Policies, principles and processes under the EU Agenda for Change

Geert Laporte, Deputy DirectorFlorian Krätke, Policy Officer

Meeting for senior ACP officials in charge of development financing

Brussels, 15-16 April 2013

National and Regional Programming for the

11th EDF

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Introducing ECDPM

• Independent development policy ‘think and do’ tank working on European Union’s relationship with Africa, Caribbean and Pacific (ACP) for more than 25 years;

• Providing practical, policy-relevant analysis and support to ACP and European stakeholders;

• Non-partisan facilitator of dialogue;

• Systematic linking with key players in the EU and the ACP through networks and partnerships;

• Independent sounding board for ACP and EU development policies;

• Currently funded by some 10 European States;

• Board of ECDPM drawn from ACP and Europe.

1. A new EU development policy• Agenda for Change

2. A new budgetary context• EU budget 2014-2020• Funding for the 11th EDF

3. Differentiation and the 11th EDF• Legal basis for differentiation• Different types of differentiation• Likely consequences for the 11th EDF

4. National and regional programming• Programming process• Joint programming• Priority sectors

Contents

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A new EU development policy

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The Agenda for Change explained

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An extension of the European Consensus on Development, the ‘Agenda for Change’ (2011) presents a strategic shift in EU development policy, with more focused areas of intervention;

Differentiate partnerships based on needs, capacities, commitments, performance and potential impact, including fragile states;

Coordinated EU action and coherence among EU policies (PCD).

I) Human rights, democracy and good governance;

II) Inclusive and sustainable growth for human development.

PRINCIPLES FOCUS

Democracy, human rights & rule of law; Gender equality; Public sector management; Tax policy & administration; Corruption; Civil society & local authorities; Natural resources; Development-security nexus.

1) Social protection, health, education and jobs;

2) Business environment, regional intregration and world markets;

3) Sustainable agriculture and energy.

ACTION

Joint programming together with EU Member States;

Modalities for joint actions (budget support, trust funds, delegated cooperation);

Innovative financing (including blending);

Common framework for measuring & communicating results.

MODALITIES

The Agenda includes initiatives to increase the effectiveness of EU development cooperation:

• Joint programming;

• Sectoral concentration (2-3 sectors);

• Enhanced budget support;

• Using ODA to leverage other resources (blending, DRM);

• Policy Coherence for Development (PCD);

• Differentiated approach to partner countries.

Note that 20% of EU aid should support ‘social inclusion and human development’, an 20% of the EU budget should contribute to ‘low-carbon resilient societies’.

The Agenda for Change (contd.)

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• With the Agenda for Change, the EU subscribes to current global trends in development and a vision ‘beyond aid’;• ‘differentiation’ of countries (focus on the

poorest)• leveraging non-ODA financial resources

(blending)

• Much reaffirmation of past commitments (joint programming, PCD), some codification of past practice;

• Will the EU be able to put in practice this ambitious programme? How?

A new direction for EU development cooperation?

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A new EU budgetary context

A new EU budget – how much for development?

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• Member States agreed on Multi-annual Financial Framework (MFF) (EU budget) 2014-2020 at the European Council of 8th February.

• Negotiations still ongoing in EU: European Parliament still to give consent, new EC proposal limits increases of aid to DCI, EIDHR and IfS;

• Resources for the external action, including development, suffered the largest cuts:

Heading MFF 2007-2013 MFF 2014-2020 % change

MFF – Total Commitment Appropriations € 993.60 billion € 959.88 billion - 3.5

Heading 4 – Global Europe (includes DCI, IfS, EIDHR etc.) € 55.935 billion € 58.704 billion + 5

11th European Development Fund (outside the MFF) € 22.687 billion € 26.984 billion + 18.9

2011 prices

• EU Member States further from 0,7% target;

• Certain instruments / programmes see only little growth (EIDHR, IfS, PAP, DCI);

• Increased pressure to deliver on aid effectiveness commitments reflected in Agenda for Change.

