EN    EN EN 
 
EN 1   EN  EUROPEAN COMMISSION 
Brussels, 19.4.2011 
SEC(2011) 500 final 
  
COMMISSION STAFF WORKING DOCUMENT 
EU Accountability Report 2011 on Financing for Development 
  
Review of progress of the EU and its Member States 
  
Accompanying document to the 
 
COMMUNICATION FROM THE CO MMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMI TTEE OF THE REGIONS 
 
Enhancing EU Accountability on Financing for Development 
towards the EU Official Devel opment Assistance Peer Review 
  
VOL I  
{COM(2011) 218 final} 
{SEC(2011) 501 final} {SEC(2011) 502 final} {SEC(2011) 503 final} {SEC(2011) 504 final} {SEC(2011) 505 final} 
  
 
EN 2   EN CONTENTS 
1. Introduction................................................................................................................ .. 9 
2. Increasing Financial Resources for Development and Global Challenges ................ 11 
2.1. Improving Domestic Resource Mobilisation ............................................................. 11 2.1.1. Providing enhanced support for domestic resource mobilisation .............................. 11 2.1.2. EU assistance to developing countries in tax and customs reform and related capacity 
building ...................................................................................................................... 1 3 
2.1.2.1. Mobilising domestic financial resources for development ........................................ 14 
2.1.2.2. Promoting good governance in the tax area............................................................... 14 2.1.2.3. Adoption and implementation of the OECD  Guidelines on Transfer Pricing ........... 15 
2.1.2.4. Assessment of the three principles  of good governance in the tax area..................... 16 
2.1.2.5. Transparency.......................................................................................................... .... 16 
2.1.2.6. Exchange of Information............................................................................................ 16 2.1.2.7. Fair tax competition .................................................................................................. . 16 
2.1.2.8. Tax Information Exchange Agreements .................................................................... 16 2.1.2.9. Donor coordination in the tax area............................................................................. 17 2.1.2.10. Transparency in the extr active industries sector ........................................................ 17 
2.1.2.11. Emerging themes...................................................................................................... .. 18 
2.2. Scaling up Official Deve lopment Assistance (ODA) ................................................ 19 
2.2.1. EU ODA Commitments in the Global Context.......................................................... 20 2.2.2. EU ODA Performance 2005-2010 compared to other donors................................... 21 2.2.3. Role of Debt Relief in EU ODA ................................................................................ 23 2.2.4. Performance on ODA targets (2005-2010)................................................................ 25 2.2.5. Achievement of the 0.7% ODA/GNI Target by 2015................................................ 28 2.2.6. Lessons Learnt and the Way Forward........................................................................ 33 2.2.7. EU not acting in line with its promise on ODA to Africa.......................................... 36 2.2.8. EU ODA to Least Developed Countries stable.......................................................... 37 2.3. Scaling up funding for tackling Climate Change and Biodiversity Challenges......... 39 
2.3.1. Climate change fast-start finance............................................................................... 39 2.3.1.1. Background ............................................................................................................ .... 39 
2.3.1.2. Volume and focus of EU support............................................................................... 41 
 
EN 3   EN 2.3.1.3. The global context.................................................................................................... .. 42 
2.3.1.4. Measuring additionality ............................................................................................. 43  
2.3.2. Biodiversity............................................................................................................ .... 46 
2.3.2.1. Background ............................................................................................................ .... 46 
2.3.2.2. Volume and focus of EU support............................................................................... 47 2.3.2.3. The global context.................................................................................................... .. 49 
2.4. Increasing international support to Developing Countries through Innovative 
Financing Sources and Mechanisms .......................................................................... 51 
2.5. Leveraging Private Flows .......................................................................................... 55 2.5.1. Private Capital Flows ................................................................................................. 56  
2.5.2. Remittances............................................................................................................. ... 60 
2.5.2.1. Donor Initiatives..................................................................................................... .... 62 
2.5.2.2. Improving data on remittances................................................................................... 63 2.5.2.3. Favouring cheaper, faster and more  secure flows of remittances .............................. 64 
2.5.2.4. Policy environment .................................................................................................... 64 
2.5.2.5. Support for the Financial Sect or in Developing Countries ........................................ 66 
2.5.3. Leveraging private flows............................................................................................ 66 
2.6. Supporting Trade Capacity through Aid.................................................................... 67 
2.6.1. Background .............................................................................................................. .. 67 
2.6.2. Trade Related Assistance ........................................................................................... 68 2.6.3. Total 'wider' Aid for Trade......................................................................................... 69 2.6.3.1. Aid for Trade by EU provider.................................................................................... 70 2.6.3.2. Aid for Trade by category.......................................................................................... 71 2.6.3.3. Wider Aid for Trade geographical distribution.......................................................... 72 2.6.4. Increasing Trade Related Assistance and Aid for Trade to ACP countries ............... 74 
2.6.5. Effective delivery of Aid for Trade............................................................................ 74 2.6.5.1. Ownership ............................................................................................................. ..... 75 
2.6.5.2. Joint Aid for Trade operations and harmonisation: moderate progress ..................... 75 
2.6.5.3. Regional dimension of Aid for Trade ........................................................................ 76 2.6.5.4.  LDCs and EU AfT ..................................................................................................... 76 
2.6.5.5.  Aid for Trade monitoring and evaluation................................................................... 77 
 
EN 4   EN 2.6.6. Conclusions............................................................................................................. ... 77 
2.7. Reducing the Debt Burden of Developing Countries ................................................ 78 2.7.1. Challenge of recent economic trends: Preserving debt sustainability........................ 78 2.7.2. Analysis of debt relief initiatives ............................................................................... 80 2.7.3. Vulture funds or the thr eats associated with commer cial creditor litigation ............. 83 
2.7.4. Alternative debt management initiatives.................................................................... 84 2.7.5. Discussion on enhanced forms of sovere ign debt restructuring mechanisms............ 85 
3. Improving the Effectiveness of Support to Developing Countries ............................ 87 
3.1. Making EU aid more effective................................................................................... 87 3.1.1. EU and Member States  action on ownership ............................................................. 88 
3.1.2. EU and Member States action on alignment.............................................................. 88 3.1.3. EU and Member States action on harmonisation....................................................... 91 3.1.4. EU and Member States action on mutual accountability........................................... 93 3.1.5. EU action on managing for development results ....................................................... 94 3.2. Supporting better Global Governance........................................................................ 95 3.2.1. Introduction............................................................................................................ .... 95 
3.2.2. Reforming multilateral institutions ............................................................................ 96 
3.2.2.1. IMF................................................................................................................... .......... 96 
3.2.2.2. World Bank (WB) Group........................................................................................... 97 3.2.2.3. Regional Development Banks.................................................................................... 98 3.2.2.4. UN System ............................................................................................................. .... 98 
3.2.3. Feedback from the EU and Member States................................................................ 99 3.2.4. Concluding Observations......................................................................................... 100 
Annexes :  
Vol. II : Annex 1:  Bibliography  
Annex 2:  ODA methodology  
Annex 3: Statistical Annex on ODA results and trends  
Annex 4: Results of the EU fast star t Climate Finance monitoring   
Vol. III : Annex 5: Third Monitoring Report and Progress Review of the EU  
Fast Track Initiative on Division of Labour  
Vol. IV:   Annex 6: Aid for Trade Report  
Vol. V : Annex 7: Donor Profiles  
Vol. VI : Annex 8: Survey Results
 
EN 5   EN LIST OF ACRONYMS  
A2II  Access to Insurance Initiative  
ACP  Africa, Caribbean and Pacific  
ADA  Austrian Development Agency  
ADB  Asian Development Bank  
ADF  Asian Development Fund  
AfDB  African Development Bank  
AFI Alliance for Financial Inclusion  
AfT Aid for Trade  
AMC  Advance Market Commitment  
ASEAN  Association of Southeast Asian Nations  
AT Austria  
ATAF  Africa Tax Administration Forum  
B4D  Business for Development  
BE Belgium  
BIO  Belgian Investment Company for Developing 
Countries  
BMI/SBI  Belgian Corporation for International Investment  
BMZ  Germany’s Federal Ministry for Economic Cooperation and Development
 
BPC  Building Productive Capacity  
CBD  Convention on Biological Diversity  
CDE  Centre for the Development of Enterprise  
CDM  Clean Development Mechanism  
CER  Certified Emission Reduction  
CGAP  Consultative Group to Assist the Poor  
CIAT  Inter-American Centre of Tax Administrations  
COP  Conference of the Parties to the CBD  
CPA  Country Programmable Aid  
CPSS  Committee on Payment and Settlement Systems  
CRS  Creditor Reporting System  
CRW  IDA Crisis Window  
CSO  Civil Society Organisation  
CSR  Corporate Social Responsibility  
CZ Czech Republic  
DAC  Development Assistance Committee  
DDA  Doha Development Agenda  
DE Germany  
DEVCO  Directorate General for Development Co-operation
 
DFI Development Financial Institutions  
DFID  Department for International Development  
DK Denmark  
DMF  World Bank Debt Management Facilitation for Low Income Countries
 
DMFAS  Debt Management and Financial Analysis System  
DTC  Double Taxation Convention  
DTC  Developing and Transition Countries  
DTIS  Diagnostic Trade Integration Study  
EAC  East African Community  
EBRD  European Bank for Reconstruction and Development
 
ECB  European Central Bank  
 
EN 6   EN EDF  European Development Fund  
EDFI  European Development Finance Institution  
EEE  Espace Economique Européen  
EGI Ethical Globalisation Initiative  
EIB European Investment Bank  
EIF Enhanced Integrated Framework  
EITI  Extractive Industries Transparency Initiative  
EPA  Economic Partnership Agreement  
ES Spain  
ETS  EU Emission Trading System  
EU European Union  
EUR  Euro  
FAC  Foreign Affairs Council  
FAO  Food and Agriculture Organisation  
FAT  Financial Activities Tax  
FDI Foreign Direct Investment  
FI Finland  
FIRST  Financial Sector Reform and Strengthening 
Initiative  
FLEGT  Forest Law Enforcement, Governance and Trade  
FR France  
FTA  Free Trade Agreement  
FTT  Financial Transaction Tax  
G20  Group of Twenty (G8 countries plus Argentina, Australia, Brazil, China, EU, India, Indonesia, Mexico, Saudi Arabia, South Africa, South 
Korea,  and Turkey), European Commission
 
G8 Group of Eight (i.e., Canada, France, Germany, 
Italy, Japan, Russia, United Kingdom and USA, plus EU)
 
GAVI  Global Alliance for Vaccines and Immunisation  
GDP  Gross Domestic Product  
GEEREF  Global Energy Efficiency and Renewable Energy 
Fund  
GEF  Global Environment Facility  
GIZ Gesellschaft für Internationale Zusammenarbeit  
GNI  Gross National Income  
HDI  Human Development Index  
HIPC  Highly Indebted Poor Countries  
HLF  High Level Forum  
HU Hungary  
IBRD  International Bank for Reconstruction and Development
 
IDB  Inter-American Development Bank  
IE Ireland  
IF EIB Investment Facility  
IFAD  International Fund for Agricultural Development  
IFCA  Investment Facility for Central Asia  
IFFIm  International Financial Facility for Immunisation  
IFI International Financial Institutions  
ILO International Labour Organisation  
IMF  International Monetary Fund  
IPD Innovative Partnerships for Development  
 
EN 7   EN IPSAS  International Public Sector Accounting Standards  
IT Italy  
ITC International Tax Compact  
ITF EU–Africa Infrastructure Trust Fund  
ITRS  International Transactions Reporting System,  
KfW  Kreditanstalt für Wiederaufbau  
LAIF  Latin America Investment Facility  
LDC  Least Developed Countries  
LI Lithuania  
LIC Low Income Countries (LDC+OLIC)  
LMIC  Lower Middle Income Countries  
LU Luxembourg  
LV Latvia  
MDG  Millennium Development Goals  
MDRI  Multilateral Debt Relief Initiative  
MIGA  Multilateral Investment Guarantee Agency  
MoU  Memorandum of Understanding  
MS Member States  
MSME  Micro, Small and Medium Enterprises  
MT Malta  
MTO  Money Transfer Organisation  
NGO  Non Governmental Organisation  
NIF Neighbourhood Investment Facility  
NL Netherlands  
NORAD  Norwegian Agency for Development Cooperation  
ODA  Official Development Assistance  
OECD  Organisation for Economic Co-operation and 
Development  
OECS  Organisation of Eastern Caribbean States  
OJ Official Journal  
OLIC  Other Low Income Countries  
PCD  Policy Coherence for Development  
PEFA  Public Expenditure and Financial Accountability  
PEM  Public Expenditure Management  
PFM  Public Financial Management  
PPP Private Public Partnerships  
PSD  Payment Services Directive  
PT Portugal  
REDD and REDD+  Reducing Emissions from Deforestation and 
Forest Degradation. REDD+ goes beyond deforestation and forest degradation, and includes the role of conservation, sustainable management 
of forests and enhancement of forest carbon 
stocks.
 
REGMIFA  Regional Micro Small and Medium-Sized Enterprises Investment Fund for Sub-Saharan Africa 
REPARIS  The Road to Europe: Programme of Accounting Reform and Institutional Strengthening
 
ROAP  Regional Office for Asia and the Pacific  
ROSC  Report on the Observance of Standards and Codes
 
SE Sweden  
 
EN 8   EN SME  Small and medium-sized enterprises  
SWC  System-Wide Coherence Reform  
TA Technical Assistance  
TCX  The Currency Exchange  
TD Trade Development  
TEEB  The Economics of Ecosystems and Biodiversity 
Study  
TIEA  Tax Information Exchange Agreements  
TNA  Trade Needs Assessment  
TPR  Trade Policy Regulations  
TRA  Trade Related Assistance  
TRAdj  Trade Related Adjustment  
TRI Trade Related Infrastructure  
UK United Kingdom  
UMIC  Upper Middle Income Countries  
UN United Nations  
UNCCD  United Nations Convention to Combat 
Desertification  
UNEP  United Nations Environment Programme  
UNFCCC  United Nations Convention on Climate Change  
UNITAID  International Drug Purchasing Facility  
US or USA  United States of America  
USD  United States Dollar  
WB World Bank  
WBIF  Western Balkans Investment Framework  
WFP  World Food Programme  
WTO  World Trade Organisation  
 
 
EN 9   EN 1. INTRODUCTION  
This Staff Working Document is the ninth EU Accountability Report on Financing for 
Development in a series of a nnual progress reports drafted since 2003 (previously labelled 
‘Monterrey report’). It assesses wh ere the EU and its Member States stand in relation to their 
common commitments. The Report fulfils the Council’s mandate1 to the European Commission to 
monitor progress and report annually on common EU commitments, which were initially with a 
view to the International Conference on Financi ng for Development in 2002 and have been further 
developed and extended. The C ouncil expanded the monitoring mandate to the Commission 
accordingly to cover aid effectiveness2, aid for trade3, good governance in tax matters and 
development4 and fast-start climate finance.5  
 The report is also an input to EU preparations fo r several international mee tings in 2011, namely the 
UN Conference on the Least Developed Countries (L DCs) in Istanbul (May 2011) the Busan High 
Level Forum IV on aid effectiveness (HLF4) in late November 2011, the follow-up meetings to the 
Cancun UNFCCC climate conference of Decem ber 2010, and the bi-annual WTO/ OECD 
monitoring meeting on aid for trade by all donors.  
The report builds on the input provided by the EU Me mber States and Commission staff in (i) the 
annual questionnaire on Financing for Develo pment 2010/11 (formerly known as the ’Monterrey 
questionnaire’), which covers al l EU commitments related to th e international financing for 
development agenda, (ii) the bi-annual trade an d development WTO/ OECD  survey of 2010, (iii) 
the complementary in-country monitoring of aid for trade provided by EU  donors, through EU 
Delegations and (iv) the third que stionnaire on the implementation of the EU Fast Track Initiative 
on Division of Labour and Comp lementarity. Germany, in close cooperation with the European 
Commission, led the monitoring of  the Fast Track Initiative. 
 The Council also called on the Commission to make the annual progress report a model of 
transparency and accountability
6. For this reason, in contrast to previous years, this year the 
Commission is presenting a single, comprehensiv e report covering all to pical issues of the 
international financing for development agenda. For the first time, 22 of the 27 Member States have 
agreed to the publi cation of their rep lies to the annual questionnaire on financing for development. 
The replies can be consulted online7. Extra information will be incl uded in the EU Donor Atlases 
20118. Annex 1  lists the bibliography for all chapters, Annex 2  presents the methodology applied 
for analysing ODA indications/ forecas ts provided by EU Member States. Annex 3  is the Statistical 
Annex on ODA trends (including i ndividual graphs for all EU Me mber States showing the gaps 
from 2010 to reaching 2015 targets fo r ODA to Africa and ODA to LDCs). Annex 4  reports the 
results of the EU Fast Start Climat e Finance (FSF) monitoring exercises. Annex 5  is the Third 
Monitoring Report and Progress Review of the EU  Fast Track Initiative on Division of Labour. 
                                                 
1 Council Conclusions of 21 May 2003 and 24 May 2005. 
2 Different Council Conclusions on the EU Operational Framew ork on Aid Effectiveness, last of 10 December 2010 (on 
transparency and mutual accountability). 
3 Council Conclusions of 15 May 2007 on the European Conduct of Division of Labour in development policy, Council 
Conclusions of 29 October 2007 on the EU Aid for Trade Strategy. 
4Council Conclusions of 14 June 2010 
5 Council conclusions of 7 December 2010. 
6Council Conclusions of 15 June (on the MDGs) and 10 December (on tran sparency and mutual accountability). 
7 http://ec.europa.eu/europeaid/ how/accountability/eu-annual-acc ountability-reports/index_en.htm   
8 The donor atlases will be availabl e on http://development.donoratlas.eu. 
 
EN 10   EN Annex 6  enclosed the Aid for Trade Report for 2011. Annex 7  reflects Member States’ replies to 
the most pertinent questions  on the questionnaire, while Annex 8  gives an overview of the overall 
outcome of the survey.  Financing for development aims to create a favou rable environment for development by addressing 
the responsibilities of both deve loping countries and the global community. The UN Doha Follow-
up Conference on Financing for Development in 2008 reiterated that sustainable development 
depends on mobilising financial resources for development and using them effectively. It also recognised that each country bears primary responsi bility for its own devel opment and that national 
policies, domestic resources and national development strategies are essential.  The EU and other donors need to live up to their commitments  and to keep their part of the 
agreement on what is needed to achieve the Millennium Development Goals (MDGs).   This report shows that over the period 2004-2010, th e EU and its Member States accounted for 57% 
of net ODA to developing countri es from all DAC and EU donors, and for 65% of the global EUR 
25.7 billion increase in ODA during this period; in 2010, the EU and its Member States missed their 
collective 2010 target of 0.56% by a wide margin ( by almost EUR 15 billion), but the positive trend 
continued and the EU and its Memb er States together reached the highest ODA/GNI rati o of the last 
20 years, i.e. 0.43%. The EU scaling-up process has been uneven, with asymmetric efforts. Member 
States not contributing their fair share to the bur den-sharing effort endanger the performance of the 
EU as whole and substantially increase the risk of failure on future ODA targets.  
 The third Monitoring Report and Progress Review of  the EU Fast Track Initiative on Division of 
Labour (see Annex5) was drafted by Germany, in close coordination with the European 
Commission. Together with trends  since 2008, that report shows that  in the 17 partner countries 
involved in the initiative since the beginning, there has been encouraging progress. There is 
widespread use and institutionalisation of donor ma ppings as an aid management instrument, an 
upward trend in country-level agreement on sector  definitions as an im portant precondition for 
Division of Labour and solid use of ‘lead donor’ a rrangements that can generate more momentum 
for Division of Labour in the future.  The Monterrey Consensus and the Doha Declarati on recognise the importanc e of other financial 
flows for development besides ODA. To achieve  sustainable progress towards the MDGs the 
financing discussion should look holistically at increasing developing count ries’ overall revenue 
base for development. The EU can effectively s upport its partners’ with increasing their domestic 
resources for development in line with the principles of good govern ance in tax matters 
(transparency, exchange of information and fair tax competition). Enhanced international cooperation in tax matters in particular will not  only increase domestic revenues in developing 
countries by reducing tax evasion,  it will also help to address money laundering, corruption and the 
financing of terrorism.  The EU has consistently supported developing countries in using trad e as a tool for development. 
As part of its joint Aid for Trade strategy the EU as a whole agreed to actions to increase Aid for 
Trade and enhance its impact. The EU’s combin ed annual Aid for Trade was EUR 10.5 billion in 
2009, matching the all-time high recorded the year be fore. As regards the EU and Member States’ 
Trade Related Assistance – a subc omponent of Aid for Trade, a subs tantial increase was reported in 
2009, bringing the collective amount to EUR 3 billi on), well above the ta rget (as from 2010) of 
EUR 2 billion per year. 
 
EN 11   EN 2. INCREASING FINANCIAL RESOURCES FOR DEVELOPMENT AND GLOBAL CHALLENGES  
2.1. Improving Domestic Resource Mobilisation  
The objective of this chapter is to present prog ress in implementing the Monterrey consensus and 
subsequent Doha declaration in th e area of tax and development. Th is area was not covered in depth 
in previous accountability reports  – the EU Council asked in 2010 that it be from 2011 onwards.  
The analysis is based on the current international debate on issues identified in recent European Commission documents on the subject. Taxation s hould also be seen in the context of the 
diminishing importance of debt relief. Domestic resource mobilisation is crucial create more and 
sustainable fiscal space to implement and sustai n development programmes. The review is also 
informed by feedback provided by the EU and Me mber States. The focus is on two topics: (a) 
strengthening good governance in tax matters in developing countries; and (b) harnessing EU 
instruments to provide enhanced support.  
2.1.1.  Providing enhanced support for domestic resource mobilisation  
EU Commitments 
Current EU thinking on tax and development set out in the Communication from the 
Commission to the European Parliament, the Council and the European Economic and 
Social Committee of 21 April 2010,Tax and De velopment - Cooperating with Developing 
Countries on Promoting G ood Governance in Tax Matters9 and the accompanying Staff 
Working Document10.  Its recommendations were backed up by the Council Conclusions of 
14 June 2010 11. 
 
Taxes are essential for sustainable development, the legitimacy of the State, economic stability, and the financing of public services and infrastr ucture. The Communication on Tax and Development
12 
argued that development aid policie s should contribute to building effective, efficient, fair, and 
sustainable tax systems  in line with the principles of good governance in tax matters 
(transparency, exchange of information and fair tax competition) and generate sustainable revenues  
in EU partner countries.   When attempting to increase domestic tax revenues, developing countries are often confronted with 
the incidence of corruption, lack  of capacity of tax administ rations and the structure and 
competitiveness of their economy (large informal sect ors. Some developing count ries rely to a large 
extent on revenues stemming from  extractive industries which tend to be less predictable. The 
effectiveness of national tax system s could also be affected by the use of tax incentives to attract 
foreign investment. In addition, implementing domes tic tax rules is becoming ever more difficult in 
a world with an increasing geographical mobility of taxpayers and the existence of non-cooperative 
jurisdictions and harmful tax pr actices. In view of these chal lenges, the EU, in its Council 
Conclusions on Tax and Development of 14 June 2010, stated that it w ould ‘support developing 
countries in tax policy, tax admini stration and tax reforms, includi ng the fight agai nst tax evasion 
and other harmful practices’.  This covered 10 points: 
                                                
 
9COM(2010)163 of 21.04.2010 . 
10http://ec.europa.eu/taxation_customs/resources/documents/common/publications/com_reports/taxation/sec(2010)426_
en.pdf  
113023rd FOREIGN AFFAIRS Council meeting Luxembourg, 14 June 2010  
12 COM(2010)163 of 21.04.2010 
 
EN 12   EN  
1. Mobilising domestic resources for developmen t through efficient and fair tax systems; 
2. Discouraging capital flight, including tax evasion and avoidance, and illicit financial 
flows; 
3. Supporting proposals outlined in earl ier Commission communications; 
4. Recognising that developing countries bear  primary responsibility for building and 
improving efficient and fair tax systems and committing the necessary resources thereto, with EU and Member St ates supporting these efforts; 
5. Using budget support programmes to accelerate tax reform; 
6. Emphasising programme-based and comprehensive approaches; 
7. Enhancing support for the EITI; 
8. Promoting the principles of good governan ce in tax matters and working towards a 
transparent and cooperative in ternational tax environment; 
9. Encouraging the participation of developing co untries in structures and procedures for 
international tax cooperation; and  
10. Facilitating this process by covering thes e aspects in the annual Financing For 
Development Report. 
It is for each partner country to de fine its policies and reforms. This is particularly true of taxation 
policy. Development aid  should be adapted to each country according to its economic situation, 
international position and policies.   
 In the case of low income countries the main ch allenges could be to increase generally low tax 
revenues by expanding the tax base. A recent study
13 states that, as a rule of thumb, according to the 
UN, these countries would need to increase revenues by about 4 percent of GDP, although a low 
tax-to-GDP ratio does not necessarily reflect a poor  tax performance. Therefore, it is important not 
only to increase domestic revenues, but possibly to  consider the tax system as a whole:  its 
composition, its impact on economic activity and private in vestment, its redistributive effects and 
its impact on state-building.   There is limited systematic and comparable inform ation on the tax systems of developing countries. 
The annual PWC / World Bank ’Doing Business’ report provides an estimate of the impact of tax 
policy and governance in most developing countrie s. While limited in scope, the information is 
available and updated annually and could provide a useful indica tor of relative and absolute 
progress on the tax reforms pursued by developi ng countries to improve the business climate. 
However, extreme care is needed in interpreting the resu lts as some of the underlying assumptions 
can lead to misleading results in some countri es. Similarly, the PEFA measurement framework
14 
includes four indicators on revenues,  transparency and effectiveness. For some specific indicators, 
measurement of progress (and accountability) is stra ight forward such as the conclusion of bilateral 
tax treaties or tax information ex change agreements. Measuring progress in partner countries is 
complicated due to incomplete information on d onor support. Donor support in the area of tax and 
development is embedded in either policy refo rm programmes or technical assistance/capacity 
                                                 
13 http://ec.europa.eu/development/services/events/tax_development/docs/td_tax_challenges_bird.pdf 
14 See for instance recent IT C study of 26 countries: 
http://taxcompact.net/pdf/ITC%20PEFA%20 paper%20first%20draft%2012102010.pdf 
 
EN 13   EN building projects. Sometimes policy reforms are also embedded in government commitments in the 
context of budget support operations. They may be  complemented by assist ance to institutions, 
typically over the medium-term, e.g. with t echnical advice, drafting laws and regulations, 
consensus-building, and setting up and/or building in stitutions. Frequently, ta x-related activities are 
a component of a larger programme and/or project assisting a country. As seen in the responses to 
the questionnaire discussed belo w, technical assistance and capaci ty-development activities tend to 
be quite varied.    During the 2000s, developing countries received support from multilateral and bilateral donors, 
notably the EU and its Member States to build tax systems. Available information indicates that in 
the last decade some 65 developing countri es undertook tax reforms with donor support – but 
efforts were sustained in fewer than 10 countries. Furthermore, following Monterrey, there has been 
no visibly increased emphasis on tax reform in deve loping countries; in cont rast to the significant 
scale-up of reforms in public expenditure manageme nt (PEM, i.e., public financial management and 
procurement).    There are several possible explanat ions for the limited importance of support for tax reforms in the 
2000s. One is that budget support operations and th e related policy dialogue tend to focus more on 
public expenditure management and social sectors th an on revenue mobilisation. Another is that the 
agenda in the 1990s was driven by th e tariff reform that took place in  most countries, together with 
strong demand for support on taxation in former co mmunist countries. While this agenda has to 
some extent been exhausted, developing countries s till require country-specifi c support in the area 
of tax policy and administration.  Tax reform and related instituti onal support is complex and needs to be sustained over time, to 
implement a full agenda and also to benefit from experience of what does  and does not work in 
order to fine-tune the arrangements as needed. Give n the importance of tax reforms and their central 
role in the Monterrey agenda, EU donors may cons ider accelerating progre ss in this area through 
promoting more domestic resour ce mobilisation in line with the principles of good governance in 
tax matters, inter alia  in the context of budget support operations.  
 
2.1.2.  EU assistance to developing c ountries in tax and customs re form and related capacity 
building  
 
This section is based on EU Member States’ rep lies to the 25 questions in the annual survey of 
progress on the implementation of the Monterrey co mmitments. The questions and statistics on the 
replies are given in Annex 8. These are analysed in the light of the 10 points listed in the previous 
section. Before discussing the replies, a few issu es warrant mention. The space to reply to some 
questions was left blank and the feedback received may be incomplete. The analysis assumes in 
such cases that the donor does not provide  significant support in the area.   
 Furthermore, part of the information provided co ncerns ongoing support, some of which may have 
begun a few years back while in other cases, it may refer to possible future involvement. Moreover, 
some of the answers given had to be discounted because they were not relevant to the question 
asked or a positive answer was given even though the explanatory text suggested the opposite. 
Finally, the level of details prov ided differed from one Member State to another – with some 
countries providing extensive an swers and specific examples. 
 
EN 14   EN 2.1.2.1.  Mobilising domestic financia l resources for development 
The questionnaire did not ask about the volume of  support provided to tax and customs systems. 
However, the OECD/DAC collects information on assistance to public financial management and 
trade facilitation (mainly customs) in the Creditor  Reporting System. These data show that the 15 
EU DAC members committed some EUR 125 millio n of such assistance in 2008 and 2009. 
Germany, the Netherlands and Sweden reported the most assistance to these sectors.  
 A quarter of EU countries do not provide any suppor t to tax systems and revenue mobilisation, five 
of them having joined the EU only recently. While aid levels are not quantif ied, in terms of donor 
focus ACP countries tend to receive support from mo st other EU Member States, reflecting the fact 
that the poorest countries are given priority. On average, eac h donor covers two or more 
regions/country groupings, typi cally ACP, EU candidates, EU  neighbourhood policy, or Asia – 
support for Latin America is less frequent. The tw o EU-related groups se em to be considered 
important for economic and, no doubt, political reas ons. In addition to the EU, France, Hungary, 
Spain and the UK were the only Member States to  be active in all five regions listed in the 
questionnaire, some of them indirectly. The remain ing member countries were  typically involved in 
only one or two regions. These figur es may reflect selectivity and di vision of labour, but also seems 
to indicate that broad based support for tax system s and resource mobilisation is not yet a priority 
for many Member States.  The most common type of support provided is to  tax administrations, followed by tax policy. A 
handful of Member States prov ide other types of support such  as training and capacity 
development, notably in customs administration a nd the judiciary. These c ontribute significantly to 
improved revenue mobilisation and to the effectiveness,  efficiency and fairness of tax systems. It is 
less apparent whether Member States pursue coor dinated and complementar y approaches to avoid 
aid fragmentation and unmet demand in some countri es – especially those w ith less donor presence.  
 Ministries of Finance are the prim ary beneficiaries of this aid. Over half the EU donors also 
help customs and/ or semi-autono mous revenue authorities. A handf ul of respondents reported that 
they provided support to other institutions, for example a Prevention of Money Laundering Office. 
The choice of counterparts seems justified by the fact that Minist ries of Finance bear primary 
responsibility for tax reform a nd revenue collection, whereas ma ny developing countries have 
chosen not to set up semi-autonomous revenue au thorities yet. National governments are the most 
frequent beneficiaries of capacity-building for fi nancial management. Over two-thirds of EU and 
Member States support national supreme audit institu tions, with civil societ y organisations (CSOs) 
and parliaments being helped less frequently. The relatively low level of engagement with CSOs 
and national parliaments may lead to low le vel of stakeholder own ership of tax reform.  Where 
CSOs are weak, key stakeholders in reforms may lack a voice. Similarly, parliaments lacking an 
adequate understanding of public  financial management issues  may not fully appreciate the 
importance of the laws presented to them in this  area, and may not suffic iently scrutinise public 
expenditure and hold governments to account.  
2.1.2.2.  Promoting good governance in the tax area  
The EU and most Member States provide support for addressing  tax evasion and harmful tax 
competition, and promote the principles of good governance in t ax matters in their 
cooperation policy. According to comments made in reply to the questionnaire, the approaches 
vary from one donor to another.  Most commonly, donors use budget  support as an  entry point, 
together with technical assistance, dialogue and monitoring agreements.   
 
 
EN 15   EN Under the 10th European Development Fund’s (EDF ) ‘governance incentive’ tranche, the EU may 
offer additional funding in return for detailed commitments on the principles of good governance in taxation. A number of encouragin g and concrete commitments have  been made by ACP countries. 
In March 2010, in the second revision of Cotonou Agreement, the EU and ACP countries agreed, 
subject to further ratification at national level,  to include a provision a llowing EU support for the 
implementation of international best practices in tax matters, including transparency and exchange 
of information. The main challenge would appear to  be to ensure that commitments are translated 
into concrete measurable and effective actions a nd that sufficient technical cooperation is provided 
to achieve this.  The German Federal Ministry for Economic C ooperation and Development (BMZ) has launched 
the International Tax Compact
15 (ITC) – an informal internati onal action and dialogue platform 
grouping bilateral and multilateral donors to strengthe n international cooperation with developing 
and transition countries to fight tax evasion and avoidance. Othe r EU Member States supporting 
this initiative include France, the Netherlands and Spain. The work of the ITC focuses on the 
following areas: (1) at country/regio nal level encouraging increased development cooperation in tax 
matters; and promoting the dissemination of succe ssful practices and the exchange of reform 
experiences in policy formulation, legislation, and implementation, in addition to capacity 
development and institution building; (2) at in ternational level facilitating access to and the 
exchange of information between policy makers, ta x administrators, donors,  civil society and the 
private sector; (3) analytical work an d studies; and (4) networking and dialogue. 
 The European Commission has sinc e late 2008 taken part in the In ternational Tax Dialogue (ITD). 
The ITD is a collaborative arrangement involvi ng the IMF, OECD and World Bank Group, among 
others, to encourage and facil itate discussion of tax matters  among national tax officials, 
international organisations, and a range of other key stakeholders. The ITD Secretariat is currently 
hosted by the OECD
. 
 
