EU member states: 3 funding trends you should know

A unique opportunity to push for an ambitious development and financing framework to succeed the Millennium Development Goals, 2015 is turning out to be a bitter year for the European Union. Accused of foot-dragging, the EU has recently come under intense fire by nongovernmental organizations. Ignoring calls for an overhaul of the global financial system, the 28-member bloc has not backed the creation of an intergovernmental body that would decide on global tax standards. Meanwhile, activists have warned that the failure of EU ministers to set a deadline for their pledge to dedicate 0.7 percent of gross national income to development aid constituted a “historic mistake.” Ongoing austerity measures also paint a grim reality at the level of EU member states. Once one of the first countries to meet the 0.7 percent target, the Netherlands is in the midst of drastic aid cuts that show no signs of abating. In France, President François Hollande’s budgetary choices have set the country back by more than a decade in reaching its aid target. By 2019, Belgium — a non-negligible donor to fragile states such as the Democratic Republic of the Congo and Burundi — will have decreased its development budget by 1 billion euros ($1.1 billion). And as early as next year, Finland’s aid budget will be slashed in half. But beyond the headline-grabbing announcements, a number of less visible — yet no less important — developments are taking place. Using data for 2013 — the latest year for which the Organization for Economic Cooperation and Development has official development assistance figures for the 19 EU member states that are part of the Development Assistance Committee — Devex highlights three funding trends you should keep an eye on. 1. Governance and education are prime concerns. Devex analysis of EU member states’ aid flows per sector found a clear preference for governance and education. Combined, these areas mobilized $11.9 billion, or about a quarter of total ODA disbursed by EU member states in 2013. Top donors to both sectors included Germany ($3.3 billion), the United Kingdom ($2.7 billion), France ($1.7 billion), the Netherlands ($1.4 billion) and Sweden ($1.1 billion). However, growing international concern with stability and security-related issues seems to have led several European donor countries to shift away from education to focus more on institution building and good governance. Indeed, the 2010-2013 period saw EU member states’ spending on education decrease by $640.4 million, while funding for government and civil society received an additional $457.1 million. The steepest aid “transfer” took place in the Netherlands, where a 50 percent reduction in education assistance was accompanied by a doubling of funds dedicated to the promotion of governance and democracy. 2. Health a priority, but only for a handful of donors. Absorbing close to $4 billion, health and population programs accounted for the third-largest share of ODA disbursed by EU member states in 2013. The sectors appear to be the purview of a handful of donor countries only, with the U.K. doling out the lion’s share of funds. In 2013, the British government disbursed $2 billion to global health, including reproductive health — a notable jump of almost 20 percent compared with the previous year. Although trailing far behind their British counterparts, Germany, France, the Netherlands and Sweden also figured among the most generous donors of health ODA. But with the exception of Germany, a closer look at their levels of expenditure between 2010 and 2013 reveals a steady downward trend. Decreasing aid budgets in various EU member states do not bode well for European financial support of global health. In the past few years, health grants have been drastically reduced in the Netherlands, Spain and France — with Paris choosing to increasingly rely on loans. 3. Equity investments are gaining ground. When it comes to the type of ODA instruments used, four of five top European donors — the U.K., Germany, Sweden and the Netherlands — hand out most of their aid as grants. One notable exception is France. In 2013, Hollande’s government disbursed $3 billion — or more than a third of its development assistance — in the form of loans, thus joining Poland and Portugal in the ranks of European countries providing the highest shares of ODA credit. It’s important to note that despite all of the talk on a strengthened role of the private sector in development, an increase in European ODA channeled through public-private partnerships has not occurred. However, innovative financing has picked up pace in certain EU member states. Austria and Germany, for instance, significantly ramped up equity investments in recent years. Meanwhile, the U.K. has started experimenting with equity investments in “soft” sectors such as education and health — two areas where very few donors rely on this particular financing mechanism. Check out more funding trends analyses online, and subscribe to Money Matters to receive the latest contract award and shortlist announcements, and procurement and fundraising news.