EU Development Aid. By Ravi Sodha. Please do not circulate without the author s permission. To contact author, please

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1 EU Development Aid By Ravi Sodha Please do not circulate without the author s permission. To contact author, please ravisodha1@gmail.com

2 Development aid is a policy that is encompassed within neo-liberal thought. The belief that states can cooperate with one another for mutual benefit and absolute gains is firmly enshrined in neo-liberal theory. However, mutual benefit and absolute gains point towards advantages to donors in sending development aid, which creates the question of whether development aid is purely philanthropic or if neo-liberal thought means that donors should look to gain something from the sending of aid. According to the website of the European Commission s EuropeAid Development and Cooperation, their role is defined as an active and proactive player in the development field, we promote good governance, human and economic development and tackle universal issues, such as fighting hunger and preserving natural resources (European Commission, 2011a). The European Union s (EU) role in development through EuropeAid is intended to support the United Nation s Millennium Development Goals (MDGs) to achieve the eight anti-poverty goals by their 2015 target date (United Nations, n.d.) 1. EuropeAid itself was set up in order to implement EU development cooperation in all developing countries (Orbie, Forthcoming, p. 5). In addition, the EU is a unique donor due to bilateral aid and multilateral institutions existing concurrently (Carbone, 2005, pp ). Although EuropeAid states its intentions in development, it is still debated what exactly the nature of EU development aid is. For example, Faber and Orbie (2008) argued that trade and development have been closely linked with trade policy being used to achieve development objectives (p. 192). Furthermore, the Treaty of Maastricht states under Article C that external activities as a whole should be consistent, thus linking development with other policies (Carbone, 2008, p. 324). However, will this allow the EU to target MDGs or will development be used for other objectives? The EU meaning Member States and the Commission - prides itself as being the leading development aid donor due to the fact that it gave 50 billion across the globe in 2008, which equalled 56% of all development aid given globally (Development Portal, n.d.). However, where exactly does this aid go to and for what purpose? The European Commission declared poverty reduction as the main objective of EU development policy and the most amount of poverty is found in Sub-Saharan Africa and South-East Asia (Carbone, 2005, p. 980). However, aid towards these areas has fallen alongside the rise in aid to middle income countries (ibid.). In addition, we are also seeing those that need aid being unlikely to be able to reach the MDGs (Thiele, Nunnenkamp, & Dreher, 2007, p. 596). Here we will look at the examples of Turkey, Kosovo and India, three countries that receive a lot 1 For more information on MDGs, see 1

3 of development aid from the EU, however do not appear to need it as much as other countries across the globe, given that achieving MDGs is a main priority (EuropeAid, 2010). The focus of this paper is to analyse why the EU is giving vast amounts development aid to countries that do not appear to need it as much as others would. The EU is a major supporter of the MDGs and as has been said by Thiele et al. (2007), countries such as Sub- Saharan Africa for example are the most likely to not reach the goals (p. 596) and therefore it would be appropriate to assume that the EU would be supporting these countries the most. However, although development aid is being directed there, vast amounts are also being sent to countries, which do not appear to require the aid as much. The paper will help to configure the use of development aid by the EU and show the type of development actor that the EU is. The conclusion will compare the analysis of the paper with the hypothesis that development aid is being determined by other policy areas due to horizontal coherence and to create clear aims across policy areas. Policy Coherence for Development Theoretically, a major aspect to consider when analysing the EU s development policy is the concept of Policy Coherence for Development (PCD). Gebhard (2011) claimed that a lack of coherence constitutes one of the most frequently bemoaned aspects of the EU s political and bureaucratic performance (p. 102). Moreover, Bretherton and Vogler (2008) have stated that while it [the EU] is undoubtedly a global actor, if it is to become an effective sustainable development actor the Union s PCD strategy must be fully implemented (p. 415). The definition of PCD differs, however there are two main explanations: the negative approach and the positive approach. The negative approach is the absence of incoherencies between and the mutual impairment of policies, whereas the positive approach is the interaction of policies with the aim of achieving overriding objectives (Carbone, 2008, p. 326). Furthermore, what must also be considered, particularly in this case, is the difference between two types of coherence: horizontal and vertical coherence. The EU has a unique structure because it is both vertically and horizontally layered (Gebhard, 2011, p. 102). Horizontal coherence refers to coherence between different policy areas, while vertical coherence means coherence between the different Member States and the EU (Carbone, 2008, p. 326). These main concepts will be very important in the analysis of the EU s development aid. 2

