COMMISSION STAFF WORKING PAPER EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT
Date: 2011-10-13
Institutions: European Commission
Subjects: European Commission, coordination of aid, coordination of financing, development aid, poverty

EUROPEAN COMMISSION 

Brussels, 13.10.2011 
SEC(2011) 1173 final 

COMMISSION STAFF WORKING PAPER 

EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT 

Accompanying the document 

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

Increasing the impact of EU Development Policy: an Agenda for Change 

{COM(2011) 637 final} 
{SEC(2011) 1172 final} 

 
 
 
 
  
 
1.  PROBLEM  DEFINITION:  what  is  precisely  the  problem,  who  is  most  affected  and 
why is public intervention necessary? 

In  the  current  global  context,  against  the  backdrop  of  key  international  challenges1,  the 
legitimacy of aid discussion, and the new contextual settings both at EU (post-Lisbon external 
action  framework)  and  international  level  (G20,  IFIs,  UN…),  there  is  a  need  for  change  to 
“increase the impact of EU development policy”. The aim is to make the EU's development 
policy  fit  to  meet  the  challenges  of  the  coming  decade,  and  to  help  partner  countries  bring 
about the changes needs to accelerate their own progress towards poverty reduction and the 
MDGs. 

Current research2 shows that, since 2005, when the Paris Declaration was adopted, global aid 
allocation  patterns  have  deteriorated.  In  fact,  numerous  problems  undermine  the  efficiency 
and effectiveness of EU and other actors' development policies. Firstly, aid fragmentation has 
increased  in  parallel  to  ODA  increases.  There  is  a  trend  to  deliver  assistance  in  smaller 
parcels. At the same time, donor proliferation has increased: globally, donors are operating in 
more countries and, within these countries, in more sectors. At the sector level, proliferation is 
also rife: 41% of all sectors in recipient countries had recorded disbursements from more than 
three EU donors in 2007.  

Secondly, the proliferation of donor-partner country relationships results in high coordination 
efforts which burden first and foremost the partner countries, but also donor representatives in 
the field. Duplication of effort with other donors -including Member States- together with the 
lack of coordination can lead to sudden gaps in geographic/sector coverage (the so called "aid 
orphans") and can create an atmosphere of uncertainty for the partner countries and the main 
beneficiaries in these countries, very often including the most vulnerable groups.  

Long-term costs of ineffective aid are analysed by academics in terms of their impacts on the 
quality of partner administration and of the economies of recipient countries. Such costs are 
mostly given in qualitative terms although in some cases quantitative costs could be found in 
terms  of  economic  growth  foregone  or  cost  increases  from  lack  of  predictability  in 
development  funding3.  For  example,  long  term  costs  linked  to  fragmentation  alone  result  in 
the inability of government to impose order upon project portfolio or even obtain an overview 
of aid-funded investments and activities, lack of effective planning, geographical patchiness, 
etc4.  

2.  ANALYSIS  OF  SUBSIDIARITY:  Is  EU  action  justified  on  ground  of  subsidiarity 
(Necessity and EU value added)? 

According  to  the  Lisbon  Treaty,  development  policy  is  a  shared  competence  between  the 
Commission and Member States. The Commission will play its part in increasing the impact 

1 

2 

3 

4 

Such  as  financial  crisis,  climate  change,  energy  access,  food  insecurity,  migration  pressures,  state 
fragility, regional conflicts and international security, emergence of new powers/investors/donors. 
"Trends  of  In-country  Aid  Fragmentation  and  Donor  Proliferation:  An  Analysis  of  Changes  in  Aid 
Allocation Patterns between 2005 and 2009", Report on behalf of the OECD Task Team on Division of 
Labour and Complementarity, First Draft – 24 March 2011, final version forthcoming. 
"Aid Effectiveness Agenda: Benefits of a European Approach" 
http://ec.europa.eu/development/icenter/repository/AE_Full_Final_Report_20091023.pdf  
idem 

