Annual Report from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions - Keeping Europe's promises on Financing for Development {COM(2007) 158 final} {COM(2007) 163 final} {SEC(2007) 415}
Date: 2007-04-04
Institutions: European Commission
Subjects: EU aid, developing countries, development aid, the EU's international role

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 4.4.2007 
COM(2007) 164 final 

ANNUAL REPORT FROM THE COMMISSION TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMITTEE OF THE REGIONS 

Keeping Europe's promises on Financing for Development 

{COM(2007) 158 final} 
{COM(2007) 163 final} 
{SEC(2007) 415} 

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TABLE OF CONTENTS 

1. 

2. 

2.1. 

2.2 

2.3 

2.4 

2.5 

3. 

4. 

5. 

6. 

7. 

8. 

9. 

10. 

11. 

Introduction .................................................................................................................. 3 

EU aid levels could reach record highs throughout 2006-2010................................... 4 

EU global performance surpassed its objectives while some Member States have yet 
to strengthen their efforts ............................................................................................. 4 

Good prospect to reach the next milestone targets by 2010......................................... 6 

On track to deliver on the UN goal for Least Developed Countries (LDC) by 2010 .. 7 

Effective focus on Africa ............................................................................................. 7 

But critical challenges need to be tackled .................................................................... 8 

Slow but steady progress in implementing innovative sources of financing ............... 9 

Vigilance required to ensure continued debt sustainability in developing countries. 10 

An EU Aid for Trade Strategy underscores the commitments on trade and 
development ............................................................................................................... 10 

Aid effectiveness – EU to make better use of available tools.................................... 10 

Speedier progress required towards more predictable aid mechanisms..................... 11 

Mitigating the impact of exogenous shocks: stronger support by Member States is 
warranted to support emerging concepts.................................................................... 11 

Untying aid: international developments lag behind EU progress............................. 12 

Strengtheining the EU's influence in the international financial institutions (IFI) .... 13 

The EU confirms support for the global public goods (GPG) but will not link actions 
to the recommendations of the International Task Force........................................... 13 

12. 

Conclusions ................................................................................................................ 14 

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1. 

INTRODUCTION 

The  EU  is  the  biggest  aid  donor  in  the  world,  and  its  share  of  total  ODA  is  growing.  It  is 
taking long-term, far-reaching commitments on development finance and their timely delivery 
to contribute to the achievement of the Millennium Development Goals (MDG): 

•  In 2002 the EU committed to a target of 0.39% of their combined Gross National Income 
(GNI)  to  Official  Development  Assistance  (ODA)  by  2006.  In  2006  the  EU  not  just  met 
but exceeded this target increasing their ODA to 0.42% of GNI and by disbursing, in 2006, 
a record high of € 48 billion1. In 2005 Africa received the most substantial part of EU aid. 
Overall one third of EU ODA was used for social and administrative infrastructure to fight 
poverty and 10% for humanitarian assistance. 

•  In 2005 the EU set further targets of collectively 0.56% ODA/ GNI by 2010 to bridge the 
financing gap for finally attaining the 0.7% ODA/ GNI goal by 20152. These historic EU 
commitments account for almost 80% of promised G8 aid increases for Africa. The EU is 
on track to meet both. 

•  One  Member  State  dedicated  in  2006  just  over  1  %  of  its  GNI  to  ODA.  Three  others 
reached over 0.8% ODA/ GNI. Other Member States, who seemed to be off track just few 
years ago have scaled up their aid substantially. The ten Member States who adhered to the 
EU in 2004 have collectively doubled their aid since their accession. 

•  The  Union  also  leads  the  international  Financing  for  Development  process  because  it  is 
already implementing aid better and faster. In addition to signing the Paris Declaration on 
Aid Effectiveness the EU has introduced joint analyses and multi-annual strategic planning 
of country assistance provided by the EC and the Member States3 and is in the process of 
agreeing an EU Code of Conduct on Division of Labour in Development Policy4. 

However,  this  progress  cannot  be  taken  for  granted  and  should  not  hide  certain  issues, 
specifically: 

•  big variations in aid budgets between Member States: 

•  the use of one off measures which sometimes disguise the overall trend in aid volumes; 

•  the need for more effective aid disbursement to ensure that it reaches those who need it. 

1 

2 

3 

4 

In  order  to  collectively  provide,  by  2006,  at  least  0.39%  of  the  EU  GNI  as  ODA,  Member  States 
committed to increase their ODA; those with ODA of 0.7% ODA/ GNI committed to maintain the high 
levels; all other Member States committed to achieve at least 0.33% ODA/GNI. 
The second intermediate collective target for 2010 is based on individual baseline targets, i.e. Member 
States that have not yet reached an ODA of 0.51% of their GNI undertake to reach that level; Member 
States undertake to achieve the 0.7% ODA/GNI target by 2015 and those which have achieved that goal 
commit themselves to remain above that target; Member States that joined the EU after 2002 strive to 
achieve  or  maintain,  by  2010,  a  minimum  of  0.17%  ODA/GNI  and  of  0.33%  by  2015.  This 
commitment  is  combined  with  the  promise  to  provide  collectively  at  least  50%  of  the  agreed  ODA 
increase to Africa 
Council  Conclusions  of  April  2006.  'Financing  for  Development  and  Aid  Effectiveness:  Delivering 
more, better and faster'. 
Based on the Commission Communication COM(2007) 72, 28.2.2007. 

