GREEN PAPER EU development policy in support of inclusive growth and sustainable development  Increasing the impact of EU development policy
Date: 2010-11-10
Institutions: European Commission
Subjects: development policy, economic growth, economic policy, sustainable development

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EUROPEAN COMMISSION 

Brussels, 10.11.2010 
COM(2010) 629 final 

GREEN PAPER 

EU development policy in support of inclusive growth and sustainable development 

Increasing the impact of EU development policy 

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TABLE OF CONTENTS 

1. 

2. 

2.1. 

2.2. 

2.3. 

2.4. 

2.5. 

2.6. 

2.7. 

3. 

3.1. 

3.2. 

4. 

4.1. 

4.2. 

5. 

6. 

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

High impact development policy ................................................................................. 6 

Putting “High Impact” cooperation into practice......................................................... 6 

Growth for human development .................................................................................. 7 

Promoting Governance................................................................................................. 7 

Security and fragility.................................................................................................... 8 

Making coordination of aid a reality............................................................................ 9 

Policy Coherence for Development ........................................................................... 10 

Improving the impact of Budget Support................................................................... 11 

Development policy as a catalyst for inclusive and sustainable growth.................... 11 

Partnerships for inclusive growth............................................................................... 12 

Fostering regional integration; continuing to ensure trade for development ............. 14 

Sustainable development, a new driver...................................................................... 15 

Climate change, biodiversity and development ......................................................... 15 

Energy and development............................................................................................ 17 

Agriculture and Food security.................................................................................... 19 

Conclusion.................................................................................................................. 21 

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1. 

INTRODUCTION 

In  2000,  developed  and  developing  countries  adopted  the  Millennium  Development  Goals 
(MDGs);  8  main  goals  and  underlying  targets  to  reduce  poverty  by  2015.  As  recently 
acknowledged by world leaders at the High-Level Plenary Meeting of the General Assembly 
in New York on 20-22 September 2010, although progress is mixed in terms of both MDGs 
and countries, much has been achieved and millions of people have pulled themselves out of 
poverty. 

However,  while  in  the  past  decade  economic  growth  has  been  robust  in  many  parts  of  the 
world, a great deal remains to be done and many developing countries risk lagging behind in 
recovering from the negative impacts of the global economic and financial crisis. Around 1.5 
billion people still live in extreme poverty (half of them in Sub-Saharan Africa) and one sixth 
of  the  world’s  population  is  undernourished.  In  many  of  the  least  developed  countries 
resilience  in  the  face  of  the  current  economic  crisis  has  been  fragile,  with  GDP  in  these 
countries  generally  reducing  in  2009.  There  has  been  very  little  progress  in  the  MDGs  on 
reducing  maternal  and  child  mortality,  and  quality  of  education  and  prospects  for  access  to 
sanitation are concerns. Furthermore progress has varied greatly between regions and in some 
cases  the  benefits  of  growth  have  not  been  felt  by  the  wider  population  even  in  countries 
where economic growth is robust.  

As  for  the  European  Union  (EU)  and  its  Member  States,  over  the  last  ten  years,  and  in 
particular  since  the  adoption  of  the  European  Consensus  on  Development1  in  2005,  it  has 
doubled  the  amount  of  official  development  assistance  (ODA)  it  provides,  improved  its 
performance  in  terms  of  aid  delivery,  and  Member  States  have  rallied  around  shared  policy 
approaches.  Aid  effectiveness2  has  improved,  partnerships  and  cooperation  agreements  as 
well as financial instruments have been modernised, and mechanisms have been put in place 
to improve policy coherence for development (PCD)3. Recognising that its partner countries 
bear primary responsibility for defining their own development strategies while emphasising 
the  key  role  of  good  governance,  the  EU  has  increasingly  moved  from  a  donor-beneficiary 
type  of  relationship  to  a  partnership4,  involving  contractual  approaches,  based  on  policy 
dialogue and linking results to specific cooperation programmes or instruments. 

In  2010,  the  EU  adopted  an  ambitious  position  in  support  of  the  MDGs,  including  the 
reaffirmation of the collective target of devoting 0.7% of its GNI to ODA by 2015. It remains 
the world’s leading donor. It has made a real difference on the ground to millions of people 
around the world. Whilst recognising that further efforts are needed, the EU is proud of these 
achievements;  for  the  Union  development  assistance  remains  a  matter  of  solidarity,  of 
commitment and of mutual interest. Indeed, the Lisbon Treaty has placed development policy 
at  the  heart  of  the  EU's  objectives,  Article  208  specifying  that  "Union  development 
cooperation policy shall have as its primary objective the reduction, and, in the long term, the 

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4 

http://ec.europa.eu/development/icenter/repository/european_consensus_2005_en.pdf  
http://ec.europa.eu/development/how/aid_effectiveness_en.cfm  
http://ec.europa.eu/development/policies/policy_coherence_en.cfm  
In  recent  years,  the  EU  has  established  various  partnership  agreements  that  govern  its  relations  with 
developing  and  emerging  countries  such  as  the  Africa-EU  Strategic  Partnership,  the  revised  Cotonou 
Agreement with ACP States,  EU strategic partnerships with emerging and transition economies or the 
Central Asia Strategy.  

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eradication  of  poverty.  The  Union  shall  take  account  of  the  objectives  of  development 
cooperation in the policies that it implements which are likely to affect developing countries". 

Development  assistance  will  continue  to  require  long-term  financial  commitment.  It  is 
therefore  particularly  important  to  demonstrate  its  relevance  to  EU  citizens,  and  this  for  a 
number of reasons, notably to address poverty reduction and other global challenges. Climate 
change  is  closely  interlinked  with  development  as  it  further  enhances  the  need  for 
development assistance and requires increased focus on other major questions such as energy 
access  and  security,  water  scarcity  and  food  security.  Development  assistance  needs  to 
address  bad  or  weak  governance  which  provides  fertile  ground  for  terrorism,  piracy, 
trafficking and criminality; to better manage migration flows by facilitating legal migration in 
line  with  labour  markets  needs,  fighting  illegal  migration  and  making  migration  work  for 
development;  to  promote  economic  growth  in  developing  countries  and  accompany  their 
integration into the world economy. In this framework, development education and awareness 
raising  are  of  strategic  importance  in  view  of  gaining  the  support  of  European  citizens  for 
development cooperation. 

The review of progress on the MDGs therefore makes it clear that the world needs to do more 
in  support  of  countries'  efforts  towards  the  MDGs,  not  just  in  terms  of  ODA  levels,  but  at 
least  as  importantly,  in  terms  of  how  aid  is  granted  and  used.  In  particular,  aid  alone  will 
never  succeed  in  pulling  millions  of  people  out  of  poverty.  Beyond  safeguarding  and 
improving essential services, development assistance can only be effective by addressing the 
underlying causes of insufficient progress towards the MDGs. Aid is not a panacea and is one 
of  several  financial  flows  towards  developing  countries.  It  must  tackle  the  roots  of  poverty 
rather  than  its  symptoms,  and  primarily  be  a  catalyst  of  developing  countries'  capacity  to 
generate  inclusive  growth,  which  allows  people  to  contribute  and  benefit  from  economic 
growth,  and  to  mobilise  their  economic,  natural  and  human  resources  in  support  of  poverty 
reduction strategies. It is thus increasingly obvious that MDGs will not be achieved without 
more  and  more  inclusive  growth.  A  1%  increase  in  developing  countries'  gross  national 
income can be far more effective than an increase in aid to these countries. It can significantly 
improve countries' capacity to achieve poverty reduction and have a multiplier effect through 
employment creation and social protection. 

