Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions : supporting developing countries in coping with the crisis - Millennium Development Goals : impact of the Financial Crisis on Developing countries {COM(2009) 160 final} {SEC(2009) 442} {SEC(2009) 443} {SEC(2009) 444}
Date: 2009-04-08
Institutions: European Commission
Subjects: Doha Round, EU programme, aid system, developing countries, economic cooperation, economic recession, monetary crisis, third country

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 8.4.2009 
SEC(2009) 445 

COMMISSION STAFF WORKING DOCUMENT 

accompanying the 

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

Supporting developing countries in coping with the crisis 

Millennium Development Goals — Impact of the Financial Crisis on 
Developing countries 

{COM(2009) 160 final} 
{SEC(2009) 442} 
{SEC(2009) 443} 
{SEC(2009) 444} 

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TABLE OF CONTENTS 

1. 

2. 

2.1. 

2.2. 

3. 

3.1. 

3.2. 

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

The Current Development Agenda .............................................................................. 5 

International commitments and initiatives in support of the MDGs............................ 5 

EU/European Commission support to achieve the MDGs........................................... 7 

The Global Economic Context: overview of the recent multidimensional (food, fuel 
and now financial) crises and the global economic downturn ..................................... 9 

Impacts of the food and fuel crises and price volatility ............................................... 9 

Impacts of the Financial Crisis................................................................................... 12 

3.2.1.  Direct impacts of the financial crisis.......................................................................... 12 

3.2.2. 

Impacts of economic slowdown................................................................................. 13 

3.3. 

Economic Vulnerability ............................................................................................. 18 

3.3.1.  Typologies of vulnerability ........................................................................................ 18 

3.3.2.  Recent crises: different impacts at country level ....................................................... 19 

4. 

4.1. 

4.2. 

5. 

5.1. 

5.2. 

The “road ahead” - other key challenges up to 2015 ................................................. 24 

Inequality.................................................................................................................... 25 

Fragility ...................................................................................................................... 28 

The Policy Response .................................................................................................. 30 

Domestic policy responses in developing countries .................................................. 30 

Responses from the international community............................................................ 31 

5.2.1.  Responses to the food crisis ....................................................................................... 31 

5.2.2.  Responses to the financial crisis ................................................................................ 33 

6. 

6.1. 

6.2. 

7. 

Looking ahead to 2015............................................................................................... 34 

The missing dimensions of the MDG framework...................................................... 35 

Global challenges to global goals and targets ............................................................ 37 

Conclusions and key policy implications................................................................... 37 

ANNEX 1................................................................................................................................. 39 

ANNEX 2................................................................................................................................. 49

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1. 

INTRODUCTION 

This Staff Working Paper on the MDGs analyses the situation and prospects for progress on 
development  and  the  MDGs  in  particular  in  the  light  of  the  current  financial  crisis.  The 
objectives  of  the  MDGs  staff  working  paper  are  (1)  to  take  stock  of  current  initiatives 
undertaken  by  the  international  community  to  accelerate  progress  on  the  MDGs  and  (2)  to 
reflect upon the challenges ahead up to 2015 given the rapidly changing global context, and in 
particular the financial crisis.  

The  MDGs  garnered  much  support  in  2008  with  the  Accra  High  Level  Forum  on  aid 
effectiveness, the New York UN High Level Event on 25 September, recommendations of the 
MDG Africa Steering Group and the adoption of the EU Agenda for Action on MDGs by the 
European Council in June 2008. A UN MDGs review Summit is planned for September 2010. 

The  background  to  this  paper  is  the  EU  Member  States’  commitment  to  increase  official 
development  assistance  (ODA)  over  the  coming  years,  which  they  confirmed  at  the  Doha 
Conference (on Financing for Development to Review the Implementation of the Monterrey 
Consensus, 29 November - 2 December 2008). The broader context is implementation of the 
European Consensus on Development (2005).  

The analysis draws from the recent EU Research paper “MDGs at Midpoint”1 and focuses on 
the  challenges  posed  by  the  effects  of  the  recent  food,  energy  and  financial  crises  on 
developing  countries,  global  governance  and  development  policy.  It  identifies  the  most 
pressing  needs  to  be  met  in  order  to  accelerate progress on the MDGs in the lead up to the 
2010 Review summit and by 2015. It also looks at more structural issues where sustainable 
development,  climate  change  and  the  ‘missing  dimensions’  of  the  MDGs  are  discussed.

1 

“Millennium Development Goals at Midpoint: Where do we stand and where do we need to go?” EU 
Research  Paper  by  François  Bourguignon 
(Paris  School  of  Economics),  et  al,  2008, 
http://ec.europa.eu/development/icenter/repository/mdg_paper_final_20080916_en.pdf . 

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The Millennium Development Goals (MDGs) are a global monitoring framework to assess 
progress in reducing poverty and deprivation. A rare international development consensus has 
been achieved around the MDGs. When they were set in 2000/2001, the MDGs were based on 
1990  trends  and  were  seen  as  realisable  goals,  given  sufficient  resources  and  commitment. 
Achieving them would secure a very basic level of wellbeing for almost a fifth of humanity. 

2008  was  marked  by  an  unprecedented  degree  of  global  action  on  development.  It  also 
marked  a  turning  point  in  the  EU’s  joint  efforts  to  eradicate  poverty  through  sustainable 
development.  Support  for  accelerating  progress  on  the  MDGs  was  bolstered  at  the  Accra 
High-Level  Meeting  on  Aid  Effectiveness  and  the  New  York  UN  High-Level  Event  on  25 
September and related new commitments, the recommendations of the MDG Africa Steering 
Group  and  the  adoption  of  the  EU  Agenda  for  Action  on  MDGs  (European  Council,  June 
2008). The EU’s commitments on the provision of Official Development Assistance (0.56% 
GNI by 2010, 0.7% by 2015) were duly reaffirmed at the Doha Conference on Financing for 
Development in November 2008.  

Significant  progress  has  been  made  on  the  MDGs,  particularly  in  countries  where 
governmental  commitment  is  backed  by  strong  policies  and  public  expenditure,  such  as 
Ghana and Vietnam. The world is on track to halve poverty by 2015. 120 million people were 
lifted out of poverty between 2000 and 2005, meaning the share of people living in poverty 
fell by 2.4% per year. However, 1.4 billion people still live on less than $1.25 a day.2 

Globally, between 2000 and 2005: 

•  2 million lives were saved by reducing child mortality 

•  30 million additional children (aged 6-12 years) now go to school 

•  30 million additional families now have access to drinking water 

•  Boys and girls attend primary school in equal numbers 
However, progress is uneven. The reduction in global poverty is largely due to rapid recent 
growth in the large Asian countries: China, India, Indonesia, and Vietnam. The world is still 
off track on a number of targets, especially relating to child mortality, maternal mortality and 
water.  There  are  strong  disparities  across  regions  and  countries.  Indeed,  most  developing 
countries  are  projected  not  to  meet  most  MDGs  and  Sub-Saharan  Africa  lags  very  much 
behind.3 

2 

3 

The  World  Bank-defined  poverty  line  of  US  $1  a  day  has  recently  been  revised  to  US  $1.25. 
Consequently,  the  number  of  people  living  in  extreme  poverty  is  now  1.4  billion  people  at  2005 
Purchasing Power Parity. 
“Millennium Development Goals at Midpoint: Where do we stand and where do we need to go?”, see 
footnote 1. 

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Progress  on  achieving  the  MDGs  is  shaped  by  the  global  economic  environment,  domestic 
policies, and for the poorest countries, how much and how well aid is delivered and used. The 
challenges  remain  formidable.  They  include  high  and  volatile  commodity  prices  and 
accelerating  climate  change,  as  well  as  the  continuing  threats  of  chronic  poverty,  growing 
inequality,  poor  governance  and  the  particular  problems  faced  by  fragile  and  post-conflict 
states.  

The financial crisis and economic slowdown make this a precarious time for development. 
The prospects for achieving the MDGs face serious threat, as the global economic slowdown 
undermines  progress  in  developing  countries,  reducing  per  capita  growth  rates  and  causing 
severe budget  problems. Initial predictions that the developing countries would be  insulated 
from the worst of the financial turbulence have proved over optimistic. The impact on low-
income countries is now expected to be high, especially in Sub-Saharan Africa. The crisis is 
projected to increase the financing needs of low-income countries by US$ 25 billion in 2009.4 
The effects of the financial crisis are being felt in emerging and developing countries alike, 
though  the  impacts  vary  significantly  across  regions,  countries  and  population  groups.  The 
effects  are  felt  through  several  transmission  channels,  and  include  contagion  from  the 
financial crisis and from the impacts of global economic slowdown. Decreasing remittances, 
reduced  foreign  investment,  and  falling  demand  for  goods  and  services  are  all  expected  to 
adversely  affect  developing  economies  and  emerging  markets.  As  well  as  compounding  the 
development  challenges  faced  by  many  countries,  the  effects  of  the  financial  crisis  and 
economic  slowdown  may  even  put  at  risk  the  gains  to  date  in  relation  to  the  Millennium 
Development Goals. 

2. 

THE CURRENT DEVELOPMENT AGENDA  

2.1. 

International commitments and initiatives in support of the MDGs 

In  2008  existing  commitments  were  confirmed  and  major  new  steps  were  taken  to  assess 
progress on the MDGs (with high-level meetings in Accra, New York, and Doha). 

On 1 July 2008, the recommendations of the MDG Africa Steering Group were launched at 
the  African  Union  Summit  in  Egypt,  setting  out  the  practical  steps,  strategies  and 
programmes needed to achieve the Millennium Development Goals. To accelerate progress, it 
is now critical to set national policies and prioritise national resources for the MDGs. 

The  G8  Summit  of  7-9  July  2008  in  Hokkaido,  Japan,  focused  on  a  series  of  priorities 
including the world economy, high oil and food prices and the resulting food crisis, climate 
change,  development  and  Africa.  G8  Leaders  pressed  for  the  full  implementation  of  the 
Financial  Stability  Forum  (FSF)  recommendations  to  strengthen  the  international  financial 
system and to work towards the implementation of the OECD standards of transparency and 
information exchange for tax purposes. G8 leaders also renewed their 2005 Gleneagles ODA 
commitments to increase development assistance to Africa by US $25 billion a year by 2010.5  

4 
5 

IMF ‘The Implications of the Global Financial Crisis for Low-Income Countries’, Feb 2009. 
The Gleneagles Communiqué, G8, Geneagles, 2005. 

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Three forums on aid effectiveness were held in Accra, Ghana, from August 30 to September 
4, 2008: the official Third High-Level Forum (HLF3) on Aid Effectiveness and two parallel 
forums organised by civil society.  

The  HLF3  reviewed  progress  on  implementing  the  Paris  Declaration  on  Aid  Effectiveness 
based on evidence collected by the Monitoring Survey undertaken in 54 countries. The Accra 
Agenda for Action (AAA) was adopted on 4 September 2008, following an extensive process 
of consultation.  

At  the  request  of  the  UN  Secretary  General,  a  report  on  “Delivering  on  the  Global 
Partnerships  for  Achieving  the  MDGs”  was  launched  on  4  September  2008.  It  describes 
progress on achieving MDG 8 (to develop a global partnership for development) and related 
targets, in particular: 

(1) 

(2) 

(3) 

(4) 

increasing  ODA  by  US  $18  billion  a  year  to  meet  the  2010  target  set  at  the  G-8 
Summit in Gleneagles in 2005;  

re-commencing  trade  negotiations  immediately  based  on  the  promise  to  give  a 
development focus to trade negotiations;  

improving  access  to  essential  quality  medicines,  especially  in  the  public  sector,  to 
make them available to the poor; 

and  accelerating  the  diffusion  of  new  technologies  for  development  and  increasing 
investment in infrastructure, especially electricity.  

On 22 September 2008, a high-level meeting on Africa’s Development Needs was held. It 
focused on “transforming the climate for business to accelerate private sector-led growth and 
progress towards the MDGs”.  

On 25 September 2008, in New York at the UN High-Level Event on the MDGs, the focus 
was  on  implementing  existing  development  commitments.  The  Event  encouraged  forward-
looking  initiatives  and  urged  countries  to  join  with  the  private  sector  and  civil  society  to 
establish  proposals  that  are  deliverable  and  provide  concrete  results.  An  estimated  US  $16 
billion in commitments was announced, including $1.6 billion to bolster  food security,  $4.5 
billion  for  education  and  $3  billion  to  combat  malaria.  The  Secretary-General  and  the 
President of the General Assembly also called for a MDGs Review Summit in 2010. 

The  final  Communiqué  of  G-20  Summit  in  Washington  (15  November  2009)  makes  an 
explicit  reference  (paragraph  14)  to  the  need  to  achieve  the  MDGs  in  the  developing 
countries,  reaffirming  the  development  assistance  commitments  made  and  urging  both 
developed  and  emerging  economies  to  undertake  commitments  consistent  with  their 
capacities and roles in the global economy. 

The  Doha  International  Conference  on  Financing  for  Development  to  Review  the 
Implementation of the Monterrey Consensus, held from November 29 to December 2 2008, 
was another key opportunity to strengthen the commitments of countries, intergovernmental 
agencies and the private sector to eradicate poverty and accelerate progress on the MDGs. The 
Doha  Declaration  on  Financing  for  Development  reaffirmed  the  Monterrey  Consensus  and 
called for a United Nations Conference at the highest level to examine the impact of the world 
financial and economic crisis on development.  

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The  Doha  Declaration  maintained  all  the  commitments  made  in  Monterrey  regarding  the 
mechanisms needed to reach the MDGs, and the pledge of 0.7% of developed countries’ GNI 
for official development aid. The Doha Declaration also explicitly recognises that promoting 
gender  equality  and  women’s  economic  empowerment  is  essential  in  achieving  equitable 
development.  

Climate  change  and  other  environment-related  issues  will  clearly  remain  on  top  of  the 
international  development  agenda  for  many  years  beyond  2015.  Eradication  of  poverty  in 
developing countries and tackling climate change are inextricably linked. The MDGs will not 
be  achieved  if  climate  change  and  environmental  degradation  are  not  tackled.  A  strong 
partnership between developing and developed countries is needed to address climate change. 
This  includes  support  to  countries  to  integrate  climate  resilience  and  low  carbon  strategies 
into their development plans through assistance for adaptation, clean energy and technology. 

The  United  Nations  Climate  Change  Conference  held  in  Poznań  on  December  13  2008 
stepped  up  international  cooperation  on  a  future  climate  change  arrangement,  risk 
management  and  research  and  development  of  new  technologies.  Africa  and  the  European 
Union  adopted  an  important  joint  declaration  on  climate  change,  which  underlines  the 
concerns of both continents as they tackle global warming and reiterates their common aim to 
reach an ambitious post-Kyoto international agreement in Copenhagen in December 2009.  

2.2. 

EU/European Commission support to achieve the MDGs 

As stated in the European Consensus on Development6 (2005), the primary and overarching 
objective of EU development cooperation is to eradicate poverty in the context of sustainable 
development, including pursuit of the UN Millennium Development Goals. The EU pursues 
this objective through a multidimensional agenda, combining aid, aid effectiveness and policy 
coherence for development. The EU’s share in global aid is increasing (60%, or € 46 billion, 
in  2007).  Despite  the  new  financial  context,  EU  Member  States  confirmed  in  Doha  (in 
December 2008), their pledge to increase aid flows in line with the target, which is for the EU 
as a whole to reach 0.56% GNP by 2010 and 0.7% GNP by 2015. 

In recognition of the need for concrete new and better coordinated initiatives in support of the 
MDGs  and  global  poverty  reduction,  the  European  Council  adopted  an  EU  Agenda  for 
Action  on  MDGs  (June  2008)7  which  represents  a  collective  European  offer  to  developing 
partners and to the international community. It sets a number of intermediate milestones to be 
reached by 2010 to meet the MDG targets by 2015. It also sets examples of EU action to form 
part of the commitments already made by the EU and the expected outcome of increased EU 
aid  in  those  sectors.  The  Agenda  estimates  the  global  external  financing  gaps  per  sector  by 
2010  to  achieve  the  MDGs  in  2015,  based  on  international  organisations’  data  and  on  the 
work of the UNSG Africa MDGs Steering Group.  

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7 

The European Consensus on Development, (December 2005), 
http://ec.europa.eu/development/icenter/repository/eu_consensus_en 
EU Agenda for Action on the MDGs (June 2008), 
http://register.consilium.europa.eu/pdf/en/08/st11/st11096.en08.pdf  

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Most Member States plan to use the EU Agenda for Action as a positive tool to raise public 
awareness and enhance policy dialogue in support of the MDGs.8 By setting concrete targets 
and timelines for reaching the MDGs, the EU Agenda also gives strong political impetus to 
increase  coordination  amongst  EU  donors.  Most  Member  States  have  planned  specific 
initiatives  to  achieve  the  MDGs  under  the  Agenda,  particularly  in  the  sectors  of  health, 
education,  and  water  and  sanitation.  Gender  equality  and  the  empowerment  of  women  is  a 
crosscutting priority for most Member States. 

