DIRECTING EU POLICYTOWARDS POVERTY ERADICATION

From Commitments to Targets to Results…

Mirjam van Reisen

For comments on this paper, please contact:Mirjam van Reisen, email: mvreisen@xs4all.be

ECDPMDecember 2001

Contents

ACRONYMS AND ABBREVIATIONS................................................................................................4PREFACE.................................................................................................................................................5

1 INTRODUCTION...................................................................................................................................6

2 POVERTY ERADICATION: THE INTERNATIONAL DIMENSION...........................................72.1 INTERNATIONAL COMMITMENTS TO POVERTY ERADICATION....................................................72.2 DEFINING TARGETS FOR POVERTY ERADICATION.....................................................................102.3 NATIONAL STRATEGIES FOR POVERTY ERADICATION: THE CONCEPTS OF ‘OWNERSHIP’,

‘GOOD GOVERNANCE’ AND ‘CIVIL SOCIETY’...........................................................................112.4 INTERNATIONAL STRATEGIES FOR POVERTY ERADICATION: POVERTY REDUCTION ...................

STRATEGY PAPERS.....................................................................................................................132.4.1 Enhancing National Responsibility.............................................................................142.4.2 Poverty Reduction Strategy.........................................................................................14

2.5 TOWARDS NEW CONDITIONALITIES..........................................................................................15

3 THE EMERGING FOCUS ON POVERTY REDUCTION IN COMMUNITY ASSISTANCE (1957–92).................................................................................................................................................173.1 1957–76: FROM YAOUNDÉ TO LOMÉ........................................................................................173.2 1976–88: EXTENDING AID THROUGH THE BUDGET..................................................................173.3 1984–92: EXPANDING DEVELOPMENT COOPERATION WITH THE MEDITERRANEAN

COUNTRIES, ASIA AND LATIN AMERICA...................................................................................183.3.1 Cooperation with Mediterranean Countries...............................................................183.3.2 Community aid to Asia and Latin America.................................................................19

3.4 COOPERATION WITH INTERNATIONAL FINANCIAL INSTITUTIONS..............................................20

4 1992–2000: TOWARDS A GENERAL EUROPEAN APPROACH TO POVERTY ERADICATION.....................................................................................................................................204.1 THE TREATY ON EUROPEAN UNION..........................................................................................204.2 HORIZON 2000...........................................................................................................................214.3 MAINSTREAMING ‘POVERTY’ IN EU DEVELOPMENT PROGRAMMES........................................224.4 CONCENTRATING THE COMMUNITY’S DEVELOPMENT POLICY ON ‘POVERTY’.........................234.5 ENHANCING THE POVERTY FOCUS IN COMMUNITY AID: DEFINITIONS....................................24

5 PRIMARY POVERTY FOCUS: THE EVOLUTION OF FINANCIAL RESOURCES...............255.1 EVOLUTION OF GEOGRAPHICAL DISTRIBUTION OF COMMUNITY AID.......................................255.2 EVOLUTION IN THEMATIC DISTRIBUTION OF COMMUNITY AID................................................265.3 FOCUS ON LEAST DEVELOPED AND LOW-INCOME COUNTRIES................................................265.4 CHANGING THE EMPHASIS TOWARDS THE LDCS......................................................................28

6 SECONDARY AND TERTIARY POVERTY FOCI.........................................................................296.1 COUNTRY STRATEGY PAPERS: QUALIFYING ‘OWNERSHIP’......................................................296.2 POVERTY REDUCTION STRATEGY PAPERS.................................................................................306.3 LINKING THE PRS AND THE CSS: EMPHASIS ON SOCIAL SECTORS..........................................316.4 THE PRS, THE CSS AND SELECTIVITY......................................................................................32

7 MEASURING PROGRESS..................................................................................................................327.1 TARGETING AID: THE 20/20 COMPACT.....................................................................................337.2 MEASURABLE SECTORAL OUTPUT TARGETS.............................................................................337.3 COMMISSION’S RESERVATIONS ABOUT OUTPUT TARGETS.......................................................347.4 INTEGRATING THE EDF INTO THE BUDGET...............................................................................367.5 THE COMMISSION’S EFFORTS TO HARMONISE COMMUNITY DEVELOPMENT PROGRAMMES. . .37

8 CONSTRAINTS AND OPPORTUNITIES.........................................................................................378.1 WHAT COMMUNITY INSTITUTIONS CAN DO.............................................................................39

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ABOUT THE AUTHOR......................................................................................................................................42

ANNEX 1: DAC LIST OF AID RECIPIENTS (1997/98) AND ACP COUNTRIES.....................................43ANNEX 2: ALLOCATION OF DISBURSEMENTS OF ODA BY THE EU, INCLUDING MEMBER

STATES, TO COUNTRIES BY LEVEL OF INCOME, 1986/87–1996/97......................................44ANNEX 3: DAC SYSTEM OF CLASSIFICATION BY SECTOR OF DESTINATION.............................45ANNEX 4: OUTPUT TARGETS, 2001 BUDGET............................................................................................46

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Acronyms and AbbreviationsAASM Associated African States and MadagascarACP Africa, Caribbean and Pacific ALA Asia and Latin America ProgrammeCA commitment appropriationsCEEC Central and Eastern European CountriesCFSP Common Foreign and Security PolicyCIS Commonwealth of Independent States (of the former Soviet Union)CSP Country Strategy PaperCSS Country Support StrategyDAC Development Assistance Committee (OECD)EC European CommunityEDF European Development FundEEC European Economic CommunityEIB European Investment BankESAF Enhanced Structural Adjustment Facility EU European UnionGNP gross national productHIC high-income countryHIPC Highly Indebted Poor CountryIFI international financial institutionIMF International Monetary FundIPRSP Interim PRSPITeM Instituto Tercer MundoLDC least developed countryLIC low-income countryLMIC low- to middle-income countryMEDA Measures to accompany activities in favour of Mediterranean partnersMEP Member of the European ParliamentNGO non-governmental organisationNIP National Indicative ProgrammeNIS Newly Independent States (of the former Soviet Union)OA Official AssistanceOCT Overseas Countries and TerritoriesODA Official Development AssistanceOECD Organisation for Economic Cooperation and DevelopmentOOF other official flowsPA payment appropriationsPhare Programme for Central and Eastern European CountriesPFP Policy Framework PaperPRGF Poverty Reduction and Growth Facility PRS Poverty Reduction StrategyPRSP Poverty Reduction Strategy PaperQSG Quality Support GroupSAPRIN Structural Adjustment Participatory Review NetworkTacis Technical Assistance for the Commonwealth of Independent StatesUK United KingdomUN United NationsUPICs upper- to middle-income countries (and territories)US United StatesWTO World Trade Organization

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PrefaceI would like to thank Commission officials who assisted in providing vital information for this publication. I am grateful to Terhi Lehtinen from ECDPM for her comments on earlier drafts of this paper.

I would first like to make a personal comment on the terminology related to ‘poverty’. This paper is about poverty, and as such relates to people living in poverty. I do not like to refer to these people as ‘the poor’. The people living in poverty I have met are mostly remarkably resourceful and have an admirable wisdom and outstandingly practical view of life. Rarely have I benefited from tastier meals than those I received in the most remote areas, prepared by people who fit into the category of those earning ‘less than a dollar a day’.

And also another note on terminology. Formally, the Community aid programme comprises the aid programmes implemented by the European Commission and those of the Member States. Strictly speaking, the term ‘Community programme’ can mean ‘the Community programme including the Member States’ or ‘Community programme excluding the Member States’. The analysis presented in this paper encompasses only the aid programme implemented by the Commission. Wherever the term ‘Community programme’ is used, it refers to the Community programme excluding the Member States, unless specifically stated otherwise.

Mirjam van ReisenLa Hulpe, November 2001

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1 IntroductionCopenhagen, March 1995. At the UN World Summit for Social Development, the European Community commits itself, along with 117 countries, to the task of eradicating poverty. For the first time in history, specific targets are set towards the goal of poverty eradication.

Brussels, April 2000. The European Commission adopts a policy paper in which poverty reduction is identified as the overarching objective of its development activities.

Geneva, June 2000. At the second UN World Summit for Social Development, the international community sets international development targets for poverty eradication.

New York, September 2000. At the UN Millennium Summit, the international community restates its commitment to the international development targets for poverty eradication agreed in Geneva – the ‘Millennium development goals’.

Brussels, October 2001. The Commission and the EU Member States express their strong commitment to the Millennium development goals, including reducing by half the proportion of people living in extreme poverty before 2015. The term ‘extreme poverty’ is used to refer to people living on less than US$ 1 a day.

The policies recently adopted by the European Commission towards the eradication of poverty are a clear reflection of and response to developments in the international community. While this is heralded as a new positive development, a historical analysis of Community aid shows that the commitment to poverty eradication dates back to the origin of its aid programme. This is particularly true of the European aid programme initiated under the Community budget in the late 1970s.

Consequentially, a wealth of experience has been built up in the area of poverty eradication in recent decades, of which little use has been made. The resolutions adopted by the European Parliament in the 1980s, pointing to the weaknesses of Community aid in the area of poverty eradication, show remarkably little difference from those adopted on the same subject in recent times. This is the case despite numerous reforms initiated by the Commission to deal with the problems, as well as important changes in the international context.

It appears to be very difficult to translate long-standing commitment to eradicate poverty into action – and it seems to be even more problematic to convert these commitments into concrete and measurable results. The question then arises as to whether the European commitment to poverty eradication is more than a paper-commitment.

The Commission now insists that all its external policies are geared towards poverty eradication. These lofty statements should be more than just rhetoric, and be supported up by structures and staff specialised to implement such policies. The commitments should be backed up with figures of input and output of resources as well as evaluations of actual effect of actions on poverty eradication.

These simple yardsticks of progress are not availble. The European Commission even withheld figures on sectoral output over 1999/2000 from the European Parliament in its preparations regarding the Budget for 2002. Country Strategy Papers, in which actions for EU development co-operation is prioritised, have not been sent to the Parliament, nor have they been made available to the public. The Commission has not made overviews of staff specialised in various fields of poverty eradication available either. By its own admission, the Commission states that evaluations of its activities have not found, or looked at, the impact of its activities on the fight against poverty.

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The commitment to the eradication poverty will not bring a result in and of itself. Policies will need to ba backed up by concrete goals and targets, and supported by monitoring mechanisms to measure progress in achieving these.

Europe can make a difference, if commitment is transformed in visible results. The current international context provides opportunities to do so. The September 11 attacks on New York and Washington, can orient external policies on the acknowledgement that human security cannot be guaranteed by military force, and that international cooperation to take people out of poverty and despair, is an essential element in safeguarding world peace.

The 2001 UN Conference on Racism and Xenophobia in Durban, South Africa, pointed to the historic role that Europe has played in the colonisation process. This gives Europe all the more responsibility to make a significant contribution to the implementation of the Millennium Development Goals. This role could prove vital in creating stability amid the insecurity that has followed from the terrorist aggression.

This paper examines the efforts of European institutions to redirect development policies to assist people living in poverty. These efforts are assessed within the international context of new ideas about how poverty eradication can best be achieved. ]delete] This paper therefore addresses the following questions:

What has changed recently in the policy orientation of the international community towards poverty eradication?

What has been the policy of the European Community so far in relation to the eradication of poverty?

How has the European Community responded to the policies of the international community intended to eradicate poverty?

How can the activities of the European Community in poverty eradication be enhanced?

The Commission distinguishes three levels of poverty as the foci for directing Community aid. Under the primary poverty focus, aid is directed towards the poorest, least developed countries (LDCs). Under the secondary and tertiary poverty foci, aid is directed at the ‘poorest sections’ in developing, low-income countries (LICs) and middle-income countries (MICs), respectively. I have found these concepts useful, and have used them in this analysis of the European Community’s policy to eradicate poverty.

2 Poverty Eradication: The International Dimension2.1 International Commitments to Poverty Eradication

At the UN World Summit for Social Development (the Social Summit) held in Copenhagen in 1995, 117 heads of State or Government1 and the European Community made an historic commitment to eradicate absolute poverty, and adopted concrete plans and initiatives to that end. Some further commitments, particularly related to women, were made at the Fourth UN Conference for Women, held in Beijing in 1995, and these were reconfirmed by the UN General Assembly in its Special Sessions on Social Development and on Women, both held in 2000, as well as at the 2000 Millennium Summit in New York.

The measures agreed were not some vague and general commitments. On the contrary, they included concrete and measurable targets in a number of different areas that would have an immediate impact

1 Including all EU Member States.

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on the lives of people living in poverty. Among the measures and initiatives, the governments committed themselves to achieving the following goals by 2015 at the latest:

basic education for all; ensuring that 80% of children finish primary school; reducing by one-third 1990 infant mortality rates; providing blanket vaccination [for whom, against diseases such as …?] ; reducing by one-half 1990 malnutrition levels; providing medical care for women during pregnancy and childbirth; increasing life expectancy to over 60 years; providing drinking water and sanitation for all; eliminating the gender gap in literacy; and ensuring equal access to primary school for girls and boys.

The rich countries also made a commitment to designate 0.7% of their gross national product (GNP) to aid, and to reduce their military expenditures.2

In establishing these commitments at the 1995 Social Summit and in subsequent processes, the international community adopted crucially important, measurable targets as part of the overall effort to eradicate poverty, acknowledging that:

poverty can not be defined solely (and thus resolved) in terms of income; the eradication of poverty should be related to greater investment in social sectors; common targets need to be established and agreed upon in or to measure progress towards

poverty eradication; and the progress in eradicating poverty can be measured using objective and quantifiable criteria

other than the one-dimensional aspect of income.

In 1996 the group of industrialised countries that coordinate their aid through the Development Assistance Committee (DAC)3 of the Organisation for Economic Development and Cooperation (OECD) adopted time-bound targets. The Commission participated in the elaboration of these targets, which were related to the commitments made in the United Nations. The targets included:

reducing by one-half the proportion of people living in extreme poverty. universal primary education in all countries by 2015; demonstrable progress towards gender equality and the empowerment of women by

eliminating gender disparities in primary and secondary education by 2005; reducing by two-thirds the mortality rates for infants and children under age 5, and by three-

fourths the rate of maternal mortality, all by 2015; ensuring access through the primary health care system to reproductive health services for all

individuals of appropriate age as soon as possible, and no later than 2015; and the implementation of existing national strategies for sustainable development in all countries

by 2005, in order to ensure that current trends in the loss of environmental resources are effectively reversed at both global and national levels by 2015.4

The Commission recognised that the DAC targets were based on only a limited selection of commitments, and emphasised that they should not be interpreted as a reduced commitment to the other goals agreed by the international community.5

2 Social Watch Report 2001.3 In 1996 the members of the DAC were: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany,

Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, the United Kingdom, the United States and the Commission of the European Communities.

4 OECD, Shaping the 21st Century: The Contribution of Development Cooperation, Paris, March 1996.5 European Commission, DG VIII, Strengthening Actions in the Fight against Poverty. Discussion Note, Brussels,

1999.

