International Development Committee - Minutes of EvidenceHC 1680

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Oral Evidence

Taken before the International Development Committee

on Tuesday 7 February 2012

Members present:

Malcolm Bruce (Chair)

Mr Sam Gyimah

Richard Harrington

Pauline Latham

Jeremy Lefroy

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Examination of Witnesses

Witnesses: Mr Andris Piebalgs, EU Commissioner for Development, Mr Antti Karhunen, Advisor, Cabinet of Commissioner Piebalgs, Mr Christopher Jones, Head of Cabinet, Cabinet of Commissioner Piebalgs, and Mr Peteris Ustubs, Deputy Head of Cabinet, Cabinet of Commissioner Piebalgs, gave evidence.

Q87 Chair: Good morning, Commissioner. It is nice to see you. I do not know whether you recall but we did have a breakfast with you some while ago.

Mr Piebalgs: I remember. It was a year ago or something like that.

Chair: It is good to meet you again and I will get my colleagues just briefly to introduce themselves and obviously we can then engage. As you know, we are the International Development Committee, monitoring the work of DFID, and we are conducting an inquiry into the role of the EU as a development partner in all its different aspects. We have five of us here. We are an all-party group, but for reasons that are beyond their control the Labour party have fallen away, but that is just the way it turned out. One is ill, one is at an engagement, and two of them are effectively not functioning on the Committee for reasons that are perfectly proper. However, I am Malcolm Bruce, I am a Liberal Democrat MP representing a constituency in the north-east of Scotland and I chair the Committee.

Jeremy Lefroy: Jeremy Lefroy, Conservative MP for Stafford in the Midlands.

Mr Gyimah: Sam Gyimah, Conservative MP for East Surrey.

Marek Kubala: Marek Kubala. I am a Committee Clerk.

Richard Harrington: I am Richard Harrington. I am a Conservative Member of Parliament for Watford, just outside London.

Pauline Latham: Pauline Latham, a Conservative Member of Parliament for the middle of England, in mid-Derbyshire.

Q88 Chair: Unfortunately Hugh Bayley, who is the one Labour MP who was coming, has been taken ill so has not managed to make it.

What we recognise is that the UK is giving something around €1.6 billion under various budget heads to the European Union for development and humanitarian aid purposes. What we are trying to evaluate is how effective that is in delivering the UK’s development and humanitarian objectives. I suppose we have the capacity where there is discretion to make recommendations to the British Government that we should do more or less through the EU, and we have no predetermination of a view about that. It would be helpful if we started off by giving you an opportunity to make a sales pitch in the sense of what it is you feel that the Commission, and particularly your part of the Commission, adds to the UK’s aid and development programme, and the extent to which you believe it adds value and enables us to achieve our objectives. That perhaps gives you an opportunity to make a pitch for how we match each other up. Obviously if you feel there are honest divergences perhaps we will have a discussion about those too.

Mr Piebalgs: Thank you, Malcolm. It is very kind to give me a word of introduction and I very much welcome your Committee here in Brussels, because I believe the public in general is for ever questioning public monies being spent, in particular for development.

I think I would start from the legal point of view even, because the EU runs on the basis of the Lisbon Treaty and one of the objectives of the European Union is poverty alleviation and eradication. So, basically, the EU as a whole-it means all 27 countries-is committed to this very clear, specific goal.

Today we have three directions for the EU concerning poverty eradication and alleviation. One issue where we are very much focused is this Policy Coherence for Development. For example, recently we proposed legislation that we will ask all extractive industries to disclose country by country their profits and their earnings, and also project by project, so the make-up of the stream of revenue in such a country. Also we recently canvassed communication on trade and development, but we have also done taxation and development. We try very much to use the expertise of the house to see what policies could make a big influence on it.

The second issue is one where we are particularly placed because we are not the 28th donor; we are still one of 27, because the UK has full control of how our money is being spent and in this respect we have a particular opportunity to start a process like joint programming. At the end of the day what we would like to achieve and develop in co-operation is that the country systems are developed with efficient maturity to continue development objectives. Let us take Brazil, for example, where we have been for quite a substantial time. I believe now the programme the Government runs is so mature that it is able to fight poverty on its own. It still stays there. It still is an objective, but I believe that we need to try to pool our resources in a way that supports the Government’s plans where they exist and try to get the maximum result from them.

The Commission is well placed and I would say it is not soft co-ordination. It is trying to come up with initiatives; it depends on the place. In Somalia or South Sudan in particular we have joint programming. There are 12 member countries participating and the Commission has been well placed to put this issue forward. On Haiti it was France and Spain. So we are going to be well placed to do it.

Third, we are also a development agency. EuropeAid supports roughly, through EuropeAid member countries, 18% of development spending worldwide. There are a couple of advantages of this spending. First, and it is extremely important for development co-operation, it is a seven-year programme, so that means basically it is a predictability of the fight against poverty. None of the national Administrations with even the most advanced budget procedure could guarantee such stability in fighting poverty in this way, so I think that this is a great advantage.

The second advantage of this money being spent is that through the Cotonou Agreement, through our engagement of long standing with developing countries’ Governments, we have also political dialogue as a part of development. It does not mean that we always are able to use Government systems, but it gives us a good opportunity to reflect and in partnership with this country to move for the most effective ways to strengthen the country’s own system to deal with poverty, because that is the objective that we try to achieve.

Third, we cover globally. Even the UK, one of the most developed in its spending, for example, is not in the Pacific. The EU is also helping countries like the Solomon Islands, like Vanuatu-so least developed countries far away-and in this way addressing poverty issues in the countries that member countries alone will never reach for a lot of reasons. So we have a coverage of roughly 150 countries worldwide and that basically gives the possibility to fight poverty globally and to fight for universal rights globally, and I think it gives member countries a good advantage in achieving their policy objectives globally.

