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My vision for development policy – Letter to Member States and the European Parliament

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I wanted to share with you a letter I’ve sent to EU Development Ministers in view of the Foreign Affairs Council, and to Members of the European Parliament and some NGOs.

I thought that, in such crucial moment for development, it was appropriate to share with the Ministers and MEPs the issues I consider as immediate objectives and long-term orientations, so that the debate is launched!

In a nutshell, the more I think about it, the more I meet people, I visit countries, and the more I’m convinced that our development policy and aid should be directed towards economic growth and job creation, while keeping good governance as a strong priority. This is what we want for Europe, this is what developing countries need as well. We will be supporting them in this endeavour, to set up sound health, tax, legal and social systems; to fund infrastructures and develop industrial markets; to establish good governance and build sustainable economy.

I let you have a look and I’d be happy to read your comments.

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Letter to the EU Development Ministers:

Dear,

In the light of the forthcoming Foreign Affairs Councils that will focus on development policy, and in the run-up to the European Council on 17-18 June, I thought it opportune to write to you to outline some thoughts regarding the immediate issues that we will need to discuss, as well as some longer term, more fundamental concerns.

It is true that 2010 is a pivotal year for development policy. The UN MDG High Level Meeting that will take place in New York on 20-22 September represents a major challenge and opportunity. It is an opportunity to reflect and promote the fact that the EU is by far the world’s largest aid donor, giving more than half of global assistance. And furthermore, it is an opportunity to communicate to a wider audience not only this fact, but that the EU is practically unique in the way that it truly focuses its aid on poverty alleviation. On both of these grounds European citizens have every right to be very proud, and we all need to make even greater efforts to make sure that all of us are aware of Europe’s achievements both at Community and national level. Furthermore, the Meeting is an excellent opportunity for the EU to take the lead in identifying a clear programme of actions that are needed to achieve the MDGs – particularly those most off-track – by 2015.

The MDG event is also a challenge. EU ODA has almost doubled since the adoption of the MDGs, amounting to €49 billion in 2009, and again, this is something to be proud of. Although a decrease from 2008 volumes, it corresponds to 0.42%of EU GNI and is a strong outcome compared to other major donors, despite tight budget situations in most Member States. Nevertheless, the EU is behind the schedule to reach the collective EU intermediate target of 0.56% by 2010, as a step towards devoting by 2015 0.7% of GNI to ODA. In the current financial and economic crisis, reaching our overall EU commitment by 2015 is certainly still achievable, even though it will be difficult, and will require real political commitment and action from us all. This is why it is vital that at the June European Council a clear message of our determination to meet our commitments in 2015 is made in unequivocal terms, and that Member States agree to indicate credible and verifiable annual Action Plans outlining what they will undertake to achieve these commitments. On this basis the EU will again be able to lead the MDG discussion in New York.

In addition, the EU has to redouble its efforts to make sure that its aid is granted effectively; that it makes a real difference in helping developing countries find their own way to pull their citizens onto the first rung of the ladder towards a developed economy, so that they can develop a medium-term future where they can finance their own continued economic growth and development, and no longer need to rely on foreign aid.

This brings me to a central point. Even if all the aid granted by the EU were to be focused on the world’s poorest countries, it would amount to a very limited figure for each of their citizens. When we meet our 0.7% commitment, this figure will of course increase, but we should have no illusions that aid alone will achieve the goal of eradicating global poverty and giving all the world’s citizens an independent economic future. In this light I believe that it is vital that we focus on getting real “value for money” from the aid granted, ensuring that it acts as a catalyst for growth and jobs in the developing world; that every Euro granted leads to as much as 10 or more Euros in investment. The Europe2020 initiative is in reality just as relevant to the developing world as it is the EU – only through catalysing jobs and growth in the developing world will the vicious circle of aid and dependence be broken: a 1% increase in GDP in a developing country will generate far more benefit than a significant increase in ODA.

With this in mind I would like to seek your help in refocusing EU development policy on jobs and sustainable growth in the developing world, on leveraging the aid spent, and on increasing the efficiency with which we grant aid. I would propose the following actions in this respect.

In the wake of our difficulties to deliver on our ODA targets, aid effectiveness has become one of the key challenges for the European Development Policy. The EU has agreed in principle for some time on the importance of co-ordinating our efforts to avoid the overlap and duplication of our aid programmes, to reduce the administrative burden on our partners in developing countries, and focus on areas where each Member State or the Commission can provide the greatest added-value. However, despite the European Consensus, which is based on the principles of aid effectiveness, the Paris Declaration, the Accra Agenda for Action, the EU Code of Conduct on Division of Labour of 2007 and the Operational Framework of 2009, progress in practice has been much too slow.

