Getting added value from EU development aid

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The EU should better manage European development aid to reduce administrative costs, improve efficiency and deliver economies of scale, writes Stephen Tindale.

Stephen Tindale is an associate fellow at the Centre for European Reform. His policy brief on EU development aid is available on the CER website

"In European capitals, development aid is increasingly regarded as an instrument of foreign policy, to promote national commercial or strategic interests. These are legitimate objectives, but human well-being must not be overlooked. The world has made considerable progress in promoting economic and social development. But major challenges remain. Around one billion people still do not have enough to eat and lack access to safe water. One and a half billion have no source of electricity. These people must be helped, even if such aid has no commercial or strategic benefit to the donors.

The EU is a major donor of both short-term humanitarian aid, to help deal with conflicts or natural disasters, and longer-term development aid, to help countries make progress economically, politically and socially. Humanitarian aid is not seriously questioned by European politicians and publics: the need for emergency relief is very visible on television screens. By contrast, development aid – which accounts for over 90 per cent of global (and European) aid flows – is a highly contested subject.

The EU spent €53 billion on aid in 2011. The Commission administered €9.6 billion; the rest was given directly by national governments.

The agreement on the EU’s multiannual financial framework for 2014-20 does not include a significant increase in Commission development aid. This is regrettable. The Commission is more widely regarded as a neutral development player than are national governments, whose commercial or historical links sometimes dominate decisions.

The Commission operates programmes in countries which are very poor but not significant recipients of member-state aid, such as Eritrea, the world’s fifth poorest country, where the Commission has funded agriculture and infrastructure projects.

There are also practical advantages to Commission-administered aid. One large programme is more likely to be effective than several small ones, so Commission management can deliver economies of scale and cut administrative costs.

The Commission has 136 delegations working on development around the world. These reduce the need for member-states to have their own offices. Commission management also cuts the administrative burden on recipients: developing country governments often complain about having to report to large numbers of donors separately. Commission development aid is not perfect, but overall is well administered.

The Millennium Development Goals (MDGs) set targets for the reduction of poverty, hunger, disease and environmental damage by 2015. The UN is holding a review summit in September to discuss how these goals should be updated.

Aid alone will never be enough to meet the MDGs: economic growth is essential, and it is not possible to establish whether development aid contributes to economic growth.

However, the MDGs are not intended only to promote economic growth. Progress towards universal primary education and reduced child mortality can be achieved even if the economy is not growing, as long as there is money available to build schools, train teachers, and provide safe drinking water and sanitation. Development aid can provide some of this money.

Commission development aid should be used primarily for maintaining progress towards the MDGs, not for strategic or foreign policy reasons. The European External Action Service must be involved in development aid decisions, since aid is a powerful means of extending the EU’s ‘soft power’. But the decisions should continue to be taken by the Commission itself.

Bangladesh is a clear example of a country that requires aid for reasons of human need. This country is not widely seen as a strategic priority, though many observers have concerns about the rise of Islamic fundamentalism there. Bangladesh is not well endowed with natural resources, though it has some gas and coal.

Yet the human development case for aid to Bangladesh is strong. It is a low-lying, densely populated country. Increases in extreme weather due to climate change will present great threats to Bangladesh, as will rising sea levels.

Much development aid should continue to go to sub-Saharan Africa. This part of the world already has several failed states, including Somalia and the Democratic Republic of Congo. Failed states provide a haven for terrorists and thus pose a risk to Europe. So a strategic case can be made for assistance to some parts of sub-Saharan Africa. But even if it could not, there is a strong moral case. Over 400 million Africans – more than half the total population – live on less than $1.25 a day, which the United Nations defines as living below the poverty line. Three hundred million Africans – a third of the total population – do not have access to clean water and sound sanitation.

Three quarters of the world’s poor live in middle income countries. The MDGs will not be met if these people are not helped out of poverty. But, one might argue, middle income countries should deal with their own problems.

Aid to India presents a stark example of this dilemma. India is an emerging economic and political power. It has nuclear weapons and a space programme. So the Indian state is not without money. Yet many millions of Indians still live in poverty.

Development aid to middle income countries should go to specific programmes aimed at the very poor. The Commission should work with local and regional governments, particularly to deliver decentralised renewable energy, to help achieve the MDGs. In India it should work with the governments of poor states such as Rajasthan, Uttar Pradesh, Orissa and West Bengal, instead of the national government in Delhi.

Renewable energy technologies are well suited to provide decentralised energy, so reducing the need for electricity or gas grids. For example, solar photovoltaic panels combined with batteries can provide light for villagers each night. This enables children who have to work during the day to learn in the evening. Access to electricity also enables households to set up small businesses.

Development aid for energy will contribute to better livelihoods, better economic prospects and greater human security."

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