Why do I say that it is full control? For all the projects and all the approaches that we have, first of all I come to the member countries, and for the budget I also go to the Parliament. So there is this full process of which the member countries are fully part. I could not do something on my own, without the agreement of the member countries concerned. In the management committee I have very seldom been blocked. Usually the proposals are accepted by unanimity so we try to build proposals that sweep in all the countries.

The last point perhaps is not the most important but it is still crucial. We have a commitment to devote 0.7% of GNI to fighting poverty. That is the objective the EU countries have taken and they have always confirmed; even last year they confirmed this objective. In reality, we have an uphill struggle. The UK is doing fine, and there are some countries that are doing excellently like Luxembourg, Sweden, Denmark and the Netherlands, but there are countries that are struggling. If we look at what EDF is spending, the next country of EDF spending is Italy. If their bilateral spending is much less than they spend fighting poverty through the EU, it is not because it is their own choice but due to the negotiation of the financial framework, in which there are discussions about how much is for agriculture, how much for regional funds and how much for external policy. Then when it is agreed, it is guaranteed that the money will be paid for the poorest people in the world.

It is also not unimportant to mention that new member countries like Latvia, my native country, are mostly engaged in fighting the poverty objective of the Europeans through the EU institutions. That is why I say that a decent level of spending for fighting poverty is guaranteed from all the EU countries. What is the overall objective amount? Each time it is decided by member countries in the MFF discussion. I have no strong views on this but our proposal was based on 2011’s EDF and for the next budget it is on the basis that countries achieve 0.7% and the proportion is not higher than it is today. Actually, we took an even lower proportion because we took the figure of 12%, saying that member countries today should be on 0.56%; they are at 0.43% of GNI. So we do not ask for an increase now, but we ask for an increase in the money for fighting poverty, and for me that is the most important.

Through the EU itself there are some advantages, but at the end of the day all member countries will decide, "Well, we will spend all the money through national spending and it will be 0.7% and it is guaranteed". For me that is most important if people really deliver for fighting poverty.

Chair: That is interesting but, of course, it will not happen that way, the way things are going, I guess. Pauline, you wanted to ask a supplementary.

Q89 Pauline Latham: Yes, just a couple of points on things that you said. You talked about asking the extractive industries to tell you what they have spent, what they have taken out and what they spent in country. Was that voluntary or do they have to do that? If they do have to do it, how do you enforce it? The second point is you said something that confused me slightly. You said that the United Kingdom still has full control of the money that we give you for you to spend. Can you tell me how that works in practice?

Mr Piebalgs: On the first question, legislation is proposed. In a lot of countries we have seen when a study is done that, basically, legal outflows match what development aid provides. So it is important that the money stays in the country-that it is not development money that is flowing out. The problem is that the extractive industries make contracts that are not sufficiently transparent and not accessible to the public, and money goes out. That is why we made binding legislation that will be enforced. It still needs to be agreed by the member countries in the Council and in the Parliament; only then it will be legally binding for EU-listed companies and large companies in extractive industries and forestry. There is a similar Act in the United States, the Dodd-Frank Act, and we expect the Chinese and others will buy in through the G20 process. So that is that one.

The UK have full control because it is a comitology procedure. Whenever first political decisions are canvassed, under Agenda for Change, it goes to member countries and councils make conclusions. They could completely throw out the policy thinking, but that is where they say, "Well, we agree on your policy thinking; do it". Then for each spending decision we go to comitology. So it means member countries sit on each spending decision and take a decision. You can say the UK is one of 27, but still it has full control because control means not, "I am taking a decision alone", but "I am fully aware what decisions have been taken and I can take corrective action if I do not like what this Commission is proposing".

Q90 Pauline Latham: You are saying because they are around the table they can have an input. They do not have direct control over the portion that we give to you; they do not have direct access?

Mr Piebalgs: No. It is my proposal based on the overall volume of the EU, because once the money is in EU’s budget it loses national identity. It is not German money, it is not French; it is not that of the UK. It is money given by member countries to the European Union to manage for development and it is pooled. We ask our member countries when we spend money in Somalia, for example, for supporting AMISOM peace troops. On "identity", I cannot say, "It is British money," or "It is Latvian money." Any of the EU member countries could say, "That is my money that is being spent." I think that is a huge advantage because in a way the UK could say, "Not only do we spend what we spend in our national budget, but all the EU budget for development is the UK budget for fighting poverty". That is what I am saying.

Q91 Richard Harrington: Commissioner, since we last met, when we had breakfast with you-it must be more than a year ago now-we have visited several countries in Africa particularly, as part of our inquiries. As a person who was a complete outsider to this development field, obviously one learns all the time, but there is one thing I am not clear about and I would like your views on. It seems to me very strange that in many places we visit DFID is there, the EU is there, there is a whole selection of national countries, bilateral arrangements and multilateral agents, and we find ourselves-again this is me viewing as an outsider-in many cases vying for attention and influence with national Governments to do projects with the EU, who are our friends and colleagues of course.

I realise that you can’t sort out this huge problem, because it is part of the way the international world works with different relationships. Could you comment on how you feel the EU role differs from, say, that of DFID? Why should we as British parliamentarians, with some, maybe limited, influence over UK Government not say, "Well, we have a very good machinery with DFID. We have the management structure; we have all the systems, and we are in so many different countries. Why should we not pump more money through DFID and its management system than through the European Union?" I am referring particularly, of course, to the EDF, which is more of a voluntary arrangement. If you could comment on that, your thinking would be very useful.

Mr Piebalgs: As I see it, and my predecessor would go even further, the money for development is money that belongs to poor people. That is my point. Ideally we should not even decide if it is DFID or the EU. We have a countries development plan, which is basically from the Paris Declaration and Busan; that is the basis for our work. We know the envelopes that we have. It does not matter whether this is DFID’s money or the EU’s money. We try to address the most critical points of this plan to make a transformational change in society.

