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Challenges of development cooperation for EU New member states Maja Bucar, Faculty of Social Sciences, University of Ljubljana Mojmir Mrak, Faculty of Economics, University of Ljubljana [email protected] ; [email protected]

1 Introduction

With the accession to European Union, 10 + 2 new member states (accession in 2004 and in 2007) 1 , have automatically joined international donor community and need to design and implement active policies of international development cooperation. They need to take on board the policy objectives, principles and guidelines of the international donor community and in particular, the European ones. This represents a significant challenge, since the European Union (EU) and its Member States make up the world’s largest donor of international aid, accounting for more than 50% of development assistance and have set for themselves ambitious targets for the future commitments in the area of development cooperation (European Consensus on Development, 2005 2 ).

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2

In May 2004, the following countries joined European Union: Czech Republic, Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia. In January 2007, Romania and Bulgaria joined. Joint Statement by the Council and the Representatives of the Governments of the Member States meeting within the Council, the European Parliament and the Commission; Council Document 14820/05.

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All 12 NMS of the EU are currently in the process of strengthening their international development policy activities. While national characteristics of these activities as well as their dynamics vary considerably, there are many patterns that are common to all or at least to a large majority of countries in this group. NMS share several characteristics of the current status of their international development policies, they are faced with similar problems, and they have to respond to many common development industry challenges. The following paper is an attempt to capture some stylized facts about these patterns. It discusses the strategies, institutional framework, the size and direction of development aid as well as the main issues, faced by the new donors (low public awareness of the development cooperation concepts, budgetary pressure, limited human resources with the experience in selection and implementation of development projects, etc.).

The limitations of the paper are several. There is a lack of systematic monitoring of development cooperation policies in NMS, resulting from the fact that this is a new area of activity. Development cooperation as such is going through “development” period as well, both in terms of institutions as well as personnel. In addition, there are serious problems with data in English (there would be documentation available in the national language, which we could not use). More conclusive assessment would therefore require additional work and verification of findings within the countries. Therefore, this paper should be treated as preliminary work in a rather complex field, focusing as much on the content as on identification of the problems.

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2 NMS as an »emerging« / »re-emerging« group of donors

While in the 1970s there were three large groups of donors, Development Assistance Committee countries of the OECD (in the further text OECD DAC countries), countries of the Council of Mutual Economic Assistance (in the further text CMEA countries, and Arab countries, in the 1990s and in the early years of this century, the 22 member countries of the OECD DAC contributed around 95% of total international financial assistance. In the following years, it is realistic to expect that some other, non-OECD DAC countries will start assuming a more important role. We are talking basically about four groups of countries (Manning, 2006):

•

OECD members, including NMS, that are not members of the DAC; This group includes four NMS (Poland, Czech Republic, Slovakia and Poland) as well as Turkey, Korea, and Mexico. All the four NMS have a history as donors under the CMEA countries, some on a relatively major scale.

•

NMS that are not members of the OECD; This group includes 8 NMS: Bulgaria, Cyprus, Estonia, Latvia, Lithuania, Malta, Slovenia, and Romania. The absolute amount of development assistance from this group will be rather small given the size of their economies.

•

Middle East and OPEC countries and funds; Similarly as in the 1970s, increased oil prices enhanced again significantly their funding possibilities. In contrast to the countries in the first two groups, funds from these donors are likely to be focused on the Muslim world and Africa.

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•

Other countries, including China and India; This group of includes a wide variety of countries from different regions of the world, such as Latin America (for example, Venezuela, Brazil), Europe (for example Israel), and Asia (for example, Thailand, Taiwan). The group also includes China and India which, in addition of being still significant aid recipients, have over the recent years developed large and ambitious development assistance programs oriented primarily towards the African countries.

Many of NMS, including Czech Republic, Hungary, Poland, Slovakia and Slovenia, consider themselves today »re-emerging« rather than »emerging« donors. And there is a justification for this view. In the pre-transition period, the CMEA countries were namely significant providers of development assistance to the countries »on the road to socialism« in developing world. Slovenia, being a part of the highly influential non-aligned SFR Yugoslavia, provided assistance to fellow non-aligned countries. Development assistance efforts of all these countries in the pre-1990s period were therefore driven primarily on the ideological or political basis.

In the years immediately after the transition started, development assistance of today's NMS was drastically reduced both on the political as well as economic grounds. Nevertheless, some countries return to the provision of development aid very soon after the transition started. Slovenia, for example, started to provide development assistance already in 1992 as a response to the humanitarian crisis in the Western Balkans, accompanied with a large inflow of refugees from the region.

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In addition to humanitarian reasons, there have been other drivers that prompted NMS to the return of aid provision in the 1990s. One of them was the requirement for the EU accession, which bounded all NMS to the implementation of the »acquis communitaire«. For the four OECD NMS, EU requirements had been combined with the intergovernmental norms and standards for international assistance programs, set by the OECD DAC. Foreign policy and economic interests related to the neighboring regions of the southeast and east Europe constitute the next driver for development assistance of a majority of NMS. In all these countries, ODA is namely considered as an important policy instrument for maintaining regional stability. Last but not least, development assistance of NMS to the neighboring regions has been further emphasized by their desire to share transition and EU accession expertise with the neighboring countries lagging behind in these processes.

Until the accession to the EU, many of the NMS were themselves recipients of the donor funds (some still are). Their new donor status requires a different attitude in this area. To participate fully in the activities at the level of the European Commission and to contribute to the effectiveness of EU aid, these countries first have to design their development policies and strategies, raise the awareness among their citizens and engage in different development cooperation projects. The integration of an already well-developed concepts, principles and commitments of the EU and implementation of these policies is a challenging task for MNS as they emerge or re-emerge as donors. Let us examine more closely some of the main policy orientations and concepts, which NMS need to integrate in their development cooperation on the account of their EU membership.

