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European Commissioner for Development
How to make EU Development policy supportive of inclusive growth and sustainable development
Committee of Development, European Parliament
Brussels, Tuesday 9th November 2010
Ladies and gentlemen;
The UN High Level Conference on the MDGs has given us all good reason to pause for thought.
It has given us much from which we can take a great deal of encouragement and pride, particularly as Europeans. Since 2000, when the MDG targets were agreed, European official development assistance has doubled, and we remain committed to meeting our promise of delivering 0.7% of the Union's GNI to ODA by 2015. The EU has made a real difference on the ground to millions of people around the world.
In addition, progress has been on both aid delivery and aid effectiveness, mechanisms have been put in place to improve policy coherence for development, and recognising that its partner countries bear primary responsibility for development and good governance, the EU has moved from a donor-beneficiary relationship towards real partnerships.
But the real pause for thought that I have taken from New York is not these achievements, but how much remains to be achieved.
Around 1.5 billion people still live in extreme poverty, with half of them in Sub-Saharan Africa, and one sixth of the world’s population is undernourished.
Many of the least developed countries have suffered the most from the current economic crisis, with GDP in these countries generally reducing in 2009; furthermore, the benefits of growth have often not been felt by the wider population even in countries where economic growth is robust.
There has been very little progress in meeting the MDGs on reducing maternal and child mortality, and quality of education and prospects for access to sanitation are concerns.
Many, many citizens lack reliable supplies of energy, a pre-requisite to meet most MDGs: in Sub-Saharan Africa, for example, less than 30% of the citizens have access to grid-based electricity.
This is a worrying list, and is far from exhaustive. It is the real message that we need to take to heart. It is a call to action. It is a call to translate our promises into tangible results in terms of people pulled out of poverty, to look to the future and to refocus our efforts. Above all, however, it is call to see that we achieve real, concrete and improved results on the ground.
It is also a call for realism. It is a call to accept that if we continue as today, and even with increasing aid levels, not all the MDGs will be achieved, and clearly, in many countries, progress will be strictly limited, indeed if existent.
This is unacceptable, and we have to look to answers and solutions, not statements and aspirations.
It is precisely with these challenges in mind that I am determined to refocus EU development spending and policies, in partnership with developing countries, to increase the concrete impact of our programmes, in terms of real results, in achieving the MDG's, in making an impact on the lives of citizens in the developing world, and in justifying to EU citizens the need to increase aid budgets, often at a time of reducing welfare support at home.
With this aim, the Commission will adopt a package of measures, including a Green Paper on "EU development policy in support of inclusive growth and sustainable development" and a Communication on the consolidation of EU Africa relations as well as Green Paper on Budget Support in October.
This package starts a process, which will, I am determined, increase the impact of our efforts. It will only succeed, however, with the support, input and determination of all involved. And it will involve difficult choices; one thing is clear, increasing the impact of aid will require prioritisation.
The Green Paper is focused on four key questions:
High Impact Aid in short recognizes a determination to put into effect common sense principles that have been recognized for some time. These include aid effectiveness, focusing on projects and areas where we can demonstrate a clear EU added value, as well as ensuring that all the EU's policies work for development, from trade to agriculture, from climate change to fisheries.
It recognizes the need to focus on ensuring that every Euro spent results in a lasting development legacy, in terms of opportunity. It is relevant to all areas of development assistance, and most particularly to human development: without an educated and healthy population, a country can never grow and pull itself out of poverty. This must and will remain priorities of the EU and Member States' development efforts.
It also recognizes the need to promote and prioritize governance as an integral part of aid policy; it is no surprise that progress in achieving the MDGs has in very many cases been combined with high or increasing levels of democratic governance, the respect for human rights, the fight against corruption, the rule of law and institution and state building. We have to find ways to use aid as an even more effective driver towards ever higher standards. This is a particularly important question with respect budget support.
High Impact aid also recognises the link between development and security; the adage "no security without development and no development without security" is true. But it is also true that in the past we have often failed to address the roots of insecurity through development support before it is too late. The new European External Action Service provides us new opportunities for integrating development and security policy in a way that can leverage external action to support our development goals, and both I and Baroness Ashton are determined to do so.
On all of these issues, rapid change and progress is going to be needed if we are to meet our aspirations and obligations regarding the MDGs and I look forward to your contribution in making this a reality.