From that point of view, I would say for me that whether DFID’s part is bigger than that of the EU plays no role, as long as there is money to address the problem. But the EU’s specific role is that it represents 27 countries, because part of our strength is, especially after the Lisbon Treaty, that we are trying to build an EU of 27. That means that through this EU voice, Latvia, Slovakia, Bulgaria, Romania, Greece and Portugal are also part of this political process and that makes the support for the development much more broader based politically, because it is not only a transfer of money. It is engagement in fighting poverty, and we get all 27 in. It does not guarantee the spread of money on it, so I would say-

Q92 Richard Harrington: There is a political rationale that it brings in small countries that otherwise would not be involved in development.

Mr Piebalgs: I would argue that is the main argument. I would say at the end of the day what I care about is that the job is being done.

Q93 Chair: But you made the point, from the UK point of view, that you reach the parts that the bilateral programme of the UK does not or may not reach. A good example would be the current crisis in Sahel, which is not a priority directly for the UK but it is politically. We want to be engaged but we think countries other than Britain should take the lead because of the connection. I think we would all say we are quite proud of what DFID does. We know it has international respect. They have a lot of policy advisors and so forth. In those countries where DFID is not strong or not engaged at all, do you have the capacity, the policy, support and advice to be able to deliver the poverty reduction effectively so that we can turn around and say, "By giving this discretionary money to the EU we are delivering our poverty reduction and the MDGs in countries that otherwise DFID would not be engaged in"?

Mr Piebalgs: I think DFID is in 20-something countries; we are in more than 150, including Sahel, Mali, Mauritania and Niger. I do not believe that DFID is big in those countries, so we are part of it. But, for example, for a country like Myanmar, the EU and DFID are big. So in a way we are strengthening DFID in places where they are alone-using the EU funds to strengthen some activities there. Or we could take the examples of Somalia or South Sudan-a couple of places where we also strengthen DFID’s role because otherwise DFID would be alone with a limited impact, so that helps us to shift the funds. We are also in central Asia; we are in Nepal. In Oceania, which I mentioned, who will work for the Solomon Islands? There would be no one if we were not there. That is a global engagement that allows fighting poverty to cover the world. We are also supportive in Yemen, which I know your Committee sometimes asks questions about; for example, working with Palestinian refugees through UNRWA.

We are trying, through the EU, to leverage aid to all the places in the world where otherwise it would not come. Nationally it would be difficult to spread the blanket further, and this EU framework helps because it is France, it is Germany, it is the UK, it is Italy and it is Spain, so it gives an advantage. It is also a disadvantage in that we will have fighting ahead of us now with a graduation process involving 19 countries, because countries individually look at favourite areas, and they are not very happy that we have our criteria and limit bilateral development aid in countries where there is still poverty but it is not deserved. It is better for us to concentrate on countries like the Central African Republic where no one else will do the job if we do not do it. We will have more money to make more impact in these places. It is not an easy debate; so there is strength and a bit of weakness, I would say.

Q94 Chair: I am going to bring in Pauline Latham to talk about the Agenda for Change and one aspect of it, but first I have one question. There has been some criticism of the slowness in dispensing or disbursing some of the money. Is that still an issue or do you feel that you are getting on top of it? We have heard that in a number of places.

Mr Piebalgs: I would agree that it is a weakness of the system, because the system is built extremely conservatively. The reason is that as we work in very unstable places, at the end of the process, even in the middle of the process, they have the Court of Audit and Budget Control Committee. They take an example and they look and find an error there. They do not ask me why I did it. They just see an error, then I am slaughtered in the Parliament and I have no defence any more. That requires a lot of controls. There is an audit before we start, and also in the middle, so we can correct any mistake by end payment. We could perhaps issue a recovery order but is very difficult to expect that it will be paid back. That is one of the issues.

The second, which we are trying to improve now, is the procedures. Programming takes one and half years, plus one is the designing stage. It could be cut shorter, because the weakness of this long timeframe is that we are now responding to more mature partners, and for them, in political life, three years is an age. If I am saying, "I will help you in three years’ time", the person says, "Well, I will not be in office any more". I think we are trying to cut that, but there are limits on what we can afford to do because we can’t compromise the accountability of the money being spent. So we are trying to cut it, but it will always be a bit of a challenge-it will be relatively slow. But if I compare that with projects with DFID or with German agencies, it is not so different. I think it is a general weakness of all aid delivery that it takes time. It takes time to prepare and also to do it, spending correctly.

Q95 Pauline Latham: You mentioned earlier the Agenda for Change. You talked about how 19 countries are going to graduate from aid because they are now upper middle-income countries. Can you explain why the ACP are exempt from this, especially given that a number of Caribbean states are upper middle-income countries? Why is the same approach not being applied to the European neighbourhood region, which includes many upper middle-income countries and yet they are still getting huge amounts of aid from the EU?

Mr Piebalgs: I will start with the EDF. I think 85% of the countries are low-income countries, which leaves us with countries like Namibia and a couple of Caribbean states there. Our challenge is that the Cotonou Agreement, which has been agreed and will expand in 2020, basically guarantees that we agree in dialogue with them, and they say the Caribbean do not deserve the support. That is what I would say. They have a veto right in this process. That is why we can’t completely graduate from it. What we intend to propose is strong differentiation according to the level of income.

But for the Caribbean I have a bit of a soft spot because the countries are vulnerable to two major challenges: climate change and natural disasters. It is the same with the Pacific. If we focus our aid, in saying, "This is an area we can support because your own resources are not sufficient to address this issue", I would say it would be money well spent because they need to build shelters-they need to build a resilient infrastructure for hurricane attacks. We have been over there. They are vulnerable economies that in a way deserve some attention even if the income per capita is there. The Cotonou Agreement makes this group of 78 countries a bit, I would say, specific but it was its legal commitment from the UK and member countries towards ACP countries. So it is a special relationship.

