Streamlining aid to the world’s poor
Spurred on by the downturn, EuropeAid is striving to deliver more aid, more effectively, and more quickly to developing countries, explains Director General Koos Richelle Historically, EuropeAid – the European Commission (EC) department that oversees and implements EU foreign aid programs – has not always been the quickest and most agile organization. But with current economic conditions significantly worsening the plight of many developing countries, EuropeAid has not only delivered, it has set new standards for the future.
“In our daily work, we see the consequences of the crisis in the countries with which we deal,” explains Koos Richelle, EuropeAid’s Director General.
This has given greater impetus to the commitment to “more, better and faster aid,” that Richelle promised on taking office in 2004. Although the full impact of the meltdown is not yet clear, developing countries are seeing drops in commodity prices, foreign direct investment, international trade, and remittances transferred back home by emigrants, with more bad news potentially around the corner.
“The big fear is that developed countries will take longer to get out of this very deep and unknown crisis, and that they will be too late to help poor countries hitting the bottom of the downturn,” Richelle warns. Practically speaking, the crisis has already sparked huge food shortages in developing countries overly dependent on agriculture – which is where the EU (the world’s largest aid donor) comes in.
Real-time response
In the first half of 2009, the EC introduced two new short-term aid measures in a fraction of the time it usually takes: The €1 billion, three-year “Food Facility” aims to help combat rising food prices in 50 developing countries, part of a wider campaign to improve food security worldwide.
Following EuropeAid’s lead, the EC encouraged the World Bank and the United Nations to focus on a single program per country – a rarity in the donor world. A fi rst tranche of €314 million went to 23 of the hardest-hit countries to provide seed and fertilizer to farmers, and finance irrigation and other public works projects. “Vulnerabilty Flex,” earmarks €500 million over the next two years toward plugging social budget deficits in countries where the EC believes it can make a difference – for example, the Democratic Republic of Congo, Ethiopia and Tanzania. The money, an early mobilization from the reserves of the 2008-13 European Development Fund, will cover half of recipients’ financing costs.
“Normally we are seen as a slow and cumbersome donor, so it’s quite impressive that we were able to put these two measures in place within eight months,” says Richelle.
Procurement, too, is under scrutiny. While procurement procedures themselves have not changed as a consequence of the downturn, the EC has instructed all its services to do everything possible to speed things up. In EuropeAid’s case, one example is an effort to shorten payment delays to just 30 days.
Richelle also expects a new attempt to simplify the procurement rules in 2010.
Naturally, there is heightened pressure on EuropeAid – financed on the basis of a multi-annual budget by the EC and the European Development Fund – to ensure that money is wisely spent and its promises delivered. The multi-annual arrangement leaves some room for maneuver (the agency disbursed €1.5 billion in 2001, rising to €3.6 billion in 2008 and expects to spend more than €4 billion in 2011).
EuropeAid is also accelerating its mid-term review by several months to “see if we need to adapt our programming to circumstances,” explains Richelle. The agency’s eagerness to respond quickly is all the more laudable given that internal resources are consistently stretched, although there is an agreement between the budgetary authority and the EC to stabilize EuropeAid’s permanent staff until 2013. With about 3.8 staff per €10 million spent, it’s one of the world’s leanest aid organizations.
Why budget support makes sense
Increasingly, instead of funding individual programs, EuropeAid offers either general budget support, such as that outlined above under Vulnerability Flex,or support for a specifi c sector.
“We know from libraries full of books that incidental projects are not always sustainable,” explains Richelle. “You can build a school, but what happens if you turn your back after two years? Who pays the teachers’ salaries? Who buys the books? Based on this experience, there is a trend to support governments more by sector, like health, education or infrastructure.”
Budget aid now constitutes half of the total disbursed at national level by the EC, the world’s leading proponent of the approach. How much should be spent – and where – is determined by the EC with the approval of all 27 EU governments.
Particularly important during the current crisis, this kind of support enables recipients to maintain their standing in international capital markets and keep social safety nets intact.
More broadly, Richelle says a budget-based approach gives recipient governments legitimacy among their citizens and allows donors to develop long-term relationships with developing countries. “Aid must be sustainable to be truly effective,” he states.
But in order to work, the benefi ciary government needs to have a clear focus on what they want to achieve. “If they feel this is something they have to implement just to create a good image, that has been invented in Brussels or Washington or New York, then it won’t work,” argues Richelle. “Unfortunately, you sometimes see that no matter how much aid you pour into a country, it’s destined to failure because the bigger political environment is not conducive to improving the situation.”
It’s a delicate balancing act, says Richelle, but one that’s very familiar to international aid donors.
The way ahead
After five years as Director General, Richelle acknowledges development aid is no panacea: “In 60 years, not one country has graduated from poverty because of development cooperation alone.”
In fact, for a long time industrial countries didn’t always have the best interests of the developing world at heart, using aid instead for geo-political positioning.
He believes all that changed with the UN Millennium Declaration in 2000. Some 192 countries and more than 20 major organizations signed up to a 2015 deadline for 8 far-reaching goals, such as reducing extreme poverty and hunger, achieving universal primary educationand promoting gender equality.“ Aid must be sustainable to be truly effective.”
For the first time, there is a code of conduct for both recipients and donors, with the former obliged to formulate inclusive policies, be transparent and safeguard human rights. Richelle says that for donors the message is clear: “Stop making donor-land Disneyland. Don’t go to a poor country to implement your own fantasy, but try to help the country and work together as donors and coordinate among yourselves, even at the level of division of labor.
Straightforward as this may sound, Richelle believes there’s still a long way to go: “We’re moving in the right direction, but we have to move faster and coordinate better. We have seen that, in times of crisis, it is possible for the donor community to come together.”
He feels that,especially now, there should be a common platform for all donors, including non-governmental organizations and key private players like the Bill & Melinda Gates Foundation. “We should not limit development cooperation in our minds to offi cial development assistance,” he insists. “That’s the only way forward.”
However, Richelle emphasizes that development of a country goes well beyond “donorism,” and points to important additional contributions from other sources. These include emigrant remittances home (which although reduced are still almost three times the value of offi cial development assistance), more foreign direct investment and the creation of small and medium-sized companies. “It’s important to get a comprehensive picture of the situation on a country-by country basis to be able to judge their level of – and perspective on – development,” says Richelle, who, ultimately, is optimistic about the future.
“Like all crises, this crisis will pass, hopefully quickly and without too much permanent damage.”
Ernst & Young's involvement with the European Union is coordinated by EY Europe, a dedicated unit based in Brussels. To connect with them, please contact europa@be.ey.com.