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3 European Union Development Assistance: key policies, concepts and commitments

The “Treaty on European Union” (Maastricht Treaty, 1993) established the overall objectives of European development cooperation and assistance as follows: •

To enhance the sustainable economic and social development of the developing countries, and more particularly, the most disadvantaged among them;

•

To further the smooth and gradual integration of the developing countries in the world economy and

•

To fight against poverty in the developing countries.

This can only be achieved by pursuing policies that promote the development and consolidation of democracy, the rule of law and the respect for human rights and fundamental freedoms. Besides that, the Community and the Member States shall also comply with the commitments and take account of the objectives they have approved in the context of the United Nations and other international organizations. Today, the European Community’s activities in the field of development cooperation are based on the Millennium Development Goals agreed by the world leaders at the Millennium Summit in September 2000, with the overarching objective of reducing world poverty by half by 2015.

To ensure more effective and efficient aid, the Treaty also established three principles for EU development cooperation, referred to as the »3 Cs«: •

Complementarity: Community development policy should be complementary to Member States' policy. EU Member States have delegated to the Commission responsibility for managing a substantial portion of their assistance to developing countries. However, they have kept alongside EC aid their own bilateral aid programs, with different political objectives and strategic approaches. Therefore it is extremely

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important to have a clear division of labor between the Community and the Member States, and that is what »complementarity« is about. •

Coordination: It means ensuring consultations and information exchanges between the EU and the Member States on their development cooperation policies and programs (including in international organizations).

•

Coherence: It means that efforts must be made to ensure that Community development policy objectives are taken into account in the formulation and implementation of other policies affecting the developing countries (these policies are for example in the areas of trade, migration, energy, agriculture, health, education and so on).

Following a proposal by the European Commission on “Finance for Development”, the Council of 25 States decided in May 2005 to collectively provide 0.56 % of GNI by 2010 as an intermediate step to achieving the UN 0.7 % target by 2015. The Commission proposed “old Member States” to increase their ODA to a level of 0.51% of GNI (in case they have not yet reached it) and “new Member States” to reach 0.17 % of GNI and 0.33% of GNI by 2015. In practical terms this commitment would increase collective EU aid to 66 billion EUR in 2010. 3 As stated in the “European Consensus on Development” 4 , at least half of this increase in aid will be allocated to Africa. The new commitments will further reinforce the EU’s position as the world’s biggest aid donor and constituted fundamental elements of the ‘European Consensus on Development’– and the EU Strategy for Africa 5 agreed later in

3 4

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The 25 Member States' ODA totalled 43 billion EUR in 2005. Joint Statement by the Council and the Representatives of the Governments of the Member States meeting within the Council, the European Parliament and the Commission; Council Document 14820/05. European Council of 15-16.12.2005 ‘The EU and Africa: Towards a strategic partnership’ (document 15961/05 of 19.12.2005).

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2005. According to the “European Consensus on Development” (i.e. Consensus), the EU will continue to prioritize support to the least developed countries (LDCs) and other low-income countries (LICs). Development aid will also continue to be given to middle-income countries (MICs), particularly to lower MICs, many of which face similar problems as LICs. Particular attention will be given to fragile states and donor orphans.

In order to promote donor coordination and complementarity between the Community and the Member States, it is extremely important to have a clear division of labor. A division of labor implies an increase of efficiency (e.g. reduce transaction cost of donor coordination), effectiveness (e.g. by focusing on sector or geographic aid “orphans”), as well as strengthening of the role of the EU in international development cooperation in a long term. Focusing on the NMS, the EU plans to “capitalize on the NMS experience and facilitate the gradual emergence of these countries as new donors” (European Consensus on Development: 12). However, the question with which the NMS are faced is what specific “comparative advantage” they possess and where can they claim their priorities and interests.

An insight in current state of development cooperation of NMS is given in the next chapter of the paper, where basic characteristics of size and sector/ geographic orientation of development assistance of NMS are presented.

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4 Current status of NMS as donors In 2002, i.e. still before EU accession, the 10 NMS provided ODA equivalent to no more than 0.03 per of their collective GNI Already in 2005, i.e, in the first full year of accession, this share increased to a level of around 0.1 per cent of GNI for the group as a whole. This is significantly lower when compared to EU share of 0.44 per cent, but on the other hand, it represents approximately one third of the ODA/GNI ratio reported by the less developed member of the EU-15, such as Greece – 0.17 per cent or Portugal – 0.21 per cent (OECD, 2007). As shown in Table 1, there are significant differences among individual NMS with respect to their ODA/GNI ratios. On the one hand there are countries, like Cyprus, and the Baltic states, with the ratio around 0.05 per cent in 2006, and on the other there are countries, like Czech Republic, Hungry, Poland and Slovenia, with the corresponding ratios of 0.1 per cent and more. An exception among the NMS is Malta, which already reached the 2010 ODA/ GNI target of 0.17 per cent 6 .

