Examination of Witnesses (Quesitons 1-19)
MR BERNARD
PETIT, MR
RANIERI SABATUCCI
AND MR
ANDRÉ LIEBAERT
23 JANUARY 2007
Q1 Chairman: Good morning. It is nice
to see you again. Thank you for taking the time to meet us. As
you know, we have a fairly busy day and since we last met we have
had a fairly busy programme. Obviously, development policy is
what we and the Committee are about and we are always interested
to explore how a body like the EU, with 25 members with different
approaches and a Commission to deliver, can operate. It is a very
big deliverer of aid when you take the Commission and all the
member states together. I can remember Louis Michel, when he spoke
in London, saying that he would like to be able to think that
the European Union could operate somewhat like the World Bank
and indeed deliver the kinds of programmes that the World Bank
does. I have to say that when I put that to the World Bank they
said, "If we thought he could do it we would be scared, but
we are not scared". I wonder if you might give us a feel
for how you feel EU development policy, which is big when you
put all the programmes together, can actually operate vis-a"-vis
the other international agencies, such as the UN, the World Bank
and the like, given the honest truth that it is disparate, but
collectively if we all push in the same direction it would be
the biggest player in the field. How do you feel it can relate
and does relate?
Mr Petit: First,
thank you very much for seeing me again after one year. You were
here in December last year[1],
I think, and I am delighted to have this little discussion with
you. Before answering your question I would like to say a few
words about what we have been able to achieve in 2006 because
I remember in December 2005 we were at the end of a year which
was qualified by a lot of people as the year of development. When
I look back to that year I have the conviction that 2005 was a
kind of turning point in a period of action and reflection which
has led to a kind of centrality of development or central role
that development is playing in a globalised world, and around
this central role have been brought together all the structural
and long-term responses to the challenges of globalisation, linked
now with migration, security, the protection of the natural resources
of the planet and international stability. Development is today
fundamentally political for the EU and for the Commission in particular.
This is a big difference from the World Bank and Europeans can
be very proud to have played a central role during this period.
They did that by being the biggest contributor to the increase
in ODA[2],
and you will remember the figures. They were the most committed
and ambitious on the agenda of aid effectiveness which led to
the Paris Declaration, and we were very much behind the Declaration.
They did that by deciding at the level of the heads of state an
EU Strategy for Africa, not a Commission strategy but an EU Strategy
for Africa, and adopting this famous European Consensus on Development,
and do not think that in this word "consensus" there
is a kind of sarcastic reference to the Washington consensus.
That was not the idea of the Commission anyway. It was the first
time in 50 years of co-operation that the Commission and the member
states had federated the position around a common vision of development
policy based on shared values, common principles and common objectives
with a lot of financial means at their disposal. They can be proud.
It is not the US, it is not the G8; this is what the Europeans
have been doing. I think this is a historic decision because you
know that in the past the EU was the main donor, the main trading
partner, for all the developing countries, but when you are outside
the Community circle and people are congratulating you by saying,
"That is fantastic, you are the main donor, the main trading
partner, but, by the way, what is the EU development policy?",
we were forced to answer, "Sorry, there is no EU development
policy. There is the British one, the French one, the Commission
one but not a single EU development policy", so we have been
able to transform statistical reality into a political project.
It is really very important politically because first of all it
gives a weight, a leverage, a visibility to the EU compared to
the others and, secondly, when you assert that in the context
of enlargement you add 10 new countries. They were receivers two
years ago of development assistance. They are now providers of
development assistance, and immediately they put themselves at
the highest level of the agenda with best practices and they wanted
to adhere to a European vision of development, so I think this
is very important. By the way, they were much more supportive
of us when we proposed that than previous member states—than
the UK, than the Germans, than all the Scandinavians or the Dutch.
We have been able to have this Consensus because we had the huge
support of the 10 new countries. This is what has been achieved
and, of course, 2006 was the year of implementation of this decision
and we can discuss the way we have implemented that. We can discuss
governance, which is also high on the agenda of all the donors,
and we have at the level of the EU a specific sensitivity which
is different from the one developed by Mr Wolfowitz. We can discuss
that effectiveness, what we have been doing in terms of the programming
of assistance, moving towards joint programming at the level of
the member states, we can discuss the 10th EDF[3],
any subject you want. As far as your concrete question is concerned,
our feeling is that nobody in the world should have the monopoly
of thinking in terms of development, fortunately. Monopoly is
bad for the private sector, it is bad in public assistance, so
it is important to have different perceptions provided we all
share the same objective, which is poverty eradication and how
to achieve the MDGs[4].