The achievement of the MDGs by 2015 must therefore remain Europe’s first and overriding 
priority,  and  the  European  Consensus  on  Development  provides  the  fundamental  principles 
for  moving  forward5.  Combating  global  poverty  is  one  of  Europe's  core  values,  goals  and 
interests. And there is clear evidence that pursuing this objective at EU level can offer high 
added value, notably by ensuring a global and coherent reach and presence across the world, 
creating  scale  and  political  weight  of  action,  as  well  as  division  of  labour  leading  to  aid 
efficiency gains both in the EU and in partner countries. 

Given the current challenges, this Green Paper seeks to launch a debate on how the EU can 
best support developing countries' efforts to speed up progress towards the MDGs, and how it 
can strive to leverage new opportunities to reduce poverty. It sets questions around four main 
objectives to be pursued collaboratively by the EU and its Member States: 

5 

Notably comprehensive approaches to poverty reduction, ownership and alignment on partner countries, 
coordination and policy coherence. 

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•  how to ensure high EU impact development policy, so that every euro spent provides the 
best  value  added  and  value  for  money,  the  best  leverage  and  the  best  legacy  of 
opportunities for generations to come, 

•  how to facilitate more, and more inclusive, growth in developing countries, as a means 
of reducing poverty and providing a chance for all to have a decent living and a perspective 
for their future. 

•  how to promote sustainable development as a driver for progress, and 

•  how to achieve durable results in the area of agriculture and food security.  

be 

Paper  will 

the  Commission's  website 
published 
This  Green 
(http://ec.europa.eu/yourvoice/).  The consultation  will  run  from  15 November  to  17 January 
2011  and  is  open  to  any  interested  stakeholder.  Individuals,  organisations  and  countries  are 
invited  to  send  their  contributions,  in  the  form  of  answers  to  the  questions  presented  in  the 
document and/or as general comments on the issues raised. In particular, contributions would 
be greatly valued from the EU's partners in developing countries. 

on 

Contributions  received  will  be  published,  possibly  in  a  summarised  form,  unless  the  author 
objects to publication of their personal data on the grounds that such publication would harm 
his/her  legitimate  interests.  In  this  case,  the  contribution  may  be  published  in  anonymous 
form. Otherwise,  the  contribution  will not be  published  nor, in principle,  will its  content be 
taken  into  account.  Furthermore,  since  the  launch  in  June  2008  of  the  Register  for  Interest 
Representatives (lobbyists) as part of the European Transparency Initiative, organisations are 
invited to use this Register to provide the European Commission and the public at large with 
information  about  their  objectives,  funding  and  structures.  It  is  Commission  policy  that 
submissions  from  organisations  will  be  considered  as  individual  contributions  unless  the 
organisations have registered 

Contributions should be sent to DEV-GREENPAPER-EUDEVPOL@ec.europa.eu. Enquiries 
about this consultation can be made to the same mailbox, or to the European Commission, DG 
Development, Unit A/1, Office SC-15 03/70, 1049 Brussels, Belgium. 

The result of this consultation will inform the Commission's proposals related to modernising 
European development policy to be made in the second half of 2011 as well as other policy 
initiatives in related fields. 

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2. 

HIGH IMPACT DEVELOPMENT POLICY 

The  impact  of  cooperation  is  influenced  by  a  whole  range  of  factors  that  shape  the  broader 
framework  of  EU  development  policy,  including  the  global  economic  context,  partner 
countries'  own  policies,  the  coherence  of  donors'  policies  (on  trade,  agriculture,  migration, 
humanitarian  policies,  climate  mitigation,  etc.),  and  the  policy  dialogue  that  precedes  aid 
programming  decisions.  In  certain  countries,  the  external  dimension  of  EU  policies  has  a 
greater impact on development than aid.  

That said, the financing needs to meet the MDGs go far beyond public funds available today, 
be  it  at  national  level  in  developing  countries  or  at  international  level  through  development 
cooperation  and  the  emerging  South-South  cooperation.  Moreover,  in  the  current  economic 
and  financial  context,  the  need  for  fiscal  consolidation  will  exert  increasing  pressure  on 
donors' aid budgets. Innovative solutions must seriously be considered. They include options 
considered  in  the  framework  of  the  debate  on  innovative  sources  of  financing6  "with 
significant revenue generation potential"7 as well as efforts to improve the impact of existing 
ODA flows. 

It is clear that European aid must bring strong value added and real value for money, and must 
focus  on  areas  where  a  clear  added  value  can  be  shown.  Put  simply  it  means  that,  in  all 
relevant forms and all sectors, the EU has to demonstrate that its aid programmes will provide 
the greatest long term impact and will be used as a key instrument to focus on achieving the 
MDGs  and  beyond.  This  starts  primarily  by  targeting  four  fundamental  and  underlying 
requirements:  human  development  and  security  as  preconditions  for  any  country's 
development, growth and social inclusiveness for any long lasting engagement. These are all 
necessary and complementary conditions on which we need to work consistently. 

2.1. 

Putting “High Impact” cooperation into practice 

It is important that the objectives outlined above are reflected in all stages of the programming 
and  expenditure  cycle,  thus  investing  in  projects  where  one  Euro  spent,  be  it  from 
development aid, climate finance, or other aid budgets, can result in leverage and growth in 
the  partner  country.  The  EU  and  its  Member  States  might  consider  a  certain  number  of 
conditions to be met for programmes/projects/support, in terms of: 

(i) Added Value,  

(ii)  Prerequisite  of  EU  co-ordination  prior  to  approval  of  grants/programming  for  example 
through the existence of a European Country Strategy document,  

(iii)  Demonstration  that  the  programmes/grants/budget  support  proposed  will  produce 
leverage  on  reforms  and  sound  policies  on  one  hand,  and  on  other  sources  of  funding 
(including  by  involving  the  private  sector  or  mobilising  domestic  fiscal  resources),  on  the 
other. 

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COM(2010) 549, and COM(2010) 700.  
Council Conclusions on the Millennium Development Goals for the United Nations High-Level Plenary 
meeting in New York and beyond – Supporting the achievement of the Millennium Development Goals 
by 2015, 11080/10, 14 June 2010 

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In addition, the monitoring and evaluation of and communication on achievements of aid are 
of  increasing  importance  against  the  background  of  ongoing  fiscal  consolidation  as  aid 
budgets  may  come  under  increasing  pressure.  Increasing  the  accountability  and  visibility  of 
the  EU's  contribution  also  shows  its  partners  that  it  has  delivered  on  its  international 
commitments. We therefore need to be able to convincingly demonstrate the achievements of 
EU development cooperation. This will require increased efforts to strengthen monitoring and 
evaluation systems as well as reporting requirements in both the EU and its partner countries. 

1. 

2. 

3. 

How could the EU and its Member States develop a set of Guidance Instructions on 
programming  and  expenditure  requiring  a  certain  number  of  conditions  to  be  met 
(added value, coordination, impact) for all programmes/projects/support? 