2.1.2.3.  Adoption and implementation of the OE CD Guidelines on Transfer Pricing 
About half of the Member States provide as sistance with implementi ng OECD guidelines on 
transfer pricing. The reasons given for not provid ing support included strategic choices, a lack of 
resources, reliance on indirect suppo rt, an intention to support this ar ea in the future and no request 
from beneficiaries. The support that was confir med tended to go through tw o main channels: OECD 
and Africa Tax Administration Forum (ATAF).  While transfer pricing rules could help developing  countries to mobilise revenues, donor support for 
this remains rather limited. The EU encourages research on innovative appr oaches to implementing 
the OECD transfer pricing guidelines in developing countries, such as assist ance by other countries 
in applying the rules, or joint tax audits by devel oping countries’ administra tions. It also considers 
that developing countries need to  strengthen their tax administrati ons’ assessment capacity to apply 
the arm’s length’ principle. Most of the activitie s of Member States tend to be part of broader 
programmes. A few EU donors provide support th rough the OECD (e.g. the EU, France, Germany, 
Ireland, Slovakia and the UK) or through twi nning projects, discussion of fraud avoidance 
mechanisms and negotiations on double taxa tion (Austria, Latvia and Romania).  
                                                
 
15 http://taxcompact.net/index.html 
 
EN 16   EN 2.1.2.4.  Assessment of the three principles  of good governance in the tax area 
Most Member States say they assess benefici aries’ commitment to the principles of good 
governance in tax matters and say they use indirect m eans to deal with this issue, for example when 
devising a new cooperation framework .  
2.1.2.5.  Transparency 
The Commission and the majority of Member States said that they analysed the country’s situation 
in the light of international standards for the tran sparency of tax systems. In doing so, a number use 
comparisons with international transparency standards and many draw upon the conclusions of 
Public Expenditure and Financial Accountability (PEFA) assessment reports and, in one case, a 
Report on the Observance of Standards and Codes (ROSCs). Others conduct periodic studies, use 
public information, or take advantage of opportunities , e.g. when signing tax tr eaties, to review this 
area. France mentioned the use of peer reviews undert aken by the Global Forum on Transparency 
and Exchange of Information for Tax Purposes a nd of the list of non-c ooperative jurisdictions 
published by OECD. Overall, it appears that there is sufficient public information available for 
the EU and Member States to conduct analys es of the transparency of tax systems , even if in 
some cases the basic documentation may not be recent. 
2.1.2.6.  Exchange of Information 
Half the Member States indicated that they analysed the situation in the beneficiar y country in the 
light of international stan dards of exchange of information.  Th ey pursued various approaches, such 
as use of PEFA – which may not be  the most relevant tool - and pub lic information sources, specific 
analysis and studies, tailor-made approaches for l east developing countries and use of discussions 
on double taxation as the entr y point.  The indica tors used for standards of  exchange of information 
may also be based on the assessment of the OECD Global Forum on taxa tion. One Member State 
noted that exchange of information is an important obj ective, but that, when the focus is on least 
developed countries the extent to  which implementation of int ernational standards emerges as 
a dominant theme in an individual programme  will depend on the circumstances of that 
country  and particularly the capacity and sophisticatio n of its tax au thority. The reas on why certain 
EU Member States did not address this area included lack of capacity and reliance on alternative 
ad-hoc approaches.    
2.1.2.7.  Fair tax competition 
While  some Member States indicated that they  analysed fair tax competition issues  most others 
mention selectivity/ division of labour, limited relevance and reliance on indirect means as 
arguments for not being active on this issue. Where analysis was done, it was done as part of 
general comparative studies of tax systems, in pr eparation for a cooperation project, or it was driven 
by country circumstances. Another common practice cited was the use of available reports, notably 
PEFA and 'Doing Business Reports'. This is thus an area that, based on Member States’ 
answers, does not seem to be perceived as a pr iority as part of meeting the EU’s commitments.   
2.1.2.8.  Tax Information Exchange Agreements 
During 2010, the vast majority of EU Member States  concluded Tax Information Exchange 
Agreements (TIEAs) and Double Taxation Conventions (DTC) and were drafting additional 
ones. This is an area where significant  progress is being achieved. However, only two EU donors 
provide technical assistance to  countries with which TIEAs  or double taxation conventions 
are planned or signed , while half provide broader assist ance on good governance in tax matters. 
Further technical cooperation with developing count ries that are committed to the principles of 
good governance in the tax area is esse ntial to enable them to nego tiate and implement TIEA and, 
where appropriate, DTC. If non-EU countries ar e willing to sign and implement TIEAs with 
 
EN 17   EN Member States, technical assistance may be offe red by the EU provided th at funding is available 
and based on prior commitments to implement th e three principles of good governance in tax 
matters (transparency, exchange of information and fair tax competition).  A noteworthy approach to transparency pursued by the Belgian Ministry of  Finance is to publish al l such agreements on its 
website
16. 
2.1.2.9.  Donor coordination in the tax area 
The EU is also committed to harmonisation with other donors. The EU and most Member States 
indicated that they coordinate d with bilateral and multilateral donors when supporting developing 
countries’ tax reform agendas.  The usual way of  doing this was at country level (9) or through 
international initiatives (ATAF, Afritacs , OECD, ITC and International Tax Dialogue17 (ITD), EU, 
World Bank and IMF). Other stand-alone or comp lementary approaches included coordination 
through twining projects and budget support policy di alogue. However, a review of budget support 
programmes implemented during th e last decade indicates that tax reform is not a major feature 
of multilateral donors’ reform agenda and coor dination has not yet yielded significant 
broadening or deepening of tax re forms in budget support operations.   
 
A majority of Member States suppo rted international or regional initiatives or organisations that are 
active in the area of tax reform. The IMF  (both Regional Technical Ce ntres and the Trust Fund on 
Tax Policy and Administration) was the most common partner  and received by far the most 
financial support. In addition to the ATAF, CIAT, International Tax Dialogue and International Tax 
Compact, other institutions receiving some type  of EU donor support in cluded the Investment 
Climate Facility for Africa and OE CD. While there are a number of  institutions receiving support, 
there is insufficient information to assess whet her this leads to inefficiency and unnecessary 
segmentation in delivery of tax reforms. 
2.1.2.10.  Transparency in the ex tractive industry sector 
Extractive Industries Transp arency Initiative (EITI). The EITI aims at strengthening 
governance by improving transparency and accountability  in the extractive industries sector. With 
35 implementing countries now, the initiative is  becoming a global standard for corporate 
governance and transparency. The EITI asks companies to publish payments to governments. It 
asks governments to disclose revenues received  from companies. This enhances domestic 
accountability and strengthens th e demand for good governance so that corruption related to 
extractive activities should decrease.  Some 3.5 billion people live in countries rich in oil, gas and 
minerals. Through good governance the exploitation of these resources can generate large domestic 
revenues to foster inclusive growt h, discourage conflict and reduce poverty. 
 The EU is an increasingly active participant in  and supporter of this initiative. Its position is 
reflected in the recent European strategy on the sustainable suppl y of raw materials
18, and in the 
follow-up to the commitments on enhanced support made in the 2010 Tax and Development Communication
19. The EU hosted and co-financed EITI expert meetings in 2010 and 2011 and 
                                                 
16 http://www.minfin.fgov.be/portail2/fr/index.htm 
17 The International Tax Dialogue (ITD) is a collabora tive arrangement involving the EC, IDB, IMF, OECD, UK 
(DFID) and World Bank Group to encour age and facilitate discussion of tax matters among national tax officials, 
international organisations, and a range of other key stakeholders. The ITD Secretariat is currently hosted by the OECD. 
http://www.itdweb.org/Pages/Home.aspx 
18COM(2011) 25,  Tackling the Challenges in Commodity Markets and on Raw Materials, 
http://ec.europa.eu/enterprise/policies/raw-materials/files/docs/communication_en.pdf   
19 http://register.consilium.europa.eu/pdf/en/10/st11/st11082.en10.pdf , §7. 
 
EN 18   EN joined the supporting countries’ constituency in the EITI Board in order to actively contribute to 
developing this initiative further.  A Multi-donor Trust Fund, administered by the World Bank, and bilateral donors including EU 
Member States provides assistance  to EITI in-country implemen tation. The Trust Fund was set up 
in 2003 and European aid agencies such as th e UK Department for International Development 
(DFID), Gesellschaft für Internationale Zusa mmenarbeit (GIZ), the Norwegian Agency for 
Development Cooperation (NORAD) as well as the European Commission play  an important role 
in its implementation.  EITI implementation is advancing; 11 countries
20 have now achieved EITI-compliant status and 
several countries have become new candidates21. This is remarkable progress compared to late 
2009, when only Azerbaijan was compliant among a total of 26 implementing countries. 
 In order to enhance revenue transparency and corporate governance, the European Commission is 
currently assessing the feasibility of asking EU lis ted companies to disclose financial data on a 
country-by-country basis. Such a reporting standard  would be a powerful tool for parliaments and 
civil society to hold multinational enterprises an d governments to account for the revenues paid and 
received respectively and could yield important benefits in terms of domestic revenue mobilisation by reducing corruption and harmful tax practices. 
 
Kimberley process.  The European Commission is committed to supporting the  Kimberley process 
(KPCS), is an active participant in the KP CS and has chaired it in 2007. The Commission 
furthermore chairs the Kimberley Process M onitoring Working Group that supervises KPCS 
implementation globally and has also funded projec ts, e.g. through statistic al analysis, satellite 
monitoring and technical expertise, in order to enhance the capacity of the Kimberley Process to respond to crises, e.g. in Côte d’Ivoire or Zimbab we. Within the EU, the KP CS is implemented by a 
Council Regulation, adopted in December 2002. Th e Regulation lays down the procedures and 
criteria to be followed in the import and export of rough diamonds into and from the EU, and creates a uniform EU Kimberley Pro cess certificate which is  used for all shipments. In Belgium, the 
Kimberley Process Certification Scheme is bei ng followed up by the Belgian Ministry of Foreign 
Affairs, the Ministry of the Ec onomy and the Ministry of Finance in cooperation with the diamond 
industry in Antwerp. The UK has enacted the necessary national legislation allowing it to 
implement the Kimberly Process Certification Scheme in the UK. The UK implements the EU 
Regulation as a designated Community Authority  which allows it to verify incoming diamond 
shipments for conformity with the Kimberly Proce ss and to issue Kimberly Process Certificates for 
export shipments.  
2.1.2.11.  Emerging themes 
The responses to the questionnaire  indicate that the area  of tax policy and ad ministration receives 
attention and support from most EU Member Stat es. In the case of good gove rnance in tax matters, 
this support is more uneven. Recent Member Stat es’ support tends to be quite limited due to 
selectivity, lack of know-how, reli ance on indirect approaches, insufficient resources or a lack of 
                                                
 
20 Azerbaijan, Liberia, Timor Leste, Ghana, Mongolia, Centra l African Republic, the Kyrgyz Republic, Niger, Nigeria, 
Norway and Yemen. 
21Afghanistan, Albania, Burkina Faso, Cameroon, Chad, Côte d’Ivoire, Democratic Republic of Congo, Gabon, Guinea, 
Indonesia, Iraq, Kazakhstan, Madagascar, Mali, Mauritania,  Mozambique, Peru, Republic of the Congo, Sierra Leone, 
Tanzania, Togo, Zambia, Guatem ala and Trinidad & Tobago. 
 
EN 19   EN demand from counterparts. This approach has th e benefit of avoiding spreading donor support too 
thinly, especially in the case of  smaller programmes, and may result  in better division of labour.   
 The responses suggest that many countries follow si milar/coordinated appro aches, even if perhaps 
more could be done. Budget suppor t operations, programming of aid to a country, and the PEFA 
exercise appears to provide important entry points to the dialogue on various issues.  Some Member 
States, notably the UK, appear to use a tailo r-made approach to each country, with inherent 
differences between low and middle income c ountries. There are also specific examples of 
interesting pilots involving e-government and other a pproaches that if successful may be replicable. 
There is also reliance on partnership with othe rs, notably the OECD, IMF, World Bank and various 
institutions focusing on taxes. Finally, progress is monitored through different means, which range 
from donor-led studies to reliance on public information, including PEFA and investment climate reports. This reflects the link an d complementarity between tax re form and institution building, and 
public expenditure management and investment climate reform.  Member States do not seem to advocate or  pursue tax policy reforms under budget support 
operations. This seems consistent w ith the earlier observation that this area does not receive priority 
in the macro policy dialogue with developing countries. This issue ha s been set out in the recent 
Commission Green Paper 'The future of EU budge t support to third countries' to launch a public 
consultation
22. Following on from this consultation, th e Commission will issue a Communication 
on budget support later in 2011.   
2.2. Scaling up Official Deve lopment Assistance (ODA)
23 
EU Commitments 
In 2002, the EU Member States adopted join t commitments on ODA increases. These 
commitments were further developed and broadened, and endorsed by the European 
Council in 2005 ahead of the UN World Summit t hat undertook the first review of progress 
on the Millennium Declaration and the MDGs. Th e EU and its Member States agreed to 
achieve a collective ODA level of 0.7% of GN I by 2015 and an interim target of 0.56% by 
2010, both accompanied by individual national ta rgets. The EU Member States agreed to 
increase their ODA to 0.51% of their national  income by 2010 while those countries which 
had already achieved higher levels (0.7% or abo ve) promised to mainta in these levels. The 
Member States that acceded to the EU in or  after 2004 (EU-12) promised to strive to spend 
0.17% of their GNI on ODA by 2010 and 0.33% by 2015.24 
                                                 
22 COM(2010) 586 of 19.10.2010 
23Depending on data availability, the text sometimes refers to EU15 and EU20, which can nevertheless be taken as 
approximations of the EU’s collective performance. For explanations, see Annex 2: Methodology. 
24The exact wording is as follows: ‘In the context of the commitment to attain the internationally agreed ODA target of 
an ODA/GNI ratio of 0.7%, the European Council notes with satisfaction that its Member States are on track to 
achievethe 0.39% target of GNI in 2006 for ODA volumes c ontained in the Barcelona co mmitments. While reaffirming 
its determination to fulfil these commitments, the Council decided on a new collective European Union target of an 
ODA/GNI ratio of 0.56% by 2010. That would result in an a dditional EUR20 billion a year in ODA. In this context, the 
European Council can reiterate , in accordance with the outcom e of the Council on  24 May 2005, that Member States, 
which have not yet achieved an ODA/GNI ratio of 0.51% undert ake to attain that level, within their respective budget 
allocation processes, by 2010, while those that are already ab ove that level undertake to continue their efforts. Member 
States which joined the EU after 2002, and have not ye t achieved an ODA/GNI ratio of 0.17%, will endeavour to 
increase their ODA to attain that level, within their respec tive budget allocation processes, by 2010, while those that are 
already above that level undertake to continue their effort s; Member States undertake to achieve the target of an 
 
 
EN 20   EN In addition the EU committed in 2005 to: (a ) increase ODA to Sub-Saharan Africa and (b) 
provide 50% of the ODA increase to Africa as a whole (North Africa and Sub-Saharan 
Africa).   
In 2008 the EU as a whole also committed to provide between 0.15 and 0.20% ODA/ GNI 
to the Least Developed Countries by 2010.25  
2.2.1.  EU ODA Commitments in the Global Context 
The origins of the 0.7% target  can be traced back to the late 1950s26. This was formally recognised 
in October 1970 when the UN General Assembly adopted a Resolution in cluding the goal that 
“each economically advanced country will progressively increase its official development assistance to the developing countries and will exert its best efforts to reach a minimum net amount 
of 0.7% of its gross national product at market prices by the middle of the Decade.” Although the 
goal of allocating annually 0.7% of GNI to ODA is accepted by all donors except the United States 
of America, only EU donors and Norway have set a date  to achieve it.  Norway  attained the goal in 
1976 and, since 2000 has been providing ODA to developi ng countries in the order of 0.8-1% of its 
GNI
27. The United States of America does not issue or  approve forecasts of projected ODA; in 2010 
it provided USD30 billion (EUR 20.4 billion), 0.21% of its GNI. At the G8 Summit in Gleneagles 
in 2005, the US, Japan and Canada alongside the EU G8 members, a ccepted to cont ribute to the 
collective G8 promise to increase aid to Africa. President Obama promised to double US official 
development assistance by 201528 – a pledge that, if fulfilled, will begin to appear in ODA 
disbursements after 2010. Japan29 promised to increase its ODA volume by USD10 billion in 
aggregate over 2005-2009, but fell short by USD3.6 billio n; it increased its aid by USD1.6 billion in 
2010, raising its ODA/GNI ratio to 0.20%, like the US well below the DAC average of 0.32%. 
Canada met its aim to double its 2001 Internati onal Assistance Envelope  (IAE) level by 2010 to 
reach an ODA/GNI ratio of 0.33%30. Australia and Switzerland have announced their in tent to reach 
an ODA/GNI target of 0.5% by 2015-2016 and 2015, respectiv ely; their current levels are 0.32% 
and 0.41%. New Zealand has committed to 0.35%  ODA/GNI in 2010-11, but fell short with only 
0.26% in calendar year 201031. Korea, the most recent DAC member, has committed to 0.25% 
ODA/GNI by 2015 with an interim target of 0.118% in 2010, which it met32”. 
                                                                                                                                                                  
ODA/GNI ratio of 0.7% by 2015, while those which have achieved that target commit themselves to remaining above 
that target; Member States which joined the EU after 2002 will endeavour to increase their ODA/GNI ratio to 0.33% by 
2015. European Council, 18 June 2005, Doc. 10255/05 Conc. 2. 
25European Council, 11 November 2008, Doc. 15075/1/08, Rev. 1 
26T.J. Moss (2005). Ghost of 0.7%: Origins and Relevance of the International Aid Target . Center for Global 
Development. 
27 OECD-DAC Secretariat Simulation of DAC Memb ers’ Net ODA Volumes in 2006 and 2010.  
http://dx.doi.org/10.1787/131026367850  
28 Obama administration committed in 2009 to double foreign aid: 
http://www.usaid.gov/press/frontlines/fl_aug09/p5_nsc080909.html  
29DAC 2011 press release on preliminary ODA 2010: Japan’s Gleneagles promis e was to give USD 10 billion more 
over the period 2005 to 2009 than if its ODA had stayed at its 2004 level over this period. It fell short by USD 3.6 
billion due mainly to severe economic and budgetary constrai nts, as well as significant early repayments on ODA loans 
by some borrowing countries. http://www.oecd.org/document/11/0,3746,en_2649_34447_44981579_1_1_1_1,00.html  
30 DAC 2011 press release: http://www.oecd.org/document/35/0,3746,en_2649_34447_47515235_1_1_1_1,00.html   
31OECD Development Co-operation Report 2008  
32DAC Special Review of Korea’ s Development Co-operation: http://dx.doi.org/10.1787/522324562341 . The 
government is determined to increase Korea’s development assistance, and outlines this objective as one of 50 core tasks in its long-term planning manifest o, Vision 2030. The government set exp licit targets, and committed to reaching 
0.118% ODA/GNI by 2010 and 0.25% by 2015 (an estimated USD 3 billion+): 
http://www.oecd.org/dataoecd/53/50/42347329.pdf  
 
EN 21   EN  
The EU and its Member States are therefore – apart from Norway - the only group of donors to 
transform the long-standing UN 0.7% goal, considered  by many as an ’aspirational goal’, into a 
realistic, time-bound target. The EU  decided to move forward and ach ieve this goal in steps within 
15 years (2000 – 2015), in line with the deadlines of the Millennium Declaration and based on a 
mix of individual and collective intermediate targets. The firs t intermediate EU ODA objectives 
were defined in 2002 during the preparation for the Monterrey International Conference on 
Financing for Development, based on the EU’s ODA levels in 2000.  
 The agreement was that the EU’s combined e fforts would achieve the 0.7% ODA/GNI ratio by 
2015 in three steps: 
• A first set of intermediate targets
 for 2006. As a first significant step, those Member States that 
had not yet reached the 0.7% target committed themselves –individually and within their 
respective budget allocation to increasing their ODA volume between 2002 and 2006 to 0.33% 
of GNI. The other Member States agreed to renew th eir efforts to remain at or above the target of 
0.7% ODA, so that collectively an EU aver age of 0.39% would be reached by 2006. These 
targets were set by the then EU 15 Member States. 
• A second set of intermediate targets for 2010  was agreed in 2005, after the enlargement of the 
EU to 25 Member States. These targets have been endorsed33and reconfirmed by the European 
Heads of State and Government on various occasions34. Bulgaria and Romania, in the context of 
their accession to the EU in 2007, also subscribed to the commitments. The new ODA targets were differentiated to take into account the differe nt national income levels and the transition of 
the newer EU Member States from ODA recipien ts to ODA donors. The definition of the 2010 
intermediate targets t ook into account the EU’s  collective ODA levels in 2004 (0.42% of GNI) 
and put 2010 at mid-way, i.e. 0.56% to achiev ing 0.7% by 2015. This collective target was 
translated into different individual targets for Member States (0.51% for EU15 and 0.17% for 
EU12). The collective target assu med that the most generous EU  donors would (a) deliver on 
more ambitious national timetables (e.g. Belgiu m, Finland, France an d the United Kingdom 
based on a steady scaling up) and (b) those alr eady above 0.7% promised to sustain and not 
decrease their high levels. These countries were  counted upon to achieve a higher collective level 
than the individual targets mentioned above.  
• A third set of targets for 2015
: 0.7% is the collective target a nd minimum indivi dual threshold 
for the EU15. The EU12 target was set at 0.33% corresponding to the EU 15 collective outcome 
for 2000, thereby accepting that the newest 12 Memb er States needed a long transition phase to 
adapt to the EU acquis .   
In 2005, as part of the first review of progress on the MDGs and the G8 Summit at Gleneagles, 
these EU commitments were the main basis for calculating that the donor community would raise 
an additional USD50 billion (a t 2004 prices) in official de velopment assistance by 201035. 
2.2.2.  EU ODA Performance 2005-2010 compared to other donors 
The EU has not only pledged to de liver more aid than non EU donors,  but its combined efforts are 
already delivering substantially greater amounts of  ODA, and individual EU countries (with a few 
                                                 
33European Council, 18 June 2005, Doc. 10255/05 
34Most recently by the European Council on 17 June 2010 
35The dollar value of the 2010 pledge was calculated by OECD DAC and backed by UN and World Bank estimates of 
incremental MDG costs, net of domestic resource contributions. 
 
EN 22   EN exceptions) are also making more substantial effo rts in relative terms.  Over the period 2004-2010, 
the EU and its Member States accounted for 57%  of net ODA to developing countries from all 
DAC and EU donors, and for 65% of the global  EUR 25.7 billion ODA increase in real terms 
during this period.   
 
EN 23   EN Figure 1 – Net ODA by Donor (EUR million, 2008 prices)  
2004 2005 2006 2007 2008 2009 2010
EU 36775 47083 48367 45617 50032 50152 53458
Canada 2477 3228 2889 2937 3324 3000 3382
Japan 6225 9443 8547 6018 6656 5925 6624
USA 15315 21010 17140 15428 18610 19737 204360100002000030000400005000060000EUR million at 2008  pricesNet ODA Volumes by Donor 
(Disbursements, EUR million at 2008 prices)
 
Source: OECD DAC/European Commission 
 
The above statistics do not include aid from la rge emerging donors like Brazil, China, India, or 
Russia, as none of them report to DAC.  Overa ll, aid from emerging donors is estimated to amount 
to about 10-12% of total ODA from a ll donors (EUR10-12 billion per year). 
 As shown in Table 1 , both the EU’s per capita ODA and its ODA/GNI ratios are greater than those 
of non-EU DAC Members. Indeed, its ODA/GNI rati o is double that of Ja pan and the USA. The 
EU12 still have ODA/GNI ratios that are below th e average for non-EU DAC donors, but they have 
been growing from a low base. Collectively, th e EU outperforms most other donors by a wide 
margin. 
 
Table 1 – ODA/GNI and ODA per capita of EU  Member States and Non-EU DAC Members  
(at 2008 prices) 
ODA volumes 
(EUR billion) ODA per 
capita (EUR)ODA/GNI 
(%) Country 
2004 2010 2004 2010 2004 2010 
EU 25/27 36.8 53.5 75 107 0.34 0.43 
EU 15  36.4 52.6 95 134 0.35 0.46 
EU 10/12  0.3 0.8 3 8 0.07 0.09 
USA  15.3 20.4 52 66 0.17 0.21 
Japan  6.2 6.6 49 52 0.19 0.20 
Canada  2.5 3.4 77 99 0.27 0.33 
DAC Non EU Members  29.6 38.6 58 69 0.19 0.23 
DAC Members  66.0 91.2 71 96 0.25 0.32 
Source: OECD DAC/European Commission  
2.2.3.  Role of Debt Relief in EU ODA 
The growth of EU ODA in 2010 is significant if one  considers the declining importance of debt 
relief in the overall ODA effort of EU Member States. In the period 2005-2006 several EU Member 
States (namely Austria, Belgiu m, Finland, France, Germany, Italy, Spain and the UK) saw an 
 
EN 24   EN increase of ODA due in large part to exceptional debt relief. Almost two thirds of the EU15 debt 
relief over the period 2004-2009 was directed to two resource rich countries: Iraq (33%) and 
Nigeria (30%).  Some smaller but still significant debt relief programmes were also implemented in 2007 and 2008 but became minimal in 2009, except for France.  One positive effect of the EU ODA commitments is that they stimulated growth in EU ODA other 
than for debt relief over the period 2005-2010, and this  more than compensated for the fall in debt 
relief. Over the period 1995-2010, EU  ODA net of debt relief grew by 0.06% of GNI from 0.34% in 
1995 to 0.41% in 2010 for EU27. The gap between  the EU and non-EU DAC Members’ ODA net 
of debt relief had narrowed to only 0.10% of GNI by 2005, but the recent growth means that the gap 
has widened again reaching 0.23% of GNI by 2010   Debt relief certainly helped  increase EU ODA over the pe riod, and especially help ed meet the targets in 
2006. But it was a ’one -off’ effect exercise and not  sustainable. The real ch allenge now fo r the Member 
States is to increase their national ODA  budgets in a period of budget austerity.  
 
Figure 2 – EU ODA and Debt Relief as a % of GNI  
0.34 0.33 
0.29 0.29 0.28 0.29 0.30 0.29 0.28 0.30 0.30 0.31 0.33 0.36 0.39 0.41 0.04 0.04 
0.03 0.03 0.02 0.02 0.03 0.06 0.06 0.04 0.12 0.10 0.05 0.04 0.02 0.02 
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010ODA without debt relief Debt Relief 
  
Source: OECD DAC (covering 20 EU Me mber States report ing to the DAC) 
 
As shown in Figure 3  below, debt relief played an important role in ODA for several Member 
States: Austria, France, Germany and Italy had a high share of de bt relief in their ODA over the last 
five years. It is interesting to note that some of  the Member States that are already behind schedule 
on their individual aid commitments have made the greatest use of debt re lief (e.g. Germany, Italy 
and Portugal). Sudden increases in ODA shown in th e country charts in Annex 3 were mainly due 
to debt relief. Portugal carried out substantial debt relief or rescheduling operati ons in 1995-2000 
and again in 2004. Spain did likewise in 2001 and 2005-2006, Italy in 2002-2006, Germany in 
2002-2008, France for the entire period 1995-2010 (f luctuating between 11%  and 45% of total 
ODA), and Austria in 1999-2002 and 2005-2008. 
 
EN 25   EN Figure 3 – Share of Debt Relief in Net ODA (cumulative, 2004-2010, %) 
39%
22% 22%
20%
18%17%
13%
11%10%
5% 5% 5% 4%4%3%2%2%1% 0% 0% 0% 0% 0%
 
Source: OECD DAC  
 
2.2.4.  Performance on ODA targets (2005-2010) 
ODA figures on 2010 net disbursements are prelimi nary, based on information of the EU Member 
States and the European Commission. For those EU Member States that report to the OECD/ DAC 
final and more comprehensive ODA figures will  become available towards the end of 2011  
 
As anticipated in the 2010 Financing for Deve lopment annual progress report, after achieving 
its 2006 intermediate target of 0.39% of GNI, the EU and its Member States did not achieve 
their collective 2010 target of 0.56%. Howev er, the positive trend continued reaching the 
highest ODA/GNI ratio for twenty years, notwit hstanding the decline in debt relief and the 
EU-wide budget.  
Since 2008 the financial crisis has hit EU Member States har d, triggering the deepest global 
economic recession for decades. State-financed resc ue packages for the affected banking sector, 
higher social protection costs a nd lower budget revenues have dram atically changed the fiscal 
situation in many Member States. Nine Member  States (namely Belgium, Cyprus, Denmark, 
Finland, Ireland, Luxembourg, Neth erlands, Sweden, and the Un ited Kingdom) achieved or 
exceeded the 2010 EU individual minimum targets. Most  of them also reached their more ambitious 
national ODA targets. However, other eighteen EU  Member States missed the individual 2010 
minimum thresholds and, as a consequence, also  the collective target of 0.56% has not been 
achieved (see Figure 4  below).  
 In 2009, EU-27 ODA decreased in volume terms to EUR 49 billion, but increased as a share of GNI 
from 0.40% in 2008 to 0.42% due to falling GNI levels during the crisis. ODA growth resumed in 2010 and ODA increased by more than EUR 4.5 billi on to almost EUR 54 bi llion, equivalent to 
0.43% of GNI. Despite the increase, this means the EU has missed the co llective target of 0.56% 
ODA/GNI target in 2010 by a wide margin of  about 0.13% of GNI (EUR 15 billion).  
 
 
EN 26   EN Low or negative economic growth rates in the EU as a consequence of  the crisis, and the 
consequential austerity measures that Member Stat es introduced, led to di fferent pressures on ODA. 
On the one hand lower GNI growth combined with higher public expenditure elsewhere may lead to 
a cut-back in spending on development co-ope ration, which in turn would result in a lower 
trajectory of scaling up to meet 2015 targets. On the other hand, where aid vol umes are not cut, aid 
level can appear higher when expressed as a percentage of GNI but provide no additional ODA funding for developing countries.  
 
 Figure 4 – Gap between 2010 and 2015 targets and 2010 results 
Gap between 2010 ODA levels and agreed individual targets of the 27 EU Member States 
and direction of change from 2009 to 2010
1.09
0.560.550.53
0.200.7
0.330.97
0.90
0.81
0.64
0.50
0.43
0.38
0.320.29
0.170.150.13 0.120.11 0.10 0.10 0.09 0.09 0.09 0.08 0.070.060.51
0.17
0.000.200.400.600.801.001.20
Luxembourg
Sweden
Denmark
The Netherlands
Belgium
UK
Finland
Ireland
France
Spain
Germany
Austria
Portugal
Greece
Italy
Cyprus
Slovenia
Czech Republic
Malta
Lithuania
Estonia
Hungary
Bulgaria
Slovak Republic
Poland
Romania
LatviaODA as % of GNI
2010 level (preliminary) 2010 individual commitment 2015 individual commitmentDirection of change of ODA as % of GNI
          increase          no change          decrease
 
Source: OECD DAC/European Commission (EU annual  questionnaire on financing for development) 
and EU annual questionnaire on financing for development) 
 
EN 27   EN Table 2: EU ODA volumes and as % of GNI 2004 – 2010 a nd gaps for reaching the 2010  intermediate ODA targets 
O DA E UR 
MillionODA  in %  
of GNIOD A  E U R  
MillionODA  in %  
of GNIO DA E UR 
MillionODA  in %  
of GNIO DA E UR 
MillionODA  in %  
of GNIO DA E UR 
MillionOD A  in %  
of GNIO DA E UR 
MillionOD A  in %  
of GNIO DA E UR 
MillionOD A  in %  
of GNIO DA EUR 
MillionOD A  in %  
of GNIGap E UR 
millionGap in %  of 
GNI
Official T argets EU-15: 0.51 EU-15: 0.51
EU-12: 0.17 EU-12: 0.17
(or national 
targ et)
Austria 545 0.23 1266 0.52 1194 0.47 1321 0.50 1188 0.43 820 0.30 905 0.32 1419 0.51 513 0.19
Belgium 1178 0.41 1580 0.53 1575 0.50 1425 0.43 1654 0.48 1874 0.55 2265 0.64 2486 0.70 221 0.06
Bulgaria 10 . 0 0 1 70 . 0 6 1 30 . 0 4 1 20 . 0 4 3 10 . 0 9 5 8 0.17 27 0.08
Cyprus 4 0.03 4 0.03 21 0.15 18 0.12 26 0.17 33 0.20 34 0.20 29 0.17 0 -
Czech Republic 87 0.11 109 0.11 128 0.12 131 0.11 173 0.12 154 0.12 169 0.12 234 0.17 65 0.05
Denmark 1640 0.85 1697 0.81 1782 0.80 1872 0.81 1944 0.82 2018 0.88 2164 0.90 1901 0.80 0 -
Es t o n i a 4 0.04 5 0.05 11 0.09 12 0.08 16 0.10 13 0.10 14 0.10 24 0.17 10 0.07
Fi n l an d 547 0.37 726 0.46 665 0.40 717 0.39 808 0.44 926 0.54 1008 0.55 910 0.51 0 -
Fran ce 6820 0.41 8067 0.47 8445 0.47 7220 0.38 7562 0.39 9048 0.47 9751 0.50 10026 0.51 274 0.01
Germany 6064 0.28 8112 0.36 8313 0.36 8978 0.37 9693 0.38 8674 0.35 9606 0.38 12888 0.51 3282 0.13
Greece 258 0.16 309 0.17 338 0.17 366 0.16 488 0.21 436 0.19 378 0.17 1139 0.51 762 0.34
Hungary 56 0.07 81 0.11 119 0.13 76 0.08 74 0.08 84 0.10 85 0.09 158 0.17 73 0.08
Ire land 489 0.39 578 0.42 814 0.54 871 0.55 921 0.59 722 0.54 676 0.53 647 0.51 0 -
Italy 1981 0.15 4096 0.29 2901 0.20 2901 0.19 3370 0.22 2368 0.16 2349 0.15 7780 0.51 5432 0.36
Latvia 70 . 0 6 80 . 0 7 90 . 0 6 1 20 . 0 6 1 50 . 0 7 1 50 . 0 7 1 20 . 0 6 3 1 0.17 19 0.11
Lithuania 80 . 0 4 1 20 . 0 6 2 00 . 0 8 3 50 . 1 1 3 50 . 1 1 3 00 . 1 1 2 80 . 1 0 4 6 0.17 18 0.07
Luxe mbourg 190 0.79 206 0.79 232 0.89 274 0.92 288 0.97 298 1.04 301 1.09 286 1.00 0 -
Malta 8 0.18 7 0.17 7 0.15 8 0.15 11 0.20 10 0.18 7 0.11 10 0.17 3 0.06
T he Netherlands 3384 0.73 4115 0.82 4343 0.81 4547 0.81 4848 0.80 4615 0.82 4795 0.81 4654 0.80 0 -
Poland 95 0.05 165 0.07 236 0.09 265 0.10 258 0.08 269 0.09 285 0.08 581 0.17 295 0.09
Portugal 830 0.63 303 0.21 316 0.21 344 0.22 430 0.27 368 0.23 489 0.29 843 0.51 354 0.22
Romania 30 . 0 0 8 40 . 0 7 9 40 . 0 7 9 90 . 0 9 8 60 . 0 7 2 0 5 0.17 119 0.10
Slovak Republic 23 0.07 45 0.12 44 0.10 49 0.09 64 0.10 54 0.09 56 0.09 112 0.17 56 0.08
Slov enia 25 0.10 28 0.11 35 0.12 40 0.12 47 0.13 57 0.15 48 0.13 60 0.17 13 0.04
Spain 1962 0.24 2429 0.27 3038 0.32 3755 0.37 4761 0.45 4728 0.46 4467 0.43 5259 0.56 792 0.13
Sweden 2191 0.78 2705 0.94 3151 1.02 3170 0.93 3281 0.98 3266 1.12 3418 0.97 3500 1.00 82 0.03
UK 6362 0.36 8667 0.47 9926 0.51 7194 0.36 7973 0.43 8251 0.52 10391 0.56 8795 0.56 0 -
E U 15 T OT AL 34441 0.35 44856 0.44 47033 0.43 44954 0.39 49207 0.43 48413 0.45 52963 0.46         62532 0.56 11712 0.10
E U 12 T OT AL 317 0.07 464 0.09 635 0.09 745 0.09 825 0.09 830 0.10 854 0.09         1548 0.17 699 0.08
E U 27 T OT AL 34758 0.34 45320 0.42 47668 0.41 45699 0.37 50032 0.40 49243 0.42 53817 0.43         64365 0.53 12411 0.10
Gap to collective 2010 target 0.56%
Target in EUR million: 68,376       
Gap in EUR million 14,559       
Gap in % of GNI 0.13          2010 (preliminary) 2010 (commitments)2010: financial gap to 
INDIVIDUAL targets 2004 2005 2006 2007 2008 2009
 
 
EN 28   EN The trends among Member States varied, as the figures and tables in Annex 2 show. The 
largest increase during 2010 was made by the United Kingdom (EUR 2.1 billion), followed 
by Germany (EUR 0.9 billion), France (EUR 0.7 billion), and Belgium (EUR 0.4 billion). 
These four countries accounted for over 90% of the increase between 2009 and 2010. Cyprus 
(0.20%) exceeded its individual,  intermediate target thres hold of 0.17% ODA/GNI, which it 
had already achieved in 2009, one year ahead of  schedule. Sweden, despite increased ODA 
volumes corresponding to 0.97% of its GNI again de monstrated how difficult it is to remain, 
year-on-year, in keeping with  its national 1% ta rget level. Belgium, although reaching a 
record level of 0.64% ODA/GNI, had planned to  spend 0.7% of its GNI for development 
assistance in 2010 and beyond, in li ne with its national legislation and projects reaching that 
level in 2011. Ireland, severely hit by the fina ncial crisis, had decided, in 2010, to slow down 
the scaling-up of ODA process and to align with the common EU timetable, by postponing 
the target date for reaching 0.7% ODA/ GNI from 2012 to 2015. Consequently Ireland's ODA 
spending in 2010 was cut, but le ss than initially feared.  
From 2009 to 2010, ODA fell in nine Member States (Greece, Irel and, Italy, Latvia, 
Lithuania, Malta, Romania, Slovenia and Spai n), although for most of them the decline was 
minor. The worst aid cuts were made in Sp ain (down EUR 261 milli on, to 0.43% ODA/GNI).  
The performance of Italy and Germany will be pa rticularly important in helping achieve the 
2015 target as they account for almost half the shortfall. Italy has s hown little commitment to 
the ODA targets and has continuously cut its aid budge ts over the last five years. This has led 
to a decline in ODA/GNI ratios from 0.20% in  2002 to 0.15% in 2010, with a few occasional 
increases over the period due mostly to one-off  debt relief operations that are not enough for 
sustaining ODA levels. Germa ny, whose ODA/GNI ratio grew from 0.27% in 2002 to 0.38% 
in 2010, also relied substantially on the one-off effects of debt relief. Contrary to its 
declaration annexed to the Ma y 2005 Council Conclusions, Germ any has not introduced the 
innovative sources of financi ng with sufficient revenue generation potential it had declared 
were necessary to reach the ODA targets. Increas ed allocations to the Development Ministry’s 
budget came too late and at much too low a leve l to create the necessary upward trend. 
2.2.5.  Achievement of the 0.7% ODA/GNI Target by 2015 
The EU scaling-up process has been uneven, with  asymmetric efforts. Member States not 
contributing their fair share to the burden-shari ng effort endanger the performance of the EU 
as a whole and substantially increase the ri sk of collective failure on ODA targets.   
Figure 5  below shows the long-term trends in ODA volumes for the EU27.  At the current 
pace and with existing budgets, there is a delay equivalent to about 25 years on the path to 
0.7%, as ODA is projected to increase at an annual rate of 0.01% of GNI. These Commission 
simulations build on the trends of 2005 – 2010 a nd spending forecasts, as available, that 
Member States reported in thei r replies to the annual questio nnaire. To reach 0.7% ODA/ GNI 
by 2015 as planned, efforts would have to be st epped up dramatically but this may not be 
realistic under current economic conditions. Furthermore, as shown in Figure 4  above, the 
main effort would have to come from under-per forming Member States, which would have to 
drastically increase their ODA in a short time span under tight budget conditions. To reach the 2015 target Latvia would need to sextuple its cu rrent ODA volumes over the next five years, 
Bulgaria, Greece, Italy, Poland, Romania, an d the Slovak Republic quintuple; Estonia, 
Hungary, and Malta quadruple; a nd Austria, the Czech Republic, Portugal and Slovenia triple 
their aid allocations.. This effort is all the mo re significant since the exceptional debt relief 
operations that explain, for example, the sudden increase in 2005-2006 (see Figure 5) will not 
be feasible again.  
 