With the World Bank we have, I would say, a privileged relationship.
We probably discuss these things much more with the Bank than
with any of our member states. I see people from the Bank every
week in my office and we talk on the phone. We are, particularly
in Africa, the two biggest actors for all the countries so we
cannot compete; we have to be able to work together, even with
different sensitivities from time to time. What we are doing with
the Bank beyond this day-to-day co-ordination, including in the
field, is developing a process called the Limelette Process. Limelette
is a castle not far from Brussels where we met for the first time
at the level of senior management, that is to say, the Africa
Vice President and the Director-General of DG Development, and
every year we invite five country directors of the Bank in the
field and five heads of delegation of the Commission. We sit together
for two days and discuss one or two specific issues. In the following
weeks we will discuss governance because governance is an issue
where we do not share the views of the Bank. Even if Mr Wolfowitz
has modified a little bit his position compared to last year,
in particular after the annual meeting in Singapore, we still
have a different approach from theirs.
Q2 Mr Davies: Can you characterise the
differences?
Mr Petit: Yes. First we say that
good governance must be at the top of the agenda for everybody
because it is so important for aid effectiveness to have countries
with good governance, but we must not change the development agenda.
The development agenda is not fighting corruption, as Mr Wolfowitz
has said several times. The development agenda is poverty eradication
and achieving the MDGs. Good governance is part and parcel of
that and we should not shift the priorities from one side to the
other. Secondly, Mr Wolfowitz deals with governance too much in
terms of fighting corruption. It is essential to fight corruption,
of course. Corruption is a tax on the poor. I would say corruption
is an insult to the poor, but corruption is just a symptom of
the failure of a system, of the impossibility for a state to give
access to the main services to its population—access to
administration, access to justice, access to health and so on.
That is the second difference. The third and main difference is
that there is always a tension when you are dealing with the way
to support governance between conditionality and ownership, between
dialogue and sanction. For the Bank the governance agenda is led
by strong conditionality. We do not think this is a good approach
because we think that you cannot make a state reform itself through
conditionality. The state itself must take all the decisions and
put in place all the measures to be able to take the necessary
steps and implement the necessary reforms towards good governance.
This is the reason why we prefer incentives to conditionality,
and this is what we are doing for the moment with the ACP[5]
countries. In other words, we are doing what we are preaching.
Chairman: What you have just said is
helpful because whenever we visit, as we have done, countries
in Africa, for example, over the last 12 months we have visited
several, we always meet the representatives of the European Commission
and the World Bank, so we have had quite a few exchanges on how
that works on the ground and, although we take on board what you
have said about the differences, there is also very often, it
seems to us, a very good practical working relationship on the
ground. But I wonder if I can bring some of my colleagues in with
additional questions for you.
Q3 Mr Singh: You are quite rightly
very proud that the EU now has a development policy and I sense
the pride coming from you. There is going to be a huge increase
in aid budgets between now and 2015. In your opinion should those
monies be disbursed bilaterally or do you think they should come
from the EU, because 80% of that increase will be from member
states? If you think it should be through the EU does the EU have
the capacity to disburse those budgets in an effective and fair
way to achieve poverty reduction and the MDG goals?
Mr Petit: This is a very important
question. There are two elements to the answer. First, there is
today a kind of negative correlation between the political willingness
to move towards more and more EU development policy and the percentage
of assistance managed collectively, that is to say, through the
Commission. Last year the Commission was disbursing around 20%
of the global EU development assistance, but with the bilateral
increase by the member states on one side and the stagnation or
very slow increase in Community development assistance this percentage
will be 15% in 2010 and maybe 10% in 2015. That is to say that
the collective effort of the EU through the Commission will diminish
while at the same time there is more and more political willingness
to have much more EU development assistance, not because the Commission
is asking for more money but it is just a fact, a reality. Secondly,
you are right to say that with this huge amount of additional
resources bilaterally each Member State will say, "Part of
it I will manage bilaterally and part of it at a multilateral
level and there I have a choice. Either I go to the World Bank
or I go to the EU". I think that for almost every Member
State this is a question they are asking and the answer is linked
to the assessment that each Member State will make of the capacity
of the Commission to deliver. In this respect, and I think even
your Committee has acknowledged that in the past, we have a lot
of statistical facts and figures which demonstrate that we have
been able to increase dramatically the way we are disbursing aid.
