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 {SEC(2009) 442} {SEC(2009) 443} {SEC(2009) 444} {SEC(2009) 445}
Date: 2009-04-08
Institutions: European Commission
Subjects: Doha Round, developing countries, economic cooperation, economic recession, monetary crisis, third country

EN 

EN 

   EN 

 
COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 8.4.2009 
COM(2009) 160 final 

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 

{SEC(2009) 442} 
{SEC(2009) 443} 
{SEC(2009) 444} 
{SEC(2009) 445} 

EN 

   EN 

 
 
  
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 

I. 

INTRODUCTION 

The  world  is  in  turbulence.  No  country  or  region  is  escaping  the  current  global  crisis. 
Developing  countries,  already  badly  hit  by  successive  food,  fuel  and  climate-change-related 
crises,  are  suffering  severely  from  the  consequences  of  the  financial  crisis  and  economic 
downturn. Tens of millions of people are falling – or relapsing – into poverty; the climate and 
the environment are under ever-greater threat; growth is slowing and unemployment is rising 
and there is a risk that the Millennium Development Goals (MDGs) are in jeopardy and the 
gains of this last decade will be forfeited.  

In these uncertain times, the temptation is to look inwards. This would be a historic mistake. 
In  this  age  of  interdependence  our  future,  our  values,  our  security  and  our  prosperity  are 
inextricably linked with those of the developing countries. Recovery in advanced economies 
will  drive  recovery  worldwide.  In  turn,  growth  in  developing  countries  will  provide  jobs, 
growth and prosperity elsewhere too and contribute to global peace and stability. 

In 2008, the international community repeatedly stressed that development is part and parcel 
of the solution to this global crisis. At the international conferences in New York, Accra and 
Doha, and at the G20 in Washington, strong positions were taken and precise commitments 
made to reach the MDGs, to stick to aid targets, to make aid more effective, and to involve the 
developing countries in the reform of global governance. These successes owe a great deal to 
the European Union's united stance, leadership and determination.  

The  G20  Summit  in  London  of  2  April  2009  further  underscored  the  urgency,  calling  for 
significant measures to be put into place to support developing countries. “Business as usual” 
is  not  an  option  in  the  present  circumstances.  Therefore,  this  Communication  builds  on  the 
main  results  of  the  annual  "Monterrey  survey"  detailed  in  the  attached  Staff  Working 
Documents1,  and  sets  out  twenty-eight  concrete  measures  the  European  Union  should  take 
forward to help developing countries cope with the crisis.  

1 

The  four  Staff  Working  Papers  are:  on  Financing  for  Development  ("Where  does  the  EU  go  from 
Doha?" - SEC(2009) 444), Aid for Trade ("2009 Aid for Trade Monitoring Report" - SEC(2009) 442), 
Aid effectiveness ("Aid Effectiveness after Accra – where does the EU stand?" - SEC(2009) 443) and 
on  the  Millennium  Development  Goals  ("Millennium  Development  Goals  –  impact  of  the  financial 
crisis on developing countries" - SEC(2009) 445). 

EN 

2 

   EN 

                                                 
II. 

THE CONTEXT: FACTORS OF VULNERABILITY AND RESILIENCE 

All recent analyses on the impact of the crisis converge on one point: after the advanced and 
emerging economies, the "third wave" of the crisis has reached developing countries2.  

Firstly, they are being affected by the direct impact of the financial crisis in particular due to 
the  drying-up  of  credit,  investment,  private  capital  inflows  and  increased  exchange  rate 
volatility. Countries which are heavily dependent on private capital market flows, especially 
foreign direct  investment, are  particularly badly affected. Those developing countries which 
are heavily dependent on remittances are very hard hit. In total, the World Bank estimates that 
capital flows to developing countries will fall from $1 trillion in 2007 to around $600 billion 
in 2009.  

Secondly, the effects of the global economic slowdown are being felt in developing countries. 
The  IMF  expects  developing  economies  to  grow  by  a  meagre  3.25%  in  2009,  down  from 
6.3%  in  2008  and  7.9%  in  2007.  Another  immediate  consequence  of  the  global  economic 
slowdown  is  the  contraction  of  global  world  trade  volumes.  As  the  global  demand  for 
commodities falls and their prices decline as a result, developing countries' export revenues 
are  expected  to  decrease  sharply  leading  to  deteriorating  external  balances  as  well  as  lower 
revenues. Developing countries which are net exporters of commodities will suffer the most 
from plummeting  commodity prices, while net importing countries of raw materials will on 
the  contrary  see  their  import  bills  reduced.  As  a  result,  according  to  the  World  Bank, 
developing countries will face a financing gap of $270 to $700 billion this year. 

As a result of these forces, developing countries already face serious social consequences of 
the crisis. Governments with widening public finance imbalances find it difficult to maintain 
the  level  of  social  expenditure;  maintenance  of  public  infrastructure  is  being  postponed; 
funding  for  social  safety  nets  is  in  decline  just  when  it  is  most  needed;  and  the  number  of 
unemployed and working poor, especially in urban areas, is increasing exponentially.  