EN 29   EN Figure 5 - EU 27 ODA/GNI Ratios (1995-2015)  
0.370.37
0.33 0.330.31 0.320.330.35 0.35 0.350.41 0.41
0.370.400.420.430.500.550.610.650.70
0.43 0.430.44 0.45 0.45
0.000.100.200.300.400.500.600.700.80
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015ODA as a % of GNIEU27  - ODA as a % of GNI 
Historical data and projections for reaching 2015 targets
EU15 EU25 EU27 EU15 ODA to Africa EU15 ODA to LDCs Required linear increase EU27  Commission projections or MS forecasts
2010 Target: 0.562015 Target: 0.70
LDC Target: 0.15
 
Source: OECD DAC/European Commission (EU annual  questionnaire on financing for development) 
 
EN 30   EN Table 3: Estimates and gaps to be bridged fo r reaching the 2015 ODA targ ets, based on Member States ' forecast information and C ommission simulation 
O DA EUR 
MillionODA  in %  
of GNIOD A  E U R  
M illionODA  in %  
of GNIO DA E UR 
M illionOD A  in %  
of GNIO DA EUR 
MillionODA  in %  
of GNIO DA E UR 
M illionODA in % 
of GNIODA  E U R 
MillionOD A  in %  
of GNIO DA E UR 
M illionODA in % 
of GNIGap EU R 
millionGap in %  of 
GNI
Official T argets EU-15: 0.7 EU-15: 0.7
EU-12: 0.33 EU-12: 0.33
Austria 905 0.32 929               0.32 1,053          0.35 1,046          0.34 1,099          0.34 1,034          0.31 2329 0.70 1424 0.42
Belgium 2265 0.64 2,576            0.70 2,676          0.70 2,771          0.70 2,869          0.70 2,972          0.70 2972 0.70 707 0.13
Bulgaria 31 0.09 31                 0.08 36               0.09 42               0.10 49               0.11 56               0.12 151 0.33 121 0.26
Cyprus 34 0.20 34                 0.19 34               0.19 35               0.18 36               0.18 36               0.17 69 0.33 35 0.16
Czech Republic 169 0.12 180               0.12 193             0.13 197             0.12 211             0.13 225             0.13 579 0.33 411 0.22
Denmark 2164 0.90 2,043            0.82 2,043          0.79 2,043          0.77 2,144          0.79 2,257          0.81 2240 0.80 76 -
Es t o n i a 14 0.10 17                 0.12 21               0.14 23               0.14 27               0.16 31               0.17 61 0.33 47 0.25
Fi n l an d 1008 0.55 1,074            0.56 1,119          0.56 1,175          0.56 1,229          0.55 1,334          0.57 1624 0.70 616 0.25
Fran ce 9751 0.50 9,555            0.47 10,044        0.48 9,128          0.42 9,513          0.43 9,940          0.43 16091 0.70 6340 0.26
Germany 9606 0.38 10,479          0.40 10,933        0.40 11,416        0.41 11,911        0.41 12,426        0.42 20851 0.70 11245 0.34
Greece 378 0.17 418               0.19 423             0.19 441             0.19 459             0.19 480             0.19 1779 0.70 1401 0.52
Hungary 85 0.09 94                 0.09 96               0.09 95               0.09 94               0.08 93               0.08 379 0.33 294 0.26
Ire land 676 0.53 669               0.52 708             0.55 766             0.57 834             0.60 914             0.63 1021 0.70 345 0.20
Italy 2349 0.15 2,495            0.16 3,281          0.20 2,003          0.12 1,792          0.11 1,606          0.09 11948 0.70 9600 0.57
Latvia 12 0.06 12                 0.06 12               0.06 12               0.06 13               0.06 13               0.06 74 0.33 62 0.27
Lithuania 28 0.10 33                 0.11 39               0.13 46               0.14 53               0.16 63               0.18 117 0.33 89 0.22
Luxe mbourg 301 1.09 292               1.00 309             1.00 327             1.00 346             1.00 366             1.00 366 1.00 65 -
Mal ta 70 . 1 1 1 3                 0.22 15               0.24 18               0.27 20               0.30 23               0.33 23 0.33 16 0.16
Th e  Ne t h e r l a n ds 4795 0.81 4,646            0.76 4,480          0.71 4,661          0.70 4,810          0.70 5,059          0.70 5059 0.70 264 -
Poland 285 0.08 321               0.09 357             0.09 391             0.09 428             0.10 467             0.10 1541 0.33 1256 0.26
Portugal 489 0.29 335               0.20 364             0.21 403             0.23 448             0.24 499             0.26 1340 0.70 851 0.50
Romania 86 0.07 99                 0.08 119             0.09 136             0.10 157             0.11 180             0.12 510 0.33 424 0.26
Slov ak Republic 56 0.09 66                 0.10 63               0.09 63               0.08 63               0.07 63               0.07 297 0.33 242 0.27
Slov enia 48 0.13 60                 0.17 66               0.17 69               0.17 71               0.17 73               0.17 143 0.33 96 0.20
Spain 4467 0.43 4,234            0.40 3,934          0.36 4,450          0.39 5,045          0.43 5,729          0.47 8510 0.70 4043 0.30
Sweden 3418 0.97 4,025            1.00 4,184          1.00 4,367          1.00 4,551          1.00 4,739          1.00 4739 1.00 1321 -
UK 10391 0.56 10948 0.56 11411 0.56 14878 0.70 15561 0.70 16308 0.70 16308 0.70 5917 0.23
E U 15 T OT AL 52963 0.46 54716 0.46         56962 0.46         59873 0.47         62613 0.48         65663 0.48         96238 0.71 44215 0.30
EU 1 2  TO TA L 8 5 4 0 . 0 9          960 0.10         1052 0.10         1128 0.10         1221 0.11         1324 0.11         3946 0.33 3092 0.25
E U 27 T OT AL 53817 0.43         55677 0.43         58014 0.43         61001 0.44         63834 0.45         66986 0.45         100181 0.68 47307 0.29
MS Projection/Budget Forecast Gap to collective 2015 target 0.7%
Target in EUR million: 103,736  
Gap in EUR million 49,919    
Gap in % of GNI 0.34       
2010 ODA on 2015 GNI 0.36       
Total 0.70       2015 (commitments)2015: financial gap to 
meet individual targets 2010 (preliminary) 2011 2012 2013 20142015 
(forecast/simulation) 
 
 
EN 31   EN  
Initial projections for 2011, based on Member Sa tes’ replies or budget data monitored by 
Concord/AidWatch36, point to an increase in ODA budgets be low the expected GNI growth rate 
that would lead to a stable  ODA/GNI ratio for 2011 of 0.43%. 
 The prospects for 2011 according to Memb er States' reports are as follows: 
• The ODA budgets for Austria, Belgium, the Czech Republic, Estonia, Finland, 
Germany
37, Greece, Hungary, Italy, Lithuania, Malta, Poland38, the Slovak Republic, 
Slovenia, Sweden and the United Kingdom  are expected to grow in 2011.   
• Bulgaria, Cyprus, Ireland39, Latvia, and the Slovak Republic will maintain their ODA 
budget essentially at the same level in nominal terms. 
• Denmark, France, Luxembourg, the Netherlands, Portugal40, and Spain will reduce their 
ODA budget in 2011. 
• Romania did not provide estimates for its 2011 ODA budgets and no third party 
monitoring was available. 
The ODA graphs in Annex 2  show each EU Member State's r eadiness to meet the individual ODA 
target levels of 0.7% and 0.33% of GNI for EU15 and EU12 respectively in 2015. Annex 1  outlines 
the methodology used to analyse ODA indicators and forecasts provided by Member States. 
 A recent survey by OECD DAC
41 reached similar conclusions; i.e. that donors’ forward budget 
plans will probably remain subs tantially steady in 2011. According to this surve y, global Country 
Programmable Aid (CPA) is ‘progr ammed to grow at a real rate  of 2.5% per year from 2009 to 
2012. This is good news in the li ght of the current climate of  budgetary austerity in OECD 
countries. The bad news is that growth in pla nned CPA is decelerating significantly, from an 
average annual growth rate of 7% over the past three years. Almost all th e planned growth was in 
2010, with a zero-forecast growth rate in 2012.’   Enabling factors for increases in Member States’ ODA . There has been some progress in 
establishing what can be consider ed ‘multi-annual timetables’ for ODA, as repeatedly called for by 
Council Conclusions. Timetables have proven a usef ul tool for embedding the scaling-up of aid 
volumes in national budgets in line with stated co mmitments. Member States have taken different 
paths in developing timetables (see Box 1 ).  
 However, even where these tools exist, they cannot stop possible reducti ons in ODA budgets when 
there is a strong political intent to do so, as show n by the recent events in the Netherlands or Spain. 
Nor can the tools replace the political will to increase ai d where no such will exists. 
 
                                                
 
36AidWatch Briefing (February 2011), Between austerity and political will: EU MS ODA budgets in 2011. Risks 
that in 2011 genuine EU aid will fall for the first time since 1997 . 
37According to Aid Watch (2011), Germany’s budg et for 2011 will increase to 0.40% of GNI. 
38Based on Aid Watch (2011), as no reply was provided by the Member State. 
39According to Aid Watch (2011), Ireland’s ODA budget will decline in 2011. We inserted the reply 
provided by Ireland to the Monterrey questionnaire. 
40According to Aid Watch (2011), Portugal’s ODA budget will decline in 2011.  
41See the 2010 OECD Report on Aid Predictability Survey on Donors’ Forward Spending Plans 2010 – 2012.  
 
EN 32   EN Box 1. Approaches to maintain ing or increasing ODA budgets 
Enacting legislation to make 0. 7% ODA/GNI a binding obligation.  Belgium  has set, by law, a minimum aid 
level commitment, called the ‘growth-path’ towards the 0.7% target. The ‘growth path’ is set out in the 
solidarity notes and can also be amended by the soli darity notes. These are drafted and approved by the 
government but the government cannot amend the legally bindi ng target of 0.7% to be reached in 2010. Despite 
this, the Belgian ODA level was 0.64% of GNI in 2010, missing its legally binding commitment to the 0.7% 
target. For many years the Netherlands  has had a legal obligation to spend a fixed proportion of its GNI as 
ODA. In a letter of 26 November 2010 to the House of  Representatives on its development cooperation policy 
the new ruling coalition stated that ’[the budget] will be reduced in two equal steps in the next two years, from 
0.8% to 0.7% of GNP as of 2012’. In the UK, the government will enshrine in law before April 2012 its 
commitment to spend 0.7% of GNI as ODA from 2013. There seems to be cross-party consensus on the 
importance of ODA and readiness to assume responsibility in the world, as the commitment for 2015 was kept 
notwithstanding the recent change in government.  Cross- party consensus is important in maintaining high 
ambitions even under difficult budget situations. 
Transparent multi-year budget spending plans . The UK Government has set out its commitment to 
increase Official Development Assistance (ODA) to 0.56% of GNI in 2011 and 2012 and 0.7% from 2013 in 
line with the UK’s international commitments to help the very poorest in the World. The Spending Review 
2010, published on 20 October 2010, sets out the figures for each year up to 2014 in clear spending plans 
(http://www.hm-treasury.gov.uk/spend_sr2010_documents .htm). The UK’s ODA budget will increase every 
year between now and then, amidst b udget cuts in many other areas, an  indication that ODA increases are 
possible despite budget austerity, if the political will is there. 
Government-endorsed develo pment policy documents. The Finnish  Development Policy Programme42, 
i.e. Government Decision-in-Principle, has stated the commitment to ensuring the development cooperation 
appropriations which ’will take Finland towards 0.7% GNI set by the UN,  and Finland is committed to 
achieve the target of 0.51% in 2010 as established in the European Council’s decision’. Denmark’s  
commitments and strategic priorities are set down in its new development strategy ‘Freedom from Poverty - 
Freedom to change’ and the accompanyi ng multi-annual budget forecast43. The Spanish  ‘Master Plan for 
Development Cooperation 2009-2012’44 forms the basis of Spanish development cooperation at government 
level and was endorsed by the Spanish Government and Pa rliament. The Master Plan states that Spain aspires 
to reach an ODA/GNI ratio of 0.7% by 2012 . Spain has shown a significant commitment to increase its aid 
over the last few years, but ODA is always lagging behind its own national plans and has been declining 
since 2008.  Given current aid levels, it seems unrealistic to assume that Spain could achieve its national 
target, especially in light of the further aid cuts announced for 2011. 
Indicative multi-annual timetables . Four Member States ( Belgium, Malta, Sweden, and the United 
Kingdom )45 have indicative multi-annual timetables in place that show the path towards the achievement of 
their individual target for 2015. As part of next y ear’s budget process for the financial year 2012 and the 
medium-term financial plan until 2015, the German  government will define its intended budgets for 
development cooperation. Nevertheless government and parliament will discuss the actual annual budgets for 
2013-2015 and how to reach this goa l in the annual budget processes. 
 
                                                 
42http://formin.finland.fi/public /default.aspx?contentid=107497  
http://formin.finland.fi/public /default.aspx?contentid=107497   
43http://amg.um.dk/NR/rdonlyres/1C903D5E-3A75-453F-BACB 
8EBF8B55F7F2/0/Priorities_danish_development_assistance20112015.pdf  
http://amg.um.dk/NR/rdonlyres/1C903D5E-3A75-453F-BACB 
8EBF8B55F7F2/0/Priorities_danish_development_assistance20112015.pdf   
44http://www.maec.es/en/MenuPpal/Actualidad/No tasdePrensa/Paginas/49NP20090514EN.aspx  
http://www.maec.es/en/MenuPpal/Actualidad/No tasdePrensa/Paginas/49NP20090514EN.aspx   
45The total number of Member States with multi-annual timetables is ten. However, six are on a path away from rather 
than towards keeping their individual commitments for 2015. Denmark and Luxembourg have plans showing they will 
keep their volumes steady in nominal terms. They will, thus not meet their commitment to sustain their efforts, as levels and volumes in real terms are both  pr ojected to decline. The C zech Republic and Finland have timetables till 2013 or 
2014, showing paths with significant implicit back-loading of their commitments.  Cyprus and Estonia have multi-
annual timetables that show they will not meet their 2015 target of 0.33%. 
 
EN 33   EN 2.2.6.  Lessons Learnt and the Way Forward 
The European Union and its Memb er States have repeatedly reiterated their commitments to 
achieve the 0.7% ODA to GNI ra tio by 2015, as a concrete, time- bound goal. The rationale for a 
time-bound target was to provide adequate funding to  achieve the Millennium  Development Goals. 
This was not as an act of solidarity  or charity but a strategy to tack le the root caus es of poverty and 
fragility before they spiral out of control, genera ting refugee flows and security threats. It was also 
designed to face challenges that know no boundaries a nd that affect the entire globe, such as climate 
change, loss of biodiversity, desertification or the spread  of infectious diseases. 
 There are thus no grounds for seeing the 2015 goal as a mere aspiration or a de claration of intent, as 
some Member States do. ODA is not an act of charit y that makes sense only in ‘good times’ but it is 
in the Union’s own interests. There is a clear need to better communicate these goals and to educate EU public opinion about their im portance. Significantly, the late st Eurobarometer on Development 
Cooperation shows that Europeans be lieve it is important to help people in developing countries 
because they are facing challenges such as overwhe lming poverty. Two out of  three Europeans cite 
self-interested motivation for giving aid, namely trad e, terrorism, migration and political relations 
with third countries.
46 
 
There are several lessons to be dr awn from the EU’s experience.  
 First, the reduced ambition  of some national plans has had a real impact on collective progress on 
ODA. Some of the more ambitious Member States have reduced thei r targets compared to the ones 
that formed the basis for the 2005 Council Conclusi ons. Had these commitments been met, the EU 
27 ODA/GNI
47 ratio would have been closer to the 2010 target (0.50% rather than 0.43% based on 
simulations prepared for this report).   Second, the current fiscal crunch  has led some countries to revise  their commitments and targets. 
Spain , after increasing ODA substantially under the current government, has announced a reduction 
of EUR 800 million in the next two years and ha s acknowledged that the 0.7%  of GNI target will 
have to wait until 2015 at least, and even then will only be attain ed if economic conditions improve. 
The coalition treaty of the new government of the Netherlands states that ODA spending will be 
reduced from 0.8% to 0.7% for the legislative pe riod of the new government, which goes against 
the spirit of its individual commitment as an EU c ountry to sustain its effo rts. Although the agreed 
individual EU target was to reach 0.33% by 2006 and 0.51% by 2010 Portugal  translated this into 
national targets of 0.33% by 2006, 0.30% by 2009, and 0.34% by 2010. It has missed all three. At 
the UN Millennium Summit of September 2000, Ireland  committed to reaching the UN target of 
0.7% GNI by 2007. Its government gradually increased ODA from 0.39% of GNI in 2003 to 0.58% 
by 2008. However, in 2005 the target date for m eeting 0.7% was revised to 2012. In 2009 it was 
further postponed to 2015. Italy  has consistently missed targets and its aid has declined. Without 
debt relief, which is expected to be about  EUR 0.6 billion in 2011 and EUR 1.3 billion in 2012, 
respectively, Italy’s ODA is projected to remain essentially unchanged in nominal terms (at about 
EUR 2 billion per year) between 2010 and 2013 at al ready minimal levels. According to Social 
Watch (2010), Germany  publicly announced in late 2009 that it  considered the EU’s step-by-step 
ODA scaling up plan as a declaratio n of intent, not an obligation unde r international law, and could 
                                                
 
46Special Eurobarometer 318 / Development Aid in times of economic turmoil  Wave 71.2 – TNS Opinion & 
Social (Fieldwork: May 2009 – June 2009 Publication: October 2009) 
47Commission simulation based on public announcement and intermediate targets indicated in the OECD DAC’s 
annual Development Co-operation Report. 
 
EN 34   EN not achieve an ODA ratio of 0.51%  in just one year. Finally, Greece  is drawing conclusions from 
the fact that it will not be able to move away from low aid levels and indicated that 0.51% will not 
be achieved prior to 2012, and this revised target is likely still too ambitious given current economic 
circumstances. The majority of 12 newest Member  States do not see the 0.17% or 0.33% targets as 
firm commitments, and have adopted lower nationa l targets (e.g. Estonia forecast to reach 0.17% by 
2015, Cyprus 0.18% by the same year) or seem to have no plan for ODA increases.  
 Third, back-loading the increase in ODA expenditure  has been the main factor in missing target 
levels. Sustaining the scaling-up pro cess through debt relief grants is impossible: debt relief grants 
are ‘one-off’ exercises by nature and insufficient if  not replaced after the de bt relief spike by ‘fresh 
money’ in ODA budgets. Experience shows that missi ng intermediate targets in a significant way 
leads to missing subsequent targets too. A good exam ple is the Member Stat es that si gnificantly 
missed the 2006 target of 0.33% GNI:  Greece, Italy and Portugal .  Once the target was missed, 
statements were made that the 2006 target would be achieved by 2007 or 2008.  In reality, the 2006 
target has not been met by any of them even  by 2010 and these three Member States ended up 
missing both the 2006 and
 the 2010 targets. 
 
Table 4 - Gap between 2010 ODA levels and 0.7%  and 0.33% ODA/ GNI individual targets,  
by Member State 
Member State  Funding Gap 
(EUR million)  Member State  Funding Gap (EUR million)
 
 0.7% target  0.33% target  
Germany  11245 Poland  1256 
Italy 9600 Romania  424 
France  6340 Czech Republic  411 
UK 5917 Hungary  294 
Spain  4043 Slovak Republic  242 
Austria  1424 Bulgaria  121 
Greece  1401 Slovenia  96 
Sweden  1321  Lithuania  89 
Portugal  851 Latvia  62 
Belgium  706 Estonia  47 
Finland  616 Cyprus  35 
Ireland  345 Malta  16 
Netherlands  264    
Denmark  76    
Luxembourg  65  Total  47307  
 
Source: OECD DAC/European Commission (EU annual  questionnaire on financing for development) 
 
Fourth, Europe relies  not only on the medium-sized donors, but also on EU countries with large 
economies  such as France, Germany, Italy and the UK to  boost average aid levels so as to reach 
targets. These countries account for 70% of the ga p to be filled between 2010 and 2015. If Europe is 
to meet the collective ta rget of 0.7% ODA/GNI by 2015, it is impera tive that all the big players step 
up their efforts.  
 
Table 4  above shows the funding gap between the 0.7% target and the current  level of ODA from 
EU Member States. When analysing the ODA gap to 2015, we can distinguish four groups of 
Member States: 
1. Denmark, Luxembourg, the Netherlands, and Sweden have already achieved the 0.7% 
target and rather than providing addi tional resources, may actually reduce their 
 
EN 35   EN contribution. These countries account for 3% of the gap and the risk of backtracking on 
their ODA commitments is small but not zer o. Available multi-annual budgets show that 
Denmark, the Netherlands and Luxembourg are planning to keep their aid steady in 
nominal terms till 2014 or 2015, with declining ODA/GNI ratios. Only Sw eden is expected 
to grow its aid both in volume and as a share of GNI. 
2. Belgium, Cyprus, Finland, France, Irela nd and the United Kingdom have reached the 2010 
targets or missed it by a small margin, and could achieve their individual targets (0.7  % and 
0.33  %) on time or ahead of time. These countries account for 30% of the funding gap and 
their downside risk is limited. Their share of the gap is likely to be filled, although the current degree of back-loading is probably too high. 
3. Austria, the Czech Republic, Estonia, Ge rmany, Lithuania, Malta, Poland, Slovenia and 
Spain have missed the 2010 targets but could st ep up their efforts. They account for 40% 
of the funding gap and the risk of not meeting their targets on time is relatively high. The 
most likely outcome is that only a fraction of their share of the gap will be filled on time.  
4. Bulgaria, Greece, Hungary, Italy, Latvia, Po rtugal, Romania, and the Slovak Republic are 
far behind and are unlikely to meet their individual targets by 2015. These countries account for 27% of the gap and the likelihood of  major improvements is low. The current 
economic situation in Greece and Portugal in particular may place a serious constraint on 
increasing ODA budgets. 
Unless decisive action is taken, the risk is high that the 2015 target will be missed by a large margin 
as shown by the above analysis. Th e Commission has pointed this out in the last four annual reports 
and has, over the years, proposed several ways of stepping up efforts. The options remain the same 
as identified in last year’s report: 
1. All Member States draw up realistic and verifiable national ODA action plans outlining 
how they aim to scale up and strive to ach ieve the 2015 ODA targets. Each annual action 
plan should be published by the end of the year preceding the spring Foreign Affairs Council (Development) (FAC). Core el ements of the action plan are:  
• Increasing ODA each year (by volumes and as a percentage of GNI) compared to the 
previous year in order to re ach and sustain EU targets. ODA increases are an issue of 
political choice, even in di fficult budgetary situations.  
• Indicating ODA estimates for the remain ing period until 2015. Overall ODA increases 
in the period 2010–2015 should be commensurate with the individual target to be 
reached or sustained by and beyond 2015 (0.7% of GNI for the EU-15 and 0.33% for the EU-12. Higher aid levels already achie ved by the strong performers should be 
maintained.  
• Describing concrete actions  to build public support for development in the Member 
State concerned, including better coverage of development-related issues in the national 
media and finding new and better means of  communication on deve lopment. The EU 
and its Member States need to do more to communicate developm ent success stories, 
and should do this more systematically and jointly. A better informed and educated 
public that is supportive of development cooperation can be a powerful ally in government commitments to increase ODA spending. Only an educated public will be able to hold governments accountable for delivering on their commitments.  
 
EN 36   EN 2. The European Council, in J une 2010, took up partially the idea of an EU-internal annual 
ODA peer review, by requesting an annual re port of the Council on the ODA situation. 
However, it remains to be seen whether th e European Council will assess the progress of 
each Member State and what guidance it will give for further joint EU progress for attaining the agreed ODA targets..  
3. Describing mechanisms for ensuring scaling- up. National legislation ring-fencing ODA or 
making ODA targets legally binding is helpin g some Member States to reach the 0.7% 
target early (Belgium) or to maintain aid leve ls at or above that level (Sweden). Against 
this background, the Commission had also propos ed that Member States should consider 
enacting national legislation on ODA levels wi th a view to reaching the agreed EU ODA 
targets or maintaining higher national aid levels . This could be done either through specific 
legislation, such as that currently bei ng examined in the UK, or through specific 
annotations in the national budget laws. 
Increasing ODA levels is not a tech nical exercise and Member Stat es need to decide on the way 
forward.  
2.2.7.  EU not acting in line with its promise on ODA to Africa 
What share of EU ODA increases have been  directed to the African continent? 
Since making the commitment to direct 50% of EU  aid increases to Africa  in 2005 (based on 2004 
aid levels), the combined EU aid to Africa has risen by a bout EUR 3.3 billion at constant prices so 
that 26% of ODA growth between 2004 and 2009 went to Africa, as shown in Figure 6.  
Figure 6 - ODA to Africa from EU15 in EUR million and as  a % of GNI (including imputed multilateral flows)  
ODA to Africa from EU Member States reporting to DAC in EUR million and as a % of GNI
including imputed multilateral flows
13,977 14,45716,36017,27118,431 18,20021,9283,3736,6408,412
2,0261,1982,483-
0.160.190.21
0.16 0.160.180.19
-5,00010,00015,00020,00025,00030,000
2004 2005 2006 2007 2008 2009 2010EUR million (2008 prices)
-0.050.100.150.200.25
% of GNI
EU Net ODA to Africa and imp multi excluding debt EU Net Debt Relief to Africa Per cent of donor GNIPlease note :  preliminary 2010 
data do not allow to identify debt relief to Africa.  Imputed multilateral flows for 2010 are estimates.
  
Source: OECD DAC data for 2004 – 2009 and Commission simulation on DAC data for 2010 
 
Most EU Member States stated that they have already met the commitment on ODA to Africa and 
some (e.g. Netherlands) have set up systems to mon itor their performance in this respect. For some, 
 
EN 37   EN aid to Africa already accounts for most of their bilateral ODA (e.g. 80% for Ireland, 64% for 
Portugal). Few Member States will not contribute to  that target through their bilateral ODA as they 
believe their comparative advantage is in other re gions of the world. An important dimension is the 
imputed multilateral share of EU aid to Africa, which amounted to some EUR 8.7 billion in 2010 
and contributed 50% of the collective EU increase from 2004 to 2010.   
How did EU ODA to Sub-Saharan Africa increase since 2005? 
EU ODA to Sub-Saharan Africa grew by around EU R 2.6 billion in real terms over the period 
2004-2009, thus meeting the less demanding target of  increasing EU aid to Sub-Saharan Africa. 
Preliminary estimates for 2010 indicate there was no further growth. Only the Netherlands and 
Portugal decreased their ODA to Sub-Saharan Africa over this peri od. The growth was due to aid 
through multilateral channels (EUR 1.8 billion), a nd ODA excluding debt relief (EUR 1.5 billion) 
partly compensated by a decline in debt relief of EUR0.7 billion. The relative importance of Sub-
Saharan Africa declined over the period from  47% of total EU ODA to 42%.      
2.2.8.  EU ODA to Least Developed Countries stable  
In November 2008, Member States promised, as part of the EU’s overall ODA commitments, to 
provide collectively 0.15% to 0.20% of their GNI to Least De veloped Countries (LDCs) by 2010 
while fully meeting the differentiated commitments set out in the ’Brussels Programme of action for 
the LDCs for the decade 2001-2010’. 
 According to available OECD DAC data, LDCs' sh are of EU ODA has increased both in absolute 
and relative terms since 2004 and stood at EUR 15.1 billion at 2008 prices, 31% of EU ODA or 
0.13% of GNI in 2010.  Ten Member States plan to ac hieve the LDC target of 0.15% to  -0.20% by 2015 wh ile ten think 
they will not do so, due in some  cases to budgetary constraints. For the remaining seven Member 
States no information is available.  According to DAC data summarised in Table 5 , Belgium, Denmark, Finla nd, Ireland, Luxembourg, 
the Netherlands, Sweden and th e United Kingdom had already me t the ODA to LDC target by 2009 
and stayed above it also in 2010. All of these countries had an average ODA/GNI ra tio well above 
the 0.15% mark for the entire period si nce taking the EU commitments. Ireland  is the only Member 
State that has kept a share of ODA to LD C greater than 50% for the entire period. Portugal  met the 
target on average in 2004-2009 and, along with Hungary and  Italy,  maintained a share of LDCs in 
total ODA greater than the EU average of 30% for most  of that period. Member States that have not 
reached the target need to make a deliberate effort  to increase their overa ll ODA and, within this, to 
increase the proportion of aid that goes to LDCs.   
 
Figure 7  summarises the evolution of the ODA to LDCs over GNI ratios for EU Member States 
reporting to DAC over the period 20 04-2010. The peak in 2005 and 2006 is due to large debt relief 
operations in those years. 
 
EN 38   EN Table 5 - ODA/GNI to LDCs and LICs 48 (2009 and average 2004-2009, %) 
 
ODA/GNI 2009 Average ODA/GNI 2004-
2009 Country  
LDC OLIC LIC LDC OLIC LIC 
 Austria  0.09 0.03 0.12 0.08 0.04 0.11
 Belgium  0.20 0.05 0.25 0.18 0.05 0.23
 Denmark  0.34 0.12 0.46 0.33 0.12 0.45
 Finland  0.19 0.05 0.24 0.15 0.04 0.19
 France  0.12 0.08 0.20 0.12 0.06 0.18
 Germany  0.10 0.03 0.13 0.09 0.04 0.13
 Greece  0.04 0.01 0.04 0.04 0.01 0.05
 Ireland  0.28 0.04 0.32 0.27 0.04 0.31
 Italy  0.05 0.01 0.07 0.06 0.02 0.08
 Luxembourg  0.39 0.09 0.48 0.34 0.08 0.43
 Netherlands  0.21 0.06 0.26 0.24 0.08 0.31
 Portugal  0.10 0.01 0.10 0.16 0.01 0.16
 Spain  0.12 0.03 0.15 0.08 0.02 0.11
 Sweden  0.34 0.09 0.43 0.30 0.07 0.38
 United Kingdom  0.18 0.06 0.24 0.15 0.08 0.23
 Czech Republic  0.04 0.01 0.05 0.03 0.01 0.04
 Hungary  0.03 0.01 0.04 0.03 0.00 0.03
 Poland  0.02 0.00 0.03 0.02 0.00 0.03
 Slovak Republic  0.02 0.00 0.03 0.04 0.01 0.05
 Slovenia  0.03 0.01 0.04 0.06 0.01 0.07
 Total EU (20 Member 
States)49  0.13 0.05 0.17 0.12 0.05 0.17
 
Source: OECD DAC  
 
 
                                                 
48 LDCs : Low Developed Countries. LICs: low Income Countries. OLIC: Other Low Income Countries 
49For other EU Member States th at are not DAC members this in formation is not available. 
 