EU-Africa MDG Partnership 

The EU also has a specific partnership on MDGs with Africa under the Action Plan adopted 
as  part  of  the  2007  Joint  Africa-EU  Strategy  which  provides  for  various  levels  of 
cooperation.9  One  of  the  eight  Africa-EU  Partnerships  focuses  on  policy  dialogue, 
cooperation  and  joint  action  to  achieve  the  MDGs  across  Africa  by  2015,  with  concrete 
actions and goals for 2008 – 2010 being outlined in the First Action Plan. 

The EU and Aid Effectiveness 

Improved aid effectiveness contributes to achieving the MDGs. In particular, a clear division 
of  labour  among  donors  and  alignment  with  country  systems  helps  improve  absorption 
capacity  in  partner  countries,  especially  when  scaling-up.  The  EU  champions  aid 
effectiveness  through  the  Paris  Declaration  on  Aid  Effectiveness  (2005),  the  four  additional 
EU commitments made in Paris, and the Accra Agenda for Action (2008). The EU Common 
position  for  Accra  singles  out  four  areas  to  drive  progress  forward:  division  of  labour, 
ownership  and  use  of  country  systems,  predictability  of  aid,  and  mutual  accountability  for 
results,  including  revised  conditionality.  The  EU  Code  of  Conduct  on  complementarity  and 
division of labour (2007) aims to reduce aid fragmentation.  

Policy Coherence for Development 

Closer and more widespread interdependence and interaction with developing countries offer 
new  opportunities  to  promote  sustainable  development,  fight  poverty  and  address  common 
challenges  —  not  just  through  development  cooperation  but  also  through  other  policies,  by 
increasing  their  coherence  with  development  objectives.  European  trade  and  agriculture 
policy, for example,  can  considerably influence the capacity of  African countries to combat 
poverty  and  hunger.  Cooperation  on  research  and  regulating  intellectual  property  rights  can 
help developing countries combat HIV/AIDS. Through its Policy Coherence for Development 
approach  (confirmed  by  the  European  Council  in  June  2008),  the  EU  actively  looks  for 
synergy  between  its  policies  and  development  objectives.  Twelve  areas  were  identified  in 
2005,  including  migration,  security,  environment,  research,  trade,  information  society, 
transport,  the  social  dimension  of  globalisation/  employment  and  decent  work,  agriculture, 
fisheries,  climate,  and  energy  policies,  which  are  all  particularly  relevant  in  the  new  global 
context.  

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9 

From  Member  States  replies  to  the  2009  Monterrey  Questionnaire,  which  reports  on  progress  in  the 
context of the annual ‘Monterrey report’. 
Joint Progress Report on the implementation of the Africa-EU Joint Strategy and its first Action Plan 
(2008-2010), http://www.africa-
union.org/root/au/Conferences/2008/november/au_eu/final%20documents/2008%2011%2021%20Joint
%20Progress%20Report%20Final%20clean.doc  

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The  Commission  issued  the  first  comprehensive  EU  Policy  Coherence  for  Development 
Report10 in September 2007 and put forward recommendations on selected policies, such as 
security, migration, research and trade. The 2009 PCD Report is currently being prepared. 

3. 

THE  GLOBAL  ECONOMIC  CONTEXT:  OVERVIEW  OF  THE  RECENT 
MULTIDIMENSIONAL  (FOOD,  FUEL  AND  NOW  FINANCIAL)  CRISES  AND  THE 
GLOBAL ECONOMIC DOWNTURN 

The past two years have seen a succession of global crises (food, fuel, financial) which have 
affected advanced, emerging and developing countries alike. The specific multifaceted impact 
varies greatly between regions, countries and groups of population, depending on their degree 
of vulnerability to external economic shocks.  

These crises have the potential to seriously affect development and the achievement of the 
MDGs.  A  number  of  developing  countries  and  population  groups  have  been  particularly 
severely hit by the combination of these crises. There are now real concerns that the progress 
on development made in past years will be reversed.  

While the current focus is on the global financial crisis and economic downturn, the effects of 
the global food crisis must not be overshadowed. The two crises are intrinsically linked, and 
wreak devastating effects in developing countries. 

3.1. 

Impacts of the food and fuel crises and price volatility 

2006-2008  saw  unprecedented  worldwide  surges  in  fuel  and  food  prices.  The  long  boom  in 
commodity prices was the greatest for a century: exceptional both in its duration and in the 
range  of  commodities  affected.  It  is  estimated  that  the  escalation  of  food  prices  pushed 
between 130-155 million people into extreme poverty.11 

Oil  prices  have  risen  steadily12  as  demand  grew  in  developed  and  emerging  countries, 
including China and India. This was exacerbated by a slow supply response and by the fact 
that  conventional  resources  can  no  longer  satisfy  the  demand,  while  alternatives  are  more 
expensive  (oil  sands)  and/or  more  polluting  (coal,  oil  sands).  Food  prices  also  soared13, 
reversing three decades of declining agricultural prices. 

High  fuel  costs  resulting  in  higher  agriculture  costs  are  one  of  the  many  causes  of  the  food 
crisis, along with falling food stocks and rising demand for maize in biofuel production.1415  

10 

11 

12 
13 

14 

on 

Policy 

Report 

EU 
2007), 
http://ec.europa.eu/development/icenter/repository/eu_report_policy_coherence_COM(2007)_545_final
_en.pdf  
World  Bank,  “Global  Economic  Prospects  2009:  Commodities  at  the  crossroads”,  Washington  D.C., 
December 2008. 

Development 

(September 

Coherence 

for 

Crude oil prices peaked at $147/barrel in July 2008. 

The price of a number of commodities started to rise steadily in 2006, they increased dramatically in the 
second half of 2007 and peaked in the first months of 2008. 
World  Bank,  “Global  Economic  Prospects  2009:  Commodities  at  the  crossroads”,  Washington  D.C., 
December 2008. 

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In its May 2008 Communication16, the European Commission underlined that “the food price 
inflation affected several commodities at the same time: cereals, meat, and dairy products all 
recorded two digit or even three digit increases in less than a year. The size and abruptness of 
the price surge have generated macro-economic imbalances across the world”. 

Developing  countries  and  the  most  vulnerable  populations  within  them  have  been  hit 
disproportionately by the  food  crisis.  While  growth  in  many exporting developing countries 
was  boosted  by  the  increase  of  commodity  prices  (including  oil),  it  dampened  growth  in 
countries importing these products.. 

In  many  of  these  net-importing  countries  the  surge  in  food  prices  has  had  severe  adverse 
effects on poor households, and particularly on the ones which are net buyers of food17, both 
in urban and rural areas. As stressed in the 2008 UN MDG Report, “poor people who do not 
produce  their  own  food  are  the  most  severely  hurt  because  a  larger  proportion  of  their 
expenditure is allocated to food. Higher food prices limit their ability to obtain not only food 
but also other essential goods and services, including education and health care”18. To that 
extent, the food crisis has contributed to sharp reversals in MDG progress on many fronts, in 
particular MDG 1 as the proportion of undernourished in all major developing regions in the 
world has now risen.19 

15 

16 

17 

18 
19 

The  extent  to  which  increasing  demands  for  crops  to  produce  biofuels  could  have  contributed  to  the 
recent  surge  in  food  prices  must  be  considered  with  nuances.  According  to  Commission's  analyses, 
current EU biofuel production has little impact on current global food prices, as biofuels use less than 1 
per cent of EU cereal production. On the other hand, the proactive policy pursued by the US has had a 
noticeable impact on the maize market, but so far has remained a relatively moderate contributor to high 
food prices in general (Source: European Commission, Communication on "Tackling the challenge of 
rising food prices Directions for EU action", COM(2008) 321 final, Brussels, 20 May 2008, p.4.) 
European Commission, Communication on “Tackling the challenge of rising food prices Directions for 
EU 
2008, 
http://ec.europa.eu/commission_barroso/president/pdf/20080521_document_en.pdf  

COM(2008) 

Brussels, 

action”, 

final, 

May 

321 

20 

A household is defined as a net food buyer when the value of food staples it produces is less than the 
value of food staples it consumes. Poor households tend to be net buyers of food, even in rural areas 
where  agriculture  and  staple  food  production  determine  the  principal  livelihoods  for  many  (Source: 
FAO, "The state of Food Insecurity in the World 2008 - High food prices and food security", 2008). 
United Nations, “The Millennium Development Goals Report 2008”, New York, 2008. 

FAO, “The State of Food Insecurity in the World 2008: High food prices and food security threats and 
opportunities”, Rome, 2008. 

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Diversity of food price impacts on poverty — Impact of food price increases in 2005-07 on 
$1/day poverty  

$1/day poverty rate

12

10

8

6

4

2

0

-2

-4

Bolivia

Cambodia

Madagascar

Malawi

Nicaragua

Pakistan

Peru

Vietnam

Zambia

Average

Rural

Urban

Total

Source: World Bank Global Monitoring Report, 2008. 

The FAO estimates that soaring food prices resulted in the highest single increase in hunger 
since  1990–92.  Between  2003–2005  and  2007,  high  food  prices  contributed  to  swelling  the 
number of undernourished people by 75 million, bringing the total number to 923 million.20  

Overall, the World Bank estimates that rising food prices may have plunged an additional 100 
million people into deeper poverty and hunger, breaking close to seven years of progress in 
poverty reduction.21 The increase in the number of poor is only part of the emerging costs of 
the  crisis.  According  to  the  World  Bank,  “the  more  profound  consequence  is  the  impact  of 
rising  prices  on  households  who  were  already  poor  struggling  to  meet  their  daily  food  and 
nutrient needs”22. For the poorer, the double shock of food and fuel price rises represents a 
threat to their basic survival. 

20 
21 

22 

EN 

FAO, see footnote 19. 

Ivanic  M.  &  Martin  W.,  “Implications  of  Higher  Global  Food  Prices  for  Poverty  in  Low-Income 
Countries”, Policy Research Working Paper 4594, WORLD BANK, Washington D.C., April 2008. 

World  Bank,  “Rising  Food  and  fuel  prices:  Addressing  the  risks  to  future  generations”,  Washington 
D.C., October 2008. 

11 

   EN 

 
 
                                                 
This  long  commodity  boom  has  finally  come  to  an  end,  with  international  prices  falling 
sharply  during  the  second  half  of  2008  in  response  notably  to  slower  growth,  increased 
supplies  and  revised  expectations.  However,  recent  FAO  data  and  analysis  show  that  food 
prices  fall  less,  or  even  not  at  all,  on  domestic  markets  in  several  developing  countries  and 
that  food  crises  currently  persist  in  32  countries  around  the  world,  of  which  20  in  Africa23. 
From  a  longer  term  perspective,  World  Bank's  economic  forecasts  predict  that  food 
commodity prices are likely to remain much higher over the coming 20 years than during the 
1990s,  partly  because  of  higher  energy  prices  and  the  influence  of  biofuel  demand  for  food 
crops24. 

3.2. 

Impacts of the Financial Crisis 

Contrary  to  initial  forecasts,  which  projected  that  the  crisis  would  be  limited  to  the  most 
integrated  economies  in  the  world  economy,  it  is  now  widely  recognised  that  developing 
countries are seriously hit by the financial crisis and the ensuing global economic slowdown. 
Even  though  the  outbreak  of  the  crisis  was  in  advanced  economies,  its  effects  will  reach 
developing countries through various channels and in different ways. 

While  most  developing  countries  are  still  struggling  with  the  effects  of  the  unprecedented 
high surge in food and energy prices, the current financial crisis threatens to exacerbate their 
situation and may reverse the progress made on the MDGs.  

Developing  countries  may  be  hit  by  the  effects  of  the  crisis  through  two  main  transmission 
channels. 

3.2.1.  Direct impacts of the financial crisis 

The  most  integrated  economies  in  emerging  countries,  such  as  Brazil  and  India,  and  some 
developing countries with relatively developed financial markets (such as Pakistan, Nigeria, 
Thailand, South Africa, and the Philippines) have directly suffered from capital flight due to 
their  direct  exposure  to  the  international  financial  system.  Typically,  countries  that  are  the 
most integrated to the  global financial  system  have  also  witnessed  the steepest  falls in  their 
stock and bond markets, coupled with the sudden withdrawal of foreign capital and significant 
currency depreciation. 

For  most  other  developing  countries,  the  crisis  hits  in  quite  different  ways.  They  suffer 
contagion  effects,  such  as  the  drying-up  of  credit,  investment  and  private  capital  market 
flows.  Tighter  credit  conditions  and  increased  uncertainty  are  curbing  investment  in  both 
developed and developing countries in 2009. The World Bank estimates that capital flows to 
developing countries will fall from $1 trillion in 2007 to around $600 billion in 2009.25 Given 
their scarce resources and very limited access to capital, the effects of  credit drying up will 
certainly be damaging for developing countries. 

23 

24 
25 

indications  hint  a  smaller  2009  cereal  drop",  12th  February  2009,  Rome, 

FAO,  "Early 
http://www.fao.org/news/story/en/item/10127/icode.  
World Bank, See footnote 11.  
World  Bank,  “Weathering  the  Storm:  Economic  policy  responses  to  the  financial  crisis”, Washington 
D.C., November 2008. 

EN 

12 

   EN 

 
                                                 
There  is  a  risk  that  the  global  financial  crisis  leads  to  domestic  financial  crises  in  some 
developing  countries  if  it  exposes  existing  structural  weaknesses  in  their  domestic  financial 
systems. Countries with high domestic credit growth rates in the private sector in recent years, 
such as Nigeria, Guinea Bissau and Angola for example, appear to be more at risk.26 

In  the  longer  term,  weak  economies  facing  a  reduction  in  private  investment  flows  in  a 
context of financing constraints, decreasing prices and weaker global growth may be even less 
able to cope with internal economic weaknesses and development needs in the future, notably 
in  infrastructure  and  network  industries.  Uganda,  for  example,  has  estimated  that  FDI  will 
decrease from 10% of its GDP to 4% of its GDP in 2009/2010.27 In Ethiopia, the Ethiopian 
Electric  Power  Corporation,  which  is  the  sole  provider  of  electricity  in  the  country,  has 
indicated that its investment plans will be severely affected because of the crisis.28  

Although these contagion effects have important consequences for developing countries, they 
are only one of the ways in which the global financial crisis can affect developing countries. It 
seems  that  the  more  widespread  and  serious  impacts  of  the  financial  crisis  for  developing 
countries will be due to the global economic slowdown. 

3.2.2. 

Impacts of economic slowdown 

The  world  economy  is  entering  the  most  severe  slowdown  since  the  1930s,  as  the  financial 
crisis  in  developed  countries  has  shaken  markets  worldwide.  The  economic  recession 
following  the  financial  crisis  is  leading  to  lower  growth  rates  in  developing  countries,  thus 
putting an end to the robust growth recorded by many from 2002-2007. 

26 

27 

28 

M.  Berndt,  P.  de  Lima,  B.  Marchitto,  “The  impact  of  the  financial  crisis  on  ACP  countries”,  opcit., 
pp.15  and  22.  See  also:  World  Bank,  “Global  financial  crisis  and  implications  for  developing 
countries”,  G  20  Finance  Ministers’  Meeting,  Sao  Paulo,  Brazil,  November  2008,  p.2;  World  Bank, 
“Weathering the storm: economic policy responses to the financial crisis”, opcit., p.6. 

Groupe  de  la  Banque  africaine  de  développement,  “L’impact  de  la  crise  financière  actuelle  sur  les 
économies  africaines”,  Conférence  internationale  sur  le  financement  du  développement,  Doha,  Qatar, 
29 novembre — 2 décembre 2008, p.3. 

N. McCulloch, “Voices from the South — The impact of the financial crisis on developing countries — 
Analysis two”, IDS, November 2008. 

EN 

13 

   EN 

 
                                                 
Growth rates (real GDP) in developed & developing countries 

Source: IMF, “World Economic Outlook Update”, January 2009. 

The global economic downturn will have significant impacts in developing countries, starting 
with lower growth rates. A growing number of developing countries have already witnessed a 
significant  deceleration  in  economic  growth,  which  in  turn  diminishes  the  prospects  of 
achieving the MDGs. 

