#03 development cooperation
Simon Maxwell

European Aid: Aspiring to the Gold Medal

In the Olympic Games of development cooperation, the European Commission (EC) stands among the top three in the table of medal winners – boasting more medals than the World Bank and about as many as the whole of the United Nations (UN). Andris Piebalgs, the Development Commissioner, can aspire to be the Usain Bolt, the Lightning Bolt, of world aid; or, perhaps better, the famous decathlete, Daley Thompson, proficient not just in one sport but in many – aid, trade, finance, diplomacy and defence, to name a few.

The EC’s pre-eminence is marked by both size and span. In terms of size, disbursements of official development assistance (oda) have reached about €10 billions per year. The World Bank stands at about €8 billion, and all the agencies of the UN put together at about €5bn before trust funds are included, about €12 billion in total. No bilateral aid programme comes close.

In terms of span, Europe has a range of interests and instruments with which other multilaterals cannot compare. In addition to grants, the European Union (EU) is able to provide loans, through the European Investment Bank. In addition to aid, the EU is responsible for trade policy, and has a voice on finance issues, for example at the G20. In addition to narrow development policy, the EU has a role in peace-making and peace-keeping, with instruments to match, like the African Peace Facility covering conflict prevention and post-conflict stabilisation. And in all of this, the EU’s relations with developing countries are based on partnership principles, notably through the Cotonou Agreement with 79 countries of Africa, the Caribbean and the Pacific. Truly, the decathlon is an appropriate metaphor.

In previous years, the Commission did not usually manage to stand on the podium, with a medal round its neck. The quality of its aid projects was sometimes poor, and there were major problems with slow delivery and unspent funds. Clare Short, the UK development minister, famously threatened to repatriate UK aid money if quality did not improve. She was more outspoken than most, but was probably not the only aid minister to think this way.

More recently, disbursement levels have improved, and also the quality of the administration. A recent evaluation is by the Centre for Global Development in Washington[1]. The CGD scored development agencies with respect to 30 criteria related to: maximizing efficiency, fostering institutions, reducing burdens, and transparency and learning. The EC scored above the mean on all four of these aggregate measures. No doubt, the administration will improve further with the recent merger of EuropeAid and Directorate General (DG) Development into the new DevCo. The recently-appointed Director General, Fokion Fotiadis, has a rare opportunity to reshape a major international bureaucracy.

The policy framework also took a major step forward, with the approval in 2005 of a European Consensus on Development. The European Commission, the Council, and the European Parliament all approved this document, which emphasised the objectives of poverty reduction and sustainable development, including human rights and good governance. The Consensus recognises the scale and global reach of the Commission, and its role in delivering coherence between aid and other development-related aspects of policy, like trade. Similar principles underlie the Lisbon Treaty, which has a strong emphasis on poverty reduction.

All this may sound too good to be true, but athletes can always improve, and indeed must do so if they are to continue winning medals. The Commission knows that development policy must evolve to meet new challenges. Andris Piebalgs has launched a review with exactly this purpose in mind, a Green Paper which may lead to a revision of the European Consensus. His particular enthusiasm is for growth, and, underpinning growth, for infrastructure. He brings from a previous portfolio both passion and an expertise in the field of energy. This will play well in an international context which has identified 2012 as the International Year of Sustainable Energy for All. The Green Paper also puts emphasis on what it calls ‘high impact’ development cooperation, by which is meant that public funds should be used to leverage additional domestic and private contributions: ‘crowding in’, not ‘crowding out’ other actors.

Will this be enough at the next Olympic Games? The challenge will certainly be fierce. The victory medal will go not just to the most efficient, nor to the athlete with the widest range of sports. Four big problems need to be solved by all hopeful contenders; four hurdles need to be jumped.

First, development challenges are increasingly global, not local. Climate change and financial stability are obvious examples of problems which are systemic in nature and need intervention at global level if solutions are to be found. There are many others. Take food security, an essential manifestation of welfare at household level, but one influenced by events many thousands of kilometres away, which may affect the price or availability of food in local markets. No doubt, many factors have influenced the wave of protests in the countries of North Africa and the Middle East; but rising food prices, caused by floods in Australia, fires in Russia, and incentives to use maize for biofuels in the US are not the least important. That is why rulers intent on holding power have increased food subsidies to head off the crowds at the palace gates.

No medal hopeful can afford to ignore global issues; no development minister can avoid investing time, political capital and money at the global level. The era of aid programmes built around national or even regional country programmes is over. This has profound implications for partnership relations between poor and rich countries. For the EU, it means shifting attention from nation states to multilateral fora, like the UN or the African Union. And it means working in partnership with developing countries in pursuit of shared global interests. Who will be in the Green Room at the G20, when global imbalances are discussed? Or at the climate talks in Durban in December? The EU will ignore China, India, Brazil and other emerging powers at its peril.

