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EU Council Meeting: More, and More Effective Aid

Time for delivery in Luxembourg

On 10-11 April 2006, EU Development Ministers will gather in Luxembourg for their twice-yearly Council meeting. The meeting provides the first occasion in 2006 to examine progress on promises made by the EU in 2005 towards eradicating poverty. On the agenda: making the roughly € 40 billion per year of EU aid more effective. Co-operation between EU donors must prevail over national habits, if developing countries are to be able to make the most of precious resources. By Denise Auclair and Karine Sohet.

 

The effectiveness of EU aid is not a new theme, but the issue has taken on a greater urgency since 2005. EU Member States have pledged to raise their aid levels to 0.56% of gross national income by 2010 (0.7% by 2015). While it remains to be seen whether governments will honour their pledges – with high doubts especially for Italy –, this should mean an extra € 20 billion per year in EU aid spending by 2010. Increased aid raises issues of management by developing countries, whose governments are already overwhelmed by the demands on their time by a multiplicity of donors, each with their own requirements.

* Member States have yet to heed the Monterrey call
The basis for discussions at the 10-11 April meeting are the proposals by the European Commission published in early March, in the form of three communications. The first, The challenge of scaling up EU aid 2006-2010 corresponds to the annual monitoring report on EU aid commitments, with the promises of 2005 now included alongside previous pledges in relation to the 2002 Monterrey Conference on Financing for Development. The report notes that on quantity of aid, EU aid levels in 2004 were stagnant in terms of percentage of gross national income, only matching the 0.34% level reached in 2003. The report warns, “The collective result in 2006 will depend on those Member States that are still below the minimum threshold of 0.33%.”

The Commission underlines the need to ensure that resources provided for debt relief do not detract from fresh aid resources, as agreed at Monterrey in 2002. Member States have yet to heed this call, though pressure is increasing from civil society. In the run-up to the meeting in Luxembourg, the confederation of European development NGOs CONCORD has released figures showing that nearly one-third of aid figures for 2005 should not be counted as such, as the amounts do not represent real resource transfers to developing countries (>>> EU aid: Genuine leadership or misleading figures; see box).


EU: Misleading aid claims

In a new study, EU Aid: Genuine Leadership or Misleading Figures?, NGOs criticised key EU member states including the UK, France and Germany for inflating their aid figures. NGOs provide evidence that a total of 12.5 billion of headline EU aid in 2005 did not result in additional money for poverty reduction but was spent on debt cancellation, housing refugees and educating foreign students in European universities. Last year, European governments made an historic commitment to substantially increase their aid for the poorest countries and agreed to reach the UN target of allocating 0.7% of their Gross National Income (GNI) to fight extreme poverty by 2015.

In their briefing, NGOs praise a few countries like Sweden and Luxembourg for their high aid levels and minimal aid inflation. However, the majority of member states are boosting their headline aid levels by massaging the figures. France, Germany and the UK look likely to be the governments with the most inflated aid figures in 2005 with respectively 3.50, 2.96 and 2.26 billion spent on debt cancellation, housing refugees in Europe and educating foreign students in European universities. NGOs also say that Italy is unlikely to meet agreed aid targets and spends even less on aid than some of the much poorer new EU member states. broader NGO coalition.

Key findings include:
* The UK, France, Germany and Italy together counted a staggering 8.47 billion debt relief for Iraq and Nigeria as part of their Official Development Assistance (ODA).
* Austria, which currently chairs the EU presidency, is likely to have inflated its aid figures by as much as 50% in 2005.
* Italy is set to miss its aid target and the country's official ODA level is close to new member states like Malta, Slovenia and the Czech Republic.

While technically permitted under OECD rules, European Union governments' insistence on accounting for this debt cancellation in their ODA figures contravenes the United Nation's 2002 agreement in Monterrey. The agreement calls for debt cancellation to be funded additionally to Official Development Assistance (ODA). The final version of the report will be published at the end of April.

Source: CONCORD/EURODAD



On aid effectiveness, the Communication is particularly weak on collective targets. The text glosses over the fact that more than one year after the 2005 Paris Declaration on Aid Effectiveness, the OECD Development Assistance Committee has thus far been unable to finalise targets for 2010 for all of the 12 indicators agreed in the declaration. The Council is invited to support the establishment a strong monitoring mechanism for the objectives and indicators of the Paris Declaration. However, there is no sign of a higher ambition on the targets, needed in the areas of conditionality, a mutual accountability framework and predictability. Civil society is looking for process on defining these targets that will include their consultation.

The report also addresses the role of Community aid. Following the Council decisions on the 2007-13 Financial Perspectives and 2008-13 European Development Fund (EDF), the share of Community aid in total EU aid is forecasted to drop from its current 20% to 15% by 2010 and 13% by 2013. This means that Member States would have to provide around 90% of future EU aid increases bilaterally – which many governments are not prepared to do, given the additional human resources this would require. In response, the Commission proposes to establish co-financing models to facilitate the channelling of Member States’ bilateral together with EC aid, by developing different types of host structures open to Member States’ voluntary contributions (a first example being the recent Africa Infrastructure Trust Fund; see >>> here).

