Select Committee on International Development Appendices to the Minutes of Evidence


APPENDIX 8

  

Memorandum submitted by the Overseas Development Institute

1.  INTRODUCTION

1.  The International Development Committee last reviewed EU matters in 1997-98 (IDC 1998). Developments since then have validated the Committee's judgement on the key issues. There has been significant progress, not least because of consistent and constructive pressure by the UK Government.

  However,

    (i)  the new Commission appointed in 1999 arguably mishandled the re-organisation and re-allocation of responsibilities. This was not just a missed opportunity, but left the Commission constantly trying to adjust to the second best;

    (ii)  the new policy paper has many strengths, but is ambiguous on what the commitment to poverty reduction might mean, and unclear on strategic priorities. There is too much room for manoeuvre;

    (iii)  partly as a result of (i), the proposed reorganisation is unnecessarily complex, and in some respects misdirected.

  2.  The most important issue is (i) above. The EU needs a strong Development Directorate, but is unlikely to get it under current proposals.

  3.  We think the IDC should:

    (i)  pat itself on the back for its work in 1997-98;

    (ii)  recognise the contribution made by Clare Short MP and her team, and ask how it can be sustained;

    (iii)  examine the impact of the 1999 re-structuring, and (depending on how far it thinks its authority extends) make friendly observations, offer advice, or recommend change;

    (iv)  encourage the Commission and the Council to tighten up the wording of the recent policy document; and

    (v)  observe, advise or recommend, as above, on some details of the proposed administrative reforms.

  4.  It is worth recalling that the IDC reached a total of 13 main conclusions and recommendations in 1998. [8] The most important of these were to: focus more on the elimination of poverty; reform the management structure; be more flexible in trade negotiations, particularly on reciprocal liberalisation; and strengthen political co-operation.

  5.  Similar sentiments were laid out in a speech by the Secretary of State, Clare Short MP, in July 1999, setting out 10 specific proposals:

    (i)  a coherent new statement of EU development policy;

    (ii)  a more effective poverty focus in allocating resources;

    (iii)  simplified procedures and increased accountability;

    (iv)  the full range of skills necessary to deliver programmes effectively;

    (v)  more authority devolved to overseas delegations;

    (vi)  strengthened evaluation;

    (vii)  improved co-ordination and complimentarity between the Commission and the donors;

    (viii)  early decision to contribute to the HIPC initiative;

    (ix)  more generous trading arrangements for developing countries; and

    (x)  a formal, published annual report.

  6.  The main question we address in the following paragraphs is whether these various ideas have been taken up, particularly in the new Development Policy Paper (EU 2000b) and the proposals for reform of the management of external assistance (EU 2000a). We also refer briefly to the revised Lome Agreement approved in May 2000 (EU 2000c).

2.  THE COMMISSION RE -ORGANISATION

  7.  A new, internal "constitutional settlement" was agreed when the new Commission took office in mid-1999. The previous situation was complex, with overlapping geographical and sectoral responsibilities, and a separate "Common Service" (SCR) for project implementation and evaluation. As is well known, the UK position was that there should be one Commissioner for External Affairs, one for Development, and one for Trade, and at first sight, this was what happened with Messrs Patten, Nielson and Lamy taking the respective portfolios. However, the allocation of specific responsibilities was messier. Mr Patten was nominated as primus inter pares. He retained responsibility for aid matters in non-ACP countries, and also oversight of the "common service" for implementation (and evaluation). This left the Development Commissioner (Mr Nielson) with responsibility for development policy, but no operational control over programmes outside the ACP. Aid implementation and evaluation also fell outside his control. Humanitarian aid (for all countries, not just the ACP) was brought within his compass, but remained as a separate office (ECHO). Mr Lamy was allocated responsibility for trade.

  8.  The contours of the Patten/Nielson boundary are not consistent with international best-practice, which is to bring policy and implementation together, for all developing countries, and to maintain close policy and operational relationships between development and humanitarian departments.