What are current good practises at EU and Member State level on which to build? 

How could the diversity of aid flows (from public and private sources, from various 
policies' external action budgets) be adequately combined, tracked and reported on 
for maximum impact, accountability and visibility? 

2.2. 

Growth for human development  

Without a food-secure, educated and healthy population, a country can never grow and pull 
itself out of poverty. Economic growth has to be socially inclusive if it is to deliver sustained 
development  benefits,  requiring  coherence  and  balance  across  policies.  Reduction  of 
inequalities through income generation, including productive and decent employment, gender 
equality,  social  protection,  as  well  as  universal  access  to  quality  education  and  training,  a 
responsive higher education system which can supply the human resources required, as well 
as  health  care  services  are  of  key  importance  to  reduce  poverty,  achieve  the  MDGs  and 
contribute to social cohesion, human rights and peace.  

These must and will remain priorities of the EU and Member States' development efforts in 
the countries most in need. 

Building  on  its  deep  experience  of  support  for  human  and  social  development  and  looking 
beyond the traditional areas of activity, the EU is now in a position to review how to better 
integrate  a  focus  on  skills,  innovation,  creativity  and  entrepreneurship,  in  a  comprehensive 
approach to social policies, and how to support active labour market policies, the decent work 
agenda, and the development of effective national social protection systems. 

4. 

5. 

How  can  the  EU  and  its  Member  States  best  ensure  that  aid  on  education  and 
healthcare becomes more focused, and increases further its impact, effectiveness in 
terms of human development and growth? 

How should the EU support skills development in partner countries in line with the 
features  and  needs  of  local  labour  markets,  including  in  the  informal  sector?  How 
could the EU's global approach to migration contribute in this regard? 

2.3. 

Promoting Governance  

Experience has shown that without good governance the effect of aid programmes will have a 
limited  effect  and  ensuring  high  impact  cooperation  will  always  be  extremely  difficult. 
Democratic governance, the respect for human rights, the fight against corruption, the rule of 
law and institution and state building are integral parts of the EU's cooperation strategies.  

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Effective governance requires sound financial management of funds and effective prevention, 
control,  and  sanction/reparation mechanisms to fight corruption and fraud.The promotion of 
transparency, accountability and participation in decision-making also play a key role, notably 
through the role of Parliament, an independent judiciary system and audit institutions. Focus 
must also be put on enhancing the regulatory capacity of governments with a view to creating 
a  business-friendly  environment  which  would  make  the  best  use  of  domestic  resources  and 
attract  domestic  and  foreign  investment,  combined  with  mechanisms  to  ensure  that  the 
benefits of growth reach all parts of society. In this regard, the EU's experience on transition 
can be valued. Civil society organisations are also vital partners. In its political dialogue with 
national  authorities,  the  EU  promotes  minimum  standards  of  an  enabling  environment  for 
civil  society  organisations  and  encourages  a  genuine  dialogue  between  State  and  Non-State 
Actors.  

Dialogue between partners and a focus on providing incentives for result-oriented reforms are 
the  main  principles  of  the  current  EU  approach.  This  is  done  by  integrating  indicators  of 
progress both in the periodic reviews of aid allocations and in specific programmes or budget 
support. The EU has already moved towards contractual and demand-based aid programming, 
for example in the form of the Governance Initiative8 with the African, Caribbean and Pacific 
(ACP) States, the MDG Contract9 and governance clauses in EU partnership agreements with 
the ACPs countries and countries in Asia, Latin America and the European Neighbourhood. 
The regional dimension of promoting governance is important to secure better acceptance and 
legitimacy of reforms. 

However, a continued focus on using aid as a catalyst for improvements in governance as an 
integral  part  of  development  partnerships  has  to  remain  a  priority  of  the  EU’s  development 
policy,  and  in  some  partner  countries  much  remains  to  be  achieved.  This  gives  rise  to  a 
number  of  questions  on  how  best  to  make  a  further  step  forwards  in  using  aid  to  promote 
governance.  For  example,  while  ex  ante  multiannual  country  allocations  bring  some 
predictability  to  developing  countries'  financing,  consideration  may  be  given  to  moving 
towards new approaches offering incentives for reforms and for mobilising internal resources. 

6. 

7. 

8. 

How  can  the  EU  adapt  its  approach,  instruments  and  indicators  in  support  of 
governance reforms in developing countries/regions? 

How and to what extent should the EU integrate more incentives for reform into its 
aid allocation process, for both country and thematic programmes? 

How should the EU promote sound frameworks to assess and monitor development 
results achieved by recipient countries? 

2.4. 

Security and fragility 

Without  peace  and  security,  the  rule  of  law,  adequate  and  predictable  legislation  or  sound 
public finances, aid will never succeed in giving people a long term future. This is enshrined 
in  both  the  European  Security  Strategy  and  the  European  Consensus  on  Development. 
Moreover,  a  close  link  between  the  EU’s  development  policy  and  the  EU's  wider  external 
action  is  vital  to  ensure  that  aid  is  effective,  based  on  a  well  coordinated  and  cost-effective 

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See  notably  the  Commission  staff  working  paper  on  "Supporting  democratic  governance  through  the 
governance initiative: A review and the way forward" - SEC(2009) 58, 19.11.2009. 
http://ec.europa.eu/development/how/aid/mdg-contract_en.cfm  

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approach at EU and Member State level. This is especially true in fragile states, post-conflict 
situations,  and  countries  where  a  combination  of  factors  provide  fertile  ground  for  the 
emergence of, or support to, social violence and violent extremism. 

The  post-Lisbon  Treaty  institutional  arrangements  in  the  EU  provide  an  opportunity  for  a 
more comprehensive and better coordinated European approach to address the root causes of 
conflicts  and  support  partner  countries'  efforts  to  build  peaceful,  democratic,  legitimate  and 
inclusive states.  

In particular, the EU, by making use of the new European External Action Service (EEAS), in 
collaboration with  the  relevant Commission services, might wish to establish consistent and 
comprehensive  political  strategies  linking  early  warning  and  preventive  diplomacy  to  short-
term,  crisis  response  measures  (humanitarian,  diplomatic,  civilian  and  military  crisis 
management) and to longer term instruments and policies (on development cooperation, trade, 
environment  and  adaptation  to  climate  change  to  reduce  vulnerability  to  natural  disasters, 
migration,  etc.).  These  could  also  integrate  a  proper  development  component  to  address 
governance,  state  building  and  other  development-related  reforms  required  to  sustain  peace 
and stability and foster human rights. 

In  this  context,  coherence  and  proper  articulation  with  humanitarian-related  activities  is 
the 
fundamental 
strengthening  of  their  resilience  and  the  effective  transition  from  emergency  response  to 
recovery. 

the  reduction  of  vulnerability  of  crises-prone  countries, 

towards 

9. 

10. 

11. 

How should the EU tackle the nexus between security and development, especially in 
fragile  and  conflict-prone  countries,  and  put  greater  emphasis  on  democratic 
governance, human rights, the rule of law, justice and reform of the security sector, 
when programming development interventions?  

How  could  the  EU  better  coordinate  with  development  actions  when  programming 
security interventions? 

How  can  the  EU  best  address  the  challenge  of  linking  relief,  rehabilitation  and 
development in transition and recovery situations? 

