THE DEVELOPING WORLD
There’s much ground to make up, but the reform of EU aid is now under way
Summer 2007
Streamlining Europe’s massive but fragmented aid effort is a major challenge. Jean-Michel Severino, head of France’s AFD international development agency, explains why it has been so difficult and assesses the steps still to be taken if it is to be a success
The European Union is a giant of international development assistance: it dispenses €48bn a year, or over half of the world total. The European Union’s institutions alone spend close to €9bn per year, about a sixth of all official development assistance (ODA).
Yet Europe doesn’t wield the international influence that this vast public effort should give it: the fragmentation of Europe’s aid is such that the EU’s capacity to sway the international debate and shape policy is rather limited. And indeed, the major debates on development cooperation strategies are rarely framed in Europe.
This is all the more regrettable because there is a distinct European vision of development aid, which is built on two pillars. The first is an integrated vision of development, based on joint progress in the socio-economic, political and commercial fields and exemplified in the African, Caribbean and Pacific (ACP) agreements, the Euromed initiative and the EU’s neighbourhood strategy. The second is Europe’s emphasis on the notion of partnership between donor and recipient states, to ensure that the latter remain the drivers of their own development. But the absence of a unified European voice in the Bretton Woods Institutions has led this vision to be marginalised in the conceptual debates on international development. In recipient countries too, European aid suffers from a lack of visibility.
Yet there is nothing pre-ordained about this state of affairs: the EU can and should be ambitious regarding its development assistance efforts, and that implies turning it into a truly European endeavour. The years ahead are going to see European development aid increase considerably following the EU’s commitment to raising ODA form the present 0.42% of its GDP to 0.56%. It could therefore stand at €84bn by as soon as 2010. This context of growth in our aid spending should be the occasion of improving the coherence between member states’ development policies, and for a drive to strengthen the ties between the various European development actors.
Enhanced cooperation between European donors is all the more necessary because the whole field of international aid is becoming more complex by the day. World Bank data shows that the average number of donors per country rose from about 12 in the 1960s to about 33 during the 2001-2005 period. China, Brazil, Korea and India, all of which have been substantial recipients of foreign aid, are now emerging in certain parts of the developing world as donors. Then there is the surge in recent decades in the number of NGOs, private foundations and international funds that are actively at work on development issues.
Meanwhile, the growing complexity of the global aid architecture is imposing significant costs on recipient countries that now have to manage relations with such a high number of foreign actors. It was an awareness of this problem that led in 2005 to a collective commitment by donors to improve the harmonisation of their aid practices, couched in the “Paris Declaration”. But if the international community is to move forward on this agenda then European countries should clearly be leading the way, not least because the EU now represents close to 60% of all the sovereign donors active in ODA worldwide.
In response to this need for enhanced coordination between the EU’s member states, the initial reflex was that of centralisation. The Commission felt tempted to construct a new international development strategy from scratch, rather than to build on the wealth of experience of existing bilateral cooperation institutions. Instead of clarifying the architecture of European aid, this risked adding yet another layer to an already variegated landscape. Countries that receive aid from Europe already complain about the excessive complexity that reduces the efficiency on the ground of EU assistance. The reforms needed to make Europe’s different aid efforts more coherent should thus aim at simplifying the existing mechanisms.
When Romano Prodi was its president, the European Commission took an important step in that direction by creating EuropeAid, a single agency in charge of the implementation of the Union’s various cooperation policies. Recent initiatives by its Development Commissioner Louis Michel to equip the EU with a coherent body of doctrine through key documents such as the “European consensus” and the EU’s “Strategy for Africa” have also been laudable achievements, but much more remains to be done.
The success of the EU’s reform drive will depend on its ability to progressively clarify the roles of the different European aid actors. One of the crucial issues on the table will be that of articulating member states’ bilateral aid systems, each with their different aid instruments, and the Commission’s own development institutions. This matter is unlikely to be easily solved in the years to come. Yet there is much that can be done to move towards a more coherent and efficient European-wide practice.
As in other European policies, the subsidiarity principle constitutes an important safeguard against excessive centralisation, and without it we would risk losing the benefit of the bilateral agencies’ experience. The EU’s efforts should therefore be concentrated on those tasks that are difficult for individual member states to accomplish on their own. This leaves it with a considerable task at hand: to start with, the Commission would have a real added value in coordinating and promoting European thinking on both development policymaking and research.