EN 39   EN Figure 7 - EU ODA to LDCs as a % of GNI including imputed multilateral flows 
 
8,713 9,534 9,604 9,948 11,102 11,659 12,731 13,701 15,009 14,844 15,136 597 575 1,951 4,047 2,652 676 619 395 465 238 
-0.090.100.110.13
0.13
0.110.110.120.130.130.13
-0.010.010.030.050.070.090.110.130.15
-5,000 10,000 15,000 20,000 25,000 
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 (E)
% of GNI€ million (2008 prices)ODA to LDCs from EU in EUR million and as a % of GNI
(including imputed multilateral flows - data at 2008 prices)
EU Net ODA to LDCs and imp multi excluding debt EU Net Debt Relief to LDCs Per cent of donor GNISource :  OECD DACPlease note :  preliminary 2010 
data do not allow to identify debt relief to LDCs.  Imputed 
multilateral flows for 2010 are 
estimates .
 
Source: OECD DAC  
 
 
2.3. Scaling up funding for tackling Climat e Change and Biodiversity Challenges 
2.3.1.  Climate change fast-start finance 
EU Commitments  
European Council Conclusions on 10/11 Decem ber 2009: The EU and its Member States 
are ready to contribute with fast-start funding of EUR 2.4 billion annually for the years 
2010 to 2012. 
2.3.1.1.  Background 
Climate change is a global threat. The EU as a w hole is committed to playing a leading role in the 
fight against global warming in or der to keep global average temperature increase below 2 degrees 
Celsius compared to pre-industrial levels.50 Consequently, the EU is an active participant in the 
negotiations on climate change under the Unit ed Nations Framework Convention on Climate 
Change (UNFCCC). A key topic of these negotiations  is the financing of mitigation and adaptation 
activities. Developed countries expect developing countries, espe cially the economically more 
advanced ones, to contribute to the overall effort to combat c limate change. At the same time, 
                                                 
50See http://ec.europa.eu/dgs/clima/mission/index_en.htm for an overview of EU ac tions on climate change 
 
EN 40   EN developing countries want to s ee a clear position from developed countries on finance for climate 
change related action51. 
 During the Climate Change Conference in Cope nhagen in December 2009, developed countries 
made pledges for short-term as well as long-ter m climate financing. These commitments were later 
anchored in the agreements conc luded at the Climate Change Conf erence in Cancún (the ‘Cancún 
Agreements’) in December 2010. The collective commit ment by developed countries is to provide 
new and additional resources approaching USD 30 billion for the period 2010-2012, with balanced allocation between adaptation and mitigation.    Funding for adaptation will be prioritised for the most vulnerable developing countries, such as the 
Least Developed Countries, Small Island Developing States and Afri ca. The European Commission 
and its Member States have pledged to cont ribute fast-start funding totalling EUR 2.4 billion 
annually for the years 2010 to 2012
52. 
 Developed countries also committed to a long-te rm goal of jointly providing USD 100 billion per 
year by 2020 to address the needs of developing count ries. This funding will come from a variety of 
sources, public and private, bilateral and multilateral, including alternative sources of finance. This 
longer term pledge has been made in the context of meaningful mitigation action by the developing 
countries. The UN Secretary General’s Advisory Group on Climate Finance has concluded that it is 
feasible to reach the USD 100 billion target , but that it will be a challenging task
53. 
 To maintain trust in the international negotiati ng process, it is vitall y important to ensure 
transparent measurement, reporti ng and verification (MRV) of thes e climate finance commitments. 
This was recognised at the Ca ncún conference. Developed count ries were asked to provide 
information on the resources they would make ava ilable to provide their fast-start commitment and 
on the ways in which developing countries can acce ss these resources. This information was to be 
sent to the UNFCCC secretariat for compilatio n into an information document in May 2011, 2012 
and 2013. It was agreed that a Standing Committee shou ld be set up to help ensure that climate 
change financing is delivered in a more consiste nt and coordinated manner and to help rationalise 
the financial mechanism, mobilise financial resour ces and improve the measurement, reporting and 
verification of support provide d to developing countries.  
 The EU is a strong advocate of  transparent reporting. It drew  a comprehensive report on the 
implementation of its fast-start commitments ah ead of the Cancún Climate Change Conference, 
based on a survey of Member States
54. The EU also intends to produce further fast-start progress 
updates for the subsequent UNFCCC Conferences (2011, 2012)55. The EU welcomes initiatives to 
make climate financing even more transparent56. Monitoring ODA which is related to climate 
change (and other environmental is sues)  is a difficult task due to the complexity of the issues and 
their multidimensional character. To help carry out  this task, a system of markers (agreed with 
Secretariats of each of the Rio Conventions—see Box 2 ) has been set up within the DAC/CRS 
                                                 
51European Commission, Stepping up international climate finance: A European blueprint for the Copenhagen 
Deal, COM(2009) 475 final 
52European Council Conclusions on 10/11 December 2009  
53http://www.un.org/wcm/content/site/clima techange/pages/financeadvisorygroup    
54 European Council, EU Fast start fina nce Report for Cancún, 6 December 2010 
55 In its meeting of 7 Decembe r 2010, the ECOFIN Council ’ invites the Commission to integrate fast start 
finance reporting into its annual EU ac countability and development finance report, with a further end-of-year 
update for UNFCCC meetings as needed .’ (§4) 
56 European Council, EU Fast start fina nce Report for Cancún, 6 December 2010 
 
EN 41   EN system. In parallel, other monitoring work is also being carried out, such as  the Fast St art Finance 
initiative ( www.faststartfinance.org ) sponsored by Denmark, Germany, the Netherlands, the UK 
and some other countries.   
Box 2. The ‘Rio markers’ – monitoring development assistance to address climate change, biodiversity 
and desertification 57 
In 1998 the OECD/DAC added the so called ‘Rio markers’  to the CRS system to enable the identification of 
aid activities related to the three Rio Conventions signed in 1992: the United Nations Framework Convention 
on Climate Change (UNFCCC), the Convention on Biological Diversity (CBD) and the United Nations 
Convention to Combat Desertifica tion (UNCCD). The use of the markers was made compulsory for DAC 
reporters for aid from 2007 onward. All bilateral aid ac tivities should be screened and marked as having the 
objectives of each Convention as a ’principal objective’ , ’significant objective’ or ’not targeted’. Activities 
can be marked for more than one convention, so ther e are overlaps between ODA volumes targeted at the 
individual conventions. 
The original Rio marker on climate change only covers mitigation related activities. For aid data from 2010 
onwards, a new marker will be introduced in use that al so tracks aid in support of climate change adaptation, 
in order to give a more complete pict ure of climate-change-related ODA.  
Using the Rio markers is fraught with methodological difficulties. The OECD/DAC points out that the 
marker data do not produce exact ODA volumes. Rather, they give an indication of the amounts allocated or 
spent and the extent to which donors  address the objectives of the Rio Conventions in their aid programmes. 
2.3.1.2.  Volume and focus of EU support 
EU and its Member States are jointly committed to  provide fast-start finance amounting to EUR 7.2 
billion in 2010-12. EUR 2.34 billion of this was provided in 2010 (data as of end February 2011). 
The current austerity requirements on national budge ts make it more difficult to mobilise funds. 
Nevertheless, the EU seems well on track to meet its overall target. Annex 4  provides a detailed 
breakdown of the commitments.  Fast-start finance is part of the wider action on climate financ ing being taken by the EU and the 
Member States. Data pr ovided by 10 Member States shows that their non-fast-start climate 
financing in 2010 was almost three times as large as their fast st art-financing commitments that 
year.   The EU uses both multilateral and bilateral channe ls for deploying its fast-start finance; 56% of 
commitments are multilateral and 43% bilateral.  Multilateral channels include the Climate 
Investment Funds, the Global Environment Faci lity, the Adaptation Fund, the Least Developed 
Countries Fund, the Forest Car bon Partnership Facility, the Re gional Development Banks and UN 
agencies. By channelling funds th rough existing platforms, initiati ves and bilateral structures the 
EU aims to reach the beneficiar ies efficiently and minimise addi tional administrative complications 
and the proliferation of new initiatives. Some 82
 % of the funds have climate change as a principal 
objective and 18% as a significant objective. Loans play  a large role in EU’s fast-start finance: 55% 
of the commitments are reported as loans and 45% as grants.  Around 35% of the commitments are earmarked for adaptation, 45% for mitigation and 15% for the 'Reducing Emissions from Defore station and Forest Degradation+ '-Initiative (REDD+). Support for 
adaptation aims to help poor and vulnerable countrie s adapt to and build resilience to the adverse 
                                                
 
57Source: www.oecd.org/dac/stats/rioconventions .  
 
EN 42   EN effects of climate change. Funding will help deve loping countries protect their infrastructure, 
industry and agriculture from cha nging weather patterns and rising sea levels. It will also support 
investment in water management, drought-resistant cr ops and disaster risk reduction, and will help 
provide better scientific an alysis as the basis for deci sion making and national planning. 
 Support for mitigation aims to speed the transiti on to a low-carbon global economy and to reduce 
greenhouse gas emissions by promoti ng the deployment of clean en ergy technologies. Funding will, 
for example, promote and support low-carbon energy, energy efficiency, low-carbon transport and 
the development of Nationally A ppropriate Mitigation Actions.  
 Support for REDD+ aims to cut greenhouse gas em issions by reducing deforestation and forest 
degradation in developing countries and by enhancing the sustainable management and 
conservation of forests and carbon st ocks. In this context, the EU is seeking to promote synergies 
between REDD+ governance objectives and the EU Action Plan for Forest Law Enforcement, 
Governance and Trade (EU FLEGT initiative).  Climate issues have become increasingly integrated in broader development strategies (making 
ODA ‘climate resilient ’) so that actions to mitigate and adap t to the negative e ffects of climate 
change often support efforts to reach other MDGs a nd vice versa, e.g. by fo stering climate-resilient 
development and access to clean energy. The EU will continue working to integrate climate change, 
biodiversity and other global commitments more  fully into its development strategies. 
2.3.1.3.  The global context 
The EU has been the largest contributor to mitig ation-related ODA since well before the 
Copenhagen conference. The European Commis sion and DAC-reporting Member States committed 
EUR 7.7 billion to aid activities  aimed at climate change m itigation between 2007 and 2009. This 
represented 50% of global reported  aid to combat climate change. These activities targeted areas 
which are closely linked to the obj ectives of fast-start finance.  
 After Japan, the EU as a whol e has pledged the largest amount  to fast-start finance (see Table 6 ). 
Note, however, that it is impossible to make like-fo r-like comparisons of fast -start contributions and 
pledges by different donors, as the metrics used vary as do the defini tions of what qualifies as fast-
start finance. Japan, for instance, counts other official flows (covering a range of non-ODA funding 
forms, such as export credits, as pa rt of its fast-s tart finance.  
 
Table 6 - Pledges to fast-start finance (2010- 12) and reported ODA to mitigation 2007-2009 
 
 Total pledged fast-
start finance 2010-12 (EUR million )
 Total ODA to mitigation 2007-2009 (2008, EUR million)
 
Australia  413 337
Canada  292 108
Japan  11.278 6.070
Norway  752 643
Switzerland  101 70
US 1 278* n/a
EU 7.200 7.580
* = US data is for fiscal year 2010 only 
Source: www.faststartfinance.org  for fast-start finance pledges and OECD/DAC for ODA to mitigation58 . 
                                                 
58 Activities marked with a ‘principal’ or a ‘significant’ objective are included). The ODA data is for the 
 
 
EN 43   EN  
2.3.1.4.  Measuring additionality 
The European Council has endorsed the principle that climate financing should not undermine the 
fight against poverty and conti nued progress towards the MDGs59. The Council has also agreed that, 
while support for mitigation and adaptation in deve loping countries will require additional resource 
mobilisation from a wide range of financial sources , ODA will continue to play  a role, particularly 
in supporting adaptation (includi ng disaster risk reduction), in the most vulnerable and least-
developed countries60. 
 Paragraph 95 of the Cancún Agreements states that developed countries will provide ’new and 
additional resources’ as fast-start fi nance. It is important for the cr edibility of the commitments that 
fast-start climate finance is not replacing other development finance. However no agreed definition 
exists of what constitutes ‘new and additional’.   The general understanding of  additionality is that certain financing sources or types of expenditure 
should not be lower than a pre-defined benchmark or reference level. In the ca se of climate finance, 
this concerns in particular the relation of climate finance to offi cial development assistance (ODA), 
as referred to by the Council.   Climate-related financing will normally be report ed as ODA as long as the support fulfils the 
OECD/DAC criteria of ODA. As climate and devel opment finance are mutually reinforcing and the 
objectives intertwined, tryi ng to separate the two would appear artificial  and unproductive. While 
adaptation projects will, as a rule, show multiple benefits, most mitigation projects will also have 
developmental benefits (e.g. reducing deforestation or renewable energy proj ects). Climate-related 
financing will also come in non-ODA form, e.g. thr ough non-concessional loan s or official export 
credits which do not qualify as ODA and possibly in countries not included in the DAC list of ODA 
recipients.  EU Member States use different defini tions of additionality as shown in Figure 8 . Some Member 
States aim for additionality rela ted to climate related funding, while others include climate spending 
in their efforts to increase ODA. Three Member States define additiona lity as ODA over and above 
the UN ODA target of 0.7% of GNI. One Member State states explicitly that fast-start financing is 
strictly additional to the aid budget and will not be reported as ODA. The most commonly used 
reference year is 2009, with some Member States using 2010. Some Member States finance climate 
efforts from outside the ODA budget s or through innovative sources . Some Member States use a 
combination of the definitions in  the graph and some have not yet decided on a definition of 
additionality. One Member State notes that development cooperati on and climate change are so 
closely linked that it is difficult to distinguish between the two objectives in terms of funding.  
 
                                                                                                                                                                  
European Commission and the 15 Member States which report to the OECD/DAC. No mitigation data was 
available for Luxembourg or the US which do not report on the Rio markers. No mitigation data was available 
for the Netherlands for 2009  
59European Council Conclusions of 30 October 2009, §23 
60Conclusions on Climate Change and Development of the General Affairs and External Relations. Council of 17 
November 2009, §15 
 
EN 44   EN Figure 8 - Definitions of additionality used by EU Member States in reporting fast-start financing in 
the context of this report 
 
Source: Questionnaire on financing for development61. 
 
At an aggregate EU level, given that the EU pledge was made collectively, the additionality 
requirement of the Copenhagen Accord should also be applied collectively. Si nce the EU’s view is 
that ’traditional’ aid to reduce poverty should not be diverted in  order to fund climate change 
activities, total ODA less climate related ODA woul d be an appropriate benchmark for gauging to 
new and additional climate finance, within the context of the specific definitions used by various Member States, as outlined above. This would ma ke it possible to check whether increases in ODA-
related climate finance are really additional or wh ether they encroach on other areas of ODA.   
 To even out annual variations, the ODA part of the benchmark could be defined as the average level 
of EU ODA budgetary commitments in the peri od 2007 to 2009, expressed in absolute and real 
terms. A benchmark level for climate-related ODA is  harder to obtain becau se, as was highlighted 
above, the current climate change marker only covers mitigation. Data on adaptation will only be available from 2010 onwards. For the years 2010 to  2012 a distinction would ideally need to be 
made between fast-start finance and other climate-re lated finance, but there is no way to track fast-
start finance within the DAC system.   The average EU total ODA for the period 2007 to 2009 in constant 2008 prices is EUR 48.6 billion 
and the corresponding amount for mitigation-relate d ODA is EUR 2.5 billion. For the purpose of 
this illustrative exercise it is assumed that the average total adaptation-related ODA for the period 
corresponded to the same share – 35 % - of total climate-related as the share of adaptation reported 
for fast-start finance. This would give an estimate of adaptation-re lated ODA of around EUR 1.4 
billion and total climat e-related ODA of some EUR 3.9 billion. The benchmark level would be 
EUR 44.7 billion. By this reasoning,  if climate finance is to be additional, the EU’s total ODA 
excluding climate-related ODA should be higher th an this benchmark level in the years 2010-12. 
Figure 9  illustrates this, using this  report’s estimate for the EU ’s total ODA in 2010 – namely –
EUR 53.5 billion in constant 2008 prices. This is EUR 8.7 billion above the benchmark level, which 
                                                
 
61 Based on 26 responses, of which 2 did not reply to the question. The European Commission is included as a 
‘Member State’ in the text. Two countries reported using two definitions. The ’Other’ category includes Member States 
that have not yet decided on a definition of additionality an d two Member States that have not reported any definition 9
748Additional to climate
related funding in a
specific reference year
Additional to the level of
ODA spending in nominal
terms
Additional to a ODA
spending target in % of
GNI
Other definition of
additionality
 
EN 45   EN corresponds to the maximum potenti al volume of climate finance that would be additional without 
cutting into support to other sectors. This is enough to cover the EUR 2.3 billion in constant 2008 
prices dedicated to fast-start finance and a consta nt level of EUR 3.9 billion of non-fast-start finance 
for 2010 compared to 2007-2009, which would imply a fa irly strict definition of additionality of 
fast-start finance being in addition to climate financ e in previous years. However, the latter can only 
be verified once the 2010 data on Rio-marked ODA become available .  
 
Figure 9: Calculating the additionality of climate fina nce – an illustrative example, EUR million in 2008 prices   
 
 Average 2007-2009 2010
Fast-start -2  2 9 1
Non fast-start (est) 3 887 3 887
Other ODA 44 713 47 280 30 000 35 000 40 000 45 000 50 000 55 000
Benchmark 
EUR 44.7 billionVolume above 
benchmark
in 2010:
EUR 8.7 billionTotal ODA 2010: 
EUR 53.5 billion
 
Source: OECD DAC for ODA and mitigation data 2007-2009 for DAC reporting Member States. Financing for 
development questionnaire for non-reporting Member States  and 2010 data. Mitigation data was not available 
for Luxembourg or for the Netherlands in 2009 . 
 
Consequently, if the EU continues to scale up ODA in 2011 and 2012 towards meeting its aid 
targets in 2015, the additionality requirement could be met, since the increase in total ODA is likely 
to exceed any increase in climat e-related ODA (both fast-start a nd non-fast-start finance). This 
would be in line with the EU commitment that  ’climate financing should not undermine or 
jeopardise the fight against pover ty and continued progress towa rds the Millennium Development 
Goals’.  It should be clear from the above that it is hard to quantify the benchmark because of the 
unreliability of the data on EU climate finance. On ce higher-quality data become available, it will 
be possible to monitor precisely the additionality of EU fast-start . In particular, the additionality 
exercise requires more complete data, includi ng data on adaptation financ ing, and further progress 
in the methodology and application of  the OECD DAC Rio Markers.  
 
EN 46   EN  
2.3.2.  Biodiversity 
EU Commitments  
European Council conclusions on the Co nvention on Biological Diversity (CBD): 
outcome of and follow-up to the Nagoya biodiversity conference, 20 December 2010 : The 
EU and its Member States have committed them selves to implementing the strategy for 
resource mobilisation and to substantially increasing resources (financial, human and 
technical) from all possible s ources balanced with the effec tive implementation of the CBD 
and its strategic plan. The EU will actively invol ved in developing baselines for monitoring 
the implementation of the st rategy, and into implementing the COP 10 decision to adopt 
targets at CBD COP 11, provided that robus t baselines have been identified and endorsed 
and that an effective reporting framework has been adopted.  
2.3.2.1.  Background  
In recent decades unprecedented economic growth  and human development have benefited people 
across the globe. However, these benefits have come  at the cost of degraded ecosystems and loss of 
biodiversity caused by changes in land use, over-e xploitation, the spread of invasive species, 
pollution and climate change. These negative eff ects are not only of concern because of the 
important intrinsic value of Nature, but also becau se they result in a decline of the ‘ecosystem 
services’ which natural systems provide. These se rvices include produci ng food, fuel, fibre and 
medicines, regulating water, air and climate, mainta ining soil fertility, storing carbon and recycling 
nutrients. Any loss of such services could have serious economic and social consequences, as has 
recently been shown 62. 
 A global strategy to combat bi odiversity loss for the coming decade was adopted at the tenth 
meeting of the Conference of the Parties (COP 10) of the Convention on Biological Diversity 
(CBD) in Nagoya (Japan) in October 2010
63. The plan is backed up by a strategy for mobilising 
resource to help achieve the CBD’s three objectives . This strategy aims to substantially increase 
international financial flows and domestic funding for biological diversity in order to significantly 
reduce the current funding gaps and thus help ensure that the C onvention is indeed implemented. 
The EU is working on a biodiversity strategy that will be adopted in 2011 and that follows on from the EU’s previous Biodiversity Action Plan. The new strategy will integrate the EU’s CBD 
commitments and the EU headline target – which is to  the loss of biodivers ity and the degradation 
of ecosystem services in the EU by 2020, and indeed  to restore them as far as possible, while 
stepping up the EU’s cont ribution to averting glob al biodiversity loss
64. 
 The EU recognises that the link between ecosystems and employme nt, income and livelihoods in 
developing countries is even str onger than in developed countries.
65 Consequently, the 
                                                 
62Economics of Ecosystems and Biodiversity  (TEEB) study, http ://www.teebweb.org/  
63The Convention on Biological Diversity entered into force in 1993 and has three main objectives:  i) the conservation 
of biological diversity; ii) the sustaina ble use of the components of biological di versity; and iii) the fair and equitable 
sharing of the benefits arising out of the utilisation of genetic resources. The Convention obliges developed countries to 
provide new and additional financial resources related to the implementation of the Convention (Article 20).  
64EU Council Conclusions on Biodiversity: Post-2010 EU and global vision and targets and international ABS regime, 
15 March 2010 
65EU Council conclusions on Biodiversity: Post-2010 EU and global vision and targets and international ABS regime, 
15 March 2010 
 
EN 47   EN 020040060080010001200140016001800
2007 2008 2009Principal objective
Significant objectiveCommission’s Communication on Policy Coherence fo r Development states that the EU should 
‘enhance funding earmarked for biodiv ersity and strengthen measures to mainstream biodiversity in 
development assistance’66. This ambition is carried forward in the EU Development Policy (the 
European Consensus on Development Cooperation)67 and Neighbourhood Policy68. 
 Indeed, one of the aims of the EU’s Biodivers ity Action Plan was to increase the development 
cooperation funds earmarked for biodiversity while  mainstreaming biodiversity more effectively 
into EU and Member States’ development aid budgets. Biodiversity is thus an integral part of EU’s 
development cooperation policy and activities. Until now, these activities have been monitored by 
reporting on the Biodiversity Action Plan. Ahead of the Nagoya meeting the Council asked the 
European Commission to continue reporting on the amount of funds re lated to biodiversity 
conservation and sustainable use
69.  
2.3.2.2.  Volume and focus of EU support 
From 2007 to 2009, the EU committed, on average, EUR 1.3  billion per year to biodiversity-related 
aid.70 The volume increased by more than 50% during th is period in real terms; from EUR 1 billion 
in 2007 to EUR 1.5 billion in 2009 (see Figure 10 ). In contrast the share of activities which had 
biodiversity as their principa l objective decreased from 36%  in 2007 to just 15% in 2009. 
 
Figure 10: EU's biodiversity-related ODA by ob jective. 2007-200 9, commitments, EUR million at 
constant 2008 prices 
Source: OECD DAC/CRS71. 
 
Among EU Member States, Germany, France and Spai n were the largest donors, but several other 
countries also donated substantial amounts during this period (see Table 7 ). Member States that are 
not DAC members are also contribu ting to the effort, as evidenced  by the appearance of the Czech 
Republic, Slovenia and Romania in the table.   
                                                
 
66COM (2005) 134 final 
67COM (2005) 311 final 
68COM (2003) 104 final, COM (2004) 373 final 
69EU Council Conclusions on Preparation of the tenth meet ing of the Conference of th e Parties (COP 10) to the 
Convention on Biological Diversity (CBD), 14 October 2010 
70See the Box on the Rio markers above for an ex planation of how this amount is calculated. 
71 Luxembourg does not report on the Rio ma rkers. No data for th e Netherlands for 2009  
 
EN 48   EN The EU’s biodiversity-related aid as a share of total EU ODA incr eased from 2.1% in 2006 to 3.2% 
in 2009. One major challenge in increasing the share is the low priority ofte n given to biodiversity 
by partner countries faced with other needs. More over, very few Member States have dedicated 
funds for biodiversity. Exceptions include the UK’s Darwin Initiative and th e Swedish International 
Biodiversity Programme SwedBio72.  
 
Table 7: EU’s biodiversity-relat ed bilateral aid, 2007-2009, commi tments, EUR million at constant 
2008 prices 
 2007 2008 2009 Average  
2007-2009 
Austria  10  22  21  18  
Belgium  47  83  92  74  
Czech Republic  2  3  2  2  
Denmark  71  113  84  89  
Finland  35  90  82  69  
France  115  154  168  145  
Germany  169  197  217  194  
Greece  3  3  6  4  
Ireland  20  14  75  36  
Italy  80  54  45  60  
Netherlands  156  170  n/a  163  
Portugal  1  1  3  2  
Romania  0.05  0.06  0.06  0  
Slovenia  1  1  1  1  
Spain  67  240  207  171  
Sweden  0  10  5  5  
United Kingdom  7  12  11  10  
European Commission73  207  239  517  321  
Total  991  1 406  1 533  1 310 
Source: OECD DAC/CRS74. 
 
Nearly a third of the EU’s bi odiversity-related aid goe s to Africa and around one fifth each to 
America and Asia (see Figure 11 ). The support is divided between  over 140 regions and territories. 
One fifth of the support has no specific geographical focus. 
 
                                                 
72Commission Staff Working Document, Consolidated Profile Accompanying Document to the Report from the 
Commission to the Council and the European Parliament - th e 2010 Assessment of Implementing the EU Biodiversity 
Action Plan, SEC(2010) 1163 final, p. 131, 90 and 94. 
73 The European Commission did not consistently use the Rio Marker on biodiversity until 2009. As a consequence, the 
European Commission data reported to the DAC and presented in the table are currently under review. Preliminary revised volumes are 2007: EUR 75 million, 2008: EUR 151 million, and 2009: EUR 412 million. 
74 Luxembourg does not report on the Rio markers and there is no data for the Netherlands for 2009. Activities marked 
with a ‘principal’ or a ‘significant’ objective are included. M onterrey survey for the C zech Republic, Romania and 
Slovenia. 
 
EN 49   EN Figure 11 - EU’s biodiversity-relat ed bilateral aid by geographic ar ea, 2007-2009, percentage share, 
commitments 
30%
20% 18%8%5%1%18%
Africa
America
Asia
North Africa and Middle East
Europé
Pacific
Bilateral, unspecified
 
Source: OECD DAC/CRS75 
 
In terms of sectors, the EU’s biodiversity-rel ated aid falls primarily within environmental 
protection, followed by water and sanita tion, agriculture and forestry (see Figure 12 ). 
 
Figure 12: EU’s biodiversity-related bilateral aid by sector, 2007-2009, percentage share, commitments 
 
Environmental 
protection
37%
Water and 
sanitation
20%Agriculture
14%Forestry
7%Other
22%
 
Source: DAC/CRS76 
2.3.2.3.  The global context 
Global ODA for biodiversity rose in 2009 after a small decline in 2008 (see Table 8 ). In terms of 
activities reported to the OECD/DAC the increase was 24% in real terms to a total of EUR 3.0 
                                                 
75 see footnotes 73 and 74 
76  see footnotes 73 and 74 
 
EN 50   EN billion in 2009 in constant 2008 pr ices. The US does not report on th e Rio markers and data for the 
Netherlands are missing for 2009. The annual contri bution of each country can be estimated at 
around EU200 million. The EU contribution corresponds to around half of all biodiversity-related 
ODA over the period 2007 to 2009. 
 
Table 8: Total biodiversity-related bilateral aid 2007-2009, commitments, EUR million at constant 
2008 prices 
 
 2007 2008 2009 Average 
2007-2009 
Australia  43  67  110  73 
Canada  43  36  125  68 
Norway  53  72  202  109 
Japan  1 233  608  787  876 
Korea  9  17  29  18 
Switzerland  33  19  26  26 
US  187  199  205  197 
EU  991  1 406  1 533  1 310 
Other  2  6  2  4 
Total  2 594  2 430  3 019  2 681 
Source:  OECD DAC/CRS77 
The EU and its Member States  provide contributions to a number of biodiversity-related 
conventions: the Convention on Biological Divers ity, the Ramsar Convention on Wetlands, the 
Convention on the Conservation of  Migratory Species of Wild  Animals, the Convention on 
International Trade in Endangered Species, the African-Eurasian Migratory Waterbird Agreement 
and the World Heritage Convention78.  
 In addition, the EU Member States  are important contributors to the Global Environment Fund (GEF) 
and the UNEP Environment Fund. The GEF serves as  the financial mechanism for the Convention on 
Biological Diversity. It has been replenished five times. EU Member States  provided EUR 1.096 billion 
to explain GEF-4, wh ich represented 52% of  total contributions
79.  
 Preliminary data on the recently-concluded explai n GEF-5 shows that, comp ared to the previous 
replenishment, EU Member States increased their contributions considerably  - by 24% - to EUR 1.357 
billion, or 54% of total contributions
80. The UNEP Environment Fund will spend around a fifth of its 
budget on biodiversity-relate d activities in 2012-2 013. EU Member States co ntributed EUR 43.9 million 
to the UNEP Fund in 2009 and EUR 39.2 million in 2010, wh ich in both years co rresponded to around 
three quarters of total contri butions/pledges81.  
                                                 
77 Luxembourg does not report on the Rio markers and there are no data fo r the Netherlands for 2009. Activities 
marked with a ‘principal’ or a ‘significant’ objective are included. Monterrey surv ey for the Czech Republic, 
Romania and Slovenia. USAID, Biodiversity Conservation and Forestry Programs Annual Report, October 2010. The 
United States does not report on the Rio markers. The US data in the table are labelled ‘funding’ in the USAID report  
78See SEC(2010) 1163 final for details 
79SEC(2010) 1163 final 
80GEF Secretariat & World Bank, Summary of Negotiations Fifth Replenishment of the GEF Trust Fund, May 17, 2010, 
http://www.thegef.org/gef/sites/the gef.org/files/documents/GEF-A.4  
7%20Summary%20of%20Negotiations%20of%20the%20Fif th%20Replenishment%20of%20the%20GEF_0.pdf  
81http://www.unep.org/rms/en/Financing_of_UNEP/Environment_Fund/index.asp  
 
EN 51   EN 2.4. Increasing international support to Deve loping Countries through Innovative 
Financing Sources and Mechanisms  
EU Commitments 
Conclusions 11 November 2008 (Common EU  position for the Doha Financing for 
Development Conference: 
The EU welcomes the success of  the pilot phase of implementa tion of innovative sources of 
financing and calls for a change of scale in th is area. It encourages all donors which have 
shown their ability to provide stable and predictable resources in a coordinated manner 
and to participate in existing initiatives in the field of health (air ticket levy/UNITAID, 
IFFIm/GAVI, AMC). It encour ages broad collaboration, which includes the private sector, 
civil society and the internati onal financial institutions, to ex periment with and implement 
new mechanisms and partnerships allowing an increase in financing for development, 
including via the carbon market. The EU will st udy the creation of tools to assist private 
financing for development, in particular to mobilise savings used for the benefit of 
developing countries.  
European Council (October 29 and 30, 2009) 
– agreed on the need to prepare a coordinated strategy for exiting from the broad- based 
stimulus policies when recovery is secured, 
– invited the Commission to examine innovative fi nancing at the global level, with a view 
to facilitating fisca l exit strategies and fiscal consolidation, 
– recognised the need to significantly increa se financing to help developing countries 
implement ambitious climate mitigation and adaptation strategies, without jeopardising 
the fight against poverty and con tinued progress towards the MDGs, 
– highlighted the role of innovative financing in ensuring predictabl e flows of financing 
for sustainable development, especially towards the poorest and most vulnerable 
countries. 
European Council (June 15, 2010) 
The EU is seriously considering proposal s for innovative financing mechanisms with 
significant revenue generation potential, with a view to ensuring pr edictable financing for 
sustainable development, especially towards the poorest and most vulnerable countries. 
The EU calls on all parties to significantly step up efforts in this regard, welcomes the 
ongoing work by the Leading Group on Innovativ e Financing for Development, and takes 
note of the ongoing work of the Task Force on International Financial Transactions for 
Development and of the Task Force on Innovative Financing for Education. 
Innovative financing mechanisms have been under di scussion and trial for some years in order to 
address financing needs for development. Innova tive sources of financing could play a more 
prominent role in the near future, not least be cause of the difficulties of  many donor countries in 
meeting their ODA commitments in the medium term. Development budgets are coming under increasing pressure, in particular because of the difficult situation of public  finances in many donor 
countries as a consequence of the crisis. The reference here is to  innovative sources of development 
finance, and it is therefore not confined to ways to increase official development assistance (ODA). 
 
