ODI: multilateral aid and the EU s contribution to meeting the MDGs Thank you Simon and good afternoon ladies and gentlemen. It is a delight to speak on an ODI platform again and to share it today with Louis Michel. A billion of our fellow citizens live on less than a dollar a day, lacking the essential medicines, the clean water and the right to education that we take for granted here in Europe. Their lot will never change unless we make it change. The UN Millennium Summit will confirm in September that our MDGs are nowhere near being met and if the development challenge was not tough enough anyway, in 1
Sub Saharan Africa thanks in the main to a worsening HIV/AIDS epidemic, development progress is reversing. More political will, more money and more effective development assistance will then be essential if 2005 is to be remembered as the year we began to get back on track to meeting the MDGs. One further precondition for progress will be a more effective contribution from multilateral aid organisations: - from the UN system - from the World Bank - from the EC (and others). As bilateral donors and as key members of these institutions we have to will this to happen. We know we need to double the volume of aid. 2
Whether you look at the Sachs report or take just one part of the picture the continuing gap in financing to combat the spread of AIDS, it s clear we need more money. We need aid to be more predictable countries need to know how much they have coming in and for how long. Some countries we know are nervous about whether they have got the ongoing finance to continue to afford to buy anti-retrovirals for those on anti-retroviral treatment, never mind expanding access to more people. We need aid to be more harmonised, donors acting as one to impose the minimum of administrative burden. In Uganda there were, in 2003, 30 different donor missions to discuss AIDS treatment with government never mind all the other health related donor missions 3
tying up valuable government minister and civil servants time. We need aid to be unconditional responding to countries own priorities, not our own and not micromanaging. And we need aid to be targeted to those who really need it. As the fifth largest bilateral donor and with a rising aid budget, I think there remains a key role for bilateral donors..bilateral aid can build on existing relationships, often post-colonial friendships and responsibilities. It can play to donor countries particular strengths and skills. 4
It can challenge multilateral donors; it can engage directly in political dialogue; it can support leaders and innovators; It can advocate policies that favour the poor. 55% of our own 3.6 bn budget was given bilaterally last year. With 40 bilateral donors such aid is often uncoordinated a particular challenge in responding to the AIDS epidemic. It s high cost, high maintenance It s still often tied, to the donor country s priorities and (worse) to their companies. It s unaccountable the poorest countries have no formal voice or control over how it is used, and it operates without any binding rules. 5
So we do need to recognise the advantages that multilateral aid brings. Multilateral aid is better for being untied and for enhancing a global or in the case of the EU a regional commitment to universal values and solutions. At best it can concentrate expertise, experience and best practice in one place and then deploy it universally and evenly. It offers the prospect of streamlined support because in principle it s more capable of making long-term, predictable commitments than bilateral aid. There is too, unlike bilaterals, some accountability to developing countries. 6
Last year of our multilateral aid, 10% went to the UN, 44% to the EU and 21% to IDA World Bank Funding. Multilateral aid is getting better. Management and institutional reforms are starting to work. In the last few years, the multilaterals have begun to put in place new aid allocation policies and new management systems based solely on results; and they have started to make clear commitments to the MDGs, and to new ways of working at the country level. So where does multilateral aid slip up? First, the international system remains ambivalent about it. It s asking, what long-term role do we want the multilateral organisations to be playing? 7
What is our vision for it? Second, it s still not as efficient as it should be. Too often, corporate governance fails to secure the next stage of reforms that we all want. New policies and approaches are not being applied consistently in every country, and it continues to depress me that the quality of work in so many organisations is so dependent on the individual in charge, and not on the corporate standard. Third, some multilaterals are still too dominant in the policy debate, imposing heavy policies and conditionality, and not providing the space for countries to agree their own ways of monitoring progress with their own citizens. 8
