Legal base	—
Document originated	8 April 2009
Deposited in Parliament	16 April 2009
Department	International Development
Basis of consideration	EM of 23 April 2009
Previous Committee Report	None; but see (29616) 8403/08 HC 16-xxi (2007-08), chapter 1 (14 May 2008)
To be discussed in Council	18-19 May 2009 "Development" General Affairs and External Relations Council
Committee's assessment	Politically important
Committee's decision	Cleared

Background

10.1 The eight Millennium Development Goals (MDGs) were agreed at the United Nations Millennium Summit in September 2000.[49] Nearly 190 countries have subsequently signed up to them. The MDGs are:

—  eradicate extreme poverty and hunger;

—  achieve universal primary education;

—  promote gender equality and empower women;

—  reduce child mortality;

—  improve maternal health;

—  combat HIV and AIDS, malaria and other diseases;

—  ensure environmental sustainability;

—  develop a global partnership for development.

10.2 In July 2007, the Prime Minister (Gordon Brown), speaking alongside the UN Secretary General, Ban Ki-moon, launched the MDG Call to Action,[50] with the support of 14 heads of state or governments and 21 private sector leaders. It is aimed at "an international effort to accelerate progress on the MDGs and help make 2008 a turning point in the fight against poverty", given that "we're halfway to 2015 and, at the current rate, we will fail to meet all of the MDGs".[51]

10.3 On 14 May 2008, we considered Commission Communication 8408/08 and supporting Staff Working Papers, which provided a mid-term assessment of progress towards the MDGs and put forward priority areas for action and proposals in each area. The Commission's aim was "to make a contribution to the formulation of a European common position, with an eye to the Accra and Doha meetings[52] and the high-level UN event in September 2008 in particular, and so confirm the EU's key role on the international scene and its commitment to the MDGs." The Commission said efforts needed to be redoubled to ensure the goals were met by 2015 and identified four priority areas for EU action: Aid Volumes, Aid Effectiveness, EU policy coherence and Aid for Trade. The Commission did not mince its words: the forthcoming international gatherings would be "a test of the international community's and the EU's credibility". With the EU in particular, the Commission said that Europe "already has the tools and the policies. It now has to move from words to action … We do not need new promises, but should translate existing commitments into ambitious deliverables".

10.4 Given the importance of the subject and the widespread interest in the House, we recommended that the Communication be debated in European Committee B prior to the June European Council at which it was to be adopted.[53] That debate took place on 9 June 2008.[54]

The Commission Communication

10.5 A year on, as the present Communication says in its introduction, "the world is in turbulence. No country or region is escaping the current global crisis ….In these uncertain times, the temptation is to look inwards. This would be a historic mistake. In this age of interdependence our future, our values, our security and our prosperity are inextricably linked with those of the developing countries." The Commission notes that in 2008 "the international community repeatedly stressed that development is part and parcel of the solution to this global crisis", and says that at the international conferences in New York, Accra and Doha, and at the G20 in Washington, "strong positions were taken and precise commitments made to reach the MDGs, to stick to aid targets, to make aid more effective, and to involve the developing countries in the reform of global governance.". It asserts that "these successes owe a great deal to the European Union's united stance, leadership and determination." More recently, the Commission says, the G20 Summit in London of 2 April 2009 "further underscored the urgency, calling for significant measures to be put into place to support developing countries", and that ""Business as usual" is not an option in the present circumstances."

10.6 Therefore, the Commission says, this Communication builds on the main results of the annual "Monterrey survey" detailed in the attached Staff Working Documents on:

—  Aid for Trade ("2009 Aid for Trade Monitoring Report" — SEC(2009) 442);

—  Financing for Development ("Where does the EU go from Doha? What prospects for meeting the EU targets of 2010 and 2015? Annual progress report on financing for development" — SEC(2009) 444);

—  the Millennium Development Goals ("Millennium Development Goals — impact of the financial crisis on developing countries" — SEC(2009) 445) and;

—  Aid effectiveness ("Aid Effectiveness after Accra — where does the EU stand and what more do we need to do?" — SEC(2009) 443).

