3.2.1. Defining Country and Region Specific Response Strategies
The analysis above confirms the need for the Community to adapt its approach in each region and country, in view of differences in the scale of the challenges that these face. Chapter 6 of this report gives an overview of how the Community is responding to regional specific issues. The Commission’s country and regional strategy paper process outlined in the previous chapter is designed to allow it to develop tailored response strategies. The mid term review of these provides an opportunity to consider if any amendments are needed, including based on the analysis above about which regions and countries are lagging behind on particular objectives.
In the same way that monitoring progress needs to be a collective effort, devising response strategies is also not something that the Commission can do in isolation.
49 The result for the Balkans has to be read with caution since it only covers three countries of which both The Federal Republic of Yugoslavia and Croatia are amongst the worst 10 performing countries with significant drops in enrolment (-27% and -12% respectively). Figures for Central Asia and the Pacific are not representative as they are based on a single country.
Instead, it must work with countries themselves and other donors, to help identify the key priorities in each case and how Community assistance can best help to address these. In line with its commitment to a partnership approach based on local ownership, the Commission uses countries’ own national development strategies (Poverty Reduction Strategies in low-income countries) as the starting point. The EC’s Country Strategy Papers set out the Community’s response to this, taking account of other donors’ plans. Regional strategy papers are similarly prepared in consultation with countries in the region, regional bodies and other donors, and provide a means for the Community to help effectively address challenges that cut across the whole region.
3.2.2. Effective Targeting of Resources
As part of its commitment to increasing the impact of its assistance, the Community has committed to pay particular attention to the situation of the least developed and other low-income countries. In 2000, 59% of EC bilateral ODA went to these categories of countries; the bulk of the rest (35%) went to lower middle-income countries50.
As well as need, the Community’s resource allocation decisions also take account of the efforts of governments of partner countries to reduce poverty as well as their performance and absorption capacity.
A performance-based allocation methodology was agreed for ACP countries as part of the 9th European Development Fund. There is an opportunity to consider topping- up of allocations to countries (as well as reductions) after CSP mid-term reviews. Allocations to regions can also be revised after midterm reviews and if necessary even before, in case of special performance. In early 2003, the Commission will begin discussing with EU Member States and ACP partners the possibility to use €1 billion of the 9th EDF (that was held back by Member States as a reserve, conditional upon disbursement of the rest of the Fund) to establish an EU Water Fund to support implementation of the EU Water Initiative launched at the World Summit on Sustainable Development (see Special Feature, Chapter 7). The objective of this Fund would be to develop innovative and flexible approaches and to leverage aid resources (ODA) with private investments.
3.2.3. Addressing Debt Sustainability
One of the critical elements of the MDG ‘to develop a global partnership for development’ is to deal comprehensively with the debt problems of developing countries through national and international measures in order to make debt sustainable in the long term. The Community has continued to play an important role in this area during 2002, through its support for the enhanced debt relief initiative for Heavily Indebted Poor Countries (the HIPC process). As of the end of 2002, the Community’s total pledge was over €1.27 billion: € 734 million as a donor to the multilateral HIPC Trust Fund; and € 485 million as a creditor to finance the settlement of its own claims; plus an additional € 60 million, again as a creditor, to alleviate all remaining special loans granted to least developed ACP HIPCs.
50 OECD DAC Peer Review of EC Aid, 2002. Table II-3. This excludes 26% of bilateral EC ODA not allocated in this assessment.
The HIPC initiative is still facing important challenges, namely full financing, ensuring long-term debt sustainability and dealing with difficult country cases, essentially HIPCs emerging from conflict and/or with substantial problems of arrears. The Commission remains committed to covering the potential cost of the topping up caused by the global economic downturn and the fall of commodity prices on a fair burden-sharing basis. The Community’s overarching objective is to ensure that, within HIPC, developing countries can reach and maintain in the longer term a sustainable level of debt, reinforce their efforts to reduce poverty and promote growth. For this reason, the Community has consistently stressed the importance of strengthening the link between provision of debt relief through HIPC and process of donor support for countries’ national poverty reduction strategies (the PRSP process).