The crisis may also have important political and security implications. Increased poverty and 
social unrest could turn latent political divergences into acute strife. There may also be a more 
direct impact, with salaries not paid, due to budget constraints, in the public sector, including 
police and armed forces, fuelling unrest or even military coups. Normal political contests may 
harden, resulting in civil strife as ethnic parties fight for total power or access to resources. 
Moreover, the crisis could increase the substantial migration flows both in-country and intra-
regionally. There could also be an impact on migratory pressure to advanced economies. 

While the crisis is affecting all developing countries, the extent of the impact, its symptoms 
and the ability to cope vary significantly across regions, countries and groups of populations. 
Due to improved policies over recent years, many developing countries are more resilient to 
the current crisis than in past global downturns and have some scope for policy responses to 
support  growth  and  cushion  the  impact  of  the  crisis.  The  commodity  boom  of  the  last  few 
years, higher macroeconomic stability, structural reforms and debt relief, have allowed many 
countries  to  improve  their  financial  position.  Nevertheless,  their  scope  for  an  independent 
monetary  and  fiscal  policy  response  is  severely  limited  because  of  persistent  inflationary 

2 

IMF (“The Implications of the Global Financial Crisis for Low-Income Countries”, March 2009); WB (“Swimming 
Against the Tide: how Developing Countries are Coping with the Crisis”, March 2009 and ("The Global Economic 
Crisis:  Assessing  Vulnerability  with  a  Poverty  Lens",  February  2009));  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). 

EN 

3 

   EN 

                                                 
pressures,  strained  budgets  and  deteriorating  external  balances,  as  well  as  the  continuing 
effect  of  the  surge  in  food  and  energy  prices  in  2008,  and  downward  pressures  on  their 
exchange rates.  

Global efforts to stabilise the financial sector, and aiming to stimulate economic recovery, are 
therefore  highly  relevant  to  developing  countries.  EU  actions  to  improve  financial  sector 
regulation and to implement the European Economic Recovery Plan are major contributions 
in this respect. The ongoing or envisaged reforms of the lending activities of the IMF and the 
Multilateral Development Banks (MDBs) can help many developing countries, be they low- 
or middle-income economies. 

But others are more vulnerable and they risk missing these new opportunities. In this context, 
special  attention  should  be  given  to  the  most  vulnerable  developing  countries  with  limited 
resilience capacity. In the light of the above analysis, an appropriate response should assess 
the degree of vulnerability and resilience of a country, based on parameters such as: 

•  dependence on export revenues and degree of integration into world trade; 

•  dependence  on  external  financial  flows  and  transfers,  in  particular  foreign  direct 

investment and remittances; 

•  capacity  to  react,  which  depends  on  the  overall  quality  of  governance,  availability  of 

external reserves, external debt and margin to adopt fiscal stimulus measures. 

Hence,  the  Commission  and  EU  Member  States  will  in  2009,  in  collaboration  with 
international institutions and partner countries, conduct further joint country impact analyses 
of the crisis with a view to identify the most vulnerable countries and to take coordinated EU 
country-specific action.  

EN 

4 

   EN 

 
III. 

TIMELY, COORDINATED AND TARGETED EUROPEAN ACTION 

III.1.  HONOURING  OUR  AID  COMMITMENTS,  LEVERAGING  OTHER 
RESOURCES 

The  EU  continues  to  be  by  far  the  biggest  provider  of  Official  Development  Assistance 
(ODA) – with 59% of the overall total, having increased its share by 4 percentage points over 
2007.  In  2008,  the  EU  reversed  the  downward  trend  in  ODA  flows  registered  in  2007. 
Collective  ODA  levels  returned  in  2008  to  0.40%  of  GNI,  up  from  0.37%  in  2007,  i.e. 
disbursements  of  almost  €50  billion  and  an  incr ease  of  more  than  €4  billion  and  €2  billion 
compared  to  2007  and  2006  respectively.  In  addition,  13  Member  States  now  have  multi-
annual  national  timetables  illustrating  how  they  will  meet  their  individual  commitments  in 
2010 and 2015, hence improving aid predictability.  

Despite this upward trend, the outlook for the coming years appears rather problematic. Many 
Member States are far removed from the 2010 individual milestones. The additional effort to 
reach the collective target of 0.56% ODA/GNI in 2010 is equal to €20 billion. ODA is a key 
factor in the quest to reduce world poverty, reach the MDGs and leverage other sources. Its 
predictability is a value per se and must be ensured. The global crisis cannot be an excuse to 
water  down  our  commitments.  Aid  is  not  a  matter  of  charity  but  one  of  the  drivers  of 
recovery. 

ODA alone, however, will not be enough. The EU must use all the sources and instruments 
available  to  leverage  assistance  aimed  at  stimulating  growth,  investment,  trade  and  job 
creation.  Such  a  comprehensive  effort  should  constitute  a  “whole  of  the  Union  approach", 
taking  into  account  instruments  and  processes  such  as  export  credits,  investment  guarantees 
and technology transfers for the benefit of development.  

