# EUR-Lex - 52011PC0541 - EN

*|*

# 52011PC0541

**COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS PROPOSAL FOR THE EU COMMON POSITION FOR THE 4TH HIGH LEVEL FORUMON AID EFFECTIVENESS, BUSAN /* COM/2011/0541 final */**

			*

			*

1.
Introduction

Aid reform originated in the Monterrey
Consensus on Financing for Development (2002), in which the international
community agreed to more effective Official Development Assistance (ODA). Subsequent
High Level Forums in Rome (2003), Paris (2005) and Accra (2008) added
principles, concrete commitments and a monitoring framework to strengthen the
reform.

The objective of the 4th High
Level Forum, to be held in Busan from 29 November to 1 December 2011, is to
assess progress against agreed commitments, review the aid effectiveness agenda
and link it with the wider agenda on development financing. The focus is on
supporting strengthened development results in the context of new global
development challenges and partnerships, including the engagement of emerging
economies. The Forum is not to duplicate the international agenda on Financing
for Development but to focus on the added value of aid effectiveness in
reducing poverty and achieving the Millennium Development Goals by 2015.

The purpose of this
Communication is to propose the EU Common Position for Busan to be followed by
the EU and its Member States (hereafter referred as the EU) participating in
Busan. The Communication assesses progress in implementing the commitments and provides
proposals on how to focus the aid effectiveness agenda and to extend its
principles to other actors and sources of development finance. It also proposes
streamlining the global governance structure and focusing on country level
implementation.

2.
Evidence of progress

For the first time, a wealth of information
on aid reform and its impact on development results is available. The
independent Phase II Evaluation and the Monitoring Survey of the Paris
Declaration provide evidence of performance against the Paris and Accra
commitments.

The evidence concludes that pursuing the
aid effectiveness agenda has led to aid quality improvements through strengthening norms of good practice and better partnerships. This
has contributed to achieving development results. Evidence confirms that among the five aid effectiveness principles
country ownership has advanced furthest. Alignment and harmonisation have progressed unevenly, while the use of
partner country systems has not increased despite improvements in those
systems. Managing for development results and mutual accountability have advanced
least. The trend in aid predictability has even gone
into reverse compared to 2005. Overall, progress is slow on the part of both
partner countries and donors as only two out of 13 targets have been achieved
globally: coordinated technical cooperation and untying aid.

The performance of the Commission and 14
Member States[1] which participated in the Monitoring Survey is better than global
performance overall. The EU Operational Framework on Aid Effectiveness has been
instrumental in this. The Commission and 14 Member States perform well on three
targets: on joint technical cooperation and in using country systems for public
finance management and procurement. The performance of the Commission and 14
Member States has been less successful in predictability, use of programme-based
approaches and joint missions. Aid fragmentation, which increased between 2005
and 2009, and transparency remain as challenges. The preliminary results of a study commissioned by the Commission[2]
suggest that by implementing the Paris and Accra commitments more ambitiously the
EU would gain €4 billion a year.

This table summarises global performance
and the performance of the Commission and 14 Member States in 32 partner countries
which took part in the 2005 and 2010 monitoring surveys.

|| Global || Global || EU[3] || EU[4] || Target

|| 2005 || 2010 || 2005 || 2010 || 2010

1 Operational development strategies || 19% || 52% || 1) || 1) || 75%

2a Quality of public finance management || - || 38% || 1) || 1) || 50%

2b Quality of procurement systems || - || - || 1) || 1) || No target

3 Aid reported on budget || 44% || 46% || 42% || 51% || 85%

4 Coordinated technical cooperation || 49% || 51% || 40% || 61% || 50%

5a Use of public finance systems || 40% || 48% || 48% || 55% || 55%

5b Use of procurement systems 2) || 40% || 44% || 51% || 66% || No target

6 Reducing parallel project implementation units || - || 32% || - || 49% || 66%

7 Aid is more predictable: disbursement as scheduled || 42% || 43% || 41% || 49% || 71%

8 Aid is untied 3) || 80% || 87% || 81% || 82% || 87%

9 Programme-based approaches || 43% || 48% || 47% || 51% || 66%

10a Joint missions || 20% || 22% || 27% || 32% || 40%

10b Joint analytical work || 41% || 44% || 49% || 59% || 66%

11 Results oriented frameworks || 7% || 22% || 1) || 1) || 38%

12 Mutual accountability frameworks || 44% || 50% || 1) || 1) || 100%

1) Indicator for partner
countries

2) Global score 2010 for all 78
partner countries

3) Indicator 8 are unweighted
averages

At global level, slow and varying performance can be partly explained by the fact
that it takes time to reform practices. Evidence suggests
that most commitments have lacked political support and
that approaches to aid effectiveness have been too bureaucratic.
In addition, the contents of the agenda have been too broad to keep the
necessary focus.

