FINANCING FOR DEVELOPMENT
US-EU: A major new commitment
> BY ROMAN ROLLNICK AND JAY NEWTON-SMALL
Copyright © 2002 by The Earth Times. All rights reserved

But officials said the world's two major donors differed in their approach towards meeting the UN's Millennium goal of halving poverty around the world by the year 2015. The US flatly rejected the UN-endorsed goal of boosting official development assistance (ODA) to 0.7 percent. The EU said it embraced this goal. They also said the Monterrey conference chaired by Mexican President Vicente Fox marked a new turning point for the world in development aid. In an interview with this newspaper, Poul Nielson, the European Commissioner for Development and Humanitarian Aid, said: "We stick to this, the established system on how to define the challenge of 0.7 percent and how to get there. This is the starting point for the EU." Nielson said Europe's contribution over the next three years would be in the range of $8 to $10 billion per annum.

Alan Larson, US Under Secretary for Economic, Business and Agricultural Affairs, said: "First of all I would like to point out that the US has never been a party to the 0.7-percent agreement target. That has a lot to do with tactics," he added. "I am the first to commend the EU for their announcement, but the focus on 0.7 percent hasn't been particularly successful, and since its creation in the 1970s percentages have declined on the whole." Instead, he said, the United States would contribute $5 billion over the next three years-the largest three-year increase in the history of US development aid. Both officials were at pains to state that despite these differing approaches, the aim was ultimately the same-to insure that much-needed funding is provided to help alleviate poverty. They praised UN Secretary General Kofi A. Annan for helping nations around the world at a preparatory conference last month reach a firm agreement that would not have to be re-negotiated this week. Annan, US President George W. Bush and Romano Prodi, president of the EU executive commission, are all scheduled to speak in Monterrey later this week.

At a lively and widely attended US briefing for government delegations from around the world, Larson and John D. Negroponte, the US Ambassador to the United Nations, answered tough questions about Bush's pledge last week to contribute $5 billion in development aid.

"On the surface it looks very interesting, but we do not know the details, so we came here today," said Yeo Heng Hau, Deputy Secretary from the Malaysian Ministry of Finance.

Many of the questions dealt with how the money would be spent. Lyonpo Om Pradhan, ambassador to the UN of the small Himalayan mountain kingdom of Bhutan, wanted to know, for example, whether the money would be geared towards the poorest nations, or the 49 least developed countries, or to developing countries that were more advanced. Another ambassador, Enele Sopoaga of the tiny Pacific island nation of Tuvalu, asked if any money would go towards helping South Pacific islands attract investment.

Negropnte and Larson answered some questions directly-for example citing potential investment in hydroelectricity in Bhutan-but they firmly declined to go into specifics in other areas.

"We haven't decided for sure on the routes that much of the money would take- bilateral or multi-lateral for example," said Larson. "The president has asked us to work together with other donor countries and institutions to explore ODA. In fact, he also issued a challenge to them to commit to the same approach."

In reaction, Ulrike Lunacek, a Green Party member of the Austrian Parliament, challenged the US panel, demanding Washington explain why, although $5 billion seemed like an enormous sum, it was only a tiny portion of the annual US GNP. Even with this increase, she said, US ODA was dwarfed by that of the European Union.

According to figures released by the Organization for Economic Cooperation and Development (OECD), the EU gave $25.4 billion in ODA in 2000, while the US contribution was $9.6 billion. The UN-endorsed ODA in order to reach the Millennium goal of halving world poverty is about $100 billion annually, or about 0.7 percent of donor countries´ GNP. In his interview with The Earth Times, Nielson said it was exactly the goal of 0.7 percent that the EU had in mind. Why, he was asked, had both donor blocs so recently come up with such major assistance pledges, and thus sought to galvanize a new relationship with poorer nations?

"It is partly September 11," he said referring to last year's terrorist attacks in the US, "but it is also the accumulated effect of a number of quite, substantially speaking, successful UN conferences. The accumulated shared volume of politics and multilateralism that has emerged globally have produced meaningful answers for this world." At their summit meeting in Barcelona last week, EU leaders agreed to try to reach the goal of 0.7 by collectively increasing their ODA so that they reach an average of 0.39 percent by the year 2006. In 2000, the EU average was 0.33 percent-a figure which will stand as the bar minimum. This means that countries like Denmark-which contributed 1.06 percent of GNP in 2000-will not be affected, whereas Italy-which contributed 0.13 percent that year-will have to more than triple its ODA budget.

Relative to the size of its economy, the US has an aid budget of about 0.1 percent of GNP-the lowest of the major donor nations. The additional $5 billion will only increase this figure by an estimated 0.025 percent per annum.

Nielson, who did not want to comment on the US approach, remarked that "we have come a long way since Seattle", when the World Trade Organization meeting that year collapsed in failure.

While the American government puts more emphasis on the benefits of trade than Europe, Nielson said, "We have a shared a view of the kind of challenges to improve the situation in developing countries. This balanced experience of what we have to do is good. The balance of what we need to do relating to good governance aspects and ownership aspects is very healthy."

Emphasizing the views of many UN officials in Monterrey this week, he added: that, "we now see a common line on how to do things, which is also very healthy. The third element is how to use the participation of business in the battle against poverty."

Europe, Nielson said, contributed 55 percent of global ODA in the year 2000. "It is clear from what is being decided right now that the dynamics don't stop at 0.39 percent. We have to collectively discuss how we move beyond it."