(1) 

(2) 

Honour  ODA  commitments.  EU  Member  States  must  honour  their  individual  and 
collective  commitments  to  reach  their  ODA  targets  by  2010  and  2015.  This  will 
release  an  extra  €20  billion  in  ODA  in  2010.  A  resolute  effort  is  therefore  needed 
already this year.  

Leverage new resources. Member States should step up efforts to mobilise additional 
development-relevant  finance.  Our  target  is  that  every  euro  spent  on  aid  should 
leverage five euros in non-ODA (e.g. technology transfers, trade finance and private 
investment).  The  Commission  also  recommends  that  Member  States  deepen  and 
apply more widely innovative sources of financing, for example building on ongoing 
voluntary solidarity levies, such as the airline tax to finance health programmes. 

III. 2. ACTING COUNTER-CYCLICALLY 

Action  is  needed  now.  Support  should  have  a  direct  counter-cyclical  impact.  The  poorer 
economies  badly  need  financing  during  these  times  of  crisis.  Measures  should  be  taken  to 
adapt  priorities,  disburse  aid  more  quickly  and,  where  necessary,  frontload  assistance  and 
accelerate  budget  support.  Member  States  are  urged  to  take  action  along  these  lines  in  the 
context of their bilateral aid. 

EN 

5 

   EN 

(3) 

(4) 

(5) 

(6) 

(7) 

Refocus  priorities.  The  Commission  will,  in  partnership  with  developing  countries, 
accelerate  the  Mid-Term  Review  of  its  strategy  papers  and  support  programmes  in 
2009  and  2010  with  a  view  to  reflect  new  needs  and  rising  priorities.  The  EIB 
should,  in  the  context  of  its  Activity  Plan  2009-2011,  focus  on  counter-cyclical 
actions  in areas  such as infrastructure, including  energy and climate  change-related 
activities, and the financial sector.  

Quicken  disbursement.  The  Commission  is  applying  more  flexible  implementation 
procedures to a number of emergency and post-emergency countries or regions and 
will  keep  the  situation  in  other  countries  under  review.  The  EIB  will  endeavour  to 
accelerate disbursements under agreed financing contractual commitments.  

Frontload aid. The Commission has advanced commitments constituting a large part 
of  the  Community  assistance  to  ACP  countries  (€4.3  billion  frontloaded  for  2009) 
and  will examine further  ways to speed up  aid  delivery3. The EIB should  frontload 
commitments  in  the  framework  of  ACP  Partnership  Agreements  (€3.5  billion 
Investment  Facility  and  €2  billion  Own   Resources  in  2008-2013)  and  under  other 
external mandates (€25.8 billion in 2007-2013, possibly increasing by €2 billion) and 
is encouraged to accelerate expenditure towards ENP countries in Eastern Europe, in 
cooperation  with  the  EBRD,  as  well  as  towards  the  accession  and  pre-accession 
countries. 

Accelerate  budget  support.  The  Commission  has  committed,  in  2008,  nearly  €3 
billion in budget support (a quick-impact instrument) as a frontloading measure for 
ACP countries which translates as 72% of all budget support foreseen for 2008-13. 
The  Commission  will  review  ongoing  budget  support  operations  in  the  most 
vulnerable countries and will assess, on a case by case basis, the options to frontload 
disbursements  and  review  the  macroeconomic  conditions  or  any  other  aspects 
necessary to accelerate disbursements. 

Exploring  macro-economic  assistance.  In  exceptional  cases,  some  macro-economic 
assistance  to  European  Neighbourhood  Policy  (ENP)  countries,  accession  and  pre-
accession  countries  could  be  considered,  provided  in  cooperation  with  the 
International Monetary Fund and in coherence with IMF programme conditions.4 

III.3. IMPROVING EFFECTIVENESS: A MATTER OF URGENCY 

In these times of crisis, neither developed nor developing countries can afford to pay the high 
price  of  fragmentation  and  lack  of  coordination,  as  is  currently  the  case.  Worldwide,  225 
bilateral and 242 multilateral agencies fund hundreds of thousands of activities each year. In 
108 countries, more than ten EU donors are providing country programmable aid. EU donors 
fund around 60 000 projects with an average annual contribution in 2007 of only €400 000 to 
€800 000 per activity.  

3 

4 

Broken down as €3 billion for budget support; €800 million for the Food Facility and €500 million for 
the ad hoc FLEX mechanism. 
For countries on the OECD/DAC list for reporting on 2008-2010 aid flows. 

EN 

6 

   EN 

                                                 
This "aid ineffectiveness" is very costly. The volatility and lack of predictability of aid alone 
can increase costs by between 15% and 20%5. Tied aid has also been estimated to raise costs 
of goods, services and works by between 15% and 20%. Preliminary calculations show that 
the  cost  of  failure  to  apply  the  full  aid  effectiveness  agenda  could  range  from  €25  to  €35 
billion until 2015, or €5 to €7 billion a year, if th e level of EU donors' net bilateral assistance 
remains stable.6 Such is the cost of "non Europe" in development. 