With respect to the second main challenge posed in the Green Paper, "development policy as a catalyst for inclusive and sustainable growth", it is again worth reflecting that the underlying objective of aid is to act as a catalyst, to support partner countries grow and in particular to help create an environment that is friendly to sustainable and inclusive growth, enabling these countries to pull themselves out of poverty.
Economic growth, providing that it is socially inclusive, produces a much greater effect in terms of poverty reduction than incremental increases in ODA. The issue of socially inclusive growth is essential here; there is no point supporting growth that benefits only a tiny part of a population.
Many factors influence a growth friendly environment, including political stability, good governance, security, the respect of human rights, a conducive regulatory and policy business environment, a well educated, healthy and creative population, the sustainable use of scarce natural resources, economic infrastructure, implementation of core labour standards, and effective and beneficial participation in international trade.
The Green Paper therefore questions whether and how the EU should consider new Joint Strategies for Inclusive Growth in partnership with the individual or regional groupings of developing countries, also involving private-sector stakeholders — businesses, foundations, academia and civil society organisations — all committed to the goal of making measurable progress on issues where they can act together. This is also a particular focus of the EU-Africa Communication, where real progress could be made through working together.
The EU, as one of its "deliverables" under such a strategy might therefore support industry that really benefits the long term development of the country and its population. For example, it might focus on helping the development of higher value added, post-extractive industries; copper wire rather than the export of cooper ore. Possibilities for support include leveraging aid to support infrastructure to get goods to market, and supporting projects that pose a level of risk making it difficult to attract private financing
The ease and cost in establishing a new company, particularly an SME, or running an established one, also plays a very important role. This concerns not only initial registration formalities, but for example subsequent tax compliance, the fight against corruption and capital flight. EU assistance, both financial and technical, can support reforms in this area, based on commitments and determination to introduce improvements by partner countries.
Finally, the role of regional integration and trade has to be given greater priority. Only 12% of African trade is with Africa, and as the EU's experience demonstrates, the greatest driver of growth is trade and a common economic space with our neighbours. The EU has great experience here, which must be better put to use. Equally, considerable progress has been made in promoting a development friendly trade policy, and aid for trade, which reached an all-time high of €10.4 billion in 2008. But much progress remains to be achieved, and this will be one of the Commission's priorities in the coming months.
The Green paper seeks to identify how to translate aid into socially inclusive, long lasting growth. It is not about making a profit from development, but catalysing growth for the benefit of the world's poorest citizens.
If such Joint Strategies could take off and succeed, establishing a jointly pursued agenda with the EU and developing countries each playing agreed roles and meeting agreed objectives, huge gains could be made that would have a direct and lasting effect on meeting the MDGs and beyond. The aim is ambitious and far from simple, but I am sure that if successful, it could produce enormous benefit.
The third focus of the Green Paper is the challenge of sustainable development. Without a reliable, predictably priced source of energy, growth can never flourish. Without electricity, how can we hope to bring clean water to every citizen? How can we hope for good education without electricity, when internet teaching has to become a key support to schools? How can universal basic healthcare be achieved? Electricity is a key precondition to practically all the MDGs.
And yet today so much of the world's poorest citizens have no access to reliable supplies of electricity. The World Energy Council estimated in 2005 that less than half of the urban population of sub-Saharan Africa had access to electricity, and only 7.5% of rural citizens. And those with supplies are subject to endless power cuts. This is a huge driver of poverty; without access to electricity, how can we pretend that people have a chance to pull themselves onto the first rung of the development ladder?
Electrification presents not just huge challenges in terms of poverty, but also climate change. The population of sub-Saharan Africa is expected to grow by as much as 2.6 times above today's level, to 2 billion. The picture for Africa as a whole is similar, as it is in much of the developing world.
With economic growth rates constantly and thankfully exceeding 5% in many African countries, the potential growth in greenhouse gas emissions looks frightening, and, unchecked, threatens to render irrelevant any cuts made in the EU and the rest of the developed world.
However, the need to address climate change cannot be a reason to constrain economic growth in the world's poorest countries. This must be a given; the EU uses more electricity to power its fridges than the entire consumption of the 750 million citizens of sub-Saharan Africa. By way of comparison, the US uses twice the amount of electricity per capita than the EU, 100 times more than Kenyan citizens.
As is often the case, a challenge can become an opportunity.
In Copenhagen the developed world committed to provide nearly US$ 30 billion of fast start finance for developing countries during 2010-2012, as well as a goal of mobilising jointly US$ 100 billion a year by 2020, provided that developing countries put in place meaningful mitigation actions and are transparent about their greenhouse gas emissions.