4 Case Studies Turkey, Kosovo and India have been chosen for this study because of the features of these countries that show that they do not need development aid as much as others. Turkey is regarded as a rapidly developing country and the largest national economy in Central and Eastern Europe (Trading Economics, n.d.(a)). Kosovo s economic growth is exceeding IMF targets (ECIKS, 2007) and India is regarded as having a diverse economy with many different sectors (Trading Economics, n.d.(b)). Moreover, in 2009, Kosovo s GDP per capita was $2,500, and in 2010, Turkey s GDP per capita was $12,300 and India s GDP per capita was $3,400 (CIA, n.d.(a)). In addition, in 2010, Turkey s GDP growth was 7.3%, Kosovo s GDP growth was 4.5%, and India s GDP growth was 8.3% (CIA, n.d.(b)). None of these countries have been named as a Least Developed Country (LDC) by the UN, which contains 48 countries of which 33 are situated in Africa (UN-OHRLLS, n.d.), which only serves to support the statement of Thiele et al. (2007, p. 596) that Sub-Saharan Africa is much more in need of development support in order to reach the Millennium Development Goals. Turkey As has been mentioned, Turkey is a major recipient of development aid from the EU, even though economic growth has been very good and it is regarded by some to have a prosperous economy. In 2008, Turkey was in the top ten recipients of EU aid (Phillips, 2010) receiving million, a figure which is due to rise to almost 900 million by 2012 (European Commission, 2011b). According to the European Commission, Turkey is eligible for financial aid due to the Instrument for Pre-accession Assistance (IPA) (ibid.). The IPA is available as assistance to all accession candidates and acts as a single framework to coordinate aid to cover many different policy areas such as development and cross-border cooperation (EUROPA, 2010). The sending of development aid to potential Member States is not a recent advance, with development aid having been sent to accession candidates before the 2004 enlargement (Lightfoot, 2008, p. 128). Therefore, it can be seen that development aid is being sent to assist Turkey to fulfil accession criteria. Thus, this case shows horizontal coherence through development aid being linked with accession criteria to achieve the objective of accession and for candidates to reach the appropriate criterion. However, it can 3

5 also be seen that development aid to accession candidates to the EU is given to be able to create vertical coherence between a potentially new member and the existing Member States through using aid to develop cooperation before accession is confirmed. Kosovo Out of the three cases in this paper, Kosovo s raw stats make it the most obvious country to require EU development aid. The EU has been directing aid to the country since the Kosovo crisis in 1999 through partnership with the United Nations Interim Administration Mission in Kosovo (UNMIK) (European Commission, 2007). After the devastation of wars and the continued path to independence, assessments conducted by the World Bank and the European Community estimate external financing needs for Kosovo reconstruction at $2.3 billion over four to five years (Tarnoff, 2001). The Government of Kosovo outlined that development aid is necessary to enhance the standard of living of the population, fight poverty and pursue integration into the European Union (European Commission, 2008). The intention to fight poverty is a key objective of the MDGs; however there also appears to be different reasons for development aid to Kosovo. Due to the fact that Kosovo has still an undecided status, economic and social development has been effected meaning that the EU has needed to send development aid in order to stabilise the country (European Commission, 2007). Much like Turkey, Kosovo has been included in the IPA and hence is eligible for assistance from the EU. However, there is also a stabilisation aspect of the EU s support to Kosovo (ibid.), helping the country during the undecided period to not collapse, which is unsurprising due to many major EU Member States immediately recognising Kosovo as a sovereign state after its self-proclaimed independence (BBC, 2011). Therefore, with regards to the research being done in this paper, it can be seen that to an extent the EU is following MDGs in the fight against poverty, however this is also supplemented with political aims to stabilise the country following its self-proclaimed independence and much like Turkey, to support the country in its status as a future accession candidate to the EU. India India is already a different case to those of Turkey and Kosovo because of its geographical position outside of Europe and thus removing the ambition of accession to the EU. The

