Poverty focus of EU under scrutiny

A leading UK-based think tank says that European Union (EU) development spending should focus more on alleviating poverty in developing nations.
Only 46 per cent of EU-managed aid reached lower income countries in 2009 says the recent report by Open Europe, a research body which is calling for reform of the EU.The figure compares with 74 per cent of UK aid and an overall EU Member State average of 58 per cent.

Open Europe’s supporters include some of the UK’s top businesses leaders: Sir Stuart Rose, former Chairman, Marks and Spencer plc; Sir Crispin Davis, Former Chief Executive, Reed Elsevier Group plc; Sir David Lees, Chairman, Tate and Lyle plc; Sir Henry Keswick, Chairman, Jardine Matheson Holdings Ltd; Lord Sainsbury of Preston Candover KG, Life President, J Sainsbury plc; Sir John Egan, Chairman, Severn Trent plc; Lord Kalms of Edgware, President, DSG International plc. and Hugh Sloane, Founder of Sloane Robinson.

EU aid is also subject to unnecessary administrative and transaction costs, with money being recycled between national governments, the EU and other international bodies, such as the United Nations or World Bank, up to three times before it reaches those in need, says the recently published report.

UK redraws aid map

This publication comes in the wake of the unveiling by the UK government of its redrawn development spending map. From now on, nations, bodies and policies which provide the best results in fighting poverty and building a safer world will be pinpointed.

By 2016, the UK’s Department for International Development (DFID) – the UK’s international development agency - will have closed bilateral aid programmes in 16 countries: China, Russia, Vietnam, Cambodia, Moldova, Bosnia, Cameroon, Lesotho, Niger, Kosovo, Angola, Burundi, the Gambia, Indonesia, Iraq and Serbia.

It means that the UK development aid will focus on just 27 countries: Afghanistan, Bangladesh, Burma, the Democratic Republic of Congo, Ethiopia, Ghana, India, Kenya, Kyrgystan, Liberia, Malawi, Mozambique, Nepal, Nigeria, Occupied Palestinian Territories, Pakistan, Rwanda, Sierra Leone, Somalia, South Africa, Sudan, Tajikistan, Tanzania, Uganda, Yemen, Zambia and Zimbabwe. This set of nations accounts for three-quarters of global maternal mortality, nearly three-quarters of global malaria deaths and two-thirds of out of school children.

In light of their poor performance or relevance to the UK’s development objectives, namely poverty reduction, the UK government has also removed funding from some international bodies. The UK government says, however, that some organisations provide very good value to the British taxpayer. They include UNICEF, The Global Alliance for Vaccines and Immunisation (GAVI), the Private Infrastructure Development Group, and the Global Fund to Fight Aids, Tuberculosis and Malaria.

EU review urged

Open Europe is urging the EU to embark on a similar review of its development spending. “With the world facing social and political upheaval, from Bahrain to Ivory Coast, it is essential that the spotlight is turned on the aid efforts of the international community, including the EU’s €12bn annual external aid budget,” reads a pressed statement issued by the Open Europe. While development aid can have a real impact, the EU’s aid budget suffers from poor accountability, unnecessary bureaucracy and, most critically, less than half the money spent actually goes to the world’s poorest people. Old colonial links and regional proximity, rather than fighting global poverty, continue to determine the destination of most EU aid,” says Open Europe’s Research Director, Stephen Booth. A second report by the body to be released in the next fortnight will focus on the effectiveness of EU aid in North Africa.

“There’s no conclusive evidence that the EU adds value to national aid programmes that are already performing relatively well, such as the UK’s aid spending. National contributions to the EU aid budget should be made voluntary with the Commission primarily playing a coordinating role, encouraging best practice and coherent policies among member states,” adds the press release.

Aid to EU neighbours

According to statistics provided by Open Europe, from 2000-2009, developing European countries received $US10.49 per capita of the European Commission’s administered aid, while sub-Saharan Africa received only $US3.94 per capita. Turkey was the top recipient of EU aid in 2009 and other European neighbours, Kosovo and Serbia, were also big recipients.

European Commission-managed EU aid currently has administrative costs of 5.4 per cent, higher than the UK’s Department for International Development’s (DFID) costs of 4 per cent and the UK Government’s target of reducing these to 2 per cent by 2014-15. Some EU aid streams, such as the programme for African, Caribbean and Pacific (ACP) countries, have administration costs as high as 8.6 per cent, or above the ceiling the UK imposes when giving grants to NGOs, says the report.

Open Europe’s researchers say that €1.4bn or 10 per cent of EU aid is needlessly passed on to other multilateral donors every year, such as the United Nations and World Bank. “This money is simply being recycled between donors – up to three times in some cases – before it reaches a recipient country and is subject to unnecessary administration and transaction costs. In 2009, the Commission also agreed to ‘delegate’ €242.7M worth of aid spending back to the EU’s national governments, which begs the question why the money was ever given to the EU by member states in the first place,” says the report.

Dangers of budget support

The EU’s current drive to transfer up to 50 per cent of its aid directly to recipient governments’ treasuries, through ‘budget support’, rather than pre-agreed projects means that the EU risks donating money directly to discredited or illegitimate regimes, claims Open Europe. While budget support does offer benefits, such as better alignment of aid with recipient countries’ national policies, the research group claims that the EU often lacks the proper controls and monitoring to ensure money is not wasted or lost to corruption. The huge focus on budget support risks an overreliance on an unproven development policy.

However, Open Europe also highlights in the report examples of EU aid well spent, which could be built on in the future, where the link between aid and performance has been strong.

It recommends that Member State contributions to the EU aid budget should be voluntary which would drive better performance and accountability. Other recommendations are that the EU’s role should be more geared towards facilitating  aid co-ordination and division of labour across the 27 EU states, It warns that the EU needs to avoid overreliance on budget support for delivering its aid and that trade should also be used more vigorously as an instrument to foster development “The EU needs to be more open to trade and remove internal subsidies, which are particularly damaging to farmers, among others, in the developing world,” reads the report.

Over the past few months the European Commission has been reviewing its own policies including how to give greater impact to its programmes in alleviating poverty, the future of budget support and nature of funding of external activities after 2013.

To view Open Europe’s report: http://www.openeurope.org.uk/research/euaid2011.pdf
For details of UK’s review: http://www.dfid.gov.uk/Media-Room/News-Stories/?q=&t=&c=&p=&page=2