Report from the Commission to the Council and the European Parliament - Annual Report 2009 on the european community's development and external assistance policies and their implementation in 2008 {SEC(2009)831}
Date: 2009-06-30
Institutions: European Commission
Subjects: activity report, aid evaluation, aid policy, cooperation policy, developing countries, development aid, impact study

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COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 30.6.2009 
COM(2009) 296 final 

REPORT FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN 
PARLIAMENT 

Annual Report 2009 on the European Community's Development and External 
Assistance Policies and their Implementation in 2008 

{SEC(2009)831} 

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REPORT FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN 
PARLIAMENT 

Annual Report 2009 on the European Community's Development and External 
Assistance Policies and their Implementation in 2008 

The  year  2008  posed  challenges  for  the  European  Union  and  its  development 
partners  across  the  world.  Soaring  food  and  energy  prices  and  the  global  financial 
crisis  tested  the  EU's  ability  to  meet  ongoing  aid  commitments  and  deal  with  new 
needs.  The  European  Commission  responded  swiftly  to  offset  the  impact  of  high 
food  prices  on  poor  countries.  The  European  Union  demonstrated  its  reliability  by 
setting up a €1 billion Food F acility for 2008-2010 from the EU budget by the end of 
December. In  the  meantime, the  Commission increased its budget for humanitarian 
food  aid  from  the  emergency  aid  reserve  with  €140  million  and  redirected  money 
earmarked  for  food  security  to  the  most  vulnerable  populations.  Furthermore,  it 
called  up  €200  million  from  the  unallocated  reserve  in  the  10 th  European 
Development  Fund  (EDF).  The  Commission  also  undertook  to  increase  levels  of 
macro-financial assistance to countries in need on a case-by-case basis. Despite the 
economic  crisis,  the  EU  and  its  Member  States  reaffirmed  their  commitments  to 
increase  development  assistance  in  coming  years.  Responding  in  a  flexible  and 
effective way to the situation as it unfolds will remain a key objective for 2009. 

A truly global dimension 

The global nature of the EU's external policies was clearly evident in 2008 as the EU 
deepened its relations with partners across the world and sought their cooperation on 
global  issues  like  climate  and  energy,  trade  liberalisation  and  the  attainment  of  the 
Millennium Development Goals of 2000 by the target date of 2015. 

In  May,  the  EU  put  its  relations  with  Latin  America  on  a  new  footing  at  a  summit 
meeting  in Lima.  Leaders from  the  two sides adopted  an agenda for joint  action to 
focus on two themes: social cohesion and sustainable development. The EU held its 
first-ever summit with South Africa in July. Georgia became an unscheduled centre 
of  attention  in  August  as  a  result  of  the  conflict  with  Russia.  The  Commission 
quickly put together a three-year package of up to €500 million. It mobilised a first 
payment of €60 million for internally-displaced  persons in Georgia before the end of 
the year. 

The EU devoted a lot of attention in 2008 to its neighbours in eastern Europe and in 
the  Mediterranean  basin.  It  launched  the  Union  for  the  Mediterranean  with  its 
southern  partners  in  July,  while  in  December  the  Commission  proposed  a  new 
Eastern  Partnership  for  its  eastern  neighbours.  Negotiations  on  a  new  partnership 
agreement with Russia, frozen by the EU because of the conflict with Georgia, were 
unblocked at an EU-Russia summit in November. During the year, the EU provided a 
total  of  €498  million  in  assistance  to  the  Palestinians  mainly  to  cover  the  running 
costs  of  the  Palestinian  Authority  and  to  support  the  Palestinian  Reform  and 
Development Plan. 

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Throughout  the  year,  the  EU  and  its  African  partners  started  work  on  the  eight 
thematic partnerships which are part of the ambitious joint strategy adopted at their 
Lisbon summit in December 2007. The two sides also strengthened their dialogue on 
global  issues,  including  the  impact  of  the  financial  crisis,  climate  change  and 
governance in international institutions. Following on China's increased involvement 
in  Africa,  the  Commission  made  proposals  for  three-way  cooperation,  EU-China-
Africa, to find common solutions to common challenges.  

