World Bank, which administers the fund, provides the secretariat and implements investment projects.

The World Bank, dominated as it is by the G7, is not the appropriate forum for such a Facility. The World Bank's lack of democracy and transparency make it ill-suited as the administrator of the principal global sustainable development fund. The crisis is a global one and requires a global response, where all countries feel they have a say in policy formulation and implementation. The dominance of the GEF by the World Bank makes this unlikely. Many Southern countries have expressed the fear that environmental criteria will become just another form of conditionality imposed by the North. Nor does the World Bank's environmental record suggest that it is the most appropriate body for drawing up a strategy for the Facility, as it is required to do by the GEF. It has continued to treat environmental concerns as externalities, and has failed to integrate them fully into its analysis of projects (though this is perhaps a reflection of a wider slowness to adopt, or even formulate mechanisms for 'full costs accounting', which present formidable difficulties. This is in itself an area that requires further work). In addition, the Facility is short of funds.

The present GEF is only a pilot scheme, due to end in mid-1994. Negotiations on its restructuring are expected to be completed by December 1993. This provides an ideal opportunity to restructure the GEF as a true partnership between the UNEP, the UNDP and the World Bank, perhaps with its own secretariat that can draw on the expertise of the three agencies in the design, implementation and evaluation of projects. Ideally, this would be located in the UN, under the authority of the Commission on Sustainable Development, and ultimately under democratic control by member states on the basis of one-member-one-vote, and not the weighted voting system that exists in the Bretton Woods financial institutions. This would enhance both the prospects of a global partnership and the co-ordination of the multilateral actions, and the authority of the Commission on Sustainable Development.

The present arrangement, with the principal financial mechanism existing outside the UN and the Commission, weakens its authority and the cohesiveness of the multilateral environmental institutions.

This new body should be constituted with a more democratic decision-making mechanism, perhaps along the lines of the Montreal Protocol Fund, balancing representation of developing and industrial countries on its Executive Committee. In addition, it will need to be financed by new mechanisms which give it a continuous, or at least predictable and independent, flow of resources. Possibilities would include taxes on environmentally harmful activities in member states; consumption taxes on unsustainable products (such as CO2); 'feebates' (fees levied on resource consumption over a basic need level, rebated to countries below that level) - all these having the two-fold effect of helping to curb such behaviour and of raising revenue for environmentally beneficial activities; earth stamps; debt swaps or conversion; taxes on arms sales; on energy sources; on global currency markets; etc.

Cofinancing should not be counted as part of GEF contributions as it will inherently introduce elements of the donor-recipient relationship into the body and will also allow richer countries to pick and choose those projects that are of most interest to them. It should only be welcome where it is clearly additional to GEF contributions and other aid. Finally, some resources should be made available for South-South projects and co-operation.

While the establishment of the GEF in 1990, and the Rio Summit, its declarations and the Commission for Sustainable Development have produced a number of new multilateral bodies dealing with the environment, existing development and environmental agencies (UNDP, World Bank, IMF and related financial institutions, the UNEP and the other UN specialised agencies) have a vital role in promoting Agenda 21 and the Biodiversity and Climate Change Conventions. The task is too great for one agency. Indeed, it is vital that the new emphasis on the environment and development is integrated into all the activities of these agencies, and of member states of the UN.

In recent years the World Bank has introduced reforms aimed at strengthening its awareness of environmental criteria. It has greatly expanded its environmental staff and has a number of different departments for reviewing the environmental impacts of projects. However, many of these reforms have been criticised for being poorly executed, and the Bank has overridden its own environmental guidelines in a number of cases. The Bank has announced a new set of reforms, specifically to improve a declining project success rate, but which have implications for sustainable development. These include an ombudsman, an independent review group which will monitor projects, and greater transparency in its operations.

However, it is clear that for the World Bank to tackle sustainable development successfully it must institute changes that go beyond formal institutional changes and include the culture of the organisation. Project completion and monitoring must become more important than loan approval. The Bank must adopt a longer-term view of development, and environmental concerns must be more thoroughly integrated into project analysis. Participation of local governments, NGOs and local communities must become more integral to the processes of project design, implementation and evaluation. All this is recognised by the World Bank itself (in the Wapenhans Report on Effective Implementation: Key to Development Impact), and some changes have been made in this direction. U4[]However, the Bank remains highly centralised and this is a hindrance to its efforts.

