House of Commons - European Scrutiny

Select Committee on European Scrutiny Eighteenth Report

1 EU Development Policy

(28383)

7124/07

+ ADD 1

COM(07) 72

Commission Communication: EU Code of Conduct on Division of Labour in Development Policy

Legal base —

Document originated 28 February 2007

Deposited in Parliament 12 March 2007

Department International Development

Basis of consideration EM of 19 April 2007

Previous Committee Reports None; but see (26737) 11413/05: HC 34-v (2005-06), para 3 (12 October 2005) and (28201) 17033/06: HC 41-xv (2006-07), para 5 (21 March 2007) and HC 41-vii (2006-07), para 3 (24 January 2007)

To be discussed in Council 14-15 May 2006

Committee's assessment Politically important

Committee's decision For debate in the European Standing Committee

Background

1.1 The Commission's Communication begins with a clarion call: "European citizens want a stronger Europe, capable of improving the living conditions of the world's poorest. A Europe that delivers more, and does so better and faster in the fight against global poverty. A more vocal Europe, with a political impact that matches the level of its financial generosity". But, the Commission continues, "European citizens also want a more effective and efficient Europe".

1.2 Instead, "the multiplication of development aid activities and structures has led to a complex and expensive aid industry". Too many donors are concentrating on the same countries and the same sectors. Some developing countries are faced with a multitude of missions, leading to unnecessary administrative costs, duplication and differences in donor requirements, rules and conditionalities, which in turn reduces transparency and increases the potential for corruption. Other countries suffer on the contrary from so-called donor fatigue, leaving them almost entirely up to themselves. A consensus is emerging, the Commission says, "that this opaque and complex situation is not sustainable and that the European Union (EU) should take the lead in addressing the problem".

The Commission Communication

1.3 The Commission notes that, in 2005, all donors signed the Paris Declaration[1] underlining the importance of complementarity and the need to make full use of each other's comparative advantages, while respecting the ownership of partner countries. In its contribution to the Paris Declaration, the EU agreed to develop an operational strategy towards complementarity, which became an integral part of the 2005 European Consensus on Development[2] and a central element in the EU Aid Effectiveness Action Plan presented in 2006. Following this proposal, EU ministers agreed to develop operational principles on how to better organise the division of labour in a partner country or between countries. "The present Communication — progressively elaborated since 2004 over seven presidencies with the participation of experts of the Member States — should be seen in the light of this framework". The Commission says that the EU has a special responsibility, "accounting for 52% of worldwide ODA and 80% of the scheduled scaling up of aid".

1.4 The Commission reviews the challenges to such complementarity:

Politics and visibility:

Operational challenges

Use of existing expertise

1.5 Nonetheless, all EU donors now share common development objectives, a common vision, values and principles, already cooperate on the ground with each other and the Commission and joint programming is emerging. The EU donor atlas has identified the gaps, duplications and unnecessary administrative costs; now, "reinforcing the complementarity of EU donors' activities is a key factor in increasing Europe's performance as a donor of reference". Agreeing a conceptual framework is not only a prerequisite for effective joint action by the EU, but also in developing the Paris Declaration by offering "the international community the definition of key concepts and principles".

1.6 The Commission sees complementarity having five dimensions: "all interact with each other and must be seen as a whole" — in-country complementarity (to reduce duplication); cross-country complementarity (to reduce the increasing gap between "aid darlings" and "aid orphans"); cross-sector complementarity (the EU as a whole should be able to provide a complete "tool box" of thematic and sectoral operations, building on the specific expertise of individual donors); vertical complementarity (e.g., large-scale projects involving regional and national levels); and cross-modalities and instruments complementarity ("a combination of various modalities and instruments, whose synergies need to be strengthened").