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In establishing these targets, the DAC members stated that ‘Those responsible for public money are accountable for its effective use. We have a duty to state clearly the results we expect and how we think they can be achieved’.6 In this they were responding to the growing doubts in the industrialised countries that public money was actually contributing to the fight against poverty [delete]. The DAC members recognised the need to redirect their policies towards output- and results-oriented approaches, so that the successes of development aid would be more visible to the public. They also recognised that social development – particularly in primary education, gender equality and basic health care – was a crucial aspect in any strategy focused on the eradication of poverty. The importance of environmental sustainability and regeneration was also acknowledged.

Box 1: Achievability of the DAC Targets

In an assessment of whether the identified targets were achievable, the World Bank* concluded that the evidence was mixed. If poverty is measured in terms of income, then poverty outcomes are a function of the overall level of economic growth and the extent to which the poor participate in that growth. Measured in this way, forecasting poverty is a product of forecasting overall growth and changes in inequality, but both are difficult to measure. The World Bank researchers concluded that:

reaching the goal of cutting poverty by half by 2015 would depend on the initial poverty level, the initial income distribution, and changes in that distribution over time;

if developing countries grow at the same rates as those that prevailed in the early 1990s, or if performance is projected on the basis of current policy and structural conditions, many will not achieve their poverty reduction goals; if there are increases in inequality the situation is likely to be worse;

many or most of the countries of sub-Saharan Africa will not halve their poverty rates by 2015;

the achievement of social goals is intimately linked with poverty goals – there is evidence of two-way causal relationships between incomes and social outcomes, and from social conditions to income growth; and

even with high rates of growth, past levels of progress would lead to child mortality rates still substantially above the DAC goal for 2015.

The researchers concentrated on two goals: halving extreme poverty and reducing by two-thirds the child mortality rate. For these goals to be achieved, they concluded that: ‘considerably more effort is needed today – in improved economic management, and in increased public and private efforts to improve the social conditions of the population at large’.*

The Knowledge Network for Poverty Reduction, a group of economists coordinated by the UNDP’s Social Development and Poverty Elimination Divisions, examined the patterns of economic growth and poverty in 38 countries. The study found that high growth is not a guarantee of poverty reduction, and concluded that: ‘These results suggest that policymakers need to be concerned not just about the pace of growth but also its character. […] Countries need to directly empower the poor and create for them an environment conducive to more employment and high incomes’.**

In its report Overcoming Human Poverty, the UNDP noted that in order to reach the targets, the following key points must be acknowledged:** ‘old-school’ prescriptions – supplementing rapid growth with social spending and safety nets

– have proved inadequate;

6 Ibid., p.2.

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countries must link their poverty reduction programmes not only to their national policies, but also to their international and financial policies; this will include linking international trade policies to poverty;

there must be responsive and accountable institutions of governance; capacity building, self-organisation and empowerment of people living in poverty are

essential; resources must be focused on the poor.______________* Lionel Demery and Michael Walton, Are Poverty and Social Goals for the 21st Century Attainable? Poverty Reduction and Economic

Management Network, World Bank, May 1998. The authors are respectively the Principal Economist and Director of the Department on Poverty Reduction of the World Bank.

** UNDP, Overcoming Human Poverty, Poverty Report 2000, New York, 2000.

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2.2 Defining Targets for Poverty EradicationThe 1995 Social Summit did not attach targets to the goal of eradicating absolute poverty. The DAC committed itself to reducing by one-half of the proportion of people living in (extreme) poverty, although this target, if interpreted literally and narrowly, would be meaningless:7 ‘Halving the proportion of people living in poverty (and not the absolute number) can be achieved even if 900 million people still spend less than one dollar a day in 2015’.8 The importance of the DAC target was that it made eradicating poverty into a measurable and quantifiable goal. The DAC defined ‘extreme poverty’ on the basis of the World Bank standard: ‘The World Bank has used the standard of $  370 per capita in annual income, or about $ 1 per day, as the threshold of extreme poverty. Based on that standard, it has estimated that 30% of the population in developing countries – or some 1.3 billion people – live in extreme poverty, and that their numbers are increasing’.9 The DAC stated explicitly that the goal it had identified would not be the end-goal, and that it ‘obviously goes only part of the way toward meeting the global poverty eradication target identified at Copenhagen. But it seeks to give the target a concrete, attainable focus for the medium term’.10

At the UN Millennium Summit, held in New York in September 2000, world leaders endorsed the target to halve extreme poverty by 2015.11 The Summit also confirmed the definition first provided by the OECD of extreme poverty as ‘people whose income is less than one dollar per day’. It also added ‘and […] people who suffer from hunger and, by the same date, to halve the proportion of people who are unable to reach or to afford safe drinking water’.12 With this addition, the Summit was perhaps recognising that the OECD definition was not sufficiently refined. Defining poverty in terms of income alone is problematic because it almost inevitably guides proposals for economic policies formulated in terms of economic growth, as the only parameter of so-called ‘pro-poor policies’.

The inevitability of the connection between the pro-poor policies and economic growth, based on a narrow definition of poverty, leads to a disregard for the now widely available evidence that economic growth might only lead to poverty reduction if other parameters, such as income distribution, access to social services, etc., are also improved. It should be considered that in circumstances where these additional elements are not included in economic policies, economic growth might not lead to poverty eradication.13 Indeed, in the wake of the financial crises in East Asia, South America and Russia, there is evidence that certain types of rapid economic growth, based on the free movement of speculative capital, can eventually produce more poverty. Nevertheless, the fact that a concrete and measurable target for poverty eradication was established has been important in ensuring that governments can be held accountable for the implementation of their commitment made on several occasions since 1995.14

7 The Commission seems to support the view that the target should be read as halving the incidence of extreme poverty, not the proportion. In its working paper on measures to address poverty reduction, the Commission stated that ‘international development goals have been agreed. In particular, there is a commitment to reduce the incidence of extreme poverty by half by 2015’ (emphasis added). Commission of the European Communities, Measures taken and to be taken by the Commission to address the poverty reduction objective of EC development policy, Commission staff working paper, Brussels, 26 July 2001, SEC(2001)1317.

8 Bissio, R., ‘Charting progress. Much ado…’, in: Social Watch Report 2001, Montevideo, no. 5.9 OECD, ibid., 1996, p.9.10 OECD, ibid., 1996, pp.9–10.11 United Nations, Resolution adopted by the General Assembly, 55/2, UN Millennium Declaration (A/55/L/2), 2000.12 UN General Assembly Millennium Declaration, September 2000. 13 The Commission has adopted the same position: ‘In general, EC policy recognises that whilst growth is necessary

for poverty reduction, it is not sufficient, and the economic, social and environmental policies accompanying the process of growth and development must address inequality in the distribution of the resources generated, and ensure that the resources on which economic growth and livelihoods of the poor depend are used in a way which allows progress in poverty reduction to be sustained. Specific measures should be undertaken to make economic opportunities available to poor people, both through direct and indirect measures’. Commission of the European Communities, Measures taken and to be taken by the Commission to address the poverty reduction objective of EC development policy, Commission Staff Working Paper, Brussels, 26 July 2001, SEC(2001)1317, p.5.

14 Bissio, ibid, 2001.

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Box 2: Defining Poverty

‘You want to know how I define poverty? How can you ask the question when you yourself see that I live in poverty? The definition of poverty is right in front of you. Look at me. I stay alone. I don’t have enough food. I have no decent clothing or accommodation. I have no clean water to drink. Look at my swollen leg. I can’t get to the clinic, which is too far for me to walk. So what kind of definition of poverty do you expect me to give you which is better than what you are seeing with your naked eyes?’ (Grandmother from Chipinge, Zimbabwe)*

At the UN Millennium Summit the international community made a commitment to halve extreme poverty, defined as ‘people whose income is less than one dollar per day’. This measure is used for making comparisons between countries and regions. Within countries and regions a range of indicators can be used to reflect the varying degrees of poverty. The UNDP Human Development Report has developed a highly sophisticated model for measuring various aspects related to poverty.

Poverty is increasingly understood as a phenomenon that affects people due to their lack of power to determine and influence who has access to what. Amartya Sen, the Nobel Prize-winning economist, defined poverty as ‘...deprivation of basic capabilities rather than merely as lowness of incomes’.** Consistent with this line of analysis, the Summit placed poverty in a broader context of social exclusion, reflecting the concerns that poverty is related to the process of social disintegration, and that economic liberalisation has undermined social cohesion. In the literature, ‘absolute’ and ‘relative’ poverty are distinguished as follows: Absolute poverty is based on what human beings require as a minimum to survive. This is

often associated with the identification of ‘basic needs’. Relative poverty is based on the position of a person or family in relation to others in the

community, or to a standard considered necessary for living in a society. Poverty is defined as a phenomenon in a social context.

Poverty can also be defined as a denial of human rights, emphasising that people living in poverty feel powerless and voiceless. Much work is currently under way to define poverty as a denial of rights, capabilities and access to resources. Understood in this way, the exacerbation of poverty can be interpreted as a violation of human rights, and thus poverty eradication is an obligation under the Human Rights Treaties.**

The Community defines ‘poverty’ as a mixture of the above: ‘Poverty is multidimensional. People are poor when they lack the capability to meet adequate standards of well being, in terms of economic, social and human security levels, civil rights and political empowerment. Thus poverty reduction is closely intertwined with development issues’.***

______________________________

* ‘The suffering are the cornerstone in building a nation’, 1995, in: The Dimensions of Poverty, Social Watch, 1997, Montevideo, No 1. ** Bissio, ‘Charting progress. Much ado…’, in: Social Watch 2001, Montevideo, 2001.*** Commission of the European Communities, Measures taken and to be taken by the Commission to address the poverty reduction

objective of EC development policy, Commission staff working paper, Brussels, 26 July 2001, SEC(2001)1317, p. 4.

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2.3 National Strategies for Poverty Eradication: The Concepts of ‘Ownership’, ‘Good Governance’ and ‘Civil Society’

The 1995 Social Summit was convened in light of the perceived tensions between globalisation and social development. Its task was to identify the tensions, and to propose actions for ensuring that social development could be enjoyed as a universal concept. Within this universal notion of social development, responsibilities at different levels were clearly distinguished. Structural adjustment policies had been undermining national administrations for more than a decade, and the critical notion was gaining ground that multilateral organisations were running many developing countries and determining their domestic policies. It was also argued that universal programmes of action for social development would not be effective because individual circumstances differed widely, and these differences needed to be taken into account if strategies were to be effective. Consequently, the Heads of Government committed themselves to establishing programmes for social development and poverty eradication by 1996.

As an outcome of the Summit, the Programme of Action agreed in Copenhagen was based on the idea that strategies for poverty eradication were the responsibility of national governments. At the same time, the international community was responsible for creating an economic and political environment that would be conducive to social development. The Programme of Action stated: ‘We acknowledge that it is the primary responsibility of States to attain these goals. We also acknowledge that these goals can not be achieved by States alone. The international community, the United Nations, the multilateral financial institutions, […] and all actors of civil society need to positively contribute [...] in a global effort to reduce social tensions, and to create greater social and economic stability and security’.15

The idea that national governments are responsible for determining their own policies is effectively captured in the concept of ‘ownership’ that developed from it. The concept of ‘ownership’ – referring to national responsibility for social development – required the existence of a legitimate national administration. It is, therefore, not coincidental that the first commitment made by Heads of Government at the 1995 Social Summit identified the need for national governments to

‘provide a stable legal framework, in accordance with our [government’s] constitutions, laws and procedures, and consistent with international law and obligations, which includes and promotes equality and equity between women and men, full respect for all human rights and fundamental freedoms and the rule of law, access to justice, the elimination of all forms of discrimination, transparent and accountable governance and administration and the encouragement of partnership with free and representative organisations of civil society’.16

In other words, the Heads of Government acknowledged that ‘ownership’ requires a transparent and accountable government that recognises the rule of law and the independence of the judiciary. They also believed that encouraging partnership with civil society and its representative organisations would enhance the quality of governance. Hence, the concepts of ‘ownership’, ‘good governance’17

and ‘civil society’ are related, and stem from the recognition that the national administration, led by a legitimate and representative government, should be in charge of national policies for development.

15 UN World Summit for Social Development, March 1995, Copenhagen Declaration and Programme of Action, p.11.

16 Ibid., p.12.17 I use this term with some hesitation, as it has often been understood as donors unilaterally determining the

elements of good governance for the recipient countries. Following debates on this issue, such as during the negotiations on the Cotonou Agreement, I believe that there is a growing common understanding on what constitutes ‘good governance’.

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Box 3: UN Decade for the Eradication of Poverty

17 October 1987. On the 30th anniversary of the Fourth World Movement, 100,000 defenders of human rights come together to attend the first Commemoration in Honour of the Victims of Extreme Poverty. They unveil a Commemorative Stone in Paris.

1992. Thousands of communities throughout the world link up to launch a joint appeal to the United Nations to recognise and promote the Commemoration of 17 October. Mr Javier Perez de Cuellar chairs an international committee to support the appeal. On 22 December, the UN General Assembly declares 17 October the International Day for the Eradication of Poverty and invites all governments, private organisations and individuals to observe the day (Resolution 47/196).

1994. At UN Headquarters in New York, the Secretary-General welcomes 300 Fourth World delegates from 45 countries to commemorate the World Day. They bring a replica of the Commemorative Stone in the form of a quilt made from thousands of pieces of cloth given by very poor and other families throughout the world. They ask that the UN create a world memorial for the victims of extreme poverty.

1996. The United Nations launches the ‘Decade for the Eradication of Poverty’ and, on 17 October, in the garden of UN Headquarters in New York, sets the Commemorative Stone in Honour of the Victims of Extreme Poverty as a world memorial.

Source: Fourth World Movement, email: fourthworld@erols.com

2.4 International Strategies for Poverty Eradication: Poverty Reduction Strategy Papers

Until 1995 the International Monetary Fund (IMF) had denied any linkage between its activities and social development or poverty eradication. The World Bank, on the other hand, had been looking at ways to enhance its policies aimed at reducing poverty. In its 1989 annual report, the Bank stated that: ‘The central goal of the World Bank is the reduction of poverty’, and that ways to achieve this are ‘at the heart of the Bank’s activities’. In September 1989 the then President of the World Bank, Lewis Preston, made poverty reduction the Bank’s primary objective.

In its 1990 World Development Report18 and in a 1991 policy paper, Assistance Strategies to Reduce Poverty, the Bank explained the ‘evolution of our longstanding approach’ to its basic mission to reduce poverty. This strategy has two main elements. The first is concerned with the nature and rate of economic growth, and includes improving the macroeconomic framework for market liberalisation in order to attract private investment and expand the private sector. The second is concerned with providing services to the poor, including ‘social safety nets’ that are ‘designed to protect the poorest and most vulnerable people from extremes of privatisation’.19

The mounting criticism of this approach, culminating at the time of 1995 Social Summit, claimed that this ‘two-tier’ strategy contained too many contradictions. The macroeconomic policies that were designed to foster liberalisation were creating poverty, and the ‘social safety nets’ were by no means effective in redressing that problem. In a recent letter to the Financial Times, Professor Joseph Stiglitz, Nobel Prize winner and former Vice-President of the World Bank, recalled the criticism as follows:

18 World Bank, Poverty: World Development Report 1990, Oxford University Press, Oxford, 1990.19 World Bank, Assistance Strategies to Reduce Poverty, policy paper, Washington, DC, 1991.