The  Commission  pressed  for  more  regional  cooperation  and  economic  integration 
among  African-Caribbean-Pacific  (ACP)  partners  as  a  means  to  promote  growth, 
trade  and  development.  It  focussed  efforts  on  negotiations  for  regional  Economic 
Partnership Agreements (EPAs), with groups of sub-Saharan countries and with ACP 
countries  in  the  Caribbean  and  Pacific  regions.  ACP  states  also  benefited  from  the 
regional  component  of  the  new  EDF,  such  as  a  contribution  of  €300  million  to  the 
African Peace Facility, support for ACP institutions and for the Global Fund to fight 
AIDS, tuberculosis and malaria.  

During  the  year,  the  Commission  continued  efforts  to  conclude  formal  agreements 
with  strategic  Asian  partners,  China  and  India,  as  well  as  with  South  Korea  and 
members  of  ASEAN  (the  Association  of  South-East  Asian  Nations).  Assistance  to 
ASEAN concentrates on its integration efforts as outlined in the ASEAN economic 
community  blueprint,  and  builds  on  European  experience  with  regional  integration 
tools  such  as  statistics,  customs  and  common  standards.  The  Commission  also 
pursued negotiations for comprehensive Association Agreements (political dialogue, 
development  cooperation  and  preferential  trade)  with  the  Andean  Community  and 
with Central America. 

Getting the policies right 

The unforeseen events of 2008 did not distract the EU and the European Commission 
from their development priorities. During 2008, the Commission reviewed progress 
towards  the  Millennium  Development  Goals  at  mid-way.  It  assessed  EU  technical 
and financial assistance in the context of the eight MDGs. The Commission prepared 
the  EU's  agenda  for  action  on  the  MDGs  in  June.  This  sets  milestones  for  2010  to 
make  up  lost  ground  on  core  social  (particularly  health)  and  environmental targets. 
For  the  Lower  and  Middle-Income  Countries,  cooperation  concentrates  mainly  on 
supporting policies to reduce poverty. 

In fact,  these  events reinforced the need for  more  policy  coherence,  particularly  on 
big issues like climate change, where the EU is at the heart of the process, and world 
trade. The EU's high profile on climate change can directly benefit the poorest and 
most vulnerable developing countries as witnessed by the operational launch of the 
Adaptation Fund agreed at the UN Climate Change Conference in Poznan, Poland, in 
December  2008.  The  first  Voluntary  Partnership  Agreement  under  the  FLEGT 
(Forest law enforcement, governance and trade) initiative was concluded with Ghana 
in September 2008. 

In  2008,  the  Commission  increased  efforts  to  integrate  issues  like  gender,  the 
environment,  and  the  rights  of  children  and  indigenous  people  fully  into  the 
development process. In February, the Commission proposed a package of measures 
focussing on children in external actions. It sets a number of priorities at regional and 

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global level in relation to child labour, child trafficking, children affected by armed 
conflict and violence against children. During the year, the Commission took steps to 
make  sure  that  other  EU  policies  which  impact  on  development  cooperation  and 
assistance do so positively. These include not only trade but also agriculture, energy, 
research and development, migration, security and tax policy as well. During 2008, a 
number of Caribbean and Pacific countries undertook the commitment to implement 
the principles of good governance in the tax area which was among the criteria taken 
into account to allocate the 10th EDF Governance Incentive Tranche. 

The  Commission  has  moved  democratic  governance  to  the  top  of  its  agenda  as  a 
marker  and  reference  point  in  planning  and  delivering  its  technical  and  financial 
assistance. It sees democratic governance as a policy area to be supported per se as 
well as a cross-cutting issue incorporated into all aid programmes in all sectors. It is 
also a central theme in any policy dialogue. During 2008, the Commission defined a 
methodology  to  analyse  and  address  the  governance  issue  in  its  sector  operations. 
The challenge is that promoting democratic governance is a highly sensitive process 
and one which is specific to each country.  

In  2008,  the  Commission  worked  hard  to  make  its  aid  more  effective  by  creating 
coherence  and  synergy  between  the  relevant  geographic  and  thematic  instruments 
which  promote  democracy  and  human  rights.  In 
this  context,  geographic 
programmes  are  devoted  mainly  to  institution-building  and  democratic  processes 
such as elections. They provide electoral assistance, support for parliaments, human 
rights and civil society institutions, and the media. As the EU's main thematic tool, 
the European Instrument for Democracy and Human Rights (EIDHR) is the concrete 
expression of the importance the EU gives to this policy. The EIDHR can intervene 
in places where the EU is not normally present and, more crucially, even without the 
agreement of third countries. Its main beneficiaries are groups and individuals who 
are  struggling  for  democracy,  human  rights  and  fundamental  freedoms  within  civil 
society. 

