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Document 52013SC0273
COMMISSION STAFF WORKING DOCUMENT EU Accountability Report 2013 on Financing for Development Review of progress by the EU and its Member States Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Beyond 2015: towards a comprehensive and integrated approach to financing poverty eradication and sustainable development VOL 1
COMMISSION STAFF WORKING DOCUMENT EU Accountability Report 2013 on Financing for Development Review of progress by the EU and its Member States Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Beyond 2015: towards a comprehensive and integrated approach to financing poverty eradication and sustainable development VOL 1
COMMISSION STAFF WORKING DOCUMENT EU Accountability Report 2013 on Financing for Development Review of progress by the EU and its Member States Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Beyond 2015: towards a comprehensive and integrated approach to financing poverty eradication and sustainable development VOL 1
/* SWD/2013/0273 final */
52013SC0273
COMMISSION STAFF WORKING DOCUMENT EU Accountability Report 2013 on Financing for Development Review of progress by the EU and its Member States Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Beyond 2015: towards a comprehensive and integrated approach to financing poverty eradication and sustainable development VOL 1 /* SWD/2013/0273 final */
TABLE OF CONTENTS Abbreviations. 3 Executive
summary. 7 Introduction. 14 1........... Beyond
MDGs and Beyond Aid. 15 1.1........ Towards
an Integrated Approach to All Financing Processes. 15 1.2........ Towards
a Comprehensive Approach to All Financing Sources. 17 1.3........ Strengthening
Global Governance. 20 2........... Domestic
Public Finance for Development 22 2.1........ Domestic
Resource Mobilisation. 22 2.2........ Maintaining
Sustainable Debt Levels. 31 3........... Private
Finance for Development 35 3.1........ Private
Investment for Development 35 3.2........ Trade
and Development 42 3.3........ Remittances
for Development 47 4........... International
Public Finance for Development 47 4.1........ Introduction. 47 4.2........ Official
Development Assistance (ODA) 47 4.3........ Funding
for Tackling Climate Change. 47 4.4........ Funding
for Addressing Biodiversity Challenges. 47 4.5........ Science,
Technology and Innovation (STI), including Technology
Development and Transfer 47 4.6........ Future
of Development Finance Reporting. 47 5........... Combining
Public and Private Finance for Development 47 5.1........ Introduction. 47 5.2........ Implementation
Table. 47 5.3........ Recent
Trends. 47 5.4........ EU
Policies and Programmes. 47 6........... Using
Development Finance Effectively. 47 6.1........ Introduction. 47 6.2........ Implementation
Table. 47 6.3........ EU
Policies and Programmes. 47 Annex
1 – Bibliography. 47 Annex
2 – Methodology. 47 Annex 3 - Statistical Annex on ODA trends……………………………… (Volume
2 and 3) Annex 4 – Aid for Trade Report
2013……………………………………………. (Volume 4) Abbreviations || ACP || African, Caribbean and Pacific ADF || Asian Development Fund AfT || Aid for Trade AGOA || US African Growth and Opportunity Act ALSF || African Legal Support Facility AMC || Advance Market Commitment ANDI || African Network for Drugs and Diagnostics Innovation AT || Austria ATAF || Africa Tax Administration Forum B4D || Business for Development BE || Belgium BG || Bulgaria BMZ || German Federal Ministry of Economic Cooperation and Development BWI || Bretton Wood Institutions C2D || Debt Reduction-Development Contracts CAC || Collective Action Clauses CBD || Convention on Biological Diversity CIAT || Inter-American Centre of Tax Administrations COP || Conference of the Parties to the CBD CPA || Country Programmable Aid CPSS || Committee on Payment and Settlement Systems CRS || Creditor Reporting System CSO || Civil Society Organisation CSR || Corporate Social Responsibility CY || Cyprus CZ || Czech Republic DAC || Development Assistance Committee DC || Developing Countries DE || Germany DFID || Department for International Development – UK DK || Denmark DMF || World Bank Debt Management Facility for Low Income Countries DMFAS || Debt Management and Financial Analysis System – United Nations (UNCTAD) DRTF || Debt Relief Trust Fund DSF || Debt Sustainability Framework EBA || Everything-but-Arms Arrangement EBRD || European Bank for Reconstruction and Development ECOSOC || United Nations Economic and Social Council ECREEE || ECOWAS Regional Centre For Renewable Energy And Energy Efficiency EDCTP || European and Developing Countries Clinical Trials Partnership EDF || European Development Fund EE || Estonia EEAS || European External Action Service EIB || European Investment Bank EIF || Enhanced Integrated Framework EITI || Extractive Industries Transparency Initiative EL || Greece EPO || European Patent Organisation ES || Spain EST || Environmentally Sound Technologies ETS || EU Emissions Trading System EU || European Union EUR || Euro FAT || Financial Activities Tax FATF || Financial Action Task Force FDI || Foreign Direct Investment FEMIP || Facility for Euro-Mediterranean Investment and Partnership FfD || Financing for Development FI || Finland FIAS || Facility for Investment Climate Advisory Services FP || Framework Programme FR || France FTT || Financial Transaction Tax G20 || Group of Twenty (G8 countries plus Argentina, Australia, Brazil, China, EU, India, Indonesia, Mexico, Saudi Arabia, South Africa, South Korea, and Turkey) G8 || Group of Eight (i.e. Canada, France, Germany, Italy, Japan, Russia, United Kingdom and USA, plus EU) GAVI || Global Alliance for Vaccines and Immunisation GCCA || Global Climate Change Alliance GDP || Gross Domestic Product GEEREF || Global Energy Efficiency and Renewable Energy Fund GEF || Global Environment Facility GEOSS || Global Earth Observation System of Systems GIIN || Global Impact Investing Network GIZ || Gesellschaft für Internationale Zusammenarbeit GNI || Gross National Income GSP || Generalised System of Preferences HIC || High Income Countries HIF || Health Insurance Fund HIPC || Heavily Indebted Poor Countries HIV/AIDS || Human Immunodeficiency Virus/Acquired Immune Deficiency Syndrome HLF || High Level Forum HLPF || High Level Political Forum on Sustainable Development HR || Croatia HU || Hungary IATI || International Aid Transparency Initiative ICF || International Climate Fund ICT || Information and Communication Technology IDB || Inter-American Development Bank IE || Ireland IF || EIB Investment Facility IFCA || Investment Facility for Central Asia IFD || Innovative Financing for Development IFFIm || International Financial Facility for Immunisation IFHA || Investment Fund for Health in Africa IFI || International Financial Institutions IFM || Innovative Financing Mechanisms ILO || International Labour Organisation IMF || International Monetary Fund IMF/RTC || IMF Regional Technical Centre ISO || International Standard Organisation IT || Italy ITC || International Tax Compact ITF || EU–Africa Infrastructure Trust Fund KfW || Kreditanstalt für Wiederaufbau LAIF || Latin America Investment Facility LDC || Least Developed Countries LIC || Low Income Countries (LDC+OLIC) LT || Lithuania LU || Luxembourg LV || Latvia MDG || Millennium Development Goals MDRI || Multilateral Debt Relief Initiative MDTF || EITI Multi-Donor Trust Fund MIC || Middle Income Countries MNC || Multinational Corporation MOI || Means of Implementation MoU || Memorandum of Understanding MS || Member States MSME || Micro, Small and Medium-Sized Enterprises MT || Malta MTO || Money Transfer Operators NGO || Non-Governmental Organisation NIF || Neighbourhood Investment Facility NL || Netherlands ODA || Official Development Assistance OECD || Organisation for Economic Cooperation and Development PCD || Policy Coherence for Development PEFA || Public Expenditure and Financial Accountability PEFA-PFM || Performance Measurement Framework for Public Finance Management PFM || Public Financial Management PIDG || Private Infrastructure Development Group PPIAF || Public-Private Infrastructure Advisory Facility PPP || Private Public Partnerships PRD || Poverty-Related Diseases PSD || Payment Services Directive PT || Portugal R&D || Research and Development REACT || Renewable Energy and Adapting to Climate Technologies REDD and REDD+ || Reducing Emissions from Deforestation and Forest Degradation. REDD+ goes beyond deforestation and forest degradation, and includes conservation, sustainable management of forests and enhancement of forest carbon stocks. REGMIFA || Regional Micro Small and Medium-Sized Enterprises Investment Fund for Sub-Saharan Africa REPARIS || The Road to Europe: Programme of Accounting Reform and Institutional Strengthening RO || Romania SE || Sweden SK || Slovak Republic SIDS || Small Island Developing States SME || Small and medium-sized enterprises StAR || Stolen Assets Recovery Initiative STI || Science Technology & Innovation TA || Technical Assistance TCX || The Currency Exchange TIEA || Tax Information Exchange Agreements TR AID || Transparent Aid TRA || Trade-Related Assistance TRIPS || Agreement on Trade-Related Aspects of Intellectual Property Rights UK || United Kingdom UN || United Nations UN DESA || United Nations Department of Economic and Social Affairs UNCAC || United Nations Convention Against Corruption UNCTAD || United Nations Conference on Trade and Development UNEP || United Nations Environment Programme UNFCCC || United Nations Convention on Climate Change UNGA || United Nations General Assembly UNITAID || International Drug Purchasing Facility US or USA || United States of America US$ || United States Dollar VAT || Value Added Tax WB || World Bank WIPO || World Intellectual Property Organisation WP-STAT || Working Party on Development Finance Statistics WTO || World Trade Organisation EXECUTIVE SUMMARY This Staff
Working Document is the eleventh in a series of annual progress reports
prepared by the European Commission since 2003 (previously referred to as
‘Monterrey reports’) under its mandate from the Council to monitor progress and
report annually on the European Union’s collective commitments, initially
focusing on official development assistance (ODA) commitments agreed to at the
2002 Monterrey International Conference on Financing for Development. The
Council subsequently extended the original mandate to other areas of Financing
for Development, including domestic resource mobilisation, aid effectiveness,
aid for trade and ‘fast-start’ climate finance. The table below summarises
progress by the EU and its Member States in the implementation of 40
commitments in all areas of Financing for Development. Overall,
the 2013 EU Accountability Report found: ·
substantial progress on EU commitments concerning private investment, trade, finance
relating to climate change adaptation and mitigation, STI and innovative
financing sources and instruments; ·
moderate progress
on EU commitments concerning domestic resource mobilisation, debt
sustainability, remittances, biodiversity protection and development
effectiveness; and ·
limited or no progress on EU commitments concerning volumes of ODA. All commitments analysed
in this report have emerged over the past decade, as new challenges have become
clearer and the EU has recognised the need to strengthen its leadership role in
finding solutions to global problems. EU Commitment || Target Date || Status[1] || Comments 1. Domestic Resource Mobilisation || || || Support on tax policy, administration and reform || No date specified || || Member States (MS) are providing support, but this is still rather limited. Support for established regional tax administration frameworks (e.g. CIAT, ATAF) || No date specified || || The EU and six MS support the ATAF; four MS are members of the CIAT. Exploring country-by-country reporting by MNCs, exchange of tax information, transfer pricing and asset recovery || No date specified || || 26 MS and the Commission are members of the Global Forum on Transparency and Exchange of Information for Tax Purposes. Five MS participated in the OECD’s informal Task Force on Tax and Development, which includes a work stream on transfer pricing. Six MS support the StAR Initiative. Encourage the participation of developing countries in international tax cooperation || No date specified || || 17 MS and the Commission support at least one forum or dialogue platform, including the OECD Convention on Mutual Administrative Assistance in Tax Matters; the International Tax Dialogue and the International Tax Compact. Ratify and implement the UN Convention Against Corruption (UNCAC) and the OECD Convention on Combatting Bribery of Foreign Public Officials in International Business Transactions || As soon as possible, preferably before 2010, for UNCAC; no date specified for OECD Convention || || Germany and the Czech Republic have not ratified UNCAC. 22 MS are party to the OECD Convention but, according to Transparency International, only four actively, and seven moderately, enforce it. Support transparency and accountability through EITI and similar initiatives, possibly also in other sectors || No date specified || || Ten MS and the Commission supported the EITI in 2012, e.g. through direct support to the Secretariat, bilateral support at country level or through the MDTF; five MS provided support to other initiatives (e.g. the Construction Sector Transparency Initiative and the Kimberley Process). 2. Debt Sustainability || || || Support existing debt relief initiatives, in particular the HIPC Initiative and the MDRI || No date specified || || Three countries reached HIPC completion point in 2012. Several MS initiatives support MDRI and similar programmes. Support discussions, if relevant, on enhanced sovereign debt restructuring mechanisms, on the basis of existing frameworks and principles || No date specified || || Limited support (only the EU and 11 Member States see a need for reform, not necessarily structural). Participate in international initiatives such as the WB/IMF Debt Sustainability Framework (DSF) and promote responsible lending practices || No date specified || || A recent IMF assessment found broad compliance with the DSF[2]. Promote the participation of non-Paris Club members in debt-workout settlements || No date specified || || No bilateral action, only support for dialogue through one annual meeting with non-members, not attended by China and India[3]. Take action to restrict litigation against developing countries by distressed debt funds || No date specified || || No action to restrict litigation mentioned by MS, only legal support to developing countries for litigation through multi-donor trust funds (e.g. DMF, ALSF). 3. Private Investment for Development || || || Support the development of the private sector, including small and medium-sized enterprises, through measures to enhance the overall investment climate for their activity, inter alia by promoting inclusive finance and through relevant EU investment facilities and trust funds || No date specified || || The EU and MS have provided substantial funding for private sector development (in 2004-10, the Commission alone provided EUR 2.4 billion in direct support in the form of grant funding). Since 2007, the EU, together with some MS, has set up eight regional blending facilities, covering all regions of EU external cooperation. Several MS’[4] national development finance institutions also support blending activities (EU facilities and others). MS reported over 100 ODA activities for private sector development in 2012. Strengthen the EIB’s capacity to support EU development objectives and promote the efficient blending of grants and loans in third countries, including in cooperation with MS’ finance institutions or through development financing facilities || No date specified || || Half of the Commission-funded private sector development support mentioned above was channelled through the EIB. Support for blending facilities as described above. Enhance efforts to promote the adoption by European companies of internationally-agreed CSR principles and standards, the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises || No date specified || || Exploratory research was undertaken by the Commission in June 2012. Commitments by large EU enterprises are expected by 2014[5]. Respond to the Commission’s invitation to develop or update MS’ plans or lists of priority actions in support of CSR || No date specified || || On-going discussion with MS on plans and peer review mechanism[6]. Several MS intend to complete their plans in 2013. 4. Trade and Development || || || Increase collective TRA to EUR 2 billion a year by 2010 (EUR 1 billion from MS; EUR 1 billion from Commission). Around 50% of the increase to be available to ACP countries. || 2010 || || Collective EU TRA commitments reached EUR 2.8 billion in 2011; EU collective wider AfT amounted to EUR 9.5 billion. TRA to Africa increased by 50% in 2011 as compared with 2010. Sustain EU and MS efforts, giving increased attention to LDCs and joint AfT response strategies and delivery || No date specified || || Active participation in the EIF, a multi-donor programme to help LDCs become more active in the global trading system. The proportion of EU collective AfT going to LDCs increased from 16% in 2010 to 19% in 2011. However, these shares are much lower than those of non-EU DAC donors. Reach agreement on regional AfT packages in support of ACP regional integration, under the leadership of the ACP regional integration organisations and their Member States, and involving other donors || No date specified || || In terms of total volume, regional AfT is growing faster than overall AfT. In 2011, the EU and MS committed EUR 726 million to ACP regional programmes and projects (8% of collective EU AfT, as compared with 4% in 2008). EUR 642 million were committed to Sub-Saharan Africa alone. Challenges were encountered with respect to the absorption capacity and performance of some regional organisations and their capacity to effectively coordinate donors. Continuously review the EU’s AfT strategies and programmes, taking into account lessons learnt and focusing on results || No date specified || || The EU is active in the International Policy Dialogue on Aid for Trade in the OECD (latest meeting in January 2013) and WTO (next Global Aid for Trade Review in July 2013). Regular discussions are held with MS and an EU monitoring report on AfT is published annually as part of this Accountability Report. Enhance the complementarity and coherence between trade and development instruments, focusing on LDCs and developing countries most in need, and increasing private sector involvement || No date specified || || The Trade, Growth and Development Policy adopted in 2012 enhances complementarity and coherence and takes a differentiated approach to LDCs and other developing countries most in need. The new GSP adopted by the EU in 2012 focuses on countries most in need, strengthens the GSP+ as an incentive to good governance and sustainable development and makes the scheme more transparent, stable and predictable. Better coordinate EU AfT, and align it behind the development strategies of partner countries || No date specified || || 38% of the respondents to a survey carried out in 2013 among EU Delegations and EU MS field offices in developing countries (see AfT report in Annex) believe that there have been moderate improvements in coordination (including through joint needs assessments, implementation and monitoring/evaluation). 5. Remittances and Development || || || Enhance the development impact of remittances || No date specified || || The EU and several MS have launched initiatives to train migrants and foster migrants’ savings and diaspora investments in their countries of origin. Reduce the average cost of transferring remittances from 10% to 5% by 2014 || 2014 || || The average cost of sending remittances from the EU is estimated at 10.6% of the amount sent – higher than the global average of 9.1% and only marginally lower than the EU average of 11.71% in Q3 2008, when monitoring of remittance costs started. 6. Official Development Assistance || || || The EU and MS agreed to achieve a collective ODA level of 0.7% of GNI by 2015 || 2015 || || The EU ODA/GNI ratio is projected to reach 0.43% by 2015. Take realistic, verifiable action to meet individual ODA targets by 2015 and share information about this action || No date specified || || 22 MS provided information on 2013 financial year allocation, but limited information was provided on realistic/verifiable action. Increase collective ODA to Sub-Saharan Africa || No date specified || || 2012 EU ODA to Sub-Saharan Africa increased as compared with 2004. Provide 50% of the collective ODA increase to Africa as a whole || No date specified || || Only 7% of total EU ODA growth between 2004 and 2012 went to Africa. Provide between 0.15% and 0.20% of collective ODA/ GNI to LDCs by 2010 || 2010 || || EU ODA/GNI to LDCs was 0.14% in 2010, 0.13% in 2011, and 0.12% in 2012. 7. Funding for Tackling Climate Change || || || Contribute EUR 2.4 billion annually in 2010-12 to ‘fast start’ climate funding || End 2012 || || The EU and MS contributed EUR7.3 billion in 2010-12 to ‘fast start’ climate funding. Work towards pathways for scaling up climate finance from 2013 to 2020 from a wide variety of sources to reach the international long-term joint goal of mobilising US$ 100 billion a year by 2020 || 2013-20 || || Not applicable yet. Work has started. 8. Funding for Protection of Biodiversity || || || Hyderabad commitment to double total biodiversity-related international financial resource flows to developing countries (in particular LDCs, SIDs and countries with economies in transition), as compared with 2006-10, by 2015 and at least maintain this level until 2020 || 2015 and 2020 || || Not applicable yet. 9. Science, Technology and Innovation || || || Improve mechanisms for international STI cooperation and for the development of ICT on major sustainable development challenges || No date specified || || The EU Research Framework Programme and EU ODA increasingly support cooperation with partner countries in a range of sectors. Several EU-funded research projects have specifically targeted the use of ICT to share experience and knowledge across countries[7]. Promote clean and environmentally sound technologies as a means to facilitate a transition to a green economy for all countries, regardless of their development status || 2014-20 || || The EU and 15 MS support STI and technology transfer activities relating to the green economy. Support STI research cooperation and capacity building to enhance sustainable development in developing countries, including through the new Horizon 2020 research and innovation programme’’ || 2014-20 || || ’Horizon 2020 will put increased emphasis on STI partnerships with developing countries, in particular through bi-regional partnerships. Several MS implement programmes in this field. 10. Innovative Financing Sources and Instruments || || || Consider proposals for innovative financing mechanisms with significant revenue generation potential, with a view to ensuring predictable financing for sustainable development, especially for the poorest and most vulnerable countries || No date specified || || Several MS are using innovative sources of development funding, although they accounted for only 2% of ODA in 2010-12. It is unclear whether revenue generation for development from existing and new taxes (e.g. FTT) will be significant. Promote new financial tools, including blending grants and loans and other risk-sharing instruments || No date specified || || Several blending instruments have been introduced and further developed over 2012, now covering all regions of EU external cooperation. The EU Platform for Blending in External Cooperation was established in December 2012. Use innovative financing mechanisms taking into account debt sustainability and accountability and avoiding market disturbances and budgetary risks. || No date specified || || MS and Commission funds for innovative financial instruments increased from EUR 600 million a year in 2010-11 to over EUR 2 billion in 2012. 11. Development Effectiveness || || || Implement the European Transparency Guarantee and commitments relating to the common open standard for the publication of information on development resources, e.g. by publishing implementation schedules by December 2012, with the aim of full implementation by December 2015 || December 2012 (schedules) and December 2015 (implementation) || || By December 2012, the Commission and 20 MS, including all nine that are signatories to IATI, had published schedules to implement the common standard. In their schedules, the Commission and 13 MS set out plans for implementation by 2015. A majority of the schedules (11 out of 21) were rated ‘unambitious’ by Publish What You Fund (PWYF). 19 MS had a rating of ‘poor’ in PWYF’s 2012 Transparency Index, four MS and the Commission were rated as ‘fair’ and four MS as ‘moderate’. Promote joint programming and increase coordination in order to develop a EU joint analysis of, and response to, partner countries’ national development strategies || No date specified || || Joint programming was taken forward in six partner countries in 2012 and is expected to be in place at the start of the next programming period (2014) in at least eight. The opportunities for joint programming were assessed on the ground in a total of 55 countries and preparations for joint programming will go ahead in almost all of these. Nine MS have issued guidelines on joint multi-annual programming. Implement the results and mutual accountability agenda || No date specified || || Currently, the EU and 24 MS participate in mutual accountability arrangements in over 10% of their priority countries, and 13 MS and the EU do so in 50% or more. The EU and 21 MS participate in country-level results frameworks and platforms in over 10% of their priority countries, and 12 MS and the EU do so in 50% or more. Introduction This
Accountability Report is the eleventh in a series of annual progress reports
prepared by the European Commission since 2003 (previously referred to as
‘Monterrey reports’). Building on previous reports, it assesses where the EU
and its Member States stand in relation to 40 common commitments on Financing
for Development. This report focuses on the evolution in key areas since the
2012 report, and thus only summarises issues discussed at length last year. The
Report responds to the Council’s invitation to the European Commission to
monitor progress and report annually on common EU commitments, initially
focusing on ODA commitments made at the 2002 International Conference on
Financing for Development in Monterrey. The Council later expanded the original
monitoring mandate to cover other areas of Financing for Development, including
domestic revenue mobilisation, aid effectiveness, aid for trade, and fast-start
climate finance. For the
third time, the Commission presents a single, comprehensive report covering all
topical issues of the international Financing for Development agenda. This
year, the report also covers Science, Technology and Innovation, to reflect new
commitments made as part of the Rio+20 process, and domestic resource
management in addition to resource mobilisation, in line with the new EU Budget
Support Guidelines. Building on this comprehensive approach, the report is also
intended to contribute to discussions on the post-2015 international
development framework, including the UN Special Event to review progress
towards achieving the MDGs. Financing and other Means of Implementation issues
are an integral part of the discussions on the Rio+20 follow-up on sustainable
development and the post-2015 overarching framework. The
report is based on input provided by the 28 EU Member States, including
Croatia, and the Commission through (i) the 2013 EU annual questionnaire on
Financing for Development, which covers key EU commitments related to the
international Financing for Development agenda, and (ii) public sources and
online databases on development cooperation. The
Council also called on the Commission to make the annual progress report a
model of transparency and accountability. As in 2011 and 2012, all Member
States have agreed to the online publication of their replies to the annual
questionnaire on Financing for Development. The Commission complements this
exercise through Donor Profiles that give an overview of the
overall development strategy of each Member State. All
these documents are available on the EuropeAid webpage[8]. Annex 1
lists the bibliography for all chapters. Annex 2 presents the
methodology applied for analysing ODA and climate finance. Annex 3 is
the Statistical Annex on ODA trends (including individual graphs for all EU
Member States showing the gaps to reaching 2015 targets).
Annex 4 consists of the Aid for Trade
Report 2013. 1. Beyond
MDGs and Beyond Aid The
Millennium Development Goals (MDGs) and the funding commitments of the
Monterrey Conference were made more than a decade ago. Over this period, the
global political and economic landscape has significantly changed. Growth in
emerging economies has become the key driver of the global economy. Disparities
among and within developing countries have increased and the GNI per capita of
a few upper middle-income countries has outscored that of some European Member
States. Likewise, new actors have emerged in the development arena, including
from the private sector. The understanding of what development means is also
changing, with a greater focus on sustainability in all its dimensions, and
broader issues relating to governance, human rights and peace and security. 1.1. Towards
an Integrated Approach to All Financing Processes EU Commitments ·
Council Conclusions of 25 October 2012 on
Rio+20, §33: Underlines the need for
coherence, coordination and non-duplication of efforts with regard to the
Financing for Development process; expresses its support for an integrated
approach to the various MoI aspects of the Rio+20, the post-2015 development
agenda and other relevant processes, given that the potential financing sources
are the same, and highlights the importance of addressing in a comprehensive
manner the various strands relating to finance and technology transfer
including those undertaken in the context of climate change, biodiversity and
desertification. ·
Council Conclusions of 25 June 2013 on the
Overarching Post-2015 Agenda, §17c:
There is a need for a common and comprehensive approach to financing for
development beyond 2015. It will be important to address, in a coherent and
comprehensive manner, relevant international processes relating to finance,
role of ODA, innovative sources of financing, financial regulation and illicit
financial flows, technology transfer, capacity building, trade and those
processes undertaken in the context of climate change, biodiversity and
desertification. It will also be important to bear in mind the outcome from
Rio+20 on a process proposing options for a financing strategy for sustainable
development. As
emphasised throughout the EU public consultation on ‘Towards a post-2015
development framework’[9] and
underlined in the European Report on Development 2013[10], the values
and principles of the Millennium Declaration remain relevant today, but
achieving them ‘requires agreement on a broader set of goals than the MDGs, (…)
a wider range of instruments than ODA, the main tool of the MDG effort, and an
approach that moves beyond the historical donor-recipient relationship.’ The goal of
EU Development Policy, as stated in the European Consensus on Development[11] and in
Article 21 of the Treaty on European Union[12] and Article
208 of the Treaty on the Functioning of the European Union[13], remains
‘poverty elimination in the context of sustainable development’[14]. The ‘Agenda
for Change’[15] further underlines
the importance of promoting ‘inclusive and sustainable growth for human
development’, stressing that ‘development is not sustainable if it damages the
environment, biodiversity and natural resources and increases the
exposure/vulnerability to natural disasters.’ The recent UN
Task Team Report on the Post-2015 Development Agenda on ‘A renewed global
partnership for Development’ stated clearly that the commitments made at
Monterrey will remain an important cornerstone of this renewed global
partnership for development[16]. However,
while the framework agreed at Monterrey remains useful, it should be extended
to accommodate recent developments. Some of these developments have been
incorporated into the Global Partnership for Effective Development Cooperation,
agreed to at the Busan High Level Forum on Aid Effectiveness in 2011. In February
2013, the Commission adopted a Communication on ‘A Decent Life for All:
Ending poverty and giving the world a sustainable future’[17]. The
Communication proposes a common approach to the follow-up of Rio+20, and in
particular the definition of Sustainable Development Goals, and to the review
of the Millennium Development Goals. It suggests working towards an overarching
framework to address these issues. In June 2013, the Council endorsed this
general approach.[18] International
processes have multiplied, and there is now a momentum for consolidating these.
The UN High Level Panel on post-2015 has published its report, the UN Open
Working Group on Sustainable Development Goals has started its work and the UN
Expert Committee for proposing options on a sustainable development financing
strategy is being established. Various other processes also ponder what the
post-2015 agenda should look like and how this could be implemented. Recent
reports from the UN Secretary General, ECOSOC and UN General Assembly
resolutions[19] all seem to
favour merging the Financing for Development and Rio+20 Means of Implementation
follow-up strands. In May 2013,
the High-Level Panel of Eminent Persons on the Post‐2015 Development Agenda
published its final report[20], in which it
also recognised the need to promote a single and coherent post-2015 development
agenda that integrates economic growth, social inclusion and environmental
sustainability. All post-2015 intergovernmental processes, including the Rio+20
follow-up, should be coherent and brought together into one comprehensive
vision and approach. The European
Union can lead these processes as it did for the Monterrey and Doha Conferences
on Financing for Development, and this is the time to flesh out the Union’s
vision for a post-2015 overarching framework. At the time
of drafting this report, financing issues had been actively discussed neither
in the post-2015 development agenda nor the Rio+20 follow-up process[21]. However, an
intergovernmental expert group is being established in the framework of the
Rio+20 follow-up to propose options for a sustainable development financing
strategy by 2014; and the UN will decide in 2013 on the appropriateness of
holding a new Financing for Development Review Conference. As stated in
the Global Partnership Roadmap for 2013[22], ‘bridging
the Financing for Development and post-2015 discussions is the nascent
intergovernmental process on sustainable development finance. The UN intergovernmental
expert group is expected to be composed of 30 experts from different regions,
and will hold four meetings in 2013 and two meetings in 2014. The process will
assess financing needs, consider the effectiveness, consistency and synergies
of existing instruments and frameworks and evaluate additional initiatives. A
report should be presented to the UN General Assembly in 2014 and this
sustainable development finance process may eventually be integrated with the
existing FfD process’. As potential
sources of finance are identical and limited, the means to achieve poverty
eradication and sustainable development should not be considered or measured
separately. In its Conclusions on Rio+20[23], of October
2012, the Council of Ministers expressed ‘its support for an integrated
approach to the various Means of Implementation aspects of the Rio+20, the
post-2015 development agenda and other relevant processes, given that the
potential financing sources are the same’. Every euro
allocated to serve global policy objectives can only be spent once, but may, at
the same time, serve several objectives. As underlined in the EU’s contribution
to the Rio+20 Outcome Document[24], ‘a joint
approach by traditional donors, emerging economies, international financial
institutions (IFIs) and the private sector is needed, addressing the ‘silo’
approach to channelling funds and ensuring a more effective identification and
use of existing resources, as well as mobilisation of available and innovative
sources of finance’. As shown Table 1.1.1 below, the Financing for Development
process encompasses all Means of Implementation. The process started at Rio+20
has the potential to have essentially the same scope. Other financing
initiatives do not necessarily address some of the issues (e.g. remittances,
trade, debt or systemic issues). The present report provides an overview of all
the different means, including, for the first time, Science, Technology and
Innovation. Table 1.1.1 – Elements of Means of
Implementation Covered under existing UN Processes Means of implementation for: || Process Financing for Development || Rio+20 || Climate Change || Biodiversity Domestic resources || Yes || Yes || Yes || Yes Private flows, FDI, innovative mechanisms || Yes || Yes || Yes || Yes Other private flows/CSR/Remittances || Yes || Yes || Yes || No Trade || Yes || Yes || Yes || No ODA || Yes || Yes || Yes || Yes Effectiveness || Yes || Yes || Yes || Yes Capacity building || Yes || Yes || Yes || Yes Innovative sources || Yes || Yes || Yes || Yes Debt || Yes || Yes || No || Yes Systemic issues/international architecture || Yes || Yes || Yes || No Policy Coherence for Development and other policy challenges || Yes || In part || No || In part Science, Technology and Innovation || In part || Yes || Yes || Yes 1.2. Towards a Comprehensive Approach to All Financing
Sources EU Commitments ·
Council Conclusions of 25 October 2012 on
Rio+20, §34: Underlines
that resources for the implementation of sustainable development policies have
to be mobilised by all types of stakeholders and come from all sources,
national and international, public and private as well as financial and
non-financial actions. ·
Council Conclusions of 25 June 2013 on the
Overarching Post-2015 Agenda, §17d: The
mobilisation of all resources, public and private, domestic and international
and their effective and innovative use will be vital for the successful
development and implementation of the [post-2015] framework. Recent
studies[25] show that
most developing countries have the financial means to end poverty[26] by 2030.
While the cost is negligible for Upper MICs, it is estimated at around 5.5% of
GDP in 2008 for Lower MICs (an amount that could be easily covered for example
by better tax collection), where almost 80% of the global poor live (bearing in
mind that every individual country situation is by definition unique). MICs
also have stronger national buffers to deal with exogenous shocks. Progress
depends primarily on the design and implementation of appropriate national
policies to ensure the inclusiveness of development and pro-poor growth. In
contrast, the investment needs of LICs for ending poverty were estimated at
25.4% of their GDP[27] in 2008, and
they are projected to remain significant in 2020 (14.9%), and 2030 (9.7%). LICs
have much lower levels of national resource mobilisation and greater
vulnerability to global shocks due to low buffers. The progress in LICs will
continue to require external financing to support national efforts in ending
poverty by 2030. At an
aggregate level, as shown in Table 1.2.1 below, most resources to end
poverty by 2030 can be mobilised by the public sector domestically and by the
private sector both domestically and internationally, while public
international finance is very small in comparison. Data are readily available
only for ODA, while they need to be assembled from a variety of sources for all
other means of implementation. The methodology used in assembling such data is
described in Annex 2. Public
finance fulfils the same function whether coming from domestic or external
sources. Domestic public finance is directly available for implementing
government plans from the moment of collection. International public finance
should complement domestic resources and help to implement nationally owned
development strategies, using development finance effectively. For middle-income countries, domestic revenues
constitute the main financial source, while ODA has only a marginal role (0.4%
of GDP). The domestic revenues of low-income countries are relatively lower,
and ODA remains a significant source (12% of GDP) representing the most
important external financial flow. The aggregate
data above hide many national-level differences. While the specific situation
of each country requires an individual approach, the above analysis shows
massive differences of vulnerabilities and abilities between MICs and LICs.