Substantial reforms are needed and the EU has led the way. First, by acting and speaking as 
one, it has given a major push to setting new internationally agreed targets, such as the Accra 
Agenda  for  Action  (AAA)  adopted  by  the  Accra  High  Level  Forum  in  2008.  Secondly,  by 
adopting measures to reduce fragmentation amongst European  actors, initiatives such as the 
Code of Conduct  on  Division  of Labour are a significant contribution  to taking forward  the 
aid effectiveness agenda worldwide. 

This dynamic should now be strengthened. The expertise, resources and instruments of each 
donor  should  be  better  geared  to  one  another.  A  coordinated  EU  effort  on  the  basis  of 
common  priorities  will  enhance  the  short-term  positive  impact  of  our  action  and  ensure  its 
long-term sustainability.  

(8) 

(9) 

(10) 

(11) 

Take bilateral action. EU Member States and the Commission should work together 
in  the  preparation  of  individual  action  plans  for  implementing  the  "AAA" 
commitments.  These  plans  should  outline  actions 
legal  and/or 
administrative obstacles to aid effectiveness as well as internal incentives to change 
administrative behaviour, working methods and programming processes.  

to  remove 

Push  collective  EU  approaches.  The  Commission  will  propose,  in  2009,  codes  of 
conduct respectively on global and vertical funds, on the use of country systems and 
on technical assistance. Implementing the  Code of Conduct on Division of  Labour, 
the Commission will also promote an EU approach towards cross-country division of 
labour. In the same spirit, the EIB should strengthen its cooperation with financing 
partners,  donor  agencies  and  with  the  Commission,  including  through  delegated 
cooperation and the blending of EU resources. The cooperation between the EIB and 
the  EBRD  will  also  be  strengthened  in  the  framework  of  the  Eastern  Partnership 
Strategy. 

A  collective  EU  approach  to  address  the  crisis.  By  way  of  implementing  this 
Communication,  EU  Member  States  are  invited  in  2009  to  present  actions  and 
instruments  introduced  in  response  to  the  crisis  in  developing  countries  in  view  of 
building  a  coordinated  response.  The  next  Monterrey  report  will  assess  the 
implementation of the actions thus identified. 

Further reform of international aid architecture. As the world largest donor, and by 
acting  and  speaking  as  one,  the  EU  is  a  driving  force  for  simplification  of  the 
international aid architecture. One reform the EU could push for implementation by 
the wider donor community is on “results-based conditionality”, where streamlining 

5 
6 

Homi Kharas. Measuring the Costs of Aid Volatility, Wolfensohn Centre for Development, June 2008. 
Figures based on the preliminary findings of the study "The Aid Effectiveness Agenda – Benefits of a 
European  Approach".  The  study,  commissioned  by  the  European  Commission,  is  forthcoming  in 
summer 2009. 

EN 

7 

   EN 

                                                 
and  harmonisation  could  increase  the  ownership,  predictability,  transparency  and 
democratic scrutiny of conditions for the use of aid resources. 

III.4. CUSHIONING THE SOCIAL IMPACT, SUPPORTING THE REAL ECONOMY  

III.4.1. Protecting the most vulnerable 

The current crisis could push a further 90 million people in developing countries into poverty 
in 2009,7 with women, children, the elderly and the disabled most at risk. The EU must, as a 
priority,  pursue  the  2010  milestones  in  its  MDG  Agenda  for  Action  or  risk  further 
compromising  2015  targets.  Continued  support  in  the  fields  of  health,  decent  work  and 
education  is  key  to  ensure  that  the  most  vulnerable  are  not  left  unprotected.  There  is  an 
economic cost to social crisis. Without a skilled, healthy workforce, recovery will be delayed 
and growth put at risk. The loss of revenues will affect the public financing of relevant social 
services. 

(12) 

(13) 

Take  targeted  social-protection  measures.  The  Commission  will  and  EU  Member 
States  should  support  developing  countries'  targeted  actions  to  cope  with  the  direct 
social  impact  of  the  crisis  through  the  creation  and  strengthening  of  social  safety 
nets,  facilitation  of  direct  cash  transfers  and  enhancement  of  in-kind  transfers.  The 
Commission will give specific attention, when feasible and needed, to social safety 
nets, labour intensive works and the reform of labour markets. 

Support mechanisms to safeguard social spending. The Commission will propose to 
dedicate  in  2009  at  least  €500  million  from  the  10 th  EDF  to  support  those  ACP 
countries  hardest  hit  by  the  crisis.  This  financing,  will  be  delivered  as  much  as 
possible  as  budget  support,  through  (i)  the  existing  FLEX,  based  on  past  export 
losses  as  well  as  (ii)  an  ad  hoc  vulnerability  FLEX,  based  on  parameters  such  as 
forecasted export losses, decreased remittances and financial flows (q.v. Chart I). The 
Commission calls on EU Member States to participate in this initiative as part of the 
international effort targeting the most vulnerable. 

