Article > A six-point plan for reforming EU aid

THE DEVELOPING WORLD

A six-point plan for reforming EU aid

Autumn 2008

by Simon Maxwell

Events in 2009 will offer Europe an opportunity to reform its own aid architecture and establish leadership of the international development agenda. Simon Maxwell, who heads the UK’s Overseas Development Institute, sets out his reform plan

by Nathalie Delapalme

by Jean-Michel Debrat , Simon Maxwell

The Lisbon Treaty may or may not pass, but the evidence is incontrovertible. In the field of international development, at any rate, the agenda is moving sharply in a trans-national or multilateral direction, on topics where Europe has a strong comparative advantage. Whether the EU is able to take full advantage of this opportunity will depend not mainly on Lisbon, but on a wider reform process, touching especially on the instruments of EU engagement around the world. 2009 will be a crucial year for change.

It may seem perverse to suggest that the international development agenda is changing. For the past decade, the clear focus of development policy has been on the Millennium Development Goals – reducing poverty, primary education, improved health care, and tackling environmental challenges, all by 2015. The MDGs were first formulated in 1996, by the OECD, but were rapidly mainstreamed, especially in the UN’s 2000 Millennium Declaration. They were the focus in 2002 of the Monterrey Conference on Financing for Development, then in 2005 at the Gleneagles G-8 summit, and at countless other leadership events. They have also been prominent in EU debates, for example in the “development package” unveiled in April this year. And 2008 has also been dominated by the Call to Action on the MDGs, launched in July 2007 by UK Prime Minister Gordon Brown in New York, and now taken up by EU leaders at the European Council, by the G-8 and by the UN – at the Call to Action summit convened in late September by Secretary-General Ban Ki Moon.

MATTERS OF OPINION

Millennium Goals unknown to 80% of Europeans

Calls for action on the Millennium Development Goals (MDGs) have done little to raise the profile of the targets formulated eight years ago. Fewer than two in 10 Europeans had heard of the MDGs when polled in early 2007, and in the UK, where Prime Ministers Tony Blair and Gordon Brown have given prominent backing to the development agenda, 86% of those questioned in a Eurobarometer survey answered “No” or “Don’t know” to the question “Have you ever heard or read about the Millennium Development Goals?”

Despite EU aid accounting for some 57% of the worldwide total at the time of the survey, a considerable number of respondents (28%) could not form an opinion as to whether, compared to national governments, the EU brought added value as an aid donor. An equal number – 28% of those questioned – gave the most popular response: that the EU’s added value was its cooperative programmes with practically all developing countries.

Presented with a choice of nine EU aid options for Africa, Europeans said that the most important was the fight against diseases such as HIV/AIDS and malaria (46%), followed by work that supported peace and security (43%). Protection of the environment got the least backing (12%).

http://www.gallupworldpoll.com/

There doesn’t seem to be much risk, then, that we will forget about the essentials of human development. Yet the agenda of international meetings shows that leaders are, to be frank, more concerned about a related but distinct set of issues: oil and food prices, the credit crunch, Iraq, Afghanistan and climate change. These are issues that resonate domestically. How easy is it to walk the talk on poverty reduction in Africa, when rising inflation and unemployment lead to dips in the polls and by-elections lost?

Three sets of issues are driving a new discussion, a new discourse, about international development. This does not replace the conversation about the MDGs, but rather adds to it.

First, the latest phase of economic globalisation is proving to be hugely successful in reducing poverty, especially in China and other east Asian countries where manufacturing exports are creating hundreds of millions of jobs. There is a debate about poverty numbers triggered by the World Bank’s latest cross-national estimates of income, but these numbers are falling rapidly. Other countries face knock-on problems, however: struggling to create jobs in a highly competitive manufacturing environment, managing the surge in commodity prices, and dealing with the unravelling of global imbalances. Put these challenges together with those created by the credit crunch and it is no wonder that world leaders are concerned about the effectiveness of international institutions. Transparency, early warning, even regulation are the watchwords of the day. Once again, and perhaps as ever, leaders are charged with trying to manage globalisation: riding the tiger without ending up inside it.

Second, and not unrelated, security now looms large in development planning. In some countries, the pursuit of the Millennium Development Goals can proceed untrammelled by concerns about violence, conflict, terrorism, crime and drugs. In those countries, aid can support rational public expenditure programmes and focus on results. The so-called Paris agenda on aid effectiveness is especially appropriate in such countries, focusing as it does on aligning behind government priorities. Growth rates in excess of 5% a year can be achieved. And, interestingly, many countries which achieve this will reach middle-income status by the middle of the next decade, and therefore begin to fall off the aid map. India, Pakistan and Senegal, for example, will all be middle income countries by 2015, and Bangladesh will follow soon after.