 
EN 52   EN The recent Commission Comm unication "Taxation of the Financial Sector"82 mentions arguments 
for a fair and substantial contribution, by the fi nancial sector, to addr ess many and varied key 
challenges for the EU, including "commitments to wards developing countries and to combat 
climate change and global resour ce scarcity." The Commission is  currently conduc ting an impact 
assessment on new financial sector taxes; the impact assessment is expected to be published before 
the summer 2011. Depending on the findings of the impact assessment and on concrete Commission proposals revenues from such taxes coul d possibly be used to also respond to global 
and European challenges, such as development and the achievement of the MDGs and other internationally agreed development objectives, as  well as efforts to tackle climate change. 
 In its Staff Working Paper "Innovativ e financing at a global level"
83, the European Commission 
provided an assessment of the various instruments of innovative financing relating to the financial 
sector, climate change and development on the basis of a number of criteria (see Box 3  below). 
Box 3. Review of Innovative financing instruments 
Air ticket levy . UNITAID is a drug purchasing facility aimed at combating the major pandemic diseases 
affecting the developing world. UNITAID buys the necessary drugs and diagnostics and negotiates 
significant reductions in the prices of pharmaceutical firms. Almost half  of the available funding comes from 
a solidarity contribution levied on air tickets. This is already applied in 11 countries and it has enabled France 
for example to generate an extra EUR 160 million in conventional aid. 
International Financing Facility .  The International Finance Facility for Immunisation (IFFIm) exists to 
rapidly accelerate the availability and predictability of funds for immunisa tion. The funds raised by IFFIm 
are used by the GAVI Alliance, a public-private partnership which aims to reduce the number of vaccine-
preventable deaths and illness among ch ildren under five. So far IFFIm has raised more than USD3 billion 
for the GAVI Alliance’s immunisation pr ogrammes. IFFIm's financial base consists of legally binding grants 
from its sovereign sponsors. By signing the grant agreements, these countries have agreed to pay these 
obligations in a specified schedule of payments over 20 years. 
Advance Market Commitments (AMCs) for vaccines aim to encourage th e development and production of 
affordable vaccines tailored to the needs of developing countries. Through a forward-looking binding 
contract from donors and international agencies guar anteeing a viable market for target vaccines, AMCs 
encourage vaccine makers to develop or build manuf acturing capacity for urgen tly needed vaccines. The 
binding contract guarantees a pre-agreed price for the first doses of v accines sold to developing countries, so 
that companies can re-coup their inve stment costs. In exchange, participating companies must guarantee to 
supply vaccines for the long term at a pre-agreed sust ainably low price that deve loping countries can afford. 
In the AMC pneumococcal pilot, the governments of Italy, the United Kingdo m, Canada, Russia, and 
Norway and the Bill & Melinda Gates Foundation have committed USD1.5 billion, with GAVI promising to 
allocate USD1.3 billion thro ugh 2015. In March 2010, GlaxoSmithK line (GSK) and Pfizer Inc. became the 
first two companies to make long-term commitments to supply new vaccines for the Pneumo AMC. The two 
participating firms committed to supply 30 million doses each per year for a 10 year period. These doses will 
be sold at USD3.50 each rather than at the current price in industrialised co untries of USD70 per dose. 
EU ETS Auction Revenues .  Some Member States used the EU Emissions Trading System (EU ETS) 
auctioning revenues for development. According to Commission estimates, ETS auction revenues could 
reach EUR 50 billion annu ally by 2020.  The total revenues Germ any raised, for example, were EUR 528 
million in 2009 and EUR 560 million in 2010, of which EUR 230 million were reported as ODA. The 
Federal Ministry for the Environment, Nature Conservation and Nuclear Safety (BMU) coordinates its 
activities with the Federal Ministry for Econom ic Cooperation and Development (BMZ). BMZ’s 
programmes are fully integrated with existing development cooperation. 
                                                 
82COM52010)549 of7.10.2010  
83 SEC(2010)409 of 1.4.2010 
 
EN 53   EN National Lotteries .  The Belgian Survival Fund (BSF), financed with proceeds from the national lottery, was 
created in 1983 by the Belgian Government in response to drought and famine in sub-Saharan Africa. The 
following year, BSF and IFAD formed a partnership to pursue a common goal; helping poor people in rural 
areas overcome poverty and improve food security. Joint Programme (JP) interventions target the most 
vulnerable populations in the most fragile parts of Africa. From January 2010 the BSF will be renamed the 
Belgian Fund for Food Security (BFFS) to better refl ect its food security agenda. The International 
Communities programme is the UK Big Lottery Fund’s way of helping disadvantaged communities overseas. 
It will have a budget of up to £80 million between 2010 and 2015. 
Depending on the mechanism, at most six Member States raised funds vi a innovative mechanisms 
in 2010. The use of the IFFIm was most common (F rance, Netherlands, Italy, Sweden, Spain and 
United Kingdom) , followed by AMC (United Kingdom and Italy) and Debt2Health (Germany 
only).    Austria and Germany have introduced air ticket le vies, but the funds raised are not earmarked for 
development cooperation. The United Kingdom al so supports the Private Infrastructure 
Development Group (PIDG) governed by a donor council  with members from 8 donors, and utilises 
innovative facilities to address ma rket failures preventing private i nvestment in infr astructure in 
developing countries. Social a nd environmental safeguards conf orm to World Bank standards. 
 A new tax on international financial transactio ns (FTT or Tobin tax) is supported by several 
Member States.  In a report re leased in April 2010, the IMF propos ed instead a levy on the balance 
sheets of all financial institutions and a "financial activities tax" on pay and profits, rather than a tax 
on international transactions.  Th e IMF concluded that “there may indeed be a case to supplement a 
levy of the kind described above with some other form of taxation, but an FTT does not appear well 
suited to the specific purposes set out in the mandate from G-20 leaders
84.” Some Member States 
such as Belgium, France and Spain support the intr oduction of an FTT at EU level or worldwide.  
 The recent Commission Comm unication on "Taxation of the Financial Sector"
85 established a clear 
link between a number of key challenges for the EU (including "commitments towards developing 
countries and to combat climate change and global resource scarcity ") and the "fair and substantial 
contribution" of the financial sector "to address the above challenges".  
 The Commission is currently conducting an impact assessment on new financial sector taxes which 
is due to be published in 2011. Revenues from such taxes could potentially, as part of the national 
or EU budgets, or through some fo rm of earmarking to internationa l funds, be used to respond to 
global and European challenges, su ch as development and the achievement of the MDGs, as well as 
efforts to tackle climate change. 
                                                
 
84IMF (2010) - Financial Sector Taxation. The IMF’s Report to the G-20 and Background Material . p. 17 
85See http://ec.europa.eu/taxation_customs/resources/documents/taxation/com_2010_0549_en.pdf   See 
http://ec.europa.eu/taxation_customs/resources/documents/taxation/com_2010_0549_en.pdf   
 
EN 54   EN  
Table 9 - EU Innovative Sources for Develo pment Cooperation (EUR  million, 2007-2009) 
 
Mechanism & Instrument 2007 2008 2009 Average EU Member States 
Solidarity 300 289 255 281  
National Lottery 133 114 90 112 Belgium, UK  
New Taxes 167 175 165 169  
of which Adaptation Fund 2 2 3 2   
of which Airline Levy 165 173 162 167 France  
Catalytic - - 76 25  
Advanced Market Commitment (AMC) - - 76 25 Italy, UK  
Leveraged - 223 1,102 442  
Frontloading of ODA (e.g. IFFIm 
bonds issued) - 223 1,102 442 France, Italy, The Netherlands, 
Spain, Sweden, UK, 
Total 300 512 1,433 748  
Sources: Annual Reports for Lotteries, UNTAID for Airline Levy, UNFCC for Adaptation Fund, GAVI for 
AMC and IFFIm, OECD DAC for EU philanthropy 
 
Only nine Member States are planning to step up support for innovative financing mechanisms with 
significant revenue generation potential aimed at en suring predictable fina ncing for sustainable 
development. For example, Germany is setting up a new special fund under public law (Sondervermögen “Energie- und Klimafonds”) to fina nce national and intern ational programmes in 
the fields of energy efficiency, renewable ener gies and climate change . The fund will be in 
operation from 2011 onwards, with a small amount of funding available from contractually agreed 
payments by energy utilities. From 2013 onward s additional revenues from auctioning EU 
emissions allowances (compared to the 2008 level of EUR 915 million; excl uding emissions trading 
in the aviation sector) will be ch annelled to the special fund. It is  expected that several hundred 
million euro of climate and environment relate d ODA will be committed annually through this fund 
from 2013 onwards, subject to parliamentary budget approval. EUR 31.5 million will be committed 
as climate and environment related ODA from this fund in 2011.  As shown in Table 9  above, amounts raised from innovative sources for development cooperation 
from EU Member States have b een increasing over the period 2007-2009. National lotteries  in 
Belgium and the United Kingdom have been used  to fund development programmes, while the air 
ticket levy  has contributed to the fight against HIV/ AIDS through UNITAIDS and the 2% levy of 
the "Certified Emission Reductions" (CERs)  issued in respect of ea ch project under the Clean 
Development Mechanism (CDM) has raised about  EUR 7 million for climate change adaptation. 
Overall, these innovative sources have had a limite d impact, equivalent to just 3% of EU-15 ODA 
in 2009. However, catalytic ( AMC ) and leveraged ( IFFIm ) tools are now star ting to produce flows 
for the benefit of developing countries.  Flows incl uded in the table are funds  raised on international 
bond markets. The interest and principal on these bonds will need to be paid and donor contributions counted as ODA as the bonds are redeemed.    Although small, these innovative sources represent an  important option in a period of hard-pressed 
aid budgets. However, they also raise legitimate issu es in terms of additionality and earmarking of 
aid funds, coupled with ring-fenc ing of specific tax revenues. 
EU philanthropy and private donations  to developing countries have  existed for many years and 
therefore can hardly be consid ered innovative. Although smaller th an in North America, they 
amount to about EUR 2.5 billion per year ove r the period 2007-2009 acco rding to OECD/DAC 
statistics. These private flows are ofte n supported by EU Member States through tax discounts  that 
 
EN 55   EN are not considered as ODA, as they are not flows fr om the official sector, but nevertheless help to 
increase resources availabl e to developing countries. 
 
2.5. Leveraging Private Flows  
EU Commitments 
●Conclusions 11 November 2008 (Common EU  position for the Doha Financing for 
Development Conference)§10: “The EU is co mmitted to promote policies and instruments 
supporting private investment and the expansion of partner c ountries' private sector in 
support of an inclusive and sustainable economic  growth. The EU also recalls the positive 
impact and importance of migrants’ remittances.” 
§ 27: "The EU recognises the development impac t of remittances in migrants’ countries of 
origin. It encourages all countries the need for an enabling environment, the EU 
encourages the promotion of financial sector development in countries of origin. It 
commits to adopt “General Principles for In ternational Remittances Services" agreed by 
the Committee on Payments and Settlements Sy stems (CPSS) and operational definitions 
and recommendations allowing the improvement of  data on remittances and calls for all 
countries to do the same. The EU also encour ages partner countries to  reduce the cost and 
improve the safety of transfers, and to suppor t the migrants’ initiatives with a view to 
reinforce the impact of remittances on econom ic and social development. Underlining, in 
this regard, to address gender equality and empowerment of women to reinforce the 
impact of remittances on development". 
●Council Conclusions of 18 May 2009 (support to developing countries in coping with the 
crisis) § 11: “The Council expresses concern a bout the negative impact of the crisis on 
remittance flows. Bearing in mind their impor tance for development, the EU will further 
work towards enhancing the impact of remittances on development, including through the 
reduction of transaction costs. In this regar d, the Council welcomes the work in progress 
in international fora, including inter alia  the G8 Global Remitt ances Working Group, 
chaired by the World Bank, and work towards the establishment of an African Remittances 
Institute.” 
Council Conclusions of 18 November 2009 on Poli cy Coherence for Development §10: "to 
promote transparent, cheaper, faster and more  secure flows of remittances to migrants' 
countries of origin, and to en sure that relevant legislati on does not contain provisions 
hampering the effective use of  legal remittance channels.” 
 
In 2009, the Council emphasised the importance of m obilising all possible sources of financing for 
development, including export credits, investme nt guarantees and techno logy transfers, as 
instruments to leverage assistance aimed at stimul ating inclusive growth, investment, trade and job 
creation. The quality of info rmation on this type of financing is important in order to ensure global 
accountability and to better grasp th e development impact of different financial sources and flows. 
This requires a comprehensive overview of as many development-relevant financial flows as 
possible and from as many donors as  possible. Some of these non-ODA flows are, in principle, 
tracked under the established OECD/DAC reporting system, which needs to be developed further. 
Not all EU Member States have a reliable system in place yet to monitor such flows. Improving data on the different flows is, how ever, essential to enable better use of ODA to leverage more, and 
complementary, flows for development.  
 
EN 56   EN  
In July  2009, at the L´ Aquila summit, the G8 Heads of St ates endorsed the '5x5' objective and 
pledged “to achieve in particular the objective of a reduction of the global average costs of 
transferring remittances from the present 10% to 5% in five years through  enhanced information, 
transparency, competition and cooperation with partners.” 
2.5.1.  Private Capital Flows 
Foreign Direct Investment . The economies of many developing countries suffer from a general 
shortage of capital, especially fo reign direct investment (FDI). To  increase foreign investment and 
prevent the flight of domestic private capital, many developing c ountries are working to provide 
companies with transparent and simple regulator y and fiscal frameworks , expanded access to 
finance, business development se rvices, technology and innovation – in short creating a favourable 
business climate.    The majority of Member States reported that  they support private flows through investment 
guarantees, dedicated funds, pref erential loans and support for joint ventures in developing 
countries in sectors that have high returns in  terms of development, often through bilateral 
agreements.  
 
Some Member States and the Co mmission also have special progr ammes to promote microfinance. 
Germany, for example, supports the Regional Micr o Small and Medium Enterprises Investment 
Fund for Sub-Saharan Africa (REGMIFA). REGM IFA is promoted by a donor consortium 
composed of leading Donors/DFIs (including, inter alia, France, Germany, Netherlands, and Spain) 
and IFIs, and led by the German Financial C ooperation (KfW). It aims to enhance long and 
medium-term financial needs of local financial intermediaries providing funding to Micro, Small 
and Medium Enterprises (MSMEs) in Sub-Saharan Africa.  Dedicated institutions in Member States, such as national development agencies and development finance institutions, are in charge of specific tools and projects. For example, the Belgian 
Investment Company for Developi ng Countries (BIO), which wa s created in 2001 by the Belgian 
State and Belgian Corporation for International Investment (BMI/SBI ), aims to promote a strong 
private sector in developing countries and/or emerging economies so that these can accomplish 
sustainable development, promote social welf are and decrease poverty. BIO supports the local 
private sector directly (loans, equity stakes , guarantees for local micro, small and medium 
enterprises) and indirectly thr ough intermediary financial institu tions (banks, non-banking financial 
institutions, investment companies/funds aimed at  SMEs and microfinance institutions or MFIs). 
BIO also provides grants for feasibility studies a nd technical assistance to local enterprises and 
intermediary financial institutions.   Several Member States also contribute to initiativ es led by the international financial institutions 
that provide capital, guarantees, and various forms of finance and risk management tools to the 
private sector. To invigorate th e business and investment climat e in South Eastern Europe the 
Austrian Development Agency (ADA)  strongly supports the World Ba nk initiative “The Road to 
Europe: Program of Accounting Reform and Ins titutional Strengthening (R EPARIS)”. This is a 
regional programme aimed at cr eating a transparent policy environment and an effective 
institutional framework for corporate repor ting. The programme is designed around the 
introduction, implementation and effective en forcement of relevant portions of the EU acquis to 
southern-eastern European countries in order to  contribute to foreign direct and portfolio 
investment, foster private and fi nancial sector developments, impr ove the business environment and 
investment climate, and facilitate potential integr ation into (or harmonisation with) the European 
 
EN 57   EN Union. Denmark , in cooperation with AfDB  and Spain, is working on establishing an African 
Guarantee Fund in order to enable MSME’s to gain greater access to financial services.  
 The EU promotes foreign and domestic investment s through its support for the private sector in 
developing countries. The vast majority of  support is provided through national support 
programmes, the remainder being through region al programmes (including All ACP programmes). 
In the same framework, the European Investment Bank (EIB) is entrusted with the management of 
the Investment Facility (IF) pr ovided from the EU Member States' budgets via the European 
Development Fund (EDF). The IF, alongside the EIB own resources,  meets the financing needs of 
investment projects in the ACP region with a broad ra nge of loans and flexible risk-bearing 
instruments. In line with the objectives set out by the EU Policy and by the international community 
in the United Nations (UN) Millennium Development Goals (MDGs), the EIB’s overriding aim is to support projects that deliver sustainable economi c, social and environmen tal benefits through: 
supporting responsible private and public investments; fost ering regional cooperation and 
integration; mobilising domestic savings and acti ng as a catalyst for foreign direct investment; 
encouraging the broadening, deepening and strengthen ing of the local financ ial sector; and relying 
on/promoting partnerships.  
 
The European Commission encourages blending mech anisms, in which grants are added to loans as 
a way of achieving a number of objectives, including the ne ed to increase the volume of private and 
public development finance in a context of restrict ed resources. In order to support the EU policy, 
regional strategy and partnership in the targeted region and count ries, the Europe an Commission 
has set up five regional blending facilities: the Neighbourhood Investment Facility (NIF); the 
Western Balkans Investment Framework (WBIF); th e EU–Africa Infrastructure Trust Fund (ITF); 
the Latin America Investment Facil ity (LAIF) and the Investment Facility for Central Asia (IFCA). 
The potential range of instruments includes: t echnical assistance (TA); feasibility studies; 
investment co-financing; equity participation; risk-capital; inte rest rate subsidies; on-lending; 
guarantees; insurance subsidies; and incentive payments. TA/feasibility studies and interest rate 
subsidies provide for the largest number of projects. The facili ties cover similar broadly defined, 
sectors, i.e. transport, energy, so cial, environment and finance for SM Es. Partners in the beneficiary 
country can be public, private or mixed, with public  partners dominating the current projects aside 
from SME support.  Alongside the regional frameworks, the European Co mmission plays an active role in the sector 
approach, mainly in cooperation with Member States . An interesting example of this is provided by 
the Global Energy Efficiency a nd Renewable Energy Fund (GEER EF), an innovative Fund-of-
Funds, providing global risk capital through private investment for en ergy efficiency and renewable 
energy projects in developing c ountries and economies in tran sition. Launched in 2004, GEEREF 
aims to accelerate the transfer, development, use and enforcement of environmentally sound 
technologies for the world's poorer regions, helping to bring secure, clean and affordable energy to 
local people. GEEREF was initiated by the Direct orate General for Environment and the Directorate 
General for Development Co-operation (DEVCO) of the European Commission.  It is sponsored by 
the European Union, Germany and Norway and a dvised by the European Investment Bank Group. 
It has secured funding for a to tal of EUR 108 million and is considered as an ODA by DAC. 
 
According to Eurostat86, net FDI from the EU27 to devel oping countries peaked in 2007 and has 
been declining since then, as shown in Figure 13  below. 
                                                 
86 Eurostat is the statistical office of the European Union situated in Luxembourg. Its task is to provide the 
European Union with statistics at European level th at enable comparisons between countries and regions 
 
EN 58   EN  
Figure 13 – Net FDI Flows from EU to Develo ping Countries (EUR billions, current prices) 
 
2005 2006 2007 2008 2009
FDI to Developing Countries 48 84 204 130 100 -50 100 150 200 250 BIllions of Euros (current prices)FDI from EU27 to Developing Countries
 
Source: Eurostat 
 
Corporate Social Responsibility  refers to the voluntary inclusi on of social and environmental 
concerns, beyond the minimum legal requirements, in companies' business operations to address 
societal needs.  It has become an increasingly im portant concept and is pa rt of the debate about 
globalisation, climate change, competitiveness and su stainability. CSR practices  are not a substitute 
for public policy, but they can c ontribute to a number of public policy objectives in developing 
countries, especially in relation to labour markets, labour standa rds, skills development, more 
rational use of natural resources  and overall pove rty reduction. 
 In Europe, the promotion of CS R reflects the need to promote common values and increase the 
sense of solidarity and cohesion. In order to prom ote awareness and the adoption of CSR principles 
by companies operating in developing countries the Commission is supporting several projects 
totalling approximately EUR 50 million in th e period 2004 – 2010. The Commission regularly 
consults its High-Level Group of Member Stat es representatives and its European Multi-
Stakeholder Forum on the internatio nal aspects of CSR policies.  
The vast majority of Member States undertake na tional action to promote CS R principles and 15 of 
them report that they advocate th e adoption of internationally agr eed principles and standards on 
corporate social and environmenta l responsibility by European comp anies. Most of them strongly 
support multilateral initiatives such as: 
• The OECD Declaration on Intern ational Investment and Multinational Enterprises which 
promotes voluntary standards of responsible business conduct within the framework of the 
OECD Guidelines for Multinational Enterprises.  These guidelines are currently undergoing a 
review which is likely to be completed in May 2011. Twenty-three EU Member States and the 
Commission have created Nationa l Contact Points on the implementation of the guidelines.  
• The UN Global Compact, which is a voluntary co rporate citizenship initiative for companies 
committed to supporting and enacting a set of 10 core values in the ar eas of human rights, 
labour, the environment and combating corruptio n. Global Compact Local Networks have been 
established in 20 EU Member States. 
 
EN 59   EN • The International Labour Or ganization (ILO) Conventions and recommendations on labour 
standards. 
• the IFC’s "Performance Standards on Environment and Social Sustainability". 
• European Development Finance Institution (EDF I) “Principles for Responsible Financing”.  
• the Global Reporting Initiative (GRI). 
• the Principles of Responsible Investment (PRI). 
• the mandate of the Special Representative of  the UN Secretary-Genera l on business and human 
rights, Professor John Ruggie. 
• the OECD initiative concerning a “Due Diligence Guidance for Responsible Supply Chains of 
Minerals from Conflict-Affected and High-Risk Areas”. 
• OECD Convention on combating briber y of foreign public officials. 
• FAO Code of Conduct for Responsible Fisheries. 
• Realising Rights: the Ethical Gl obalisation Initiative (EGI) spearheaded by Mary Robinson. CSR 
is one of the core activ ities of EGI with a focus on a few c ountries (e.g. Liberia and Ghana) in 
Sub-Saharan Africa. 
There are a variety of other activitie s supported by a few Member States.  
 The Austrian Development Agency (ADA)  offers Business Partnershi ps to Austrian/European 
companies on a co-financing basis. One typical ex ample is the hepatitis vaccination programme of 
the OMV, the leading Austrian oil and gas cor poration. The project, implemented in Pakistan, 
focuses on vaccination and medical education a nd is part of a comprehensive development 
programme which includes water and infrastructu re. Another example is the business partnership 
with five European carpet retailers and the STEP foundation. It focuses on the elaboration of 
common CSR-standards for the entire value chain in carpet manufacturing in Nepal and Pakistan. 
 The German Government  has defined its own CSR Strategy  and brought forward a CSR Action 
Plan that builds on broad consulta tion with stakeholders. The inte rnational and development policy 
perspective is included in the national CSR Strategy. Developmen t Partnerships with business 
companies (develoPPP.de). Since 1999, the Fede ral Ministry for Economic Cooperation and 
Development has supported more than 1,200 proj ects with an amount of approx. EUR 500 million. 
The majority of these projects contain CSR components. Denmark’s  Innovative Partnerships for Development (IP D) Programme sets out  to promote better 
working and living conditions for employees, their families, the community and society at large by 
advancing strategic CSR and so cially responsible innovation.  
 The UK Government  is a strong supporter of responsible business behaviour.  The UK promotes 
adherence to the OECD Guidelines on Multinational Enterprises, which set recommendations for good corporate behaviour. NGOs and trades unions can  lodge, and have lodged, complaints against 
companies for breaching the Guidelines. Under the OECD mechanism the UK government investigates the complaints and produces a conc lusion, with recommendations for improvement if 
necessary.   
 
 
EN 60   EN Social and environmental considerations in public procurement rules . The EU public 
procurement Directives87 allow contracting authorities to take into account environmental and 
social considerations at all stag es of the procurement procedure. The prerequisite is that these 
considerations are linked to  the subject matter of the contract or  to the execution of the contract, if 
they are addressed in the contract performance clau ses, and comply with th e fundamental principles 
of the Treaty on the Functioning of the EU (transpa rency, non-discrimination) and with relevant EU 
law.  EU Member States may intr oduce more specific rules in their na tional legislation, in order to 
further promote the inclusion of social and envi ronmental considerations in public procurement, 
provided such national rules are in line with the pub lic procurement Directives and all relevant EU 
law. Also, on 28/01/2011 the Commission publishe d a guide to taking account of social 
considerations in public procurement88.  
 A number of Member States reported subs tantial reforms of their rules in 2010.  
 The Ministry for Foreign Affairs of Finland  is defining a new case management process. This is an 
overall process which has been ongoing sinc e 2009 and is based on updating manuals and 
templates. A new initiative during 2010 has been  the consistent addition of social and 
environmental clauses into terms of reference templates. These new templates and interlinked 
manuals are being put into use,  even though the case management process software is not yet 
usable.  In 2010 the government of the Netherlands  started to implement its new policy on sustainable 
public procurement. From January 2010 environmenta l criteria have been applied and from 2011 
onwards social criteria will also be applied.  P ublic procurement is used to pursue various policy 
objectives, including development objectives. The government links its public procurement policy 
to economic diplomacy, activitie s of multilateral organisations (e.g. ILO) and supply chain 
initiatives (e.g. the Dutch Sustainable Trade In itiative and ‘fair trade municipalities’). The 
government has chosen to apply fundamental labour  standards and human rights on a generic basis 
(i.e. in a uniform manner in al l public procurement). The development aim is to bring about 
improvements in the entire supply chain (a proc ess-oriented approach). For a limited number of 
products, for which community-supported supply chai n initiatives ex ist, supplementary standards 
apply. These standards relate to living wages/income (or fa ir trade), working hours, and 
occupational health and safety. The system is de signed to be as simple  as possible for both 
contracting parties and suppliers, a nd to be consistent with actual practice. It only applies to large 
contracts (above EUR 133,000 for goods and services). Companies will be held accountable for the 
way they fulfil their supply chain responsibilities with regard to th e product, work or service they 
deliver. 
2.5.2.  Remittances 
Remittances sent by migrants to their countries of origin, private by nature, are essential to 
improving the livelihoods of millions of people a nd for some countries ar e more significant in 
volume terms than ODA.   
                                                
 
87Directive 2004/17/EC of 31 March 2004 coordinating the procurement procedures of entities operating in the 
water, energy, transport and postal services sectors (OJ L 134, 30.4.2004) and Directive 2004/18/EC of 31 March 2004 on the coordination of procedures for the award of public works contracts, public supply contracts 
and public service contracts (OJ L 134, 30.4.2004). 
88See http://ec.europa.eu/social/BlobServlet?docId=6457&langId=en  
 
EN 61   EN According to a recent Eurostat publication89, the total number of non-nationals (i.e. persons who are 
not citizens of their country of residence) living on the territory of the EU Member States on 1 
January 2009 was 31.9 million, representing 6.4% of the total EU population. More than one third 
of them (11.9 million) were citizens of a nother Member State. Among the non-EU foreign 
population living in the EU in 2009, 48.2% are citi zens of a High Human Development Index (HDI) 
country (with Turkey, Albania and Russia accounti ng for almost half); 44.4% are citizens of a 
Medium HDI country (one fifth of whom are citi zens of Morocco, followed by nationals of China 
and Ukraine); only 7.4% of th e non-EU foreign population livi ng the EU are from developing 
countries with a lower HDI (30% of whom have Nigerian or Iraqi citizenship).  
 With regard to migration flows in 2008, another recent Eurostat publication
90 indicated that in 2008 
EU Member States received a total of 3.8 million immigrants and at least 2.3 million emigrants are 
reported to have left one of the EU Member States. Compared  with 2007, immigration to EU 
Member States is estimated to have decreased by 6 % and emigration to have increased by 13 %. 
The scale and patterns of immigratio n differ from one Member State to another. It is estimated that 
more than a half (55%) of immigrants to the EU  in 2008 previously resided outside the EU, while 
44% of immigrants had previously  also lived in one of the EU Member States (other than the 
country of immigration).  
 The impact of the economic crisis on migration em ployment, migrant stocks and flows is not easy 
to assess, but it is generally acknowledged that migrants are often more affected by the economic 
downturn either because they work in sectors that ar e more affected by the crisis, such as tourism or 
construction, or because of th eir particular vulnerability.  
 
According to World Bank data, global remittance flows to developing countries grew from 2007 (EUR 203 
billion) to 2008 (EUR 220 billion). Remittance flows star ted to decrease in the last quarter of 2008. For 2009 
global remittances to developing countries remained stable at EUR 220 billion. In 2010 the growth in 
remittances is expected to have resumed and attained EUR 245 billion-91  
Worker remittances are defined by the World Bank as the sum of three components: (a) workers’ remittances 
recorded under the heading “current transfers” in the curr ent account of the balance of payments; (b) 
compensation of employees which includes wages, salaries, and other benefits of border, seasonal, and other 
non-resident workers (such as lo cal staff of embassies) and which are recorded under the “income” 
subcategory of the current account; an d (c) migrants’ transfers which are re ported under “capita l transfers” in 
the capital account of the IMF’s Ba lance of Payments Yearbook.  
 
Data on remittance flows are not always reliable , as a large proportion of remittances are not 
recorded in official statistics. The World Bank es timated that immigrants sent about USD440 billion 
of remittances and worker compensations to thei r countries of origin in 2010. Of these, USD325 
billion were sent to devel oping countries, although only USD22 billion went to low income 
countries, compared to about USD56 billio n of ODA in 2009. The relative importance of 
remittances in terms of volume is therefore so metimes exaggerated in the case of low income 
countries.   
                                                
 
89Eurostat, Statistics in Focus , 45/10. 
90Eurostat, Statistics in Focus , 1/11. 
91World Bank Migration and Remittances (Excel files attached to Outlook for Remittance Flows 2011-12: Recovery 
after the crisis, but risks lie ahead ) data as of November 2010 converted into Euro using Eurostat’s 
Euro/ECU exchange rates - Annual data.   
 
EN 62   EN According to WB statistics, remittances from EU  Member States to all countries (developed and 
developing) grew steadily between 2004 and 2008 and then declined in 200992.  Available data 
point to a further sl ight decline in 2010. 
 
Figure 14 – Remittances from EU Member States to All Countries  
 
Source: World Bank - World Development Indicators 
 
According to Eurostat most remittances from EU Member States registered in their Balance of 
Payments statistics93 are sent to developing countries. Of  the EUR 30.3 billion of remittances 
reported in official statistics for 2009, EUR 8.3 b illion were intra-EU an d EUR 22 billion extra-EU. 
EUR 19 billion were sent to developing countries94.  
2.5.2.1.  Donor Initiatives 
In recent years the importance of remittances has been recognised, and several international 
initiatives propose concrete measures to measur e them more accurately, assess their impact in 
country specific contexts, lower transfer costs, make them safer and faster, formalise them and 
leverage their impact on development by developing incentives for investment. 
                                                 
92World Bank’s World Development Indicators.  
93Data on remittance flows are often underestimated due to the use of informal re mittance channels, irregular 
migration, and ambiguity in the definition of migran ts (foreign born versus foreigner, seasonal versus 
permanent).  The quality of data is also affected by la ck of adherence to IMF guidelines on BOP statistics by 
some countries and differences between ho st and recipient coun tries’ records.  
94http://appsso.eurostat.ec.europa.eu/nu i/show.do?dataset=bop_remit&lang=en 
 
EN 63   EN  
Box 4. Summary of main international initiatives 
Guidelines for the compilation of data on remittances have been drafted by the 'Luxembourg Group'95 the 
'General Principles for Interna tional Remittances Services' and th e recent G8 initiative of a 'Global 
Remittances Working Group' coordinated by the World Bank. The G20 Summit in Seoul of November 2010 
recognised the importance of facilita ting international remittance flows and enhancing their efficiency to 
increase their contribution to growth with resilience and poverty reduction, and committed to support the 
above initiatives towards a reduction of the global average cost of transferring remittances.  
On a number of occasions (see above) the EU has undertaken to make remittances cheaper, faster 
and more secure and to maximise their development impact.   Some EU Member States follow a multi-pronged appr oach to foster remittances. The Netherlands is 
a good example, focusing on creating favourable condi tions to reinforce th e positive link between 
remittances and development through its own polic ies on remittances. The Netherlands contributes 
to the development of the financial sector in c ountries of origin. The aim is to achieve a more 
sustainable development impact of remittances. Las tly, the Netherlands aims to increase the poverty 
alleviation effect of money tr ansfers by promoting small-scal e initiatives by migrants.   
2.5.2.2.  Improving data on remittances 
Eurostat has started regular collection of data on remittances flows from each EU Member State and 
third countries. This information is regularly updated (most recently in December 2010). Generally, 
Member States still combine different data comp ilation methods for remittances, as these flows are 
difficult to capture. In the past, the ITRS (Inte rnational Transactions Reporting System, a data 
collection system based on data from banks and ente rprises on individual tran sactions) was the main 
source for data compilation, but direct repor ting by Money Transfers Operators, surveys and 
administrative data have also gained in significa nce in the meantime. The main reference for data 
compilers is the IMF's manual "International Transactions in Remittances": Guide for Compilers and Users", which was prepared by members of the Luxembourg Group and which are already 
applied by a number of Member States. At present more precise data on remittances are transmitted to Eurostat only on a voluntary basis - only data for Total World, Intra/Extra EU and Intra/Extra 
Euro Area are mandatory for Quarterly Balance of Payments reporting. The ECB also publishes 
data on workers' remittances for the euro area.  In response to the increasing demand for data  on remittances, Eurostat  launched a new annual 
survey in 2009, in which it asked Member States  to provide statistics on remittances and 
compensation of employees, collected as pa rt of balance of payments statistics. 
 According to the responses to the Commission's annual questionnaire on financing for development, 
14 Member States have no robust and reliable data concerning the amounts and destination of 
remittances from their country, such as ad-hoc surv eys, while 12 Member States said their data are 
robust.  Twelve Member States have not adop ted and do not intend to adopt the operational 
definitions, recommendations and best practices on improving the quality and coverage of data on 
remittances according to the compilation gui de drafted by the "Luxembourg Group".   
                                                
 
95The Luxembourg Group was created as an informal working group of practitioners to consider the difficulties of 
collecting and compiling remittance data. The objective of the Group is to make recommendations for improvements that should lead to the production of a compilation guide for remittance statistics. Jointly with Eurostat and the World 
Bank, the IMF planned the first meeting of the Luxembourg Gr oup (and constituted its secretariat) which was held in 
June 2006 with participa tion from 16 countries. 
 
EN 64   EN 2.5.2.3.  Favouring cheaper, faster and more secure flows of remittances  
According to the World Bank’s Remittance Prices Worldwide, the cost of sending remittances from 
the EU, measured for a USD200 tr ansfer, has been falling steadil y since 2008 in Fr ance, Italy and 
the United Kingdom, while remaining above the general averages in Germany. The United 
Kingdom and Italy have an average total cost below the overall aver age (8.89 percent). As shown in 
Table 10  below, costs declined in France and It aly and increased in Germany. However, the 
average cost is still higher than  the 5% target by 2014 set at the L’Aquila G8 Summit. The EU has 
not developed its own monitoring system. 
 
Table 10 - Average Cost to transfer  USD200 for EU G8 Countries (%) 
 
Country   2008   Q1 2009   Q3 2009   Q1 2010   Q3 2010  
 France  10.92 11.50 11.15 10.01 8.95 
 Germany  14.07 13.53 12.71 11.85 12.67 
 Italy  10.03 7.36 8.21 8.11 7.87 
 United Kingdom  10.26 10.27 9.05 8.29 8.07 
 G8 Average  10.26 10.32 8.80 8.37 8.40 
 Global Average  9.81 9.67 9.40 8.72 8.89 
Source: World Bank 
 
Banks remain more expensive than Money Transf er Operators (MTOs) and the differing importance 
of each channel in EU Member States may explai n price variations across countries, as banks 
dominate the money transfer mark et in France or Germany, for example, while MTOs are relatively 
more important in the United Kingdom.  
 
