Europe questions ‘official development aid’ (OECD reaction)

 In the document “Policy Coherence for Development - Establishing the policy framework for a whole–of–the-Union approach”, Europe stresses the importance of other financial flows to developing countries and at the same time tends to widen the definition of ODA, according to development ngo’s.
This would open the possibility for member states to take into account other financial efforts, which before weren’t recognised as ODA, and thus make it easier for them to comply with the 0,7 pct-norm for spending on development aid.

Interview with Andrew Mold

What does OECD think about the European document “Policy Coherence for Development - Establishing the policy framework for a whole–of–the-Union approach? Interview (complete version) with Andrew Mold, senior economist and Head of the Finance for Development Unit at OECD Development Centre in Paris.

1. Why does the Commission bring out this kind of communication right now?

There is a lot of pressure at the moment to reform the aid architecture, both on the European Commission and the OECD DAC, for two or maybe three fundamental reasons. One – a growing frustration with the perceived failure of aid to produce the kind of results that was expected of it.
Two – the growing protagonism in non-DAC donors, who are challenging traditional ways of aid delivery by DAC members. Three – I think the economic crisis has catalysed this kind of rethink – policy coherence has been in the pipeline for a long time now, but there is nothing like an economic crisis to focus attention on the need to improve efficiency.

2. Which essential statements would you retain of this document?

“Aid has a key role to play in support of developing countries’ efforts to reduce poverty and achieve the MDGs. But it will not be enough in itself. In addressing a number of key global issues, the EU can do much more to enhance the positive effects for development of its own policy choices in other policy areas.” Nothing to disagree with there!

3. Is it a prelude to a shift in development policies of member states? So yes, in which way?

Not really, I don’t think a document like this would precipitate a sea change in the way development policies are conceived or executed. Rather, it is part of a process, a slow recognition that policies in general need to be more coherent if they are to deliver development. Now, another question altogether is whether this document has addressed the right areas where there is a lack of coherence.

4. The text is quite vague and not really ambitious?

There are certainly things missing from the text. Trade policy is only mentioned a few times, for instance, yet it is one of the areas where there is a great deal of incoherence in European policy. As Mike Moore, when he was Director General of the WTO, once said,  ‘You can’t preach the pure water of free markets when you drink subsidized wine and milk’.
Yet this is precisely what the EU (and other industrial nations) do. EU fishing policy is another area – many developing countries suffer from overfishing by European boats, yet there is no political will to get this issue under control. The tough thing about policy coherence is that it involves costs – both political and economic ones – and I am not yet convinced that the European Union member states are prepared to withstand those costs.

5. Which important steps are taken, in your opinion?

I am not particularly comfortable with the areas which are identified as priority action areas, but I do agree with the broad sentiment, that aid is not enough in itself to guarantee development or poverty reduction. I guess in part this is a reaction to some of the non-DAC donors – China especially – which has integrated its aid policy with its commercial interests – its trade and investment policy, in a way which is surprisingly popular among many aid recipients. To be sure, this approach is not without its own set of problems, but it does seem to partially redress the lack of investment by traditional donors in the productive sectors.

6. Do you think that Europe is setting out the ground to expand ODA and so, loosen existing criteria on Official Development Aid? Ngo’s are afraid that this will allow member states to take into account other ‘aid-money’, such as relief for the effects of climate change in Africa.

Again, I guess there has always been some pressure to widen the definition of ‘aid’. The DAC has understandably tried to resist such moves – in the past, for instance, some members of the DAC wanted to include private donations as part of official ODA figures. Also, the figures for Chinese aid (quickly becoming one of the major protagonists in Africa) are not transparent – it not always being clear where the aid component ends and where the commercial part begins. So obviously other donors think there is ‘unfair competition’.
That said, I personally would not be in favour of any widening of the definition. Indeed, there is a narrower concept, developed by my colleagues in the Development Cooperation Directorate of the OECD, called ‘Country Programmable Aid’, which in my view is a much better measure of how much aid is received. This measures total ODA excluding bilateral humanitarian aid, debt relief, administration costs, in-donor country refugee costs, and imputed student costs.
I would argue that we would be better off targeting this indicator of aid, if we truly believe in ‘recipient country ownership’ and ‘partnership’. We shouldn’t really be counting all the nuts and bolts of the aid industry, simply in order to appear more ‘generous’ – what matters ultimately is how much reaches the developing countries themselves.

7. The document puts some priorities, which seem closely linked to European interets. Why else would ‘intellectual property rights’ be mentioned? Strangely, trade is not mentioned.

Agreed. This is the rather more disconcerting side of this document. I don’t think the arguments on IPRs are really defendible, from a development angle. Firstly the evidence is very weak that strong IPRs attract foreign investment. Secondly, developing countries need more technology transfer, not less. There are arguments that a strong IPR regime can simply end up impeding the flow of new technologies rather than incentivising it. In the view of all this, it seems very strange to make IPRs a ‘priority area’, especially in view of its controversy among developing countries themselves, who are fiercely opposed to TRIPs.
There are other areas in the document too where the authors seem to be catering to some entrenched political interests, such as the statement “the EU will engage with developing countries in a dialogue on the feasibility of regional agricultural policies based on lessons learned from the CAP in order to strive towards food security at regional and sub-regional level.”
Gone is any mention of the need to liberalise further the European agricultural sector. Now it might just be that in the future, agricultural policies will be more regionally or nationally based, in the name of food security. That may be a welcome development for some countries in the developing world (though not the competitive exporters of agricultural products).
But that is not the policy that we have been pushing on the poorest developing countries themselves, who have largely liberalised their own agricultural sectors to foreign imports. This is clearly a sign of incoherence. This kind of policy incoherence is one of the major themes of my recent study “Policy Ownership and Aid Conditionality in the Light of the Financial Crisis – A Critical Review” (www.oecd.org/publishing).
We need to align our development discourses and rhetoric with what we in fact practice. Otherwise our declarations of intentions with regard to development policy will continue to seem shallow and insincere. If the European Commission document provokes a rethink along those lines, then it is to be welcome.