Select Committee on European Scrutiny Twenty-Third Report


15 Making EU Aid More Effective

(a)

(27333)

7066/06

COM(06) 85

+ ADD 1

(b)

(27334)

7067/06

COM(06) 87

(c)

(27335)

7068/06

COM(06) 88


Commission Communication: Financing for Development and Aid Effectiveness - The challenges of scaling up EU aid 2006-2010


Commission Communication: EU Aid: delivering more, better and faster


Commission Communication: Increasing the impact of EU aid: A Common framework for drafting country strategy papers and joint multi-annual programming

Legal base
Documents originated2 March 2006
Deposited in Parliament9 March 2006
DepartmentInternational Development
Basis of considerationEMs of 14 March 2006
Previous Committee ReportNone. But see HC 34-i, para 4 (4 July 2005); HC 34-v, paras 3 and 4 (12 October 2005); and HC 34-vii, para 13 (26 October 2005), HC 34-xii, para 10 (30 November 2005) and HC 34-xv, para 12 (18 January 2006).
Discussed in Council10-11 April General Affairs and External Relations Council
Committee's assessmentPolitically important
Committee's decisionCleared, but further information requested

Background

15.1 The 2000 United Nations General Assembly agreed to eight UN Millennium Development Goals (MDGs) to be achieved by 2015 — the eradication of extreme poverty and hunger, achievement of universal primary education, promotion of gender equality and female empowerment, reduction of child mortality, improvement of maternal health, combat of HIV/Aids, malaria and other diseases, environmental sustainability and a global partnership for development — each with associated targets and benchmarks to measure progress. A Millennium Review Summit was held at the 2005 UN General Assembly, when heads of state and government reviewed, and decided on measures to accelerate, progress.

15.2 On 4 July and 12 October 2005[52] we considered three Commission Communications:

  • an overview of the EU's contribution to achieving the MDGs and identifying the measures that need to be taken by the EU to reach these goals, particularly in Africa;
  • an overview of the state of implementation of the eight "Barcelona Commitments" which the EU made at the Monterrey Conference on Financing for Development in March 2002, assessing which of these commitments need to be reviewed and presenting proposals for new commitments on financing and aid effectiveness; and
  • a review of eleven priority non-aid policies where the EU could assist developing countries to attain the MDGs: trade, environment, security, agriculture, fisheries, social dimension of globalisation, employment and decent work, migration, research and innovation, information society, transport and energy.

Together, they formed the Commission's April 2005 "Millennium Development Goals" package, which subsequently formed part of the preparation for the UN High-Level Meeting on Financing for Development (held on 27-28 June 2005, to review progress since the Monterrey Conference and prepare the meeting on Financing for Development at the Millennium Review Summit itself) and the G8 Summit in Gleneagles (6-8 July 2005). They were debated in the European Standing Committee on 3 November 2005.

15.3 On 12 October we also considered the Commission's draft Declaration on Development Policy,[53] which was debated in the European Standing Committee on 17 November 2005 and adopted — as the "European Consensus on Development" — by the December 2005 European Council.

15.4 That Council also adopted the EU Strategy on Africa, which we considered on 26 October, 30 November 2005 and 18 January 2006.[54] Together, they form the backdrop to these three further Communications.

The Communications

15.5 All three relate to the central consideration of how to improve the effectiveness of the even larger volumes of aid that have now been committed by what was already, collectively, the biggest global aid donor, and which has also incorporated ten (and soon to be twelve) new Member States, with little experience of development work; and which have the MDGs and, above all, poverty alleviation, and Africa as the focal points. Collectively, they comprise the Commission's "Aid Effectiveness Package".

(A) FINANCING FOR DEVELOPMENT AND AID EFFECTIVENESS - THE CHALLENGES OF SCALING UP EU AID 2006-10

15.6 The Council invited the Commission to monitor the implementation of the new EU commitments to accelerate progress on achieving the MDGs and to report progress annually on the financing and effectiveness of aid, including for Africa. This first assessment is based on Member States' contributions of late 2005 and is supplemented by a Commission Staff Working Document, which provides a detailed evaluation of progress.