III.4.2. Sustaining economic activity and employment 

III.4.2.1. Maintaining and building infrastructure 

Maintenance  and  building  of  infrastructure  are  effective  crisis  mitigators  to  reach  the  most 
vulnerable and create jobs,  through local infrastructure development and maintenance while 
serving  basic  needs  and  stimulating  economic  activity  and  trade.  Investments  in  large-scale 
infrastructure should be accelerated to increase competitiveness of developing countries and 
create  cross-border  and  cross-regional  interconnectivity8.  Concerning  Africa,  the  EU  will 
focus on closing the infrastructure financing gaps for the key missing links identified in the 
EU  Africa  Infrastructure  Partnership.  The  Commission  will  discuss  with  the  African  Union 
(AU)  the  appointment  of  "project  coordinators",  i.e.  political  personalities  to  lead  regional 
brokering on these key missing links. This approach has proven of added value in the context 
of  the  Trans-European  Networks,  both  for  energy  and  transport.  Also,  in  the  light  of  needs 

7 
8 

World Bank, 2009. 
Further  details  on  African  and  Mediterranean  regional  infrastructure  initiatives  in  Annex  3  and  4 
respectively of the SWD on Financing for Development. 

EN 

8 

   EN 

                                                 
identified by the AU ahead of the recent G209, the EU effort on African missing links is all 
the more timely and essential. 

(14) 

(15) 

(16) 

Support quick delivery infrastructure and job creation. The Commission will provide 
support  for  labour-intensive  infrastructure  works  and  maintenance  in  order  to 
preserve access to services and to curb likely under-spending on maintenance due to 
fiscal pressure in developing countries. The Commission encourages Member States 
and other donors to take similar action. In this framework, the Commission will set-
up  a  network  of  EU  and  other  financiers  to  draw  up  a  pipeline  of  accelerated 
infrastructure investments to be financed in 2009/2010. The Commission encourages 
the EIB to use on-lending agreements with regional development banks and domestic 
financial intermediaries for local infrastructure. 

Establish  regional  infrastructure  in  the  Mediterranean.  In  the  framework  of  the 
Union  for  the  Mediterranean,  the  Community,  including  the  EIB,  and  the  Member 
States  will  establish  the  regional  maritime  and  land  highways,  support  renewable 
energy, antipollution measures and south-south interconnectivity.  

Increase  by  2010  to  €500  million  the  grant   inlay  in  the  EU-Africa  Infrastructure 
Trust Fund. The Commission, for its part, will allocate €200 million for 2009-2010, 
doubling its current inlay, and calls on Member States to join this effort so to raise 
€500 million. Achieving this target will levera ge €2.5 billion in soft loans to support 
infrastructure. Furthermore, the Commission proposes to adapt the Trust Fund (i) to 
include national infrastructure which is part of regional networks and (ii) to introduce 
risk  guarantee  mechanisms.  Hence,  the  Commission  calls  on  Member  States  to 
support  the  necessary  amendment  of  the  Trust  Fund  Agreement.  Moreover,  the 
Project Financiers Group should include the Africa Development Bank and be open 
to contributing third countries. 

III.4.2.2 Revitalising agriculture 

While food prices have gone down recently, remaining structural problems, such as a lack of 
productive  capacity  and  infrastructure,  necessitate  continued  support  for  and  increased 
investment  in  agriculture.  Revitalising  agriculture  in  developing  countries  requires  a 
comprehensive  approach.  Reviewing  existing  strategies  and  support  programmes  entails 
domestic policy reforms, along with support for input provision, such as seeds, fertilisers and 
agricultural finance, for demand-driven research and extension, and for sustainable production 
systems.  In  addition,  targeted  infrastructural  investments  will  need  to  link  more  effectively 
production areas with markets, requiring support to be provided both for export infrastructure 
and for small-scale rural infrastructure.  

9 

Africa's Common Position: Preparation towards the G20 meeting of April 2, 2009, AU, March 2009. 

EN 

9 

   EN 

                                                 
(17) 

Speed  up  financing  for  agriculture.  The  Commission  is  frontloading  the  €1  billion 
Food Facility. The first tranche of €314 million  has also been agreed and will target 
23 countries  judged to be most at risk. Overall, the Commission will  commit  more 
than  €500  million  in  over  40  countries  in   the  first  half  of  2009  and  another  €300 
million  by  the  end  of  the  year,  thus  accelerating  the  coordination  and  efficiency  of 
support for agriculture. 

(18) 

Invest  in  agricultural  corridors.  The  Commission  and  Member  States  should  work 
with the regional organisations and the private sector to align investments in support 
of linking markets and production areas, a new focus for the EU.  