Among the UN specialised agencies there is a lack of resources and capacity. Both have combined in a vicious circle which has led to demoralisation in many UN agencies as staff have moved elsewhere, frustrated by a lack of resources, and those left have to cope with institutional restraints. However, the UN is the appropriate body to coordinate the global response to the environmental crisis, and this requires both financial and political support from its members states. It is vital that the CSD is not reduced merely to a figurehead of the system by a lack of resources and the location of the major environmental funds essentially outside the UN system.

The UNDP needs to be strengthened so that it can fulfil its role of providing technical cooperation and capacity building, crucial to environment-friendly development. UNEP has seen growing financial support, but the UNDP has not benefited accordingly from the increased international concern with the environment. Its Capacity 21 fund, launched during the Rio Summit with the aim of raising $100m to aid developing countries to formulate strategies for sustainable development, received only $6m in pledges. This is symptomatic of the UNDP's declining role in the provision of technical assistance. Although it was designated as the principal multilateral body for the provision and co-ordination of technical assistance, UN member states have channelled their money through other bodies. As a result, the UNDP's core fund represents only around 2% of the total funds available for technical assistance. Since then the fund has stalled and some countries have frozen payments, and contributions to the UNDP's regular budget have fallen. The UNDP must formulate its strategy for capacity building and the UN member states must put greater weight behind the process. On the UN's part there must be greater co-ordination between the specialised agencies in their response to the challenge of implementing Agenda 21.U4[]

UNEP must strengthen its Earthwatch database, and expand its functions so that the data becomes more widely available to governments and international organisations engaged in the design and execution of development projects. The valuable work that UNEP has done in promoting scientific study on particular environmental issues, and its promotion of international environmental law and policy-making, should be continued. The growing importance of environmental law is demonstrated by the establishment of a Chamber of the International Court of Justice specifically to deal with environmental disputes in August 1993.

Where UNEP has been less successful is in its role as a co-ordinator of environmental policy in the UN system. This should be made a priority, and member states, both directly and through the CSD, could upgrade the UNEP's ability to do this by demanding that all technical co-operation projects should receive prior seal of approval by a UNEP-directed central project review body before any disbursements.C&TS[]

Poverty alleviation is crucial to a sustainable development strategy. Structural adjustment packages have paid insufficient attention to poverty in the past, and there is therefore a need to find new development approaches that can combine economic growth with poverty alleviation. The IMF also must integrate poverty reduction into its stabilisation programmes (and both institutions should perhaps move beyond them, to development contracts). (See next section.)

Development Contracts

The future role for the UNDP might be as the central organ of a Development Contracts system, the successor to Structural Adjustment Programme. Development Contracts, first proposed by Thorveld Stoltenberg in 1989, have received growing attention. They would provide a mechanism for medium-to-long-term development planning, formulated by developing countries themselves, in consultation with the various donors and multilateral agencies. The developing country and the donors would agree to a development plan and accept certain mutual obligations as a consequence. All parties would agree to follow the policy framework laid down as long as external circumstances did not change too radically from those assumed in the plan, and all other parties met their obligations.

The Development Contract would offer a number of advantages including a co-ordinated and coherent funding base for the development plan, a more co-operative relationship between donors and developing countries, and greater commitment to the plan on the part of the developing country as they had formulated it themselves. The contractual nature of the relationship would mean that obligations rested on all parties - while developing countries would be required to undertake reforms, so too would developed countries be required to reform their trade policies to allow developing countries access to their markets, to assist in the alleviation of the debt crisis, improve the quality and level of assistance, and accept reciprocal obligations concerning the environment. The Development Contract could be linked to the National Sustainable Development Strategy Plans that countries were asked to formulate by Agenda 21, and would thus provide a mechanism for drawing up sustainable development plans that would encompass both development and environmental considerations.

There is also room in the Development Contract mechanism for dealing with issues of governance and democracy. Criteria relating to transparent administration, democratic institutions and public accountability could be included in the Contract. Monitoring of such criteria would be problematic, but use could perhaps be made of human rights organisations, constitutional experts, or the UNDP's proposed Political Freedom Index (PFI)).

