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Andris Piebalgs

European Commissioner for Development

The future of development policy and budget support

"Launching the Agenda for Change. Increasing the impact of EU development policy and the future approach to budget support" Conference

Brussels, 19 October 2011

Distinguished Guests, Ladies and Gentlemen,

Well, the moment I've been eagerly waiting for has arrived. Today we open a new chapter in EU development policy. I use the words "new chapter" because my message to you today is about drawing on past achievements and making changes to build a better future for all.

The Agenda for Change you have in front of you introduces a raft of important changes to how we do development policy, while at the same time building on the good things that have come out of our development policy, and the European Consensus on Development in particular. The agenda is the result of a period of intense consultation and reflection in which you have all played your part. It is a solid blueprint to take us forward. Forward into a future in which we make a bigger and faster difference than ever before to the lives of people in developing countries; forward into a future in which those people have the opportunity to pull themselves out of poverty; forward into a future in which every euro we spend delivers at least a euro of results on the ground and more opportunities.

Why aid works

Before I go on, let's take stock. I realise I am somewhat preaching to the converted here; but it sometimes does us good to remind ourselves why we do what we do – i.e. that aid really does work.

Now I know there are plenty of aid sceptics out there who would rather see money spent elsewhere. But I think theirs is a very short-sighted approach. To them I would ask this:

What about the 85 000 female students, most in sub-Saharan Africa, who have been able to enrol in secondary education thanks to Commission support?

What about the 5 million children who won't have to suffer the consequences of measles, because we've helped get them vaccinated?

What about the 31 million households now connected to drinking water?

I have learnt that the aid we have given over past decades or so has made a real difference to real people. Whether in a hospital in Djibouti or South Sudan, at a wind farm in Vanuatu or at a veterinary laboratory in Afghanistan, I have seen aid at work with my own eyes.

Meeting the challenges ahead

Every one of you knows that we still face huge development challenges. The green shoots of change are there. But we cannot leave them untended. We need to do more, and nurture them.

My pride in what we in Europe have achieved in development is tempered only by a sense of frustration that there is much more for us to do. More to get the world's poorest countries out of the cycle of poverty and onto the ladder of prosperity. More to prevent people dying needlessly and from being born into a life without opportunity. More to deliver better aid and get better, sustainable results.

We have a duty to European taxpayers and to people in developing countries to get the most from our resources. Not only is that good development policy, it makes good financial sense as well. And tackling the root causes of poverty and insecurity to give developing countries and their people the opportunities they deserve will open up opportunities for us too. A developing world freed from the shackles of poverty and insecurity and given the chance to grow will make for more prosperity and security all over the world. Put simply, investment in the developing world's future is investment in our own future as well. As the vice-president of the World Bank Ms Obiageli Ezekwesili recently said, the world economic recovery will need the economic growth that Africa is enjoying and can continue to enjoy. In short, the World needs Africa.

Be in no doubt: we can rise to these challenges. And we will. We have proposed a budget framework for the coming years that will enable the EU to pursue its leading role on the world's development stage. Through Member States' efforts we must meet our 0.7% ODA target. Our task is to channel the resources available to us strategically, where they are needed most and can make the most difference.

Three key areas

The time is right for us to step up a gear and move into the fast lane. We've been doing well so far, but the capacity for us to build on our successes and do better going forward is there. We must also understand that the context in which we plan and act has shifted. For instance, a number of former developing countries have caught up with developed countries and even become aid donors in their own right. The Arab Spring has highlighted the thirst for democracy and for a brighter future. Yet we continue to wrestle with a worldwide financial crisis that has left the most vulnerable economies even more exposed and put a strain on our own finances.

Against this backdrop, to rise to the challenge of spending our resources wisely and well we must set our sights very high. Being the biggest player is all well and good, but I want us to be the best as well. And being the best means getting the work done efficiently and with lasting results. Our twelve-point Agenda for Change has been designed to bring about the changes that will make our development policy the best in the world. Let me take you through three of the areas in which we hope to make this happen.

1. Governance

I'll start with governance. Good governance is key to a country's basic development and poverty reduction efforts. Reducing poverty for good requires robust and honest state institutions that are both able and willing to help poor people improve their standards of living and to provide them with public services, rights and security. Likewise, democratic processes make the state accountable to its citizens, encourage transparency and guard against corruption. Basically, they allow for constructive relations between government and people.

So our development support should also be a spur to democratic governance and respect for human rights. It needs to offer incentives to democratic reform processes and at the same time actively support developing countries in making positive change for the better.

Think of development policy and governance as two sides of the same coin. On the one side, development policy and action can help bring about positive improvements in governance. On the flipside, improvements in governance can play an often critical role in reducing poverty. Included in this is the crucial role of parliaments, civil society and NGOs in holding governments to account for their actions even at local level. It is a role that needs strengthening and that we will support. It will therefore be a greater focus of budget support contracts in the future, and aid will be directed as a positive vector for change. Likewise, empowering women is key to concrete progress on the ground.

That being said, human rights are, by their very nature, universal. They form part of the human race's basic value set. As such they should be defended, regardless of their benefit to development efforts.

2. Inclusive and sustainable growth

So governance is key to basic development. Equally, however, countries won't pull themselves out of poverty unless they can find a way to grow. We've already seen proof of this in Timor-Leste, where EU assistance has been critical to the country's robust economic growth of about 35% over the last three years. Other remarkable results include lower poverty levels, 83% school enrolment and a rise in life expectancy from nearly 46 years in 1990 to 61 and a half years in 2009. So EU aid really is a catalyst for growth and human development.