Growth prospects for 2009 are expected to vary significantly across developing countries and 
regions. According to IMF forecasts,29 world GDP growth will be 3.4% in 2008 and 0.5% in 
2009. Growth in high-income countries is expected to fall from 2.7% in 2007 to a contraction 
of -2% in 2009, while in the developing world growth is expected to slow sharply to 3.3% in 
2009  from  6.3%  in  2008  and  8.3%  in  2007.  Growth  in  Sub-Saharan  Africa  is  expected  to 
decline to 3.5% in 2009, compared to 6.9% in 2007, before rising again to 5% in 2010. 

Slower  growth  rates  in  developing  countries  are  expected  to  seriously  endanger  the 
achievement of the MDGs and trap more people into poverty. The World Bank estimates that 
a one percent drop in growth in developing countries could trap another 20 million people into 
poverty. Recent estimates compiled by the World Bank show that slower growth will push 46 
million more people below the poverty line of US$1.25 a day while an extra 53 million people 
will stay trapped on less than US$2 a day. This is added to the 130-155 million people who 
were already pushed into poverty in 2008 as a result of soaring food and fuel prices. 

As the crisis turns into an unemployment crisis, the International Labour Organisation (ILO) 
for its part has warned that world unemployment in 2009 could increase by between 18 to 30 
million people in comparison to 2007, and by more than 50 million if the situation continues 
to deteriorate as a result of the current crisis. In the worst case scenario, 200 million workers, 
mostly in developing economies, could be pushed into extreme poverty.30 In Asia, the loss of 
employment  will  be  significant  and  more  workers  will  be  pushed  into  vulnerable  jobs  in  a 
region where formal wage employment is still very low.  

29 
30 

IMF, “World Economic Outlook Update”, January 2009. 
ILO, Global Employment Trends 2009, Geneva, January 2009.  

EN 

14 

   EN 

 
 
                                                 
Furthermore the ILO expects the crisis to be more detrimental for women than men in most 
regions  of  the  world  and  projects  a  female  unemployment  rate  ranging  from  6.5  to  7.4 
percent, such that the number of unemployed women will rise between 10 and 22 million.31 
The ILO also highlights the risk of the rising incidence of informal employment, aggravating 
pre-existing  challenges32,  which  will  add  to  the  pre-existing  lack  of  adequate  basic  social 
protection for large shares of the population. 

As  labour  markets  weaken  in  rich  countries,  remittance  flows  to  developing  countries  are 
expected  to  decline.  Forecasts  of  falling  employment  in  the  developed  world,  especially  in 
sectors  with  many  migrant  workers  (such  as  construction,  retail  and  catering)  suggest  that 
migration  flows  from  developing  countries  may  slow.  Fewer  economic  migrants  will  go  to 
developed  countries  in  recession,  which  in  turn will lead to fewer remittances and probably 
lower  volumes  of  remittances  per  migrant.33  Remittances  are  projected  to  stagnate  in  the 
second half of 2008, and shrink in 2009. 

An  immediate  consequence  of  the  global  economic  slowdown  is  the  contraction  of  world 
trade volumes, for the first time since the 1982 recession, as the global financial crisis has led 
to recession in high-income countries and a sharp slowdown across the developing world. 

Trend in global trade volumes 

14

12

10

8

6

4

2

0

-2

-4

1981

1985

1989

1993

1997

2001

2005

2009

Source:  WORLD  BANK,  “Global  Economic  Prospects  2009  —  Commodities  at  the  crossroads”,  December 
2008 

This will lead to a sharp fall in export revenues for countries whose exports to advanced and 
emerging economies account for a significant share of their account balance, such as Mexico, 
Papua New Guinea, Bangladesh, Cambodia, Republic of Congo, Guyana and Seychelles. The 
decrease  in  export  revenues  is  projected  to  be  exacerbated  by  the  fall  in  commodity  prices, 
which have been plunging since mid-2008.34  

31 
32 

33 
34 

ILO, Global Employment Trends for Women Report, March 2009. 
ILO,  "The  financial  and  economic  crisis:  A  Decent  Work  response",  Discussion  paper  for  the  304th 
Governing Body Session of the ILO, March 2009. 
RATHA Dilip et al., “Outlook for remittance flows 2008-2010”, WORLD BANK, 2008. 

Oil  prices  plummeted  by  more  than  60%  from  their  peak  levels  of  July  to  November.  The  prices  of 
other commodities, including basic grains, have also declined significantly. 

EN 

15 

   EN 

 
 
                                                 
Source: IMF, "The implications of the global financial crisis for low-income countries", March 2009. 

The  fall  in  commodity  prices  will  hurt  primarily  net  exporters  of  primary  commodities, 
notably oil and metal for which the price declines have been the sharpest, although countries 
that  have  accumulated  sufficient  public  savings  from  the  commodity  boom  will  be  better 
placed to support their economies for some time. 

However,  although  the  recent  fall  in  commodity  prices  has  certainly  eased  inflationary 
pressure in developing countries, the recent declines in food and fuel prices have not made the 
pressure and problems disappear. Commodity prices are expected to climb again and remain 
volatile in the medium term, partly due to the underlying imbalances in commodity markets.35 

Thus,  a  constant  structural  problem  that  poor  and  vulnerable  countries  must  face  is  price 
volatility.  Since  many  developing  countries  continue  to  rely  on  earnings  from  exporting 
primary  commodities,  they  remain  particularly  vulnerable  to  high  volatility  in  primary 
commodity prices.  

According  to  UNCTAD,36  volatility  has  negative  effects  at  both  macroeconomic  and 
microeconomic levels. In developing countries, particularly the poorest, the problems created 
by  commodity  price  volatility  are  aggravated  since  their  economies  are  less  resilient  to 
external shocks. The level and stability of commodity prices therefore remains an important 
policy issue, as the outlook for developing countries depends primarily on future trends in the 
prices  of  their  primary  commodity  exports.  Effective  insurance  mechanisms,  together  with 
sound macroeconomic policies and structural efforts to increase agricultural productivity and 
economic  diversification,  could  be  part  of  a  long-term  approach  to  this  long-standing 
problem. 

35 
36 

EN 

World Bank, see footnote 11. 

United Nations / UNCTAD, “Trade and development report 2008 — Commodity prices, capital flows 
and the financing for development”, New York/Geneva, 2008. 

16 

   EN 

 
 
                                                 
The EU Research Paper on the MDGs underlines the importance of insurance mechanisms: 
"Donors can play a part in smoothing the macro-economic effects of fluctuations in the price 
of  commodities  and  the  terms  of  trade,  thereby  reducing  the  ‘vulnerability’  of  developing 
countries  to  exogenous  shocks.  The  absence  of  insurance  has  a  remarkably  strong  negative 
effect  on  investment  and  growth.  Hence  the  payoff  (in  terms  of  economic  growth  and 
ultimately  poverty  reduction)  to  interventions  related  to  risk  coping  might  well  be 
underestimated".37  

Given  the  projected  decline  in  export  revenues,  private  financial  flows,  remittances  and 
reduced  access  to  credit  faced  by  developing  countries,  Official  Development  Assistance 
(ODA) is more important than ever in mitigating the impacts of the crisis and achieving the 
MDGs.  

Projected trend in financial flows to developing countries 

Source: Cali, Massa, Willem Te Velde, “The Global Financial Crisis: financial flows to developing countries set 
to fall by one quarter”, ODI, November 2008 

37 

“Millennium Development Goals at Midpoint: Where do we stand and where do we need to go?” see 
footnote 1. 

EN 

17 

   EN 

 
 
                                                 
The European Investment Bank (EIB) estimates that all economic sectors will suffer from the 
reduced  availability  of  funds  and  slowing  growth  as  a  result  of  the  crisis.  For  instance, 
tourism,  which  constitutes  an  important  source  of  income  and  employment  in  many 
developing countries (notably in North, East and Southern Africa), might suffer from a major 
reduction  of  demand  as  consumers  from  advanced  economies  cut  down  on  long-distance 
travel. "Tourism sensitive" countries in the Pacific such as Fiji and Samoa, in the Caribbean 
such as Dominican Republic or Jamaica, or in Eastern and Southern Africa such as Uganda 
and Botswana are expected to see heavy declines of tourism receipts. Another example is the 
financial  sector,  where  foreign  bank  ownership  may  no  longer  be  a  guarantee  for  stability. 
Therefore countries with a high share of foreign-owned banks could be more at risk than those 
with few. 

Overall,  instability  (a  succession  of  booms  and  slumps)  and  its  effects  in  terms  of  curbing 
growth  and  fluctuating  incomes  has  significant  and  long-term  implications  from  a  social 
perspective.  It  can  retard  progress  on  poverty  reduction,  trigger  social  unrest  and  political 
instability  and  push  people  into  poverty  traps  (poor  people  contracting  health  handicaps, 
children leaving school, workers dropping out of the labour market…)38, which impedes long-
term development prospects and the achievement of the MDGs over and above the effects of 
the crisis itself and macroeconomic recovery.  

3.3. 

Economic Vulnerability  

The  effects  of  the  crises  are  likely  to  be  far  more  damaging  for  low-income  countries  with 
high degrees of economic vulnerability because this affects countries' ability to cope with and 
recover from the negative consequences of external shocks, risks and uncertainties. 

3.3.1.  Typologies of vulnerability 

A  general  definition  of  the  concept  of  “vulnerability”  is  given  by  the  UN  Department  of 
Economic and Social Affairs: “vulnerability can be seen as a state of high exposure to certain 
risks  and  uncertainties,  in  combination  with  a  reduced  ability  to  protect  or  defend  oneself 
against those risks and uncertainties and cope with their negative consequences. It exists at 
all  levels  and  dimensions  of  society  and  forms  an  integral  part  of  the  human  condition, 
affecting  both  individuals  and  society  as  a  whole”  (UN-DESA,  2003).39  This  definition 
highlights  three  key  dimensions  inherent  to  the  concept  of  vulnerability:  the  shocks  (size, 
frequency),  exposure  to  these  shocks;  and  the  ability  to  cope  with  and  recover  from  these 
shocks (or resilience). 

38 

39 

See:  P.  Guillaumont,  “An  Economic  Vulnerability  Index:  its  design  and  use  for  international 
development  policy”,  opcit.,  pp.8-9;  P.  Guillaumont,  “Macro-vulnerability  in  Low-Income  Countries 
and aid responses”, Annual World Bank Conference on Development Economics, 2006, pp.74 – 78. 

P. Hirby,  “Is  globalisation  good  for  us? Introducing  the  concept of vulnerability”, Working  Paper n°. 
129,  Research  Centre  on  Development  and  International  Relations  (DIR),  Aalborg  University,  2004, 
p.3. 

EN 

18 

   EN 

 
                                                 
The  1999  Economic  Vulnerability  Index  (EVI)  measures  the  extent  and  dimensions  of 
economic  vulnerability  of  countries  in  a  globalised  economy.  It  uses  a  composite  indicator 
reflecting different aspects of countries’ exposure and vulnerability to exogenous shocks due 
to their structural characteristics (size and location of the country, structure of its economy).40 
This  criterion  was  designed  for  the  purpose  of  elaboration  of  the  list  of  Least  Developed 
Countries (LDCs), in addition to the two other criteria (GDP per capita and Human Capital 
Index).41  

The  succession  of  financial  crises  during  the  second  half  of  the  1990s  underlined  the 
vulnerability  of  emerging  countries  and  led  the  IMF  to  develop  its  own  vulnerability 
indicators. The fund monitors four groups of indicators: (1) indicators related to external and 
domestic debts; (2) indicators related to reserve adequacy; (3) indicators related to financial 
soundness  (to  assess  the  strengths  and  weaknesses  of  countries’  financial  sector)  and;  (4) 
corporate  sector  indicators  (to  trace  the  exposure  of  companies  to  foreign  exchange  and 
interest  rate).  These  vulnerability  assessments  are  incorporated  into  the  IMF’s  consultations 
with its member countries.42 

3.3.2.  Recent crises: different impacts at country level 

Typology of vulnerable countries 

There are several key vulnerability factors to consider to gain a better understanding of the 
differentiated impact of the current (and previous) crises and to identify the most potentially 
vulnerable countries.43 However, specific impact and needs assessments should be carried out 
on a country basis to make sure the right response is provided at domestic level.  

1. 

2. 

40 

41 

42 
43 

The  degree  of  exposure  of  countries’  banking  systems  to  global  financial  markets. 
Countries  with  more  sophisticated  and  integrated  financial  systems  have  been 
directly affected by the contagion effects and spill-overs of the financial turmoil as 
risk aversion spiked.  

The degree of reliance on FDI, portfolio inflows and other private flows to finance 
current  account  deficits.  Overall,  inflows  of  private  capital  to  developing  countries 
have increased significantly over recent years, including into Sub Saharan Africa, but 
they are currently reversing and they should further decrease as a result of the crisis. 

The Economic Vulnerability Index (EVI) is a measure used by the United Nations to classify the 
development of the 192 member states. See: 
http://www.un.org/esa/policy/devplan/profile/criteria.html#evi. 
See  notably:  P.  Guillaumont,  “An  Economic  Vulnerability  Index:  its  design  and  use  for  international 
development 
2008, 
http://www.wider.unu.edu/publications/working-papers/research-papers/2008/en_GB/rp2008-99;  Lino 
Briguglio,  Gordon  Cordina,  Nadia  Farrugia,  and  Stephanie  Vella,  “Economic  vulnerability  and 
and  measurements”,  UNU-WIDER,  Research  Paper  N°.  2008/55, 
resilience: 
http://www.wider.unu.edu/publications/working-papers/research-papers/2008/en_GB/rp2008-55/. 
More information on: http://www.imf.org/external/np/exr/facts/vul.htm. 

policy”,  UNU-WIDER,  Research 

2008/99,  November 

paper  N°. 

concepts 

See D. Willem te Velde, “The global financial crisis and developing countries: which countries are at 
risk  and  what  can  be  done?”,  ODI  Background  Note,  October  2008;  World  Bank,  “Weathering  the 
storm: economic policy responses to the financial crisis”, November 2008; IDS, “Voices from the South 
— The impact of the financial crisis on developing countries”, November 2008. 

EN 

19 

   EN 

 
                                                 
3. 

4. 

5. 

Domestic regulations on capital movements should also be taken into account when 
analysing the risks of private capital outflows at country level.  

Similarly,  developing  countries  that  resort  to  commercial  lending  to  finance  trade 
operations and investments might be affected as international banks may not be able 
or willing to lend as much as they have in the past.44  

Trade  features  are  another  key  factor  to  consider  when  analysing  the  impact  of  the 
crisis at country level. 

The  level  of  dependency  on  remittances  from  migrant  workers  is  another  relevant 
determinant  of  vulnerability,  as  fewer  economic  migrants  will  go  to  developed 
countries and remittances flows are expected to decrease further in 2009 in response 
to  the  weakening  of  labour  markets  in  rich  countries.45  Haiti,  for  example,  where 
remittances represent almost 20% of GDP value, could be particularly at risk.46 The 
impact  on  flows  to  recipient  countries  will  however  depend  significantly  on 
exchange rates.  

44 

45 

46 

D. Willem te Velde, “The global financial crisis and developing countries: which countries are at risk 
and what can be done?”, November 2008. 

See D. Ratha, S. Mohapatra and Z. XIU, “Outlook for remittances flows 2008-2010: growth expected to 
moderate significantly, but flows to remain resilient”, Migration and Development Brief 8, World Bank, 
November 11, 2008. 

M. Berndt, P. de Lima, B. Marchitto, “The impact of the financial crisis on ACP countries”. 

EN 

20 

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The table below gives a list of remittance-dependent countries (in US$ million).47 

Region 

2004 

2005 

2006 

2007 

2008e 

Share of 
GDP (2007)

Tajikistan 

Moldova 

Lesotho 

Honduras 

Lebanon 

Guyana 

Jordan 

Haiti 

Jamaica 

Kyrgyzstan 

El Salvador 

Nepal 

Armenia 

Nicaragua 

Philippines 

Guatemala 

Albania 

Bangladesh 

Sierra Leone 

ECA 

ECA 

SSA 

LAC 

MNA  

LAC 

MNA 

LAC 

LAC 

ECA 

LAC 

SAS 

ECA 

LAC 

EAP 

LAC 

ECA 

SAS 

SSA 

252 

705 

355 

1 175 

5 591 

153 

467 

920 

327 

1 821 

4 924 

201 

2 330 

2 500 

932 

985 

1 623 

1 784 

189 

2 564 

823 

813 

519 

322 

3 030 

1 212 

940 

616 

1 019 

1 182 

361 

2 391 

5 202 

218 

2 883 

1 063 

1 946 

481 

3 485 

1 453 

1 175 

698 

1 691 

1 498 

443 

2 625 

5 769 

278 

3 434 

1 222 

2 144 

715 

3 711 

1 734 

1 273 

740 

1 750 

1 550 

45.5% 

38.3% 

443 

28.7% 

2 820 

6 000 

24.5% 

24.4% 

278 

23.5% 

3 434 

1 300 

2 144 

22.7% 

20.0% 

19.4% 

715 

19.0% 

3 881 

2 254 

1 300 

18.4% 

15.5% 

13.5% 

771 

12.1% 

11 471 

13 566 

15 251 

16 291 

18 669 

11.6% 

2 627 

1 161 

3 584 

25 

3 067 

1 290 

4 314 

2 

3 700 

1 359 

5 428 

50 

4 254 

1 071 

6 562 

148 

4 472 

1 071 

8 893 

150 

Dominican Republic 

LAC 

2 501 

2 719 

3 084 

3 414 

3 575 

Cape Verde 

Morocco 

Senegal 

Togo 

Guinea-Bissau 

Sri Lanka 

Dominica 

Vietnam 

Uganda 

SSA 

MNA 

SSA 

SSA 

SSA 

SAS 

LAC 

EAP 

SSA 

113 

137 

137 

139 

4 221 

4 590 

5 451 

6 730 

633 

179 

28 

789 

193 

28 

925 

229 

28 

925 

229 

29 

139 

6 730 

1 000 

229 

30 

1 590 

1 991 

2 185 

2 527 

2 720 

23 

25 

25 

26 

30 

3 200 

4 000 

4 800 

5 500 

5 500 

311 

323 

665 

849 

875 

Note: Estimates based on data until October 2008.  

