EU looks ahead to 2018 as budget negotiations loom

The European Union flag in front of the Berlaymont building in Brussels, Belgium. Photo by: EU

BRUSSELS — How will European Union governments’ focus on preventing migration affect the development landscape? Will the attempt to stimulate private sector investment in Africa and the EU neighborhood through the External Investment Plan pay off? And what form will the EU’s relationship with the African, Caribbean and Pacific states take beyond 2020?

These will be some of the pressing strategic questions occupying EU development policy-makers in 2018, and the answers to them will have an impact that will ripple out across the development sector. But, even as officials grapple with such thorny issues, many are still expecting the coming year to be largely spent following the stubbornly practical negotiations over the EU’s next seven-year budget.

Budget maneuvers

Preparations for the 2021-2027 budget go to the heart of EU development policy, with every external financing instrument up for review.

The European Commission is expected to present its budget proposal by the summer, sending this to the top of the agenda for NGOs and others from January onwards.

“The multiannual financial framework will not only define how the EU spends its development money but also how its architecture is set up,” said Andrew Sherriff, head of program for European external affairs at the think tank ECDPM. “The new spending won’t start until 2021, [but] the process of negotiating and key choices will be made in 2018, and it will draw a lot of focus from other areas. You will have the ability to see how some of the political trends, like migration, security and Brexit, might really change the EU.”

European Council President Donald Tusk has argued to EU heads of state, for instance, that “a dedicated financial instrument, specifically geared towards stemming illegal migration, should become one of the key priorities in the new MFF.”

Emily Wigens, interim Brussels director at the campaign group ONE, said her team will be “laser focused” on the negotiations, ensuring any restructure of existing instruments does not result in cuts to spending on poverty eradication.

The Commission last month released a report to member states and the European Parliament on whether existing instruments worth a total of 51.8 billion euros ($62.5 billion), including the Development Cooperation Instrument, European Instrument for Democracy and Human Rights, and the European Neighbourhood Instrument, are still fit for purpose.

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Drawing on staff working documents informed by evaluations carried out by external consultants, the report found that despite the changed development landscape given the 2030 Sustainable Development Goals and the European Consensus on Development, there was no need for major amendments to any instrument.

However, the report did find room for improvement in reducing bureaucracy, how the EU distinguished its own contribution to development objectives, and the need for “more strategic and overarching programming” to ensure “coherent interactions at operational level.”

“The specific scope of geographic instruments has made it difficult to engage strategically and coherently with some partner countries,” the report found, pointing out that engagement with Africa goes through three geographical instruments.

One solution, considered in a recent paper by ECDPM, is to use fewer instruments to achieve greater simplicity and flexibility. No matter the outcome in the next budget, the authors argued, “differentiation according to geographic pillars [such as Africa and the EU neighbourhood], categories of countries [such as distinguishing the least-developed from upper and middle-income countries] and scales of action will remain essential.”

There is also the question of what to do with the 30.5 billion euro ($36.8 billion) European Development Fund, which currently sits outside the EU budget. Whether to “budgetize” the EDF has been a recurring issues for over 30 years, the ECDM paper pointed out, with arguments over coherence and oversight by the parliament outweighed until now by the idea that being outside the budget makes it easier for EDF to be used for special items such as the African Peace Facility, helps ensure the EU’s overall level of official development assistance, and underscores the unique ACP-EU relationship, where EDF is the main financial instrument.

Hilary Jeune, Oxfam’s development policy adviser, predicted that 2018 will be “consumed” by discussions over the budgetisation of EDF.

The External Investment Plan takes off

The EU’s External Investment Plan is this year expected to start supporting projects in Africa and the EU neighborhood, with the Commission expecting to generate at least 44 billion euros ($53.1 billion) in private investment.  

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As Devex reported previously, the 4.1 billion euro ($4.9 billion) EU investment through the EIP will go towards technical assistance, improving countries’ investment climate, and a 1.5 billion euro ($1.8 billion) guarantee, known as the European Fund for Sustainable Development. This guarantee will be implemented through trusted development banks and is designed to cover some of the risk of projects in developing countries where the private sector has traditionally been reluctant to engage.

The Commission has so far announced five investment windows in areas such as sustainable energy, micro-, small-, and medium-sized enterprises and agriculture, to guide development banks as they prepare to submit their proposed investment programs.

Once these are assessed and announced, which the Commission hopes to do by summer, Jeune said Oxfam and others will be keen to verify the criteria used to choose the successful projects.

Civil society has expressed concern that using ODA to leverage private investment too often supports projects with limited development impact. The Commission meanwhile, points to a strategic board designed to ensure projects meet criteria consistent with the SDGs. In 2018, these competing views will be put to the test.