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‘Bankers and businessmen in the developed world would love to see structural adjustment programmes foisted on the people of the developing world. Of course Wall Street believes in capital market liberalisation. But there is little evidence that this really contributes to economic growth although the downside risk is enormous, as we saw in the 1997 Asian crisis. There is no sensible reason, i.e. one backed by solid research, to push these sorts of “reforms”, even though financial types feel they are bringing “market discipline” to countries in trouble’.20

The 1995 Summit was important in that it established that the multilateral organisations needed to create an international framework that would allow national governments to ‘run their countries’. The Summit agreed that the policies of the multilateral organisations would also need to be reviewed. This had a particular bearing on the World Bank and the IMF’s structural adjustment policies, trade policies, including within the framework of the World Trade Organisation (WTO), and debt relief policies. It was expected that the IMF and the World Bank – the multilateral organisations that, together with the WTO, are responsible for shaping the macroeconomic and political environment – would focus on the implementation of various aspects related to the commitment to improve the ‘enabling’ environment.

In his letter to the Financial Times, Stiglitz also pointed to specific preconditions for improving the ‘enabling environment’ to help ‘countries in trouble’: ‘Markets are the key to long-run success, but creating a market-friendly environment entails more than mindless deregulation: it requires, for instance, competition policies, strong and well regulated financial institutions, an environment that is conducive to the transfer of new technologies, and governments that are not corrupt’. Stiglitz claimed that the new World Bank and IMF policies designed since the 1995 Social Summit are taking these preconditions into account. Other critics claim that the policies may have changed, but their basic approach has remained the same. Stiglitz agrees with the latter that ‘there is still a lot to be done’.21

2.4.1 Enhancing National Responsibility

The IMF and the World Bank have concentrated on the issue of how to enhance national responsibility for social development and poverty eradication. However, they have not re-assessed their own policies, which are part of the ‘enabling’ environment, as structured by the multilateral organisations. As a consequence of this lack of focus in their response, by focusing on national responsibility, they have not reviewed the constituent elements of the structural reform policies that have exacerbated poverty.

The idea of ‘national responsibility’ for poverty eradication has now been merged with the notion of structural adjustment. The structural adjustment polices are still essentially geared towards trade liberalisation and the opening up of markets in order to attract foreign investment, fostering a globalisation process that is in the interests of a limited range of actors, and fails to protect the livelihoods of people living in poverty.

2.4.2 Poverty Reduction Strategy

In September 1999 the World Bank and the IMF launched the new Poverty Reduction Strategy (PRS). As part of the strategy, the IMF’s Enhanced Structural Adjustment Facility (ESAF) was renamed the Poverty Reduction and Growth Facility (PRGF). The idea of the new policy was essentially that, through Poverty Reduction Strategy Papers (PRSPs), a government would produce its own national policy programmes, with a renewed emphasis on poverty eradication as the focus for its economic and social policies.

20 Stiglitz, J., ‘Better to have the new World Bank than the old one’, Letter to the Editor, Financial Times, 31 August 2001.

21 Ibid. In particular, Stiglitz pointed to the ‘grossly unbalanced’ allocation of voting rights to member countries, and argued that ‘the views represented in the Bank are more closely aligned with finance ministries than with a broader swathe of society’.

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The European Commission and the EU Member States welcomed the new strategy and approved of its main elements:

PRSPs will provide a framework for mainstreaming poverty reduction in government and donor policies.

Country ownership is paramount; governments will be responsible for both the design process and the final product.

Strategies will reflect the outcome of an open and participatory process involving civil society and all relevant international institutions and donors.

Strategies will be tailored to individual country circumstances, and will be based on an understanding of the nature and causes of poverty, and public actions that can help to reduce it. The strategies will include, very importantly, medium- and long-term goals that can be monitored, with results feeding back to design.

The results of the strategies will be monitored using final and intermediate indicators of success. Reaching agreement on results to be achieved will be more important than the policies and the means to be employed.

Strategies will also be comprehensive, embracing a combination of macroeconomic, structural and social reforms that can provide the basis for sustained growth and the reduction of poverty.

The issue of good governance, including the transparency and efficiency of public expenditure management, will be a fundamental ingredient of any strategy to reduce poverty and restore growth.22

PRSPs are results-oriented; they set goals for poverty reduction in terms of outcome-related goals that are tangible and monitorable. It is clear that the conceptualisation of the PRSPs departed from the Social Summit’s premise that social development is the responsibility of the national government, provided that the government is representative and accountable, and that the administration is enhanced by interactions with civil society.

2.5 Towards New ConditionalitiesThe PRSP replaced the old tripartite Policy Framework Paper (PFP), drawn up between a country, the World Bank and the IMF, and became the over-arching framework for all lending to ‘soft-loan’ countries. One of the ‘practical implications’23 of the PRSP was that the access to the IMF’s renamed Poverty Reduction and Growth Facility would ‘...require a PRSP which has been endorsed by the Boards of both the IMF and the World Bank’.24 The PRSP did not only replace the framework for lending from the IMF and World Bank, but was intended to be the basis for all donor and creditor relationships with a country. The PRSP, or an Interim PRSP (IPRSP), would also be required for candidate countries applying for access to Highly Indebted Poor Country (HIPC) debt relief facilities or other forms of international assistance.

Although the conditionalities for funds under the structural adjustment facilities had originally been ‘limited’ to measures in the macroeconomic area, the PRSP extended conditionalities to the policy areas of social development, poverty eradication, good governance and human rights. Thus, the notion of ‘ownership’ became attached to the reality of ‘conditionality’.

22 Original emphasis. Poverty Reduction Strategy Papers (PRSPs), Comments on the joint statement presented to the IMF/WB Boards in December 1999 by Commissioner Nielson, presented as Annex 2 in: European Commission, DG Development, Director, Note to Heads of Delegation, Heads of Unit and Desk Officers, Poverty Reduction Strategy Papers: Guidance Notes, Brussels, 1 May 2000, B2(00)D/4371.

23 Ibid.24 Original emphasis. European Commission, ibid.

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The idea of redirecting national policies towards the above-mentioned elements is in line with international commitments. However, the specific tying of these policies to approval from the boards of the multilateral organisations as a means of access to additional resources creates tension. The idea of ‘ownership’ does not sit comfortably with the required endorsement by the boards of the World Bank and the IMF.

The contradiction between ‘ownership’ and ‘conditionality’ is even more pronounced by the implication that the PRSP needs to be supported by all providers of external assistance. The need for coherence and coordination in donor support is well documented – and the PRSP provides a possibility of removing conflicts from donor policies, as external support would be mobilised around a single poverty reduction plan. However, this also increases the power of the donor community to dictate their conditions – which is in contradiction with the notion of ‘ownership’.

The latter is particularly a problem given that the macroeconomic policies ‘proposed’ by the World Bank and the IMF have not been reviewed. From the perspective of the Bank, and certainly of the IMF, the aim of the PRSP is to focus on the promotion of rapid economic growth. It seems that IMF lawyers have advised the IMF staff to refer to economic growth whenever poverty reduction is mentioned; perhaps this was necessary because the IMF’s mandate does not include poverty reduction. IMF documents clearly define how rapid growth can be achieved: by structural reforms to create free and more open markets, including trade liberalisation, privatisation and tax reform policies that will create a stable and predictable environment for private sector activity.

The persistence of the IMF and the World Bank in viewing a particular form of economic growth as the only policy option that can underpin the PRSP seriously limits the scope for governments to determine their own national policies for poverty eradication and social policy, and hence undermines the very idea of ‘ownership’.

Box 4: The Role of Civil Society

Social WatchEstablished at the 1995 Social Summit, Social Watch is an international network of citizens’ organisations struggling to eradicate poverty and the causes of poverty, to ensure an equitable distribution of wealth and the realisation of human rights. Social Watch promotes people-centred sustainable development, and holds governments, the UN system and international organisations accountable for meeting their national, regional and international commitments to eradicate poverty. It aims to achieve its objectives through a comprehensive strategy of advocacy, awareness-building, monitoring, organisational development and networking. The international secretariat of Social Watch is based in Montevideo, Uruguay, and is hosted by the Third World Institute (ITeM).

Social Watch organises civil society organisations and groups, which monitor the implementation of the commitments adopted in the Copenhagen Programme of Action at national and international levels. It publishes an annual report with statistical indicators showing the progress made by governments in achieving the targets adopted in Copenhagen and after. These are also available on the web: http://www.socialwatch.org/

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Structural Adjustment Participatory Review Network (SAPRIN)SAPRIN is a global network of 1200 civil society organisations whose main aim is to challenge the imposition of structural adjustment programmes (SAPs) on national governments. The initiative is in line with the ten commitments adopted at the Copenhagen Summit, in which governments agreed to ‘review the impact of structural adjustment programmes on social development’. In 1997, with World Bank President James Wolfensohn, it launched a programme to develop participatory research methods to include civil society groups and organisations in the PRSP. Since then, SAPRIN has carried out, together with the World Bank, participatory reviews of SAPs in eight countries: Bangladesh, Ecuador, El Salvador, Ghana, Hungary, Mali, Uganda and Zimbabwe. In each country, the government has agreed to participate as a third party in the review. URL: http://www.saprin.org/

EURODAD/PRS-WatchEURODAD is one of the many non-governmental organisations (NGOs) concerned with the PRSP process. Through its PRS-Watch listserve programme, EURODAD offers a central information service on PRS-related matters, provides analyses of the PRSP process and content, and enables members to share their thoughts and ideas, including central concerns such as the link between PRSPs and the HIPC initiative, the participation of civil society organisations and the process of ensuring country ‘ownership’. URL: http://www.eurodad.org

3 The Emerging Focus on Poverty Reduction in Community Assistance (1957–92)3.1 1957–76: From Yaoundé to Lomé

The Treaty of Rome and contractual obligations resulting from the convention on food aid provided the legal basis for Community aid. When the embryo Community was established, four of the six original Member States – Belgium, France, Italy and the Netherlands – were administering dependent territories. The Treaty of Rome made provision for the association of these Overseas Countries and Territories (OCTs) with the Community, and the European Development Fund (EDF) was created to offer them financial assistance. In the years to follow, many of these countries became independent.

In 1963, 18 former colonies (mainly French-speaking) formed the Associated African States and Madagascar (AASM), and signed a first agreement with the Community, the Yaoundé Convention, to pursue the established relations. In the early years an additional instrument related to food aid was created, the costs of which were covered from the Community budget. This food aid initially consisted entirely of deliveries in kind taken from surpluses produced in Europe as a result of the Common Agricultural Policy. The enlargement of the European Community in 1973 to include the United Kingdom raised the issue of the 20 developing countries that were members of the British Commonwealth. Several of these, plus other former British colonies in Africa, and Ethiopia, joined the African, Caribbean and Pacific (ACP) group of countries, when a new agreement, the Lomé Convention, was signed in 1975. The Yaoundé and Lomé Conventions were, and still are, intergovernmental agreements, and the resources for their implementation come from a separate fund to which all EU Member States contribute.

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3.2 1976–88: Extending Aid through the BudgetCountries that had previously been part of the British Empire that did not join the ACP group (e.g. India and Bangladesh) signed separate cooperation agreements with the European Community. This coincided with the beginning of more general cooperation activities in developing countries, financed through the annual Community. The budget line supporting the activities of European development NGOs, was introduced in 1976. A new financial aid programme covering the ‘non-associated developing countries’ of Asia and Latin America was approved in the same year, following an initiative of the European Parliament. A variety of protocols with countries in the Mediterranean basin were concluded at about the same time, the resources for which were also included in the Community budget.

In 1981 the Council adopted a ‘Plan to Combat World Hunger’,25 and in July 1983 a regulation on a special programme to combat hunger. This programme had its own budget line, to which ECU 108 million were initially allocated, with increases in subsequent years.26

In 1984, at a meeting in Dublin, the Council decided to focus on combating famine in Africa. The Commission undertook to put into action a plan for the recovery and rehabilitation of the African countries worst affected by drought. The programme was of a humanitarian nature.27

In the early 1980s the countries of sub-Saharan Africa received more than 60% of Community aid, mainly due to the Lomé Conventions. More than 20% of Community aid went to Asia, as a result of massive food aid to India and Bangladesh. The budget line for the specific programme to combat poverty in Africa was discontinued in 1988.28

3.3 1984–92: Expanding Development Cooperation with the Mediterranean Countries, Asia and Latin America

In 1984 the Commission proposed to increase substantially the assistance to non-associated countries, including the Mediterranean countries, under the heading Development, in the 1985 budget.29 The proposals for increases in these budget lines were made despite the relatively low utilisation of existing resources under these budget headings.30

3.3.1 Cooperation with Mediterranean Countries

At first, the cooperation with the Mediterranean (Measures to Accompany Activities in Favour of Mediterranean Partners, MEDA) benefited Greece, Portugal and Spain. For this reason, it has always been rather different in character from the cooperation with the ACP or Asia and Latin America Programme (ALA) countries. The countries to which the MEDA programme still applies are all included in the DAC list of aid recipients.31 Nevertheless, the regulations state that: ‘Whereas the measures under this Regulation go beyond the framework of development assistance and are intended 25 Commission of the European Communities, Nineteenth General Report on the Activities of the European

Communities, 1985, p.323.26 Official Journal, C 219, 29 August 1985; Commission of the European Communities, Ibid., pp.323-324.27 European Yearbook 1985, Vol. XXXIII, Martinus Nijhoff, p.EC29.28 European Commission, European Community Aid: Medium-term Strategy of Poverty Reduction, unpublished,

December 1999, p.3.29 Title 9.30 The utilisation of appropriations in 1984 was as follows. For development cooperation the use of CA is 89.1% and

for PA is 74.3%. The use of CA for non-associated countries was relatively low (73.6%) and the use of PA extremely low for the budget line on specific and exceptional measures (22.1%) and also quite low for cooperation with Mediterranean countries (49.1%). The overall utilisation of the budget was 95.9%. Commission of the European Communities, Nineteenth General Report on the Activities of the European Communities, 1985, p.58.

31 These are: Algeria, Cyprus, Egypt, Israel, Jordan, Lebanon, Malta, Morocco, Syria, Tunisia, Turkey, and the Occupied Territories of Gaza and the West Bank.

