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The Founex Report - Specific Guidelines

3.9. There is a considerable debate at present how specific guidelines should be formulated for project appraisal, taking into account environmental considerations in each sector and field. We have learnt that some work on guidelines is already under way in certain international financial institutions. While we recognize the need for specific guidelines for project appraisal, we must enter a note of caution here. In the present state of our knowledge, there is need for extreme care in devising specific guidelines so that they do not become bottlenecks in the implementation of development projects, or raise such issues of detail as are irrelevant in the current state of development in many of the developing countries. In any case, it is for the developing countries to formulate such guidelines in the light of their own experience and requirements. We suggest, therefore, that the developing countries should take an initiative in this regard and also discuss this issue at the level of the United Nations regional economic commissions, regional banks and other relevant international agencies. No rigid guidelines should be laid down by multilateral or bilateral donors at this stage unless there has been an opportunity for adequate consultations with the developing countries through various appropriate forums.

3.10. In order that social costs and benefits be properly calculated and reflected in the allocation of scarce resources, developing countries will have to consider the framework of social controls that they need to establish over economic decision making, particularly in the private sector.

There is a wide variety of social controls which can be considered in this context. There are indirect controls relying on the imposition of disincentives, such as taxes, effluent charges, etc. and on giving incentives through fiscal subsidies for environmental improvement. There are direct controls which range from outright prohibition, statutory regulation or the curtailment of production of toxic materials, to administrative measures taken to control location of industrial production or of human settlements. No general guidelines can be laid down as to the effectiveness of direct or indirect controls in various developing countries, since this will depend on a wide variety of factors, including their political systems, their social and cultural values and the economic strategy being pursued by them. Each society must find its own balance between the range of direct and indirect controls available in this field. Since a large proportion of total investment in developing countries is generally under public control, directly or indirectly, and since these countries are already using a number of administrative controls as well as fiscal incentives to regulate private activity, it should be easier for them to find a judicious balance between various forms of social controls for environmental improvement. We suggest that more study and research should be undertaken on the effectiveness of direct and indirect social controls over environment, so that a range of specific policies is available to the developing countries from which they can choose in accordance with their own requirements and preferences.

3.11. In order to formulate environmental policies, the developing countries require a lot more information and knowledge than they currently possess. We suggest therefore that one of the first priorities should be to broaden their knowledge and information in the environmental field. It would be useful if the developing countries undertake a survey of their present state of environment and the major hazards to which they are exposed. They should also undertake studies and research to define the kind of environmental problems that are likely to arise in the process of development over the course of the next two to three decades. It would also be helpful to compile all existing legislation regarding environmental control, including the regulations dealing with urban zoning, location of industries, protection of natural resources, and so on. This accumulation of information and knowledge should enable the developing countries to get a clearer perspective of their environmental problems and of the corrective action that they may require at different stages of development. Since public participation in any such efforts is vital, efforts should also be made to build the environmental concern into education curricula, and to disseminate it to the general public through media of mass information. We would like to stress once again the need for a good deal of careful research and study in this field, and the importance of avoiding hasty guidelines and action.