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The Commission hereby presents its fifth annual report on EU progress towards implementing 
the  historic  commitments  agreed  in  2002  ahead  of  the  Monterrey  Conference  and  further 
shaped by the European Council prior to the UN World Summit in 2005 to accelerate progress 
towards  the  MDG5.  The  EU  commitments  are,  moreover,  core  parts  of  the  European 
Consensus for Development. The UN High Level Dialogue on Financing for Development in 
late  2007,  the  Third  High  Level  Forum  on  Aid  Effectiveness  in  Accra  and  the  'Monterrey 
follow-up' conference to be held in Doha in 2008 will again discuss how to scale up aid and to 
deliver aid more effectively and efficiently. 

This Communication builds on the opinions of the 27 EU Member States (EU-27) expressed 
in  their  responses  to  the  monitoring  questionnaire  of  late  2006.  A  detailed  analysis  of  the 
survey is contained in the accompanying Commission Staff Working Paper6. 

2. 

EU AID LEVELS COULD REACH RECORD HIGHS THROUGHOUT 2006-2010 

2.1. 

EU global performance surpassed its objectives while some Member States have 
yet to strengthen their efforts 

The EU achieved its first intermediate collective ODA goal one year ahead of schedule, i.e. in 
2005,  and  confirmed  its  excellent  performance  in  2006:  the  combined  EU  ODA  of  € 48 
billion  represents  an  ODA/  GNI  ratio  of  0.42%,  exceeding  the  0.39%  target.  The  collective 
outcome for the 15 Member States, who alone subscribed to this target in 2002 (EU-15), was 
even  more  impressive,  as  they  reached  0.43%  ODA/GNI.  Undoubtedly  debt  relief  to  Iraq, 
Nigeria and post-tsunami aid contributed to the peak of EU ODA in 2005-06. 

5 

6 

Council Conclusions of May 2005. 'Millennium Development Goals: EU Contribution to the Review of 
the MDGs at the UN 2005 High Level Event'. The EU promises also comprise additional commitments 
concerning  innovative  sources  of  financing  for  development,  debt  relief  and  Global  Public  Goods, 
better  coordinated  and  more  effective  aid,  including  more  predictable  aid  mechanisms,  mitigation  of 
exogenous shocks, aid untying and the reform of the international financial institutions. 
Financing  for  Development  from  Monterrey  2002  to  Doha  2008  -  Progress  report  2007  -  SEC(2007) 
415. 

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Table 1: EU ODA levels 2004-2006 

2004

2005

2006

ODA in 
million €

ODA in % of 
GNI

ODA in million 
€

ODA in % of 
GNI

ODA in million €

ODA in % of 
GNI

EU-15: 0.33

1175

1178

NA

4

87

1639

4

547

6820

6064

258

56

489

1982

7

8

190

8

3384

95

830

NA

23

25

1962

2191

6339

35047

316

35364

0,50

0,40

NA

0,03

0,11

0,83

0,04

0,36

0,41

0,27

0,15

0,07

0,39

0,14

0,06

0,04

0,86

0,18

0,67

0,05

0,59

NA

0,07

0,10

0,24

0,78

0,36

0,35

0,07

0,34

1266

1580

NA

4

109

1696

5

726

8067

8112

309

80

578

4096

8

12

206

7

4116

165

303

NA

45

30

2428

2706

8662

44852

467

45318

0,52

0,52

NA

0,03

0,11

0,81

0,05

0,46

0,47

0,36

0,17

0,10

0,42

0,29

0,07

0,06

0,86

0,17

0,81

0,07

0,21

NA

0,12

0,11

0,27

0,94

0,47

0,44

0,09

0,42

1205

1568

2

16

124

1780

8

658

8324

8247

306

96

794

2926

9

15

232

7

4343

239

312

3

44

35

3028

3161

10049

46932

592

47524

0,48

0,50

0,01

0,11

0,12

0,80

0,07

0,39

0,47

0,36

0,16

0,12

0,53

0,20

0,06

0,08

0,89

0,15

0,81

0,09

0,21

0,00

0,10

0,12

0,32

1,03

0,52

0,43

0,10

0,42

Official Targets

Austria

Belgium

Bulgaria

Cyprus

Czech Republic

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Latvia

Lithuania

Luxembourg

Malta

The Netherlands

Poland

Portugal

Romania

Slovak Republic

Slovenia

Spain

Sweden

UK

EU 15 TOTAL

EU 10 TOTAL

EU 25 TOTAL

EU 27 TOTAL

O
DA  in  €  million  at  current  prices.  Coloured  cells  contain  information  supplied  by  Member  Sttates,  other  cells  are  Commission  data  or 
calculations. EU-12 total and EU-27 total GNI and ODA figures in 2004 and 2005 do not include the GNI of BG and RO. 