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to apply to countries only in part classifiable as developing countries…’.32

The purpose of the MEDA programme was to reinforce political stability, to establish a Euro-Mediterranean free-trade area, and to develop economic and social cooperation. Within the context of the latter, the regulations identified the fight against poverty as an objective, as well as ‘the improvement of social services, especially in the area of health, family planning, water supply, sanitation and housing’. The area of basic education was not specifically incorporated. Because the MEDA programme initially consisted of pre-accession aid to the southern European countries, its outlook has tended to be closer to the structural funds than to traditional Community development assistance. Community institutions, including the European Parliament, have been inclined to use different principles for the provision of aid to developing countries and to other regions. The MEDA countries, early on, and later those of Central and Eastern Europe (CEECs), were treated differently treatment from other aid recipients. It is notable that, in general, the Community policy in relation to poverty eradication has not been seen to apply to the Mediterranean or the CEECs, despite the well documented widespread poverty in these two regions.

3.3.2 Community aid to Asia and Latin America

In 1985 Spain and Portugal signed the Accession Treaty. This included a provision, annexed to the Treaty, that Community aid to Latin America would be increased. This was deemed necessary because the aid programme to Latin America had been fairly limited until then.33 In 1985 the budget of ECU 268 million, less overhead for aid to non-associated developing countries, was divided on a geographical basis: 75% for Asia, 20% for Latin America and 5% for non-associated African countries. As a consequence, the European institutions started to pay more attention to aid programmes for non-associated countries. In 1987 the European Parliament agreed to the proposed geographical distribution of the appropriation (Asia 75%, Latin America 25%).34

The Parliament agreed with the Commission’s proposal that aid under the ALA programme should be concentrated on the poorest Latin American and Asian developing countries and be directed particularly towards the poorest sectors of their populations. The Parliament also pointed to the need to establish aid structures for training, education, research and health, and demanded a breakdown in the budget line to show the ‘specific types of expenditure in question’.35

In 1988 the Parliament again insisted on increased resources for aid programmes. 36 The budget article concerning aid for developing countries in Latin America and Asia was split under two separate headings, 65% for Asia and 35% for Latin America. Following a debate on aid to Asia and Latin America, the Parliament called on the Commission and the Budget Authority to provide increased appropriations in the 1989 budget for ‘economic assistance’.37 In its resolution, the Parliament stated 32 Council Regulation (EC) No. 1488/96, 23 July 1996, on financial and technical measures to accompany (MEDA)

the reform of economic and social structures in the framework of the Euro-Mediterranean partnership. Official Journal, L189, 30 July 1996.

33 Commission of the European Communities, Nineteenth General Report on the Activities of the European Communities, 1985, p.328.

34 This was agreed following an animated debate in committee. Several Spanish MEPs expressed their wish for a 50/50 distribution, a position that Spain advocated at the same time in the European Council. Agence Europe, No. 4536. The Parliament made the following statement: ‘the need to increase Community aid to the poorest countries of Latin America, in conformity with objective development criteria is a significant factor in the determination of the geographical distribution of appropriations’. The Parliament reiterated its call for closer cooperation with Latin America, which should take the form of ‘increased aid by the Community to the poorest countries and the most deprived sectors of the population’, while insisting that this must not be at the expense of Asia, given the level of poverty in many Asian countries. Agence Europe, No. 4509.

35 Adopted: 1987,03,13, Official Journal, C99.36 By increasing this chapter Parliament can increase the proportion of non-compulsory expenditure, and increase its

powers over the budget as a leg of the budget authority.37 The Parliament adopted a resolution that took the view that the nature of the Community’s cooperation with the

developing countries of Asia and Latin America should be differentiated and that a separate scheme should be set up for each region.

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that it was essential to define and implement an effective strategy of cooperation based on multi-annual programmes that would meet the specific needs of these two regions.38 The resolution emphasised that financial and technical cooperation should be strictly poverty oriented so that the poorest countries and the poorest sectors of their populations would benefit.39 The same points were stressed in a subsequent resolution, reaffirming that the intention of the budget lines was to combat poverty at two levels: (1) between countries, especially recognising the needs of the least developed countries (LDCs); and (2) within countries, emphasising the poorest sectors of their populations.

The resolutions also identified some of the structural problems that constrained the effectiveness of the implementation of the budget lines, including the insufficient utilisation of the budget lines, and the lack of transparency with regard to the outputs. In these resolutions the Parliament introduced the concept of multi-annual planning and identified the need for increased funds for development cooperation in subsequent years. This is consistent with the efforts of the European Parliament over the last two decades to increase funding for development cooperation as part of the European Community budget.

3.4 Cooperation with International Financial InstitutionsThe cooperation between the European Commission and the World Bank dates from 1987, when Sir William Ryrie, head of the International Finance Corporation (a World Bank subsidiary that encourages private investment in developing countries) visited Brussels at the request of Mr Cheysson, then Commissioner for Development Cooperation. Sir William was convinced of the need to strengthen the role of private industry in the development effort of the Third World, and stated his intention to submit to the Commissioner proposals aimed at improving cooperation between the World Bank and the Commission.40

Subsequently, various investment instruments were developed in the Community programme, and a policy towards structural adjustment programmes began to emerge. The European Council adopted a first resolution on structural adjustment programmes in 1988.41 Under the Lomé IV Convention (1990–95) an additional fund, worth ECU 1150 million, was established to support structural adjustment, and Lomé IV bis (1995–2000) included a structural adjustment facility worth ECU 1400 million. In 1995 the Council adopted a new resolution on structural adjustment, in which it requested the Commission to implement the Lomé Convention with greater emphasis on the social dimension, particularly on supporting public finances through an approach that would prioritise social sectors.

4 1992–2000: Towards a General European Approach to Poverty Eradication4.1 The Treaty on European Union

In 1992, the adoption of the Maastricht Treaty on European Union provided the Community with a legal underpinning for and formal competence over development cooperation. The Treaty established the objectives of European development cooperation as follows: to fight against poverty in developing countries;

38 The resolution also ‘Recalls that the creation of separate budget headings in 1988 confirmed the will to develop the Community’s cooperation with these countries along the lines of a differentiated political strategy’, and ‘considers that in future it would be more appropriate to discuss the problems of Asia and Latin America separately’.

39 Council Regulation (EEC) No. 422/81: Official Journal, L48, 21 February 1981, p.8.40 Agence Europe, No 4510, March 1987.41 Resolution, Doc. 6453/89.

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to enhance the social and sustainable development of developing countries, particularly the least favoured among them; and

to further the integration of developing countries into the world economy.42

The Treaty stated that Community competence in development cooperation was to be shared with the Member States, and also established the Common Foreign and Security Policy (CFSP) as one of the ‘pillars’ of the European Union. The Treaty established four principles for EU development cooperation, referred to as the four C’s:

Coordination: The Commission and Member States should coordinate their activities. Complementarity: The programmes of the Commission should be additional to the

programmes carried out by Member States. Coherence: The policies of the EU towards developing countries should take the objectives of

development cooperation into account. Consistency: The EU’s development cooperation policies should be consistent with its

external policies.

In recent years the principle of ‘complementarity’ has received much attention. Both the Commission and Member States wish to set clearer demarcation lines between the responsibilities of the Member States and of the European Community in development cooperation.

4.2 Horizon 2000 As a follow-up to the inclusion of development cooperation as a Community competence, the Council undertook to develop a series of resolutions and decisions to elaborate the articles in the Maastricht Treaty. This process of ‘clarification’ of the Treaty’s obligations on development cooperation is called the ‘Horizon 2000 process’.

On 25 May 1993 the Council and its Member States decided that the fight against poverty in developing countries would be one of the main priorities of their development cooperation programmes43 – this applies to both Community programmes and those of the Member States. They agreed to coordinate their policies focused on the fight against poverty, and to launch an initiative in some pilot countries to develop methods in this regard. Both the Council and the Commission would later identify these initiatives as inadequate.

In December 1993 the Commission presented a Communication to the Council and the Parliament on the fight against poverty. The communication reflected the growing donor consensus in the area of poverty eradication, and recognised the multifaceted concept of poverty, involving income, access to services and political participation. It drew specific attention to economic, social and political processes that actively exclude people living in poverty from participating in the benefits of development. The Communication also set out a poverty reduction strategy with five components:

economic and social integration of the poor; sustained and equitable growth; access to economic resources; efficient basic social services for all; and protecting the poorest, most marginalised and vulnerable.44

42 Treaty of Amsterdam, Title XX, Article 177. 43 Council of the European Communities, 1663rd Meeting, Development Cooperation, Brussels, 25 May 1993, Press

release, 6705/93 (Presse 83)-EN.44 Set out in: European Commission, DG VIII, Strengthening Actions in the Fight against Poverty. Discussion Note,

Brussels, 1999, p.5.

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In response, on 2 December 1993 the Council adopted a resolution stating that the fight against poverty should be an integral element in the preparation for and implementation of all development policies and programmes: ‘the fight against poverty should occupy a central position in the framing of development cooperation policies and programmes’.45 In this and several other resolutions, the Council emphasised that structural adjustment programmes should ‘take account of the essential components of the fight against poverty’, including ‘the reduction of inequalities in income distribution and access by the poor to social services’.46

In 1998 the Council approved new conclusions on poverty reduction that explicitly supported the DAC international targets, in which it acknowledged that the framework provided by the 1993 resolution had ‘proven difficult’.47 The Council and the Commission agreed on the need to strengthen the commitment to and approach of the Community and Member States to ‘poverty elimination’ and the ‘need for a broader framework for understanding poverty and its causes and consequences’. 48

Specifically, the 1998 resolution pointed out that:

‘Most effort has been directed towards stimulating economic growth, supporting investment and reform in the social sectors and other essential services, and seeking to provide safety nets for the poorest. While these are indispensable for poverty reduction, it is widely recognised that a more comprehensive approach is now required which more actively takes account of the relationship between poverty and social exclusion, and addresses concerns about equity, social justice, democracy, human rights and conflict prevention’.49

The 1998 resolution further referred to the need to understand ‘the costs and benefits of globalisation’, for the first time contemplating the possibility that globalisation could have negative effects on the fight against poverty. It also stated that particular attention should be paid to ‘the needs of the least developed countries, and to target numbers of poor people in other parts of the developing world’.50

Table 1. List of EC Resolutions (1992–2000)Resolution/Conclusion* Topic

1992 Development cooperation in the run-up to 2000 CoordinationFamily planning in population policies in developing countries Population

1993 Coordination of development policies CoordinationFight against poverty PovertyProcedures for coordination between the EC and Member States Coordination

1994 Cooperation with developing countries in the field of health HealthFood security policies and practices Food aidEducation and training EducationFight against HIV/AIDS in the developing countries Health

1995 Complementarity between the development policies and actions of the Union and the Member States ComplementarityIntegrating gender issues in development cooperationStructural Adjustment

GenderSAPs

1996 Gender and crisis prevention, emergency operations and rehabilitation GenderHuman and social development and European Union development Social policy

1997 Coherence between the EC’s development cooperation and its other policies Coherence

45 Council of the European Communities, 1714th Meeting, Development, Brussels, 2 December 1993, Press Release, 10641/93(Presse 215)-EN.

46 Ibid.47 Council of the European Union, 2093rd Meeting, Development, Conclusions on the Fight against Poverty,

Brussels, No. 8531/98, Press 151. 48 Ibid.49 Ibid.50 Ibid.

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1998 Guidelines for operational coordination CoordinationConclusions on integrating gender issues in development cooperation GenderConclusions on the fight against poverty Poverty

1999 Conflict prevention and management (small arms and weapons, anti-personnel landmines) ConflictDevelopment of the private sector Private sectorIntegrating environment and sustainable development (conclusion) Environment

2000 Council Statement on EC development policy Development* Resolution, unless stated otherwise.

4.3 Mainstreaming ‘Poverty’ in EU Development Programmes

In its 1992 resolution regarding regional budget lines for development cooperation, the Council explicitly referred to the objectives laid down in the Maastricht Treaty. The 1992 ALA Regulation on financial and technical assistance to, and economic cooperation with, developing countries in Asia and Latin America stipulates that: ‘Financial and technical assistance shall be targeted primarily on the poorest sections of the population and the poorest countries in the two regions, through the implementation of programmes and projects in whatever sectors Community aid is likely to play an important role’.51 The Council also resolved that: ‘The aim of Community development cooperation policies shall be human development [...] the human dimension of development shall be present in all areas of action’.52

Following the clarification of Community competence in development cooperation in the Maastricht Treaty, the Lomé IV bis Convention was signed in 1995. This Convention recognised explicitly the objectives of EU cooperation policy, by including that: ‘In support of the development strategies of the ACP States, due account shall be taken of the objectives and priorities of the Community’s cooperation policy, and the ACP States’ development policies and priorities’.53

The Cotonou Agreement, signed in 2000, made even more explicit reference to the fight against poverty as its primary objective. This was given high priority, appearing in Article 1 under ‘Objectives of the Partnership’: ‘The partnership shall be centred on the objective of reducing and eventually eradicating poverty consistent with the objectives of sustainable development and the gradual integration of the ACP countries into the world economy’.54 This is also the first time that the goal of ‘eradicating poverty’ – using those words – was included in an EU agreement with developing countries.

51 Council Regulation (EEC) No. 4438/92 of 25 February 1992, on financial aid and technical assistance to, and economic cooperation with, the developing countries in Asia and Latin America, Official Journal, L052, 27 February 1992. This regulation is still in force.

52 Council Regulation (EEC) No. 4438/92 of 25 February 1992.53 The Lomé IV Convention as revised by the agreement signed in Mauritius on 4 November 1995, The Courier, No.

155, January/February 1996, Article 4.54 ACP–EU Partnership Agreement, signed in Cotonou on 23 June 2000, The Courier, September 2000, special issue

on the Cotonou Agreement, Article 1.

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4.4 Concentrating the Community’s Development Policy on ‘Poverty’

The European Commission adopted a Communication on the Community’s development policy on 26 April 2000.55 The Communication, which included a joint statement of the Council and the Commission, confirmed the ‘focus on poverty reduction as an overarching objective’ of EC development cooperation and the selection of ‘main priorities for EC support in this context’. 56 The Communication outlined a new framework for the Community’s development policy, explicitly setting it in the international context:

‘Community development policy is part of an international strategy where a comprehensive view is currently emerging. The strategy adopted by the Development Assistance Committee of the OECD [the international targets], in which the Community takes part, has a key role in the international coordination efforts. Other initiatives go in the same direction – such as the World Bank Comprehensive Development Framework or the IMF/World Bank Poverty Reduction Strategy Papers’.57

The Communication identified as the ‘guiding principles’ in international initiatives: ‘ownership in the developing countries of their own development process and increased attention to the social dimension of growth and development’.58 The most heralded contribution of the Communication is that it unequivocally defined development cooperation as oriented toward the fight against poverty – even though the term ‘poverty eradication’ is not used: ‘The overarching objective is to refocus the Community development policy on poverty reduction and on aligning the policy framework in different regions. The method would be to support action that would enable developing countries to fight poverty themselves’.59 The Communication set out an integrated framework for Community development activities, identifying six priority areas where Community action could offer added value: trade for development, regional integration and cooperation, support for macroeconomic policies, transport, food security and sustainable rural development, boosting institutional capacity, good governance and the rule of law. 60

4.5 Enhancing the Poverty Focus in Community Aid: Definitions

In its communication on the Community’s development policy, the Commission distinguished three complementary ways to enhance the poverty focus of Community aid:61

Primary poverty focus: concentrating efforts on countries categorised as less developed (LDCs) and other low-income countries (LICs). The primary poverty focus is directly related to the OECD/DAC’s categorisation of developing countries according to their levels of

55 Commission of the European Communities, The European Community’s Development Policy, Communication from the Commission to the Council and the Parliament, Brussels, COM(2000)212, 26 April 2000.