2.5.  Making coordination of aid a reality 

Effective coordination of aid programmes is a legal obligation for the Union and its Member 
States. Article 210 of  the Lisbon Treaty provides "In order to promote the complementarity 
and efficiency of their action, the Union and the Member States shall coordinate their policies 
on development cooperation and shall consult each other on their aid programmes including 
in  international  organisations  and  during  international  conferences."  The  importance  of  aid 
coordination  with  other  donors  has  been  enshrined  in  the  European  Consensus  on 
Development,  the  Code  of  Conduct10  and  the  Operational  Framework11  based  on  the 
international aid effectiveness agenda (Paris Declaration and Accra Agenda for Action)12. 

10 

11 

12 

Council  Conclusions  on  "EU  Code  of  Conduct  on  Complementarity  and  Division  of  Labour  in 
Development Policy", doc 9090/07, 15.5.2007. 
The EU Code of Conduct on Division of Labour and Complementarity and the Operational Framework 
on Aid Effectiveness. 
http://www.oecd.org/dataoecd/58/16/41202012.pdf  

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However, until now, truly effective aid coordination at the programming stage has remained 
an exception rather than a rule. 

Coordination  has  to  become  much  more  systematic  and  effective,  as  recognised  by  the 
Council13, which has invited the Commission to "present a proposal to the Council by 2011 
for progressive synchronisation  of  EU and national programming  cycles at  partner country 
level  and  based  on  partner  countries’  development  strategies  and  taking  into  account  their 
programming cycles". The Commission intends to put forward such a mechanism in 2011.  

12. 

What are the most appropriate manner and structures, legal and practical, to make 
aid  effectiveness  and  European  Country  Strategy  documents  a  reality?  How  can 
practical effect be best given to the Lisbon Treaty and the Council conclusion of 14 
June in that regard? 

2.6. 

Policy Coherence for Development 

Policy Coherence for Development is a legal requirement under the Lisbon Treaty14. Policies 
in areas such as trade, fisheries, agriculture, migration or climate and energy, just to name a 
few, can have a huge impact on the poorest countries' capacity to reduce poverty and grow. 

In  the  “Twelve-point  EU  action  plan  in  support  of  the  Millennium  Development  Goals” 
published by the Commission on 21 April 201015, the Commission underlined that “The EU 
also  supports  MDGs  by  making  other  policies  beyond  aid  more  supportive  of  development 
objectives. Over the last five years, the EU has put in place ex ante and ex post mechanisms to 
this  end,  including  impact  assessments  which  look  into  the  external  impact  of  policy 
proposals.  The  PCD  Work  Programme  sets  concrete  targets  and  indicators  of  progress  to 
implement  the  EU  commitments  on  PCD  across  a  whole  range  of  policies  impacting  the 
following five global challenges: trade and finance, climate change, food security, migration, 
and security. It is being used as a tool to guide EU decision-making, in particular involving 
the Commission, the Council and the Parliament, on the broad range of decisions that affect 
developing countries beyond development assistance. 

To  make  further  progress,  one  approach  may  be  to  use  the  PCD  Work  Programme  more 
proactively  and  at  an  earlier  stage  in  the  preparation  of  new  initiatives.  Further  work  and 
consultation  is  thus  needed  on  how  to  turn  this  commitment  into  a  concrete  programme  of 
action.  In  particular,  a  key  remaining  challenge  is  to  further  develop  current  approaches  to 
assess the concrete impact of EU policies on development objectives. 

13. 

What  practical  and  policy  related  measures  could  be  taken  in  the  EU  to  improve 
Policy  Coherence  for  Development?  How  could  progress  and  impact  be  best 
assessed? 

13 
14 

15 

Council Conclusions on the MDGs, 14 June 2010. 
Article  208  if  the  Treaty  on  the  Functioning  of  the  EU:  "(…)  The  Union  shall  take  account  of  the 
objectives  of  development  cooperation  in  the  policies  that  it  implements  which  are  likely  to  affect 
developing countries". 
http://ec.europa.eu/development/icenter/repository/COMM_COM_2010_0159_MDG_EN.PDF 

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2.7. 

Improving the impact of Budget Support 

Budget support is a way of implementing development aid which consists in giving financial 
aid to the treasuries of the recipient countries. Over the last years, budget support (general or 
sectoral)  has  become  important  at  EU  level  to  support  sound  economic  and  public  finance 
policies as well as the reform agendas of partner countries. The Commission is committed to 
ensuring that budget support is used selectively and with the maximum possible effectiveness, 
efficiency and impact.  

Given  the  importance  of  ensuring  a  comprehensive  review  on  the  use  of  this  important 
instrument,  a  Green  Paper  on  "The  Future  of  EU  Budget  Support  to  third  countries"16  has 
been  adopted  by  the  Commission  on  19  October  2010.  It  aims  at  a  widespread  public 
consultation, gathering views and evidence from relevant stakeholders on how lessons learned 
can result in improved use of budget support at both Community and Member State level in 
the future. 

3. 

DEVELOPMENT POLICY AS A CATALYST FOR INCLUSIVE AND SUSTAINABLE GROWTH 

The underlying objective of aid is to act as a catalyst, to support partner countries growth and 
in particular to help create an environment that is friendly to sustainable and inclusive growth, 
enabling these countries to pull themselves out of poverty. Economic growth, providing that it 
is  socially  inclusive,  produces  a  much  greater  effect  in  terms  of  poverty  reduction  than 
incremental increases in ODA.  

factors 

influence  a  growth 

friendly  environment, 

Many 
including  political  and 
macroeconomic  stability,  good  governance,  security,  respect  of  human  rights,  a  conducive 
regulatory  and  policy  business  environment  able  to  generate  productive  and  decent 
employment, a  well educated, healthy and creative population, the sustainable use of scarce 
natural  resources,  economic  infrastructure,  implementation  of  core  labour  standards,  and 
effective and beneficial participation in international trade.  

The  EU  is  already  working  in  all  those  areas  in  its  existing  partnerships  with  developing 
countries. A reflection is however needed on how to further improve its impact on growth, not 
as an end in itself, but as a means for poverty eradication.  

Obviously,  the  capacity  of  developing  countries  to  pursue  good  governance  and  growth 
enhancing  policies  differ  widely.  Growth  oriented  cooperation  will  be  more  appropriate  for 
countries which are embarking on policies on growth enabling factors and which provide for 
socially  inclusive  growth,  while  more  traditional  development  instruments  need  to  be 
continued  for  countries  most  in  need  or  those  in  a  conflict  cycle  or  in  a  fragile  situation. 
Differentiation between countries and regions may thus lead to develop new approaches for 
better  cooperating  with  countries  willing  to  engage  in  new  forms  of  partnerships,  while 
continuing  to  support  state  building,  good  governance  and  poverty  focused  strategies  where 
needed.  It  follows  that  a  country  specific  policy  mix,  which  recognises  its  particular 
challenges, is important, while working in partnership and respecting ownership, focusing on 
results and ensuring mutual accountability. 

16 

COM(2010) 586  
http://ec.europa.eu/development/how/consultation/index.cfm?action=viewcons&id=5221 

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Furthermore, EU action must be better coordinated and concentrate on areas where it can add 
true value. The Lisbon Treaty and the new institutional setting for the EU's common foreign 
and security policy, as well as new competences related to areas of interest for development17, 
provide opportunities for a sharpened strategic development policy in the wider framework of 
more effective external action.  