47529

0,41

The  front-runners  ensuring  the  EU’s  success  are  the  nine  Member  States  that  have  either 
achieved the 0.7% target or decided to reach it prior to 2015. Particularly outstanding is the 
commitment of Sweden (SE) now allocating 1% of its GNI to aid and Luxemburg (LU) that is 
set to follow by 2012. Member States that registered much lower ODA levels a few years ago, 
e.g. Germany (DE) and Spain (ES), have demonstrated that scaling up is possible when the 
political  will  is  there.  Nevertheless  Spain  missed  the  0.33%  individual  baseline  by  €  142 
million.  The  10  Member  States  that  joined  the  EU  in  2004  (the  EU-10)  have  doubled  their 

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ODA  since  the  accession  and  have  demonstrated  their  commitment  to  the  "acquis 
communautaire". 

The  Union’s  output  would  have  been  even  more  impressive  if  Greece  (EL),  Italy  (IT)  and 
Portugal  (PT)  had  also  lived  up  to  the  agreed  0.33%  ODA/GNI  individual  target  on  time. 
They  have  pledged  to  catch  up  with  the  group  by  2007  (EL,  PT)  and  2008  (IT),  but  their 
difficulties so far illustrates the general risk entailed in “one-off” ODA boosts in single years 
(PT: ODA-counted debt relief for Angola in 2004; IT: contribution to multilateral agencies in 
2005)  that  are  not  sustained  by  policy  changes  ensuring  gradually  growing  aid  budgets.  To 
avoid  a  widening  gap  between  the  Member  States’  performance  in  delivering  on  shared 
promises,  continuing  efforts  are  required  by  Member  States  trailing  below  the  minimum 
baselines. 

2.2. 

Good prospect to reach the next milestone targets by 2010 

In  contrast  with  the  global  ODA  outlook  that  foresees  lower  aid  levels  in  2007-2008  the 
Union's aid levels are expected to rise throughout 2007–2010 in line with the EU pledge for 
2010. Improved economic growth prospects mean that the EU could mobilise, an, extra € 27–
30 billion annually compared to 2006, thus more than the initially projected € 20 billion. The 
amounts  that  Member  States  are  forecasting  remain  vulnerable  to  GNI  developments  and 
might  not  meet  the  targets.  The  forecast  figures  of  several  Member  States  are  not  yet 
underpinned  by  clear  year-on-year  budget  increases,  but  depend  on  ad  hoc  developments. 
While  debt  relief  grants  have  become  instrumental  in  attaining  higher  ODA  levels  in  the 
short-term and have, since 2005, constituted the lion's share of aid from Austria (AT) at over 
50%,  France  (FR),  DE,  IT  and  the  UK  (for  each  around  1/3  of  total  ODA),  they  are 
insufficient  over  time.  To  maintain  the  dynamics  required  to  get  to  the  2010  targets  an 
accelerated  mobilisation  of  programmable  funds  is  warranted,  including  recourse  to 
innovative  sources  of  financing,  where  necessary.  PT  –  despite  a  planned  impressive  148% 
ODA increase in the period 2006-2010 - is not  yet on track to meet the next EU individual 
target. Also, some of the EU-12 (the Member States that have joined since 2004) have yet to 
demonstrate how they intend to further increase their aid volumes in the run-up to 2010. 

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Table 2: Forecasts and assumptions for achieving the 2007–2010 goals 

