Select Committee on European Union Thirty-Fourth Report


CHAPTER 5: Development Assistance

156.  The EU Strategy for Africa's primary aims of achieving the MDGs and the promotion of sustainable development, security and good governance is to be backed by "increased, sustainable and predictable financial flows at a level consistent with [the EU's] ambitions."[107] To this end the Strategy commits the EU and its Member States to:

  • increasing aid;
  • agreeing the 10th EDF and ensuring adequate resources for North Africa in future EC budgets;[108]
  • implementing innovative financing mechanisms such as a voluntary contribution on airline tickets or through financing the International Finance Facility for Immunisation;
  • supporting proposals to cancel outstanding debts owed by Heavily Indebted Poor Countries;[109]
  • strengthening the EU humanitarian aid department (ECHO); and
  • making aid more effective.

157.  This Chapter focuses its attention on the first and last of these aspects of the Strategy where the need for co-ordination between the various institutions and, accordingly, the challenges for implementation are greatest.

The EU's aid commitments

158.  The EU (including the Member States) provides around 55 per cent of global official development assistance (ODA).[110] This is set to increase as the EU and its Member States have committed themselves to meeting the UN's target of 0.7 per cent of combined gross national income (GNI) by 2015 which other states are less likely to achieve. At least half of any new money found over the next decade has been promised to Africa.[111]

159.  This agreement translates to around €20 billion per annum of additional ODA. This means at least an additional €10 billion for African countries.

TABLE 3

Proposal for new EU ODA targets 2006-2010[112]

Countries in italics are those already at, or expected to achieve, the UN's 0.7 per cent target by the earlier date of 2010.
2006 2010 Gap 2010-2015
%GNI %GNI%GNI
Austria0.33 0.51 0.19
Belgium0.5 0.7-
Cyprus0.02 0.17 0.16
Czech Republic0.133 0.170.16
Denmark0.82 0.79 -
Estonia0.02 0.170.16
Finland0.42 0.7 -
France0.47 0.640.06
Germany0.33 0.51 0.19
Greece0.33 0.510.19
Hungary 0.03 0.17 0.16
Ireland0.61 0.7-
Italy0.33 0.51 0.19
Latvia0.037 0.170.16
Lithuania0.07 0.18 0.15
Luxembourg0.9 0.9-
Malta0.18 0.18 0.15
The Netherlands0.8 0.8-
Poland0.1 0.17 0.16
Portugal0.33 0.510.19
Slovak Republic0.092 0.17 0.16
Slovenia0.1 0.170.16
Spain0.37 0.54 0.16
Sweden1.0 1.0-
United Kingdom0.42 0.51 0.19
EU 15 Total0.43% 0.58% 0.12%
EU 10 Total0.09% 0.17% 0.16%
EU 25 Total0.42% 0.56% 0.14%

160.  The commitments made by the EU in May 2005[113] were divided between the old and new Member States. Only the EU15 had to achieve the full 0.7 per cent of GNI by 2015; the EU10 have a more realistic target of 0.33 per cent. Given the small size of the EU10 economies, and the greater proportion of GNI donated by a few of the Member States, the combined total will come to 0.7 per cent. Those Member States currently donating more than 0.7 per cent are expected to maintain their current level of contributions. The Commission also proposed half-way targets for 2010 based on Member States' current levels of ODA.

161.  We consider that the EU's commitments are sufficient to make a significant difference to developing countries, particularly Africa. The important thing now is to meet those commitments already made rather than extending them further.

162.  As can be seen from the above table there are significant differences in the current percentages of GNI dedicated by individual Member States to development assistance. In order to reach even the midway 2010 targets above, a number of Member States will have to make significant increases, with further increases due between 2010 and 2015. Without achievement of these increases, the additional aid earmarked for Africa will not be found.

163.  An analysis of these targets by the European Centre for Development Policy Management concluded that the EU has to multiply its annual aid volume by 2.5 before 2015. A successful achievement of the EU promises will primarily depend on the efforts taken by a small number of larger EU Member States: Italy, Spain, Germany, United Kingdom and France. Taken together they will have to increase their flows by €42.2 billion, or 82 per cent of the total increase. In relative terms the EU10 will have to increase their aid flows spectacularly but in absolute terms most will depend on the actions of a few old Member States.[114]

164.  We welcome the EU Member States' commitments to increase aid and to ensure that half of that increase goes to Africa. We are, however, concerned that some Member States will not be able to meet their commitments. We reiterate the recommendation in our recent Report on the Millennium Review Summit that monitoring procedures should be rigorously applied in order to ensure that the pledges made by all Member States are met.[115]

165.  A major review exercise should be conducted by the Commission in 2010 to determine whether Member States are meeting their commitments. If they are not, the Commission should put forward constructive ideas for reaching the 2015 target including, if necessary, increases in the EDF and the EC's development budget.

