Increasing efficiency of EU development assistance

The European Commission has today adopted a proposal for a regulation on further untying of community aid from the EU budget in a bid to boost the effectiveness of its development assistance. The regulation should increase competitive bidding for the supply of goods and services financed by development aid thereby securing the best value for money of the €3.5 billion in annual EU development aid from the EU budget. Untying should furthermore promote regional integration by encouraging suppliers in developing countries to pursue contracts in neighbouring countries and strengthen local ownership by removing constraints on recipient governments' procurement of aid financed goods and services. As a novelty the proposed regulation offers unrestricted access to its programs to suppliers from other donor countries, including the USA and Japan. Access will be based on reciprocity. With the adoption of the regulation the EU will take the lead in the international efforts to end the practice of tying aid to the delivery of supplies from the donor country.

Commissioner for Development and Humanitarian Aid, Poul Nielson said: "Untying of aid is not a goal in itself. But it is an important tool in our continued attempts to improve the effectiveness of our development aid. Providing more value for money will be to the obvious benefit of the poor we target and will meet the legitimate expectations of the European tax payers. "

The regulation establishes the access of suppliers of goods and services to all development assistance programmes financed from the EU budget.

Programmes with a thematic scope will be open to suppliers from all developing countries and transition countries. Programmes with a geographic scope will be open to nationals of the region targeted by the programme in view of promoting regional integration.

Instruments are open to nationals from member states from candidate countries and from countries of EEA (Norway, Iceland and Liechtenstein). For nationals of all other donor countries (such as USA, Japan and Canada) instruments will be accessible based on reciprocity.


Background

Tying of aid is the mechanism by which the procurement of goods and services financed by development assistance is limited to suppliers from the donor country. International studies have indicated that the increased competition ensuing from the complete untying of aid could generate an efficiency gain of up to 30 pct. of the aid.

At the European Council of Barcelona of March 2002 EU member states agreed to untie aid to least developed countries as recommended by the OECD. Member states furthermore agreed to continue discussions of further untying bilateral aid and to consider steps towards further untying of Community aid. The Commission subsequently adopted a Communication "Untying: enhancing the effectiveness of aid" in November 2002 in which it proposed an approach, that goes far beyond the existing limited international consensus. The Council and the Parliament in 2003 endorsed the Commission's proposals related to Community aid. The current regulation translates this political approach into practice.

The current proposal covers external assistance financed under the EU budget. A similar initiative has been taken with regards to the development assistance financed under the European Development Fund. Such an initiative would require an amendment of the Cotonou agreement that is the legal framework of EU development assistance to Africa, Caribbean and Pacific. Based on a mandate from the Council of ministers the Commission will now discuss this initiative with ACP countries.

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