House of Commons - International Development

Select Committee on International Development First Special Report

THE WORK OF THE INTERNATIONAL DEVELOPMENT COMMITTEE 1997-2000

Reports on the EU and other Multilateral Development Agencies

59. In view of the fact that between 25 and 30 per cent of the annual budget of the Department for International Development is spent by the European Community, the Committee has, since its inception, maintained a keen interest in the development policies of the EC. To date, the Committee has considered EC development policies on three occasions — once in each Session. The Committee has also examined the policies of the EC in the context of its inquiries into Conflict Prevention, Debt Relief, Kosovo and Mozambique.

THE RENEGOTIATION OF THE LOMÉ CONVENTION [FOURTH REPORT, SESSION 1997-98]

60. In July 1997, the Committee agreed to conduct an inquiry into the renegotiation of the Lomé Convention which governed the provision of aid, trade preferences and political dialogue between the European Union and 71 developing countries in Africa, the Caribbean and the Pacific (ACP).

61. The Committee, in its Report, recommended that the central focus of the Convention should be the elimination of poverty. It also made a number of recommendations relating to the management of EC development assistance, calling for improved targeting, monitoring and evaluation of aid and for improvements in coordination between the Commission, EU Member States and ACP countries. The Report also called for more appropriate staffing within the Commission and recommended the publication of an annual report on the operation of the Lomé Convention.

62. The Government, in its response, agreed with many of the Committee's conclusions and recommendations, stating that "The Committee's Report raises many very important questions across a range of issues. The Government has shared many of the concerns expressed by the Committee and worked to ensure that the Commission's draft [negotiating mandate] was amended to meet these concerns".[39] Since the publication of the Report, negotiations on the Lomé Convention have been concluded and the successor treaty — the Cotonou Agreement — was signed in June 2000. The central objective of the Cotonou Agreement is, as the Committee recommended, the reduction and, ultimately, the eradication of poverty. The Agreement is now also underpinned by the International Development Targets. Other Committee recommendations are also reflected in the new Agreement: a stronger emphasis on conflict prevention and resolution; an improved role for civil society; a commitment to explore all possibilities for providing ACP countries which are unable to enter Regional Economic Partnership Agreements (REPAs) with benefits equivalent to those under Lomé; finally, the Commission has produced proposals to provide duty and quota-free access to the EU for all products (except arms and munitions) for all least developed countries from 1 January 2001 — a proposal similar to the Ruggiero proposal which was welcomed by the Committee.[40]

63. A number of the Committee's recommendations relating to the management of aid have since been addressed by recent Commission proposals for a statement on EC development policy and proposals for reforming the management of external assistance. These proposals were discussed in a further Committee report which is examined below.

THE FUTURE OF THE EC DEVELOPMENT BUDGET [FIRST REPORT, SESSION 1998-99]

64. Having examined the Lomé Convention, the Committee decided that it would be appropriate also to examine all other EC development assistance, which is distributed through Category 4 of the EC budget. The inquiry also provided an opportunity to examine some of the concerns relating to the management of external assistance that the Committee had raised in the course of its Lomé Report. Late 1998 was a propitious time to be examining the issue: the Department for International Development had just published its Institutional Strategy Paper on the EC, the Commission had just published Agenda 2000, setting out its priorities for the first years of the new century, discussions were underway within the EU on the new Financial Perspectives — setting out expenditure ceilings for the various budget categories of the EC for the years 2000-2006, and the Commission was due to be reorganised by the year 2000. The Committee felt that this would be a useful opportunity to influence discussions on priorities for Category 4 expenditure. In the course of the inquiry, the Committee visited Brussels and met a number of MEPs, NGOs and Commission officials, as well as Commissioners Erkki Liikanen (DGXIX) and Neil Kinnock.

