Keeping Europe's promises on Financing for Development

The European Union (EU) has made remarkable progress towards meeting its financing for development commitments. However, more rigorous efforts are necessary, notably to perpetuate the increase in volumes of official development assistance (ODA) and to make better use of available tools to improve aid effectiveness.

ACT

Annual report from the Commission to the European Parliament, the Council, the Economic and Social Committee and the Committee of the Regions of 4 April 2007, Keeping Europe's promises on Financing for Development [COM(2007) 164 final - Not published in the Official Journal].

SUMMARY

This is the fifth annual report from the European Commission on EU progress towards implementing the commitments agreed in 2002 and renewed in 2005 regarding financing for development. These aim to contribute to achieving the millennium development goals (MDG).

The EU is the biggest aid donor in the world and its participation in official development assistance (ODA) is constantly growing. The EU ODA results exceeded expectations in 2006, amounting to EUR 48 billion, which represents an ODA/GNI (gross national income) ratio of 0.42 % and exceeds the target of 0.39 % set for 2006. Despite these very positive results overall, the Commission calls on the Member States which did not meet their individual ODA targets to step up their efforts and asks all the EU countries to mobilise more programmable funds. Some Member States achieved high levels of OPA, notably through debt cancellation for poor countries, but the Commission stresses that such operations are undertaken only once and must be replaced by more stable and predictable development assistance.

As regards the beneficiaries of the assistance, the Member States of the EU-15 already allocate at least 0.15 % of their GNI to the least-developed countries (LDC) or intend to reach this level of assistance by 2010. Almost half the EU aid is intended for Africa. In addition, the EU has decided to allocate over half the aid promised on top of the ODA volumes each year to the continent of Africa.

Despite this overall progress, constant efforts have to be made in order:

• to guarantee the long-term predictability of aid flows by establishing national timetables by the end of 2007 so as to ensure gradually rising aid levels year-on-year;
• to ensure the participation of all Member Stats in the effort needed to achieve the 2010 objective;
• to ensure that the increase in the volumes of ODA are permanent and the results of budgetary efforts real on the part of the Member States;
• to strengthen the ODA reporting capacities and methodology of Member States to guarantee the comparability of volumes of aid;
• to facilitate the effective and efficient use of aid volumes. To this end, EU donors should examine their structures and their operative and aid modalities. This process needs to include in particular national plans to strengthen capacity to scale up ODA and the speedy application of the forthcoming Code of Conduct on Division of Labour amongst EU donors.

Some Member States have implemented innovative sources of financing (such as the airline ticket tax for an International Drug Purchasing Facility - UNITAID, and the International Finance Facility for Immunisation - IFFIm) in favour of developing countries. These are stable and predictable sources of finance and lock in long-term budgetary commitments. Nevertheless, they cannot be a substitute for ODA.

As far as the heavily indebted poor countries (HIPC) are concerned, the Commission encourages Member States, in the appropriate international forums, to promote responsible lending and borrowing. This should encompass improved debt management of the developing countries and the promotion of dialogue with the new lenders. In fact, the multilateral debt relief initiative cancels the debt to the International Development Association (IDA), the African Development Fund and the International Monetary Fund (IMF), but does not cover the outstanding loans from other regional development banks.

As far as the aid effectiveness is concerned, most of the objectives set out in the action plan " Deliver more, better, faster " are under way:

• the joint multi-annual strategic planning has already been implemented in all the African, Caribbean and Pacific (ACP) countries, where the 10th European Development Fund (EDF) has enabled joint programming with other donors in the field;
• following the success of the first edition in November 2006, European Development Days will be held every year.

The following actions have been taken:

• the adoption of a Code of Conduct on the divison of labour among EU debtors
• a revised EU Donor Atlas, including the first regional (West Africa) and country (Mozambique) editions;
• EU Roadmap on the harmonisation of aid;
• the removal of all the obstacles to co-financing.

In 2006 initiatives designed to increase the resilience of developing countries to external economic shocks (price vulnerability) and natural events (disasters, climate change and pandemics) have been drawn up and implemented. However, Member States paid little attention to them and progress is limited. To improve this situation, the Commission suggests certain measures to Member States, such as:

• a common EU approach to disaster prevention and preparedness;
• strengthening support for developing new instruments and methods to reduce adverse effects of external shocks on developing countries;
• active participation in the International Task Force on Commodity Risk Management.

As regards untying aid, the EU has made more progress than other international donors. However, the Commission encourages Member States to untie all their aid. In 2006 the Community untying regulations were translated into the new financial cooperation instruments under the EC budget.

The Commission stresses the need to improve EU coordination within the international financial institutions (IFI) through increased dialogue and information sharing, whilst recognising the progress made in this field. It also proposes to reinforce the European voice within the IFI, while at the same time enhancing the voice of developing countries.

The EU confirms support for global public goods (GPG) and has made notable progress towards enhancing the supply of priority GPG, for example in health and environmental matters. Nevertheless, its actions will not be linked to the recommendations of the International Task Force, although it continues to take on the "responsible leadership" role.

Background

In 2005 the Commission gave fresh impetus to the EU development policy with the adoption of a Development Policy Framework 2006-2010. It takes stock of whether the commitments entered into are being met by adopting a package of measures comprising this Communication and two others (please see 'Related Acts').

RELATED ACTS

Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions From Monterrey to the European Consensus on Development: honouring our commitments [COMM(2007) 158 final - Not published in the Official Journal].

This political Communication introduces the two Specific Communications "Keeping Europe's promises on Financing for Development" and "Towards an EU Aid for Trade strategy - the Commission's contribution".

Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions entitled " Towards an EU Aid for Trade strategy - The Commission's contribution " [COM(2007) 163 final - Not published in the Official Journal].

Last updated: 12.09.2007