10 March 2000

FERN's comments on

'The European Community's development policy'

Introduction

The performance of EC aid has been under severe criticism by NGOs, by evaluations carried out on behalf of the European Commission and by the DAC peer review. The Development Council of May 1999 reiterated many of these criticisms and asked the Commission to develop 'an integrated up to date statement on development policy based on the goals set out in the Treaty. The statement should create an overall profile of EC development co-operation and a framework for prioritising objectives, policies and fields of actions'. The current proposal for 'the European Community's development policy' does not fulfil these expectations.

The paper mentions several good points (i.e. refocusing aid, concentrate on limited number of fields, and increasing effectiveness) but gives no clear indications on how to reach results on any of these points, or what the consultative process should look like.

The following five issues are particularly worrisome and will be elaborated on in this short paper.

Summary of points:

1. Inadequate consultation, no participation

Although this document was published when requested by the Council (first half of 2000), i.e. on time, it was not subject to the widest consultation possible, as demanded by the Council. Environment NGOs were not consulted or even notified that the paper was available. We hope that the draft Communication will be open for wider consultation, including consultation meetings with NGOs in North and South before it is sent to the Council.

2. No environmental integration

Despite the fact that 'environmental integration' must legally be incorporated into the definition and implementation of all Community policies[1], this document does not make a clear attempt to fulfil that requirement. Although it is stated in the document that environment and gender issues should be "mainstreamed", no indication of what this may imply is given. Environment and gender issues remain untreated. Furthermore, despite the Council's request to base the paper on all existing policies and policy statements, no reference is made to any of the Community's environmental policies. We expect a next draft to reflect all earlier statements and commitments made

3. No focus on sustainable development

The aim of the document should be, in line with the Treaty, to enhance sustainable development. This policy document should therefore give equal importance to the three pillars of sustainable development: economic, social and environmental. The current paper puts most emphasis on the economic side and pays more lip service to the other pillars. This should be rectified in a next draft.

4. No clear analysis of world trade and poverty alleviation

We recognise that the Treaty requires poverty alleviation and integration in the market economy as a focus of EC development aid. However the paper  lacks an analysis of how to alleviate poverty and does not fully acknowledge that integration in the global market economy can have detrimental as well as beneficial effects, depending on the economic, ecological and social conditions of the relevant country. Poverty alleviation is too often linked to economic growth, while such a link does not follow in all cases. A next draft should look at these issues with much more clarity.

5 Lack of coherence between different EC policies.

It is clear that the impact of other Community policies, including agriculture, fisheries, trade and investment, have a big and often detrimental impact on developing countries' economies. A paper on the Community's development policy must acknowledge this and propose measure to minimise these negative impacts.

6. Unclear process

The Council demanded an Action Plan as well as a proposal for a standard framework of country strategy papers, based on the work of a group of experts. It is unclear how this discussion paper relates to the action plan and the development of country strategy papers. This document includes no deadlines, nor are any implementation or evaluation mechanisms described. Although some issues are proposed to be the focus of the future Community development co-operation policy, there are no criteria developed or a framework created to support this focus. The draft Communication should lay down a framework accompanied by a calendar for the elaboration of country support strategies and implementation mechanisms.

These six main points are elaborated on below:

1: Inadequate consultation and no participation

This paper was sent out for consultation to certain development NGOs a week before the deadline for comments. Most environment NGOs were not informed about the existence of the paper. In fact FERN found it only by chance on the Commission's web site. NGOs in the South have, as far as we know, not been consulted either. Whether partner governments in the South have been consulted, we do not know. If so, the tight deadline will make it impossible for most of them to respond.

The Development Council, stated in its May meeting that a proposal for community policy should be presented 'in the first half of 2000 after the widest possible consultation'. We think it is essential that such a consultation process is started sooner rather than later. Such a process should involve at least 2 consultation meetings with NGOs from North and South and include the possibility for detailed comments on a first and second draft. Sufficient time and funds will have to be set aside for such a process to make it effective and worthwhile. In this respect the EC can learn some lessons even from the World Bank.

