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• ancillary provisions e.g. possible common use of
the resource and/or whether exploitation rights are
exclusive or not.
EXTENDING THE LENGTH OF
CONTRACTS
Bioprospecting activities, especially in the pharmaceutical
industry, are characterised by high:
REWARDING BENEFITS THROUGH PAYMENTS AND MARKETS
• asset specificity, in particular site-specificity (particular
genetic materials are sited in particular locations)
and dedicated assets (companies invest in
bioprospecting to exploit the possibility of patenting
new discoveries) (Williamson 1979) 21 ;
• uncertainty: firms investing in R&D are unsure about
the probability of new discoveries (Williamson
1979); and
• complexity: the activity generates several (positive
and negative) impacts on biodiversity exploitation,
research, innovation, corporate competitiveness
and wealth redistribution.
Long-term contracts represent a way to minimise
transaction costs 22 linked to the above factors or to
Source: Getty Images.
bureaucratic and administrative constraints (e.g. generated
by procedures such as public tenders or authorisations
in countries exercising sovereign rights over
biodiversity within their jurisdiction). Minimising such
costs is important to provide incentives for companies
to invest in R&D and to share benefits in accordance
with CBD provisions.
Specific areas where there may be scope for improvement
include:
• building a high level of trust between the parties,
given the complexity of the issue and the impossibility
of monitoring all aspects related to agreements
(as in Section 5.2 above); and
• instituting facilities for tracking benefits and resolving
disputes across jurisdictions to make royalty
sharing agreements enforceable. As with traditional
knowledge, this will need inter-governmental
cooperation.
5.3.3 EQUITABLE SHARING OF
BENEFITS DERIVED FROM
GENETIC RESOURCES
Equitable sharing of benefits is desirable not only
on equity grounds, but also because it ensures
more effective management of genetic resources.
Traditional economics states that market institutions
determine the efficient allocation of resources and the
issue of equity can be left to policy makers. If applied
to the context of genetic resources, this would mean
that it did not matter who received what proportion of
the rent from their exploitation: the market structure
would ensure that materials were exploited and conserved
optimally.
However, recent literature shows that the traditional divide
between equity and efficiency does not hold in this
field (Gatti et al. 2004; van Soest and Lesink 2000) 23 .
Genetic resource contracts negotiated between corporations
and institutions in provider countries are very different
from atomistic market transactions. A better way
to analyse their outcomes is to use empirical results
from game theory experiments which strongly suggest
that the final outcome depends on the perception of
TEEB FOR NATIONAL AND INTERNATIONAL POLICY MAKERS - CHAPTER 5: PAGE 38