Yet, it is clear that all countries need to do more to mobilise resources and
use them in a targeted way in order to reach the global development goals. Private sector finance accounts for about one
quarter of all flows in both low-income and middle-income countries. It can
serve as means of implementing the fight against climate change and the
protection of biodiversity, or be leveraged through innovative financial
instruments like blending, presented in Chapter 5. This illustrates the extent
to which private finance has become pivotal in many developing countries and
confirms the need to work more closely with private sector actors and include
them into the post-2015 dialogue. While all resources
fluctuate somewhat, domestic sources tend to be more stable and exceed by far
external finances. Experience shows that, with the right policies, more
resources can be mobilised. With regard to private finance and private sector
actors, it is important to work
towards streamlining their contribution towards global goals, including through
the use of policy incentives. Table 1.2.1 – Total
Resources Available to Developing Countries by Income Group (EUR billion, 2010) Flow || LIC || MIC || Unallocated by income || Total Amount || share of GDP || amount || share of GDP Public Domestic Finance || 42 || 13.1% || 3,275 || 22.0% || || 3,317 Tax revenue || 41 || 13.0% || 3,211 || 21.6% || || 3,252 Public or Publicly Guaranteed External Debt || 0 || 0.0% || 64 || 0.4% || || 65 || || || || || || Memo item: Total Reserves || 41 || 12.9% || 4,033 || 27.1% || || 4,074 || || || || || || Public International Finance || 39 || 12.1% || 57 || 0.4% || 63 || 158 ODA Grants || 35 || 11.2% || 28 || 0.2% || 29 || 92 (of which EU) || 15 || 4.8% || 11 || 0.1% || 13 || 39 Concessional Loans || 1 || 0.2% || 5 || 0.0% || 2 || 7 (of which EU) || 0 || 0.1% || 1 || 0.0% || 1 || 3 Other official finance || 2 || 0.7% || 24 || 0.2% || 28 || 54 (of which EU) || -0 || -0.1% || -2 || -0.0% || -2 || -4 International security operations || || || || || 5 || 5 (of which EU) || || || || || 2 || 2 || || || || || || Private Finance – domestic and international || 71 || 22.4% || 3,538 || 23.8% || 42 || 3,652 Domestic Private Investment || 42 || 13.1% || 2,636 || 17.7% || || 2,678 External private finance (debt, FDI, portfolio investment, remittances) || 29 || 9.2% || 902 || 6.1% || 42 || 974 of which: Private non-guaranteed External Debt || 1 || 0.2% || 69 || 0.5% || || 70 FDI || 11 || 3.5% || 431 || 2.9% || || 443 Foreign Portfolio Investment || || 0.0% || 181 || 1.2% || || 181 Remittances || 18 || 5.5% || 221 || 1.5% || || 238 (of which EU) || 3 || || 40 || || || 43 Private charity || || || || || 42 || 42 || || || || || || Total finance for investments || 151 || 48% || 6,870 || 46% || 105 || 7,126 || || || || || || International Trade (facilitates private and public finance mobilisation) || || || || || || Total volume of developing countries’ exports of goods and services || 78 || 24.5% || 4,304 || 29.0% || || 4,382 See Annex 2 for details on the methodology used. Data on EU
private finance flows to and EU imports from developing countries as a group
are not currently provided by Eurostat. 1.3. Strengthening Global Governance EU Commitments ·
Council Conclusions of 18 May 2009, §36: Considering that world trade, investment and financial
stability are essential for restoring global sustained growth, the Council
welcomes the G20 agreement on the reform of the mandates, scope and governance
of [International Financial Institutions]to reflect, inter alia, changes in the
world economy and the new challenges of globalisation, to ensure greater voice
and representation for emerging and developing countries, including open,
transparent and merit-based top management selection processes. The European
Union promotes effective multilateralism and supports the fundamental role of
the UN system in global governance. It is indeed a founding principle of the
EU, as stated in Article 21 of the Lisbon Treaty[28]. Many
development challenges of the 21st century, spanning from climate
change to biodiversity protection, from fighting illicit capital flows to
increasing developing countries’ access to global markets, from financial
stability to security, defy borders, call for innovative instruments, blur the
lines between development cooperation in the context of sustainable development
and other policy fields, and require solutions that are often not only
multilateral, but also multipolar involving new or re-emerging sovereign
players, and a much more active civil society without borders. The new Global
Partnership for Effective Development Cooperation that has recently emerged
calls for a more inclusive, efficient and effective global governance – an
important objective of the EU. To this end, there is a need to reform the
institutional framework, centred on the UN System, while confirming its leading
role in the coordination and monitoring of the implementation of global policy
goals. An important
step in this direction was made at the Rio+20 Conference, held in June 2012 in
Rio de Janeiro, which initiated a process to strengthen the institutional
framework for sustainable development. This includes further integration of
sustainable development within the work of the General Assembly and of the
Economic and Social Council (ECOSOC) as a key element of the overarching
framework of the UN activities and its agenda setting. In this context, Rio+20
decided to establish a High Level Political Forum (HLPF) on Sustainable
Development, replacing the Commission on Sustainable Development. The HLPF
will, among other agreed functions[29], follow-up
on the implementation of sustainable development commitments, provide political
leadership and guidance, enhance integration of the three dimensions of
sustainable development, improve cooperation and coordination within the UN
system, and strengthen the science policy interface. The EU and Member States
support the idea that the HLPF should be ‘directly linked with
ECOSOC, and working at a higher political level (UNGA) at regular intervals’[30]. This should
contribute to enhance coherence with the review of the MDGs and the post 2015
framework. A High Level
Panel (HLP) of Eminent Persons was also established by the UN Secretary-General
to make proposals on the post-2015 Development Agenda. The HLP formulated
recommendations regarding the vision and shape of a ‘Post-2015 development
agenda that will help respond to the global challenges of the 21st
century, building on the MDGs and with a view to ending poverty’ in May 2013.
The Panel also advised on how to strengthen the global partnership for
development, improve accountability at all levels, build political consensus on
the Post-2015 development agenda, and include the private sector.[31] With regard
to International Financial Institutions, IMF members are in the process of
ratifying the 2010 Quota and Governance Reform, which is a major achievement in
enhancing the credibility, legitimacy and effectiveness of the Fund. All EU
Member States have fully ratified the 2010 Quota and Governance Reform. In
January 2013, the Executive Board formulated important building blocks for
agreement on a revised quota formula and agreed that the review of the quota
formula will be taken together with the 15th General Review of Quotas by
January 2014. An agreement on an integrated package needs to be reached by that
deadline. It is foreseen that the review will lead to further increases in the
quota shares of dynamic emerging market economies. The
World Bank governance reform process is less advanced. Some progress has been
made on the implementation of the 2010 reforms for enhancing voice and
participation of developing countries and meeting new challenges, but more is
needed in terms of finding an appropriate voting formula by 2015 and ensuring
that future selection processes are truly merit based regardless of
nationality. The World
Bank has recently put forward its Common Vision Paper, outlining the proposed
goals and principles for the future strategy of the World Bank Group, to be
endorsed in 2013. With the aim of ending extreme poverty and promoting shared
prosperity and environmental sustainability, the World Bank goals and
principles mirror very much those of the EU Agenda for Change. 2. Domestic
Public Finance for Development 2.1. Domestic Resource
Mobilisation EU
Commitments ·
EU
policy on tax and development is set out in the 2010 Communication on ‘Tax and
Development – Cooperating with Developing Countries on Promoting Good
Governance in Tax Matters’[32] and the accompanying Staff
Working Document. Their main recommendations were endorsed by the Council in
its Conclusions of 14 June 2010[33] and by the European
Parliament in a resolution of March 2011. In these Conclusions, the Council
encouraged the Commission and Member States to: 1. support developing countries in
tax policy, tax administration and tax reforms, including in the fight against
tax evasion and other harmful tax practices; 2. support, including financially,
already established regional tax administration frameworks such as CIAT (Centro
Inter-Americano de Administraciones Tributarias) and ATAF (African Tax
Administration Forum), as well as IMF Regional Technical Centre; 3. work towards exploring
country-by-country reporting as a standard for multinational corporations; a
global system for exchange of tax information; reducing incorrect transfer
pricing practices; and promoting asset recovery; 4. encourage the participation of
developing countries in structures and procedures of international tax
cooperation should be strongly encouraged, including in the United Nations and
the OECD, in the International Tax Dialogue and International Tax Compact; and 5. enhance their support to the EITI
(Extractive Industries Transparency Initiative) and consider expanding similar
practices to other sectors. ·
The relevance of this agenda was reinforced
through the 2011 Commission Communications on ‘An Agenda for Change‘ and ‘The
future approach to EU Budget support to third countries’[34]. These Communications provide further emphasis on tax policy and
administration by stating that ‘the EU will continue to promote fair and
transparent domestic tax systems in its country programmes, in line with the EU
principles of good governance in the tax area, alongside international
initiatives and country by country reporting to enhance financial transparency’[35]. The main recommendations of the Agenda for Change were endorsed by
the Council in its Conclusions of 14 May 2012. ·
In September 2012, the EU adopted new ‘Budget
Support Guidelines’ in line with the 2011 Communication which places a stronger
emphasis on encouraging partner countries’ efforts to mobilise domestic
revenues and to reduce their aid dependency. In particular, the guidelines
state that ‘within budget support contracts, DRM will be considered within the
macroeconomic (fiscal policy) and public financial management (tax
administration) eligibility criteria, and it should be given greater attention
in policy dialogue and capacity development.’ ·
An
updated synthesis of EU position on tax reform is presented in the 2012
Commission Communication on ‘Improving EU support to developing countries in
mobilising Financing for Development‘[36]. The Commission stressed that
‘it is up to the partner government to enact and uphold the appropriate
regulatory measures and policies to ensure that the virtuous cycle of tax
collection-development spending-development progress-increased tax collection
materialises. The EU and its Member States can facilitate this process by
continuing to expand their support to strengthen the capacity of tax systems,
and to ‘incorporate tax administration and fair tax collection, including
rationalising tax incentives and good governance in tax matters, into policy
dialogue with partner countries.’ Additional support can be through regulatory
means, such as combating illicit capital flows and reducing the misuse of
transfer pricing as well as strengthening the Extractive Industries
Transparency Initiative (EITI) and adopting legislation for country by country
reporting for multinational enterprises. ·
The EU
has committed to take action at the international level to fight corruption,
tax evasion and illegal financial flows. In the Council Conclusions of 11
November 2008 (EU position for Doha FfD conference), §18, the EU promised
in particular to: 1. ratify and implement the
United Nations Convention against Corruption (Merida) as soon as possible and
best before 2010; 2. adhere to the OECD Convention
on Combating Bribery of Foreign Officials in International Business
Transactions; 3. adopt and implement
international norms to prevent money laundering, as well as the financing of
terrorism and proliferation, support international cooperation repatriation of
stolen assets, among those the Stolen Assets Recovery initiative (STAR); and 4. promote the principles of
transparency and accountability over natural resource revenue by supporting and
implementing the Extractive Industry Transparency Initiative (EITI), as well as
other specific initiatives aiming at improved governance and transparency in
the extractive sector. ·
Commission
Communication of 6 December 2012 (and ensuing ECOFIN Council Conclusions of 14
May 2013 and European Council Conclusions of 22 May 2013) on an Action Plan to
strengthen the fight against tax fraud and tax evasion[37]. The Action Plan sets out 34
actions that the Commission proposes to take with Member States over the next
two years, in order to combat tax fraud and evasion, and is accompanied by two
Recommendations on measures intended to encourage third countries to apply
minimum standards of good governance in tax matters, and on aggressive tax
planning[38]. 2.1.1. Introduction Domestic
revenue is the most important source of development finance directly available
to governments. As emphasised in the 2012 Communication on Improving EU
support to developing countries in mobilising Financing for Development[39] ‘the primary
responsibility for development lies with the developing countries themselves’. Studies have
shown that many
developing countries need substantial additional revenue[40] and a
corresponding increase in fiscal space to finance poverty-reduction and
adaptation to climate change. Increasing domestic revenue not only supports
this type of spending, it also allows a country to assume ownership for its
policy choices, thus strengthening good governance[41]. The objective
of this section is to present current EU thinking and progress in the area of
tax and development. The analysis below reveals that the EU policy framework
put forward in 2010 has been mainstreamed by some Member States and associated
with an emerging consensus amongst practitioners on how best to support tax
reforms to enhance effective domestic resource mobilisation. The rest of the
section presents the evolution of EU and Member State’s support during the past
year. 2.1.2. Implementation Table The
table below summarises progress made in 2012 in implementing the EU commitments
on domestic resource mobilisation. Further details are discussed in the main
text. EU Commitment || Target Date || Status[42] || Comment Support on tax policy, administration and reform || No date specified || || Member States (MS) are providing support, but this is still rather limited. Support for established regional tax administration frameworks (e.g. CIAT, ATAF) || No date specified || || The EU and six MS support the ATAF; four MS are members of the CIAT. Exploring country-by-country reporting by MNCs, exchange of tax information, transfer pricing and asset recovery || No date specified || || 26 MS and the Commission are members of the Global Forum on Transparency and Exchange of Information for Tax Purposes. Five MS participated in the OECD’s informal Task Force on Tax and Development, which includes a work stream on transfer pricing. Six MS support the StAR Initiative. Encourage the participation of developing countries in international tax cooperation || No date specified || || 17 MS and the Commission support at least one forum or dialogue platform, including the OECD Convention on Mutual Administrative Assistance in Tax Matters; the International Tax Dialogue and the International Tax Compact. Ratify and implement the UN Convention Against Corruption (UNCAC) and the OECD Convention on Combatting Bribery of Foreign Public Officials in International Business Transactions || As soon as possible, preferably before 2010, for UNCAC; no date specified for OECD Convention || || Germany and the Czech Republic have not ratified UNCAC. 22 MS are party to the OECD Convention but, according to Transparency International, only four actively, and seven moderately, enforce it. Support transparency and accountability through EITI and similar initiatives, possibly also in other sectors || No date specified || || Ten MS and the Commission supported the EITI in 2012, e.g. through direct support to the Secretariat, bilateral support at country level or through the MDTF; five MS provided support to other initiatives (e.g. the Construction Sector Transparency Initiative and the Kimberley Process). 2.1.3. Recent Trends Domestic tax revenues
represented a significant share of the overall development finance available
for both low income and middle income countries in 2010, as shown in Figure
2.1.3.
Figure 2.1.3 – Domestic Tax Revenues as a Share of Total
Resource Flows of Low-Income (LIC) and Middle-Income Countries (MIC) in 2010 The relative
level of domestic
revenue collection is generally a function of per-capita income. The ratio
between tax revenues and GDP in developing countries varies, but is in
general a smaller share of GDP than in higher income countries. Overall,
government revenues have been a stable and increasing source of financing[43] for most
developing countries, except for LICs where ODA funding often exceeds efforts
in domestic revenue mobilisation. On average, tax revenues account for 13% of
GDP in LICs, 20% of GDP in MICs, and 35% of GDP in High Income Countries (HICs)[44]. Moreover,
the share in LICs has been essentially stationary since 1970, while it has
grown in both MICs (+9%) and HICs (+4%). This is partly for structural reasons,
but mostly results from suboptimal tax systems (e.g. narrow tax base) and weak
tax administration (collection capacity). Fragile countries, in particular,
have much lower average tax revenue (14%) as a proportion of GDP than
non-fragile countries (20%)[45]. Natural
resources are an important source of tax revenues: between the early 1980s and
2005, resource-rich countries in sub-Saharan Africa increased their tax–GDP
ratios by about seven percentage points; non-resource related tax revenue in
the region, on the other hand, was essentially stagnant[46]. The most significant additional long-term
mobilisation efforts should be undertaken by LICs and fragile states, which lag
behind in terms of tax ratio, while avoiding distortions that would penalise
private sector investment. This usually involves institution and state
building, but does
not preclude shorter-term reforms even in the absence of fully effective
institutions[47]. Many
developing countries offer tax incentives and exemptions to investors,
particularly in areas which would otherwise be considered undesirable for
investment. For
example, in the last decades many African countries provided tax exemptions in
their Value Added Tax (VAT) system and other forms of tax incentives and
exemptions. Tax
incentives and their corresponding tax expenditures have been characterised as
‘substantial’ even if they are not easy to quantify on the basis of a
consistent methodology and they vary significantly from one country to the
other[48]. Tax
incentives are estimated to reduce tax revenues by several percentage points of
GDP (e.g. 3% in Tanzania according to the Tanzania Revenue Authority[49]) and their
efficacy in attracting foreign direct investment is also open to question,
especially in Africa[50]. Illicit
financial flows[51] are
particularly harmful for developing countries, although their size is difficult
to estimate. According to a recent report by Global Financial Integrity[52], developing
countries lost EUR 442 billion per year through illicit flows over the decade
2000-2010. In 2010 alone, illicit outflows from developing countries had grown
to EUR 649 billion – almost six times the value of net ODA from all donors in
the same year. 2.1.4. EU Policies and Programmes 2.1.4.1. Domestic Revenue Mobilisation The
EU and 19 Member States[53] reported new
initiatives to strengthen developing countries’ tax systems. This reflects the
continued importance of taxation in support to developing countries. The
content of such support varied from the very narrow (e.g. study tours for
instance in the case of Czech Republic and Romania) to the quite broad and
multi-country programmes (e.g. UK support to EITI, and France’s support to
capacity building in West Africa). New initiatives in the area of domestic
revenue mobilisation include Germany’s support to South Sudan and UK’s support
to the Palestinian Authority. A recent UK
Parliamentary report[54] has put
added emphasis on the importance of tax in developing countries, in line with
EU commitments. The critical importance of taxation in development and poverty
reduction is at the centre of this report. It states that effective tax
collection involves: (a) with respect to the extractive industries, a heavier
focus on taxing volumes of extraction or turnover; and (b) improved collection
of personal income taxation, VAT and local property taxation. Underpinning the
latter is an urgent need to provide incentives for formalisation of enterprises
to join the formal sector. The report underlines the global nature of tax
collection, where regulatory issues play a major role, and recommends enacting
laws unilaterally requiring (i) tax authorities to exchange information
automatically to deter cross-border tax evasion; (ii) corporations to report
their financial information on a country-by-country basis; and (iii) assess any
new primary or secondary UK tax legislation against its likely impact on
revenue-raising in developing countries – especially to discourage the misuse
of transfer pricing. The
2012 Accountability Report had noted the absence of a joint diagnostic
framework for assessing tax systems. In the course of 2012, efforts have been
made by several donors (including EU MS and the Commission) and the IMF to
develop a joint assessment tool. The 2012 report had also noted that the
coordination and complementarity of the Member States’ approaches could be
enhanced, while country coverage seemed improved based on suitable division of
labour between Member States. These observations appear to remain valid and
international coordination platforms (e.g. the International Tax Compact)
should be further deployed. Finally, there is no information on whether the
weakness related to the relatively low engagement with national parliaments and
civil society organisations have benefitted from any specific support. These
organisations are an important part of the good governance and accountability
frameworks in developing countries and would benefit from capacity-building. To improve support to developing countries,
several new studies provide guidance for prioritisation and sequencing of
support and identify approaches that are the likeliest to succeed, as discussed
in Box 2.1.4 below. Portugal
remains the only Member State to report funding tax reform in developing
countries at a share above 50% of its ODA for public financial management
(PFM). Another fourteen Member States[55] provide
support for tax reform, but at lower shares of their PFM aid, while nine Member
States[56] do not
provide any. These results are in line with what had been reported last year. The EU and
twelve Member States[57] report
monitoring domestic resource mobilisation through budget support operations.
The monitoring takes place in a number of ways, with many taking advantage of
this task being performed by donor groups and/or through Joint Performance
Assessment Frameworks – which minimises the reporting burden imposed on
recipient countries. Other approaches have been pursued by Austria, through its
dialogue on aid dependency, Germany’s ‘fiduciary risk assessment tool’ which
sets a 10% threshold on revenue to GDP as a trigger for budget support, and
Denmark, which is issuing new guidelines on budget support to address this area
more systematically. The EU and the majority of Member States support
developing countries’ efforts to assess the impact of tax incentives.
Member States’ support is largely through technical assistance, provision of
experts, twinning, training and studies. Some, such as Germany and Denmark, go
beyond the simple quantification of the expenditures and assess impact in terms
of investments, cost benefit and efficiency. Other donors, such as the UK,
Germany and Ireland also provide indirect support by funding related work by
institutions such as the IMF (including its Regional Assistance Centres) and
the World Bank, in line with the Council Conclusions of June 2010 on Tax and
Development. Box 2.1.4
–Tax and Development: recent findings A 2013 OECD study[58] shows that
taxation should be regarded not only as a means to raise revenue but also as an
essential component of good governance. In that sense, how revenue is collected
is as important as how much gets collected. And linkages between taxation and
governance also involve supporting institutions and organisations outside the
revenue system (e.g. the Judiciary, Parliament, civil society). Donors can
support revenue collection processes, but partner country ownership and
leadership are preconditions for success. Two focused studies
conducted in 2012 by the International Centre for Tax and Development, with
funding from DfID and Norad, update knowledge in selected areas, provide
further validation of current approaches, and may help EU and Member States to
prioritise their interventions: ·
The report
on Taxation and Development[59] summarises lessons learnt
from 50 years of research. It concludes that: (i) encouraging and funding local
think tanks has important long-term payoff; (ii) better tax policy and
administration depend on country circumstances and need to be tailor-made; and
(iii) support needs be oriented to build capacity within and outside government
and sustaining such efforts over the long-term. ·
The report
on Donors, Aid and Taxation in Developing Countries[60] proposes seven ‘big picture’
considerations for the design of donor programmes: (a) supporting local
leadership of reform efforts; (b) incorporating more systematic political
economy analysis into the design and implementation of reform; (c) designing
tax reform that seek to foster broader linkages between taxation, state-building
and governance; (d) paying careful attention to the complexity of the
relationship between aid and tax effort; including tax exemptions on aid; (e)
better designing tax-related conditionality, particularly by developing a more
nuanced set of performance indicators; (f) ensuring the effective coordination
of donor interventions; ; in line with the implementation of the Paris
declaration and subsequent commitments and (g) paying greater attention to the
international policy context, and particularly the role of tax exemptions for
donor projects, tax havens and tax evasion by some multinational corporations
in undermining developing country tax systems. There is
still no consensus in the EU on foregoing tax exemptions on projects
financed through external aid. At EU level, some progress has been achieved
in this area, for instance when financing framework contracts, but there
continues to be lack of consensus on the way forward. Some Member States, such
as France, Romania and Slovenia have mainstreamed this approach in their
disbursement of foreign aid. Others, such as Denmark, have implemented it
partially – in the case of VAT on goods and services purchased in partner
countries. A few Member States are not in favour of the elimination of
exemptions on various grounds including the concern it will reduce the volume
of goods, services and civil works that may be purchased. A large majority of
Member States consider however that a coordinated approach towards the
elimination of tax exemptions would be desirable, arguing that such an approach
would need to: (a) apply to all donors, not just European ones; (b) exclude
humanitarian aid; (c) be based on a prior study that determines which
exemptions to be maintained and provides a thorough analysis of implications;
and (d) be linked to harmonisation of taxes within the EU. 2.1.4.2. Tax Evasion and Fraud Tax evasion
and fraud are widely believed to be important factors limiting revenue
mobilisation but also undermining good governance and institutional
development.
Tax
evasion and fraud threaten governments´ revenues, both in developed and
developing countries, thereby limiting their capacity to carry out their
economic policy and to proceed to necessary structural reforms. Tax evasion generally
comprises illegal arrangements where liability to tax is hidden or ignored,
i.e. the taxpayer pays less tax than he is legally obligated to by hiding
income or information from the tax authorities. Tax fraud is a form of
deliberate tax evasion which is generally punishable under criminal law. The
term includes situations in which deliberately false statements are submitted
or fake documents are produced[61]. In recent
years, the challenge posed by tax fraud and evasion has increased considerably.
The globalisation of the economy, technological developments, the
internationalisation of fraud, and the resulting interdependence of tax
authorities reveal the limits of strictly national approaches and reinforce the
need for joint action. The interaction of many different tax systems in the
context of a global economy creates many possibilities for the undermining of
tax systems[62]. The private
sector is accused to use the possibilities offered by ‘tax havens’ which,
generally speaking, are countries that base their attractiveness on opacity and
harmful tax competition in the direct tax area to relocate their tax bases in
their low-tax jurisdictions, and to conceal this from their country of
residence (through means such as obstacles to the identification of beneficial
ownership, bank secrecy and conduit companies). The revenue
losses which can arise from both tax evasion and tax fraud as well as tax
avoidance[63] are
difficult to estimate. According to some estimates concerning only the United
States, the revenue cost of profit shifting towards ‘tax havens’ by US
multinationals could be up to EUR 45 billion, while individual tax evasion
could cost up to EUR 38 billion yearly[64]. Estimates
of this kind are not available for the EU, but on the basis of the similar
amount of FDI stocks in ‘tax havens’ in both USA and the EU, the tax revenue
losses can be estimated to be of similar magnitude[65]. The OECD and
the G20 have been calling for more determined action to combat tax evasion and
fraud. There is growing pressure on tax havens to increase the transparency of
their tax systems and put an end to unfair competitive practices. The EU and
most Member States have provided further support for addressing tax evasion,
tax fraud and harmful tax competition, and promote the principles of good
governance in tax matters in their cooperation policy. In
the area of exchange of information, the EU and twenty-six Member States are
supporting the Global Forum on Transparency and Exchange of Information for Tax
Purposes. According to OECD data[66], sixteen
Member States[67] signed a
total of thirty-six new Tax Information Exchange Agreements with twenty-seven
developing countries in 2012. In addition, Croatia
has signed fifty-five Double Taxation Agreements and is continuing with the
negotiations in order to spread the network of Double Taxation Agreements as a
good tool for tackling cross-border tax evasion. Furthermore,
several Member States, such as Germany, Ireland, Luxembourg, the Netherlands,
the Slovak Republic and the United Kingdom supported initiatives in 2012 such as
the International Tax Compact[68] (ITC) and
the OECD tax and development programme[69] aimed at
helping developing countries fight tax evasion, improve information exchange
and limit the misuse of transfer pricing. In 2011, the
Commission initiated a Tripartite Initiative with the World Bank and the OECD
to enhance the capacity of developing countries to adopt and implement Transfer
Pricing Guidelines while providing a secure and stable environment for
multinational corporations to invest in these countries. This initiative
supports training and technical assistance initiatives in countries that are
politically committed and institutionally ready. In March
2012, the European Council called on the Commission to step up action against
tax fraud and tax evasion. The European Parliament had also adopted a
Resolution in April 2012 calling for concrete ways to combat tax fraud and tax
evasion[70]. In response
to this, the Commission adopted a Communication in June 2012 on ‘Concrete ways
to reinforce the fight against tax fraud and tax evasion including in relation
to third countries’[71], setting out
key challenges posed by tax fraud and evasion, and concrete measures to address
them, highlighting the importance that EU partners under international trade
and cooperation agreements commit to good governance principles in the tax
area. In December
2012, the Commission adopted an Action Plan to strengthen the fight against
tax fraud and tax evasion[72]. Through the
description of 34 specific actions, the Action Plan presents a comprehensive
set of measures to help Member States protect their tax bases and recapture
taxes legitimately due. This action plan is accompanied by two recommendations
to encourage Member States to take immediate and coordinated action on
aggressive tax planning and so called ‘tax havens’[73]. These
initiatives constitute an immediate response to the identified needs to ensure
a coherent policy vis-à-vis third countries, to enhance exchange of information
and to tackle certain fraud trends. Furthermore, it calls for EU Member States
to consider offering closer cooperation and technical assistance to third
countries, especially developing ones, which are committed to complying with
minimum standards of good governance in tax matters in order to assist them in
fighting effectively against tax evasion (e.g. possible secondment of tax
experts to such countries for a limited period of time) which could have a
positive impact on their capability to raise revenues and institutional
development. 2.1.4.3. Money Laundering, Illicit
Flows, and Corruption More
coordinated international action to prevent money leaving developing countries
illicitly and taking the necessary policy measures (fiscal transparency and
exchange of information, country-by-country reporting, anti-money laundering
measures, efficient tax collection systems) to reduce illicit flows would bring
a significant increase in resources that are available to developing countries’
governments. In February
2013, the Commission adopted two proposals to reinforce the EU’s existing rules
on anti-money laundering and fund transfers. The proposals include a directive
on the prevention of the use of the financial system for the purpose of money
laundering and terrorist financing and a regulation on information accompanying
transfers of funds to secure ‘due traceability’ of these transfers. Both
proposals fully take into account the latest Recommendations of the Financial
Action Task Force (FATF), the world anti-money laundering body, and go further
in a number of fields to promote the highest standards for anti-money
laundering and counter terrorism financing. Many Member
States have in the past provided support to developing countries in combating
corruption and money laundering, some of which is on-going. The Commission has
allocated more than EUR 93 million on 69 projects dedicated to the fight
against corruption in various regions since 2009. Moreover, the Commission is
financing a number of Rule of Law and sectoral capacity building projects that
address corruption indirectly. EU Member
States are signatories to several conventions aimed at combatting corruption,
including the OECD Anti-Bribery Convention, and the UN Convention Against
Corruption (UNCAC). Twenty-two EU Member States[74] are
signatories of the OECD Convention, while all Member States and the EU have
signed UNCAC. According to the 2012 Transparency International Progress Report
on Country Enforcement of the Anti-Bribery Convention[75], only four
EU Member States[76] (out of the
twenty-two analysed in the report) do actively enforce the OECD Anti-Bribery
Convention, while five do not enforce it at all[77]. Germany and
the Czech Republic are the only EU Member States that have not ratified the
UNCAC yet, although they signed it, respectively, in 2003 and 2005[78]. At the Third
Conference of States Parties in Doha, in November 2009, it was decided to set
up a Mechanism for the Review of Implementation of the UNCAC (UNCAC Review
Mechanism). Only the executive summaries of the country review reports are
published, unless a reviewed country chooses otherwise. Austria, France,
Germany, the Netherlands, Sweden and the UK have supported financially the
review mechanism with EUR 1.3 million over the period 2010-2012. The Stolen
Asset Recovery (StAR) initiative was launched in 2007 by the World Bank and UN
to support international efforts to end safe havens for corrupt funds. In 2012,
six Member States[79] provided
support to the StAR Initiative in various forms (including financial support,
or staff secondment). Spain is providing Albania with training on fighting
money laundering and financial crimes. 2.1.4.4. Extractive Industries In
2011, the European Commission proposed amendments to the
existing Transparency and Accounting Directives regarding transparency
requirements for listed and large non-listed EU companies, and made proposals
on country by country reporting[80]. The main
thrust of the proposal[81] is to
provide mandatory disclosure requirements for extractive industry companies on
a country and project basis. These requirements are in line with the voluntary
requirements set by the Extractive Industry Transparency Initiative (EITI)
standards. In 2012, the
Commission and ten Member States[82] supported
EITI, either politically, technically or financially. Financial support was
channelled through direct support to the EITI Secretariat, bilateral support at
country level and/or through the EITI Multi-Donor Trust Fund (MDTF). Germany
for instance is supporting EITI implementation through bilateral and regional
technical cooperation projects. Other recent financing provided by Member
States in this area include UK’s contribution of about EUR 30 million to a
World Bank project[83] in the
Democratic Republic of Congo, or Belgium’s contribution of EUR one million to
the Extractive Industries Technical Advisory Facility. There is no
consensus among Member States over whether and how the approach of EITI should
be extended to other sectors. Some would be favourable to such extension to
sectors such as forestry and/or on the basis of country driven priorities.
Others are in favour of strengthening the reporting requirements under the
existing EITI, as it is currently under way. Germany is supporting the Constructive Sector
Transparency initiative (CoST). 2.2. Maintaining Sustainable Debt Levels EU
Commitments ·
The EU
is committed to supporting debt sustainability in developing countries, in line
with the 2001 Doha Declaration. This has been clearly articulated, inter alia,
in the Council Conclusions of 18 May 2009 (§12), which state that ‘the
EU will continue supporting the existing debt relief initiatives, in particular
the Heavily Indebted Poor Countries (HIPC) Initiative and Multilateral Debt
Relief Initiative (MDRI) and values the Evian approach as an appropriate
flexible tool to ensure debt sustainability’. The EU also confirmed that it
‘supports discussions, if relevant, on enhanced forms of sovereign debt
restructuring mechanisms, based on existing frameworks and principles,
including the Paris Club, with a broad creditors’ and debtors participation and
ensuring comparable burden-sharing among creditors with a central role for the
Bretton Woods Institutions (BWI) in the debate’. ·
More
recently, the Council Conclusions of 15 October 2012 stated that (§3)
‘The EU will continue to deliver on debt relief commitments to support the
sustainability of public finances in developing countries, participate in
international initiatives such as the WB/IMF Debt sustainability framework, and
promote responsible lending practices. Moreover, the EU will promote the participation
of non-Paris Club members in debt-workout settlements, and Member States that
have not yet done so will take action to restrict litigation against developing
countries by distressed-debt funds. The EU will also support developing
countries’ efforts to avoid unsustainable debt levels.’ 2.2.1. Introduction Many developing countries built up their foreign
debt to unsustainable levels in the 1970’s and 1980’s. Starting from the mid
1990’s and accelerating from the mid 2000’s, heavily indebted developing countries
have received debt relief, whereby a large share of past official debt to
bilateral and multilateral official creditors was forgiven or repaid through
grants, allowing these countries to reallocate resources from debt service to
development expenditure. As debt relief has also created fiscal space for
new borrowing, often from emerging donors, there is always a risk that the debt
of poorer countries might return to unsustainable levels. 2.2.2. Implementation Table The table below
summarises progress made in 2012 in implementing the EU commitments on debt
sustainability. Further details are discussed in the main text. EU Commitment || Target Date || Status[84] || Comment Support existing debt relief initiatives, in particular the HIPC Initiative and the MDRI || No date specified || || Three countries reached HIPC completion point in 2012. Several MS initiatives support MDRI and similar programmes. Support discussions, if relevant, on enhanced sovereign debt restructuring mechanisms, on the basis of existing frameworks and principles || No date specified || || Limited support (only the EU and 11 Member States see a need for reform, not necessarily structural). Participate in international initiatives such as the WB/IMF Debt Sustainability Framework (DSF) and promote responsible lending practices || No date specified || || A recent IMF assessment found broad compliance with the DSF[85]. Promote the participation of non-Paris Club members in debt-workout settlements || No date specified || || No bilateral action, only support for dialogue through one annual meeting with non-members, not attended by China and India[86]. Take action to restrict litigation against developing countries by distressed debt funds || No date specified || || No action to restrict litigation mentioned by MS, only legal support to developing countries for litigation through multi-donor trust funds (e.g. DMF, ALSF). 2.2.3. Recent Trends Net external private
and public debt flows to developing countries represented a marginal share of
the overall development finance available for both low income and middle income
countries, as shown in Figure 2.2.3. Figure 2.2.3 – Net External Public and Private Debt Flows as a Share
of Total Resource Flows of Low-Income (LIC) and Middle-Income Countries (MIC)
in 2010
Borrowing by developing countries is an important
source of finance that dissociates government spending from revenue inflow
fluctuations, and allows frontloading development investments. As such,
borrowing can be a stable source of finance. In this context, it is important
to note the stabilising role international official lending has played in the
financial crisis during the first year of the crisis, replacing private sector
lending that contracted significantly in 2009. Overall, the total external debt outstanding as
a percentage of GNI declined from 37.9% in 2000 to 21.5% in 2011, and debt
service to export ratio of developing countries has declined from 20.4% in 2000
to 8.8% in 2011. The improvement in debt indicators was widespread across
regions. Low income countries also improved their external debt to GNI ratio
from 68.7% in 2000 to 28.7% in 2011, and their debt service to export ratio from
11.2 to 4.6% over the same period[87]. In 2011, net debt inflows from official
creditors declined by 14%, while net debt inflows from private creditors
remained steady. In 2010 and 2011, private lending proved more resilient and
remained close to its 2007 peak in both years, with volumes 6 to 14 times
higher than public and publicly guaranteed lending. This growing importance of
private lending, even though within a framework of improving debt indicators,
poses a risk to overall economic stability as systemic unsustainable private
debt tends to become public debt. A study of 90 defaults and renegotiations on
debt owed to private creditors by 73 countries found that debt renegotiations
have an average length of over seven years, produce average creditor losses of
40% and lead to limited debt relief[88]. 2.2.4. EU Policies and Programmes Substantial debt relief was provided in 2012 by
EU Member States, either bilaterally or through multilateral initiatives such
as the HIPC and MDRI. Over the period 2000-2011, debt relief provided
collectively by the EU Member States and the Commission amounted to EUR 58
billion at 2010 prices, equivalent to 71% of global debt relief. Active participation in the HIPC (Heavily
Indebted Poor Countries) Initiative - aiming at providing debt relief to Low
Income Countries - continued in 2012. Full relief was granted to the three
countries that reached HIPC completion point in 2012: Ivory Coast, Guinea and
Comoros. The Paris Club reached debt restructuring agreements for Guinea, St
Kitts and Nevis, Côte D’Ivoire and Myanmar. UNCTAD
prepared a set of principles on sovereign lending and borrowing in 2011, and
launched the endorsement process at the Doha Conference in December 2012. The
principles aim to reduce the frequency and severity of debt crises by
developing a set of voluntary guidelines that promote and reinforce responsible
sovereign lending and borrowing practices. Lack of globally agreed rules and
regulations guiding sovereign financing have contributed to irresponsible
sovereign borrowing and lending to sovereign countries. The principles are
meant to fill this gap. Several debt swap programmes have been launched
by Member States in developing countries. EU Member States and the Commission
also contributed to the Debt Relief Trust Fund (DRTF) that allows the
participation of the African Development Bank in the HIPC Initiative. Some
Member States also assisted countries that are not eligible for HIPC. The
United Kingdom, for example, provides bilateral assistance to poor countries that
are not eligible for debt relief under the HIPC initiative. Under the UK
Multilateral Debt Relief Initiative (UK MDRI), the UK reimburses ten per cent
of qualifying countries’ debt service payments to the World Bank and African
Development Bank. The UK provided over EUR 18 million via the UK MDRI in 2012
and is scheduled to provide up to EUR 3.3 million in 2013. The EU is
focusing on supporting stronger debt management capacities and better public
finance management. Several EU donors and the Commission support UNCTAD’s Debt
Management and Financial Analysis Software (DMFAS) Programme, and the World
Bank’s Debt Management Facility (DMF), to strengthen debt management capacity
in Low Income Countries through the provision of software and technical assistance.