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According to the Maltase NGOs, amost half of this was spend on housing refugees within Malta. (CONCORD, 2006)

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Non-edited draft April 2007 Table 1: EU ODA levels 2004 – 2005 – 2006 7 ODA Levels Mio. €

2004 as % of GNI

Mio. €

2005 as % of GNI

Targets Austria 554 0,23 1072 0,45 Belgium 1195 0,41 1358 0,45 Cyprus 4 0,04 4 0,04 Czech Republik 88 0,11 102 0,11 Denmark 1664 0,85 1675 0,81 Estonia 4 0,05 5 0,06 Finland 535 0,35 600 0,39 France 6921 0,41 8093 0,47 Germany 6155 0,28 6204 0,28 Greece 380 0,23 484 0,28 Hungary 45 0,06 68 0,085 Ireland 496 0,39 546 0,40 Italy 2011 0,15 3279 0,24 Latvia 7 0,06 7 0,06 Lithuania 8 0,042 12 0,06 Luxembourg 192 0,83 204 0,85 Malta 8 0,18 7 0,18 The Netherlands 3434 0,73 4104 0,83 Poland 96 0,05 200 0,09 Portugal 842 0,63 454 0,33 Slovak Republic 23 0,072 29 0,09 Slovenia 25 0,1 30 0,12 Spain 1991 0,24 2600 0,30 Sweden 2224 0,78 2587 0,88 UK 6439 0,36 7138 0,39 EU 15 0,35 35033 40398 0,40 EU 10 0,07 308 464 0,09 EU 25 35341 0,34 40862 0,38 Data sources: OECD/DAC Annual report 2005 and replies by EU MS to the Monterrey survey.

Mio. € 1080 1577 5 110 1715 6 671 8213 7505 589 89 675 4577 8 14 216 9 4221 250 450 30 35 3234 3070 8061 45854 556 46410

2006 as % of GNI 0,33 / 0,43 0,5 0,04 0,11 0,80 0,06 0,416 0,47 0,33 0,33 0,1 0,47 0,33 0,06 0,064 0,86 0,2 0,82 0,1 0,33 0,085 0,127 0,35 1 0,42 0,44 0,10 0,42

In spite of the increase in development assistance due to the contributions made by NMS to the EU budget, it seems that the achievement of the set goal of 0.17% of GNI will be difficult. 4.86 per cent of total member states contributions to EU budget are recorded as ODA. As contributions of member states to the EU budget are equivalent to around 1 per cent of their respective GNIs. This de facto means that ODA flows equivalent to around 0.05 per cent of their respective GNIs consist exclusively of contributions to the EU budget, commitments to the UN system and multilateral financial institutions, and administrative costs of running the

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Table reproduced from EC, COM (2006) 85 final.

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ODA system in the country. Any further increases in ODA tend to increase the volume of bilateral assistance as well as voluntary commitments to various multilateral organizations.

Table 2 demonstrates a wide gap between the current level of development assistance and the commitments of NMS. It is not surprising that a study, carried out by CONCORD (2006) predicts that with the exception of Malta (see comment on page 9), none of the NMS is likely to achieve the EU target for 2010, despite substantial increases in aid over the last years. In several NMS, development NGOs point to lack of political commitment to the issues of development assistance, reflecting in part the lack of a significant constituency for development cooperation, as there are only few development NGOs and the public supports mainly humanitarian aid to neighboring countries (EC; The consequences of enlargement for Development Policy, 2003). In fact, the Europeanization of development policies has resulted in growing attention in NMS to these issues. The data available reflects an intensified activity in institutionalization of development cooperation, in setting a functioning legal framework and developing a set of criteria for selection of recipient countries as well as channels through which to execute development aid programs.

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Table 2: Prospects for achievement of the 2006-2010 intermediate EU goals 8 2006

ODA Levels Mio. €

2010 (latest figures)

%GNI

Targets

Mio €

2010 (commitments)

%GNI

0,33 / -

Mio. €

%GNI

0,51 / 0,17

0,51 / 0,17

Austria

1080

0,43

1397

0,51

1397

0,51

Belgium

1577

0,5

2561

0,70

2561

0,7

Cyprus Czech Republik

5

0,04

10

0,06

28

0,17

110

0,11

137

0,11

212

0,17

1715

0,80

1997

0,80

1997

0,80

Estonia

6

0,06

8

0,06

21

0,17

Finland

671

0,416

1287

0,7

1287

0,7

France

8213

0,47

11483

0,6

11483

0,6

Germany

7505

0,33

12359

0,51

12359

0,51

589

0,33

1041

0,51

1041

0,51

89

0,1

176

0,17

176

0,17

675

0,47

1227

0,62

1227

0,62

4577

0,33

3519

0,24

7478

0,51

8

0,06

13

0,07

31

0,17

Denmark

Greece Hungary Ireland Italy Latvia Lithuania Luxembourg

14 216

0,064 0,86

20

0,07

48

0,17

250

0,83

258

0,86 0,17

9

0,2

7

0,17

7

4221

0,82

4848

0,8

4848

0,8

Poland

250

0,1

570

0,17

570

0,17

Portugal

Malta The Netherlands

450

0,33

768

0,51

768

0,51

Slovak Republic

30

0,085

77

0,17

77

0,17

Slovenia

35

0,127

58

0,18

58

0,18

Spain

3234

0,35

7136

0,60

7136

0,6

Sweden

3070

1

3783

1,00

3783

1

UK

8061

0,42

12863

0,59

12863

0,59

EU 15

45854

0,44

66519

0,56

70486

0,60

EU 10

556

0,10

1076

0,15

1228

0,17

EU 25

46410

0,42

67595

0,54

71714

0,57

Source: Replies of EU MS to the Monterrey survey

NMS are transition economies that were only recently on the recipient side of the development cooperation. All NMS with exception of Malta and Cyprus share many characteristics that are important for determining both their development assistance profile and their programs. All these countries have over the last decade and a half gone through a successful transition process when they all were on the recipient side of the development cooperation. This provides them with a good and fresh understanding of the importance of

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Table reproduced from EC, COM (2006) 85 final.

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development cooperation, experience sharing and donor coordination. If properly integrated in their policies, this experience alone can constitute an important comparative advantage.