The evidence suggests there is a need to
identify key commitments to strengthen aid reform and provide a basis for
future focus, in line with priorities identified by partner countries:

Ownership: Partner
country ownership is fundamental for aid to achieve development results.
It needs to be deepened to democratic ownership to address the importance of
inclusive dialogue and strengthened capacities among local stakeholders and
institutions.

Transparency and predictability: Reliable, well-communicated aid flows are fundamental to increasing
partner countries' ability to implement development strategies. Transparency
and predictability also strengthen democratic ownership and accountability. They
enable donor coordination and results reporting. The study suggests that the lack of
predictability of EU aid costs around €1 billion a year[5].

Alignment:
Aligning with partner country priorities and using country systems are important
in supporting partner countries’ ownership and leadership. Use of country
systems supports the overall capacity development of partner countries to
provide effective services

Accountability for results: Supporting development results is
the overall justification for the aid effectiveness agenda. Accountability for
results, in turn, should be addressed by increasing capacity to monitor,
measure and report results and use them for making subsequent decisions.

Reduced fragmentation and proliferation: Proliferation and fragmentation lead to duplication and unnecessary
transaction costs. The EU could save more than €700 million a year by reducing
aid fragmentation[6].

Countries in fragile situations: Evidence shows that aid effectiveness
principles are relevant to countries in fragile situations, but enhanced implementation
of good practices, adaptations and flexibility are needed.

3.
Future aid effectiveness commitments

While reaffirming the Paris principles, the
Busan Forum should prioritise and deepen the key policy commitments of Paris
and Accra. The overall aim is to enable a high level of ambition to support
development results. The Busan outcome document should be the future framework
for aid effectiveness encompassing the Paris Declaration and the Accra Agenda
for Action while directing future implementation in priority themes and
commitments. The Commission proposes that the EU Common Position should include
the following themes and proposals for commitments by partner countries and
donors including multilateral organisations and vertical funds.

3.1.
Ownership

The Busan outcome
document should address ownership as a combination of commitments on democratic
ownership, capacity development, strengthened country systems and results-based
conditionality.

Partner countries should, with the support
of donors, commit to i) strengthen democratic ownership, emphasising an
approach in which stakeholders negotiate a broad consensus on development
strategies. Governments should promote an enabling environment for different
stakeholders - including parliaments, civil society organisations and the private
sector - to bring their added value into development processes. Such favourable
conditions require functioning democratic, legal and judicial systems including
respect for human rights and gender equality. Democratic ownership also requires
transparency of information on development resources including the publication
of national budgets. Partner countries should ii) institutionalise inclusive
and results-oriented multi-stakeholder dialogues, and iii) safeguard the active
participation of groups often excluded from decision-making, particularly
women.

Partner countries and
donors should iv) reaffirm their commitment to capacity development as one key
element for ownership, and v) agree to seek approaches that balance results
orientation and long-term capacity development. Partner countries should commit
to vi) continued leadership in country system reforms, and donors vii) should
provide their capacity development support according to local priorities,
context and capacity and use sectors as the primary entry point for joint
approaches. Partner countries and donors viii) should work together towards
harmonised and results-based conditionality.

3.2.
Transparent, harmonised and aligned partnerships

Transparency and predictability

The main
achievement in transparency since Accra has been the agreement and
implementation of the International Aid Transparency Initiative (IATI) standard
by its current 20 signatories, including nine from the EU. In Busan, donors
should reaffirm their commitment to publicly disclose regular, detailed and
timely information on aid volumes, conditions and the results of development
expenditure. This should be done on an annual and rolling three- to five-year
basis to enable accurate budgeting, accounting and auditing by partner
countries.