Since the despatch of the first EU election observers to Russia in 1993, EU Election 
Observation  Missions  (EOMs)  have  become  a  highly-visible  tool  of  European 
diplomacy.  In  2008,  the  European  Commission  sent  EU  EOMs  to  monitor  national 
elections in 10 countries in Asia, Africa and Latin America: Pakistan, Bhutan, Nepal, 
Cambodia, Rwanda, Angola, Ecuador, Guinea-Bissau, Ghana, and Bangladesh. The 
European Commission is continuing its training programme for election observers in 
2009.  

More and better aid 

The  amount  of  aid  handled  by  the  Commission,  including  its  Delegations,  has 
increased steadily and substantially over recent years. The value of funds committed 
during 2008 reached €9.33 billion, an increase of more than 90% since 2001. Despite 
the  late  ratification  of  the  10th  EDF,  the  Commission  was  able  to  commit  €4.89 
billion  from  this  source  by  the  end  of  the  year.  In  this  effort,  the  Commission 
mobilises  its  various  financial  instruments:  the  EDF  for  ACP  countries,  the 
Development Cooperation Instrument for Asia and Latin America, and the European 
Neighbourhood Policy Instrument for eastern Europe and the southern Mediterranean 
countries. 

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The  European  Union  has  been  the  driving  force  behind  efforts  to  make  aid  more 
effective by channelling it through country systems to reinforce local ownership and 
reduce transaction costs for partner countries. The Third High-Level Forum on Aid 
Effectiveness in Accra, Ghana, in September laid special emphasis on the division of 
labour  among  donors,  the  use  of  country  systems,  the  predictability  of  aid,  mutual 
accountability for results and less conditionality. 

The output from the Forum, the Accra Agenda for Action (AAA), sits well with the 
EU’s  own  aspirations.  The  AAA  involves  a  wider  range  of  partners,  donors  and 
recipients than ever before. Partner countries themselves, emerging-country donors, 
middle-income countries and non-state actors, all play an increasingly important role. 
Looking beyond the AAA, the Commission will continue discussions with Member 
States  on  how  to  carry  forward  the  aid  effectiveness  agenda  at  a  European  and 
international level. It is a question of value for money – for the beneficiary countries, 
and for the European taxpayer.  

As  part  of  its  response  to  the  commitments  on  the  use  of  country  systems  and  aid 
predictability, the Commission finalised its proposals for the MDG-Contract, which 
will provide longer-term, more predictable form of general budget support targeted at 
good performing countries with a proven track record of successfully implementing 
budget  support.  MDG-Contracts  were  initially  approved  for  seven  ACP  countries 
(Burkina  Faso,  Ghana,  Mali,  Mozambique,  Rwanda,  Uganda,  and  Zambia), 
representing over 40% of programmed general budget support in the 10th EDF. 

During 2008, the Commission worked intensively to reform its technical cooperation 
and project implementation units. It adopted the so-called 'backbone strategy' in July. 
This defines a series of principles including focus on development of local capacity, 
a demand-led approach, partner country ownership throughout the management cycle 
of operations, and strong result-orientation.  

The  Commission  further  increased  the  share  of  development  aid  delivered  in  the 
form  of  budget  support,  its  preferred  delivery  vehicle  when  conditions  allow. 
Budget  support,  where  funds  are  transferred  to  the  national  treasury  of  the 
beneficiary country, is gradually replacing direct project-linked funding. During the 
year,  budget  support  commitments  represented  39%  (€3.86  billion)  of  all 
commitments from the EC budget and the EDF. 