On neighbourhood policy countries, it is like pre-accessions; they are more objective, so it is not just poverty eradication and alleviation, because basically the purpose of neighbourhood policy is that it is very ambitious. Countries should achieve a level of human rights, democracy and economic prosperity that makes them very comfortable neighbours for us. So that means that ambition is higher; it is not just poverty eradication. So we care that Libya is evolving as a democratic state, we care that the economy is sufficient so that people do not try to cross the Mediterranean to the EU to look for labour because they are satisfied with the countries themselves. It is the same with Ukraine, and the same with Moldova.

Q96 Pauline Latham: What about Turkey?

Mr Piebalgs: Turkey is an pre-accession country. Member countries agreed that it is a candidate country. In 2010 we spent €654 million on auditable expenses. It is quite a substantial amount, but it is our contract, I would say. So we decided that they would be a candidate country. We assume that one day they should be able to take the responsibilities of member countries, as Latvia has. Is particularly an environmental protection that requires huge investment in treatment of waste water and solid waste. A lot of what we don’t do in sub-Saharan countries we do in Turkey because of the expectation that one day negotiations will be over, there is a possibility that Turkey will be part of the EU, and then they should be able to fully apply EU legislation in all the areas. In some areas it is quite demanding; for example, protecting the environment.

Q97 Pauline Latham: If they were not accession countries we would not be giving them that amount of money?

Mr Piebalgs: No.

Q98 Pauline Latham: Supposing Turkey says, "Thank you very much, you are giving us all this money every year, it is really great. We are raising our standard of living but in 10 years’ time we are not going to join the EU", do you get any money back?

Mr Piebalgs: No. I understand the question. Turkey itself provides, I think, roughly more development aid than we put into it, so that is true. But as I said, the ambition is different. It is a contractual relationship. When they submitted the application there was discussion, and it was member countries, not Commission reports, that determined this starting point, and said it is a candidate country and we treat Turkey no differently from how Latvia was treated. For Latvia you have invested quite a substantial amount and it made a huge difference to my country. It is by far a better country than it was in 1996 when we applied and started to be in the process. You could see the issue of environmental protection is nothing compared with what it was 10 years ago; it is a remarkable change. From this point of view, the money is not wrongly invested, but it has got it because of the assumption that it will be a member country.

Q99 Pauline Latham: But people are dying in other countries.

Mr Piebalgs: But it is not a question for me, I would say. It is more a question for William Hague.

Q100 Richard Harrington: If the European Union decides, for what I believe to be totally stupid reasons, to give money to Turkey, which as everyone knows has no intention whatsoever of coming into Europe-but that is a different issue, I realise that is not within your remit-how can we pretend that it is development aid? Why is it part of the EDF? If the EU wants to give money to Las Vegas let it. That is another political decision. But why is there this ridiculous pretence that this is aid? It is not at all. If some deluded bureaucrats think that Turkey might want to come into Europe, that is fine. It is a different issue. But you are doing very-

Chair: It is a little unfair to blame bureaucrats.

Mr Piebalgs: Exactly. It is nothing to do with me.

Q101 Richard Harrington: It is nothing to do with you, but let us not pretend that it is part of international development or anything like that. It seems unfair that it is lumped on your budget and that you have to bear this when we are talking about, as you said repeatedly in your presentation, alleviating poverty, which is what we are here for. Sorry, Chairman, that is the end of my outburst. I couldn’t restrain myself.

Mr Piebalgs: If I may make a couple of comments. One issue is that when the financial framework is being discussed it is member countries that decide how much money goes to pre-accession, including Turkey, and it is up to them to decide what is the pre-accession envelope. But as I speak, Turkey is committed; that is how it is. It strives for membership and has never said anything else. There are regular reports that member countries discuss and they could decide differently. So it is up to member countries to make this decision. I do not control how much money will be decided for Turkey because it is decided by member countries. It is not my decision. It is not DCI that spends money in Turkey.

The second point is, and it is a more fair point, to do with the reports. Basically what we go from is OECD DAC, which decides the criteria of which operations are DAC-able or seen as a party, and it is rather a long list. Whenever we start a project we also make all these estimations but part of this money is DAC-able-depending on the response to these criteria. That means that each Turkish project is evaluated, and a percentage is classified, and we send OECD DAC information, project by project. We are striving to be transparent and doing quite well. I think we are second best in this category of project transparency. It is up to them to decide.

So, is it right or wrong? It is not so easy to answer because the purpose is not poverty alleviation, but money is spent according to international criteria. It would be wrong not to do it because the taxpayer asks how much percentage is taken on GNI. It is not such an easy debate for me; I could be criticised if I asked my staff not to report all the money in Turkey for those purposes.

Chair: Then for those criteria you go through negotiations on a regular basis-understood.

Q102 Mr Gyimah: My concern is around governance conditionality. The Agenda for Change and the budget support communication place emphasis on the promotion of European values: human rights, democracy and the rule of law. Can you explain to me how the EC is going to put governance conditionality into practice, especially given some of the other pressures, whether it is trade, security, agriculture or energy interests? Is there wide across-Commission support for this initiative?

Mr Piebalgs: I think it is a very valid question. Oxfam in particular argues that budget support is the best form because you use the government system; you strengthen the government system, you reach people and there is greater sustainability. I would agree with the argument that there is full agreement. We have experience with so-called MDG contracts, where we set criteria or indicators according to the MDG, and we set very clear conditionality, public finance management and macroeconomic conditions. We never provide budget support to any country that is not in the good books with the IMF or has a problem with the IMF; the payment does not come.

But we have had setbacks, mostly coming from the political side. We provided budget support for Tunisia during the times of Ben Ali. We provided budget support also to Malawi when they had a human rights issue, and that makes this process extremely vulnerable. I can’t defend in any the terms giving money to a Government that violates human rights. I am dead. I can’t do this. Nobody will agree with me that I am fighting poverty and helping people. They said, "Do it but don’t use the government system in place". That makes this system vulnerable. I think it is much more honest to speak with the country, saying, "It is too dynamic an interpretation; what we expect is that human rights conditions will improve, not deteriorate." That gives it a contractual relationship that gives me the right to stop the aid and they know it. They know it if there is a human rights violation that it is not just punitive action. It is nothing to do with punitive. I am not credible if I am not looking for these criteria. So, with human rights, democracy, is the situation overall satisfactory? In the worst case it goes like this, but hopefully it improves not deteriorates. If it deteriorates we can’t guarantee budget support.