Some Member States - including France, Germa ny, Italy, the Netherlands, and the United Kingdom 
- have set up remittance price comparison webs ites. The German government has set up a 
remittance price comparison website (www.geldtransf air.de). This was done in cooperation with the 
Frankfurt School of Finance and Management, w ho now own the ongoing pr oject. The objective is 
the reduction of transfer costs for formal remitt ances from migrants living in Germany to their 
countries of origin.  In 2009 Italy launched the “Rome Road Map fo r Remittances” at an 
International Conference. A dedicated website on the costs of remittances has been elaborated by 
stakeholders and co-funded by th e Ministry of Foreign Affair s and has operated since 2009 
(www.mandasoldiacasa.it ); it has been the first such website certified by the World Bank as being 
compliant with current applicable standards. The Netherlands supports a remittances comparison 
website (www.geldnaarhuis.nl). This website pr ovides information in eight languages on money 
transfer costs charged by banks  and money transfer offices. 
2.5.2.4.  Policy environment  
Substantial progress has been ach ieved in the form of the adopt ion of the Payment Services 
Directive (PSD) in November 2007, which lays the legal foundation for an EU-wide single market 
for payments, although it applies to intra-EU mone y transfers only. Fourteen Member States have 
gone beyond the requirements of the Directive to c over transfers between operators when one of 
them is outside the EU or when the transaction is made in currencies other than those existing in the 
EU.  Fully implemented in the EU Member Stat es since November 2009 - with the exception of 
Poland which is expected to adopt it in 2011 - it allows for a new category of non bank service 
provider, namely the "Payment institutions", i.e. money transfer operators or telecom providers for their pre-paid activities, which are now recognised as a separa te payment service provider and 
subject to specific authorisation. They have to comply with appr opriate prudential and regulatory 
requirements harmonised throughout the EU/EEE. This directive has resulted in increasing 
 
EN 65   EN competition, with 131 new licences obtained in EU Member States in October 2010, most of them 
in the United Kingdom. In addition, the E-Money Di rective adopted in October 2009, which has to 
be transposed by 30 April 2011, will authorise e-mone y institutions (such as issuers of pre-paid 
cards, on-line or telecom pr oviders for their pre-paid activities) to carry out busines s activities other 
than issuing e-money. Here again, the EMD stil l only applies to payments made within the 
EU/EEE, but the Member States have the right to ex tend its scope should th ey so wish. Both 
directives will be evaluated by the end of 2012, when their economic  impact will be assessed and 
recommendations will be made re garding their potential revision. 
 In the Council Conclusions of 30 November 2009, the EU undertook "to promote transparent, 
cheaper, faster and more secure flows of remittances  to migrants' countries of origin, and to ensure 
that relevant legislation does not contain provisions hampering the effective use of legal remittances channels", within the broader context of migration wh ich is one of the five pr iorities of the work on 
Policy Coherence for Development. The European Commission intends to keep up its efforts to 
identify any provisions hampering the effective use of legal remittances channels in the context of 
promoting mobile banking and transfers. It is sometimes argued that the legislation on anti money-
laundering and counter terrorism financing may be perceived as a barrier for migrants to send 
money through formal channels as well as a burden  on money transfer operators. So far, no Member 
State has conducted an assessment of the impact  of the legislation on anti money-laundering and 
counter-terrorism financing on the remittances' market.  
 As part of the Stockholm Programme, which is the 5-year plan (2010-2014) in the area of justice 
and home affairs
96, the European Council invited the Co mmission to submit proposals on how to 
further ensure efficient, secure and low-cost remittance transfers, and enhance the development impact of remittance transfers, as well as to ev aluate the feasibility of creating a common Union 
portal on remittances to inform migrants about tr ansfer costs and to encourage competition among 
remittance service providers.   A number of targeted in itiatives have been set up to support developing countries in establishing a 
policy framework that is more conducive to rem ittances, such as the Commission's support for the 
establishment, under the auspices of the African Un ion,  of an African Institute for Remittances and 
the contributions by a number of Member States  and the Commission to the multi-donor Financial 
Facility for Remittances of the International Fund for Agricultural Development (IFAD) which, 
inter alia, provides grants for innovative proj ects that support: i) the creation of enabling 
environments for market development, openness and transparency; ii) th e design of innovative 
business models; iii) the introduc tion of new technologies as a mean s for better financial inclusion; 
iv) financial access and services to rural re mote areas; and v) migrant investment and 
entrepreneurship. France  and the African Development Bank also organised two workshops in 
November 2009 with relevant local stakeholders in  Bamako and Casablanca in order for them to 
share experiences on existing regulatory framewor ks and discuss potential improvements to be 
made in terms of cost reduction, formalisation of flows, and suppression of barriers to competition 
and so on.
 More could be done to support developing count ries in improving data collection, and to 
strengthen their capacity in policy making, for example to counter potential anti-competitive 
behaviour of money transfer operators.  In a different vein, recent measures by some Memb er States, such as the decree in Italy requiring 
money transfer operators to inform local police within 12 hours if the pers on wishing to transfer 
                                                
 
96http://www.statewatch.org/news/2010/jun/eu-jha-council -jun-10-stockholm-programme- action-plan-conclusions.pdf  
 
EN 66   EN funds is unable to present a residence permit, could be counter-produc tive from a development 
perspective, because such restrictions will increas e the use of informal less secure channels to 
transfer remittances. 
2.5.2.5.  Support for the Financial Sect or in Developing Countries 
The Commission and EU Member States also imple ment programmes in part ner countries with the 
aim of developing the financial s ector (e.g. microfinance, technica l assistance on financial sector 
regulation and supervision). Throug h its development cooperation, th e EU supports the creation of a 
more favourable business environment in de veloping countries. Denmark, France, Germany, 
Netherlands, Sweden and the Un ited Kingdom contribute to the Pa rtnership for Making Finance 
Work for Africa, a major initiative that has been launched as part of the G8  commitments of the G8 
Heiligendamm summit of 2007, to support the effo rts of African countries to boost economic 
growth and fight poverty by encour aging and facilitating developm ent of the financial sector. 
Germany also cooperates bilaterally with part ner countries in advanc ing financial sector 
development, including the banking sector. Germ an Financial Cooperation (KfW) is one of the 
world’s major investors in microfinance. Germany is  active in several international initiatives that 
aim to improve the overall banking system, e .g. Financial Sector Reform and Strengthening 
Initiative (FIRST), Alliance for Financial Inclusi on (AFI), Consultative Gr oup to Assist the Poor 
(CGAP), and the Access to Insu rance Initiative (A2II). Furthermore, Germany co-chairs the G20 
expert working Group on SME Finance, aiming in particular at improving access to finance for 
SME in developing countries. Eight EU Member States (France, Germany, Ital y, Luxembourg, Netherlands, Portugal, Spain and 
the United Kingdom) declare they have implemente d solutions internally and in cooperation with 
third countries to overcome barrier s to access to financial services by migrants and their families, 
with a view to reinforcing the impact of rem ittances on their economic and social development. 
Two other Member States (the Czech Republic and Greece) plan to implement such solutions in the 
near future. Eight Member States (Belgium, Germ any, Estonia, Greece, Spai n, France, Italy and the 
United Kingdom) have implemented the "General Principles for International Remittances Services" agreed by the Committee on Payments and Settlements Systems (CPSS)  and referred to in 
the Council Conclusions of November 2008.   Some Member States (such as Finl and) feel that current payment se rvices already meet the needs of 
migrants at a reasonable cost and therefore take the view that no action is necessary. The share of 
remittance services providers in the overall paym ent transmission is minor, the bulk of payments 
are transferred via banking channels. Furthermore, there are no indications th at the current payment 
services do not satisfy the need s of migrants.  In other cases there are few immigrants from 
developing countries (Ireland, Latv ia, Lithuania, and Slovenia). 
 To improve financial literacy and access to financial services, the UK informs migrants about 
financial products suited to thei r needs and also works through dial ogue with the private sector. The 
UK prepared a leaflet explaining what information has to be given to the sender of money, what 
needs to be checked to make sure that the money reaches the recipient safe ly and what rights the 
sender has if things go wrong.  The Netherlands r ecently evaluated its cost comparison website. As 
most migrants have access to fina ncial services similar to that of  the rest of the population in the 
EU, the cost of remittances depends mainly on access to financial services in non-EU countries.  
2.5.3.
 Leveraging private flows 
There have been a limited number of initiatives by Member States on leveraging private flows to 
developing countries.  
 
EN 67   EN One of the most significant is th e support provided by Germany, France and the Netherlands for the 
Local Currency Financing Fund “The Currency Exchange” (TCX). TCX provides market risk 
management products in developing and emerging markets. This unique fund focuses on currencies 
and maturities which are not cove red by regular market providers. In this way, TCX helps provide 
local microfinance institutions and banks, bilatera l and multilateral development financers, and 
enterprises with long term fi nance in local currency.  
The Netherlands has also supported several priv ate public partnerships (PPPs) in development 
cooperation.  At present there are 75 PPPs in vari ous sectors: health, agri culture, water, trade and 
energy. They take various forms: innovative public private financing mechan isms, technical support 
to enhance the business climate, product developm ent, promotion of inclusive business models, 
pilots for sustainable trade, and capac ity building for local water utilities. 
 Sweden has launched a new programme called “B usiness for Development” or B4D. The B4D 
programme contains tools for new forms of dialogue  and collaboration with the private sector.  The 
purpose is to mobilise resources and encourage comp anies to develop their core activities so that 
they can contribute even more to ensuring be tter conditions for poor pe ople. The B4D toolbox 
contains, among others, “Innovations Against Poverty”, “Challenge Funds” and “Market 
Transformation”. 
 
2.6. Supporting Trade Capacity through Aid
97 
EU Commitments 
On 15 October 2007, the Council of the European Un ion adopted the EU Ai d for Trade Strategy 
with the following objectives:  
- Quantitative Aid for Trade (AfT): ambitions wi thin the gradual increase of overall EU aid 
(Member States’ and European Commission’s collectiv e spending on Trade Related Assistance to 
reach EUR 2 billion annually by 2010). 
- Enhancing the Pro-poor Focus and Quality of EU AfT 
- Increasing EU-wide and Member State donors’ c apacity in line with globally agreed aid 
effectiveness principles 
- Building upon, fostering and supporting ACP regi onal integration processes with an ACP-
specific angle of EU AfT 
2.6.1.  Background 
Increased participation in world trade has the potential to be an  engine for growth and poverty 
reduction in developing countries  by generating revenues and em ployment, lowering prices on 
essential goods and promoting t echnology transfer and increased productivity. Market opening and 
strengthened internationa l trade rules provide ne w opportunities, but are not on their own sufficient 
to generate trade, especially in the poorest co untries. Many countries face internal "behind the 
border" constraints such as a lack  of productive capacity, poor infras tructure, excessive red tape and 
inability to meet standards in high value export markets - all of which impact negatively on the 
competitiveness of developing country exports and undermine the potential benefits of increased 
imports. Trade-related development assistance – known as Aid for Trade (AfT) – targets these 
                                                 
97 This chapter summarises the Aid for Trade monitoring report 2011, which is included in Annex 6. The report 
provides detailed analyses of the data and issues covered in this summary. 
 
EN 68   EN “supply-side” constraints. It also strengthens co untries’ capacity to negotiate and implement trade 
agreements to reap the most benef it from increasing tr ading opportunities .  
 The EU and its Member States adopted a joint Aid for Trade Strategy on 15 October 2007 that aims 
at supporting all developing countries , particularly the Least Develope d Countries (LDCs), to better 
integrate into the world trading system and to  use trade more effec tively in promoting the 
overarching objective of eradicat ing poverty in the c ontext of sustainable development.  
 The strategy embraces the full AfT agenda, wh ich can be divided into six categories 1) Trade policy 
and regulations ; 2) Trade development ; 3) Trade-related infrastructure ; 4) Building productive 
capacity ; 5) Trade-related adjustment ; and 6) Other trade-related needs . Categories 1, 2 and 6 
correspond to more narrowly focused ‘Trade-Relat ed Assistance’ (TRA). TRA plus the remaining 
categories are referred to as ‘the wider Aid for Tr ade agenda’, which has em erged as the concept of 
ODA to benefit trade has broadened. The OECD/ DAC tracks ODA in each of the AfT categories 
through its Creditor Reporting System (CRS).  The EU AfT strategy is a joint strategy to whic h EU Member States have signed up. In addition, 
several Member States have adopte d specific AfT strategies in line with their national development 
policies. Sixteen Member States
98 and the EU responded this ye ar to the OECD/WTO AfT 
questionnaire which is intended to acquire information on the progress by individual donor 
countries with a particular focus on outcomes of  AfT strategies and programmes. The responses 
show that Member States and the EU ge nerally continue their engagement  without 
significantly altering their strate gy. Yet, six Member States adju sted their national AfT strategy 
since 2008 in areas such as region al integration, ‘economic growth’ and  enhanced engagement with 
the private sector. Six Member States foresee further changes in their strategies  in the near future.  
 The Commission prepares every year a monito ring report in order to assess progress in 
implementing the commitments made by the EU and its Member States in the EU AfT Strategy. This is done in close co ordination with the AfT reporting that is carrie d out by the WTO and the 
OECD, in the context of the moni toring of global AfT. The present chapter is a summary of the 
fourth EU AfT monitoring report, which is included in Annex 5, toge ther with sub-annexes. More 
background, explanations and analysis of the issu es covered in this summary can be found there. 
2.6.2.  Trade Related Assistance 
Trade-Related Assistance supports developing countries to design and implement trade policies and 
agreements, to stimulate trade by domestic firm s and encourage investme nt in trade-oriented 
industries. In 2005, the EU and its Member States  committed to increase its collective TRA to EUR 
2 billion per year from 2010 - EUR 1 billion by th e EU and EUR 1 billion in bilateral aid from the 
Member States. Last year's monitoring report show ed that the EU and Member States already met 
their EUR 2 billion target for TRA in 2008. In 2009,  the EU as a whole continued to increase its 
TRA commitments substantially, reaching almo st EUR 3 billion, compared to EUR 2.4 in 
2008  (Figure 15 ). This results mainly from an increase in Member States TRA commitments, from 
EUR 1.4 billion in 2008 to EUR 2 billion in 2009. F our Member States make up 76% of total 
commitments in TRA provided by Member States in 2009: Germany (34%), the UK (17%), Spain 
(15%) and Belgium (10%).  Member State financial commitments in 2009 incr eased in particular for Category 2 "Trade 
development, for which an increase of 50% was r ecorded. Trade development represented close to 
                                                
 
98 BE, CZ, DE, DK, ES, FI, FR, HU, IE, IT, LI, LU, NL, PT, SE, UK 
 
EN 69   EN 80% of total Member States TRA commitments in 2009. In contrast, the EU TRA was almost 
evenly split over the TRA categories in 2008 and 2009.  
Figure 15 – Trade Related Assistance 
(EU and EU Member States, EUR million)  
Trade Related Assistance
(EU and EU MS, in EUR million)
276 388 482 299 473 677 841 1.359 2.052 
592 566 733 
811 695 902 1.032 1.007 911 
867 954 1.215 1.110 1.168 1.579 1.874 2.366 2.964 
- 500 1.000 1.500 2.000 2.500 3.000 3.500 
2001 2002 2003 2004 2005 2006 2007 2008 2009EU MS EU Grand Total
 
 
Source: OECD CRS Database, Doha Develop ment Database, Monterrey Questionnaire 2011 
 
In terms of geographical coverage, EU and Member States TRA volumes towards Africa 
increased substantially compared to 2008 ; it reached EUR 1.1 billion in 2009, representing 40% 
of all TRA (compared to 25% in 2008). Asia r eceived the second largest share of TRA (23%), 
followed by Latin America (16%), Europe (5 %) and Oceania (1%). Many programmes have a 
global coverage and are therefore classified by the OECD as geographically "unspecified" – the 
total amount for this cate gory is EUR 0.43 billion. 
 
2.6.3.  Total 'wider' Aid for Trade 
The AfT concept has widened over the years to incl ude more general support for infrastructure and 
productive sectors, whereas the original scop e of AfT did not stretch far beyond TRA, i.e. 
supporting beneficiaries to formulate and implement tr ade policies. Last year's report indicated an 
all-time high of total EU and Member States Aid fo r Trade commitments in 2008; the latest data for 
2009 show that this high level was not an isolated event: The commitments increased slightly 
(+1.4%) in 2009 and reached a total of almo st EUR 10.5 billion - EUR 7.1 billion from EU 
Member States and EUR 3.3 billion from the EU (Figure 16 ).  
 The EU and its Member States accounted for about  37% of AfT from the world’s major bilateral 
and multilateral donors in 2008-2009 and is together the world's largest provider of AfT.  This is 
a substantial increase compared to 2004-2005, when th eir share was 30% of the total. The EU on its 
own is after Japan the world la rgest donor of AfT, representi ng 11.4% of the world's total. 
 
EN 70   EN Figure 16  Aid for Trade(EU and EU Member States, in EUR million) 
Aid for Trade
(EU and EU MS, in EUR million)
3.322 3.413 3.175 3.369 3.327 4.384 4.975 4.685 7.279 7.137 1.277 1.741 2.036 1.903 1.444 2.117 2.563 2.436 3.056 3.345 
4.599 5.154 5.210 5.272 4.770 6.501 7.538 7.120 10.335 10.482 
- 2.000 4.000 6.000 8.000 10.000 12.000 
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009EU MS EU Grand Total
 
Source: OECD CRS Database, Doha Development Data base, Questionnaire on financing for development 
2.6.3.1.  Aid for Trade by EU provider 
After having increased by  55% in 2008, AfT from Member States  practically stabil ised in 2009. EU 
AfT commitments continued to increase, albeit at  a slower pace (+9.5% in 2009 compared to +25% 
in 2008). The slowdown in Member State commitmen ts is largely attributable to France and 
Germany in 2009, as shown in Table 11 . Yet they remain the largest Member State donors of AfT; 
together with the UK accounting for more than 60% of total AfT from EU Member States. 
 
Table 11 Amounts of Aid for Tr ade by Member States: 2000-2009 
 
(EUR million) 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 
Austria  18 15 63 21 17 27 26 44 51 58 
Belgium  86 114 186 135 178 155 156 209 221 389 
Bulgaria        0 0 0 0 
Cyprus        - - -  
Czech Rep.        3 3 0 0 
Denmark  495 81 206 188 367 410 189 255 173 251 
Estonia        0 0 0  
Finland  29 31 41 38 43 100 64 84 135 256 
France  301 635 329 466 527 755 744 1 017  1 738  1 090  
Germany  613 962 816 776 889 1 138  1 495  1 213  2 036  1 889  
Greece    6 4 12 14 22 11 10 13 
Hungary        - - -  
Ireland  18 19 19 22 26 20 29 30 52 44 
Italy 152 105 164 187 70 310 239 111 186 202 
Latvia        0 0 0 0 
Lithuania        0 0 1 0 
Luxembourg   3 2 15 14 11 12 27 28 22 
Malta        - - -  
Netherlands  221 343 463 303 461 384 686 510 466 515 
 
EN 71   EN Poland        - - 0  
Portugal  23 30 17 8 41 61 7 47 13 66 
Romania        - 0 0  
Slovakia        - - -  
Slovenia        1 1 2 0 
Spain  225 253 306 366 247 135 561 474 701 757 
Sweden  143 192 135 170 150 200 259 267 225 247 
United Kingdom  998 631 422 670 286 665 480 380 1 240  1 335  
EU MS  3 322  3 413  3 175  3 369  3 327  4 384  4 975  4 685  7 279  7 137  
EU 1 277  1 741  2 036  1 903  1 444  2 117  2 563  2 436  3 056  3 345  
Grand Total  4 599  5 154  5 210  5 272  4 770  6 501  7 538  7 120  10 335 10 482  
Source: OECD CRS Database, Doha Development Data base, Questionnaire on financing for development 
 
2.6.3.2.  Aid for Trade by category 
Figure 17  illustrates the trend for total EU and Member States ’ AfT for each AfT category. 
Commitments for building productive capaci ty (BPC in the Figure) have increased 
considerably in recent years , and reached a record high of EU R 5.6 billion in 2009, representing 
56% of total AfT. This covers s upport to agricult ure, fisheries, banking, bus iness industry etc. The 
second biggest category—trade-relat ed infrastructure (TRI), which covers transport, storage, 
communication and energy—has followed a much more fluctuating path; commitments decreased from EUR 4.9 billion in 2008 to EUR 3.8 billion in  2009, after having increas ed by 76% in 2008. 
This can be explained by the fact  this category covers large infrastructure projects for which 
substantial commitments are made on an irregular basis.  Due to the nature of the support – instituti on building, technical assi stance, training etc, 
commitments for trade policy and regulations (TPR ) are on a much smaller scale (6% of total AfT 
in 2009). They increased by about 33% in e ach of 2008 and 2009, a clear indication of the 
continued attention to EU And Member States' s upport to the capacity of developing countries to 
formulate and implement trade policy. Activities in  the trade-related adjustment (TRAdj) category 
have only been reported for AC P countries, and in limited amount s (in 2009 the total for this 
category was EUR 11.3 million), because the relevant  sector code was added to the CRS only in 
2008. As a consequence, TRAdj commitments are not shown in the graph. Most programmes under category 6 'other trade-related assistance' are in EU Neighbourhood countries and Europe as in 
these regions programmes more often cover areas  that go beyond the sectors covered by Aid for 
Trade. They can be part of broader government advi ce or public reform projects in several sectors 
and as such reported as “Multi-sect or Aid”. A total of 67 projects were  included in this category in 
2009 representing a total amount of EUR 333 million.    
 
EN 72   EN Figure 17 Aid for Trade by Category (EU + EU Member States, in EUR million)  
Aid for Trade by Category
(EU + EU MS, in EUR million)
- 1.000 2.000 3.000 4.000 5.000 6.000 
2000 2001 2002 2003 2004 2005 2006 2007 2008 20091. TPR 3. TRI 4. BPC 6. Other Source : OECD CRS, 
EU 
Source: OECD CRS, EU 
 
2.6.3.3.  Wider Aid for Trade geographical distribution 
Efforts under the EU AfT strategy cover all de veloping country regi ons, as reflected in Figure 18 . 
Compared to the 2000-2004 average, 2009 EU AfT commitments increased for all regions. 
Comparing with the 2005-2009 average, 2009 commit ments only decreased for Europe and North 
of Sahara (between 2008 and 2009 from EUR 1.3 billion to EUR 0.7 billion in Europe and from 
EUR 1.5 billion to EUR 0.8 billion in North of Sahara.  
 
Africa accounted for the largest share of  AfT from the EU and its Member States;  
commitments amounted to  EUR 4.1 billion corresponding to  41% of total AfT in 2009 . Last year's 
report indicated that the relative share of Sub-Sa haran Africa was decreasing to the benefit of North 
Africa. However, the 2009 data demonstrates a reve rse trend with almost stable commitments in 
North of Sahara and substantia l increases in Sub-Saharan Afri ca. The South of Sahara region 
received by far the largest am ounts of AfT of all regions. 
 
Asia received the second largest share of AfT  (22% of total in 2009), followed by America 
(11%), Europe (7%) and Oceania (1%). As for TR A, the AfT classified as 'unspecified' (which 
includes programmes with global coverage) increased substantially  in recent years and reached 
almost EUR 1.9 billion in 2009 repres enting 19% of total TRA. This is mainly due to three large 
global commitments to the EU Food Facility whic h were reported as geographically “unspecified” 
(global coverage). 
 
EN 73   EN  
Figure 18 - Aid for Trade by OECD Region (bilateral & regional programmes, EU + EU Member 
States, in EUR million) 
Aid for Trade by OECD Region
(bilateral & regional programmes, EU + EU MS, in EUR million)
- 500 1.000 1.500 2.000 2.500 3.000 3.500 
South of
SaharaAsia America North of
SaharaEurope Africa Oceania Unspecified
Annual Average 2 000-2004 Annual Average 2 005-2009 2009 
Source: OECD CRS 
 
The share of AfT to LDCs as percentage of total AfT from EU and EU Member States 
remained relatively stable at 22% in 2009 , down from 24% in 2008, as shown in Figure 19 . 
LDCs accounted for EUR 2.3 billion in 2009, compared to EUR 7.8 billion to non-LDCs. 
Interestingly, the figure also demonstrates that the LDC share of EU AfT (30% in 2009) has been 
continuously higher than the LDC share of Member States AfT (19% in 2009) , despite a decreasing 
LDC share of EU AfT as compared to 2008.  
Figure 19 
Aid for Trade to LDCs
(EU and EU MS, in EUR million)
 22%  24% 22% 22%  32% 29%  27%  24%  22% 34%32%
22%26%41%46%
43%
34%
24%42%
30%35%
22%23%
19%21%26%
16%17%19% 21%
- 2.000 4.000 6.000 8.000 10.000 12.000 
2000 2001 2002 2003 2004 2005 2006 2007 2008 20090%5%10%15%20%25%30%35%40%45%50%
EU+EU MS AfT to LDC EU+EU MS AfT to non LDC EU: % LDCs in AfT EU MS: % LDCs in Af T
 
Source: OECD CRS  
 
EN 74   EN 2.6.4.  Increasing Trade Related Assistance and Aid for Trade to ACP countries 
ACP countries receive specific at tention in the EU AfT strategy,  including in relation to their 
ongoing regional integration efforts. The assessment  of progress in implementing the AfT agenda 
for this group is therefore a key issue in each EU AfT report. 2009 showed a very important 
increase in both AfT and TRA to ACP countries . Total EU TRA commitments reached EUR 
1.16 billion, almost triple the 2008 level. The ACP share of total recipient countries increased 17 percentage points to 40% of the total. There wa s a particularly strong increase in regional 
programmes from both the EU as well as Member St ates which were up six fold compared to 2008, 
almost entirely allocated to Africa.  As regards wider AfT, commitments to ACP c ountries increased 18% in 2009, reaching a new all-
time high of EUR 3.6 billion  (Figure 20 ). The ACP share of total AfT delivered by the EU and its 
Member States increased four percentage point s to 36% in 2009. Again, th e overall increase can 
mainly be attributed to increasing commitments  in regional programmes (more than doubling from 
EUR 0.4 billion in 2008 to EUR 0.9 billion in 2 009), while commitments to bilateral programmes 
remained stable (EUR 2.7 billion).  
 
Figure 20 – Aid for Trade ACP Countr ies (EU+Member St ates, EUR million) 
 
 
2.6.5.  Effective delivery of Aid for Trade 
The second pillar of the EU AfT Strategy is focussed on enhancing the impact of the support. The 
following sections report on the re sults of a Field questionnaire99 on AfT to EU and EU MS Field 
offices; and responses to an OECD/WTO questionnaire100 sent out to collect information as part of 
the WTOs work programme on Aid for Trade. This year, the EU's Field que stionnaire aimed inter 
alia at deepening the understanding of a series of ke y issues that emerged from last year's analysis, 
in particular the potential for more joint EU an d EU Member States work  on AfT in the partner 
countries; perceived absence of comprehensive trad e needs assessments; a relatively smaller share 
                                                 
 
82EU delegations and EU Member States embassies in 89 partner countries across the developing world  
completed a questionnaire on how the Aid for Trade agenda is progressing at country and regional level. 
10016 Member States and the European Commission responded to the OECD/WTO Aid for Trade questionnaire 
which is intended to acquire information on the progress by individual donors with a particular focus on 
outcomes of Aid for Trade strategies and programmes. 
 
EN 75   EN of EU and Member States ODA allocated to AfT in LDCs than for developing countries as a whole; 
and the room for strengthening sup port to regional integration.  
2.6.5.1.  Ownership 
In half of partner countries, EU delegations  and Member States representatives report that 
trade is a regular topic in their poli cy dialogue with the partner country.  This is a considerable 
improvement compared to the 33% of positive responses to last year’s questionnaire. But in 37 partner countries (42%) trade is a topic of policy dialogue only to  a limited extent, and in eight 
countries not at all. The Member States responses  to the OECD/WTO questi onnaire indicate that 
trade is a more regular topic in policy di alogues between donors and regional communities 
(reported by eight Member States) compared to the policy dial ogues between donor and partner 
countries (reported by five Member States).  
EU and Member States donors indicat ed that civil society was alwa ys included in the dialogue in 
9% of partner countries. Civil society was sometim es included in the policy  dialogue in 40% of the 
cases. Similarly, nine Member States out of 16, and the EU, report in the OECD/WTO questionnaire that the private sector is some times involved in the policy dialogue. Two Member 
States report that the private sector  is always involved in their dialogue with partners. There is, in 
other words, continued room for a broadened dialogue.  
Compared to 2008, an increasing demand for AfT is reported in about 50% of partner 
countries , with a particularly stro ng increase of AfT demand in EU Neighbourhood countries 
(reported in 70% of cases for this re gion). It is interesting to note that overall, the Field responses do 
not actually support the notion that th ere is a clear link between the in clusion of trade issues in the 
policy dialogue and demand for Aid for Trade. On the contrary, there appear s to be rather little 
correlation between these two elements and more in -depth analysis is nece ssary to fully understand 
the inter-linkages betwee n dialogue and demand. 
Almost  half of the Field responses report that the partner country has effective national 
coordination processes in place to develop and implement an integrated trade strategy . The 
other half of the countries are said  either not to have su ch coordination processe s, or to have them 
formally but not use them activel y. Reasons given relate to lack  of capacity, understaffing and 
reconciling different interests among the private sector players. This remains an important area for 
further attention to ensure that AfT is effective. 
This year's exercise showed that in half of the partner countri es a comprehensive trade needs 
assessment has been undertaken in the last 5 years  (and partially in a further 17% of partner 
countries). This is a modest improvement compared  to situation signalled in  the 2008 responses, but 
still seems to imply that in at least one third of  partner countries EU and its Member States are 
providing AfT on the basis of an out of date or non- existent trade needs assessment. In these cases, 
other methods are used to agree on AfT priorities. It should also be noted that even if a recent 
comprehensive trade needs assessment is available, the findings appear to be fully reflected in national trade  strategies only in about 60% of cases. 
2.6.5.2.  Joint Aid for Trade operations and harmonisation: moderate progress 
This year’s field responses indicate that  in 21% of partner countries , EU donors significantly 
improved their donor coordination compared to 2008  (in terms of joint needs assessments, joint 
implementation, joint monitoring/evaluation etc). Moderate improvement is  reported by 43% of 
respondents. The responses to th e OECD/WTO questionnaire support this finding - nine out of 16 
Member States indicate that ha rmonisation of AfT strategies betw een Member States have been 
 
EN 76   EN progressing at a moderate pace. No Member State characterised the overall improvement as 
‘significant’ – suggesting that their "aggregate" re sponse "hides" the important progress 
experienced by some field offices.  
2.6.5.3.  Regional dimension of Aid for Trade 
The field responses indicate that  in 54% of partner countries EU donors supported (of which 40% 
partially) the partner country in strengthening  the inclusion of strategic economic regional 
integration priorities in the national  development plan or trade strategy . 64% of responses 
report that this is an improvement compared to 2008.  When grouping the responses by sub-region, a st rongly diverging picture emerges. EU donors 
appear particularly to have supported the inclus ion of regional economic integration in national 
development plans or trade strategies in the EAC and the Caribbean (60%) and to a somewhat lesser 
extent in Latin America and Nei ghbourhood (50%). Noteworthy is the relatively low score of other 
African regions where donors are supporting regional inte gration initiatives at national level, such 
as ESA, SADC, Central and West Africa. Although re gional integration is mo re advanced in some 
regions than in others, this does not fully explain the diverging res ponses from the EU field offices. 
2.6.5.4.  LDCs and EU AfT  
The questionnaires paid specific attention to AfT in LDCs, following last year's finding that the 
share of EU and Member States ODA allocated to  AfT in LDCs was smaller than for developing 
countries as a whole, despite the apparent trade-related needs of LD Cs. Thirteen of the 37 responses 
to the questionnaire received from EU donors based in  LDCs (35%) reported that trade issues were 
a regular element of  policy dialogue in their part ner countries. Eighteen (49% ) said that it was so 
only to a limited extent. Six said that trad e was not part of the dialogue at all. In  12 countries 
(32%), the policy dialogue was considered to have improved compared to the situation in 
2008. This should be compared with the responses for all countries for wh ich 45% had noted an 
improvement. As the baseline situation was better in the total sample, this would suggest that 
despite progress, LDCs do not appear to be catchi ng up with the other devel oping countries on this 
front. Comments relating to the reasons for changes or lack of changes in the LDC policy dialogue 
often relate to either progress or stagnation in trade negotiations. Anothe r reason cited was that 
several countries were in a crisis or post crisis situation, leading to a generally scaled down dialogue 
or a focus on basic constitutional and socio-economic issues.
 As many as 19 of the joint responses 
received from EU donors in LDCs (more than 50%) considered that demand for Aid for Trade had increased since 2008; 11 said it had not. Th ree reported it had incr eased significantly.  
 Responses from EU donors in LDCs indicate  a lower degree of availability and use of trade 
policy coordination mechanisms in L DCs as compared to the total sample . Only 11 of the 37 
LDCs (30%) EU field offices considered that nati onal mechanisms were in place to coordinate trade 
policy – featuring inter-ministerial and inter-inst itutional coordination – compared to 50% for all 
countries. A further 16 (43%) said  that such mechanisms existed formally, but we re not actively 
used. In 9 countries, such mechanis ms were said not to exist.  
 Several references were made to the Enhanced Integrated Framework (E IF) which could improve 
coordination platforms although there were also quite  a number of reports on EIF not using fully its 
potential in this regard.   Responding to the  question whether LDCs had carried out a comprehensive trade needs 
assessment in the past 5 years , there were 21 positive answers (57%), 14 negative (38%), and 2 
partially. This indicates if anything a potential  worsening compared to 2008 when 22 out of 31 
 
EN 77   EN (79%) LDCs were said to have undertaken a comp rehensive trade needs assessment in the last 5 
years. The score is comparable to the total sample.  33 responses considered that a main  constraint to increas ing the attention to trade in LDCs was low 
absorption capacity. 21 responses referred to the LD C country’s low capacity to identify needs and 
priorities. Eight responses indicated that the most important or important constraint was insufficient 
availability of donor resources; but  25 considered that this was not important or less important. 
“Other more pressing priorities" were mentioned by 15 respondents as importa nt. No one said 'very 
important', but 15 respondents indicated that they were not sure about the answer to this question. 
 This indicates a need to focus more on LDCs' capac ity to position trade issues in their development 
strategy, identify more clearly the trade-relate d needs, and place more attention on absorptive 
capacity. 
2.6.5.5.  Aid for Trade monitoring and evaluation  
The past few year's have seen a search for impr oved methods to demonstrate the impact of AfT on 
trade and development performance of partner c ountries - a challenging task, not least due to 
attribution problems. Asked a bout the difficulties that donors encounter in assessing AfT 
programmes and projects,  EU Delegations in developing count ries considered the difficulty in 
obtaining in-country data as the most im portant challenge (69% of respondents). The 
difficulty to identify quantifiable objectives for intervention was rated as another important 
hurdle (67%). To a slightly lesser extent the di fficulty in defining suitable indicators was 
considered as an important chal lenge (57%). A key aim of monito ring and evaluation is to feed-
back results into the government's trade development strategy. For this specific processes need to be 
in place, but the responses to the EU field office questionnaire indicate that this is often lacking. Only 3% of respondents reported that this 'signi ficantly' applies and 37% 'moderately'. This is 
clearly an area where further work  is required. Monitoring and evalua tion was also addressed in the 
OECD questionnaires: nine Member States i ndicated that AfT mon itoring had moderately 
improved.  Regarding evaluation of AfT strategies, programmes and projects, Member States 
reported a number of challenges th ey face, in decreasing order of importance: 'difficulty of 
assigning trade outcomes to the pr ogramme' (attribution) was consid ered as most the important by 
seven Member States, followed by ‘difficulty in identifying quantifiable objectives’ which was considered ‘most important’ by four Member States. 
2.6.6.  Conclusions 
The outcome of this year's AfT mo nitoring exercise demonstrates that both the EU and its Member 
States continue to advance in implementing the EU AfT Strategy. The results point to a 
strengthening of EU engagement in AfT, both in terms of volume commitments as well as on 
enhancing the impact of AfT delivery on the ground:  The EU combined annual AfT reached EUR 10.5 b illion in 2009, maintaining the all-time high 
registered the year before and a substantial  increase was reported for EU TRA, bringing the 
collective amount to near ly EUR 3 billion, well above the Hong Kong target to spend (as from 
2010) EUR 2 billion per year on TRA.   Reports from the EU field offices  point to moderate improvement in the processes that underpin 
both the volumes and the effectiven ess of AfT, such as; addressing trade in the partner-donor policy 
dialogue; improved coordination to develop and impl ement trade strategies; availability of trade 
needs assessments; joint operati ons and harmonisation; and the inclusion of strategic economic 
regional integration pr iorities in national development plans. 
 