Though some NMS are OECD members and others are not, for all of them the DAC “standards” are a key point of reference. All NMS base their development assistance policy orientation on the UN Millennium Declaration Goals. They are the following: (i) to eradicate extreme poverty and hunger, (ii) achieve universal primary education, (iii) to promote gender equality and empower women, (iv) to reduce child mortality, (v) to improve maternal health, (vi) to combat HIV/AIDS, tuberculosis and other diseases, (vii) to ensure environmental sustainability, and (viii) to develop a global partnership for development. Taking rather limited institutional and personnel capacities of most NMS for ODA programming and implementation, they contribute towards achieving the Millenium Development Goals primarily through multilateral channels, especially through the EU budget financing.

If the Commission Comprehensive monitoring report of 2003 (EC, 2003) still found inconsistency of development policies of NMS (at the time candidate countries) with EU principles, 9 the strategy papers, mostly produced after the accession, do not show this. The policies have obviously been revised to pay increase attention to the EU agreed principles and guidelines. What, however, still remains a challenge is the integration of the policy frameworks in the daily policies and annual programs, which will combine the comparative advantages, specific experience and planned foreign policy priorities with the development cooperation strategies of NMS. 9

In particular with regard to the guidelines laid down by the OECD Development Assistance Committee as well as the commitments and objectives they had accepted in the context of the UN and other international organizations.

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Apart from Millenium Development Goals, NMS place considerable importance in implementing their development assistance, especially the bilateral one, on sectors/ geographical areas, where they have comparative advantages. With respect to sectors, a clear comparative advantage of NMS exists in the areas of transition expertise as well as EU accession expertise. It is for this reason that practically all NMS with exception of Cyprus and Malta put a lot of emphasis in providing bilateral assistance in these areas. Policy makers, entrepreneurs, and NGOs of NMS posses a wealth of transition / EU accession best practices as well as knowledge of potential difficulties and obstacles to smooth transition process. The available evidence suggests that several of the on-going development projects are of this nature (training of civil servants, consultancies in different policy areas to the governments, counseling to civil society, etc). The application of best practices is extremely important for the countries in Southeast and East of the EU to help them reversing the unfavorable development trends. This is a concern shared by the entire international community.

New member states have an interesting list of main recipient countries, with pronounced priority given to neighboring non-EU member countries or ex-Soviet countries, where they have comparative advantage in better comprehension of state of affairs due to their own historical experience. 10 These factors are, for example, very much present in Poland with its assistance to Ukraine and Belarus, in Baltic states with the assistance going again to Belarus and South Caucasus, or in Slovenia with a large majority of bilateral assistance channeled to the Western Balkan countries. Some NMS, such as Poland and Hungary, also allocate part of their development assistance to their minorities in those neighboring countries that are still eligible for ODA financing. 10

Details of country priorities are specified in Annex 1.

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In contrast to the NMS with the socialist history and with transition experience, bilateral ODA of Malta and Cyprus has quite different features in terms of both subjects and geographical priorities. These two countries are much more oriented towards promoting good governance, market economy, democracy, civil society development, etc, in the North African and Middle East countries, and in the poorer countries of the Commonwealth (Novak, 2006).

On a conceptual ground, NMS orient themselves towards international best practice, stressing the importance of “soft” knowledge transfer and good governance, rather than physical infrastructure. In practice, however, the countries are often under strong pressures to use ODA funds for subsidizing exports and for funding infrastructure project, i.e., for providing those types of development assistance that are not any more the core of development assistance schemes provided by traditional donors.

More difficult for the NMS is the development cooperation with developing countries, especially with the least developed ones. A strong focus on Africa by EU, whereby 50% of the increase in aid should go to this continent, is a heavy target for NMS. Here, the assistance of the European Commission in designing the instruments, which would help donor countries to develop their policies, would be beneficial. The EU should provide capacity building support to enable the NMS to play an active role within the EU aid. Only a few NMS have been implementing development projects in the less developed countries, which is understandable due to their limited experience and resources.

A more detailed overview of the current state of affairs in the area of development cooperation in each new member state is presented in the Annex 1. The following chapter lists

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some of the main problems and challenges that NMS face in designing and putting in place effective development cooperation programs.

5 Problems and challenges of development cooperation in NMS

NMS as new or re-emerging donors need to address specific challenges in designing their strategies of international development cooperation, which need to be taken into account when assessing their potential as donors. Some of the main problems and challenges are listed bellow, but the selection is by no means complete neither are the problems listed in accordance to their ranking. Also, there are several specifics at the level of individual countries, which could not be captured in such an overview. We do however believe that every one of the NMS is faced with these issues, with differences maybe in the intensity of the problem or in the policy attention given to the solution search.

Policy and legal framework; All successful endeavors require a clear direction and a road map that guide the action. Experience of traditional donors clearly indicate that a well designed policy framework – being either in a form resolution, strategy or another type of a policy document adopted by the authorities – is a necessary precondition for successful implementation of a country’s development assistance. As reflected in the study carried out by Bucar, Plibersek and Mesic (2007) one of the most active areas of work of NMS in the development cooperation in recent years had been design of appropriate policies and strategies.

With the support of international organizations, most of the countries have

prepared strategy papers, which may however vary somewhat in their content as to how specific they are in defining the priorities and institutional framework.

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There are three concerns that are often voiced with respect to the policy documents outlined by the NMS. The first one refers to the priority objectives of the NMS’ policy documents. In is namely argued that poverty reduction and Millenium Development Goals in general do not feature strongly enough in these document. While MDG are cited as the priority objective in principle in the strategic papers, when a closer look at the priorities in practice is taken, this is not the case any longer. In part this “shift” of priorities can be attributed to the geographical preferences of NMS: development assistance to least developed countries is more of an exception than the rule within their bilateral aid. The CONCORD claimed in 2004 that just three NMS (Estonia, Malta and Poland) listed poverty reduction as an objective for their ODA. In most NMS higher priority was being assigned to issues like promotion of democracy and the rule of law (seven countries), regional security and sustainable development (six countries each) (CONCORD, 2004).