56 Commission of the European Communities, Measures Taken and to be taken by the Commission to address the poverty reduction objective of EC development policy, Commission Staff Working Paper, Brussels, 26 July 2001, SEC(2001)1317.

57 Commission of the European Communities, The European Community’s Development Policy, Communication from the Commission to the Council and the Parliament, Brussels, COM(2000)212, final, 26 April 2000, pp.4-5.

58 Ibid., p.559 Ibid. The Communication also stated: ‘The general objective of development cooperation is to encourage

sustainable development that leads to a reduction in poverty in developing countries’.60 The Council welcomed the Communication in its conclusions adopted on 18 May 2000. On 10 November 2000,

the Council and the Commission adopted a statement of general policy that reaffirmed the Community’s solidarity with developing countries, echoing the broad lines of the Communication. The Council also welcomed this joint initiative at its meeting in Nice in December.

61 Commission of the European Communities, The European Community’s Development Policy, Communication from the Commission to the Council and the Parliament. Brussels, COM(2000)212, final, 26 April 2000.

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income, first approved in 1996, and is based on the income levels defined by the World Bank. In other words, the primary focus is on the poorest countries, including India and China.

Secondary poverty focus: more poverty-focused cooperation programmes in middle-income countries (MICs), where there are nevertheless large numbers of people living in poverty. Specific attention should be paid to and in those countries where more than 20% of the population lives under below the poverty lines of 1$1 per day per capita;

these include Brazil, Botswana, Costa Rica, the Dominican Republic, Ecuador, El Salvador, Paraguay, Peru, the Philippines, South Africa, and Trinidad and Tobago.62

Tertiary poverty focus: more poverty-focused cooperation programmes in all other developing countries. This focus established a general policy direction towards poverty eradication, without identifying a specific group of countries.

In a follow-up to the Communication, the Commission issued a Staff Working Paper setting out the ways in which measures would be taken to address the poverty reduction objectives of the Community development policy. It specified two areas of action that should be considered when ‘analysing the poverty focus’: enabling actions: structural measures aimed at underpinning pro-poor economic growth and

sectoral policies leading to social, political, environmental or economic benefits for poor people; and

direct or focused actions focusing on the rights, interests and needs of poor populations.63

5 Primary Poverty Focus: The Evolution of Financial Resources5.1 Evolution of Geographical Distribution of Community

AidThe geographical expansion of the Community development programme has been matched by substantial increases in financial resources. Total aid, in commitments, increased from EUR 2.7 billion in 1990 to EUR 8.3 billion in 1999.64 The growth in the geographical programmes is shown in Table 2.

Table 2. Evolution of geographical programmes (commitments, at current prices), 1990–99.1990 1999 Average annual

nominal growth rate, 1990–99

ECU/EUR million

% of total ECU/EUR million

% of total

ACP countries 791 41.28 2600 38.79 14

62 European Commission, ibid., based on 1999 World Bank development indicators.63 Commission of the European Communities, Measures taken and to be taken by the Commission to address the

poverty reduction objective of EC development policy, Commission Staff Working Paper, Brussels, 26 July 2001, SEC(2001) 1317, p.9.

64 European Commission, The European Community Aid: Medium-term Strategy of Poverty Reduction, unpublished, December 1999, pp.3–4.

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Asia 208 10.86 439 6.55 9Latin America 154 8.04 314 4.69 8Mediterranean 238 12.42 1094 16.32 18CEECs* 495 25.84 1444 21.55 13Newly Independent States** -   432 6.45 -Balkans -   251 3.75 -South Africa 30 1.57 128 1.91 17Subtotal (1) 1916 100.00 6702 100.00 15Source: Adapted from European Commission, The European Community Aid: Medium-term Strategy of Poverty Reduction, unpublished, December 1999, p.4.

* Newly Independent States (NIS): countries of the former Soviet Union. All of these, except the Baltic states, are member of the Commonwealth of Independent States (CIS).** Central and Eastern European Countries: countries of the former East Block, that were not within the Soviet Union. Note: NIS and CEEC countries are also referred to by the European Commission as ‘countries in transition’

The data in Table 2 show that all regions have benefited from the growth of the Community programme. It is also clear that the proportion of aid to Asia and Latin America is still very small, particularly considering that the largest number of people in poverty live in Asia. In terms of disbursements (actual payments), the evolution by region shows more drastic changes. Table 3 shows that the disbursements to ACP countries decreased from 70% in 1986/87 to 37% in 1996/97. The total disbursements to the former East Bloc countries accounted for 30% in 1996/97.

Table 3. Evolution of geographical programmes (in disbursements), 1986–97.1986/87 1996/97

US$ million % US$ million %ACP countries 1562 69.98 1886 36.79Asia 316 14.16 509 9.93Latin America 109 4.88 287 5.60Mediterranean 245 10.98 871 16.99Newly Independent States*   344 6.71CEECs   926 18.06Balkans   245 4.78South Africa   58 1.13Subtotal 2232 100.00 5126 100.00Non-allocated 508 1359Total 2740 6485

Source: Adapted from OECD/DAC, in: European Commission, The European Community Aid: Medium-term Strategy of Poverty Reduction, unpublished, December 1999, p.4.* Newly Independent States (NIS): countries of the former Soviet Union. All of these, except the Baltic states, are member of the Commonwealth of Independent States (CIS).** Central and Eastern European Countries: countries of the former East Block, that were not within the Soviet Union. Note: NIS and CEEC countries are also referred to by the European Commission as ‘countries in transition’

5.2 Evolution in Thematic Distribution of Community AidThe thematic lines doubled in the period 1990 to 1999, due mainly to the growth in the humanitarian aid programme and other external aspects of Community policies, particularly fisheries agreements. The evolution of thematic or horizontal instruments is shown in Table 4.

Table 4. Evolution of thematic programmes (in commitments, at current prices), 1990–99.1990 1999 Average annual

nominal growth rate, 1990–99

ECU/EUR million

% of total ECU/EUR million

% of total

Food aid 490 64.22 505 31.92 0Humanitarian aid 44 5.77 331 20.92 25

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NGO co-financing 100 13.11 200 12.64 8Human rights - 0.00 98 6.19  Other thematic lines 129 16.91 141 8.91 1External aspects of Community policies (fisheries, etc.)

- 0.00 307 19.41  

Subtotal (2) 763 100.00 1582 100.00 8Source: European Commission, The European Community Aid: Medium-term Strategy of Poverty Reduction, unpublished, December 1999, p.4.

In principle, the thematic budget lines are neutral in terms of geographical direction. Nevertheless, figures provided by the Commission show that certain lines, such as food aid, have benefited the countries of the ACP, Asia and the countries of the former Soviet Union (called the Newly Independent States – NIS), rather than the Mediterranean, Latin American and the Central and Eastern European countries (CEECs).65 The largest proportion of emergency aid has been directed to the Balkans (especially the republics of the former Yugoslavia), as well as to the NIS and ACP countries.

5.3 Focus on Least Developed and Low-Income Countries

The evolution of Community aid disbursements according to the income level of the recipient country shows that the proportion of aid going to low-income countries has declined. This is to be expected, given the increased resources allocated to the Mediterranean and former East Bloc countries. The very large increase in aid to the low- to middle-income countries (LMICs) is mainly due to the aid to the republics of the former Yugoslavia, and countries in the Mediterranean basin. The increase in upper- to middle-income countries (UMICs) is due to the growth in aid to the Mediterranean, as well as to Latin American countries (Argentina, Brazil, Chile, Mexico and Uruguay).

Table 5. Evolution of Community aid disbursements according to the income level of the recipient country (excluding countries in transition), 1986/87 to 1996/97.

1986/87 1996/97US$ million % US$ million %

LDCs* 1145 51.28 1404 33.54LICs 537 24.05 847 20.23LMICs 494 22.12 1605 38.34UMICs 40 1.79 314 7.50HICs 17 0.76 16 0.38Total geographically allocated 2233 100.00 4186 100.00

Countries in transition 508 936Not allocated geographically 1395Total aid 2741 6517

* Categories defined by DAC/OECD (see Annex 1). Source: OECD/DAC, in: European Commission, The European Community Aid: Medium-term Strategy of Poverty Reduction, unpublished, December 1999, p.5.

With regard to the destination of aid, the proportion of Community aid directed to the LDCs used to be much higher than the average allocated by the EU Member States. However, data for 1996/97 show that the Community allocation (33.54%) is now below the average for the Member States (34.2%), although this is still slightly above the total DAC average of 31.5% (see Annex 2). If the aid to countries in transition is also taken into account, the proportions shown in Table 6 emerge.

65 Newly Independent States (NIS): countries of the former Soviet Union. All of these, except the Baltic states, are member of the Commonwealth of Independent States (CIS). Central and Eastern European Countries: countries of the former East Block, that were not within the Soviet Union. NIS and CEEC countries are also referred to by the European Commission as ‘countries in transition’

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Table 6. Evolution of disbursements of Community aid according to the income level of the recipient country (including countries in transition), 1986/87 to 1996/97.

1986/87 1996/97US$ million % US$ million %

LDCs 1145 41.77 1404 27.41LICs 537 19.59 847 16.54LMICs 494 18.02 1605 31.34UMICs 40 1.46 314 6.13HICs 17 0.62 16 0.31Countries in transition* 508 18.53 936 18.27Total geographically allocated 2741 100.00 5122 100.00

* The disbursements to countries in transition have grown since 1997.Source: OECD/DAC, in: European Commission, European Community Aid: Medium-term Strategy of Poverty Reduction, unpublished, December 1999, p.5.

In 1986/87, 42% of all Community aid was allocated to the LDCs, compared with only 27% in 1996/97.66 In the Financial Perspective 2000–2006, aid to several countries with economies in transition has been redefined in the Community budget as pre-accession aid. This shift in aid allocations from the LDCs towards the LMICs and UMICs has been the result not only of the expansion of the Community aid programme, but also of changes in the nature of the thematic budget lines. Within the ACP group, for instance, middle-income countries have benefited from the combined effect of several instruments such as STABEX,67 SYSMIN,68 banana support structures, fisheries agreements and European Investment Bank (EIB) activities (see Table 7).

Table 7. Contributions of selected instruments (STABEX, SYSMIN, banana support, fisheries agreements, EIB support) to the total aid to the various categories of countries, 1996/97.

Group of countries %LDCs 14LICs 26LMICs 52UMICs 57

Source: European Commission, European Community Aid: Medium-term Strategy of Poverty Reduction, unpublished, December 1999, p.7.

Other instruments, food aid in particular, tend to benefit the low-income countries. In 1996/97, some 59% of food aid was disbursed to LDCs and 20% to LICs, whereas 27% of emergency aid was allocated to LDCs and 43% to LICs.69

5.4 Changing the Emphasis towards the LDCsDue to the expansion of the Community aid programme to new regions, the proportion of aid to the LDCs has diminished. In absolute terms, aid to the LDCs has increased, but only slightly, and has not kept pace with the various commitments to give greater emphasis to aid required by the LDCs – as well as compensation in exchange for concessions on trade in subsequent trade negotiations.

66

67 STABEX aims to promote exports by helping export stabilisation through compensation for losses caused by price or quantity fluctuations.

68 SYSMIN is a financial facility for mining products set up for those ACP states whose mining sectors occupy an important place in their economies and which are facing difficulties.

69 European Commission, ibid.

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Community aid to the LDCs is mainly arranged through the European Development Fund (EDF), as 41 out of 50 LDCs are members of the ACP group.70 Although several Member States have been pushing for more Community aid to the LDCs, in reality, the division of Community aid instruments within and outside the budget creates critical obstacles to its realisation. The impediments to creating more budgetary space to the LDCs are found in the division between the instruments, as well as some more specific aspects of the nature of funding to ACP countries through the EDF, such as:

EDF financing is based on a multi-annual scheme, whereas aid through the Community budget is defined annually, and as a result the two are not comparable.

The EDF is not integrated into the financial perspectives under which long-term arrangements for Community spending are agreed. Consequently, a long-term agreement in which the balance between the different aid contributions are consistent does not exist.

The process of allocating and disbursing EDF financing is very slow, and although the funds are agreed for five years, it often takes up to 13 years to conclude the payments from each fund. As a consequence, annual comparisons of what is politically agreed and made available show more than double the amounts actually disbursed to LDC countries. In other words, the administrative reality leads to a situation that is at odds with the political decisions to make more Community aid resources available to LDC countries through the EDF.

The decisions concerning aid through the budget and aid through the EDF involve different political actors. While the Council is solely involved in setting the amount made available to the EDF, both the Council and the Parliament are involved in setting the budget. This creates unpredictability, as political commitments made by one institution do not necessarily determine the actual decisions.

The unresolved problem of the division between the Community aid instruments has a long history. In 1973 the Parliament agreed that the EDF should be incorporated into the Community budget. The potential possibility of integrating the EDF in the Community budget is referred to as ‘budgetisation’.

Following the Parliamentary proposals, the Commission proposed some form of budgetisation, which was rejected by the Council. Since then the Commission has included the EDF in its pre-budget proposals, and since 1977 the Parliament has also included the EDF in the annual budget. The Parliament has adopted several resolutions expressing its desire to integrate all Community aid activities. The Council has resisted these attempts to change. It is laid down in the Maastricht Treaty on European Union that the EDF will continue to be financed by national contributions, in accordance with existing provisions. It will be necessary for an Inter-Governmental Conference to change this provision and to acknowledge the need to create a consistent basis within the budget for cooperation aimed at poverty eradication.

6 Secondary and Tertiary Poverty Foci At present the Commission has only limited instruments to plan, programme and monitor its efforts to focus its policy more generally on poverty eradication. The Commission views the Country Support Strategy as its main instrument for promoting this policy: ‘A more poverty-focused formulation of the Country Support Strategies, which are at the basis of the cooperation programmes of the Community, is essential in this process’.71 At present the Commission uses two concrete instruments to promote the secondary and tertiary poverty foci: the Country Strategy Paper, and cooperation with the IMF/World Bank in the PRSPs.

70 The remaining nine LDCs are members of the ALA group of countries.71 Commission of the European Communities, The European Community’s Development Policy Communication

from the Commission to the Council and the Parliament, Brussels, COM(2000), final.