This leaves development policy increasingly focused on the hard cases, where political and geo-political problems intersect with, and reinforce, poverty. Afghanistan and Iraq are obvious cases. The Horn of Africa contains many examples, from Eritrea and Somalia, through Sudan and northern Uganda, down to Burundi and the borders of the Democratic Republic of Congo. A recent UK government publication says that by 2010 half of the world's poorest people could live in countries where violent conflict is either a fact of life or a very real threat. In these environments, investment in primary health care and education, often underpinned by humanitarian assistance, are necessary but not sufficient. Diplomatic and sometimes military resources are needed. But what, for development ministers, are the terms of engagement? Who makes policy? Who controls expenditure? Who manages coherence across the range of problems and interventions?

The third set of issues is the debate about climate change, which is beginning to reflect a shift from national planning and national programmes to regional and even global actions. Mitigation and adaptation need to be national projects, but the frameworks, policies, funding and institutions are increasingly global, emerging from the tortuous thickets which link Kyoto to Bali to Copenhagen in 2009. Climate is not the only global public good, of course. Financial stability, disarmament, indeed international security, all these are on the minds of governments. The context is one in which existing and rising powers are all increasingly impatient with the performance of the international system, hence the series of UN panels, proposals for an Asian regional IMF, a possible Bretton Woods II conference and the Commonwealth initiative on reform of the international system.

In approaching these complex challenges, all of which require more effective collective action, leaders have choices to make. Some will choose to work alone, forming ad hoc alliances. Others will work in regional groups or will concentrate their efforts on the UN and the Bretton Woods institutions. Others still will turn their minds to new formations, like the G-20. Most, of course, will want to be present everywhere. Why, then, the EU?

To be chosen the EU will have to demonstrate comparative advantage in five areas: values; policies; structures; programmes; and capacity to implement.

The core values are not really in doubt. Article 1a of the EU’s proposed constitution, and repeated in the draft Lisbon treaty, says that ‘the Union is founded on the values of respect for human dignity, freedom, democracy, equality, the rule of law, and respect for human rights’. Hands up anyone who disagrees! Making this operational is more challenging. My own contribution has been to suggest the concept of global social inclusion or global social justice as a paradigm for EU involvement in the world, taking these core principles and relating them to the evolving development agenda. They add new dimensions to the somewhat instrumental focus on money income and health or education outcomes that characterises the MDGs. They bring rights, voice and accountability to centre stage. They create space for work on social protection. And they bring into the limelight issues about the distribution of income, wealth and power on a global scale. European values provide a strong foundation for a new engagement.

As far as policies are concerned, the EU again offers a strong comparative advantage. A focus on poverty reduction as the ultimate objective, enshrined in the draft treaty. A strong commitment to working together within the Union, enshrined in the European Consensus on Development and also the Code of Conduct on complementarity and the division of labour in development policy. And a set of regional strategies - for the Horn of Africa for example - which provide a coherent review of the issues and sketch out responses across the aid, diplomatic and security spheres.

What these approaches reflect is the range of competences and interests available at European level: not just aid, but trade, diplomacy and military assets. These will all be stronger if the Lisbon treaty is passed, especially with the creation of a single EU foreign minister and a new common external service to represent the EU abroad. In this sense, the EU has, or may yet have, a range of instruments which equip it to deal effectively with new international challenges - an aid programme and a trade policy, its common foreign and security policy (CFSP), an embryonic military capacity, and a nascent diplomatic service.

In the development sphere, these are underpinned by a philosophy of partnership, especially with signatories to the Cotonou Convention. The joint parliamentary assembly and the joint Council of Ministers provide the essential infrastructure for the kind of mutual accountability that characterises progressive and inclusive development relationships.

The structure of the Union’s bureaucracy, in other words the European Commission, is still unsatisfactory. In particular, there are overlaps and complications as between the four Commissioners responsible for external action, in addition to the High representative for the CFSP. To a British eye, though perhaps less so to some other EU members, there is an uncomfortable inconsistency in having a Development Commissioner, Louis Michel, who does not have direct control of the main implementing body for aid delivery, EuropeAid. The Commissioner for External Relations, Benita Ferrero-Waldner, has that role, in addition to her responsibility for foreign and neighbourhood policy. Meanwhile the Commissioners for trade and for enlargement have carved out individual niches, and all have to deal with the High representative, Javier Solana. We British pragmatists tend to be in favour of muddling through, but even with angels committed to collaboration in all these roles, there are inevitable pitfalls. This is an essential issue to be tidied up when a new Commission is installed in 2009.

