Learning from the past: EU aid in the Eastern Partnership

For seven years now, the EU has made direct transfers to the state budgets of its eastern partners (minus Belarus) to support reforms in anything from energy and justice to water sanitation.

A total of around €1.2 billion, 60 percent of bilateral aid, was envisaged for this so-called budget support, with Ukraine, Moldova and Georgia receiving the highest amounts, and Armenia and Azerbaijan the least.

What happened with this aid, given the different attitudes of eastern governments to EU-style reforms, let alone their problems with corruption and inefficient public administration?

The answer from a major research project carried out at Polish Institute of International Affairs (Pism) is that too often nothing happened: the EU has trouble spending money.

In the cases of Moldova and Georgia, Brussels managed to release around half the promised resources; but due to lengthy procedures, the majority of operations have not yet been finalised.

The others - Armenia, Azerbaijan and Yanukovych’s Ukraine - had problems meeting the basic condition of transparency in public financial management, meaning the EU could not release the funds. The last two countries received payments of no more than one third of the planned amount.

Where the EU did manage to spend money it brought very slim results. The recipient administrations were at ease drafting strategies, but implementation lagged behind.

In general, the countries fulfill the conditions of financial tranches: Moldova ranks the highest (at almost 100%), with Georgia (90%) and Armenia (85%) close behind, while Ukraine (60–70%) and Azerbaijan (50%) are at the back of queue.

But even fulfilling the conditions does not necessarily mean the progress of reform. Particularly in the case of Armenia NGOs warn that the government is only maintaining a façade.

Therefore, not only the varying levels of political willingness in respective governments is to blame for mixed results. The EU has its own sins to confess: overambitious miscalculations in choosing sectors and conditions, while focusing too little on the real implementation of the reforms.

Examples include the highly corrupt Ukrainian energy sector requiring billions of euros to reform which was an EU focus but received relatively little funding.

In Georgia, meanwhile, decentralisation of regional development was a priority where there was no real political taste for such changes.

EU ambitions do not go hand in hand with proposed volume of money. On the contrary the EU would like to trigger massive reforms requiring significant national funding which the countries do not usually have.

Small countries such as Moldova, Georgia, and Armenia appreciate EU aid as budget support constitutes between 1-5 percent of their annual national budgets. But they are all too poor to commit to costly reforms in real terms.

In case of Ukraine, EU funds are peanuts (only 0,1% of national budget).

In almost all countries, the EU finds it hard to monitor results as there are no effective monitoring mechanisms, either in civil society (Georgia being an exception) or the administration itself.

The weakness of public administration systems makes it more difficult to perform. EU advisory services cannot help as they are launched untimely, usually one year after the programme starts.

Also, transparency and communication is lagging behind: the EU and EaP governments find it difficult to communicate the benefits of reforms to people, bar some dry and selective facts about the volume of money.

The Eastern Partnership (EaP)is approaching its fifth anniversary. To ensure a positive future in the coming years even more important than the quantity of money is the question of quality.

This will be no mean feat for Brussels to deliver. In order to ensure political backing for EU reforms in the EaP region, bigger funds should be given to the best performing governments and more co-operation with international financial institutions is required.

Conditions for reforms should be more focused and better consulted with various interest groups, as it was successfully done in Georgia’s agricultural reform.

Public pressure is crucial and to achieve this, more innovative campaigns explaining the substance of supported reforms on people’s wellbeing are needed.

And NGOs should be given the right to participate in EU aid monitoring committees to ensure its transparent use.

At the end of a day, the effectiveness of EU aid is not only important for fulfilling EU geopolitical ambitions, but it touches the wallets of EU tax payers.

A longer version of the report is available here.

The writer is a researcher at Pism, a Warsaw-based think tank