Source: World Bank (2008) based on IMF Balance of Payment Statistics 

10.6% 

10.1% 

9.5% 

9.4% 

9.3% 

9.2% 

9.0% 

8.5% 

8.4% 

8.3% 

8.1% 

8.0% 

7.9% 

7.2% 

47 

ODI, see footnote 43. 

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21 

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6. 

Policy and institutions are the main determinants of resilience to shocks, meaning the 
ability  to  cope  with  the  adverse  effects.  Structural  issues  determine  the  extent  to 
which developing countries are able to adjust in the long run to external shocks. In 
particular,  developing  countries  with  stronger  economic  fundamentals  and  solid 
macroeconomic  policy  frameworks  and  institutions  are  in  a  better  position  to  deal 
with  the  negative  impact  of  the  crisis.  Key  factors  such  as  the  level  of  foreign 
exchange  reserves,  inflation  rates,  current  account  and  fiscal  positions  as  well  as 
gross public debt (expressed as % of GDP) should be carefully analysed on a country 
basis to assess the risk of the current crisis leading to a balance-of-payments crisis.48  

Progress  on  economic  fundamentals  has  been  made  in  many  developing  countries  in  recent 
years, notably thanks to better domestic economic policies, debt relief efforts and high export 
revenues  from  the  commodity  boom,  which  enabled  many  countries  to  improve  their  net 
foreign  position.  But  there  are  stark  differences  among  countries  and  developing  countries 
generally have less flexibility and policy space (in comparison with advanced economies and 
emerging  markets),  to  take  the  necessary  fiscal,  and  monetary  (counter-cyclical)  policy 
responses to the crises and mitigate their effects at domestic level.  

High commodity prices during previous crises also raised the current account deficits in many 
importing  countries49  and  reduced  their  ability  to  cope  with  the  fall-out  from  the  current 
financial crisis due to the policy responses taken (tax reductions, increased subsidies) to offset 
the effects of soaring prices on consumers and companies.50 Previous crises have exacerbated 
the vulnerability of many developing countries to the current global financial turmoil and its 
economic implications. 

Various analyses aimed at identifying the potentially most vulnerable countries to the global 
economic  and  financial  crisis  have  already  been  undertaken  by  major  institutions,  including 
the World Bank51, the IMF52 and the ILO53.  

48 
49 

50 

51 

52 
53 

See footnote 46. 

Current  account  deficits  have  raised  to  worrying  levels  in  many  oil-importing  countries  (they  exceed 
10%  of  GDP  in  about  one-third  of  developing  countries)  (World  Bank,  “World  Bank,  “Global 
economic prospects 2009 — Commodities at the cross roads”, opcit.). 

For example, data from a recent IMF survey covering 161 countries show that nearly 57% of countries 
increased  food  subsidies  while  22%  reduced  tax  on  fuels.  Besides,  almost  one  in  five  countries 
increased food subsidies while 22% increased fuel subsidies (World Bank, “Global financial crisis and 
implications for developing countries”, opcit., p.4.). 

WORLD BANK, "The global economic crisis – Assessing vulnerability with a poverty lens", February 
2009 

IMF, "The implications of the global financial crisis for low-income countries", March 2009 

ILO, see footnote 32. 

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22 

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Based on various analyses54, and bearing in mind the major expected negative effects of the 
crisis  on  developing  countries  (i.e.  lower  growth  rates,  falling  export  revenues,  declining 
external  financial  flows  –  including  remittances  and  private  investment  flows,  budgetary 
pressures), the Commission's assessment of the degree of vulnerability and resilience of any 
country to the effects of the crisis is based on the three following areas: 

(1) 

(2) 

its dependence on export revenues and degree of integration into world trade 

its dependence on external financial flows and transfers, in particular foreign direct 
investment and remittances 

(3) 

its capacity to react in particular to adopt fiscal stimuli measures 

To measure the extent to which countries are vulnerable in each of these areas, eight criteria 
have been used. 

In addition to the macroeconomic dimension, specific impact and needs assessments are also 
being carried out  on a  country  basis  and  at  the country level, building  upon recent  analyses 
provided by European Commission delegations on the impact of the financial and economic 
crisis in their respective countries. The aim is to better grasp the differentiated effects of the 
crisis  on  developing  countries  by  confirming  or  completing  the  quantitative  data  with  more 
qualitative information, notably on the social and political effects. 

Preliminary analysis of these reports shows that as a number of countries are expected to have 
more difficulties in financing social services and pursuing reforms, some are facing growing 
risks of high unemployment and threats of increased political instability. 

54

WB ("The Global Economic Crisis: Assessing Vulnerability with a Poverty Lens"); ODI ("The global 
financial crisis and developing countries – What can the EU do?", January 2009); EIB (The impact of 
the financial crisis on ACP countries", December 2008; ADB ("Country Economic Monitoring Notes", 
February 2009);  

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23 

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4. 

THE “ROAD AHEAD” - OTHER KEY CHALLENGES UP TO 2015 

The  series  of  crises  (food,  energy,  the  current  financial  crisis  and  consequent  economic 
downturn) will have an impact on developing countries’ performance on progress on MDGs. 
The  succession  of  crises  is  also  generating  changes  in  global  economic  and  political 
governance and in development agendas (aid policies, institutions, resources) by default. 

Compounded  by  the  financial  crisis,  two  other  challenges  to  achieving  the  MDGs  by  2015 
appear particularly important to address, namely inequality and fragility. 

EN 

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4.1. 

Inequality 

Although the MDGs do not directly address inequality (except gender equality MDG 3), the 
Millennium Declaration upholds the principles of equality (equal rights and opportunities) and 
solidarity  (equity  and  social  justice).  Progress  on  achieving  the  MDGs  is  measured  by 
aggregating  and  averaging  change  at  national  level.  National  averages  can  obscure  major 
inequalities  in  wealth,  gender,  group  identity  and  other  factors.  However,  the  MDGs  are 
statements  of 
international  consensus  on  universal 
entitlements, centred on global justice and human rights. These include the right to education, 
gender equality, survival and to a decent standard of living.  

international  purpose  rooted 

in 

Even before the series of recent crises, progress on the MDGs has been extremely uneven. 
Global income poverty (MDG 1) has fallen largely due to rapid economic growth in China, 
India, Indonesia and Vietnam. However, in many countries poverty reduction has been slow 
due to economic stagnation, slow growth and/or inequality.55 

Growth  is  critical  for  poverty  reduction  but  growth  alone  cannot  reduce  poverty.  Other 
aspects  of  development  policies  also  matter.56  The  World  Development  Report57  (2001) 
espoused the instrumental importance of inequality: that high inequality is bad for growth and 
that  high  inequality  is  bad  for  poverty  reduction,  because  it  reduces  the  amount  by  which 
poverty falls for each 1% of growth. There is evidence that the impact of growth on poverty 
reduction  is  significantly  lower  when  inequality  is  on  the  rise  than  when  inequality  is 
declining.58  

However,  since  1990,  the  majority  of  developing  countries  have  experienced  rising 
inequality.  According  to  the  EU  Research  Paper  on  the  MDGs  (2008),  “Inequality  has 
increased so much that it considerably weakened the poverty reduction impact of growth”.59  

The  least  developed  countries  are  today  farther  away  economically  from  the  richest 
countries  than  ever  before.  Cross-country  inequality  in  mean  income,  which  has  grown 
relentlessly  over  the  last  two  hundred  years,  continues  to  widen.  The  ratio  of  Purchasing 
Power Parity (PPP) GDP per capita in the 10 richest countries to PPP GDP per capita in the 
10 poorest increased from about 21 in 1960 to 34 in 1990, yet again to 47 in 2001 and to 50 in 
2005.60  With  GDP  expressed  in  market  exchange  rates,  the  ratios  are  much  higher.  Some 
countries have also seen a sharp drop in life expectancy, in most (but not all) cases as a result 
of  HIV/AIDS.  In  Zambia  life  expectancy  is  just  37  years.  It  is  questionable  whether  the 
processes  of  globalisation  and  market  integration  that,  along  with  new  technologies,  have 
been  the  sources  of  accelerated  world  economic  growth,  can  continue  without  a  concerted 
effort to deal with divergence and inequality.  

55 

56 
57 
58 
59 

60 

“Millennium Development Goals at Midpoint: Where do we stand and where do we need to go?”, see 
footnote 1.. 

Idem, see footnote 1. 

WORLD BANK, World Development Report 2000/2001: Attacking Poverty.  
Ravallion, Martin. Pro-Poor Growth: A Primer (2004). 
“Millennium Development Goals at Midpoint: Where do we stand and where do we need to go?”, see 
footnote 1. 

Dervis, K, Ideas for Development, Blog Oct 2007. 

EN 

25 

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Progress on the MDGs is also highly uneven among population categories and hides huge 
disparities and inequality within countries.  

There has been a clear trend over the last two decades in rising inequality within countries.61 
Even countries with an impressive recent record on growth, such as India, have wide national 
disparities in human development indicators, such as child and infant mortality. There are also 
marked gender inequalities. In India the death rate for children aged 1-5 is 50% higher for 
girls than for boys62. Women and girls face structural inequality in nutrition, healthcare and 
status.  These  structural  inequalities  lead  to  massive  underutilisation  of  women’s  economic 
potential.  Reducing  inequality  in  the  distribution  of  human  development  opportunities 
therefore instrumental in accelerate progress on the MDGs.  

As  we  near  2015,  we  need  increasingly  to  focus  on  areas  that  are harder  to  reach  and  on 
chronic poverty. By 2015, if the international community (donors and developing countries) 
achieves the MDGs targets, global poverty will only have been reduced by half.  

The  location  and  geographical  distribution  of  the  poor  is  changing  and  the  remaining  half 
will  be  more  difficult  to  address.  Tackling  chronic  poverty  will  most  probably  remain  a 
priority for international partnerships after 2015. UNESCO estimates that, despite impressive 
national and regional progress in education and marked increases in enrolment rates, at least 
29 million children will still be out of school in 2015.63 

To  some  extent,  household  vulnerability  is  a  product  of  macro-economic  vulnerability 
(through  macro-micro  interactions).  Economic  crises  in  developing  countries  often  lead  to 
cuts  in  government  social  spending,  particularly  on  essential  services  such  as  primary 
healthcare, education and transport, as public revenues plummet. Misguided macroeconomic 
policy  responses  to  crises  can  have  dramatic  effects  on  human  lives,  as  illustrated  by  the 
experience of Nicaragua in 1991, where a 400% devaluation in 1991 led to a 360% increase in 
prices, making a basic basket of consumption goods unaffordable on an average salary.64  

Public  spending,  in  particular  on  social  protection,  is  regarded  as  playing  a  key  role  in 
promoting  equity  and  in  addressing  chronic  poverty.  Social  protection  measures  should 
therefore  be  given  a  greater  focus.65  Social  protection  policy  recommendations  may  be 
particularly important to achieve the MDGs in the current financial crisis and global economic 
downturn.  As  the  EU  Research  Paper  on  MDGs  states “When  the  global  economy  is  hit  by 
major  shocks,  the  poorest  need  to  be  protected  from  the  consequences,  whether  these  are 
fluctuations in income, high food and oil prices or the emerging effects of climate change”.66 

61 

62 

63 

64 

65 

66 

Cornia,  G.A.,  "Inequality,  growth  and  poverty  in  an  area  of  liberalization  and  globalization",  Oxford 
University Press, 2004. 
United Nations Development Programme, Human Development Report: International cooperation at a 
crossroads: Aid, trade and security in an unequal world", 2005. 
UNESCO  —  EFA  Global  Monitoring  Report  2009,  Overcoming  Inequality  —  Why  Governance 
Matters. 
S.  Fukuda-Parr,  “The  human  impact  of  financial  crisis  on  poor  and  disempowered  people  and 
countries”, UN General Assembly: Interactive Panel on the Global Financial Crisis, October 2008, p.3. 

“Millennium Development Goals at Midpoint: Where do we stand and where do we need to go?”, see 
footnote 1.  

Idem, see footnote 1. 

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26 

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Many  developing  countries  lack  robust  social  protection  systems.  The  figure  below 
illustrates the number of social protection programmes by type and country group on the basis 
of an unofficial survey of 144 developing countries.67 It shows that nineteen of 49 low-income 
countries  and  49  of  95  middle-income  countries  lack  established  social  safety  net 
programmes.  Moreover,  only  about  one-third  of  low-income  and  middle-income  countries 
benefit from some form of cash transfer programme. 

Developing countries with social protection programmes, out of 144 

Source:  R.  U.  Mendoza,  “Responding  to  the  food,  fuel  and  financial  crisis  of  2008:  a  case  for  pro-poor  stabilization  policy”,  10  January 
2009, http://www.voxeu.org/index.php?q=node/2774  

The distributional impacts of external shocks within a given country are highly skewed among 
groups  of  population,  depending  on  household  wealth,  demographics,  education  attainment 
and  location.68  Globally,  poor  and  disempowered  people/households  (mostly  female-
headed), that already struggle to meet their basic needs are the most vulnerable  as they  are 
generally  less  equipped  to  deal  with  economic  instability  and  tend  therefore  to  resort  to 
harmful  coping  strategies,  such  as  pulling  children  out  of  school,  eating  less  (or  less 
nutritious) food, selling key productive assets or contracting debts, with the risk of generating 
adverse  long-term  and  potentially  inter-generational  effects.69  But  not  all  poor  people  are 
affected  in  the  same  proportion  -  some  are  sometimes  protected  from  shocks  by  the  same 
factors that reduced them to poverty in the first place, such as geographic isolation and poor 
links with national and global markets. For instance, a study on the 1998 economic crisis in 
Indonesia showed that the urban poor suffered the most, while the ability of poor households 
living  in  rural  areas  to  produce  food  helped  them  cope  with  the  consequences  of  high 
inflation.  

Case-by-case analyses should therefore be conducted to design the right policy and financial 
responses to reduce the vulnerability of certain developing countries and their populations to 
external shocks. 

67 

68 

69 

Lustig, N., “Thought for Food: The Challenge of Coping with Soaring Food Prices”, Centre for Global 
Development Working Paper, 2008. 
M. Ravallion, “Bailing out the world’s poorest”, Policy Research Working Paper n°4763, World Bank, 
October 2008, p.3. 

R.  U.  Mendoza,  “Responding  to  the  food,  fuel  and  financial  crisis  of  2008:  a  case  for  pro-poor 
stabilization policy”, opcit. 

EN 

27 

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Rising  inequality  and  the  need  for  tested  remedies  to  tackle  chronic  poverty  in  developing 
countries up to and beyond 2015 is an ongoing challenge. However the  recent food,  energy 
and financial crisis may be exacerbating inequality. 

Thus, the redistributive potential of policies for health, education and social protection is 
of major significance. Improved access for the poor to public services and assets (especially 
in  the  health  and  education  sectors)  and  income  transfer  programmes  to  sustain  the  poorest 
families  are  essential  to  changing  the  structure  of  opportunities  and  are  key  to  reducing  the 
intergenerational transmission of poverty and inequality.  

4.2. 