Finally, the judicious leader who has to make choices at the margin between national and Commission programmes, while factoring in the World Bank, regional development banks and the UN, will want to be assured that effectiveness is high and rising. Here there have been improvements, but there is work still to be done. A single development policy, the creation of EuropeAid, de-concentration of authority to country offices, improved structuring of funding, all these have helped to improve efficiency. Nevertheless, donor surveys show that the EU is still regarded as overly bureaucratic, compared to other sources of funding. It is also the case that only about half of the aid channelled through Brussels reaches low-income countries, a figure regarded by many donors as low.

The reality is that the European Commission is entrusted with only one-sixth of EU member states’ aid, with five-sixths still being channelled bi-laterally by European governments themselves or through other multilateral agencies.

The EU has major comparative strengths in tackling the emerging development agenda. Like others, it is firmly committed to poverty reduction, well-represented at country level and deeply engaged in meeting the MDGs. The EU is also possessed of a range of non-aid policies and instruments and thus has more arrows in its quiver than the World Bank. It is potentially more accountable. It also has more muscle than the UN, with a direct line to rich country policy and the ability to manage the collective voice of its 27 member states. This is not to say that the EU should neglect the World Bank or the UN, far from it. With its particular mix of principles, policies and programmes, Europe has much unrealised potential.

On the other hand, we should not be naïve. European consensus is not universal and, where it exists, not easily achieved. National interests have not been subsumed, and for example shape the geographical distribution of aid. National differences of view still constrain policy, for example on the protection of European agriculture – an observation which Peter Mandelson must ruefully reflect upon. Nevertheless, the cards in Europe’s hand look better by the day, and must encourage more ambitious play.

With regard to international development, the EU’s hand will be further strengthened if it can take advantage of internal and external opportunities. Externally, trade talks are on hold, pending a new administration, However, , the MDG summit and the Accra high-level meeting on aid effectiveness have pointed the way forward on aid, and the Doha review of financing for development is still to come. These meetings will be followed next year by the Italian G8 and the Copenhagen meeting on climate change. Internally, the timetable includes the EU’s own budget review and next year’s elections and appointment of a new Commission.

To maximise its opportunities, the EU needs a change agenda which responds to new development needs. It goes without saying that global trade and climate deals need to be concluded, that the confusion over Economic Partnership Agreements needs to be cleared up, and that donor aid pledges need to be met. Those topics will feature prominently on the international agenda through to the end of 2009. In addition, there are more structural issues. From a long list, here are six suggestions:

• First, is it time to re-think the role of the African, Caribbean and Pacific Group? This clustering has become out-dated, in particular for Africa, as the African Union has become established, bringing to the table not just the sub-Saharan African members of the ACP, but also South Africa and the Mediterranean countries. The new EU-Africa strategy reflects the new reality. Do ACP members really perceive it as having value-added?

• Second, preserve the accountability mechanisms developed with the ACP, especially the joint assemblies and ministerial councils. Make these more global in their reach and more effective. As a half-way house, perhaps invite non-ACP countries as observers. This does not mean handing over control of EU policy or spending – that would negate the value of joined-up thinking within the EU itself. Instead, use the assemblies and councils, and the arbitration procedures written into Cotonou, to set up arenas in which the EU and the developing countries can hold each other to account.

• Third, this means being cautious on one popular proposal, which is to bring the European Development Fund into the budget, so as to increase oversight by the European Parliament. There is a good case for the EU to do precisely the opposite, which is to broaden the scope of the EDF and merge the budget into that. This would give all aid recipients the benefit of the accountability arrangements associated with the EDF as well as access to Cotonou arbitration procedures.

• Fourth, I have previously argued that the EU should create a special, new MDG Fund to by-pass the constraints of Cotonou and the Financial Perspectives to 2013, thus enabling the EU to absorb a larger share of member state aid. This may no-longer be necessary, since a new arrangement has been designed which allows co-financing of aid programmes. This allows Member States to route more money through Brussels. A target for the amount of aid channelled through the new mechanism would help raise the share of Commission-disbursed funds in total EU aid from one sixth to – what? A third? A half?

• Fifth, expand the Peace Facility, so as to give the EU more opportunities in the fragile states of the “Bottom Billion”.

• Sixth, re-organise the next Commission when it takes office in 2009, so that there will be only one Development Commissioner who has full control over all development policies and funds, who would then work in partnership with other commissioners concerned with external affairs. The person occupying this new, enlarged role should also have a formal role in trade negotiations.

In addition to this rather specific and aid-oriented list, more thought needs to be given to joining up the dots on policy coherence, especially between security and development, for example on the military side, and on issues like migration. Careful mapping of coherence issues would be a good place to start.

As always in advocating reform, the difficulty lies less in producing proposals than in securing consensus and delivering actual change. For that reason, a final suggestion is to establish a Commission on external action, to help map the future of the Union in this field. The timetable would be to have a report ready for the new Commission in November 2009.

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