10.7 The Commission sets out twenty-eight concrete measures the European Union should take forward to help developing countries cope with the crisis, which it groups under a number of broad headings:

The context: factors of vulnerability and resilience

While the crisis is affecting all developing countries, the extent of the impact, its symptoms and the ability to cope vary significantly across regions, countries and groups of populations; an appropriate response should assess the degree of vulnerability and resilience of each country.

Timely, coordinated and targeted European action: honouring our aid commitments, leveraging others

The EU continues to be by far the biggest provider of Official Development Assistance — 59% of the overall total, having increased its share by 4 percentage points over 2007. Collective ODA levels returned in 2008 to 0.40% of GNI, up from 0.37% in 2007, but:

"many Member States are far removed from the 2010 individual milestones. The additional effort to reach the collective target of 0.56% ODA/GNI in 2010 is equal to €20 billion. ODA is a key factor in the quest to reduce world poverty, reach the MDGs and leverage other sources. Its predictability is a value per se and must be ensured. The global crisis cannot be an excuse to water down our commitments. Aid is not a matter of charity but one of the drivers of recovery. ODA alone, however, will not be enough."

Acting counter-cyclically

Action is needed now. Support should have a direct counter-cyclical impact.

Improving effectiveness: a matter of urgency

"In these times of crisis, neither developed nor developing countries can afford to pay the high price of fragmentation and lack of coordination, as is currently the case. Worldwide, 225 bilateral and 242 multilateral agencies fund hundreds of thousands of activities each year. In 108 countries, more than ten EU donors are providing country programmable aid. EU donors fund around 60 000 projects with an average annual contribution in 2007 of only €400 000 to €800 000 per activity."

Protecting the most vulnerable

The current crisis could push a further 90 million people in developing countries into poverty in 2009 (says the World Bank), with women, children, the elderly and the disabled most at risk. The EU must, as a priority, pursue the 2010 milestones in its MDG Agenda for Action[55] or risk further compromising 2015 targets. Continued support in the fields of health, decent work and education is key.

Sustaining economic activity and employment

Maintenance and building of infrastructure are effective crisis mitigators to reach the most vulnerable and create jobs, through local infrastructure development and maintenance while serving basic needs and stimulating economic activity and trade.

Revitalising agriculture

While food prices have gone down recently, remaining structural problems, such as a lack of productive capacity and infrastructure, necessitate continued support for and increased investment in agriculture. Revitalising agriculture in developing countries requires a comprehensive approach, reviewing existing strategies and including support programmes.

Investing in green growth

The crisis offers a major opportunity to create greener economies.

Stimulating trade and private investment

The WTO reports that global trade is predicted to fall for the first time in more than 20 years, by 9%; capital inflows have already decreased dramatically and intraregional trade flows have slowed down substantially. An upturn is needed. Building trust and predictability for market actors, reducing trading costs, and reinforcing productive capacity, will help countries counteract some of the negative effects of the crisis, and will help them come out stronger when the worst is past. Two objectives should be pursued. First, the EU should accelerate more than ever its Aid for Trade (AfT) Strategy and respect the collectively pledged intent to devote €2 billion to trade-related assistance (TRA) by 2010 and ensure follow-up of all other aspects of the AfT Strategy.

Working together for governance and stability

Governance and fighting corruption are key to sustainable economic development. Developing countries need to pursue efforts to establish a sound macroeconomic and regulatory environment for private-sector activities and growth, which the Commission sees as the best incentive for attracting foreign investment and reducing domestic capital flight.

An open economy

The Commission says the EU's strategy to help developing countries cope with the crisis is framed within a wider global context within which, "as highlighted at the London Summit, decisive action is needed not just to sustain global recovery, but also to reinvigorate world trade and investment and for greater inclusion in global institutions. A return to the status quo ante is not an option. More protectionism means less growth and less development."

More efficient and inclusive global institutions

Global governance systems have been outpaced by the intensity of political and economic integration and interdependence worldwide. To harness this process, a more efficient and inclusive global architecture is needed.