III.4.2.3. Investing in green growth 

The crisis offers a major opportunity to create greener economies. Climate change is a huge 
challenge  and  global  action  must  be  taken  now  to  avoid  irreversible  damage  later.  The  EU, 
having  made  its  own  firm  commitments,  is  resolutely  engaged  in  securing  an  ambitious 
Copenhagen outcome in December and the full participation of developing countries  to this 
end must be facilitated. As regards Least Developed Countries (LDCs), the setting of National 
Adaptation  Programmes  of  Action  (NAPAs)  is  a  priority  issue  for  support.  These  NAPAs 
contain the most urgent requirements and should be embedded in national strategies. So far, 
39 countries have adopted such plans and others, including non-LDCs should follow suit10.  

(19) 

(20) 

(21) 

Push forward the Climate Change Alliance. EU Member States should contribute to 
the Global Climate Change Alliance (GCCA), endorsed by the European Council in 
2008. The GCCA seeks to boost support for the poorest and most climate-vulnerable 
developing countries, in particular LDCs and small island developing states. 

Use innovative financing for climate change. EU Member States should use part of 
the  revenues  from  auctioning  emissions  allowances,  as  agreed  in  the  European 
Emissions  Trading  System  legislation  for,  amongst  others,  climate  adaptation 
measures, afforestation, reforestation and technology transfer in developing countries 
that  will  have  ratified 
the  Copenhagen  agreement.  The  Commission  also 
recommends  that  Member  States  explore  the  possibility  of  launching  the  Global 
Climate  Financing  Mechanism  (GCFM)  as  a  bridging  initiative  in  the  transition 
period  between  2010  and  the  full  implementation  of  any  new  financial  architecture 
agreed at the Copenhagen conference. 

Focus on renewable energy. The EIB should invest in renewable energy and energy 
efficiency.  The  regional  dimension  through  regional  energy  transmission,  gas 
pipeline  and  distribution  projects  will  be  reinforced.  In  eligible  countries,  the  EIB 
should  endeavour  to  increase  the  use  of  its  €3  billion  Energy  and  Sustainability 
Facility. The Commission will promote renewable energy in ACP countries through 
the  €200  million  Energy  Facility  and  is 
identifying  a  new  programme  to  support 
energy in Latin America as part of the 2010-2013 Regional Indicative Programme. 

10 

The  following  countries  have  adopted  NAPAs:  Bangladesh,  Benin,  Bhutan,  Burkina  Faso,  Burundi, 
Cambodia, Cape Verde, Central African Republic, Comoros, Democratic Republic of Congo, Djibouti, 
Eritrea,  Ethiopia,  Gambia,  Guinea,  Guinea-Bissau,  Haiti,  Kiribati,  Lesotho,  Liberia,  Madagascar, 
Malawi,  Maldives,  Mali,  Mauritania,  Mozambique,  Niger,  Rwanda,  Samoa,  Sao  Tome  and  Principe, 
Senegal, Sierra Leone, Solomon Islands, Sudan, Tanzania, Tuvalu, Uganda, Vanuatu, Zambia. 

EN 

10 

   EN 

                                                 
(22) 

Support  the  transfer  of  environmentally  friendly  and  sustainable  technologies.  The 
Commission  and  Member  States  should  support  the  Global  Energy  Efficiency  and 
Renewable Energy Fund (up to €80 million  by 2010), an innovative risk capital fund, 
managed  by  the  EIB  Group,  aiming  to  accelerate  the  transfer,  development  and 
deployment  of  environmentally  sound  technologies  in  developing  countries  and 
economies in transition. 

III.4.2.4. Stimulating trade and private investment 

As a result of the crisis, the WTO reports that global trade is predicted to fall for the first time 
in more than 20 years, by 9%. Capital inflows have already decreased dramatically and intra-
regional trade flows have slowed down substantially. An upturn is needed. Building trust and 
predictability  for  market  actors,  reducing  trading  costs,  and  reinforcing  productive  capacity, 
will  help  countries  counteract  some  of  the  negative  effects  of  the  crisis,  and  will  help  them 
come out stronger when the worst is past. Two objectives should be pursued.  

First, the EU should accelerate more than ever its Aid for Trade (AfT) Strategy and respect 
the collectively pledged intent to devote €2 bill ion to trade-related assistance (TRA) by 2010 
and ensure follow-up of all other aspects of the AfT Strategy. In 2007, the EC surpassed the 
objective  set  for  2010,  with  TRA  equal  to  €1.0 19  billion.  EU  Member  States'  TRA  totalled 
€960 million, a significant increase from 2006. Co mbined EU spending on all Aid for Trade 
again exceeded €7 billion in 2007. These positive  quantitative trends must be sustained and 
translated  into  more  effective  development-  and  growth-oriented  strategies  embedded  in 
national  programmes  as  well  as  in  the  regional  integration  agendas.  The  EU  regional  AfT 
packages  for  the  ACP  must  be  urgently  put  together,  building  on  the  recently  adopted  EU 
Regional Strategy Papers.  