6 2006 EU-India Country Strategy Paper (CSP) meant the EU sending 225 million over a five year period (EEAS, n.d.). The figure seems unnecessary due to rapid economic growth and social change in the country (ibid.), however the EU has pointed to the fact that this has only occurred in some parts of the country. India contains one third of the world s poor and thus it is necessary that development aid is to be sent in order to achieve the MDGs (ibid.). Social inequalities still vastly exist between the rich and the poor, leaving the poor in a very precarious situation when it comes to health and education, two of the MDGs (ibid.). Therefore, although India has an impressive economic growth and is fast becoming a major economic power, social inequalities have left it still needing external aid in order to achieve the MDGs. This is the reason why the EU is sending development aid to India, with it highlighting health and education as two key areas in need of development, although the EU has stated that development assistance will decrease as India s economy grows (ibid.). However, alongside the goals of dealing with health and education, the CSP also states how an important aim is to improve economic cooperation between the EU and India (ibid.), making it obvious that MDGs are not the only objectives of development aid to India. This is evidence of the claim made by Faber and Orbie (2008) that trade and development have been linked. Therefore, by sending development aid to India, the EU is helping to secure economic ties with a country that is quickly becoming an important economic power. Thus, although the purpose of the EU s development aid to India is to achieve MDGs, there is also an aspect of horizontal coherence mainly combining trade and development through closer economic ties between the two countries leading to increased trade. Analysis From the case studies of Turkey, Kosovo and India, the different facets of EU development aid can be seen. The cases of Turkey and Kosovo have shown the use of development aid in the IPA. This prioritisation of development aid towards accession candidates is something that has existed for some time, especially before the 2004 enlargement with Poland being the third largest recipient of EU aid in 1999 (Lightfoot, 2008, p. 133). Furthermore, since the 2004 enlargement, Lightfoot (2008) stated that new Central and Eastern European Member States have tended to send bilateral development aid to their neighbours, with this linking closely with their self-interest and also in order to gain public support for aid being sent (p. 133), which falls in line with aid being sent to accession candidates, as they are mainly 5

7 situated in that area. This shows a political influence in the decision where to send development aid. The existence of political influence on development aid is also shown in the case of Kosovo, where the fact that many EU Member States were quick to recognise Kosovo as an independent state would influence their decision to support the stabilisation process of the country through development aid. However, more generally through the IPA we can see horizontal coherence linking development aid with accession criterion, but also looking long term towards vertical coherence between potentially a new Member States and existing Member States through using development to increase cooperation. The example of India is an all together different one. The case study on the country has shown that although India is a fast growing economy, social inequalities have left some of the population falling short of the MDGs. Therefore, EU development aid is being used in order to help the poorer areas of India to reach these objectives. However, development aid has also been tied in with trade policy through horizontal coherence in order to increase economic ties between the two countries, which is becoming increasingly significant due to the growing economic power of India. Therefore, horizontal coherence is also evident here with trade and development being linked, which supports the analysis of Faber and Orbie (2008). It seems that PCD, in particular horizontal coherence and positive PCD, has become a very important aspect within the EU and one that Member States wish to achieve, as although all Member States agreed to commit to poverty reduction in the Lisbon Treaty, the trend has been that in terms of percentages of total EU aid, the amount of aid going to LDCs is on the decline (Lightfoot, 2008, p. 133). Thus this shows how coherence has perhaps become a more important initiative, exhibiting the difference between rhetoric and reality in terms of the EU s development aid policy. Although in rhetoric, the EU wishes to be seen as a philanthropic development actor helping to reduce poverty and achieve the MDGs in LDCs, in reality aid is being tied to other policies through horizontal coherence to reach overriding objectives (positive PCD). In fact, according to Hayes and Bunyan (2003), now LDCs are receiving more money in remittances than in development and humanitarian aid from western countries (p. 415). Although this does not suggest that the EU is avoiding achieving MDGs (with this aspiration evident in Kosovo and India), instead that in reality it is not the only or main goal of development aid. However, PCD is encompassed within the liberal perspective of economics and the fact that the both the EU and the target country will gain from development aid does not detract from this perspective that currently exists. Furthermore, as 6