Growth is first and foremost about the human beings who actually create it. We must do more to further human development. We must ensure that people are healthy, educated and able to find decent jobs. And we must help countries set up their own social protection schemes. We will continue to focus, as a minimum, 20% of EU funding on health and education, and in particular we will improve and increase our focus on women, transforming the Gender Action Plan into a living tool, and leading by example.

Clearly, in seeking growth our watchwords must be sustainability and inclusiveness. Growth that cannot last and only benefits a few in society will be of no use in spurring on development and poverty reduction.

At the end of the day, our efforts on governance, growth and human development are all geared towards enabling the world's poorest to climb up the ladder of prosperity.

In fact, I can not stress the word "inclusive" enough. If projects won't deliver benefits to the wider society, we won't support them.

Some sectors in particular must be at the forefront of our push for growth. Sustainable and inclusive Agriculture and Energy feature highly in our Agenda for Change, and with good reason.

No country has ever pulled itself out of poverty without first being able to feed its population.

During my recent visit to the Horn of Africa, I witnessed at first hand the devastating consequences of hunger and malnutrition in a small children's hospital in Djibouti. Hunger and malnutrition kill. It's that simple. We must do all we can to enable countries to feed themselves.

Likewise, no country has ever pulled itself out of poverty without first being able to secure its energy supply.

The recent initiative of the UN Secretary-General, the High-Level Panel on Energy 4 All, on which I am proud to serve, has the aim of ensuring basic energy services for every global citizen by 2030. It is perfectly possible to achieve this, with the necessary political determination. I for one am determined that it will succeed.

Through robust support for agriculture and energy in our partner countries, we can help shield them from shocks such as scarcity of resources and supply or price volatility.

The road out of poverty also involves creating a favourable business environment for the local private sector. We should explore new ways in which we can collaborate with the private sector to deliver sustainable and inclusive growth.

One such area is grant/loan blending, which has unlocked more than 20 billion euro in project financing for EU development policy since 2007. Blending mechanisms help beneficiaries achieve easier and faster access to financing with appropriate conditions. We should further explore leveraging options for our grant resources.

3. Delivery and results on ground

Reducing poverty and achieving the MDGs will only happen if we do everything we can to maximise results.

We have a number of avenues to explore to make our results count. Blending is one. Another is better aid coordination with others, especially EU Member States, along with improved policy coherence for development. We already co-finance programmes and projects and work through delegated cooperation. In future we also intend to step up joint programming of our aid to make it at once more coherent, more effective and more visible. Simpler programming and better EU coordination can make for better planned, more transparent and more predictable aid flows – the right recipe for more and better results.

And then we have budget support.

We are launching our proposed new policy for budget support alongside our Agenda for Change because we recognise just how important budget support is to implementing development policy, getting aid delivered and achieving more and better results on the ground. There are no two ways about it: with budget support we can address the source, not just the symptoms, of under-development, and provide a strong platform to engage with our partner countries in a broad policy dialogue on key development issues. In fact, budget support remains our preferred aid modality.

The excellent results that budget support can deliver are there for us all to see. Take education in Mali, for example. Between 2002 and 2009, the gross enrolment rate for basic education rose from 64% to 81% and the completion rate from 40% to 56%. Over that same period the number of children in school shot up from 1.3 to 1.9 million. Without the additional funding provided through budget support from the EU, it would have been impossible for the government to build the schools, train and pay the teachers and produce the textbooks to achieve these very positive, sustainable results.

We know that our approach to budget support has not been perfect. We have listened to criticism, analysed our approach and responded with ideas for improving and refining it on a number of fronts.

For instance, the reference to "contracts" in the communication reflects the step change we want for budget support in terms of deliverables and mutual accountability.

We will provide general budget support through these contracts only if our partners are on track with respect to human rights, democracy and the rule of law.

Where conditions do not exist to permit the use of general budget support sector budget support remains a tool that can be used to improve governance, and often it is the best delivery mechanism in a specific sector.

Through budget support we will also promote sound financial management, mobilising domestic resources and fighting corruption. This is crucial if we are to break the cycle of aid dependency and enable partner countries gradually to stand on their own two feet.

Partner country budgets cannot come under closer scrutiny unless budgetary information is publicly available. We are committed to strengthening budget transparency by making it a specific eligibility criterion for budget support.

Finally, back to results. Results matter. That's a fact. We agree that donors must do more to demonstrate the results of development cooperation. With a common results framework the EU and its Member States would be speaking with one voice to explain what development cooperation is about and what results have been achieved. We would be making our results more visible, boosting aid transparency and improving the coordination process. And we would be making ourselves more accountable. Mutual accountability is the focus as we approach the Fourth High-Level Forum on Aid Effectiveness in Busan. This tricky process will prove worthwhile if it focuses minds and action on results.

Ladies and Gentlemen,

I'll leave you with one last thought. Last year I visited Uzbekistan and learnt about a project funded by the EU in cooperation with UNICEF which, by providing information and training for women, has brought about a huge drop in infant and maternal mortality in Uzbekistan. Of course my first reaction on hearing this good news was: "This is aid working in practice." And do you know what my second reaction was? "If we achieve this kind of change for the better in Uzbekistan, why can't we achieve as much – if not more – elsewhere?"

The answer is that we can. Armed with a more strategic, up-to-date development policy and a new approach to budget support we can now set about doing more, doing better and replicating success.

You have helped shape the Agenda for Change. It's your agenda as much as ours. We hope you will embrace it. It's about doing our best for our partner countries in the developing world and making change for the better. In doing so, we will be investing in everyone's future.

The two communications we are launching today are a call to action. I'm ready to take up that call. I hope you are too.

Thank you.

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