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Background BriefingsPOVERTY FOCUS OF EC DEVELOPMENT ASSISTANCE
The European Community is the largest single multilateral donor. Its annual official development assistance (oda) expenditure is almost $6 billion. One of the UK government’s objectives is to improve the effectiveness of EC programmes in helping to meet the Millennium Development Goals agreed at the United Nations. One of our targets is to secure an increase in the share of EC aid that is spent in low-income countries1 to 70% by 2006. Where does the EC spend its development budget?Most donors spend the majority of their aid in low-income countries. Nine of the 15 EU member states spend more than 70% of their aid in these countries. In 1990 EC assistance to the poorest countries was also up at 70% but there has been an alarming downward trend ever since, by 2000 only 38% of the EC’s aid benefitted low income countries, with 62% going to middle2 or high income3 developing countries. How did this situation arise?30 years ago, the EC only provided development assistance to former colonies. This came from the European Development Fund, which relies on voluntary contributions from individual member states4 . There was virtually no external expenditure from the EC budget itself. Since then, major new programmes have been established for Asia and Latin America, the former Soviet Union, the Mediterranean and the Balkans. With the size of the EDF unchanged in real terms, and the vast bulk of the new programmes being spent in middle-income countries, the result has been a shift in the balance of EC aid away from poor countries. EC oda by Region
These developments have meant that the share of EC aid going to low-income countries has fallen steadily:
Of more concern, EC aid to some regions has fallen in real terms, notably to South Asia which is home to two-thirds of the world’s poor people. And the imbalance in the allocation of EC aid measured by the number of poor people in each region remains striking:
Last year’s new commitments remained dominated by assistance to the “near abroad” areas of Europe and the Mediterranean region as demonstrated by the top ten list of recipients from the External Relations budget, shown below. Unlike the UK, many other member states feel these nearby regions are a high priority for Europe.
Recent ChangesThere is now a clear international consensus that to be effective, development assistance should be focused on poor countries. Research also shows that when assistance is provided to countries with poor policies, the result can be to shield those countries from the need to reform. Most aid should therefore go to countries with large numbers of poor people and should back reformers. Middle-income countries will also still need assistance, but this should usually be in the form of technical assistance to help carry out reforms, and through improved trade access and private sector development. Further ProgressThe targeting and effectiveness of EC assistance should improve by adjusting the use of policy instruments available to the EC to reflect the varying circumstances of the countries in these regions. We want to see a return to the proportion of the EC assistance going to Low Income countries from its current low point of only 38% back to the 70% as it was in the late 80’s. Technical assistance which complements concessional lending offers an appropriate package to middle-income countries6 . What about foreign policy objectives?It is more important than ever to look at the EU’s security, economic and environmental objectives alongside its development ones. By tackling the unsustainable inequities that affect the world, an effective international development effort will make an irreplaceable contribution to both global justice and our global security interests. This does not affect the issue of resource allocation. Any decision to provide large grants to developing countries should pass the same tests of effectiveness: is this the best way to achieve the EU’s objectives, and how do the needs of these countries stack up against those of other countries? The fact is that grants are rarely the most effective form of assistance to middle-income counties, who instead need technical assistance to help secure policy reform, and trade access to stimulate economic growth. Prospects & Opportunities for ImprovementReversing the current trend in the share of assistance to low income countries is not straightforward. It requires not only changes to the legislative framework but also an evolution from currently conflicting views within the member states about the purpose of the EC’s external relations and development assistance budgets. Other member states view their purpose quite differently. However, the Development Policy Statement and associated reform initiatives provide a positive base on which to build. The key opportunities to shape the EC’s development assistance, and reverse the current decline include:
Footnotes;
August 2002 Back to Top |
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