Speakers:
Gareth Thomas, MP - Parliamentary Under Secretary of State at DFID
Louis Michel, EU Commissioner for Development and Humanitarian Aid

Chair:
Tony Worthington, MP

1. Gareth Thomas opened the session and concentrated on multilateral aid and the EU's contribution to meeting the MDGs. He began by stating that the deprivation faced by a billion of the World's citizens that lived on less than a dollar a day would not be changed unless effort was made to make it change. He also noted that the UN Millennium Summit in September would confirm that the MDGs were nowhere near being met and that in some areas, for example Sub-Saharan Africa, development progress was reversing. He argued that more political will, more money and more effective development assistance would therefore be essential if 2005 was to be remembered as the year in which the MDGs were put back on track.

2. Gareth Thomas then went on to note that a further precondition for progress would be a more effective contribution from multilateral aid organisations including the UN system, the World Bank and among others, the EC. He argued that as bilateral donors and key members of these institutions, the UK had to ensure these changes occurred.

3. Gareth Thomas argued that the need to double aid was clear and used the continuing gap in financing to combat the spread of AIDS as an example of where more money was needed. He also argued that aid needed to be more predictable to enable countries to make long-term investments, for example in antiretroviral therapies. There was also a need for aid to be more harmonised in order to reduce administrative burdens on recipients. Aid also needed to be unconditional and respond to countries' own priorities not donors'. Gareth Thomas also noted that aid needed to be targeted to those who really needed it.

4. In this vein, Gareth Thomas argued that there remained a key role for bilateral donors as bilateral aid could build on existing relationships, often post-colonial friendships and responsibilities and exploit opportunities that were less available to multilateral donors. He indicated that 55% of the UK's £3.6bn budget was given bilaterally in 2004.

5. Gareth Thomas noted however that with 40 bilateral donors, such aid was often uncoordinated which was a particular challenge in responding to the HIV/AIDS epidemic. It was also often high cost 'high maintenance' and it was also still too often tied to donor country's priorities and interests. He also argued that bilateral aid was also unaccountable and that the poorest countries had no formal voice or control over how it was used.

6. Given these shortcomings, Gareth Thomas argued that it was necessary to recognise the advantages that multilateral aid brought. He argued that multilateral aid was better for being untied and for enhancing a global, or in the case of the EU, regional commitment to universal values and solutions. He also argued that it made it possible to concentrate expertise, experience and best practice in one place and then deploy it universally and evenly, offering the prospect of streamlined support. Gareth Thomas continued by highlighting that unlike bilateral aid, multilateral aid offered some accountability to developing countries and that multilateral aid was getting better especially as management and institutional reforms were starting to work.

7. Gareth Thomas acknowledged that multilateral aid was not perfect however and 'slipped-up' on a number of issues:

a) Firstly, the international system remained ambivalent about it citing lack of clarity about its long term vision and role
b) Secondly, it was not as efficient as it could have been and that too often, corporate governance failed to secure the next stage of reforms that were needed
c) Thirdly, some multilaterals were still too dominant in the policy debate and imposed heavy policies and conditionalities which did not provide the space for countries to agree their own ways of monitoring progress with their own citizens

Gareth Thomas argued that imperfect as they were, it was the leadership that they could offer which needed to be exploited to capitalise on in this most important of years. He argued that the HIV/AIDS crisis was just one example where multilaterals were showing leadership but where more ambition and determination was still needed.

8. Gareth Thomas then went on to detail that the UK would seek to support and encourage further examples of such multilateral leadership through the Presidencies of the G8 and EU; from the UN, from the World Bank and from the EC.

9. From the UN and all its component parts the UK had three priorities where it thought the UN should show leadership and ambition

a) Wholesale reform of the UN humanitarian system
b) Wholesale reform of the UN development system

c) Linking the international system's work on development more explicitly to security

10. From the World Bank, Gareth Thomas explained that while the IDA concessional arm was a good partner to the poorest countries, it needed to do better. Specifically it needed to

a) Move faster to reduce conditionality
b) Work better as a partner with other donors and governments
c) Deal once and for all with the burdens of developing country debts that prevent money being spent where it is needed most - in health and education and involved cancelling bilateral and multilateral debt

11. From the European Union, while there were several reasons why the British people could be proud of the difference that EC aid made, the EU was at a crossroads which offered it the opportunity to establish itself once and for all as a true partner of poorer nations and a powerful friend in the fight against poverty. In order to do this however, the EU needed to

a) Be seen as a global player working on behalf of developing countries on broad ranging issues
b) Be seen as a global trade partner for developing countries
c) Be more as a development partner as currently, EC aid was still not sufficiently focussed on meeting the MDGs

12. Gareth Thomas then indicated that during the 1990s, global aid fell sharply and was still lower than it was a decade ago. At the same time however, the proportion aid going to the poorest countries had also decreased. He explained that this was why the UK had a commitment to spend more than 90% of its bilateral aid in 'Low-Income Countries' by 2005/6. He also noted that the DAC average way 65% and that the latest EC figure was 56%, which was up from 51% in 2002 but that was still not good enough. To illustrate, Gareth Thomas pointed out that Europe spent $100 of aid for every poor person living in the Mediterranean and less than $1 for every poor person in Asia. He stressed that the EU could not justify this huge difference and called for the EC to increase its development funding for low-income countries to 70%.