3.2.4. Increased Use of Sector Wide Approaches and Budget Support
The Community is increasingly providing assistance to developing countries in the form of sectoral support, as well as budget support for macroeconomic policies. This is consistent with the approach outlined in the November 2000 Joint Declaration on Development Policy, which spoke of “increased recourse to sectoral support and to direct budgetary aid where the conditions so allow”.
This shift is based on the belief that it will help to enhance the impact of the Community’s aid and increase ownership. In contrast to a standalone project, a sector wide approach enables the Community to tackle a much wider range of issues that are likely to affect the intended outcome of the intervention, working closely with other donors and the recipient country. Rather than just financing the construction of a hospital, for example, the Community might provide support for the government to implement a much wider set of policy, management and financial reforms in the health sector. This shift is consistent with the Community’s commitment to a partnership approach with developing countries, which promotes local ownership (which recent experience has shown to be a critical factor in the success of external assistance interventions). It also helps to build local capacity, since it works within national procedures rather than bypassing these. It also promotes coordination and complementarity between donors. The sectors where the Commission, together with other donors, is applying a sectoral approach include transport, health, education and agriculture.
Budget support goes a step further than sector programmes, in providing direct budgetary aid. The bulk of the Community’s budget support is directed to both maintain a stable macroeconomic framework, an essential condition for stimulating economic growth, and to sustain progress in key policy areas such as public finance management, health and education. Community support is designed to be fully coherent with the beneficiary country’s poverty reduction strategy. Further details are provided below.
In a number of countries (such as countries in crisis, or with weak administrations unable to co-ordinate donors) it is clear that it will be necessary to maintain a “project approach”. However, even in these countries, it would be appropriate to: i) accompany traditional projects with sectoral type support in those areas (e.g. sub- sectors) where sufficient capacity exists, and ii) support, wherever appropriate, the building up of capacity to lay the foundations for a transition towards the programme approach.
3.2.5. Focusing on a Limited Number of Priorities
In line with its commitment to work together with other donors to achieve its strategic objective, the Community has identified 6 priority areas for its assistance to developing countries. These are areas where the Commission and Council have agreed that it has a specific value added. They are as follows: the link between trade and development; regional integration and cooperation; support for macroeconomic policies and equitable access to social services; transport; food security and rural development; and institutional capacity building in particular good governance and the rule of law. A smaller number of areas for intervention are agreed in each country and regional strategy, in consultation with the country or countries concerned and taking account of other donors’ plans.
In 2002, the Commission’s inter-service Quality Support Group carried out a preliminary analysis of the extent to which Country Strategy Paper allocations followed these 6 priority areas.51 This was complicated by the fact that the Community’s classifications do not match up perfectly with the sectoral codes set by the OECD Development Assistance Committee. This also did not include allocations from horizontal and thematic budget lines. It also only looked at country programmes (the bulk of the Community’s support for regional integration and cooperation comes under regional programmes – see regional chapters of this report – so it is excluded from the table below).
Insofar as it was possible to compare the 6 areas with resource allocation by DAC sector code, the analysis suggested that the CSP process has led to a concentration of the Commission’s aid in the intended areas.
Concentration of Community Resources in Priority Areas from CSPs
Area of concentration Corresponding DAC sector(s) Share of total resource allocation
Trade and Development Sector 33
Trade and Tourism
5.9 %
NB This figure includes only those actions directly relating to trade promotion and classified as such under DAC codes. It excludes a wide range of actions addressing more fundamentally the improvement of the trade and investment environment. In addition, approximately 50% of the resources under regional programmes are devoted to supporting trade and development.
Support for macroeconomic policies
Sector 51
Structural adjustment with the World Bank and IMF
14.7 %
NB: this figure includes macro- economic support with social sector conditionalities, i.e. linked to improved health and education outcomes and financing for health
and education sectors (see 3.3.3 for more details)
Targeted support for social sectors
Sector 11
Education, Sector 12 Health and population programmes, Sector 14 Water supply and sanitation and Sector 16 Other social infrastructure
21.4 %
Transport Sector 21
Transport and Storage
19.2 %
Food security and rural development
Sector 31
Agriculture, Forestry and Fishing and Sector 52 Developmental Aid/Food Security
7.8 %
Institutional capacity building, Good Governance and the Rule of Law
Sector 15
Government and civil society
14.9 %
(NB: Interventions in many different areas include institutional capacity building aspects)
Total share of resources in these areas 83.9 %