But I think what the countries get from it is a predictability that the aid will be delivered on the 6th of each month or whatever. They also have something to gain from it and when I discuss this, developing countries are more understanding about it. The worst thing is when you don’t spell out the contractual relationship because then there is a different interpretation of it. I believe the new budget support strengthens the budget support idea, not weakens it, but I face quite a lot of criticism. They say, "You put an additional condition on it." That is not true, because we always evaluated it but we never spelled out exactly what it is and what happens when we can’t deliver any more budget support. In the Ben Ali case, the Government case is the best because people benefited from it, but I have had enormous criticism around the EU that we supported the regime, not people, and it is false. But you can’t not respond to such a challenge.

Q103 Mr Gyimah: Sorry, just picking up on the final point you made: is the criticism about the fact that you are putting conditions in place or the other way around?

Mr Piebalgs: No, the criticism is that we are putting these conditions in place. That is a criticism from NGO communities that very much are supporting the budget support. They also said why don’t we have a qualitative indicator, but I can’t do that because it is numbers that we are striving for. Last year, I think 17% was disbursed through budget support. Most of it was sectoral budget support, but it is dialogue. Both sides should agree on these contractual relations. We can propose and we can do it, but it requires these criteria, and you accept and that makes us stronger. That is why I think just to mention some percentages, 25, 30 or 50, does not reflect this relationship because it is fair if the country says, "No, these conditions are too tough for us. We would like you to support poor people through NGOs so you are going directly with the project. We are fully conformed to business because you are asking too much from us".

I think also the lesson learnt from MDG contracts is that we rely too much on technical indicators. What we would like are more qualitative indicators as well, such as reforms in a particular sector that increase sustainability. For example, I was in Myanmar and we hammered those words "budget support", but it was difficult to explain because it was one part of indicators that have been fulfilled, some were not. That means that we are trying to make budget support much more politically credible for our partners and for ourselves.

Q104 Chair: But in the case of budget support you already have an established relationship and that is understandable. What about the countries where you can’t get budget support because they are too corrupt and too-what sanctions can you impose on conditions? If we take the DRC, we just did a report on the UK’s engagement in conflict. We did a double negative and said it should not be unconditional. What are you going to do when they fiddle elections, lock up the opposition, have no free press and carry out all kinds of human rights abuses? Are you going to take the money away and leave the poor people unsupported or are you just going to give up and let them carry on?

Mr Piebalgs: We provide people support through NGOs, through the UN institutions in Madagascar, Zimbabwe and Myanmar. So we are doing that, but definitely it is alleviation. For example, in Myanmar I will go and look what we have. We have projects running for 100 million, so we are going to tribal areas, and there is some activity in education and in health, but we fully understand that we provide alleviation, so we do not leave. It is much slower as a process, and the delivery is not so sustainable, but I believe that it is right to support poor people even if we have no relation with the Government, just as we never had any relations with Myanmar, or with Madagascar-that is another. DRC is a challenging case because in DRC-well, it is also ES. I do not know how we deal with DRC, to be honest, because the election result is a huge disappointment. The country is extremely vulnerable. There have been controversial tendencies after the election, but they have been the hope that we could build on, in the country. How it will evolve? It very much depends on relations inside DRC. I think that DRC is one of the most complicated cases, if I look into the future, because the country is so unstable that to leave it not doing anything is not a solution. It is not a solution. That means engaging with poor people and trying to exert political pressure on the country when it goes completely wrong, through article 96 or through the political dialogues that we could push.

Q105 Mr Gyimah: The word you used a number of times was "contract". I am struggling to understand in what way the budget relationships are contracts if, in the case of DRC, we cannot envisage a situation in which we pull out or you can’t enforce it. In what way is it a contract? It sounds like it is a contract for us but not for them.

Mr Piebalgs: Budget support is one of the aid modalities. It is not the only modality. For budget support it is a minority of the countries that we are doing. As I said, in 2010 only 17% was disbursed through this budget support and some years it had been a bit more. When we engage in budget support we should spell out much more the obligations and expectations from both sides. They expect, and rightly expect, that the money will be delivered exactly on the date and they could put it in the budget. It is a source of income, and I understand that today’s system is not such a guarantee, a given. I wish that there were very clear conditions, but from the other side I also need a clear commitment that is deliverable. I also need the political situation in the country not to deteriorate so that I have a full conscience when I am delivering budget support. In this respect it is a contract that should be clear-cut from both sides and fully predictable-it is simple enough that you know why the budget disbursement is not coming. So that is how it is. Where to use it is firstly an internal discussion-could we at least apply it, are the conditions right, is public finance management there, is the human right situations there, is the macroeconomic situation there? Then there is a discussion with the partner because it is up to them also to decide. A lot of them favour budget support but a lot of them would say, "No, it is too much of our sovereignty given away", and it is up to them to decide.

Q106 Richard Harrington: Commissioner, as you know, in DFID "results" is now very much the byword and the philosophy. Everything is results-based; there is a comprehensive results framework and everything, which for those of us who are fundamentally politicians is very important because it helps us justify the spending to our taxpayers and to our electorate-it is not all going to African dictators. "These are the results, these are the outcomes"-it makes it easier for us. Also I do feel that it is very important. It is something that the new coalition Government is pushing for in the UK. I understand in Europe you found it rather more difficult to evaluate things on a results framework because there is not the same comprehensive results framework as there is in the UK. Could you perhaps let us know if you are proposing to change it and how you are doing it so that we will be able to justify your expenditure in very much the same way?