2007

2008

2009

2010

ODA in 
million €

ODA in % of 
GNI

ODA in million 
€

ODA in % of 
GNI

ODA in million 
€

ODA in % of 
GNI

ODA in 
million €

ODA in % of 
GNI

Official Targets

Austria

Belgium

Bulgaria

Cyprus

Czech Republic

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Latvia

Lithuania

Luxembourg

Malta

The Netherlands

Poland

Portugal

Romania

Slovak Republic

Slovenia

Spain

Sweden

UK

EU 15 TOTAL

EU 12 TOTAL

EU 27 TOTAL

870

1799

16

14

128

1863

9

746

9180

9426

683

98

813

4072

10

19

254

8

4532

305

517

59

57

40

4305

3328

9572

51960

765

52724

0,33

0,55

0,06

0,10

0,11

0,80

0,07

0,42

0,49

0,40

0,33

0,11

0,51

0,27

0,06

0,07

0,90

0,17

0,81

0,11

0,33

0,05

0,12

0,13

0,42

1,02

0,46

0,46

0,10

0,44

901

2030

31

16

147

1956

11

796

10581

10605

799

106

942

5218

13

23

274

9

4702

352

588

115

69

46

5464

3486

11156

59498

938

60436

0,33

0,59

0,11

0,10

0,12

0,80

0,07

0,43

0,54

0,43

0,36

0,11

0,55

0,33

0,06

0,08

0,91

0,17

0,80

0,12

0,37

0,10

0,14

0,14

0,50

1,02

0,52

0,51

0,11

0,48

939

2288

46

17

171

2054

13

870

11982

11784

1057

127

1018

6974

16

26

300

9

4916

439

660

171

82

52

6524

3655

12740

67759

1168

68927

0,33

0,64

0,14

0,10

0,13

0,80

0,07

0,46

0,59

0,47

0,45

0,13

0,55

0,42

0,07

0,08

0,92

0,17

0,80

0,14

0,39

0,14

0,16

0,15

0,56

1,02

0,56

0,55

0,13

0,52

EU-15: 0.51

EU-10: 0.17

0,51

0,68

0,17

0,10

0,17

0,80

0,07

0,70

0,63

0,51

0,51

0,14

0,60

0,51

0,07

0,11

0,95

0,17

0,80

0,17

0,44

0,17

0,17

0,17

0,62

1,00

0,60

0,60

0,16

0,57

1512

2561

60

19

230

2152

15

1395

13383

12963

1262

148

1199

8730

19

40

336

9

5136

574

768

228

95

64

7676

3730

14324

77126

1499

78626

ODA in € million at current prices. 
Source: coloured cells contain information supplied by Member States, other cells are Commission data or calculations. 

2.3. 

On  track  to  deliver  on  the  UN  goal  for  Least  Developed  Countries  (LDC)  by 
2010  

Further  to  the  World  Summit  Outcome  of  2005  and  the  Monterrey  Consensus  all  EU-15 
countries either already allocate at least 0.15% ODA/GNI to LDC or intend to reach this level 
by 2010. Six other Member States are willing to agree to a minimum ODA share for LDCs. 
The nexus of support to the neediest (LDC, aid “orphans”, fragile states), poverty reduction 
and  the  achievement  of  the  MDG  will  be  centre-stage  again  at  the  Accra  and  Doha 
conferences of 2008. 

2.4. 

Effective focus on Africa 

Since  2002  Europe's  annual  aid  to  Africa  has  doubled  and  reached  almost  € 14  billion  in 
2005. Almost half of the EU aid already goes to Africa, and half of its aid promised on top of 
2006  ODA  volumes  annually  has  been  pledged  to  the  continent  as  part  of  the  EU-Africa 

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strategy. When the OECD/DAC definite ODA statistics 2006 become available later this year 
the Commission will establish a baseline chart, against which future EU allocations to Africa 
can  be  assessed.  In  line  with  the  overall  outlook  on  EU  scaling-up  of  aid  the  outlook  for 
allocating  an  additional  annual  € 10  billion  or  more  of  combined  EU  aid  to  Africa  is 
promising.  

2.5. 

But critical challenges need to be tackled 

In order to further demonstrate that the EU keeps its promises on development finance, and 
leads in delivering aid more effectively and efficiently the following issues require attention: 

•  Longer-term  predictability  of  aid  flows  is  a  prerequisite  to  achieving  the  MDGs.  While 
some Member States are acting on national plans to gradually scale up their aid, the ODA 
flows of other Member States are more volatile, in quantity or in composition. Against this 
background,  it  is  crucial  that  all  Member  States  establish  national  timetables,  by  the 
end of 2007, to ensure gradually rising aid levels year-on-year. 

•  In particular those Member States that have neither reached the 2006 targets nor prepared 
for  getting  to  2010  milestones  need  to  demonstrate  better  how  they  will  bridge  the 
remaining  gap  in  the  spirit  of  securing  fair  burden-sharing  between  Member  States. 
Their undertakings should be underpinned by redoubled outreach activities to win public 
opinion for higher aid volumes. The Commission is ready to support this course.  

•  Additionality of debt relief: in 2005, the net ODA volumes excluding debt relief grants of 
those  three  Member  States  that  together  represent  55%  of  the  EU's  total  aid,  either 
decreased (DE –5.5%, FR –0.7%) or only marginally increased (UK +0.9%). This seems to 
go against the Monterrey Consensus and the Council Conclusions of April 20067.  

•  In  order  to  ensure  the  comparability  of  aid  volumes  Member  States  need  to  strengthen 
their  ODA  reporting  capacities  and  methodology.  Current  EU  DAC  members  should 
call  on  the  DAC  to  adapt  its  outreach  strategy  accordingly  in  relation  to  emerging 
donors namely to the 12 EU countries that are not DAC members; the Commission can 
assist this process. 