The Lisbon Treaty enshrines the need to act much more in complement and calls on the EU and its Member States to coordinate their development policies and cooperation and to consult each other on their aid programmes. Such an approach can, according to academic estimates, provide efficiencies of between at least 3 and 6 billion Euros per year. However, in practice much more needs to be done to make this a reality, and effective co-ordination today remains an exception, leading to waste and justified criticism of the EU by our partners, other donors and civil society. We must demonstrate before the New York MDG event, as well as at next year’s High Level Forum in Seoul, concrete progress in terms of reducing the overlap and duplication of our aid programmes and the administrative burden on our partners in developing countries

In seeking to make progress it is important to be clear regarding our objectives. First of all, aid effectiveness should not introduce any form of Community control over Member States sovereign decisions on how and where aid is granted by them. It must however provide an effective mechanism to enable Member States and the Commission to take account of one-another’s intentions regarding aid programming when reaching their own, independent decisions.

It is with these considerations in mind that the Commission proposed, in its recent Communication on A twelve-point plan in support of the Millennium Development Goals, to “progressively bring together the timing of national and EU programming cycles at partner country level by 2013 and use the joint programming framework to share development priorities and objectives in developing countries to avoid duplication and overlap” and to “use the common timing and build upon the joint programming framework to develop European country strategy papers and multi-annual programmes, as has been done by the EU for Haiti, thus meeting our commitment to deliver on aid effectiveness and predictability to partner countries”.  I am sure that you will share my determination to make these gains, not just to the benefit of our partners in the developing world, but also to demonstrate our determination to EU taxpayers to get the maximum value for money. But to achieve this will require real political determination of us all in order to quickly drive these changes within our respective administrations. This requires strong action by us all, both in the Commission and in Member State ministries. I look forward to discussing with you how to make very rapid progress. Once the EU has translated the aim of aid effectiveness into practice, I suggest that we should use this as a springboard to lead an international effort to improve effectiveness, both with other country donors and civil society.

I also look forward to reflecting together with you on other ways to ensure that aid really helps to create a sustainable economy in our partner countries; that as mentioned above, every Euro granted leads to real leverage in terms of actual investment.

I have no doubt that it is true that if a developing country succeeds in providing itself with a system of effective governance providing for the rule of law and security, together with effective education and healthcare and reliable energy and transport infrastructure, it will have the means to pull itself onto the path of development. ODA as grant money alone will never meet these challenges, particularly those regarding essential infrastructure for economic growth, and therefore we need to concentrate on aid being a catalyst, rather than a panacea in its own right.

Perhaps I might make some first comments on possible approaches to pursue this objective.

Firstly, the new Lisbon Treaty provides us with the opportunity to have a more effective link between development and wider foreign policy; it is indeed a truism that there is no development without security and the rule of law, and no security without development. Baroness Ashton and I are determined to use these new opportunities and synergies more effectively to make effective governance an even greater cornerstone of development policy. With this in mind, the Commission will now start work on two new Communications, firstly on “An integrated EU external relations strategy for the Horn of Africa: development, security, piracy and the rule of law”, and a second on “An EU Strategy for an effective development policy with respect to Afghanistan”. I hope for your support in making these initiatives an effective start to capturing the possible benefits that the Lisbon treaty provides for the EU.

In addition, I believe that we need to consider very seriously how we can move from a grant-focused approach towards increasingly a blended grant and loan based aid policy, focused on using EU development funds to leverage investment in infrastructure in developing countries, and particularly Africa. For example, as I am sure you know, less than one-third of people living in sub-Saharan Africa have access to electricity, and many that do have such access have no reliable supply. This has a huge negative effect on the ability to meet many of the MDGs, and is a major limit on the ability of small business to grow in the developing world, or even survive. Development aid alone will never provide the funds needed, but a step-by-step approach based on grants, loans and risk-sharing facilities might. The existing experience with the Infrastructure Fund gives us an example of what can be achieved. Could we even work together, with our partners in the developing world, aid agencies and the EU’s energy industry, to aim that within two decades all global citizens have access to reliable and sustainable electricity? Of course, there is a huge link here between development and sustainability, and the results of Copenhagen will provide huge opportunities for financing the development of sustainable energy in the developing world.

One additional avenue for creating leverage from available aid can be through budget support. Over the last years the proportion of the EU’s aid budget that has been provided in the form of budget support has increased very significantly. I am convinced that this can be an effective manner to create leverage from aid through its combination with nationally raised money. However, after this initial experience at Community level I believe that a thorough evaluation of how and when such an approach has been successful is necessary. The Commission will therefore be launching a public consultation on this issue very shortly with a view to a future Communication identifying best practice, and I look to your support in developing a truly objective review of this important instrument.