  The arrangement currently in place:

    —  encourages boundary disputes, especially over policy;

    —  complicates administration and increases internal transactions costs; and

    —  creates unfortunate discontinuities in the project cycle, especially between planning and implementation.

  Many of the administrative reforms proposed represent attempts (sometimes laborious) to deal with this basic problem. Second-best solutions rarely work however. It would be far better to start again.

  9.  It is important to say that our comment here is not designed to undermine Mr Patten, or to strengthen Mr Nielson at his expense. Both have already made important contributions. Mr Nielson's Development Directorate does need to be strengthened, and that does imply transferring staff and activities from Mr Patten. However, there is a perfectly respectable case to be made for having one external affairs commissioner as primus inter pares, and logic suggests that this should be Mr Patten. The way to reinforce this is to set up effective internal management structures for the group of external affairs commissioners, and to equip Mr Patten with the necessary strategic planning capability. He needs Cabinet Office functions, a policy unit, and a foreign affairs staff, not the massed ranks of the common service, or a miscellaneous collection of aid desks.

3.  THE NEW DEVELOPMENT POLICY

  10.  The document under consideration is a Communication from the Commission to the Council. It was discussed at the Development Council Meeting on 18 May 2000, and it was agreed that the Council would work with the Commission to agree a formal policy statement at the next Development Council later in the year. Thus, there is still scope to improve the document, and for the IDC to make its view heard.

  11.  In general, the document tackles the right questions, and has sensible things to say about such issues as (a) current development challenges, (b) the EU's comparative advantage, (c) strategic priorities and (d) priorities for internal implementation. In particular, we very much welcome:

    —  the unambiguous focus on poverty reduction;

    —  the need for a global approach to development policy, consistent throughout the world;

    —  the emphasis on identifying the EU's comparative advantage, particularly critical mass, political weight, and the link to trade;

    —  the supporting strategic framework;

    —  the emphasis on the three legs of European co-operation with developing countries, viz political, trade, and economic;

    —  recognition of the need for greater focus in spending aid money;

    —  the call for simplification of instruments and reduction in the number of budget lines;

    —  the proposals for greater delegation to field offices and the commitment to better reporting; and

    —  the suggestion that Member States take more of a hands-off policy-based role in managing the EU Programme.

  12.  Notwithstanding the above, two problems stand out for further discussion as the document is finalised.

  13.  First, the document is ambiguous about the poverty focus. It rightly notes that the share of EC official development assistance (oda) going to the poorest countries has fallen sharply, and is now well below that achieved by other donors. Recently published data show that the share of EC aid reaching poor countries has fallen from 78 per cent to 52 per cent over 20 years. There is a further factor, however, which is that a growing share of EC external spending does not quality as official development assistance at all, being directed mainly to non-qualifying countries in Eastern Europe and the former Soviet Union. In the mid-1980s, no funds were disbursed in these areas. In 1997-98, the share was about 25 per cent. If this is taken into account, the share of total spending reaching the poorest countries was no more than 40 per cent.

  14.  The Paper's response to this is to identify "three ways of enhancing and measuring the poverty focus of Community aid:

    (a)  improve the primary poverty focus: meaning more concentration of efforts on LDC's and other LIC category countries;

    (b)  improve the secondary poverty focus: meaning more poverty-focussed co-operation programmes in middle-income countries (MIC) where more than 20 per cent of the population live under the poverty line of $1/per day per capita;

    (c)  improve the tertiary poverty focus: meaning greater focus on poverty reduction in co-operation programmes in all other developing countries.

  Improving the primary poverty focus is clearly limited by the setting of the political priorities and the consequences for the distribution of the financial resources to the regions".

  15.  It is not at all clear to us what this means. In particular, the last sentence appears to let the Commission off the hook of reallocating resources.

  16.  More work is promised on this topic, and it is badly needed. We think the IDC should propose targets for the proportion of aid going to low income countries—for example, to reach the average of the Member States' bilateral programmes (ie around 55 per cent) by 2010, or, better, the UK figure (in 1998-99, 71 per cent).

