Beyond Lomé IV
Future Relations between the EU and the ACP Countries

NGO Discussion Document, March 1997

Chapter 5 - Investing in social development

There is consistent evidence that the people of Europe want a generous and effective programme of European Community development co-operation. This public support will only be sustained if the Community can prove that it is effective in transforming poor people's lives through securing their human rights to food, security, health and education, and increasing their opportunity to live fulfilling lives.

EU governments struggling to maintain low inflation, cut budget deficits and meet the criteria for European Monetary Union have continued to take the easy option of cutting ODA budgets. The EU average of 0.38 per cent of GNP is shamefully below the UN recommended level of 0.7 per cent. Despite this, the EU member states transferred a substantial $31.54 billion in ODA in 1995, representing over 46 per cent of total OECD DAC. The scale of these resources provides the EU with a major opportunity to help alleviate world poverty and address the rising number of conflicts in the world.

To achieve this the Member States and the Commission should work to increase the quantity and quality of EU aid. Any increase in aid controlled by the European Community should be contingent upon proof of high quality through investing in social development; promoting participation of local people in the design of policies; and ensuring coherence between Community aid and the EU's wider trade and development policies. These improvements can only be achieved with adequate human resources within the Commission to implement the tasks required. For example, the Commission needs adequate provision of staff with the expertise to effectively target and work with the poor; a serious attempt to use gender analysis in development programmes requres the capacity to collect and interpret gender-disaggregated data.

Investment in health and education is one of the most important determinants of human development. It is also increasingly recognised as an important determinant of employment, income, productivity, and economic competitiveness. Similarly, gainful employment is a vital determinant of welfare, income and social cohesion.

Although there have been significant improvements in social indicators in the post war period, basic rights to health, education, food and employment continue to be denied to millions of people especially in the world's poorest countries. Today 1.5 billion people have no access to basic health services. More than 100 million primary school age children - two thirds of them girls - are not in school. More than 800 million people are hungry today. Some 120 million workers worldwide are unemployed with millions more suffering from underemployment, many of whom earn below the poverty line.

Despite the enormous need, only a small fraction of EU ODA is allocated directly towards basic social services and income generating schemes, where it can be most effective in poverty eradication. This is a missed opportunity. Donors like the EU should be allocating at least 50 per cent of its ODA to social investment. The European Court of Auditors notes that "...although the provision (..) of the Lomé Convention insists that particular attention be paid to the most vulnerable social categories, (..) it is clear that in some countries there has been a shift in favour of measures to restore the financial equilibrium to the public sector. In so doing, the EDF's resources have not been allocated in full to the poorest elements in society." They also observe that, in general, EC budgetary support to the social sectors of countries that they investigated was insufficient. They recommended that a rate which significantly exceeds 50% should be used in social areas. In particular, basic health care and primary education have been identified by the Court of Auditors as areas where greater budget expenditure is required.

This should focus on:

• The basic social services identified in the 20:20 compact such as basic education and primary health care (including reproductive health), nutrition programmes and safe drinking water and sanitation, as well as the strengthening of local institutional capacity to deliver these services.
• Support to income generating activities for the poor in rural areas and the urban informal sector including small scale credit facilities, training, technical and marketing assistance; public investment/employment schemes to generate socially productive jobs that progressively transfer ownership of assets to the unemployed; and investment in local agricultural production and food security systems combined with land reform measures targeted at poor women and men.
• Strengthening social and civil organisations, for example farmers associations, women's organisations, co-operatives, trade unions, human rights organisations, to help increase their influence in policy decisions and their ability to access resources and secure their basic social and economic rights.

EU aid should give priority in its aid programmes to countries whose Government's make a mutual commitment to achieving the objectives in basic social services set out in the 20:20 compact.

Similarly, the EU should press the International Finance Institutions (IFIs) to introduce effective social conditionality so that the disbursement of structural adjustment loans is made conditional on government action to improve universal access to basic services, including the withdrawal of user fees.

Much aid is still not effectively targeted at the poor. The poorest 40 per cent in developing countries receive less than half as much aid per capita as the richest 40 per cent (UNDP). In large part this is because elites in poor countries capture the benefits of aid. This in turn may be related to weak institutional capacity and skills, and/or overburdening of tasks and conditionalities imposed by external bodies such as the IMF, WB, WTO, and other donors. Investment in local institutional capacity is essential to help poor countries implement effective social and economic development strategies for the poor.

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Updated on April 3, 1997
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