EU Steps Toward Common Aid

Brussels – The European Commission has decided to push for more ambitious reforms ahead of the aid effectiveness summit to be held in Busan later this year. The European Commission, the executive arm of the European Union, is looking for a common EU position that could save the EU 4 billion euros which can be spent on additional aid.

But NGOs have expressed concern about the Commission's new proposal to drop several indicators of aid effectiveness. They have doubts about the recommendation to blend loans and grants from development banks and donors to leverage additional development funding. The European Commission does not clarify in its report how and which financial institutions are going to be chosen, and how the social impact of the aid will be tracked, experts say.

The European Commission has prepared a report ahead of the high level forum on aid effectiveness in Busan, Korea, to be held from Nov. 29 to Dec 1. The report has been sent to all EU member states who now have to decide on a common position at the summit.

The Commission's communication highlights the fact that the EU has made considerable progress in improving its aid effectiveness policy. Currently, the EU is the world's biggest donor, giving 53 billion euros to partner countries. “We are happy to note that the way we offer aid is better now than ever before,” Catherine Ray, spokeswoman for the EC's development department tells IPS. “There is a lot more aid transparency than five years ago. But now we have to go further.”

In the report, the Commission suggests implementation of the Paris and Accra agreements more closely. The Paris agreement was adopted at the second High Level Forum on aid effectiveness. It lays out an action-oriented roadmap to improve the quality of aid by suggesting a series of specific measures and a monitoring system to assess progress and to make sure donors and recipients hold each other accountable for their commitments. The Accra agreement was developed to accelerate the advancement towards the Paris targets.

One of the proposed reforms is stronger coordination between donors. “We can achieve this by joint programming,” Catherine Ray tells IPS. After the 2010 earthquake in Haiti, high representative for foreign affairs of the EU Catherine Ashton declared to the United Nations that the EU would jointly deliver aid, for the first time ever. Since July 2011 the EU is also using joint aid programming in South Sudan.

According to the Commission, the number of these practices have to increase. “Studies show that if we better coordinate aid policies and programming by member states and the EU, we can save up to 4 billion euros,” says Ray. “And we also need better coordination on an international level. Countries as the United States, France, Italy, Canada and Belgium, but also institutions such as the Commission all have their own aid programmes. These should all be tuned into each other.”

But civil society is looking at dangers inherent in such moves. “At present there are 15 indicators of aid effectiveness,” Franz Berger, aid effectiveness coordinator at CONCORD, the European Confederation of Relief and Development NGOs, tells IPS. “The Commission proposes to drop seven of them. We are very critical of this; it decreases the gobal accountability and peer pressure on donors.”

CONCORD is also highly sceptical about the Commission's suggestion to involve the private sector in development aid. “That is our biggest concern,” says Franz Berger. “The report does not explain why more private sector involvement makes aid more effective.”

Both NGOs and the Commission agree the private sector has to be developed in recipient countries to eradicate poverty. “But some EU countries only use their development aid to open new markets for their companies,” says Berger. “There is a very thin line between the EU who wants new global opportunities for their own companies, and developing a local private sector in developing countries.”

The confederation of NGOs says the Commission's report makes no mention of increasing untying of aid. 'Tied aid' is aid in which all purchases for development are made from firms in the donor country. A study by by the European Network on Debt and Development (Eurodad) released earlier this week revealed that two-thirds of all development aid is channeled to companies in the donor country.

Currently 82 percent of EU development aid is officially untied, although the EU's 2010 target was 87 percent. But according to Eurodad's study, most untied contracts still go to firms from rich countries.

Reacting to the NGO's comments, Ray tells IPS: “Untying aid is an important issue. We have increased national purchasing of goods and services during the last five years, but we have to strike the proper balance to make sure that the taxpayer's money is given to entities – NGOs, institutions, governments and companies – that can ensure the highest level of accountability and management standards.”

Finally, the Commission recommends blending loans and grants from donors and development banks such as the European Investment Bank or the African Development Bank as a way to raise money to leverage additional development fund.

“The argument is that there is too little aid and therefore aid should be used to provide incentives for private companies and banks to invest in developing countries,” says Berger. “But private companies are looking for profit and growth, and there is no evidence this will really help lift people out of poverty. Instead of downplaying the role of aid, we think the EU should live up to its commitment to provide 0.7 percent of their GNI (gross national income) as aid, which they promised to reach in 2015. The EU will have to mobilise more than 50 billion extra to reach this goal.”

EU Development Ministers have until Nov. 14 to work out the EU's position based on the European Commission's report.