DMF support in particular focuses on diagnosing weaknesses in the management of
debt and in the set-up of medium term reform strategies, as well as legal
support against vulture funds. Several EU Member States address the problem of
vulture funds also through the African Legal Support Facility (ALSF),
administered by the African Development Bank. Existing debt workout mechanisms for Low Income
Countries (e.g. HIPC, Paris Club) need to be adjusted to reflect a changing
reality: only four potentially eligible countries remaining for HIPC, increased
importance of emerging donors, and shift of debt portfolios to private
commercial lending. There is also increasing demand within the UN System for
reopening the international discussion on a structured approach to solving
sovereign debt crises[89]
with a series of meetings organised by the Economic and Social Council to
consider options. According to some Member States, the promotion and further
development of collective action clauses (CAC) in bond contracts are preferable
to the alternative of large-scale structural changes to the current mechanisms
available to LICs. Sovereign debt restructuring has long been complicated by a
free rider problem, as any restructuring had to be negotiated with each
bondholder individually. CACs allow borrowers to restructure their debt if a
qualified majority of bondholders agrees to the proposed terms. 3. Private
Finance for Development 3.1. Private Investment for Development EU
Commitments Private Sector Development ·
Council
Conclusions of 15 June 2010 on the Millennium Development Goals, §25: The EU and its Member
States will continue to encourage and to support the development of the private
sector, including small and medium enterprises through measures enhancing the
overall investment climate for their activity, inter alia through promoting
inclusive finance and through relevant EU Investment Facilities and Trust
Funds. § 27. In the framework of the review of the European Investment Bank’s
(EIB) external mandate, the EU and its Member States should strengthen the
capacity of the EIB to support EU development objectives and to promote
efficient blending of grants and loans in third countries including in
cooperation with Member States finance institutions or through facilities for development
financing. ·
Council
Conclusions of 9 March 2012 on Rio+20, §30: Underscores the importance of
the private sector and of partnerships between the private and the public
sector in promoting investment, trade and innovation, including in delivering a
global GESDPE. ·
Council
Conclusions of 14 May 2012 ‘Increasing the Impact of EU Development Policy: an
Agenda for Change’:
The private sector and trade development are important drivers for development.
An enabling business environment and more effective ways of leveraging private
sector participation and resources in partner countries as well as increased
regional integration, aid for trade and research and innovation will be key to
the development of a competitive private sector. This has to go along with
promoting labour rights, decent work and corporate social responsibility. Corporate Social responsibility ·
Council
Conclusions of 11 November 2008 (EU position for Doha FfD conference), §25: [the EU] will further
enhance efforts to promote the adoption, by European companies, of
internationally agreed principles and standards on Corporate Social
Responsibility. ·
Council
Conclusions of 18 May 2009 (Support to developing countries in coping with the
crisis),
§9: The EU underlines the importance of the concept of corporate social and
environmental responsibility. ·
Council
Conclusions of 15 June 2010 on the Millennium Development Goals, §26: In addition the EU and
its Member States commit to increasing their efforts to mobilise the private
sector and engage with business to help accelerate progress towards the MDGs
including by promoting the UN Global Compact and the Corporate Social
Responsibility principles. Innovative public-private partnerships with the
business and NGO community, combining and reinforcing each other’s knowledge
and capabilities, can enhance the effectiveness of our aid. ·
Competitiveness
Council Conclusions of 5 December 2011, §7: Welcomes the Communication from the
Commission A Renewed EU Strategy 2011-2014 for Corporate Social Responsibility
as well as of the Social Business Initiative; emphasises market advantages of
responsible business conduct; encourages the Member States to respond to the
Commission’s invitation to develop or update their plans or lists of priority
actions in support of the Europe 2020 Strategy. ·
Council
Conclusions of 9 March 2012 on Rio+20, §30: reaffirms the need to implement
worldwide sound corporate governance as well as international principles and
standards on corporate social responsibility. 3.1.1. Introduction The
private
sector is a critical stakeholder and partner for development. It
plays a key role in supporting inclusive growth, notably by creating jobs
(local small-scale businesses provide 90% of jobs in developing countries)[90], providing
essential goods and services (including health, education, water, energy and
infrastructure), as well as being a major source of tax revenues. Engaging
the private sector as a development partner has been an approach pursued since
the 1980s by bilateral donors and multilateral organisations. It has been
rallying even more support in recent years, as illustrated by the official
recognition of the importance of the private sector as actor in development at
the Busan 4th High-Level Forum on Aid Effectiveness in 2011, and at the Rio+20
Summit in 2012. Against
this background, and as stated in the ‘Agenda for Change’, the EU is thus
striving to work more closely with the private sector for achieving the
objective of inclusive and sustainable growth and poverty eradication. When considering
the role and contribution of the private sector to development outcomes, it is
important to acknowledge that the private sector is not a homogeneous entity.
It should indeed be captured in its multiplicity, ranging from micro, small and
medium enterprises (MSMEs) - operating in the informal or formal sector -
through to large multinational corporations (MNCs). Development partnerships
with the private sector must therefore be tailored to the type of private
actors that are being considered, including by distinguishing between foreign
and local private companies, and between large firms and MSMEs. Such
partnerships with the private sector can take many forms. For instance, at the
level of policy reform, business and professional associations, trade unions
and private sector organisations, as well as large operators can play an
important role in policy dialogue around reforms to improve the business
environment. At the level
of private companies’ business operations, development partnerships
should be promoted in areas that advance both development and business outcomes
so that they are mutually reinforcing (e.g. inclusive business models and
responsible business practices, public-private partnerships for the delivery of
basic public goods and infrastructure services, and/or business linkages
through a ‘growth poles’ approach etc.). At the level
of development financing, innovative financial mechanisms can be used to
leverage additional private finance for delivering public goods. The main EU
instruments to engage with the private sector at the level of development
financing are the Regional Investment Facilities, which combine EU grants with
loans in view of unlocking additional financing for important investments in EU
partner countries. The use of so-called blending mechanisms[91] to catalyse
private investment has increased in 2012. Support to the private sector –
mainly SMEs – was in 2012 twice the amount of 2011 and represented 13% of the
total grants blended that year. A new ‘EU Platform for Blending
in External Cooperation’[92] was
established in December 2012 with the European Development Finance Institutions
(EDFI) to further increase this catalysing role. Domestic and foreign private investments are a key source of
employment, wealth creation and innovation, and as such, can contribute to
sustainable development and poverty reduction in developing countries[93]. The ‘Agenda for Change’ also stresses that
private domestic and foreign investment and improving infrastructure are
critical success factors for igniting and sustaining private sector growth. In June 2012,
at
the G20
Summit in Mexico, the Working Group on Private Investment and Job Creation
presented its report on ‘Promoting responsible investment for sustainable
development and job creation’[94]. Eleven key policy
recommendations were made to developing countries and development partners for
creating a supportive environment for domestic and foreign private investment.
These recommendations are grouped into the following four distinct policy
stages: ·
Improving
the business climate and the regulatory framework for foreign and domestic
investment; ·
Assisting
developing countries to attract the most value adding investment to their
economies; ·
Promoting
responsible investment in value chains; and ·
Stimulating
investment in local enterprise development. 3.1.2. Implementation Table The
table below summarises progress made in 2012 in implementing the EU commitments
on private sector development. Further details are discussed in the main text. EU Commitment || Target date || Status[95] || Comment Support the development of the private sector, including small and medium-sized enterprises, through measures to enhance the overall investment climate for their activity, inter alia by promoting inclusive finance and through relevant EU investment facilities and trust funds || No date specified || || The EU and MS have provided substantial funding for private sector development (in 2004-10, the Commission alone provided EUR 2.4 billion in direct support in the form of grant funding). Since 2007, the EU, together with some MS, has set up eight regional blending facilities, covering all regions of EU external cooperation. Several MS’[96] national development finance institutions also support blending activities (EU facilities and others). MS reported over 100 ODA activities for private sector development in 2012. Strengthen the EIB’s capacity to support EU development objectives and promote the efficient blending of grants and loans in third countries, including in cooperation with MS’ finance institutions or through development financing facilities || No date specified || || Half of the Commission-funded private sector development support mentioned above was channelled through the EIB. Support for blending facilities as described above. Enhance efforts to promote the adoption by European companies of internationally-agreed CSR principles and standards, the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises || No date specified || || Exploratory research was undertaken by the Commission in June 2012. Commitments by large EU enterprises are expected by 2014[97]. Respond to the Commission’s invitation to develop or update MS’ plans or lists of priority actions in support of CSR || No date specified || || On-going discussion with MS on plans and peer review mechanism[98]. Several MS intend to complete their plans in 2013. 3.1.3. Recent Trends Domestic and foreign private
investment in developing countries represented a substantial share of the
overall development finance available for both low income and middle income
countries, as shown in Figure 3.1.2.
Figure 3.1.3 – Domestic and Foreign Private Investment
Flows as a Share of Total Resource Flows of Low-Income (LIC) and Middle-Income
Countries (MIC) in 2010 FDI can
stimulate domestic investment, increase local market competition, enlarge
international market access for local products and generate externalities and
knowledge ‘spillovers’. FDI attraction has become a priority of development
agendas. It
is worth noting however that the impact of domestic and foreign private
investment on development depends on the type and strategy of investors, as
well as host country conditions, policies and institutions. The
global financial and economic crisis had a major impact on FDI flows. According to the latest data from UNCTAD[99], global FDI flows fell by 18% to an estimated EUR 1.0 trillion in
2012, down from a revised EUR 1.2 trillion in 2011. The
2012 figure is close to that of 2009, when FDI flows reached their lowest level
of just slightly over EUR 0.9 trillion. This decline is mainly due to
macroeconomic fragility and policy uncertainty faced by investors. For example, the EU-27’s FDI inflows and outflows dropped from a
peak in 2007 to a low point in 2010; provisional figures for 2011 indicate an
upturn in both directions. For
the first time ever in 2012, FDI flows to developing countries exceeded
those to developed countries by EUR 101 million, reaching
EUR 529 billion, the second highest level ever recorded. FDI flows to developing economies remained resilient, declining only
by 3%. Rising
FDI to developing countries was driven by a 10% increase in Asia and a 16%
increase in Latin America and the Caribbean. However, Africa and the least
developed countries (LDCs) saw a third year of declining FDI inflows, although prospects
for Africa are brightening. The 2011 decline in flows to the continent was due
largely to divestments from North Africa. In contrast, FDI inflows to
sub-Saharan Africa recovered from EUR 22 billion in 2010 to EUR 27 billion in
2011, a level comparable with the peak of 2008. Emerging
economies, mainly in Asia and South America have clearly become more important
destinations for EU FDI. This trend had started well in advance of the economic
crisis of 2008/2009 but the European recession intensified it. While
developed countries remain the leading source of outward FDI, developing and
transition economies have emerged as important sources of outward FDI since the
1990s. Many multinational corporations from developing and transition economies
are increasingly undertaking cross-border investment activities through FDI.
Between 1980 and 2011, their share of world outward FDI rose from 6.2% to
26.9%, peaking at 31.8% in 2010. 3.1.4. EU Policies and Programmes Policies and
programmes of the EU and its Member States focus
essentially on two fronts: the first concerns the creation of an
enabling environment for private sector development in partner countries, while
the second involves seeking new forms of engagement with the private sector to
achieve development goals. The type of engagement with the private sector
generally takes one of the following forms: co-financing projects or providing
blending facilities and other financial tools to crowd in investment from
private sector to support growth and job creation in partner countries;
fostering public-private dialogue, supporting development partnership with
private sector (DPP) aiming to achieve business and development goals,
promoting Public-Private Partnerships (PPP) for the delivery of public goods
and services (notably, infrastructure, health, etc.), testing and disseminating
innovative business models (IBM). 3.1.4.1. Private Sector Development In
line with the ‘Agenda for Change’, EU support is being notably targeted towards
the development of competitive local private sectors as a means to promote
inclusive and sustainable growth. Even if private sector development is not a
focal sector in all partner countries, the EU seeks to mainstream it in its
cooperation programmes (at national and regional level) with most partner
countries (e.g. in agriculture, energy, governance). To
date, EU support to private sector development has mainly focused on creating
an enabling environment for local businesses. A recent study on the ‘Evaluation
of EU support to Private Sector Development’[100] indicates
that over the period 2004-2010, the EU provided substantial grant funding for private
sector development, spanning a wide range of activities, including capacity
building, regulatory reform, and technology transfer. This made the EU an
important player in private sector development both financially and in terms of
scope covered, and private sector development an important area of its aid
delivery. The report further indicates that the European Commission provided
EUR 2.4 billion of direct support to private sector development. There are also
several well-recognised private sector development donors among Member States,
such as Austria, Denmark, France, Germany, Sweden, or the UK. Roughly
half of EU total support to private sector development (considering both grants
and loans) is channelled through the EIB[101]. The EIB
manages several EU instruments to support private sector development in partner
countries. Two of them specifically target the private sector: ·
The
‘Facility for Euro-Mediterranean Investment and Partnership’ (FEMIP) supports
growth and job creation in two priority areas: private sector development
(notably SMEs and the industrial sector) and the creation of an
investment-friendly environment in the Mediterranean region. Since 2002, EUR 13
billion have been invested through FEMIP, mobilising roughly EUR 35
billion of additional capital together with international financing
institutions, bilateral agencies and the private sector in order to advance the
integration of the region. The European Commission provides an annual
envelope of EUR 32 million to the EIB to carry out risk capital operations. ·
The
‘ACP Investment Facility’ is an instrument financed from the EDF and managed by
the EIB. It is geared specifically to fostering private sector investment in
the ACP countries (through risk capital and loans to the private sector). Between
2004 and 2010, EUR 3.5 billion have been contracted via the ACP Investment
Facility. Several
EU Member States have also undertaken initiatives aimed at improving the
business environment and investment climate in partner countries. This support
is driven in part by indicators to measure the business environment of
countries; the so-called ‘Doing Business Indicators’[102], and its
related publication, the Doing Business Report[103]. Despite
some shortcomings[104], including
bias in favour of large firms[105] and concerns
over labour protection[106], these
indicators have been effective in drawing attention to the importance of
reducing the burdens of business regulation and improving the investment
climate. For
example, Austria and France have provided financial support (EUR two million
and EUR one million respectively) to the ‘Facility for Investment Climate
Advisory Services’ (FIAS)[107]. Implemented
by the World Bank Group, the FIAS offers client governments a range of advisory
services to assist them in improving the investment climate for domestic and
foreign investors. Other important aspects of private sector development
supported by Member States include initiatives aimed at facilitating access to
financial services by MSMEs, such as micro-finance activities supported by
Austria, Belgium and Latvia. Furthermore, France, Germany and Lithuania are
also supporting capacity building programmes in partner countries. Alongside
promoting the development of the private sector in partner countries, EU donors
are also striving to engage with private enterprises through different
instruments in view of maximising development impact. Examples of activities
and programmes of Member States include: –
Swedish Sida’s ‘Business for Development’ (B4D)
Programme, which presents a framework for, and an approach to, collaboration
with private sector actors. The main instruments are challenge funds,
Public-Private Partnerships and drivers of change. The objective is to
stimulate private sector development and entrepreneurship in developing countries. –
Danida’s Business Partnerships, aimed at
facilitating the establishment of commercial partnerships that have a
significant impact on development in poor communities. The aim is to create
value both for partners and the local society. –
Finland has provided a grant amount of EUR 15
million to Finnfund (Finnish Fund for Industrial Cooperation), a
development financing company which offers long-term risk funding for
commercially profitable investments in developing and transition countries. The
funded projects have development objectives, specifically for the increase in
the production capacity. Six
Member States[108] are members
of the ‘Private Infrastructure Development Group’ (PIDG) which aims at
mobilising private investment in infrastructure, in order to increase service
provision for the poor, boost economic growth and reduce poverty in the world’s
poorest countries. As
part of the new programming cycle for 2014-2020, the EU is considering new
initiatives regarding private sector engagement for development, including
possible support to the up-scaling of inclusive business models and other forms
of private sector engagement in development through core business operations.
This includes a preliminary analysis on a new set of Guiding Principles for
engaging with the private sector. 3.1.4.2. Blending[109] As mentioned in the
‘Agenda for Change’, the use of innovative financial instruments which blend EU
grants with additional non-grant funds, such as loans and equity from financing
institutions, is seen as powerful tool to leverage private sector support.
Blending has the potential to address several factors that currently hold back
private investment into projects with a strong developmental impact. Since 2007, the EU,
together with several Member States, has set up eight regional blending
facilities. Currently, the Facilities mainly support public investment
projects. The main bulk of all grants contributions approved since 2007 went to
investments promoted by a public entity, although in recent years, the EU regional
blending facilities have also increasingly supported local businesses through
risk capital, loan guarantees and technical assistance to leverage private
investment and commercial finance (representing 11% of grants committed to
date). The European Commission is
currently working to extend the use of innovative financial tools such as risk
capital and guarantees with a view of unlocking additional private investments
and commercial finance for developmental projects, including in other sectors,
such as transport and energy. 3.1.4.3. Corporate Social
Responsibility[110] Although it
is difficult to assess and monitor the extent to which Corporate Social
Responsibility (CSR) impacts sustainable development outcomes in developing
countries, the EU has underlined the relevance of CSR in the context
of the EU’s external relations, including trade policy. As
a matter of fact, corporate social responsibility is increasingly present in
trade agreements that the EU concludes. In as much as trade flows interface
with investment in development, the fact that trade agreements contain CSR
clauses will enhance a development cooperation potential that is sustainable. The 2012
Communication on ‘Social Protection in EU Development Cooperation’[111] states for
instance that ‘the EU’s initiative on Corporate Social
Responsibility can support the private sector in developing countries to
implement relevant international guidelines in order to achieve more inclusive
and sustainable growth and further development’. The EU and fourteen Member States[112] have supported (and/or are planning to undertake) initiatives aimed
at promoting CSR principles. Such initiatives include: ·
the development of national plans on CSR and
business and human rights (as requested by the European Commission in its 2011
CSR Communication[113]); ·
the participation in international initiatives
such as the UN Global Compact, the OECD Guidelines for Multinational
Enterprises, ILO Tripartite Declaration on Multinational Enterprises and Social
Policy, the Extractive Industries Transparency Initiative (EITI) and the
Kimberley process; ·
policies linked to the UN Guiding Principles on
business and human rights, and to CSR in trade and development; and ·
support to capacity building and knowledge
exchange programmes (e.g. on uptake of ISO 26000 guidelines). A peer review
of Member States’ policies on CSR and their participation in related
initiatives was initiated by the European Commission in 2012. The peer reviews
aim at: 1) spurring the production by Member States of national action plans on
CSR and national action plans on business and human rights, and 2) facilitating
the production of an updated compendium of Member States’ CSR policies and
activities. A central aspect of the EU Strategy on
CSR is improving EU companies’ disclosure of social and environmental
information. Following up on the 2011 Communication and on the Single Market
Act 1[114], the Commission has recently put forward a legislative proposal
amending the existing rules in the Fourth and Seventh Accounting Directives in
order to enhance the transparency and usefulness of the non-financial
information disclosed by large companies and groups with more than 500
employees. The need to improve the quality of CSR disclosure via regulatory
measures has also been recently highlighted by two resolutions from the
European Parliament[115]. Moreover, the EU Strategy on CSR makes a
commitment to monitor the pledges made by European enterprises with more than
1000 employees to take account of internationally recognised CSR principles and
guidelines. Human rights
are an increasingly important aspect of corporate social responsibility, but
until now there has been no practical guidance specifically for smaller
enterprises. The ‘UN Guiding Principles on Business and Human Rights’[116] define what
companies and governments should do to avoid and address possible negative
human rights impacts by businesses, but many challenges remain when it comes to
the implementation of the Guiding Principles. In December 2012, the first UN
Forum on Business and Human Rights, in which several EU Member States
participated, was a first attempt at addressing some of the key trends and
challenges in implementing the Guiding Principles. The EU itself encourages and
contributes to the implementation of the UN Guiding Principles. To this end,
the European Commission is supporting a process to develop guidance for
enterprises on the corporate responsibility to respect human rights, currently
focusing on three business sectors (i.e. employment and recruitment agencies;
ICT/Telecommunications; and oil and gas). The three practical guidance notes
were published in June 2013[117] and are based on the UN Guiding Principles on
Business and Human Rights[118]. The EU has also published an
introductory guide to human rights for SMEs[119], available in 28 languages. Launched at the UN Forum on Business
and Human Rights, this guide seeks to explain why human rights are relevant for
European SMEs, and how they can address human rights risks. 3.2. Trade and Development EU Commitments The EU has consistently supported
developing countries in using trade as a tool for development. As the impact of
Trade policy on development is covered in a separate report on Policy Coherence
for Development, it is not covered in detail in the current report, which
concentrates on Aid for Trade (AfT)[120]. ·
Council Conclusions of 15 October 2007 laying down a joint ‘EU Strategy on Aid for Trade: Enhancing EU
support for trade-related needs in developing countries’, focused on increasing
volumes of Aid for Trade, especially to the poorest countries, and enhancing
the impact of this support. One of the commitments was to collectively spend
EUR two billion annually on Trade-Related Assistance by 2010 (EUR one billion
from MS and the Commission respectively). In the range of 50% of the increase
should be made available to ACP countries. ·
Council conclusions of 15 June 2010, §24: The EU and its Member States have already reached their
collective target to spend EUR 2 billion annually on Trade Related Assistance,
and their total Aid for Trade has reached record high levels of EUR 10.4
billion. The Council calls upon them to sustain their efforts, and in
particular to give increased attention to LDCs and to joint AfT response
strategies and delivery. (…) In particular, the Council calls on the EU and its
Member States to reach agreement on regional Aid for Trade packages in support
of ACP regional integration, under the leadership of the ACP regional
integration organisations and their Member States, and involving other donors. ·
Council Conclusions of 16 March 2012, §28: Confirming that the EU and its Member States should continue
to lead global efforts to respond to the Aid for Trade demands, and calling on
the Commission and Member states to continuously review the EU’s Aid for Trade
strategies and programmes, taking into account lessons learned and focusing on
results; §29: Recognising the need for better targeted, result-oriented and
coordinated Aid for Trade as part of the aid and development effectiveness
agenda, as agreed in Busan, by encouraging developing countries to integrate
trade as a strong component in their development strategies, enhancing the
complementarity and coherence between trade and development instruments,
focusing on LDCs and developing countries most in need and increasing the
engagement of the private sector; §30: Calling on the Commission and Member
States to better coordinate their aid for trade, and to align it behind the
development strategies of partner countries, supporting efforts to integrate
the inclusive and sustainable growth dimension in these strategies, keeping in
mind the importance of capacity building. ·
Council Conclusions of 15 October 2012, §4: The EU will continue work to deliver more focused, targeted
and coordinated Aid for Trade in line with the EU’s Agenda for Change and with
robust monitoring and evaluation framework. 3.2.1. Introduction Trade is an
essential engine of growth and one of the principal sources of revenue for
developing countries. Although trade revenues are not a source of development
finance per se, trade can help boost development and reduce poverty by
generating growth through increased commercial opportunities and investment, as
well as broadening the productive base through private sector development.
Between 2000 and 2008, GDP per capita increased from EUR 353 to over EUR 433 in
LDCs. Much of this can be attributed to an increase in trade and foreign
investment[121]. While many
developing partners have furthered their integration into the world economy and
global trade order and have increased their competitiveness, others, in
particular LDCs, continue to lag behind and risk further marginalisation. The
new EU policy framework for trade, growth and development, adopted in 2012,
aims precisely at focusing efforts on LDCs and other developing countries
most in need. It acknowledges the need for more differentiation
among developing countries in order to better reflect their differences in
needs, potentials and objectives. In
line with the EU PCD commitments, the EU has also strived to improve the
coherence and complementarity between the EU’s trade and development policies.
The forthcoming EU Report on PCD will take stock of progress in that area. 3.2.2. Implementation Table The table below summarises progress made in
2012 in implementing the EU commitments on Trade and Development. Further
details are discussed in the main text. EU Commitment || Target date || Status[122] || Comment Increase collective TRA to EUR 2 billion a year by 2010 (EUR 1 billion from MS; EUR 1 billion from Commission). Around 50% of the increase to be available to ACP countries. || 2010 || || Collective EU TRA commitments reached EUR 2.8 billion in 2011; EU collective wider AfT amounted to EUR 9.5 billion. TRA to Africa increased by 50% in 2011 as compared with 2010. Sustain EU and MS efforts, giving increased attention to LDCs and joint AfT response strategies and delivery || No date specified || || Active participation in the EIF, a multi-donor programme to help LDCs become more active in the global trading system. The proportion of EU collective AfT going to LDCs increased from 16% in 2010 to 19% in 2011. However, these shares are much lower than those of non-EU DAC donors. Reach agreement on regional AfT packages in support of ACP regional integration, under the leadership of the ACP regional integration organisations and their Member States, and involving other donors || No date specified || || In terms of total volume, regional AfT is growing faster than overall AfT. In 2011, the EU and MS committed EUR 726 million to ACP regional programmes and projects (8% of collective EU AfT, as compared with 4% in 2008). EUR 642 million were committed to Sub-Saharan Africa alone. Challenges were encountered with respect to the absorption capacity and performance of some regional organisations and their capacity to effectively coordinate donors. Continuously review the EU’s AfT strategies and programmes, taking into account lessons learnt and focusing on results || No date specified || || The EU is active in the International Policy Dialogue on Aid for Trade in the OECD (latest meeting in January 2013) and WTO (next Global Aid for Trade Review in July 2013). Regular discussions are held with MS and an EU monitoring report on AfT is published annually as part of this Accountability Report. Enhance the complementarity and coherence between trade and development instruments, focusing on LDCs and developing countries most in need, and increasing private sector involvement || No date specified || || The Trade, Growth and Development Policy adopted in 2012 enhances complementarity and coherence and takes a differentiated approach to LDCs and other developing countries most in need. The new GSP adopted by the EU in 2012 focuses on countries most in need, strengthens the GSP+ as an incentive to good governance and sustainable development and makes the scheme more transparent, stable and predictable. Better coordinate EU AfT, and align it behind the development strategies of partner countries || No date specified || || 38% of the respondents to a survey carried out in 2013 among EU Delegations and EU MS field offices in developing countries (see AfT report in Annex) believe that there have been moderate improvements in coordination (including through joint needs assessments, implementation and monitoring/evaluation). 3.2.3. Recent Trends Over the
period 2005-2011, the volume of world merchandise trade grew by an average of
3.7% annually – despite a sharp downturn in 2009. Growth rates over this period
have been much higher for many developing countries and for LDCs in particular
with an average of 4.6% annual increase[123]. Total volumes of
developing countries’ exports of goods and services revenues are only
marginally smaller than finance for development flows, and larger for middle
income than for low income countries. Developing
countries, in particular LDCs, have made measurable progress
in their participation in the global trading system. However, for
many LDCs this participation still remains too narrowly focused on a
limited range of exports (often primary commodities). In addition,
prospects for further integration into the global economy continue to
be hampered by a range of supply-side and trade-related infrastructure
constraints. LDCs still
remain on the margin of global trade: they only account for 1.12% of
global exports (despite a 23.9% increase of the value of their exports in 2011
compared to 2010)[124], attract little
Foreign or Domestic direct investment, and are locked into supplying a narrow
range of goods and services. 3.2.4. EU
Policies and Programmes 3.2.4.1. Trade
Policies The EU is the
largest trading partner of developing countries and the market most open to
them. It accounts for 15.5% of their total trade. According to Eurostat, EU
imports of goods and services from ACP countries amounted to over EUR 113 billion in 2011. The main EU
trade preference programme for developing countries is the Generalised
Scheme of Preferences (GSP), which provides reduced tariffs for their goods
when entering the EU market. The GSP covers three separate regimes: ·
The ‘standard’ GSP, which currently provides 176
developing countries and territories with preferential access to the EU; ·
The special incentive arrangement known as
‘GSP+’, which offers additional tariff reductions to support vulnerable
developing countries in the implementation of international conventions in the
areas of human rights, labour rights, environment and good governance. ·
The ‘Everything but Arms’ arrangement (EBA),
under which all products from LDCs, except arms and ammunitions, can enter the
EU market at zero tariffs and without quotas. In
2011, imports that received GSP preferences were worth EUR 87 billion, which
represents around 5% of total EU imports and 11% of the total EU imports from
developing countries. On 31 October
2012, the EU has adopted a new GSP which will come into effect in
2014. The
scheme was reformed in order to better pursue the main goal of supporting
economic growth in developing countries according to their development, trade
and financial needs. As a result, the new GSP is focused on countries which are
most in need of it, i.e. on poorer beneficiaries (89 countries: 49 LDCs in the EBA
scheme, and 40 other low and lower-middle income partners), via the deferral of
preferences for countries which are already competitive or have a better access
to the EU market thanks to bilateral agreements. At the same time, thanks to
the new GSP+ arrangement, more support and incentives are provided to countries
effectively implementing international human rights, labour rights and
environment and good governance conventions. The scheme, that will last ten
years instead of the customary three years, is also more transparent, stable
and predictable. In January
2013, the European Commission issued a comparative analysis[125] of EU and US
trade preferences for the LDCs and the AGOA[126]
beneficiaries, presenting product and country coverage of the preferences and a
detailed analysis of the structure of EU and US imports from the two groups of
beneficiaries. The analysis shows that: (i) a larger share of EU imports
benefits from duty-free tariffs compared to the US, (ii) the EU’s EBA
initiative offers duty-free and quota-free entry to all products from the LDCs
(except arms and ammunition), while the US extends preferences to three
quarters of all imports (with figures on par for the AGOA beneficiaries), (iii)
EU preference schemes are better utilised, and (iv) the EU imports more goods
duty free than does the US. 3.2.4.2. EU Aid for Trade An estimated
EUR 151 billion[127] have been
mobilised globally since the launch of the Aid for Trade (AfT) initiative in
2005. AfT
resources have grown by more than 80% and reached approximately EUR 34 billion
in 2010, with a third of that share going to LDCs. This figure would
increase further if the trade-related assistance and wider aid for trade
offered by South-South partners was included. Progress has
been made not just in terms of the amounts of money committed, but also in
terms of results. For example, it has been estimated that a 10% increase in Aid
for Trade spending on infrastructure has led to a 6.5% increase in goods
exports[128]. The EU and
its Member States are collectively the major contributor to AfT programmes
worldwide, accounting for around a third of total worldwide Aid for Trade
in 2011. The EU collective wider AfT commitment amounted to EUR 9.5 billion in
2011. With a decrease of -11% in 2011 (after an increase of 17% in 2010), this
growth rate is far below the average annual growth rate recorded by the EU and
its Member States since 2002 (+10%) but less than the global decline of -16% in
2011. The decline in EU collective AfT in 2011 was not an isolated phenomenon. In
fact, the reduction remained far below those of the USA (-41%) and Japan
(-20%). AfT remains
concentrated in some EU Member States (Germany, France, UK, Spain and the
Netherlands) and EU institutions. The two most important donors, accounting for
almost 60% of EU collective AfT in 2011, were Germany (EUR 2.7 billion) and the
Commission (EUR 2.7 billion). The EU has met the 2010 G20 Seoul commitment[129] to (at
least) maintain AfT levels at the average of 2006-2008. Although
Africa saw the largest decrease in AfT observed in 2011, it remains the most
important recipient of collective EU AfT programmes, accounting for almost 36%
of EU AfT flows. There has also been a clear downward trend of the share of AfT
commitments dedicated to LDCs and ACP since 2000. For instance, the share of EU
collective AfT to LDCs has declined after having remained stable in the period
2006-2009. Commitments to LDCs accounted for 24% of EU collective AfT in 2008
(EUR 2.3 billion) and they now represent only 19% of the total (EUR 1.7 billion).
ACP States have also been affected by this negative trend, from 44% of the
total in 2005 to less than 35% in 2011. There is however an exceptional and
substantial increase in the share of programmes dedicated to these countries in
2011 (with respectively 34% of AfT dedicated to ACPs and 19% dedicated to
LDCs). Over 90% of
EU collective AfT commitments are focused on two broad categories: trade
related infrastructure (43% of the total since 2001), and building productive
capacity (49% of the total since 2001). There are strong similarities in the
structure of AfT by broad category between the EU and its Member States, albeit
covering different sectors. The EU is more specialised on agriculture,
transport and storage and trade policy, while EU Member States are more
involved in energy, banking and financial services, business and other
services. The EU and
its Member States participate in several donor coordination fora such as the
‘International Policy Dialogue on Aid for Trade’ in the OECD and the WTO Global
Aid for Trade Reviews. The EU and its Member States have also set up an experts
group in order to better coordinate EU AfT and align it behind partner
countries’ priorities. 38% of the respondents to a survey carried out in 2013
among EU Delegations and EU MS field offices in developing countries (see AfT
report in Annex) believe that there have been moderate improvements in
coordination (in terms of joint needs assessments, joint implementation, and
joint monitoring/evaluation). The EU is
also a strong supporter of, and active participant to, the ‘Enhanced Integrated
Framework’ (EIF), a multi-donor programme housed in the WTO Secretariat
supporting LDCs to be more active players in the global trading system by
helping them tackle supply-side constraints to trade. The programme is
currently helping 47 LDCs worldwide, supported by a multi-donor trust fund, the
EIF Trust Fund, with contributions from 23 donors including the EU and several
EU Member States[130]. The
European Commission has pledged EUR 10 million to the EIF Trust Fund and
provides support on the ground by taking the role of a ‘facilitator’ in several
LDCs. 3.3. Remittances
for Development EU Commitments ·
The
Council has repeatedly committed to reduce the cost and improve the safety of
transfers and to further work to enhance the impact of remittances on
development (e.g. Council Conclusions of 18 May 2009, §11). It has
committed to ‘adopt General principles for International Remittances Services
agreed by the Committee on Payments and Settlements Systems (CPSS) and
operational definitions and recommendations allowing the improvement of data on
remittances’ (Council conclusion of 11 November 2008, §27). The Council also
committed ‘to ensure that relevant legislation does not contain provisions hampering
the effective use of legal remittances channels’ (Council conclusions of 18
November 2009, §10). ·
Council
Conclusions of 29 May 2012, §27: The Council reaffirms the need to ensure faster,
easier and cheaper remittance transfers and enhance the impact on development
of social and financial remittances, while ensuring coherence with other
development priorities. ·
Council
Conclusions of 15 October 2012, §5: Remittances are a key private
source of financing for developing countries. The EU recalls the G8 and G20
goal of reducing the average cost of transferring remittances from 10% to 5% by
2014 and reaffirms the need to ensure faster, easier and cheaper remittance
transfers, in line with the 29 May 2012 Council Conclusions, to maximise the
development impact of migration and mobility. 3.3.1. Introduction Remittances
are cross-border, person-to-person financial transactions of relatively low
value. Even if often indistinguishable from any other low-value cross-border
transfers, remittances are typically recurrent transfers sent by migrants to
their families in the country of origin. Remittances are vitally
important for
recipients and their communities, as a source of income (providing disposable
funds), for
developing country governments, as a valuable inflow of funds, as well as for banks in
recipient countries (by providing foreign currency and access to new potential
customers). Over the past 15 years, remittances have largely
outpaced global development aid to developing countries and they proved to be
more resilient than foreign direct investment during the crisis. However,
persistent unemployment in Europe and the narrowing of migration entry channels
present serious downside risks. 3.3.2. Implementation Table The table below summarises progress made in 2012 in
implementing the EU commitments on Remittances for Development. Further details
are discussed in the main text. EU Commitment || Target date || Status[131] || Comment Enhance the development impact of remittances || No date specified || || The EU and several MS have launched initiatives to train migrants and foster migrants’ savings and diaspora investments in their countries of origin. Reduce the average cost of transferring remittances from 10% to 5% by 2014 || 2014 || || The average cost of sending remittances from the EU is estimated at 10.6% of the amount sent – higher than the global average of 9.1% and only marginally lower than the EU average of 11.71% in Q3 2008, when monitoring of remittance costs started. 3.3.3. Recent Trends Remittances to
developing countries represented a significant share of the overall development
finance available for low income countries in 2010, as shown in Figure 3.3.3,
while it was more marginal for middle income countries.
Figure 3.3.3 – Remittances to Developing Countries as a
Share of Total Resource Flows of Low-Income (LIC) and Middle-Income Countries
(MIC) in 2010 Officially
recorded remittance flows to developing countries were estimated by the World
Bank[132] to be close
to EUR 312 billion in 2012 (an increase of 5.3% compared to 2011). Remittances
to developing countries are projected to grow by 8.8% annual rate during 2013 -
2015 to about EUR 400 billion in 2015. Global trends
show that remittance flows are predominantly going to low and lower middle
income countries. Among the top ten countries in terms of value of remittances
received, one is low income (Bangladesh), six are lower middle income (India,
Philippines, Nigeria, Egypt, Pakistan, Vietnam), and three are upper middle
income (China, Mexico, Lebanon). The primary
body responsible for collecting remittances data at the EU level is Eurostat.