In  seeking  to  promote  development  policy  as  a  catalyst  for  inclusive  growth  the  following 
issues are particularly relevant. 

3.1. 

Partnerships for inclusive growth  

A  predictable, 
transparent,  rule-based  and  non-discriminatory  business  environment, 
combined  with  support  to  investment  in  the  productive  sector  and  the  existence  of  market 
opportunities, are all needed in order to attract and retain domestic and foreign investments. 
The  question  therefore  arises  whether  the  EU  should  consider  new  Joint  Strategies  for 
Inclusive  Growth  in  partnership  with  the  individual  or  regional  groupings  of  developing 
countries, also involving private-sector stakeholders — businesses, foundations, academia and 
civil  society  organisations  (CSOs)  at  large,  etc.  —  all  committed  to  the  goal  of  making 
measurable  progress  on  issues  where  they  can  act  together.  These  Joint  Strategies  can  be 
developed  within  exiting  formal  partnership  arrangements  between  EU  and  groups  of 
developing countries, or indeed with individual countries. 

Non-state actors are a force for and a component of development with their multiple roles of 
advocacy agents, service providers and donors or lenders in their own right, thereby bringing 
insight and added value. A regular dialogue with them needs to be sustained, such as the one 
launched by the Commission18 aiming at reaching consensus on the challenges ahead and the 
areas most in need of change. 

Such joint strategies can be based on a number of different priorities, with both the EU and 
partner countries agreeing clear respective responsibilities and deliverables such as:  

–  Promoting  and  supporting  productive  and  sustainable  investments,  both  foreign  and 
domestic, in the poorest developing countries, in particular those which do not benefit from 
increased  trade  and  do  not  currently  attract  large  investment  flows.  Possibilities  include 
leveraging  aid  to  support  ancillary  infrastructure  investment  to  accompany  private 
investment (e.g. to get products to market), and supporting projects that pose a level of risk 
making  it  difficult  to  attract  private  financing,  where  appropriate,  in  the  form  of  risk 
sharing finance. Such investment should aim less at supporting the development of existing 
industrial  activities,  notably  extractive  industries,  but  rather  focusing  on  activities  with 
higher  value  added,  notably  post-extractive  industries.  It  should  also  aim  to  benefit  the 
widest possible range of citizens in the country concerned.  

–  Access  to  capital  and  affordable  credit,  particularly  for  Small  and  Medium  Enterprises 
(SME)  and  micro-enterprises,  is  of  key  importance  to  support  the  growth  of  local 
agriculture, 
leverage  between  aid  and  financial 
instruments. In situations where access to domestic finance is difficult or not available, the 

industry  and  services,  fostering 

17 
18 

such as investment, migration. 
The Structured Dialogue on the involvement of civil society and local authorities in development was 
launched in March 2010 and will end in May 2011,   
https://webgate.ec.europa.eu/fpfis/mwikis/aidco/index.php/Structured_dialogue  

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EU  could  further  support  a  gradual  evolution  of  the  domestic banking  system  and  local 
capital markets allowing domestic or foreign investors to enter into operations with a clear 
impact  on  development,  which  they  would  otherwise  not  engage  in  because  of  the  risks 
involved. This might, for example, be achieved via an integrated EU fund or mechanism, 
operated  jointly  by  the  EU  institutions  and  European  development  banks  and  financial 
institutions  that  would  offer  subsidised  loans,  technical  and  financial  support  where 
necessary  and  risk  sharing,  in  a  closely  coordinated  manner,  to  promote  private 
investments in developing countries.  

–  Legal  and  regulatory  framework.  The  ease  and  cost  in  establishing  a  new  company, 
particularly  an  SME,  or  running  an  established  one,  plays  a  very  important  role.  This 
concerns  not  only  initial  registration  formalities,  but  for  example  subsequent  tax 
compliance, the fight against corruption and capital flight outside the country and permit 
issues. EU assistance, both financial and technical, can support reforms in this area, based 
on commitments and determination to introduce improvements by partner countries. This 
also includes investment protection, transparent and open business registration and closure 
procedures,  and  affordable  and  trustworthy  contract  enforcement  modalities.  Because  of 
growing pressures of global demand, the governance of rights related to the exploitation, 
management  or  alienation  of  natural  resources,  including  land,  water,  raw  materials  or 
fisheries is gaining importance. However, progress on such issues depends greatly on the 
determination of partner countries. 

–  Innovation:  Scientific  and  technological  cooperation  and  capacity-building,  as  well  as 
investment  in  knowledge,  innovation  and  new  technologies  can  play  a  key  role  in  fast-
tracking inclusive growth and lifting people out poverty. One of the greatest challenges for 
developing  countries  is  to  identify  and  exploit  the  areas  where  they  have  a  comparative 
advantage,  in  order  notably  to  be  able  to  compete  with  larger  emerging  countries.  Thus, 
country-specific  measures  to  encourage  technology  development  and  transfer  that  can  be 
translated  into  viable  businesses  are  of  paramount  importance  to  multiply  the  number  of 
investment  opportunities.  The  potential  growth  impact  of  cultural  and  creative  industries 
on the local economy of many developing countries should also be given special attention. 
Protection  and  enforcement  of  intellectual  property  rights  in  line  with  international 
obligations  and  taking  into  account  development  levels  and  needs  can  play  an  important 
role to support innovation. Information and Communication Technologies (ICT) can have 
a  huge  and  rapid  transformational  power  in  all  socio-economic  domains  and  are 
remarkably  cost effective  regarding the  provision  of  services  in  areas  such as  healthcare, 
education,  energy  and  environment  management, 
transport  systems,  government 
administration or trade and financial services19. 

–  Decent work and social protection: Higher inequality sharply reduces the pace of poverty 
reduction  and  has  considerable  adverse  effects  on  economic  growth.  By  reducing 
inequality  and  supporting  the  most  disadvantaged  people,  social  protection  promotes 
human  capital  investments,  enhances  productivity,  improves  socio-political  stability,  and 
contributes to the creation of sound institutions. An integrated employment and inclusive 
growth  agenda  focussing  on  skills,  productivity  and  a  regulatory  business-friendly 
environment is necessary. In EU cooperation with Latin American countries for instance, 

19 

Thanks  to  significant  technological  advancements  and  market  developments,  there  are  more  than  3 
billion  mobile  phones  in  use  in  developing  countries  today  and  ten  times  more  Internet  users  than  in 
2000. 

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social  cohesion  is  a  central  objective  and  is  considered  a  key  ingredient  for  inclusive 
growth. 

In  all  those  fields,  the  respect  for  human  rights  and  social  and  environmental  sustainability 
standards  must  be  ensured  by  reference  to  the  UN  Global  Compact  and  OECD  guidelines, 
either  by  means  of  sectoral  arrangements  or  regulations,  such  as  under  the  Forest  Law 
Enforcement,  Governance  and  Trade20  Agreements,  Fisheries  Partnership  Agreements, 
Extractive Industries Transparency Initiative21, or the Kimberley process22, or in the form of 
Corporate  Social  Responsibility23  and  accountability.  These  initiatives  should  complement, 
not substitute the efforts undertaken to enhance the business environment at country level and 
help to fill regulatory and enforcement gaps. 

