'Wise persons' to scrutinize EU development finance

BRUSSELS — European Union states have given nine economists six months to suggest changes to the bloc’s development financing structure, as the European Investment Bank, European Commission, and European Bank for Reconstruction and Development vie to assert their role in meeting the 2030 Agenda for Sustainable Development.

The mandate for the “High-Level Group of Wise Persons,” agreed last week by European governments, is to set out “the challenges to and opportunities for rationalising” European development finance, particularly the respective roles of EIB and EBRD.

The group will look at what best delivers “development impact,” “the respective strengths and weaknesses of the mandates and instruments of all actors involved,” and “the strategies put forward by the EIB, the EBRD and the Commission to further develop their mandates with a view to enhancing private sector development and sovereign lending, including, as appropriate, in least‑developed and fragile countries.”

Thomas Wieser, former president of the Euro Working Group, will chair the group, which includes José Antonio Alonso, Monique Barbut, Erik Berglöf, Jacek Dominik, Nanno Kleiterp, Norbert Kloppenburg, Franco Passacantando, and Susan Ulbaek.

The idea for the group emerged in a French-German declaration last summer, which initially called for recommendations, “especially regarding the respective roles of EIB and EBRD,” in time for a meeting of EU heads of state in December 2018. The timetable was pushed back, but the new October deadline for the group’s report allows their recommendations to feed into member states’ final deliberations on the EU’s 2021-2027 budget.

One sticking point in those talks, which is not mentioned in the wise persons’ mandate, is whether the €30.5 billion ($34.5 billion) European Development Fund should be brought inside the EU’s general budget. Asked whether the group will address the EDF question, Berglöf told Devex, “I couldn’t say whether this is the intention but I think it should be if you are really taking a look at the total system.”

However, Berglöf, director at the Institute of Global Affairs at the London School of Economics and formerly EBRD chief economist,  said the group was not just about EU instruments: “This is also about the national-level institutions and getting a systemic view of how they can work better together.”

In September last year, the commission declared that it wanted to play a leading role in steering investments from European development actors, including national players such as the Agence Française de Développement. That clashed with the vision of EIB President Werner Hoyer, who has said there are “many inefficiencies” in the European development landscape and is pursuing plans for an EIB subsidiary focused on projects outside the EU. Meanwhile, EBRD is now considering a move into sub-Saharan Africa, to be decided at its annual meeting next year.

“Collectively, the EU invests more in developing countries than the rest of the world combined,” said Mikaela Gavas from the Center for Global Development think tank. “But the impact of its investment is mired in a system that is fragmented and uncoordinated and thus unable to meet its full potential of taking a leading role in sustainable development.”

Gavas said the wise persons’ group could propose a division of labor between EIB and EBRD, but the “problem is that the objectives, modes of operating and the expertise of the two banks are very different. There cannot simply be an arbitrary division between lending operations in the public and private sectors, or Europe and Africa.”

Xavier Sol, director at Counter Balance, a coalition of NGOs scrutinizing European development finance, said the “elephant in the room” is the prospect of merging EIB and EBRD — envisaged by a previous wise persons’ committee on EIB external lending in 2010.

Berglöf praised that report but argued that the work of the G20 Eminent Persons Group on Global Financial Governance, in which he was also involved, alongside greater knowledge of the private sector’s importance to development, and the ambitious scope of the Sustainable Development Goals, warranted a fresh look at European development finance.

In launching the commission’s vision for EU development policy in September, commission President Jean-Claude Juncker said: "We don't need new institutions or wise men groups to meet our goals: We need wise decisions, taken swiftly by relying on our existing structures and partners."

But Berglöf said his impression from conversations with staff at the commission and among EU member states was that “this is not the view any longer,” adding, “I think there is a broad understanding that [the wise persons’ group] makes sense.”

Oxfam and Eurodad welcomed the group’s formation while expressing concern that civil society should be adequately consulted. “It would be crazy not to — they are very important parts of the development architecture,” Berglöf said.

“When thinking about how we do [development] in individual countries, we need to have very broad platforms that also include in some way private sector and civil society.”