65. The Committee's Report covered a wide range of issues relating to the EC development budget and was extremely critical of both the priorities, management and implementation of development assistance by the Commission. The Report concluded that the EC lacked a development focus and that the priorities of the Commission in this field involved a "shocking and completely unacceptable neglect of the needs of the poorest countries in the world".[41] The Report concluded that "the budget has placed the political and strategic interests of Member States above the needs of the poor"[42] and recommended that the principal objective of Category 4 expenditure should be "poverty-focussed assistance to least developed and other low income countries",[43] and recommended that no less than 62 per cent of EC development assistance — the average of EU Member States — should be spent in low income countries. The Committee also recommended that pre-accession expenditure should be taken out of Category 4 expenditure, that Category 4 should be re-titled "Development Assistance" and that a separate directorate-general for development should be created to oversee this budget. The Committee reiterated the recommendation made in its Report on The Renegotiation of the Lomé Convention that the Commission produce an annual report on its development activities. Finally, the Committee criticised underspends and delays in the disbursement of funds to development programmes. Just before the publication of the Committee's Report, the OECD Development Assistance Committee published a Peer Review of the EC's development programme which reflected many of the Committee's key conclusions.[44]

66. The Government, in its response, stated that "The Government welcomes the Committee's support for its policy on redirecting EC aid towards the poorest, and hopes the Committee's report will add momentum for reform";[45] the Secretary of State for International Development stated that it was "a very good report" and that it had "made an important contribution".[46] The Government agreed with the Committee's conclusion that EC development assistance polices were not sufficiently poverty focussed and agreed that policy documents are rarely effectively, consistently or comprehensively translated into operations. The Government rejected the Committee's proposals for renaming Category 4 "Development Cooperation" (acknowledging that Category 4 also funded other, non-developmental objectives) but supported the Committee's proposal for a single directorate-general. Finally, the Government applauded the Committee's efforts to strengthen links with its parliamentary counterparts.

THE EFFECTIVENESS OF EC DEVELOPMENT ASSISTANCE [NINTH REPORT, SESSION 1999-2000]

67. The Committee's third report on EC development assistance policies was published in July 2000. As with the Committee's Report on The Future of the EC Development Budget,[47] the Committee visited Brussels and, on this occasion, took formal evidence from Committee officials, including Commissioners Patten and Nielson and the Director of the European Community Humanitarian Office (ECHO). The inquiry concentrated on two key Commission documents that had been published since the Committee had concluded its previous inquiry: a draft Statement on EC Development Policy,[48] which the Committee had called for in its Report two years previously on the Development White Paper, and Proposals for the Reform of the Management of External Assistance[49]. The inquiry also allowed the Committee to examine the reorganisation of the Commission which took place in mid-1999.

68. The Committee noted some progress — for example, the number of Commissioners concerned with development being cut from four to two — but remained exasperated that the Commission had failed to reform its development activity effectively. The Report concluded that "the EC is living on borrowed time — the Commission should give up its addiction to half-measures and have the courage to reform for the benefit of the world's poor".[50]

69. The Committee's Report reiterated the conclusions, made in both previous reports, that EC development activity was unlikely to be effective in the absence of a clear poverty focus and without a single development budget category presided over by one Commissioner in charge of a single directorate-general with exclusive responsibility for expenditure in all developing countries. The Committee also examined the two Commission documents in detail. Whilst the Committee welcomed the publication of the documents as an important first step towards improving the accountability, poverty focus and effectiveness of EC development assistance, it had a number of reservations about their content. In particular, the Committee expressed a concern about proposals to have three types of poverty focus which it saw as an attempt to maintain the status quo and ring-fence resources for middle-income countries. Whilst welcoming the Commission proposals to focus EC development activity on six core areas, the Committee was anxious that any projects which were not compatible with these areas should be scrapped.

70. Once again, the Committee examined the issue of underspends. It was appalled by the evidence it received: that the backlog of outstanding commitments had reached over _20 billion by the end of 1999 and that the average delay in disbursing committed funds had increased from three to four-and-a-half years. It noted the problem that NGOs were having in getting paid on time and drew attention to the fact that not a single penny of the _250 million allocated for reconstruction in Nicaragua in the wake of Hurricane Mitch had been spent.

71. The Government response to the Report was extremely positive. The Government only rejected two of the Committee's proposals: that there should be a payment code of conduct for the EC introducing penalty payments for delays in payments; and the Committee's proposal for a separate budget category for development as this would "encourage upward pressure on EC budgetary ceilings".[51] On this latter point, the Committee subsequently wrote to the Government stressing that it was not proposing the allocation of any additional funds to the EC for the establishment of a new budget category, nor was it proposing that the changes should be made immediately. Rather, the Committee felt that, as a point of principle, expenditure by the Commission should be divided between external relations and development in separate budget categories in order to provide a much greater degree of clarity between EC expenditure on political priorities and developmental objectives. The Government, in its response to the Committee's letter, noted that the Committee's proposals were "clear and reasonable" and that "Ministers sympathise with the Committee's underlying point... They differ from the Committee on the tactics".[52]