We know that in the past we were considered, in particular by
a previous government in the UK, the worst donor in the world
in terms of disbursement. Since the reform a lot of improvements
have been made, and now we are disbursing €8 billion a year
and are still wondering how we can do that because it is a huge
amount of money. Mr Richelle, whom I do not think you will be
meeting this time but you met him last time, did a fantastic job
in AIDCO[6]
by reducing dramatically the delays between commitments and disbursement
by streamlining the procedures, by a process of devolution to
the field, giving the power in the field, so we have now the capacity,
I think, to manage adequately. However, the member states are
not yet convinced. I give you a very simple example. We have developed
at the EU level, not the Commission level, a partnership on infrastructure
in Africa because we think it is so essential for trade liberalisation;
if there is no communication they cannot export, et cetera.
We have done that and we have said to the member states that in
order to have an instrument to support this partnership we will
set up a trust fund and we asked member states on a voluntary
basis to contribute. You know that today the World Bank is managing
900 trust funds and the addition is much more than the resources
of the IDA[7],
so we have said, "Let us do as the Bank is doing: a trust
fund that is an EU vision of development of infrastructure. Put
the additional money that you have decided on in this trust fund".
We have four member states within the 25 which have contributed.
The biggest contribution is €10 million. The others are,
one five million and the others one million. It is not with this
amount of money that we will change the face of infrastructure
in Africa. This is just to illustrate that the member states,
even if they are happy with the reform, and we must still push
for reform, are not yet convinced, so this is the situation.
Q4 James Duddridge: Which countries have
contributed? You said four.
Mr Petit: The Spanish, the Italians,
the Austrians. I cannot remember the other one.
Q5 Mr Davies: Why has DFID refused
to support you? They must have given a reason.
Mr Petit: DFID said, "We
are interested in that but the budgetary process is already committed
and we cannot provide any resources now, but we are still reflecting
for next year".
Q6 Chairman: Seriously, because DFID
have acknowledged that infrastructure should be a higher priority
and that DFID does not have the capacity to deliver on infrastructure,
so it is slightly surprising to us that they would take that view.
That is an interesting piece of information but I guess what you
are saying is that you have a way to go to persuade member states
to give you the executive responsibility for their money. They
still tend to want to spend it themselves?
Mr Petit: Yes. In addition to
that, because I think it is relevant to what you were saying,
the idea is not to have the Commission become the agency of the
EU because our objective is to work in terms of complementarity,
meaning division of labour, with the member states but also with
the other donors. In other words, when in a given country DFID
is highly present, very effective in a specific sector with a
lot of staff in the country, why should the Commission put money
in and start a bilateral dialogue with that country? We should
give first the leadership of the dialogue to DFID and then put
in the resources to be managed by DFID or by the French or the
Germans. This is where we want to go. We cannot do that now because
the financial regulation does not allow us to give resources to
the member states to do that, but we are in the process of changing
this financial regulation and it will be a possibility in the
future.
Q7 Joan Ruddock: In terms of the
trust fund, is there a particular encouragement to the newest
countries that have joined the EU to contribute to that trust
fund? Is that a way of saying to them, "You can do this even
if you have not got a development department in your own country"?
Mr Petit: Yes, exactly. I think,
by the way, that one of the countries which wants to contribute
is Hungary. As far as these new countries are concerned the question
we can ask is, does it make sense for each of them to develop
their own structure for development, their own agency of development?
Already they have considered that they must not start from scratch;
they must adopt this European Consensus and the best practices
about the principles of development assistance and partnership.