10.8 In conclusion, the Commission says:

"This multifaceted crisis poses a serious threat to global stability. Our long-term political vision must guide swift and decisive immediate action. Commitments made last year must be respected and accelerated. But the crisis also holds opportunities. Opportunities to reach out to the developing world and establish a new and better kind of partnership, to invest more and better so as to stimulate our own economies, to refocus priorities, to achieve green growth, to redesign the international economic and financial architecture and adapt it to the realities of this new century. None of this will happen without strong and unconditional European leadership pushing forward the new Global Deal decided in London. To make the difference, Europe must be united. The time to act is now."

10.9 Against this background, the Minister of State at the Department for International Development (Mr Gareth Thomas), in his 23 April 2009 Explanatory Memorandum, helpfully analyses the Commission Staff Working Documents as follows:

"Aid for Trade Monitoring Report 2009 (SEC 2009 442): This annex provides a progress report against the EU Aid for Trade strategy which was adopted in November 2007. It focuses on the EC's and Member States' pledges, made in 2005, to each increase aid for trade commitments to €1 billion (£0.93 billion) a year by 2010. The annex sets out that the EC's commitments have increased from €941 million (£876 million) in 2006 to €1.02 billion (£0.95 billion) in 2007. Member States' commitments increased from €639 million (£595 million) in 2006 to €960 million (£894 million) in 2007. Therefore the EU has virtually achieved its combined target of €2 billion (£1.86 billion).

"The working paper also details the problems of counting aid for trade and the continuing efforts made by EU members, including the UK, to work together to improve and harmonise reporting. It notes that eleven Member States have now adopted their own Aid for Trade strategies. The UK's aid for trade strategy was launched in 2008.

"The Monterrey Process on Financing for Development (SEC 2009 444): This annex highlights the progress towards the EU commitments to increase Official Development Assistance (ODA). It highlights the important commitments made at the UN Follow-up Conference on Financing for Development in Doha in December 2008, and is structured on the Doha chapters, detailing: EU support for improved revenue mobilisation by developing countries through improved cooperation on tax policy and public financial management; mobilising foreign direct investment and other private flows, such as remittances; promoting innovative financing arrangements such as the International Financing Facility for Immunisation (IFFIm); improving debt sustainability; strengthening the international financial and monetary institutions through further reforms of the World Bank and International Monetary Fund (IMF); and financing responses to climate change. 

"The Report notes that EU ODA levels increased in 2008 to a record level of almost €50 billion (£46.5 billion), but that overall EU ODA was only 0.4% of EU Gross National Income (GNI), below the 2006 level of 0.42% and the 2010 target of 0.56%. The Report asserts that some Member States have apparently abandoned their 2005 commitments, and others are increasing their ODA too slowly to achieve the agreed targets. However, the Report states that there has been a clear and persistent increase in EU aid to sub-Saharan Africa (excluding debt relief) since 2005, indicating that aid programmes are being refocused towards Africa. The EU is also on track to achieve its target to provide 0.15% of GNI as ODA to least developed countries. But progress has been slow in establishing multi-annual timetables to show how Member States intend to increase their ODA to reach the targets, including the 0.7% target, by 2015. The Commission also asserts that the EU needs to be innovative with financing development in all its forms, including adaptation for climate change and that further reforms are needed to global governance structures to make them more inclusive.

"Millennium Development Goals — Impact of the Financial Crisis on Developing countries (SEC 2009 442): This annex stresses that despite a hugely important series of events in 2008, including the EU Agenda for Action and the Doha, Accra and UN meetings, much still needs to be done to ensure that the MDGs are met. The challenge is compounded by the fuel, food and financial crises which have had a huge impact on developing countries. The latter is expected to increase the financing needs of low-income countries by $25 billion (£17 billion) in 2009 through the drying up of private investment flows, a fall in remittances, export slumps and reduced economic growth.

"The Commission outlines its vulnerability assessment tool to help it redirect and improve its aid to mitigate the impact of the financial crisis. It also stresses that the crisis will adversely affect social equality, as those least able to adapt are pushed towards deeper poverty and marginalisation. Countries in situations of fragility are also exposed to greater risk of global instability, further exacerbating their difficulties in meeting the MDGs. The annex concludes by urging the honouring of commitments on aid quality and quantity, increased policy coherence and inclusive reform of the international financial system.