8 Thomas (2000) states that in terms of donors and development aid, they are likely to so [send development aid] in ways which benefit themselves, [...] it is by no means a foregone conclusion that such development will also benefit the poor (p. 4). Therefore, the idea already existed that development aid will not necessarily go towards achieving MDGs, which is the case in some examples of recipients of EU development aid. Conclusion The analysis section has shown why development aid has gone to Turkey, Kosovo and India. Aid has gone to Turkey due to its position as an accession candidate, also to Kosovo under the same instrument but also for political reasons and for MDGs, and also to India in order to achieve the MDGs but additionally for trade and economic reasons. Therefore, we have seen that development aid has not merely been sent to these countries to achieve the MDGs but also for other objectives. There has been evidence to show the existence of horizontal coherence in development aid to the three countries looked at by linking development aid with other policies to reach overriding objectives. Thus, it can be concluded that the EU sends development aid to countries due to reaching other policy objectives, which relates to the positive approach of Policy Coherence for Development. Furthermore, as predicted by the hypothesis, horizontal coherence is a clear reason for development aid to the three countries studied, although positive PCD is also of importance. This paper has not meant to discredit the EU for the use of PCD, as Matos (2000) stated that the success of development process is influenced by the social, political and cultural situation in the target country (p. 195), it seems plausible for the donor to also look at these factors alongside development aid. In fact, it may be looked on as an achievement that PCD and horizontal coherence exist, as the so-called inter-pillar divide has had a negative impact on the overall capacity of the EU to perform more efficiently (Gebhard, 2011, p. 124). In conclusion, in terms of the question why is the EU sending vast amounts of development aid to countries such as Turkey, Kosovo and India when there are other countries that need it more?, it is possible to see that for Kosovo and India, the EU is looking at tackling MDGs, however in all three cases development aid has been linked with other policy goals. This has been done through horizontal coherence and positive PCD. Furthermore, policy coherence is needed to avoid undermining the credibility of the EU as an actor in international politics and international development (Carbone, 2008, p. 326). 7

9 Moreover, Carbone states that development aid now also encompasses economic interests and political considerations (ibid.). Therefore, although the EU is linking development aid with other policy goals, this is because policy coherence is being stressed so that the EU is an effective development actor. In answer to the research question of this paper, PCD has been the reason for development aid being sent to Turkey, Kosovo and India and this has meant that the EU has become a more coherent and effective development actor in achieving its objectives. 8

10 References BBC. (2011, March 16). Regions and territories: Kosovo. Retrieved April 1, 2011, from Bretherton, C., & Vogler, J. (2008). The European Union as a Sustainable Development Actor: the Case of External Fisheries Policy. European Integration, 30 (3), Carbone, M. (2008). Mission Impossible: the European Union and Policy Coherence for Development. European Integration, 30 (3), Carbone, M. (2005). Review Article: Transformations in European Union Development Policy: From Rhetoric to Results? Journal of International Development, 17, CIA. (n.d.(a)). Country Comparison: GDP - per Capita (PPP). Retrieved April 1, 2011, from CIA. (n.d.(b)). Country Comparison: GDP - Real Growth Rate. Retrieved April 1, 2011, from Development Portal. (n.d.). Frequently Asked Question on EU Aid. Retrieved March 31, 2011, from ECIKS. (2007, February 6). Ruecker: Kosovo's economic growth rate is 5%. Retrieved March 31, 2011, from Economic Initiative for Kosovo: EEAS. (n.d.). India: Country Strategy Paper Retrieved April 1, 2011, from European External Action Service: EUROPA. (2010, August 18). Instrument for Pre-Accession Assistance. Retrieved April 1, 2011, from EuropeAid. (2010). Annual report 2010 on the European Union's development and external assistance policies and their implementation in Retrieved March 31, 2011, from European Commission: 9

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12 Tarnoff, C. (2001, January 16). Kosovo: Reconstruction and Development Assistance. Retrieved April 1, 2011, from CRS Report for Congress: Thiele, R., Nunnenkamp, P., & Dreher, A. (2007). Do Donors Target Aid in Line with the Millennium Development Goals? A Sector Perspective of Aid Allocation. Review of World Economics, 143 (4), Thomas, A. (2000). Poverty and the 'End of Development'. In T. Allen, & A. Thomas (Eds.), Poverty and Development into the 21st Century (pp. 3-22). Oxford: Oxford University Press. Trading Economics. (n.d.(a)). Turkey GDP Growth Rate. Retrieved March 31, 2011, from Trading Economics. (n.d.(b)). India GDP Growth Rate. Retrieved March 31, 2011, from United Nations. (n.d.). Millennium Goals. Retrieved March 31, 2011, from UN-OHRLLS. (n.d.). Least Developed Countries: Country Profiles. Retrieved April 1, 2011, from 11