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AidWatch 2010: Penalty Against Poverty More and better EU aid can score Millennium Development Goals

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Executive Summary

This year’s annual AidWatch Report comes at a critical moment in the complex and ever changing struggle to eradicate poverty and inequality worldwide. In September this year, a UN Summit will be held to assess progress towards the MDGs. Sitting here in mid-2010, with the food and economic crisis having raged for much of the last 3 years, the MDGs are now an even more distant prospect and the UN Summit needs to ind a way to avoid these Goals being missed. In the UN Secretary General’s words: “With ive years to go to the target date of 2015, the prospect of falling short of achieving the Goals because of a lack of commitment is very real. This would be an unacceptable failure from both the moral and the practical standpoint.” For the past four years, AidWatch has tracked the EU’s progress towards achieving its aid quantity and quality commitments. On aid quantity, EU Member States have pledged to give 0.7% of EU GNI as development aid by 2015 and an interim target of 0.56% of EU GNI by 2010. This commitment was made by the EU as part of its contribution to providing sufficient financing to help reach the UN Millennium Development Goals (MDGs).

We understand that aid alone cannot eradicate poverty and solve development challenges, but we know it can make an important contribution to these efforts. It is currently the most flexible source of financing for many of the poorest countries as they deal with the impacts of the economic crisis; it has played an important role in getting at least 30 million extra children into school in sub-Saharan Africa since 2000; and coordinated aid to support sector strategies - an approach encouraged by the aid effectiveness agenda - is delivering significant impacts in sectors such as health and agriculture. Given these and potential future achievements, the disappointing progress of EU member states on aid quantity and quality in 2009 illustrated in this report is a major threat to these EU’s development ambitions.

This report shows that aid levels stagnated in 2009 and are well short of promised levels for 2010. In 2009, aid decreased from €50bn in 2008 to €49bn. Despite the drop in absolute numbers, aid in % of GNI increased in 16 out of the 27 European countries, reaching an average 0.42% in 2009 (up from 0.40% in 2008). However, in most cases the advances are small and reflect the fact that EU economies contracted due to the economic crisis rather than a real effort to increase aid levels. Figures in constant prices show that in reality ODA only rose in 13 European countries: Hungary (23.1%), Romania (17.5%), France (16.9%), United Kingdom (14.6%), Poland (13.4%), Finland (13.1%), Cyprus (11.7%), Belgium (11.5%), Sweden (7.4%), Slovenia (7.1%), Denmark (4.2%), Lithuania (2.4%) and Luxembourg (1.9%). Conversely, significant falls were registered in the other 14 EU Member States, including several EU-15 countries. The worst performers include: Austria (-31.2%), Italy (-31.1%), Ireland (-18.9%), Slovakia (-17.8%), Portugal (-15.7%), Bulgaria (-12.7%), Germany (-12.0%), Greece (-12.0%).

In addition, all evidence indicates that 2010 will not see significant improvements. According to official estimates, 2010 aid levels are expected to reach a maximum of 0.46% of the GNI, far from the 0.56% collective target and over €11bn short in terms of funding. Most of these shortfalls will be consequence of insuficient funding by Italy (€4.5bn), Germany (€2.6bn) and France (€800m).
Official aid figures, however, fail to capture the reality of European aid lows. In 2009, European countries reported €3.8bn of inflated aid as ODA, or almost 8% of the total igure. A breakdown of the data shows that €1.4bn was debt cancellation, €1.5bn student costs and almost €1bn was spent on refugees in donor countries. nce inlated aid is discounted from the oficially reported ODA figures, aid levels drop to 0.38% of European GNI. If EU Member States continue the current trend and once inflated aid is discounted, EU countries will fall €19bn short of their promises in 2010. This is a significantly larger amount than the €11bn shortfall official figures predict.

It is widely accepted that in order for development assistance to provide effective and sustainable support that responds to the needs of the poorest people it needs to be managed and directed by developing country institutions under close scrutiny from citizens. Ownership is therefore the central element of the Paris Declaration, the Accra Agenda for Action and other efforts to improve the effectiveness of aid. Although important progress has been made in this area, this year’s AidWatch Report shows that EU donors continue to fall well short of what is required. They all too often fail to provide sufficient support to women’s, poor and marginalized groups; they remain un-transparent; they continue to impose excessive conditions on their aid that weaken democratic accountability; and they pursue non-development objectives with their aid. Moreover, EU governments have shown limited commitment to the Policy Coherence for Development agenda and there have also been efforts by some EU member states to redefine their aid commitments – through the Whole of Union approach – which we fear may result in less support to poor countries.

Some might say that given the huge impacts of the global economic crisis on Europe such disappointing trends in EU development support were inevitable, but this is simply not true. With suficient political will from the EU – as shown by their inancial sector bailouts of €1 trillion, equivalent to all aid delivered since 1960, and by the increases in ODA registered in some countries – an emergency development response could have been mobilised. Given that the economic crisis has now moved into its third year, EU member states should have done much more by now.

It is not too late for the EU to maximise its contribution to the MDGs and 2010 provides important opportunities for doing so, with the UN MDG Review Summit in September and important discussions taking place on the achievements of the Paris Declaration. If EU countries can use these fora to renew their commitments to meet their aid promises, to implement ambitious aid effectiveness reforms and use their other policies to better support development then a genuine development partnership will emerge that will help ensure that 2010 is remembered for our efforts to score the most important goals, the Millennium Development Goals.

The 1,600 organisations represented by CONCORD, the European Confederation for Relief and Development NGOs, call upon EU governments to take responsibility for leading the global call to increase aid quantity and quality through:

  1. Agreeing binding year on year timetables of aid increases required to meet the 2015 European aid quantity targets and demonstrate with regular inancial reports how they are being implemented.

  2. Endorsing the European Commission call to implement a EU peer review mechanism at the Heads of State level and involving the European Parliament, in order to hold governments to account on their aid commitments.

  3. Ending inflation of aid budgets with debt cancellation, refugee and student costs; making climate inance additional to existing ODA targets; and stopping discussions on widening the definition of ODA to include other items such as security or migration as suggested by the Whole of the Union approach.

  4. Implementing, on top of their aid quantity commitments, a financial transaction tax to help finance global public goods such as poverty reduction and climate change.

  5. Speeding up the implementation of the Accra Agenda for Action and Paris Declaration at the national level in consultation with developing countries; and putting in place an annual process for concrete monitoring of progress on Paris and Accra commitments.

  6. Embracing and promoting the concept of democratic ownership by going beyond measuring ownership through alignment, ensuring that the voices and concerns of citizens and parliaments are central to national development plans and processes and taking forward the following specific recommendations:

• Gender: put gender equality and women’s empowerment at the centre of development cooperation by supporting the implementation of the EU Gender Action Plan with financial and human resources, and taking stock of best practices in EU Member States.

• Transparency: proactively increase the availability and accessibility of timely accurate and comparable information on development policy and practice.
All European governments should sign up to the International Aid Transparency Initiative, and demonstrate how they will implement its commitments.

• Untying aid and procurement: end all practices of formal or de facto aid tying and use developing countries own systems as the first option.

• Aid allocation: ensure that no aid money is spent on activities which are not primarily focused on reducing poverty and that aid is not used to pursue donor foreign policy or commercial interests.

  1. Demonstrating how all European policies are coherent with development objectives, including in the crucial areas of trade, climate change, migration and food security.