Towards a post-aid world: What role for the EU?

The publication of the Dutch Scientific Council for Government Policy (WRR) report: “Less pretension, more ambition: Development Aid that makes a difference”, caused quite a stir. Skeptics were quick to seize on the report as endorsement for the view that aid needs radical reform, or should even be scrapped altogether. On Tuesday 23rd March, the lead writer of the report Peter van Lieshout was in Maastricht to debate some of the implications of the report at the EU level. Also sitting around the table were ECDPM director Paul Engel and Mrs Brave Ndisale, Head of the Malawi Mission to the EU in Brussels.

The WRR report strives to avoid easy conclusions. It notes that while most developing countries – with the notable exception of the Sub-Saharan Africa – have succeeded in reducing poverty in the last few decades, it is difficult to draw empirical conclusions on the extent to which either success or failure can be attributed to aid, as opposed to other intervening factors. The report therefore calls for a more modest and targeted approach, proposing three core objectives for Dutch development funding: (i) continuing to contribute to concrete poverty alleviation and the immediate improvement of living conditions; (2) addressing structural improvements through sustainable economic activity; and (3) focusing on global public goods such as climate, food, energy and safety, where “our self interest is clear”.

A new political narrative

In exploring the extent to which these conclusions apply to EU funding, the metaphor of a brightly decorated Christmas tree was a recurring theme at the debate. Paul Engel postulated that EU development policy is the equivalent of putting balls of 27 different colours on a Christmas tree and asking countries to pick some. Some harmonization has been achieved but by far not enough. This is complicated by the fact that the EU itself operates as a 28th donor with its own policy priorities, not to mention the different lines taken by individual directorates, the Council and Parliament.

According to Mrs Ndisale, there are, however, plenty more trees in the christmas market and developing countries should have the space to articulate their priorities. She recalled how Malawi was rebuffed by donors in 2004, when it sought to tackle persistent food insecurity by asking for aid to be directed to boosting domestic food production. The government went ahead anyway, reallocating part of its budget to launch an agricultural subsidy scheme. This decision was vindicated when after only one year, Malawi succeeded in producing sufficient grain for its domestic needs and the donors started to flock back.

While acknowledging that clear policy priorities are critical, Peter van Lieshout cautioned against a naïve expectation that pure demand will always work: “If you ask countries to state what they need, you often get the sense that they are tailoring their priorities to fit the balls on offer. Selective interpretation of demands is also the inevitable consequence of an unequal relationship, Engel added, pointing to the very different approaches taken by the EU on the one hand, and China and other emerging powers on the other.

Van Lieshout pointed out that the Millennium Development Goals illustrate this supply-driven approach, underlining the ambivalence of the concept of ownership. But while they are far from ideal, they do help to focus the public imagination, especially in donor countries, Engel added.

It is precisely on this issue of engaging euro-skeptic taxpayers that makes van Lieshout wary about a meta narrative on EU development funding – essentially handing over even more control to Brussels. “The EU should take into account citizens’ expectations of its role”. One way to do this is to ensure that the EU avoids competing with bilateral donors by taking on only larger projects that build on its comparative advantages: regional integration, strengthening governance, cross-border infrastructural projects, budget support, and so on.

For Engel, the best way for the EU to safeguard its role is to take the lead in constructing a ‘post-aid’ world and helping to set up an alternative Public Finance Facility for development in the medium to long term. “This should be an EU or global pot offering predictable funding for home-grown projects in developing countries that is not tied to technical assistance from donor countries”, he noted. Ndisale concurred, and called for the EU to serve as a “launch pad for domestic capital formation”, stimulating greater (bilateral) foreign direct investment as direct aid is phased out.

Achieving coherence

Whatever path it takes, it is clear that greater streamlining of aid policies in the EU is critical in achieving development effectiveness. The speakers explored the implications of new instruments that have been put in place to ensure better coordination and greater policy coherence for development in EU external action, particularly the EU Consensus on Development and the EU Code of Conduct on Complementarity and Division of Labour in Development Policy. While recognising that their implementation will take time, Engel suggested a number of practical steps that could be taken. An example is to subject all EU internal and external policies to ex-ante ‘development impact assessments’ for every (non)development policy the EU or its member states adopts. This approach would also provide an opening for civil society organisations and academics to play a more active role in monitoring such support.

Ultimately, achieving greater policy coherence for development requires winning hearts and minds – not only of skeptical European citizens, but of competing EU institutions as well. There are concerns in the South as well, as pointed out by Ndisale, who observed that ‘donor darlings’ might benefit most from the new aid rationalisation. By following through on its own commitments to clean up its house, the EU could help allay these fears, and facilitate a regrouping of bilateral initiatives around a common global agenda. However, reiterating some of the lessons of the WRR study, van Lieshout suggested that a gradual approach might be more feasible, building on regional integration first before moving on to a global project.

Watch a synthesis of the discussion

Notes:

1. An English summary of the WRR Report can be downloaded on the WRR website.

2. The Broker, a Dutch-based international development magazine, has been running a vibrant online discussion since the publication of the WRR in January and will publish a special update, with summary of the Dutch and international (English) discussions in its April issue.

3. Maastricht Debates is a networking platform on issues of international cooperation, European relations, and globalisation. ECDPM is one of nine organisations behind the initiative.