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6.1 Country Strategy Papers: Qualifying ‘Ownership’ Both in the Cotonou Agreement and in the programmes for countries in Asia, Latin America, the Mediterranean and Eastern Europe, new programming procedures have been assessed. The objectives of these new procedures are:

to enhance the quality and consistency of programming in order to reflect the EU’s policy and priorities;

to work with a longer-term perspective in a multi-annual planning framework; to harmonise programming procedures for the ACP countries and countries of other regions; to produce the ‘right mix’ for each country or region, incorporating both external assistance

and other Community/EU policies and priorities (trade, the CFSP, etc.); and to take into account other policies such as interregional policies, and aspects of

complementarity with the Member States, international financial institutions (IFIs) and other donors.72

For the Lomé Conventions this was not new, as multi-annual programmes (through the National Indicative Programmes) have always underpinned a multi-annual approach. Nevertheless, there were some changes in the Cotonou Agreement, both in programming procedures, and the procedure for resource allocation.

In relation to the programming procedures, a distinction was introduced between Country Support Strategies (CSS), as detailed in Country Strategy Papers (CSPs), and National Indicative Programmes (NIPs). The CSPs are prepared by the ACP states, and reflect the needs and specific circumstances of each country. The CSS is intended as an instrument to prioritise activities, and ‘to build local ownership of cooperation programmes’.73 It is at this stage of the programming process that the concept of ‘ownership’ is introduced. If there is any divergence between the Community’s own analysis and that of the ACP country, these differences ‘shall be noted’.74

On the basis of the CSP, the ACP countries submit to the Community a draft NIP ‘on the basis of and consistent with its development objectives and priorities as expressed in the CSS’. 75 The draft NIP specifies the sectors on which support is to be focused, the most appropriate measures to be taken, and the resources reserved for projects and programmes. In accordance with the Cotonou Agreement, the NIPs are to be adopted by common agreement between the Community and the ACP states. The Community will, at this point, assess whether the NIP reflects the objectives and criteria set out in the Community policy. Ownership of the programming by the ACP is, therefore, subject to approval by the Community, linked to the criteria that the Community has identified.

In reality, the Community has assumed more powers than were agreed in the Cotonou Agreement. An EDF Committee of Member States’ representatives has been established, with the task of supervising the implementation of financial assistance provided by the Community. Legally, this decision of the Council to charge a committee of Member States with supervising the Agreement does not apply to the EDF, so that, in reality, the decision-making power of the Committee is similar to those of other committees supervising aid to other regions.

So, contrary to what was agreed in the Cotonou Agreement on leaving ownership of the CSS with the ACP countries, the CSS is approved by the EDF Committee. Subsequently, the NIP also has to be approved by a qualified majority of Member States through this Committee, in order to achieve ‘a

72 Commission of the European Communities, Communication to the Commission on the Reform of the Management of External Relations, 16 May 2000, Rev 8. The consistency and quality of programming are monitored by an interdepartmental Quality Support Group (QSG).

73 ACP–EU Partnership Agreement, The Courier, September 2000, Special Issue, Annex IV, Implementation and Management Procedures.

74 Ibid. 75 Ibid.

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broad consensus on the general policy to follow in relation to a country’. 76 Subsequent decisions on projects are also approved by the Committee, giving Member States important decision-making power in relation to the implementation of development aid.77

The role of the Member States’ Committee in approving the CSS, the NIP and subsequent projects obviously defines the scope for ‘ownership’ of the CSS. One could also say that the ‘ownership’ is conditional on the approval of the Committee. There seems to be some contradiction between the agreed ‘principles’ and the practicalities relating to their implementation.

6.2 Poverty Reduction Strategy Papers Coinciding with the IFI’s creation of the Poverty Reduction Strategy, the European Commission became interested in working more closely with the Bretton Woods Institutions. At the joint annual meeting of the World Bank and the IMF in Prague in September 2000, Commissioner Nielson stated: ‘I [...] welcome strongly the new approach of the Bretton Woods Institutions and our support for the Poverty Reduction Strategy process. I also welcome […] the opportunity for the EC to be involved in this process, both at headquarters and field level’.78

In practical terms, the Commission saw an emerging convergence between the process of the IFI’s PRS and the Community’s CSS. In May 2000, in a brief to Heads of Delegations, the Commission specified that ‘In this context PRSPs will provide an important framework for 9th EDF programming’.79 The programming guidelines for the 9th EDF reflect the importance attached to the PRSP in more absolute terms: ‘For countries which are involved in the design and development of poverty reduction strategies in the framework of the World Bank initiative, it is automatically assumed that the point of departure for EDF programming will be the PRSP preparations’.80 More concretely, within the framework of the PRSP process, the Commission and the World Bank agreed on the possibility of jointly co-financing their support to the implementation of PRSPs in ACP countries.81 The PRSP would also provide a basic document for future new support under the Commission’s Structural Adjustment Facility.

The linking of the PRSP and the CSS provides an opportunity to improve coordination of aid provided by the Community and other multilateral donors. The Commission also hopes that, in linking up to the PRSP process, it can have greater influence over the outcome of the PRS. 82 The latter, however, will be determined by the scope allowed by the World Bank and the IMF for the Commission to play a role in the PRS process. Commissioner Nielson made this point in a letter to the managing director of the World Bank, as follows:

‘I would like to make one observation. The effectiveness of the Commission’s participation in PRSP discussions depends fundamentally on the role that we are invited to play and the amount of time and information that we have available to prepare. In some cases these issues

76 Commission, internal memo by Poul Nielson, 12 July 2000.77 Ibid.78 Commissioner’s Nielson’s statement at the annual meeting of IFIs, in Prague, September 2000.79 Original emphasis. European Commission, Note to Heads of Delegation, Heads of Unit and Desk Officers,

Brussels, 11 May 2000, B2(00)D/4371.80 Commission of the European Communities, Measures taken and to be taken by the Commission to address the

poverty reduction objective of EC development policy, Commission Staff Working Paper, Brussels, 26 July 2001, SEC(2001) 1317, p.9. By the end of 2000 the Commission had undertaken interim PRSPs (IPRSPs) in Benin, Burkina Faso, Chad, Ethiopia, Kenya, Uganda and Sao Tome (according to the EC’s Report on the Implementation of European Commission External Assistance, Staff Working Document, D(2001)32947, p.8), and in Madagascar and Mongolia (according to the Commission Staff Working Paper SEC(2001)1317, p.8).

81 Ibid., p.23.82 Ibid.

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still present a problem [...] often leaving us (and I suspect other donors) trailing in the wake of the Fund and the Bank and their discussions with Government’.83

There is clearly an issue here as to how the Commission can have an impact on the outcome of the PRSP, other than through participating in their financing through the EDF – since the World Bank and IMF evidently guide the process.

Box 5: Ownership versus Conditionality

The World Bank, the IMF and the European Commission have continuously emphasised the importance of ‘ownership’ over the PRS process by developing countries. At the same time, it has also been made clear that the principal elements of conditionality have not changed. This is set out very clearly in a statement on the conditionality for reaching a decision point under the enhanced HIPC Initiative, which will induce the ‘irrevocable release of assistance for debt relief linked to floating conditions’.

The conditionalities can be divided in three categories: macroeconomic reform, structural reforms and social policies (and additional poverty reduction requirements). The macroeconomic and the structural reforms contain the ‘classic’ package of conditionalities for structural adjustment loans, which include privatisation, sectoral reform, budget management and tax reforms. Added to these are the conditionalities related to ‘good governance’, social policy and poverty reduction measures. Within the latter category fall the preparation of a PRSP and the implementation of a PRS, as well as policies in social sectors, particularly health and education. There is also an expectation that measurable output targets will be established, as well as criteria for measuring the impacts of the PRS programme.

It is quite clear that the scope for ‘ownership’ of the PRS process is limited by the conditionalities and procedures for approval for releasing the funds and loans to which the PRS gives access.

Source: European Commission, DG Development, SPA TASK Team on Contractual Relationships and Selectivity. Review of Conditionalities used for the Floating HIPC Completion Point, Brussels, 27 November 2000, CT D(2000).

6.3 Linking the PRS and the CSS: Emphasis on Social Sectors

The linking of the PRS and the CSS is advocated on the basis that it would lead to:

enhanced ownership by the developing countries of policies directed at poverty eradication; greater coordination among donors in implementing strategies directed to poverty eradication; increased joint commitment – of both the governments of developing countries and the donors

– over a sustained period of time to policies that will contribute to the eradication of poverty; progressively more funding for social sectors, particularly health and education; and more transparent and measurable outcomes by establishing clear output targets and criteria for

measuring impacts.84

For the European Community, the key elements that should guide its policies are, therefore, to accept the need for multi-annual commitments to agreed policies, as opposed to flexibility, and increased funding for social sectors, particularly health and education.83 Letter from Commissioner Poul Nielson to Sven Sandström, Managing Director of the World Bank (Brussels,

B2(00)D/2992.84 In his address to the annual World Bank–IMF meeting in Prague, September 2000, Commissioner Nielson

mentioned four points: (1) a long-term vision and strategy; (2) enhanced country ownership of development goals and actions; (3) more strategic partnerships among stakeholders; and (4) accountability for development results.

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6.4 The PRS, the CSS and SelectivityAs the corollary of the new approach, the Commission believes that in future decisions on aid allocations should take into account the results of the recipient government’s performance in implementing the desired policies, measured in terms of the progress in implementing institutional reforms; the use of resources; effective implementation of current operations; poverty alleviation or reduction; and sustainable development measures and macroeconomic and sectoral policy performance.85

In poor countries with very weak systems of governance, the Commission intends to concentrate its activities on strengthening the structure of governance. Alternatively, it may channel aid through alternative non-governmental routes, ‘to ensure that poor people benefit’.86

7 Measuring ProgressWith regard to measuring poverty-related issues in the country strategy evaluations, the Commission has reported that: ‘Though the European Commission’s handling of issues related to poverty is improving, evaluations found this issue still needed much work’.87 The Commission Services are currently working on a methodology to measure the ‘poverty focus’ of Community development cooperation. These endeavours have so far concentrated on preliminary work to measure the impacts of EU aid. The Commission appreciates that it might not succeed in this effort, given the number of ‘methodological challenges’:

‘It is impossible to isolate the impact on poverty indicators of an individual donor’s impact in a specific country, because the indicators may be influenced by many exogenous factors. Even when policy change is assessed as a whole (rather than attributed to individual donors), the measurement of counterfactual policy outcomes is problematic. There is also a time lag between inputs and their expected results’.88

As the EU policy has converged with those of the international financial institutions and other donors, with coordinated activities based on common assessment approaches, it is increasingly difficult to isolate the efforts of individual donors. In addition, as EU aid is less focused on isolated projects, and increasingly directed towards budget support, the links between direct cause and effect, and the success or failure of its contributions are becoming progressively more difficult to establish.

85 European Commission, Report on the Implementation of the European Commission External Assistance, Situation as at 01/01/01, Staff Working Document, D(2001) 32947, p.91.

86 Ibid., p.9.87 Ibid., p.156. Also, civil society involvement and capacity building were found to be weak in Community

programmes.88 Ibid.

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7.1 Targeting Aid: The 20/20 CompactThe progress towards attaining the Millennium development goals needs to be measured, but not necessarily in terms of the achievements of individual donors. As the principle of country ‘ownership’ is heralded as the new underpinning of the current approaches, combined with the renewed commitment to improve the coordination of donor inputs, and among donors and the respective governments, it follows that the impacts of the efforts of single donors are increasingly difficult to determine.

At the UN Millennium Summit it was agreed that the contributions of individual donors to the development goals would be measured in terms of their effects on human development and social sectors. It was calculated that the goals could be achieved if both the governments of developing countries and aid donors make a concerted effort to devote a minimum of 20% of their resources to improving basic social services: health, education, water and sanitation. This initiative – the so-called 20/20 compact – is based not on ‘conditionality’, but on partnership.

The compact is probably a more realistic alternative to the concept of ‘ownership’, in recognition of the fact that achieving the latter will be seriously hampered by the fact that donors do require a decisive role in determining the conditions for granting their aid. The compact builds on the observation that aid is most effective if governments and donors are in agreement on the objectives and policy approaches – and aid as well as government resources are utilised in the same direction. The 20/20 compact aims to provide financial underpinning for the new strategies to eradicate poverty, but for the Community it raises the question of how better targeted and measurable allocations directed towards poverty eradication can be made through the EU budget.

7.2 Measurable Sectoral Output TargetsAs one leg of the budget authority, the European Parliament has traditionally played an important role in ensuring a poverty focus in the Community cooperation programme. For the 2001 budget, the Parliament focused on the question of how the budget could be simplified to allow for a policy-oriented (rather than project-oriented) development approach focusing on poverty eradication. The Parliament and the Commission have cooperated in developing proposals for reducing the number of budget lines, and for refining instruments for targeted policy inputs in the broad regional budget lines.

The Parliament has also judged that a greater emphasis on poverty eradication by a sectoral approach has to be underpinned by the Community budget. The Community budget is dominated by a regional focus, with some smaller sector-focused lines bolted on. The sectoral focus could, therefore, be best achieved within the scope of the regional programmes. This would allow the Commission to programme in a multi-annual fashion, based on policy objectives. At the same time, it would allow Parliament to execute its rights as a leg of the budget authority, by establishing broad-based sectoral targets. In this way a micro-management by Parliament through a proliferation of the number of small (sector-based budget lines) could be avoided. This would have a double beneficial effect on the efforts to gear European cooperation policy towards those sectors most relevant to poverty eradication.

In 2000 the Parliament proposed that the 2001 budget include sectoral targets in the regional budget lines. The DAC provided a basis for reporting on the purpose of aid, by agreeing on a classification system for reporting on the destination of aid by sector, which was introduced for a three-year trial period. The agreed sectors included, among others, (basic) health and (basic) education (see Annex 3).89 The DAC system of classification corresponded largely with the one already used by the Commission on sectoral allocations for the EDF. The Commission intends to extend the classification system to its reports on aid by sector in other regions.

89 OECD, Reporting on the Purpose of Aid (note by the secretariat), DCD/(DAC), (99)20, agreed by DAC members on 14 September 1999 and entered into effect as of that date.

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The European Parliament built in a number of mechanisms to make sure that the sectoral targets enhanced the new poverty orientation developed by the Commission. It introduced several qualifying comments on the sectoral targets agreed in the budget:

The definition of targets by Parliament goes hand in hand with recognising the importance of the ‘ownership’ of policies by ACP countries; the targets are, therefore, global political targets which may vary between countries, based on the needs identified in the programming exercise.

The Commission can deviate from the targets if it demonstrates in its annual report that the needs identified by the recipient countries were different from the targets set by Parliament.

The Commission can deviate from the targets if it demonstrates in its annual report that complementary activities by other Member States require the Commission to prioritise sectors other than those proposed by the European Parliament.