"EU Aid Effectiveness after Accra (SEC 2009 433): This annex covers the four areas of EU commitments made in May 2008 and the EU Guidelines for Accra: division of labour; use of country systems; predictability of aid; and mutual accountability for results, including less conditionality. It provides a snapshot of progress but relatively little on proposed actions going forward.

"It acknowledges that while progress has been made in implementing the Paris Declaration and the additional EU aid effectiveness targets, considerable efforts are still needed to meet the goals by 2010. It sets out the reported impediments to aid effectiveness such as limited donor capacity, national priorities based on political, historic or other interests and donor staff training and awareness. It proposes only a few specific measures, e.g. MDG Contracts to promote greater predictability of aid. Most attention is devoted to division of labour between donors. It reaffirms that aid effectiveness should be at the top of the EU's priority list."

The Government's view

10.10 The Minister regards the most significant policy commitment as being the re-affirmation of ODA targets for 2010 and 2015 in spite of the downturn, and says the UK is on track to meet the targets.

10.11 He draws attention to, and welcomes, the Commission's support for the fast-tracking of IDA (World Bank) as a way of getting more resources for developing countries from the development banks; stronger tax governance; frontloading EIB lending outside the EU; and dedicating in 2009 at least €500 million (£465 million) from the 10^th EDF to those ACP countries worst affected by the crisis. He continues as follows:

"Overall, the picture is mixed on the four specific areas. Although there has been important progress made, a much greater effort is required to meet the 2010 and 2015 ODA targets, particularly important, but more challenging, in the current economic crisis.

"Aid for Trade Monitoring Report 2009 (SEC 2009 442): The EU pledges were made against a very narrow definition of aid for trade which is termed 'trade related assistance' (TRA). A wider aid for trade definition would include TRA plus infrastructure and productive capacity. Whereas pledge-related commitments stood at an impressive €2 billion (£1.86 billion) in 2007, overall EU aid for trade amounted to over €7 billion (£6.52 billion) reflecting little increase over 2006.

"The UK is pleased to note the commitment to increase grant funding for the EU-Africa Infrastructure Trust Fund. The challenge is to ensure that the excellent progress towards the pledges is sustained and that overall aid for trade is increased in line with countries' needs and the EU's commitments.

"The Monterrey Process on Financing for Development (SEC 2009 444): The Government believes that the Report gives a clear picture of EU implementation of its commitments, including those made at the Doha Conference. We support most of the suggestions and recommendations in the Report. The London Summit in April set out several new commitments, including on tax cooperation and reform of the international financial institutions. However, we share the Commission's concern that the collective EU commitment to reach 0.56% ODA/GNI may be missed, despite the fall in expected GNI which has reduced the level of ODA required to meet this commitment. The UK remains committed to provide 0.56% of GNI as ODA in 2010, and to reach 0.7% by 2013. We have also set out our plans to meet our ODA commitments to Africa, and we have already met the target to provide 0.15% ODA/GNI to the least developed countries. The Government will continue to press other donors to meet their commitments. This will be a key issue for the EU and the G8 this year and for the UN High-Level Conference on the Financial Crisis in June and at Copenhagen in December.

"Millennium Development Goals — Impact of the Financial Crisis on Developing countries (SEC 2009 442): The Commission rightly identifies the sheer scale of the challenge in meeting the MDGs, particularly in the current economic climate. It also correctly points to the EU's leadership role on this and the importance of fulfilling our commitments, including the helpfully highlighted, EU MDG Agenda for Action. The UK has worked closely with the Commission on the analysis underpinning this assessment and it is in line with our position at the London G20 Summit. We continue to be actively engaged in expert groups on improving the EU's analysis and response to fragility and vulnerability in developing countries and policy coherence.

"While the paper sets out a thorough assessment of each of the MDGs, the UK will be working in Council to ensure that the most off-track MDGs (those focused on education and health) are addressed.

