What EU can do in war against poverty

Date: 30/04/03

World poverty is not insurmountable, says Commissioner Poul Nielson. One possible solution is simplicity itself - more aid. The development chief speaks to David Cronin

IT WOULD be easy to despair. While a coterie of the world's population can find ample money for stealth bombers and precision-guided missiles, 1.2 billion people struggle to make ends meet on less than one euro per day.

Around 9,000 perish from AIDS every day, in most cases because they cannot afford life-saving medicines. Malaria kills up to two million per year in Africa.

And while innumerable young people in the rich world cruise along the information superhighway, 115 million of their less fortunate peers are not even learning how to read or write. An estimated 40 of children in Africa do not go to school, while two-thirds of the planet's 860 million illiterate adults are women. With the scale of poverty so overwhelming, then, can it be ever be tackled?

Poul Nielson, the development commissioner, contends that it can. And he believes one of the main solutions is that old fuddy-duddy concept called generosity. Increasing the amount of aid that the Union gives to poor countries can lead to measurable improvements in the lot of their citizens, he feels, especially if the aid is focused on vital areas such as health care and education.

"The starting point is that there is too little development assistance in terms of volume. This is one rare case where more of the same is a meaningful and intelligent answer.

"Today it [aid] is better organised than ever before. We are jointly working with our partner countries, the World Bank and other donors, on the basis of quite well-organised country strategies of poverty reduction with principles that are agreed to. This was not the case ten years ago."

Despite the grim overall picture, victories are being registered in the war against poverty. The United Nations reports, for example, that the number of infants who die before their fifth birthday each year has fallen from 15 million in 1980 to about 11 million worldwide today. And some developing countries have made giant strides in getting their young citizens into classrooms - India is expected to have 95 of its children at school in 2005.

"We see things that work," says Nielson. "We see an improvement in the picture concerning child diseases. We see some slow but quite broad improvement in the level of literacy. So it [aid] does work."

Big countries - small percentages

At €26 billion, the EU already accounts for more than half of the development aid which the rich world gives to poor countries each year. The figure sounds impressive but belies the comparatively risible amount which some larger member states give.

Although Italy is a member of the 'Group of Eight' top industrial nations, it is the least generous donor of the EU-15 in terms of its proportion of national income. In 2002, Rome's total aid allocations came to just over €2 billion, or 0.2 of gross national income (this was a rise on 2001, when Italy gave only 0.15 of national income).

During the March 2002 UN conference on financing development in Monterrey, Mexico, there was a general EU pledge that member states' aid levels should rise so that the average level for the current EU-15 will reach 0.39 of national income in 2006. It is currently 0.34, according to data released last week by the Organization for Economic Cooperation and Development (OECD).

The 2006 target is seen as a staging post on the road towards all EU states allocating 0.7 of national income to development as part of the Union's contributions to the UN's 'Millennium Goals'. These state that the number of people living on less than a euro a day should be halved, that all children should receive primary education, that the rate of under-five mortality should be slashed by two-thirds and that the spread of AIDS and other major killers should be halted by 2015.

Monterrey watershed

Nielson considers Monterrey as a watershed in the history of development aid. "This was the first time ever that member states - based on a [European] Commission input - collectively decided on what they do."

The commissioner also considers it very encouraging that member states have assigned the Commission the task of keeping an eye on whether aid expenditure is rising. "It should mean something that the low performers have all said that they do this [not reach the aid target], not because development assistance doesn't work but for purely economic and financial reasons."

According to the OECD, Belgium, Denmark, Ireland, Luxembourg, the Netherlands and Sweden are the only EU countries which already exceed the 0.39 interim target. Yet Nielson, a Social Democrat, makes no effort to conceal his disappointment that the right-leaning government in his native Denmark has cut aid as part of a reassessment of national priorities.

The proportion Denmark gave fell from 1 of national income in 2001 to 0.96 in 2002 - but the OECD has calculated that the €1.6 billion contributed by Copenhagen last year represented a 6.4 decrease in real terms. Nevertheless, the Danes still remain the Union's largest donors.

"The elite donor ain't what it used to be," laments Nielson, who was the Danish development minister before he moved to Brussels in 1999.

The OECD statistics indicate that the EU increased aid by 2.8 in real terms between 2001 and 2002. Rises were recorded for Belgium, Finland, Ireland and France but there were decreases (in real terms) in Luxembourg, the Netherlands, Portugal, Sweden, Britain, Denmark, Austria and Spain. Donation levels for the latter two declined by more than 15 in real terms, compared to the previous year, primarily because they had given exceptional amounts for debt relief efforts in 2001.

EDF fund

A key component of the EU's aid work is the European Development Fund (EDF). Founded in 1957, it is designed to benefit the African, Caribbean and Pacific (ACP) bloc. The current programme, known as the ninth EDF, is based on an EU-ACP accord signed in Cotonou, Benin, in 2000. It provides for €13.5 billion to be paid over five years.

As things stand, the EDF is separate from the main EU budget. This has several drawbacks. Rather than requiring the Union's governments to contribute an agreed percentage to the fund, it is dependent on ad hoc contributions from national coffers. The amount that each member state gives is decided in talks, which bear some of the hallmarks of horse-trading, every five years. The EDF is not subject to the same scrutiny by the European Parliament as the Union's general budget.