EN 

2 

   EN 

 
                                                 
 
of its aid, while fully acknowledging that other dimensions, aspects and actors (such as policy 
coherence  for  development,  aid  modalities,  country  ownership,  etc)  are  complementary  and 
ought to be taken into consideration in so far as they have a bearing on the overall impact of 
EU development policy. Therefore the EU's role in promoting coordination and coherence, its 
capacity to pool services and resources, and to conduct the EU dialogue with partner countries 
is necessary as action by the Member states alone cannot sufficiently fulfil these functions. As 
a result, coordinated action by the EU as a whole has an added value that, in terms of policy 
and financial leverage, is bigger than the sum of individual action of 27 Member States and 
the Commission5. A 2009 study6 estimated that the potential benefits of a European approach 
to aid effectiveness would be in the order of Euro 3 to 6 billion per year.  

As emphasised by the public consultation on the Green Paper, the Commission should focus 
the aid it manages on a more limited range of sectors and areas; choices should be made more 
strategically than in the past, taking account of the EU's comparative advantages and potential 
to  make  a  significant  impact.  The  Commission  has  also  a  leading  role  to  play  in  terms  of 
initiating  and  coordinating  improved  division  of  labour  (DoL)  between  the  EU  and  the 
Member States. 

In order to maximise this added value, a specialisation and better DoL could lead to greater 
efficiency,  economies  of  scale  and  lower  transaction  costs  whose  benefits  could  be  used  to 
further 
the  EU's 
negotiating/bargaining power, thus ensuring that the EU is better placed to play a leading role 
at global level.  

resources  available  and 

to  enhance 

reinforce 

financial 

the 

3. OBJECTIVES OF EU INITIATIVE: What are the main policy objectives? 

As stated by the Treaty, the main objective of EU development policy and practice is poverty 
reduction  in  the  context  of  sustainable  development.  The  internationally-recognised  targets 
under  this  objective,  subscribed  to  by  the  EU,  are  the  Millennium  Development  Goals 
(MDGs).  A  key  international  conference  in  September  20107  highlighted  the  gap  between 
current levels of attainment vis-à-vis the MDGs and the targets themselves, with less than 5 
years  to  go;  there  is  particular  concern  about  the  lack  of  progress  in  certain  countries  and 
regions (notably in Sub-Saharan Africa) and against some of the MDGs (notably maternal and 
child health).  

Given the effort still needed if the MDGs are to be reached by 2015, the EU needs to rapidly 
increase  the  impact  of  its  aid  on  poverty  reduction.  Beyond  2015,  the  EU  will  need  to 
continue to support the global effort until poverty is eliminated completely. The objective of 
the proposed change programme is therefore to ensure that every euro of EU development aid 
generates  the  greatest  possible  impact  on  poverty  in  developing  countries,  in  order  to 
maximise the contribution made by the EU to the MDGs and longer-term poverty elimination.  

5 

6 

7 

As  demonstrated  above  with  reference  to  the  study  on  the  aid  effectiveness  agenda:  benefits  of  the 
European Approach from October 2009 
http://ec.europa.eu/development/icenter/repository/AE_Full_Final_Report_20091023.pdf 
"Aid  Effectiveness  Agenda:  Benefits  of  a  European  Approach",  HTPSE  Limited,  October  2009, 
http://ec.europa.eu/development/icenter/repository/AE_Full_Final_Report_20091023.pdf  
UN High Level Plenary Meeting on the MDGs, New York. 

EN 

3 

   EN 

 
                                                 
 
It  is  assumed  that  impact  on  poverty  reduction  can  be  improved  by  focusing  EU  aid 
geographically  and  sectorally  on  a  more  limited  range  of  countries  and  areas  rather  than 
dispersing  small  amounts  of  aid  too  thinly  worldwide.  In  doing  so,  the  Commission  will 
remain a global actor on development issues, while, as a donor, concentrating its aid on those 
sectors and countries where impact will be the highest.  

