Select Committee on International Development Minutes of Evidence

Supplementary memorandum submitted by ActionAid and BOND

Monterrey Process 0.7% TargetAid Untying
AustriaConsiders that economic growth alone is insufficient to raise the living standards of the poor, and that equitable income distribution is needed. Concerned about the issue of global burden-sharing. Maintains that an increase in ODA should be accompanied by a review of EU development co-operation, with a particular emphasis on the harmonisation of policies and operational procedures. Committed to the achievement of 0.7%. Planning to reach 0.35% by 2003. Fears that 0.7 could be a "moving target" and that, when achieved, developed countries will be asked to contribute further. Around 40.8% of the bilateral aid programme is tied and 34% takes the form of technical cooperation (TC). Procurement statistics show that around 75% of tendered amounts went to the purchase of Austrian goods and services.
BelgiumPlaces high value on aid effectiveness and processes to ease the burden on aid recipients, such as harmonization of procedures. Ambitious programme for increasing ODA with the objective of reaching 0.40/41% of GDP in 2003. 12% of the bilateral aid programme is tied. Makes extensive use of TC (46%) which is tied. Currently in the process of implementing the OECD/DAC recommendation concerning the untying of aid to LDCs, but not considering any further steps at this stage.
DenmarkPoverty reduction is the overarching goal of Danish assistance with a focus on promoting sustainable development through pro-poor growth that creates gender equality and promoting respect for human rights and democracy. Supports the development of country-led poverty reduction strategies and considers donor co-ordination a key element for efficiency in aid delivery. Based on the Government budget proposal for 2002, it is estimated that Danish development assistance in 2002 will amount to close to 1% of GDP, a reduction in favour of domestic spending. Around 20-25% of aid is tied. As far as procurement is concerned, foreign companies are only invited to tender when sufficient competition cannot be established among national companies. Danida's 1999 annual report shows that 98% of service contracts were awarded to Danish firms. Agrees in principle with untying aid to LDCs, except for some areas. Yet, no initiatives are foreseen. Any move in the direction of untying is conditional on moves on food aid.
FinlandIncreasing support for trade capacity building to enhance developing countries' participation in the global trading system. Adopted a comprehensive policy of poverty reduction, combating global threats to the environment and promoting equality, democracy and human rights in developing countries as well as participation in the resolution of the debt problem of the world's poorest countries. Did not reach the foreseen level of 0.341% for 2002. Yet, the commitment is still valid. As the absolute amount included in the budget would remain stable, the ratio-based on reduced growth perspectives for the GNP for 2002 might be 0.35%. Aid is generally untied. Tied aid includes TC which amounts to 32% of the bilateral aid programme. Does not intend to introduce any new initiatives and is still investigating what is required in terms of implementing the DAC recommendations, especially in the light of the different existing layers of regulations (WTO/GATT, EU directives and national).
FranceConsiders that less emphasis should be placed on aid volume in the discussions related to Monterrey as it considers the question of aid effectiveness and quality as more central. Maintains that emphasis should be on discussion of the objectives agreed and the means needed to attain them. Currently, strongly opposed to binding timeframe towards 0.7%. Yet, conscious of the need to increase resources. Will increase assistance to 0.33% in 2001. Official data shows that a small amount of aid is tied (6.6%). A large amount remains partially tied (25%) and a high proportion of the bilateral programme takes the form of TC (45%). The majority of French consultancy contracts are awarded to French firms. Maintains its position that untying of aid does not cover multilateral aid (Community aid) and is currently not prepared to go any further, in particular not in the direction of untying vis-a"-vis other OECD countries. Yet, willing to discuss the concept of aid untying among the 15 EU Member States.
GermanyDevelopment co-operation based on long-term co-operation with equal partners with the involvement of the private sector and civil society. Emphasises a coherent pro-poor policy in collaboration with international institutions. Convinced that a progressive increase of ODA over the next years is the right approach and has already pleaded for such an increase. Believes that further improvements in harmonising policies and procedures is necessary. Committed to increasing the current level of .027% to 0.35% or 0.36% in 2006 Procurement of goods and services under the bilateral aid programme is generally untied. However, the bulk of German development assistance takes the form of TC (61%) and is generally tied. Most consultancy contracts are awarded to German firms.
GreeceAcknowledges the importance of co-ordination, coherence and complementarity of donors' policies and activities. Believes that security and general political concerns are important elements to take into account in development policy. Emphasises that the EU should have a common approach to address certain major security threats, such as the migratory pressure from Eastern Europe and Africa, through development policy. ODA ratio rose from 0.15% in 1998 and 1999 to 0.20% in 2000. Currently preparing the second 5-year Plan for development co-operation which will take into account the 11 September attacks and the outcome of the WTO Ministerial meeting in Doha. Intends to increase ODA volume, with approximately 40% of the development co-operation budget earmarked for the Balkan countries, Albania, FYROM, Bulgaria and Romania. 76.5% of the bilateral aid programme is tied and 22% is allocated for TC programmes. Maintains that aid must be untied. Believes that tied aid negatively affects the quality of aid.