Secondly,  the  EU  should  take  forward  the  work  on  trade  finance,  in  line  with  the  G20 
outcome.  With  the  tightening  of  global  liquidity  conditions,  trade  financing  has  been 
adversely  affected.  According  to  the  IMF,  the  Low  Income  Countries’  volume  of  trade 
financing  dropped  by  18%  in  the  last  quarter  of  2008.  Export  credits,  credit  facilities  and 
guarantees are crucial vehicles for boosting trade and must be enhanced. 

(23) 

(24) 

Step  up  implementation  of  the  AfT  agenda  and  make  AfT  more  effective.  The 
Commission and Member States should intensify their efforts to implement the Aid 
for Trade Strategy, sustain current levels of commitment, including by continuing to 
provide €2 billion level TRA in 2009 and 2010 , and ensure that support is effective 
and  produces  the  expected  results.  The  ACP  and  Latin  America  regional  AfT 
packages should support regional organisations and partner countries in an effort to 
pool development aid for "regional stimulus". 

Increase export credit. The G20 agreed on a $250 billion multi-lateral trade finance 
initiative  through  export  credit  and  investment  agencies  and  through  the  MDBs. 
Many Member States have substantially increased the capacity of their export credit 
agencies  (ECA)  to  guarantee  and  insure  export  transactions.  The  Commission 
recommends that further extended capacity should be given to cover higher volumes 
of business in support of developing countries. The EIB should consider supporting 
multilateral initiatives on trade finance. 

(25) 

Ensure guarantees for investment and provide credit facilities. (i) The Commission 
and  the  EIB  are  working  together  to  increase  guarantees  for  investment,  inter  alia 

EN 

11 

   EN 

through the expansion of guarantee possibilities under the Infrastructure Trust Fund 
and the EIB's Investment Facility; (ii) The Commission calls on the Council to adopt 
the Commission proposal of May 2008 that will provide for financial strengthening 
of the Facility for Euro-Mediterranean Investment and Partnership (FEMIP) through 
the use of reflows; (iii) The Commission will strengthen the Investment Facility for 
ENP  countries  in  Eastern  Europe;  (iv)  The  EIB  should,  through  the  provision  of 
loans, equities and/or guarantees, step up its support to microfinance institutions as 
well as to the banking sector..  

IV.  WORKING TOGETHER FOR GOVERNANCE AND STABILITY  

Governance  and  fighting  corruption  are  key  to  sustainable  economic  development.  Several 
areas deserve special support. Developing countries need to pursue efforts to establish a sound 
macroeconomic and regulatory environment for private-sector activities and growth. This is 
the best incentive for attracting foreign investment and reducing domestic capital flight. Good 
governance in the fiscal area, i.e. transparency, exchange of information, fair tax competition, 
and  sound  customs  systems  will  increase  domestic  financial  resources  for  development. 
Moreover  external  debt  should  be  managed  carefully.  Higher  borrowing  to  help  offset  the 
impact of the crisis could pose serious risks to the sustainability of debt, in particular for those 
developing countries that already have a high debt burden. 

Countries  in  fragile  situations  will  require  specific  attention  and  action.  Measures  must  be 
taken  to  enhance  early  warning,  conflict  prevention,  crisis  management  and  democracy 
building  aiming  at  consolidating  political  and  social  stability  and  preserving  the  democratic 
gains attained over the last years. The Commission will intensify political dialogue with these 
countries. 

Finally,  this  national  governance  agenda  should  be  complemented  by  a  strengthening  of 
regional integration processes. Uncoordinated, or even competing, national plans can have a 
detrimental effect on neighbouring countries and worsen the economic recession. Conversely, 
regional  integration  and  cooperation,  in  particular  the  promotion  of  intra-regional  trade  and 
free  movement  of  goods,  services,  persons  and  capital,  will  help  mitigate  the  longer-term 
effects  of  the  crisis.  In  this  regard,  the  conclusion  of  comprehensive  Economic  Partnership 
Agreements with ACP regions is essential. 

(26) 

(27) 

(28) 

Enhance policy and political dialogue. The Commission will in 2009, in the context 
of  the  Mid-Term  Review  and  the  Governance  Initiative,  make  economic  and 
financial governance a key issue in its political dialogue with partner countries. 

Strengthen  tax  governance.  The  Commission  will  promote  good  governance  in  the 
tax  area  on  international,  regional  and  domestic  levels.  In  order  to  deliver  on  the 
development goals, and to improve the global financial and regulatory systems, the 
Commission calls on Member States and partner countries to support this objective. 

Avoid  new  debt  crises.  The  Commission  and  Member  States  should  promote  a 
discussion  on  enhanced  sovereign  debt  restructuring  mechanisms  building  on 
existing frameworks and principles.  

EN 

12 

   EN 

V. 

GLOBALISATION: OPENNESS, EFFICIENCY, INCLUSIVENESS 

V.1. AN OPEN ECONOMY 

The EU's strategy to help developing countries cope with the crisis is framed within a wider 
global context within which, as highlighted at the London Summit, decisive action is needed 
not just to sustain global recovery, but also to reinvigorate world trade and investment and for 
greater inclusion in global institutions. A return to the status quo ante is not an option. 

