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The Founex Report - Investment in Human Resources

4.13. The environmental concern can also be utilized for greater support for projects and programmes in the social sectors. Traditionally, the aid-giving agencies have tended to frown upon such projects and programmes for their presumed low rate of return, at least in the short run. But investment in human resources is now catching the imagination of the donors. Programmes in education, nutrition, public health, water supply and other social services are beginning to be regarded favourably. Here is another opportunity that can be grasped. The developing countries can use the growing concern for social services in the developed world to escape from the tyranny of financial rates of return in traditional project appraisal, to seek broader international support for their social programmes in conformity with their own national priorities, and to obtain a greater amount of local currency financing for these programmes and projects.

4.14. There may well be other opportunities. If there is a growing concern about the pollutive effects of synthetics industries, the present rate of substitution for natural resources of the developing countries may at least tend to slow down. If there is a concern about the depletion of natural resources, opportunities may open up for re-examination of prices negotiated under long-term commodity agreements and renegotiation of concessions for minerals and oil. If there is a technology based on recycling of raw materials, it could also help the developing countries by opening up opportunities for savings in resource use of waste materials, and more efficient management of their own development. If there is a universal concern for global environmental problems, additional financial resources may become available from the developed world to combat these problems at an earlier stage in the developing countries. Special attention could also be given to seeking out other possibilities of achieving complementarity between the Second Development Decade strategies and efforts in the field of human environment. The main strategy should be to seize these and other similar opportunities, to enlarge their scope and to build upon them the edifice of more beneficial international economic relations. Attitudes of isolationism and indifference will hardly help in a world drawn increasingly closer; the developing countries must articulate their own interests and insist on international arrangements to protect these interests in the changing pattern of trade, aid and technology.

4.15. In this context, there are two major issues that we considered at some length: the opportunity for relocating industries with pollutive implications in the developing countries and the possibility of setting up a Special Fund for financing the implications of the environmental concern of the developing world. Our deliberations on these two issues follow.

4.16. The enforcement of higher environmental standards in the developed countries is likely to raise the cost of production of several "pollutive" industries such as petroleum and chemical industries, metal extracting and processing industries, paper and pulp industries. Such a development opens up an opportunity for the developing countries to move into some of these industries if their natural resource endowments, including relatively less used environmental resources, create a comparative advantage in these fields. Such efforts should not, however, lead to a discarding of environmental standards adopted by the developing countries. Unfortunately, this whole subject bristles with controversies. There are those who argue vigorously that there should be no export of pollutive industries from the developed to the developing world. There are others who believe, just as strongly, that the opportunity for a better geographical distribution of industries must be seized immediately irrespective of any environmental costs.