Mr Piebalgs: It is not exactly true that we are not looking. There is results-based monitoring. Each project is evaluated; it is not only an external audit but also an external evaluation. What was achieved? What are the goals?

What was lacking, I think, until now was a very comprehensive framework of what we would like to achieve in this particular country for development policy, outcomes and outputs to measure. We are going in that direction. It is more difficult because basically we are trying to transform a country. How can you describe and indicate that as a transformer? I could clearly say that we have provided drinking water for 31 million people with EU financing, with 9 million getting access to sanitation, 9 million kids getting to school and 720,000 teachers having been trained. I could continue-I have the figures-but when you make a first approach to the country, and development policy is still more country-based, we need to describe indicators in a more comprehensive way. That is a task that I gave my service. We are trying to improve this framework of measurement and make it more global. You can say how successful you are in each year, and I can give the figures of what we have achieved. As I said, I could give an exact figure for Myanmar or any other country. I could name the figures, but it does not give exactly the flavour we would like to achieve. In a lot of countries we are also basing our results on MDGs, so overall access to education has increased globally from 83% to 88%. I could say that at least 1% of this is definitely the financing that went through the EU, but for many people it is not sufficient.

I believe that the main success for me would be a country like Ghana, a good graduate for development aid. We would say, together with Ghanaians, that there is a need in the country but the country is mature enough and managing enough resources to continue the development objectives. I think that is what people would like to hear, and for today’s graduation of middle-income countries I can’t exactly claim that. I cannot claim that in China or India there was development work and it made an impact, or in Colombia or Namibia. We did it but we never quite measured the outcomes. I can’t claim the success or failure of these countries, but I believe that at the end of the day we need to have an integrated framework through the joint programming of what we would like to achieve in the country, and South Sudan is the first example where we are trying to do this.

It is uphill but we are trying to learn from DFID, which definitely is a frontrunner. Also the World Bank is doing it. We are trying to improve our system because it is crucially necessary. These figures perhaps do not say everything but it is saying a lot.

Q107 Richard Harrington: Something else that DFID has made a big issue about is the movement towards the private sector in development policy, which was announced last year. As far as we can tell DFID are very serious about it. I wondered if you supported that and, if so, what steps you are taking to enhance the role of the private sector as far as EU development aid is concerned?

Mr Piebalgs: We fully support it and there is a debate still ongoing. The thinking that I came to is that economic growth per se does not guarantee less poverty in the country, but without growth you can’t expect to win against poverty. So growth is a crucial condition. If you look at countries like Burkina Faso, Niger or Mali, you do not feel that the countries ever will be able to run out of it. That means that there is some crucial element lacking, and it is a private sector development because the private sector brings economic prosperity but also the rule of law. It brings also democracy and human rights, because you can’t expect Government-created jobs to be sustainable. I believe that the extension to the private sector is right, not only from an economic point of view but also that of human rights and democracy.

We have long-running planning vehicles. We have investment facilities together with the European Investment Bank. We have the EU-Africa Infrastructure Trust Fund and we are trying to come humbly in this sector. I would mention, for example, one small project. With our support the first black-owned company was established in South Africa recently, so I visited it. It is a rather small company, but we are addressing some niche issues that make a difference in the country. I would say I was quite surprised when they said this. It was not my objective-we support it for other reasons-but they have been very proud to say this.

We are trying humbly, but that is not the main focus from us. That is still social sectors. We have guaranteed in the Agenda for Change that at least 20% goes for social services. I would not mind spending even more but I believe through the leveraging of long-run planning we can provide financing. Then there are basically at least three difficulties for the private sector: access to money, which I think that could be done through our development banks or investments; access to energy, which we are strongly addressing because it is crucial, particularly in rural areas; and a rule on governance, but there we have a political dialogue and discussion.

I have seen remarkable things happen. If you are in Ethiopia you should visit the coffee exchange or stock exchange, whatever it is. It is very rudimentary but it is remarkable what was achieved by the leader, the lady that runs it. It is also based on legislation, because it is private enterprise in a way but it is backed by law, so there is a law. She managed to get laws that back that, and it has made a huge impact for the farmers because smallholder farmers know how the price is building, so you see there is a huge difference if you are successful in it. It is not a panacea, that I would say, but it is crucial that in development we address this issue because it multiplies our efforts and it really moves the country up the levels of development. Yesterday we discussed with my service the maximum case for the remaining years, and I think that spending on these types of activities could be to the value of €400 million or €500 million.

Q108 Jeremy Lefroy: Commissioner, moving on from the private sector, or very much staying with it actually, a couple of things. First, we do not, I think, hear often enough about job creation as part of development policy objectives. In Europe our focus absolutely across the EU is on job creation. It must be, because unemployment is a terrible thing and completely destructive of national economies, yet when it comes to development aid we do not seem to hear about employment creation, even though in many of these countries half the population is under the age of 20 and what they want above all, in addition obviously to good education and good health, is a job at the end of it. The private sector is obviously a key driver of that, but included in the private sector I would include agriculture, where again we have lost the plot over the past 20 years. It is coming back into focus, but I wondered what your Department is doing particularly on that. The United States has tended to take a leading role but I think this is something that is too important just to be centralised because agriculture in many of these countries is going to be the key driver for employment in primary production, secondary processing and indeed in consumer industries.

Mr Piebalgs: I fully agree with this because job creation definitely is a huge challenge in a lot of countries, particularly also for neighbourhood countries. But we also understand that with the resources we have we can’t have too many sectors that we address, so in the communication, beside the classical social work, we mention only two sectors. One is access to energy and the second is food security-it is agricultural production. Most of the poor people live on degradated soils. There are no feeder roads, there is no access to the market and there is no storage capacity, so it is very clear some substantial investment is needed. In Rwanda, for example, there is terraced agriculture. You can’t expect a farmer to have such money for investment, ever. He is unable to raise such an amount of money. I think development partners must come to the areas to give the people a chance to come to market or to get more productivity out and pass on the knowledge.