Implications of the budget cuts for EU aid and programming

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• 11th European Development Fund kept outside the EU budget;

• Overall approximately 1% decrease in funding per annum;

• EU-15 decreased contributions slightly, EU-12 increased moderately;

• Increasing talks of review and ‘budgetization’ in the run-up to the expiration of the Cotonou Agreement between ACP and EU in 2020.

Funding for the 11th EDF

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• Internal Agreement agreed in principle, Implementing Regulation and Financial Regulation still under negotiation in EDF Committee;

• Some concern over timing of ratifications of the 11th EDF (as usual);

• Large MSs (FR, UK, DE) still have over 50% of voting rights in EDF Committee;

• EDF preserved at the status quo, thought there are doubts in EU Member States’ on the future of the EDF;

• New EU Member States’ increased contribution does not mean they are more committed to the ACP.

Next steps and considerations

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Differentiation and the 11th EDF

1. Differentiated eligibility to development assistance.

2. Differentiated levels of development assistance;

3. Differentiated mix of policies and instruments;

All types have a legal basis in the CPA.

Types of differentiation

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• Differentiated treatment has historically been part of EU development cooperation (Lomé onwards);

• European Consensus on Development (2005) identifies differentiation as a ‘necessity’:• Use of cooperation modalities and levels vary

according to circumstances in partner countries/regions;

• Criteria: needs and performance;• LDCs and fragile states are prioritised,

‘appropriate attention’ given to MICs.

History and legal basis

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‘Differentiation’ is fundamental principle of ACP – EU cooperation:

“co- operation arrangements and priorities shall vary according to a partner’s level of development, its needs, its performance and its long term development strategy. Particular emphasis shall be placed on the regional dimension. Special treatment shall be given to the least developed countries. The vulnerability of landlocked and island countries shall be taken into account. Particular emphasis shall be placed on regional integration, including at continental level” (CPA, Article 2)

History and legal basis (contd.)

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• Based on: need, performance, capacity, commitment & potential EU impact;

• Differentiation applied in two stages of aid allocation: (1) eligibility to grant-based bilateral aid (new);(2) aid allocation at programming stage.

• Criteria for first stage: • UMICs according to the OECD-DAC;• More than a 1% share of global GDP;• Other indicators (next slide).

This type of differentiation will not be applied to the 11th EDF.

Differentiated eligibility to development assistance

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• Likely indicators used for 11th EDF:• GNI p/c;• Population;• Human Asset Index (HAI);• Economic Vulnerability Index (EVI);• Worldwide Governance Indicators (WGI).

• Other indicators suggested:• Environmental Performance Index (EPI);• Human Development Index (HDI);• Absorption capacity.

• Provisions for state fragility.

Differentiated levels of development assistance (contd.)

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Envisions a transition of certain countries to different aid and non-aid modalities through thematic envelopes (DCI) and particular instruments (EIDHR, PI):

• Loans (esp. blending of loans and grants);• Technical cooperation;• Support for trilateral cooperation.

Differentiated mix of policies and instruments

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• Criteria for differentiation have not changed much from the 10th EDF – important factor is the weighing;

• LICs and LMICs already the focus of the EDF (over 90% of allocations, increasing trend);

• Explicitly stated differentiation policy indicates that UMICs will likely receive lower aid allocations;

Key question: how will differentiation affect programming, and what is the

‘destination’ of differentiation?

Likely consequences for the 11th EDF

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National and regional programming for the

11th EDF

• Programming principles closely linked to Agenda for Change;

• Sector definition / choice:• Alignment to partner country/region definitions;• Drivers: 1) ownership of sector priorities and policies, 2)

expected results and impact, 3) EU priorities and comparative advantage;

• Implementation modalities should not drive;• Specific allocation may be made to strengthen CSOs and LAs.

• Sector concentration:• SIDS only one sector (critical mass);• Possibility of additional interventions in fragile states.

Programming instructions for Delegations possibly adjusted at a later stage in light of MFF outcome.

Guiding principles and instructions for programming

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First phase completed: Delegations have submitted analysis and proposals for overall lines of EU response (or draft joint-programming document) to EEAS/DEVCO late September 2012;

EEAS/DEVCO have not yet responded with instructions to all Delegations to start the second phase of programming;

Some Delegations started drafting MIP/NIP already.