They have done that, but do they have to develop a sectoral policy
paper? I do not think it is very useful. They exist and we should
share that. Do they have to build an agency? It is probably not
the most efficient way. The only problem is that these countries
are very much interested in their neighbours. In Africa they are
not very present, so the idea is to ask the Commission for Africa
to help them to manage their assistance, but this is specific-region
focused, not globally, so this is a question probably we have
to discuss with them, but I do not think it makes a lot of sense
when everybody is talking about rationalisation, about alignment,
even if we are not serious about alignment.
Q8 Ann McKechin: Following on from
that, you have obviously described the Consensus as a major advance
in terms of EU thinking.
Mr Petit: Historic.
Ann McKechin: I just wondered, a year
on from the Consensus being agreed, what tangible differences
you are seeing in terms of the Commission's actions both on the
ground in developing countries and in terms of policy coherence
between, for example, yourselves and trade in the EU in terms
of development policy.
Mr Petit: There is always—and
you know that perfectly well—a certain gap between a political
statement, even when the heads of state are making these political
statements, and the way you are translating that into the bilateral
policies of the member states and in the field. The big difference,
I think, is that more and more we are not thinking in terms of
"Commission". We are thinking in terms of "EU",
so everything we are proposing to the member states is not to
ask them to give guidelines to the Commission for the management
of Community resources but to try to develop an EU vision on everything,
an EU position. This is what we did for the Strategy for Africa;
it is an EU strategy. For the partnership on infrastructure it
is an EU partnership. And with governance, going back to what
I said at the beginning, governance is the position now of all
the member states; it is not the position of the Commission, we
all share this position. And, by the way, there is a kind of tension
or paradox between what we are deciding in Brussels and what is
decided in the board of the World Bank in Washington, because
there is a position on governance here but in the board of the
Bank, even if the majority of the European executive directors
were very much on the line of the Commission and the decision
of the Council, some of them thought that it was perhaps not a
good position; they were supporting the Bank much more, so there
are sometimes some contradictions. Anyway, the important thing
is to think in terms of "EU". Another important thing
is to accept that one of the main challenges is to make aid more
effective, and to make aid more effective we have to change the
way we are doing business in Europe but in the world also. Changing
the way we are doing business means that we must be serious about
all these nice words and nice ideas in the development business
like ownership, alignment, scaling up, harmonisation, because
the reality in the field is completely different. If you talk
of alignment nobody is really implementing this concept. In the
different countries you have the PRSP[8]
which has a cycle. This cycle has reviews, so all the donors go
for the review but one month later the member states go back to
having their individual reviews. You have a lot of missions non-co-ordinated
but the Consensus says that now we have to do that, to co-ordinate
50% of the mission, and we will do that. You have different strategies.
DFID has a country strategy document with different countries,
the French now have these, and the Swedish. All these documents
contain exactly the same elements—the political, the economic,
the social and so on.
Q9 Ann McKechin: On a practical level
DFID has memorandums of understanding with a variety of countries
for a 10-year remit, so are you saying that perhaps two or five
years hence there will be a sort of EU standard template for these
memorandums which the French will be following, the Germans will
be following and other EU countries will be following?
Mr Petit: I hope it will not be
in 10 years but now because it does not make sense, in particular
in terms of transaction costs for the country, if we have 10 member
states with 10 different country strategies. The idea is to move
towards a joint strategy. We have started this process and for
the ACP countries we have 10 countries now for which we are developing,
including with DFID, this joint strategy and when there is a process
including other donors, of course we are doing that with other
donors, but this is not sufficient. With the huge increase in
aid you were mentioning we have to change also the modalities
in which we are disbursing our assistance. Budget support is the
most efficient modality, when the conditions allow it, to support
the different countries. If the increase in the assistance is
translated into projects, if the doubling of assistance leads
to doubling the number of projects, it is a nightmare and we will
not be able to implement this political increase, and DFID is
exactly on the same line as the Commission on that, pushing for
more budgetary support.
Q10 Joan Ruddock: Just for clarity
on that, given that the EU is trying to influence the bilateral
programme, and you have just illustrated how you are doing that
with DFID, is DFID the model or do you have a number of models,
because you cannot be saying, "We will adjust in this Member
State and this Member State and this Member State". You have
to come to some conclusion, "This is the model". Do
we have the model?