To ensure continuity, the targets set by Parliament will be related to figures on the allocation of commitments for the previous year, in percentage terms, provided by the Commission each year in a working document accompanying its budget proposals.90

Box 6: DAC Output Targets: Establishing the Purpose of Aid

The members of the OECD’s Development Assistance Committee (DAC) requested that an output-oriented system be developed for monitoring the allocation of aid. Directives were therefore developed for reporting on the sector of destination of aid. After a three-year trial period (1996–99), the classification system was endorsed by the DAC. The term ‘purpose of aid’ covers any or all of three dimensions: the sector of destination, the form or type of aid, and the policy objective(s) of a given transaction that is reported as official development assistance (ODA), official assistance (OA), or other official flows (OOF) (see Annex 3). Reporting is transaction by transaction in the DAC Creditor Reporting System (CRS) and in the form of annual aggregates.

7.3 Commission’s Reservations about Output TargetsThe Commission’s responses to the Parliament’s initiative on sectoral output targets have been mixed. The Commissioner for Development Cooperation initially assisted the Parliament in developing the output targets for the 2001 budget. The categories that were established by the Parliament were based on proposals submitted by the Commission to make them consistent with their databases. 91 In parallel negotiations with Parliament, the Commission has also committed itself to the implementation of the sectoral output targets, particularly in the negotiations related to the discharge procedures that took place in 2000 and 2001, for the years 1998 and 1999, respectively.

In 2000 the Parliament accepted to grant discharge to the Commission for the year 1998, on the basis of an action plan provided by the Commission, in which it responded to the Parliament’s concerns as follows:

90 The Commission provided these figures for the 2001 budget. In the negotiations for the 2002 budget, the Commission unexpectedly claimed that it could no longer provide these figures.

91 These were almost entirely in line with the DAC categories and little adaptation was required to make the two systems compatible (see Annex 3).

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‘The EC development cooperation has poverty reduction as its central objective and part of the priority areas will be the support to social sectors through structural adjustment programmes. Since health and education will receive more emphasis, the implication is that a greater amount of financing than in the past would be dedicated to these sectors. This, in turn, will allow EC development cooperation to respond more effectively to the internationally adopted DAC targets’.92

The Commission’s statement in the action plan confirms the priorities previously established in the policy paper on development cooperation, which stated that: ‘The development of social policies such as health, food security, education and training [...] are of the utmost importance. [...] resources must be properly targeted towards the poorest of the poor’. The Commission also made an explicit declaration on how this sectoral orientation should be measured:

‘More attention will also be paid to actual disbursement levels [...]. The reporting on EC development cooperation must evolve towards DAC-OECD standards and shift gradually from input orientation towards results. It is clear, however, that the second part of the exercise is particularly complex and will only yield major results in 3–4 years’ time, if and when reporting of major indicators is fully established for the programmes. On the other hand, adopting OECD standards on reporting should be feasible by 2001’.93

In this declaration the Commission acknowledged the desirability of the methodology adopted in the OECD (DAC) context for establishing a reporting system for measuring output, and affirmed the feasibility of adopting the OECD standards on reporting by 2001. It should be stressed that the context of granting discharge, in which the Commission made these declarations, did put extra weight on its requirement to implement these pledges as stated. In line with these commitments, the Commission also stated in a working paper that: ‘The Commission is at present improving its internal information systems to allow for a better analysis of aid flows and their impact on poverty reduction’.94

In the preparations for the 2002 budget, the Commission argued that sectoral output targets were not consistent with its cooperation policy. The Commission failed to produce figures of sectorial distribution of commitments and informed the Parliament it did not have the adequate information technology and systems to produce these figures. The Commission also insisted that it required more ‘flexibility’ and could not operate on the basis of sectoral definition in the budget. In a lengthy exchange with the Parliament the Commission insisted it could not implement the sectoral output targets.95

Parliament insisted that figures should be made available and that adequate resources needed to be allocated to basic social services. A compromise was reached with the Commission, and Commissioners Patten and Nielson accepted:

“the need to give strong support to social infrastructure with the emphasis on basic education and health.”96

The budget 2002 stipulates that 35% of the regional budget lines be allocated to basic social services.

92 Commission Action Plan, attached to the Resolution adopted by the European Parliament on the EDF (1998 discharge), PE 286.787, adopted in June 2000.

93 Original emphasis, European Commission, ibid.94 Commission of the European Communities, Measures taken and to be taken by the Commission to address the

poverty reduction objective of EC development policy, Commission Staff Working Paper, Brussels, 26 July 2001, SEC(2001) 1317, p.10.

95 For a further analysis of the Commission’s motives for changing its position, see Reisen, van M., European Integration and Enlargement: Is there a Future for EU Development Policy? Brussels, October 2001.

96 Letter by Commissioners Nielson and Patten to Mr Miranda, Chair of the European Parliament Development Committee, dated 7 December 2001, D(2001)3608.

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Box 7: Sectoral Output Targets: Consistency and Complementarity

The DAC classification system was developed in response to the desire among donors to have greater visibility and transparency in relation to where aid is allocated. By agreeing to use a common classification system, donors will be able to track and compare the allocations of aid to various sectors. It will also allow donors to monitor the progress towards meeting the 2015 Millennium development Goals, which required them to increase investments in the social sectors, particularly health and education.

Once fully implemented, the classification system will be used for reporting by all DAC members, including all EU Member States and the Commission, thus ensuring that the data obtained are consistent and compatible. The use of the system will enable comparisons and analyses of the various instruments within and outside the Community budget, and of the allocations made by Member States and the Commission. It will therefore provide a very useful and precise tool for assessing the complementarity of their activities.

7.4 Integrating the EDF into the BudgetParliament has long been concerned that the lack of consistency among the Commission’s various aid programmes is an obstacle to ensuring primary, secondary and tertiary poverty foci in its aid and cooperation efforts. The Commission has failed to develop a credible overall development programme because of the lack of comparable data on sectoral allocations among the various programmes, and on planned and actual commitments and payment appropriations on an annual basis.

The Council has seriously contributed to the disintegration of the Community programme. On the one hand, the Council has consistently made statements in favour of a poverty focus in the development programme, and has requested that a greater proportion of resources be directed to LDCs. On the other hand, it has failed to make any progress in integrating the EDF, which consists of all but six LDCs, into the Community budget. In an annex to the Maastricht Treaty it was agreed that the assistance to ACP countries would remain outside the Community budget.97

In establishing the 2001 budget, Parliament’s overall efforts were focused on ensuring greater transparency in this regard. It intended for the development budget lines to more clearly express a poverty focus, with an emphasis on the LDCs and, within those countries, basic education and health.98 In order to plan the budget with these two objectives, Parliament recognised that it would be necessary to have a total overview of EC’s development efforts, including in the LDCs. This would, therefore, necessarily include activities in the ACP countries arranged through the EDF, so that output targets were also established for the EDF. In this way the Parliament intended to contribute to the harmonisation of the various development programmes inside and outside the budget, which had been publicly acknowledged as a first step to the eventual development of more effective instruments that would ensure the primary, secondary and tertiary poverty foci through the budget.

In order to ensure that the output targets would not interfere with the programming exercise, intended to give greater ownership to ACP countries, a clause was included in the budget that the Commission could justify deviations from the overall targets in its annual report to Parliament.

97 Council of the European Union, Declaration on the European Development Fund, Final Act, Treaty on European Union, 1992.

98 European Parliament, Opinion of the Committee on Development Cooperation for the Committee on Budgets on the 2001 budget, Max van den Berg, Rapporteur, July 2001. The corresponding amendments were adopted by Parliament.

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Finally, the Parliament agreed that, to ensure the timely exhaustion of the 9th EDF, the Commission’s budget proposals should also include commitment and payment forecasts in line with the Commissioner’s various public assurances that the 9th EDF would be exhausted by 2006.

7.5 The Commission’s Efforts to Harmonise Community Development Programmes

In 2000 the European Commission stated its intention to undertake an analysis of how a comprehensive poverty approach could be realised within the whole of EU’s external spending. Referring to the policy statement it adopted on 26 April 2000, in its Action Plan, the Commission responded to concerns raised in the 2000 discharge process over the year 1998, by stating that:

‘On 26 April the Commission adopted a comprehensive policy statement on development (EC Development Cooperation policy). This will be followed in the coming weeks by a working document on “priorities for the EU’s external spending and its poverty focus”.99 This document will set out a method of determining to what extent aid is channelled towards the poorest countries as well as towards the poorest segments of the population. It will cover the combined category 4 of the budget (devoted to External Actions) and EDF financial resources over a medium term outlook. Secondly, the Commission will be putting forward a combined presentation of EDF resources with the budget in the context of the 2001 budget exercise. This will allow for a comprehensive overview of aid flows with their sectoral orientations’.100

This statement demonstrates the Commission’s intention, in the context of the process of negotiating the 2001 budget, to undertake a comprehensive overview of all aid flows and their sectoral orientations. It is also clear that these comments referred to the entirety of the development cooperation budget, and were not limited to either the budget lines or the EDF alone. The integration of the sectoral output targets in the budget would provide an opportunity to make the development programmes more consistent and to achieve a de facto integration of reporting on the EDF targets and allocations in the budget. This would allow both primary and secondary poverty foci to be established on an annual basis, without further major reforms to the various existing Community programmes for external aid.

Notwithstanding its pledges in the discharge processes, in the preliminary draft budget for 2002, the Commission failed to provide either implementation figures on the 2001 output targets, or prospective figures on the exhaustion of the 9th EDF. A failure to exhaust the 9th EDF within the given timeframe (by 2006) will negatively affect the Commission’s ability to achieve a primary poverty focus. The Commission’s failure to produce these data raises questions with regard to its intention to exhaust the 9th EDF in the defined timeframe, and to prioritise certain sectors directly relevant to poverty eradication.

8 Constraints and OpportunitiesSince the signing of the Maastricht Treaty, progress has been made in directing Community assistance towards poverty eradication. The Community has been, and still is, an active supporter of the Millennium development goals on poverty eradication by 2015. Poverty eradication is now a recognised priority of European Community development aid, and this objective has been mainstreamed – on paper - in the major programmes of the Community programme. This has been a major achievement.

99 The document referred to did not evolve into an official Communication. According to the Commission it is, and will remain, an internal document. Letter, DEV/B/3 D(01)5521.

100 Emphasis added. Commission Action Plan attached to the Resolution adopted by the European Parliament on the EDF (1998 discharge), PE 286.787, adopted in June 2000.

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The weakness in the Community programme with regard to poverty eradication is not in its overall commitment, but in various aspects related to the implementation of this commitment. This problem presents itself at various levels where aspects of the Community programme are defined.

An analysis of Community aid in the past shows that the special colonial links between some Member States and third countries have been, and still are of vital importance in the way the programme has developed. The assistance programme has become a ‘bolt-on’ approach; the interests of various Member States in the developing world have been linked to the programme as the Union has expanded. It is generally recognised that this has resulted in a programme that lacks consistency and harmony. It has also resulted in a pattern of negotiations where to a large extent the special interests of some Member States determine the positions taken in the Council by its Members.

This historical review has revealed the tendency to reinvent the wheel. The commitment to poverty eradication has been consistently expressed by the various Community institutions, and by the Parliament in particular. However, there are serious concerns about the implementation of these commitments, some of which were raised as long as 20 years ago, and urgently need to be addressed, in order to identify how real and meaningful changes can be achieved: These concerns centre on:

the lack of integration and harmonisation of the Community development programme; the underperformance of the utilisation rates of both budget lines and the EDF; and the lack of transparency in the outputs of the budget lines and the EDF.101

In improving the poverty focus of Community aid, a number of constraints and opportunities present themselves at various levels of policy and in relation to the different Community institutions. The formulation of an effective Community strategy for poverty eradication will therefore hinge on whether a number of key issues are successfully resolved:

The integration and harmonisation of the Community development programme, and the utilisation of the DAC categories of low- and middle-income countries in the reporting on EU aid activities, including in the Community budget;

The removal of existing contradictions between, on the one hand, the objectives of the PRS/CSS in poverty eradication, and on the other, the conditions related to the macroeconomic policies required by the donors, which effectively create poverty;

The development of an effective Community voice within the international financial institutions and the WTO, and a coordinated Community position on ‘issues of equity focusing [on] the allocation of assets and wealth and the implications of tax policy for equity’,102 as well as on issues related to the liberalisation of trade and services;

The enhancement of country ‘ownership’ by defining clear roles for the institutions involved in decision making, implementation, approval and control.

The establishment of clear procedures for defining targets for the primary and secondary poverty foci throughout the whole Community aid programme. These targets should also be applied to the Community budget, and integrate the EDF.

101 Other issues raised in previous resolutions adopted by the Parliament, and which are still valid, are related to staffing levels and expertise at HQ and in delegations; the need to decentralise activities to delegations; the need to expand and strengthen delegations; concerns about the complexity of procedures, and the powers of Member States’ committees.

102 Commission of the European Communities, Measures taken and to be taken by the Commission to address the poverty reduction objective of EC development policy, Commission Staff Working Paper, Brussels, 26 July 2001, SEC(2001) 1317, p.7.

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8.1 What Community Institutions Can DoThis section offers a number of suggestions as to what steps the various Community institutions could take to ensure that the issues listed above are resolved, in order to enhance the Community’s contribution to the fight against poverty.

The CouncilThe Council plays a key role in defining the overall nature of the Community development programme, and also has the power to remove certain obstacles that are currently undermining its focus on poverty alleviation. In particular:

The Inter-Governmental Conference should remove the declaration on the EDF from the Maastricht Treaty on European Union.

The Inter-Governmental Conference should establish a common Community policy towards the international financial institutions, based on the commitment to have poverty eradication as the primary focus of development activities, and define Community competence in this area.

The Inter-Governmental Conference should integrate into the Treaty on European Union the principle that the EU’s external policies should not contradict the development objectives laid down in Article 177(1), particularly the fight against poverty, and strengthen Article 178.

In view of the Community’s significant contribution to overseas development assistance (ODA), the Council should seek to increase the visibility of Europe’s collective involvement in the implementation of the Millennium development goals, by including the activities of individual Member States in public information on the EU’s external aid programmes, and by publishing an annual report highlighting Europe-wide regional and sectoral aid allocations.

The Council should actively strengthen the ‘complementarity’ of development activities undertaken by the Commission and Member States, by agreeing to introduce the OECD/DAC classification system for reporting on regional and sectoral aid allocations in all EU Member States.

The Council should redefine the roles of Member States’ committees to ensure consistency with the principle of ‘ownership’, and their role in approving country support strategy and projects should be reconsidered.

As one leg of the budget authority, the Council should more actively contribute to ensuring greater harmonisation and transparency in the budget for development cooperation, including the assistance to ACP countries, and thus enhance the primary poverty focus.

As one leg of the budget authority, the Council should ensure more specific sectoral policy definition of budget lines, and invest aid especially in countries that implement effective policies aimed at poverty eradication.

The European Parliament The European Parliament should continue to insist that poverty eradication remains the

primary objective of the Community programme, and extend this principle to all developing countries, including those in the Mediterranean region.

It is important that the European Parliament continues to insist that the Commission, as the executive, implements the sectoral output targets in the regional aid programmes, as

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established by the budget authority, and that the Commission provides all relevant data requested by the Parliament.