•  Preparedness  for  efficient  and  effective  use  of  rapidly  rising  aid  volumes:  Member 
States will provide 90% of the additional EU aid bilaterally. As the lion's share is supposed 
to  be  programmable  aid,  EU  donors  must  urgently  review  their  structures  and  operative 
and aid modalities to deliver more aid, better and faster. This process needs to include: 

•  national  plans  to  strengthen  capacity  to  implement  scaled-up  ODA,  otherwise 
scaling  up  remains  a  question  of  commitments,  but  disbursement  could  lag 
behind; 

•  the speedy and practical application of the forthcoming EU Code of Conduct 

on Division of Labour in Development Policy; 

•  increasing  use  of  any  different  disbursement  channels,  such  as  common 

European instruments that emerge, as a result of the European Consensus 

7 

Council Conclusions of April 2006, footnote 1 to paragraph 24. 

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– 

– 

to implement  joint  policy  objectives, such as the EU-Africa Strategy 
or  far-reaching  EU  Partnership/Association  Agreements,  for  instance 
through voluntary contributions to the EU Trust Fund for Infrastructure 
in Africa; 

to respond to global challenges, e.g. related to external shocks such as 
climate  change, natural disasters, commodity price variations  or  major 
threats to public or animal health; 

– 

to facilitate delivery of joint EU commitments, e.g. aid for trade; 

and which contribute to enhancing the EU profile and visibility in the world. 

3. 

SLOW  BUT  STEADY  PROGRESS  IN  IMPLEMENTING  INNOVATIVE  SOURCES  OF 
FINANCING 

Progress in 2006 was based on considerable efforts by some EU Member States which also 
attracted  the  participation  of  non-EU  countries.  FR  and  UK  decided  to  devote  together 
estimated  annual  revenues  of  more  than  € 200  million  from  an  airline  ticket  tax  for  an 
International  Drug  Purchasing  Facility  (UNITAID).  UK,  FR,  IT,  ES  and  SE  (together  with 
Norway) raised the first US$ 1 billion on capital markets for the International Finance Facility 
for  Immunization  (IFFIm)  to  vaccinate  children.  Recently,  the  UK  and  IT  (together  with 
Canada,  Norway,  Russia  and  the  Bill  &  Melinda  Gates  Foundation)  launched  the  first 
Advance  Market  Commitment  (AMC)  to  speed  up  the  development  and  market 
introduction of a new vaccine for the pneumococcal disease in developing countries; a further 
pilot for a malaria vaccine is being considered. 

The new instruments provide stable and predictable sources of finance. Their main advantage 
consists  in  locking  in  long-term  budgetary  commitments.  This,  however,  might  entail 
additional transaction costs and require considerable administrative and political efforts. 

Most of the revenues arising from innovative mechanisms will be delivered through existing 
channels and organisations that are experienced in working in the health sector of developing 
countries.  Although  this  avoids  setting  up  parallel  structures,  aligning  these  initiatives  with 
partner countries’ health strategies remains a challenge. 

The  vast  majority  of  EU  Member  States  are  not  considering  effective  participation  in 
innovative  sources  in  the  foreseeable  future,  for  either  development  purposes  or  for  global 
public goods. 

The Commission encourages Member States that are currently not participating in any of the 
initiatives  to  continue  analysing  their  effectiveness  with  a  view  to  possibly  broadening 
participation and mobilising additional and more stable sources of finance. It also recalls that 
innovative  sources  cannot  substitute  ODA  and  recommends  that  Member  States'  efforts  in 
implementing innovative sources of financing do not distract from other important priorities 
of development finance. 

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4. 

VIGILANCE  REQUIRED  TO  ENSURE  CONTINUED  DEBT  SUSTAINABILITY 
DEVELOPING COUNTRIES  

IN 

In  addition  to  the  continuing  impact  of  the  extraordinary  debt  relief  (Iraq,  Nigeria)  the 
implementation  of  the  Heavily  Indebted  Poor  Countries  (HIPC)  Initiative  continued.  The 
Multilateral Debt Relief Initiative (MDRI) reinforces efforts to further reduce HIPC debt by 
providing  100%  cancellation  of  debt  stock  vis-à-vis  the  International  Development 
Association  (IDA,  WB),  African  Development  Fund  and  IMF,  but  does  not  cover 
outstanding  loans  from  the  Inter-American  and  other  regional  Development  Banks.  The 
Commission  encourages  reinforced,  internationally  coordinated  endeavours  to  support  low-
income  countries  in  their  efforts  to  avoid  unsustainable  debt  situations.  These  undertakings 
should encompass improved debt management, include new creditor  countries in the debate 
on  the  debt  sustainability  framework  and  address  the  free-rider  problem  (i.e.  the  possibility 
that  debt  relief  cross-subsidises  lenders  that  offer  non-concessional  loans  to  post-HIPC 
countries).  The  Commission  proposes  that  the  Council  calls  on  the  Member  States 
to further  consider,  in  the  appropriate  international  fora,  on  how  to  promote  responsible 
lending and borrowing, including by improving developing countries' debt management and 
promoting dialogue with new lenders. 