166.  The United Kingdom Government should set a positive example by being open and transparent in the way in which they achieve their own target; and should encourage others to do the same.

167.  The commitments made by each Member State represent that State's total contribution to ODA. Some part of that ODA is managed by the Community (through the EDF and the EC budget), though the greater part represents bilateral and other multilateral contributions. The volume aid targets set no prescriptions for Member States as to whether the money which they spend should be spent through national programmes, through the EU or through other multilateral initiatives.

168.  It is unlikely that the Member States, particularly the new Member States which do not have a history of providing development aid, will disburse all their aid bilaterally. Therefore, as Myles Wickstead noted, multilateral aid will become more important, particularly through the World Bank. (Q 80)

169.  Currently the resources managed by the Commission represent 20 per cent of global EU assistance. However, the funds available to the Commission will not rise at the same rate as the increases agreed by the Member States in May 2005. Therefore, the proportion of EU aid deriving directly from the Member States is due to rise.[116]

170.  Given that the EC budget until 2013 is now fixed, as is the 10th EDF (also to 2013), there is limited scope for increasing EU aid through contributions to the EC. It is possible that future increases will be made to the 11th EDF, or to the EC budget in the next round of negotiations, though this will leave little scope for gradual increases in Member State commitments up to 2015.

Co-ordination of EU aid

171.  It is not enough that the EU meets its new targets for ODA, resources need to be targeted in such a way that the programmes and projects into which they are channelled are effective at reducing poverty and avoiding duplication. This depends, in the first instance, on the efficient co-ordination of EU and Member State development policies.

172.  As Commission President Barroso said in announcing the Commission's proposed Strategy for Africa in October 2005: "One of the EU's most central challenges in development co-operation remains to ensure a coherent and effective approach between 26 different actors, the 25 Member States and the European Commission, with 26 development policies."[117]

173.  There are a number of reasons for the difficulties of co-ordination of development policies between the Community and the Member States. One is the different policies that exist on aid—how much should be provided, to which countries and so on—as well as on its relationship to other areas such as trade and security. For example, Alex Vines, Head of the Africa Programme at Chatham House, argued that there is more policy coherence amongst European partners in relation to very aid dependent countries than in relation to natural resource rich locations "where you have real competition which can be to the detriment of wider goals such as poverty alleviation." (Q 131) It is to be hoped that common policies such as the Strategy for Africa will help to overcome some of these differences.

174.  The other reason for lack of increased co-ordination within the EU is a general reluctance to give up competence to the Commission, even when agreeing with the Commission's specific policy on how resources should be spent.

175.  Commissioner Louis Michel has been a keen advocate of closer co-operation between the Member States and the Commission during his time in office. The Commission proposed a new 'European Consensus on Development'[118] which, following discussion by the Member States at an informal meeting of development ministers, was redrafted to stress that development is a shared competence and that Community policy "shall be complementary to the policies pursued by the Member States."[119] Michel's vision of the Commission taking the lead in the co-ordination of development policy was rejected by the Member States.

176.  The EU Development Policy Statement which was agreed by Council does, however, list a number of comparative advantages of the Commission in relation to development aid:

  • A global presence—the Commission is present in more countries than any one Member State, and in some cases is the only EU partner substantially present;
  • Exclusive competence in trade—the Commission can provide support to partner countries to integrate trade into national development strategies and to support regional co-operation;
  • Promotion of development best practice—the Commission has the potential to serve as an intellectual centre in development issues;
  • Facilitation of co-ordination and harmonisation—the Commission will promote co-ordination, complementarity and coherence at the international level, particularly in the context of disaster relief;
  • A delivery agent where size and critical mass are of special importance; and
  • Consistent standards—the Commission will promote democracy, human rights, good governance, respect for international law and the participation of civil society.[120]

177.  The Commission regards itself as playing a very different role to the Member States in terms of development co-operation. The Commission has negotiated Country Strategy Papers (CSPs) with some 140 different partner countries and with 17 partner regions. This gives it a global perspective shared by very few Member States.

