Consultation on the future of EU Budget support to third countries

banner9_bleu_white16 November 2010

Global Health Europe's response to the EU's consultation on theĀ Green Paper on the Future of EU Budget Support to third countries reflects our central concern with aspects of health and its governance in the interests of the people of the European Union, our neighbours and global citizens. Global Health Europe invites you to register and contribute to this response with your comments. The official consultation deadline is 31 December 2010. The European Commission background documents can be found at:
http://ec.europa.eu/development/how/consultation/index.cfm?action=viewcons&id=5221&lng=en

The recent DG SANCO, DG DEV and DG RTD joint communication on the EU Role in Global Health (COM(2010)128) underlines the need for coherence between trade, development, foreign affairs and health policy. Our focus on global governance for health encompasses advocacy for and negotiation of human rights at both national and international levels and specifically the role that the EU can play in conjunction with academic, business and civil society groups. While we see aid as a moral imperative, we believe it must be seen in the context of other actions and systems that are required to achieve sustainable health and development in the long term. Members of our team have experience of health and other aid programmes as well as experience of the impact of corruption and measures to address it.

Q1: Should budget support operations (especially general budget support) be designed to better reflect partner countries' commitment to the underlying principles and if so, how? In particular, should budget support programmes make more use of political governance conditionality? Is there a case for adopting a different approach to political conditionality for general as opposed to sector budget support?

Negotiation of general budget support measures place the onus solely on third countries to respect the underlying principles. We suggest that a further principle should address the issues that give rise to the need for continued aid this should encompass mutual commitment to fair trade, global governance and the funding and protection of global public goods. On this basis negotiation of general budget support would include long term measures to reduce and eliminate the need for aid based on measures to be taken by both sides in the discussion.

With regard to sector support budget support negotiations would specify target levels of investment for both government and aid support and joint outcome targets. In most cases there are alternatives to government systems. In health for example 40% of services in rural Africa are provided by NGOs. Thus it is quite feasible to negotiate how much aid is channelled through different channels depending upon performance.

Q2: How can the budget support process be consistent with the political dialogue on underlying principles while maintaining the focus of policy dialogue on agreed development objectives? What could be the relevant fora and the appropriate level involving donors and partner country to raise and discuss concerns regarding underlying principles?

We suggest that in such policy dialogue the EU should focus on issues of governance and long term development as expressed in the underlying principles as well as more specific discussion of sector wide action programmes. This requires different levels of discussion, though these issues are linked. Governance and long term development discussions should include regional organisations such as the African Union. It is important for both general and detailed discussions to be open and transparent. Global public goods will require cooperation and funding from global, regional and national levels. Public health surveillance, as required for the observance of International Health Regulations, is one example of a global public good that requires such cooperation and funding.

Q3: How can donors meaningfully respond to any deterioration in the underlying principles while protecting the development benefits and predictability of budget support?

As noted an initial response may be to divert more aid through NGOs, though it is important to note that such other channels cannot be assumed to be free of corruption. A further step is to name and shame the projects, parties and politicians that are failing to live up to the principles. This strategy is not without risk both politically and personally. and the offence caused may have a wide political impact. However, more frank and fearless speaking would be welcomed by a great many people, note for example, the impact of Sir Edward Clay's remarks about corruption in Kenya which still echo there (he described officials as "eating" (a reference to corrupt practices) "like gluttons and vomiting on the shoes of donors".

Q4: How can policy dialogue with partner countries be made more effective and inclusive in contributing to achieving reforms, results and objectives?

We suggest that greater use of broadcast and online media would be an effective tool to engage academic business and civil society groups in third countries as well as for the general public. An informative, instructive and entertaining approach is required. It has recently been reported that by 2012 a third of the population of Africa will have access to online services including by mobile phone.

We suggest that it is also important to engage academic, business and civil society groups at European level and to provide better information to the public of Europe on the positive achievements of aid and development as well as issues of global governance such as fair trade, environmental protection and the funding of global public goods. This should counter a growing public impression that aid is not working and can even be counter productive.

Q5: How should donors use budget support conditionality to help improve performance, and how should they respond to failure to meet agreed conditions?

General budget support is probably too blunt a tool to use in most cases though it is appropriate to use sector support in this way. Public exposure of issues and pressure from regional level e.g. the African Union could be more helpful. While it must also be recognised that there is some way to go in developing effective dialogue at this level it is timely to restart this process.

Q6: How can performance monitoring frameworks be improved and result indicators be best used in budget support operations in order to address the challenges identified above?

Q7: How can the performance of the public financial management system, including fraud prevention measures, and the value for money of budget support funds be best enhanced? Should the EU set minimum requirements for budget support?

The EU should certainly require adequate audit arrangements and should provide the necessary training and technical support for this. The main problem in many countries is not the lack of technically capable auditors (though this remains and issue) but the lack of such staff in government audit roles due to poor pay and conditions. There is also a problem of record keeping and access to records within departments due to a combination of incompetence and obstruction.

