THE DEVELOPING WORLD
The case for a single European development agency
Autumn 2008
The days when Europe’s plethora of aid donors exerted significant influence in recipient countries are fading, says Jonathan Holslag. He proposes centralising the EU’s development cooperation into one that would rival USAID and counterbalance the growing aid weight of China, Russia and Brazil
The European Union faces a stark choice in its approach to development aid: Continue to compete with China, Russia and other emerging donors as individual countries and risk a continued loss of influence and effectiveness, or unite – first internally, then with other non-EU donors – to get better results for aid recipients.
Europe’s first problem is homemade, a result of turf wars between member states and NGOs that result in a confusing and incoherent mixture of aspirations and implementing agencies. It is widely known that the European Union is the world’s largest donor, with an annual budget of €75bn – but it is hardly recognised as such. In India, for example, OECD statistics reveal that there are 851 different “EU” projects underway for a total budget of €4bn. This isn’t “EU” aid, but aid from a variety of EU sources. The average EU member-state donor is active in 23 different sectors. In the agricultural sector, eight member states maintain 29 different projects with an average value of €510,000 each. And in the education sector, six European countries invest on average €230,000 each.
This fragmentation isn’t just silly, it’s counter-productive because it results in reduced efficiency. Too much money and time are spent on administration, consultancy and coordination, as numerous recipient countries’ governments can attest. The visibility of EU aid is further diminished by the fact that almost a fifth of its resources are invested via international organisations or NGOs.
In a world where perception is often reality, the fragmentation of EU aid weakens the EU’s leverage over local development strategies. The 2005 European Consensus on Development and the 2006 EU Aid Effectiveness Action Plan, both of which suggest ways to improve the division of labour in a partner country, could have been important steps forward, but national actors like France’s AFD, the UK’s DFID and Germany’s GTZ cling tenaciously to their own little development dominions.
A better way to manage EU development aid would be to create a European equivalent of the US Agency for International Development and integrate member states’ development cooperation programmes into a single European agency and strategy.
Such an entity is increasingly necessary as new powers like China, Russia and Brazil start to expand their own development cooperation and apply it as a vital lever for obtaining international political and economic influence.
This isn’t just about egos and influence. The ultimate goal of all serious international aid programmes is to raise the standard of living of the people whose countries receive the aid. For several years, Europe has been putting greater emphasis on supporting sustainability issues, including the improvement of social standards, human rights, the environment and responsible public administrations. And there a united EU-AID programme could in theory provide a powerful example – but only if governments are willing to accept Europe’s terms; which brings us to Europe’s second problem.
As the EU continues its counter-productive, compete-with-thy-neighbour aid programmes, China, Russia and Brazil are rushing to profile themselves as friendly giants to the developing world. And they have become considerably more generous with their wealth. Whether this aid relates to road construction or investments in schools or hydroelectric power generation, China is more visible than ever before, especially in Africa. China clearly sees development assistance as a new source of diplomatic influence, and has reserved much of its aid for Africa and Latin America that can help China satisfy its huge appetite for natural resources. India, meanwhile, last year pledged €3bn to Africa, despite still being an aid recipient itself.
Often there are strings attached, such as access to natural resources, having aid projects implemented by foreign contract labourers, improving import access for goods and privileged diplomatic collaboration in multilateral bodies such as the United Nations. And although such aid might nevertheless be reasonably described as healthy competition for the EU, it can become problematic and even unethical when offered to undemocratic regimes and governments that sometimes are even at war. The military junta in Myanmar, for example, owes its survival mainly to aid from its neighbours. “China and India are our life insurance,” a Myanmarese official admitted at the sidelines of a Greater Mekong Region meeting organised in Bangkok in December last year. The same goes for the warlords of Khartoum, who succeeded in capitalising on competition between China, India, Malaysia and the Gulf States by carving out impressive aid packages.
In many cases, aid to such regimes is squandered or even used in ways that are detrimental to the long-term interests of the receiving countries. In the past few years, millions of euros have been wasted in the construction of new presidential palaces and other white elephants. The lack of good governance and transparency makes it is doubtful whether political crooks will funnel the new funds into the reconstruction of their country when it is so much more enticing to use it for shopping on the Champs-Élysées.
As Europe seeks to put more emphasis on governance and sustainability issues, the ready availability of funds from a growing variety of sources has emboldened some developing countries to show European officials the door when they insisted on too much accountability or democracy. Developing countries remain interested in Europe’s aid, but no longer face pressure to meet its conditions. In 2005, for instance, Kenya turned to Beijing after the Netherlands suspended nearly €150m in development aid because of corruption; Angola walked away from negotiations with the World Bank after China threw out a €2.5bn financial lifejacket with no political strings attached; and Myanmar embraced a delegation from India after largely ignoring EU Development Commissioner Louis Michel’s call for more openness.
Aid has always been big business, but for Europe it can hardly be considered rewarding, whether in terms of influence or as a contribution to sustainable development. What is the relevance of promoting ecological farming in Ghana when the local government could reverse its entire policy as a consequence of Chinese support for a different kind of green revolution? What is the significance of encouraging transparency in the Congo’s mining industry when Asian companies extract mountains of copper and cobalt without regard to accountability?
Most of Europe’s standards on development cooperation are laudable. We mustn’t join a race to the bottom with other, less scrupulous donor countries. Instead, we should try to persuade these states that it is in their own interest to join forces on issues like governance, environment, corporate social responsibility and security. But to that end the EU has to earn their respect, and have the credibility to convince the citizens of countries that receive aid that Europe’s governance and sustainability demands are in their own long-term interest.
How do we get from here to there? First, we need a swift agreement on the added value of centralising development cooperation at a European level in a capable EU-AID - a single, visible and effective agency for coordinating, financing and executing our aid projects. This requires an accelerated stage of enhancing coordination, with the Commission’s Delegations taking the lead in determining the EU’s interests, the needs of the partner countries, the necessary policies, as well as in streamlining their implementation. The multi-annual indicative programmes (MIPs) that nowadays form the framework for the Commission’s development cooperation should evolve into coherent strategies that involve all European donors that are active in a developing country. This integration of our aid programmes is a precondition for greater effectiveness.
Making EU aid a true political instrument ultimately also means centralising aid funding in the same hands, gradually replacing shattered national aid budgets.
If, despite the problems surrounding its Lisbon treaty, the EU eventually succeeds in developing its own diplomatic service, that will be an indispensable element in the simultaneous development of an EU aid agency as an effective tool in the service of the EU’s overall foreign policy goals. It should evolve into a visible and effective player on the international scene and become a credible vehicle for engaging other donors into sustainable synergies.
Maintaining the status quo is no longer an option. Both European taxpayers and the citizens of aid recipient countries deserve a more coherent, more responsible and more sustainable approach to development assistance. But they won’t get them unless Europe steps up to the challenge. If we cannot do better, we might as well quit.