  17.  The second issue concerns the "integrated framework" proposed in the policy paper. This is the alpha and omega of the paper, in intellectual terms. It offers an attractive logframe approach to setting priorities: essentially, the goal is poverty reduction and the "strategic areas" are purposes. A few points:

    —  it is interesting to compare this list with the three-legged strategy of World Development Report 2000 (empowerment, security, opportunity). Security (risk management, safety nets) is the big omission here (assuming that democratisation is defined broadly enough to include empowerment);

    —  good to see "equitable" growth—but notable that income distribution is not mentioned elsewhere in the document;

    —  there are some obvious questions about priorities and sequencing and trade-offs to be dealt with. For example, should institutional development precede integration into the world economy;

    —  regional co-operation is a puzzling "strategic area": is it an end in itself, or rather a means to the end of growth;

    —  finally, does the list of priority fields which follows the table correspond to the integrated framework? There are some good items on this list (health, education, rural development, food security, transport), but also some surprising omissions (energy?). Also, there is little sense of prioritisation, of a link to poverty reduction.

  18.  In general terms, we feel that there is no real attempt to rank the strategic priorities in terms of how they would contribute to poverty reduction or how they relate to each other. There must be doubts about the EC capacity and skills to pursue all these objectives and how are they to be "weighted" to help guide officials. Further, if capacity is limited, then the EC may have to do less in certain sectors. Which forms of aid make the smallest demands on EC capacity? The complexity and fragmentation of objectives is recognised as a weakness of the system (paragraph 2.3) but does not seem to be tackled here.

4.  REFORM OF THE MANAGEMENT OF EXTERNAL ASSISTANCE

  19.  This document diagnoses weaknesses in structure/systems and proposes organisational and staffing reforms to improve administration. Three weaknesses are rightly perceived to be:

    —  fragmentation in the structure and systems;

    —  poor programming and implementation; and

    —  mismatch of objectives and resources relative to people (hence overload and ineffectiveness).

  20.  The essential proposed reforms are the following.

  Reform and unification of the programming system. Programming is to be guided by strategic priorities or strategic frameworks (integrating development and trade etc) with multi-annual programming. Consistency and quality are to be monitored by a Quality Support Group. Programmes (and hence presumably regional and country strategies) are to be agreed by the whole group of RELEX Commissioners. A common administrative culture within RELEX services will be encouraged.

  Programming will be the responsibility of the geographical Directorates General, but the rest of the cycle, especially project management, from identification of projects through to implementation, will be the responsibility of a new body. The exceptions where programming and implementation remain integrated include ECHO, ECOFIN and possibly management of NGOs.

  Creation of a single body in charge of project implementation and to maintain quality control. The proposal is for an "office type structure" to succeed the Common Service (SCR) and to report to a Board of all Commissioners.

  21.  Some of this is sensible. In particular, we welcome the idea of integrated, strategic frameworks—these should be published—and also the proposals for greater delegation to the field, with fewer committee controls by Member States in Brussels. All proposals to simplify procedures will also be welcome. However, we have five comments.

  22.  First, the arrangements proposed are tremendously complicated, with different people in different bodies responsible for different stages of the aid cycle, and with the lines of communication and accountability between them unclear. Successful aid management requires very close integration of all stages (and close consultation with and ownership by the development partner). The basic logic of the reform here seems to be shaped by the allocation of responsibilities to Commissioners, and by the previous decision to create the SCR. All this will greatly increase transaction costs and perpetuate a second best solution. It will also increase the risk of top-down approaches with insufficient country participation. It would be very useful for the IDC to ask for quite detailed clarification on how these arrangements will work in practice. To whom, for example, will technical staff in Delegations report?

  23.  Second, seeking to achieve greater efficiency in spending aid means finding the right balance between pace and quality of disbursement. In particular, the EC needs to be cautious with new initiatives. For instance, moving from a strongly government-to-government co-operation to working with "new" actors such as the private sector, local governments or civil society, is going to require fundamental changes in attitude, trust and working methods, and will therefore take time. Pressure to spend too much too quickly would be counterproductive.