15.7 The Commission's analysis of the prospect for meeting the new aid targets is somewhat downbeat. It says that though there were additional aid flows of €2.3 billion in 2004 over 2003, this did not constitute any real increase in percentage terms; and that "the collective result in 2006 will depend on those [Member States] that are still below the minimum threshold of 0.33%" (which, from the associated table, boils down to the 10 new Member States). It then notes that the Financial Perspective package 2007-13 agreed by the December 2005 European Council "concluded that the EC budget for external actions shall increase annually by 4.5%, and allocated an additional €22.682 billion for cooperation with ACP countries during 2008-2013 under a 10th European Development Fund (EDF):

"These decisions have consequences: Should they be confirmed, the real share of the EC's contribution (from EC budget and EDF) to [the ]EU's collective ODA would decrease from today['s] 20% to 15% by 2010 and 13% by 2013. Moreover, if MS honour their ODA pledges they will have to provide around 90% of the additional EU aid bilaterally.

"Against this background, the EU must face a double challenge to ensure its credibility as a key global donor, as indicated by the European Consensus for Development:

  • The Council Conclusions do not secure appropriate funds for the EC to respond to the expectations of partners resulting from the ambitious EC and EU Association/Partnership Agreements concluded with many partner countries worldwide.

"If MS's national aid systems came also under considerable strain due to the scaling up of aid that would undermine the commitment to make the EU collectively a stronger, more effective aid performer.

"Hence and to ensure a global EU coherence and visibility it is crucial to put in place appropriate structures and ways also at EU level that facilitate the coordinated and complementary channelling of MS' bilateral and EC aid. The Commission will contribute to this effort by developing different types of host structures open to MS' voluntary contributions, such as the European trust fund for infrastructure in Africa, call for proposal mechanisms as applied under the ACP Water and Energy Facilities, or the exploration of the feasibility of common instruments to respond to global challenges related to the fall in commodity prices and natural catastrophes (for example an EU-FLEX or similar)".[55]

15.8 Turning to the new intermediate targets for 2010, the Commission says that preliminary estimates show that the majority of Member States have introduced the necessary measures to attain the 2010 ODA targets: six will provide 0.7% or more of their GNI as ODA, with Sweden keeping its ODA at 1.0% of GNI and Luxembourg endeavouring to attain that level; a further four MS will allocate around 0.6% of their GNI for development aid and others foresee progressive year-on-year increases to reach 0.51% ODA/GNI. But, the Commission notes, while ODA flows are expected to grow consistently, "a significant proportion of the increase seems related to debt relief operations (notably Iraq, Nigeria throughout 2005-2007)", and recalls that the Monterrey Consensus underlined the need to ensure that resources provided for debt relief do not detract from ODA resources intended to be available for developing countries. "The challenge ahead consists of introducing the necessary dynamics in MS' budget planning to reach sustained higher ODA levels in view of the 2010 goals, especially in countries that are still far from attaining the 2006 baseline target. There is a noticeable trend among MS to backload the required growth of aid budgets".

15.9 Regarding the ten new MS, the Commission says they have agreed to "individual baselines adapted to their specific situation" and have "committed themselves to striving towards reaching the 'acquis' of the EU in 2002 by 2015 (0.33% ODA/GNI) through gradual increases of their ODA. and an intermediate target of 0.17% by 2010". It regards their overall performance as "impressive, especially when compared with other big OECD/DAC donors. If current trends are confirmed, the combined ODA volume would increase more than six-fold between 2003, the year prior to accession to the EU, and 2010 and reach the 0.17% baseline target" and concludes that "whereas some countries have planned for progressive aid increases, others need to step up their efforts and adapt their ODA budgets, especially through allocations other than their contribution to the EC budget and the 10th EDF. By 2010, the combined aid levels of the EU10 would equate to the projected ODA/GNI ratio of the US.

15.10 On Africa, it says that:

"The EU undertook to raise aid to Sub-Saharan Africa and to ensure that half of the envisaged collective aid increases as of 2006 will be allocated to Africa. Whereas the G8 — building largely on the EU's financial efforts — also promised aid increases for Africa towards 2010, the EU pledge has so far not been matched by commitments from others, neither in scope nor in terms of verifiable indicators. The promise on Africa pertains to the collective EU effort avoiding interference with national aid priorities of individual MS. Further work on the division of labour needs to ensure a fair burden-sharing amongst EU donors and with international partners".

