Agencies unite to put spotlight on development aid

Date: 24/10/1996

THE European Union's development policy is at a crossroads. Over the next year, EU officials will either succeed in their uphill struggle to put development cooperation back on the Union agenda, or budgetary troubles, combined with growing 'aid fatigue', will drive member states to make drastic cut-backs in national and multilateral aid programmes.

For the European Commission, the challenge has never been clearer. “Development has to be put back on the front page,” stresses Development Commissioner João de Deus Pinheiro.

Although aid and cooperation may not be a top EU priority at the moment, Pinheiro says he is confident that the Union will soon enter another “development cycle” - but only if the conditions are right.

Development experts at Commission headquarters in Brussels, the Development Assistance Committee (DAC) of the Paris-based Organisation for Economic Cooperation and Development, and the World Bank in Washington are battling to come up with new ways of regenerating public interest in development cooperation.

In the process, inter-institutional rivalries appear to be fading for the first time. Faced with the prospect of a decline in aid resources and public demand for more effective and efficient use of funds, international aid agencies are putting aside their long-standing rivalries to hammer out joint strategies for economic and social development.

At recent talks in Washington and Lisbon, Pinheiro and World Bank President James Wolfensohn agreed to reinforce their hitherto tenuous cooperation links so that they could work together to tackle environmental issues, boost private investment in Africa and help the continent's efforts at economic reform and restructuring.

For the EU, reviving interest in development is especially crucial. Unless Union governments and an increasingly aid-weary public can be persuaded that helping developing countries is still a worthwhile pursuit, the debate on the future of the Lomé Convention - the trade and aid agreement linking the Union to 70 African, Caribbean and Pacific (ACP) states - and the wider issue of the EU's future as the world's largest aid donor could be jeopardised.

Pinheiro is hoping to trigger a Union-wide debate on development cooperation by launching a Green Paper on the future of the Lomé agreement early next month.

“We need to take a fresh look at the Lomé Convention,” he stresses. “The agreement was a huge breakthrough when it started. But in the last ten years, there have been so many changes that you have to ask yourself if the instrument and the framework are still 100&percent; valid.”

Political alliances engendered by the Cold War have faded and world-wide trade liberalisation has diminished the impact of the trade preferences which were once a cornerstone of the Lomé relationship.

Pinheiro says the final decision on whether or not to maintain the Lomé pact will be taken once all interested parties have been consulted.

“For the moment we are asking questions, we want to steer the debate,” he says.

Several options are likely to be mooted. The EU could abandon the global Lomé arrangement in favour of separate agreements with specific African sub-regions, or new deals could be struck on the basis of each country's level of economic development.

Pinheiro predicts that in the end, both the EU and the ACP states will opt for a mix. “We will maintain an institution that we cherish, but with enough flexibility to respond to the trend of regional integration,” he says.

The focus of the new pact is likely to be on promoting peace and stability in Africa through political dialogue with governments in the region, on efforts to build institutions and 'capacity' in the developing countries and on encouraging the activities of the private business sector. Poverty alleviation programmes rather than trade preferences will get priority.

The debate on the future of the Lomé pact and EU development aid is taking place against an increasingly sombre backdrop.

International agencies estimate that four-fifths of the world's population will be living in developing countries by the year 2000 and, as a recent report by the DAC group of aid donors points out, “the success or failure of poor people and poor countries in making their way in an interdependent world will have a profound influence in shaping the 21st century”.

Yet donors are hardly responding with increased generosity.

Total net resource flows from OECD countries and international agencies to developing countries were estimated at 147 billion ecu in 1994. Only 47 billion of this total was in the form of official development assistance, with the rest coming from private investors. As a percentage of gross national product, the OECD's aid average was down to 0.3&percent;, the lowest level since 1973.

The EU's own debate on financial aid for the Lomé countries last year was equally discouraging. It took member states more than nine months of intensive debate to approve a 14.7-billion-ecu European Development Fund for the ACP states over a period of five years. This represented a 20&percent; increase over the last Lomé aid package, but barely kept pace with inflation in ACP countries.

Officials in Brussels fear that next time around, EU governments may be even less generous - unless, of course, the Union and others can find new ways of reviving public interest in development aid.

“We need a new motivation for development cooperation, based on fighting the growing threat of global poverty rather than the receding threat of the Cold War,” says Mahbub ul Haq, a consultant working with the United Nations Development Programme. While security may no longer be threatened by fears of a nuclear holocaust, it is, according to Ul Haq, “certainly threatened by the travel of global poverty across international frontiers in the form of drugs, AIDS, pollution, illegal migration and terrorism”.

This is a view shared by many in the EU. “To make development aid relevant to European public opinion, one has to talk about negative interdependence,” says one Commission official, warning that failure to help developing countries will result in an increase in immigration, environmental problems and the growth of religious extremism in poorer nations.

Others argue that the EU should emphasise that development is a matter of 'enlightened self-interest', since increased prosperity in the developing countries expands markets for goods and services produced in industrialised states.

But more is needed: EU officials admit the focus will have to be on making aid more effective and ensuring that less money goes further.

One way of achieving this is by joining forces. A ground-breaking new partnership forged by the World Bank and the Union is one example of erstwhile competitors working together to speed up Africa's efforts at economic reform. Instead of promoting rival development plans, the two have agreed to devise a 'single strategy' for structural change in Africa.

“We have agreed that African countries must be in the driving seat of economic development,” says Pinheiro. “There can be no progress and growth without the will of the recipient country.”

Shifting the 'ownership' of structural adjustment programmes from Washington to African capitals marks a radical departure in the World Bank's traditional 'top down' approach to economic reform. But, at a time of scarce financial resources, efficiency is the name of the game.

Pinheiro's deal with the World Bank also gives the EU a chance to move centre stage.

In the past, Union development officials have tried to make up for some of the 'deficiencies' in the bank's approach. As African countries slashed spending to meet the bank's tough macroeconomic criteria, the EU was forced to provide badly-needed funds for social sectors such as health and education.

The EU will now become an indispensable ally for African countries seeking to make structural adjustments in the search for rapid economic growth.

Instead of asking African countries to meet a huge array of strict conditions, Pinheiro says the EU will press the World Bank to adopt a more flexible approach. There will be a limited number of 'core economic criteria' which countries undergoing structural adjustment will have to respect. But, in future, aid donors will also take account of a country's overall efforts at democratisation and economic reform.

In this way, the structural adjustment strategies will be adapted to “capacity and constraints” of each country, argues Pinheiro.

Equally importantly, intra-EU coordination of aid policies will be stepped up. Instead of pursuing their own development projects, Pinheiro says Union governments are learning to work together in Africa.

EU aid coordination has already been successfully tested in Ethiopia, the Ivory Coast and Mozambique. In Mozambique, an irrigation project begun by the Italian government has now received financial backing from the British and Portuguese and the Lomé aid budget.

If EU aid is to be used more efficiently, “we have to do this more often”, insists Pinheiro.