In Busan, donors should commit to i)
develop internal systems which allow for multi-year budgeting of development
cooperation, ii) adapt a global reporting standard based on IATI and the Development
Assistance Committee (DAC) Creditor Reporting System, iii) develop and
implement mechanisms which align aid data standards with partner countries'
budget classifications and iv) disclose all country-specific information of the
DAC forward spending exercise, including more detailed information at sector
level. Partner country commitments on transparency are integral parts of
democratic ownership and accountability commitments.

In Busan, the EU should send a strong
political message on EU leadership on transparency by launching an 'EU
Transparency Guarantee' based on the existing transparency commitments adopted
in the EU Operational Framework on Aid Effectiveness.

Reduced fragmentation and proliferation

Despite high investments by the EU on
division of labour, aid fragmentation still presents challenges. The results of
country and sector concentration take time to materialise, however, global
efforts need to be increased.

The Paris and Accra commitments have not fully
addressed the political nature of division of labour. In addition, evaluation shows
that partner countries have not been able or prepared to lead in determining
the optimal roles of donors.

In Busan, donors should commit to i)
proceed further with concentration and division of labour while recognising
that political decision making is essential for success, ii) move from
individual country strategies towards joint assistance strategies among those
donors that have the political will to work together, and iii) avoid further
proliferating vertical funds and instead use and strengthen the existing
channels. Donors and partner countries should iv) promote a global high-level debate
on cross-country division of labour based on the DAC's analytical work on
fragmentation and forward-looking plans, also addressing under-funded countries.

Alignment

The evidence confirms that aligning with
partner countries' national priorities and using their systems makes aid more
effective. Use of country systems does not refer solely to budget support but
is equally important for project support. Partner country governments have the
lead in strengthening country systems while the identification and mitigation
of risks should be done jointly by partner countries and donors.

In Busan, donors should i) reaffirm their
current commitment to align with the partner countries' national development
plans, and ii) to use and strengthen, together with partner countries, country
systems for all aid modalities for more effective institutions and policies.

3.3.
Accountability for results

The overall justification for the aid
effectiveness agenda is that it supports achieving development results. Yet
performance on results is significantly off track. The same applies to
performance on mutual accountability between partner countries and donors and
with their respective publics.

Both partner countries and donors are
increasingly accountable to their publics on the use of aid funds and achieving
results. While some countries have initiated mutual accountability frameworks
according to the Paris and Accra commitments, they need to be rolled out
universally and also include accountability for results.

While Paris and Accra affirmed the
importance of managing aid to get results, in Busan the ability to measure and
report results should be at centre stage. However, the pressure to deliver results
should not compromise the longer term process of developing partner countries'
capacities to plan, deliver, measure and report development results. Donor
assessments of results should be based, to the extent possible, on partner
countries' reports on results.

In Busan, partner countries and donors should
deepen their accountability for development results by committing to i)
increased investment in developing the statistical capacity of partner
countries, including through the initiative Paris21[7], and ii) strengthen partner
countries' monitoring and evaluation capacities to track development results. Partner
countries and donors should commit to iii) transparent reporting on development
results using partner countries' assessment frameworks, iv) the universal use
of mutual accountability frameworks tailored to country contexts to monitor
progress on commitments and results and v) strengthen results-based
decision-making for aid investments.

3.4.
Countries in fragile situations

The Paris Declaration and Accra Agenda for Action recognised
that aid effectiveness principles are relevant in fragile situations. However, they
need to be tailored to the specific challenges of countries in fragile
situations stemming from weak ownership and capacities and the urgent needs for
basic service delivery. The results of monitoring the 10 specific Fragile
States Principles[8]
show that, while aid effectiveness principles remain relevant, the way they are
implemented in situations of fragility needs more fine-tuning.

The Busan outcome should i) recognise and support the work of the International Dialogue on Peacebuilding and
Statebuilding, and the growing leadership of the g7+[9] countries by endorsing the Monrovia
Roadmap on Peacebuilding and Statebuilding as a framework for defining and
measuring results in fragile states, ii) endorse the
DAC guidance on state building, transition financing and risk management in
fragile situations, and iii) call upon donors to adapt their procedures for
decision-making, funding and implementation to the specific challenges of
situations of fragility.