13. Gareth Thomas finished by welcoming Commissioner Michel's efforts to mobilise support for a new and higher EU aid volume target, on the way to meeting the 0.7% target and hoped that movement on this issue could be announced at the UN summit in New York. He also argued that the EC needed ensure that it applied the most effective methods for delivering aid.

14. The floor then past to Louis Michel. He began by quoting a speech that Nelson Mandela had delivered at the launch of the MAKEPOVERTYHISTORY campaign: "Overcoming poverty is not a gesture of charity. It is an act of justice. It is the protection of a fundamental human right, the right to dignity and a decent life. While poverty persists there is no true freedom". He argued that these words eloquently introduced the challenges faced by the development policy of the European Union.

15. He continued to explain that in his first official visit to London since becoming Development Commissioner, it was no accident that he asked to make the ODI event for the development community a keynote public part of his programme. He hoped that his presentation would but the EC 'back on the map' especially as the EU was the biggest donor in the world and the biggest importer for products from developing countries.

16. Louis Michel indicated that whether the UK development community was campaigning for trade justice or for more and better quality aid, he hoped to contribute ideas to the debates but also to take from it key messages which could guide the EU as it formulated its new development policy.

17. Louis Michel continued that the starting point for the new EU development policy was that the world had changed almost out of recognition. Nine Eleven, while a simple combination of numbers, carried a meaning that reached far beyond development issues. He illustrated that the new security situation and the threat of international terrorism affected development policy. In addition to this the HIV/AIDS epidemic and global warming were other major issues in the changing international context. Furthermore, conflict prevention and reconstruction had replaced cold war concepts. Louis Michel stressed however that one thing had not changed and that was the injustice of poverty making the MDGs as relevant today as they ever were.

18. While the world had changed, Louis Michel also argued that the development agenda had changed and that developing countries, development ministries and the development community needed to deliver a stark, cogent, three-pronged message: trade justice, debt relief and more and better aid.

19. Louis Michel also indicated that the EU had changed and far from being static, was showing itself to be a dynamic framework for Europeans to work together.

20. Given that the since the last EU development policy statement, laid out in November 2000, the world had changed, the development community had changed and the EU had changed, Louis Michel then outlined the key elements of the new development policy. Firstly he indicated that compared with 25 separately negotiated, procured and often competing national aid and development programmes the EU offered significant advantages as it could offer a coherent and coordinated position. Furthermore the impact of financing at the level of the EU was much greater than had it been split 25 different ways. Louis Michel indicated that the EU was working hard to develop a real strategic approach that would cover the EU as whole, not just programmes financed by the EC. He noted that this would require all Member States to cooperate, and he welcomed DFID support in this regard. In looking to the future, Louis Michel saw three issues emerging:

a) The place of development in the external action of the EU. He argued that development policy had to be seen in the context of the common foreign and security policy and, more importantly at present, EU trade policy. He argued that the development and security nexus, as well as the link between development and migration, were increasingly important elements of the debate. His goal therefore was coherence, rather than a hierarchy of objectives.
b) Partnership - Louis Michel argued that too often in the past "the North" had set priorities for developing countries and that too often cooperation had been reduced to disbursement-driven aid, adding to the problems of the poor. Louis Michel indicated that as regards the EU's partners in developing countries, the principles of partnership, ownership and participation would be strengthened, in line with the most recent recommendations by the DAC to align donor policies and practice to those of the beneficiaries. Furthermore, Louis Michel argued that 'partnership' started at home. Within the EU, although there had been pioneering improvements in transparency and untying aid to include developing countries themselves, they were still far from effective. There was also a need to prioritise the renewal of partnership among international development actors and with NGOs
c) Effectiveness - the Commission had strived to apply this important principle in order to improve aid effectiveness by selecting six focal sectors for intervention. Louis Michel summarised these as the link between trade and development; regional integration and cooperation; support for macroeconomic policies and equitable access to social services; transport; food security and sustainable rural development and institutional capacity building, notably good governance and the rule of law.

21. Louis Michel indicated that in practice, these issues had been complicated by the multiplication of new initiatives (for instance the EU water and energy initiatives) and political priorities (eg integration and migration concerns). He noted that cross-cutting issues had been most integrated in programming documents and sometimes lip-service had been paid in doing so. In the future he argued that there as a need for better and deeper dialogue between partners in order to avoid defining focal sectors a priori and to agree the best mix of policies and actions according to the local context.

22. Louis Michel continued by arguing that the EU could add value in a number of key themes (for instance the development of human capacities and citizens rights, or economic growth and development) which could provide the basis for achieving the right mix. The different Member States could also contribute to identifying the specific approach to providing their expertise under the basic themes, although he noted that it was important to keep this simple.

23. In concluding Louis Michel noted that like Commission President Barroso, he would put Africa at the heart of his new proposal for the new EU development policy. In this key year, he argued that both the EC and the British Government had a major role to play in shaping the agenda. He implored that while the challenge was enormous, as seen from the Sachs report, the World could not afford to fail. He stressed that there was a need to invest immediately in development and that his aim was to find the best way to do this.

Nambusi Kyegombe
February 2005