The  funds  are  provided  either  as  general  budget  support  (GBS)  or  sector  budget 
support (SBS) where the focus is on one sector. In 2008, GBS commitments made up 
60%  of  all  new  budget  support  operations,  amounting  to  €2.3  billion.  The  main 
beneficiaries  were  ACP  (21  countries),  Asian  (Laos  and  Vietnam),  and  Latin 
American (Honduras). As for SBS, 2008 saw not only an increasing use of this aid 
vehicle  but  also  a  greater  diversity  in  the  sectors  covered,  especially  in  non-ACP 
countries1.  Total  SBS  commitments  amounted  to  €1.5  billion,  about  40%  of  new 
budget  support  operations  committed  in  2008.  SBS  operations  represented  18%  of 
new budget support commitments for the ACP region, nearly 60% in Asia, and up to 
100%  among  the  EU’s  eastern  and  southern  neighbours  and  South  Africa.  In  the 
latter  cases,  budget  support  operations  are  concentrated  in  areas  such  as  justice, 

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legislative  support,  energy,  trade  and  competitiveness.  In  Asia,  most  of  the 
commitments  were  in  the  social  sectors.  In  Latin  America,  the  main  sectors  were 
water  management,  education  and  employment.  Although  in  ACP  countries  SBS 
focused  on  traditional  sectors  (roads,  health  and  education),  some  new  sectors  like 
justice, professional training, decentralisation are also emerging. 

The  Commission  is  currently  developing,  in  consultation  with  other  donors  and 
Member States, a comprehensive methodology for evaluating both general and sector 
budget support operations at country level. This methodology will be tested in 2009-
2010  and  subsequently  refined.  In  2008,  a  comprehensive  overview  of  EC  general 
budget support programmes  was also undertaken coving 46 programmes.  It reveals 
that on average 70% of the variable tranche of payments which is based on specific 
performance indicators was disbursed. This is an indication that targeted results were 
achieved at a fairly high level.  

One  of  the  criteria  beneficiary  countries  must  demonstrate  in  order  to  qualify  for 
budget  support  is  their  ability  to  manage  public  finances.  Effective  public  finance 
management  (PFM)  is  essential  to  ensure  that  governments  are  accountable  for 
European taxpayers’ money entrusted to them for the benefit of their population. 

As with most other donors (including the IMF and the World Bank), the EC uses an 
initial  dynamic  PFM  diagnosis  as  the  baseline  for  measuring  progress  over  time. 
From June 2005 to the end of 2008, so-called PEFA2 assessments were carried out in 
55 ACP countries. All ACP countries and nearly all other countries around the world 
benefiting from EC budget support had completed a PEFA assessment by end-2008. 

The  Commission  has  committed  itself  to  make  budget  support  more  effective  and 
transparent  by  strengthening  PFM  assessments,  improving  the  structure  and 
formulation of financial agreements, refining further the eligibility criteria for budget 
support and risk assessments, and improving reporting systems.  

In future, budget support operations will increasingly be used to meet the financing 
requirements  of  developing  countries.  The  Commission  will  continue  to  look  after 
the special needs of fragile states. 

Focus on results  

The  Results-Oriented  Monitoring  (ROM)  system  has  become  an  integral  part  of 
implementing  most  Commission  programmes.  It  provides  a  transparent,  rapid  and 
comprehensive review of how a project is progressing at a given point in time. It is 
carried  out  in  all  regions  of  external  cooperation  by  independent  experts.  Using  a 
well-structured  and  robust  methodology,  findings  are  presented  according  to 
internationally agreed criteria3. After eight years, ROM has proved its usefulness not 
only  at  project  level  to  inform  on  project  performance,  but  also  at  macro  level  to 
support management decisions, and at programming level to provide qualitative data 
for analysis.  

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Public Expenditure & Financial Accountability is a methodology applied by the EC and other leading 
donors to assess public financial management by beneficiary countries. 
Relevance and design, efficiency, effectiveness, impact and sustainability. 

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In  2006,-2008,  more  than  530  completed  projects  were  monitored  by  the  ROM  ex 
post  methodology.  A  2007  study  examined  its  potential  benefits  and  confirmed  ex 
post  ROM  as  a  cost-effective  and  flexible  tool.  For  ongoing  projects,  the  ROM 
methodology  has  been  streamlined  and  improved,  so  as  to  better  cover  important 
topics  such  as  the  mainstreaming  of  gender  and  environmental  issues.  The  need  to 
move forward from purely quantitative to more qualitative analysis of ROM data was 
also tackled in 2008. 