We believe -with the Council- that complementarity can primarily be achieved through a demand driven process in the developing country itself. Participation of the recipients of EC development co-operation in the process of elaborating a new EC development co-operation strategy is therefore essential. The paper itself notes that 'the guiding principles… are ownership in the developing countries of their own development process and increased attention to the social dimension of growth and development. These guiding principles are not reflected in the current paper nor in the process of the development of this paper.

There is insufficient mention in this document of the need for improved dialogue with civil society nor is there a clear statement on the importance of civil society in development cooperation. If the Commission wishes its development cooperation initiatives to have sustainable, positive results for the people in developing countries then it must ensure that the civil society that, in practice, implements development cooperation activities is involved from the start, i.e. in drafting of policies, in making  decisions and implementation of activities.

2 and 3. No environmental integration and no focus on sustainable development

The Council demanded an integrated and up to date statement on development policy based on existing policy statements. The current document makes no reference to any of the following EC documents: Forests and development, the EC approach; the (draft) EC Biodiversity Action Plan for development co-operation; the Resolution on Indigenous Peoples in development co-operation and the Commission's working document on the same issue, to name just a few relevant position papers.

Environment concerns are crucial for development cooperation as many communities are dependent on natural resources for their livelihoods. Subsistence agriculture is a case in point. These communities need to balance their needs with environment protection to ensure their future livelihoods. The sustainable and long-term impact of the Community's development policy would also benefit from ensuring coherent management and protection of natural resources and the environment.

Indigenous peoples are often the most marginalised members of society. Forests are extremely important to indigenous peoples, as the majority of indigenous peoples live in forest areas. In its resolution on indigenous peoples the Council clearly sets outs its development cooperation approach. The Commission, however, has obviously not taken this into account when drafting this document.

As the evaluations of the environmental performance of EC development aid as well as the aid to forest projects[2] were very critical, it is essential that a new EC policy addresses theses criticisms which include:

* lack of expertise in environmental matters and insufficient staff within environmental departments of the Commission;

* no mandatory advice to desk officers from environmental experts before project approval;

* lack of a properly formulated or implemented integrated environmental policy;

* lack of adequate environmental impact assessments;

* opaqueness of the funding structures and process;

* rigid decision-making structures and highly bureaucratic structures.

A bibliography of all EC policy papers and statements relevant for EC development aid should be included in the final draft of this text. Such a bibliography should also include the International Conventions to which the EC is a signatory.

4 No clear analysis of world trade and poverty

On Foreign Direct Investment

The top fifth of the world's people in the richest countries enjoy 82% of the expanding export trade and 68% of foreign direct investment, the bottom fifth barely more than 1%.[3] These figures show that foreign direct investment does not reach the most disadvantaged people development co-operation ought to reach. Although this fact is mentioned in the paper, no conclusions are being drawn from this fact.

Comments on the text:

• The table on page 5 should also include the flows of revenue resulting from FDI which are repatriated to the countries where the FDI has originated from. Only then can you truly assess the role played by FDI in economic development.
• A distinction must be drawn between long-term investment and short-term speculation.
• FDI linked to "footloose" industries, that move regularly to find cheaper sources of labour, natural resources should be taken into account. 

On integration in the market economy

Integration in the market economy is not an objective in itsef but rather a possible mechanisms that can help promote sustainable development. It is clear that most developing countries have not yet developed to a stage where they are able to meet the challenge to significantly export to the world market. It was believed that the Uruguay Round would improve their chances by increasing the market access of developing countries' exports to the rich countries' markets. The hopes were especially on textile and agricultural products where developing countries have some comparative advantage. But Seattle has taught us that many developing countries believe they have not sufficiently benefited from being integrated in the world economy. On the one hand implementation of existing agreements caused severe problems leading to poverty in some cases, on the other hand developing countries had to lower their tariffs by a bigger margin than developing countries.

