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2.23. Investment is critical to the ability of developing countries to achieve needed economic growth 
to improve the welfare of their populations and to meet their basic needs in a sustainable manner, all 
without deteriorating or depleting the resource base that underpins development. Sustainable development 
requires increased investment, for which domestic and external financial resources are needed. Foreign 
private investment and the return of flight capital, which depend on a healthy investment climate, are 
an important source of financial resources. Many developing countries have experienced a decade-long 
situation of negative net transfer of financial resources, during which their financial receipts were 
exceeded by payments they had to make, in particular for debt-servicing. As a result, domestically 
mobilized resources had to be transferred abroad instead of being invested locally in order to promote 
sustainable economic development.

2.24. For many developing countries, the reactivation of development will not take place without an early 
and durable solution to the problems of external indebtedness, taking into account the fact that, for 
many developing countries, external debt burdens are a significant problem. The burden of debt-service 
payments on those countries has imposed severe constraints on their ability to accelerate growth and 
eradicate poverty and has led to a contraction in imports, investment and consumption. External 
indebtedness has emerged as a main factor in the economic stalemate in the developing countries. 
Continued vigorous implementation of the evolving international debt strategy is aimed at restoring 
debtor countries' external financial viability, and the resumption of their growth and development 
would assist in achieving sustainable growth and development. In this context, additional financial 
resources in favour of developing countries and the efficient utilization of such resources are essential.

Objectives

2.25. The specific requirements for the implementation of the sectoral and cross-sectoral programmes 
included in Agenda 21 are dealt with in the relevant programme areas and in Chapter 33 entitled 
"Financial Resources and Mechanisms".

Activities

(a) Meeting international targets of official development assistance funding

2.26. As discussed in Chapter 33, new and additional resources should be provided to support Agenda 21 
programmes.

(b) Addressing the debt issue2.27. In regard to the external debt incurred with commercial banks, the 
progress being made under the strengthened debt strategy is recognized and a more rapid implementation 
of this strategy is encouraged. Some countries have already benefited from the combination of sound 
adjustment policies and commercial bank debt reduction or equivalent measures. The international 
community encourages:

(a) Other countries with heavy debts to banks to negotiate similar commercial bank debt reduction with 
their creditors;

(b) The parties to such a negotiation to take due account of both the medium-term debt reduction and new 
money requirements of the debtor country;

(c) Multilateral institutions actively engaged in the strengthened international debt strategy to continue 
to support debt-reduction packages related to commercial bank debt with a view to ensuring that the 
magnitude of such financing is consonant with the evolving debt strategy;

(d) Creditor banks to participate in debt and debt-service reduction;

(e) Strengthened policies to attract direct investment, avoid unsustainable levels of debt and foster 
the return of flight capital.

2.28. With regard to debt owed to official bilateral creditors, the recent measures taken by the Paris 
Club with regard to more generous terms of relief to the poorest most indebted countries are welcomed. 
Ongoing efforts to implement these "Trinidad terms" measures in a manner commensurate with the payments 
capacity of those countries and in a way that gives additional support to their economic reform efforts 
are welcomed. The substantial bilateral debt reduction undertaken by some creditor countries is also 
welcomed, and others which are in a position to do so are encouraged to take similar action.

2.29. The actions of low-income countries with substantial debt burdens which continue, at great cost, 
to service their debt and safeguard their creditworthiness are commended. Particular attention should 
be paid to their resource needs. Other debt-distressed developing countries which are making great 
efforts to continue to service their debt and meet their external financial obligations also deserve 
due attention.

2.30. In connection with multilateral debt, it is urged that serious attention be given to continuing 
to work towards growth-oriented solutions to the problem of developing countries with serious 
debt-servicing problems, including those whose debt is mainly to official creditors or to multilateral 
financial institutions. Particularly in the case of low-income countries in the process of economic 
reform, the support of the multilateral financial institutions in the form of new disbursements and 
the use of their concessional funds is welcomed. The use of support groups should be continued in 
providing resources to clear arrears of countries embarking upon vigorous economic reform programmes 
supported by IMF and the World Bank. Measures by the multilateral financial institutions such as the 
refinancing of interest on non-concessional loans with IDA reflows - "fifth dimension" - are noted 
with appreciation.

Means of implementation

Financing and cost evaluation

2.31. See Chapter 33.

D. Encouraging economic policies conducive to sustainable development

Basis for action

2.32. The unfavourable external environment facing developing countries makes domestic resource 
mobilization and efficient allocation and utilization of domestically mobilized resources all the 
more important for the promotion of sustainable development. In a number of countries, policies are 
necessary to correct misdirected public spending, large budget deficits and other macroeconomic 
imbalances, restrictive policies and distortions in the areas of exchange rates, investment and 
finance, and obstacles to entrepreneurship. In developed countries, continuing policy reform and 
adjustment, including appropriate savings rates, would help generate resources to support the 
transition to sustainable development both domestically and in developing countries.