In addition, eight evaluation reports were completed in 2008: four geographical, one 
thematic and three on aid delivery modalities. Twelve new evaluations were initiated. 
Ten  concern  individual  countries  while  the  other  two  deal  with  conflict  prevention 
and  peace  building,  and  employment  and  social  inclusion.  The  Commission  takes 
into account the results of these evaluations to improve the quality and impact of its 
external assistance. In general terms, the evaluations showed a good performance in 
terms of relevance and effectiveness of EC programming and implementation. Areas 
where more efforts are needed include: synergy between activities; mix of modalities 
for delivering aid; and coherence between country and regional aid. The EC has also 
undertaken efforts to increase the visibility of its activities especially when funds are 
channelled through International Organisations or through budget support. 

Working together 

More  donor  coordination,  particularly  through  sharing  expertise  and  concentrating 
activities (division of labour), is important for increasing aid effectiveness. It is now 
practised in many countries. Tanzania, Mozambique, Uganda, Ghana, Burkina Faso 
and  Mali  are  examples  of  sub-Saharan  African  countries  where  coordination  is 
advanced and a clear division of labour is applied. In December 2008, a conference 
on EU donor coordination in Latin America was organised by the Commission and 
the  French  EU  Presidency.  In  Afghanistan,  a  joint  EU  contribution  on  aid 
effectiveness  was  prepared  as  part  of  a  response  to  the  Afghan  National 
Development Strategy. In Occupied Palestinian Territory, the EC created an efficient 
instrument, PEGASE, to deliver aid including contributions by Member States. Since 
it was launched in February 2008, PEGASE had disbursed (in the 12 months to 31 
January  2009)  €409.2  million  in  direct  fina ncial  support.  It  has  also  managed  over 
€131 million from 14 EU Member States of which 78% was disbursed in the same 
period. 

The Commission continued to channel part of its development aid through the United 
Nations,  the  World  Bank  and  other  international  organisations  where  this  was  the 
most effective means of delivery. In Iraq, most of the EC €785 million support since 
2003 has been channelled through the IRFFI (the International Reconstruction Fund 
Facility  in  Iraq),  a  multilateral  mechanism  established  in  2004.  Two  major 
evaluations  completed  in  2008  came  to  the  conclusion  that  the  Commission,  the 
World Bank and UN agencies have benefited from this increased cooperation, which 
has  been  facilitated  through  financial  and  administrative  framework  agreements. 
These  have  made  it  possible  for  the  Commission  to  provide  assistance  in  countries 
where conditions on the ground were too difficult and hazardous for it to establish its 
own delivery channels. However, a new strategic approach needs to be considered, 
and visibility must be reinforced.  

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In addition, the Commission strengthened its cooperation with the UN and the World 
Bank for responding to post-crisis situations and for planning recovery operations by 
way of a joint declaration signed on 25 September 2008. The initiative establishes a 
common  platform  for  the  delivery  of  an  effective  and  sustainable  international 
response after disaster- and conflict-related crises. All donors and partners are invited 
to join this effort.  

In  2008,  the  Neighbourhood  Investment  Facility  (NIF)  was  established  to  pool 
together  grant  resources  from  the  Commission  and  the  Member  States  to  leverage 
investments  in  partner  countries  provided  by  European  public  finance  institutions. 
The  lending  operations  mainly  focus  on  mainly  on  three  priority  sectors:  energy, 
transport and the environment. The facility approved 15 projects for financing via a 
total NIF contribution of €70.95 million. This leveraged loans from European finance 
institutions  of  €1.65  billion.  In  addition 
to  the  EC  Budget  contribution,  Member 
States have to date pledged €37 million of di rect contributions to the NIF Trust Fund 
for 2008-2010. 

Finally,  the  Commission  issued  a  policy  paper  on  Local  Authorities:  Actors  for 
Development to set out the first elements of a strategy which will capitalise on local 
authorities' experience as partners in development. 

In 2009, the economic crisis will with no doubt make the situation of many countries 
more fragile. Attaining the Millennium Development Goals will become harder. This 
is  why  EU  external  assistance  policy  focuses  on  achieving  concrete  results, 
enhancing  the  flexibility  of  its  aid  instruments  and  fostering  action  on  regional 
integration.  

