How EC Aid is spent

The EC development programme has two components: aid stemming from the Cotonou Agreement, and aid through the Development Cooperation Instrument, which funds non-ACP countries and EC Thematic Programmes such as Environment or Human Rights.

The Cotonou Agreement

In 2000, the European Union (Member States and Commission) and 77 countries from Africa, the Caribbean and the Pacific (ACP) signed the Cotonou Agreement. This legally binding agreement sets out the legal framework for trade and development cooperation for 20 years and places environmental sustainability at the highest level of the agreement by imposing it as a requirement on all participants. The central objective of the agreement is thus ‘poverty reduction and ultimately its eradication; sustainable development; and progressive integration of the ACP countries into the world economy’ (Art. 19). Furthermore, under this agreement, the different signatories have committed themselves, in the pursuit of cooperation, to ‘incorporate economic, social, cultural, environmental and institutional elements that must be locally owned’ (Art. 20). In addition, Article 32, on cooperation over environmental protection and the sustainable use of natural resources, provides for a legal basis to push for the integration of environmental considerations into all aspects of development co-operation.

Central to the Cotonou Agreement is the negotiation of Economic Partnership Agreements (EPAs) which are agreed on a bilateral basis between the EU and regional groupings of ACP countries. The requirements of sustainable development must be incorporated in the EPAs.

Disbursement of funds to these countries is made through the European Development Fund (EDF), the financial protocol linked to the Cotonou Agreement. The EDF funding totals 22.8 billion Euro over the five-year period 2008-2013, In addition to the EDF, the European Investment Bank (EIB) provides 1.5 billion Euro towards development cooperation. This money comes from the EDF and comprises 1.1 billion capital to the Investment Facility and 400 million Euro for interest rate subsidies and technical assistance. Funds are paid by the Member States directly into the EDF, without going through the EC budget.