Nielson wants the EDF incorporated into the budget as soon as possible. This is being discussed by members of the Convention on the future of Europe and there is considerable support for the 'budgetization' idea. Spain, though, is the principal member state opposed.

"We expect that 2007 will be the year when money will pour in for the tenth EDF but we will have to discuss the percentage distribution between the 25, when they [ten new countries] become members next year and all this will have to be fixed in 2005," says Nielson.

Meanwhile, some €11 billion that has been allocated to the EDF down the years still remains unspent. Conditions in some ACP states are among the main reasons for that. In particular, the EU has recoiled from giving direct budget support to autocratic regimes or to those embroiled in conflict.

"You have to look at countries like Nigeria during the years of military dictatorship or Congo, Somalia, Liberia, Haiti, Togo. There's a large number of so-called failed states or conflict cases, where we haven't been able to do things," explains Nielson.

A partial solution to ensuring that unspent money does not linger in a bank account for decades should stem from the Cotonou agreement, which came into effect on 1 April.

"In the review next year of country strategies, we will move money from bad performers to better performers," says Nielson, as the Cotonou accord allows for greater flexibility than the system previously in place.

As part of ongoing work the Commission is holding talks with its ACP 'partners' to evaluate which projects are bearing fruit and which are not. It is envisaged that money awarded to those which are found to fall into the latter category can be 'decommitted'. One possibility is that part of the amounts concerned could be channelled to the fight against AIDS, malaria and tuberculosis.

Nielson visited Sudan last month for talks about the possibility of restarting the Commission's aid programme there. In two decades, the civil war there has claimed two million lives, yet the Commission has been heartened by recent peace moves between the Muslim-dominated Sudanese government and Christian guerrillas, the Sudan People's Liberation Army. The conflict has thwarted the release of more than €400 million in aid that had been set aside for the desperately poor country.

Describing that sum as a "peace dividend", Nielson says many of the documents needed for its release are ready and that the Commission can start using it gradually once there is a peace deal.

"All is conditional on the two sides: when they sign a peace agreement, I will sign the country strategy paper and the national indicative programme. They will be focused on two main sectors. One is food security, broadly defined to also include water, sanitation, smaller rural infrastructure, access roads. The other one is education."

Untying aid

The Commission has already put in place a €2 million programme to help Khartoum prepare to administer EU aid. "They don't have an institutional memory of how this piano plays," Nielson remarks. "It's so complicated unfortunately that we owe it to our partners to look at capacity-building as the first start-up contribution.

"These are small preparatory elements. But the real show only gets started when there is a peace agreement."

Last November, Nielson presented the Union's governments with a plea to stop restricting aid contracts to firms from their own countries. A new study by the ActionAid Alliance charity argues that 'tied aid' can be poor value for money as it prevents companies from outside the donor countries making more competitive bids. It also contends that more jobs could be created in poor countries if their firms were able to tender.

The Commission's view is that the full rigours of EU single market legislation should apply to most aid contracts above a certain monetary value.

Members of the OECD have agreed on the principle of untying a variety of forms of aid destined for the 49 states designated by the UN as 'least developed countries' (LDCs).

Yet Nielson feels it would be wrong for the untying only to apply to LDCs and not other developing countries which are a little less poor or middle-income economies. The Union, he says, is showing a good example to the US and Japan on how untying can occur. For example, about 25 of contracts are awarded to firms in the ACP countries. Similar moves are being made as part of EU aid efforts for Asia and Latin America. The tying of food aid, however, is a question which the OECD has not tackled. This is a highly sensitive issue for some EU states - for example, Spain has an effective policy of supporting the export of national products as part of food aid activities, which were worth €5.7 million for 2001. So the possibility of the Union taking the lead on untying this kind of aid seems remote for now.

"This is something with the bottom line of classical trade politics to it," says Nielson. "To open up our volume of activities, if the others don't, is somehow not easy to have all member states agreeing on."

Transatlantic tensions

The question of how politicized aid can be was highlighted by the recent EU-US kerfuffle over attempts to deal with the food crisis gripping southern Africa. Washington has blamed the consumer resistance to genetically modified (GM) foods in Europe for influencing Zambia's refusal to accept GM maize from the US to feed its hungriest citizens. This sparked what Nielson calls an exchange of "clearly expressed" views on each side of the Atlantic.

Nielson distances himself from concerns that the war in Iraq and its aftermath would divert the attention of donors from other needy cases.

He points out that the €100 million aid package which the Commission has announced for Iraqi civilians since 20 March is being drawn from an "emergency reserve" so that work in other parts of the world will not be affected: "The budgetary emergency reserve is a highly important and adequate instrument because, if we have unforeseen crises that can't be met by the ordinary budget for humanitarian aid, we can access this optional money. And this is exactly what we are doing now and have been doing in Kosovo and Afghanistan and some Palestinian cases."

World poverty is not insurmountable, says the European Commissioner for Development and Humanitarian Aid, Poul Nielson. One solution is simplicity itself - more aid.