4.
Extending aid effectiveness principles to other
sources of development finance and actors

The evidence suggests that aid
effectiveness commitments are relevant beyond their present scope in terms of actors
and sources of development financing. The increasing importance of non-DAC
donors calls for their wider participation in the aid effectiveness agenda and
in the Busan Forum. The following sections addressing development effectiveness
include the actors and sources of finance which can bring added value to
effective development cooperation and which should be a priority in the Busan
Forum.

4.1.
Role of the emerging economies and South-South cooperation

Emerging economies are playing a rapidly
growing role in supporting partner countries, including through South-South cooperation.
It is important that Busan is used as an opportunity to strengthen the global
development partnership based on the diverse approaches to and experiences of
development.

Contributing to development results is
relevant to all stakeholders providing development financing. The Busan Forum should
include an exchange between partner countries, donors and emerging economies to
share experiences in achieving results. Based on this the Busan Forum could build
towards shared principles and differentiated commitments. Aid effectiveness
principles can provide added value in formulating them.

The relevance of South-South and Triangular
cooperation should be reaffirmed in Busan. To strengthen the results of these
cooperation channels, the Busan outcome should address complementarities
between North-South and South-South partners based on transparency regarding
development financing flows. The Busan outcome should also emphasise the role
of regional platforms for knowledge-sharing on successful development
experiences as well as capacity development and aid management practices.

4.2.
Civil society organisations, local authorities
and private foundations

Building on the Accra Agenda for Action and
the results of the EU Structured Dialogue, the Busan outcome should reaffirm the
recognition of civil society organisations (CSOs) as independent actors in
their own right and acknowledge that CSOs complement the roles of governments
and the for-profit private sector. In addition, the Busan outcome should recognise
the role of local authorities when they have autonomy and the right to initiate
specific interventions supportive of local development needs.

In Busan, civil society organisations and
local authorities from donor and partner countries should be called on to
continue their ongoing efforts to enhance accountability, transparency and
integrity in their operations based on self-regulatory mechanisms such
as the Istanbul CSO development effectiveness principles[10].

The Paris principles are also applicable to
private foundations that have an increasingly important role as donors. Foundations
should be called upon to make adaptations to the Istanbul principles to fit
their activities and partnerships.

Finally, when acting as donors, international
CSOs and private foundations should promote local
ownership by acknowledging the lead of local civil society in taking the
initiative in identifying local development needs.

4.3.
Working together with the private for-profit
sector

The emergence of private actors offers
different viewpoints and solutions to development challenges. This calls for closer
involvement of the private sector in development cooperation to strengthen the
catalytic role of aid. Increased cooperation should be based on the aid
effectiveness principles.

Blending of loans with grants and further
use of innovative financial instruments (risk capital, guarantees,
risk-sharing) in cooperation with multilateral and bilateral institutions offers
means to leverage additional development funding from the private sector. In
Busan, development partners should be called on to further develop and increase
the use of blending and innovative financial instruments. Furthermore, the
private sector should be called on to take an active role in development cooperation
through public-private-partnerships and corporate social responsibility
practices.

4.4.      International climate change
finance as part of Official Development Assistance

The Copenhagen-Cancun process agreed on
substantial finance to address climate change: so-called Fast Start Finance
amounting to $30 billion over the years 2010-2012 and an increase in
public and private funding to reach $100 billion per year by 2020.

The Busan outcome should i) endorse the application
of the aid effectiveness principles to climate change finance and target
similar endorsement in the Copenhagen-Cancun-Durban process, ii) ask the United Nations Framework Convention on Climate Change Transitional Committee to
include the aid effectiveness principles in the
design of the Green Climate Fund, and iii) make a commitment to assess the
application of the aid effectiveness principles regularly through the
Monitoring, Reporting and Verification mechanism on climate finance.

5.
Future aid effectiveness governance and monitoring

At present, the key elements for efficient aid
effectiveness governance are not sufficiently addressed. First, continuous
political support has not fully materialised and has mainly been restricted to
the three High Level Forums. Second, country level implementation has not been
adequately supported by global structures and the DAC-hosted Working Party on
Aid Effectiveness (WP-EFF) has become a self-standing, heavy bureaucracy.
Third, monitoring of the Paris commitments has taken place, but this has not
been adapted to country contexts. Finally, mutual accountability frameworks
have not been developed in all partner countries, and their outcomes have not
been systematically debated at the global level.