1.7 The most important considerations for a code of conduct are explained:

the primary leadership and ownership in country-level division of labour should lie with the partner country government;
division of labour must not be implemented at the expense of global aid volumes or aid predictability;
the EU must first and foremost organise its own division of labour, which will provide a basis for a better international division of labour;
complementarity should be based on the comparative advantage of donors in supporting partner governments. "In addition to its role as a donor, the Commission has a recognised added value, in developing strategic policies, promoting development best practices and in facilitating coordination and harmonisation", as well as in "the external dimension of internal Community policies";
in order to reduce the burden on partner country governments, donors should consider entering into delegated cooperation arrangements, whereby a lead donor acts on behalf of others who become "silent partners". The code must be implemented in a pragmatic way, building on existing processes and with effective monitoring systems.

1.8 Finally, the ten guiding principles of the Code are set out:

Guiding Principle 1 — Concentrate on focal sectors in country.

EU donors will seek to focus their active involvement in a partner country on a maximum of two sectors, in which they have comparative advantage. These sectors should correspond with partner county priorities.

In addition to the focal sectors, which should absorb the bulk of available funding, donors can provide general budget support, where conditions permit to do so, and provide support to civil society, research, or university and school cooperation.

Guiding Principle 2 — Redeployment for other in-country activities.

EU donors should change their method of providing aid in non-focal sectors, by either remaining engaged through lead-donor arrangements and delegated cooperation or partnerships, redeploying into general budget support, or exiting in a responsible manner. The Commission gives as an example the arrangements whereby the Department for International Development has delegated the implementation of its support for land reform in South Africa to Belgium.

Guiding Principle 3 — Ensure an adequate EU presence.

At least one EU donor should be actively involved in each strategic sector considered relevant for poverty reduction. EU donors should also seek to limit the number of donors to a maximum of 3 per sector by 2010, based on their comparative advantage.

Guiding Principle 4 — Replicate practices at regional level.

Taking into account the increasing aid volumes and activities at regional level, EU donors will apply the above principles also in their work with partner regional institutions.

Guiding Principle 5 — Establish priority countries.

EU donors would commit to reinforcing the geographical focus of their assistance to avoid spreading their resources too thinly.

Guiding Principle 6 — Address the "orphans" gap.

EU donors will strive to dedicate part of their aid budget to "under-funded" or neglected countries, which are often fragile states whose stabilisation has a positive spill-over effect for the wider region.

Guiding Principle 7 — Analyse and expand global areas of strength.

EU donors will deepen the self-assessment of their comparative advantages, moving towards more specialisation while maintaining the diversity of expertise for the EU as a whole. The Commission will further develop its expertise and capacities in the areas where it has comparative advantage, especially at the country level.

Guiding principle 8 — Pursue progress on other dimensions of complementarity.

EU donors will also consider the division of labour when they discuss reform of the international aid system, and how different aid methods can be made more effective when they programme their work in specific countries.

Guiding Principle 9 — Promote jointly the division of labour.

In order to achieve greater impact of the EU's collective contribution in a particular sector or country, EU donors will increasingly rely on joint statements for information of their domestic audiences, and for advancing the agenda with other international partners and with partner countries.

Guiding Principle 10 — Deepen the reforms.

EU donors recognize that division of labour will imply real structural changes, reforms and staffing consequences.

1.9 A 20-page Staff Working Paper, annexed to the Communication, sets out the Code in greater detail, gives examples of definitions of comparative advantage for donors, and provides case studies of successful practices for many of the principles.

The Government's view

1.10 In his helpful Explanatory Memorandum of 19 April 2007, the Parliamentary Under-Secretary of State at the Department for International Development (Mr Gareth Thomas) notes that development cooperation is a shared competency, and that the code is voluntary and self-policing and intended to become best practice, rather than to become mandatory.

1.11 He says that the Code does not call for additional spending, either by Member States or the Commission, but instead aims to encourage donors to consider a range of actions which can increase the effectiveness of their spending. This, he says, will mean in some cases that donors manage funds for another donor and vice versa, but "would only be done where a partner country government has identified a particular donor as having a comparative advantage delivering aid in its country". He continues as follows:

"The idea of a Code was proposed by the Ad Hoc Working Party on Aid Effectiveness and endorsed by the Council in November 2004. The Code was developed by the Commission in consultation with Member States. It presents a good framework for donor cooperation, building on and advancing the Paris Declaration commitments on aid effectiveness, and it is intended to be discussed at the Ghana High Level Forum on Aid Effectiveness in September 2008.