While World Bank estimates are based on migrant stocks in each country and
their income, Eurostat obtains and consolidates remittances data from each
Member State’s balance of payment statistics. However, the way that data is
collected in individual countries varies considerably and some Member States do
not collect remittances data at all. Moreover, World Bank statistics include both
remittances (i.e. transfers made by migrants who are residents of the host
country) and workers’ compensation (i.e. transfers made by non-residents),
while Eurostat covers only remittances. The two sources therefore differ, with
the latter being much more conservative. World Bank
figures for EU remittances to developing countries in 2011 amount to EUR 46.7
billion. According to Eurostat, remittances from the EU amounted to EUR 39.2
billion in 2011, up by 2% compared with 2010. This total includes both intra-EU27
and extra-EU27 flows. Extra-EU27 flows of workers’ remittances, which
represented nearly three quarters of the total, grew by 3% to reach EUR 28.5
billion, while intra-EU27 flows remained relatively stable at EUR 10.7 billion. Among the
Member States for which data are available, the outflow of workers’ remittances
in 2011 was highest from France (EUR 9.7 billion, or 25% of total EU27
remittances), Italy (EUR 7.4 billion, or 19%), Spain (EUR 7.3 billion, or 19%),
Germany (EUR 3 billion, or 8%) and the Netherlands (EUR 1.5 billion, or 4%).
Among these five Member States, the share of extra-EU27 remittances in the
total ranged from 64% in France to 83% in Italy. 3.3.4. EU Policies and Programmes The EU and
its Member States have undertaken a number of remittance related initiatives
over recent years and some improvements have been made. However, there is still
a significant amount of work to be done if the commitments made by the EU and
its Member States over the last five years with respect of remittances are to
be met. In 2012, the
Commission published a report[133] assessing the
state of play of the EU commitments on remittances. The study addressed a
variety of themes, such as data collection, transparency and competition,
transfer prices, development impact of remittances and policy coherence. The report
confirms that there has been significant progress towards facilitating
remittance transfers from Europe. In particular, the regulatory and operational
environment for remittance transfers has been improved, and the price of
transfers has been reduced by a small amount. The Payment
Services Directive (PSD) – which provides the legal basis of a single European
market for payments by promoting competition and strengthening market
transparency - has considerably improved the payment environment, notably
by increasing the number of businesses that can offer remittances services. However, the
report also points to the need for Member States to take further measures to
improve the quality and comparability of remittances data. Several EU
Member States are already taking measures to improve the data collection of
remittances as part of their Balance of Payments statistics. The
introduction of the PSD has also resulted in greater reporting requirements for
money transfer operators (MTO). Accurate data on the volume of remittance flows
helps to make informed decision-making and design appropriate development
initiatives. However, until now there has been no real connection between the
PSD and data collection. It is expected that leveraging the reporting
requirements of the PSD could lead to more accurate data collection. In order to
improve data collection, a new EU Regulation on Community Statistics concerning
balance of payments, international trade in services and foreign direct
investment stipulates that the reporting of annual data on remittances with
full geographical breakdown will be mandatory as of 2014. Moreover, the
report recommends that the Payment Services Directive be broadened to include
transactions that are sent to countries outside of the European Economic Area
(EEA) - the PSD is currently only binding for intra-EEA transfers. Some EU
Member States have already chosen to extend its reach to transactions where one
of the parties is located outside the EEA. A full review
of the PSD was conducted by the Commission in 2012 to evaluate the impact of
the PSD and identify areas that should be addressed. Results of the review
process
suggest that the PSD may need to be revised; both to adjust some of its provisions
to take into account the lessons from experience since its entry into force,
and to cater for the latest market developments and innovation in retail
payments. A revision of the PSD therefore features as one of the main levers in
the Single Market Act II, presented in mid-2013. 3.3.4.1. Reducing
the Cost of Remittances In 2011, the
G20 committed to reduce the cost of remittances from a global average of 10% to
5% by 2014[134]. According
to the World Bank[135], the
worldwide average remittance cost in the first quarter of 2013 was 9.05%, while
they are averaging 7.5% in the top 20 remittance corridors. It is estimated
that if the 5% reduction were achieved, up to an additional amount of EUR 12
billion a year would become available to citizens in developing countries. Much still
has to be done within the EU to reduce transfer costs to 5% by 2014. According
to the above-mentioned report, the average price in 2012 for sending
remittances from the EU was estimated at 10.6% of the sent amount; higher than
the global average of 9.1% and a little lower than the EU average of 11.71% in
Q3 2008. Remittance prices vary considerably within the EU depending on the
countries they are being sent from and to, the method that is used, and the
speed of the transfer. Several EU Member
States[136] have
indicated that they are taking action towards reducing the cost of remittances,
in line with the G20 commitment. For example, Italy has abolished a tax on
remittances towards extra-EU countries, while the Dutch Minister for Trade and
Development Cooperation has promised to take up the subject with the banking
sector. Five Member
States[137] have also
set up website portals to facilitate the comparison of transfer costs through
different operators. Sweden is considering doing likewise. The role of
recipient countries must not be overlooked. Public authorities in recipient
countries can also significantly contribute to reducing remittance costs
through measures aimed at improving the efficiency of their payment system
infrastructure as well as ensuring competitive market conditions. Receiving
countries are also important potential providers of data, notably on informal
remittances. More attention should therefore be paid to support measures
addressing these challenges. Although they
account for approximately 40% of remittances received by developing countries,
South-South remittance flows have been overlooked. As a matter of fact,
remittance flows to Africa mainly originate elsewhere in Africa rather than in
other continents. It is estimated that about 67%[138] of incoming
flows to Africa come from migrants living in other African countries, with the
majority of these flows being informal. Remittance
costs can be very high in other regions of the world. This is particularly true
for Africa, with an average percentage cost of sending money to (or within)
Africa close to 12% in January 2013[139]. The World
Bank’s database ‘Send Money Africa’[140] shows that
the ten most expensive corridors globally were all intra-Africa, with the top
five originating from South Africa and rates as high as 25%. 3.3.4.2. Enhancing
the Development Impact of Remittances As
highlighted in a 2011 report by the OECD[141], migration
poses a number of challenges that need to be addressed. One of them concerns
the dependency remittances can create for the recipient families. It is thus
essential to promote
the channelling
of remittances flows towards a more informed and productive use. The EU and several Member States have
undertaken initiatives to this end. For example, the German GIZ has published a
‘Handbook on Financial Literacy for Remittances and Diaspora investment’,
collecting different methodologies of financial literacy activities targeting
migrants and recipient families. The purpose of the
handbook is to guide the design of
development projects that support increased financial inclusion and independence
of migrants and their families; link remittance flows to other financial
products/services (savings, insurance, loans); and foster migrant savings and
Diaspora investments in their countries of origin. Other Member States (Italy, Belgium and
the Netherlands) have set up capacity building and training programmes to
mobilise and support Diasporas in setting up businesses in their countries of
origin. 4. International
Public Finance for Development 4.1. Introduction International public finance has been a
stable and increasing source of finance at the global level but volatile at the
country level. While the situation varies at country level, it is overall of
little importance to MICs, accounting for only 0.4% of their GDP and 3% of
foreign resource flows. At the same time, it remains an important source of
finance for LICs, where it accounts for around 12% of GDP and 60% of foreign
resource flows. The potential of significant increases in ODA is low, due to
the current recession and limited increases in the national budgets of donor
countries, but existing sources can be better used.
Figure 4.1.1 – International Public Finance Flows as a
Share of Total Resource Flows of Low-Income (LIC) and Middle-Income Countries
(MIC) in 2010 There are two
types of commitments relating to international public finance for development:
those concerning the quantity and volume of flows and those concerning their
quality and effectiveness. Quantitative commitments are the subject of this
chapter, while qualitative commitments are analysed in Chapter 6. As the
focus of this chapter is on quantitative targets, EU policies or programmes
will not be reviewed, unless they have a direct bearing on such quantities. The
chapter will end with a brief discussion of the current debate on the ODA
concept as it has a direct impact on the future of existing collective and
individual ODA targets. Numerous
commitments have been made in terms of increasing and distributing the quantity
of public finance for development and for tackling global challenges and their
impact on developing countries. Most of them concern a subset, Official
Development Assistance or ODA, which comprises official loans of concessional
character and grants used for development purposes. EU Member States and other
donors have agreed to global targets for ODA to developing countries, expressed
as shares of their GNIs, and to a subset of targets concerning aid to specific
groups of countries (e.g. LDCs, Africa, or Sub-Saharan Africa) or for specific
purposes (e.g. aid for trade, Fast Start Climate Finance). Other quantitative
targets were set for additional public finance for global goals (e.g. climate
change adaptation and mitigation activities), but are not necessarily funded
through ODA. The concept of ODA itself is under discussion,
as many feel the need to broaden its definition and/or to monitor the full
breadth of public financial flows to developing countries, even at less than
concessional terms, provided they have a developmental focus. The terms under
which public finance is provided are also crucial. Lending has gained
prominence in the debate about different development financing instruments.
According to some studies, grants have a tendency to substitute (instead of
adding to) domestic revenues, while loans are associated with stronger domestic
revenue mobilisation[142]. While the
shift towards lending instruments helps to frontload development spending, it
also needs to be accompanied by measures to ensure debt sustainability of the
borrower. 4.2. Official Development
Assistance (ODA) EU Commitments ·
ODA Levels. In 2002, the EU and its Member States
adopted joint commitments on ODA increases. These commitments were further
developed and broadened, and endorsed by the European Council in 2005 ahead of
the UN World Summit that undertook the first review of progress on the
Millennium Declaration and the MDGs. Then, the EU and its Member States agreed
to achieve a collective ODA level of 0.7% of GNI by 2015 and an interim target
of 0.56% by 2010, both accompanied by individual national targets. The EU
Member States agreed to increase their ODA to 0.51% of their national income by
2010 while those countries which had already achieved higher levels (0.7% or above)
promised to maintain these levels. The Member States that acceded to the EU in
or after 2004 (EU12) promised to strive to spend 0.17% of their GNI on ODA by
2010 and 0.33% by 2015. ·
The commitment to
these goals has been repeatedly confirmed by the Council, most recently in the
Council Conclusions of 15 June 2010 on the Millennium Development Goals, the
Conclusions of the European Council of 17 June 2010, the Environment Council
Conclusions of 9 March 2012 on Rio+20, the
Council Conclusions of 14 May 2012 (on the Annual Report 2012 to the European
Council on EU Development Aid Targets), the Council Conclusions of 14 May 2012
(on Agenda for Change), the European Council Conclusions of 8 February 2013 and
the Council Conclusions of 29 May 2013 (on the Annual Report 2013 to the
European Council on EU Development Aid Targets). ·
The European
Council Conclusions of 8 February 2013 reaffirmed that the 0.7% goal was a
key priority, adding that ‘the European Union should as part of this commitment
therefore aim to ensure over the period 2014-2020 that at least 90% of its
overall external assistance be counted as official development assistance
according to the present definition established by the OECD Development
Assistance Committee (DAC).’ ·
Predictability of
ODA increases. The
Council has also stressed the importance of increasing predictability of the
ODA increases through national multiannual planning. In 2007, the Council
invited Member States concerned to introduce such timetables by the end of
2007. In November 2008 and May 2009 this call was reiterated and the
deadline extended to the end of 2010. ·
In its Conclusions
of 15 June 2010 (§30) and 14 May 2012 (on the Annual Report 2012 to
the European Council on EU Development Aid Targets) (§5b), the Council asked Member
States to take realistic, verifiable actions for meeting individual ODA targets
by 2015 and to share information about these actions and, within the budgetary
processes of the Member States, to share information on their planned ODA
spending for the next budgetary year as well as the intentions for remaining
period until 2015. ·
ODA
to Africa. In
addition the EU committed in 2005 to: (a) increase ODA to Sub-Saharan
Africa and (b) provide 50% of the ODA increase to Africa as a whole (North
Africa and Sub-Saharan Africa). ·
ODA
to LDCs. In
2008 the EU collectively also committed to provide between 0.15 and
0.20% ODA/ GNI to the Least Developed Countries by 2010[143]. 4.2.1. Introduction Although the
goal of allocating annually 0.7% of GNI to ODA is accepted by all DAC donors
except the United States of America, only EU donors and Norway have set a date
to achieve it, transforming the long-standing UN 0.7% goal, considered by many
as aspirational, into an achievable, time-bound target. The EU decided to move forward
and achieve this goal in steps within 15 years (2000 – 2015), in line with the
set deadline for reaching the MDGs, and based on a mix of individual and
collective intermediate targets. The first intermediate EU ODA objectives were
defined in 2002 during the preparation for the Monterrey International
Conference on Financing for Development, based on the EU’s ODA levels in 2000. 4.2.2. Implementation Table The table below
summarises progress made in 2012 in implementing the EU ODA commitments.
Further details are discussed in the main text. EU Commitment || Target Date || Status[144] || Comment The EU and MS agreed to achieve a collective ODA level of 0.7% of GNI by 2015 || 2015 || || The EU ODA/GNI ratio is projected to reach 0.43% by 2015. Take realistic, verifiable action to meet individual ODA targets by 2015 and share information about this action || No date specified || || 22 MS provided information on 2013 financial year allocation, but limited information was provided on realistic/verifiable action. Increase collective ODA to Sub-Saharan Africa || No date specified || || 2012 EU ODA to Sub-Saharan Africa increased as compared with 2004. Provide 50% of the collective ODA increase to Africa as a whole || No date specified || || Only 7% of total EU ODA growth between 2004 and 2012 went to Africa. Provide between 0.15% and 0.20% of collective ODA/ GNI to LDCs by 2010 || 2010 || || EU ODA/GNI to LDCs was 0.14% in 2010, 0.13% in 2011, and 0.12% in 2012. 4.2.3. Recent Trends 4.2.3.1. EU
ODA Performance 2005-2012 compared to other donors The EU’s combined efforts are already delivering
substantially greater amounts of ODA than non EU donors, and individual EU countries
(with a few exceptions) are still making greater efforts in relative terms,
although the gap is narrowing. Figure 4.2.3a –ODA/GNI by Donor (% and EUR million, current prices) Source: OECD/DAC and
European Commission Table 4.2.3a – ODA/GNI and ODA per capita
of EU Member States and Non-EU DAC Members Donor || ODA per capita (EUR) || ODA/GNI (%) || ODA (EUR Billion) 2010 || 2011 || 2012 || 2010 || 2011 || 2012 || 2010 || 2011 || 2012 EU || 107 || 105 || 100 || 0.44 || 0.42 || 0.39 || 53.5 || 52.8 || 50.6 Non EU DAC Members || 79 || 79 || 85 || 0.23 || 0.23 || 0.22 || 44.4 || 44.6 || 48.1 USA || 74 || 71 || 75 || 0.21 || 0.20 || 0.19 || 22.9 || 22.2 || 23.7 Japan || 65 || 61 || 64 || 0.20 || 0.18 || 0.17 || 8.3 || 7.8 || 8.2 Canada || 115 || 113 || 126 || 0.34 || 0.32 || 0.32 || 3.9 || 3.9 || 4.4 Source: OECD/DAC and European
Commission As shown in Figure
4.2.3a and Table 4.2.3a, both the EU’s per capita ODA and its
ODA/GNI ratios are greater than those of non-EU DAC Members. Indeed, its
ODA/GNI ratio is more than double that of Japan and the USA. Collectively, the
EU outperforms most other donors by a wide margin. The USA, Japan and
Switzerland have higher per capita income than the average for EU Member States
but much lower per capita ODA. The US GNI is close to 90%of the EU27 GNI, but
US ODA represents less than half of EU ODA. It is clear that most of the gap to
achieving the 0.7% target lies outside the EU. However, the gap between EU and
non EU DAC Members has been narrowing since 2010, because the former are
reducing their ODA efforts while the latter are keeping theirs essentially
stable, as shown in Table 4.2.3. The difference between EU and non EU DAC
averages for ODA/GNI ratios has fallen from 0.21 in 2010 to 0.17 in 2012. 4.2.3.2. Performance
on ODA targets (2005-2012) ODA
figures on 2012 net disbursements are preliminary, based on information
provided by EU Member States and the European Commission. For those EU Member
States that report to the OECD/ DAC, final and more comprehensive ODA figures
will become available at the end of 2013. EU collective
ODA spending in 2012 was EUR 55.2 billion (0.43% of the European Union’s
GNI), compared to EUR 56.3 billion (0.45% of GNI) in 2011. A significant amount
of EU Institutions’ ODA (EUR 4.5 billion equivalent to 0.04% of EU GNI) is not
imputed as ODA to EU Member States by the DAC Secretariat. As a consequence,
the ODA spending of the twenty-eight Member States (i.e. the sum of ODA
imputed to them) in 2012 was EUR 50.6 billion, equivalent to an ODA/GNI ratio
of 0.39%, continuing the previous year’s decline from 0.44% in 2010 to 0.42% in
2011. The reduction in nominal terms was of EUR 2.2 billion (-4%). The downward
trend of EU aggregate ODA spending started in 2011, and accelerated in 2012,
with a rate of decrease in ODA/GNI ratios expanding from 0.02% of GNI between
2010 and 2011, to 0.03% of GNI between 2011 and 2012. Since the EU
took its first time-bound ODA commitments in 2002, EU aggregate ODA fluctuated,
but overall was on an upward trend until 2010. Since then, EU aggregate ODA has
been declining in both absolute and relative terms, and the speed of this
decline accelerated in 2012. In real terms, EU aggregate ODA is back to its
2005 levels. However, one third of the reduction between 2011 and 2012 was due
to lower debt relief, which accounted for 26% of EU ODA at its peak in 2005 and
only for 2% in 2012. –
Since 2008, EU Member States have been hardly
hit by the financial crisis, triggering the deepest global economic recession
in decades. State-financed rescue packages for the affected banking sector,
higher social protection costs and lower budget revenues have dramatically
changed the fiscal situation in many Member States. Low or negative economic
growth rates in the EU as a consequence of the crisis, and the related
austerity measures that Member States introduced, led to pressures on ODA. –
Through the first three years of the crisis, the
EU’s aggregate ODA spending continued to increase, but eventually succumbed to
the pressure in 2011 and 2012, resulting in a reversal in the slow trajectory
of scaling up to meet 2015 targets. The 2012 decline
in ODA by EUR 2.2 billion was the result of an overall negative performance by
most Member States. In nominal terms, fifteen Member States reduced their ODA
by a total of EUR 3.2 billion, while twelve Member States increased theirs by a
total of EUR 1.0 billion, although most of these increases were due to
fluctuations in the exchange rate between their national currencies and the
Euro[145].
ODA budget cuts in Spain (EUR 1.5 billion), Italy (EUR 1.1 billion), the
Netherlands (EUR 0.3 billion), and Belgium (EUR 0.2 billion) accounted for 94%
of the total reduction in EU ODA spending. Only Austria, Luxembourg, Latvia and
Poland increased their ODA/GNI ratios between 2011 and 2012, as shown in Figure
4.2.3b. Looking at
overall developments since 2004, six Member States now have lower ODA/GNI
ratios than at the beginning of the period under consideration. Four Member
States (i.e. Greece, Italy, Portugal and Spain) reduced their ratios from an
initially low level, while the remaining two (Denmark and the Netherlands) had
ratios above the 2015 collective target of 0.7% both at the beginning and the
end of the period. Only Greece, Portugal and Spain had also ODA volumes at
current prices that were lower in 2012 than in 2004. Figure 4.2.3b – Gap
between 2015 targets and 2012 results [146] Source: OECD/DAC and European
Commission (EU annual questionnaire on Financing for Development) There is
limited information available on the predictability EU ODA. In both the
2011 and 2012 EU Accountability Reports, one-year EU ODA/GNI ratio projections
were relatively accurate but slightly optimistic: 3% higher than the actual
ratio in 2011, and 6% higher in 2012. The two-year projection included in the
2011 Accountability Report was 11% higher than the actual EU ODA ratio of 2012. An OECD/DAC
Survey[147]
– carried out in July 2012 – revealed that ten Member States[148] and the
Commission provide 3-5 year plans for country programmable aid, but only the
Commission, Sweden and the United Kingdom do so for all partner countries. 4.2.3.3. Achievement
of the 0.7% ODA/GNI Target by 2015 Based on the
projections provided by Member States and/or estimates prepared using their
2006-2012 compound annual growth rate[149],
the EU28 ODA is expected to increase to 0.43% of GNI by 2015, below the level
reached in 2010 and almost 40% below the 0.7% target. Considering the expected
GNI growth rate until 2015, reaching the 0.7% ODA/GNI target would require the
EU and its Member States to almost double their current ODA in nominal terms
from EUR 50.6 billion today to EUR 97.1 billion by 2015. Figure 4.2.3c
below shows the long-term trends in ODA volumes for the EU28. ODA growth has
stalled, and the path to 0.7% is unclear, even if EU ODA is projected to
stabilise between its 2010 and 2011 levels by 2015. There is also a significant
risk that the current decline might continue until 2015 and beyond. Table 4.2.3b: Estimates and gaps to be bridged for reaching the 2015 ODA
targets, based on Member States’ forecast information and Commission simulation
Shaded cells are Commission estimates
Figure 4.2.3c - EU 15/25/27 ODA/GNI Ratios (1995-2012) and EU
28 Projections (2013-2015) Source: OECD/DAC and European
Commission (EU annual questionnaire on Financing for Development) The EU
scaling-up process has been uneven, with asymmetric efforts among Member
States. Those Member States not contributing their fair share to the
burden-sharing effort have kept the collective EU performance below the
targets, and are also those that would need to make the greatest efforts to reach
the 2015 targets. Table 4.2.3b above shows
that a significant amount of EU Institutions’ ODA (worth EUR 4.5 billion,
equivalent to 0.04% of EU GNI) is not imputed as ODA to EU Member States by the
DAC Secretariat. In contrast, the EU ODA projections shown in Figure 4.2.3c
only refer to ODA imputed to EU Member States, and are therefore conservative.
In addition, Table 4.2.3b shows the projections and the sometimes
drastic increases needed by individual Member States in their budgets of
2013-2015 if they are to meet their targets. For example, to reach the 2015
target Italy would need to sextuple their current ODA volumes over three years;
Bulgaria, Croatia[150],
Greece, Latvia, Romania, and Spain would need to quintuple theirs; Estonia,
Hungary, Poland, and the Slovak Republic would need to quadruple; while
Austria, Cyprus, the Czech Republic, Lithuania, Portugal and Slovenia would
need to triple their aid allocations. The
projections provided by Member States suggest that many of them do not plan to
make such increases under the current tight budget conditions. 23 Member
States provided some projections for their ODA in the coming years and 16 have
provided projections up to 2015. Excluding the four Member States that are
already above 0.7% ODA/GNI, as indicated earlier, only Belgium, Malta and the
United Kingdom foresee reaching their 2015 targets. Based on these indications
and the Commission’s own projections, it is foreseen that thirteen Member
States will at least marginally increase their ODA/GNI ratio by 2015, however
remaining far from reaching their individual targets. For 2013, the
projections (based on Member Sates’ replies or budget data available online)
point to a substantial increase in ODA budgets (EUR 5.2 billion), larger than
the cumulative cuts of 2011 and 2012. This is due in great part to significant
ODA budget increases in the United Kingdom to reach the 0.7% target in 2013
(45% of total net increase), with another third generated by increases by
Austria, France, Italy and Spain (ranging between EUR 400 and 500 million
each). The ODA
graphs in Annex 3 show the prospect for each EU Member State to meet its
individual ODA targets (of 0.7% and 0.33% of GNI for EU15 and EU12
respectively) in 2015, as well as the size of the gap and how much of it is
likely to be filled by 2015. Based on past
ODA performance and future plans, six categories of Member States can be
identified: ·
Member
States that are leaders in ODA performance (3): Sweden, Luxembourg,
and Denmark, have shown consistent performance over the entire period
always remaining above the 2015 targets. ·
Member
States that are above the 0.7% target but are planning to decrease (1). The Dutch
government expects its ODA ratio to fall below 0.7%, from 0.71% in 2012, to
0.60% in 2015. ·
Member
States on track to achieve their 0.7 or 0.33 target in or before 2015 (3). The United
Kingdom has stated its intention to meet the 0.7 target this year, after
growing from 0.36% in 2004 to 0.56% in 2012. Belgium also intends to
reach its target by 2015. It had reached a peak of 0.64% in 2010, before
reducing it to 0.47% in 2012. The Government still plans to achieve the 0.7
target by 2015, after stabilising at 0.51% in 2013 and 2014. Malta
showed a consistent growth of its ODA/GNI ratio from 0.18% in 2004 to 0.25% in
2011, before declining to 0.23% in 2012. The Government still expects to reach
its 0.33% individual target by 2015. ·
Member
States that have shown a consistent, visible growth of their aid, but do not
expect to achieve their individual targets by 2015 (3). Between
2004 and 2009, Finland has increased its ODA ratio from 0.37% to 0.54%
and has now essentially stabilised at this level, which it expects to maintain
through to 2015, thus achieving less than 75% of its 2015 target. Austria
has increased its ODA/GNI ratio (net of debt relief) at a slow but steady pace
from 2004 (0.23%) to 2010 (0.32%), when it started slowly declining, reaching
0.28% by 2012. Austria expects to be able to raise its ODA/GNI ratio to 0.42%
by 2015, 40% short of its target. France increased its ODA steadily from
0.41% in 2004 to 0.50% in 2010, and has since reduced it to 0.46% in 2012.
France expects to regain the lost ground by 2015 (0.49%), but still 30% short
of its target. ·
Member
States that have gone off track due the economic crisis and are unlikely to
catch up any time soon (3). The significant budget cuts of 2011 and 2012
affected particularly Spain that had shown a remarkable upward trend
before the crisis, almost doubling its ODA/GNI ratio from 0.24% to 0.46%
between 2004 and 2009. Since then, its ratio has fallen to 0.15% in 2012, less
than one third of its 2009 level, and the country does not expect to regain any
of the lost ground before 2015. Ireland had consistently increased its
ODA ratios from 0.39% in 2004 to 0.59% in 2008, but has since then started a
decline that led to a ratio of 0.48% in 2012 and a forecast of 0.44% by 2015, a
little over two thirds of the peak reached in 2008, and almost 40% short of its
target. Cyprus increased its ODA/GNI ratio from 0.03% in 2004 to 0.23%
in 2010, before declining by almost 50% in 2011-2012 to 0.12%. The country
expects to raise its ODA slightly over the next three years, remaining well
below its 2010 level and almost 50% short of its target. ·
Member
States that have never shown a sustained increase in their ODA, and are in some
cases cutting their low levels of ODA even further (14). Greece,
Italy and Portugal are among the six Member States[151] whose
ODA/GNI ratios were lower in 2012 than in 2004. Germany has kept its ODA
levels practically steady (between 0.35% and 0.39% of GNI) for the entire
period between 2005 and 2012. Bulgaria, Czech Republic, Estonia, Hungary,
Latvia, Lithuania, Poland, Romania, Slovak Republic, and Slovenia have
shown steady ODA ratios over the last four years with fluctuations within a
0.02-0.03 band, and do not project any significant increase towards their ODA
target by 2015. Croatia expects to stabilise at a ratio of 0.15% of GNI,
following a similar path to the ones of several Member States after their
accession. Table 4.2.3c -
Gap between 2012 ODA levels and 0.7% and 0.33% ODA/ GNI individual targets,
by Member State Source: OECD/DAC and European
Commission (EU annual questionnaire on Financing for Development) Several
factors that explain why, under the status quo, targets will be missed
by a wide margin: First, the reduced
ambition of some national plans has had a real impact on collective
progress on ODA. Some of the more ambitious Member States have reduced their
targets compared to the ones that formed the basis for the 2005 Council
Conclusions. Most of the Member States do not plan to reach their individual
targets. Second, the current
fiscal crunch has led some countries to revise downwards their commitments
and targets. Third, back-loading
the increase in ODA expenditure is often unrealistic. Experience shows that
missing intermediate targets in a significant way leads to missing subsequent
targets too. A good example is provided by the Member States that significantly
missed the 2006 target of 0.33% GNI: Greece, Italy and Portugal. Once
the target was missed, statements were made that the 2006 target would be
achieved by 2007 or 2008. In reality, the 2006 target has not been met by any
of them even by 2012 and these three Member States ended up missing both the
2006 and the 2010 targets. Fourth, reaching
the EU ODA targets is contingent not only on the medium-sized donors, but
also on EU countries with large economies such as France, Germany, Italy
and the UK boosting average aid levels. These countries account for almost 70%
of the gap to be filled between 2010 and 2015. If the EU as a whole is to meet
the collective target of 0.7% ODA/GNI by 2015, it is imperative that all the
big players play their full part, whereas only the United Kingdom has so
far committed to do so. Table 4.2.3c above shows
the funding gap between the current level of ODA from EU Member States and the
0.7% target. It appears clearly that unless decisive action is taken, the 2015
target will be missed by a large margin. 4.2.3.4. Falling
Short of EU’s Promise on ODA to Africa[152] Between 2005,
when the commitment was made to direct 50% of EU aid increases to Africa (based
on 2004 aid levels), and 2012, the combined EU aid to Africa has risen by about
EUR 0.8 billion at constant prices. This means that 7% of total EU ODA growth
between 2004 and 2012 went to Africa, as shown in Figure 4.2.3c. The
smaller increase than last year is due to the fact that EU bilateral ODA to
Africa declined from EUR 12 billion in 2011 to EUR 10 billion in 2012. No reference
is made in Member States’ replies to specific actions towards the target of
allocating 50% of the ODA increase to Africa. On the other hand, Member
States often cite the share of Africa in their overall ODA or geographically
programmable ODA for measuring their effort in this respect. Most EU Member
States are taking actions to increase ODA targeted to Africa. For some, aid to
Africa already accounts for over half of their bilateral ODA (e.g. Belgium,
France, Ireland, Italy, and Portugal). A few Member States declare that they
will not contribute to that target through their bilateral ODA as they state
that their comparative advantage lies in other regions of the world. An
important dimension is the imputed multilateral share of EU aid to Africa,
which amounted to an estimated EUR 8.3 billion in 2012 and represented the
entire EU increase from 2004 to 2012, as purely bilateral ODA declined over the
period. Overall, 45% or EUR 21.1 billion of EU ODA was targeted to Africa in
2011. 4.2.3.5. How Did EU ODA to
Sub-Saharan Africa Increase since 2005? EU ODA to
Sub-Saharan Africa grew by around EUR 1.2 billion in real terms over the period
2004-2012, thus meeting the less demanding target of increasing EU aid to
Sub-Saharan Africa. Over 90% of this growth was due to aid through multilateral
channels. Only the Netherlands and Portugal significantly decreased their ODA
to Sub-Saharan Africa over this period (-32% and -64%, respectively), with
Spain showing only a very small decline of two percentage points. Preliminary
data for 2012 show a 9% decline in bilateral EU ODA to Sub-Saharan Africa
compared to 2011. 4.2.3.6. Honouring
the EU Commitment on ODA to Least Developed Countries In November 2008, the EU Member States promised,
as part of the EU’s overall ODA commitments, to provide collectively 0.15% to
0.20% of their GNI to LDCs by 2010, while fully meeting the differentiated
commitments set out in the ‘Brussels Programme of Action for the LDCs for the
decade 2001-2010’. Figure 4.2.3d – EU ODA to Africa in EUR million and as a% of GNI
(including imputed multilateral flows) Source: OECD/DAC data for 2004 – 2011 and Commission simulation on DAC
Advance Questionnaire data for 2012 Figure 4.2.3e - EU ODA to LDCs in EUR million and as a% of GNI including
imputed multilateral flows Source: OECD/DAC data for 2004 – 2011
and Commission simulation on DAC Advance Questionnaire data for 2012 The LDCs’
share of EU ODA has increased both in absolute and relative terms since 2004.
Last year’s report provided estimates, based on preliminary data, which seemed
to indicate a volume of EU ODA to LDCs corresponding to 0.15% of EU GNI, thus
meeting the target. Final statistics showed that the estimate was too
optimistic, and that EU ODA to LDCs actually amounted to EUR 16.1 billion in
2011, representing only 0.13% of EU GNI. EU ODA to LDCs, now estimated using a
new methodology (described in Annex 2), declined further in 2012 to less than
EUR 14 billion, or 0.12% of EU GNI. The target has therefore been missed both
in 2011 and in 2012. Figure 4.2.3e summarises the
evolution of ODA/GNI ratios to LDCs for EU Member States over the period
2004-2012. Belgium, Denmark, Finland, Ireland, Luxembourg, Netherlands,
Sweden and the United Kingdom remained above the ODA to LDC target in 2012.