Fragility 

Many of the world’s poorest countries can be described as “situations of fragility” lacking the 
capacity  or  will  to  fulfil  their  basic  functions,  meet  their  obligations  and  responsibilities 
regarding service delivery, management of resources, rule of law, equitable access to power, 
security and safety of the populace and protect and promote citizens’ rights and freedoms.70  

Recent  reports  and  analysis  show  that  the  MDGs’  achievement  gap  is  much  larger  in 
situations of fragility.71 Many fragile counties still need to meet the very basic conditions of 
stability  and  establish  a  minimum  institutional  framework  to  begin  reducing  poverty  and 
make headway on the MDGs. Uneven progress on the various MDG indicators across regions 
and countries is partly explained by the distinction between fragile and non-fragile countries.  

Fragility exacerbates poverty, has disproportionate impacts on vulnerable groups and often 
leads  to  reversals  in  progress  on  the  MDGs.  The  World  Bank  Global  Monitoring  Report 
(2007) reports that “27% of the extreme poor in developing countries live in fragile states”, 
and  poverty  reduction  in  these  countries  will  remain  out  of  reach  unless  “fragile  states 
become less vulnerable to adverse shocks, and they increase their capacity to absorb external 
funds and to mobilise internal resources”.  

Moreover, negative spill-over effects from these countries — the trafficking of people, drugs, 
criminality and terrorism and the impact on international trade, development and stability — 
can be enormous. 

70 

71 

EN 

COM(2007)643,  “Towards  an  EU  response  to  situations  of  fragility  —  engaging  in  difficult 
environments 
2007, 
http://ec.europa.eu/development/icenter/repository/COM_2007_0643_EN.pdf. 
UN MDGs Report 2008, WB Global Monitoring Report 2008, Bourguignon report 2008 (see footnote 
1). 

peace”,  October 

development, 

sustainable 

stability 

and 

for 

28 

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The  causality  between  state  fragility,  state  failure  and  vulnerability  is  complex  and  it  is  not 
easy  to  isolate  what  causes  what.72  Fragility  makes  it  difficult  to  implement  proper 
development  strategies  and  to  achieve  equitable  and  sustainable  economic  growth. 
Development work in fragile situations requires sustained engagement and new, imaginative 
use  of  combined  political,  technical,  financial  and  sometimes  military  resources,  engaging 
with governments but also civil society and non-state actors. 

Though  fragile  countries  have  very  dissimilar  conditions,  they  often  share  institutional 
instability,  which  undermines  the  predictability,  transparency  and  accountability  of  public 
decision-making  processes  and  the  provision  of  security  and  social  services  to  the 
population.73  

For all these reasons, the Commission issued a Communication on fragility in 200774. Follow 
up work is currently on-going in particular through the elaboration of pilot countries' action 
plans and through work in collaboration with the World Bank on budget support in situations 
of fragility. 

As demonstrated recently, the financial crises can also strike economies with relatively sound 
institutions and broadly successful policies but there is a growing consensus that the extent of 
the  effects  is  smaller  in  countries  with  better  institutions  and  policies.75  Under-developed 
financial markets and fragile economies tend to magnify the effects of real shocks. 

An analysis of the various factors of vulnerability indicates that fragile countries are more 
exposed  to  shocks  and  they  will  tend  to  suffer  from  cyclical  multi-dimensional  crises  more 
frequently.  

Countries  in  situations  of  fragility  often  present  structural  economic  features  that  heighten 
their  vulnerability.  These  include:  (1)  limited  or  entirely  lacking  banking  systems,  (2) 
dependency  on  private  financial  flows  with  a  high  share  of  foreign-owned  banks,  (3) 
significantly  limited  capacity  of  absorption,  (4)  long-standing  arrears  and  (5)  limited 
governmental capability to collect taxes to form a solid revenue base.76  

Strong institutions are the main determinants of a country’s resilience to exogenous shocks. 
Therefore  fragile  countries  have  a  reduced  capacity  to  react  to  shocks.  The  financial  crisis 
may swell the number of fragile situations. 

72 

73 

74 
75 

76 

Guillaumont,  P.,  "An  economic  vulnerability  Index:  Its  design  and  use  for  international  development 
policy", November 2008. 

Engberg-Pedersen et al., "Fragile situations: Current debates and central dilemmas", Danish Institute for 
International Studies, 2008. 

COM(2007) 643 final, 25/10/2007. 
Lessons  from  World  Bank  Research  on  Financial  Crises,  Development  Research  Group,  The  World 
Bank Development Research Group, November 2008. 

Di John, J., “Retaining legitimacy in fragile states — Rebuilding the revenue base for sustainable peace, 
May 2007. 

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5. 

THE POLICY RESPONSE 

5.1. 

Domestic policy responses in developing countries 

Domestic  policies  are  crucial  to  accelerate  progress  on  the  MDGs,  take  advantage  of 
opportunities offered by the global economy and use aid as effectively as possible. One set of 
policies  cannot  fit  all  countries,  and  country  specificity  in  terms  both  of  opportunities  and 
constraints should be recognised and taken on board.77  

Weak  governance  is  one  of  the  major  obstacles  to  achieving  the  Millennium  Development 
Goals.  Without  a  reinforced  commitment  to  fully  respecting  human  rights,  democratic 
principles, rule of  law and good governance,  efforts to assist  developing countries and their 
populations  affected  by  the  global  crisis  will  fall  short.  The  principles  of  sound  democratic 
governance  hold  that  the  state  be  responsive  and  accountable  and  should  facilitate  civil 
society participation in efforts to alleviate the impacts of the financial crisis. 

In  response  to  rising  food  prices,  some  countries  began  to  take  protective  policy  measures 
designed to reduce the impact of rising world food commodity prices on their own consumers. 

In the autumn of 2007, some exporting countries made policy changes designed to discourage 
exports  and  keep  domestic  production  within  the  country.  The  objective  was  to  increase 
domestic  food  supplies  and  restrain  increases  in  food  prices.78  Early  in  2008,  importing 
countries  also  began  to  take  protective  policy  measures  to  combat  rising  food  prices.  Their 
objective was to make high-cost imports available to consumers at lower prices.79 However, 
export restrictions are short term policy choices which lead to further increase of world prices, 
to the detriment of other countries, and also to the detriment of domestic producers since they 
insulate  them  from  world  market  signals  and  risk  suppressing  investment  in  the  agriculture 
sector. 

Some countries responded by building on their existing social protection systems, reflecting 
a growing consensus on their importance. However there is still great room for improvement 
here. In Latin America, for example, cash transfer programmes cover more than 25% of the 
poor population in only 8 of the 26 countries for which data is available.80 In other regions, 
programme  coverage  is  better  —  in  Asia,  the  proportion  of  the  poor  receiving  some  social 
protection  benefits  is  about  57%.  However,  benefits  there  are  also  much  more  limited.  An 
analysis  of  31  Asian  and  Pacific  countries  found  that  about  half  of  the  countries  had  social 
protection expenditure totalling a mere 20% of the poverty line income or expenditure.81 

77 

78 

79 

80 
81 

“Millennium Development Goals at Midpoint: Where do we stand and where do we need to go?”, see 
footnote 1. 
The  policies  adopted  include:  elimination  of  export  subsidies  (e.g.  China);  rise  in  export  taxes  (e.g. 
Argentina, Russia, Indonesia, Malaysia, Kazakhstan and China); restrictions in export quantitative (e.g. 
Ukraine,  India,  Vietnam  and  Argentina);  export  bans  for  some  products  (e.g.  India,  Serbia,  Ukraine, 
Egypt, Cambodia, Vietnam and Kazakhstan). 
The policies adopted include: reduced imported tariffs (e.g. India, Indonesia, Serbia, Korea, Mongolia 
and Thailand); subsidising consumers (e.g. Morocco and Venezuela). 
Lustig, N., see footnote 67. 
Wood,  J.,  “A  Social  Protection  Index  for  Asia”,  2009,  Paper  for  presentation  in  the  Association  for 
Public  Policy  Analysis  and  Management  Conference  on  Asian  Social  Protection  in  Comparative 
Perspective, 7-9 January, 2009, National University of Singapore, Singapore. 

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30 

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There is a growing recognition that most social protection programmes across the world lack 
a clear mechanism to deal with the “new poor”, pushed into poverty by the aggregate shocks. 
Policy  adjustments  are  often  made  in  an  ad-hoc  fashion  after  the  event,  indicating  that  the 
“vulnerable near-poor” do not receive adequate social protection.  

In response to the financial crisis, many developed and emerging countries have drafted fiscal 
stimulus packages to boost consumer and business demand.82  

The  link  between  the  global  economic  environment  and  the  level  and  effectiveness  of  aid, 
coupled with national policies, is crucial to achieving the MDGs. Therefore it is important to 
look  not  solely  at  new  national  policies  to  respond  to  crises  but  also  at  the  sustainability  of 
policies  addressing  the  MDGs.  In  some  countries  the  financial  crisis  may  curb  the  planned 
expansion of basic services, for example.  

5.2. 

Responses from the international community 

5.2.1.  Responses to the food crisis 

The response to the food crisis was swift and coordinated. Immediate action to help the most 
severely hit countries was taken both at global and regional levels. 

At global level, important measures were taken by the United Nations specialised agencies, 
Funds and Programmes and Bretton Woods institutions. 

As early as December 2007, the UN  Food and Agriculture Organisation (FAO)  launched 
the Initiative on Soaring  Food Prices to help  the most  severely affected countries.  Through 
this  initiative,  almost  $59  million  were  granted to  governments  to  distribute  seeds,  fertiliser 
and  other  farming  tools  and  supplies  to  smallholder  farmers.  The  FAO  appealed  for  $1.7 
billion  to  support  urgent  activities  under  its  Initiative  until  the  end  of  2009.  In  June  2008, 
world leaders held an emergency summit in Rome to address the food crisis and pledged $22 
billion  to  the  FAO.  But  most  of  what  was  pledged  has  not  been  forthcoming  and  the  FAO 
estimates  that  $30  billion  per  year  is  needed  to  invest  in  the  massive  task  of  boosting 
smallholder agriculture on a global scale. 

During the annual meeting dedicated to the world food crisis in April 2008, the UN Board of 
Executives established a High-Level Task Force (HLTF) on the Global Food Security Crisis 
under  the  leadership  of  the  UN  Secretary  General.  The  HLTF  produced  a  Comprehensive 
Framework  for  Action  (CFA)83  calling  for  sustained  growth  in  food  availability  through 
smallholder  production,  increased  social  protection  systems,  strengthened  food  security 
management systems, improved international food markets, and an international consensus on 
sustainable  biofuels.  Immediate  action  includes measures  to  help  vulnerable  people  now,  as 
both  consumers  and  producers  of  food;  while  longer-term  action  focuses  on  addressing 
underlying,  structural  issues  to  help  build  resilience  and  contribute  to  sustainable 
improvements in global food security and poverty reduction within the context of the MDGs. 

82 

83 

On average, developed and developing countries are implementing stimulus packages ranging from 1 to 
2%  of  GDP.  As  an  example,  China  has  announced  significant  stimulus  packages  of  US  $586  billion. 
See footnote 28. 
UN High-level Task Force on the Global Food Crisis, “Comprehensive Framework For Action”, New 
York, July 2008. 

EN 

31 

   EN 

 
                                                 
In  April  2008,  ministers  from  150  countries  met  in  Washington  D.C.  to  endorse  the World 
Bank’s New Deal on Global Food Policy. The New Deal embraces short, medium and long-
term responses, including safety nets such as school feeding, food for work, and conditional 
cash  transfers;  increased  agricultural  production;  a  better  understanding  of  the  impact  of 
biofuels; and action on trade to reduce distorting subsidies and trade barriers. Also as part of 
its  Global  Food  Response  Programme  (GFRP),  the  World  Bank  has  created  a  new  US$1.2 
billion rapid financing facility to speed assistance to the neediest countries. So far, the GFRP 
has  approved  and  begun  disbursing  US$851  million  in  27  countries.  An  additional  US$309 
million is being earmarked for programmes in nine countries. 

In July 2008, G8 leaders adopted a Statement on Global Food Security at the G8 Summit in 
Hokkaido  (Japan),  calling  notably  for  "a  fully  coordinated  response  and  a  comprehensive 
strategy" by the international community to tackle the issue of food crisis84.  

Building  on  these  various  international  initiatives,  the  international  community  launched  in 
January  2009  at  the  Madrid  High  Level  Meeting  on  "Food  Security  for  All  conference"  a 
consultation  process  leading  to  the  creation  of  a  Global  Partnership  for  Agriculture  and 
Food  Security  (GPAFS).  The  Global  Partnership  aims  at  maintaining  the  issue  of  food 
insecurity high on the political agenda, coordinating global food prices and harmonising aid 
delivery  at  country  level.  It  will  also  help  developing  countries  prepare  and  implement 
national plans to tackle hunger and support agricultural development. 

At  regional  level,  a  number  of  significant  initiatives  were  taken  to  urgently  tackle  the  food 
crisis,  including  by  the  Asian  Development  Bank,  the  African  Development  Bank  and  the 
European Commission. 

In April 2008, the Asian Development Bank (ADB) published a report outlining its strategic 
response to the food crisis.85 A month later, during its annual meeting, the ADB provided up 
to $500 million in  immediate  budgetary support to the hardest-hit countries in Asia and the 
Pacific.  In  the  medium  to  longer  term,  the  ADB  has  decided  to  increase  lending  for 
agriculture and rural development to more than $2 billion in 2009. 

On  24  July  24  2008,  the  African  Development  Bank  established  the  African  Food  Crisis 
Response  (AFCR)86,  a  framework  for  accelerated  support  to  its  Member  States  affected  by 
high food prices. Adding $1 billion to its agricultural portfolio, the objectives are threefold: to 
reduce  the  vulnerability  of  the  poor  to  high  and  unstable  food  prices;  to  support  growth 
through increased agricultural productivity, market participation and strengthened government 
policies for sustainable agricultural development; to increase capacity and lay the conditions 
for sustainable agricultural growth. 

84 

85 
86 

EN 

G8  Leaders  Statement 
http://www.mofa.go.jp/policy/economy/summit/2008/doc/doc080709_04_en.html.  
Asian Development Bank, “Soaring Food Prices — Response to the crisis”, Manilla, 2008. 

on  Global  Food  Security, 

2008,  Hokkaido 

July 

(Japan), 

Resolution B/BD/2008/14 Rev.1 –F/BD/2008/09/Rev. 1. 

32 

   EN 

 
                                                 
The European Commission, in its Communication of May 200887, called for a three-pronged 
response  including  short-term  development  action  focusing  on  humanitarian  responses, 
medium-term action concentrating on safety nets, and longer-term action to boost agricultural 
production. 

In  addition,  following  a  proposal  from  the  Commission88,  the  EU  has  created  a  € 1  billion 
Food Facility to help the poorest countries cope with high food prices.89 The Food Facility is 
providing support to farmers in the most affected developing countries through the supply of 
seed and fertilisers; help meet the basic food needs of the most vulnerable people; and support 
measures to ensure long-term agricultural production. This time-bound initiative (2008-2010) 
is  complementary  to  the  existing  Commission  policies  and  financing  instruments  to  support 
rural development, food security and agricultural production in developing countries. 

5.2.2.  Responses to the financial crisis 

A distinction can be made between immediate responses to help developing countries mitigate 
the  impact  of  the  financial  crisis  and  longer-term  responses  to  reform  the  economic  and 
financial architecture. Convinced that development is part of the global solution to the crisis, 
the EU is ready to contribute to the international effort to support developing countries. 

Immediate responses 

Most of the immediate responses to the crisis are based on the financial rescue of some of 
the hardest-hit emerging and developing countries. 

For instance, in response to the liquidity pressures on emerging markets, the IMF has created 
a  new  facility,  the  Short-Term  Liquidity  Facility  (SLF),  to  provide  major,  up-front,  quick-
disbursing and short-term financing to eligible emerging countries with a good track record of 
sound economic policies. 

The World Bank decided to increase its financial support up to US$100 billion over the next 
three years to help developing countries cope with falling revenue, investment and trade and 
to help them design supportive policies. In December 2008, the World Bank launched its new 
Financial Crisis Response Fast-Track Facility of US$2 billion to speed funds to the poorest 
countries, through an accelerated approval process for money from the US$42 billion IDA 15 
fund.  These  funds  are  to  be  used  in  priority  for  safety  nets,  infrastructure,  education  and 
health. Moreover, the World Bank recently urged developed countries to pledge 0.7% of their 
stimulus  packages  to  a  vulnerability  fund  to  assist  developing  countries  that  cannot  afford 
bailouts and deficits.90 

87 

88 

89 

90 

European  Commission,  “Tackling  the  challenge  of  rising  food  prices  —  Directions  for  EU  action”, 
COM(2008) 
2008, 
http://ec.europa.eu/commission_barroso/president/pdf/20080521_document_en.pdf  

Brussels, 

final, 

May 

321 

8 

European  Commission,  “Proposal  for  a  regulation  of  the  European  Parliament  and  of  the  Council 
establishing a facility for rapid response to soaring food prices in developing countries”, COM(2008) 
450/5. 