Second, the geographical focus of development cooperation is narrowing, as more countries escape the poverty trap and reach middle income status. India and China are there already, and Brazil, and Ghana. More than twenty countries have graduated from low income to middle income status since 2000, and, according to Andy Sumner[2], 72% of the poor now live in middle income countries. This simple fact poses an enormous challenge to aid. Why should Europe, barely recovering from recession, and facing a long-term struggle to rebuild fiscal balance, provide cash to fund poverty programmes in countries which in most cases are growing fast, have large foreign exchange reserves, and in many cases aid programmes of their own? India, for example, has many people living below the poverty line, more than in the whole of sub-Saharan Africa. However, it also has a nuclear programme, a space programme, and an aid programme of its own, worth over $US 500 million per annum. Aid to India can be justified, for example if it helps to accelerate poverty reduction or underwrite welfare in a way the Indian Government cannot manage on its own.

Aid can be a vehicle for learning and influence. It can also be a partnership, linking civil society organisations in Europe and the EU, and helping learning to travel from East to West as well as West to East. New instruments will be required: not just government-to-government grants, but also twinning local authorities, private sector organisations or non-governmental organisations (NGO), supporting innovation and challenge funds, and, importantly, blending grants with loan funds. Europe and India can also work together to tackle global problems like climate change.

Notwithstanding these arguments, aid to India will doubtless shrink in coming years. Should the same not be true of the many middle income countries which currently receive aid from the EU? Turkey, for example? Or many other countries in Europe’s immediate neighbourhood? There are better, more modern ways of strengthening partnership.

The geographic narrowing raises a third challenge, which is that the residual category of poor, slow-growing economies consists mostly of fragile states, where low levels of income and poor human development combine with poor governance, and, often, conflict, to produce a quagmire of development problems. Traditional aid is hard to spend in these circumstances: government accounting and administrative systems are weak, corruption is often widespread, and NGO staff in the field is at risk of kidnapping or worse. In these countries, humanitarian aid can be more appropriate than development aid, at least in the short run, and may need to be combined with political investment in conflict resolution and long-term support for peace-keeping. The ‘development’ minister will either need to draw extensively on the resources of foreign policy and military colleagues, or, as often happens, take the lead. Poverty reduction remains the priority – in Afghanistan or Somalia, for example – but achieving it requires different skills and a different package of resources.

Finally, the challenge of policy coherence looms over the aid programme. Agriculture, fisheries, climate policies, trade – all these impact on developing countries, often in ways which exacerbate poverty. A good example is European subsidies on cotton [3], estimated to cost West and Central African producers up to $US 150 million per year. It would be misleading to claim that every aspect of European policy should be designed so as to offer maximum benefit to developing countries: trade-offs will inevitably arise. Nevertheless, costs to developing countries should be avoided wherever possible, and compensation considered when the poor are asked to bear the burden to measures which benefit richer Europeans.

Put these new challenges together, and the skills our development athletes need are ever-changing and ever more difficult to acquire. In days gone past, it might have been enough to master an aid programme whose primary function was to transfer resources and implement projects in classically poor developing countries. Those skills are still required, of course, in Tanzania, Rwanda or Malawi. For that task, a deep knowledge of aid effectiveness is the primary requirement. Familiarity with the Principles of the Paris Declaration (an international agreement signed by over one hundred Ministers, Heads of Agencies and other Senior Officials) – ownership, alignment, harmonisation, accountability – is the main qualification, updated by the Accra Agenda for Action, and honed for the High Level Forum on Aid Effectiveness that will take place in Buzan, South Korea, later in 2012.

Elsewhere, different capabilities are required. Development ministers – and the civil service administrations that support them – need to understand the global economy and global politics, and be able to help broker the global deals that will keep our planet safe and our communities prosperous. They need to be able to understand and engage in the complex politics of war-torn territories far from home. They need to mobilise resources and alliances in partner ministries, to make sure that the international environment favours poverty reduction rather than restrains it. And in fulfilling these tasks, they need to lead their public opinion on a journey of understanding, bridging compassion and self-interest, making the case not just for ‘development’, but for global citizenship.

Europe, and European leaders, have a special responsibility with regard to global citizenship. As the largest trading bloc, our own welfare depends on peace and prosperity abroad, on a world characterised by respect for the rule of law. As home to 500 million people, we need global warming to be arrested, and the environment to be protected. Most of all, as a Union based on freedom and respect for human rights, our values require active citizenship and responsibility on the global stage. That is why we must continue to aspire to the gold medal in international development.

Footnote:

[1] Report of the Centre for Global Development on the quality of ODA:
http://www.cgdev.org
[2] Andy Sumner: Global Poverty and the New Bottom Billion: What if Three-Quarters of the World’s Poor Live in Middle-Income Countries?
http://www.ids.ac.uk
[3] Ian Gillson: How cotton subsidies harm Africa
http://www.odi.org.uk