Mr Petit: You are right. What
we have done is the following. We have taken all the different
models, we have had discussions with the member states and we
have assessed the fact that in all these models you have exactly
the same building blocks. We have said, "Let us try to build
one single model based on what you are doing". We have done
that and the country has adopted a specific model for joint programming,
so we have that, and we have said, of course, "It is not
a single instrument. You can adapt that, you can be flexible",
but at least we now have this model. This is very important because
in Europe only DFID and ourselves are exactly on the same line,
which means the following: I was mentioning budget support. Budget
support is an efficient instrument but not sufficient because
budget support is too volatile and not sufficiently predicable
because conditionality is attached to it. When you want to support
education in a country, when you know that the country has to
recruit 2,000 teachers or 1,000 nurses, a minister of finance
must have a good knowledge of what the donors are able to deliver
and for the moment we have no instrument to give this predictability.
This is the reason why we are developing in the Commission, with
the support of DFID—only DFID, not the other member states—the
idea of an MDG contract with less conditionality and a longer
period, which can be six or 10 years, and giving the assurance
to a country of a minimum level of budgetary support every year.
Q11 Mr Davies: For 10 years?
Mr Petit: Ten or six years. Of
course, six years is the legal framework, but DFID was even considering
10 years.
Q12 Mr Singh: Are you saying that
you are reducing the conditionality? This may worry the public
in Great Britain, for example, who are quite willing to give money
but they will not see accountability for the money that they donate
and that the Government donates, so if you are saying less conditionality
how are you increasing the accountability?
Mr Petit: When I say less conditionality
I do not mean no conditionality because first this country must
have been on track in terms of IMF[9]
conditionality for at least three or four years before. You cannot
give this kind of MDG contract to any country. What I mean is
that if you want to support education through your budget support
this support cannot be undermined because the country, because
of conditionality, has not privatised three companies. This has
nothing to do with it but it is part and parcel of the same package,
so what we want to do is dissociate that.
Q13 Hugh Bayley: What does a contract
mean if it does not tie the recipient of the money to delivering
things? That in itself must be a conditionality.
Mr Petit: A contract ties a country;
that is the essence of a contract, but not on this kind of conditionality,
privatisation, liberalisation or whatever, but on the results
on education, on the results on health, the increase in the rate
of vaccination, the increase in the number of teachers, these
kinds of things.
Q14 Hugh Bayley: When we last met
you were talking about the size of the EU aid budget. We are a
very large donor, but you said that the EU is "a dwarf in
terms of political influence".
Mr Petit: When I said that it
was the case. It is no longer today.
Hugh Bayley: What political influence
do you think ought to accrue to the EU as a result of our development
spending?
Mr Petit: I said we were a dwarf
because we had no EU policy and it was fragmented between member
states and the Commission. Now we have this vision and this vision
gives the leverage. I can tell you, by the example of the Paris
Declaration, that the EU was mainly behind this declaration on
aid efficiency, harmonisation, alignment and so on, because we
have taken this position within the EU and now we are respected
in the world because we have this vision. By the way, we went
beyond the Paris Declaration, so the EU has made additional commitments
going beyond the Paris Declaration, so there is this capacity,
and not only in terms of development policy by spending money.
We have also this capacity now in political terms where the position
we are taking on migration, the position we are taking in the
political dialogue with the different countries mean that now
people must count on us and it is not fragmented as it was in
the past.
Q15 Hugh Bayley: Looking globally,
do you think there is a move away from hard power to soft power?
In other words, do you think development spending will become
more influential in terms of international political leadership
over the next few years in comparison to military power?
Mr Petit: I think development
policy and development spending today are fundamentally political.
Development is no longer about financing schools, roads and hospitals.
Development is, I think, the best instrument we have in the world
for harnessing globalisation. If you take the example of migration
or protection of the natural resources of the planet, it is because
you have development resources, because you are fighting poverty
that you can in the long-term solve or answer or tackle these
different challenges. This is the political part of development.