The Food facility Regulation, adopted on 16th December, published in the Official Journal n° L354 of 
31 December 2008 and therefore came into force on 1st January 2009. 

“Zoellick  Calls  for  ‘Vulnerability  Fund’  Ahead  of  Davos  Forum”,  World  Bank  Press  release,  30 
January 2009. 

EN 

33 

   EN 

 
                                                 
Longer-term responses 

Longer-term  responses  to  the  financial  crisis  consist  essentially  of  major  initiatives  to 
reform  the  international  financial  and  economic  architecture.  Such  initiatives  are  currently 
being discussed by international bodies, including  the G20  and  the  UN. Institutional reform 
was  also  the  subject  of  discussion  at  the  Informal  Meeting  of  Development  Ministers  in 
Prague on 29 January 2009. 

In  November  2008,  at  the  Washington  summit,  the  G20  leaders  made  a  number  of 
commitments  to  address  the  global  financial  and  economic  crisis  in  a  sustainable  and 
inclusive  way.  While  all  leaders  agreed  that  urgent  action  was  required,  the  final  summit 
declaration  underscored  that  “a  broader  policy  response  is  needed,  based  on  closer 
macroeconomic  cooperation,  to  restore  growth,  avoid  negative  spill-overs  and  support 
emerging market economies and developing countries”.91  

Following-up the Washington Summit, the second G20 summit in London in early April 2009 
expressed  its  determination  to  lay  the  foundation  for  a  fair  and  sustainable  world  economy 
and  took  a  number  of  additional  measures  to  strengthen  coordination  between  countries  in 
order  to  help  restore  global  economic  growth  and  reform  financial  markets.  Commitments 
were  taken  to  stabilise  financial  markets,  avoid  protectionism;  reform  the  global  financial 
markets; and put the global economy on track for sustainable growth as well as ensuring a fair 
and sustainable recovery for all, including the vulnerable in the poorest countries. 

At  the  UN  Conference  on  Financing  for  Development  in  Doha  in  November  2008, 
governments stressed the need to comply with existing aid commitments to poor nations, even 
amid the current economic slowdown, and called for a UN High-level conference on the world 
financial and economic crisis and its impact on development. 

In  November  2008,  the  President  of  the  UN  General  Assembly  set  up  a  High-level 
Taskforce  of  Experts,  chaired  by  Nobel  Prize  economist  Joseph  Stiglitz,  to  undertake  a 
comprehensive  review  of  the  global  financial  system,  including  the  major  international 
economic institutions, and to suggest how to reform the International Financial Institutions to 
enable  them  to  adapt  to  new  power  shifts  in  the  world  economy  and  respond  better  to  new 
challenges. One recent initiative is the proposal that Africa be given a new seat on the World 
Bank  Board.  This  reform  would  increase  Sub–Saharan  Africa’s  seats  to  3  (out  of  25)  and 
increase the voting rights of developing countries to 44%.  

6. 

LOOKING AHEAD TO 2015  

Much remains to be done to achieve the MDGs between now and 2015. Ongoing challenges 
to  the  MDGs  presented  by  growing  inequality  between  and  within  countries  and  the 
challenges  faced  by  conflict-affected  and  fragile  countries  have  been  exacerbated  by  the 
current global economic crisis.  

91 

“Declaration  of  the  Summit  on  Financial  Markets  and  the  World  Economy”,  Washington  D.C.,  15th 
November 2008. 

EN 

34 

   EN 

 
                                                 
A  rare  international  development  consensus  has  been  achieved  around  the  MDGs  using  a 
clear  framework  and  set  of  indicators  as  well  as  development  language  that  has  helped 
communication between donor and partner countries. The MDGs played an essential political 
role  in  mobilising  support  for  development  assistance  when  aid  disbursements  were  on  a 
downward  trend  in  many  key  OECD  countries  and  remain  a  key  focus  of  development 
policies.92 However as we approach 2015 and some countries come closer to achieving their 
country targets for the MDGs, the focus may shift to pockets of extreme poverty. Even if the 
MDGs are achieved in the next seven years, global poverty will only have been reduced by 
half  and  the  remaining  half  will  pose  fresh  challenges  to  the  international  development 
agenda. For low-growth poor countries and fragile countries, 2015 may only be the beginning 
not the end of the road.  

Hence it is important to begin thinking about the MDGs in the lead up to and beyond 2015. 
Two  issues  in  particular  merit  special  attention:  how  to  tackle  chronic  poverty  persisting  in 
2015  and  how  to  sustain  the  MDG  achievements.93  Connected  to  both  these  issues  is  the 
widely  recognised  problem  of  data  collection  and  analysis  that  is  currently  already  being 
explored  by  work  on  new  monitoring  frameworks,  targets  and  indicators.94  Strengthening 
national  statistical  capacity  is  important  in  order  to  make  possible  the  timely  provision  of 
reliable  statistics  which  are  essential  for  the  implementation  and  follow-up  of  the  MDGs 
Indicators framework. 

In order to start a process of inclusive debate at international level ahead of 2015, the scope 
and flexibility of the MDG framework can be carefully considered. Although there is general 
agreement that the MDG framework adds value to the international development agenda,95 its 
scope appears more questionable.96 In particular there is an ongoing debate on the “missing 
dimensions” of the MDG framework and on the global challenges to global goals and targets 

6.1. 

The missing dimensions of the MDG framework 

The  original  purpose  of  the  MDGs  paradigm  is  to  measure  and  encourage  sustainable  pro-
poor  development  progress  and  donor  support  for  domestic  efforts.97  However,  while  the 
structure of the MDGs has proved highly effective in improving public understanding of what 
sustainable pro-poor development might look like in practice, it seems less useful as a tool for 
deciding  what  investments  should  be  given  priority  to  achieve  this  development.  This  is 
mainly because the policy areas are not weighted in any way and the general nature of some 
goals  makes  it  hard  to  come  up  with  targets  and  indicators  that  adequately  capture  the  key 
aspects of the policy area. 

92 
93 
94 
95 

96 

97 

“MDGs at Midpoint: Where do we stand and where do we need to go?” see footnote 1. 

Idem, see footnote 1. 

Sabina Alkire “The missing dimension of Poverty data”, Oxford Development Studies December 2007. 

See  footnote  1  and  Manning,  R.,  “Using  indicators  to  encourage  development:  lessons  from  the 
Millennium Development Goals”, January 2009. 

See footnote 102 and Chronic Poverty Research Centre, “A proposal to introduce social protection into 
the MDGs”. 

Manning, R., “Using indicators to encourage development: lessons from the Millennium Development 
Goals”, January 2009. 

EN 

35 

   EN 

 
                                                 
The  selection  of  the  goals  has  come  under  attack  for  neglecting  important  issues.  Many 
advocates have criticised the absence of a goal and targets on rights, empowerment and good 
governance,  which  can  be  considered  as  some  of  the  key  issues  to  lift  the  poor  out  of 
poverty.98  Similar  criticisms  focus  on  the  absence  of  other  development  challenges,  like 
security  issues,  citizen  participation,  food  security,  socio-economic  inequality  and  social 
exclusion.  

A number of proposals to raise awareness of these other aspects have already been made. The 
Chronic Poverty Report 2008-09, for example, identifies five chronic poverty traps that must 
be  addressed  by  the  international  community99.  The  solution  proposed  is  centred  on  an 
increased level of social protection and public services. These are considered crucial to fully 
achieving  the  existing  MDGs  and  to  ensure  their  sustainability  after  2015.  Stemming  from 
this  idea,  the  Chronic  Poverty  Research  Centre  published  a  proposal  to  enhance  the  MDGs 
with  a  more  explicit  target  (under  MDG  1)  related  to  social  protection.  Social  protection  is 
seen  as  critical  to  protect  the  poor  from  sudden  shocks,  such  as  food  price  rises,  and  in  the 
longer  term  promotes  investment  in  healthcare  and  education,  which  increase  prospects  and 
life chances. Other examples include a series of papers from the Oxford Poverty and Human 
Development  Initiative  (OPHI)  and  from  the  University  of  Bath,  which  suggest  a  defining 
poverty in a way that embraces further dimensions.100 

However,  broadening  the  scope  of  the  current  MDGs,  by  adding  more  goals  or  more 
monitoring indicators may be counter-productive.101 Although the situation needs adjusting, it 
is  unclear  whether  new  targets  would  be  the  best  answer.  The  risk  of  increasing  the 
complexity of an already complicated international situation may be too high. Any addition to 
the  MDG  framework  should  be  cautiously  balanced  against  the  risk  of  losing  partner 
countries'  commitment  to  let  the  MDGs  feature  prominently  in  their  national  development 
agendas. 

Other  issues  relate  to  developing  countries'  perceptions  of  who  ‘owns’  the  MDGs  and  how 
they can be translated into national poverty reduction priorities. National priorities are often 
corralled  into  MDG  compliance,  and  the  goals  are  often  seen  at  country  level  as  developed 
country constructs. Listening to the voices of developing countries may entail a stronger focus 
on  clear  local  indicators  that  reflect  the  on-the-ground  situation  bringing  into  question  the 
sweeping global targets. Increasing developing country ‘ownership’ of the MDGs is a major 
factor in accelerating progress up to and beyond 2015.  

98 
99 

100 
101 

EN 

Idem. 

The  traps  are:  Social  discrimination,  Insecurity  and  poor  health,  Poor  work  opportunities,  Spatial 
disadvantage  and  Limited  citizenship  (from  Chronic  Poverty  Research  Centre,  "The  Chronic  Poverty 
Report 2008-09 — Escaping poverty traps", July 2008). 
See footnote 97. 

See footnote 1 and 97. 

36 

   EN 

 
                                                 
6.2. 

Global challenges to global goals and targets 

A second relevant issue concerns global public goods. These goods are public (i.e. non-rivalry 
in consumption and non-excludability of benefits), extend to more than one set of countries or 
more  than  one  geographic  region  and  do  not  discriminate  against  any  population  groups  or 
generations (present and future).102 By their very nature, public goods are known to have large 
externalities  and  sweeping  benefits.  Examples  are  biodiversity,  water  and  climate  patterns. 
Global public goods are considered preconditions for the development of countries and their 
populations.  Protecting  and  managing  sustainably  the  natural  resource  base  is  key  to 
successful poverty reduction strategies. 

The issue here is should more focus be placed on key global public goods, such as minimising 
the  extent  of  climate  change  or  providing  greater  security  in  the  international  development 
agenda? This is linked to the more general question of whether any new goals should be set at 
developing country level or more explicitly at global level.103 The aspects of development are 
gradually  changing  and,  as  barriers  between  countries  continue  to  lower,  the  influence  of 
global factors seems likely to have a greater weight in determining the progress of the poor. 
This suggests that the approach of considering a set of indicators linked to absolute poverty 
needs  also  to  be  tested  against  a  more  “one-world”  approach.  The  aim  here  would  be  to 
encourage policy makers in every country to give greater weight to tackling systemic global 
issues,  of  which  absolute  poverty  would  be  only  one.  In  this  case,  the  two  main  concerns 
would be whether such a macro framework would be negotiable and whether it might lead to 
poverty being under-weighted compared to other global issues.104  

Given the above, the current level of uncertainty on these issues, and the EU’s prominent role 
internationally and in the development process of partner countries, the EU might take a lead 
in launching an international debate in the next couple of years with the aim of exploring the 
various options for the development narrative after 2015.  

7. 

CONCLUSIONS AND KEY POLICY IMPLICATIONS 

The current financial turmoil and its repercussions on the world economy, combined with the 
effects  of  previous  food  and  energy  crises,  have  revealed  how  much  influence  (whether 
positive  or  negative)  the  global  economic  context  can  have  on  progress  on  the  Millennium 
Development Goals (MDGs) and their sustainability.  

A clear conclusion is that developing countries are vulnerable to a host of fall-out effects from 
the past and current crises, either directly (in the food crisis) or indirectly (as a result of the 
financial  and  fuel  crises).  The  culmination  of  these  negative  effects  seems  to  exacerbate 
inequality  and  jeopardise  progress  made  on  the  MDGs,  pushing  the  2015  goalposts  even 
further.  

102 

103 
104 

EN 

I.  Kaul,  I.  Grunberg,  and  A.  Stern,  “Global  Public  Goods:  International  Cooperation  in  the  21st 
Century”, Oxford University Press, 1999. 
See footnote 101. 

Idem. 

37 

   EN 

 
 
                                                 
The  international  development  community  has  an  important  role  to  play  in  ensuring  that 
commitments to ODA are fulfilled, that aid is given in a more coherent and effective manner 
and that there is true coherence with global trade and financial policies to ensure that the most 
vulnerable countries and their most vulnerable populations are not disproportionately affected. 
The EU is playing an important role on all three fronts. The gains made during 2008 in terms 
of global action on development must be maintained if the MDGs are to be achieved. Given 
the depth and intensity of the current crisis the period 2009-2015 will be one of even greater 
challenge for achieving progress on the MDGs. 

New issues are arising in discussions and action since the Millennium Summit in 2000. It is 
clear that the MDGs have been useful to garner support for development assistance, but they 
have  their  limitations.  Debate  on  the  usefulness,  extension  or  differentiation  of  the  MDGs 
seems to be expanding to encompass the global dimensions of poverty and the need for more 
national involvement and ownership. It will be important to ensure leading up to 2015 there is 
an  internationally  owned  framework  to  take  action  and  development  policy  forward  taking 
into  account  these  issues  and  maintaining  the  focus  on  helping  the  most  vulnerable  lift 
themselves out of or avoid debilitating poverty. 

The  global  dimension  of  new  challenges  that  overlap  strongly  with  development,  such  as 
global  food  security,  access  to  energy  or  climate  change,  must  feature  prominently  in  the 
development agenda. Although the MDGs are likely to be important for the longer-term task 
of  eradicating  poverty  beyond  2015,  development  policy  is  being  challenged  by  a  host  of 
aspects brought sharply into focus by the financial crisis.  

EN 

38 

   EN 

 
ANNEX 1  

State of play of progress on achieving the MDGs by 2015105 

The  2005  World  Summit  assessing  progress  on  the  MDGs  reported  significant  gains.  From 
2000 to 2005 more than 120 million people have escaped poverty. About 2 million lives have 
been  saved  by  reducing  child  mortality,  30  million  additional  families  now  have  access  to 
water,  30  million  additional  children  now  go  to  school,  and  boys  and  girls  attend  school  in 
equal numbers in many countries where the gap used to be very wide. Recent UN assessments 
indicate  the  world  seems  on  track  to  halve  global  poverty  by  2015,  which  is  the  first 
development  goal.  However,  global  progress  has  been  highly  uneven  and  mainly  driven  by 
the  rapid  growth  and  improvements  in  the  giant  countries  of  Asia,  including  China,  India, 
Indonesia  and  Vietnam.  Other  regions  in  the  world  have  performed  poorly,  especially  Sub-
Saharan Africa, which still lags behind on income and non-income MDGs. Gender parity in 
primary  and  secondary  school  is  the  only  goal  -  other  than  poverty  reduction  -  for  which 
developing countries seem to be on-track overall. The world  is off-track on  the  other goals, 
most of all in the poorest regions in South Asia and Sub-Saharan Africa. The most off-track 
MDGs are child mortality and maternal health. 

GOAL 1 

Eradicate 
extreme 
poverty 
and hunger 

Target 1.A:  

Halve, between 1990 and 2015, 
the proportion of people whose 
income is less than one dollar a 
day 

In 1990 1.8 billion people lived in extreme poverty, equal 
to 41.7% of the world population. In 2005 the figure fell to 
1.4 billion, equal to 25.7% of the world population. These 
estimates  take  into  consideration  the  new  threshold  of 
$1.25  per  day  (compared  to  the  previous  $1)  recently 
established  by  the  World  Bank.  The  recent  change  to  the 
threshold  has  had  the  obvious  consequence  of  increasing 
the  absolute  number  of  people  living  below  the  poverty 
line, but it has had only a minor impact on the evaluation 
of trends in poverty and thus on achieving the MDGs.  

In 1990 28.7% of the world population lived on less than 
$1  a  day.  In  2005  the  percentage  had  fallen  to  18.1%. 
More  than  120  million  people  came  out  of  poverty 
between 2000 and 2005, i.e. a 2.4% annual drop.  

The  East  Asia  and  Pacific  region  has  made  the  most 
dramatic progress in reducing the number of people living 
on less than $1 per day—from 29.8% in 1990 to 9.1% in 
2005. China led this decrease, moving from 33% to 9.9%.  