178.  A further attempt at closer co-ordination was made by the Commission more recently as part of its new package on aid delivery.[121] The most contentious element of the package was the proposals for joint programming. The Commission's aim was to replace the country strategies of 10 Member States plus the Commission with one single EU strategy in order to improve efficiency. A number of Member States, including the United Kingdom, did not support this proposal, regarding it as an attempt by the Commission to increase its own powers at the expense of the dual competence on development enshrined in the Treaties.[122]

179.  The Council[123] afforded this proposal a cautious welcome, agreeing to a two-step approach consisting of a joint analysis of each country situation, with a gradual and voluntary progression towards a joint response to the problems identified by the joint analysis. Recognising that "[j]oint multi-annual programming will pave the way for co-ordination of policies, harmonisation of procedures and opportunities and decisions relating to complementarity",[124] the Member States appear to have found the principle as hard to accept as to reject.

180.  Effective co-ordination and harmonisation is essential for the EU when dealing with Africa compared with leaving the many challenges to be resolved by numerous European states acting independently of each other.

181.  The Belgian government are fully supportive of this need for enhanced co-operation. We were told that they:

"have a lot of sympathy for countries which have a lack of capacity to deal with their own government affairs, having to deal with 25 EU Member States, plus the international finance institutions, plus the other donors. This would be unmanageable for countries like ours and it is what we, as the international community of donors, are imposing on them. One way or another, therefore, you have to streamline this. You have to come to a coherent approach where the beneficiary country has the lead." (Q 211)

182.  The Secretary of State agreed that there was a practical question of how resources could be matched to the needs of particular countries in Africa. (Q 50) Again this comes back to the question of co-ordination of aid. Whilst agreeing that particular Member States have specific interests in certain countries and differing areas of expertise, it is important that the Member States, with the Commission, take a broad view of where resources are most needed and will have the greatest impact. This may entail the Commission, in particular, acting to assist those countries less favoured by the Member States.

183.  The Commission's new donor atlas[125] will assist greatly in this exercise and help to prevent certain African nations being overlooked.

184.  Myles Wickstead, former Head of the Secretariat for the Commission for Africa, pointed out that the main focus of development issues, at least for the coming period, will continue to be at the country level. However, he also considered it important for the EU to develop relations with the RECs and with the AU in order to discuss issues which span borders such as disease control and physical infrastructure. (Q 85) The Strategy for Africa is particularly important to development in its aim of increasing regional dialogue in order to focus on pan-African development issues.

185.  We agree that, in the context of the EU Strategy for Africa, EU donors must take a more co-ordinated approach to delivery of aid.

186.  In relation to individual beneficiary countries, the needs and wishes of the particular country must determine who takes the lead in that co-ordination. In many cases the Commission will be the most appropriate coordinator of donor activity and should be allowed to so act by the Member States.

187.  In relation to overall EU development assistance the Commission is best placed to analyse global distribution and remedy any imbalances. Under the Strategy for Africa the Commission should carry out a detailed analysis of how Member States' combined ODA is being spent and produce a report specifying how better co-ordination could help to achieve the Strategy's objectives.

Delivery of EU aid

188.  The European Commission oversees greater development resources than any single Member State. It disbursed €7 billion in 2004 making it, in volume terms, the third largest donor in the world behind the US and Japan.[126]

189.  The Commission is not directly comparable to the development agencies of the Member States however—it is not simply a 26th donor. It overseas the spending of funds both under the EC budget (such as through the European Neighbourhood Policy)[127] and under the European Development Fund, which is a separate inter-governmental fund.[128] It is therefore accountable to the European Parliament and the Member States in different ways depending upon whence the relevant funds are derived. The Commission is restricted by its competencies, by EU policies and by numerous regulations. Moreover, those restrictions may result in spending policies significantly different to the policies of individual Member States.

THE EU'S RECORD ON AID DELIVERY

190.  In April 2004 we published a Report on the reforms then being undertaken by the Commission on delivery of EC aid.[129] We concluded that the reform programme had had a positive impact on aid effectiveness and would lead to further improvements as long as the Commission retained a self-critical approach. However, there remained scope for further changes that would make EC aid still more effective.

191.  The EU delegations in partner counties are responsible for the implementation of programmes at the partner-country level. A process of devolution to the delegations is now complete and speed of delivery has improved as a result of this process.[130]

192.  However, Commission officials have acknowledged that whilst the Commission has been very successful in stimulating the debate on development policy, it still has a difficulty in delivering what has been decided at the political level.[131]

193.  BOND[132] criticised the EC's record of "[s]low disbursement of funds, bureaucratic procedures and lack of capacity [which] continue to hinder the effectiveness of European Community aid." They argued that much more progress in this area was required. (p 147)

PARIS DECLARATION ON AID EFFECTIVENESS

194.  The Strategy for Africa specifies that EU aid can be made more effective by ensuring early implementation for Africa of the international commitments agreed in Paris in March 2005.

