By Maria José Romero
The European Commission (EC) is pushing ahead with its plan to increasingly ‘blend’ development aid with private finance, despite the fact that the Commission’s commitment to development seems weak and civil society groups and other important stakeholders are excluded from the process.
In mid-December the EC set up an EU Platform for Blending in External Cooperation, which aims to “provide recommendations and guidance on the use of blending in the external cooperation of the European Union.” In practice this includes “a review of the existing blending mechanisms and the development of a common results based framework to measure impact.” These are both valuable tasks but Eurodad has followed the “blending” agenda closely, and it seems that they might not consider all the essential inputs or draw the right conclusions.
The process towards an EU blending platform
The EC “Agenda for Change” policy paper recommended new ways of using private finance to promote development, to reduce the burden on the public purse. According to this document, supported by the Council in May 2012, “the EU will further develop blending mechanisms to boost financial resources for development,” a process that “should be supported by an EU platform for Cooperation and Development incorporating the Commission, Member States and European financial institutions.”
In the process of setting up such a platform the EC commissioned a Group of Experts, composed of EU Member States, the External Action Service, the European Investment Bank (EIB) and the European Parliament as an observer, to develop its proposal. In March last year, a public consultation was opened to gather different stakeholders’ views. Eurodad, Counter Balance and Green Alternative Georgia submitted a joint contribution which points out some concerns regarding the purpose and added value of the proposed platform and how blending mechanisms have been implemented. In particular,
- the risk of financial incentives outweighing development principles;
- insufficient attention to transparency and accountability;
- unclear monitoring and evaluation methods;
- opportunity costs may be high, but are not carefully considered; and
- debt risks for developing countries of increasing lending.
As a result, there is now a new “EU Platform for Blending in External Cooperation,” where the word “development” is not even in the title anymore, perhaps because the initial title seemed to be broader and more ambitious, particularly in the current context of scarce public resources.
EU blending facilities: What is the best way to assess them?
Since 2007, the EC has set up eight regional blending facilities to link EU budget grants with loans from public finance institutions (i.e. international, regional and European bilateral public financial institutions) or commercial loans and investments from the private sector. Currently, they cover Africa, Latin America and the Caribbean, the EU-neighborhood region and Asia; so all areas covered by EU external cooperation. So far the allocation of funds has been limited, with €1.5 billion of grants from the EU budget and over 320 operations financed for the eight facilities. However, the EU’s rhetoric indicates that blending mechanisms will be used more extensively in the near future.
According to the EC statement, “the new EU Platform will act as a major forum to build on the successful experience so far in this area and look at how to improve the quality and efficiency of blending mechanisms.” The practical work will be taken forward by “technical groups including the European Commission, the EIB, other European bilateral and multilateral finance institutions and those finance institutions which participate in the EU blending mechanisms.” It is worth noting that civil society organisations are not directly involved in the work of the platform and so far there is no clear mechanism to include their concerns and expertise in the planned review.
In late October 2012, the European Parliament issued its own resolution on the future of EU development policy insisting that the implications of the blending platform need to be more carefully thought through, with parliament’s involvement. The EP resolution calls on the EC “to provide clear information on how this mechanism serves the purpose of a development policy based on ODA criteria and how the power of scrutiny of Parliament will be exercised.” This resolution is a welcome step, and confirms Eurodad and others’ concerns.
Additionally, some civil society organisations, such as ALOP, APRODEV and CEE Bankwatch, among others, are also investigating the actual facilities and projects financed to draw lessons about their impacts. Their main conclusions are in line with Eurodad concerns: “sustainable development and poverty reduction objectives are overshadowed by EU geopolitical and corporate interests.” Thus, “greater transparency in project selection criteria and accountability to civil society needs to be established.”
If the EC and platform members are committed to taking forward a comprehensive review of the existing facilities, inputs from the European Parliament and CSOs should be considered thoroughly throughout the process. If not, they will run the risk of undermining the legitimacy and effectiveness of the process.