In the dialogue with the different countries, in particular with
countries in conflict and post-conflict countries, the fact that
we have this huge leverage, the EU resources, in our hands helps
this political dialogue very much. I can tell you that Louis Michel
is very political in what he is doing and he is very interested
in contributing to the peace process in different countries and
he is around the world all the time for mediation, for prevention,
for helping countries. Why? Because he has this huge leverage
with the development resources.
Q16 Mr Singh: Leverage or bribe?
Mr Petit: Leverage.
Q17 Richard Burden: You have placed
a great deal of emphasis on the Consensus being something that
should influence all areas of thinking, that it is an EU Consensus,
not just a Commission Consensus. I guess if you look at the European
Development Fund it will be borne out in there in terms of the
focus of that fund on poverty eradication and low-income countries,
but if you take that across the Commission ODA generally the figures
do not seem to match that. We are still talking about just around
55% of EC ODA being directed at low-income countries, with countries
like Serbia, Montenegro and Turkey still being at the top of the
league. Do you think there is a case for rebalancing that?
Mr Petit: First of all, the decision
on the way we allocate the resources between the different regions,
as you know, does not belong to the Commission; it belongs to
mainly the heads of state in the EU. They are the ones who will
decide what will go for the ACP, what will go for the neighbouring
countries or Asia/Latin America, but once the way we are allocating
the resources in the different countries is decided it is based
on need and performance with the objective of poverty eradication
and with a specific focus on least-developed countries (LDCs)
and low-income countries. The figures you have mentioned I think
have changed because the figures I have show that there has been
a huge increase in the poverty focus concentration for aid towards
LDCs and other low-income countries between 2002 and 2005, because
we are now at the level of 46% of net disbursement for the least-developed
countries in 2005, which means more than 43% increase over six
years, and of course this trend was accompanied by a strong decrease
in the share of disbursement to the middle-income countries from
46% in 2000 to 28% in 2005. In addition, to date the main recipient
of our development assistance globally is sub-Saharan Africa,
much more than all the others, and in the European Consensus on
Development there is this orientation to give focus to LDCs and
low-income countries, so things have changed. The important thing
for the Commission was to make sure that poverty eradication and
reaching the MDGs was not only something for the ACP and that
the other regions share the same objectives, and I can tell you
that it was a difficult discussion with my colleagues from other
departments when the Commission proposed that. The objective must
be poverty eradication everywhere.
Q18 Chairman: Can you say who is
the largest recipient of EC aid now if it is not Serbia and Montenegro
and Turkey?
Mr Petit: Today?
Chairman: Yes.
Mr Petit: Do you have the Commission
Annual Report of 2006?
Richard Burden: I am not sure our figures
were that different. The figures I was quoting were 2005 figures
so I am assuming they came out of the 2006 report. That does show
that the majority is on low-income countries, 55%, which I think
is what you were saying: the majority is.
Chairman: These are 2006 figures. The
EC is 52%.
Mr Davies: You are merging three things.
Q19 Richard Burden: I am not sure.
The brief we have got is 2004 figures and 2005 figures, and the
ones I was quoting were the 2005 figures, which do show a majority
to low-income countries, but it is 55%, which is not a big majority
of resources. I do not dispute that the gap has been narrowing
and that low-income countries do receive the majority of assistance,
but it is still well below, for instance, the 90% from the Development
Fund. Factually what you say is obviously absolutely correct,
that a decision is made on the broad level and then you have the
focus of disbursing what is in that particular budget, but I guess
what I was getting at was that if the Consensus is meant to be
influencing all areas of policy-making has it really managed to
do that in that first set of discussions?
Mr Petit: As I said, the Consensus
does not say that globally the heads of state of Europe must give
the bulk of the resources to low-income countries. They said,
"Within the decision taken by the heads of state what we
have to do is give a focus to the low-income countries".
1 International Development Committee, Oral Evidence,
EU Development Co-operation and External Relations Policy,
6 December 2005, HC 745, Session 2005-06. Back
2
Official Development Assistance. Back
3
European Development Fund. Back
4
Millennium Development Goals. Back
5
African, Caribbean and Pacific Group of States. Back
6
EuropeAid Co-operation Office. Back
7
International Development Association. Back
8
Poverty Reduction Strategy Paper. Back
9
International Monetary Fund. Back
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