Q8: How can budget support (including capacity building) be designed to further enhance domestic accountability and ownership in partner countries, including the participation of civil society?

Capacity building in third countries could be more effectively focussed on the key institutions required for effective domestic accountability. In relation to health, these include the Ministry of Health, the organisations representing and supporting health professionals, education and research institutes and civil society organisations which in this instance may include local government.

Q9: How can mutual accountability better contribute to enhancing effectiveness of budget support operations in both donor and partner countries?

Q10: What kind of visibility/communication activities should be carried out both in donor and partner countries to enhance mutual accountability?

Public diplomacy is required both in third countries and within the EU to inform both the case for budget support and other policy measures. While twinning and work with international and local civil society organisations on local to local projects can give rise to higher costs and problems of coordination and control these measures also build global citizenship and this should be seen as essential context for aid and development.

Q11: What criteria should the Commission use to inform decisions on how much if any budget support to provide to eligible countries?

This is best negotiated on the basis of need, mutual commitment and governance. For example studies suggest that in some countries increased health aid has been more than matched by increases in government expenditure, while other countries have seen the reverse effect. It would be helpful for the EU to state why aid is allocated to third countries. While this will be challenging it might be considered less controversial than such judgements on bilateral aid.

Q12: What are the advantages and disadvantages of providing both general and sector budget support within the same country, or having one single budget support instrument? In which context would SBS be considered a more effective type of budget support?

Q13: What are the advantages and disadvantages, as well as the practical arrangements to ensure consistency and efficient coordination, of using a broad palette of aid instruments alongside GBS/SBS?

General budget support and sector budget support are not mutually exclusive there is a case for providing both within the same country. GBS is a measure to develop broad governance competence and must be accompanied by capacity building. SBS provides a basis for working together on Sector Wide Action Plans. Indeed if bilateral and multilateral aid from EU Member States were better coordinated it would be apparent that both coexist along with a broad range of other instruments.

Q14: How can the above risks be best assessed within a comprehensive framework and managed to improve the effectiveness of budget support?

Corruption occurs at many levels, it includes diversion of moneys to the private accounts or business interests of senior government politicians and official, the allocation of money to favoured areas and posts to selected groups, bribery to gain contracts for businesses and theft and graft at local levels. In patrimonial societies not all of this will be considered immoral, some may be considered a right, or their turn to eat and some just a fact of life. There is no comprehensive framework that can guard against all such risks. However it is simple common sense to use surveillance techniques to monitor the finances of senior politicians and officials and this can be done but it is not made public.

Q15: What kind of measures should the EU apply if the risk level is considered high with regard to fraud and corruption?

The public are the most effective guards against corruption other than at the most senior levels noted above. Measures which encourage people to report on the unaccounted wealth of officials and local politicians, to share mobile phone photos of corrupt practices and to question why and how contracts are let can all help. The EU could encourage and support such measures alongside the audit and review that are already taken.

It must not be overlooked that some of this activity brings with it threats and risks. Perhaps European based international accounting firms which might have the resilience required for such investigation could be asked to provide their expertise and staff time as a contribution in kind to address this major global issue.

Q16: How can donors meaningfully respond, including with financial corrective measures, to cases of large scale corruption or fraud in the implementation of policies benefiting from budget support?

Banks in Europe and elsewhere are often the repositories of the profits of corruption. The confidentiality of such stolen loot are protected by a variety of means with the aide of the banks themselves. While steps have been taken to address this issue at international level with EU support there is surely further progress to be made in recovering such assets and to hold banks to account as accessories to theft.

With respect to the countries from which such monies are stolen it is not reasonable to add to their problems by withholding future aid but naturally more stringent monitoring and audit will be required.

Q17: Should budget support be used to promote stability in fragile states, and if so how?

By definition fragile states will at first lack the governance capability required to operate GBS. There will need to be transitional arrangements to manage reconstruction and capacity building in the short term. This might nevertheless be considered in a long term plan taking countries into SBS - GBS and eventually into sustainable development.

Q18: How can budget support programmes be designed and implemented to best promote inclusive and sustained growth?

Q19: How can budget support policy dialogue and conditionality promote more domestic revenue generation and terminate dependency on aid? What form of an exit strategy should donors include in their budget support operations, and how to arrange it?

A long term sustainable development plan should be prepared with all third countries and the African Union (or other regional organisation) to phase out their reliance on aid, looking instead to international bond markets to finance major public sector investments, to foreign direct investment to finance large scale private sector growth and micro financing for local entrepreneurial development. The potential of other financial sources such as savings and remittances should also be explored. The sustainability plan should also focus on EU and AU responsibilities for removing obstacles to trade and private sector development and financing.

Q20: How can budget support be used to assist partner countries and regional organisations to further the process of regional integration?

We suggest a growing role in the negotiation of GBS and an associated long term plan for sustainable development should be taken by regional organisations such as the African Union. A growing proportion of the financial risk involved in underwriting development should be borne by regional banks such as the African Development Bank. Happily Africa's economic growth rate is more than sufficient to sustain this.

Ā 

Additional information