Imperfect as multilaterals are it is the leadership they can offer which we need to exploit and capitalise on in this most important of years. The HIV/AIDS crisis is just one example where multilaterals are showing leadership but where more ambition and determination is still needed. We will seek to support and encourage further examples of such multilateral leadership through our Presidencies of the G8 and EU; from the UN, from the World Bank and from the EC. From the UN and all its component parts we have three priorities where we want them to show further ambition and leadership this year. To begin with, the UK would like to see wholesale reform of the UN humanitarian system. 9
You will know that not the least of Hilary Benn s proposals is the setting up of a $1 billion UN fund to support humanitarian responses in neglected or newly emerging crises, with 100 million of UK funds on the table as an initial contribution. You will remember our other proposals: like more power to better qualified UN humanitarian coordinators; and more and better-trained personnel. Louis, I hope the commission will support us in trying to improve the UN s humanitarian response. Second, we want a wholesale reform of the UN development system. Already, progress has been made under Kofi Annan s leadership on the long-standing challenges the 10
competition for scarce resources, the jostling over responsibilities, inflexible procedures, fragmented decision-making, bureaucracy. The UN can point to the establishment of UNAIDS, for instance, as an example of how its different parts can agree to adapt and modernise when the changes needed are clear and where the external pressure is great enough. But the UN development system and its agency programmes can also do more to harmonise first amongst themselves, and second with national Poverty Reduction Strategies. Third, the international system s work on development must now be explicitly linked to its work on security. 11
The High Level Panel said as much in its December report, and it was absolutely right. Our role in the development community is to promote the security of the poor. To do this, we need an international system that addresses poverty, and conflict, and the links between the two. That s why we very much support the Panel s recommendation for a UN Peace-building Commission linked to the Security Council. The High Level Panel and the Millennium Project have both demonstrated the UN s further potential to give a lead this year. 12
If we can make the reforms work then we will have a UN with the capacity to give the leadership this year demands. But the UN should not be the main manager of aid to the poorest countries. We need other organisations, with other skills, to do this. So I turn to the World Bank and specifically to its concessional arm, the IDA, which has negotiated the final round of its replenishment this week. I remain convinced that IDA is a good partner for the poorest countries, but it needs to do better. First, it must move faster to reduce conditionality. Too many policies have been imposed which are not priorities for poverty reduction. 13
Performance conditions have to be matched with countries own priorities not those of the donors. Second, IDA must work better as a partner with other donors and governments. Too much work is still led from Washington: it needs to meet its targets for decentralising work to the field. Yesterday, the UK gave a record breaking 1.43 bn to IDA for the three years 2005 2008 63% up on the last round of funding. Part of this contribution was linked to the World Bank s progress in reducing conditionality and working better with other donors. And third, we have to deal once and for all with the burdens of developing country debt that prevent money being spent where it s most needed in health and education. 14
That means the cancellation not just of bilateral debt, but of multilateral too. From 1 st January this year, the UK will pay its share (10%) of the debt service owed by the poorest developing countries to the World Bank and the African Development Bank. For 20 countries, this could be worth some $900 million by 2015. Canada and Ireland have now said they will come in to pay their share and G7 Finance Ministers have agreed to discuss further multilateral debt relief. ---------------------------------- Third and finally let me turn to the European Union. The British people can be proud of the difference EC aid makes: 15
- whether in response to the tsunami - in helping make success of the Global Fund - or its excellent Humanitarian Office. The EU is at a crossroads: - a new Commission - a new Parliament - and negotiations underway on the future of its aid agenda It has an opportunity to establish itself once and for all as a true partner of poorer nations and a powerful friend in the fight against poverty. First, the EU needs to be seen as a global player working on behalf of developing countries. 16
In many ways it is. For example, we very much salute the fact that the Union approaches the New York summit wanting to see the importance of sexual and reproductive health and rights firmly established as an undisputed element of meeting the MDGs. This is an issue the EU very much needs to be champion. The Union has huge reach, and huge clout beyond its borders. We have especially welcomed the role of its Peace Facility in supporting the AU in Darfur. Addressing new and old security concerns, and dealing with fragile states calls for more EU action, and for a more coherent European approach. 17
