The Role of the European Union in Development Assistance and in Increasing ODA. (Financing for Development)

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In March 2002, the International Conference on Financing for Development, held in Monterrey, Mexico, addressed the major challenge of mobilizing the financial resources necessary for the implementation of the Millennium Declaration's development targets, such as halving world poverty by the year 2015.

Counting on increased mobilization of resources at the domestic level, economies in developing countries would have to grow at an average of 7 per cent per year until 2015 to finance these goals, which will be very difficult to achieve. In addition, calculations presented by the World Bank and the International Monetary Fund indicate that reaching those targets would require a doubling of the official development assistance (ODA) from the current level of $50 billion to $100 billion per year.

Private resource flows over the last years have become the major driving force of development. ODA, however, still plays an essential role as a complement to other sources of financing for development. This applies especially to those countries with the least capacity to attract private direct investment, those with small markets and in difficult geographical locations, etc. ODA also remains the crucial instrument for supporting education, health, public infrastructure development, agriculture, rural development and food security. For many least developed countries, small island developing States and landlocked developing countries, ODA is still the largest source of external financing and will remain critical to the achievement of the goals and targets of the Millennium Declaration and other internationally agreed development targets.

The European Union (EU) is the world's biggest provider of development assistance. In 2001, the Community and its 15 member States provided more than $26 billion, which represents more than 50 per cent of the world's total ODA. While the average contribution of the Organisation for Economic Cooperation and Development (OECD) countries for assistance was 0.24 per cent of gross national income (GNI), the Union's average was considerably higher, namely 0.33 per cent of GNI.

Following its renewed commitment to the UN target at the 2001 European Council in Goteborg, Sweden, the Union decided to step up its development assistance. In March 2002, member States made a dual commitment at the European Summit in Barcelona (Council Conclusions, European Council, 15 and 16 March 2002).

Member States that have not yet reached the UN goal of 0.7 per cent of GNI committed themselves to increasing their ODA volume, while other countries renewed their efforts to remain at or above the 0.7 per cent target. Collectively, this means that the EU committed to increase development aid spending to an average of 0.39 per cent of GNI by 2006. This could mean an extra $7 billion a year in Union aid by 2006 and an additional cumulative $20 billion to development cooperation between now and 2006. As such, the Monterrey Conference proved to be a milestone on the path towards the UN target.

Member States will be responsible for mobilizing, managing and disbursing this increase. Within their respective budget allocation processes, all EU member States will in any case strive to earmark at least 0.33 per cent of their GNI to ODA by 2006. Today, four of the five OECD members that have reached the promised level of 0.7 per cent of GNI to be spent on ODA are EU members. More recently, Finland, Belgium, Ireland and France committed to meet or exceed the 0.7 per cent target within the next coming years; others have set intermediate targets higher than the EU benchmark. The United Kingdom announced an increase by 2005 of around $2.2 billion in its annual ODA budget, raising the GNP ratio from 0.32 to 0.4 per cent.

Each EU member State needs to draw up a clear road map setting out how it intends to reach this goal. Members have asked the European Commission to monitor the follow-up of the Barcelona commitments; a first report will be presented to them in May 2003. …