Sub-Saharan  Africa  is  the  worst-performing  region:  the 
poverty  rate  rose  from  46.7%  in  1990  to  49.7%  in  2000, 
dipping to 41.1% in 2005 and the absolute number of poor 
people increased by a third. However countries within the 
group  fare  differently:  poverty  fell  by  an  annual  rate  of 
4.6% in Ghana between 1999 and 2006 but increased at an 

105 

The Millennium Development Goals and targets come from the Millennium Declaration, signed by 189 
countries in September 2000. In 2007, the MDG monitoring framework was revised to include four new 
targets  agreed  at  the  2005  World  Summit.  The  four  new  targets  are:  Target  1.B  Achieve  full  and 
productive  employment  and  decent  work  for  all,  including  women  and  young  people;  Target  5.B 
Achieve,  by  2015,  universal  access  to  reproductive  health;  Target  6.B  Achieve,  by  2010,  universal 
access  to  treatment  for  HIV/AIDS  for  all  those  who  need  it;  Target  7.B  Reduce  biodiversity  loss, 
achieving,  by  2010,  a  significant  reduction  in  the  rate  of  loss.  Moreover,  the  language  has  been 
modified in some cases for technical reasons, so that the data can be more clearly reflected. 

EN 

39 

   EN 

 
 
 
 
 
                                                 
annual rate of 3.8% in Uganda between 2000 and 2003.  

Target 1.B:  

Achieve  full  and  productive 
employment  and  decent  work 
for  all,  including  women  and 
young people 

Between  55%  and  75%  of  the  working  age  population  is 
employed in most regions.  

The two exceptions are Northern Africa and Western Asia, 
mainly  because  the  employment:  population  ratio  for 
women is less than 25% (more than 40 percentage points 
below the ratio for men).  

In  Eastern  Asia  the  ratio  is  78%  for  men  and  65%  for 
women,  but  there  is  a  striking  difference  in  employment: 
population  ratios  of  young  people  and  the  rest  of  the 
population.  Although 
the  high  youth 
unemployment  of  other  regions,  Eastern  Asia’s  young 
people  are  working  rather  than  investing  in  education  for 
the future. 

it  escapes 

A  major  issue  is  that  half  the  world’s  workforce  is  in 
unstable and insecure jobs: in developing regions 64% of 
working  women  and  57%  of  working  men  are  own-
account  and  contributing  family  workers.  Here  again  the 
picture across countries is highly uneven: Zambia, Bolivia 
and  Paraguay  have  experienced  an  increase  in  vulnerable 
workers  of  over  1%  per  year  in  the  period  1990-2005, 
while  Vietnam,  Thailand  and  Namibia  have  recorded  a 
decrease of more than 1% per year over the same period. 

Moreover,  jobs  in  most  the  developing  countries  provide 
little  relief  from  poverty  because  the  pay  is  too  low.  In 
sub-Saharan  Africa,  over  half  the  workers  are  “working 
poor”, meaning that, although they have a job, they live in 
a household where each member earns less than $1 a day. 
The global percentage of “working poor” (calculated over 
the  total  number  of  workers)  has  however  fallen  from 
30.6% in 1997 to 20.4% in 2007.  

Full, secure and productive employment seems to remain a 
distant target. 

Fewer than 40% of the 77 countries with adequate data to 
monitor trends are on track to hit this MDG target.  

In  particular  progress  on  child  malnutrition  seem  to  be 
very  slow  in  Southern  Asia  and  Sub-Saharan  Africa, 
where  the  percentage  of  underweight  children  under  the 
age  of  5  in  2006  was  still  46%  and  28%  respectively.  A 
high-yield,  drought-resistant  and  protein-rich  variety  of 
rice (NERICA) contributed to food security and improved 
nutrition in several countries in sub-Saharan Africa. But it 
didn’t  suffice:  the  total  prevalence  of  undernourishment 
only fell from 20% in 1992 to 16% in 2004. 

Moreover  the  rise  in  food  prices  between  2006  and  2008 
put  great  pressure  on  many  developing  economies  and 
threatened to unravel hard-won progress in fighting hunger 
and  malnutrition.  Almost  105  million  people  in  the  least 
developed  countries  have  been  added  to  the  world’s poor 
since 2005 because of rising food prices. 

Target 1.C:  

Halve, between 1990 and 2015, 
the  proportion  of  people  who 
suffer from hunger 

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Goal 2 

Target 2.A: 

Ensure that, by 2015, children 
everywhere,  boys  and  girls 
alike, will be able to complete a 
full 
primary 
schooling 

course 

of 

Achieve 
universal 
primary 
education 

Goal 3 

Promote 
gender 

equality and 

empower 

women 

Target 3.A:  

Eliminate  gender  disparity  in 
secondary 
and 
primary 
education,  preferably  by  2005, 
and in all levels of education no 
later than 2015 

Prices  are  now  falling  but  are  predicted  to  remain  higher 
than in the past, with the crisis having long-lasting effects. 

Progress  on  this  goal has  been  widespread.  Overall  the 
total  net  enrolment  ratio 
in 
developing  countries  rose  from  80%  in  1991  to  88%  in 
2006.  In  almost  all  regions  it  now  exceeds  90%,  with 
many  countries  close  to  achieving  universal  primary 
enrolment.  

in  primary  education 

Sub-Saharan  Africa  and  South  Asia  are  the  two  regions 
lagging  behind,  with  a  net  enrolment  ratio  in  primary 
school  of  71%  and  88%  respectively.  More  than  70m 
primary school-age children are still not enrolled. But even 
in  these  regions,  some  countries  have  made  substantial 
progress. Malawi,  Uganda,  Tanzania  and  Kenya  have 
abolished  school  fees,  enabling  more  than  one  million 
extra children in each country to enrol in primary school.  

However  the  good  progress  in  access  masks  problems  in 
completion  of  primary  school.  In  half  the  countries  with 
available  data  for  2004,  less  than  87%  of  pupils  who 
started  grade  one  reached  the  last  grade.  According  to 
2006 data, attendance is higher in urban than in rural areas, 
but  being  poor  is  the  key  determinant:  surveys  in  sub-
Saharan  countries  indicate  that  children  from  the  poorest 
households  are  least  likely  to  attend  school,  regardless  of 
whether they live in urban or rural areas. 

The  world  seems  till  a  long  way  off  achieving  gender 
equality.  Progress  in  equal  access  to  remunerative  labour 
markets  has  been  modest,  except  in  low  performing 
regions. This is compounded by lower welfare for women 
than  for  men.  In  many  developing  regions,  women  still 
lack property rights and access to credit.  

Overall,  women  occupy  almost  40%  of  all  paid  jobs 
outside agriculture, compared to 35% in 1990. But almost 
two  thirds  of  women  in  the  developing  world  work  in 
vulnerable  jobs  are  self-employed  or  unpaid  family 
workers.  In  Southern  Asia  and  sub-Saharan  Africa,  this 
accounts for more than 80% of all jobs for women. 

Women  are  slowly  gaining  ground  in  political  decision-
making,  but  progress  is  erratic  and  marked  by  huge 
regional  differences. 
the  global 
proportion of parliamentary seats held by women reached 
a high of nearly 18%. Women today occupy at least 30% 
of parliamentary seats in 20 countries, but none in Asia. 

In  January  2008, 

All  regions  except  Sub-Saharan  Africa  seem  broadly  on 
track  to  meet  the  gender  parity  target  by  2015,  even  if 
some  countries  in  the  regions  still  lag  behind. In  2005 59 
countries  out  of  the  181  with  data  available  had  already 
achieved  gender  parity  in  both  primary  and  secondary 
education.  

Globally,  for  every  100  boys,  95  girls  were  enrolled  in 
primary  school  in  2005.  South  Asia  has  made  the  most 

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progress,  up  from  77  to  93  girls  every  100  boys  between 
1991 and 2006. Latin America & the Caribbean and East 
Asia  and  the  Pacific  have  reached  gender  parity  in 
secondary education and are close in primary schooling. 

In  rural  areas  and  in  poorest  regions  the  disparity  in 
girl:boy  schooling 
is  greater  (the  difference  being 
respectively 4 and 3 percentage points, compared to just 2 
in urban areas and 1 in the richest regions). 

Goal 4 

Target 4.A:  

Reduce child 
mortality 

Reduce by two-thirds, between 
1990  and  2015,  the  under-five 
mortality rate 

The  under-five  mortality  rate  in  developing  countries 
slowly  improved  from  103  to  80  deaths  per  1000  live 
births  between  1990  and  2006,  with  37%  of  deaths 
occurring  in  the  first  month  of  life.  Therefore  the  goal  is 
still some way off. 

With  a  child  mortality  rate  of  157,  Sub-Saharan  Africa 
accounts for about half of the deaths of children under five 
in  the  developing  world.  The  HIV/AIDS  epidemic  and 
civil  conflicts  have  hampered  the  region’s  progress  in 
reducing child mortality. 

The developing regions closest to achieving the target are 
Northern Africa (down from 82 to 35), South-Eastern Asia 
(from 77 to 35) and Latin America & the Caribbean (from 
55 to 27). But even in these regions over half the countries 
are not on track.  

Goal 5 

Improve 
maternal 
health 

Target 5.A:  

Reduce  by 
three  quarters, 
between  1990  and  2015,  the 
maternal mortality ratio 

Of all the MDGs the goal on maternal mortality has seen 
the  least  progress.  Maternal  mortality  decreased  by  less 
than 1% a year between 1990 and 2005, from 480 to 450 
deaths per 100 000 live births. This is way below the 5.5% 
annual improvement needed to reach the target.  

Pregnancy  remains  the  main  cause  of  death  of  girls  aged 
15-19  in  developing  countries.  In  2005  alone,  more  than 
500 000 women died during pregnancy, childbirth or in the 
six weeks after delivery. 99% of these deaths occurred in 
developing regions, with sub-Saharan Africa and Southern 
Asia  accounting  for  86%  of  them.  In  these  regions 
maternal  mortality  rates  have  barely  changed  since  1990. 
In  particular,  in  sub-Saharan  Africa,  a  woman’s  risk  of 
dying  from  treatable  or  preventable  complications  during 
pregnancy and childbirth over the course of her lifetime is 
1 in 22, compared to 1 in 7 300 in developed regions. 

In  Malawi  and  Zimbabwe,  maternal  deaths  have  even 
increased  in  the  past  years  as  a  consequence  of  HIV, 
conflict and deteriorating health systems.  

Target 5.B:  

Achieve,  by  2015,  universal 
access to reproductive health 

The proportion of deliveries attended by skilled healthcare 
personnel increased from 47% in 1990 to 61% in 2006. In 
the  same  period  the  proportion  of  women  (15-49  years 
old)  attended  by  skilled  health  personnel  at  least  once 
during pregnancy rose from 54% to 74%.  

In  almost  all  developing  regions,  adolescent  fertility  fell 
between  1990  and  2000  (from  67  to  55  births  by  women 
15-19  years  per  1000  women),  then  largely  stagnated  or 
increased marginally between 2000 and 2005 (from 55 to 

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53 on average). 

Adolescent fertility remains especially high in sub-Saharan 
Africa (119 per 1000 women), where fertility remains high 
among  all  women  of  childbearing  age.  Total  fertility  has 
declined  substantially  over  the  past  two  decades  in  many 
countries in Latin America and the Caribbean and South-
Eastern Asia, yet adolescent fertility has fallen slowly and 
remains  over  60  births  per  1 000  women  in  these  two 
regions.  

The gap between women’s stated desires to delay or avoid 
having children and their actual use of contraception also 
declined  in  most  countries  between  1995  and  2005. 
However,  in  sub-Saharan  Africa,  24%  of  married  women 
still have an unmet need for family planning, and the rise 
in contraceptive use has, on average, barely kept pace with 
the growing desire to delay or limit births.  

In  all  regions,  this  unmet  need  is  highest  in  the  poorest 
households. This is most pronounced in Latin America and 
the Caribbean, where 27% of the poorest households have 
an  unmet  need  for  family  planning  compared  to  12%  of 
the  wealthiest  households.  In  sub-Saharan  Africa,  unmet 
need  is  high  —  over  20%  –  even  among  the  wealthiest 
households. 

Improvements in prevention programmes are reducing the 
number  of  people  newly  infected  with  HIV  down  to  2.7 
million in 2007 from 3 million in 2001, and the expansion 
of  antiretroviral  treatment  is  reducing  the  number  of 
people who die from AIDS (2 million in 2007 down from 
2.2  million  in  2005).  However,  due  to  unmet  treatment 
needs,  AIDS  remains  among  the  leading  causes  of  death 
globally and the primary cause of death in Africa.  

With  newly  infected  people  surviving  longer,  the  number 
of  people  living  with  HIV/AIDS  has  risen  from  29.5 
million  in  2001  to  33  million  in  2007,  most  in  Sub-
Saharan Africa.  

Condom use and knowledge about HIV can help decrease 
the number of individuals who become infected with HIV. 
Between 1999 and 2004 condom use for females’ partners 
increased  in  all  Sub-Saharan  African  countries  with 
available  data,  with  the  only  exception  of  Zimbabwe, 
where usage is estimated to have fallen from 11% to 10%. 

The  proportion  of  population  living  with  HIV  needing 
treatment and receiving antiretroviral therapy rose between 
2006 and 2007 from 22% to 31%, but it remains low.  

In almost every region, women represent a growing share 
of people living with HIV, and 59% of all people affected 
in sub-Saharan Africa.  

The  HIV  prevalence  rate  for  15-49  year olds  was  highest 
in  Sub-Saharan  Africa  (5.7%)  in  2007  and  much  higher 
than the average for all developing countries (0.9%).  

Goal 6 

Target 6.A:  

Combat 
HIV/AIDS, 
malaria and 
other diseases 

Have halted by 2015 and begun 
to 
spread  of 
the 
reverse 
HIV/AIDS 

Target 6.B:  

Achieve,  by  2010,  universal 
access 
for 
HIV/AIDS  for  all  those  who 
need it 

treatment 

to 

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Target 6.C:  

Have halted by 2015 and begun 
incidence  of 
to  reverse 
the 
malaria 
other  major 
diseases 

and 

Work  in  Cambodia  has  highlighted  the  importance  of 
community-based  action  in  combating  HIV/AIDS.  Since 
September 2003, the country has used a UNDP-developed 
package of participatory techniques known as Community 
Capacity  Enhancement  (CCE)  and,  although  the  country 
has  one  of  the  highest  prevalence  rates  in  Asia  and  the 
Pacific, it has now reversed the spread of the infection. 

According  to  UNDP  data,  malaria  takes  a  terrible  toll  in 
sub-Saharan Africa, which accounts for 90% of all malaria 
deaths.  There  malaria  accounts  for  25%  to  35%  of  all 
outpatient  visits,  20%  to  45%  of  hospital  admissions  and 
15% to 35% of hospital deaths. Joint efforts of the NMCP, 
UNDP  and  other  partners  achieved  a  notable  decrease  in 
malaria  incidence  rates  by  30%  in  11  Northern  states, 
cutting morbidity by 55% and mortality by 52%.  

The number of insecticide-treated mosquito nets produced 
worldwide jumped from 30  million in 2004 to 95 million 
in 2007. All sub-Saharan African countries for which there 
are  trend  data  showed  increases  in  insecticide-treated  net 
use  among  children  under  five.  16  of  these  20  countries 
have at least tripled coverage since around 2000. However, 
despite tremendous progress, the use of insecticide-treated 
mosquito nets still falls short of global targets.  

There  has  been  less  progress  in  treating  malaria  than  in 
preventing  it.  In  a  subset  of  22  sub-Saharan  African 
countries,  the  proportion  of  children  with  a  fever  who 
received  anti-malarial  medicine  dropped  from  41%  in 
2000  to  34%  in  2005.  Similarly,  treatment  with  the 
Artemisinin-based combination therapy (ACT) was 6% or 
less between 2004 and 2006 in a subset of 14 countries. 

Evidence suggests that large-scale expansion of prevention 
programmes  and  improved  access  to  more  effective  anti-
malarial  drugs  can  substantially  reduce  malaria  cases  and 
deaths.  In  South  Africa documented  cases and deaths  fell 
by  80%  between  2000  and  2006  after  introducing  ACT 
and  improving  mosquito  control  (including  spraying  with 
DDT). In Eritrea, more than a million mosquito nets were 
distributed  between  2000-2006  and  as  a  result  recorded 
malaria cases and deaths plummeted by more than 70%. 

Progress  on  tuberculosis  targets  is  mixed.  In  developing 
regions, the number of new tuberculosis cases per 100 000 
population  (incidence  rate)  peaked  in  2004,  then  fell  by 
0.7% between 2005 and 2006. If these trends are sustained 
globally,  the  incidence  of  tuberculosis  should  be  halted 
and  reversed  well  before  2015.  Moreover  the  prevalence 
rate  for  tuberculosis  (the  number  of  existing  cases  per 
100 000 people) and the death rate are falling even faster. 

