DEVELOPMENT: EU Aid Plans Heading for Crisis

By IPS Correspondents Reprint | | Print |

Analysis by John Quigley

BRUSSELS, May 18 2006 (IPS) - The future of EU spending on external aid for developing countries has been cast into doubt following a vote Thursday in the European Parliament. A legislative proposal governing how the EU will allocate and spend overseas development aid has been rejected, and this may force a suspension of EU aid spending.

Parliament voted to reject a proposal from the European Commission that would establish a new financing instrument for development and economic cooperation (DCECI) with third countries. The new instrument is intended to replace the old Asia-Latin America Regulation and, controversially, would greatly enhance the powers of the Commission to establish policy goals in development cooperation.

The negative vote calls into question the European Union’s commitment to eradicating poverty and boosting the health or education prospects of some the world’s poorest countries, including in Asia.

Together, the EU and its member states provide an estimated 55 percent of global overseas development aid (ODA), and the impact for development projects run by Europe could be severe. The question how this external relations money will be spent in the years 2007 until 2013 was the focus of negotiations that began in 2004 and reached a crisis point Thursday.

With the adoption of the Financial Perspectives for the years 2007 until 2013, the EU now has a budget framework in place for the next seven years. Of the 50 billion euros (63 billion dollars) proposed for external relations between 2007-13, approximately 15 billion euros (19 billion dollars) is proposed for DCECI spending.

There has been no clear allocation of money from the DCECI proposal on a regional basis. However, if the Commission and Council stick to the traditional system of allocating development aid money for Asia, seen in the old Asia-Latin America Regulation, Asia could expect between 600 and 700 million euros (658 to 885 million dollars) annually. In comparison, Latin America could expect about half that.

The author of the parliament report advocating rejection of the Commission proposal, Gay Mitchell, wants two separate instruments, one each for development and for economic cooperation.

“Time is running out,” he said, and “the EU’s concern must be for the welfare of developing countries.” A new system must be in place before the end of this year if the funding of development programmes is to be maintained into January 2007.

Thursday’s vote is the culmination of negotiations that began in September 2004 when the European Commission proposed a radical overhaul of how the EU would spend money in third countries. That proposal suggested that the existing system was too complicated and massively inefficient. Sixteen different external assistance instruments would be abolished and, in future, there should be only several geographic and thematic instruments.

The proposal calls for three geographic instruments. First, for pre-accession aid for those countries seeking to join the EU; secondly, for countries just outside the borders of the EU and including North Africa; and thirdly, for development cooperation and economic cooperation (DCECI), covering all other countries not included in either of the first two instruments.

The geographic instruments would be complemented with three thematic instruments. First, for humanitarian aid covering relief and emergency spending; secondly, for macro-financial aid for countries of the former Soviet Union; thirdly, a stability instrument to help third countries tackle crises and cross-border challenges including trafficking and terrorism.

The DCECI proposal is the instrument more directly concerned with Asia. And it has proved the most controversial, with the European Parliament claiming that it is wrong in principle to merge the priorities of delivering assistance to developing countries and industrialised countries into the one instrument. The idea of trying to lump together all external relations spending outside of the continental European heartland was seen as ludicrous.

The vote Thursday, in Strasbourg, cemented a hardening of views of all protagonists in the negotiations, from the Parliament, Commission and Council. Parliament’s anger is focussed on two specific issues.

First, that the DCECI proposal should be split into two separate instruments. Thus, Parliament’s Committee on Development deleted all references to economic cooperation in their report. Mitchell suggested that cooperation with industrial countries could be dealt with in a new proposal.

Secondly, Parliament decried the threat to its legislative powers, which allow it to decide jointly with the Council on matters relating to cooperation aid. If the Commission had its way, the power to decide the priorities for development cooperation would be removed from Parliament.

However, this could see development priorities being opened up to political considerations of the day. To counter this threat, the Committee on Development decided that the goal of EU development policy was not to be “guided” by the UN Millennium Development Goals (MDGs) but to “achieve” them.

The Committee also agreed to place a time limit on the legal effect of the proposal, bringing it to an end when the forthcoming Financial Perspective period expires in December 2013.

Parliament’s vote will provoke a crisis if the reluctance of the European Commission to compromise on the principle is not overcome. EU commissioner for external relations Benita Ferrero-Waldner is prepared to concede that there should be a distinction between policy towards developing countries versus industrialised countries. However, she wants this distinction to be made within the existing text.

Ferrero-Waldner considers the demand for a separate instrument to be unhelpful. “The Commission will not be able to deliver external assistance quickly and efficiently if Parliament makes the system more complicated,” she said.

This is not the view of EU development non-governmental organisations. Eurostep, a grouping of development NGOs considers the Commission’s claims to be unfounded. “Only a separate instrument for development assistance can ensure Europe’s credibility with developing countries,” said Simon Stocker of Eurostep.

The crisis puts at risk aid programmes with developing countries including food aid, fighting diseases, conserving the environment, promoting human rights, aid to uprooted people and rehabilitation and reconstruction aid whose legal effect all expire in December.

Providing this kind of aid has made the EU the largest donor worldwide of overseas development assistance (ODA). However, a closer examination of what the EU calls ODA shows some striking anomalies. Gay Mitchell criticises the EU for including all kinds of external aid spending into ODA figures. “Monies voted for development should not be spent on other purposes, such as immigration control,” he said.

A report published in April by Concord – a confederation of development and relief NGOs – said that one-third of what was reported in 2005 as European ODA was in fact not new aid but rather debt cancellation for Iraq and Nigeria, the provision of housing for refugees inside the EU, and money spent on educating foreign students in the EU.

After voting to reject the combined DCECI proposal, Parliament has put the ball back into the European Commission’s court. The threat to the EU’s external aid spending is real and the time to sort out the mess is short. Commission president José Manuel Barroso once said the EU has the resources to win the war on want. But without the spending mechanism in place to fight the war, the billion people living in poverty will have little to look forward to.