Eleven Member States[153]
do not expect to be able to reach the 0.15% target any time soon. For several
EU12 Member States, even allocating all of their ODA to LDCs would not suffice
to meet the target, given their actual and projected ODA/GNI targets below
0.15%. 4.2.4. EU Policy The European
Union and its Member States have repeatedly reiterated their commitments to
achieve the 0.7% ODA to GNI ratio by 2015, as a concrete time-bound goal. The
rationale for a time-bound target was to provide adequate funding to achieve
the MDGs. Although EU Heads of State and Government confirmed that ODA remains
an important element of the EU support to developing countries, the Council has
not agreed any concrete measures to ensure the national steps necessary for
fulfilling this commitment. The
Commission has, in the last five annual reports, proposed three ways to step up
efforts: (a) drawing up realistic and verifiable national ODA action plans
outlining how Member States aim to scale up and strive to achieve the 2015 ODA
targets; (b) introducing a peer review mechanism whereby the European Council
would assess the progress of each Member State and give guidance for further
joint EU progress for attaining the agreed ODA targets; and (c) enacting national
legislation ring-fencing ODA. Under current trajectories, the EU as a whole is
set to miss its 2015 collective target by a wide margin, and a lack of
readiness to act would therefore affect its credibility. The
discussion on new FfD aggregates to monitor after 2015 should in no way affect
the efforts towards meeting longstanding commitments that have been reiterated
on numerous occasions. 4.3. Funding for Tackling Climate Change EU Commitments ·
Under the December
2009 Copenhagen Accord, developed countries made important pledges for fast
start as well as for long-term climate financing. The collective commitment by developed
countries was to provide new and additional resources approaching US$ 30
billion for the period 2010-2012 with balanced allocation between adaptation
and mitigation. Funding for adaptation would be prioritised for the most
vulnerable developing countries, such as the Least Developed Countries and
Small Island Developing States. In the context of meaningful mitigation actions
and transparency on implementation, developed countries committed to a goal of
mobilising jointly US$ 100 billion per year by 2020 to address the needs of
developing countries. This funding should come from a variety of sources,
public and private, bilateral and multilateral, including alternative sources
of finance. ·
The EU has
frequently confirmed the importance of supporting developing countries moving
towards sustainable economic growth and adapting to climate change (e.g. European Council Conclusions of 19-20 June 2008, §28). It has also underlined that
climate financing should
not undermine or jeopardise the fight against poverty and continued progress
towards the Millennium Development Goals (§23 European Council Presidency Conclusions 30
October 2009). ·
European Council meeting of 10-11 December
2009. In the run-up
to the Copenhagen Conference, the EU and its Member States committed to
contributing EUR 2.4 billion annually over the period 2010-2012 to the fast
start climate funding (§37). The Council
Conclusions of 15 May 2012, 13 November 2012 and 14 May 2013: ·
reaffirmed the EU
and its Member States’ commitment to provide EUR 7.2 billion cumulatively over
the period 2010 – 2012 to fast start finance; ·
reaffirmed the
importance of continuing to provide support by developed countries beyond 2012
for policies, programmes and initiatives that will deliver substantial results
and value for money in the context of meaningful mitigation actions and
transparency in implementation, and in helping to increase climate resilience; and ·
reiterated that,
in this respect, the EU and other developed countries should work in a
constructive manner towards the identification of pathways for scaling up
climate finance from 2013 to 2020 from a wide variety of sources, public
finance and private sector finance, bilateral and multilateral, including
alternative sources of finance, as needed to reach the international long term
committed goal of mobilising jointly US$100 billion per year by 2020 in the
context of meaningful mitigation actions and transparency on implementation. 4.3.1. Introduction Development
and climate change are closely interconnected. If not contained, climate change
risks undermining years of progress in reducing poverty in the context of
sustainable development and meeting the MDGs. Conversely, development and the
associated increased use of fossil fuels and other resources is the main driver
of climate change. Investing in
a low-carbon growth path in the context of an inclusive green economy early in
the development process is likely to be cheaper and more efficient that
polluting first and cleaning up afterwards. The integration of climate change
concerns in development offers real win-win opportunities. Climate
change will, however, also be a significant additional burden and challenge for
many developing countries that will add costs and complexity to poverty
reduction efforts. The world has
agreed to limit the global annual average temperature increase to 2º C above
pre-industrial levels by 2050. Reaching this target would require substantially
increased global efforts. As a matter of fact, even if all countries lived up
to their most ambitious current commitments and pledges, some estimates are now
closer to a global average increase of 4°C. A recent World Bank report[154] has tried to
illustrate what consequences such a 4°C increase would have on the world. The
latter would be devastating: inundated coastal cities, food and water
shortages, heat waves and droughts. All countries would be affected, but for
the most vulnerable populations living in the poorest countries - consequences
would be disastrous. The report thus acts as a wake-up call to significantly
step up efforts to reduce greenhouse gas emissions in all countries, and to
support the most vulnerable in adapting to its consequences. Least Developed
Countries and Small Island Developing States (SIDS) need special consideration
due to their extreme vulnerability. Economic
development is the best hope for adaptation to climate change, but it cannot be
development as usual. Activities needed to adapt to climate change are in
practice difficult to distinguish from ‘normal’ development activities. Most
often ‘adaptation’ is a question of integrating and mainstreaming climate
change concerns into the general development planning process, and to support
‘climate-smart’ projects and programmes. In 2010, the
World Bank[155]
had estimated that the cost of adapting to a 2oC warmer world by
2050 will be in the range of EUR 54 billion to EUR 78 billion a year, or EUR
2.2 to EUR 3.1 trillion for the entire period. There is however no guarantee
that adaptation to a 4°C world would even be possible, and this is why it is
paramount that early, cooperative, international actions are taken to avoid
such a scenario. A major
difficulty in this endeavour is that there is no precise internationally agreed
definition of climate finance at present. The term broadly refers to resources
that catalyse low-carbon and climate-resilient development. It covers actions
required to mitigate climate change by reducing greenhouse gas emissions as
well as actions to adapt to climate change by addressing the impacts. It
includes support to an enabling environment, capacity for adaptation and
mitigation, R&D and the deployment of new technologies. Climate finance
will have to be mobilised through a range of instruments from a wide variety of
sources, international and domestic, public and private, multilateral and
bilateral, and including new and innovative sources of financing. To date, most
of the public climate financing from developed to developing countries reported
to UNFCCC has been ODA that originated from development assistance budgets. 4.3.2. Implementation Table The table below
summarises progress made in 2012 in implementing the EU commitments on climate
finance. Further details are discussed in the main text. EU Commitment || Target Date || Status[156] || Comment Contribute EUR 2.4 billion annually in 2010-12 to ‘fast start’ climate funding || End 2012 || || The EU and MS contributed EUR7.3 billion in 2010-12 to ‘fast start’ climate funding. Work towards pathways for scaling up climate finance from 2013 to 2020 from a wide variety of sources to reach the international long-term joint goal of mobilising US$ 100 billion a year by 2020 || 2013-20 || || Not applicable yet. Work has started. 4.3.3. Recent Trends Monitoring
ODA which is related to climate change and other environmental issues has long
been a difficult task due to the complexity of the issues and their multidimensional
character. The OECD/DAC CRS reporting system has included policy markers for
environment and climate change mitigation for a number of years. Since 2010,
reporting also includes a climate change adaptation marker. Data prepared using
both climate markers were released for the first time in January 2012, and now
cover ODA disbursed during 2010 and 2011. These data
are the best available proxy on climate-related ODA, but have not been set-up
to track financial flows, and should thus be analysed carefully to avoid double
counting. At present, different approaches are used by different donor
countries to convert the Rio-marked OECD/DAC from quality to quantified climate
finance flows. The method followed by the European Commission is to report the
budget of programmes marked with Rio marker 2 (principal objective) as 100%
climate relevant while only 40% of the budget of programmes and projects marked
with Rio marker 1 (significant objective) is reported. Some EU MS follow the
same approach, while others have been using slightly different systems. There
are no guidelines on the application of such conversion factor internationally
or at EU level - a gap that should be filled. There is currently on-going work
within OECD/DAC to develop a common methodology for improving the tracking of
climate-related development financing. In November
2012, the EU presented a joint consolidated report[157] to UNFCCC
tracking on the Fast Start Finance pledge for 2010 – 2012. Fast Start Financing
is a sub-set of the overall climate finance flows from the EU and the Member
States to developing countries. The 2012 FSF Report shows that the EU and its
Member States committed EUR 7.3 billion for fast-start finance for tackling
climate change over the period 2010-2012, thus exceeding the goal of EUR 7.2
billion, despite a difficult economic situation and budgetary constraints. Several
Member States[158]
have been channelling their fast start finance through the GEF managed Least
Developed Countries Fund (LDCF) or the Adaptation Fund, while others are
channelling it directly to SIDS and LDCs. Three quarters of the pledges
received by the LDCF, and almost 95% of the donor contributions received by the
Adaptation Fund were made by EU Member States. The 2011 Accountability Report
suggested a methodology for assessing ‘additionality’ of Fast Start Financing
based on a baseline average ODA level in 2007-2009. According to the figures
available for 2012, this criterion seems to have been met in 2010 and 2011, but
may not have been met for 2012[159]. Table 4.3.3 below
presents the overall ODA committed by EU donors in 2010 and 2011 for climate
change adaptation and mitigation relevant activities. It combines two sources:
(a) the CRS data that determines how much ODA was spent on adaptation and
mitigation in 2010 and 2011; and (b) data from the 2011 and 2012 EU annual
questionnaires on Financing for Development to determine the share of fast
start climate finance (often provided only as commitments). Unfortunately,
detailed ODA data are released over a year after the close of the calendar year
they refer to, and 2012 data will only be available in January 2014, too late
to be included in this report. Table 4.3.3 – EU ODA for Climate Change
Adaptation and Mitigation in 2010-2011 (Commitments, EUR million at constant 2011
prices)[160] Type || 2010 || 2011 Adaptation || 2,343 || 1,912 of which: Principal || 373 || 336 Significant || 1,969 || 1,577 Mitigation || 5,214 || 3,277 of which: Principal || 3,527 || 1,811 Significant || 1,687 || 1,466 Adaptation and Mitigation || 1,928 || 1,736 of which: Both Principal || 923 || 235 Both Significant || 1,005 || 1,501 Total Climate Change || 9,484 || 6,925 of which: || 2,307 || 2,340 Fast-start finance Non Fast-start finance || 7,177 || 4,585 Sources:
DAC CRS The EU has
been by far the largest contributor to both mitigation-related and
adaptation-related ODA in 2010 and 2011, with a share of 50.3% over the period,
even though there was a significant reduction in real terms between 2010 and
2011. This decline seems to have been partially reversed in 2012 based on
preliminary data provided by some Member States through the 2013 questionnaire. It is
difficult to get an overview of total climate related financial flows from EU
to developing countries as there is neither an agreed methodology nor a
comprehensive system put in place to track private flows. According to OECD[161], in the
2009-2010, the global aggregate flows for mitigation and adaptation were in the
range of EUR 53 to 90 billion annually. Public bilateral sources are estimated
between EUR 11-17 billion, mostly for mitigation, while multilateral
development finance (including concessional and non-concessional sources) is
estimated to provide another EUR 11-13 billion, 97% of which for mitigation
purposes. Private climate finance far outweighs public sources, as FDI and other
private finance flows are estimated to have ranged between EUR 28 and 54
billion annually over the same period. Carbon market flows represent only a
small fraction of total private flows (about EUR 1.5 billion), while less than
EUR 0.8 billion of export credits were considered to be supporting low-carbon
projects. 4.3.4. EU Policies and Programmes Discussions on the appropriate funding to enable
and support developing countries to implement their mitigation commitments and
address adaptation challenges will remain a central element of the climate
change negotiations under UNFCCC, and will be an important element of the new
2015 International Climate Change Agreement. While no specific intermediary targets have been
established for the midterm period 2013-2020, the Doha climate change
conference ‘encouraged’ developed countries to provide at least US$ 10 billion
per year between 2013-2015 (similar to the amount provided as ‘fast-start’
financing). Further, there is no agreed key for determining the specific commitment
of the individual developed countries towards the US$100 billion per year
target. A Commission Staff Working Document[162]
in 2011 advised that the EU’s share should represent one third of this amount
(if equal consideration were given to greenhouse gas emission and ability to
pay). The EU made a submission to UNFCCC in 2013 on envisaged strategies to
contribute to mobilising additional climate financing of US$ 100 billion per
year by 2020. A mix of public finance, carbon market finance and private finance
(including sources leveraged by development banks) will be required to deliver
on this commitment. There are many common challenges between the
need to scale up climate finance and the discussion in the broader Financing
for Development debate. The similarities include both the range of potential
sources for mobilising international financing (domestic and international,
public and private, bilateral and multilateral, new and innovative sources) and
the principles that should guide their use (focus on results, impact,
transparency, mutual accountability, etc.). It therefore seems important that
the EU defines a coherent approach to these issues across the different
international processes and negotiation tracks where financing and means of
implementation are being discussed. Improving the
system to measure, report and verify (MRV) financial support is a priority. In
this context, the current work within the OECD aimed at improving the tracking
of climate finance, including by devising methodologies for tracking private
flows, is very important. In November 2011, the Commission issued a Regulation
on a mechanism for monitoring and reporting greenhouse gas emissions and for
reporting other information at national and Union level relevant to climate
change[163].
The latter entered into force in mid-2013 and requests Member States to
report annually to the Commission information of financial and technological
support to developing countries, in accordance with the UNFCCC provisions. The
new mechanism for monitoring and reporting will eventually replace the data
gathering exercise on climate finance which had been carried out so far by the
present annual EU Accountability Report. While the proposed regulation provides
common definitions for climate change adaptation-related and mitigation-related
aid, a few Member States feel that there may still be a need to agree on one
single EU methodology to measure international public climate finance, thus
improving the transparency and comparability of EU actions. The climate change negotiations under the UNFCCC
have also added new elements to the global financing architecture, and will
continue to do so in the coming years. A number of funds and instruments have
been established under the convention, such as the Adaptation Fund, the Least
Developed Country Fund, and the Special Climate Change Fund. The Green Climate
Fund is in the process of being made fully operational, and is expected to play
an important role in mobilising and channelling climate finance in the future. Likewise,
climate funds have been established under other UN agencies and within the
multilateral and regional development banks, for example the Climate Investment
Funds implemented by a group of MDB with more than USD seven billion in
pledges. Within the EU, a number of new instruments or
initiatives were launched or further developed in 2012. They include: -
The
Global Climate Change Alliance (GCCA) was launched in 2007 by the European
Commission to strengthen dialogue and cooperation on climate change between the
EU and developing countries most vulnerable to climate change, in particular
LDCs and SIDS. From 2008 to 2012, the GCCA committed EUR 285 million from the
EU budget and through contributions from several EU Member States (e.g.
Ireland, Sweden, Estonia, Cyprus and the Czech Republic). To date, the GCCA has
been supporting programmes that address climate change in 35 countries and four
regions – and work is under way to formulate an additional nine programmes. -
The
Global Energy Efficiency and Renewable Energy Fund (GEEREF) and the EU Regional
Investment Facilities, discussed in Chapter 5, support investments in
sustainable energy in developing countries. -
In
2011, the UK Government established the International Climate Fund (ICF) to
help reduce poverty and tackle climate change in developing countries. The ICF
aims to help the poorest people adapt to the effects of climate change on their
lives and livelihoods and to support developing countries to reduce harmful
greenhouse gas emissions. The ICF provides EUR 3.6 billion for international
climate finance as part of the rising UK aid commitment for the period 2011–12
to 2014–15. The ICF scales up UK climate finance for two years beyond the Fast
Start period. Policy
coherence between policies in both developed and developing countries is an
important element. For example, a crucial but politically difficult task is to
reduce fossil fuel consumption subsidies. According to OECD and IEA statistics,
these subsidies amounted to a yearly average of EUR 34-57 billion in OECD
countries in 2005-10[164],
and to an estimated EUR 309 billion in 37 developing and emerging economies in
2010. EU policies pertaining to the various Means of Implementation will be
assessed in the forthcoming biennial EU Report on Policy Coherence for
Development to be published in 2013. 4.4. Funding for Addressing Biodiversity Challenges EU Commitments ·
In the Council
Conclusions of 14 October 2010 ‘Preparation of the tenth meeting of the
Conference of the Parties (COP 10) to the Convention on Biological Diversity
(CBD)’, the Council asked the Commission to ‘continue reporting on the amount
of funds related to biodiversity conservation and sustainable use’. Previously,
such monitoring was done via reporting on the Biodiversity Action Plan which
ended in 2010. ·
At the
10th meeting of the Conference of the Parties to the Convention on Biological
Diversity in Nagoya, Parties, including the EU, made a commitment to mobilise
financial resources for effectively implementing the Strategic Plan 2011-2020
and to substantially increase resources from all sources, including innovative
financial mechanisms, against an established baseline. ·
Within
the EU, Council Conclusions of 21 June 2011 endorsed the EU Biodiversity
Strategy to 2020[165].
Action 18 of the Strategy: ‘Mobilise additional resources for global
biodiversity conservation’ requests the Commission and Member States to
‘contribute their fair share to international efforts to significantly increase
resources for global biodiversity as part of the international process aimed at
estimating biodiversity funding needs and adopting resource mobilisation
targets for biodiversity at CBD CoP11 in 2012. The Strategy also stresses that
‘discussions on funding targets during CoP11 should recognise the need for increases
in public funding, but also the potential of innovative financing mechanisms’. ·
The Council
Conclusions of 11 June 2012 on the preparation of 11th meeting
of the Conference of the Parties to the Convention on Biological Diversity (CBD
COP 11) recognised the need to further improve the effectiveness of existing
funding and mobilise new types of funding sources, including the private sector
and other stakeholders, whilst emphasising the importance of innovative
financing mechanisms as an essential and necessary funding source, in addition
to traditional financing mechanisms, and as a tool for mainstreaming. ·
At CBD
COP11 in Hyderabad, the Parties decided on an overall substantial increase of
total biodiversity-related funding, from a variety of sources, and resolved to
achieve a number of preliminary targets including to ‘double total
biodiversity-related international financial resource flows to developing
countries, in particular Least Developed Countries and Small Island Developing
States, as well as countries with economies in transition, by 2015 and at least
maintain this level until 2020, in accordance with Article 20 of the
Convention, to contribute to achieving the Convention’s three objectives,
including through a country-driven prioritisation of biodiversity within
development plans in recipient countries’, using the preliminary baseline of
annual biodiversity funding for the years 2006-2010. Parties also agreed
complementary targets on making appropriate domestic financial provisions,
reporting, and developing national financial plans. They also decided to use a
preliminary reporting framework[166]
as a flexible and preliminary framework to report on and monitor the resources
mobilised for biodiversity at a national and global level. Progress will be reviewed
at COP12 with the aim of adopting the final target for resource mobilisation. 4.4.1. Introduction As noted in
the EU Biodiversity Strategy to 2020[167],
biodiversity — defined as the extraordinary variety of ecosystems, species and
genes that surround us — is humanity’s natural capital, delivering ecosystem
services that underpin the world’s economy. Its deterioration and loss
jeopardises the provision of these services. In addition, biodiversity and
climate change are inextricably linked as the former contributes positively to
climate change mitigation and adaptation[168],
while achieving the ‘two degrees’ target coupled with adequate adaptation
measures to reduce the impact of unavoidable effects of climate change are also
essential to avert biodiversity loss. Both are essential in the efforts to move
towards sustainable development. 4.4.2. Implementation Table The table
below summarises progress made in 2012 in implementing the EU commitments on
biodiversity-related finance. Further details are discussed in the main text. EU Commitment || Target Date || Status[169] || Comment Hyderabad commitment to double total biodiversity-related international financial resource flows to developing countries (in particular LDCs, SIDs and countries with economies in transition), as compared with 2006-10, by 2015 and at least maintain this level until 2020 || 2015 and 2020 || || Not applicable yet. 4.4.3. Recent Trends In previous
editions of the EU Accountability Report on FFD, EU support to biodiversity was
measured using the specific Biodiversity Rio Marker of the OECD/DAC CRS.
However, in July 2012, the CBD invited the EU and its Member States to report
biodiversity-related financial flows, including but not limited to ODA, through
the Common Reporting Framework (CRF). Thus, for the first time, data on
biodiversity-related finance included in the present Report have been collected
in CRF format. As part of
this process, the EU and Member States have developed specific methodologies to
capture biodiversity related ODA, applying specific coefficients to better
capture the real biodiversity component of projects. Such methodologies are not
uniform. The European Commission, for example, reported only 40% of the
allocated budget of projects with a Biodiversity Rio Marker of significant (1)
and 100% of projects marked as principal (2); Germany reported 100% of the
specific components marked as significant rather than the budget of the entire
project, and 100% of those marked as principal; Finland determined a ‘biodiversity
relevance percentage for each biodiversity related project’ that was then
applied to all projects marked as significant or principal. Table 4.4.3
Official and Private Financial Flows Directly or Indirectly Related to
Biodiversity (Commitments, EUR million at current prices) Country or Institution || 2006 || 2007 || 2008 || 2009 || 2010 || 2011 || 2012 Direct || Indirect || Total || Direct || Indirect || Total || Direct || Indirect || Total || Direct || Indirect || Total || Direct || Indirect || Total || Direct || Indirect || Total || Direct || Indirect || Total Austria || 10 || - || 10 || 10 || - || 10 || 14 || - || 14 || 16 || - || 16 || 20 || - || 20 || 16 || - || 16 || - || - || - Belgium || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - Bulgaria || - || - || - || - || - || - || 0 || - || 0 || 0 || - || 0 || 0 || - || 0 || 0 || - || 0 || 0 || - || 0 Croatia || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - Cyprus || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - Czech Republic || 1 || 3 || 4 || 1 || 3 || 4 || 1 || 4 || 5 || 1 || 3 || 4 || 0 || 3 || 4 || 1 || 2 || 4 || 1 || 5 || 6 Denmark || 3 || 90 || 93 || 3 || 90 || 94 || 3 || 90 || 94 || 3 || 90 || 94 || 3 || 90 || 94 || 3 || 90 || 94 || 3 || 90 || 94 EU Institutions || 120 || 25 || 145 || 73 || 62 || 135 || 97 || 66 || 163 || 64 || 201 || 265 || 98 || 163 || 261 || 45 || 129 || 174 || - || - || - Estonia || - || - || - || 0 || - || 0 || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - Finland || 1 || 10 || 11 || 1 || 8 || 9 || 1 || 11 || 12 || 1 || 10 || 11 || 2 || 10 || 12 || 5 || 16 || 20 || 2 || 17 || 20 France || 59 || 45 || 103 || 23 || 29 || 51 || 27 || 105 || 132 || 24 || 74 || 99 || 24 || 79 || 103 || 56 || 87 || 143 || 81 || 45 || 126 Germany || 75 || - || 75 || 125 || - || 125 || 219 || - || 219 || 250 || - || 250 || 300 || - || 300 || 499 || - || 499 || 549 || - || 549 Greece || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - Hungary || 0 || - || 0 || 0 || - || 0 || 0 || - || 0 || 0 || - || 0 || 0 || - || 0 || 0 || - || 0 || 0 || - || 0 Ireland || - || - || - || 20 || - || 20 || 14 || - || 14 || 75 || - || 75 || 25 || - || 25 || 25 || - || 25 || 22 || - || 22 Italy || - || - || - || 11 || 77 || 88 || 17 || 42 || 59 || 5 || 41 || 46 || 1 || 3 || 4 || 2 || 3 || 5 || 4 || 2 || 6 Latvia || 0 || - || 0 || 0 || - || 0 || 0 || - || 0 || 0 || - || 0 || 0 || - || 0 || 0 || - || 0 || 0 || - || 0 Lithuania || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - Luxembourg || - || - || - || - || - || - || - || - || - || - || - || - || 1 || 1 || 3 || 0 || - || 0 || - || - || - Malta || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - Netherlands || 159 || - || 159 || 97 || - || 97 || 93 || - || 93 || 95 || - || 95 || 87 || - || 87 || 82 || - || 82 || 76 || - || 76 Poland || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - Portugal || 1 || 0 || 1 || 1 || 3 || 4 || 1 || 3 || 4 || 1 || 4 || 5 || 0 || 3 || 3 || 0 || 3 || 3 || 0 || 0 || 1 Romania || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || 0 || 0 || 0 || 1 || 0 || 1 Slovak Republic || - || - || - || - || 0 || 0 || - || 0 || 0 || - || 0 || 0 || - || 0 || 0 || - || 0 || 0 || - || 0 || 0 Slovenia || - || - || - || - || - || - || - || - || - || - || - || - || 0 || - || 0 || 0 || - || 0 || 0 || - || 0 Spain || 6 || - || 6 || 10 || - || 10 || 19 || - || 19 || 15 || - || 15 || 11 || - || 11 || 7 || - || 7 || - || - || - Sweden || 9 || 26 || 35 || 15 || 39 || 54 || 18 || 54 || 72 || 17 || 92 || 109 || 21 || 108 || 129 || 20 || 131 || 151 || 55 || 156 || 211 United Kingdom || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - || - Total || 443 || 199 || 643 || 390 || 311 || 701 || 524 || 377 || 900 || 567 || 516 || 1,084 || 596 || 460 || 1,057 || 763 || 462 || 1,225 || 795 || 316 || 1,111 Source: 2013 EU Financing for Development Questionnaire Because of
the adjustments applied by each Member State, the amounts calculated under the
Common Reporting Framework may be lower than those reported previously to
OECD/DAC. They are also incomplete, as some Member States are still working on
their processes for reporting biodiversity-related financial flows. Finally, no
Member State provided information on support for biodiversity from private
sources, while no alternative data source is available at this stage. As
mentioned in previous CBD decisions, further work is needed to improve
methodological guidance on reporting biodiversity-related finance. Data
summarised in Table 4.4.3 should therefore be considered as work in
progress and likely to be updated in future editions of the EU Accountability
Report. Based on such data, biodiversity-related finance almost doubled in
nominal terms between 2006 and 2012. In 2012, the EU and Member States who
reported data committed EUR 1,111 million[170]per year in
biodiversity-related finance, including ODA. 4.4.4. EU Policies and Programmes In June 2011
and December 2011, the Council adopted Conclusions on the implementation of the
Europe 2020 Biodiversity Strategy. The new strategy has six main targets, with
twenty actions to help the EU address biodiversity challenges. Internationally,
the EU contribution to averting global biodiversity loss is to be stepped up, through
a reduction of indirect drivers of biodiversity loss (e.g. changing consumption
patterns, reducing harmful subsidies, and including biodiversity issues in
trade negotiations) and mobilisation of additional resources for global
biodiversity conservation. Council Conclusions were also adopted in preparation
for CBD COP meetings. Delivering on the
Hyderabad targets, as explained above, will require the mainstreaming of
biodiversity in the main development sectors. This is in line with the 2011 EU
‘Agenda for Change’ and more
generally, with the 2011 Communication on ‘A budget for Europe’ which indicated
that in the area of development cooperation, climate and environment, notably
biodiversity, would be mainstreamed in all relevant programmes. It is also clear that
biodiversity financing will need to come from a variety of sources, both public
and private, including from innovative financing mechanisms. Adequate reporting
on progress towards meeting these commitments will also require improved
mechanisms for tracking financing flows at both EU and national level. 4.5. Science, Technology and Innovation (STI), including
Technology Development and Transfer EU Commitments ·
Council
Conclusions of 9 March 2012 on Rio+20, §33: Underlines the important role
played by cooperation on technology, research and innovation, education and
training programmes and emphasises the need to improve mechanisms for
international research cooperation and for the development of information and
communications technology on major sustainable development challenges. ·
Council
Conclusions of 25 October 2012 on follow-up to Rio+20,§36: Reaffirms its commitment
to the promotion of clean and environmentally sound technologies as a means to
facilitate a transition to green economy for all countries regardless of their
development status as well as its commitment to support cooperation and
capacity building for developing countries, and recalls that the EU research
framework programmes are open to third countries and that the EU will further cooperate
with developing countries through its new programme for research and innovation
‘Horizon 2020’ to promote sustainable development. ·
Council
Conclusions of May 30 2013 on EU international cooperation in research and
innovation:
Recognises the added value of deepening the cooperation with developing
countries (§10); recommends further exploring how to strengthen the innovation
dimension in the cooperation with developing countries (§9). 4.5.1. Introduction The role of
STI in support of sustainable development has been recognised since the Rio
Summit in 1992. Subsequently, through the Johannesburg Plan of Implementation
on Sustainable Development[171], the
international community committed to actions in this area, notably in relation
to the development and transfer of Environmentally Sound Technologies (ESTs)[172]. At the
Rio+20 Conference of 2012, Heads of State and Government further emphasised the
role of these technologies in support of sustainable development. The debate
around STI in developing countries has shifted over the past decades. While the
focus has mostly been put in the past on building local R&D capabilities,
often in pre-competitive stage, increased attention is now being paid to
strengthening capabilities in innovation and technology closer to market
deployment. This is partly due to the lessons learnt from the success of
emerging economies in deploying their own innovation and technology
capabilities thanks to government policies and incentives, often aimed at
supporting specific sectors. At the Rio+20 Summit, agreement was reached on the
need to foster the development and transfer of environmentally sound
technologies aimed at allowing developing countries to meet their objectives
related to environment, climate change, energy and other environmentally
sensitive sectors. Currently,
there is no internationally-agreed definition of the term ‘technology
transfer’. The concept is subject to varying interpretations, which ultimately
depend on the policy objectives of the different stakeholders. The debate is
still open as to what type of actions in the R&D and innovation area
constitutes ‘technology transfer’. For instance, Germany considers that almost
all its investments related to Climate Change constitute ‘technology transfer’.
Belgium indicates that at least 25 per cent of its programmes aimed at research
institutions are dedicated to technology transfer and building capabilities. EU Member
States have called for broadening the definition of technology transfer and,
accordingly, the policy objectives in this area. The UK considers that it would
be appropriate to speak about ‘technology cooperation’ or ‘technology support’,
which would better reflect the cooperation amongst and between countries in
sharing knowledge and experience, and would also cover the participation of the
private sector. Finland maintains that the terms ‘technology transfer’ gives
the idea that technology is developed in advanced economies and then
transferred to developing countries, an approach which would not be sustainable.
It would be more effective to foster local technological development while at
the same time aim at increasing the capacities of developing countries to adapt
and use new and existing technologies, as a prerequisite for a sustainable
innovation process that responds to local needs and culture. 4.5.2. Implementation Table The table
below summarises progress made in 2012 in implementing the EU commitments on
Science, Technology and Innovation. Further details are discussed in the main
text. EU Commitment || Target Date || Status[173] || Comment Improve mechanisms for international STI cooperation and for the development of ICT on major sustainable development challenges || No date specified || || The EU Research Framework Programme and EU ODA increasingly support cooperation with partner countries in a range of sectors. Several EU-funded research projects have specifically targeted the use of ICT to share experience and knowledge across countries[174]. Promote clean and environmentally sound technologies as a means to facilitate a transition to a green economy for all countries, regardless of their development status || 2014-20 || || The EU and 15 MS support STI and technology transfer activities relating to the green economy. Support STI research cooperation and capacity building to enhance sustainable development in developing countries, including through the new Horizon 2020 research and innovation programme’’ || 2014-20 || || ’Horizon 2020 will put increased emphasis on STI partnerships with developing countries, in particular through bi-regional partnerships. Several MS implement programmes in this field. 4.5.3. EU Policies and Programmes The EU and
its Member States are longstanding supporters of research and development in
developing countries, including in the area of clean technologies, with a focus
on exchange programmes, twinning arrangements and direct support to research
institutions in developing countries. Several
Member States have developed specific strategies, or included technology as
part of their overall development cooperation strategy. In 2008, the United
Kingdom redefined its Research Strategy for the period 2008–2013, with an
overall budget of EUR 1.2 billion, in which health and agriculture were
identified as the focal sectors[175]. The EU and 17
Member States[176] have been
actively supporting technology development and transfer for developing
countries. In the case of the EU, most of the support is funded through its aid
budget as well as through the international cooperation activities of its
Research Framework Programme. The initiatives that are related to development
aid are mostly aimed at strengthening local or regional STI capabilities in
particular in health, energy, agriculture and environment. The EU is also
fostering South-South STI cooperation, for example through a EUR 45 million
funding line for research mobility aiming at fostering cooperation on topics
such as energy, agriculture, engineering and health, among universities and
research centres of ACP countries. Also, the EU is supporting the African Union
in managing R&D and Innovation actions with the aim of developing
collaboration capabilities closer to the beneficiary countries. As regards
the Seventh Research Framework Programme (FP7, 2007-13), international
cooperation activities were open to the participation of all third countries.
They included a specific budget line dedicated ‘to addressing specific
problems that third countries face or that have a global character’ [177]. The FP7 also targets specific regions and countries
addressing certain needs and issues primarily related to global challenges such
as health, agriculture, energy and environment – as well as strengthening the
research capacity of developing countries. So far, FP7 has contributed over EUR
450 million to common research projects with partners from emerging economies
and developing countries. The Strategic
Forum for International Science and Technology Cooperation (SFIC) aims to
further develop, implement and monitor the international dimension of the
European Research Area. A key issue is to coordinate international research
activities of Member States and the EU with and vis-à-vis key strategic partner
countries outside Europe. An example of this type of joint cooperation is the
building up of the Indo-European Research and Innovation Partnership. Europe is
also one of the world’s leading players in the advancement of Earth Observation
technologies and related environmental applications. European Earth Observation
covers remote-sensing satellite, ground-based, air-based and ocean-based
monitoring devices. They enable the collection of high quality observation data
for different purposes such as urban planning, adaptation to climate change,
disaster reduction, disease control and humanitarian relief. A number of
FP projects contributed directly to building capacity in developing countries
in environmental and environmentally related monitoring, assessment and
information, based on modern technology in a number of fields such as earth and
ocean observation systems and monitoring methods for sustainable development
and a contribution to international observation systems. The
implementation of the next FP, ‘Horizon 2020’, will start in 2014, maintaining
its openness to partnerships with developing countries, in particular
bi-regional partnerships[178]. It will
also contribute to addressing global challenges and specific areas of
technology development, including green economy, climate action, health and
agriculture[179]. Examples of
other noteworthy initiatives by the EU and its Member States include projects
that promote STI cooperation and/or enhance ICT implementation to address
global challenges: ·
The
Global Earth Observation System of Systems (GEOSS): GEOSS is an
international initiative. The Commission is one of the five co-chairs of the
Group on Earth of Observation (GEO) and supported the first implementation
phase of the Global Earth Observation System of Systems (GEOSS). GEOSS is a
unique example of how research cooperation has already substantially progressed
towards meeting the needs for long-term global information as a basis for
decision making. The first implementation phase (2005-2015) focuses on nine
societal benefit areas: disasters, health, energy, climate, water, weather,
ecosystems, agriculture, and biodiversity. A second phase is currently under
preparation. ·
The
African Network for Drugs and Diagnostics Innovation (ANDI) was
established to promote and sustain African-led health research and development
(R&D) and innovation by building capacity, developing infrastructure,
promoting collaborative efforts and delivering affordable new tools including
natural products and traditional medicines. The Commission provided funding of
EUR 5 million for the 2009-2013 period. ANDI has the overarching goal of
linking health innovation to development by sustaining local R&D and market
access to diagnostics, drugs, vaccines and other health products in Africa.
ANDI has a memorandum of understanding with WIPO on the management of intellectual
property and technology transfer activities. ·
In
the context of establishing the patent landscape, the European Patent
Organisation (EPO) developed and launched a new classification scheme for
patents in climate change mitigation technologies, starting with CETs, which is
now available on the EPO’s public patent information service esp@cenet. The new
scheme will provide continuous, accurate and user-friendly patent information
and thus help to improve the transparency of the patent system in this critical
technology sector. ·
The
European and Developing Countries Clinical Trials Partnership (EDCTP)
was established in 2003 in response to the global health crisis caused by the
three main poverty-related diseases (PRD) - HIV/AIDS, malaria and tuberculosis
- and as a means to achieve the health-related MDGs. The EDCTP’s core objective
is to accelerate the development of new clinical interventions (drugs,
vaccines, and micro biocides) to fight the three major PRD in sub-Saharan
Africa, and to improve the quality of research in relation to these diseases,
including the ethical review capacities and regulatory environment. Secondly,
the EDCTP aims to step up cooperation and the networking of European national
programmes for clinical trials in sub-Saharan Africa, thereby achieving a most
cost-efficient and coordinated European effort in this area. Currently, there
are 14 Member States, two Associated Countries and 29 sub-Saharan countries
engaged in the EDCTP programme. The renewal of the EU’s mandate and funding for
an EDCTP 2 programme is envisaged under the auspices of Horizon 2020
(2014-2020). There are
also examples of projects supported by the EU Member States that specifically
promote the green economy: ·
The
Renewable Energy and Adapting to Climate Technologies (REACT). The
REACT programme is a window of the Africa Enterprise Challenge Fund which aims
to stimulate private sector investment in developing and delivering low cost
clean energy and climate adaptation technologies, such as solar power, biogas,
irrigation, and water efficiency measures. Provisional estimates (currently
under review) are that by 2015, the REACT programme will have helped to deliver
access to cheaper, cleaner energy technologies to 200,000 households and 50,000
SMEs. The United Kingdom is contributing EUR 14 million to the REACT programme
between 2010 and 2016. ·
Between
2009 and 2013 Austria
granted EUR 1.8 million in support of the ECOWAS Regional Centre for
Renewable Energy and Energy Efficiency (ECREEE) which was established to
lead and coordinate regional projects and programmes that seek to establish and
operationalize markets for renewable energy and energy efficiency technologies
and services in ECOWAS. Reporting on
Technology Development and Transfer should be enhanced: in particular, work
needs to be done in improving the quality and coordination of the various
reports. There are currently three reporting mechanisms on technology transfer
activities: report to the WTO under Article 66.2 of the TRIPS Agreement, the EU
Accountability Report on FFD and, starting from 2014, the EU biennial report
for the UNFCCC[180]. The
European Commission plans to initiate a stocktaking exercise on its own funding
for R&D. 4.6. Future of Development Finance Reporting An
international consensus is emerging around the need for better measures of
progress and development efficiency to tackle global challenges. The
proposals for defining new aggregates that would enhance accountability fall
into three broad categories, described in a recent ECDPM study[181]: (a)
changing how we measure ODA efforts (notably by revising the ODA
concept)[182];
(b) changing what we measure (including by complementing/replacing ODA
with a broader aggregate such as ‘total net resource flows for development’[183]);
or (c) changing where we measure ODA/GNI ratios (at the recipient level
rather than at the donor’s level)[184]. The on-going
international processes leading to the formulation of a post-2015 overarching
framework and Sustainable Development Goals, as described in Chapter 1, are
likely to lead to several exercises aimed at estimating the financial needs
linked to the new goals, and a more comprehensive monitoring of development
finance. In that
context, the OECD Working Party on Development Finance Statistics (WP-STAT) has
started work in view of extending the coverage and categorisation of non-ODA
flows in DAC statistics. The current cash-based flow measurement system used by
DAC may need to be revised to better reflect development-related expenditures
in donor countries which indeed represent a budgetary effort but do not
generate cross-border flows, or place greater emphasis on gross instead of net
transfers[185]. OECD/DAC members have agreed not to revise the
ODA definition before 2015, in order to avoid moving goalposts before a full
analysis is made of whether donors delivered on their commitments. However, the
DAC has also been tasked to elaborate a proposal for a new measure of total
official support for development, and to investigate whether any resulting new
measures of external development finance (including any new approaches to
measurement of donor effort) suggest the need to modernise the ODA concept. A
first report on this topic is expected in 2013. In addition, a loan qualifies as ODA depending
on its concessional character, a concept not defined in quantitative terms and
on which countries’ views diverge. DAC members agreed in 2012 to establish, as
soon as possible, and at the latest by 2015, a clear, quantitative definition
of ‘concessional in character’. 5. Combining Public and Private Finance for
Development EU
Commitments ·
The Council
Conclusions of 15 June 2010 committed to seriously consider ‘proposals for
innovative financing mechanisms with significant revenue generation potential,
with a view to ensuring predictable financing for sustainable development,
especially towards the poorest and most vulnerable countries’ (§31). The EU
also committed to use these resources in line with the international Aid
Effectiveness principles (§32). ·
The Council
Conclusions of 14 May 2012 (on Agenda for Change), §17: In order to
leverage further resources and increase the EU’s impact on poverty reduction,
new financial tools will be promoted, including blending grants and loans and
other risk-sharing instruments. ·
The Council
Conclusions of 15 October 2012 made a distinction, as in this year’s
report, between the funding side (innovative financing sources) and the
expenditure side (innovative financial instruments), §1: The Council stresses
the importance of increasing use of innovative financial instruments to promote
stronger private sector engagement in inclusive and sustainable development,
especially at the local level. The EU agrees to use grants more strategically
and effectively for leveraging public and private sector resources, including
in the context of blending grants and loans and innovative risk-sharing and
joint financing mechanisms. The Council supports the setting up of the ‘EU
Platform for External Cooperation and Development’ to provide guidance to
existing blending mechanisms. The EU also stresses the central role of enabling
domestic business environments and promoting corporate social responsibility
principles, at local and global level. Use of innovative financing mechanisms
will take account of debt sustainability and accountability and will avoid
market disturbances as well as budgetary risks. 5.1. Introduction There is no
universally accepted definition of Innovative Financing Mechanisms (IFM)[186]. While the
term initially referred to new sources of development financing that
could complement traditional ODA[187] in a stable
and predictable way[188], it has
progressively been expanded to include innovative financial instruments
aiming at enhancing the impact, effectiveness and efficiency of development
finance. The main
characteristic of these mechanisms is not intrinsic financial novelty, but the
fact that they differ from traditional approaches to mobilising and/or
delivering development finance[189]. Traditional
sources of funding ODA typically include budget outlays from established sovereign
donors, or bonds issued by multilateral and national development banks, while
traditional approaches to delivering development finance include grants and
loans to beneficiaries, directly or through a variety of implementing agencies.
