How to do more and do it more effectively

Date: 22/06/06

The EU is the biggest aid donor in the world, last year devoting EUR 8.9 billion to development. But spending the money and ensuring that it arrives where it is supposed to is no easy task.

On the EU's side, the European Commission and the European Court of Auditors have over the years altered their ways of keeping track of funds. Development projects, once agreed between the Commission and a developing country, are subject to public tendering. Greater powers of decision-making given to Commission delegations abroad in the field mean that there is now more local monitoring of how projects are carried out.

While major projects used to be audited once they were finished, now they are audited every year, says Harm Rozema, a director at the European Court of Auditors. "It was very easy to be confronted with a situation previously where a project couldn't be audited because either the people who were in charge were no longer on the ground or paperwork had gone missing," he says.

Increasing funds for a project that ends up costing more is made more difficult and, when a project is taking too long to complete, Commission delegations on the ground are expected to tackle the problem. Thanks to the tendering process, fraud and theft of funds are "not excluded but the risk is minimised greatly", says Rozema.

But the bigger question of how funds are best used and what happens to them when a developing country receiving funds is corrupt or flouts democratic and human rights' standards is more difficult.

First there is the danger of overlap on the EU side. With 25 member states each with their own development philosophies and programmes, there can be duplication of effort, or worse still, conflict in the types of programmes carried out.

Stefano Manservisi, director-general for development at the Commission, says greater co-operation among the member states and more attempts at a co-ordinated EU policy would help overcome the problem, allowing the EU "to do more and do it more effectively".

Non-governmental organisations criticise the amount of red tape attached to projects and upbraid national governments which tie aid to the purchase of their goods and services and include debt relief in their statistic on development aid. A report from ActionAid concludes that "just 11% of French aid is real aid...40% of French aid is provided as debt relief, much of which is an accounting exercise rather than a real resource transfer".

Rozema agrees that this was a problem that needed to be tackled, especially to help the developing country receiving aid, which often had to perform "gymnastics to satisfy donors".

"There are activities that are co-financed by, say, five member states. But in that you will have five different rules surrounding the project and ways of going about it," he says.

The Commission's philosophy is that funds are best spent by a co-ordinated policy in partnership with developing countries. Rather than imposing projects dreamt up in Brussels, there is a greater move towards states receiving money and guiding development policies themselves.

But this can lead to protests over corrupt or oppressive regimes getting their hands on European taxpayers' money. A number of EU states last year froze aid to Uganda after a crack-down on political opposition.

But some believe suspending aid over claims of corruption or abuse is not the way to further development. "If governments have a problem it shouldn't affect entirely their financing. It should be sorted out on the political level," says Ahmed Ndyeshobola, financial expert with the Asia, Caribbean and Pacific (ACP) secretariat in Brussels.

"The rest of the population is often completely unconcerned with this political issue. We wish donors would concentrate on the delivery of aid," adds Ndyeshobola, stressing that in the event that there was a "severe abuse of power" then the matter of suspending aid was different.

Manservisi agrees that isolating states might not achieve the desired effect of helping them. "Our approach is dialogue, partnership and incentives. In the field of good governance we are not in favour of negative conditionalities and isolation. This hardly works and in the end poor people will suffer more."

He points out that in extreme cases of non-co- operation, under an agreement with developing countries, aid could be suspended and channelled through non-governmental organisations if serious problems arose. This happened recently with Mauritania and Ivory Coast. "But before arriving at these extreme situations our approach is political dialogue," he says.

Manservisi stresses the importance of an imminent deadline for the delivery of development aid: member states have only until December next year to ratify the next tranche of European Development Fund worth EUR 22.7 billion for the 2008-13 period. A delay in agreeing the EU's budget until late last year meant the time-frame for all 25 member states to ratify the development fund was tighter than usual. If they do not ratify it in time, Manservisi warns, "for the first time ever there will be a gap... no more commitments, no new money".

Author takes a look at the challenges of delivering effective development aid and how the EU keeps track of where its funding goes.
Article is part of a European Voice Special Report, 'EU development policy'.