EN 78   EN In order to sustain this advance of the EU AfT agenda and to fu rther strengthen its impact on the 
world's poorest, enhanced endeavours by the EU a nd Member States are essential in the following 
key areas: 
- Enhancing AfT support to the LDCs by increasin g attention to the cap acity of LDCs to 
formulate and implement trade development strate gies in support of incl usive growth and to 
further capitalise on the potential  of the Enhanced Integrated Framework in this respect;  
- Improve the effectiveness of AfT identified at c ountry level, including by making better use of 
trade needs assessments, enhancing the effec tiveness of platforms intended to support the 
development of trade related strategies; and acting on opportunities for increasing joint 
operations; 
- Step up support for regional integr ation, building further on existi ng initiatives su ch as the EU 
Aid for Trade packages for the ACP countries a nd increasing attention to regional issues in 
assistance provided at the national level; and 
- Support partner countries' own mo nitoring of results and impact  of Aid for Trade and the 
progress of their trade development strategies 
The European Commission's Trade and Development Communication which is foreseen for the last 
quarter 2011 provides an opportunity to further hi ghlight these issues a nd to suggest concrete 
actions on the way forward.   
 
2.7. Reducing the Debt Burden of Developing Countries 
EU Commitments 
Council Conclusions of 18 May 2009: Support to developing countries in coping with the 
crisis (§12):  ‘the EU will continue suppor ting the existing debt relief initiatives, in 
particular the Heavily Indebted Poor Count ries (HIPC) Initiative and Multilateral Debt 
Relief Initiative (MDRI) and values the Evi an approach as an appropriate flexible tool to 
ensure debt sustainability’.  
In line with the Doha Declara tion, the EU has also confirme d in the Council Conclusions 
of 18 May 2009 (§12), that it ’supports disc ussions, if relevant, on enhanced forms of 
sovereign debt restructuri ng mechanisms, based on existi ng frameworks and principles, 
including the Paris Club, with a broad cred itors’ and debtors participation and ensuring 
comparable burden-sharing among creditors with  a central role fo r the Bretton Woods 
Institutions (BWI) in the debate. 
2.7.1.  Challenge of recent economic trends: Preserving debt sustainability 
To assess debt sustainability, three main international methodologi es have been developed: the 
Heavily Indebted Poor Countries Debt Relief  Analyses, the Low Income Countries Debt 
Sustainability Framework (LIC-DSF) and the Mi ddle-Income Countries Debt Sustainability 
Framework (MIC-DSF). They all involve making pr ojections of intended borrowings and economic 
variables over a maximum 20-year period, and th en using ratios comparing debt stock, present 
value or service with GDP, exports or  budget revenue to assess payment capacity. 
 
 
EN 79   EN The indicative debt burden thresholds are not  intended to be used as rigid ceilings. There are four 
possible ratings for the risk of debt distress:101  
– Low risk: all debt indicators are well belo w the indicative debt burden thresholds 
– Moderate risk: the debt service ratio may reach it s indicative threshold but debt-stock ratios may 
breach them 
– High risk: the baseline scenario in dicates a breach of debt stock and/or service ratios over the 
projection period 
– Debt distress: the country is alr eady having repayment difficulties.  
Operational implications. The classification of risk distress forms the basis for determining the 
grant/loan mix of future Intern ational Development A ssociation (IDA) alloca tions under IDA14 and 
some other multilateral creditors such as the African Development Fund. Accordingly, IDA-only 
countries that are classified at:  
– High risk of debt distress r eceive 100% grant financing from IDA at a 20% volume discount. 
– Moderate risk of debt di stress receive 50% grant fina ncing at a 10% discount.  
– Low risk of debt distress receive 100% loan financing. 
Debt crises tend to be costly and disruptive, es pecially for the poor and other vulnerable social 
groups. Debt crises also have a negative impact on access to schooling and health services, reducing 
human capital accumulation and long-run economic gr owth. Therefore, policies aimed at mitigating 
the prevalence and cost of debt cr ises can yield large payoffs in terms of poverty re duction and can 
play a key role in helping achie ve the Millennium Development Goals. Such policies involve a 
broad choice of mechanisms: the promotion of ne wer and safer debt instruments; regulation  to 
reduce destabilising capital flows; the creation of an effective international lender of last resort; the design of a set of guidelines to  limit solvency crises by promoting respon sible sovereign borrowing 
and lending to sovereigns; and the design of a mechanism for deali ng with sovereign debt crises. 
 Debt relief provides a crucial cushion to devel oping countries in times of  difficulty. Encouraging 
progress has been made in the past year on  deliveri ng debt relief to heavily indebted poor countries. 
However, the global financial crisis and the recen t stagnation of aid flow s, means there is still 
concern for the increased debt vulnera bilities of many developing countries. 
 Until recently, liquidity crises affected mostly financially globalised economies, which borrow in foreign currency from the international capital mark et, and spared low-income countries, which rely 
on more stable official financial flows. Now, ho wever, the process of fi nancial globalisation is 
rapidly expanding to middle and low-income count ries (the so-called fr ontier markets), making 
those countries subject to potential  liquidity shocks. The least devel oped countries that are currently 
in debt distress include Comoros, the Democrat ic Republic of the Congo, Eritrea, Guinea, Guinea-
Bissau, Liberia, Myanmar, Somalia, the Sudan and Togo. Countries at high risk of debt distress 
include Afghanistan, Burkina Faso, Burundi, D jibouti, the Gambia, Haiti, the Lao People’s 
Democratic Republic, Maldives, Sa o Tome and Principe and Yemen. 
 
Debt service burdens of HIPC were expected to  remain higher in 2010 and beyond than in the 
pre-crisis years
102. The economic crisis led to a drop in th e dollar value of exports and GNI. As a 
                                                 
101 UNCTAD, Debt Sustainability Analysis (D SA): An E-Learning Training Course 
 
EN 80   EN consequence, the average external debt-to-export ratio of HIPC increased from 64 to 82% between 
2009 and 2010, and their external debt-to-GNI ra tio went from 22.0 to 23.5% over the same 
period103. This is a substantial setback , as it reversed some of the advances achieved between  
2000-2008 period, when debt dropped from 133 to 64% of exports of goods and services and from 
37 to 22% of GNI.  
The economic crisis may also have an impact on debt sustainability for Middle Income 
Countries. The IMF has set  a framework focusing on the sustainabi lity of both public and external 
debt, implicitly addressing the interaction with th e financial sector. The IMF Classical Framework 
for Middle Income Countries with Market Access
104 aims to introduce a greater degree of 
consistency and discipline in sustainability anal ysis in an attempt to make better informed 
judgements under a set of clear and transparent assumptions. To asse ss sustainability, the IMF looks 
at several scenarios of potential events and proj ections. The ‘baseline’ medium-term projections of 
the balance of payments and fiscal developments, which is based on current policies projected over 
a five-year horizon, is the benchmark scenario fo r the IMF DSA framework. The framework is not 
intended to be applied in a completely mechanical and rigid fashion. It serv es as an indication of 
potential trends in debt.  
 
The IMF has also developed a se t of tools for exploring medium -term current account and real 
exchange rate sustainability. Fina ncial sector stability assessments are made to help identify the 
vulnerability of the financia l sector to various shocks. Beyond the baseline projection, the 
framework incorporates a standard set of sensitivity  tests. The purpose is to examine the effects of 
alternative assumptions about the time paths of variables affecti ng both the ability to service the 
debt and the cost of financing it. This framew ork may be useful in at  least three cases:  
- For countries that have moderately high indebtedness , the framework can help identify 
vulnerabilities; 
- For countries on the edge or  in the midst of a crisis , it can be used to examine the plausibility 
of the debt-stabilising dynamics set out in the programme projections; 
- In the aftermath of a crisis and/or debt default , it can be useful to examine the consistency of 
the debt restructuring required to ac hieve a desired or projected outcome. 
2.7.2.  Analysis of debt relief initiatives 
25 out of 28 respondents to the questionnaire said  they delivered on co mmitments to the HIPC 
(High Indebted Poor Countries) Initiative and MDRI  (Multilateral Debt Relief Initiative), including 
commitments to the IDA and the African Deve lopment Bank, without delays. But only 13 have 
taken new steps to help restore and preserve debt sustainability  in low-income countries. Most 
Member States agree that action to support extern al debt sustainability is more effective if 
undertaken multilaterally. Spain mentioned that it has supported the IMF’s temporary moratorium 
on interest payments and the general reform of its financing. 
 
By December 16 2010, debt reduction packages under the HIPC Initiative were approved for 
36 countries, 32 of them in Africa, providing EUR 54.36 billion (USD72 billion)105 in debt-
                                                                                                                                                                  
102According to the latest status of HIPC Initiative and Mu ltilateral Debt Relief Initiative (MDRI) prepared by IDA and 
IMF staff, September 14, 2010;. confirmed during the Ministerial Meeting On Enhancing The Mobilization Of 
Financial Resources For Least Developed Countries’ Development in Lisbon, 2 3 October 2010. 
103Global Development Finance 2011: External Debt of Developing Countries, World Bank, 12 Dec 2010. External debt 
sustainability and development, UN Repo rt, Sixty-fifth session, July 2010. 
104UNCTAD, Debt Sustainability Analysis (D SA): An E-Learning Training Course 
1052010 DAC exchange rate : 1dollar =  0.755 euro 
 
EN 81   EN service relief over time . Out of the 40 eligible countries, 30 have now reached completion point, 6 
have reached decision point and 4 have yet to be gin HIPC. Of these, 24 qualified for irrevocable 
debt relief under HIPC and MDRI.   A ’sunset clause’ was included in the HIPC Initiative  to prevent it from becoming a permanent 
facility. The clause has been exte nded four times to allow the remaining HIPCs to begin to establish 
a policy track record to qualify for HIPC relief c onsideration. The sunset clause took effect on 
December 31 2006, but the Executive Boards of the IM F decided to grandfather all countries that 
had been assessed (or in the future are assesse d) to meet the HIPC Initiative’s income and 
indebtedness criteria based on e nd-2004 data. This would allow count ries that had not yet met the 
policy performance criterion of the HIPC Initiative by the end of 2006 sunset-clause date to become 
eligible for debt relief if they adopt, at any time, a qualifying economic programme.
106 
 
Figure 21 – Post decision-point HIPC’s de bt stock at different debt relief stages  
(in billions of U.S. dolla rs, in end-2009 NPV terms) 
 
Source: HIPC Initiative country documents an d IDA/IMF staff estimates, September 14, 2010107 
 
The World Bank classifies nearly a ll of the countries that have yet to complete the Initiative as 
fragile economies, indicating their need fo r additional assistance to expedite relief. 
 
Some creditors have given debt relief to HI PC that goes beyond the requirements under the 
HIPC Initiative . For Paris Club official bilateral creditor s, the amount of beyond HIPC debt relief 
provided was EUR 6.9 billion (USD9.6 billion)108 in end-2009 PV terms. Under the Least 
Developed Countries (LDC) Initiat ive, the EU cancels all outstand ing amounts on special loans of 
eligible least developed countries af ter the application of HIPC Initiati ve relief. From the start to the 
end of July 2010, the EU provided additional debt re lief on special loans of  seven completion-point 
countries and one decision-point country amounting to EUR 53.4 million. 
                                                 
106 IDA and IMF, Heavily Indebted Poor Countries (HIP C) Initiative and Multilateral Debt Relief Initiative (MDRI)—
Status of Implementation prepared IMF and World Bank staff. October 15, 2007 
107Source HIPC Initiative country documents, and IDA/IMF staff estimates. In “IMF, HIPC Initiative and Multilateral 
Debt Relief Initiative (MDRI)—Status of Implementation, Prepared by IDA and IMF, September 14, 2010. Note: 
Estimates based on decision-point debt stocks.  
1082009 DAC exchange rate: 1 dollar = 0.719 euro. 
 
EN 82   EN  
Seven Paris Club meetings were held in the year to July 2010 , all of them devoted to tackling 
the debt of HIPC. Below are three examples:  
• After the HIPC completion in January  2010, Paris Club creditors met with 
representatives of Afghanistan  in March 2010. The country  obtained a 100% write-off 
on its pre-cut-off-date debt, which included additional debt cancellations granted by creditors on a voluntary and bila teral basis. The agreement with the Paris Club creditors 
includes a comparability of treatment clause. 
• In March 2010, a Paris Club meeting was held to consider the debt situation of the 
Democratic Republic of  Congo  after it reached HIPC completion in January. The 
country obtained a complete cancellation of its stock of eligible debt, with the provision 
that it keep the Paris Club secretariat inform ed of the progress made  with other creditors 
for the next three years. That meeting highl ighted the controversial role played by 
vulture funds in the internat ional financial system. The am ounts involved were large, 
around EUR 377 million (USD500 million)
109, and the Democratic Republic of Congo 
obtained a minimum discount on them. 
Box 5 - Review of debt relief by main  creditors (Status Dec 2009, HIPC)  
Denmark  provides 100% cancellation of ODA loans and non-ODA credits contracted and disbursed before 
September 27, 1999. 
France:  cancellation of 100% of debt service on pre-cut off date commercial claims on the government as 
they fall due starting at the decision point. Once countries have reached completion, debt relief on ODA 
claims on the government will go to a special account  and will be used for speci fic development projects. 
Finland : no post-Cancellation of Date (COD) claims. 
Italy : cancellation of 100% of all debts (pre- and post-cut off date, ODA and non-ODA) incurred before June 
20, 1999 (the Cologne Summit) cancellation of rela ted amounts falling due in the interim period. At 
completion point, cancellation of the stock of remaining debt. 
The Netherlands:  100% ODA (pre- and post-cut off date debt is cancelled at decision point) For non-ODA,  
in some cases (Benin, Bolivia, Burkina Faso, Ethi opia, Ghana, Mali, Mozambique, Nicaragua, Rwanda, 
Tanzania, Uganda and Zambia), NL will write off 100% of the consolidated amounts on the flow at decision 
point. All other HIPCs will receive interim relief up to  a 90% reduction of the consolidated amounts. At 
completion point, all HIPCs will receive 100% cancellati on of the remaining stock of the pre-cut off date 
debt. 
Norway  and Switzerland  have cancelled all ODA claims. 
Sweden and Russia  have no ODA claims. 
Spain  provides 100% cancellation of ODA and non-ODA claims contracted before January, 2004. 
United Kingdom : ‘beyond 100%’ full write-off of all debts of HIPCs as of their decision points, and 
reimbursement at the decision point of any debt service paid before the decision point. 
United States:  cancellation of 100% of all debts (pre and post-cut off date, ODA and non-ODA) incurred 
before June 20, 1999 (the Cologne Summit). At deci sion point, cancellation of accrued arrears and maturities 
falling due in the interim period. At completion point, cancellation of the stock of remaining eligible debt  
                                                 
1092010 DAC exchange rate: 1dollar =  0.755 euro 
 
EN 83   EN In July 2010, Guinea-Bissau  concluded an agreement with Paris Club creditors to reschedule its 
debt under the Cologne terms, thus reducing by 98%  the debt service falling due between January 
2010 and December 2012. Under  the agreement, the country obtained a deferral until December 
2012 of payments on its short-term and post-cut-off- date debts, including a deferral of moratorium 
interest. This was intended to support adjustme nt efforts in Guinea-Bissau to reach its HIPC 
completion.  The HIPC Debt Relief Initiative and the MDRI ha ve significantly reduced the debt burden in many 
countries , freeing critical resources to help finance governments’ growth programmes.   
The perception of a large fiscal space in some LICs, however, has led to the emergence of new 
creditors  and new opportunities to access non-co ncessional sources of financing . These 
opportunities, while welcome, raise new risks.  Countries are frequently faced with new and 
conflicting market proposals, and other bilateral creditors on new financi ng options. In many cases, 
they lack the means to fully assess the related cost s and risks.  Poor financial choices, including on 
the terms on which new debt is contracted, coul d contribute to the re -emergence of debt 
vulnerabilities in these countries, put ting debt sustainability at risk. 
 
When poor, heavily indebted countries contract commercial loans while simultaneously benefiting 
from IDA grants, credits or debt relief, it is classified as free riding . The World Bank uses this term 
to denote ‘situations in which IDA debt relief or grants could potenti ally cross-subsidise lenders that 
offer non-concessional loans to recipient countries’. The Ba nk has proposed a two-pronged 
approach to free riding. Firs t, creditor coordination should be stepped up to prevent non-
concessional lending to the countries concer ned and, secondly, these countries should be 
discouraged from non-concessional borrowing through pe nalties, or reductions in either the amount 
or the grant element of IDA flows
110 
2.7.3.  Vulture funds or the thr eats associated with comm ercial credito r litigation 
The EU should also help  to find ways to tackle the problem of so called “vulture funds”, i.e. to 
prevent the actions of distressed-d ebt funds. 22 Member States have not planned specif ic actions to 
prevent aggressive litigation against HIPC. Howeve r, some EU countries are already leading the 
way. Spain  participates actively in the Paris Club in itiative working towards a coordinated fight 
against the implications of action by ’vulture funds’ for debtor countries. In the UK , the Debt 
Relief Act has prevented litigation against HIPCs in UK courts since June 2010 (see Box 6 ). 
Belgium  passed a bill in April 2008 to prevent the seizure or transfer of public funds for 
international cooperation, in partic ular related to the methods us ed by vulture funds. Germany, 
Belgium and the European Commission report that they support the African  Legal Support Facility 
(ALSF), launched by the African Development Ba nk (AfDB) in mid 2009, which provides support 
for African countries facing litigation from commercial creditors. 
 
In the US , a member of the. House of Representatives has also tabled legisl ation that would limit 
the ability of non-participating creditors to  seek awards from HIPCs via U.S. courts111. 
 
Therefore, while some commercial creditors continue  to pursue litigation to recover claims against 
HIPCs, rather than participate in the provision of  debt relief under the Initiative, the incidence of 
new litigation has fallen in recen t years. According to survey responses (September 2010) from 
                                                 
110 Free Riding and Debt Relief: Implications for IDA,  February 2007. Jan Willem Gunning Free University, 
Amsterdam and AIID and Sweder van Wijnbergen University of Amsterdam and AIID 
111The “Stop VULTURE Funds” Bill introduced in June 2009 
 
EN 84   EN HIPC authorities, the number of outstanding litigation cas es against HIPCs fell from 33 to 14 cases 
in 2008 and then rose to a total of 17 cases in 2009112. 
 
Box 6 – The U.K. Debt Relief Act 
On April 8, 2010, the UK Parliament enacted the Debt Re lief (Developing Countries) Ac t. It seeks to introduce a 
mandatory element to debt relief under the HIPC Initiative by limiting the proportion of debts previously contracted by 
a HIPC that a commercial creditor can reclaim through litigati on under U.K. law. The limit is set in reference to the 
debt reduction expected on claims under the HIPC Initiative. The Act came into force on June 8 2010. 
The key aspects of the Act are: 
1. The debt covered by the Act is the debt eligible for relief under the HIPC Initiative, but it is limited to HIPC debt 
incurred prior to a HIPC’s decision point and prior to commencement of the Act. 
2. Qualifying debt is limited to the debts of the countrie s that meet the HIPC eligibility criteria in effect at 
commencement. Any changes to those criteria going forward (whether resulting in an expansion or reduction of HIPCs) 
are disregarded by the Act. The Act is therefore restricted to an identifiable stock of historic debt. It makes no 
distinction between HIPC debt still held by the original cr editor and HIPC debt that has been traded on the secondary 
markets. 
3. The Act limits the amount of qualifying debt (and associated causes of action such as damages claims) recoverable 
by a creditor in the U.K. co urts to the amount the creditor would have received if it had applied the most recently 
published Common Reduction Factor set by the IMF and World Bank under the HIPC Initiative (on top of traditional 
relief). 
4. For the five countries that had not  yet reached decision point at the tim e the Act was passed, no Common Reduction 
Factor was available. As a result, the Act only takes into ac count the 67% traditional relief, leaving a reduced amount of 
33% payable. This may encourage credit ors to settle with the pre-decision-poi nt HIPCs before they reach decision 
point. 
5. In addition to reducing the recoverable amount on due debts, the Act also applies the same reduction to qualifying 
debts on which judgment has been obtained but not yet enforced. 
6. Qualifying debt includes HIPC debt governed by forei gn law as well as UK law. Ther efore, the Act will apply to 
cases decided by UK courts, where the governing law is foreign. 
7. The Act contains a sunset clause. Unless the UK Governme nt decides to extend the Act permanently or for one year, 
it will expire on June 8 2011. This would also need to be approved by the UK Parliament. 
8. The Act also promotes the negotiated settlement of thes e debts on terms compatible with the HIPC Initiative by 
excluding from the scope of the legislation debts where the HIPC government does not offer to do this. 
2.7.4.  Alternative debt management initiatives 
In their answers to this year’s questionnaire, Me mber States mentioned an extensive list of debt 
management initiatives beyond HIPC and MDRI:  
• Activities of the African Lega l Support Facility (ALSF) 
• The DMFAS Programme (Debt Management and Financial Analysis System), an UNCTAD 
(UN Conference on Trade and Development) provi der of technical coope ration and advisory 
services on debt management 
• The DMF (Debt Management Facilitation for Low Income Countries), a World Bank Multi 
Donor Trust Fund, scaling up World Bank work on debt management tech nical assistance in 
LICs 
• Implementing a bill to prevent the seizure or transfer of public funds for international 
cooperation, in particular  related to the methods  used by vulture funds. 
• National legislation (Belgium, UK) , or within the Paris Club. 
                                                 
1122010 Survey of commercial credito r participation and creditor laws uits against HIPCs. The survey 
elicited responsesfrom the authorities of 37 countr ies out of 40 surveyed in May/June 2010 in 
’HIPC Initiative and Multilateral Debt Relief Initiative (MDRI) -Status of Implementation, Prepared by the 
Staffs of IDA and the IMF, September 14, 2010’. 
 
EN 85   EN The African Legal Support Facility decided in November 2010 to provide a USD 500.000 grant 
to fund services of a reputable international law firm in connec tion with the dispute between the 
government of the Democratic Republic of Congo (DRC) and a renowned vulture fund. Legal 
assistance to the DRC is the first of its kind by the ALSF since its creation by the African Development Bank (AfDB) Group in 2008. The support to DRC falls within the ALSF’s mission to 
provide technical legal advice to its members in creditor litigation. This includes technical legal 
assistance to strengthen their legal expertise and negotiating capacity in matte rs pertaining to debt 
management, natural resources and extractive indus tries management and contracting; investment 
agreements and related commercial and business tr ansactions. Belgium and Germany participate in 
the ALSF.  
 
The DMFAS programme  offers countries a set of solutions for improving their capacity to handle 
the day-to-day management of pub lic liabilities and produce reliable  debt data for policy-making 
purposes. At the programme’s core is software th at can be used for the purposes of recording, 
monitoring, reporting and an alysis. Usually installed in the Mi nistry of Finance and/or Central 
Bank, it supports external and domestic public debt (l oans and securities), whether this be short-, 
medium- or long-term. It also provides coverage for private debt, grants and on-lent loans. The 
DMFAS enables the debt office to develop a debt da tabase containing detailed  and aggregated data 
on loan contracts, bonds and grants, real operations  (disbursements and debt service) as well as 
future operations (disbursements and debt service). As the system  can process large quantities of 
debt data, more time and energy can be focused on analytical and management tasks. Its design 
allows for easy customisation and adaptation in accordance with the needs a nd preferences of each 
client institution. It can also be integrated with other financial systems if the institution so wishes. 
 
The DMF  is a grant facility financed by a multi-donor  trust fund managed by the World Bank that 
helps strengthen debt management policies and inst itutions in eligible count ries by financing the 
systematic application of the World Bank’s Debt  Management Performan ce Assessment (DeMPA). 
It  supports World Bank participat ion in joint Bank/Fund technical assi stance efforts to facilitate the 
country-led application of a toolkit for form ulating and implementing a Medium-Term Debt 
Management Strategy (MTDS).  Spain carried out relief of debts contracted befo re 2003 partially through Debt Swap Agreements. 
In 2009 and 2010, Spain signed Debt Swaps Progr ammes with LICs and HPCs, including 
Mozambique, Ghana and Bolivia. Italy subscribes to and has been in the le ad, as a co-sponsor, of 
the ’principles and guidelines to promote sustainable lending practices  in the provision of official 
export credits to LICs’. The provision of official  export credits to pu blic buyers and publicly 
guaranteed buyers in LICs should re flect Sustainable Lending practic es, i.e. lending that supports a 
borrowing country’s economic and social progress without endangering its financial future and 
long-term development prospects. The Principles w ill yield their full benefits only if all creditors 
act in harmony. 
2.7.5.  Discussion on enhanced forms of sovere ign debt restructuring mechanisms 
There is some degree of support among Member Stat es for a reform of th e international debt 
rescheduling system. 12 out 28 Member  States see a need to reform  the international architecture 
for the restructuring of sovereign debts in order to deal with potential cases of debt distress in low-
income countries. Further work is required to reach an EU common approach on this issue. 
 
The German government supports the creation of a debt workout mechanism and wants to promote 
discussions. Although some parties are calling for a sovereign debt  restructuring mechanism by 
setting up an international arbitration body, Belgium is of the opinion that there is no need for 
 
EN 86   EN another international body. For Belg ium, debt distress in devel oping countries can be handled 
within the existing frameworks and principles, in particular  the Paris Club and the Debt 
Sustainability Framework of the Bretton Woods  Institutions. Within the Paris Club, Belgium 
favours broad creditor’ and debtor participatio n to ensure comparable burden sharing among 
creditors.  Some Member States (Germany for example) feel  that a common EU-positio n must be found. In its 
dialogue, especially with non-Paris Club countries, the EU should stre ss that debt sust ainability is a 
shared responsibility of all borrowers and cred itors (including emerging economies). Spain argued 
that a further implication of non-Paris Club members in the debt relief of LICs would be necessary, 
particularly in light of the growing importance of emerging creditors and even private creditors. 
Denmark calls for the involvement of non-Paris Club creditors in restructuri ng and cancel sovereign 
debt for HIPC countries in the boards of the IMF and the World Bank.   Others (Netherlands, UK) are not in favour of a st ructural sovereign debt restructuring mechanism. 
They do not see the potential for the EU to take special initiatives, except of course taking part in 
international discussions. 
 
The new debt workout mechanism would be based on the Paris Club but may also involve a role for 
International Financial Institutions within the Debt  Sustainability Framework of the Bretton Woods 
Institutions. EU Member States have already agreed to discu ss these issues but a common EU-
position may be needed.  On 8-9 April 2010, the OECD, World Bank Group and IMF convened the 11th OECD-WBG-IMF Global Bond Market Forum in Washington D.C. Debt managers and centr al bankers from 23 
advanced and emerging market economies came toge ther with private sector representatives to 
discuss the post-crisis outlook for government bond markets. Discussions focused on four key 
areas: i) the impact of crisis-related measures and the potential implications of exit; ii) measuring sovereign risk; iii) the determin ants of investor demand; and iv ) debt managers’ response to the 
crisis. Overall, participants felt that the steps taken to stabilise financial conditions had generally 
been effective and that conditions in financial markets were normalising.  
Discussions highlighted a numbe r of ongoing risks including:  
i) while credible consolidation plans were ne eded, fiscal and monetary policy could be 
tightened too soon; 
ii) managing investor uncertainty would prove crit ical in managing risk in the near-term; 
iii) regulatory changes may lead to a deterioration in conditions in primary and secondary 
markets and aggravate the chal lenges facing debt managers. 
 
EN 87   EN 3. IMPROVING THE EFFECTIVENESS OF SUPPORT TO DEVELOPING COUNTRIES  
3.1. Making EU aid more effective 
EU Commitments 
● On 17 November 2009, the Council (General Affairs and External Relations) adopted 
the Conclusions on an Operational Framework on Aid Effectiveness, with additions made 
in June 2010 (cross country division of labour DoL) and December 2010 (accountability 
and transparency).113 
● The Operational Framework includes detailed commitments on accelerating Division of 
Labour (DoL); increased use of country syst ems; ensuring techni cal cooperation for 
enhanced capacity development; and strengthening accountability and transparency. 
 
Aid effectiveness is one of the key pillars of development coope ration to which the EU and its 
Member States are firmly committed. Improving ai d effectiveness will augment the quality and 
impact of aid and contribute to more value for money.  The EU and its Member States are working on a ra nge of measures to implement commitments in 
relation to the Paris Declaration principles and the Accra Agenda fo r Action. Since 2003 the 
Commission has reviewed the efforts of all EU  donors to implement those commitments. The 
replies of the Member States  to this year’s questionnaire on financing for development
114 show that, 
although some improvements have been made, enhanced  efforts are needed to maximise the impact 
of aid.   The Fourth High Level Forum on Aid Effectiveness in Busan in 2011 will re view the evidence of 
implementing aid effectiveness principles in the wi der context of development. The EU as a whole 
will be expected to present results that are in line with the declared EU level of ambition.  
 In November 2009, the General Affairs and Extern al Relations Council adopted an Operational 
Framework on Aid Effectiveness which contains m easures in key areas of the aid effectiveness 
agenda, such as division of la bour, use of country systems and t echnical cooperation for enhanced 
capacity development. Based on Commission proposals, the Operational Framework was 
complemented, in 2010, by a subchapter on cross-country division of labour
115 and a new chapter 
on a common EU approach for implementing commitments on mutual accountability and 
transparency116. 
 Article 210 of the Lisbon Treaty marks a new era in  European development policy; it states that , 
the Union and the Member States shall coordina te their policies on development cooperation, and 
consult each other on their aid programmes, incl uding in international organisations and during 
international conferences, and may undertake join t action, and contribute if necessary to the 
implementation of Union aid programmes. 
                                                
 
113See Council document 18239/10 of 11.11. 2011: . Operational Framework on Aid Effectiveness – Consolidated text. 
114To avoid duplication with the ongoing OECD/ DAC Paris D eclaration Survey, the Aid E ffectiveness chapter in the 
annual questionnaire on financing for development was substa ntially reduced. As the results of the OECD/ DAC survey 
have not been available prior to publication of this repor t, this chapter includes less detailed information than in 
previous years. 
115Council Conclusions of 14.06.2010. 
116 Council Conclusions of 9.12.2010. 
 
EN 88   EN  
This is a new opportunity to make EU developmen t aid more effective, efficient, and potent in 
terms of actual impact on the ground. It should also  make a real difference in terms of EU political 
impact and visibility. A study carried out  on behalf of the European Commission117 found that the 
potential benefits from a European approach (i .e. joint programming, c ountry and cross-country 
division of labour) towards aid effectiveness could save an estimated EUR 3 to 6 billion per year. 
3.1.1.  EU and Member States action on ownership 
Ownership is the first principle established in the Paris Declaration. Donors committed themselves 
to respect partner country leadership and he lp strengthen their capacity to exercise it. 
 Member States (20) emphasised consultation as the main tool to build ownership, followed by 
support for capacity development (16). Most Member  States rely on bila teral negotiations and 
consultations. Ownership is achi eved by aligning strategies a nd conducting consultations. Germany 
emphasises at national and international levels the importance of capacity development as a prerequisite for implementing the aid effectiven ess principles, and the need to make capacity 
development support more effective. Capacity development is thus understood as a process 
whereby systems are enabled to unfold their cap ability for self-reliant action and management. 
 
Sweden highlighted the impact of the choice of aid modalities on ownership. Sweden’s Action Plan 
on Aid Effectiveness, valid 2009-2011, aims in its en tirety to increase the c onditions for exercising 
country leadership/ownership, e.g. by increasing the use of country systems and applying 
programme-based approaches in Swedish development cooperation. The three-year plan includes a 
number of measures to achieve seven concrete objectives. The plan includes concrete measures 
related to staff incentives to work on aid effectiveness. 
3.1.2.  EU and Member States action on alignment 
Increasing alignment of aid with pa rtner countries’ priorities, system s and procedures and helping to 
strengthen their capacities is a central principl e of the Paris Declaration. To improve alignment 
donors agreed to use country systems  (national arrangements and proc edures for public financial 
management, accounting, auditing, procurement, results frameworks and monitoring) to the 
maximum extent possible. Using a country’s own institutions and systems increases aid effectiveness by strengthening the partner country’s sustainable cap acity to develop, implement and 
account for its policies to its citi zens and parliament. Donors also  committed themselves to align 
their conditions , whenever possible, with their partner’s  national developmen t strategy, and make 
them public. Improving the predictability  of aid is another aspect of alignment, and donors have 
committed themselves to disburse aid in a timely and predictable fashion according to agreed schedules. In terms of technical cooperation, donors have agreed to  reduce the stock of parallel 
project implementation units , in order to strengthen the capacities of pa rtner countries. 
 
Use of Country Systems (UCS) . A study prepared for the third High Level Forum (HLF3) in 
Accra in 2008
118 found that progress in the use of country  systems had been limited as only a 3% 
improvement has been recorded in the aggregate (from 40% to 43%), with  almost no change in 
country averages. The Operational Framework on Ai d Effectiveness identifie d actions (general and 
                                                 
117HTSPE, Aid Effectiveness Agenda: Benefits of a European Approach , October 2009. 
118Third High Level Forum on Aid Effectiveness hosted by the Government of Ghana in Accra, 2-4 September 2008.  
OECD DAC (2008), Working Party on Aid Effectiveness, Joint Venture on Public Financial Management, Report on 
the Use of Country Systems in Public Financial Management.  
 
EN 89   EN time-bound) for the EU and its Member States to report on. Progress on some  of these actions is 
reflected in the responses to the questionnaire as follows: 
 
On using country systems as a first option119, 15 out of 24 Member Stat es supported the use of 
country systems through an assessment to identify in ternal constraints. 11 Member States revised 
the design of aid instruments i rrespective of modality; staff tr aining was provided by 12 Member 
States and 17 out of 24 Member  States supported partner c ountry capacity development for 
improving the quality of country systems.  With regard to additional time-bound actions not covered by the questionnair e, in response to the 
action on budget support
120 the Commission, following the  public consultation, launched with the 
Green Book on the Future EU Budget Support for third countries of 2010, is  currently preparing 
policy proposals on this issue. Likewise, good pr actice examples on the use of country systems 
collection by the end of 2010 is covered by the DAC work to which the Commission and the EU 
Member States contribute.  
 
On undertaking Joint Asse ssments to promote the Use of Country Systems121 16 Member 
States supported partner country capacity development fo r improved quality of country systems; 12 
Member States conducted joint assessments with others; 16 Member States  used methodologies and 
results from other donor’s assessments; and 11 Member States made me thodologies and results 
from their assessments available to others.   EU Member States usually support UCS through:  
• Use of general and sector budget support; 
• Improving procurement systems to facilitate the actual use of UCS at a later stage’; 
• Public finance management (PFM) at sector level, e.g. Finland: strengthening local PFM-
systems in the planning phase of its forestry s ector project and is now using local PFM systems 
both in forestry and water sector cooperation; and 
• Strengthening of domestic accountability syst ems (for example through support for Supreme 
Audit Institutions in several countries). 
Many EU Member States do not use country systems due to: 
• Lack of quality systems and subsequent fiduciary, political and reputational risk of using country 
systems (particularly for the treasury); 
• Lack of knowledge among staff of different opti ons to gradually use country systems (e.g. 
CABRI dimensions of putting aid on budget), part icularly when systems are still weak and 
cannot be fully used;  
• Trade-off between quick implementati on and results-orien tation and UCS; 
• Overall resource demands/initial la bour intensity of increasing us e of partners’ systems; and  
                                                
 
119 See European Council, 11 January 2011, Doc. 18239/10. Operational Framework on Aid Effectiveness – 
Consolidated text: paragraphs 6, 8, 12 and 13 (A. Use of country systems as a first option),  
120’The Commission and its Member Sates will initiate a dial ogue towards a coordinated approach on budget support by 
early 2010’ . 
121Consolidated version Operational Framework: B. Undertake joint assessments to promote the Use of Country 
Systems, paragraphs 14-17. 
 