15.11 The Commission's consequential proposals are helpfully summarised by Secretary of State for International Development (Hilary Benn) in the first of three Explanatory Memoranda of 14 March 2006 as follows:

  • "On the commitment to increase financial resources for Official Development Assistance (ODA) (EU15 to reach, by 2010, an individual baseline of 0.51% and the new EU10 of 0.17% ODA as a percentage of GNI):
    • to encourage Member States whose ODA levels are still below the baseline to make efforts to reach set targets for 2006 and in 2010;
    • to call on Member States to contribute to common EU and other aid instruments, especially for Africa, to ensure effective use of forthcoming aid increases;
    • to ensure further developments in debt relief remain in keeping with the spirit of the Monterrey consensus; and
    • to call on other donors to commit more to ensure proper MDG financing
  • To continue to consider innovative sources of finance and monitor implementation of current initiatives, notably the International Finance Facility (IFF) for Immunisation (IFF-Im) and a levy on airline tickets.
  • To support the establishment of strong monitoring processes for commitments on aid effectiveness agreed at the 2005 DAC High Level Forum by the end of 2006. Other proposals on aid effectiveness are to endorse the nine deliverables contained in the Action Plan on the effectiveness of EU aid (Communication 7067/06);[56] to support the establishment of EC aid rules favouring co-financing with Member States and other donors; to agree principles for enhancing the division of labour amongst donors; and to agree on a concerted EU strategy to address a scaling-up of EU aid;
  • To undertake more analysis by the Commission of ways to ensure more predictable aid including through a multi-annual 'Millennium Development Goal contract';
  • To continue to support the development of instruments to mitigate the impact of external shocks on developing countries. This would include, among other things, support towards market-based insurance schemes such as the Global Index Insurance Facility (GIIF);
  • To continue further untying of food aid and food aid transport.;
  • To call on the International Task Force on Global Public Goods for a prompt release of its final report;.
  • To create an informal EU coordination mechanism between European Executive Directors from the Regional Development Banks (RDBs); to ensure systematic EU coordination meetings prior to key IFI Board decisions; and to share with the Commission Board documents of the International Monetary Fund, World Bank and Regional Development Banks;
  • To implement the 2005 Council Conclusions on 'Aid for Trade' (15579/05), especially the €1 billion p.a. aid volume targets by both Member States and the Commission by 2010; to contribute to more mainstreaming of trade into poverty reduction and development strategies; and to further improve EU coordination at headquarters and field level on trade-related assistance".

The Government's view

15.12 The Secretary of State says:

"We are strongly supportive of the new aid volume targets. To meet these targets, the UK will need to spend 0.51% of its GNI as ODA by 2010. ODA targets have already been agreed in HMG's 2004 Spending Round (SR2004), including a UK ODA target of 0.47% of GNI by 2007-08 reaching 0.7% by 2013.

"We welcome the call for all Member States to respect their commitments on ODA levels if we are to achieve the MDGs. We see EC channels as one modality for scaling-up aid, but not necessarily the preferred one.

"A large proportion of ODA commitments may be met by debt stock cancellations rather than new ODA flows. We therefore support the Commission's call for debt relief efforts not to detract from new ODA resources, and are encouraging others to adopt this line.

"We support the proposals to ensure proper financing for the MDGs, especially in Africa, also in the form of debt relief. Both proposals are consistent with UK policy and practice.

"More aid will not be sufficient for those countries requiring immediate support to achieve the MDGs. The UK therefore strongly supports the work that has been done on innovative sources of financing, notably the frontloading of aid through the International Finance Facility (IFF). The IFFIm pilot is well underway and will start disbursing funds shortly. We are working jointly with France on the main IFF and will encourage others to join. The UK already has an air ticket tax.

"We support work to improve the effectiveness of European aid, turning into reality the important commitments of the 2005 Paris DAC High Level Forum on Aid Effectiveness. Overall, we welcome the Commission's efforts to focus Member States on action following these commitments.

"We welcome the Commission's initial work on promoting more predictable and less volatile aid mechanisms, including the idea for a multi-annual 'Millennium Development Goal contract'.