"We support the fact that the code is voluntary, emphasises the importance of the role of developing partner governments in determining the framework for donor support and identifying preferred partners and calls for building on current in-country initiatives and is open to all donors.

"The code sets targets for the number of donors in each sector, and number of sectors in which each donor should engage. However, for a group of donors as varied as the EU it will be difficult to find a target equally appropriate and relevant for all. Some donors are active in only one or two sectors now, while others are active in a wide range of sectors. A target of two sectors would be particularly difficult to implement for some UK programmes so to retain flexibility the Government will negotiate to try to remove the specific reference to any particular number of sectors from principle one.

"The Code also helpfully notes that donors need to tackle the imbalance of global allocations (the so-called aid darlings and orphans issue) and that donors need to work more effectively at the regional level. These recommendations are in line with the Government's White Paper commitment to agree how to resolve the problem of the unequal and inefficient way in which aid is distributed globally."

1.12 Finally, the Minister says that the Commission has consulted thoroughly with Member States during the drafting of the Code, which will be considered at the 14-15 May "development" GAERC.

Conclusions

1.13 Article 177 of the EC Treaty states that Community policy in the sphere of development cooperation "shall be complementary to the policies pursued by the Member States". Division of labour is by now a time-honoured concept with which it is hard to quarrel in principle, and there is much good sense and analysis in the Commission's proposals. But the key considerations in any such division of labour between the Member States and the Commission are getting the balance right, so as to achieve the sort of complementarity envisaged in the Treaty and create a process whereby maximum value is achieved. So the questions that arise are:

what is the most effective way of spending European taxpayers' money in order to deliver the outcomes that European taxpayers want to see delivered in the developing world?
how effectively is expenditure assessed in relation to planned outcomes?
how effectively are past lessons learnt and future actions adapted?

1.14 On the basis of our recent extensive consideration of the Special Framework of Assistance for traditional suppliers of bananas,[3] the European Commission does not emerge with high marks on these fronts; nor is it apparent where its comparative advantage lies. Nonetheless, Member States are expected to "reinforce their geographical focus" and limit the number of active donors in various ways, while "Community assistance will remain universal" and communication is to be increasingly on the basis of joint statements, all of which will be bound to affect Member States' foreign policy tools and visibility. While this may suit some smaller and newer Member States, it could have considerable negative effects on UK interests if not handled appropriately. For example, it is not at all obvious why, in South Africa, the Department for International Development judged it appropriate to delegate work to its Belgian counterpart.

1.15 At the moment, while explicitly open to all donors, the Code is couched in the language of the European Union. Would this not make it harder for partner countries and non-European donors to adhere to and thus undermine the "model" role that the Commission envisages for the Code?

1.16 The Commission also notes that a more effective division of labour requires a political mandate: "development cooperation is based on political decisions and aid budgets are subject to parliamentary scrutiny. Changes are highly political decisions and work should be guided by a clear political mandate from the top level". We agree, and accordingly recommend that this Communication should be debated in the European Standing Committee before the "development" GAERC at which Conclusions based upon it are likely to be adopted.

1 The Paris Declaration, endorsed on 2 March 2005, is an international agreement to which over one hundred Ministers, Heads of Agencies and other Senior Officials adhered and committed their countries and organisations to continue to increase efforts in harmonisation, alignment and managing aid for results with a set of monitorable actions and indicators. See http://www.oecd.org/document/18/0,2340,en_2649_3236398_35401554_1_1_1_1,00.html for further information. Back

2 (26737) 11413/05: see HC 34-v (2005-06), para 3 (12 October 2005). The draft Consensus was debated in European Standing Committee B on 17 November 2005, Stg Co Deb, cols. 1-24. Back

3 (28201) 17033/06: see HC 41-vii (2006-07), para 5 (21 March 2007) and earlier references therein. Back