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AidWatch 2015: Looking to the future, don’t forget the past – Aid Beyond 2015

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2015 has been marked by important international decision-making moments, including the Financing for Development Conference in Addis, the Sustainable Development Goals Summit in New York and the lead-up to the climate negotiations in Paris. Given the importance of these events for the existing development framework, it is no surprise the EU declared 2015 the European Year for Development. The tenth CONCORD AidWatch Report takes stock of what the EU has achieved this year and, more importantly, it warns member states that the real work starts now. It is long past time for the EU to deliver on its commitments. This report looks to the future, but it does not forget the past.

The role of aid in the new development agenda

The 2015 CONCORD AidWatch Report looks at the new development framework and what the EU can do to ensure it delivers real benefits for those suffering from poverty and inequality. Aid will remain a key development flow for years to come because it can reach farther than any other flows and is more flexible, predictable and accountable. Aid is also bound to play an enabling role in many issues on the future development agenda. It is increasingly being presented as a way to leverage private resources for development. Existing tools for measuring the development impact of leveraged private flows, however, make it very difficult to ascertain the real impact of these flows and compare results across projects.

In addition, this report discusses aid and domestic resource mobilisation. Many developing countries collect very little money in taxes, and aid can strengthen tax systems and build the capacity of domestic tax agencies. To ensure the new development framework delivers as expected, EU member states should take on board the following recommendations:

• Reach the 0.7% target by 2020. If the EU increases its aid and delivers it as effectively as possible, it will change the lives of millions of people across the world and help put many countries on track to meet the Sustainable Development Goals (SDGs) by 2030.

• Launch a consultation on how to develop a common methodology to measure the additionality of private-sector flows supported through blending mechanisms. This methodology should lead to a better understanding of the development impact of these flows and ensure that results are comparable between projects.

• Use aid to support developing countries in mobilising additional domestic resources for development, in line with the commitment made in Addis. EU member states need to state publicly how they plan to support pro-poor fiscal systems in developing countries. Major improvements could also be achieved if the EU were to take steps to tackle tax avoidance and evasion in partner countries, in line with the principle of policy coherence for development.

Delivering genuine aid

The report strongly emphasises the importance of meeting the aid quantity target, but not without ensuring that the aid is of a high-quality. Some of the expenditure items EU countries report as aid do not translate into a real transfer of resources to developing countries or, ultimately, to people who are poor and marginalised. This is the basic principle behind the CONCORD AidWatch “genuine aid” methodology (see Section 3.3). Some member states, such as Ireland, Luxembourg and Poland, have excluded all or some of these items from their aid reporting. More concerning is the fact that some EU countries are misreporting some of these expenses by including costs which, under existing guidelines, should not have been counted. The reporting of non-eligible migration-related expenses in Spain and Malta, or the misreporting of refugee costs in Hungary, are some examples included in this report.

In addition, climate finance is often double-counted towards climate and development targets, when in practice the EU aid budget has stagnated for the last few years and is clearly insufficient to meet either development or climate needs individually. EU member states should ensure that the aid they deliver focuses on issues that matter in developing countries, by implementing the following recommendations:

• Stop inflating aid, and exclude inflated aid items from ODA reporting: refugee costs, imputed student costs, tied aid, interest on loans and debt relief.

• Agree on a joint EU definition of “climate finance” so that aid and climate commitments can be measured accurately and independently, and are financed additionally. Climate finance can be reported as ODA if it complies with existing guidelines, but EU countries should not count it towards aid targets if it is also being reported in the context of climate-finance commitments.

• Stop inflating refugee costs with non-reportable expenses. CONCORD AidWatch is also concerned that the refugee crisis could be used as an excuse to count non-eligible expenditure relating to general migration flows as ODA. Refugees and migrants have a different legal status. According to the OECD, migration-related expenses cannot be reported as aid, though this has not stopped countries such as Spain and Malta from doing so.

Making aid and other development flows more effective

How aid is delivered, and the policies and practices of donor governments, can have a huge influence on its impact on poverty and inequality. This is the rationale behind the development effectiveness agenda. Evidence from developing countries shows that the EU is failing to make sufficient progress on the implementation of effectiveness principles, especially ownership and conditionality (see Section II). Development effectiveness principles are also applicable beyond the realm of aid and official development cooperation. But if both aid and non-aid development cooperation efforts are to be effective and leave no one behind, they must be coordinated. They must be organised under the umbrella of development strategies designed and owned by developing countries, based on a sharing of information and on the coordination of goals, beneficiaries and target sector. It is also important to make all this information publicly available in order to allow mutual accountability. This is as true for aid as it is for any other development flow. Development effectiveness was one of the EU’s priorities in the lead-in to the Addis conference and the SDGs, but member states have failed to back up this priority with actions.

This is a pending task, and EU and its member states should implement the following recommendations:

• Explain how and when, at a national and institutional level, they are going to deliver on the development effectiveness targets and demonstrate progress, measured against the indicators devised by the Global Partnership for Effective Development Cooperation (GPEDC). The GPEDC’s second monitoring round, which will be completed in 2016, provides an opportunity to review progress, but only if it is based on sound data and an objective critical analysis.
When insufficient progress is recorded in relation to these indicators, individual countries should devise and carry out corrective action to get back on track.

• Promote the development effectiveness principles in the context of other development flows. This would entail strengthening the GPEDC. In order to make the GPEDC a truly influential body, EU countries should also throw their support behind the GPEDC and ensure that the upcoming high-level meeting, due to take place in Kenya in 2016, has an ambitious, action-oriented agenda and high profile representatives who can take it to the next level.

• Work towards a definition of total support for sustainable development (TOSSD) that will help to improve the quality of non-aid flows in the future. To do this, it should capture only flows that are relevant from a development perspective, and the negotiation process should be opened up to all countries. The development effectiveness agenda can provide some useful principles to help differentiate between developmental and non-developmental flows.
Flows reported as TOSSD should include a description of how they comply with the development effectiveness principles (e.g. measures taken to increase the ownership of a project by developing countries).

• The effectiveness of EU aid depends on how well it follows development effectiveness principles – with a particular focus on country ownership and reducing formal or informal conditionality – whilst also ensuring that it includes civil society and improves predictability.