More  protectionism  means  less  growth  and  less  development.  Ensuring  that  global  markets 
remain open is one of the best ways to fight the downturn and stimulate a return to growth, 
which will be beneficial for both developed and developing countries. The EU should, with 
the other members of the international community, take steps to: 

–  Refrain  from  new  barriers.  In  London  the  G20  agreed  to  refrain  from  introducing  new 
barriers to trade or investment and called for the removal of trade-restricting or distorting 
measures  that  have  been  put  in  place  recently.  This  pledge  was  extended  to  the  end  of 
2010. 

–  Make  progress  to  reach  agreement  on  the  Doha  Round  as  soon  as  possible.  The  Round 
contains  elements  that  are  of  real  value  for  the  developing  countries,  and  especially  the 
poorest  countries,  for  instance  by  providing  duty-free  and  quota-free  market  access  for 
Least Developed Countries to all developed markets and increased opportunities in many 
emerging  economies.  It  would  mean,  inter  alia,  significant  cuts  in  trade-distortive 
agricultural  subsidies,  substantial  reductions  in  market  access  barriers,  and  an  ambitious 
agreement on trade facilitation.  

V.2. MORE EFFICIENT AND INCLUSIVE GLOBAL INSTITUTIONS 

Global  governance  systems  have  been  outpaced  by  the  intensity  of  political  and  economic 
integration  and  interdependence  worldwide.  To  harness  this  process,  a  more  efficient  and 
inclusive global architecture is needed. Here again, the ongoing crisis offers an opportunity to 
make the UN system and international financial institutions fit to tackle global challenges in 
an effective manner and the G20 should expedite the reform process. Appraisals by the UN, 
the  IMF  and  World  Bank  of  what  is  needed  to  enhance  their  capability  and  legitimacy  are 
being  undertaken  separately  and  will  culminate  at  different  intervals  in  2009.  The  G20  has 
expedited  the  process  of  reform  of  the  IFIs.  For  the  UN,  the  June  2009  UN  High  Level 
Conference will provide an early opportunity to take forward this reform agenda. 

Seen from the development angle, the following topics deserve special attention from the EU: 

–  On the UN, it must be put in the condition to effectively coordinate international efforts to 
help  developing  countries  tackle  a  variety  of  global  social,  economic,  financial  and 
economic challenges. For example, the ECOSOC reform should be fully implemented. In 
addition, the UN's capacity to deliver as one should be strengthened, as recommended by 
the UN Panel on System Wide Coherence (2006), e.g. in food security through the further 
integration and rationalisation of its three food and agricultural agencies in Rome.  

–  On  the  IFIs,  the  G20  in  London  agreed  to  substantially  increase  resources  for  the  IFIs, 
including  resources  to  boost  their  capacity  to  help  countries  in  need.  This  includes 
immediate financing from members of $250 billion – of which $100 billion or €75 billion 
is  provided  by  EU  Member  States  –  which  will  be  subsequently  incorporated  into  an 

EN 

13 

   EN 

expanded  and  more  flexible  New  Arrangements  to  Borrow  increased  to  $500  billion  -  a 
general  SDR  allocation  of  $250  billion  as  well  as  ratification  by  IMF  members  of  the 
Fourth  Amendment.  In  addition,  the  G20  agreed  to  reform  the  mandates,  scope  and 
governance  of  the  IFIs  to  ensure  greater  voice  and  representation  for  emerging  and 
developing countries and agreed that their heads and senior leadership should be appointed 
through an  open, transparent  and  merit-based selection  process.  For  the  World  Bank,  the 
Commission  favours  the  fast-tracking  of  IDA  as  a  crisis  mitigation  measure.  IFI 
conditionality  needs to be tailored  to  the specific situation  of each country  in the current 
crisis. 

–  More  comprehensively,  synergies  ought  to  be  drawn  between  these  reform  efforts  in  the 
pursuit  of  greater  coherence  in  respective  governance  bodies.  The  role  of  regional 
development  banks  vis-à-vis  LDCs  should  be  further  enhanced.  Lastly,  building  on  the 
London Summit, regional and continental groupings such as the AU, ASEAN and others 
should  be  invited  to  participate  in  informal  international  economic  platform  in  order  to 
vouchsafe greater efficiency and representation. 

VI. 

CONCLUSION 

This  multifaceted  crisis  poses  a  serious  threat  to  global  stability.  Our  long-term  political 
vision must guide swift and decisive immediate action. Commitments made last year must be 
respected and accelerated. But the crisis also holds opportunities. Opportunities to reach out to 
the developing world and establish a new and better kind of partnership, to invest more and 
better so as to stimulate our own economies, to refocus priorities, to achieve green growth, to 
redesign the international economic and financial architecture and adapt it to the realities of 
this new century. 

None  of  this  will  happen  without  strong  and  unconditional  European  leadership  pushing 
forward  the  new  Global  Deal  decided  in  London.  To  make  the  difference,  Europe  must  be 
united. 

The time to act is now. 

EN 

14 

   EN