This goes beyond just conflict management and dealing with immediate global threats. It s also about promoting good governance and effective states. This is a job for all of us. But I think that the Union is particularly well placed to help, drawing on its trade provisions, its diplomatic and military capacity, and its development and humanitarian assistance. Second, the EU needs to be seen as a global trade partner for developing countries. As the world s largest single market, Europe is the main trading partner for many developing countries. It s also a block 25-nation voice, in the WTO and its decisions on trade will have a huge impact on developing countries. 18
There are see several opportunities for the EU to show further leadership. We want to reach agreement in the EU and G8 on simplifying rules of origin, so that opportunities for trade are not undermined by overly strict rules. We want to get a good development outcome from the reform of the EU s Sugar Regime and the Generalised System of Preferences. We want Europe to demonstrate that the Economic Partnership Agreements which it s negotiating are truly designed to make a tangible difference to the poor. Above all, we want the EU to help get the World Trade Organisation s ambitious Doha Development Agenda back on track. 19
Of course others, especially the US, have a responsibility as well and many eyes will be on Peter Mandelson at the Hong Kong Ministerial in December. Third and finally is the EU as a development partner. EC aid has made massive strides in the last five years. But in fact EC aid is still not sufficiently focussed on meeting the MDGs. There needs to be a clear vision for EC aid a vision which is shared by everyone, and which puts poverty reduction right at the centre. There seems to be an uneven EC approach to development today. Its development policy is not being used in all regions. It is not seen as corporate policy. 20
Do policies on security, trade, development and migration really join up? With the exception of Africa, it seems that the development policy has lost out in this battle. The best way to deal with this would be for the world s second largest donor to say, very simply, that it is going to focus its efforts and resources on those most in need and to do this across the globe, and not just in Africa. I think the way to start is to take another look at the EC Development Policy. I welcome the fact that Louis is doing so. When it s done - and we understand, Louis, that it will be finalised after the Millennium Review Summit in September? - we need to make sure that the revised 21
policy is fully part of the new Development Instrument that will form part of the next Financial Perspective. This would be the best way to ensure its role in guiding the EC s future development spending. Meanwhile the EU needs to ask where its money is going, and why. During the 1990s, global aid fell sharply, and is now still lower than it was a decade ago. At the same time, the proportion of aid going to the poorest countries has also decreased. That s why the UK has a commitment to spend more than 90% of its bilateral aid in Low-Income Countries by 2005/6. The DAC average is 65%. 22
The latest EC figure is 56%, up from 51% in 2002 but still not good enough. Europe spends nearly $100 in aid for every poor person living in the Mediterranean and less than $1 for every poor person in Asia, which is, alongside Africa, the key battleground for the achievement of the MDGs. Why is a child in Egypt worth a 100 times more than a child in Bangladesh? Both need to be schooled and be healthy. We cannot justify this huge difference. So the UK calls for the EC to increase its development funding for low-income countries to 70%. 23
Focussing on the poorest countries is perfectly compatible with Europe s aims for other parts of the world, and most notably for its neighbours in the Balkans and around the Mediterranean many of which are middle income countries. It makes sense to use part of the EC budget for the benefit of these countries, not least because many of them have a lot of poor people. But we should adapt the aid to the recipient. Providing loans to middle-income countries is a good alternative to grants, freeing up the latter for poorer nations. The new Financial Perspective should give us the chance to achieve this. 24
With the overall EC external budget, we believe that the proportion going to the Development and the Humanitarian Assistance Regulations must increase. We re also calling for more aid from Europe. I welcome your efforts Louis to mobilise support for a new and higher EU aid volume target, on the way to meeting the 0.7%. We d like this to be announced in New York, having been agreed at the June 2005 European Council. Again, that would show Europe setting the pace. There is another debate a topic in itself about making sure the EC applies the most effective methods for delivering aid. 25
Whether it s the money or the mechanism, what is needed is results. One billion poor people on less than a dollar a day is an outrage in this day and age. Bilateral donors have a role to play but multilateral donors have to rise to the challenge and the opportunity that 2005 presents to demonstrate the leadership to renew the will and the political momentum to get back on track to meeting the MDGs. Thank you. 26