  24.  Third, the paper is right to say that more staff are needed, both in Brussels and in Delegations, but does not say enough about what kind of staff. We think the priority should be support staff in Brussels (analogous to the old executive grade in the British civil service) and local professional staff in the field, with some strengthening of professional advisory capacity in Brussels. The important point is that support staff and local professionals are relatively cheap compared to the internationally recruited professionals now on the books. With careful allocation of staff, and cost-effective recruitment, it might be possible for the Commission to increase its numbers significantly, and at the same time spend less not more. There should be a full staffing audit before claims for extra resources are supported.

  25.  Fourth, while a common administrative culture in RELEX is proposed, little or nothing is said about the new more effective management culture required throughout the EC organisation. We welcome the idea of moving towards management by results. However, our research on the way that the EC "mainstreamed" its poverty reduction objective found major correctable weaknesses in the management system and culture (see Healey & Cox (2000), OECD (1999)). These relate especially to policy guidance, training and incentives.

  For example, ODI research showed the need for more drive and commitment for the top of the organisation: this was very weak in DGIB; to relieve disbursement pressures on personnel to help improve the time for and hence the quality of interventions (recognised though little said about how in the short term); to rationalise the multiple objectives which have meant that desk officers have to consider too many perspectives in drawing up interventions (this is recognised but not clear how); to develop precise strategies to make objectives operational and provide operational guidance to personnel—DG8 has a better record than most agencies in training staff, which the whole of the EC needs to adopt and extend to the delegations; and to make programme managers more accountable for reporting on their record of implementing their prior approved plans and programmes.

  26.  Fifth, the Commission could be asked to say more about the long-term plan for an independent aid agency. A case for this could be made, provided it had full control of all aspects of the aid cycle. However, it seems paradoxical for the Commission to argue for this solution, while simultaneously arguing that the proliferation of consultant-managed aid offices dilutes Commission control of the aid programme.

5.  CONCLUSION

  27.  Three final points. First, the new Agreement with the ACP has important things to say about partnership and joint decision-making. Similar principles ought to apply to other regions. Will the Committee be taking evidence to capture developing country voices on these issues?

  28.  Secondly, and as the Secretary of State has reminded us, a change process needs benchmarks, regular reviews, and, in this case, deadlines. There are no performance targets specified in the documents under review. Would it be useful for the IDC to suggest that the Commission set some?

  29.  Thirdly, political momentum is essential. DFID has done very well in developing ideas and contributing to the sense of forward movement. This is very demanding of ministerial time. Can the current high priority be sustained? Are the current networks in Europe strong enough? Given its importance to the UK development programme, is there perhaps a case for a dedicated Minister of State on Europe?

Overseas Development Institute

June 2000

 BIBLIOGRAPHY

  Commission of The European Communities (2000a)— Communication to the Commission on the Reform of the Management of External Assistance", Brussels, 16 May 2000.

  Commission of The European Communities (2000b), Communication from the Commission to The Council and The European Parliament: The European Community's Development Policy, Brussels, 26 April 2000, COM(2000) 212 final.

  Commission of The European Communities (2000c), Proposal for a Council Decision concerning the signing, on behalf of the European Community, of the Partnership Agreement between the African Caribbean and Pacific States on the one part, and the European Community and its Member States, on the other part, and a Proposal for a Council Decision concerning the conclusion of the Partnership Agreement between the African Caribbean and Pacific States on the one part, and the European Community and its Member States, on the other part (presented by the Commission), Brussels, 23 May 2000, COM(2000) 324 final, 2000/0124 (AVC), Volume I.

  Healey, J and Cox, A (2000), European Development Co-operation and the Poor. Basingstoke: Macmillan.

  International Development Committee (1998), Fourth Report, The Renegotiation of the Lome Convention, Volume I, Report and Proceedings of the Committee. London: The Stationery Office.

  OECD (1999), DAC Scoping Study of the Donor Poverty Reduction Policies and Practices. London: ODI.


8   Fourth Report from the International Development Committee, Section 1997-98, The Renegotiation of the Lome Convention. Back


 
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