5. 

AN  EU  AID  FOR  TRADE  STRATEGY  UNDERSCORES  THE  COMMITMENTS  ON  TRADE 
AND DEVELOPMENT 

The  Commission  recommends  that  the  Council  and  the  European  Parliament  support  the 
proposals  presented  in  the  Communication  'Towards  an  EU  Aid  for  Trade  strategy  –  the 
Commission contribution'8. 

6. 

AID EFFECTIVENESS – EU TO MAKE BETTER USE OF AVAILABLE TOOLS 

Aid  effectiveness  is  at  the  forefront  of  the  EU's  policy  agenda  and  is  referred  to  in  all  its 
initiatives.  Since  its  adoption  in  2006  most  of  the  time-bound  deliverables  of  the  Aid 
Effectiveness Action Plan "Deliver more, better and faster" have been initiated or completed: 

(1) Joint multi-annual strategic planning shall be implemented, over time, in all countries 
as  a  means  to  improve  complementarity.  In  pursuance  to  the  Council  Conclusions  of  April 
2006,  it  started  in  ACP  countries  where  the  programming  of  the  10th  EDF  has  provided  an 
opportunity to kick-start the efforts toward joint programming with other donors in the field. 

The  experiences  vary  greatly  as  far  as  the  state  of  progress  and  participation  of  donors  are 
concerned.  Efficient  coordination  mechanisms  have  facilitated  the  elaboration  of  joint 
analysis  of  country  situations.  The  drafting  of  common  response  strategies  is  also 
progressively  materialising  in  most  selected  countries9  such  as  DRC,  Dominican  Republic, 
Ethiopia, Ghana, Haiti, Kenya, Mali, Sierra Leone, Somalia, South Africa, Tanzania, Uganda 
and Zambia. Based on the flexible and gradual nature of joint programming the processes are 

8 
9 

Commission Communication - COM(2007) 163, 4.4.2007. 
According  to  the  Council  criteria  (Council  Conclusion  51):  "a)  the  existence  of  a  Poverty  Reduction 
Strategy  or  equivalent,  b)  the  existence  of  a  sufficient  number  of  active  EU  donors,  revising  their 
programming,  c)  the  existence  of  local  coordination  processes,  d)  specific  considerations  for  fragile 
states, and e) a positive field assessment". 

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adapted to specific country situations and, where relevant, use other processes such as Joint 
Assistance Strategies. 

Due  to  the  evolving  nature  of  the  process,  these  data  are  subject  to  constant  changes. 
However, they show that, despite some significant achievements, results have been hampered 
by  the  heterogeneous  nature  of  Member  States’  programming  mechanisms  and  the  gap 
between positions expressed by headquarters and at field level. In order to help overcoming 
obstacles,  provide  technical  support  and  improve  links  between  headquarters  and  field,  the 
Commission  has  organised  joint  missions,  e.g.  in  Haiti  and  Somalia,  and  set  up  a  specific 
network of EU experts. 

(2) The Code of Conduct to promote the Division of Labour among EU donors is expected 
to be adopted by the Council in May 2007. 

(3) The first edition of the European Development Days was successfully held in November 
2006 and will now be held every year. 

(4)  A  revised  EU  Donor  Atlas,  including  first  regional  (West  Africa)  and  country 
(Mozambique) editions has been compiled. 

(5) A baseline for the four additional EU commitments regarding the Paris Declaration has 
been  set,  through  an  EU  Roadmap  exercise  on  harmonisation  which  reported  on  local 
processes  on  aid  effectiveness.  The  Commission  restates  its  intention  to  meet  the  50% 
objective for aid via country systems through budget support. 

(6) All obstacles to co-financing under EC rules have been removed. 

7. 

SPEEDIER PROGRESS REQUIRED TOWARDS MORE PREDICTABLE AID MECHANISMS 

Budget  support,  the  recognised  key  instrument  for  ensuring  medium-term,  policy-
performance-based  support  to  developing  countries,  remains  a  favoured  instrument  for  13 
Member  States.  Some  are  increasingly  willing  to  consider  general  budget  support  on  top  of 
sector budget support. The Commission is developing the concept of general budget support 
as  a  possible  way  to  increase  aid  predictability,  incorporating  clear  eligibility  criteria  and  a 
focus  on  results.  Budget  support  ought  to  be  based  on  mechanisms  ensuring  ex  post 
information  and  accountability  A  possible  arrangement  could  include  longer-term  budget 
support, guaranteeing certain levels of annual support, subject to safeguard clauses. 

8. 