Another concern is policy coherence which in practice means the combined effect of all policies at play in relation to the partner country, receiving the development assistance. Similarly as in many traditional donors, policy coherence is a difficult but clear issue to be addressed through consistent positions of individual NMS on various issues that have effects on developing countries, for example internal policies as well as trade, agriculture, fisheries and migration policies. For example, a very protectionist position of a country in the agricultural configuration of the Council is not consistent with a pro-development assistance position of the same country in another Council configuration. And third, ODA policy framework in many NMS has been developed with rather poor consultation with the country’s NGOs or other stakeholders in development cooperation.

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Significant differences among the NMS with respect to the ODA policy framework are mirrored on the side of their legislative arrangements in this area. NMS that have either already adopted a special law governing ODA (Slovenia, for example) or are in the advanced stage of its preparation (Czech Republic and Slovakia, for example) are more exception than the rule. This means that development assistance is being by and large regulated within the framework of the existing legislation. The segments of the legislation that are of particular importance for development assistance include public finance, public procurement, and taxation. It has to be underlined that this legislation is typically not adjusted to the specific requirements of the development assistance. As a consequence, it may happen that implementation of development assistance programs and projects is either slowed down or even blocked all together due to certain legal provisions that simply do not correspond to the development assistance logic.

Institutional /administrative structure; In most NMS, specialized units have been established within the Ministries of Foreign Affairs (MFA) 11 . They typically have a responsibility to coordinate the country's humanitarian and development assistance but only some also have funds to implement the development policy. Implementation of the development policy, and more importantly the budget, are in most NMS often highly decentralized among the line ministries, where each of them has its own development assistance budget, each of them provides the assistance in its area of expertise following its own methodology, and each of them design and execute calls for tenders for their respective field of competence. Due to the usual controversies, associated to the policy mandates and budgets, there is considerable resistance from line ministries regarding a strong coordinating role from the MFAs. 11

See Annex 1 for more details.

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This highly decentralized implementation structure accompanied with the lack of institutional capacity for dealing with development assistance issues prevents the articulation of clear development cooperation strategies that would be consistent with overall foreign and economic policies of the countries concerned. Such approach makes it difficult to assess the total volume of external assistance, as reporting structures are complicated and definitions of ODA are not clearly understood by all development assistance providers. Further on, strong fragmentation of the development assistance works against efforts to raise public awareness of development cooperation activities as well as against the development of multilateral partnerships in development cooperation activities. Last but not least, under this implementation structure budget cuts done for individual line ministries are typically done first in the development assistance items as they typically do not have a very strong and articulated constituency that would vigorously defend these items.

Problems associated with the decentralized structure for implementation of the development assistance are summarized in the following assessment of an official from the Czech Ministry of Foreign Affairs: “The past history in the development assistance was not an advantage, it made our work more complicated. Ten different ministries are involved in implementing the development cooperation with different methodology, philosophy. Ministry of Foreign Affairs is only coordinating their work, which is sometimes “mission impossible” and not only due to the ministries different political backgrounds. ….……We would like to have a specialized agency. We need an institution which can hold tenders. The Ministry of Finance is extremely restrictive and is saying “no” to the development agency third year in a row. We keep trying”. (UNDP, p.4)

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Looking at the individual NMS, we see frequent changes in the organizational structure with introduction of new advisory or executive bodies in relatively short time periods. This certainly reflects the difficulties faced by these countries in finding the best operational setup: on one hand avoiding the dangers of decentralization mentioned above and on the other, avoiding or better postponing the formation of an independent international cooperation body. Looking at the majority of traditional donors, responsibility for ODA implementation has been typically vested to independent development cooperation agency created for this purpose. As the volume of funds to be managed by development agencies in NMS is still rather low, it may well be argued on the efficiency ground that establishment of this kind of institutions is for the time being not an appropriate model for ODA implementation.

Nevertheless, in some of the more advanced NMS with larger ODA volumes, the ODA implementation model based on a development cooperation agency is considered more and more seriously. In Hungary, for example, such an agency has already been established while in the Czech Republic and Slovakia establishment of assistance agencies is under serious consideration. In all these countries, authorities have been effectively assisted by the UNDP. Under this model, a country's Ministry of Foreign Affairs would retain a policy coordination role and budgetary control while support to policy development and programming of assistance as well as development assistance implementation, including selection of contractors, monitoring and evaluation would be transferred to a development assistance agency.

Another important administrative constraint in all MNS is a lack of personnel with relevant expertise in international assistance in public administration. As development and humanitarian activities are typically administered by the Ministry of Foreign Affairs and

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therefore as a part of a diplomatic service, staff is subject to frequent turnover, due to the requirement to fulfill the core functions of diplomatic posting. The Czech Department for Development Co-operation and Humanitarian Aid within the MFA, for instance, has 11 allocated staff (Grimm and Harmer, p. 16). Decentralized organizational structure only reinforces the problem of human resources, both in terms of number as well as expertise, since it is impossible to employ sufficient number of trained personnel at each of the respective Ministries, participating in development cooperation. What often happens is that development cooperation is an additional task of one of the staff members.

Achieving the ODA funding at the committed level; As already mentioned, the EU member states agreed to ambitious new ODA targets, to which NMS committed themselves. Taking into account the current ODA/GNI ratios (Table 1), reached by NMS so far and in spite of significant efforts made by this group of countries to increase the ODA both in nominal and relatives terms volume, it is highly unlikely that the 2010 target will be met by the group as a whole. Reaching the ODA/GNI target is even more complicated in an environment where MNS' growth rates are very high. Achieving ODA/GNI ratio 2010 target would actually mean that nominal volumes of their ODA flows would have to increase at rates that are well beyond the growth rates of a large majority other budget expenditure items.