EN 90   EN • Difficulty of assessing systems and processes at decentralised/organisational level, making 
decisions on use or non-use based on incomplete information.  
In 2010, the Belgian Development Cooperation (BDC) developed guidelines for using country 
systems in the field of procurement and financial management . The important aspects of human 
resource management, quality management (mon itoring and evaluation), scope management and 
coordination management will be dealt with in a sec ond phase. The BDC subscribes to the Accra 
Agenda for Action and gives priority to the use of  country systems. All formulation reports must 
contain an analysis of the oppo rtunity to use the country publ ic procurement and financial 
management systems. If the conclusion is that on e of the country systems cannot be used, then a 
donor system should be adopted (ideally in a ha rmonised way with other donors providing project 
support in the sector).   For the United Kingdom, decisions on the use of country systems are made in the light of DFID’s 
three partnership commitments  (commitment to reducing pove rty, meeting human rights and 
other international obligations, and improving public financial management and accountability) and through dialogue with partner countries and other donor s.  Use of country sy stems is the preferred 
method, providing countries can demonstrate a cred ible commitment to improving public financial 
management and accountability. This is assessed as  part of a fiduciary risk assessment of the 
national Public Financial Management and Account ability system, which is obligatory in country 
planning where financial aid (i.e. use of country PFM systems) is considered. DFID’s approach to 
this is set out in the How to Note: ‘Managing Fiduciary Risk when Pr oviding Financial Aid’ 
(December 2009).  This provides guidance on assessing country PFM systems, including the use of additional safeguards, which seek to  reduce the risk of using country  systems while also helping to 
strengthen them. 
 
Changing the nature of conditionality . 13 out of 14 Member States that answered this question 
said that they harmonised condition with  other donors.  Only 3 reduced them. 
Making aid more predictable . Table 12 below presents the ratios between actual ODA flows and 
budgets prepared one or two years before.  Ratio s below 100% mean that actual expenditure was 
below budget, while ratios above 100% are over budget.  Table 13 shows th at most EU Member 
States’ aid has achieved a good degree of predictability with ratios  above the DAC average both for 
one-year and two-year predictabi lity. Only Denmark, Ireland, Ital y, Netherlands and Spain have a 
one-year predictability ratio below average.  15 EU Member States can make multi-annual co mmitments for projects, twelve for general 
programme based support, and eleven for budget support. For several, outer year budgets are 
indicative and subject to  change (e.g. Ireland). 
 
EN 91   EN  
Table 12 – Predictability Ratios of 2009 flows 
 
Predictability Ratios of 2009 flows 
One-year predictability 
ratio Two-year predictability ratio DAC Members 
2009 Outturn/programmed 
early 2009 (%) 2009 Outturn/programmed early 
2008 (%) 
Australia 111 134 
Austria 100 na Belgium 119 56 
Canada 67 97 
Denmark 91 101 European Commission 117 100 
Finland 103 98 
France 107 68 Germany  120 140 
Greece na na 
Ireland 88 48 Italy 60 63 
Japan na na 
Korea 89 na 
Luxembourg 104 97 
Netherlands 85 87 New Zealand 73 86 
Norway 71 82 
Portugal 97 91 Spain 82 121 
Sweden 101 113 
Switzerland 99 na United Kingdom 99 86 
United States na na 
DAC Total 93 94 
Source: OECD DAC Forward spending plans (2010) 
 
21 Member States stated that they align their technical cooperation  to partner country policies and 
plans.19 make the information on expenditure relate d to providing technical cooperation (including 
in-kind technical assistance) available to the gene ral public. EU Member States gave about 22% of 
their ODA in the form of technical cooperation sta nd alone projects in 2009, according to data from 
OECD DAC’s CRS database. 
3.1.3.  EU and Member States action on harmonisation 
Harmonisation refers to cooperation between donors to  improve the efficiency of aid delivery. The 
focus under the Paris Declaration process was initi ally on how to harmonise  rules and procedures 
and on developing new instruments, including programme-based approaches, pooled funding 
arrangements, joint country plans and other co mmon arrangements. Experience suggests that 
organising joint activities with too many donors is often unproducti ve, and the focus has shifted 
towards achieving a better division of labour among donors, focusing on areas of comparative 
advantage, and using silent partnerships  and lead donor arrangements elsewhere. 
 EU donors have committed themselves to es tablishing a more e ffective division of in-country 
division of labour.  In terms of achieving this goal, joint programming  represents a fundamental 
tool for the EU. In Accra, donors ag reed to start a dialogue on cross- country division of labour , 
and this is also a subject for EU-lev el action in the Operational Framework. Coordinating missions  
 
EN 92   EN is also important in terms of harmonisation, si nce the number of donor missions often represents a 
serious challenge in terms of the time and res ources that must be de voted to these visits. 
 
Better in-country division of labour.  Since 2008, the EU Fast Track Initiative on Division of 
Labour and Complementarity (FTI DoL), which involves the European Union and currently 14 
Member States as facilitators has supported DoL pr ocesses in approximately  30 partner countries. 
The network of EU DoL is being continuously upda ted and is regularly used for communication. 
Work is underway to facilitate better web- based communication and information exchange, 
fulfilling one of the commitments with regard to  DoL adopted in the Operational Framework on 
Aid Effectiveness122.The 3rd Monitoring Report and Progre ss Review of the EU Fast Track 
Initiative on Division of Labour123 and trends since 2008 show encour aging progress, especially in 
the 19 countries involved since the beginning.  There is widespread use and institutionalisa tion of donor mappings as an aid management 
instrument, an upward trend in country-level ag reement on sector definitions as an important 
precondition for DoL and solid use of lead donor a rrangements that can generate more momentum 
for DoL. Perceptions of partne r country commitment to DoL processes have also somewhat 
improved. The results of DoL processes are increasingly positive with regard to  the quality of sector 
dialogue and, to a lesser degree, the rationalisation of aid allocatio ns. Responses show an increasing 
expectation of positive contributions to aid and de velopment effectiveness. Nevertheless, the DoL 
approach is demanding and takes time to yield meas urable results. It still faces challenges with 
regard to some methodological i ssues, questions of country ownership and donor commitment. It 
needs to be better adapted to specific country cond itions and integrated with other aspects of the aid 
effectiveness agenda. An emerging issue concerni ng HLF 4 is the rapidly increasing importance of 
‘new donors’ and ‘new funding lines’ reported from  country level. This phenomenon adds to the 
complexity of the Global Aid and Development Arch itecture. 12 EU Member St ates (out of 23 that 
responded) have fully integrated the principles of the Code of Conduct  on Complementarity and 
Division of Labour (2007) in thei r strategies, staff guidance and pr ogramming processes/guidelines.  
Another six have done so partially, wh ile only two have not done so yet. 
 
Delegated cooperation . 15 out of 23 Member States have legal and administrative arrangements 
for delegated cooperation in place. As regard s the European Commission, Finland’s assessment 
procedure for indirect centralised management was finalised in June 2010, providing a framework 
for cooperation between the Foreign Ministry an d the European Commissi on.’ All projects funded 
by CyprusAid are implemented thr ough the delegated cooperation method. 
 For the following organisations the European Comm ission assessment procedure to administer EU 
funds under indirect management has been conclude d: Agence Française de  Développement (AFD), 
Deutsche Gesellschaft für In ternationale Zusammenarbeit
 (GIZ), Cooperation Technique Belge 
(BTC CTB), Austrian Development Agency (ADA) , Kreditanstalt fur Wiederaufbau (KfW), UK 
Department for International Development (DFID) , NL Ministry of Foreign Affairs, Instituto 
Portugues de Apoio ao Desenvolvimento (IPAD), Lux-Development SA, Ministry of Foreign 
Affairs Finland, Danish Ministry of Foreign Affairs (DANIDA)and the British Council. For the 
following organisations the assessment is ongoi ng: France Cooperation Inte rnationale (FCI),  
Societa Italiana per le Imprese al’Estero (SIMEST), Agencia Española de Cooperación 
Internacional al Desarrollo (AECID), Fund ación Internacional y para Iberoamérica de 
                                                 
122I. Division of Labour, paragraph 4. 
123European Commission, The 3rd Monitoring Report and Progress Review of the EU Fast Track Initiative on Division 
of Labour , Draft Version, February 24 2011. 
 
EN 93   EN Administración y Políticas Públicas (FIIAPP) a nd Australian Development Agency (AusAID). 
Denmark, Finland, Ireland, the Netherlands, Swed en and the United Kingdom subscribe to the 
Nordic Plus principles124 for delegated cooperation, where Nord ic Plus countries have agreed to 
mutually approve each other as potential partners for delegate d co-operation arrangements. The 
majority of Member States (14 out of 23) do not ha ve a mechanism in place at headquarters level to 
track cases of delegated cooperation.   
 
Improving joint programming . Overall Member States reporte d 13 cases of joint programming, 
only five of which involved joint analysis and response strategies accordi ng to the EU agreed 
Common Format for Country Strate gy Papers. A recent desk review of the experience with joint 
programming125 found that there has been a lack of pr ogress in implementing joint programming.  
Joint programming differs greatly from country to country. Experiences range from agreeing a 
strategy (e.g. Sierra Leone, Somalia) to harmonisi ng approaches at sector/programme level. These 
findings are confirmed by the 2011 su rvey. Only 13 Member States out  of 27 are currently involved 
in joint programming exercises.  Reasons for not participating vary. Cyprus, for example, does not 
do programming directly but participates in programming of Lead Donors through delegated 
cooperation. Malta works directly with NGOs. Poland and Roma nia cannot carry out multi-annual 
programming due to the fact that ODA budget allocations are a nnual. The United Kingdom is 
involved in joint programming in  a number of countries, such as Bangladesh, where a joint 
cooperation strategy involving the government a nd 17 development partners including the UK was 
signed in 2010. Other examples are Afghanistan, Ke nya,  Nigeria, Uganda, Zambia, which all use 
different models depending on the country contex t. In South Africa, the UK is signed up to a 
Country Strategy Paper that is in line with the 2006 Council Conclusions.   
 
Cross-country division of labour.  The Commission survey revealed  that in recent years, EU 
Member States have reorganised their bilateral ai d portfolios by refocusing th eir assistance, often in 
the presence of stable or in creasing aid budgets. There are 123 cases of planned exits by EU 
Member States from 69 partner countries. Ital y, Sweden, Spain and the United Kingdom accounted 
for three quarters of the exit cases.  There seem to be only five cases of EU Member States currently 
starting a new bilateral aid relati onship. Once EU Member States l eave a country, some ODA that is 
counted as country programmable aid - CPA (e .g. cultural cooperation, scholarship via state 
programmes, special education schemes like Germ an schools abroad) and so me ODA that does not 
count as CPA (ODA through NGOs and Civil Soci ety, imputed student cost, equity capital 
investment) may remain.   Exit takes time. In the case of the German c ooperation, partner governments and other donors are 
informed and if possible consulted, as the exit period lasts normally for several years. It allows for orderly conclusion of activities, achievement of intended results and, if po ssible, other donors to 
take over certain support schemes. 
3.1.4.  EU and Member States action on mutual accountability 
Mutual accountability lies at the heart of the Pa ris Declaration, and is a process by which two (or 
multiple) partners agree to be held  responsible for the commitments that they have voluntarily made 
to each other. It helps build tr ust and partnership around shared ag endas and provides incentives for 
                                                
 
124 These are principles developed to en hance aid effectiveness. Delegated c ooperation is aimed at significantly 
reducing the transaction costs for both partner governments and donors. http://www.norad.no/en/  ( Norad  - Norwegian 
Agency for Development Cooperation) 
125European Commission, IQSG  Secretariat, DG DEV A, State of Play of EU Joint Programming  of External 
Assistance - Desk Study of Recent Experiences ,  2010. 
 
EN 94   EN behaviour change needed to achieve better resu lts. A central aspect is making aid flows more 
transparent. Likewise, as stated in the Operational Framework126 'in the Accra Agenda for Action, 
donors and partner countries agreed to provide timely and detailed information on current and 
future aid flows in order to enable more accurate budget, accounting and audit by developing 
countries’. 
 
Improving mutual accountability . A 2010 study127 of national mutual accountability initiatives in 
70 countries found that only 8 partner countries made major progress on mutual accountability, 52 
partner countries do not have an  aid policy or agreed document outlining targets for ODA providers, 
and 32 partner countries had an aid information management system in place. In almost all 
countries, non-DAC donors, global funds and NGOs  do not supply data to aid management 
systems. Joint frameworks for monitoring joint comm itments have been set up in at least 15 priority 
countries for EU Member States (i.e., Bhutan, Burkina Faso, Cape Verde, Ethiopia, Ghana, Kenya, 
Malawi, Mali, Mozambique, Nicaragua, Peru, Rwanda , Tanzania, Uganda, and Zambia). They are 
either formal frameworks or policy dialogue groups. In 2010, for example, the United Kingdom  
worked with other partners to establish and re view mutual accountability frameworks in a number 
of countries including Ghana (aid policy and joint donor Performance Assessment Framework), 
Bangladesh (joint cooperation strategy), Uganda (to help de velop an aid policy and joint 
Memorandum of Understanding ), Nepal (the joint transparency and account ability initiative with 
the UN and a number of bilateral don ors) and Zambia (to develop a ne w Joint Assistance Strategy).  
 
Making aid more transparent . Increased reporting on ODA flows . Most EU non-DAC donors 
report their ODA to the OECD/DAC . The Commission encourages all of them to do this, in line 
with DAC reporting rules, although none of the EU -12 is yet a DAC member. Bulgaria and Malta 
have yet to start reporting systematically to th e DAC. The Commission will continue to work with 
the DAC secretariat to provide support to the EU’s non-DAC donors to enhan ce their statistical 
reporting capacity.  The European Commission and several Member States (Denmark, Finland, Germany, Ireland, 
Netherlands, Spain, Sweden and the United Ki ngdom) are party to the International Aid 
Transparency Initiative (IATI) launc hed in 2008 at Accra. IATI’s role is to develop consistent and 
coherent international standards for the way donors report more timely information on past and 
future aid spending. 21 out of 22 Member States make their ODA volumes public on their websites, 
often in an annual report. Member States menti oned several good examples of ODA data tools. In 
Mozambique the Government of Mozambique Me dium-Term Expenditure Framework (MTEF) and 
Budget processes, in Ethiopia the Development A ssistance Group (DAG) and EU, in Vietnam, the 
EU annual blue book exercise and annual Ministry of  Foreign Affairs report. For the Netherlands, 
an important tool to disclose information on aid volumes is the Bi-annual Results Report that 
presents the results achieved and the Dutch policy and philosophy on giving aid. The report is 
meant to inform parliament, stakeholders and the public. The Results Report is coproduced by the Ministry of Foreign Affairs and Dutch CSOs. 
3.1.5.  EU action on managing for development results 
The promotion of management for development re sults (MfDR) is central to the entire aid 
effectiveness agenda. It means that stakehol ders hold partner country governments and donor 
agencies accountable to show results, i.e. to demons trate the effectiveness and actual impact of aid. 
                                                
 
126Consolidated version: IV Accounta bility and transparency, paragraph 1 
127UN Development Cooperation Forum (DCF), Review of Progress in International and National Mutual 
Accountability and Transparency on Development Cooperation , May 2010. 
 
EN 95   EN It means that donors and recipients oblige each othe r to demonstrate that they are honouring their 
commitments and promises.  12 Member States (out of 23 who replied) provid e support for MfDR. The re sults approach suffers 
from an over elaborate and technical approa ch focused on donors and their capacity. Donor 
countries are struggling to demonstrate their attrib ution rather than their contribution to partner 
countries’ results. Donors could increase support to pa rtner countries to focus on results (improving 
statistical data, analytical capacit y etc) and then use these results to communicate to the public the 
successes and challenges of their development cooperation programmes Sweden felt that the aid effectiveness agenda need ed to be more specific to different cooperation 
contexts, particularly in conflict and post-conflict countries and in  reform cooperation with Europe, 
including how the reporting and measur ement of results is conducted.  
 
3.2. Supporting better Global Governance 
EU Commitments 
March 14, 2002 European Council Conclusions on the International Conference on Financing for 
Development. To influence the reform of the Inter national Financial System by combating abuses of 
financial globalisation, strengthen the voice of d eveloping countries in international economic 
decision-making, and, while respecting their respect ive roles, enhance cohe rence between the UN, 
International Financial Institutions and the WTO. 
3.2.1.  Introduction 
The objective of this Chapter is to give an update of the reform initiatives in the main International 
Financial Institutions (namely the World Bank, IMF, and to a lesser extent, other key multilateral development banks), as well as the UN and its specialised agencies.  
 The reform of these institutions was accelerated by perceived shortcomings in the international financial and monetary architecture revealed by the global financial and economic crisis in 2008-
2009, the effects of which continue to be felt today and are further exacerbated by increases in commodity prices in early 2011. An objective would be to ensure more effective and coordinated 
management of global issues, such as financial st ability, food and energy security, climate change 
and the fight against major pandemics. The main ch allenge is to strike the correct balance between 
legitimacy (through representativeness and acc ountability) and the effectiveness of global 
institutions.  The way forward that the Commission proposed in 2010
128 was as follows: 
• The Commission will monitor emerging discu ssions on how best to use the general SDR 
allocations, in particular to the benefit of low-income countries. 
• In line with the decision taken by the G20 and the Joint World Bank/IMF Development 
Committee, the EU and other Governors on the Boar ds need to ensure that the increases in 
developing and transition countri es voting shares are implemente d swiftly in both institutions 
and that the IMF quota is revised. 
                                                 
128 COM (2010) 159 of 21.04.2010 and Statement of Commissioner Piebalgs at the World Bank/ IMF Development 
Committee meeting in April 2010 
 
EN 96   EN • Europe’s voice international fina ncial institutions should be am plified through consolidated, less 
fragmented European representation, with the ultimate objective of having a single European 
seat at the IMF and the World Bank. EU coordina tion should be stepped up, particularly within 
regional development banks. 
• The replenishments for concessional arms of Multil ateral Development Banks such as the IDA at 
the World Bank Group and the African Developmen t Fund at the African Development Bank are 
of particular concern regarding as sistance to the most vulnerable.  
• The ’UN system-wide coherence reform’ needs s upport in order to reduce fragmentation of the 
UN to strengthen its operational capacity and improve its efficien cy at headquarters and in the 
countries where it operates. 
The next section presents the key reforms in the a bove areas undertaken in Multilateral Institutions. 
It sets out the points of view of the Europ ean Commission and Member  States, based on their 
responses to the relevant pa rt of the questionnaire.  
3.2.2.  Reforming multilateral institutions 
3.2.2.1.  IMF129 
The 2008 quota and voice reform was the first step towards realigning IMF members’ quotas with 
their relative positions  in the world economy . On 16 December 2010, the IMF’s Board of 
Governors approved a far-reaching quota and governance reform130. Once implemented (no target 
date so far), the reform packag e will result in: (a) a doubling of quotas; (b) a shift of more than 
6%of quota shares to dynamic emer ging market and developing countri es, Brazil, China, India, and 
Russia will be among the 10 largest shareholders in the Fund, while the combined voting share of 
the US and EU Members will fall below 50%, and (c) preserving the quota and voting share of the poorest member countries. A comprehensive review of the current quota formula will be completed by January 2013. Completion of the 15th General Re view of Quotas will be brought forward by 
about two years to Januar y 2014. Any future realignment is expect ed to result in increases in the 
quota shares of dynamic economies in line with their relative positions in the world economy. 
 New concessional facilities for Low Income Countri es (LICs) were estab lished in January 2010 
under the Poverty Reduction and Growth Trust (PRGT)  as part of a broader reform to make the 
Fund’s financial support more flexible and bette r tailored to the divers e needs of developing 
countries. Access limits and norms were broa dly doubled. Financing terms were made more 
concessional, and the interest ra te will be reviewed every two y ears. All facilitie s support country-
owned programmes aimed at achieving a sustaina ble macroeconomic position consistent with 
strong and durable poverty reduction and growth. Thes e facilities are as fo llows: (a) The Extended 
Credit Facility; (b) The Standby Credit Facility (SCF); and (c) The Rapid Credit Facility (RCF).    
 The 2010 reforms do not fully address the existi ng agenda. One major ongoing effort is for any 
future competition for the leadership of the IMF to become more open
. All of the Fund’s ten 
Managing Directors have been European. All ei ght of the Deputy Mana ging Directors (First 
Deputies since 1994) have been from the United St ates. For the past decade, while non-European 
candidates for Managing Director have been nominated but ultimately rejected, pressure has been intense for the selection process to be fully open to all candidates re gardless of geography. The 
                                                
 
129See summary posted in December 2010 http://blog-imfdirect.imf.org/2010/12/28/2010-the-year-of-imf-reform/  
130http://www.imf.org/external/np/exr/facts/pdf/quotas.pdf 
 
EN 97   EN IMF’s Executive Board, which selects the Managing Di rector, agreed in prin ciple several years ago 
to open up the process, but winning higher political  support for the reform has not been easy. EU 
members are ready to particip ate in changing the process of  appointing the Heads of the 
International Financial Institutions (IFIs). The heads and senior leadership of all IFIs should be appointed through an open, transpar ent and merit-based process, ir respective of nationality and 
gender. This change should apply to all IFIs including the IMF and the World Bank.  
3.2.2.2.  World Bank (WB) Group 
On April 25 2010, the Development Committee endorsed WB general a nd selective capital 
increases equivalent to EUR 66.7 billion
131 (USD86 billion). The IDA16 replenishment was 
concluded with an 18% increase (compared to  IDA15) for a total amount of EUR 38.2 billion 
(USD49.3 billion). The World Bank’s governance reform  is to be implemented in two phases, the 
first of which has already been approved and is under implementation. The package aims to create a 
new WB Group that is strategically focused on where it can add most value, has 21st century 
governance, remains financially strong, and is mo re responsive, innovativ e and accountable. This 
will be pursued through the following additional measures: 
• Shifting voting power for developing and tran sition countries (DTCs) to 47.19% for the 
International Bank for Reconstr uction and Development (IBRD), representing a total shift of 
4.59% to DTCs since 2008132; 
• The Bank's private-sector arm, the Interna tional Finance Corporation (IFC,—significantly 
increasing DTC voting power from 33.4% at present to about 40%; 
• International Development Association (IDA)—rai sing the voting shares  of borrowing member 
countries from about 40% prio r to the reforms to around 46%; 
• Multilateral Investment Guaran tee Agency (MIGA)—maintaining voting power parity between 
developed and developing members; 
• In all institutions, helping the smallest poor me mbers to maintain thei r voice and voting power; 
• Establishing unique IBRD Shareholding Princi ples, primarily reflecting evolving economic 
weight and the Bank’s development mission, in cluding: (a) economic weight in the world 
economy, measured through a formula which is comp atible with - but also suitably different 
from - IMF quotas; (b) integrated, substantive and permanent recognition of past member contributions to IDA, combined with incentives for future IDA contributions; and (c) moving over time towards equitable voting power be tween developed country  and DTC members; 
• Holding regular IBRD and IFC shareholding re views every five years to allow for more 
dynamism and to account for changes in economic weight and member contributions to the World Bank Group mission; 
• Amplifying the DTC voice on the World Bank Boards  by adding a third Dire ctor to represent 
member countries in Sub-Saharan Africa in October 2010; 
                                                
 
131 Using an average 2010 US$/Euro exchange rate of 0.775. 
132http://siteresources.worldbank. org/DEVCOMMINT/Documentati on/22553921/DC2010-006(E)Voice.pdf  
http://siteresources.worldbank. org/DEVCOMMINT/Documentati on/22553921/DC2010-006(E)Voice.pdf   
 
EN 98   EN 3.2.2.3.  Regional Development Banks 
EU countries also play a major role in the fi nancing and governance of the regional development 
banks listed below. These institutions play an impor tant role in transferring aid flows to developing 
countries and European countries in transition. They have recently risen to the twin challenges of 
carrying out their mandate of reducing poverty a nd at the same time responding to the adverse 
effects of the economic crisis  and its impact on economic growth in many countries. 
 
African Development Bank (AfDB) . Donors concluded negotiations of the Twelfth Replenishment 
of the African Development Fund (ADF-XII) in October 2010 . They agreed133 on a replenishment 
level equivalent to EUR 7.4 bil lion (USD 9.5 billion) for the ADF over the next three years (2011-
2013), a 10.6% increase in donor contributions  over ADF-11.  This came as an important 
complement to the endorsement on May 27 2010 by governors representing AfDB ’s shareholders of 
a tripling of the Bank’s capital re sources to nearly USD100 billion134.  
 
Asian Development Bank (ADB). The Asian Development Bank’s (ADB) Board of Governors had 
already agreed in 2009 to triple ADB’s capital  base from EUR 42.7 billion to EUR 127.9 billion 
(USD 55 billion to USD 165 billion).135  The negotiations on the re plenishment of the Asian 
Development Fund (ADF X) are due to commen ce next year.  ADF IX mobilised over EUR 8.5 
billion (USD 11 billion136). 
 
Inter-American Development Bank (IDB).  The IDB’s Board of Governors on July 21 2010, agreed 
to the terms of the increase of the Bank’s ordi nary capital by EUR 54 b illion (USD 70 billion).  
 
European Bank for Reconstruction and Development (EBRD).  A capital increase from EUR 20 
billion to EUR 30 billion was agreed in May 2010. 
3.2.2.4.  UN System 
The 2010 annual progress report on Financing for Development137 noted that ’The systemic reforms 
decided at the 2005 World Summit have yet to be fully implemented.’ The reforms envisaged 
improving the transparency, representativeness a nd effectiveness of the principal UN bodies and 
included major challenges, such as reform of th e Security Council and establishment of a Human 
Rights Council, as well as the challenge of achieving system-wide coherence by improving the 
coherence of operational activities. So me progress has been made during 2010. 
 The system-wide coherence reform (SWC) is impor tant to reduce fragmentation of the UN system 
and strengthen its operational capacity by improvi ng coordination between agencies and reducing 
fragmentation. The ‘delivering as one’ initiative
138 announced in 2007 and implemented in 8 pilot 
countries is intended to make the UN more coherent , effective and efficient. This process, strongly 
supported by the EU, has moved relatively fast and created an important ‘bottom-up’ momentum. 
Furthermore the call for UN system-wide coheren ce has led many UN entitie s to develop intra-UN 
partnerships and cooperation. Building on the positive experience of the pilot countries and the 
                                                 
133http://www.afdb.org/en/news-events/ article/african-development-fund-repl enished-with-usd-9-5-billion-7335/# ; 
http://www.afdb.org/en/news-events/ article/african-development-fund-repl enished-with-usd-9-5-billion-7335/#   
134http://www.afdb.org/e n/topics-sectors/topi cs/capital-increase/ ; http://www.afdb.org/en/topics-sec tors/topics/cap ital-increase/ .  
135http://www.adb.org/Documents/Brochures/I nFocus/2010/General-Capital-Increase-V.pdf ; 
http://www.adb.org/Documents/Brochures/I nFocus/2010/General-Capital-Increase-V.pdf .  
136http://www.adb.org/adf/highlight.asp  , http://www.adb.org/adf/highlight.asp . 
137http://ec.europa.eu/development/i center/repository/SEC_2010_0420_COM_2010_0159_EN.PDF ; 
http://ec.europa.eu/development/i center/repository/SEC_2010_0420_COM_2010_0159_EN.PDF .  
138http://www.undg.org/?P=7 . 
 
EN 99   EN progress made on UN business practices by heads of UN agencies, funds and programmes, the 
SWC agenda has managed to move forward. However, the results of this initiative have yet to be 
assessed through a performance evaluation.  Other important reform processes, also framed in  the context of SWC, ha ve made major progress, 
such as the humanitarian reform and the reform  of the UN gender architecture.  The humanitarian 
reform process launched by the international huma nitarian community in 2005 seeks to improve the 
effectiveness of humanitarian response by ensu ring greater predictability, accountability and 
partnership. To strength en the foundation for understanding th e process, Regional Office for Asia 
Pacific (ROAP) conducts workshops on humanitarian  reform at regional and national level to 
promote regional and country-level  progress towards humanitarian reform and create dialogue 
between policy-makers and practitio ners on the reform. The key elements of the reform are: (1) the 
Cluster Approach; (2) a strengthened Humanitarian  Coordinator (HC) system; (3) more adequate, 
timely, flexible and effective humanitarian fi nancing; and (4) the development of strong 
partnerships between UN and non-UN actors.  On 2 July 2010, the General Assembly unanimous ly adopted the resolution on ’System-wide 
coherence’ establishing the new UN Entity for Gender Equality and the Empowerment of Women, 
to be known as UN Women. With the adoption of this  resolution, the new entity will be in a position 
to close the current gap between the normative and operative work of th e UN on gender aspect, 
promote effective system-wide mainstreaming in the UN system, and improve accountability. 
 There are also reforms to streng then UN accountability in a process initiated about five years ago
139. 
Achievements during 2010 were as follows:  
• Transparency and Integrity: (a) The UN has impl emented a financial disclosure programme for 
senior officials and procurement officers to ensure  that potential conflicts of interest that may 
arise from staff members’ private holdings, a ffiliations, or activities can be identified and 
addressed appropriately; and (b) the UN issued a policy on the ’Reporting, Retaining and 
Disposing of Honours, Decorations, Favours, Gifts or Remuneration.’  
• Procurement: The UN amended the Award Review Board and formed the Senior Vendor Review 
Committee to strengthen internal control, transp arency, accountability and risk mitigation in the 
UN procurement process.  
• Ongoing Commitments: Currently, the Depart ment of Management is undertaking a 
comprehensive review of delegation of authority ; and (b) the UN is introducing the International 
Public Sector Accounting Standards (IPSAS) to improve the quality and transparency of 
financial reporting. WFP has adopted these standa rds and, due to delays, other agencies are 
expected to complete roll-out by 2013.  
3.2.3.  Feedback from the EU and Member States 
There were 12 questions in the EU and Member State questionnaire that  related to governance 
reforms at the World Bank and IMF. This section re ports feedback received from 27 Member States 
and the EU. Very few of the respondents chose not  to answer each question. The responses show a 
diversity of opinions and differences on key approach es that would need to be reconciled for the EU 
                                                 
139http://www.un.org/en/strengthe ningtheun/accountability.shtml ; 
http://www.un.org/en/strengthe ningtheun/accountability.shtml   
 
EN 100   EN group to adopt a consensus towards the Bretton Woods  institutions. Details of the questionnaire and 
responses may be found in Annex 8.    With respect to World Bank reforms, some issues  were raised repeatedl y. The key concerns and 
proposals were as follows: (a) decen tralisation of the Bank; (b) use of results-based approaches for 
greater effectiveness; (c ) fairer voting power/gr eater voice for developing countries; and (d) open 
selection of Bank President (and of senior manage ment). There were also multiple mentions of 
using a corporate scoreboard and the importance of improved internal gove rnance. Overall, this 
agenda seems aligned with ongoing reforms and issues highlighted in the previous section. 
 On the issue of quota realignment at the IMF, 16 Me mber States (out of 27 replies) felt it would 
increase the institution’s legitimacy. However, 11 Me mber States disagreed.  Many in the latter 
group felt that the reforms did not go far enough. Others were concerned by the increased 
importance of the G20 and the diminishing role for small economies. A number thought ministers 
should be more involved in decisions. This issu e was raised specifica lly in question 75 (do you 
support the creation of a Ministeria l Council for the IMF with decisi on-making powers?) with 16 of 
25 respondents in favour. Finally, a fe w were concerned that the IMF may be drifting away from its 
core mandate, even though others thought it shoul d expand that mandate. The issue of broader 
governance reform and open selection of  head of IMF was also mentioned. 
 Respondents were equally split over whether the EU  should have a single representation at the 
International Financial Institutions (IFIs). Feedb ack provided showed that countries had concerns 
such as: (a) a single euro area repr esentation may make more sense, especially at the IMF; (b) how 
would intra-EU coordination will work and conve rsely existing coordination mechanisms seemed 
sufficient to others; (c) need to preserve specific separate interests of indi vidual shareholders and of 
small countries; (d) a potential difficulty is mob ilising funding; and (e) loss of synergies within 
current constituency groups, some of which include non-EU countries. Many of these concerns were also expressed as risks to overcome by countries that  were in favour of a single representation, 
at least for the euro area. The need to reach a common position was mentioned again as a challenge. 
Related to the coordination issue, almost three-quarters of respondent s felt there should be stronger 
Brussels-based coordination on World Bank and MDB issues.  Three respondents were dissatisfied with the out come of voice and participation reforms at the 
World Bank and five were highly satisfied. The re maining two-thirds were somewhat satisfied. 
Nevertheless, major concerns and observations were  raised by responde nts that were less than very 
satisfied, in particular: (a) insufficient recognition of the efforts of smaller states and the need to 
give adequate weight to IDA cont ribution; (b) poorer c ountries may have been left-out; and (c) the 
process should have been less complex/confusing and more transparent.   A small majority of EU Member States (59%) felt that the EU should push fo r a greater portion of 
IDA resources to be allocated to Sub-Saharan Af rica. In the absence of a follow-up question, the 
reasons for the negative answers cannot be determin ed.  As this may be due to a concern over aid 
effectiveness or other reasons, a fo llow-up question to this effect could be included in subsequent 
questionnaires. In contrast, th e overwhelming majority (93%) we re in favour of creating of a 
permanent IDA crisis window (CRW) and at the tim e of writing this reform has now been agreed 
to. 
3.2.4.  Concluding Observations 
In 2010, two major risks faced by the IFIs were effectively mitigated. Ca pital increases were 
successful and so was the replen ishment of IDA, the biggest IFI concessional lending window. IFIs 
 
EN 101   EN are continuing to implement governance reform progr ammes, give greater voi ce to their borrowing 
member countries and promote stronger incl usiveness and accountability. The World Bank’s 
decision to open more documents and databases to th e public is also notewor thy. In terms of the 
UN, it is important not to lose the momentum of reforms; especially regarding adoption of 
International Public Sector Accounting Services (IPSAS). 
 An issue not addressed in the above analysis but worth mentioning here concerns another type of 
financing of IFIs and other international agen cies through multi-bilateral resources – bilateral 
funding disbursed through multilatera l agencies. These resources in practice increase the amount of 
concessional resources available for developing c ountries. However, these ear marked resources also 
contribute to the fragmentati on of donor programmes and may affect IFIs and UN agencies’ 
governance and distort resource allocation. For example on the es timated budget for a given agency 
or programme, only about one-third of it comes from untied ‘core’ resources. The rest are 
earmarked for specific projects, some quite small, in  target countries and fo r activities that may not 
be fully aligned to that agency’s  core competencies. Furthermore, the agency Executive Board only 
approves the core budget, which leads to limited ove rsight over the majority of the resources. 
 
The feedback from EU Member States proved useful . It also identified si gnificant differences on 
key issues that would need to be resolved for the EU 27 Member States to speak with the same 
voice at the Boards of the IMF and the World Bank. Most Members States agreed that the EU 
internal coordination should be improved. While a limited consolidation of European representation 
looks likely to take place in th e IMF, a specific intra-EU coordi nation in the World Bank and 
multilateral development banks could be warranted.