The issue was clearly highlighted by Peter Gakanua of the ACP secretariat in a speech to the European Parliament Development Committee[4]. Also the FAO in a study of 16 developing countries on the implementation of the Uruguay Round, found that there 'was a general trend towards the concentration of farms. In the virtual absence of safety nets, the process also marginalized small producers and added to unemployment and poverty'.

A goal such as 'integration in the global market economy' therefore has to be treated with great caution. The draft Communication should highlight the negative side for particularly the most disadvantaged people of integration in the market economy.

Development cooperation on WTO-related issues should emphasise not only technical assistance to enable developing countries to implement Uruguay Round agreements but also the review and assessment of the capacity these countries have to implement these trade agreements.

The preliminary sustainability impact assessment on a new trade round, carried out by the University of Manchester for the EC, points out that further trade liberalisation might have a negative environmental impact on developing countries dependent on exports of natural resources. This conclusion needs to be taken into account when redrafting the paper.

If regional economic partnership agreements are, as the paper suggests, to maximise the benefits of developing countries' integration into the world economy minimising the negative effects of liberalisation, the Commission should ensure that sustainability impact assessments as currently being developed by DG Trade become mandatory. This should be made explicit in this development policy paper.

This policy paper should also set the framework for sustainability impact assessments (SIAs) of the Uruguay round agreements on developing countries. This would enable sound policy judgement both in the EU and partner countries on the positive and negative consequences of the Uruguay round agreements and follow up agreements on developing countries and enable the necessary amendments to the agreements.

The Commission correctly points out that an integrated trade approach is required not only addressing issues of market access but also supply-side constraints and competitiveness. Trade issues should in fact only be addressed as complementary to food, economic, social and environment security. Therefore a trade approach should be closely linked to efforts made by development cooperation to foster local small and medium sized enterprises (SMEs). Indeed, even the EU has recognised their importance in economic growth and employment security. This is reflected in the restructuring of DG Enterprise which now has a far greater focus on SMEs.

Ad 5 Lack of coherence between different EC policies

EC trade and agricultural policies have in some cases a profound negative impact on the economies of developing countries. Tariff peaks remain in Europe for many industrial products that developing countries export. Agricultural tariffs, originally high in Europe with 213% for beef and 168% for wheat only have to be reduced by 36% as a result of the Agricultural Agreement by the end of 2000, making it very difficult for developing countries to access the European market. Further more the Agricultural Agreement has allowed developing countries to maintain most of the high subsidies that existed prior to the Uruguay Round.

The Common Agricultural Policy has had a very detrimental effect on the economy of many developing countries[5], as has the Community's fisheries policy.

The next draft of the paper should highlight the lack of coherence between the different Community policies and put forward solutions to mitigate the detrimental impact of other Community policies on developing countries. Already in 1997 the Council demanded a paper on 'coherence of the EC's development co-operation with its other policies'[6]. This paper has yet to appear.

6.  Unclear process

The policy document should examine the problems addressed in all the different evaluations of EC aid. That is currently not the case. A few comments:

On simplification and improved control

Simplification and rationalisation of aid is badly needed. A clear action-plan should be developed on how to improve the current situation.

The Commission should allow for funding proposals that do not always fall in within its policy framework but provide the opportunity to develop innovative ways to promote sustainable development.

The Commission must allow for the development of participatory monitoring processes that would enable local communities to feed their concerns or approval of a project/programme back to the EC development cooperation services.

One of the main problems is the lack of competent staff. The Commission and Member States should therefore ensure the recruitment of technically competent staff on crosscutting issues like environment. Furthermore the Commission needs to reiterate the need for more staff to manage its development aid: there should at a minimum be a requirement to have 4.3 staff per 10 million USD as in the World Bank.

The choice of strategic focus areas needs to be justified. Transport seems a strange choice as a focus for development co-operation as the transport sector is a sector for which FDI often is available. The lack of environment protection issues is disappointing as a healthy environment is the basis for any sustainable development, particularly in countries where a big part of the population is directly dependent on the use and export of agricultural products.