Innovative financing sources and mechanisms are essentially a way to fill the
financing gap between what is needed to address developmental challenges and
what donors can provide, often addressing a specific externality or market
failure. IFM are thus
mechanisms that (i) support fund-raising by tapping new sources and engaging
investors beyond the financial dimension of transactions, as partners and
stakeholders in development; and/or (ii) deliver development finance in new
ways, enhancing its impact on development problems on the ground. They can
therefore be considered ‘innovative’ either because of the nature of sources or
the way they are collected, implemented and used to catalyse additional
financing. Broadly
speaking, IFM can be divided into innovations in fund-raising
and innovative financial instruments for development: (1)
Mechanisms that generate additional Financing
for Development by tapping into new and innovative finance (or funding)
sources (non-traditional or non-conventional ODA resources, emerging donors
and the private sector). For example, global solidarity
levies (such as the airline ticket tax or the Adaptation Fund) or national
lotteries, or front loading mechanisms like the International Finance Facility for Immunisation (IFFIm), or co-payment schemes such as the Advance Market Commitment (AMC)
mechanism. (2)
Mechanisms that offer innovative financial
instruments in the way existing aid resources are pooled, blended and
delivered. For example, the EU regional blending facilities, structured
investment funds like GEEREF, Special Purpose Funds like TCX, or Guarantee
Mechanisms like GIIF. This chapter tries to quantify innovative
financing sources (Section 5.3) and instruments (Section 5.4), and shows where
the EU stands on its commitment to support the use of innovative ways to
finance development. 5.2. Implementation Table The table below
summarises progress made in 2012 in implementing the EU commitments on
innovative financing sources and instruments. Further details are discussed in
the main text. EU Commitment || Target Date || Status[190] || Comment Consider proposals for innovative financing mechanisms with significant revenue generation potential, with a view to ensuring predictable financing for sustainable development, especially for the poorest and most vulnerable countries || No date specified || || Several MS are using innovative sources of development funding, although they accounted for only 2% of ODA in 2010-12. It is unclear whether revenue generation for development from existing and new taxes (e.g. FTT) will be significant. Promote new financial tools, including blending grants and loans and other risk-sharing instruments || No date specified || || Several blending instruments have been introduced and further developed over 2012, now covering all regions of EU external cooperation. The EU Platform for Blending in External Cooperation was established in December 2012. Use innovative financing mechanisms taking into account debt sustainability and accountability and avoiding market disturbances and budgetary risks. || No date specified || || MS and Commission funds for innovative financial instruments increased from EUR 600 million a year in 2010-11 to over EUR 2 billion in 2012. 5.3. Recent Trends 5.3.1. Innovative Financing
Sources Innovative financing sources accounted for about
2% of EU ODA over the period 2010-2012, as shown in Table 5.3.1 below, with an
average of EUR 1.2 billion per year. Only one third of innovative financing
sources were reported as ODA by EU Member States in 2011. The revenues
generated by such sources were highly concentrated in five countries accounting
for 98% of the total: Germany (43%), France (37%), Belgium (7%), United Kingdom
(6%), and Italy (5%).
Figure 5.3.1 -
Distribution of Innovative Sources of Financing for Development (%, 2010-2012) Source – 2013 EU Financing for Development Questionnaire As shown in Figure 5.3.1, a relative majority of
innovative finance for development was raised through auctioning of emission
permits. Government guarantees are used by IFFIm to raise funds on
international markets. The solidarity tax on air travel is currently
implemented only by France and represents a sizeable share of the total.
Lottery proceeds are directed to aid activities in Belgium and the United
Kingdom, although the contributions from the latter have not been quantified. Table 5.3.1 - Revenues Generated by Innovative Financing Sources as
reported by Member States (2010-2012, EUR million) Member State || Innovative Financing Sources || Total revenues || Reported as ODA in 2011 || Mechanism to ensure that this financing is used in accordance with the aid effectiveness principles || 2010 || 2011 || 2012 || Belgium || Contribution Belgian Lottery || 88.0 || 88.0 || 88.0 || 88.0 || The budget provided through the National lottery is not used through a parallel mechanism, but is integrated in the normal programming of Belgium’s bilateral cooperation. Alignment of the projects and programmes with local policies || Cyprus || UNITAID || 0.4 || 0.4 || 0.4 || 0.4 || Existing initiative in the field of health which has shown its ability to provide stable and predictable resources in a coordinated manner. || France || International Solidarity Levy (tax on airline tickets) || 163.7 || 175.1 || 185.3 || 172.5 || These resources are used to fund IFFIm, GAVI and UNITAID. France contributed US$1.1 billion to UNITAID between 2006 and 2012. This contribution helped developing medicines adapted to HIV/ AIDS infected children (less than 10,000 children were under anti-retroviral treatment in 2010 but today they are more than 560,000); to drastically reduce the prices of second-line anti-retroviral medicines and of multi-drugs resistant tuberculosis treatments; or to generalise the use of more adapted anti-malaria treatments. || France || International Financing Facility for Immunisation (IFFIm) || 230.2 || 147.1 || 99.3 || 27.7 || IFFIm is based on the ‘front loading ’principle. IFFIm/GAVI estimated that IFFIm had a leverage of 1.98 in 2012. France ensures that the funds are used in line with development effectiveness principles through its participation in the Board of Directors of GAVI. || France || Debt Reduction-Development Contracts (C2Ds) || 137.0 || 135.5 || 143.1 || || Debt Reduction-Development Contracts (C2Ds) are a mechanism within the French foreign aid tool-set. The mechanism aims to alleviate debt that has been contracted by a developing country within the framework of Official Development Assistance (ODA), e.g. French foreign aid. C2Ds allow French ODA debts to be refinanced through grants. With the C2D mechanism, a country continues to honour its debt to France; when a repayment is made, France makes a grant to the country in an equivalent amount. The grant money is then allocated to poverty reduction programmes that have been selected by joint agreement between France and the receiving country || Germany || Special Energy and Climate Fund (previously: emission allowances sales revenues) || 591.0 || 562.0 || 482.7 || 27.0 || All programmes are aligned with country priorities. The Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU) coordinates its activities with BMZ. BMZ’s programmes are fully integrated with existing German development cooperation and as such adhere to the principles of aid effectiveness. || Germany || Debt2Health || 20.0 || 3.3 || || || Implementing Agency: KfW Entwicklungsbank; type of grant support: debt swap; health focus. || Hungary || European Emission Trading Scheme || || || 5.0 || || || Italy || International Financing Facility for Immunisation (IFFIm) || 25.0 || 26.7 || 26.7 || 26.7 || || Italy || Advance Market Commitments (AMCs) || 38.0 || 38.0 || 38.0 || 38.0 || || Luxembourg || Contribution to Unitaid || 0.5 || 0.5 || 0.5 || 0.5 || Unitaid is committed to improving aid effectiveness and respecting the principles of the Paris Declaration. || Luxembourg || Fonds de lutte contre certaines formes de criminalité || 3.8 || 0.6 || || 0.8 || Funds are channelled through existing mechanisms (UNODC, NGOs, and Lux Dev), how aid effectiveness principles are respected is indicated in the project documentation. || Netherlands || International Financing Facility for Immunisation (IFFIm) || || || || || || Spain || IFFIm || 9.5 || 9.5 || 8.7 || || || Spain || UNITAID || 8.0 || 5.0 || || || || United Kingdom || International Financing Facility for Immunisation (IFFIm) || 40.2 || 50.7 || 66.0 || || || United Kingdom || Advance Market Commitments (AMCs) || 17.5 || 40.3 || 14.8 || || The AMC is an innovative ‘pull mechanism’ which is being piloted to encourage manufacturers to invest in and scale-up the production of pneumococcal vaccine for developing countries. || Total || || 1,372.9 || 1,282.7 || 1,092.5 || 381.5 || || % of EU ODA || || 2.6% || 2.4% || || || || On the basis of the definitions of Innovative
Financing for Development (IFD) used by OECD/DAC[191],
64% of EU IFD concerned new public revenue streams (i.e. emission allowances,
taxes and lotteries), 31% debt-based instruments and frontloading, and 5%
public private incentives like the Advance Market Commitments (AMCs).
Debt-based instruments are usually reported as ODA as they fall due, and it is
therefore not surprising they are not fully included in ODA reporting by Member
States. 5.3.2. Innovative Financing
Instruments Seven Member States are currently using, or are
planning to use, one or more of the existing innovative financing mechanisms to
raise funds for development[192].
Overall, funds allocated for innovative financial instruments by EU Member
States and the Commission have increased from EUR 600 million per year in
2010-2011 to over EUR 2 billion in 2012. Figure 5.3.2 - Distribution of EU Innovative Financing Instruments for
Development (%, 2010-2012) Source – 2013 EU Financing for Development Questionnaire As shown in Figure 5.3.2, over two thirds of
innovative financial instruments involve blending, while structured investment
funds account for one quarter. 5.4. EU Policies and Programmes 5.4.1. Innovative Financing
Sources Innovative tax sources earmark revenues for
development cooperation. As a general principle, revenues from specific taxes
should not be earmarked to specific public expenditure but used to finance
general government spending. Governments usually follow this principle and use
earmarking only in special cases. In some countries, earmarking is even
forbidden by the budget law since it can lead to budgetary inflexibility by
restricting the decision-making powers of the current and future governments.
Moreover, the revenue generated from a particular source or sources may be
greater than – or less than – the desired or appropriate level of spending on a
particular development goal. Nor can earmarking ensure that revenues from a new
source are additional spending, as the new revenues may simply replace spending
previously financed from other public revenues. At the EU level, two innovative sources of
financing are worth underlining. First, the Financial Transaction Tax
which eleven Member States (France, Germany, Spain, Italy, Belgium, Estonia,
Greece, Austria, Portugal, Slovenia and Slovak Republic) have already decided
to apply under ‘enhanced co-operation’ rules, as approved by the EU Council of
Ministers in January 2013. These countries will impose a 0.1% tax on trades in
stocks and bonds, and a 0.01% tax on derivative transactions. The tax is
expected to generate about EUR 30-35 billion per year when applied by the
eleven Member States. A few EU Member States use FTT to finance UNITAID. France
has committed to use at least 10% of the tax’s revenues for development. If a
similar commitment were made by the other ten Member States, the tax could
raise an additional EUR 3-3.5 billion in IFD, in effect quadrupling the current
innovative funding level. Second, the
extension of the EU Emissions Trading System (EU ETS) – used to fund
development co-operation in Germany - to aviation transport, the scheme for greenhouse gas emission allowance trading within the
Community. As foreseen in the Directive
2008/101/EC of the European Parliament and of the Council decision of 19
November 2008 amending Directive 2003/87/EC, aviation activities are, since January 2012, included in the emissions from all domestic and international flights that
arrive at or depart from an EU airport[193]. 5.4.2. Innovative
Financing Instruments Innovative
financial instruments usually tackle two inter-related issues of cost and
access. The type of funding and the repayment terms are both key determinants
on the cost side. Blending of grants with market-based financing is thus a way
to reduce costs, especially for investment with long gestation period and with
economic and social rates of return well above the financial rate of return.
While other measures such as guarantees help address both issues, other
mechanisms discussed below help improving access. A few recent initiatives that have not yet
generated substantial flows are described in Box 5.4.2. Each instrument
reports substantial leveraging of private funds, from 1:1 to 1:30. The European
Commission is strengthening its blending mechanisms; combining
grants with additional flows (such as loans and risk capital) to gain financial
and qualitative leverage, and increase the impact of EU development policy. The
strategic use of a grant element can make projects and initiatives by public or
commercial investors financially viable, thereby exerting a leveraged policy
impact. The grant element may take various forms such as: direct investment
grants (41% of the grant element provided so far by the seven EU regional
blending facilities managed by DEVCO); interest rate subsidies (19%); technical
assistance (32%), risk capital (4%), and risk sharing mechanisms such as
guarantees (3%). Beyond unlocking additional project financing, the EU grant
element also reduces the price of the project for the beneficiary and
contributes to complying with debt sustainability criteria. Since
2007, the EU, together with several Member States, has set up eight regional
blending facilities[194],
now covering all regions of EU external cooperation, after the launch of three
new facilities for Asia, the Caribbean and the Pacific in 2012. EUR 1.5 billion
grants from the EU budget, the European Development Fund (EDF) and Member
States have financed more than 320 operations of EU blending mechanisms. The EU
grant contributions to individual projects have leveraged more than EUR 20
billion of loans by eligible finance institutions, unlocking project financing
of at least EUR 45 billion, in line with EU policy objectives. To date, the seven EU regional blending facilities managed by DEVCO
have covered similar broadly defined sectors: transport (26% of the grant element provided by the eight regional blending
facilities so far), energy (35%), social (5%),
water/wastewater (20%), ICT (3%), and access to finance for MSMEs (11%). Box 5.4.2 - Examples of
Innovative Financial Mechanisms Supported by Member States Germany - Support for social entrepreneurs and
foundations in development The objective is to mobilise additional private
resources for developmental activities in developing countries. This initiative
is in technical preparation and will be piloted in 2013. Netherlands
- Private Sector Revolving Fund The Netherlands is currently setting up a EUR 750
million revolving fund to bridge the gap between commercial challenges in
developing countries and the strengths of the business community. Sweden
- Business for Development (B4D) Programme B4D is an innovative programme, where Sweden engages
in new ways with the private sector in order to achieve more development
impact. An important feature of the programme is that it is open to private
sector actors from all over the world and it is the development results that
are in focus. Cost-sharing, risk-sharing, additionality, catalytic support and
leverage effect are other guiding principles. The main instruments for
collaboration are: Public-Private Development Partnerships, Challenge Funds,
Drivers of Change, Innovative Finance (please see below) and Dialogue.
Innovations Against Poverty is one example of a tool (a challenge fund) which
is used for collaborating with the business sector to stimulate companies to
come up with new innovative solutions for addressing poverty and contributing
to sustainable development. Through this challenge facility successful bidders
are able to receive support; from planning grants through guarantees, to
develop and expand their business, as needed. A similar setup is in place for
companies working with the African Enterprise Challenge Fund, with a particular
focus on post-conflict countries. United Kingdom - Impact Programme for Sub-Saharan
Africa and South Asia The
programme, launched in December 2012, will provide up to EUR 138 million over
13 years to foster the development of the market for impact investment
into Sub Saharan Africa and South Asia by: ·
Demonstrating
the development impact and financial viability of this emerging class of
investment through a new DFID Impact Fund (up to EUR 92 million) that will be
managed by CDC. The Fund will provide capital and specialist advice on a
competitive basis to enable impact investment managers to raise more capital
and invest it more effectively into high impact enterprises ·
Partnering
with USAID, Omidyar Network, Rockefeller Foundation to provide support (EUR 13
million) to the Global Impact Investing Network (GIIN) to improve the way that
social impact is measured and information about it is shared Expected results of the Programme are: ·
Over
five million poor women and men using or benefiting from access to affordable
goods and services such as health, agricultural services, energy, housing,
education, and safe water or accessing new opportunities as employees or
producers. ·
Investments
in over 100 enterprises in Sub Saharan Africa and South Asia ·
Additional
private capital catalysed by the DFID-CDC Impact Fund. ·
Over
300 locally based Fund Management staff trained in impact measurement and
investment skills. In
addition to achieving more with less by leveraging ODA grants, blending
facilities provide funding with a financial discipline that can be more
effective in boosting ‘ownership’ that traditional ODA. Moreover, they bring
together a variety of partners, improving coordination among donors,
international financial institutions and investors both in terms of funding and
policy dialogue. These facilities have also built a wealth of expertise in
environmental assessments, engineering, and project management, and this
expertise is used the overall quality of the projects they support. Some
civil society organisations have however raised concerns regarding the
increased use of blending for five reasons: (1) insufficient access to
information about blending operations; (2) unclear monitoring and evaluation
methods; (3) opportunity costs; (4) risk of financial incentives outweighing
development principles; and (5) debt risks for developing countries. To
address these concerns amongst other things, the European Commission launched a
new ‘EU Platform for Blending in External Cooperation’ at the end of 2012, a
major forum to build on the successful experience so far in this area and look
at how to improve the quality and efficiency of blending mechanisms.
Representatives from Member States, the European Parliament, the European
External Action Service and the European Commission agreed on a work plan for
2013 that includes a review of the existing blending mechanisms and the
development of a common results based framework to measure impact. Technical
groups have started their work with the participation of all relevant finance
institutions active in EU regional blending. In connection with the work of the
technical groups, consultations are held with civil society organisations. The
EU regional blending facilities currently mainly support public investments.
Only 10% of the grant contributions made so far went to projects that involve
the private sector. This support predominantly took the form of support to
MSMEs. However, the European Commission is looking into ways of increasing the
role of blending as a catalyser of private investment for development. The main
idea is not to provide grants to the private sector, but rather to use the
grant to enable additional private Financing for Development. The motivation
for increasing the role of the private sector in development is to make a
contribution to poverty eradication and the achievement of sustainable
development; not to help private firms make a profit. The grant shall serve to
crowd-in foreign and local financing, assuring the additionally of the EU grant
contribution, that seems strong given the average 34:1 leverage between ODA
grants and project financing achieved so far through blending. The leverage
varies by sector from 50:1 for urban transport projects to 4:1 for projects in
the social sectors. Debt
sustainability is another important consideration when assessing projects in
the blending facilities. In fact, the grant contribution can be used precisely
to reduce the borrowing cost for the beneficiary with a view to easing its
exposure to external debt. To ensure that debt sustainability is taken into account,
the approval process of the facilities has a built-in check for concessionality
requirements, based on IMF regulations. This aspect is already flagged in the
identification phase of the project by the lead finance institution. The
Commission, in close collaboration with the EU Delegations, verifies the
social, environmental and debt sustainability of projects supported through the
blending facilities. This also means that blending cannot be used in each and
every country, sector or project. Blending mechanisms are also used
bilaterally. Over the period 2010-2012, over half of blending was bilateral,
and Germany accounted for 92% of the total, with the balance coming from
Sweden. Implemented by KfW Entwicklungsbank, German blending mechanisms involve
a combination of interest rate subsidies and Federal guarantees. They are used
globally and focus on more profitable sectors and partner countries with
adequate debt sustainability. Sweden uses blending in specific countries (e.g.
Kenya, Sri Lanka, Mozambique) in water and sanitation and hydro power
generation, or through international development banks (e.g. EBRD, IFC). Structured
Investment Funds provide risk capital to private
initiatives in developing countries. Denmark supports the Arab Investment Fund
(AIF), and the Climate Investment Fund (DCIF). DCIF invests in commercially
viable private sector projects within energy production and energy efficiency
with a positive climate impact. Germany is financing several structured
investment funds with a geographical focus. The Netherlands is a shareholder of
the Health Insurance Fund (HIF), Investment Fund for Health in Africa (IFHA),
and Medical Credit Fund. These are funding mechanisms for developing health
insurance for people with low income or in the informal sector, and improving
and expanding healthcare capacity. Their objective is to use public funds to
leverage private sector investments. The first round of IFHA raised EUR 50
million from Goldman Sachs, Pfizer, FMO, IFC, Shell, Unilever, Aegon, Achmea,
SNS Reaal, Heineken and other companies. The Global Energy Efficiency and
Renewable Energy Fund (GEEREF) is an innovative Fund-of-Funds, providing global
risk capital through private investment for energy efficiency and renewable
energy projects in developing countries and economies in transition. Launched
in 2004, GEEREF aims to accelerate the transfer, development, use and
enforcement of environmentally sound technologies for the world’s poorer
regions, helping to bring secure, clean and affordable energy to local people.
GEEREF is sponsored by the European Union, Germany and Norway. A Public-Private Partnership (PPP) is a
partnership between the public and the private sector for the purpose of
delivering a project or a service traditionally provided by the public sector. The Private
Infrastructure Development Group (PIDG) is a multi-donor organisation[195], including
Austria, Germany, Ireland, Netherlands, Sweden and UK. It was established in
2002 to promote private participation in infrastructure in developing countries
with a strong focus on Africa. It provides long-term capital and local currency
guarantees, and TA. The Public-Private Infrastructure Advisory Facility (PPIAF)[196] is a
multi-donor technical assistance facility, set up in 1999 and financed by 17
multilateral and bilateral donors including Austria, France, Germany, Italy,
Netherlands, Sweden, and United Kingdom. It is a complementary scheme to
deliver technical assistance to developing country governments. In terms of
bilateral initiatives, the Netherlands supports the PPP Facility for Food
Security and Sustainable Development, the PPP for renewable energy, and PDP, a
PPP for product development, managed by an independent scientific secretariat
that coordinates the development of new medicines, vaccines and diagnostic
kits. Special
purpose funds leverage public long term capital to provide
solutions to market failures. The Netherlands is supporting, though a
convertible subordinated loan that is not ODAble, the Currency Exchange Fund
(TCX). TCX is a special purpose fund that hedges the currency and interest
rate mismatch that is created in cross-border investments between international
investors and local market participants in frontier and less liquid emerging
markets. In some blending operations (e.g. the NIF with EBRD), the EBRD is
making use of TCX in order to make finance available to SMEs in their own
currencies in Eastern Europe and Central Asia. This is an important innovation
for borrowers whose revenues are in local currency – the foreign exchange risk
to borrowers might have otherwise offset any concessionality or grant
component, The Netherlands also supports enterprise challenge funds for
renewable energy (e.g. the Daey Ouwens Fund, the Sustainable Biomass Fund). The
United Kingdom supports the GAVI Matching Fund designed to raise EUR 196
million for immunisation by the end of 2015. Under the initiative, the UK
Department for International Development (DFID) and the Bill & Melinda
Gates Foundation have pledged about EUR 98 million combined to match
contributions from corporations, foundations and other organisations, as well
as from their customers, members, employees and business partners. Guarantee
mechanisms can reduce risk and enhance access to finance. Sweden has
launched a EUR 76 million guarantee programme to support micro-finance. The
European Commission with EUR 24.5 million and the Netherlands with EUR 0.4
million are providing 90% of the funding for IFC’s Global Index Insurance
Facility (GIIF). The GIIF addresses the scarcity of affordable insurance
protection against weather and natural disasters in developing countries and is
currently supporting 28 developing countries with capacity building and premium
subsidies. Since its establishment in 2009, GIIF partners have issued more than
125,000 contracts. The total number to be reached by the end of 2013 exceeds
200,000, benefiting around one million households. Issues
affecting the use of IFMs. As noted by some Member
States, a number of issues need to be taken into account when using innovative
financial instruments: 1) instruments should not impede the proper functioning
of market mechanisms, 2) conditionality and earmarking of instruments can
reduce ownership of developing countries, 3) instruments can have pro-cyclical
effects which can make the availability of means unpredictable, 4) ownership
and coordination of instruments are crucial to reduce transaction costs, 5) the
creation of new instruments implies higher financial-economic risks which need
to be taken into account from the beginning of the design process and 6) a good
ex-ante assessment framework for the instruments is crucial. 6. Using Development Finance Effectively EU Commitments ·
The Council Conclusions of 17 November 2009[197]on
an Operational Framework on Aid Effectiveness, with additions made in June 2010
(cross country division of labour) and December 2010 (accountability and
transparency)[198]
contains measures in three areas: (1) Division of Labour (selected measures to
further implement the EU Code of Conduct on the Complementarity and Division of
Labour in Development Policy); (2) Use of Country Systems, and (3) Technical
Cooperation for Enhanced Capacity Development. EU Member States and the
Commission were asked to start implementing them immediately (both individually
and jointly). ·
Council Conclusions of 14 November 2011 on
the EU Common Position for the Fourth High Level Forum on Aid Effectiveness specified the importance of joint programming, cross-country
division of labour, use of country systems, mutual accountability, results, and
transparency. It also endorsed application of the aid effectiveness principles
to climate change finance. ·
Council Conclusions of 15 October 2012 (on
Financing for Development): The EU will implement
the European Transparency Guarantee and the commitments related to the common
open standard for publication of information on development resources including
publishing the respective implementation schedules by December 2012, with the
aim of full implementation by December 2015, as set out in the Busan Outcome
Document. The EU is also committed to reducing aid fragmentation in line with
the Busan Outcome Document, notably through promoting joint programming, as
defined in the Council Conclusions on the EU Common Position for the Fourth High
Level Forum on Aid Effectiveness, and increasing coordination in order to
develop a common EU joint analysis of and response to partner country’s
national development strategy. 6.1. Introduction Quality of development expenditure is at least
as important as its funding. Such quality has several dimensions. Development
effectiveness of the financial flows analysed in the previous chapters, both
public and private, is of paramount importance, and has been subject to a
series of agreements initially on aid effectiveness at the OECD/DAC High Level
Forums (HLF) of Rome, Paris and Accra, and then on development effectiveness at
the Busan HLF. The latter resulted in the launch of the Global Partnership for
Effective Development Cooperation, a new inclusive forum bringing together a
wide range of countries and organisations that are committed to ensuring that
development cooperation is effective and supports the achievement of results. As explained in Chapter 1, the debates on
Financing for Development (FFD) and on the Means of Implementation (MOI) for
the Rio+20 Conference are converging. The principles for Effective Development
Cooperation, agreed in Busan in December 2011, discussed in this chapter, refer
clearly to both FFD and MOI, from both public and private sources. The
Declaration itself stated that ‘as we partner to increase and reinforce
development results, we will take action to facilitate, leverage and strengthen
the impact of diverse sources of finance to support sustainable and inclusive
development, including taxation and domestic resource mobilisation, private
investment, aid for trade, philanthropy, non-concessional public funding and
climate change finance. At the same time, new financial instruments, investment
options, technology and knowledge sharing, and public-private partnerships are
called for’. More specifically, ‘global climate change finance is expected to
increase substantially in the medium term. Recognising that this resource flow
brings with it new opportunities and challenges, we will endeavour to promote
coherence, transparency and predictability across our approaches for effective
climate finance and broader development co-‐operation’. Effective
development funding must work towards complementarity of objectives, for
example by ensuring that funding always supports the objectives of protecting
biodiversity, valuing ecosystem services as well as climate change mitigation
and adaptation. In this respect, the impact of private investments must be
particularly monitored. The Busan principles for Effective Development
Cooperation therefore apply to all Financing for Development discussed in this
report, including Means of Implementation into financing of Global Public
Goals/ sustainable development goals, as well as all actors involved as both
civil society organisations and the private sector are part of the post-Busan
Global Partnership for Effective Development Cooperation. The EU and
its Member States played an active and constructive role in the Busan Fourth
High-Level Forum on Aid Effectiveness as well as during its preparation. The
Busan outcome document was in line with the priorities of the EU and Member
States: it is inclusive, it focuses and deepens aid effectiveness commitments
while expanding to development effectiveness and, finally, it emphasises
country level implementation while scaling down global governance structures. As stated in
the EU Common Position for Busan, the priority after Busan is to focus on
the country level implementation of aid and development effectiveness
commitments. The main EU deliverables are on joint programming and transparency.
There is also an EU commitment to support country-level results and
accountability frameworks and division of labour arrangements. A first
progress report on progress made after Busan will be presented in the second
half of 2013, and could therefore not be considered for the preparation
of this report. Final decisions on the mandate and the governance structure of
the Global Partnership as well as monitoring framework set in the Busan outcome
document were made by the Working Party on Aid Effectiveness in June 2012. The
main function of the Global Partnership is to ensure continued accountability
at the political level based on the evidence arising from country level
implementation. Global monitoring arrangements, in turn, will build on country
level monitoring processes based on a global set of core indicators on Busan
priority themes. The decisions of the Working Party were based on the proposals
negotiated by the Post-Busan Interim Group. The European Commission
(representing the EU), the United Kingdom, Germany and Sweden were all members
of the group and played an active role in it. The Global Partnership Steering Committee has
met twice so far, in December 2012 and March 2013. Regional and constituency
consultations are currently on-going and a first progress review of progress on
the ten indicators agreed in Busan will be prepared after mid-2013. The Global
Partnership is also seeking linkages with the UN post-2015 process and with the
Open Working Group on Sustainable Development Goals, to ensure consistency
between these parallel efforts. The process is ambitious and potentially far
reaching with simultaneous attempts at redefining the overall targets of
development cooperation, its scope and financing tools, the types of actors
involved from the official sector and civil society, and the focus of
effectiveness from aid to development. 6.2. Implementation Table The table below
summarises progress made in 2012 in implementing the EU commitments on aid
transparency, joint programming, and mutual accountability. Further details are
discussed in the main text. EU Commitment || Target Date || Status[199] || Comment Implement the European Transparency Guarantee and commitments relating to the common open standard for the publication of information on development resources, e.g. by publishing implementation schedules by December 2012, with the aim of full implementation by December 2015 || December 2012 (schedules) and December 2015 (implementation) || || By December 2012, the Commission and 20 MS, including all nine that are signatories to IATI, had published schedules to implement the common standard. In their schedules, the Commission and 13 MS set out plans for implementation by 2015. A majority of the schedules (11 out of 21) were rated ‘unambitious’ by Publish What You Fund (PWYF). 19 MS had a rating of ‘poor’ in PWYF’s 2012 Transparency Index, four MS and the Commission were rated as ‘fair’ and four MS as ‘moderate’. Promote joint programming and increase coordination in order to develop a EU joint analysis of, and response to, partner countries’ national development strategies || No date specified || || Joint programming was taken forward in six partner countries in 2012 and is expected to be in place at the start of the next programming period (2014) in at least eight. The opportunities for joint programming were assessed on the ground in a total of 55 countries and preparations for joint programming will go ahead in almost all of these. Nine MS have issued guidelines on joint multi-annual programming. Implement the results and mutual accountability agenda || No date specified || || Currently, the EU and 24 MS participate in mutual accountability arrangements in over 10% of their priority countries, and 13 MS and the EU do so in 50% or more. The EU and 21 MS participate in country-level results frameworks and platforms in over 10% of their priority countries, and 12 MS and the EU do so in 50% or more. 6.3. EU Policies and Programmes 6.3.1. Joint Programming The EU has achieved substantial progress on
joint programming. EU Joint Programming occurs when the EU and its
Member States agree to adopt a common multiannual programming document for
their support to a partner country or region, or when they take steps in this
direction.
In
accordance with the Council Conclusions of November 2011[200], Joint
Programming calls for a joint analysis of and a joint response to the partner
country’s/region’s development plan. It should also include the identification
of the sectors of intervention, in-country division of labour and indicative
financial allocations. In January 2012, the EU and its Member States
jointly asked that the feasibility of Joint Programming be assessed by their
delegations and embassies in eleven candidate partner countries. Joint
Programming was taken forward in six of these countries (Ethiopia, Ghana,
Guatemala, Laos, Mali and Rwanda), while it had already begun in Haiti and
South Sudan. Following the experiences in these first eight countries
(discussed in Box 6.3.1 below), the feasibility of Joint Programming in
an additional forty-two countries was canvassed. The overwhelming majority of
responses received so far have been positive, with most expecting to undertake
Joint Programming by 2016. The EU and nine Member States have issued guidelines
on joint multi-annual programming, while four Member States will issue them in
2013[201].
The European Commission and the EEAS have issued programming instructions for
the period 2014-20 noting the priority given to Joint Programming where it is
relevant to the country situation, and setting out guidance on how to deal with
it in the programming exercise. Further guidance on joint programming is
available from dedicated units within the EEAS and EuropeAid. Member States that have issued or are planning
to issue Joint Programming guidelines cover almost equally all elements of
joint programming: joint analysis, joint response, in-country division of
labour, indicative sector allocation, and synchronisation with planning cycles
of partner countries. Box 6.3.1 – On-going Joint Programming
Exercises and Lessons Learnt In Guatemala
and Laos, draft Joint Programming documents were received in December
2012, including a joint analysis of and response to national development plans,
steps towards division of labour and indicative financial allocations. Further
discussions are taking place with Member States with a view to fine tuning
these documents. In Ghana,
the Joint Programming process is built on the Busan-inspired Compact already
agreed by the government and most donors. It includes an analysis of the
strategic direction of the development of the country and ways to implement the
aid relationship. In addition, the EU and Member States will discuss a Joint
Framework Document which encompasses the wider EU-Ghana relationship. In Ethiopia,
an EU Joint Cooperation Strategy was signed in January 2012 by 21 EU donors as
well as Norway. For Rwanda, an advanced Joint Programming document,
which will be fully synchronised with the new national development cycle of the
government, is expected by June 2013. It will build on the existing and quite
well advanced division of labour process led by the Rwandan government itself.
In Mali, Joint Programming will be reviewed in order to take account of
the current political situation. In Haiti, the prospects are good for
Joint Programming to start in the short term, building on the experience of
2010. Further identification is taking place on the ground with regard to the
scope and timelines. In South Sudan, the Joint Programming agreed in
2011 is currently being implemented and a revised Joint Programming document is
foreseen for 2014. Some of the
main lessons learnt from the first Joint Programming countries are: 1) Joint
Programming processes are most effective when driven at partner country level,
having led to local solutions adapted to the specific circumstances; 2)
Ownership by partner countries, and where possible their leadership as in
Rwanda, is important; 3) In some countries, non-EU actors are taking part as
well, and it is important to remain open to other committed non EU actors; 4)
Above all, experience confirms that synchronisation with partner countries’
planning cycles is crucial. Programming instructions for all EU cooperation for
the period 2014-20 provide for flexibility to synchronise with partner
countries’ planning cycles, and to use their development plans as the basis for
all EU programming. 6.3.2. Transparency of Development
Finance Making
Development Finance more transparent is also essential. All EU
non-DAC donors now also report their ODA to the OECD/DAC. The Commission
continues to provide support to the EU’s non-DAC donors to enhance their
statistical reporting capacity. The EU15 countries have all adhered to the new
DAC CRS++ reporting formats. The
International Aid Transparency Initiative (IATI) was launched in 2008 to
develop consistent and coherent international standards so that donors report
more timely information on past and future aid spending. The European
Commission and nine Member States[202]
are signatories to IATI, and are implementing or are preparing to implement its
standards. The Czech Republic is designing a new ODA internal reporting system
in full compliance with IATI standards, and Estonia is exploring the
possibility of making its ODA statistics compatible with IATI standards. Nineteen
Member States have developed and use national aid transparency tools, usually
through their development cooperation’s websites, and annual reports. Denmark
is preparing a new law on International Development Assistance that will
require increased transparency both at partner country level, and domestically.