"EU Aid Effectiveness after Accra (SEC 2009 433): The UK believes that the Financial Crisis reinforces the importance and urgency of meeting the Paris and Accra targets on aid effectiveness. We strongly support the EU's focus on the four priorities. In a speech on 9 March, Gordon Brown highlighted the importance of country-led approaches and predictable aid flows, showing the continued prominence of this agenda for the UK. While the Commission has improved its aid predictability through MDG Contracts, we will lobby for greater prominence for this in the Council Conclusions, given that volatility and lack of predictability of aid alone can increase costs by between 15% and 20%.

"We would also like the EU to encourage member states to join the International Aid Transparency Initiative, as a way of meeting their commitments to aid transparency. We welcome the recognition that the EU needs to continue to promote mutual accountability between donors and recipient countries both at international and at country level, and the reference to the Working Party on Aid Effectiveness as one important forum for this."

10.12 The Minister then says that there are two main financial implications for Member States:

"The Commission is calling for an increase by 2010 in the grant resources available to the EU-Africa Infrastructure Trust Fund to €500 million (£465 million). The Commission is doubling its own contribution to €200 million (£186 million) from existing resources, requiring a further €300 million (£279 million) to be raised from Member State resources. DFID is currently considering increasing its own contribution as we believe this is an effective vehicle for supporting infrastructure investments in Africa.

"The Commission is also calling for the EIB to frontload its lending in its various external (to the EU) mandates. The EIB's lending ceilings are agreed by the Council, and most have significant scope for increased lending. In ACP countries, any increase in lending from the EIB's own resources would imply an increase in the amounts guaranteed directly by Member States in the event of a default. For lending in non-ACP (non-EU) countries the EIB benefits from a Community guarantee. Therefore an increase in lending in these countries implies an increase in the amounts guaranteed by the Commission."

10.13 Finally, the Minister says that the Communication will be submitted to the Development GAERC on the 18-19 May.

Conclusion

10.14 We are grateful to the Minister for his helpful and comprehensive Explanatory Memorandum, which makes clear the positive role being played by the UK and, as ever, the need for all other Member States to be as equally committed.

10.15 As well as reporting these documents to the House because of the widespread interest in the issues involved, we are also forwarding them and this chapter of our Report to the International Development Committee, so that it may be aware of them and of the Commission's analysis and proposals and of the Minister's response.

10.16 We now clear the documents.

50   See http://www.dfid.gov.uk/mdg/call-to-action.asp for full information on the Call to Action. Back

51   For full information on all aspects of the UN Millennium Development Goals, see http://www.un.org/millenniumgoals/. For the UK government perspective, see http://www.dfid.gov.uk/mdg/. Back

52   The Third High-Level Forum on Aid Effectiveness, Accra, 2-4 September 2008; Follow-up International Conference on Financing for Development, 29 November-2 December 2008. Back

53   See headnote: (29616) 8403/08 HC 16-xxi (2007-08), chapter 1 (14 May 2008). Back

54   See http://www.publications.parliament.uk/pa/cm200708/cmgeneral/euro/080609/80609s01.htm for the record of the debate. Back

55   The EU Agenda for Action was adopted by the 20 June 2008 European Council. It sets a number of milestones which will contribute to the achievement of the MDGs and provides examples of EU actions and support as part of the commitments already taken by the EU. For example, the health section estimates that the additional finance to reach the health MDGs at € 13,4 billion by 2010 based on the WHO Commission on Macroeconomics and Health's estimations; on the basis that the EU continues to provide 60% of ODA, this would mean the EU would increase its support to health by €8 billion by 2010, almost €6 billion of which would be for Africa. It is to be implemented in application of the European Consensus on Development, the EU Code of Conduct on Complementarity and Division of Labour, the Paris Declaration on Aid effectiveness and the EU commitments on Policy coherence for development. The EU will further ensure that the implementation of the Agenda for Action is fully in line with partner countries' poverty reduction, development and reform strategies. The involvement of the private sector, both in the EU and in the partner countries, is seen as a key element for poverty reduction and for the achievement of the MDGs. For the full text, see http://register.consilium.europa.eu/pdf/en/08/st11/st11096.en08.pdf.  Back