IrelandBelieves that a partnership approach holds the best possibility for significantly and sustainably reducing poverty in developing countries. Places high value in aid effectiveness, quality, accountability and transparency. Has increased ODA by 45% in 2001 and is looking at a further increase of 50% in 2002. The Minister of Finance announced on 15 November 2001 that substantial funding would bring ODA to 0.45% in 2002. Committed to achieving 0.7% in 2007. Comfortable with the UK proposals on aid untying, as its own system is almost untied. Willing to enter discussions on the issue.
ItalyDoes not consider the increase in ODA volume as the only issue to be tackled. Considers issues of efficiency of aid and absorption of capacities as vital. Attaches the utmost importance to debt cancellation and has fully adhered to the HIPC initiative. Committed to the achievement of 0.7%. Expects to reach the DAC average of 0.22% in a relatively short period of time. 61.8% of Italian aid is tied to the purchase of Italian goods and services, except for cases where items to be procured are not available in Italy. A further 15% of Italian aid is tied in the form of TC and food aid. Committed to implementing the DAC recommendation on untying of aid. Believes that further initiatives should be discussed in the DAC.
LuxembourgConcerned about aid effectiveness and quality, in particular with EC aid, as an issue affecting policy support for increased allocations of budgetary resources to ODA. Currently pursuing a policy of increasing ODA and has already reached the 0.7% target. Plans to reach 0.8% in 2002 and has a mid-term target to reach 1% around 2005. Aid is provided in grant form and largely untied. Willing to discuss proposals for further untying.
NetherlandsCommitment to maintaining a level of ODA is facilitated by strong public and political support for development co-operation. Maintains a wide spread of geographical interest, but still allocates 37% of bilateral aid to low-income and least developed countries. The present level of ODA (0.81%) will be maintained. Leading proponent of aid untying. Aid programme is mostly untied. TC is partially tied and takes up 25% of the bilateral programme. Fully supportive of the UK initiative aimed at further untying EU aid. Intend to re-allocate the funds previously used for tied-aid projects in LDCs to a special multilateral facility for future development use.
PortugalAttaches great importance to co-operation with least developed countries and is convinced that the EU should give the same importance to the 0.7% target as to the UN target of 0.15% of ODA for LDCs. Hope for a timetable for achieving 0.36% level by 2006. The majority of the bilateral aid programme is tied and contracts are usually restricted to national competition. Portugal makes intensive use of TC (50%) which is fully tied. Will implement the DAC recommendation, but concerned about possible further initiatives that go beyond the DAC recommendation. Concerned in particular with the effect of such initiatives on public opinion, on respecting equitable burden sharing and on possible consequences on distribution of aid.
SpainDiscussions on FfD should not focus on the volume of ODA. Private generosity also has an important role. Convinced that it would be unwise to increase ODA flows without improving the quality of aid. Emphasises the need to refocus aid where it is needed and towards countries that are strongly committed to the implementation of sound structural and macroeconomic policy, good governance, poverty reduction and good policy environments. The EU must ensure that available resources are used sufficiently and an EU effort not matched by similar efforts by US and Japan would be useless. Advocates that poverty should be fought not exclusively in LDCs but also in Middle Income Countries where the proportion of poor remains large. Foresees the achievement of the 0.30% level by 2003 or 2004. A level of 0.4% could be achieved before 2010. 14% of the bilateral programme is tied. A further 20% is tied in the form of TC and food aid (14% and 6% respectively).
SwedenContinuously developing new methods to improve donor co-ordination and aid effectiveness. Continues to support the ODA debt relief and is committed to contributing to the HIPC Trust Fund. Reached the 0.7% target in the 1970s. Since then budgetary allocations have varied between 1.0% and 0.7%. 0.74% will be allocated in 2002, 0.81% in 2003 and 0.86% in 2004. Practised untied procurement for the last few years for about 90% of the total amount of procurement for development co-operation. Procurement practices were recently revised following the conclusions of an Auditor General's report revealing that domestic procurement was being favoured. Currently investigating the consequences and necessary changes of implementing DAC recommendation. Welcomes further discussion on the subject.
United KingdomConsiders aid effectiveness and quality as essential and gains from increased effectiveness should be quantified, such as from untying, increased poverty focus, a better policy mix and the emphasis on good performers. Considers that long-term commitments of donors and revitalisation of SDR are crucial in the context of FfD. Committed to reaching 0.33% by 2004.To date, the only donor who has fully untied. Untying covers all categories of aid. Believes that untying needs to be pushed further in particular applying the procurement directive.

ActionAid and BOND

May 2002

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