14. 

15. 

16. 

17. 

18. 

How  and  to  what  extent  should  EU  aid  support  industrial  investment  projects  in 
developing countries and how can the correct balance be made between developing 
extractive/energy interests and promoting post extractive and industrial sectors?  

How can the EU ensure that support to economic development guarantees fair social 
inclusion of the benefits and provide better protection of social and economic rights, 
including 
labour  standards,  and  better  corporate 
accountability?  

implementation  of  core 

Which measures should be taken – and how should they be best differentiated – to 
assist developing countries' efforts in establishing an economic environment that is 
apt to promote business, particularly SMEs? 

Which  measures  or  structures  might  be  developed  with  partner  countries,  and 
European  and  international  financial  institutions  to  provide  financial  support  and 
where necessary low cost finance and financial guarantees to support such growth? 

Which  instruments  could  the  EU  use  to  promote  creativity,  innovation  and 
technology transfer and ensure their viable applications in developing countries? 

3.2. 

Fostering regional integration; continuing to ensure trade for development 

Fostering regional integration 

The  success  of  the  European  Union  in  producing  a  peaceful  and  prosperous  society  and 
extending the geographic scope of the Union has been in progressively integrating its markets, 
legally, economically, financially, politically and fiscally. Its focus on infrastructure, in terms 
of transport, telecoms and energy has enabled trade to develop and growth to flourish. It has 
found  that  the  key  to  growth  and  development  starts  with  an  integrated,  vibrant,  regional 
market.  

In the developing world, including in Africa, South-East and East Asia, and Latin America, a 
similar process is emerging, but at a much earlier stage of development. The overwhelming 
majority  of  African  trade  is  with  non-African  countries  and  there  exists  fragmentation  and 

20 
21 
22 
23 

http://ec.europa.eu/environment/forests/flegt.htm  
http://eiti.org/  
http://www.kimberleyprocess.com/  
http://ec.europa.eu/enterprise/policies/sustainable-business/corporate-social-responsibility/index_en.htm  

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overlaps  of  regional  groupings,  and  insufficient  infrastructure  connexions  between  the 
members of regional groupings.  

However,  in  recent  years  progress  towards  effective  regional  integration  has  accelerated  in 
many regions. Such progress has focused primarily on economic issues (as the EU focused on 
economic  integration  in  its  early  years).  However,  also  in  the  political  arena,  the  African 
Union  for  instance  has  recently  been  making  important  steps,  regarding  peace  and  security 
architecture and regional mediation. 

19. 

How  can  the  EU's  experience  better  inform  regions  seeking  to  strengthen  their 
integration? 

Continuing to ensure trade for development 

To fully release their economic potential, experience shows that developing countries need to 
implement  a  mix  and  sequencing  of  domestic  reform  and  international  policy  measures 
adapted to their own needs. Development usually involves the gradual liberalisation of trade 
in goods and services in a favourable business environment so as to facilitate integration into 
the world economy and regional integration.  

The  EU  has  one  of  the  most  open  markets  in  the  world  for  developing  countries.  Together 
with its Member States, it is a major provider of Aid for Trade, reaching an all-time high of 
€10.4 billion in 2008, an  increase  of €3.4  billio n  (48%) since 2007. Over the years, the  EU 
has deployed trade instruments to support both social and economic well-being in developing 
countries.  

The key objectives for the near future are to keep ensuring consistency between the EU's trade 
policy  and  the  objectives  of  development  cooperation,  to  conclude  comprehensive 
development-friendly  cooperation  and  trade  agreements  with  a  variety  of  developing 
countries, to continue strengthening Aid for Trade efforts and impacts on the ground and to 
explore the synergies between national and regional strategies for trade. 

20. 

21. 

What  can  be  done  to  ensure  more  consistency  between  the  EU's  trade  and 
development policies? 

How  to  improve  the  aid  for  trade  provisions  in  order  to  make  maximum  use  of  its 
leveraging potential for expanding sustainable economic activities in the developing 
countries, leading to further growth? 

4. 

SUSTAINABLE DEVELOPMENT, A NEW DRIVER  

The developing world is expected to be one of the main drivers of global growth in the next 
decades; both in economic and population terms. Ensuring accelerated and widespread growth 
presents  huge  challenges  in  terms  of  environmental  sustainability  and  climate  change 
adaptation and mitigation measures, but it is clear that the need to address climate change can 
not be a reason to limit efforts to lift the world's poorest citizens out of poverty.  

4.1. 

Climate change, biodiversity and development 

Climate  change  is  one  of  the  greatest  challenges  of  this  century  affecting  the  developing 
world and poses the greatest risks to the progress towards achieving the MDGs. To lift people 

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out of poverty will require ensuring that more people have access to energy; this will lead to a 
huge increase in energy consumption with an associated impact on Greenhouse Gas emissions 
and  the  global  environment.  Therefore,  sustainable  development  needs  to  be  at  the  core  of 
both  our  development  and  climate  change  policy  to  ensure  that  action  to  combat  Climate 
Change benefits, rather than increases the risk to, the growth potential of the world's poorest 
citizens.  

Development  based  on  the  sustainable  economy  could  provide  the  developing  world  with 
many  opportunities  for  growth.  The  most  effective  way  to  achieve  this  is  to  mainstream 
climate change in development. A strategic approach which “climate proofs” development - 
combining  mitigation,  adaptation  and  disaster  risk  reduction  and  prevention  activities,  is 
crucial, and initiatives mixing low carbon development with strategic resilient planning will 
provide multiple benefits in developing countries24.  

Sustainable  development  requires  strategies  addressing  economic,  social  and  environmental 
issues.  From  the  environmental  point  of  view,  sustainability  needs  to  address  both  use  and 
management  of  natural  resources,  in  particular  land,  water,  forests  and  biodiversity. 
Integrating adaptation priorities and moving towards low-carbon development will be vital in 
ensuring the sustainability of development.  

Developing  countries'  economies  depend  significantly  on  the  exploitation  of  natural 
resources,  such  as  agriculture  and  raw  materials.  At  the  same  time  there  is  increasing 
recognition that ecosystems, such as forests and wetlands, have an important role to play as 
economically  productive  assets  that  generate  flows  of  beneficial  goods  and  services.  As  a 
result  it  is  crucial  to  understand  how  dependant  businesses  may  be  on  biodiversity  and 
ecosystem services and to consider the full impact the loss of biodiversity may have on the 
potential  to  develop  new  products,  new  jobs  and  new  technologies.  The  Economics  of 
Ecosystems and Biodiversity (TEEB) study raised awareness of this challenge by putting an 
economic value  on a broad  range of services provided by nature  which before had no  price 
under conventional economic models. 

Managing  natural  ecosystems  as  carbon  sinks  and  resources  for  adaptation  is  increasingly 
recognized  as  a  necessary,  efficient  and  relatively  cost-effective  climate  solution.  Various 
land  use  management  strategies  are  needed  to  reduce  the  emission  of  GHGs  from  land  use 
change,  and  to  sustain  ecosystem  services  that  are  vital  in  adapting  to  climate  change. 
Protected areas, in particular, play a very important role in developing national measures for 
climate change mitigation  and  adaptation, and therefore increasing the protection granted to 
such areas as well as the overall coverage and management of such sites is crucial.  