I have visited projects that we finance in Myanmar. I have no experience in agriculture and my knowledge is very rudimentary, but compared with the people I would say I was a professor, I felt, because I really learned the basic skills. There is a huge under-investment also in human knowledge, how to run this agriculture, what does it mean. So they start from scratch. Agriculture is a particular issue.

Where we particularly direct our attention is two regions. One is the Horn of Africa, where we focus very much what we can do, what they are doing, what we should do and how the funds should be used for it, because we would not like to replace the private financing where it is possible. I think that would be a crucial mistake. The second is Sahel, Niger, Mali, Mauritania and Burkina Faso-north of Nigeria. That is where we see the most affected, because we see the risk that if these two regions go wrong-and there has been famine in the Horn of Africa-then humanitarian aid starts coming in. Humanitarian aid is a blessing but it is also a curse in disguise because people get used to humanitarian aid and you need to all come to the cycle. So for this reason we also make the strategies, together with our humanitarian aid and ACORN.

Chair: We had a meeting with clients this morning.

Mr Piebalgs: Yes, because we tried to get this link, particularly for agriculture. But it is an extremely challenging area. We have an involvement with US co-operation for food security because it has different approaches that are sometimes helpful. For example, Americans in Ethiopia have developed some type of surrogates for land ownership. It is like a paper; it is not exactly ownership, but still you know which plot is yours, and if the husband dies the wife continues with it. We are trying also to address some structural weaknesses, because one of the weaknesses is who owns the land, and that is a very political issue. I think that is the biggest worry I would have because there is land-grabbing going on, and this process today, even if it is not big scale, is not transparent and that could lead to huge political instability. It is just unfair, so our focus is on smallholder farmers so they can not only survive but do some trading and in this way create some employment. But it is really challenging.

Q109 Jeremy Lefroy: Thank you very much for that, and I am glad to hear it. It has always struck me that especially in the area of irrigation, right down to micro and drip irrigation, there is tremendous expertise in places like Greece from where I have been involved in buying drip irrigation systems. We are saying that these kinds of systems are good for big plantations, but we are not applying them to smallholders and yet we could easily do that. I am wondering whether we are looking at what we are doing in Europe and saying, "We have the expertise, we should be using this advantage that we have and applying it to smallholders". They need access to this kind of technology in the same way that our own farmers do in similar circumstances.

Mr Piebalgs: I think we should take more of our expertise. We are working now with DG Agri on this, trying to get them more involved also on the other part of the knowledge. I would say there are a couple of good examples where we have done that, but it could be increased by a factor of 10, because we spend yearly on agriculture today €600 million, I think, from all the moneys that it is, but it is definitely not huge amounts, so the spending should increase and address exactly the structural weaknesses. But you need a good analysis or a good development plan from our country partners. I would say energy is challenging but agriculture is even more challenging, but I believe it is right to increase the scale of investment in this area because if you do not address agriculture issues, you can’t get the market working, and that is a weakness that you can’t expect Governments to manage to address.

Chair: We are going to run out of time. We will take in Pauline and I have one final question.

Q110 Pauline Latham: Just a very quick question. DFID has said that EC aid and the EDF have good policies on gender but they are poor at implementation. What would you say about that?

Mr Piebalgs: I think I accept the criticism. We have our gender action plan from 2010. We increase our ambition from streamlining in the existing projects. We have some specific projects for North Africa that we are trying to increase but it should be done by far more. We have some alleviation systems. DFID was quite positive how we do alleviation, but I would say for the gender issue I believe everybody should deliver far more in this area, because it is a difficult area. It is politically sometimes difficult also with the countries, but I accept the criticism and we are working to improve it, working with UN Women, working against the violence. There are so many aspects of it. Poor education is a more successful part because enrolment in education will always be local indicators and also some additional inputs that girls have first to be enrolled. That exists but I would say substantial change is needed, and I believe each project should be evaluated on the basis of what it does for gender. I think it is a general weakness in all agencies and they could do better in more instances.

Q111 Pauline Latham: You have just mentioned UN Women, which is interesting. Before we had Unifem and everybody funded them very well but nobody seems to be funding UN Women to the same degree. Where are you on that scale?

Mr Piebalgs: We are working on them because we basically can’t finance any UN agency; basic financing is for member countries. The only exception is UNRWA for Palestinian refugees, because we also provide some core financing for UNRWA. We can provide the programmes while delivering the service, so if it will be a competitive project we will provide financing from UN Women. They are making an excellent impression on it and I hope that we will be partners, but at this stage I do not think that we have any projects running through them.

Q112 Chair: We find in pretty well every country we visit that the empowerment of women and the gender issue is almost central to all development. If it does not happen, pretty well everything falls foul, particularly on the MDGs. The final point, which is crucial I suppose, is the budget and what is going into the negotiation. First of all, I understand you are against budgetising the EDF and I just wondered why. Also, proposing a 22% increase in the DCI and only a 13% increase in the EDF-what is the thinking behind that difference?

Mr Piebalgs: Budgetisation of EDF has been proposed twice, I think, in the frameworks and it was rejected. The main reason for budgetisation of the EDF is to get democratic scrutiny from the European Parliament. Knowing that the European Parliament very much questions this approach I decided not to propose this time the budgetisation of EDF for two basic reasons. The first is that the Cotonou Agreement expires in 2020, so the next financial framework coincides with that. Changing that would mean also renegotiating with our partners, a 78-country bloc. That will not be easy and will creating a lot of political difficulties. I thought, "Let’s keep it until the end of it". I think that was the first argument.