195.  The "Paris Declaration On Aid Effectiveness: Ownership, Harmonisation, Alignment, Results And Mutual Accountability" was a background document for the April 17, 2005 Development Committee meeting of the World Bank. It was adopted by about 90 countries and 27 development institutions attending the High Level Forum held in Paris, 28 February-2 March 2005. The European Commission was one of the participants and has therefore committed itself to the Declaration along with the majority of the Member States.[133]

196.  The Declaration contains some 50 commitments to improve the quality of aid, which will be monitored by 12 quantitative indicators. Participants agreed to set targets for 2010 for each of the indicators, involving action by donors and partner countries, which can help to track and encourage progress in implementing the commitments.

BOX 11

Summary of the Paris Declaration on Aid Effectiveness

Donors and partners are mutually accountable for development results.


Donors should:


Scale up for more effective aid;

Adapt and apply development programmes to differing country situations;

Specify indicators, timetables and targets;

Monitor and evaluate implementation;

Base their overall support on partner countries' national development strategies, institutions and procedures;


Untie aid;


Implement common arrangements and simplify procedures;

Promote a harmonised approach to environmental assessments.

Partner countries should:

Exercise effective leadership over their development policies and strategies and take the lead in co-ordinating development actions;


Strengthen development capacity with support from donors;


Strengthen public financial management capacity;

Strengthen national procurement systems.


197.  As well as being referred to in the Strategy, under the new European Development Policy Statement the Commission has a responsibility "to play an active role in implementation of the Paris Declaration … and will be one of the driving forces to promote EU delivery of its commitments made in Paris on ownership, alignment, harmonisation results and mutual accountability."[134]

198.  The Secretary of State informed us that there is an EU working group on harmonisation of the Paris Commitments. Some targets have now been agreed including the channelling of 50 per cent of government-government assistance through country assistance and the reduction of the number of unco-ordinated missions by 50 per cent. (Q 58) Further work, however, remains to be done.

199.  The Commission should present a communication setting out how it intends to fulfil its commitments under the Paris Declaration on aid effectiveness for consideration in Council before the end of 2006.

Budget support

200.  One issue which is not discussed in the Strategy, but to which witnesses drew our attention, is that of direct budget support. Myles Wickstead was strongly supportive of moving towards budget support away from specific programmes. (Q 80)

201.  The Commission is providing more and more of its support through budget assistance. The Commission regards this as "the reality of ownership, to leave the country with the possibility to implement its own policy providing governance conditions are fulfilled."[135]

202.  The European Centre for Development Policy Management agreed that budget support should be used where possible since it gives maximum ownership of aid to the recipient government and also reduces transaction costs for the EU. The risks "can be minimised by careful consideration of the recipient entity's institutional ability to manage its own budget and ensure transparency and accountability." (p 91)

203.  The more use is made of budget support, the greater the potential for the building of expertise which can help to minimise the possible risks. The Commission and Member States would benefit from sharing their knowledge and experience in this field.

204.  Budget support is closely related to questions of governance considered in Chapter Six. Once funding is provided direct to state governments, the importance of transparency and accountability is greatly increased. Accordingly, budget support can only be used in those states which have reached a certain level of acceptable governance.

205.  However, budget support can also be a means to increase levels of accountability, in particular to national parliaments. It is not always possible for parliamentarians to ensure that funding directed at specific projects, often through NGOs, is properly spent. Moreover, directly funded projects can help to obscure the total amounts being spent in a country. Where proper mechanisms for parliamentary oversight are in place however, budget support can ensure that governments are held accountable for their own spending.

206.  Many African parliamentarians do not have the necessary expertise to carry out this level of scrutiny and much will depend on the openness of individual state governments.

207.  NEPAD could devise a programme to support parliamentary oversight of ODA spending in Africa whilst EU (including Member State) parliamentarians should share their expertise and experiences. AWEPA, the organisation of European Parliamentarians for Africa, is already going some way towards achieving this, but its resources are limited.

208.  We were informed by Gareth Evans of the International Crisis Group of an interesting initiative in Liberia. The Governance and Economic Management Assistance Programme (GEMAP) is a form of budget support which involves an international representative "sitting right in the central governing financial institutions and controlling the money flow, in and out, to ensure that at least it starts off going to the right places." (Q 331) Mr Evans described this as "the most robust form of intervention there has ever been internationally" and stated that in Liberia it had been successful in avoiding the diversion of resources. (Q 331)

209.  We agree that budget support provides a better means of supporting the aim of African ownership in the Strategy for Africa than programme support.

210.  Further consideration should be given by EU Member States to direct budget aid, including an examination of the Governance and Economic Management Assistance Programme and its potential to control finances in poorly governed African states.