"We endorse the Commission's call for more coordinated and speedier responses to mitigate the impact of exogenous shocks. However, we believe that the Commission overplays the significance of the Global Index Insurance Facility (GIIF) and downplays the importance of the IMF's Exogenous Shocks Facility (ESF). The introduction of the ESF in 2005 is the major recent change in this area. We are a strong supporter of the ESF and were the first to announce financial support (£50 million over five years). France has also contributed, and several other non-EU donors will follow suit.

"Untying will generate better value from EU development spending by securing competitive prices and purchasing from the most appropriate sources. We are committed to extending the scope of the OECD/DAC Recommendation on Untying Aid to LDCs and support the Commission and Member States efforts to fully untie food aid and food aid transport. We believe the 2003 Council Food Aid Convention (1999) negotiating mandate remains relevant to progressing full untying of food aid and food aid transport for the revision of the London Food Aid Convention.

"We support the work of the International Task Force on Global Public Goods. The importance of Global Public Goods is growing and high. The forum is valuable for promoting dialogue and raising awareness. We support the call for prompt release of the final report of the Task Force.

"We recognise the need for reform of the IFIs. However, we consider the proposals put forward by the Commission impracticable: Europeans are represented through various constituencies in the RDBs, mixing both EU and non-EU countries; there are often diverse views among Member States precluding reaching consensus; and as the 2nd largest contributor to IDA 14, our influence is commensurate with our financial stake and we would not want it to be diminished. Finally, IFIs confidentiality rules preclude Board documents to be distributed externally before approval.

"Like the Commission, we support more focus on trade-related assistance. We are keen for EU commitment to the UK-inspired 'Aid for Trade' initiative to increase countries' capacity to trade and take advantage of more open markets. We would welcome more emphasis on responding to trade priorities in the context of partners' development plans and budgets. At present too much aid for trade flows are disbursed outside of country plans and budgets, reducing aid effectiveness, increasing costs and making co-ordination and coherence difficult to achieve".

(B) "EU AID: DELIVERING MORE, BETTER AND FASTER"

15.13 The second Communication relates to the joint commitment of the MS and the Commission, at the November 2004 General Affairs and External Relations Council, in Paris at the Development Assistance Committee (DAC) High Level Meeting in March 2005 and in the run up to the UN Summit, to change practices and improve the impact of development aid in order to help partner countries meet the Millennium Development Goals.

15.14 The Secretary of State again helpfully summarises the Communication as follows:

"This chapeau paper takes these commitments and puts them into an action plan arranged around three axes: casting a glance at EU aid, leading the Paris Declaration Agenda and boosting the EU consensus. Nine deliverables are highlighted. Each is defined as having either an immediate or short term timeframe. Immediate deliverables have already been developed and are ready for immediate adoption and implementation in selected countries. Short term deliverables will be developed during 2006 and implemented in the field by 2010.

  • Axis 1: Casting a glance at EU Aid
    • Donor Atlas (immediate timeframe): A new version of this reference document which reports on patterns of development assistance
    • Compendium EU (short term timeframe): This provides partner countries and other development actors with an overview of all of Member States' current rules and procedures
    • Monitoring mechanism (immediate timeframe): This is the subject of the accompanying Aid Effectiveness package Communication (COM(2006)85)[57] and tracks international and EU specific development commitments
  • Axis 2: Leading the Paris Agenda
    • Roadmaps (immediate deliverable): Roadmaps identify concrete harmonisation issues that require implementation by all EU donors active in a given country.
    • Joint programming (immediate deliverable): This offers a common framework for regrouping the duplicating building blocks of Member States programming systems with the aim of reducing transactions costs. This deliverable is the subject of the accompanying Aid Effectiveness package Communication (COM(2006)88)[58]
    • Joint arrangements (short term deliverable): This aims to develop a template - to be agreed between the donor community and the partner country - to promote single disbursement and reporting mechanisms.
  • Axis 3: Boosting the EU Consensus
    • Division of labour (short term deliverable): This aims to improve aid effectiveness by ensuring that donor aid is better joined-up in country (reducing duplication etc. and thus the administrative burden on partner countries)
    • Co-financing (short term deliverable): This will define a strategic approach to co-financing by EU donors to allow them to undertake more joint activities.
    • EU vision (short term deliverable): This aims to stimulate the European debate on development and promote best practice, through a network of development research centres and 'European Development Days'."