Closely associated with the problems of increasing the ODA volume to the levels that would be close to the ones committed by the NMS, are also problems associated with its structure. In countries with ODA/GNI ratios 0.1 per cent or above, contributions to EU budget and other multilateral institutions participate with up to a half of total ODA flows while in NMS with lower ratios these contributions make go to over 2/3 of total ODA commitments. Relatively small room for bilateral assistance is no doubt reducing opportunities for building and

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enhancing the national development cooperation constituency and capacity. Most of the planned increase in ODA could on the other hand be devoted to bilateral assistance, opening a different angle of the problem: designing consistent and comprehensive programs of bilateral cooperation, where attention is given on one hand national priorities and interest and on the other, following the objectives and principles, agreed at the level of EU. The latter refers in particular to the directives in the area of “division of labor”- i.e. selection of priority areas for international cooperation. This leads to the next challenge for NMS: how to find their own space within the donor community.

Positioning of NMS in donor community; Today there is broad international consensus that Millenium Development Goals are general objectives of development policy. Furthermore, there is also a general agreement on the features of efficient and effective development cooperation documented in the OECD’s Paris Declaration 12 . The key element of this Declaration is the commitment by donor community to: (i) Strengthening partner countries’ national development strategies and associated operational frameworks (e.g., planning, budget, and performance assessment frameworks). ii. Increasing alignment of aid with partner countries’ priorities, systems and procedures and helping to strengthen their capacities. iii. Enhancing donors’ and partner countries’ respective accountability to their citizens and parliaments for their development policies, strategies and performance. iv. Eliminating duplication of efforts and rationalizing donor activities to make them as costeffective as possible.

12

Paris Declaration on Aid Effectiveness: Ownership, Harmonisation, Alignment, Results and Mutual Accountability, March 2, 2005.

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The Declaration therefore calls donors and consequently all EU members, the »old« ones as well as NMS, to work more closely together in order to avoid loading a heavy burden of coordination on partner countries, and at the same time to avoid duplication and multiple administrative procedures in their own countries. For NMS, this in practice means to adapt their policies currently under preparation in line with the best practice agreed at the OECD DAC and EU forum.

Harmonization of development assistance among the EU member states, though very logical from the conceptual point of view and supported at the rhetorical level, does not have a clear confirmation in the NMS' development assistance practice. While on one hand several countries are already discussing further concentration of development cooperation due to limited resources available, on the other hand, a number of countries also plan the expansion of bilateral aid in the future. The NMS strategies seem to indicate a desire to channel some of the required and planned increase in allocation of resources towards bilateral aid. An important explanation why bilateral engagement is de-facto considered as a preferred aid delivery mode of NMS is its visibility, which is aimed at serving political interests within domestic public and regional neighbors, and winning favors in the recipient country. Here we notice some controversy between more selectivity and concentration on one hand and increased bilateral activity on the other.

In addition to this, development assistance harmonization exposes NMS to certain risks that are specific to this group of countries and are not shared by traditional donors. For example, NMS, being all relatively small donors, may de-facto become less preferred donors by the recipient countries. It is realistic to expect that the recipient country would prefer that donor coordination is being assumed by the large and experienced donors, providing more

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substantial and stable financial assistance. Consequently, NMS may be easily faced with a problem of being viewed a kind of a second class donors or »donors-orphans«. And nobody wants to have small donors (UNDP, p. 4).

In a situation when a NMS has established itself as a donor in a couple of partner countries, withdrawing from some of them would be extremely difficult to justify to both the politicians and to the public opinion at large. For example, it is not realistic to expect that public opinion in Slovenia would be willing to accept withdrawal of the country's successful bilateral assistance to some of the Western Balkan countries on the ground of the EU development assistance harmonization. Further on, it is not realistic to expect that NMS – they all have rather poor development assistance capacity expertise – would play an important role in the partner countries known as »aid orphans« even though this might be viewed as preferred area of their specialization if looked at the issue from the (narrowly defined) development assistance harmonization point of view.

Within the available policy documents of NMS, the use of delegated co-operation arrangements (see EU Development Concensus) is not yet mentioned, neither in the sense of participating in an arrangement like this or offering to coordinate one. In fact, the cooperation issue is more present in some countries in relation to non-EU countries (Canada, Norway) than with other EU members. The very novelty of acting as a donor country could be one of the explanations, the other being the policies pursued by donor agencies of Canada and Norway who actively look for expertise of NMS when channeling their resources to their neighboring countries.

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Cooperation with NGOs; At the initial stages of official aid programs in NMS, NGOs were de-facto not recognized by the state authorities as strategically important partners. At the same time, independent NGOs were not familiar with the governmental dialogue, and a large majority of their funding was drawn from private (often international) 13 sources. A particular feature in all these post-communist societies was a lack of confidence between government and civil society. Though a productive tension/ dialogue between civil society and government is considered desirable, in many NMS this tension was quite pronounced in early transition period. This lack of confidence has its origins in the pre-transition period when NGOs often established and articulated themselves as a kind of the opposition to the government and are sometimes still closely associated with political opposition (Grimm and Harmer, p. 14).

In such a situation it is not surprising that that foreign aid policy formulation in NMS has not been nor very broad-based and that there is usually no systematic consultation on this subject carried out outside the government structures. According to the NGO sources, there is a lack of interest on the side of respective Ministries of Foreign Affairs to enter in a more comprehensive dialogue with the NGOs. The ministries are apparently not convinced that the NGO sector can play an important role in building public support for ODA, in policy formation and in project implementation. Further on, they apparently overestimate their own role, and are reluctant to delegate responsibilities (policy-related) to other stakeholders. On the other hand, NGOs sometimes find it difficult to understand priorities and constraints faced by the authorities, and as a result are impatient and also dismissive regarding the work of the authorities.