What will a new relationship with African, Caribbean and Pacific states look like?

Negotiations will also kick off on the EU’s new relationship with African, Caribbean and Pacific nations. The previous Cotonou Agreement, involving almost 80 countries and running from 2000 to 2020, covered development but also political, economic, and trade ties.

This time around, Sherriff said there was a need for a greater emphasis on each region, rather than looking at EU-ACP relations collectively, and trying to reconcile different interests all at once.

“The relationship should move on from its colonial foundations to something much more modern and based on the different regions and their interests and makeup,” he said.

The Commission’s negotiating directives, released in December, favored “one single agreement, articulated into a common foundation with the ACP countries and three regional compacts.”

Priorities for Africa included migration, peace and security and climate change, while for the Caribbean and Pacific the focus was largely on climate change and good governance.

Brussels also wants a stronger role for regional bodies such as the African Union, the Pacific Islands Forum and Cariforum, and subregional groups such as the Economic Community of West African States.

That sets the scene for potentially tense negotiations, however, as the ACP secretariat is sensitive to suggestions it is being usurped by other partners.

In its October paper, Towards the ACP we want, and elsewhere, the ACP called for a legally binding post-2020 agreement, in line with the SDGs, which preserves the cohesion of the ACP. It also opposed bringing EDF under the EU’s general budget.

Under the Cotonou agreement, negotiations for its successor should begin by August 2018 at the latest. Follow the negotiations with the European Parliament’s legislative tracker here.

Mark your diaries

Education replenishment

The Global Partnership for Education will hold its replenishment conference for 2018-2020 in Dakar, Senegal, in February.

As Devex reported last month, the fund is striving to make the case for education as the key to meeting a range of development objectives. At the same time, questions remain over whether it should divorce from the World Bank where it currently operates as a trust fund.

The replenishment will be less controversial in Brussels, after the Commission last month topped up its 375 million euro ($452.7 million) funding commitment from 2014 with another 100 million euros ($120.7 million), winning glowing praise from NGOs.

“We are absolutely thrilled,” said Wigens from ONE. “It’s a really great step by the Commission and it will be helpful for our teams in other markets to leverage that early pledge to get more out of different governments.”

Financing for development forum

Member states in the United Nations Economic and Social Council, civil society, business representatives, and officials from the World Bank and International Monetary Fund will meet in April in New York, to continue work on implementing the 2015 Addis Ababa Action Agenda on financing for development.

The European Development Days

Taking place on June 5-6 in Brussels, the 12th EDDs will bring together a who’s who of global development, with last year’s event attracting 8,000 participants. This year, discussions will focus on “Women and Girls at the Forefront of Sustainable Development.”

“It’s the first time that gender equality is the overall subject, which is incredible,” said Serap Altinisik, program director at the European Women’s Lobby. “It took a long while, but we’re happy to see it there now.”

A first community meeting is scheduled for Jan. 24 in Brussels, and will also be live-streamed.

A migration compact

Expect NGOs and the EU to also have their say on the U.N.’s plan to publish a global compact on refugees and safe, orderly migration in time for the General Assembly in September. The United States withdrew from the process last month, with its ambassador to the U.N. saying such a “global approach” was “not compatible with U.S. sovereignty.”

EU reviewed at the Organisation for Economic Co-operation and Development

The OECD’s Development Assistance Committee’s peer review of the EU’s development efforts is planned for Oct. 24, with a report expected about one month later.

The purpose of the reviews, which are held once every five years in addition to the OECD’s annual review of ODA, is to evaluate the donor’s policy priorities, effectiveness, and capabilities.

Jeune said the EU’s 2012 review was largely positive thanks to large chunks of budget support aimed at meeting the Millennium Development Goals. This time around could be different, she said, given Brussels’ increasing emphasis on using development assistance to mobilise the private sector, as well as the migration-focused EU Emergency Trust Fund for Africa. Private sector instruments and migration expenditure continue to cause controversy at the DAC.

Sherriff argued DAC reviews no longer carry the same weight they once did, as security and migration issues start to affect national politics, leading heads of state and interior ministers to impose their own vision of development.

“The development sector itself no longer defines and argues about priorities and approaches amongst itself,” he said. “There are bigger political forces who have a view on what should be done with development and development resources … I don’t think that’s a good thing, but that is what’s happening.”

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About the author

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    Vince Chadwick

    Vince Chadwick is the Brussels Correspondent for Devex. He covers the EU institutions, member states, and European civil society. A law graduate from Melbourne, Australia, he was social affairs reporter for The Age newspaper, before moving to Europe in 2013. He covered breaking news, the arts and public policy across the continent, including as a reporter and editor at POLITICO Europe.