The EU adopted the EU Transparency Guarantee in November 2011, while both
Sweden and the United Kingdom launched national Aid Transparency Guarantees in
2010 (see Box 6.3.2). Important dimensions of aid transparency
include: 1) the way funds are provided (within or outside national budget and
public finance management systems), 2) how predictable their disbursement is (a
key element in enabling proper planning and resource management), and 3) the
extent to which information on the use of such funds is made public. Aid predictability is essential in that regard.
For example, while overall international public finance has been stable, the
picture is different for individual developing countries. The analysis on the
basis of DAC’s Forward Spending Surveys shows that volatility of bilateral
donors’ Country Programmable Aid (CPA) is on average close to 10% (slightly
higher with multilateral institutions). Studies have found aid to be pro-cyclical
and more volatile than exports for example, and put a cost of this volatility
at about EUR 12bn[203]. At the Busan
HLF for Effective Development Cooperation in December 2011, donors committed to
providing indicative 3-5-year forward expenditure and/or implementation plans
to all of their partner countries. The implementation of annual predictability
as well as medium-term (three years) aid predictability will be monitored
through the Busan indicators. Forward spending data is also part of the agreed
IATI standard, so should improve with the progressive implementation of IATI in
the near future. Table
6.3.2 – EU Member States that are signatories to IATI and/or have published
their IATI Implementation Schedule[204] Signatory || Month/Year signed up to IATI || Date of most recent schedule Austria || || December 2012 Belgium || November 2012 || December 2012 Czech Republic || || December 2012 Denmark || September 2008 || December 2012 EC || September 2008 || December 2012 Finland || September 2008 || December 2012 France || || December 2012 Germany || September 2008 || December 2012 Greece || || December 2012 Ireland || September 2008 || December 2012 Italy || || December 2012 Latvia || || December 2012 Luxembourg || || December 2012 Netherlands || September 2008 || December 2012 Poland || || December 2012 Portugal || || December 2012 Slovak Republic || || December 2012 Slovenia || || December 2012 Spain || November 2008 || December 2012 Sweden || September 2008 || December 2012 United Kingdom || September 2008 || December 2012 The
EU performance on aid transparency is mixed. Nineteen Member States had a
rating of ‘poor’ in the 2012 Transparency Index prepared by Publish What You
Fund (PWYF), the global campaign for aid transparency. Four Member States[205] and the
Commission were rated as ‘fair’ and four Member States[206] as
‘moderate’. By December 2012, the European Commission and twenty Member States,
including all nine that are signatories to IATI, have published schedules to
implement the common standard for transparency for development cooperation
resources as required in the Busan Partnership for Effective Development
Cooperation, as shown in Table 6.3.2 above. In
particular, all EU IATI signatories have committed to start publishing in the
IATI Registry by end of 2013. The Czech Republic, Luxembourg, Poland and the
Slovak Republic have committed to begin by 2015. A majority of published
scheduled (11 out of 21) were rated as unambitious by PWYF. Publish What
You Fund rated the implementation plans along three dimensions[207]: (a)
intention to publish (current, comparable data) by 2015; b) publication
approach (frequency and open data licence); and (c) proportion of data fields
to be delivered by end of 2015. The implementation plans of Belgium, Denmark,
the European Commission, the Netherlands, Sweden and the United Kingdom (DfID)
were rated as ambitious, while the plans of the Czech Republic, Finland,
Ireland and Spain were considered as moderately ambitious. The remaining plans
were either incomplete or rated as unambitious. Civil society
organisations have also committed to make their aid more transparent as part of
the Busan process. Private grants are presently difficult to monitor and lack a
common reporting standard. Given the relative importance of private charity in
low income countries, it is essential that CSO become at least as transparent
as official donors on their funding and ensure proper reporting of their
support to developing countries, even though some confidentiality may still be needed
in sensitive areas like human rights. Box 6.3.2 – Aid Transparency Guarantees ·
In
November 2011, EU Foreign Affairs Ministers agreed on the EU Transparency
Guarantee, ensuring that EU Member states will publicly disclose all
information on aid programmes so that it can be more easily accessed, shared
and published. It will also make available to all stakeholders indicative
forward-looking information on development expenditure at country level on an
annual basis. It will finally make information available on all aid to partner
countries, to enable them to report them in their national budget documents and
help increase transparency towards parliaments, civil society and citizens. ·
In 2010 Sweden
introduced a transparency guarantee into its development cooperation. The
guarantee means that all public documents and public information will be made
available online. The information shall explain when, to whom and why money has
been made available, and what results have been achieved. Sweden’s flagship website
- www.openaid.se - was launched in 2011. Openaid.se is a democratic initiative,
facilitating accountability towards Swedish tax payers as well as towards
people in Sweden’s partner countries, by opening up development cooperation to
the public. It is a data-hub providing Swedish aid information on disbursements
in an open format. This means that the format allows for citizens, CSOs and
entrepreneurs to use, refine, and develop the data provided. The aid
information is provided on a global scale, at country level, per sector or by
implementing agency. It covers a time period of four decades. The Swedish
Government is committed to continuing its implementation of the transparency
guarantee and supports initiatives such as the Open Government Partnership, the
Open Aid Partnership, and the EU Transparency Guarantee (see below). ·
The UK
Aid Transparency Guarantee was launched in June 2010. It commits the United
Kingdom to publishing detailed information about new DfID projects and policies
in a way that is comprehensive, accessible, comparable, accurate and timely. In
November 2012, DfID launched the Open Aid Information Platform, to improve
access to its aid data and open up the chain of aid delivery, from DfID right
through to the end beneficiary. The
European Commission, in cooperation with the Joint Research Centre, is
developing an EU aid transparency tool called TR AID (Transparent Aid) to
support the sharing of aid information within the EU and across major
international donors, with the aim of using aid funds more
effectively. Sharing of aid data with the public and among donors has
always been a challenge, due to a large number of data formats in use, and
because data is available in different repositories. 6.3.3. Mutual Accountability
Frameworks Mutual accountability is a
fundamental principle for EU development policies and strategies. It refers to
the process through which two or more partners hold each other
accountable for their performance against the commitments they have
voluntarily made to each other. Although
managing for development results and mutual accountability lie at the heart of
the Paris principles, they figure among the least advanced of the five Paris
Declaration principles[208].
The
UN DCF surveys in 2010/2011 on mutual accountability in development cooperation
in 105 countries showed limited progress in this area[209]. The results
and accountability agenda was thus strongly reaffirmed in the Busan Global
Partnership
focusing on key principles of transparent, country-led and country level results
frameworks.
The so-called ‘Results
and mutual accountability Building Block’ is formed by
a coalition of donors and developing countries who on a voluntary basis are
promoting action on the Busan Partnership in this area. One of the
key objectives of the building block is to promote Country Results and
Accountability Agreements. Such Agreements should be defined and
led by developing countries, based on a two pillars approach: a developing
country pillar (definition of a results framework based on national development
strategies with a limited number of results indicators) and a development
cooperation provider pillar (accountability framework based on aid policies
and other strategies for aid effectiveness agreed at country level). These
agreements can also be used as an umbrella for other related initiatives aimed
at delivering sustainable development results. In 2012, a
number of initiatives have been taken in order to promote the Results and
Mutual accountability agenda and to identify ways in which it can be
implemented. In September
and November 2012, two regional workshops were organised in Africa (Lusaka, in
September 2012, and Cotonou in November 2012 for Francophone Africa) with the
support and participation of the EU and several Member States[210]. The main
purpose of these workshops was to share lessons learnt from country experiences
on results and accountability frameworks, including on how to build on existing
mechanisms/initiatives and further strengthen them. The objective was to
identify concrete successes and challenges in setting satisfactory results and
mutual accountability systems and ways of making further progress. The EU is
currently working with partner countries and other donors on comprehensive
approaches to domestic and mutual accountability and transparency.
At this stage, the EU and 24 Member States participate in mutual
accountability arrangements in more than 10% of their priority countries,
and thirteen Member States and the Commission do so in 50% or more of their
priority countries. These mutual accountability arrangements can have different
forms: joint performance assessment frameworks, policy dialogue groups,
consultative groups, or joint review panels. In 2011, the
‘Agenda for Change’ underlined the need for an EU common framework for
Results; and an EU experts group on Results was set up in order to share
experiences and approaches to measuring results and to reflect on how best to harmonise
project results among different donors, both at sector and country level. The
EU and 21 Member States participate in country-level results frameworks and
platforms in more than 10% of their priority countries, and twelve Member
States and the Commission do so in 50% or more of their priority countries. The Commission
is working towards the adoption of a harmonised way to monitor performance at
the country level for its own operations. To this end, EuropeAid has started
working towards the design of an overall results framework that will allow for
increased accountability for the projects and programmes portfolio it manages.
It also initiated a review of its ex-ante evaluation process as well as of its
projects and programmes monitoring, reporting and evaluation system. In
parallel, it stepped up its work on developing a new operational information
management system allowing the Commission to have appropriate information on
the performance of individual projects and programmes, as well as on the
results they achieve. The EU and
seventeen Member States support partner countries’ statistical capacities for
monitoring progress and evaluating impact. Several Member States have indicated
that this kind of support is often integrated in programme design, and hence
difficult to tabulate. Most activities focus on technical assistance and
capacity building for national statistics institutes (data collection,
harmonisation and compliance criteria, decentralisation, etc.), including in
the form of trainings, scholarships and transfer of knowledge. 6.3.4. Domestic Accountability and
Good Public Financial Management As a critical
element for domestic accountability systems and development policies, effective
Public Financial Management (PFM) lies at the heart of countries’ governance
systems. PFM not only includes technical systems and processes, also but wider
issues of institutions and incentives. The ultimate objective of PFM reforms is
to achieve more transparent, more effective and more efficient management of
government revenues, expenditure, assets and liabilities. Well-functioning PFM
systems are vital to implement policies effectively and efficiently. The EU
strongly supports PFM, mainly through its Budget Support operations.
Strengthening public finance management systems and capacities continues to be
a key area of EU cooperation. More than 80 new projects were implemented in
2012 in that area, in close cooperation with other key partners. The new
Guidelines on Budget Support notably reinforce the importance of PFM through
two new features. The first is the highlight of the existence and
structured monitoring of a relevant and credible government PFM reform
programme. The second is the reinforcement of budget transparency and oversight
of the budget that has become an eligibility criterion on its own. The
Commission uses the PEFA-PFM Performance Measurement Framework as the preferred
tool to assess the quality of the PFM system in a country. The promotion of its
use has continued in 2012 as the Commission conducted 22
assessments. The European Commission, France and the United Kingdom are working
very closely with the other four PEFA partners on the revision of the framework
to continuously enhance the PEFA tool. In early
2013, following a request from the OECD/DAC, the IMF and the Commission
published a Good Practice Note to assist donors when sequencing PFM
reforms[211].
This note reviews
lessons learnt on the sequencing of PFM reforms and offers guidance to assist
reforms in countries with different PFM backgrounds. ANNEXES Annex
1 – Bibliography Integrated
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Council meeting, Luxembourg, 25 October 2012 COUNCIL OF
THE EUROPEAN UNION (2013) Conclusions on the overarching post-2015 agenda,
General Affairs Council, Brussels, 25 June 2013 COUNCIL OF
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Foreign Affairs Development Council meeting, Luxembourg, 15 October 2012 EUROPEAN COMMISSION (2013) A decent life
for all: Ending poverty and giving the world a sustainable future,
COM(2013) 92 final EUROPEAN COMMISSION (2012) Improving EU
support to developing countries in mobilising Financing for Development –
Recommendations based on the 2012 EU Accountability Report on Financing for
Development, COM(2012) 366 final EUROPEAN COMMISSION (2012) EU
Accountability Report on Financing for Development, SWD (2012) 199 final EUROPEAN COMMISSION (2012) Report on the
consultation process on ‘Towards a post-2015 development framework’, EuropeAid/IBF EUROPEAN COMMISSION (2011) Increasing
the Impact of EU Development Policy: An Agenda for Change, COM (2011) 637
final EUROPEAN REPORT ON DEVELOPMENT (2013) Post-2015:
Global Action for an Inclusive and Sustainable Future, Overseas Development
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Entwicklungspolitik (DIE), European Centre for Development Policy Management
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PANEL ON THE POST-2015 DEVELOPMENT AGENDA (2013) A New Global Partnership:
Eradicate Poverty and Transform Economies through Sustainable Development, Final
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ANDREW (2012), From Deprivation to Distribution: Is Global Poverty Becoming
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and Doha Declaration on Financing for Development, Report of the
Secretary-General UN GENERAL ASSEMBLY (2012) Modalities of
the Financing for Development follow-up process, Report of the
Secretary-General UN TASK TEAM ON THE POST-2015 UN
DEVELOPMENT AGENDA (2012) A
Renewed Global Partnership for Development UN TASK TEAM ON THE POST-2015 UN DEVELOPMENT
AGENDA (2012) Realizing the future we want for all, Report to the
Secretary General Domestic Public Finance for Development ·
Domestic Revenue
Mobilisation COUNCIL OF THE EU
(2010), Conclusions on Tax and Development - Cooperating with developing
countries in promoting good governance in tax matters, 11082/10, 15 June
2010 EURODAD
(2013) Secret
structures, hidden crimes: Urgent steps to address hidden ownership, money
laundering and tax evasion from developing countries EURODAD/ACTIONAID
(2011) Approaches and Impacts IFI tax policy in developing countries EUROPEAN
COMMISSION (2012) Communication on concrete ways to reinforce the fight
against tax fraud and tax evasion including in relation to third countries, COM(2012)
351 final EUROPEAN
COMMISSION (2012) Commission Recommendation regarding measures intended to
encourage third countries to apply minimum standards of good governance in tax
matters, COM(2012) 8805 final EUROPEAN COMMISSION
(2011) Proposal for a Directive of the European Parliament and of the
Council amending Directive 2004/109/EC on the harmonisation of transparency
requirements in relation to information about issuers whose securities are
admitted to trading on a regulated market and Commission Directive 2007/14/EC,
COM(2011) 683 final EUROPEAN
COMMISSION (2012) An Action Plan to strengthen the fight against tax fraud
and tax evasion, COM(2012) 722 final EUROPEAN
COMMISSION/ EuropeAid (2012) Budget Support Guidelines EUROPEAN
COMMISSION (2011) The Future Approach to EU Budget Support to Third
Countries, COM(2011) 638 final EUROPEAN
COMMISSION (2011) Transfer pricing and developing countries – Final Report,
EuropeAid/PwC EUROPEAN
COMMISSION (2010) Tax and Development: Cooperating with Developing Countries
on Promoting Good Governance in Tax Matters, COM(2010) 163 final EUROPEAN
COMMISSION (2009) Promoting Good Governance in Tax Matters, COM(2009)
201 final EUROPEAN
PARLIAMENT (2013) Thematic Paper on Money Laundering: Relationship between
Money Laundering, Tax Evasion and Tax Havens, Special Committee on
Organised Crime, Corruption and Money Laundering, Author: Mr Rui Tavares EUROPEAN PARLIAMENT
(2012) Resolution of 19 April 2012 on the call for concrete ways to combat
tax fraud and tax evasion GIZ/International
Tax Compact (2010) Addressing tax evasion and tax avoidance in developing
countries GLOBAL
FINANCIAL INTEGRITY (2012) Illicit Financial Flows From Developing
Countries: 2001-2010 ICTD (2012) Donors,
Aid and Taxation in Developing Countries – An Overview, Working paper 6 ICTD (2012) Taxing
the Informal Economy: Challenges, Possibilities and Remaining Questions,
Working paper 4 ICTD (2012) Taxation
and Development: What Have We Learned from Fifty Years of
Research?,
Working paper 1 IDB (2010) Tax
Expenditure Budgets - Concepts and Challenges for Implementation, IDB-WP-131 IMF (2012) Tax
Composition and Growth: A Broad Cross-Country Perspective, WP/12/257 IMF (2012), Taxation
and Development – Again, WP/12/220 IMF (2012) Foreign Aid
and Revenue: Still a Crowding Out Effect?, WP/12/186 IMF (2012) Mobilizing
Revenue in Sub-Saharan Africa: Empirical Norms and Key Determinants,
WP/12/108 IMF (2011) Revenue
Mobilization in Developing Countries, Policy paper ITC (2010) Addressing
tax evasion and tax avoidance in developing countries, GIZ GmbH/BMZ OECD (2013) Tax
and Development - Aid Modalities for Strengthening Tax Systems OECD (2013) Addressing
Base Erosion and Profit Shifting OECD (2011) Tax
transparency 2011 – Report on progress OECD (2011) Convention
on combating bribery of foreign public officials in international business
transactions OECD (2011) Revisiting
MDG Cost Estimates from a Domestic Resource Mobilisation Perspective, OECD
Development Centre, Working Paper No. 306 OECD/Global Forum on
Transparency and Exchange of Information for Tax Purposes (2012) Progress
Report to the G20, Los Cabos, Mexico, June 2012 PwC (2012) Tax
transparency and country-by-country reporting: An overview and comparison of
the transparency initiatives TAX JUSTICE
NETWORK-Africa/ACTIONAID (2012) Tax Competition in East Africa, a race to
the bottom? TAX JUSTICE NETWORK (2011) The cost of
tax abuse: Briefing paper on the cost of tax evasion worldwide TRANSPARENCY
INTERNATIONAL (2012) Exporting Corruption? Country enforcement of the
OECD anti-bribery Convention, Progress Report 2012 UK HOUSE OF COMMONS
International Development Committee (2012) Tax in Developing Countries:
Increasing Resources for Development, Fourth Report of Session 2012–13 UNDP (2011) Illicit
Financial Flows from the Least Developed Countries: 1990–2008, Discussion
Paper WORLD BANK
(2012) Draining
Development? Controlling Flows of Illicit Funds From Developing Countries, Ed. Peter
Reuter ·
Debt CANUTO, Otaviano, and LILI Liu,
Eds. (2013)
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Debt Do Us Part: Subnational Debt, Insolvency, and Markets, World Bank IMF (2013) Review
of the policy on debt limits in fund-supported programs IMF (2012) World
Economic Outlook: Coping with High Debt and Sluggish
Growth IMF (2012) Review
of the policy on debt limits in fund supported programs PARIS CLUB (2012) Press
release of the Meeting of the Paris Club with representatives of non-Paris Club
bilateral creditors and representatives of the private sector UNCTAD (2012) Strategic
Plan 2011 – 2014, DMFAS Programme UN/DESA (2013) World
Economic Situation and Prospects UN GENERAL ASSEMBLY (2012) External debt
sustainability and development, Report of the Secretary General, A/67/174 WORLD BANK
(2013) International Debt Statistics 2013 WORLD BANK (2012) Global
Development Finance 2012: External Debt of Developing Countries WORLD BANK (2011), Restructuring
sovereign debts with private sector creditors: theory and practice’ in
Sovereign Debt and the Financial Crisis: Will This Time Be Different?, Eds.
Carlos Braga and Gallina Vincelette WORLD BANK/IMF (2012)
Revisiting the Debt Sustainability Framework for Low-Income Countries Private Finance for Development ·
Private investment
for development ECDPM (2012) GREAT Insights - Thematic
focus: ‘Private Sector for Development’, Vol. 1, Issue 8, October 2012 EUROPEAN COMMISSION (2012) Social
Protection in European Union Development Cooperation, COM(2012) 446 final EUROPEAN COMMISSION (2012) My business and
human rights: A guide to human rights for small and medium-sized enterprises EUROPEAN COMMISSION (2013) Evaluation of
European Community Support to Private Sector Development in Third Countries,
EuropeAid/ADE EUROPEAN COMMISSION (2011) A renewed EU
strategy 2011-14 for Corporate Social Responsibility, COM(2011) 681 final EUROPEAN COMMISSION (2003) European
Community Cooperation with Third Countries: The Commission’s approach to future
support for the development of the Business sector, COM (2003) 267 EUROPEAN PARLIAMENT (2013)
Resolution of 6 February 2013 on Corporate social responsibility:
accountable, transparent and responsible business behaviour and sustainable
growth, 2012/2098(INI) EUROPEAN PARLIAMENT (2013) Resolution of 6 February 2013 on Corporate social
responsibility: promoting society’s interests and a route to sustainable and
inclusive recovery, 2012/2097(INI) IMF (2013) Outward
Foreign Direct Investment and Domestic Investment: the Case of Developing
Countries, WP/13/52 UNCTAD (2012)
World Investment Report 2012: Towards a New Generation of Investment
Policies UN OHCHR
(2011) Guiding Principles on Business and Human Rights WORLD
BANK/IFC (2013) Doing Business 2013: Smarter Regulations for Small and
Medium-Size Enterprises WORLD
BANK/IFC (2012) International Finance Institutions and Development Through
the Private Sector ·
Trade and
Development EUROPEAN COMMISSION (2013) A comparative
analysis of EU and US trade preferences for the LDCs and the AGOA beneficiaries,
Directorate-General for Trade, Chief Economist Note, Issue 1 EUROPEAN
COMMISSION (2012) Trade, Growth and Development: Tailoring trade and
investment policy for those countries most in need, COM(2012) 22 final EUROPEAN
COMMISSION (2012) Trade as a driver of development, Commission Staff
Working Document EUROPEAN COMMISSION (2012) EU Trade and
Investment 2012, Directorate-General for Trade EUROPEAN COMMISSION (2012) Ten Benefits
of Trade for Developing Countries, Directorate-General for Trade ·
Remittances for
Development EUROPEAN COMMISSION (2012) EU Remittances
for Developing Countries, Remaining Barriers, Challenges and Recommendations,
EuropeAid/HTSPE HUDSON INSTITUTE (2012) Index of Global
Philanthropy and Remittances 2012, Centre for Global Prosperity OECD (2011) Tackling the Policy Challenges
of Migration: Regulation, Integration, Development WORLD BANK (2012) Migration and
Development Brief, No19 WORLD BANK (2011) Leveraging
Migration for Africa Remittances, Skills, and Investments, edited by Dilip Ratha International Public Finance for
Development ·
Official Development
Assistance ECDPM (2012),
Reporting on Development: ODA and Financing for Development. Study
commissioned by The Netherlands Ministry of Foreign Affairs and the German
Federal Ministry for Economic Cooperation and Development OECD/DAC
(2013) Moving
Towards Accession to the DAC, DCD/DAC (2013)1 OECD/DAC
(2013) Loan Concessionality in DAC Statistics, DCD/DAC (2013)2 OECD/DAC
(2012) Concessionality in Character: Sensitivity Analysis Using
Differentiated Discount Rates, DCD/DAC/STAT(2012)21 OECD/DAC
(2012) DAC High-Level Meeting Communiqué, London, December 2012 OECD/DAC
(2012) DAC Report on Aid Predictability: Survey on Donors’ Forward Spending
Plans, 2012-2015 and efforts since HLF-4 ·
Climate Finance /
Sustainable Development AFRICA GROWTH INITIATIVE (2013) Foresight
Africa – Top Priorities for the Continent in 2013, Brookings Institute COUNCIL OF THE EU (2012) Conclusions on
Rio+20: Outcome and follow-up to the UNCSD 2012 Summit, 3194th ENVIRONMENT
Council meeting, Luxembourg, 25 October 2012 EUROPEAN COMMISSION (2011) Our life
insurance, our natural capital: an EU biodiversity strategy to 2020, COM(2011)
244 final EUROPEAN
COMMISSION (2012) European Union fast start funding for developing
countries,
2010-2012 Report EUROPEAN
COMMISSION (2012) Catalogue of EU funded projects in Environmental
research (2007-2012), Directorate-General for Research and Innovation EUROPEAN
COMMISSION (2011) Proposal for a Regulation of the European Parliament and
of the Council on a mechanism for monitoring and reporting greenhouse gas
emissions and for reporting other information at national and Union level
relevant to climate change, COM(2011) 789 final EUROPEAN
COMMISSION (2011) Scaling up international climate finance after 2012,
Commission Staff Working Document, SEC(2011) 487 final EUROPEAN
PARLIAMENT (2012) Report on the proposal for a
regulation of the European Parliament and of the Council on a mechanism for
monitoring and reporting greenhouse gas emissions and for reporting other
information at national and Union level relevant to climate change, Committee on
the Environment, Public Health and Food Safety, 2012, Rapporteur:
Bas Eickhout, A7-0191/2012 IMF (2011) Promising Domestic Fiscal Instruments for Climate
Finance, Background Paper for the Report to the G20 on Mobilising Sources
of Climate Finance OECD/DAC (2011) Identifying
New Measures for Non-ODA Development Contributions OECD (2010) Financing Climate Change
Action UNECA (2012) Bridging
the means of implementation gap: Key issues for Africa UNFCCC (2012)
Report
of the Global Environment Facility to the Conference of the Parties, FCCC/CP/2012/6 UNFCCC (2012) Report of the Conference of
the Parties on its eighteenth session, held in Doha from 26 November to 8
December 2012 UNFCCC (2007)
Investment and Financial Flows to Address Climate Change WORLD BANK (2012) Adaptation Fund Trust Fund Financial Report, December 2012 WORLD BANK (2012) Turn Down the Heat: Why
a 4°C Warmer World Must Be Avoided, November 2012. WORLD BANK
(2010) Economics of Adaptation to Climate Change – Synthesis Report WORLD BANK (2010) The Cost to Developing
Countries of Adapting to Climate Change: New Methods and Estimates ·
Science,
Technology and Innovation BROZSKA, Michaela (2010) Analysis of and
recommendations for covering security relevant expenditures within and outside
of official development assistance, Paper 53, Bonn International Centre for
Conversion EUROPEAN COMMISSION (2012) Enhancing and
focusing EU international cooperation in research and innovation: A strategic
approach, COM 2012(497) EUROPEAN
COMMISSION (2007) A New Approach to International S&T
Cooperation in the EU’s 7th Framework Programme (2007-2013), Directorate-General
for Research, EUROPEAN
COMMISSION (2003) Communication from the European Communities and their
Member States to the TRIPs Council, Ref. 032/03 final ICTSD
(2012)
Technology Transfer and Innovation: Key Country
Priorities for Rio+20 IDS (2012) Renewable Technology Transfer
to Developing Countries: One Size Does Not Fit All, Working Paper Volume 2012
No 412 ODI (2012) From high to low aid: a
proposal to classify countries by aid receipt, Background Note OECD/DAC (2012) New directions in DAC
measurement and monitoring of external development finance, Paper prepared
for the DAC High Level Meeting of December 2012 OECD/DAC (2011) Identifying New Measures
for Non-ODA Development Contributions, DCD/DAC (2011)43; UNCTAD (2012) Technology
and Innovation Report 2012: Innovation, Technology and South-South
Collaboration UNCTAD (2004) Facilitating Transfer of Technology to Developing Countries: A Survey
of Home-Country Measures UNFCCC (2006)
Innovative options for financing the development and transfer of
technologies, Technical Paper, FCCC/TP/2006/1 WTO (2012) European
Union Report on the Implementation of Article 66.2 of the TRIPS Agreement, IP/C/W/580/Add.7 WTO (2012) Questions
posed by the LDC Group in the context of the tenth annual review under
paragraph 2 of the Decisions on the implementation of Article 66.2 of the TRIPS
Agreement, IP/C/W/578 WTO (2011) European
Union Report on the Implementation of Article 66.2 of the TRIPS Agreement, IP/C/W/551/Add.7 Combining Public and Private Finance for
Development/Innovative financing mechanisms EUROPEAN
THINK TANK GROUP (2011) EU Blending Facilities: Implications
for Future Governance Options, ODI/FRIDE/DIE/ECDPM OECD/DAC (2011) Mapping of some
important innovative finance for development mechanisms, DCD/DAC/STAT/RD(2011)1/RD1 WORLD BANK (2009), Innovating
Development Finance: From Financing Sources to Financial Solutions, CFP
Working Paper Series No. 1 Using Development Finance Effectively COUNCIL OF THE EU (2011) Conclusions on
the EU Common Position for the 4th High Level Forum on Aid Effectiveness
(Busan, South Korea, 29/11 -1/12/2011), 16773/11, 14 November 2011 COUNCIL OF THE EU (2011) Conclusions on
An Operational Framework on Aid Effectiveness – Consolidated text,
18239/10, 11 January 2011 IMF/EUROPEAN COMMISSION (2013) Good
Practice Note on Sequencing PFM Reforms, Jack Diamond, PEFA KHARAS, Homi (2008) Measuring the cost
of aid volatility, Brookings Global Economy and Development OECD/DAC (2012) What
is the common standard for aid information?, Communications Note drafted by the ad-hoc group for
the common standard, October 2012 UN/ECOSOC
(2013) Preparations for the Development Cooperation Forum - Phase IV:
2012-2014, DCF Support Strategy WOOD, Bernard, et al (2011) The
Evaluation of the Paris Declaration, Phase 2 Final Report, Danish Institute
for Development Annex 2 –
Methodology All figures not expressed in Euro have been
converted into Euro using OECD/DAC average exchange rates for the relevant
year. Data in Table 1.2.2 were calculated from a variety of sources as shown
below, and refer to the year 2010. Flow || Methodology and Source Public Domestic Finance || Tax revenue || Tax revenues were calculated by applying IMF tax to GDP ratios by income group[212] to GDP data by income group (source WB WDI)[213] Public or Publicly Guaranteed (PPG) External Debt || WB International Debt Statistics 2013[214], PPG external debt from non-official creditors. Short term debt not included. Official creditors covered under ‘Public international Finance’. Total Reserves || WB International Debt Statistics 2013, pages 56-59 Public International Finance || ODA Grants || OECD DAC Geo Book[215] -Net Disbursement (of which EU) || OECD DAC Geo Book - Net Disbursement. EU data do not include imputed multilateral aid and therefore underestimate the real contribution of the EU and its Member States. Concessional Loans || OECD DAC Geo Book -Net Disbursement (of which EU) || OECD DAC Geo Book -Net Disbursement Other official finance || OECD DAC Geo Book -Net Disbursement (of which EU) || OECD DAC Geo Book -Net Disbursement International security operations || United Nations Peace Keeping Operations[216] (of which EU) || United Nations Peace Keeping Operations Private Finance – domestic and international || Domestic Private Investment || (Private) Gross Capital Formation (Domestic Private Investment) is calculated on the basis of private and total Gross Fixed Capital Formation (source WB WDI). First, the ratio between Private Fixed Capital Formation and Public Fixed Capital Formation is applied Gross Capital Formation to find a proxy for Private Gross Capital Formation. Second, FDI and Private non-guaranteed external debt (source: World Bank IDS) are deducted from the private GCF, which gives the estimate for Domestic Private Gross Capital Formation. External private finance (debt, FDI, portfolio investment, remittances) || Private non-guaranteed External Debt || WB International Debt Statistics 2013, Short term debt not included. FDI || WB WDI. Foreign Portfolio Investment || WB WDI. Remittances || Year 2011. WB Database on Remittances[217]. In 2010, remittances accounted to 462bn (of which EU) || Year 2011. WB Database on Remittances, and Balance of Payment data, using the EU share of total remittances to calculate EU remittances to developing countries. Private charity || Hudson Institute[218] Total volume of developing countries’ exports of goods and services || WB WDI. Figures
on Official Development Assistance (ODA) are in current prices and taken from: –
The OECD Development Assistance Committee (DAC)
for those Member States for which DAC reports. –
Member States’ replies for those Member States
whose ODA data are not available through DAC. –
From 2013 onwards, ODA figures are taken, as far
as available, from Member States’ replies. –
Where a Member State presents only the ODA/GNI
ratio, ODA will be calculated by multiplying it with the Commission’s GNI
figure. Where a Member State gives both the ODA figure and the ODA/GNI ratio,
we will give preference to using the ODA figure as this gives a better
indication of where the achievement of ODA/GNI targets is sensitive to
differing assumptions on GNI. –
When information on both ODA and ODA/GNI ratio
for 2013 and/or beyond is missing, the trend for the missing years is
established on the basis of Compound Annual Growth Rate of 2007-2012, except if
indicated differently. –
Imputed multilateral aid for LDCs and Africa in
2012 was calculated differently this year. For the previous editions, we used
the bilateral ODA for each income group/region reported to DAC by Member States
and assumed that the proportion between bilateral and imputed multilateral aid
would remain the same as in the previous year. This assumption did not allow
accurate projections. This year, we used the actual amounts disbursed by EU
Institutions to Africa and LDCs and imputed them to Member States based on
their share of total contributions, used the actual disbursements of the Wold
Bank Group in FY12 (which does not correspond to the calendar year but is the
best proxy available) and imputed them based on funding shares derived from
table DAC1a for 2012, and did the same for other multilaterals assuming zero
nominal growth compared to 2011. –
Data on ODA to LDCs are not provided by Germany.
As for previous editions, we assumed zero nominal growth compared to 2011. Exchange
rates used for conversion into EUR are: –
the annual DAC exchange rate in the case of the
OECD/DAC data, –
for Members States national currencies, the
Commission’s annual average exchange rates from Ameco database (extracted on 19
February 2013) up to 2015. Figures
for Gross National Income (GNI) are taken in current prices from: –
the OECD/DAC statistics when available to ensure
consistency of the ODA/GNI data. –
the AMECO database as of 19 February 2013, for
other Member States and for the years not covered by the DAC, as well as for
projections up to 2014. Projections for 2015 are not available and we assumed a
nominal growth rate identical to the one used for the 2012 EU Accountability
Report. There is
often reference to OECD, and DAC membership of EU Member States. All EU OECD
members report to DAC, while only EU DAC Members report to DAC in great detail.
The list of non DAC Members reporting to DAC is available online at http://www.oecd.org/document/2/0,3746,en_2649_34447_41513218_1_1_1_1,00.html . The
table below summarises the OECD and DAC membership of EU Member States. EU MEMBER STATES || OECD MEMBERS || DAC MEMBERS || REPORTING TO DAC AT || Y || Y || Y BE || Y || Y || Y BG || || || Y CY || || || Y CZ || Y || || Y DK || Y || Y || Y EE || Y || || Y FI || Y || Y || Y FR || Y || Y || Y DE || Y || Y || Y EL || Y || Y || Y HR || || || Y HU || Y || || Y IE || Y || Y || Y IT || Y || Y || Y LV || || || Y LT || || || Y LU || Y || Y || Y MT || || || Y NL || Y || Y || Y PL || Y || || Y PT || Y || Y || Y RO || || || Y SK || Y || || Y SI || Y || || Y ES || Y || Y || Y SE || Y || Y || Y UK || Y || Y || Y || 21 || 15 || 28 There is
often reference to EU 28, EU 27, EU 15 and EU 12. The table below gives
the list of Member States in each category: EU MEMBER STATES || EU 28 || EU 27 || EU 15 || EU 12 AT || Y || Y || Y || BE || Y || Y || Y || BG || Y || Y || || Y CY || Y || Y || || Y CZ || Y || Y || || Y DK || Y || Y || Y || EE || Y || Y || || Y FI || Y || Y || Y || FR || Y || Y || Y || DE || Y || Y || Y || EL || Y || Y || Y || HR || Y || || || HU || Y || Y || || Y IE || Y || Y || Y || IT || Y || Y || Y || LV || Y || Y || || Y LT || Y || Y || || Y LU || Y || Y || Y || MT || Y || Y || || Y NL || Y || Y || Y || PL || Y || Y || || Y PT || Y || Y || Y || RO || Y || Y || || Y SK || Y || Y || || Y SI || Y || Y || || Y ES || Y || Y || Y || SE || Y || Y || Y || UK || Y || Y || Y || [1] Green: achieved or
on-track; amber: limited achievement, partly off-track; red:
off-track. [2] IMF,
Review of the policy on debt limits in fund-supported programs, 2013. [3] Press release on the Paris
Club meeting with representatives of non-Paris Club bilateral creditors and the
private sector, 11 September 2012. [4] AT, BE, DE, FR, SE, UK. [5] See implementation table in the Commission Communication on
CSR, 2011. [6] Ibid. [7] Examples include the
development of e-infrastructures and collaboration on ICTs between Europe and
developing countries for research in different areas, e.g. the EU-Med GRID
project, the EU-China GRID project and the EU-India GRID project, aimed at
supporting the interoperability of grid infrastructures in the EU and third
countries to strengthen e-Science and promote new scientific collaboration. [8] http://ec.europa.eu/europeaid/what/development-policies/financing_for_development/index_en.htm. [9] European Commission/IBF,
‘Report on the public consultation on a post-2015 development framework’, 2012.