13

This sometimes caused increased reservations on the side of the government to involve such NGOs in policy dialogue.

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In recent years, NGOs in several new member states, such as Czech Republic, Slovakia and Poland, have been involved in the formulation of development cooperation policy. An extremely important mechanism for strengthening this cooperation is the establishment of the national platforms for development NGOs in NMS. The non-presence of a national development NGO platform makes institutionalized dialogue with authorities particularly difficult. But even where national platforms exist, they often attract a few large NGOs and a significant number of smaller players (grass-root NGOs) with sometimes vested interests. Experiences show that governments are often more open to few larger organizations as the primary agencies to assist in development policy formulation and in responding to crises (Grimm and Harmer, p. 15).

A more diverse set of sources for NGO financing has emerged in recent years as well. This is well in line with the general expressed wish of the EU to include non-state actors (and this means primarily NGOs and the private sector) in the implementation of development cooperation. In addition to donor government financing, financial support start coming to the development NGO also from other sources, including the private sector, and UN and other multilateral organizations. In tapping these resources, development NGOs face different kinds of problems, including high threshold for co-financing and inadequate capacity to form partnerships with experienced development actors in other donor countries, especially in old EU member states. Without capacity building support provided by the authorities, NGOs from NMS will find it hard to compete at the EU level. In some countries, Czech Republic, Hungary and Slovakia, for example, authorities have signaled a willingness to provide financial support to NGOs that are bidding for EuropeAid funds. (Novak, section 4.6)

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Public awareness; The transformation from aid recipients to aid providers is a challenging transformation which has not only political, economic and administrative, but also cultural implications. The transformation will continue to be demanding for authorities in NMS not only in articulating and implementing policy and putting in place effective implementation structure and procedures, but maybe in more so in developing a culture that is supportive of assisting others internationally over the long term. It is much easier to rally public support in response to large international disasters than it is for ongoing protracted crises and/ or for overall development assistance and poverty reduction activities in distant countries.

One would expect the public awareness of development assistance issues in NMS is significantly lower than in EU-15 countries. The Eurobarometer polls on the contrary show that there is significant public support for official development assistance in these countries even though people often mix humanitarian and development aid. There are other challenges associated with the public opinion issues as well. For example, the public has to be convinced that development cooperation is justified despite often present low level of domestic economic development, accompanied with poverty “pockets” in practically each of them. The transition has often meant serious cuts in social expenses in NMS. It is of utmost importance to effectively involve a wide range of stakeholders in the public awareness process. Similarly as in traditional donors, government and its institutions, parliamentarians, NGOs, and the private sector organizations, all of them have to contribute towards building general public support for development aid. Dedicated programs on awareness raising need to be a standard element of development cooperation policies in all NMS, focusing on development education. Only such approach will enable NMS to build sufficient public support for increased allocation of resources towards the level of their international commitments.

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6 Conclusion To summarize, development assistance of NMS is facing many challenges. The most important among them seem to include (i) designing development assistance policies, legislation and institutions that will reflect the drastically changed role of the NMS in this area, (ii) setting development assistance priorities so as to be in line with the OECD DAC recommendations and with EU development cooperation policy, (iii) increasing the volume of funds devoted to ODA – expressed both in nominal terms and relative – that will allow the NMS to approach the 2010 and 2015 targets, (iv) establishing a position within the EU donor community, (v) putting in place a project cycle mechanism aimed at significantly improved terms of monitoring and evaluation, and with a capacity to demonstrate results, and (vi) raising political and public awareness about the development cooperation and strengthening the development assistance infrastructure.

In further discussions and design of policies on the division of labor between donors one needs to clearly observe the principles of equal participation in policy making process for all, old and new donors. The fact that current level of development cooperation is relatively low should not be taken on board as a reason not to involve NMS in the planning of future strategies at the EU level. A careful assessment of potential advantages of NMS being a donor in a particular sector/ country is required on one hand, and the options of development cooperation arrangements on equal footing promoted. A timely coordinated approach at the EU level could be valuable in preventing spreading of the planned increased aid coming from NMS too thinly and thus incorporating new donors successfully in the overall EU development cooperation. One of the specific sector priorities, which is high priority in NMS and is based on their comparative advantages (due to their own recent historical experience), is the regulative and institutional transition process from centralized planned economy to

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market economy and acqui: here there is no doubt that NMS could provide a lead and act as the development assistance coordinator at either sector or country level. This should be taken on board by “old” donors in conceptualizing division of labor.

References •

Bucar M., E.Plibersek, A. Mesic. 2007. Development Policies of New Member States and Their Participation in EU Development Cooperation; Annex 1 in Muerle, H.Towarrds a Division of labour in European Development Cooperation: Operational Options. DIE Discussion Paper 6/2007. pp.47-52.

•

CONCORD. 2004. Statement on EU-Enlargement related challenges for development policies in the European Union.

•

CONCORD. 2006. EU aid. Genuine leadership or misleading figures?

•

EC. 1993. Treaty on European Union. http://europa.eu.int/en/record/mt/top.html

•

EC.

2003.

Comprehensive

monitoring

report.

http://eur-

lex.europa.eu/smartapi/cgi/sga_doc?smartapi!celexplus!prod!CELEXnumdoc&lg=en &numdoc=503DC0675 •

EC. 2005. European Development Concensus. Joint Statement by the Council and the Representatives of the Governments of the Member States meeting within the Council, the European Parliament and the Commission; Council Document 14820/05.

•

EC. 2006. Financing for Development and Aid Effectiveness- The Chhalenges of scaling-up EU aid 2006- 2010. COM (2006) 85 final.

