EU Presidency Statement - Financing for Development

Summary: May 2, 2001: Third Preparatory Committee for the International Conference on Financing for Development: Heading IV ODA. Intervention by Ambassador Ruth Jacoby, Head of Delegation of Sweden on behalf of the European Union (New York)

General EU position

The EU underlines our continued commitment to ODA and its pivotal role for poverty reduction and the attainment of the international development targets, in particular halving the proportion of people living in absolute poverty by the year 2015.
The EU agrees with the Facilitator that there is a continuing need for ODA flows, especially to the poorest countries in support of their own development efforts, for capacity building and for the removal of obstacles to development.
The EU believes that ODA should support existing efforts in partner countries. Whilst respecting the needs of specific vulnerable groups, ODA should be geared towards the poorest countries that have fallen behind in the development process but are pursuing sound economic policies and effective strategies to address good governance, human rights, the rule of law and sustainable development within the overarching goal of reducing poverty.
The EU would like to reaffirm its continued commitment to the international goals of reaching an ODA level of 0.7% of GNP in total and an ODA level of 0.15% of GNP to the Least Developed Countries (and after that is reached, 0.20% of GNP) as soon as possible. With regard to this, the EU notes with satisfaction the 6.4 real per cent increase in net official develoment assistance flows in 2000 by the EU countries combined.
The EU emphasises the importance of building a broader consensus with parliaments and public opinion on the need to reverse the trend of declining ODA levels, in the effort to achieve the agreed international development goals.

ODA as leverage

The EU agrees with the Facilitator that ODA plays an important role as a complement to other sources of financing for the development of developing countries. The potential role and catalytic effect of ODA in leveraging larger levels of domestic and foreign capital needs to be fully recognised, both directly, as is the case for technical assistance, strengthening taxation systems and financial markets, and indirectly, by creating an enabling environment for investments and thereby increasing confidence of potential private investors. The EU views the many emerging public-private partnerships as promising and could play important roles in mobilising resources for sustainable development. In this context ODA also brings the benefit of reinforcing developing countries' potential for achieving better access to global markets.

Effectiveness of official development assistance

The EU believes that effectiveness is one of the major topics for our discussions on ODA in the FfD process. It was therefore one of the themes we focused on in our input to the discussion on this agenda item. In our view effectiveness is far more than aid levels and there is a need to take into account the absorptive capacity of partner countries to handle ODA flows as well as the quality and results of the aid provided.
In addition to efficiency and effectiveness, the EU would also like to emphasise the importance of ODA coherence, co-ordination and complementarity.
To achieve poverty reduction we must formulate coherent policies on development, trade and finance.
The EU agrees with the Facilitator that donors should work to simplify and harmonise operational policies and procedures, increase flexibility in their delivery and disbursements systems and provide capacity and institution building support. We encourage donors to increasingly harmonise their delivery of aid in ways that strengthen countries' planning and budgetary systems. Donors should also be encouraged to develop common tools in full partnership with local stakeholders. Where effective partnerships are in place much stronger support should be given to sector investment programs, sector wide approaches and to budget and balance of payments support. This is however dependent upon the transparency and accountability of the budget process.
The EU also sees a need for the UN and its funds, programmes and specialised agencies to simplify and harmonise their operational procedures, including through the broadening and enhancing of initiatives such as the UNDAF and Common Services. These initiatives need to be better co-ordinated with corresponding initiatives of the IFIs, including regional IFIs.
The EU has already stressed that capacity building is relevant in most areas of the agenda, and especially so for our discussions on ODA. Priority areas for capacity building in the FfD process could be the strengthening of the capacity to mobilise domestic and international resources including FDI, to build capacity in the LDCs to benefit from the opening of markets, to enable them to participate in the international trading system, and to strengthen the administrative capacity of LDCs to effectively handle and manage development resources.
The EU welcomes the adoption ad ref until 11 May of a Recommendation on Untying ODA to the Least Developed Countries by the DAC. The EU believes that the recommendation will contribute to increase the effectiveness of aid and to strengthen the ownership and responsibility of partner countries in the development process.

National ownership

In order for development co-operation to be as effective as possible, it is important for the whole society, men and women, to be engaged in the formulation and execution of a nationally owned poverty reduction strategy.
The EU agrees with the Facilitator that national ownership of the development process and the need for enhanced partnerships among national, regional and international actors, civil society and the private sector is of central importance. The emphasis on ownership and partnership in development co-operation in recent years - UNDAF, CDF and PRSP - is the most promising avenue for securing greater aid effectiveness.
The EU has recently concluded the Cotonou agreement with the 77 ACP countries. The ACP-EU cooperation is an example of a dynamic and innovative development approach. It underlines the link between development support and the establishment of a policy framework favourable to trade development and investment, thereby concentrating on three priority areas of cooperation: economic development; social and human development; and regional integration and cooperation.

Regional co-operation

Regional co-operation may prove to be a solution in many areas for developing countries. The main challenge is to eliminate obstacles such as for example, conflict and inadequate infrastructure. Equally challenging is to identify areas where synergies can be found between countries and best practises. What role can ODA play to further regional co-operation, and what role do and can regional and sub-regional organisations play?
The EU modalities in the design and implementation of regional policy, through the reform and expansion of the EU structural funds, can provide useful insights for the development of participatory assistance schemes in conjunction with common standards, rules and monitoring mechanisms.

Global and Regional Public Goods (GPG and RPG)

An important challenge that the FfD process must address is how the international community shall meet the growing demands for the production and protection of global and regional public goods (GPG and RPG). Many GPG and RPG are particularly important for the developing world.
In the view of the EU all countries, both their public and private sectors, should take responsibility for adequately addressing the issue of global and regional public goods and how to build capacity and mobilise resources to meet these needs.
The EU sees a need to further discuss this whole issue, and agree on a more systematic and clear definition of global and regional public goods.

Innovative sources and mechanisms for financing sustainable development

The EU agrees with the facilitator that innovative sources and mechanisms for financing sustainable development is an interesting and important subject that needs to be further explored. Advantages and disadvantages, applicability and realism of various forms of innovative sources and mechanisms for financing should be analysed.

Ref: PRES01-068EN
EU source: EU Presidency
UN forum: Second Committee (Economic and Financial Affairs, Environment)
Date: 2/5/2001

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