Success  in  eradicating  tuberculosis  depends  upon  early 
detection  of  new  cases  and  effective  treatment.  Between 
2005-2006 progress in detection slowed: the detection rate 
increased  only  marginally  to  61%,  short  of  the  65% 
benchmark  for  2006  in  the  ‘Stop  TB  Partnership’  Global 
Plan and the ultimate target of 70%. 

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Goal 7 

Target 7.A: 

Ensure 
environmental 
sustainability 

the  principles  of 
Integrate 
into 
sustainable  development 
country 
and 
programmes  and  reverse  the 
loss of environmental resources 

policies 

Target 7.B:  

biodiversity 

loss, 
Reduce 
achieving, 
a 
by 
significant reduction in the rate 
of loss 

2010, 

Africa, China and India collectively account for more than 
two  thirds  of  undetected  tuberculosis  cases.  Progress  in 
improving the detection rate in China and India stalled in 
2006.  The  detection  rate  in  Africa  —  46%  in  2006  —  is 
furthest from the target. 

Carbon dioxide emissions reached 28 billion metric tons in 
2005  and  continued 
increased 
atmospheric  concentrations  of  CO2.  Globally,  emissions 
increased by 30% from 1990 to 2005, rising annually from 
2000 to 2005 faster than in the previous decade.  

to  rise,  resulting 

in 

From  1990  to  2005,  changes  in  emissions  ranged  from  a 
38%  decline  in  countries  of  the  Commonwealth  of 
Independent  States  to  an  82%  increase  in  South-Eastern 
Asia.  Per  capita  emissions  remain  the  highest  in  the 
developed regions, about 12 metric tons of CO2 per person 
per year, compared with about 3 metric tons in developing 
regions and 0.8 metric tons in sub-Saharan Africa. 

capital  depreciation,  natural 

According to the World Bank, Europe & Central Asia, the 
Middle East & North Africa, and Sub-Saharan Africa have 
all  exhibited  a  downward  trend  in  adjusted  net  savings 
since  1995  and  had  negative  adjusted  net  saving  rates  in 
2005. Adjusted net savings measures the saving rate in an 
economy  after  adjustments  are  made  for  educational 
expenditure, 
resource 
depletion,  and  carbon  dioxide  and  particulate  emissions 
damage. A negative saving rate indicates that an economy 
is  on  an  unsustainable  future  path  of  economic  growth. 
Latin  America  and  the  Caribbean  had  a  positive  2005 
adjusted net saving rate but also had declining adjusted net 
saving levels. In recent years, only the Asian regions seem 
to have both an upward trend in adjusted net savings and a 
positive saving rate. 

In  response  to  the  loss  of  global  biodiversity,  the 
international  community  has  encouraged  land  and  marine 
protection.  As  a  result,  about  21  million  km2  of  land  and 
sea (out to 12 nautical miles) were protected by 2007. 

Deforestation  continues  to  pose  serious  challenges,  even 
though the net loss of forest area is slowing down. Thanks 
to  increased  forest  planting,  landscape  restoration  and  to 
the natural expansion of forests, deforestation of about 13 
million  hectares  per  year  resulted  in  an  estimated  net 
decline of 7.3 million hectares of forest area per year over 
the  period  2000-2005,  compared  to  8.9  million  hectares 
annually in the previous decade. The percentage of forest 
designated  to  protect  soil  and  water  resources  has  also 
increased from 8% in 1990 to 9% in 2005. 

The number of species threatened with extinction is rising 
rapidly  and  improved  fisheries  management  is  needed  to 
reduce the depletion of fish stocks. 

Target 7.C: 

Halve,  by  2015,  the  proportion 

Although  there  is  not  yet  a  global  water  shortage,  about 
2.8  billion  people,  representing  more  than  40%  of  the 
world’s population, live in river basins with some form of 

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of  people  without  sustainable 
access  to  safe  drinking  water 
and basic sanitation 

Target 7.D:  

By  2020,  to  have  achieved  a 
significant  improvement  in  the 
lives  of  at  least  100  million 
slum dwellers 

Goal 8 

Target 8.A:  

a 

Develop 
global 
partnership 
for 
development 

trading 

Develop  further  an  open,  rule 
non-
based, 
predictable, 
discriminatory 
and 
financial  system.  Includes  a 
good 
commitment 
governance,  development  and 
poverty 
reduction  —  both 
nationally and internationally 

to 

Target 8.B: 

water scarcity. More than 1.2 billion live in conditions of 
physical  water  scarcity,  which  occurs  when  more  than 
75% of the river flows are withdrawn. Another 1.6 billion 
people  live  in  areas  of  economic  water  scarcity,  where 
human,  institutional  and  financial  capital  limit  access  to 
water,  even  though  water  in  nature  is  available  locally  to 
meet human demands. 

According to the UN, currently, around one billion people 
lack  access  to  safe  drinking  water.  However  since  1990, 
1.6 billion people have gained access to safe water and at 
this rate, the world is expected to meet the drinking water 
target  (i.e.  89%  of  the  population  of  developing  regions 
use improved sources of drinking water by 2015). Progress 
has  been  most  pronounced  in  Eastern  Asia,  where  over 
400  million  people  have  gained  access  to  improved 
drinking  water  sources  and  coverage  has  grown  by  20% 
since 1990. 

There are huge disparities among and within regions. For 
example,  in  North  Africa  92%  of  people  use  improved 
sources of drinking water, while in sub-Saharan Africa the 
proportion  is  only  58%.  Likewise,  in  2006,  more  than  8 
out  10  people  without  access  to  improved  drinking  water 
sources lived in rural areas. 

Almost  a  quarter  of  the  developing  world’s  population 
have  no  form  of  sanitation.  Far  less  progress  has  been 
made  on  this  issue.  For  example,  the  percentage  of  the 
population in Sub-Saharan Africa with access to sanitation 
only rose from 26% in 1990 to 31% in 2006.  

The World Bank has estimated that meeting the water and 
sanitation  MDG  will  require  annual  investment  in  the 
order of $30 billion, roughly double the current level. 

Typical  slums  in  developing  countries  are  unplanned 
informal  settlements  where  access  to  services  is  minimal 
to non-existent and where overcrowding is the norm. Slum 
conditions  put  residents  at  a  higher  risk  of  disease, 
mortality  and  misfortune.  Slum  dwellers  represent  more 
than  one  third  of  the  growing  urban  population  in 
developing  countries  —  72%  in  Africa  —  and  by  2020 
their number is expected to swell to 1.4 billion. Improving 
their living conditions will require major investment. 

The  rise  in  ODA  appears  to  have  stalled:  after  rising 
during  2002–05,  total  net  ODA  from  Development 
Assistance  Committee  (DAC)  donors  fell  by  5%  in  real 
terms  in  2006,  and  by  8.4%  in  2007.  Today  total  aid 
remains  well  below  the  United  Nations  target  of  0.7%  of 
the GNI of DAC donors, equal to just 0.28%.  

Denmark,  Luxembourg,  the  Netherlands,  Norway  and 
Sweden  were  the  only  countries  to  reach  or  exceed  the 
target in 2007.  

At  the  December  2005  WTO  Hong  Kong  Ministerial 

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Address  the  special  needs  of 
the least developed countries. 
Includes: tariff and quota free 
access for least developed 
countries’ exports; enhanced 
programme of debt relief for 
HIPC  and  cancellation  of 
official bilateral debt and more 
generous ODA for countries 
committed to poverty reduction 

Target 8.C: 

developing 

Address the special needs of 
landlocked 
countries and small island 
developing States (through the 
Programme of Action for the 
Sustainable Development of 
Small Island Developing States 
and  the  outcome  of  the  twenty 
second special session of the 
General Assembly) 

Target 8.D: 

Deal comprehensively with the 
debt problems of developing 
countries through national and 
international measures in order 
to make debt sustainable in the 
long term. Official 
development assistance (ODA). 

Conference a decision was taken to provide duty-free and 
quota-free  (DFQF)  market  access  for  least  developed 
countries (LDCs). Under the Everything But Arms (EBA) 
regime,  the  EU  already  grants  full  DFQF  treatment,  with 
just some tariff rate quotas for sugar and rice, to be phased 
out  in  2009.  However  globally  there  has  been  little 
progress 
to  exports  from 
developing  to  developed  countries.  Excluding  arms  and 
oil,  the  proportion  of  developing  countries’  exports  that 
have duty-free access to developed countries’ markets has 
remained  largely  unchanged  since  2004  and  it  even  fell 
slightly for the least developed countries. 

in  reducing 

the  barriers 

Developed  countries’  total  support  to  their  own  domestic 
agricultural  sectors  grew  by  some  $65  billion  between 
2000  and  2004,  before  being  cut  by  $16  billion  in  2006. 
Nevertheless,  at  $372  billion,  this  expenditure  remains 
more than three times higher than the official development 
assistance  of  developed  countries.  Support  provided  by 
developed  countries  to  their  own  agricultural  sector 
continues  even  though  developing  countries  have  been 
encouraged  to  end  all  public  support  to  their  agriculture. 
This  acts  as  a  disincentive  to  agricultural  production  in 
developing  regions  and  undermines  official  development 
assistance’s broad objective of supporting development. 

By  the  end  of  June  2008,  33  out  of  the  41  eligible 
countries  had  qualified  for  debt  relief  under  the  Heavily 
Indebted  Poor  Countries  (HIPC)  Initiative.  Of  these  33 
countries,  23  had  reached 
their  ‘completion  point’, 
meaning that all the conditions for debt relief had been met 
and  relief  becomes  irrevocable.  Together,  these  countries 
had received committed debt relief of $48.2 billion in 2006 
present-value  terms.  Post-completion-point  countries  also 
received  additional  assistance  of  $21.2  billion  under  the 
Multilateral  Debt  Relief 
further 
reducing  their  debt  service.  Meanwhile,  the  value  of 
exports  from  low-income  economies  has  increased  by 
more  than  65%  since  2004,  giving  them  more  resources 
with  which  to  service  their  diminished  debt.  For  the 
average  developing  country,  the  burden  of  servicing 
external  debt  fell  from  almost  13%  of  export  earnings  in 
2000 to 7% in 2006.  

Initiative 

(MDRI), 

Target 8.E:  

cooperation 

with 
In 
pharmaceutical 
companies, 
provide  access  to  affordable 
essential  drugs  in  developing 
countries.  

In almost all developing regions, the availability of drugs 
is  limited.  It  is  better  in  the  private  sector  than  in  the 
public  sector,  although  still  scarce.  Surveys  in  about  30 
developing  countries  indicate  that  the  availability  of 
selected drugs was only 35% in the public sector and 63% 
in  the  private  sector.  In  a  sample  of  six  countries  in 
Eastern,  South-Eastern  and  Southern  Asia,  availability  in 
the private sector was only 45%. 

Some  pharmaceutical  manufacturers  have  lowered  their 
prices to public health systems in developing countries in 
line  with  the  purchasing  power  of  governments  and 
households. However, the scarce availability of medicines 
in  the  public  sector  often  forces  patients  to  purchase 
medicines  on  the  private  market  where  prices  are  still 
higher:  in  the  33  developing  countries  for  which  data  are 

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available,  the  lowest-priced  generic  medicines  on  the 
private  market  cost  over  six  times  international  reference 
prices. 

Target 8.F:  

In cooperation with the private 
sector, make available the 
benefits of new technologies, 
especially information and 
communication technologies 

total  number  of  fixed  and  mobile 

The 
telephone 
subscribers  jumped  from  530  million  in  1990  to  over  4 
billion by the end of 2006.  

In  Africa,  over  60  million  new  mobile  subscribers  were 
added  in  2006,  bringing  to  22%  the  ratio  of  Africa’s 
population that had a mobile phone. Almost every country 
now has more mobile than fixed telephone subscribers. 

Internet  use  is  increasing  rapidly,  but  the  poorest  regions 
lag behind. In developing countries, 11% of the population 
used the Internet in 2006, compared to 58% in developed 
countries and only 1% in the least developed countries. 

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ANNEX 2 

Follow up to the ‘EU Agenda for Action on the MDGs’ (June 2008) 

Analysis of the replies by EU Member States to the annual  

Monterrey questionnaire 2009 

The EU Agenda for Action on the MDGs (European Council, 19/20 June 2008) is a collective 
offer  by  Europe  to  its  development  partners  and  the  international  community.  This  Agenda 
identifies specific milestones and points of action to help meet the MDGs within timeframes. 

The EU Agenda for Action on the MDGs was presented at the UN High-Level Event on the 
MDGs in New York (25 September, 2008) and is referred to by the UN Secretary General in 
the List of Donors’ Commitments on MDGs released after the High-Level Event. 

Summary of Responses to the Monterrey Questionnaire 

Many  EU  Member  States  are  using  the  EU  Agenda  for  Action  on  the  MDGs,  which  is 
perceived as a positive tool to raise public awareness and enhance policy dialogue in support 
of the MDGs. In addition, by defining concrete targets and setting timelines for reaching the 
MDGs,  the  EU  Agenda  for  Action  on  the  MDGs  also  serves  as  strong  political  impetus  to 
increase  coordination  amongst  EU  donors.  Under  this  Agenda,  most  Member  States  have 
planned specific initiatives and actions to help achieve the MDGs, particularly in the sectors 
of  health  and  education  as  well  as  water  and  sanitation.  Gender  equality  and  the 
empowerment of women is a crosscutting priority for most EU Member States. 

Detail on the responses to the Monterrey Questionnaire by the EU Member States to the three 
MDG-related questions: 

•  17 out of 27 Member States said they plan to make use of the EU Agenda for Action (AfA) 
to mobilise political support, enhance policy dialogue and coordination in support of 
the MDGs and raise public awareness in support of the MDGs.  

For  example,  some  Member  States  have  promoted  the  EU  AfA  through  the  organisation  of 
seminars,  workshops  and  other  events  aimed  to  raise  public  awareness  in  support  of  the 
MDGs. Various entities including parliaments, NGOs, academics, schools and the media have 
been involved. The Commission and the UK have requested all country offices to support the 
use of the AfA at country level. Some Member States have set specific priorities within the 
framework  of  the  EU  AfA  (Netherlands,  Sweden)  such  as:  fragile  states,  equal  rights  & 
opportunities  for  women,  climate  change,  policy  coherence  and  aid,  democracy  and 
governance. Germany also sees the Agenda as an important tool in the EU Africa Strategy. 

•  23 out of 27 Member States said they plan to take concrete action or initiatives between 

now and 2010 in support of MDG-related sectors.  

For  example,  almost  all  Member  States  gave  examples  of  concrete  initiatives  already 
undertaken and that will be further strengthened in the next years, to support the achievement 
of the MDGs. The answers mainly focused on the health sector (expressly mentioned by 11 

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Member  States),  on  improving  water  and  sanitation  systems  (expressly  mentioned  by  6 
Member States) and on the education sector (expressly mentioned by 7 Member States).  

Some  more  specific  answers  also  highlighted  maternal  health  (expressly  mentioned  by  4 
Member  States),  gender  equality  and  women  empowerment  (expressly  mentioned  by  4 
Member  States)  and  HIV/AIDS  prevention,  care  and  treatment  (expressly  mentioned  by  4 
Member  States).  Two  Member  States  cited  environment,  climate  change  and  sustainability 
and one Member State identified countries in situations of fragility as a central focus. 

Many countries also highlighted their contributions to support international programmes and 
institutions related to the achievement of the MDGs, like the Global Fund to Fight AIDS, TB 
and  Malaria,  the  GAVI  Alliance,  the  World  Bank,  various  development  NGOs,  and  UN 
organisations. 

•  24 out of 27 Member States said they intend to increase their support to promote gender 

equality.  

Gender equality and the empowerment of women is a crosscutting priority for most Member 
States.  In  Poland,  for  instance,  all  projects  co-financed  by  the  Ministry  of  Foreign  Affairs 
must  have  a  positive  impact  on  gender  equality.  A  number  of  Member  States  have  specific 
strategic commitments on gender. France, for example, is setting up an experts’ network and 
new  actions  aimed  at  promoting  women’s  role  in  economic  development,  in  particular  in 
response  to  the  food  crisis.  The  UK  has  a  Gender  Equality  Action  Plan.  Germany  is  also 
developing  an  action  plan  on  gender  and  has  clear  commitments  on  gender  equality  in  its 
budget support. 

In  addition  to  bilateral  aid,  many  Member  States  support  existing  mechanisms  within 
multilateral organisations (e.g. UNIFEM, UNGEI, UNFPA, UNICEF, and UNHCR). 

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