Mainstreaming  and  integration  of  climate  concerns  into  development  policy  will  have 
financial aspects. At the Copenhagen Conference, the EU committed €7.2 billion of fast-start 
finance  for  mitigation  and  adaptation  measures,  including  for  disaster  risk  reduction  and 
prevention  activities  in  disaster-prone  countries,  for  2010-2012.  Developed  countries  also 
committed to a goal of jointly mobilising US$ 100 billion a year by 2020, from a variety of 
sources,  including  alternative  sources,  provided  that  developing  countries  put  in  place 
meaningful  mitigation  actions  and  are  transparent  about  their  greenhouse  gas  emissions.  A 
balanced allocation between adaptation and mitigation funding should contribute to increase 
the resilience of developing economies to climate change and support the move towards low-

24 

As outlined in the 2010 Africa Progress Report, it is imperative that "African countries…..climate-proof 
their development strategies". 

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carbon development25. Whereas adaptation will continue to be primarily financed from grants 
and  aim  in  a  first  phase  at  helping  developing  countries  develop  National  Action  Plans  for 
Adaptation, mitigation actions will also need to draw from concessional lending and private 
sector  co-financing.  Climate  and  development  funding  should 
thus  also  focus  on 
strengthening,  at  all  levels  of  society,  the  capacity  to  attract  investments  in  low  emission 
technologies and sustainable land use practices. At the October 2010 Nagoya Conference, all 
parties to the Convention on Biological Diversity agreed on the need to mobilise resources in 
support of biodiversity, in particular to assist developing countries in implementing the new 
10 year strategic plan adopted on that occasion. 

22. 

Given the close interlinkage between climate change, biodiversity, and development, 
and given the new opportunities offered by climate finance and the markets, how can 
the  mainstreaming  of  climate  adaptation  as  well  as  disaster  risk  reduction  into  the 
EU's  development  policy  be  strengthened  in  order  to  ensure  more  climate  resilient 
and sustainable economies, as well as forest and biodiversity protection? 

4.2. 

Energy and development 

Out of the many challenges of sustainable development, access to sustainable energy for all 
citizens is a key issue. In fact, generalised access to energy constitutes a pre-requisite to meet 
most MDGs: access to reliable, stable priced energy, and in particular electricity, is a driver of 
poverty eradication; vital for health, education, agriculture and economic development. These 
are challenges which call for innovative solutions and there are many positive opportunities 
that  can  result  from  an  objective  of  "climate-proofing"  development  and  cooperation 
strategies and investing in sustainable development.  

In Sub-Saharan Africa, for example, less than 30% of the citizens have access to grid-based 
electricity,  and  for  those  that  have  access,  it  is  often  an  unreliable  source  of  energy,  with 
blackouts  and  interruptions  occurring  all  too  frequently  and  for  prolonged  periods.  This 
position is shared by many other developing countries, and has huge consequences for social 
and economic development and notably on the possibility of achieving the MDGs. 

Over the last decades, oil prices have varied enormously. This has had huge effects on fragile 
and developing economies, particularly those that are largely dependent on oil, and even more 
so where fuel driven generators play an important role due in part to the absence of reliable 
electricity supplies. Finally, due to the lack of reliable electricity supplies charcoal becomes 
the cooking fuel by default, resulting in widespread health problems and deforestation. 

However,  it  is  notable  that  many  areas  in  the  developing  world  represent  ideal  places  to 
develop  renewable  energy,  including  hydro,  wind,  photovoltaic  electricity  and  concentrated 
solar  power  notably  due  to  the  highly  advantageous  natural  resources  available  (water, 
sunshine).    Moreover,  where  energy  infrastructure  is  not  available  and  renewable  solutions 
can be provided outside the grid, overall costs can be reduced. In many respects, by investing 
in local, competitive renewable energy in many parts of the developing world, it is possible to 
skip a generation in technology terms. Furthermore, introducing modern solutions for energy 
production  and  distribution  would  allow  important  gains  in  energy  efficiency.  Modern 
technology  can  achieve  important  reductions  of  greenhouse  gas  emissions  and  substantially 

25 

Current  work  on  reducing  emissions  from  forested  areas  ongoing  in  the  UNFCCC  is  highly  relevant 
particularly  if  combined  with  initiatives  such  as  Forest,  Law  Enforcement,  Governance  and  Trade 
(FLEGT) to improve forest governance in partner countries 

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improve  local  environmental  conditions.  On  the  latter,  Europe  can  play  a  key  role  in 
providing  know-how.  Where  infrastructure  is  present,  upgrading  existing  facilities  and 
interconnecting them may ensure a broader access to energy. 

By  combining  highly  leveraged  EU  development  and  the  fast-start  Copenhagen  funds 
mentioned  above  to  promote  investments  in  renewable  electricity  in  developing  countries, 
huge leaps forward in providing sustainable energy to the world's poorest countries could be 
taken. The development of renewable energy in these countries, particularly LDCs, provides 
an  additional,  very  important  development  advantage  by  reducing  their  dependency  and 
vulnerability to highly volatile oil prices.  

The EU is uniquely well-equipped to providing this assistance. It is the leading producer of 
renewable  energy  technologies.  Europe  has  the  greatest  experience  in  the  legal  and 
administrative measures necessary to catalyse investment in renewable energy, also due to it 
being the only world's region with legally binding targets on all Member States. The EU has 
committed to source 20% of its energy needs from renewable sources by 2020. 

Finally, investments in energy do not, per se, need significant grant related assistance. This is 
important; development funding alone will never be able to finance the hundreds of billions of 
Euros of investment necessary to provide every citizen with sustainable electricity. Indeed, in 
principle,  such  investments  can  be  profitable.  Leveraging  the  EU  budget  with  funds  from 
donors and financial institutions, including from the private sector, should therefore be easier 
to achieve in this sector than in others. 

It  thus  needs  to  be  considered  whether  the  EU  and  developing  countries  and/or  regional 
groupings  should  act  together,  in  the  context  of  existing  partnerships,  to  put  into  place 
concrete Joint Programmes to progressively provide sustainable energy to all citizens.  

Such programmes, involving highly leveraged EU development and climate change finance, 
EU and developing countries, the energy industry and EU financial institutions, could aim at 
identifying a timetable for joint actions, and include reforms in low income countries, both in 
terms of investment protection, taxation and regional power collaboration. They should build 
on existing actions in energy partnerships such as the EU-Africa Energy Partnership. Action 
in  the  renewable  sector  can  be  a  significant  part  of  the  solution  to  the  energy  needs  of  the 
developing world, but will need to be seamlessly integrated in a wider energy policy, covering 
for  example,  energy  efficiency,  networks  and  infrastructure,  and  ensuring  effective  supplies 
and development of other, more "traditional" energy sources. The cooperation should be open 
to non-EU donors and international institutions, and could focus, inter alia, on the following: 

•  Financing.  During  the  recent  financial  crisis  it  has  been  difficult  for  developers  of 
renewable energy projects to secure commercial financing in the  EU, where a stable and 
'renewable  friendly'  administrative  and  legal  framework  exists.  To  secure  financing  for 
more  risky  projects  in  the  developing  world,  where  such  administrative  and  legal 
conditions do not exist, is practically impossible. 