The Government's view

15.15 The Secretary of State says:

"We welcome the Commission's wish to refocus attention on our joint aid effectiveness commitments. We are already working collectively on these issues and will continue to work to ensure EU development aid is focussed on the needs of partner countries, will lead to reduced costs for governments and builds on the principles agreed in the Paris Declaration on Aid Effectiveness.

"We are pleased to see specific actions recorded against roadmaps for harmonisation processes in country and continued emphasis on developing joint working practices (strategies and financing arrangements). We particularly welcome action at country level to ease the congestion of donors in sectors and the burden this places on partner governments dealing with them. We see the EU Donor Atlas and country mapping work as useful in this respect.

"We are concerned that the process for promoting joint multi-annual programming is not inclusive enough and has been rushed to meet the Commission's need for new guidelines for the Community programming exercise (2007-2013). Other Member States share this concern. We would prefer a two-pronged approach that will allow the new format for Community programmes to go ahead, while work on a joint multi-annual framework - also involving Member States bilateral aid - can continue in slower time.

"We would also prefer to see the chapeau paper confined to actions on aid effectiveness and leave issues around the visibility of EU aid aside. The Paris Declaration on Aid Effectiveness represents an important shift of focus to partnerships with developing countries and sets challenging commitments on both sides for improving development aid. We should not lose this focus".

(C) "INCREASING THE IMPACT OF EU AID: A COMMON FRAMEWORK FOR DRAFTING COUNTRY STRATEGY PAPERS AND JOINT MULTI-ANNUAL PROGRAMMING"

15.16 This final part of the "Aid Effectiveness Package" elaborates on the EU commitment at the DAC high-level forum to the gradual introduction of joint multiannual programming by revising "the CSP framework" (of Country Strategy Papers, introduced in 2000). The Commission says "it has become increasingly clear that coordinated programming, carried out jointly at European level, can make an even more significant difference in terms of the effectiveness of aid and achievement of the MDG … Joint multiannual programming should facilitate policy coordination, promote harmonisation of procedures and enable decisions to be taken concerning complementarity. It should enable donors gradually to align their activities on the partner country's multiannual programming cycles (poverty reduction strategies and budget processes) and increase the scope for Member States and the Commission to synchronise their programming process and thus, in the long term, bring down transaction costs considerably. The breakthrough at European level came in November 2004 when, in its conclusions, the Council expressly called on the Commission to revise the 2000 CSP framework to incorporate provisions making multiannual programming possible. The principle of joint programming was reaffirmed and strengthened in the new 'European Consensus on Development', the EU's new development-policy statement published in December 2005."[59] Once revised, the framework would be applicable to all Community aid for the next programming cycle, starting in 2007.

15.17 The document then sets out the basic elements to be included and the various stages of drafting CSPs, dividing the revised framework into three sections:

  • the guiding principles for programming;
  • a summary of the nine essential components of future CSPs, with a proposal for a common format; and
  • the main stages of the procedure for drawing up future CSPs and arrangements for joint multiannual programming.

15.18 The Commission's guiding principles are:

  • A partnership framework: strategies based on co-operation and partnership agreements, consistent with regional strategies;
  • Compatibility with the objectives of the European consensus (eradicate poverty through sustainable development, meet the MDGs and promote democracy, good governance and respect for human rights);
  • Consistency with the objectives of development policy and other policies that define relations with the partner country;
  • Differentiation in view of the diverse nature of the EU's partners and the challenges facing them;
  • Cross-cutting themes must be borne in mind;
  • Division of labour, complementarity and harmonisation: everything geared towards maximising the sharing of information between all concerned and complementarity with the activities of Member States, other donors and multilateral agencies;
  • Budget support, general or sectoral, for implementation wherever possible;
  • Focus (with flexibility);
  • Ownership by the partner country and alignment with the partner country's agenda;
  • A results-based approach: key indicators for measuring the impact of aid;
  • Involvement of civil society: non-state actors, the private sector, parliaments and local authorities; and
  • Learning from the past and reviews: experience of the partner countries and of donors, external and internal evaluations, strategies adjusted in the light of the findings.