In Busan, the decisions on governance
should be sufficiently detailed to avoid lengthy discussions after Busan. In
general, the governance structure should have wide coverage of different
development partners. Post-Busan governance should contain the following
elements:

First, political engagement and
decision-making should be addressed by emphasising links between aid
effectiveness implementation and global development policy forums. This could
be done through regular high level debates on progress in International Monetary
Fund/World Bank and DAC Senior and High Level Meetings.

Second, country level implementation should
be strengthened through 'country compacts' in which partner countries, based on
multi-stakeholder consultation, agree on locally adapted Busan priorities and
targets with their developments partners, using existing local mechanisms for mutual
accountability.

Third, the WP-EFF should be streamlined,
with the termination of most of the current clusters. It should be tasked to
facilitate country level implementation (helpdesk function, synthesis, good
practices) and to conduct global monitoring together with the DAC. The DAC
should become an international hub for transparency and the host organisation
of the IATI. The UN Development Cooperation Forum should focus on strengthening
global mutual accountability.

Finally, global monitoring should be
conducted in connection with the 2015 deadline for the Millennium Development Goals.
The Paris indicators should be reduced to reflect the focused agenda. The
indicators to be included should address ownership (indicators 1, 2), alignment
(indicators 3 and 5), predictability and transparency (indicator 7) and
accountability for results (indicator 12), resulting in an equal number of
indicators for partner countries and donors. The baseline for indicators should
be kept the same to enable measurement of long-term progress. Country level
monitoring, in turn, should be based on existing local mechanisms. Generic
lessons should be distilled at the global level through the WP-EFF and the DAC.

6.
Conclusions

The Busan Forum will be a key opportunity
to focus the aid effectiveness agenda to increase the impact of aid on
development results. Informed decisions are possible due to the wealth of
evidence available on aid reform. Sustained political support will be crucial
for effective implementation. To this effect, the Commission proposes the EU continues
its leadership in aid effectiveness by pursuing the following objectives:

1.
The Busan outcome should be an encompassing document
reaffirming the Paris Principles, based on the Paris Declaration and Accra
Agenda for Action and focusing on deepened key commitments to guide future
implementation. All DAC donors, vertical funds and multilateral organisations should
fully adhere to the principles and commitments.

2.
Aid effectiveness themes included in the Busan
document should be democratic ownership, transparency and predictability, reduced
fragmentation and proliferation, and alignment as well as accountability for
results. Commitments in situations of fragility should be deepened in a
flexible manner.

3.
Aid effectiveness implementation should be anchored
at the country level through flexible partner country led 'country compacts'
based on existing local mechanisms. The global aid effectiveness governance
structure and monitoring should be streamlined.

4.
Diverse experiences of achieving development results
and interpretations of aid effectiveness principles should be invited from the emerging
economies, CSOs and local authorities as well as the for-profit and non-profit private
sector in order to work towards differentiated responsibilities and commitments.

5.
Aid effectiveness commitments should be extended
to cover other sources of development finance, particularly climate change
finance.

[1]               In addition to the Commission, the Member States that
participated in the survey are Austria, Belgium, Denmark, Finland, France,
Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden, and
United Kingdom.

[2]               See: http://ec.europa.eu/europeaid/how/ensure-aid-effectiveness/documents/aid-effectiveness-benefits_en.pdf

[3]               See footnote 1.

[4]               See footnote 1.

[5]               See footnote 2.

[6]               See footnote 2.

[7]               Paris21 is a consortium by partner countries and
donors with a secretariat hosted by the Organisation for Economic Co-operation
and Development ( OECD), see http://www.paris21.org/

[8]               Fragile States Principles refer to the Principles of
Good International Engagement in Fragile States to which OECD countries
committed themselves in 2007.

[9]               The g7+ is an independent and autonomous forum of
fragile and conflict affected countries and regions inaugurated at the first
International Dialogue on Peacebuilding and Statebuilding, held in Dili,
Timor-Leste in 2010.

[10]             http://www.cso-effectiveness.org/IMG/pdf/final_istanbul_cso_development_effectiveness_principles_footnote.pdf