2.33. Good management that fosters the association of effective, efficient, honest, equitable and 
accountable public administration with individual rights and opportunities is an essential element 
for sustainable, broadly based development and sound economic performance at all development levels. 
All countries should increase their efforts to eradicate mismanagement of public and private affairs, 
including corruption, taking into account the factors responsible for, and agents involved in, this 
phenomenon. 

2.34. Many indebted developing countries are undergoing structural adjustment programmes relating 
to debt rescheduling or new loans. While such programmes are necessary for improving the balance in 
fiscal budgets and balance-of-payments accounts, in some cases they have resulted in adverse social 
and environmental effects, such as cuts in allocations for health care, education and environmental 
protection. It is important to ensure that structural adjustment programmes do not have negative 
impacts on the environment and social development so that such programmes can be more in line with 
the objectives of sustainable development.

Objectives

2.35. It is necessary to establish, in the light of the country-specific conditions, economic policy 
reforms that promote the efficient planning and utilization of resources for sustainable development 
through sound economic and social policies, foster entrepreneurship and the incorporation of social 
and environmental costs in resource pricing, and remove sources of distortion in the area of trade 
and investment.

Activities

(a) Management-related activities

Promoting sound economic policies2.36. The industrialized countries and other countries in a position 
to do so should strengthen their efforts:

(a) To encourage a stable and predictable international economic environment, particularly with regard 
to monetary stability, real rates of interest and fluctuations in key exchange rates;

(b) To stimulate savings and reduce fiscal deficits;

(c) To ensure that the processes of policy coordination take into account the interests and concerns of 
the developing countries, including the need to promote positive action to support the efforts of the 
least developed countries to halt their marginalization in the world economy;

(d) To undertake appropriate national macroeconomic and structural policies aimed at promoting 
non-inflationary growth, narrowing their major external imbalances and increasing the adjustment 
capacity of their economies.

2.37. Developing countries should consider strengthening their efforts to implement sound economic policies:

(a) That maintain the monetary and fiscal discipline required to promote price stability and external balance;

(b) That result in realistic exchange rates;

(c) That raise domestic savings and investment, as well as improve returns to investment.

2.38. More specifically, all countries should develop policies that improve efficiency in the allocation of 
resources and take full advantage of the opportunities offered by the changing global economic environment. 
In particular, wherever appropriate, and taking into account national strategies and objectives, countries 
should:

(a) Remove the barriers to progress caused by bureaucratic inefficiencies, administrative strains, 
unnecessary controls and the neglect of market conditions;

(b) Promote transparency in administration and decision-making;

(c) Encourage the private sector and foster entrepreneurship by improving institutional facilities 
for enterprise creation and market entry. The essential objective would be to simplify or remove the 
restrictions, regulations and formalities that make it more complicated, costly and time-consuming to 
set up and operate enterprises in many developing countries;

(d) Promote and support the investment and infrastructure required for sustainable economic growth and 
diversification on an environmentally sound and sustainable basis;

(e) Provide scope for appropriate economic instruments, including market mechanisms, in harmony with the 
objectives of sustainable development and fulfilment of basic needs;

(f) Promote the operation of effective tax systems and financial sectors;

(g) Provide opportunities for small-scale enterprises, both farm and non-farm, and for the indigenous 
population and local communities to contribute fully to the attainment of sustainable development;

(h) Remove biases against exports and in favour of inefficient import substitution and establish policies 
that allow them to benefit fully from the flows of foreign investment, within the framework of national, 
social, economic and developmental goals;

(i) Promote the creation of a domestic economic environment supportive of an optimal balance between 
production for the domestic and export markets.

(b) International and regional cooperation and coordination

2.39. Governments of developed countries and those of other countries in a position to do so should, 
directly or through appropriate international and regional organizations and international lending 
institutions, enhance their efforts to provide developing countries with increased technical assistance 
for the following:

(a) Capacity-building in the nation's design and implementation of economic policies, upon request;

(b) Design and operation of efficient tax systems, accounting systems and financial sectors;

(c) Promotion of entrepreneurship.

2.40. International financial and development institutions should further review their policies and 
programmes in the light of the objective of sustainable development.

2.41. Stronger economic cooperation among developing countries has long been accepted as an important 
component of efforts to promote economic growth and technological capabilities and to accelerate 
development in the developing world. Therefore, the efforts of the developing countries to promote 
economic cooperation among themselves should be enhanced and continue to be supported by the 
international community.

Means of implementation

(a) Financing and cost evaluation

2.42. The Conference secretariat has estimated the average total annual cost (1993-2000) of implementing 
the activities in this programme area to be about $50 million from the international community on grant 
or concessional terms. These are indicative and order of magnitude estimates only and have not been 
reviewed by governments. Actual costs and financial terms, including any that are non-concessional, will 
depend upon, inter alia, the specific strategies and programmes governments decide upon for implementation.

(b) Capacity-building

2.43. The above-mentioned policy changes in developing countries involve substantial national efforts for