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close this bookPartners in Time? Business, NGOs and Sustainable Development (UNRISD, 1999, 85 p.)
close this folderPart 2: Toward civil regulation
close this folderGovernmental Policy Frameworks for Civil Regulation
View the document(introduction...)
View the documentGovernment as Facilitator
View the documentToward Global Private Regulation
View the documentOther Policy Options and Obstacles
View the documentConclusion

Other Policy Options and Obstacles

As we mentioned above, Southern governments have the opportunity to invite global corporations to invest, with the proviso that their operations are independently certified against standards set by a variety of national and international stakeholders. For the government this is free regulation; and it offers the potential for international trade to promote sustainable and equitable future incomes. Northern governments should also promote this process, as it allows for further politicization of the market and therefore the effective translation of consumer politics into beneficial social change.

However, the option of developing countries welcoming foreign direct investment (FDI) on the condition that it meets civil regulation standards appears threatened by the possibility of a Multilateral Agreement on Investment (MAI), of the type which was being drafted within the OECD until negotiations broke down in October 1998. It aimed at smoothing the international rules governing foreign direct investment. As we described earlier, FDI is now a critical determinant in development. Many NGOs were concerned that the OECD initiative would rule against the use of environmental conditions on FDI (Coates, 1997, personal communication). Other analysts believe that an investment agreement could, in principle, strengthen the ability of governments to place environmental conditions on FDI, and even propose a code of conduct for companies investing in developing countries (Esty and Gentry, 1997). Developing countries that sign such an agreement in order to attract greater inward investment may therefore be prevented from facilitating sustainable development through a fresh approach of partnership with business and civil society. Our hope is that if a global investment agreement is eventually negotiated, it should contain an exemption so that signatory governments can require investing companies to meet globally recognized environmental and social standards.

The concern with how the MAI would affect government policies for sustainable development reminds us of the importance of intergovernmental agreements. No matter how effective corporate environmentalism, civil regulation or global private regulation could prove to be, international co-operation and mechanisms of global governance are urgently required. United Nations agencies could provide these mechanisms. The Pakistan case referred to in part 1 suggests a new activist role for United Nations agencies in the area of civil regulation. A revitalized UNEP may be able to assume the kind of monitoring and verification role currently being undertaken by the ILO in the Pakistan child labour project. As part of the United Nations Secretary-General’s plans for reform, there is promise of future action to “develop new measures” to reorganize and strengthen UNEP. Kofi Annan wants UNEP to re-affirm its role as “the environmental agency of the world community” and promises to ensure that it has the “status, strength and access to resources” needed to fulfil this task (Cohen, 1997, personal communication). In Annan’s words: “Without good governance - without the rule of law, predictable administration, legitimate power, and responsive regulation - no amount of funding, no amount of charity will set us on the path to prosperity” (Annan, 1997).

Although we have argued that both government and intergovernmental agencies do have a role to play in a changed global economy, this role is not widely recognized. At the same time, the role of consumer politics, civil regulation and global private regulation in facilitating the contribution of the business sector to sustainable development is largely overlooked. Companies and governments are wary of NGOs, while activists remain wary of managing directors and politicians. Many Southern government ministers see calls for the inclusion of environmental or labour standards in trade and investment agreements as attempts at protectionism by Northern countries, rather than as opportunities for sustainable development. Negotiation toward a free trade area of the Americas is one example, where trade ministers of certain Latin American countries have stalled attempts by Costa Rica to discuss environmental standards and trade. Southern ministers still view weak environmental and social standards as a competitive advantage. Until this changes, the potential for civil regulation in the South will not be realized. One country that is seeking the opportunities afforded by sustainable development is the Philippines:

Philippine Agenda 21 [PA21] is the country’s blueprint for sustainable development. It holds great promise for “another” development. PA21 clearly defines the parameters for the involvement of FDI in the Philippine economy. The Philippines has realized, at least some segments of the Philippine bureaucracy, that if it does not clearly define its own vision, it will be defined from the outside by ODA and FDI. The real test will come when we clearly specify... investment parameters connected to productivity, profitability, equity and sustainability, among others. Then we will see if FDI will be willing to work under these new parameters, and not simply flow where the labor is cheap, or the resources plentiful and unregulated (Perlas, 1997, personal communication).

The behaviour of FDI in the Philippines over the coming years will indicate whether corporate environmentalism extends to accepting the will of the people - and acting on it.