Despite important progress made over the years, there also remain real differences between European donor countries’ approaches to development. The challenge is therefore to establish a common vision of Europe’s foreign aid priorities, which must include the establishment of a zone of economic growth and political stability in the European neighbourhood spanning the Middle East, eastern Europe and Africa. In the same way that a joint European vision was created for Africa, the Caribbean and the Pacific, European countries need to fashion an explicit policy towards other regions of the world.
In the US, leading think tanks and universities do much to shape the debate on international aid, but their French or German counterparts barely have the critical mass to be audible beyond their own national borders. This often leads to monolithic thinking about development, and the Commission could do much more to promote original European thinking on development issues by coordinating large-scale research and training projects and by developing synergies between national research efforts.
Within the Commission, the line of responsibilities between the Commissioner for external relations and the Commissioner for international development remains murky and would greatly benefit from clarification. The 11th European Development Fund (EDF) should naturally become an integral part of the EU’s budget. This would constitute a symbolic recognition that development aid is a vital part of the Union’s policies. Doing so would also give the European Parliament a say and clarify the budgetary rules that are applicable.
At the inter-state level, we are only now embarking on the arduous but necessary task of establishing the division of labour between different EU countries’ development agencies. This is a project that makes a lot of sense, but it is important that the new architecture should maintain the flexibility its stakeholders need. Just as the aid world is more and more complex, development agencies need to have the means to engage the various actors of aid, as well as a wide range of instruments to choose from.
So what could a working European development network eventually look like? The aim should be to create a coherent structure of complementary organisations that build on each others’ expertise and added value. A flexible network of that sort would allow for aid to be mobilised in large enough amounts so as to achieve critical mass in large-scale projects while also guaranteeing local anchorage. Most European actors have developed their own development instruments, ranging from grants to loans to guarantees, and from technical assistance to applied research. A working network of development agencies that could capitalise on the strengths of each of its members would collectively possess a full range of skills and tools. This wealth of innovative financial and technical instruments would enable European aid to provide solutions to the problems that genuinely face developing nations, rather than the present situation where too often they seek out only those problems that fit their ready-made solutions. Smaller donors would be able to take part in large projects they have not been able to engage in otherwise, and the private sector and foundations could be invited to contribute to this ambitious European endeavour.
But to undertake such a vast project of institutional reform, two practical developments must first take place. Without them, a reorganisation of European aid would not make sense.
First, the EU urgently needs to improve the coherence between its own policies: The trade, agricultural, employment, migration and education policies of the EU have been designed over the years without much consideration of their impact on the socio-economic development of the world’s poorest countries. Unless the clear contradictions that exist between these various European policies are tackled, the EU’s foreign aid will be no more than a corrective policy, and a grossly insufficient one at that.
Second, Europe’s development aid actors must get into the habit of working together on the ground. Synergies are built by engaging in joint initiatives, and that means working closely together not only in their headquarters but also in the field. A number of recent measures have given Europeans the chance to step-up their cooperation efforts, and these need to be exploited to their full capacity. The trust fund established to improve African infrastructures offers an opportunity for the Commission, the European Investment Bank and the bilateral aid agencies of several EU countries to work together and build common practices.
The successful reform of European aid will depend to a large degree on whether we can capitalise on existing cooperation initiatives. Aid agencies have been looking hard at ways to work more closely together, and in 2005 the European Investment Bank, the German KFW development bank and France’s AFD development agency agreed to increase cooperation through joint analyses, co-financing, funding, staff exchanges and the pooling of services. In February of this year, KFW and AFD, along with Austria’s ADA, AECI from Spain, the Czech development cooperation people and their counterparts in the Netherlands organised a forum open to all European aid practitioners. That led to the creation of a permanent network within which smaller working groups will focus on very specific issues. These initiatives could turn out to be the first steps towards a permanent forum for shaping experiences and best practices, setting up common operations based on mutual recognition of procedures and reflecting collectively on common aid strategies. This pragmatic, decentralized effort of coordination shows that the reform of European aid is well under way.