107   The EU and Africa: Towards a Strategic Partnership Council of the European Union, Brussels, 19 December 2005 15961/05, paragraph 6. Back

108   The ACP-EC Council of Ministers, meeting in Papua New Guinea on 1-2 June 2006, concluded an agreement on financing the Cotonou Partnership Agreement from 2008-2013 with a financial package under the 10th EDF of over €24 billion. The amount agreed represents an increase of about 35 per cent on the 9th EDF that draws to an end in December 2007 (Main results of the ACP-EC Joint Council of Ministers Brussels 7 June 2006, Council of the European Union 10270/06.) Back

109   See above Chapter Two, paragraph 48. Back

110   The Reform of the Management of the European Community's External Assistance: An Overview European Commission Report October 2002 p 2. Back

111   General Affairs and External Relations Council, Brussels 24 May 2005, Council of the European Union 8817/05.  Back

112   Communication from the Commission to the Council and the European Parliament: Accelerating progress towards attaining the Millennium Development Goals-Financing for Development and Aid Effectiveness COM (2005) 133, Table 2.  Back

113   General Affairs and External Relations Council, Brussels 24 May 2005, Council of the European Union 8817/05. Back

114   EU Commitments to the developing world: Will Europe be able to deliver? European Centre for Development Policy Management, 3rd technical note on EU financing for development, Jonas Fredericksen, p 6.  Back

115   European Union Committee 11th Report (2005-06): The European Union's Role at the Millennium Review Summit (HL 35) paragraph 41.  Back

116   It is estimated that the proportion of ODA delivered by the Commission in 2010 will be around 10 per cent of the EU total: International Development Committee, Oral Evidence (2005-2006) EU Development Co-operation and External Relations Policy (HC 745), Q 32.  Back

117   European Commission adopts 'European Union Strategy for Africa' 12 October 2005, IP/05/1260. Back

118   Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions: Proposal for a joint declaration by the Council the European Parliament and the Commission on the European Union Development Policy 'The European Consensus' COM (2005) 311 Final.  Back

119   Joint statement by the Council and the representatives of the governments of the Member States meeting within the Council, the European Parliament and the Commission 'The European Consensus on Development' OJ C46/1 (24 February 2006), part 2. Back

120   Joint statement by the Council and the representatives of the governments of the Member States meeting within the Council, the European Parliament and the Commission 'The European Consensus on Development' OJ C46/1 (24 February 2006), paragraphs 46-55. Back

121   Communication from the European Commission to the Council and the European Parliament: Financing for development and aid effectiveness-The challenges of scaling up EU aid 2006-2010 COM (2006) 85; Communication from the European Commission: EU aid: Delivering more, better and faster COM (2006) 87; Communication from the European Commission to the Council and the European Parliament: Increasing the impact of EU aid: A common framework for drafting country strategy papers and joint multiannual programming COM (2006) 88. Back

122   Treaty on European Union 1992-Article 130u.  Back

123   General Affairs and External Relations Council, Luxembourg, 10-11 April 2006, Council of the European Union 2723/06. Back

124   General Affairs and External Relations Council, Luxembourg, 10-11 April 2006, Council of the European Union 2723/06, p 36. Back

125   Communication from the European Commission: EU aid: Delivering more, better and faster COM (2006) 87, p 7; General Affairs and External Relations Council, Luxembourg, 10-11 April 2006, Council of the European Union 2723/06, p 38. Back

126   International Development Committee, Oral Evidence (2005-2006) EU Development Co-operation and External Relations Policy (HC 745), Q 19. Back

127   Appendix Eight. Back

128   Box 10.  Back

129   European Union Committee, 12th Report (2003-2004): EU Development Aid in Transition (HL 75). Back

130   European Union Committee, 12th Report (2003-2004): EU Development Aid in Transition (HL 75), paragraph 28. Back

131   International Development Committee, Oral Evidence (2005-2006) EU Development Co-operation and External Relations Policy (HC 745), Q 3.  Back

132   British Overseas NGOs for Development. Back

133   Austria, Belgium, Czech Republic, Denmark, France, Finland, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Poland, Portugal, Slovak Republic, Spain, Sweden and the United Kingdom are all signatories to the Declaration. The majority of the new Member States (Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta and Slovenia were not participating countries.  Back

134   Joint statement by the Council and the representatives of the governments of the Member States meeting within the Council, the European Parliament and the Commission 'The European Consensus on Development' OJ C46/1 (24 February 2006), para 56. Back

135   International Development Committee, Oral Evidence (2005-2006) EU Development Co-operation and External Relations Policy (HC 745), Q 18. Back


 
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