•  Stable regulatory and administrative conditions. Without stable and predictable conditions 
that  enable  and  encourage  investment  by  private  companies,  even  with  appropriate 
financial instruments in place, investment will not take place. This ranges from grid issues, 
tax,  company  law,  to  planning  rules.  It  also  requires  legal  provisions  allowing  open 
competition  on  electricity  markets  to  supply  customers.  It  also  requires  clear,  fair  and 
effective regulatory rules to ensure cost recovery and protect consumers. 

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•  Technical knowledge, education and training. In many parts of the developing world, the 
technical  training  facilities  are  inadequate,  or  do  not  exist.  Without  a  well-trained  work 
force,  from  electrical  engineers  to  craftsmen,  renewable  energy  will  never  meet  its 
potential.  Job  creation  is  a  central  benefit  of  any  such  development,  but  training  and 
knowledge will require real efforts. 

•  Regional markets. In many cases the need to have the possibility to sell electricity across 
borders  will  be  important,  particularly  for  larger  hydro  projects.  This  will  require  clear 
regional agreements, and regulatory stability. 

23. 

How  can  the  EU  best  act  to  support  developing  countries'  efforts  to  secure 
sustainable energy for all their citizens? What role might, for example, an EU-Africa 
Joint  Programme  to  progressively  provide  sustainable  electricity  to  every  citizen, 
combining  development  and  climate  change  funding  and  leveraged  loans  from 
Development Financial Institutions? 

5. 

AGRICULTURE AND FOOD SECURITY 

Food  security  remains  a  key  challenge  for  rural  and  urban  populations  in  many  developing 
countries where 75% of the population still depends on agriculture. It is estimated that global 
agricultural  production  must  increase  by  70%  in  order  to  feed  a  global  population  that  the 
United  Nation  expects  to  increase  to  9  billion  people  by  2050.  Hunger  affects  human 
development, social and political stability and any prospect of achieving the MDGs. Recent 
price  developments  on  world  food  markets  have  highlighted  the  continued  challenge, 
particularly for food-importing developing countries.  

Development  and  food  security  go  hand  in  hand;  experience  demonstrates  that  agricultural 
reform and the capacity to feed a country's population is a precondition to wider development 
and  poverty  reduction.  Most  of  the  poor  and  hungry  in  the  world  live  in  rural  areas  where 
agriculture forms the main economic activity. In these areas, small-scale farming is dominant. 

In Africa, for example, small-scale farmers produce about 80% of the food consumed in the 
continent. But agriculture also holds great potential in stimulating widespread income growth: 
in  developing  countries;  GDP  growth  generated  by  agriculture  is  up  to  four  times  more 
effective  in  reducing  poverty  than  growth  generated  by  other  sectors26.  Investment  in  food 
safety  through  the  implementation  of  sanitary  and  phitosanitary  standards  further  stimulates 
food  security  and  human  health.  Biodiversity  protection  and  related  ecosystem  services  are 
also  key  to  ensuring  sustainable  agriculture  and  contributing  to  nutritional  adequacy. 
Agriculture has important linkages to other sectors and its growth generates multiplier effects 
throughout  the  economy.  Moreover,  well-managed  agriculture  is  an  important  factor  in 
mitigating  environmental  challenges  such  as  deforestation,  land  degradation,  water  scarcity 
and climate change. Accelerated low carbon agricultural production will also enhance global 
price stability with the existence of varied and reliable production areas. 

A  concerted  initiative  from  the  EU  to  capitalize  on  investing  in  inclusive,  intensified 
sustainable  and  ecologically  efficient  agriculture  can  therefore  create  a  win-win  situation: 

26 

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enhanced green growth with lower emissions, and increased social stability27. In order for this 
to be successful, production should be seen in a value chain context with adequate access to 
financing,  processing  and  markets.  In  this  regard,  public-private  partnerships  could  play  an 
important role. 

The aim of ensuring that EU cooperation is "High Impact" in nature is particularly pertinent to 
agriculture and food security. In particular, experience has demonstrated the need to address 
this  challenge  in  a  comprehensive  way,  looking  at  the  whole  value  chain:  research  and 
extension  to  farmers  training,  access  to  land,  appropriate  fertilizers,  irrigation  methods, 
transport  to  markets,  storage,  finance,  banking  and  insurance,  and  processing  capacity. 
Research  and  innovation  can  play  a  key  role  in  allowing  a  step  change  in  enhancing  food 
production  if  it  is  demand-driven,  participatory  and  adapted  to  the  needs  and  priorities  of 
beneficiaries.  The  EU  possesses  wide  expertise  on  sustainable  agriculture  in  varying 
conditions, as well as extensive networks with developing countries. 

The  EU  should  therefore  make  agriculture  and  food  security  a  test  case  of  its  capacity  to 
deliver high impact cooperation and promote inclusive and green growth by concentrating its 
efforts on ensuring that where assistance is granted, it considers the whole production chain. 
This might be done by EU programmes focussing on the chain, or working better and more 
closely  with  partner  countries  and  other  donors  to  combine  efforts.  The  cooperation,  in 
partnership  with  non-EU  donors  and  international  institutions,  could  focus,  inter  alia,  on 
demand-led  research  and  innovation,  governance  of  sectors  and  value  chains,  regional 
agricultural and food markets. 

This comprehensive approach to agriculture and food security should also take into account 
the  nutritional  dimension.  Recent  scientific  evidence  shows  that  malnutrition hampers 
development efforts and undermines economic growth, with up to 3% of GDP loss. It is the 
leading cause in child deaths, and, for those who survive malnutrition, it can have irreversible 
effects  on  their  mental  and  physical  development.  Addressing  nutrition  has  a  "multiplier 
effect" in achieving the MDGs. 

Finally,  both  in  the  general  fight  against  food  insecurity  and  in  its  nutritional  dimension, 
fishing products can also play an important role. Therefore, the EU and developing countries 
share an interest in promoting sustainable fishing, including efficient systems of monitoring, 
control  and  surveillance,  and  the  sustainable  development  of  aquaculture.  The  role  of 
Fisheries partnership agreements and regional fisheries management organisations is essential 
in this respect. 

24. 

25. 

27 

How  can  the  EU's  development  policy  best  contribute  to  enhanced  food  security 
while  safeguarding  environmental  qualities?  Which  policies  and  programmes  are 
most  conducive  for  smallholder  and  private  sector  investment  in  agriculture  and 
fisheries?  

Which strategic areas should the EU engage in, particularly with respect to Africa? 
How  can  the  EU  stimulate  agro-ecological  approaches  in  farming  and  sustainable 
intensification of agriculture, sustainable fishing and aquaculture?  

As outlined in the Communication on "An EU policy framework to assist developing countries in 
addressing food security challenges" - COM(2010) 127 - and related Council conclusions of 10.5.10, 
available at: http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/EN/foraff/114357.pdf  

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26. 

How should the EU support the fight against malnutrition? 

6. 

CONCLUSION 

The  Commission  is  committed  to  continuing  the  modernisation  of  EU  development  policy 
and spending programmes, providing better added value, value for money and effectiveness. 
In  the  follow-up  to  this  Green  Paper  and  on  the  basis  of  the  responses  received,  the 
Commission will table a Communication on a Modernised EU Development Policy that will 
include,  inter  alia,  the  consideration  whether  it  is  opportune  to  review  the  European 
Consensus on Development. 

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