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Grimm, Sven and Adele Harmer, 2005. Aid donorship in central Europe. HPG Backgroud Paper. http://www.zpok.hu/img_upload/f880a7b608b6eaa8411125e501dc0547/Statement_E U_Enlargement.doc.

•

IDC- Development Strategies. 2003. The consequences of Enlargement for Development Policy; prepared for EC Directorate General for Enlargement.

•

Manning, Richard. Will. March 2006. “Emerging Donors” Change the Face of International Cooperation?, ODI lecture.

•

Novak, Adam. 2005. NGDO Partnership in the enlarged EU. Paper for the seminar »EC Development Cooperation: Policy, Instruments & Funding«, Riga.

•

OECD. 2007. Preliminary data on net official development assistance for 2006.

•

UNDP. 2007. Emerging donors initiative revisited – stock taking and next steps. Budapest, 5 – 6 March 2007, UNDP Regional Workshop Report . *

*

*

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Non-edited draft April 2007 Annex 1: Overview of development cooperation of New Member States (Bučar, Pliberšek, Mešič, 2007) ODA Statistics

Slovak Republic

Poland

2004

2005

0.072%

0. 12%

25.935 million EUR

49.533 million EUR

2004

2005

0. 05%

0.068% 159.953.160 EUR

91.748.633 EUR Hungary

Czech Republic

2004

2005

0.07%

0.09%

54 million EUR

74 million EUR

2004

2005

0.106%

0.114%

81.591 million EUR

101.927 million EUR

Country priorities

Sector priorities

Comparative advantages

Coordination of ODA

Implementation

Serbia and Montenegro, Kenya, Sudan, Kyrgyzstan, Kazakhstan, Ukraine and Belarus

Democratic institutions, infrastructure, agriculture

Institutional framework, knowhow, experience and capacities

MFA

Ministries (FA, Environment, Education, Agriculture), NGOs

Afghanistan, Georgia, Iraq, Moldova, Vietnam, the Palestinian Autonomy

Sustainable development, health, education

MFA

MFA, MF, Education

Serbia and Montenegro, BiH, Vietnam, Palestinian National Authority, Macedonia

Knowledge transfer, education, technical training, agriculture

NO

MFA

implementing agency, NGOs

Angola, Bosnia and Herzegovina, Moldova, Mongolia, Serbia and Montenegro, Vietnam, Yemen and Zambia

health care, education, energy production

health care, education, energy production

MFA

Ministry of Interior, Development Centre

poverty,

health sector, education, access to potable water, environment, capacity building, democratic institutions, public administration efficiency, cross-border cooperation, reconstruction of the economy sector

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of

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Latvia

Lithuania

2004

2005

0. 08%

0. 08%

6 million EUR

8 million EUR

2004

2005

0. 06%

0. 07%

6.7 million EUR

9 million EUR

2004

2005

0.042%

/

7.66 million EUR

Cyprus

Georgia, Moldova, Ukraine, Afghanistan

(1) Good governance and democratisation; (2) Education; (3) Economic development and trade liberalisation; (4) Environment; (5) Information and communications technologies.

Development of the ICT-sector and e-governance.

Development Co-operation Division within the MFA

Ministries, NGOs, private companies

Georgia, Ukraine

(1) Political and economic reform process; (2) European and Transatlantic integration process; (3) Development of democratic and civil society; (4) Education, culture, social development, health, environmental protection.

Good governance; Institutional transformation and capacity building; Harmonisation with the acquis.

Development Co-operation Policy Department within the MFA

Ministries, NGOs, private companies

(1) Good governance; (2) Economic reform process and transport; (3) Eurointegration process; (4) Security; (5) Environment; (5) Health and social security; (6) Culture and education.

Transition management.

Development Assistance Division of the Department of Multilateral Relations within the MFA, the Ministry of Finance

/

Infrastructure development; Social and services sectors; Environment.

Infrastructure development; Social and services sectors; Environment.

Coordination Body (CB)

Planning Bureau

Moldova,

Kaliningrad Region, Ukraine, Belarus, Moldova, Afghanistan and Iraq.

* Forensic medicine.

psychiatry

and

Future: South Caucasus and the Balkans.

2004

2005

0.04%

No data.

4.2 million EUR

(The Strategy: 5-6 million EUR)

(1) Egypt, Mali, Lesotho, Yemen and Palestine;

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No cooperation with NGOs yet.

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Slovenia

2004

2005

0. 18%

0. 18%

7 million EUR

/

2004

2005

0. 10% 17.4 million EUR

(1) Sudan, Eritrea, Ethiopia and Somalia; (2) Palestine; (3) Sri Lanka.

(1) Poverty reduction; (2) Health; (3) Education and recreational formation; (4) ICTs; (5) Good governance; (6) Children.

(1) ICTs in e-governance; (2) Education; (3) Health; (4) Desalinization; (5) Maritime Law; (6) Research on ageing; and (7) Capacity-building initiatives.

Development Policy Unit within the MFA

Other governmental and nongovernmental institutions, private companies.

Albania, BIH, Serbia, Montenegro, FYR of Macedonia and Moldova.

(1) Euro-integration process: administrative reform; (2) Trade, investment, financial institution capacity building; (3) Integrated environmental planning and management, agricultural and forestry management; (4) Postsecondary education; (5) de-mining and treating of war-affected children.

(1) Euro-integration process: administrative reform; (2) Trade, investment, financial institution capacity building; (3) Integrated environmental planning and management, agricultural and forestry management; (4) Postsecondary education; (5) demining and treating of waraffected children.

Department of International Development Cooperation and Humanitarian Assistance within the MFA

Other governmental institutions, NGOs and private companies.

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