In  support  of  this  effort,  the  Policy  Coherence  for  Development  (PCD)  agenda  also 
contributes  to  improving  the  real  results  of  our  development  cooperation  by  reducing 
inconsistencies  and  promoting  synergies  between  the  objectives  of  internal  policies  and 
development.  Moreover,  increased  coherence  between  external  policy  objectives  and 
development should be aimed for. 

4.  POLICY  OPTIONS:  Which  options  have  been  considered  and  which  have  been 
assessed in detail? 

Four major options have been identified in the impact assessment: 

The first option refers to the status quo, meaning that the aid allocation and implementation 
processes  do  not  change  from  the  current  system  (no  additional  EU  action)  and  hence 
Commission-managed  development  aid  would  continue  to  be  allocated  in  a  great  variety  of 
sectors and countries. In other words, the EU continues to do "everything everywhere" thus 
not  addressing  the  problem  of  aid  fragmentation.  This  option  has  been  assessed  in  detail 
looking  at  the  current  dispersed  and  fragmented  EU  development  aid  which  represents  the 
base for an improvement towards a more efficient and effective system.  

The second option refers to sectoral focus; in order to reduce sectoral dispersion of EU aid, 
Commission  would  focus  mainly  on  some  areas  and  sectors,  particularly  where  it  has 
comparative  advantages,  but  would  continue  to  provide  aid  to  a  large  number  of  countries 
ranging from the poorest to the most advanced developing countries (LDCs to BRICS). 

The third option concerns geographical focus; with the aim being to reduce the geographical 
dispersion of EU aid, Commission would target its aid towards a limited number of countries 
(chosen according to their needs, capacities, interests and commitments), but would continue 
to have a wide sectoral coverage.  

In  the  fourth  option,  the  EU  would  embrace  both  the  sectoral  and  geographical  foci  by 
proposing a differentiated approach to development aid allocation, as well as an aid offer that 
is focused on a limited range of sectors.  

The  impact  assessment  does  not  attempt  to  consider  pre-determined  sector  and  geographic 
choices. Rather, it tests the principles of sectoral concentration and geographic differentiation. 
The final choice  of  sectors and countries will be the product of detailed country-by-country 
analysis  and  dialogue,  following  the  established  principles  of  ownership  and  partnership 
enshrined in the Paris Declaration, and discourse with other donors, particularly EU Member 
States, within the framework of the Code of Conduct on Division of Labour.  

Strengthened PCD, improved EU coordination, choice of aid modalities and the overall levels 
of finance available for development, all factors which will also have an impact on the EU's 
success at meeting its development objectives, will be constants relevant to each of the four 
options. These elements are therefore not considered as part of the assessment of impact.  

EN 

4 

   EN 

 
5.  ASSESSMENT  OF  IMPACTS:  What  are  the  main  economic,  environmental  and 
social  impacts  of  each  option  particularly  in  terms  of  (quantified/monetised)  benefits 
and  costs  (including  estimates  on  administrative  burden,  other  compliance  costs  and 
implementation costs for public administrations)?  

Option 1 

Under  the  status  quo  option,  Commission-managed  aid  would  continue  to  be  delivered  to  a 
wide  range  of  sectors  and  beneficiary  countries.  The  Commission  would  thus  maintain  a 
global  and  cross-sectoral  presence,  potentially  giving  it  influence  across  the  board  and 
possible leverage effect in all countries. The status quo option does not tackle the problem of 
aid dispersion and fragmentation, thereby increasing the risks of inefficiency in the future aid 
programme. Moreover, scarce aid resources would continue to be spread too thinly, reducing 
impact and resulting in the loss of relevance, legitimacy and visibility of EU aid.  