DEBT RELIEF [THIRD REPORT, SESSION 1997-98, DEBT RELIEF; FOURTH REPORT, SESSION 1998-99, DEBT RELIEF AND THE COLOGNE G8 SUMMIT; FOURTH REPORT, SESSION 1999-2000, DEBT RELIEF — FURTHER DEVELOPMENTS]

72. The Committee has considered debt relief in each of the last three sessions, in particular the progress of the Heavily Indebted Poor Countries (HIPC) Initiative which aims to reduce the unpayable debt burden owed by such countries to the international financial institutions (the IMF, the World Bank and Regional Development Banks). The Government is only one board member in these institutions and thus our recommendations tend to urge the Government to argue for particular reforms within the relevant multilateral institution.

73. The Government has also been at the forefront of debt relief efforts. It has cancelled all aid debts to HIPC countries and is providing 100 per cent relief on export credit debt owed to it by individual HIPC countries from the time they reach decision point under the HIPC initiative. The Government has successfully proposed a timetable for the implementation of the HIPC Initiative, the so-called Mauritius Mandate, and led the way in restricting the provision of export credits to HIPC countries to "productive expenditure" only.[53] It has agreed with successive Committee recommendations on the need to speed up the HIPC process and allow some flexibility into its conditionalities. At the outset of the Committee's existence we argued that the structural adjustment policies of the IMF and the World Bank had to become more poverty-focussed.[54] We were pleased to see the IMF replace its Enhanced Structural Adjustment Facility (ESAF) with a new instrument specifically designed to have poverty elimination at the heart of its objectives, the Poverty Reduction and Growth Facility (PRGF).

74. We would mention two further points of interest. We have raised the question of debt relief for countries both in conflict and emerging from conflict[55]. The memorandum from DFID appended to this Report states that there are ten countries unable to qualify for debt relief because of conflict. After the Committee's most recent Report on debt relief, the Government pressed for further efforts to be made with such countries. At the G8 summit in Okinawa it was agreed that G7 officials discuss what steps could be taken. Secondly, the Committee recommended that in consideration of debt sustainability more attention be given to the country's domestic debt burden.[56] DFID commissioned work on domestic debt, completed earlier in 2000, which, amongst other things, produced guidance for developing countries in the formulation of their debt strategies.

75. The Committee is also concerned to take evidence each year on the Annual Autumn Meetings of the IMF and the World Bank. We took evidence from DFID and Treasury officials after the 1999 Autumn Meetings, and this evidence formed the basis of the Fourth Report, Session 1999-2000, Debt Relief — Further Developments. We took evidence again in 2000 after the Autumn Meetings, this time from the Secretary of State for International Development and from the President of the World Bank. We intend to publish the Minutes of Evidence. It is possible that in future years we will attempt to build on this process and further formalise it — with an evidence session just before the summer recess in advance of the Annual Meetings and then a written memorandum, and perhaps further oral evidence, after the Autumn Meetings have taken place.

39 Fourth Special Report from the International Development Committee, Session 1997-99, Government Response to the Fourth Report from the Committee, Session 1997-98: The Renegotiation of the Lomé Convention, HC 1068 Back

40 The former Director-General of the World Trade Organisation, Renato Ruggiero, proposed that all tariff and non-tariff barriers be removed on the OECD markets for the 48 least developed countries Back

41 First Report from the International Development Committee, Session 1998-99, The Future of the EC Development Budget, HC 44, para. 16 Back

42 Ibid, para. 91 Back

43 Ibid, para. 36 Back

44 OECD Development Assistance Committee Review Series No, 30 'European Community', 1998, para.0.29 Back

45 First Special Report from the International Development Committee, Session 1998-99, Government Response to the International Development Committee, Session 1998-99: The Future of the EC Development Budget, HC 391, p.v Back

46 Official Report, 12 May 1999, col. 302 Back

47 First Report from the International Development Committee, Session 1998-99, HC 44 Back

48 COM(2000)212 Back

49 Communication on the Reform of the Management of External Assistance, 8889/00, 16 May 2000 Back

50 Ninth Report from the International Development Committee, Session 1999-2000, The Effectiveness of EC Development Assistance, HC 669, para. 74 Back