The opportunities for sustainable growth in the developing world, and in much of Africa in particular, are huge. Africa, for example, has enormous untapped renewable energy resources, ranging from hydro, to solar, wind and biomass.
Furthermore, just as in the EU, investing in renewable energy provides jobs and is an engine for growth. Relying on imported energy, does not. And, by investing massively in renewable energy, the developing world can escape the boom and bust pattern so often triggered by oil price volatility.
I believe that, together with the EU's partner countries in the developing world, we need to make huge efforts to catalyse this change. The EU is uniquely well-equipped to providing this assistance. It is the leading producer of renewable energy. It houses some of the major renewable technology companies, and it has the greatest experience in the legal and administrative measures necessary to catalyse investment in renewable energy.
And investments in energy do not, per se, need significant grant related assistance. This is important; development funding alone will never be able to finance the trillions of Euros of investment necessary to provide every citizen in the developing world with sustainable electricity. Indeed, in principle, such investments can be profitable. so much can be done with relatively limited funds; a perfect example of High Impact aid.
In order to catalyse such an energy revolution, financing is needed, through development banks and financial institutions such as the European Investment Bank, the World Bank, and the African Development Bank. Stable regulatory and administrative conditions are needed, which will enable and encourage investment by private companies.
And it requires technical knowledge, education and training. In many parts of the developing world, the technical training facilities for electrical engineers are inadequate, or do not exist. Without a well-trained work force, renewable energy will never meet its potential, and maintenance will be an increasing problem. Job creation is a central benefit of any such development, but training and knowledge will require real efforts.
It is surely possible to address all of these issues with the necessary political will. This is why the Green Paper asks whether and how the EU could commit to combine part of its development and climate change funding, bringing together its various development banks with other international financial institutions, and developing new instruments from loan-grant blending to risk-sharing facilities, covering political and administrative risk.
In addition, using the EU's technical expertise and its development funding, an ambitious engineering training programme with newly established Institutes might be established in Africa and elsewhere in the developing world, transferring technology and knowledge, with the close involvement of EU and African Universities, grid companies and electricity companies.
Such measures might therefore form the basis of new Energy Partnerships, between the EU and developing countries or regional groupings, to progressively provide sustainable electricity to every citizen. The opportunities are enormous, and they are achievable. Again, these opportunities are one of the issues highlighted in the EU-Africa Communication.
The final questions raised in the Green paper relate to agriculture.
Food security remains a key challenge for many developing countries where 75% of the population still depends on agriculture. It is a central issue to all of the MDGs; it is the leading cause in child deaths and, for those who survive malnutrition, it can have irreversible effects on their mental and physical development.
Addressing nutrition therefore has a "multiplier effect" in achieving the MDGs. Furthermore, agriculture is a key to overall development: in developing countries, GDP growth generated by agriculture is up to four times more effective in reducing poverty than growth generated by other sectors1. And it is true that there is practically no example of a country that has pulled itself onto the ladder of development without first successfully reforming its agriculture system and feeding itself. For all of these reasons it must continue to be a priority for the EU's development policy.
The "High Impact" objective is particularly relevant to agriculture and food security. Experience has demonstrated time and time again the need to address this challenge in a comprehensive way, looking at the whole value chain: research and education, fertilizers, irrigation, transport to markets, storage, banking and insurance and processing capacity. And yet, so often we fail to heed these lessons. This has to change.
I believe therefore that the EU should make agriculture and food security a test case of its capacity to deliver High Impact cooperation and promote inclusive and green growth. It must concentrate its efforts on ensuring that where assistance is granted, it delivers across the whole production chain. This might be done by focussing EU programmes on the entire chain, or working better and more closely with partner countries and other donors to combine efforts.
Ladies and gentlemen,
I hope that my remarks today demonstrate a real determination to address the huge remaining challenges of the MDG targets.
I hope that they demonstrate a determination to take the difficult decisions to modernise the EU's development policy towards one that significantly improves delivery, impact, and results.
I hope that it will contribute to an evolving EU development policy that really will achieve the objective now enshrined in Article 208 of the Lisbon Treaty, that "Union development cooperation policy shall have as its primary objective the reduction, and, in the long term, the eradication of poverty".
In making this step, I count on your help; the Green Paper raises complex questions, and difficult choices. I believe that all will share the underlying goals; but turning this into focused results will only be possible on the basis of the knowledge and input from all those central to its success, Member States, partner countries, financial institutions, NGOs and, above all, individual citizens.
Thank you for your attention.