Clearly there would need to be a forum for negotiation between the various actors, and a monitoring and arbitration system to deal with any failures to fulfil obligations. The UN ECOSOC would provide a possible forum, and the body to which reports on misdemeanours could be submitted for consideration. The UNDP would serve in a supporting role as the forum in which detailed country negotiations would take place, and as the monitoring organisation, submitting reports to ECOSOC on an annual/biannual basis. The publication of a Progress Report on Development Contracts might serve as an additional vehicle for monitoring and compliance. The UNDP would need to be expanded to take on this role, particularly by increasing its expertise on environmental matters, and might set up machinery for mediation, appeal and arbitration in cases of breach of contract.

Such a contractual arrangement already exists in a more limited state in the form of the World Bank's Aid Groups, which bring together donors with a long-term interest in supporting a particular developing country. The Aid Groups have facilitated the development of continuing policy dialogue between donors and developing countries, encouraging early recourse to the World Bank and IMF in times of economic difficulty. Similarly, the UNDP already organises Round Tables for 25 of the poorest countries to assist them in the presentation of their aid requirements to the donor community and the mobilisation of assistance. At similar Consultative Group meetings, which the World Bank organises for another 30 developing countries with relatively large capital assistance programs, the Bank looks to the UNDP to report on technical co-operation requirements for these countries. Thus there is already a co-operative relationship between the UNDP and the World Bank in such activities, laying the basis for an expanded mechanism, the Development Contract, that would encompass the wider social and environmental concerns.

Governments have a vital role in implementing Agenda 21 at a national level. It is regrettable that there is not compulsory reporting to the Commission on Sustainable Development about each countries' efforts at 'sustainable development' as it makes the task of monitoring global efforts difficult. However, for many countries to be able to complete such reports there must be financial resources and capacity building assistance in place. Governments need to review the totality of their policies (trade, transport, energy, production, etc.) in the light of environment concerns.

NGOs played an important role in the Rio Summit, and Agenda 21 called on governments and multilateral agencies to establish working relationships with competent NGOs. Their involvement has continued in the CSD, NGOs having attended and contributed to the early meetings of the Commission. Their continued role in monitoring, researching and evaluating the behaviour of businesses, governments and the IFIs is a valuable addition. They also can fulfil a more pro-active role of proposing projects, and assisting in their design, implementation and evaluation. This increased involvement needs to be strengthened. For development to be sustainable people must feel committed to the process. Drawing on the knowledge of local communities will also help to formulate projects that have increased chances of success.

Commission on Sustainable Development

The Commission on Sustainable Development (CSD) was established following the Rio Summit as the forum in which environmental and development problems could be discussed and resolved at a global level. It was charged with monitoring the progress and problems that emerge in implementing Agenda 21, and to make proposals to the General Assembly of the UN. It is expected to enhance international cooperation and rationalise the inter-governmental decision-making process for integrating environmental and development issues.

As the main body charged with monitoring the implementation of the proposals of the Rio Summit, the Commission will play a key role in future developments. Its principal role is to coordinate the completion of environmental assessments by member states in order to assess efforts to respond to environmental concerns. By monitoring the activities of states those that fail to implement Agenda 21 will be identified and encouraged to do so. The CSD's powers are however, limited. It has no powers to demand reports from governments, which remain voluntary. C&TS[] Indeed, the procedure that was adopted makes the completion of such reports, their format, level of detail and scope entirely voluntary. This threatens to make the process inherently weak. There is a legitimate concern on the part of poorer countries about the costs of such an exercise, but it is crucial that states research and define sustainable development strategies. The CSD should act to create de facto standards of reporting so as to ensure that the information received is easy to process and is comparable in nature wherever possible.

The relationships between the CSD and the financial institutions and UN departments, and particularly the GEF, have yet to be clearly laid out. Hopefully the process of restructuring the GEF after the pilot phase will facilitate such a process. The CSD should play a lead role in ensuring that agreements on financial resource transfers from North to South are implemented and it should also give specific and concrete guidance to the international financial institutions on resource provisions.

Technology Transfer

The question of technology transfer is a crucial factor in formulating sustainable development strategies. Developing countries in particular need access to new and efficient technologies to enable them to develop with as little detrimental impact on the environment as possible. As important, they need the capacity in terms of economic, managerial and technical skills to make use of these technologies, and to be able to choose between them. Again finance is a key to this process - finance to enable developing countries to gain both such capacity, and clean and efficient technology. Some of this technology is not covered by patents or lies in the public domain. International organisations should promote the transfer of such technology. Where this is not the case there is perhaps a role for international organisations to buy the rights or patents of such technology at market rates, and then distribute them to developing countries on non-commercial terms. In other cases companies could be encouraged to grant licenses, TNCs should be encouraged to adopt new practices and promote greater direct technology exchanges between parent and affiliate companies, etc.