Outline of the programming process

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• Simplified process, yet still delayed;

• Though process not the same as in the past, old habits continue:

• Little transparency in designing and programming aid allocations per country;

• prescriptive approach to programming leading to tensions with partner countries.

• Strong push by EC interest for sustainable agriculture and energy; move away from infrastructure;

• B-envelopes will be at € 0 unless need arises;

• Regional programming yet to begin though guidelines exist.

Programming process so far

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• Joint programming aims at delivering more with less resources and enhancing cost-effectiveness of aid through coordination among the Commission and EU Member States;

• The initiative is at various stages in Ethiopia, Ghana, Laos, Rwanda, Guatemala but potential for joint programming is being assessed in around 40 countries;

• A list of countries where joint programming will be undertaken in the future is expected by June 2013.

Initial experiences with joint programming

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Initial experiences with joint programming (contd.)

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• Aid fragmentation is the main rationale supporting EU joint programming;

• Other drivers, both technical and political, push donors to undertake joint programming – but Member States have different approaches;

• Partner country’s role generally limited (except in Rwanda) yet different reactions of partner governments;

• Scope for other donors’ involvement provided they adhere to rules and fundamental principles (alignment of programming cycles).

• The Agenda for Change reflects an EU aid development policy that proposes to do more/better with less and contains strong ‘beyond aid’ elements;

• Differentiation principle likely to lead to reduced aid allocations to UMICs – no clarity on the ‘destination’ of graduation;

• Programming process delayed, prescriptive or intransparent in certain places;

• Prepare for a new post-2015 development framework, with more emphasis on domestic resource mobilisation and other financial flows for development;

• Reflect on EU-ACP relations in anticipation of a new post-2020 framework.

Key conclusions

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Thank youwww.ecdpm.org

www.slideshare.net/ecdpm

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EUR million – 2011 prices. Data from EUCO37/13

Annual commitment appropriations for EU development cooperation 2014-2020

Comparison of the EDFs

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EUR millions – current prices, adapted from Gavas, 2013

1. EC 11th EDF Impact Assessment (Dec ‘11)“11th EDF should allow for a more differentiated approach”argues for sharpened geographical focus & alternative forms of cooperation with more advanced partners

2. EC proposal for Internal Agreement 11th EDF (Dec ‘11)No explicit reference to differentiation

3. Implementing regulation & Financial Regulation (2012-2013)Not formulated yet – remains to be seen

4. Joint programming ACP – EU (2013)• EU gives ACP indication of indicative amounts per country &

region• EU & ACP jointly agree on forms of cooperation (policy mix,

use of blending mechanisms,…)

11th EDF decision-making process

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1. ‘Differentiated mix of policies and instrumentsCPA goes ‘beyond aid’ (e.g. trade & political dimensions)CPA refers to innovative financing mechanisms since 2010 revision

2. Differentiated level of development assistancelevels between countries & regions have always differed‘Needs’ and ‘performance’ criteria only (CPA, Annex IV), while Agenda for Change also promotes ‘capacity’ and performance’ criteriaBut: capacity & impact criteria proposed for DCI post-2013 quite similar to performance indicators 10th EDF (e.g. economic growth, FDI)

Legal basis for different types of differentiation

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3. ‘Differentiated eligibility of development assistanceViews of applicability of approach to halt bilateral grant assistance to Upper-Middle Income Countries differsBut: theoretically EC could allocate one euro A-envelope

Legal basis for different types of differentiation, contd.

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• Needs – allocation indicators: Population sizeGDP per capitaDemographic dynamics (youth dependency)AIDS prevalence rateHuman poverty indexMalnutritionVulnerability based on Economic growth fluctuations, structural handicaps of LDCs & enclave or landlocked countries

• Performance indicatorsAid performance (absorption capacity, aid dependence)Macroeconomic performance (recent economic growth rates, environmental performance, external debt, reallocations at EDF-9 mid-term review)Investment climate (external tariff protection, FDI, gross domestic capital formation)Political performance (based on national programming dialogues)Social performance (public spending on health and education divided by spending on military, progress on MDGs 2 and 5)

10th EDF indicators for differentiation

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