15.19 The proposed format for the CSPs includes the following essential components which, the Commission says, past experience has shown make for high-quality programming:

  • the framework for relations between the donor and the partner country;
  • an analysis of the political (internal and external), economic, commercial, social and environmental situation;
    • the partner country's agenda, including the development strategy;
    • an analysis of the viability of current policies and of medium-term challenges;
    • an overview of past and present co-operation with the donor;
    • a description of the state of the partnership with the country; and
    • the donor's co-operation strategy and specific objectives, consistency with other external aid instruments and policies, and complementary with other donors; all leading to
    • a National Indicative Programme (NIP) with measurable objectives, with performance indicators, the contribution to be made by the various donors and the nature and scope of the most appropriate support mechanisms; to include
    • various standardised annexes.

15.20 The Commission says it will take a gradual approach, starting immediately with the ACP countries, followed at a later date by Asia, Latin America and the countries covered by the European Neighbourhood Policy and Russia. It points out that most of the components are to be found in the strategy documents drawn up by the Member States bilaterally, and says that the new CSP framework, with its "essential components", could also be used by the Member States.

The Government's view

15.21 The Secretary of State describes the Communication as:

"…a useful starting point for Member States and the Commission to jointly promote development aid that is focussed on the needs of partner countries, reduces transaction costs for governments and builds on the principles agreed in the Paris Declaration on Aid Effectiveness. In particular, we are looking for a framework that recognises the leading role of partner governments, encourages alignment of donor programming cycles to those of the partner country, builds on ongoing joint strategy work in country, draws on existing analysis and encourages a mutual accountability relationship where both donor and partners are judged on their performance."

15.22 However, he goes on to say that:

"We, and many other Member States, are concerned that insufficient time has been given to this process, not the least to ensure greater ownership across all involved parties. The imminent start of the Commission programming cycle would explain their wish to make fast progress. Together with others, we are therefore considering a two-pronged approach; one that would give the Commission the authority it needs for its own programming needs while taking forward work on joint multi-annual programming in slower, more considered time.

"In particular, we are looking for a framework that can work convincingly when initiated at the partner country level, under partner country leadership and encompassing all donor aid, not just the EU. We also want the core of the analysis underpinning such a framework to be joint and shared, not commissioned just for this process.

"We are involved in intensive discussions in Brussels with the Commission and other donors to resolve these issues."

15.23 Those discussions, the Secretary of State says, will take place this month in the Development Committee Working Group in Brussels, aiming at Conclusions being adopted at the "development" General Affairs and External Relations Council on 11 April 2006.

Conclusion

15.24 When we considered the final version of the EU Africa Strategy, we commented that the key question now was the extent to which its vital but ambitious aims were likely to be achieved, and that effective implementation would demand an unprecedented level and effectiveness of co-operation between Member States and the Commission, and between them and the UN, the AU, the IFIs and other bilateral donors; an unprecedented level of commitment and delivery on the part of African partners; and, above all, the EU to "put its money where its mouth is".[60] It is clear that the Commission is concerned that the last of these is by no means assured. It is therefore right and proper that it should draw attention to where Member States, and others, need to live up to their commitments. And, as the Secretary of State acknowledges, there is also much good sense and good intention in what the Commission says about the need for, and how to work towards, the improved co-ordination and coherence that will be required to achieve the extra bang for the Euro that, should history be any guide, is likely to be needed to make up for shortfalls.

15.25 But, as the Secretary of State points out, there are also several areas where the Commission, not for the first time, tries to force the pace or allows its ambitions to run ahead of what is required or is side-tracked into non-priority issues. It would seem, however, that several other Member States are of the same mind, that the Development Commissioner is aware of and responsive to these concerns, and that the likelihood therefore is that the right balance — reflecting the complementarity that Community policy shall have towards the policies pursued by Member States, as embodied in Art 177 EC — will be found in the Conclusions that are finally adopted. And should that scenario not transpire, then we are confident that the Secretary of State would not agree to any Conclusions that contradicted his caveats.

15.26 We therefore clear the Communications, but ask that the Secretary of State writes to us after the Council meeting to confirm that the points that he has highlighted have been satisfactorily resolved.





52   See headnote. Back

53   Ibid. Back

54   Ibid. Back

55   COM(06) 85, page 5. Back

56   Document (b) above. Back

57   Document (a) above. Back

58   Document (c) above. Back

59   COM(06) 88, page 5. Back

60   HC 34-xv (2005-06), para 12 (18 January 2006). Back


 
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