* Better, more and faster?
The proposal to pool Member States and EC resources in common aid mechanisms is one of the main innovations of the EC Action Plan on aid effectiveness contained in the communication entitled, EU Aid: delivering more, better and faster. The co-financing model already exists for loans under the European Investment Bank but was never used for grants, and would require special provisions in EC legislation. This proposal may be contentious for certain big bilateral donors, but could be an attractive way of spending aid for certain smaller or less experienced Member States. Thus, competition between the EC and other multilateral donors (United Nations, World Bank) in attracting Member States’ aid resources will likely increase.

The Action Plan also proposes a series of practical steps to improve donor co-ordination. A series of compendia on European Community and EU Member States’ rules and procedures will likely show that the rules are not so different and that much could be gained with harmonisation and simplification. Mapping at country level should cover the activities of all donors in the country, and the EU Donor Atlas has been updated, with specific regional volumes to follow. The intention is to allow a real debate on division of labour, to be taken further by a future proposal by the Commission on a set of pragmatic operational principles. Joint Financial Arrangements should promote single dialogue, disbursement and reporting mechanisms at country level between the donor community and the partner country, through the adoption of a formal document.

* First step to full co-ordination of EU aid
The third communication from the Commission, A common framework for drafting Country Strategy papers and joint multi-annual programming, is the second main innovation proposed by the Commission. The first concrete delivery of the Action Plan on EU Aid, it proposes a far-reaching model of joint analysis of the political, economic and social situation of developing countries leading to joint programming of Community and Member States’ aid. It represents a first step in the direction of full co-ordination or integration of EU aid and “division of labour” between EU donors present in a given developing country. Member States’ reticence might well put a brake to these long-term objectives, but the first step will nonetheless be taken.

The EC intention is to apply the Common Programming Framework (CPF) to the African, Caribbean and Pacific countries in the context of the 10th EDF programming process that is presently launched, beginning with a series of pilot countries and rolled out to all countries by 2010. The EC suggests to use the CPF as an instrument for common ‘diagnosis’ of the Country situation and envisages a flexible approach towards the second stage of common programming and division of labour, in case Member States don’t adhere to it right away.

However, the Country analysis in the proposed CFP is so exhaustive as to look unrealistic considering the absence of reliable data in many developing countries. The Country Strategy is not a Development Co-operation Strategy, but covers a much wider range of policies, including a stronger emphasis on the trade situation, good governance and security. Furthermore, it is not clear how the ownership of the partner government will be respected. The diagnosis, the assessment of past co-operation and the establishment of result-indicators and performance indicators seem to be the main (or even the sole) responsibility of the donors. The participation of civil society is only envisaged in discussing policies and drawing up the co-operation strategy, not in the diagnosis or in the monitoring/evaluation of the strategy’s implementation.

The CPF appears to reflect a shift already observed at EU policy level from a genuine and independent development policy to a broader policy mix, where development aid is seen as an instrument of foreign policy (as with the Africa Strategy which sits on top of the Cotonou Agreement). How the strategy is translated in the National Indicative Programme is then a key question with regard to the risk of aid being used for foreign policy objectives.

* 2006 must be the year of action
Discussions in Luxembourg on these proposals promise to be lively. While the European Commission considers that it has a central role to play in implementation of the EU’s aid effectiveness commitments, this role is not recognised by all Member States. Some would prefer a complementary model to a fully co-ordinated one, believe that their own policy is more effective, fear bureaucracy, or desire to safeguard their sovereignty in this policy area. Whatever their opinion on the role of the European Commission, EU Development Ministers must respond to the imperative of better co-ordination. Each Member State needs to become more energetic, actively pushing for better policies and holding countries to account when they impede progress or fail to deliver on commitments. The challenge now is for every European country to adopt best practice on each issue, so that the collective effort moves at the speed of the fastest.

2006 must be the year of action, with donors delivering on their side of the global partnership to reach the Millennium Development Goals. European citizens expect this from their governments, and poor people around the world expect better support in order to enable them to work for change and lives of dignity.

Denise Auclair is Policy Officer for EU development policy at CIDSE (International Cooperation for Development and Solidarity) and Caritas Europa. Karine Sohet is Policy and Information Officer at APRODEV (Association of World Council of Churches related Development Organisations in Europe). - The results of the Council meeting in Luxembourg are analysed >>> here.

(Posted: 5 April 2006; updated: 19 April 2006)

* More on the subject:
>>> Goodbye UK, Hello Austria: EU Presidency Outlook
>>> Will the European Union Save the UN World Summit?


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