MITIGATING  THE  IMPACT  OF  EXOGENOUS  SHOCKS:  STRONGER  SUPPORT  BY 
MEMBER STATES IS WARRANTED TO SUPPORT EMERGING CONCEPTS  

Increasing  the  resilience  of  developing  countries  to  external  economic  shocks  (price 
vulnerability) and natural events (disasters, climate change and pandemics) is a common goal 
of  EU  development  policy.  In  2006  tools  for  this  were  conceptualised  and  piloted,  but  they 
have attracted little attention and progress remains limited. 

•  Revenue  vulnerability:  The  Netherlands  (NL)  and  the  Community  (EC)  are  renewing 
their support for the Commodity Risk Management Group (CRMG) in the WB, which has 
shown  that  market-based  instruments  for  risk  reduction  related  to  external  price 
movements  are  feasible.  FR  has  developed  risk  management  initiatives  for  cotton  and 

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envisages  piloting  a  new  integrated  mechanism  in  selected  countries  within  an  emerging 
joint donor approach. 

•  "Disaster  risk  reduction"  (DRR):  In  2005-2006  the  EU  spent  over  € 3.5  billion  on 
disaster-related  support,  of  which  only  an  estimated  three  percent  went  to  ex-ante 
assistance.  Interest  in  broader  strategic  approaches  to  disaster  preparedness  is  increasing 
but much broader support  by the  Member  States is required. In order to offer  a common 
approach in 2008 the Commission will propose, a joint "EU strategy for DRR", building on 
available  experience  (e.g  from  the  9th  EDF  Natural  Disaster  Facility)  and  aligned  with 
international initiatives. 

•  FLEX is the EC's mechanism for ACP countries aimed at safeguarding reforms that could 
be  put  at  risk  as  a  result  of  short-term  fluctuations  in  export  earnings.  With  a  view  to 
reinforcing its anti-cyclical nature, proposals for making FLEX-assistance available earlier 
and more easily will be discussed with Member States and the ACP group. 

The Commission suggests that Member States 

•  strike  a  better  balance  between  ex-post  natural  disaster  responses  and  ex-ante  risk 
reduction strategies, based on a common EU approach to disaster prevention/preparedness; 

•  strengthen support for piloting/ scaling up new instruments and methods to reduce adverse 
effects  of  external  shocks  on  developing  countries,  distinguishing  between  market-based 
answers  to  shocks  resulting  from  international  price  fluctuations  and  efforts  to  mitigate 
shocks caused by natural disasters; 

•  actively participate in the International Task Force on Commodity Risk Management 

to improve information exchange on novel risk management approaches. 

9. 

UNTYING AID: INTERNATIONAL DEVELOPMENTS LAG BEHIND EU PROGRESS 

The  EU  is  untying  more  aid.  The  majority  of  Member  States  that  are  DAC  donors  have 
(almost) fully untied their ODA. Others have introduced new measures to further untie part of 
their  aid.  Some  of  the  EU-10  have  started  to  implement  the  DAC  Recommendation  on 
untying  aid  to  LDC.  The  increasing  use  of  budget  support  also  contributes  to  the  improved 
record  of  the  Union's  combined  development  assistance.  Member  States  are  encouraged  to 
advance further towards fully untying their aid. 

As the EC internal market rules apply to Member States' ODA, the Commission reaffirms 
its  duty  to  pursue  any  infringement  in  this  regard.  Member  States  that  are  in  the  process  of 
building their development cooperation systems, namely their procurement schemes, need to 
untie their aid in relation to all other Member States. 

In  2006  the  EC  translated  its  untying  regulations  into  the  new  financial  cooperation 
instruments  under  the  EC  budget;  in  this  context  the  support  to  non-state  actors  was  also 
untied. 

The Commission welcomes the extension of the scope of the DAC Recommendation (through 
lowering  the  threshold  for  its  application),  after  years  of  impasse,  and  calls  for  further 
progress, i.e. to move from a trade approach limited to the issue of reciprocal access between 

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donors to a more pro-poor approach centred on developing countries. This requires a further 
extension of the DAC Recommendation (focus on access for developing countries; promotion 
of local preferences). The Commission points to the EU agreement to further advance, within 
relevant international fora, on untying food aid and food aid transport. 

10. 

STRENGTHEINING  THE  EU'S  INFLUENCE  IN  THE  INTERNATIONAL  FINANCIAL 
INSTITUTIONS (IFI) 

Despite  the  varying  pace  of  progress,  the  EU  coordination  within  the  World  Bank  and  the 
IMF has advanced. In particular EU Executive Directors at the World Bank have so far issued 
around  40  joint  statements  in  an  informal  coordination  setting  and  thus  significantly 
augmented EU visibility and influence. Joint positions by EU Member States appear essential 
to further increasing the Union’s visibility and influence in the IFI. Improved EU coordination 
in the IFI mostly relies on increased dialogue and information sharing. WB and IMF EU EDs 
meet  weekly  to  exchange  views  on  Board  topics  and  decide  on  common  positions  where 
possible; the Commission is facilitating this coordination and aims to provide further support. 
There is scope for improving the EU coordination at the IMF, particularly in Washington. 