The European Parliament should examine whether the Commission has put in action the pledges made in previous discharge processes, with a view to future implementation.

Greater emphasis could be given to the right of the European Parliament the discharge process to examine the Commission’s implementation of the budget, including the implementation of sectoral output targets and the sectoral priorities identified in the comments to the regional budget lines.

The Court of Auditors of the European Union The Court of Auditors should utilise its authority to request the Commission to produce the

relevant data necessary to ascertain whether it has implemented the budget effectively and efficiently, and in accordance with the intention of the budget authority, since the new Commission was installed.

The Court of Auditors should give priority to examining the results of the Commission’s efforts to focus the external aid programme on poverty, in view of the fact that the European Council, the Parliament and the Commission have all insisted that poverty eradication should be the primary focus of this programme, and in view of the international commitments the Community has made to this effect.

The European Commission The European Commission should ensure further integration of the Community programme

and, above all, that the poverty focus is applied in all external aid programmes, including the EDF, the ALA and Southern Africa programmes, MEDA, Tacis and Phare. Special emphasis should be given to implementation of the Millennium development goals in all developing countries, and not just in some isolated regions.

The European Commission should actively cooperate with the Parliament and the Council in establishing a poverty focus in the Community development programme, which is clearly a shared objective.

The European Commission should provide annual data on its sectoral output, which represent its contribution to the implementation of the Millennium development goals, in terms of both regional and sectoral allocations, and ensure that these data are consistent and comparable across regions.

A much greater balance could be struck between commitments related to certain sectors. The Commission’s activities in the area of transport need to be explained in terms of the cxontribution these make to the eradication of poverty.

The European Commission should ensure that the Community position on the poverty reduction strategy, and the conditions for loans or grants from international financial institutions and other donors, do not contradict the main focus of the PRS process – poverty eradication – both at a generic level and in specific country situations.

The European Commission, as the executive body, should duly implement the budget, as decided by the budget authority, with no exception.

The European Commission should use its right under the discharge process to explain in its annual report any deviations in implementation from the budget commentaries, including on the sectoral output targets and other poverty-related comments, and in future it should refrain from making reservations to the sectoral output targets in the Community budget.

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The European Commission should actively promote the use of the sectoral output targets by the budget authority as an instrument to prevent the proliferation of budget lines, and hence the need of the budget authority to become involved in micromanagement.

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About the authorMirjam van Reisen (1962) is a development expert in European Union policies, based in Brussels. She works as a policy adviser to various NGOs and NGO networks, as well as to Members of the European Parliament. Ms van Reisen is the author of EU ‘Global Player’: The North–South Policy of the European Union, published in 1999/2000 by International Books. This book offers an in-depth analysis of the dynamics within the European Union, which is necessary for understanding development policies and practices. She is currently finalising a PhD thesis in policy studies, entitled The Logic of Coincidence: A Reconstruction of Agenda-setting on Development Aid (1980–2000), in which she analyses the political processes on which policy changes in European aid were based following the end of the Cold War in 1989. Mirjam van Reisen, a Dutch national, was previously employed by the Netherlands Ministry of Foreign Affairs and the University of Nijmegen (Department of Political Science). Between 1988 and 1995 she was associated as a policy adviser to NOVIB, an NGO in The Hague, as a consultant from the University of Nijmegen. She is the author of the annual contributions of Eurostep to the Reality of Aid (published by Earthscan, London) and Social Watch (published by Instituto Tercer Mundo, Montevideo).

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Annex 1DAC List of Aid Recipients (1997/98) and ACP countriesACP countries are indicated in italics.

Part I: Aid to developing countries and territories(official development assistance)

Part II: Aid to countries and territories in transition

LDCsOther LICs(per capita

GNP <$765 in 1995)

LMICs(per capita GNP $766 -$3035 in

1995)

UMICs(per capita

GNP $3036-$9385 in 1995)

HICs(per capita

GNP >$9385 in 1995)

CEECs/NISMore advanced

developing countries and

territoriesAfghanistanAngolaBangladeshBeninBhutanBurkina FasoBurundiCambodiaCape VerdeCentral African RepublicChadComorosCongo Dem. Rep.DjiboutiEquatorial GuineaEritreaEthiopiaGambiaGuineaGuinea BissauHaitiKiribatiLaosLesothoLiberiaMadagascarMalawiMaldivesMaliMauritaniaMyanmar (Burma)NepalNigerRwandaSao Tome and PrincipeSierra LeoneSolomon IslandsSomaliaSudanTanzaniaTogoTuvaluUgandaVanuatuWestern SamoaYemenZambia

*Albania*Armenia*AzerbaijanBosnia and HerzegovinaCameroonChinaCongo, Rep.Côte d'Ivoire*GeorgiaGhanaGuyanaHondurasIndiaKenya*Kyrgyz Rep.MongoliaNicaraguaNigeriaPakistanSenegalSri Lanka*TajikistanVietnamZimbabwe

AlgeriaBelizeBoliviaBotswanaColombianCosta RicaCubaDominicaDominican RepEcuadorEgyptEl SalvadorFijiGrenadaIndonesiaIranIraqJamaicaJordan*KazakhstanKorea Dem. RepLebanonMacedoniaMarshall IslandsMicronesia*Moldova (1)MoroccoNamibiaNiue

Palau IslandsPalestinian admin areasPanamaPapua New GuineaParaguayPeruPhilippinesSt Vincent & GrenadinesSurinameSwazilandSyriaThailand Timor=TokelauTongaTunisiaTurkey*Turkmenistan*Uzbekistan=Wallis and FutonYugoslavia Fed Rep

BrazilChileCook Islands CroatiaGabonMalaysiaMauritius=MayotteMexicoNauruSouth AfricaSt LuciaTrinidad & Tobago

UruguayThreshold for World BankEligibility($5295 in 1995)Antigua and BarbudaSeychellesArgentinaOmanBarbadosSaudi ArabiaSlovenia+ArubaBahrainGreeceLibyaMalta+MonserratSt Helena St Kitts and NevisTurks and Caicos Islands

=Aruba=French Polynesia=GibraltarKorea Rep of=Macao=Netherlands Antilles=New CaledoniaNorthern Marianas=Virgin Islands

*Belarus*Bulgaria*Czech Republic*Estonia*Hungary*Latvia*Lithuania*Poland*Romania*Russia*Slovak Rep*Ukraine

Bahamas=BermudaBrunei=Cayman IslandsChinese TaipeiCyprus=Falkland Islands=Hong Kong-

ChinaIsraelKuwaitQatarSingaporeUnited Arab Emirates

Part I countries are listed in ascending order of GNP. Countries whose GNP is not accurately known are grouped below the dotted line in the category in which they are estimated to fall, in alphabetical order.Part II as from 1996: until 1996, aid to these countries is accounted as ODA, in line with the decision of 1992. More advanced countries and territories in this category are retained on the list even where aid receipts are minimal, to ensure comprehensive reporting of financial flows.

* CEEC/NIS; + territories.(1) Moldova was included in Part I of the list as of 1 January 1997; it is classified as an LMIC.= Territory.Source: OECD/DAC, Development Cooperation: Efforts and Policies of the Members of the Development Assistance Committee, 1998 Report, Paris, 1999.

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Annex 2Allocation of Disbursements of ODA by the EU, including Member States, to countries by level of income, 1986/87–1996/97

ODA to LDCs ODA to other LICs ODA to LMICs ODA to UMICs ODA to HICs1986/87 1996/97 1986/87 1996/97 1986/87 1996/97 1986/87 1996/97 1986/87 1996/97

37.4 29.6 26.1 36.3 29.4 28.4 6.8 5.4 0.3 0.321.8 21.5 14 35.9 62 35.7 1.1 5.9 1.1 164.7 43.7 19.6 23.5 13.1 26 1.5 6.8 0.1 049.6 47.4 33.9 26.8 14.7 17.8 1.8 8 0.1 039.1 21.2 15.5 26.6 42.4 45.8 2.9 6.4 0.1 056.9 41 30 34.8 11.4 20.3 1.6 3.9 0.1 035.3 27.9 26.3 26.8 17 23.5 6.8 6.7 14.7 1567.5 66.2 23.7 17.2 7.7 9.4 1 7.2 0 060.4 37.6 23.9 33.2 14 19.3 1.7 9.8 0 0.1

37.1 26 26.1 10.7 0.142.2 39.4 29.5 27 20.3 21.6 1.9 5.7 6 6.3

91.6 2.8 3.9 1.644.9 38.4 34.8 37.1 10.5 17.2 8.1 7.2 1.6 0.1

54 41.6 35.8 28.1 8.7 24.3 1.5 6 0.1 044.3 34.2 27.6 30.6 18.8 24.2 4.7 6.5 4.6 4.651.3 33.6 24.1 20.2 22.1 38.3 1.8 7.538.1 31.5 26.9 31.6 27.9 29.7 4.2 5.1 2.9 2.1

Source: Commission of the European Communities, The European Community’s Development Policy, Communication from the Commission to the Council and the Parliament. Brussels, 26 April 2000, COM(2000), final.

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Annex 3DAC System of Classification by Sector of DestinationIn the DAC system of classification,103 aid is categorised according to the sector of destination,104

which in total add up to all ODA. This system has been applied in the nomenclature used in the EU budgets for 2001 and 2002, and in the sectoral targets specified in the regional budget lines. The categories are as follows:105

Social infrastructure and servicesEducation

Of which basic educationHealth

Of which basic healthPopulation and reproductive healthWater supply and sanitationGovernment and civil societyOther social infrastructure and services

Economic infrastructure and servicesTransport and storageCommunicationsEnergyBanking and financial servicesBusiness and other services

Production sectorsAgriculture, forestry and fishingIndustry, mining and constructionTrade and tourism

Multisector/cross-cuttingGeneral environment protectionWomen in developmentOther multisector

Commodity aid and general programme assistanceProgramme assistance

Structural adjustment with World Bank/IMFDevelopmental food aidOther general programme and commodity assistance

Action relating to debtEmergency assistance

Relief food aidOther emergency and distress relief

Administrative costs of donors

Support to non-governmental organisations

Unallocated/unspecified

103 OECD, Development Cooperation Directorate, Reporting on the Purpose of Aid, Official Document, DCD/DAC(99)20, 12 July 1999, OECD, Paris, 1999.

104 The term ‘purpose of aid’ covers any or all of three dimensions: the sector of destination, the form or type of aid, and the policy objectives(s) of a given transaction that is reported as Official Development Assistance (ODA), Official Assistance (OA), or Other Official Flows (OOF). Reporting is transaction by transaction in the DAC Creditor Reporting System (CRS), and in the form of annual aggregates in Table DAC5.

105 The DAC identifies some further sub-categories, but these were not seen as relevant to the Commission’s classification system.

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Annex 4Output Targets, 2001 BudgetOutput targets for cooperation with ACP and OCT-DOM countries, encompassing B7-1, B7-11

Commitments in 2000 (%)

Output targets for CA in 2001 (%)

Sectors Subsectors Sector Subsector Sector Subsector1. Social infrastructure 23% 35%

1a. Education 4% 10%Of which basic education (6%)

1b. Health 8% 10%Of which basic health (6%)

1c. Population and reproductive health [ missing??]

1d. Water supply and sanitation 2%1e. Government and civil society 8% 8%1f. Other social infrastructure and

services 3% 3%2. Economic infrastructure 35% 23%

2a. Transport and storage 33% 21%2b. Communications2c. Energy2d.Banking, finances and

commercial services 2% 2%3. Production sectors 16% 14%

3a. Agriculture, forestry and fishing 7% 7%3b. Industry, mining 6% 4%3c. Trade and tourism 3% 3%

4. Multisector/cross cutting 4% 6%

4a. General environment protection 4% 4%4b. Women in development 2%4c. Other multisector

5. Commodity Aid and general programme assistance 22% 22%

Total 100% 100%

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Output targets for cooperation with Asian developing countries, encompassing B7-300 and B7-301Commitments in

2000 (%)Output targets for

CA in 2001 (%)Sectors Subsectors Sector Subsector Sector Subsector1. Social infrastructure 54% 54%

1a. Education 46% 35%Of which basic education (10%)

1b. Health (including the fight against poverty-related diseases) 1% 10%Of which basic health (10%)

1c. Population and reproductive health 3%

1d. Water supply and sanitation 1% 1%1e. Government and civil society 5% 5%1f. Other social infrastructure and

services 1%2. Economic infrastructure

2a. Transport and storage2b. Communications2c. Energy2d. Banking, finances and

commercial services3. Production sectors 11% 11%

3a. Agriculture, forestry and fishing 9% 9%3b. Industry, mining3c. Trade and tourism 2% 2%

4. Multisector/cross cutting 14% 14%4a. General environment protection 2% 7%4b. Women in development 7%4c. Other multisector 12%

5. Commodity aid and general programme assistance 21% 21%

6. Support to NGOsTotal 100% 100%

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Output targets for cooperation with Latin American developing countries, encompassing B7-310 and B7-311

Commitments in 2000 (%)

Output targets for CA in 2001 (%)

Sectors Subsectors Sector Subsector Sector Subsector1. Social infrastructure 42% 42%

1a. Education 15% 15%Of which basic education (6%)

1b. Health (including the fight against poverty-related diseases) 10%Of which basic health (6%)

1c. Population and reproductive health 5%

1d. Water supply and sanitation 6% 6%1e. Government and civil society 6% 6%1f. Other social infrastructure and

services 10%2. Economic infrastructure 5% 5%

2a. Transport and storage2b. Communications2c.. Energy 2% 2%2d. Banking, finances and

commercial services 3% 3%3. Production sectors 37% 29%

3a. Agriculture, forestry and fishing 29% 21%3b. Industry, mining 2% 2%3c. Trade and Tourism 6% 6%

4. Multisector/cross cutting 9% 9%4a. General environment protection 2% 4%4b. Women in development 5%4c. Other multisector 7%

5. Commodity aid and general programme assistance 7% 5%

6. Support to NGOs 10%Total 100% 100%

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Output targets for cooperation with the countries of Southern Africa, including South Africa, B7-32Commitments in

2000 (%)Output targets for

CA in 2001 (%)Sectors Subsectors Sector Subsector Sector Subsector1. Social infrastructure 38% 40%

1a. Education 1%Of which basic education

1b. Health (including the fight against poverty-related diseases) 20%Of which basic health

1c. Population and reproductive health

1d. Water supply and sanitation1e. Government and civil society 17%1f. Other social infrastructure and

services2. Economic infrastructure 40% 20%

2a. Transport and storage2b. Communications2c.. Energy2d. Banking, finances and

commercial services 40%3. Production sectors 20% 10%

3a. Agriculture, forestry and fishing 20%3b. Industry, mining3c. Trade and tourism

4. Multisector/cross cutting 2% 10%4a. General environment protection4b. Women in development4c. Other multisector 2%

5. Commodity aid and general programme assistance 10%

6. Support to NGOs 10% Total 100% 100%

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