This clearly has considerable implications for the GATT and any regulatory system for trade and Transnational Corporations (TNCs). Patents for important technologies (for example medical drugs) often represent the product of heavy investment in Research and Development by TNCs, and are likely to be extremely expensive, if they are for sale at all. Furthermore, a major preoccupation for many states in the current GATT talks concerns intellectual property rights, and is the source of some dispute. Agenda 21 stipulated that they must be protected in any technology transfer. Conflicts between the interests of the North and South were evident in the Biological Diversity Convention as Southern countries demanded that they receive some benefit from developments based on biological entities found in their countries. These issues are far from resolved.

Capacity building is as, if not more important than technology transfer. Without proper capacity in terms of human and institutional resources such technology is unlikely to be used at anything like its potential. And with such capacity countries can improve the efficiency of their use of present technologies. There must be emphasis on the transfer of managerial and engineering techniques required to learn incrementally and continuously - in short on human resources. The UNDP, as the most important provider of technical co-operation should obviously be expected to play an important role in this process.

In general, business and governments and international organisations need to find better ways of working together to improve and conserve the environment, while at the same time ensuring that development priorities are met. This will relate closely with the facilitating and regulatory framework that countries impose on business.

New Indicators of 'Sustainable Development'

Associated with the reporting procedure is the need to find new indicators of development that include environmental data. As pointed out elsewhere, the disparities between the UNDP's Human Development Index and national GNP measures provide at least circumstantial evidence that efficient use of scant resources can engender good standards of living as much as the wasteful use of abundant resources. The use of national indicators ('real-cost accounting' at a national level) that would account for waste as well as production would give policy-makers and politicians a much greater appreciation of the environmental costs of actions. A similar process must be incorporated into project appraisal of donors and into the accounting practices of governments and businesses.

The Biological Diversity and Climate Change Conventions

The Climate Convention and the Biological Diversity Conventions both have laudable aims. However, many scientists believe the actions proposed to achieve their ends are insufficient. The Climate Change Convention was primarily a symbol of the world's recognition of the problem and the need for action. Those developed countries who signed the Convention committed themselves to reduce greenhouse gas emissions to 1990 levels by the year 2,000. Developing countries made not such commitment, arguing that development must inherently involve the increased production of such gases. However, development, with the aid of new technology and increased efficiency, need not be as 'dirty' as it was in the past. For this goal to be realised the questions of capacity building and resource transfers from North to South must be addressed. At the Rio Summit the questions of resource transfers was left unresolved. The Biological Diversity Convention was dodged by differing interests in relation to property rights and competing demands on forests and other sources of genetic material. There has been progress since the Rio Summit (the US has signed the Climate Change Convention) but it has been slow. The Climate Change Convention must be ratified by the parliaments of those states that signed before it becomes international law. There must be renewed political commitment to the Climate Change and Biodiversity Conventions and to the guidelines for the management of forests. The UN, and particularly the CSD and UNEP, has an important role to play in catalysing such a renewed commitment, along with the strong and vocal environmental NGO movement. 
9. Transnational Corporations and Global Governance in the 1990s

Two trends in the international economy have become increasingly apparent in the last few decades - the increasing globalisation of production and the importance of transnational corporations (TNCs) as motors of both economic growth and the process of internation-alisation.

Transnational corporations occupy a pivotal role in international production and trade. Their activities have an extensive impact on the environment. TNCs control 70% of the world's trade, and 90% of all technology and product patents worldwide are held by transnationals. An estimated 40% of world trade is conducted in the form of intra-firm trade. A UNCTC/TCMD study on climate change estimated that more than 50% of global greenhouse gas emissions were in the province of TNCs.

Transnational corporations thus have great power, which, if harnessed to the process of sustainable development, could prove of great benefit. There is an growing consensus that governments and TNCs should work together in mutually advantageous ways to promote national and international economic welfare. It is no longer a question of simply regulating transnational corporations, but rather of structuring cooperative national approaches that facilitate rather than inhibit international transactions, and economic and social development.