Option 2 

Sharpened  sectoral  focus  could  contribute  to  the  higher  impact  of  EU  aid  by  concentrating 
resources on a limited number of sectors, thus increasing the EU's critical mass. This could 
also increase specialised expertise, visibility and reputation of the EU in a number of sectors, 
particularly  where  it  has  recognised  comparative  advantage.  In  addition,  the  Commission 
would  maintain  its  global  development  presence,  thus  allowing  influence  and  possible 
leverage  effect  in  all  countries.  Sectoral  concentration  however  runs  the  risk  of  creating  a 
possible  mismatch  between  Commission's  limited  offer  and  demand  from  partner  countries. 
This could result in difficulties in spending all resources. In addition, a top-down approach to 
sectoral concentration would undermine country ownership (a recognised essential ingredient 
for aid effectiveness and overall success of development). 

Option 3 

Sharpened  geographical  focus  could  contribute  to  increasing  the  impact  of  EU  aid  by 
targeting  limited  resources  on  those  countries  where  they  are  needed  most  and  where  aid 
could  have  greatest  impact.  In  doing  so,  the  Commission  would  apply  a  differentiated 
approach  to  aid  allocation  and  partnerships,  based  on  comprehensive  political  and  policy 
dialogue with all partner countries, through which the EU would define the most appropriate 
form of cooperation, leading to informed and objective decisions on the most effective policy 
mix, aid levels, financial instruments and aid arrangements. 

Geographical  focus  might  however  run  the  risk  of  weakening  EU  influence  and  leverage 
effect in certain countries and regions where it no longer operates. In the absence of enhanced 
coordination  and  division  of  labour  between  EU  and  MS,  it  also  risks  widening  the  gap 
between  donor  darlings  and  donor  orphans,  at  a  time  when  an  increasing  number  of  EU 
donors are reducing their portfolios and exiting from a number of developing countries. Both 
these issues can however be mitigated by accompanying measures, such as a graduated exit 
strategy, forging new types of partnerships with those countries which no longer receive grant 
aid and making progress on joint programming and division of labour. 

Option 4 

Sharpened  sectoral  and  geographical  focus  could  contribute  to  significantly  increasing  the 
impact of EU aid through better and more strategic use and allocation of scarce aid resources. 

EN 

5 

   EN 

 
In  doing  so,  the  EU  could  increase  its  critical  mass  in  certain  sectors  and  countries,  thus 
allowing  strengthened  bargaining  power  and  increased  leverage  effect  on  resources  and 
policies.  By  leading  through  example,  the  Commission  could  increase  the  visibility  and 
legitimacy  of  its  aid  and  encourage  EU  MS  to  do  likewise.  This  would  also  strengthen  the 
Commission's  role  as  convener  and  coordinator,  notably  on  crucial  aspects  of  division  of 
labour. 

6.  COMPARISON  OF  OPTIONS:  What  is  the  preferred  option  on  the  basis  of  which 
criteria/justification? 

The Impact Assessment concludes that Option 4 is  the strongest option. It  would produce a 
more strategic, justifiable and visible allocation of scarce EU aid resources which, instead of 
being spread too thinly over sectors and countries, as in the status quo (Option 1), would be 
focused  where  they  are  needed  most  and  where  they  could  have  the  greatest  impact  on 
poverty. Option 4 combines the strengths of each of Options 2 and 3 and overcomes some of 
the limitations of a single-focus (sector or geography).  

The approach embodied by Option 4 will allow the Commission to achieve a more balanced 
and strategic role as donor, which should have positive spin-offs in terms of its visibility and 
reputation.  

7.  MONITORING  AND  EVALUATION:  What  are  the  arrangements  to  establish  the 
actual costs and benefits and the achievements of the desired effects? 

The Commission already has regular monitoring and evaluation systems in place, covering the 
breadth  of  its  aid  programme.  It  currently  evaluates  country  and  thematic  strategies, 
individual programmes and projects. Larger evaluation exercises assess the complementarity 
and synergy between the different legislative instruments, including non-spending activities. 
Complex evaluations may also cover overarching political objectives as laid down in relevant 
political  processes  as  well  as  address  cross-cutting  and  transversal  issues  relevant  to  all  or 
several  legislative  instruments.  As  far  as  possible,  the  Commission  associates  all  relevant 
stakeholders in the evaluation phase of the EU assistance, including joint evaluations.  

EN 

6 

   EN