Finally, I would like to reflect on the other possibilities than ODA that we have to provide assistance to our partner countries. Developing a reliable tax base is vital, as examined in some depth in the Commission’s recent Communication on Tax and Development. Such programmes require real expertise, something EU Member States have in abundance. Although non-grant related aid cannot distract us from achieving our 0.7% GNI commitment, I believe that we need to work together to see how we can assist our partner countries in promoting real and effective governance.

All of the above leads me to the conclusion that it is now opportune to begin work on a revision of the 2005 European Consensus on Development. I consider it important in this respect that any such revision is jointly developed by the Commission and the Member States in partnership. With this in mind I intend to launch a wide public consultation, and would also propose to accompany this with a series of public meetings and private meetings of representatives of EU Development Ministers.

These are of course just some first reflections, and in particular we will need to discuss issues such as how we can work together to target the most off-track countries and MDGs and particularly in those countries where real progress remains elusive, how we can use the EU’s expertise to assist the emerging regional development initiatives particularly in Africa – the EU’s experience can provide some very valuable lessons here, as well as innovative sources of financing, to name but a few.

Yours sincerely,

Andris Piebalgs

My vision for development policy - Letter to Member States and the European Parliament , 4.0 out of 5 based on 8 ratings

4 Responses to “My vision for development policy – Letter to Member States and the European Parliament”

  1. Markus Gastinger says:

    Dear Sir,

    I fully agree with most of your letter and would especially like to wish you best of luck in your endeavour to bring EC and member state aid closer together. I do think that this could indeed free up substantial amounts that can be channeled to LDCs.

    May I just add one point: As you rightly point out, ODA can hardly be the answer to all development problems. Compared to private flows such as FDI, it is marginal. I was therefore thinking, the best way to attract foreign investment is by giving the local population increased purchasing power, i.e. by raising their income, since this will be one of the main considerationa for foreign companies whether or not to establish subsidiaries.

    Do you think something like establishing  a Sub-Saharan-African-wide minimum wage, at least for projects implemented by the EU (in addition to all social standards that we already have to adhere to), would be a viable way forward to increase the living standard in those countries? Something like 2$/hour would probably already be a huge headway for most employees in these countries and reduce the gap between LDCs and more developed countries.

    I would be glad to hear your views on that!

    Yours faithfully,
    Markus

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  2. Daniel Pajank says:

    Dear Commissioner Piebalgs,

    I have three points regarding your letter: one acknowledgement, one critique and one suggestion.

    First, I acknowledge your effort to bring the EU member countries’ aid into alignment to avoid duplication and facilitate the management of incoming aid by client countries. Channeling aid in a coherent and predictable way may increase its effectiveness, especially with regard to scarce human resources in developing countries.

    Second
    , I don’t share your view that we can be proud of being the world’s largest donor contributing “so much” to alleviating poverty. As a European I feel very humble regarding our contribution to African development. In my opinion, as Europeans we have a moral duty to assist our African friends along the way they want to go to achieve economic, social and political progress. On average, European are much richer than Africans. Under the condition that Europeans and Africans are the very same human beings, there is no reason to be proud of being such a big donor. Historical reasons, first mover advantages and a good portion of good luck provide us Europeans with a duty to correct inequities and disequilibria in our world to assist the African people in acquiring the same opportunities as we enjoy them in Europe. We should not be proud in doing this since – from a moral point of view – this is the duty we simply have being more fortunate. (I am happy to clarify and discuss this point further with you)

    Third
    , the EU and other donors propagate good governance, accountability and transparency. I would suggest that you push very hard that the EU member states make their aid fully transparent. We are all well aware of the fact that giving aid has different underlying motives. Aid can be provided out of a moral duty, aid can be provided for political reasons to gain power in international relation, aid can be provided for economic reasons to open up markets for a countries own companies or to provide domestic employment in the aid sector. Exactly because of those reasons key players in donor countries may have strong interests to camouflage aid flows. It will be very hard for you to convince governments to fully disclose all aid flows going beyond the OECD aid statistics. However, living up to the highest levels of transparency will enable a more effective use of aid and raise also Europe’s moral reputation in the developing world.

    best regards,
    Daniel Pajank  

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  3. I don’t believe I would be able to keep up with managing a blog like it! Splendid job and I truly hope you maintain it.

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  4. James says:

    You know, reading this, I had no idea that the EU gave over half of the aide that is given yearly.  Good for them!  It’s always good for industrialized nations to give back to needy ones.

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