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Gaping holes limit proposed “whole of the Union” ODA plus approach

14 May 2009

In its response to new challenges for development cooperation caused by the world financial and economic crisis, the European Commission is putting forward a “Whole of the Union” approach. This would mean that not just ODA but also export credits, investment guarantees and technology transfers are counted towards the EU’s development contribution. Trade and investment promotion instruments shall be used to leverage foreign private investment in developing countries. The current Italian G8 presidency is promoting a similar proposal, and seeks endorsement by other G8 members. It’s “whole of country” approach to development is supposed to create the conditions for governments, private companies and civil society groups to contribute effectively to development. While Eurodad and many other CSOs welcome the recognition that development is about much more than aid spending, there are significant concerns that the new broader approaches are limited and flawed.

The timing is particularly noticeable. Since donor governments are coming up with these ideas in times when it becomes more and more clear that they are failing to keep their promise on scaling up official development assistance, it seems that their main intention is not to achieve policy coherence or mobilize additional resources for development, but to detract attention from their own underperformance in the core area of development cooperation. The proposed “whole of” concepts and assessment instruments threaten to dilute the existing concept of ODA.

While more money should be spent to moderate the current liquidity squeeze in many developing countries, there is a considerable risk that rich countries sideline instruments and safeguards which have been developed in recent years to ensure that financial assistance is effective, poverty-focussed and does not lead to unsustainable debt levels in recipient countries. The EU’s approach in particular implies a new shift to debt-creating forms of financial cooperation such as export credits and concessional loans. This would raise debt levels again, also because the export credit agencies and investment banks have not yet adopted a comprehensive and binding set of criteria for responsible financing as outlined in Eurodad’s Responsible Finance Charter.

Most aid effectiveness principles have not been incorporated into these institutions’ work modalities, and they largely operate outside of the donor coordination and negotiation mechanisms which try to ensure a more effective, targeted and coordinated response to the development and poverty alleviation needs in the South.

Not surprisingly, the “whole of” approach specifies only the factors and instruments with which a European country could make a positive contribution to the development of the South. It currently omits rich country actions which have a negative impact on development, e.g. unfair tax practices, agricultural subsidies or greenhouse gas emissions. Until and unless rich countries’ governments disclose the full picture and address these negative factors, such new approaches will only refer to the “half of country” impact on development.

The Italian government has asked the OECD to design an assessment instrument to measure the impact on development of its “whole of country” approach. Eurodad and other NGOs will continue to press the case that - if there is to be a broader measurement of Europe’s impacts on developing countries – that it does not consider all private flows as positive and that it takes account of outflows as well. There are several other aspects of policy coherence that should be raised if the new approach is to make any serious claim to be wholistic. 

LINKS

Development’s Black Hole report

Eurodad Responsible Finance Charter

Coping with the crisis: the EC's report on EU development finance