The second argument was financial, to be honest. I would like more poor countries to get more money. I know that politically it is more attractive to look to the north of Africa and to the neighbourhood. I know it, but I care that the people in the Solomon Islands, Nepal or Burkina Faso get the money, and the EDF has clout as a poor country or poor people instrument. In these times of austerity, I did not want us, in the budget debate, to put away this issue as a secondary one, because there will be a lot of discussion on agriculture and the structure of functions, and people will say, "Well, okay, we don’t have any money for poor people". So EDF is basically putting this question very clearly: do we want, as an EU member country, to continue to fight poverty? That is also a bit of a money issue-that we do not lose the support for poor countries.

Q113 Chair: Is that part of the reason why you have only put in a 13% increase?

Mr Piebalgs: No, about the increase. DCI is also related to thematic programmes. It is not in EDF. DCI has two particular new elements. One element is thematic programmes for supporting the fight against climate change. It is global and it is also about preserving biodiversity. So that is a part of financing. It is not only country-based financing, and a rather big chunk of this money is going there. It is our obligation to fight climate change in support of small islands. There is quite a substantial need to finance that.

The other part is that we also put in money for the EU-Africa partnership because Africa as a continent has evolved in the relationship. We put in also a bit of money for strengthening the EU-Africa relationship, supporting action plans that have been agreed in the summit with the EU countries and African Union countries. That means that on poverty eradication and EDF, you need to take away a couple of elements that come with DCI. In DCI there is also a budget line for supporting non-government organisations and civil society organisations. That is also part of the thematic line. I think if you take it away, it would be the same, or close to the same.

Q114 Chair: How far off the 0.7% target are you going to be by 2015? You are not going to admit failure yet?

Mr Piebalgs: No, I will not admit failure because what gives courage is the UK, definitely. The UK gives us courage with all the unpopularity of the measure. It was definitely a Government commitment. All this applause is because at the end of the day when a crisis strikes it is the poor people that are affected more, but we should not forget that the most poor people are not living inside the UK or Latvia. Most poor people are living in desperation in these developing countries because if they do not get support they just die. In our case our social system is not perfect but they care about each other. There is nothing there. I think that was a very strong movement.

Denmark said that they will increase the financing, and there was an increase in Portugal. There was not a sufficient increase in Spain but there was a positive movement. Not performing-there is more than one country. There is Greece, but through the EU they still participate. Italy could do more. Italy is a big contributor to EDF, and to budget better bilaterally they could do far more, in my opinion.

Then my expectation is with Germany, because at the end of the day it is the UK, Germany and France-Italy and Spain also are important-that make the real difference. Germany keeps the commitment for 0.7%. It is a Government programme and I do not see how any German Government could get away from it. France was not too bad in 2000, 0.51%. So I will struggle for it. I am not shouting very loud, but we do all the reports and we push each year for confirmation of that, and we had a confirmation from June and peer pressure is important. I will give up only in 2015. I will not give up earlier.

Q115 Chair: We will try to make sure the UK does not backslide. Thank you very much indeed again for meeting us. Obviously we could have longer but we appreciate the time you have given us and a good opportunity to meet again in a slightly more formal situation. Obviously we are going to evaluate all the things we have seen and heard and will produce a report in two or three months’ time; I do not know what our target date is. You will get the flavour of some of the issues that we are going to assess, but clearly it is important for us to get first hand from you what the priorities are, what the direction is, what the delivery is. I would say that whenever we are visiting any partner countries we do always make a point of trying to make sure that we contact and have dealings with the EU representative, and we find that valuable and helpful. I think we also have to recognise that the EU operates where we do not. One of the things that we have tended to do as a Committee is to go where DFID is operating bilaterally. We may have to think again a bit about that because clearly by focusing on only 28 countries, yet giving money to the EU, giving money to the World Bank, giving money to the UN, there is a lot of British money in aid and development going to countries where we do not necessarily have a DFID relationship but where we have another kind of engagement and we maybe need to look at that at some point. But it is extremely helpful and thank you very much indeed.

Mr Piebalgs: If I make some final points. First, I would say that we have excellent co-operation with DFID and also with Andrew Mitchell. It works really well and I mean it. It is a pleasure to work with them. It is a good partner. We try to learn something from them and I hope that they also find something useful from our approaches sometimes.

Q116 Chair: You know on their evaluation that the EDF came very close to matching up with DFID’s own objectives so you got a high rating as a result.

Mr Piebalgs: Then the second point is I would like to indicate that in parallel an OECD peer review for EU aid is running. The conclusions will come in June, I think. If you are interested, I think that will be helpful, because they did evaluations in 2007, and now after a five-year period they have done quite substantial interviews. They visited the countries.

Finally, I believe that we have created a rather robust system working with the External Action Service. I know that you addressed it. It is a complicated system because the External Action Service is not part of the Commission, but what we have achieved, I believe, is that we have not created two types of agencies. There is still one delegation, and it is the head of delegation that is fully accountable for the development objectives but also for political objectives. We have development staff dedicated to the development programmes, and on the programming level and the political level it works reasonably well.

I have always argued that the current architecture, although not perhaps perfect, is better than it was previously where we were split into different regions. I feel responsible for delivery of the aid in the best possible way. So we have a lot to learn as an institution but the ambition is that EuropeAid one day could be, well, even better than DFID. The ambition is that we could say, "Well, there are a couple of areas where we are definitely scoring better than DFID", and I think we have all the chances to achieve it but it is a moving target. DFID is also improving all the time. So we are improving, but that is the ambition-to be one of the best agencies that everybody could be proud of. As I said, it is not the 28th agency; it is a part of the UK, and I do not feel that I am in competition with them.

Q117 Chair: I was going to say that healthy competition is a good thing if it benefits poor people. If it becomes a turf war internally it is a bad thing. As long as it benefits the poor, that is the objective we are looking for. Thank you very much again and thanks to your team. I know they have not spoken but they have nodded, listened and engaged.

Mr Piebalgs: But they will be ready to impart any information you would like.

Q118 Chair: If there are any follow-up things perhaps we can come back to you, because there might be one or two questions we want to check.

Mr Piebalgs: Any statistics on any political decisions. Thank you.