The  Commission  also  invited  in  2007  the  EU  EDs  of  the  three  main  regional  development 
banks  (African,  Asian  and  Inter-American  Development  Banks)  to  Brussels  to  improve 
coordination  with  the  Commission  and  dialogue  among  themselves.  The  meeting  proved 
useful and will be regularly held. 

The Commission also proposes 

•  to pursue systematic coordination meetings of EU EDs, with the Commission participating, 
at the WB and the IMF with a view to adopting common European statements on Board 
issues as often as possible; 

•  to improve EU coordination prior to the Spring/Annual Meetings; the Commission stands 

ready to provide the necessary support; 

•  the  exchange  of  information  and  documents  between  EU  EDs  and  the  Commission, 
including  timely  and  regular  transmission  of  Board  documents  of  the  IFI  (including 
regional development banks to the Commission); 

•  to reinforce the European voice within the WB while at the same time enhancing the voice 

of developing countries. 

11. 

THE  EU  CONFIRMS  SUPPORT  FOR  THE  GLOBAL  PUBLIC  GOODS  (GPG)  BUT  WILL 
NOT  LINK  ACTIONS  TO  THE  RECOMMENDATIONS  OF  THE  INTERNATIONAL  TASK 
FORCE 

The  Report  of  the  International  Task  Force  on  GPG  –  Meeting  Global  Challenges  –  was 
released in September 2006. Overall EU Member States' first reaction seems to have suffered 
from delays in finalising the report and the low profile it was given. While mostly aware of 
the report, Member States are not convinced it contributed substantially to the debate on GPG. 
The Commission sympathises with this perception, although it acknowledges the substantial 
analytical work and consultations with a broad range of actors undertaken by the Task Force. 

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There is general agreement on the priority GPG identified by the Task Force, especially for 
those related to health and the environment, but this support in principle is not backed up by 
strong views on specific financing for GPG. 

Most  Member  States  agree  on  the  need  for  a  reformed  UN  system,  consistent  with  the 
recommendations of the High-Level Panel on UN System-wide Coherence, to strengthen the 
transparency  of  its  operations  and  overall  accountability;  but  there  is  not  support  for  the 
report's key proposal for improved global governance, i.e. the Global 25 forum. 

The Task Force's strategy for financing GPG receives mixed support: a majority of Member 
States  is  in  favour  of  some  proposals,  which  are  plain  and  already  agreed  internationally. 
Other  more  innovative  recommendations,  which  attempt  to  de-link  GPG  from  development 
assistance, deserve attention, but very few Member States support them. In view of the above 
and of the Commission's own analysis of the report, it appears that the Task Force's proposals 
do not currently attract significant EU interest. Establishing an EU Action Plan for enhanced 
supply  and  financing  of  GPG  at  this  point  in  time  would  therefore  be  premature  and  ill-
advised. Despite this assessment, the EU has made notable progress to enhance the supply of 
priority  GPG,  such  as  in  health  and  environmental  matters,  and  it  continues  to  take  on  the 
"responsible  leadership" role strongly  argued  for by the Task Force. The opportunity for an 
overarching initiative for GPG may be reassessed in the future. 

Meanwhile,  the  Commission  will  strengthen  its  action  on  environmental  GPG  through 
enhanced  collaboration  on  alliance-building  with  developing  countries.  This  enhanced 
collaboration  aims  at  a  second  phase  of  the  Kyoto  Protocol  (post-2012)  that  should  serve 
different purposes, e.g. be both compatible with achieving the MDG and with limiting climate 
warming. 

12. 

CONCLUSIONS 

The combined EU  ODA results 2006  exceeded  expectations, but some Member States have 
yet  to  catch  up  and  deliver  agreed  baseline  aid  levels.  The  overall  prospects  for  the  EU's 
attaining  the  next  milestone  ODA  targets  by  2010  are  good,  if  core  issues  are  addressed  to 
sustain  the  EU's  credibility  as  the  largest  provider  of  development  finance  and  if  public 
opinion supports scaling up. The speedy application of the EU Code of Conduct on Division 
of  Labour  in  Development  Policy  is  the  best  opportunity  for  a  quantum  leap  in  the 
effectiveness  of  EU  aid.  The  nexus  of  trade  and  development  must  be  dealt  with  under  the 
joint  EU  Aid  for  Trade  Strategy,  which  requires  credible  follow-up  by  all  stakeholders. 
Overall there is progress, at varying pace, on most of the EU commitments, but greater efforts 
are  necessary  and  more  active  Member  State  participation  is  required  in  several  areas,  e.g. 
regarding budget support and concepts to mitigate the impact of exogenous shocks. 

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