[10] European Report on Development,
Post-2015: Global Action for an Inclusive and Sustainable Future,
Overseas Development Institute (ODI), German Development Institute/Deutsches
Institut für Entwicklungspolitik (DIE), European Centre for Development Policy
Management (ECDPM), Brussels, 2013. p. xxvii. [11] European Consensus on
Development, 2005. [12] ‘Foster the sustainable
economic, social and environmental development of developing countries, with
the primary aim of eradicating poverty.’ (para 2.d). [13] ‘The reduction and, in the long term, the eradication
of poverty.’ (para 1). [14] European Consensus on
Development. [15] COM (2011) 637 final. [16] UN Task Team on the post-2015
Development Agenda, A Renewed Global Partnership for Development, 2013.
[17] COM(2013) 92 final. [18] Council Conclusions on the
Overarching Post-2015 Agenda, 25 June 2013. [19] See for example http://www.un.org/esa/ffd/documents/67GA_SGR_FfD_AUV_290812.pdf
and http://www.un.org/esa/ffd/documents/67GA_SGR_FfdModalities_AUV.pdf. [20] UN High-Level Panel on the
Post-2015 Development Agenda, A New Global Partnership: Eradicate Poverty
and Transform Economies through Sustainable Development, May 2013 [21] See http://sustainabledevelopment.un.org/followupbyunsystem.html. [22] Global Partnership for
Effective Development Cooperation, Draft roadmap for 2013. [23] Council Conclusions on Rio+20:
outcome and follow-up to the UNCSD 2012 Summit, 25 October 2012. [24] Contribution by the European
Union and its Member States to the UN Department of Economic and Social Affairs
(1 November 2011). [25] Institute of Development
Studies, Andrew Sumner, ‘From Deprivation to Distribution: Is Global Poverty
Becoming A Matter of National Inequality?’, IDS Working Paper Volume 2012 No
394, 2012. [26] Poverty is defined here as
people living on less than $2 per day. [27] Institute of Development
Studies, Andrew Sumner, ‘From Deprivation to Distribution: Is Global Poverty
Becoming A Matter of National Inequality?’ Op. Cit. [28] ‘The Union shall seek to
develop relations and build partnerships with third countries, and
international, regional or global organisations which share the principles
referred to in the first subparagraph. It shall promote multilateral solutions
to common problems, in particular in the framework of the United Nations.’ [29] The main results of the
conference are summarised in the Commission Communication on ‘A Decent Life for
All – Ending poverty and giving the world a sustainable future’, COM(2013) 92
final, 27 February 2013. [30] Council Conclusions of 25
October 2012 on Rio+20, §17 [31] UN High-Level Panel on the
Post-2015 Development Agenda, A New Global Partnership: Eradicate Poverty
and Transform Economies through Sustainable Development, May 2013 [32] COM(2010) 163 final. [33] Council Conclusions on Tax and
Development – Cooperating with developing countries in promoting good
governance in tax matters, 11082/10, 15 June 2010. [34] COM(2011) 638 final. [35] COM(2011) 637 final. [36] Recommendations based on the
2012 EU Accountability Report on Financing for Development. COM(2012) 366. [37] COM(2012) 722 final. [38] COM(2012)8805 and
COM(2012)8806. [39] COM(2012) 366. [40] About 4% of GDP in lower income
countries - See IMF (2012) Taxation
and Development – Again. [41] UN Task Team on the post-2015
Development Agenda, A Renewed Global Partnership for Development, 2013.
(para 25). [42] Green: achieved or
on-track; amber: limited achievement, partly off-track; red:
off-track. [43] IDS News & blogs, ‘Tax is the most stable
source of revenue for developing countries’,
2012. [44] IMF, ‘Tax Composition and
Growth: A Broad Cross-Country Perspective’, WP/12/257, 2012. [45] IMF, ‘Mobilizing
Revenue in Sub-Saharan Africa: Empirical Norms and Key Determinants’, WP/12/108, 2012. [46] IMF, ‘Taxation and Development
— Again’, WP/12/220, 2012. [47] Idem. [48] IDB, ‘Tax Expenditure Budgets:
Concepts and Challenges for Implementation’, IDB-WP-131, 2010. The study of seven Latin American countries
provides a detailed definition and analysis of tax expenditures and, based on
early 2000 data, estimate their cost to range from 1.5 percent of GDP (Brazil,
2001) to 12.7 percent of GDP (Guatemala, 2002). [49] Tanzania Revenue Authority,
‘Tax Exemptions and Incentives in Tanzania: Challenges for Tax Policy and
Revenue Administration’, Presentation at ICTD 2012 Annual Meeting. [50] ATAF,
Presentation of the African Tax Administration Forum at ICTD 2012 Annual
Meeting, 2012. [51] Illicit financial flows involve
the cross-border transfer of the proceeds of corruption, trade in contraband
goods, criminal activities, and tax evasion. - See UNDP (2011), ‘Illicit
Financial Flows from the Least Developed Countries: 1990–2008’, Discussion
paper. [52] Global Financial Integrity,
‘Illicit Financial Flows from Developing Countries: 2001-2010’, 2012. [53] AT, BE, CZ, DE, DK, EE, ES, FR, HR, HU, IE, IT, LU, LV,
NL, PT, RO, SL, UK. [54] UK Parliament, ‘Tax in
Developing Countries: Increasing Resources for Development’, House of Commons,
Fourth Report of Session 2012-13. [55] AT, BE, CZ, DE, DK, EE, ES, FR,
HU, IE, NL, PL, SE, UK. [56] CY, EL, IT, LT, LU, LV, RO, SK, SL do not provide
support. [57] AT, DE, DK, FI, FR, IE, IT, LU,
NL, SE, SK, UK. [58] OECD, ‘Tax and Development -
Aid Modalities for Strengthening Tax Systems’, DCD/DAC(2012)34, 2012. [59] ICTD, ‘Taxation and Development:
What Have We Learned from Fifty Years of Research?’, Working Paper 1, 2012. [60] ICTD, ‘Donors, Aid and Taxation in Developing
Countries: An overview’, Working Paper 6, 2012. [61] SWD(2012) 403 final. [62] Since the late 1990’s, both the
OECD (see the 1998 OECD report ‘Harmful tax competition: an emerging global
issue’) and the EU (with the 1997 tax package), with the Code of conduct for
business taxation, have made efforts to counter the erosion of tax bases. [63] Tax avoidance is here
understood as arrangement of a taxpayer's affairs intended to reduce his tax
liability and that, although it could be legal, is usually in contradiction
with the intent of the law it purports to follow (cf. OECD Glossary of Tax
terms). [64] J. G. Gravelle (2009): Tax
Havens: Tax Avoidance and Evasion. CSR Report for congress. [65] SWD(2012) 403 final, annex 6. [66] See http://www.oecd.org/tax/transparency/exchangeoftaxinformationagreements.htm
for details. [67] AT, BE, CY, CZ, DK, EE, FI, HU, IE, LU, MT, NL, PL, PT,
SE, and UK, based on OECD data. [68] See www.taxcompact.net. [69] http://www.oecd.org/dac/governance-development/theoecdinformaltaskforceontaxanddevelopment.htm#. [70] European Parliament resolution
of 19 April 2012 on the call for concrete ways to combat tax fraud and tax
evasion. [71] COM(2012) 351 final. [72] COM(2012) 722. [73] Commonly understood to be
jurisdictions which are able to finance their public services with no or
nominal income taxes and offer themselves as places to be used by non-residents
to escape taxation in their country of residence. [74] CY, HR, LT, LV, MT, and RO did
not sign the OECD convention. [75] Transparency International,
‘Exporting Corruption? Country enforcement of the OECD anti-bribery Convention
Progress Report 2012’. [76] In order of degree of
enforcement: DE, UK, IT, DK. The enforcement by the remaining Member States is
classified as follows: ‘moderate enforcement’ (FR, NL, ES, BE, SE, AT, FI),
‘little enforcement’ HU, LU, PT, SK, SL, BG); and ‘no enforcement: IE, PL, CZ,
EL, EE. [77] Ibid. [78] See for details: http://www.unodc.org/unodc/en/treaties/CAC/signatories.html. [79] DE, FR, LU, NL, SE, UK. [80] COM(2011) 683 final. [81] Under negotiation between the
Commission, Council and the European Parliament. [82] BE, DE, DK, ES, FI, FR, IT, NL,
SE, UK. [83] https://www.gov.uk/government/priority/increasing-business-with-the-democratic-republic-of-congo. [84] Green: achieved or
on-track; amber: limited achievement, partly off-track; red:
off-track. [85] IMF,
‘Review of the policy on debt limits in fund-supported programs’, 2013. [86] Press release on the Paris Club
meeting with representatives of non-Paris Club bilateral creditors and the
private sector, 11 September 2012. [87] World Bank International Debt
Statistics, 2013. [88] See Mark Wright, ‘Restructuring
sovereign debts with private sector creditors: theory and practice’ in
Sovereign Debt and the Financial Crisis: Will This Time Be Different?’, Carlos
Braga and Gallina Vincelette, eds. (Washington, D.C., World Bank), 2010. [89] See for example the 2012 Report of the
Secretary-General on ‘External debt sustainability and development’ (A/67/174). [90] International Finance
Corporation, ‘International Finance Institutions and Development through the
Private Sector’, 2010. [91] These blending mechanisms are
described in Chapter 5 of this report. [92] See Chapter 5 for more details.
[93] G20 Multi-Year Action Plan on
Development, 2012. [94] Report of the Inter-Agency
Working Group on the Private Investment and Job Creation Pillar to the
High-Level Development Working Group, ‘Promoting responsible investment for
sustainable development and job creation’, 2012. [95] Green: achieved or
on-track; amber: limited achievement, partly off-track; red:
off-track. [96] AT, BE, DE, FR, SE, UK. [97] See implementation table in the Commission Communication on
CSR, 2011. [98] Ibid. [99] UNCTAD, ‘World Investment
Report 2012: Towards a New Generation of Investment Policies’, 2012. [100] European Commission/ADE,
‘Evaluation of European Community Support to Private Sector Development in
Third Countries’, 2013. [101] Following a review in 2010, the Bank’s external mandate (2007-2013)
benefiting from EU Budget Guarantee was increased by EUR 3.7 billion (including
EUR 2 billion for climate change operations and EUR 1 billion for the
Mediterranean region). [102] http://www.doingbusiness.org. [103] World Bank/IFC, ‘Doing Business 2013: Smarter Regulations for Small
and Medium-Size Enterprises’, 2013. [104] http://web.worldbank.org/WBSITE/EXTERNAL/EXTOED/EXTDOIBUS/0,,contentMDK:21645387~pagePK:64829573~piPK:64829550~theSitePK:4663967,00.html. [105] CAFOD, ‘What kind of review do
we need of the Doing Business rankings?’, 2012. [106] ITUC, ‘ITUC’s reaction to the
World Bank’s report on jobs’, 2012. [107] https://www.wbginvestmentclimate.org/. [108] AT, DE, IE, NL, SE, UK. [109] The topic of blending and the
recently established EU Blending Platform are discussed in more detail in
Chapter 5 of the report (Innovative Finance Mechanisms). [110] The Commission defines corporate
social responsibility as ‘the responsibility of enterprises for their
impacts on society’. To fully meet their social responsibility,
enterprises ‘should have in place a process to integrate social,
environmental, ethical human rights and consumer concerns into their
business operations and core strategy in close collaboration with their
stakeholders’. [111] COM(2012) 446 final. [112] AT, BE, DK, DE, EE, ES, FI, FR, IT, LT, LV, NL, PT, UK. [113] COM(2011) 681 final. [114] COM(2012) 573 final. [115] European Parliament resolution
of 6 February 2013 on: ‘Corporate social responsibility: accountable,
transparent and responsible business behaviour and sustainable growth’
(2012/2098(INI)); and European Parliament resolution
of 6 February 2013 on ‘Corporate social responsibility: promoting
society’s interests and a route to sustainable and inclusive recovery’ (2012/2097(INI). [116] Endorsed in 2011 by the Council
on Human Rights, the ‘Guiding
Principles’ are recognised as the authoritative global standard for
preventing and addressing adverse impacts on human rights arising from
business-related activity, http://www.ohchr.org/EN/Issues/Business/Pages/BusinessIndex.aspx. [117] http://ec.europa.eu/enterprise/policies/sustainable-business/corporate-social-responsibility/human-rights/
[118] The documentation of consultations
on the draft guidelines held between December 2012 and February 2013 can be
found here: http://www.ihrb.org/project/eu-sector-guidance/draft-guidance-consultation.html. [119] European Commission, ‘My
business and human rights: A guide to human rights for small and medium-sized
enterprises’, 2012. [120] The full AfT report 2013 is
included in Annex 4. [121] European Commission, ‘Ten
Benefits of Trade for Developing Countries’, 2012. [122] Green: achieved or
on-track; amber: limited achievement, partly off-track; red:
off-track. [123] OECD Insights, ‘Aid for trade:
renewing the impetus’, 2013. [124] World Trade Organisation,
‘Market Access for Products and Services of Export Interest to Least Developed
Countries’, WT/COMTD/LDC/W/56, 2012. [125] European Commission, ‘A
comparative analysis of EU and US trade preferences for the LDCs and AGOA
beneficiaries’, 2012. [126] US African Growth and Opportunity Act. [127] http://www.wto.org/english/news_e/sppl_e/sppl262_e.htm. [128] Speech 13/18, K. De Gucht,
European Commissioner for Trade, 16 January 2013, http://europa.eu/rapid/press-release_SPEECH-13-18_en.htm. [129] The Seoul G20 Multi-Year Action
Plan on Development in 2010 included a commitment to at least maintain,
beyond 2011, aid-for-trade levels that reflect the average of the last three
years (2006 to 2008) and (…) monitor these commitments and evaluate their
impact on LICs’ capacity to trade. [130] BE, DE, DK, EE, ES, FI, FR, HU, IE,
LU, SE, and UK. [131] Green: achieved or
on-track; amber: limited achievement, partly off-track; red:
off-track. [132] World Bank, ‘Migration and
Development Brief’, April 2013. [133] European Commission/HTSPE, ‘EU
Remittances for Developing Countries, Remaining Barriers, Challenges and
Recommendations’, 2012. [134] Compliance to this
commitment will be evaluated in three parts; a sending country is considered on
track towards full compliance if it: (1) currently has average transfer costs
valued at below 10 % for USD200 and USD500 dollar transfer amounts OR (2)
reduced outgoing transfer costs for remittances OR (3) enacted policy that
advances the World Bank General Principles for International Remittance
Services. [135] Figures refer to the cost of
sending US$200 or the local currency equivalent – see http://remittanceprices.worldbank.org/. [136] DE, ES, FR, IT, NL, SE. [137] DE, FR, IT, NL, UK. [138] World Bank, ‘Leveraging Migration for Africa
Remittances, Skills, and Investments’, 2011. [139] http://remittanceprices.worldbank.org/. [140] http://sendmoneyafrica.worldbank.org/. [141] OECD, ‘Tackling the Policy
Challenges of Migration: Regulation, Integration, Development’, Development
Centre Studies, 2011. [142] IMF, ‘Revenue Mobilization in
Developing Countries’. Box 3, 2011. [143] European Council, 11 November
2008, Doc. 15075/1/08, Rev. 1. [144] Green: achieved or
on-track; amber: limited achievement, partly off-track; red:
off-track. [145] For example, ODA spending by the United Kingdom
marginally declined from £8,629 million in 2011 to £8,620 million in 2012, but,
when converted into Euro, increased from EUR 9,948 million in 2011 to EUR
10,627 million in 2012, accounting for 70 % of the above mentioned collective
increase of EUR 1 billion. [146] The direction of the arrows was determined based on
changes of at least 0.01 % after rounding both the 2012 and 2011 ratios to the
second decimal. [147] OECD/DAC, ‘DAC Report on Aid
Predictability: Survey on Donors’ Forward Spending Plans, 2012-2015 and efforts
since HLF-4’, 2012. [148] BE, DK, FI, DE, IR, LU, NL, PT,
SE, UK. [149] Annex 2 outlines the
methodology used to analyse ODA indicators and forecasts provided by MS. [150] For Croatia, the 2013 projection was used as it
includes imputed ODA through the European Commission. [151] The others are Spain, Denmark
and the Netherlands, the last two from initial values already above 0.7%. [152] For the first time, DAC
statistics include information on all EU Member States. Unlike previous
editions of the Accountability Report, the analysis in this chapter concerns
all EU Member States and not just the EU15, and this change explains most
differences in values. [153] CY,CZ, EL, ES, HR, HU, LT, LV, MT,
PL, and SK. [154] World Bank, ‘Turn Down the Heat:
Why a 4°C Warmer World Must Be Avoided’, 2012. [155] World Bank, ‘The Cost to
Developing Countries of Adapting to Climate Change: New Methods and Estimates’,
2010. [156] Green: achieved or
on-track; amber: limited achievement, partly off-track; red:
off-track. [157] Council of the EU, ‘EU Fast
Start Finance Report’, 15541/12, 6 November 2012. [158] Among them, Belgium, Denmark,
Germany, Spain, Sweden, and the United Kingdom have provided the most
significant contributions. [159] See the 2011 Accountability
Report for a description of the methodology. [160] The table avoids double counting
using the following method. Principal (2) always prevails over substantial (1).
If mitigation is set as principal and adaptation substantial for the same
activity, the higher mark prevails and the activity is classified as
mitigation. When the ratings are equal, the ODA is classified under ‘Adaptation
and Mitigation’. The combinations are as follows. Mitigation or Adaptation:
Principal (2-0 and 2-1); Substantial (1-0). Mitigation and Adaptation:
Principal (2-2); Substantial (1-1). [161] OECD, ‘Financing Climate Change
Action’, 2012. [162] SEC(2011) 487, ‘Scaling up
international climate finance after 2012’. [163] COM(2011) 789 final. [164] International Energy Agency,
‘World Energy Outlook 2011’, 2011. [165] COM(2011) 244 final. [166] UNEP/CBD/COP/11/14/Add.1. [167] Council Conclusions on the EU
Biodiversity Strategy to 2020, 11978/11, 23 June 2011. [168] See for example the Report from the Secretariat of the
Convention on Biological Diversity, ‘Connecting Biodiversity and Climate Change
Mitigation and Adaptation’, 2009. [169] Green: achieved or on-track;
amber: limited achievement, partly off-track; red: off-track. [170] At current prices. [171] http://www.johannesburgsummit.org/html/documents/summit_docs/2309_planfinal.htm.
[172] The definition of
Environmentally Sound Technologies can be retraced in the Agenda 21, which
refers to them as those technologies that have the potential for significantly
improved environmental performance relative to other technologies. [173] Green: achieved or
on-track; amber: limited achievement, partly off-track; red:
off-track. [174] Examples include the development
of e-infrastructures and collaboration on ICTs between Europe and developing
countries for research in different areas, e.g. the EU-Med GRID project, the
EU-China GRID project and the EU-India GRID project, aimed at supporting the
interoperability of grid infrastructures in the EU and third countries to
strengthen e-Science and promote new scientific collaboration. [175] DFID, Research Strategy
2008-2013. [176] AT, BE, CZ, DE, DK, EE, ES, FI, FR, IE, IT, LT, LU, NL,
PT, SE, UK. [177] Commission Staff Working
Document, ‘A new approach to international scientific and technological
co-operation in the 7th Research Framework Programme (2007-2013) and 7th
Framework Programme of the European Atomic Energy Community (Euratom)
(2007-2011)’, Brussels, 12.1.2007. [178] COM 2012(497). [179] European Commissioner for
Research, Innovation and Science, Máire Geoghegan-Quinn, recently stated that
Horizon 2020 recognises that ‘international cooperation in research and
innovation is a key aspect of the Union’s global commitments and has an
important role to play in the Union’s partnership with developing countries,
which are often disproportionately affected by global challenges. This
cooperation will promote inclusive growth and progressing towards the
achievement of the Millennium Development Goals and other goals agreed in the
framework of international sustainable development’. ‘EU Science: Global
Challenges & Global Collaboration’, March 5, 2013. [180] §40. Decides, building on
existing reporting and review guidelines, processes and experiences, to enhance
reporting in the national communications of Parties included Annex I to the
Convention on mitigation targets and on the provision of financial,
technological and capacity-building support to developing country Parties as
follows: (a) Developed countries should submit annual greenhouse gas
inventories and inventory reports and biennial reports on their progress in
achieving emission reductions, including information on mitigation actions to
achieve their quantified economy-wide emission targets and emission reductions
achieved, projected emissions and the provision of financial, technology and
capacity-building support to developing country Parties. 1/CP.16 The Cancun
Agreements: Outcome of the work of the Ad Hoc Working Group on Long-term
Cooperative Action under the Convention (FCCC/CP/2010/7/Add.1).
See also Decision 19/CP.18 Common tabular format for ‘UNFCCC biennial reporting
guidelines for developed country Parties’ (FCCC/CP/2012/8/Add.3). [181] ECDPM, ‘Reporting on
Development: ODA and Financing for Development’, 2012. [182] See for example, Brzoska,
Michaela, ‘Analysis of and recommendations for covering security relevant expenditures
within and outside of official development assistance’, Paper 53, Bonn
International Centre for Conversion, 2010. [183] See for example, OECD/DAC,
‘Identifying New Measures for Non-ODA Development Contributions’,
DCD/DAC(2011)43, 2011; or Severino, Jean-Michel and Ray, Olivier, ‘The End of
ODA: Death and Rebirth of a Global Public Policy’, CGD - Center for Global
Development - Working Paper Number 167, 2009. [184] See for example ODI, ‘From high
to low aid: a proposal to classify countries by aid receipt’, Background Note,
2012. [185] See OECD/DAC, ‘New directions in DAC measurement and
monitoring of external development finance’, Paper prepared for the DAC High
Level Meeting of December 2012. [186] According to the Leading
Group on Innovative Financing for Development, Innovative Financing Mechanisms
are ‘mechanisms for raising funds for development [which] are complementary to
official development assistance. They are also predictable and stable. They are
closely linked to the idea of global public goods and aimed at correcting the
negative effects of globalisation.’ [187] The question of whether or not
innovative financing can be counted as ODA in the understanding of the OECD/DAC
remains in the remit of each donor country. A thorough discussion on the
perimeter of ODA is currently on-going in view of better identifying and
measuring the various financial flows, in the broad sense, benefitting
developing countries (‘ODA+’). Initiated within the OECD/DAC, this discussion
could inspire a general debate on the modernisation and the diversification of
the measuring instruments of the financing effort for development. [188] See Declaration of Doha UN Conference on Financing for Development: §51
- "…these funds should supplement and not be a substitute for traditional
sources of finance, and should be disbursed in accordance with the priorities
of developing countries and not unduly burden them." [189] For an in-depth analysis see World Bank, ‘Innovating
Development Finance: From Financing Sources to Financial Solutions’, CFP
Working Paper Series No. 1, 2009. [190] Green: achieved or
on-track; amber: limited achievement, partly off-track; red:
off-track. [191] OECD/DAC, ‘Mapping of some
important innovative finance for development mechanisms’,
DCD/DAC/STAT/RD(2011)1/RD1, 2011. [192] For a short review of existing
innovative financing mechanisms, refer to last year’s Accountability Report. [193] http://europa.eu/rapid/pressReleasesAction.do?reference=CJE/11/139&format=HTML&aged=1&language=EN&guiLanguage=en. [194] The EU-Africa Infrastructure
Trust Fund (ITF), the Neighbourhood Investment Facility (NIF), the Latin
America Investment Facility (LAIF), the Investment Facility for Central Asia
(IFCA), the Asian Investment Facility (AIF), the Caribbean Investment Facility
(CIF) and the Investment Facility for the Pacific (IFP), and the Western
Balkans Investment Facility (WBIF). The first seven are managed by DG DEVCO and the latter one by DG
ELARG. [195] Current members are: the UK Department for
International Development (DFID), the Swiss State Secretariat for Economic Affairs (SECO),
the Netherlands
Ministry of Foreign Affairs (DGIS), the Swedish International Development Cooperation Agency
(Sida), the World Bank Group (currently represented by IFC), the Austrian
Development Agency, Irish Aid, KfW of
Germany and the Australian
Agency for International Development (AusAID). Source: http://www.pidg.org/sitePages.asp?step=4&navID=2&contentID=10. [196] http://www.ppiaf.org/ppiaf/.
[197] Council Conclusions on An
Operational Framework on Aid Effectiveness, 15912/09, 18 November 2009. [198] Council Conclusions on an
Operational Framework on Aid Effectiveness – Consolidated text, 18239/10, 11
January 2011. [199] Green: achieved or
on-track; amber: limited achievement, partly off-track; red:
off-track. [200] Doc. 16773/11: Council
Conclusions of 14 November 2011 on the EU Common Position for the 4th High
Level Forum on Aid Effectiveness (Busan, South Korea, 29/11 -1/12/2011). [201] BE, DK, EE, ES, FI, LU, NL, PL, and SK. AT, DE, FR, and
RO will issue guidelines in 2013. [202] BE, DE, DK, ES, FI, IE, NL, SE, UK. [203] Kharas, ‘Measuring the cost of
aid volatility’, Wolfensohn Center for Development Working Paper 3, 2008. [204] See http://www.oecd.org/dac/aid-architecture/acommonstandard.htm. [205] DK, NL, SE, UK (DfID). [206] BE, CZ, EE, FI. [207] See http://tracker.publishwhatyoufund.org/. [208] Bernard Wood, et al, ‘The
Evaluation of the Paris Declaration, Phase 2 Final Report’, Danish Institute
for Development, 2011. [209] UN ECOSOC, ‘Preparations for the
Development Cooperation Forum Phase IV: 2012-14’, 2013. [210] DE, FR, SE. [211] Diamond, Jack, ‘Good Practice
Note on Sequencing PFM Reforms’, 2013. [212] http://www.imf.org/external/pubs/ft/wp/2012/wp12108.pdf.
[213] http://databank.worldbank.org/data/views/variableSelection/selectvariables.aspx?source=world-development-indicators.
[214] http://data.worldbank.org/sites/default/files/ids-2013.pdf.
[215] http://stats.oecd.org/Index.aspx?DataSetCode=DACGEO.
[216] http://www.un.org/en/peacekeeping/resources/statistics/.
[217] http://econ.worldbank.org/WBSITE/EXTERNAL/EXTDEC/EXTDECPROSPECTS/0,,contentMDK:22759429~pagePK:64165401~piPK:64165026~theSitePK:476883,00.html.
[218] http://www.hudson.org/files/publications/2012IndexofGlobalPhilanthropyandRemittancesWeb.pdf.
Annex 3 –
Statistical Annex on ODA Trends
EU
ODA volumes and as % of GNI 2004 – 2012 EU
ODA to LDCs – Net disbursements (Including
Imputed Multilateral Flows for MS reporting to DAC - Euro millions, constant
2011 prices) Country || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010 || 2011 || 2012 Austria || 156 || 218 || 217 || 199 || 212 || 260 || 354 || 219 || 215 Belgium || 613 || 551 || 635 || 608 || 695 || 714 || 1,114 || 744 || 682 Bulgaria || - || - || - || - || - || - || - || 13 || 12 Cyprus || - || 3 || 4 || 4 || 5 || 7 || 8 || 5 || 4 Czech Republic || 25 || 29 || 34 || 42 || 68 || 54 || 54 || 50 || 54 Denmark || 744 || 760 || 781 || 853 || 802 || 823 || 847 || 729 || 689 Estonia || 1 || 2 || 4 || 4 || - || - || 5 || 5 || 7 Finland || 200 || 224 || 265 || 287 || 299 || 335 || 374 || 310 || 339 France || 3,134 || 1,975 || 2,265 || 2,282 || 2,251 || 2,404 || 2,811 || 2,630 || 1,950 Germany || 2,041 || 1,612 || 2,215 || 2,294 || 2,665 || 2,472 || 2,777 || 2,653 || 2,678 Greece || 64 || 75 || 93 || 89 || 113 || 86 || 81 || 60 || 59 Hungary || 13 || 31 || 19 || 39 || 25 || 29 || 31 || 27 || 25 Ireland || 271 || 284 || 390 || 406 || 442 || 360 || 376 || 335 || 338 Italy || 752 || 1,283 || 682 || 1,007 || 1,195 || 832 || 903 || 1,166 || 689 Latvia || - || 3 || 3 || 4 || - || - || - || - || - Lithuania || 3 || 4 || 9 || 21 || 17 || 11 || 15 || 17 || 7 Luxembourg || 85 || 92 || 106 || 123 || 125 || 121 || 121 || 103 || 124 Malta || - || - || - || - || - || - || - || - || 2 Netherlands || 1,511 || 1,446 || 1,169 || 1,381 || 1,450 || 1,200 || 1,417 || 1,009 || 946 Poland || 43 || 50 || 134 || 57 || 74 || 81 || 83 || 79 || 82 Portugal || 773 || 147 || 164 || 156 || 164 || 154 || 217 || 244 || 147 Romania || - || - || - || - || 25 || 27 || 23 || 29 || 26 Slovak Republic || 9 || 34 || 27 || 28 || 31 || 13 || 15 || 14 || 15 Slovenia || - || - || - || - || 10 || 10 || 11 || 10 || 10 Spain || 489 || 734 || 659 || 855 || 1,087 || 1,242 || 1,231 || 796 || 425 Sweden || 778 || 1,037 || 1,028 || 1,107 || 1,200 || 1,216 || 1,137 || 1,273 || 1,118 United Kingdom || 2,339 || 2,038 || 2,723 || 2,590 || 2,937 || 3,061 || 3,582 || 3,583 || 3,348 Total EU || 14,044 || 12,634 || 13,627 || 14,435 || 15,891 || 15,512 || 17,589 || 16,105 || 13,992 Source:
DAC Online (Table 2A). DAC Advance questionnaire for 2012. EU annual
questionnaire on Financing for Development EU
ODA to Africa – Net disbursements (Including
Imputed Multilateral Flows - Euro million, constant 2011 prices) Country || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010 || 2011 || 2012 (est.) || Increase 2012/2004 Austria || 265 || 279 || 672 || 513 || 271 || 346 || 414 || 287 || 339 || 74 Belgium || 744 || 832 || 1,016 || 792 || 810 || 920 || 1,270 || 902 || 796 || 52 Bulgaria || - || - || - || - || - || - || - || 16 || 12 || 12 Cyprus || - || 4 || 5 || 5 || 6 || 8 || 8 || 7 || 4 || 4 Czech Republic || 25 || 37 || 42 || 41 || 46 || 42 || 50 || 56 || 53 || 28 Denmark || 806 || 826 || 972 || 1,025 || 966 || 927 || 919 || 900 || 799 || (6) Estonia || 2 || 3 || 5 || 5 || - || - || 5 || 5 || 5 || 3 Finland || 233 || 262 || 318 || 325 || 350 || 403 || 420 || 378 || 403 || 171 France || 4,701 || 5,463 || 5,960 || 4,191 || 3,956 || 5,154 || 5,145 || 4,711 || 4,058 || (643) Germany || 2,637 || 3,248 || 4,401 || 3,402 || 3,602 || 3,162 || 3,198 || 3,480 || 3,170 || 533 Greece || 85 || 86 || 118 || 113 || 144 || 127 || 119 || 91 || 75 || (11) Hungary || 15 || 25 || 26 || 39 || 27 || 29 || 30 || 31 || 30 || 15 Ireland || 296 || 312 || 429 || 440 || 508 || 411 || 397 || 363 || 345 || 49 Italy || 969 || 2,042 || 1,565 || 1,230 || 1,260 || 1,061 || 1,052 || 1,396 || 928 || (41) Latvia || - || 4 || 4 || 5 || - || - || - || - || - || - Lithuania || 3 || 6 || 7 || 9 || 11 || 9 || 7 || 9 || - || (3) Luxembourg || 113 || 117 || 132 || 148 || 146 || 149 || 146 || 118 || 132 || 19 Malta || - || - || - || - || - || - || - || - || - || - Netherlands || 1,714 || 1,805 || 1,592 || 1,825 || 1,633 || 1,366 || 1,500 || 1,242 || 1,068 || (646) Poland || 55 || 68 || 154 || 75 || 91 || 106 || 95 || 100 || 93 || 38 Portugal || 796 || 172 || 184 || 178 || 257 || 202 || 307 || 341 || 316 || (480) Romania || - || - || - || - || 32 || 39 || 29 || 41 || 34 || 34 Slovak Republic || 10 || 33 || 30 || 32 || 35 || 17 || 19 || 20 || 19 || 9 Slovenia || - || - || - || - || 12 || 14 || 12 || 13 || 13 || 13 Spain || 685 || 1,037 || 1,079 || 1,188 || 1,482 || 1,800 || 1,598 || 1,046 || 537 || (148) Sweden || 881 || 1,226 || 1,240 || 1,352 || 1,371 || 1,401 || 1,238 || 1,486 || 1,349 || 468 United Kingdom || 2,697 || 3,688 || 5,319 || 2,856 || 3,153 || 3,528 || 4,243 || 4,031 || 3,945 || 1,248 Total EU || 17,733 || 21,577 || 25,269 || 19,790 || 20,171 || 21,222 || 22,222 || 21,072 || 18,524 || 791 Source: DAC Online (Table 2A). DAC Advance questionnaire for 2012.
EU annual questionnaire on Financing for Development EU
ODA to Sub-Saharan Africa – Net disbursements (Including
Imputed Multilateral Flows - Euro million, constant 2011 prices) Country || 2004 || 2005 || 2006 || 2007 || 2008 || 2009 || 2010 || 2011 || 2012 Austria || 226 || 239 || 631 || 469 || 230 || 300 || 381 || 267 || 355 Belgium || 681 || 761 || 947 || 728 || 748 || 848 || 1,209 || 872 || 791 Bulgaria || - || - || - || - || - || - || - || 14 || 14 Cyprus || - || 4 || 4 || 4 || 5 || 7 || 7 || 6 || 5 Czech Republic || 21 || 30 || 33 || 35 || 40 || 37 || 44 || 49 || 60 Denmark || 747 || 773 || 898 || 944 || 883 || 864 || 849 || 821 || 762 Estonia || 2 || 3 || 4 || 4 || - || - || 4 || 5 || 6 Finland || 201 || 228 || 277 || 289 || 307 || 348 || 383 || 350 || 375 France || 3,835 || 4,647 || 5,031 || 3,452 || 3,280 || 4,408 || 4,450 || 3,934 || 4,243 Germany || 2,287 || 2,850 || 3,993 || 2,859 || 3,112 || 2,603 || 2,735 || 3,041 || 3,067 Greece || 63 || 68 || 99 || 86 || 117 || 98 || 94 || 72 || 86 Hungary || 12 || 20 || 21 || 34 || 23 || 25 || 27 || 27 || 34 Ireland || 287 || 302 || 417 || 429 || 484 || 403 || 385 || 367 || 355 Italy || 775 || 1,870 || 1,424 || 1,041 || 1,154 || 957 || 956 || 1,284 || 1,014 Latvia || - || 3 || 3 || 4 || - || - || - || - || 7 Lithuania || 3 || 5 || 5 || 7 || 10 || 8 || 6 || 8 || 10 Luxembourg || 104 || 110 || 125 || 132 || 132 || 140 || 131 || 121 || 130 Malta || - || - || - || - || - || - || - || - || 2 Netherlands || 1,593 || 1,674 || 1,491 || 1,712 || 1,526 || 1,282 || 1,430 || 1,226 || 1,089 Poland || 46 || 56 || 140 || 61 || 79 || 92 || 82 || 86 || 111 Portugal || 785 || 160 || 173 || 155 || 181 || 174 || 296 || 349 || 280 Romania || - || - || - || - || 28 || 34 || 25 || 35 || 38 Slovak Republic || 8 || 31 || 27 || 27 || 32 || 15 || 17 || 18 || 22 Slovenia || - || - || - || - || 10 || 12 || 11 || 12 || 14 Spain || 521 || 894 || 828 || 903 || 1,150 || 1,319 || 1,254 || 803 || 511 Sweden || 797 || 1,137 || 1,136 || 1,258 || 1,265 || 1,269 || 1,142 || 1,520 || 1,236 United Kingdom || 2,442 || 3,559 || 5,147 || 2,646 || 2,869 || 3,150 || 3,961 || 3,966 || 3,882 Total EU || 15,437 || 19,424 || 22,857 || 17,277 || 17,666 || 18,393 || 19,877 || 19,254 || 18,499 Source: DAC Online (Table 2A). DAC Advance questionnaire for 2012.
EU annual questionnaire on Financing for Development The Danish government has committed to the target of 1% but has not set a fixed timetable for reaching it