EUROPA

SUMMARY

The present Communication proposes a Code of Conduct to enhance complementarity and the division of labour amongst EU donors (Community and Member States) in developing countries. The Code of Conduct was adopted on 15 May 2007 by the General Affairs and External Relations Council and the representatives of the governments of the Member States meeting within the Council. On that occasion, the Council amended certain points of the Commission proposal, in particular adding an eleventh principle to the ten principles proposed.

Donors frequently concentrate on the same countries and the same sectors. This leads to a significant administrative burden and high transaction costs in the beneficiary countries, diffuses policy dialogue, reduces transparency and increases the risk of corruption. Some countries, on the other hand, are almost ignored by donors.

The Code of Conduct defines the operational principles of complementarity in the field of development cooperation. In the absence of an internationally recognised definition of complementarity, the Commission defines it as the optimal division of labour between various actors in order to achieve optimum use of human and financial resources. This implies that each actor focuses its assistance on areas where it can add most value, given what others are doing.

The Code is based on good practices from the field and was drafted in collaboration with Member States' experts. It builds on the principles contained in the Paris Declaration on the effectiveness of development aid (ownership, alignment, harmonisation, management by results and mutual responsibility) and on the complementary objectives and values stressed in the European Consensus.

The Code of Conduct is:

• voluntary, flexible and designed to guide the policy and the actions of EU donors;
• dynamic in terms of principles, defining targets which the EU donors will endeavour to reach;
• directed to all EU decision-makers engaged in development cooperation. The Commission hopes that the other international donors will conform to it in the future;
• aimed at complementarity between public authorities involved in the EU cooperation policy, whilst acknowledging the importance of enhanced cooperation between public and private aid;
• focused on operational complementarity (concerning the working methods), in-country *, cross-country * and cross-sector *.

The Code proposes broad guidelines which establish the principles of complementarity in development aid. In particular, the Code consists of eleven guiding principles:

• concentrate the activities on a limited number of national sectors (focal sectors). EU donors should confine their assistance in a partner country to two sectors in which they offer the best comparative advantage *, as recognised by the government of the partner country and the other donors. Apart from these two sectors, donors can provide budget support and finance programmes relating to civil society, research and education;
• redeploy into other activities in-country (non-focal sectors). As regards the non-focal sectors, donors should either remain committed through a delegated cooperation/partnership agreement * redeploy the resources becoming available in general budget support or exit from the sector in a responsible manner;
• encourage the establishment, in each priority sector, of a lead donorship arrangement responsible for coordination between all the donors in the sector, with a view to reducing the transaction costs;
• encourage the establishment of delegated cooperation/partnership arrangements through which a donor has the power to act on behalf of other donors concerning the administration of funds and dialogue with the partner government on the policy to be implemented in the sector concerned;
• ensure appropriate support in the strategic sectors. At least one donor should be actively involved in each sector considered relevant for poverty reduction. In addition, there should be a maximum of three to five active donors for each sector;
• replicate this division of labour at regional level through the application of the principles of the in-country division of labour in cooperation with the partner regional bodies;
• designate a limited number of priority countries for each donor through dialogue within the EU;
• grant adequate funding to the countries which are overlooked as far as aid is concerned and which are often fragile countries whose stabilisation would have positive repercussions for the region as a whole;
• analyse and expand areas of strength: the EU donors should deepen the evaluations of their comparative advantages with a view to greater specialisation;
• pursue progress on other aspects of complementarity, such as its vertical * and cross-modality/instruments dimensions *;
• deepen the reforms of the aid systems: the changes suggested by the Code require reforms of a structural nature and in terms of human resources.

The Commission is aware of the fact that this new approach to the division of labour poses certain challenges in respect of:

• the perception of the donor countries, which could fear that this approach will reduce their visibility in a given sector or country;
• operational difficulties arising from the optimum division of labour;
• capitalising on the specific expertise of each EU donor so that it can play an active role in the division of labour.

Nevertheless, the Commission is convinced that this Code of Conduct presents opportunities for the EU, which provides more than 50% of worldwide development aid. The Union will be able to act as an engine for complementarity and division of labour in the context of the international harmonisation and alignment process (Paris

Declaration).

Finally, the Commission stresses that, to improve complementarity between the EU donors, it is necessary to:

• learn from good practices of certain national initiatives to improve the division of labour;
• guide the decisions by means of a clear political mandate since development cooperation is based on political decisions;
• establish appropriate operational modalities as complementarity is very much linked to how donors organise themselves in the planning, programming and implementation of development cooperation;
• have a pragmatic approach to implementation that is based on rational, transparent working methods aiming at concrete results;
• build effective monitoring systems, such as those of the Development Assistance Committee (DAC) of the Organisation for Economic Cooperation and Development (OECD) and - at European level - the EU Donor Atlas and the annual reporting on implementation.

Successful implementation will largely depend on the role of the Commission delegations and Member States' field offices. In addition, its implementation is to be the subject of annual monitoring based on sampling of relevant country cases, a revised EU Donor Atlas and the Development Report.

The Code of Conduct is an ongoing document; it is to be reviewed regularly before 2010 on the basis of the lessons learned from its implementation and the monitoring of the results.

Background

The objective of promoting the division of labour in EU development policy is not new. In 1995 and 1999, the Council had already adopted Resolutions on complementarity between the Community development cooperation policy and the policies of Member States. Then the Statement on Development Policy of November 2000 was an attempt to achieve operational complementarity between the Commission and the Member States on the basis of areas of added value for Community assistance. However, this approach gave rise to political and operational difficulties. In 2004 the EU decided to draw up an operational strategy towards complementarity the result of which is the present Communication. In addition, this commitment to enhanced complementarity has become a central element of the European Consensus and the Aid Effectiveness Action Plan.