However, while governments and TNCs exhibit a more constructive relationship, there is still a need to regulate the activities of transnational corporations. As transnationals have become more globalised, they have to some extent escaped the power of national authorities to regulate their behaviour. It has, for example, become increasingly difficult to pinpoint where legal responsibilities lie and where tax should be paid. In addition, the speed and ease with which TNCs are able to restructure their assets, relocate production, the oligoplistic strategies they pursue and the perceived lack of social awareness or environmental sensitivity that some large international firms display are all causes for concern. The issues of transfer pricing, technology transfer and tax avoidance are still of relevance. Moreover, individual states, particularly in the developing world, continue to find themselves in a weak bargaining position with TNCs, particularly in the face of fierce competition between states for scarce capital.

TNCs, while enjoying such power, are not democratically accountable, their actions are not transparent, and there is no guarantee that their actions will benefit social and environment-friendly development. Of particular concern is the growing marginalisation of the majority of developing countries in terms of the flows of FDI, at the very time that flows of such investment are rising faster than world trade and output. Between 1980/84 and 1985/9 the developing countries share of FDI fell from 25% to 18%. Ten developing countries received three-quarters of the total. Efforts must be made to increase the flows of FDI to developing countries as a whole.

A multilateral framework is clearly necessary. It must balance the need to promote FDI, particularly to the least developed countries with the necessity of regulatory frameworks to ensure that host countries benefit from FDI, and that it conforms with sustainable development plans.

The UN Code of Conduct on Transnationals/Anti-Monopoly Authority

A valuable starting point is the UN Code of Conduct for Transnational Corporations. This document has taken nearly 20 years to negotiate. It should be completed as a matter of urgency. Voluntary in nature, it would provide a framework by which the behaviour of both corporations and governments could be judged, and it would also provide other benefits. In particular it would help to make host country-TNC relations more transparent. the completion of the Code will require renewed political commitment from the UN member states. The conditions for such a development are better than they have been as globalisation has blurred the distinction between home and host countries. Many industrial countries now face problems once largely limited to developing countries.

Many of the issues that the UN's Code deals with are presently under discussion as part of the GATT talks (National Treatment, Restrictive Business Practices, the Transfer of Technology, etc.). This is inevitable, as any discussion of international trade must quickly recognise the importance of TNCs. In addition, the inclusion of the trade in services in the Uruguay Round has further promoted discussion of issues relating to TNCs. However, the mandate of an institution which would deal with these issues would have to be more comprehensive than that of existing institutions. Moreover many of these issues are close to resolution in the UN Code, and it would be best to continue to negotiate the UN Code, perhaps linking it to the GATT talks.

For the Code to be effective a monitoring agency (perhaps located in the UN) would be necessary to evaluate the adherence of both governments and TNCs to the Code. The publication of the identities of offending countries and TNCs would provide some form of incentive to both parties to observe the Code.

A small number of transnational corporations dominate the production, distribution and sale of a large number of goods. This is particularly true for many of the goods that developing countries produce. For example, five TNCs have 77% of the world cereal market, while 4 companies have 87% of the tobacco market. While individual states have legislation restricting monopoly behaviour, there is no mechanism for preventing such behaviour at an international level. There is thus a need to bring international policies in line with national legislation, perhaps in the form of a Global Anti-Monopoly and Restrictive Practices Policy or authorityC&TS[] which would be charged with monitoring TNCs, and encouraging international co-operation in competition policy, disclosure of corporate information, and common accounting principles.

There is also a need to consider TNCs behaviour in the context of sustainable development, and the environment. TNCs played a prominent role in the UN Conference on the Environment and Development, and prior to the Conference the international business community and individual corporations adopted a variety of environmental codes of conduct. While such developments are encouraging, there is a role for the UN organisations in setting standards of behaviour which TNCs should emulate. At the Conference a series of recommendations for industry were adopted - that they should adhere to codes of conduct; adopt a cradle-to-grave approach to their products; provide information on environmentally sound management and energy conservation; and should implement general standards of environmental responsibility to their foreign operations fully consistent with those used in their home countries. In addition, there is the need to develop methods of real-cost accounting. UNEP's Cleaner Production Programme proposed development of international guidelines on information disclosure by exporters on the potential environmental impacts of their products is a useful step forward. The UN Centre on Transnational Corporations/Transnational Corporations and Management Division (UNCTC/TCMD) and the Commission on Sustainable Development (CSD) have roles to play in defining environmentally sustainable activities and monitoring current activity.

