Financing Sustainable Development: Trends and Emerging Policy Approaches in Asia and the Pacific

In International Review for Environmental Strategies (IRES) Volume 3 Number 1 (Summer 2002)
Peer-reviewed Article

A decade after the 1992 United Nations Conference on Environment and Development (Earth Summit) in Rio de Janeiro, Brazil, the landscape of domestic and international finance for sustainable development displays a mixed picture in the Asia and Pacific region. In a large number of countries, domestic resources have not been able to meet the requirements of sustainable development while, up to the new commitments made in Monterrey, official development finance was declining. On the other hand, private capital recorded an unprecedented surge, with foreign direct investment (FDI) to developing countries in the region reaching a record level of U.S.$143 billion in inflows in 2000. However, a common feature to all the financing mechanisms envisaged in Agenda 21, the action plan adopted at the Earth Summit, is that they have not been adequate in substantially reducing poverty and stopping environmental degradation in the region. While the need to renew the commitment of meeting the targets set in 1992 remains important, efforts to mobilize financial resources need to focus on complementary sources, which includes addressing structural issues that would enable developing countries to mobilize additional resources from their own efforts, through trade and private investment, rather than a reliance on traditional North-South resource flows. Growing economies have driven large volumes of private investment into the region. However, making private capital more supportive of the social and environmental dimensions of sustainable development requires a more pro-active approach to policy on FDI in terms of regional initiatives on the FDI regulatory regime and decentralized measures at community levels. Within the context of a greater reliance on private sources, a prime objective of official development assistance (ODA) should be to support poor communities and poor countries' access to and capacity to leverage private capital

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