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The Founex Report - Industrial Pollution

The elements of a sensible policy probably lie somewhere in the middle of these two extreme viewpoints. Firstly, industries which may be regarded as pollutive in some advanced countries because of their more limited environmental carrying capacity may well not be pollutive, or much less so, in the context of the developing countries with much less environmental pollution at present. Secondly, environmental standards and costs are likely to be quite different from the developed to the developing world, so that the developing countries may still possess comparative advantage in some of these industries despite the adoption of certain environmental controls in conformity with their own requirements. Thirdly, there is no reason why the developing countries should permit foreign investment, which comes to their countries into pollutive industries, to escape more stringent environmental standards back home if it results in a high rate of remittance of profits and even a lower net transfer of resources. In any arrangement that is made, it must be ensured that a) foreign investment is on favourable terms and conditions, b) it adds to the net transfer of resources, and c) it conforms to the environmental standards that the recipient country wishes to impose in the light of its own stage of development and its own cultural and social objectives. So long as these safeguards are provided, there is no reason why the developing countries should not increasingly specialize in certain industrial fields, both for home market production and export purposes, which are going to become more costly for the developed world because of their growing concern with environmental standards.

4.17. We have also discussed the question of who pays for the higher costs arising out of the environmental concern and how the burden is to be shared between the developed and the developing world. Looking at the problem strictly from the point of view of the developing countries, it is quite clear that additional funds will be required to subsidize research for environmental problems for the developing countries, to compensate for major dislocations in the exports of the developing countries, to cover major increases in the cost of development projects owing to higher environmental standards and finance restructuring of investment, production or export patterns necessitated by the environmental concern of the developed countries. There was some discussion on how these additional funds should be provided. A proposal was made that a Special Fund should be set up specifically for this purpose. It was, however, felt that the consideration of a Special Fund was premature at this stage and the additional funds could as well be channelled through the existing international machinery so long as they could be clearly earmarked for the above-stated objectives and clearly recognized as being additional. While the precise mechanism for the channelling of additional funds could not be
discussed by us in any comprehensive manner, it was generally agreed that additional resource flows in one form or another will be needed.

4.18. Finally, there is a need for co-ordinating various international activities in the field of environment as well as for diffusing knowledge among developing countries of the nature and scope of these activities. Adequate institutional arrangements should be ensured for this purpose.

4.19. The subjects discussed in this chapter are closely related to the Strategy for the Second Development Decade as adopted by the United Nations. It is suggested that the considerations set out here should be taken into account during the review and appraisal of that strategy.