Harmonisation of National Incentive Policies and Regulatory Frameworks

Developing countries are in a weak bargaining position with TNCs. Lacking alternative sources of capital they have been forced to bid against each other for scarce FDI. This has sometimes resulted in successful countries gaining investment at the cost of any benefit to their own economies.C&TS[]

A positive role for the multilateral institutions would be to harmonise national incentive policies and regulatory frameworks for FDI. The completion of the UN Code of Conduct on Transnational Corporations and a global Anti-Monopoly Authority would aid this process, establishing a framework within which FDI regimes could operate. Building on this, a multilateral body or a UN agency (the UNCTC/TCMD or UNCTAD) could collect data on national FDI regimes as a first step to harmonising them. Governments could undertake to inform the agency of their policies, laws, regulations and administrative guidelines bearing on TNCs. This would provide a comprehensive overview of prevailing policy regimes, thus making FDI regimes more transparent, and encouraging the comparison and review of national policies.

It might then be possible to negotiate fiscal incentives down under the auspices of the UN. Increasing numbers of countries liberalised their economies in the 1980s. As a result liberalisation is no longer a sufficient incentive to TNCs to invest. Countries have responded by offering a variety of fiscal incentives. However, the widespread nature of such incentives has reduced their effectiveness, and perhaps represent little more than a cost to the host country. Certainly the extent of incentives' influence on the location of FDI is far from clear.

Building Capacity

A major constraint on developing countries attracting FDI and of ensuring that they can make the best use of it is a lack of physical and human resources. The benefits of FDI to a host country are significantly determined by the terms of specific agreements. Many LDCs do not posses strong negotiating skills to secure the best possible terms, and there is a role for the UN agencies, under the co-ordination of the UNDP, to provide technical assistance and training to address this problem. In addition, national governments often need assistance in economic management and training, and in appropriate macro-economic and organisational polices for dealing with TNCs. Such assistance has been provided in the past by the UNCTC/TCMD and clearly needs to continue.

Assistance will continue to be needed in many countries to improve infrastructure and assist in the provision of education, in order to improve poor local market and supply problems.

Many of these problems cannot however, be solved without the resolution of other long-term problems, not least falling primary commodity prices and debt. TNCs are part of this process - they are the buyers of much of developing countries' production of primary commodities, and the multinational banks hold much of the debt of developing countries. Without the resolution of these problems strong markets, improved infrastructure and human resources will be extremely hard to produce.

Encouraging Investment

For the majority of developing countries discussion of framework for FDI is largely academic. As outlined above, while FDI flows are increasing faster than world trade or output, developing countries are becoming increasingly marginalised. A concerted effort on the part of the international financial institutions and the UN agencies is necessary to help redirect investment towards developing countries and particularly the least developed countries. There are a range of measures that could be taken alongside assistance for infrastructure and human resource development and capacity building. Administrative reform may be necessary and technical assistance can be provided. Where non-commercial economic risks deter potential investors there is a role for trade credit guarantee schemes (for example the Multilateral Investment Guarantee (MIGA) scheme), and where large infrastructure capital investments are necessary the development banks can co-finance projects with private bank consortia (e.g. the EC Investment Partners Programme).

The UNCTC should be allowed to promote investment through the convening of workshops between governments and TNCs, through assisting governments to asses their FDI needs and co-financing feasibility studies. Once FDI requirements are identified the UNCTC (or another body) could play a pro-active role in attempting to attract investment.C&TS[]

Transparency International

There is a growing consensus on the need for greater democracy and 'good governance' as part of the development process. The elimination of corruption is a vital part of building accountable and efficient public services. To this end the establishment of Transparency International in May 1993 was an encouraging development.

A new NGO, established in Germany, the organisation aims to counter corruption in global business transactions. The principal tool at its disposal is its Standards of Conduct, a document that demands that all parties to international business transactions respect the law in both letter and spirit, that no parties to contracts will offer or accept bribes, and that full accounting procedures are followed. Governments are asked to take appropriate actions to combat corruption and promote transparency and accountability.

As the organisation acknowledges, corruption takes place between parties, and businesses as well as governments are targeted. It is hoped that governments agreeing to the Standards of Conduct will restrict international competitive bidding on government contracts to those corporations that have themselves signed the Standards, thus encouraging corporations to endorse the Standards of Conduct.