Wednesday

1st Feb 2023

Opinion

Next EU aid budget - less private finance tools, please

  • EU-funded project for street kids in Dakar, Senegal. But private finance tools and 'tied aid' see much money flowing back to Western companies (Photo: Matthew Tempest)

The EU budget for developing countries should be about tackling poverty in the poorest countries, not making profit for the richest.

Fierce negotiations are taking place today, as EU ministers for foreign affairs begin to thrash out a deal on the next budget allocation for development cooperation and neighbouring countries, to be spent between 2021-2027. The way EU aid is going to support private companies is one of the main stumbling blocks in those discussions.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

What is going to happen? It's too early to say.

European governments generally wish to give more subsidies to companies to encourage them to invest in the developing world, sometimes with the explicit aim to generate business opportunities for European companies – what they call a 'win-win situation'.

This trend is illustrated by the persistently high levels of "tied aid", which development experts working closely with the most vulnerable people in the world had hoped was something of the past.

Tied aid is when development assistance is given on the condition that it be used to buy goods or services from companies in the donor country.

This is a missed opportunity to use procurements to source locally and support local economic development.

According to Eurodad, more than half of all reported development assistance contracts were awarded back to firms in the donor countries in 2016.

Cynical

Supporting our companies under certain conditions may be a good thing, but it is cynical to use aid to do so.

If aid is used to subsidise private firms, the focus should primarily be on local economic actors and inclusive business models such as cooperatives and social enterprises – to ensure profit generated remains in the country and is fairly shared.

When European companies are subsidised with aid, there needs to be safeguards to ascertain beneficiary companies will generate positive social and environmental impacts, even if that translates into lower returns for their shareholders in industrialised countries.

Sadly this is often not the case.

If aid is a hypocrisy, should we end it? No, we just need to get it right.

Aid should be about rights and empowerment, justice and equality – including gender equality.

It has a crucial role to play as long as poor countries can't raise the income they need, through tax and remittances in particular.

Aid should be used to reduce – rather than exacerbate – inequalities.

How? By providing political and financial support to workers', farmers' and women rights' organisations to hold their governments to account and strengthen participatory democracy; by supporting public services available to all such as education, health care, clean water or housing and universal social protection schemes; by ensuring scarce public resources are used in the most effective way to generate decent livelihoods opportunities and support land rights of local communities.

People living in developing countries are entitled to fulfilling lives, as is every one of us living here in Europe.

That aspiration is not just a dream: it is a commitment that all countries around the world have made - to implement the Sustainable Development Agenda by 2030 – and there are only twelve years left to transform that aspiration into reality.

European countries have a major role to play to make this happen:

by fighting tax avoidance by European companies that deprives countries in the Global South from resources they are entitled to;

by replacing the obsession with GDP growth with the objective to improve people's well-being while respecting and protecting planet earth;

by ending the fetishism for trade expansion and ensuring trade is liberalised only to the extent that it improves people's lives;

by urgently regulating European companies and investors operating in the Global South to avoid the reckless exploitation of natural resources and cheap un-unionised labour.

And at next week's UN Climate talks, our governments should be championing effective measures to fight climate change.

Last but not least, our governments must ensure EU aid effectively contributes to reduce poverty and inequalities, and to the realisation of human rights.

That implies a cautious approach when using aid to leverage private investments in the Global South – a prudence which we hope our ministers of foreign affairs will champion when they meet today.

Isabelle Brachet is the international EU advocacy advisor for the NGO ActionAid

Disclaimer

The views expressed in this opinion piece are the author's, not those of EUobserver.

Aid, migration and the next EU budget

Th next EU budget is the most pivotal opportunity to advance a vision for Europe rooted in human rights and that builds a Union that works for all its members.

New Dutch terror bill must not target aid workers

A controversial counterterrorism bill could end up criminalising aid workers in the Netherlands if they enter conflict hotspots when assisting the world's most vulnerable people.

Column

Democracy — is it in crisis or renaissance?

Countries that were once democratising are now moving in the other direction — think of Turkey, Myanmar, Hungary or Tunisia. On the other hand, in autocracies mass mobilisation rarely succeeds in changing political institutions. Think of Belarus, Iran or Algeria.

More money, more problems in EU answer to US green subsidies

Industrial energy-intense sectors, outside Germany and France, will not move to the US. They will go bust, as they cannot compete in a fragmented single market. So to save industry in two member states, we will kill the rest?

Column

Democracy — is it in crisis or renaissance?

Countries that were once democratising are now moving in the other direction — think of Turkey, Myanmar, Hungary or Tunisia. On the other hand, in autocracies mass mobilisation rarely succeeds in changing political institutions. Think of Belarus, Iran or Algeria.

Greece's spy scandal must shake us out of complacency

The director of Amnesty International Greece on the political spying scandal that now threatens to bring down prime minister Kyriakos Mitsotakis. Activists and NGO staff work with the constant fear that they are being spied on.

Latest News

  1. Hungary blames conspiracy for EU corruption rating
  2. Democracy — is it in crisis or renaissance?
  3. EU lobby register still riddled with errors
  4. Polish backpedal on windfarms put EU funds at risk
  5. More money, more problems in EU answer to US green subsidies
  6. Study: EU electricity transition sped into high gear in 2022
  7. Russia and China weaponised pandemic to sow distrust, MEPs hear
  8. Frontex to spend €100m on returning migrants this year

Stakeholders' Highlights

  1. Party of the European LeftJOB ALERT - Seeking a Communications Manager (FT) for our Brussels office!
  2. European Parliamentary Forum for Sexual & Reproductive Rights (EPF)Launch of the EPF Contraception Policy Atlas Europe 2023. 8th February. Register now.
  3. Europan Patent OfficeHydrogen patents for a clean energy future: A global trend analysis of innovation along hydrogen value chains
  4. Forum EuropeConnecting the World from the Skies calls for global cooperation in NTN rollout
  5. EFBWWCouncil issues disappointing position ignoring the threats posed by asbestos
  6. Nordic Council of MinistersLarge Nordic youth delegation at COP15 biodiversity summit in Montreal

Stakeholders' Highlights

  1. Nordic Council of MinistersCOP27: Food systems transformation for climate action
  2. Nordic Council of MinistersThe Nordic Region and the African Union urge the COP27 to talk about gender equality
  3. Friedrich Naumann Foundation European DialogueGender x Geopolitics: Shaping an Inclusive Foreign Security Policy for Europe
  4. Obama FoundationThe Obama Foundation Opens Applications for its Leaders Program in Europe
  5. EFBWW – EFBH – FETBBA lot more needs to be done to better protect construction workers from asbestos
  6. European Committee of the RegionsRe-Watch EURegions Week 2022

Join EUobserver

Support quality EU news

Join us