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2000-2008 Poverty focus

Net Disbursem ents

43.1%

36.9%

32.7%

16.3%

10.4%

44.5%

43.7%

44.3%

43.6%

44. 3%

35.8%

33.4%

33.5%

32.9%

30.7%

31. 0%

41.0%

35. 0%

35.1%

21.8%

22.4%

24.9%

22.3%

8.7%

10.3%

10.8%

8.6%

27.9%

18.1%

10.7%

10.4%

26. 6%

19. 1%

10.0%

9.2%

26.0%

20.0%

13.0%

5. 9%

2.5%

3.0%

2.9%

45.8%

32.0%

21.6%

18.4%

10.4%

3.1%

39.5%

37.9%

26.7%

15.1%

11.2%

5.3%

50%

40%

30%

20%

10%

0%

2000

2001

2002

2003

2004

2005

2006

2007

2008

LDC

OLIC

LMIC

UMIC

REGION / UNALLOC

LDC+OLIC

2 000-2 003 EC rep orting to  DAC (following  the same metho d: LDCs/L ICs co untry specific a llocations -includin g EIB - /Total disbu rsements)
2 004 Ann ual Repor t informa tio n
2 005, 2006 , 200 7 A nnua l Rep ort in fo rmation accord ing to  DAC List of recipie nt up dated in 200 6
2 008 Pro vision al fig ures Ann ual Repor t exercise  -  Accor ding to DA C List o f recip ient u pdated in 200 8.

L DC : Le ast Develope d Co untries

O LIC : O th er Low Incom e Cou ntries

L MIC : Lower Middl e Income  Cou ntries

UMIC : Upp er Middle Income Coun trie s
REG IO N / UNA LLOC : Reg ional Pro gram mes a nd Unallocated

Figures  on  poverty  reduction  confirm  the  trend  of  previous  years,  with  35%  of 
Official  Development  Assistance  (ODA)  going  to  least  developed  countries.  The 
reduction of ODA to Other Low-Income Countries (OLIC) is mainly the result of a 
revision  in  the  list  of  ODA  recipients  carried  out  by  the  OECD's  Development 
Assistance  Committee  (DAC).  In  the  new  DAC  list,  which  took  effect  in  2008,  a 
number  of  OLICs  have  been  reclassified  as  Lower  Middle-Income  Countries: 
Cameroon,  Cape  Verde,  India,  Republic  of  Moldova,  Mongolia,  Nicaragua,  and 
Republic of Congo. 

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Sectoral Breakdown

9. Other/unallocated : 
Admin. costs, support to 
NGOs, unspecified;  785 
M€; 6.5%

7. Emergency assistance, 
reconstruction relief; 1 115 
M€; 9.3%

6. Action relating to debt; 
65 M€; 0.5%

5. Budget support, food 
aid, food security; 2 666 
M€; 22.2%

4. Multisector/crosscutting : 
Environment, other;  993 
M€; 8.3%

3. Production : Agriculture, 
forestry and fishing, 
industry, mining and 
construction, trade and 
tourism;  748 M€; 6.2%

Commitments 2008 (€ million)
ODA/OA resources managed by European Commission

1. Social infrastructures: 
Education, health, water, 
government and civil 
society, other ; 3 864 M€; 
32.1%

2. Economic infrastructures 
and services : Transport, 
communications, energy, 
other services; 1 786 M€; 
14.9%

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European Consensus : Areas relating to EU development cooperation

1. Governance and support 
for economic and 
institutional reforms; 1 404 
M€; 11.7%

2. Trade and regional 
integration;  413 M€; 3.4%

10. Multi areas; 3 837 M€; 
31.9%

9. Conflict prevention and 
fragile states; 1 645 M€; 
13.7%

3. Infrastructure and 
transport; 1 402 M€; 11.7%

4. Water and energy;  433 
M€; 3.6%

5.Social cohesion and 
employment;  655 M€; 
5.4%

6. Human and social 
development; 1 128 M€; 
9.4%

8. The environment and 
sustainable management 
of natural resources;  344 
M€; 2.9%

7. Rural development, 
territorial planning, 
agriculture and food 
security; 761 M€; 6 3%

Commitments 2008 (€ million)
ODA/OA resources managed by European Commission

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