A new Asia-Europe partnership for development

By Shada Islam

It used to be fairly simple – but it did not get results. Aid from rich industrialized

countries to poorer ones was seen as the key to growth and development.

Ministers and officials spent hours haggling over aid packages and critics

routinely referred “hand-outs” to poor countries.

Official aid from rich to poor countries remains a vital tool in the combat against

poverty. However, for many middle-income countries in Asia, such assistance is

dwarfed by private sector financial transfers.

In the 21st Century, working for growth and development is no longer merely

about increasing development aid.

This is particularly true in Asia where many countries are progressing from lowincome

to middle-income status. True, while extreme poverty is still a reality in

Asia, many countries in the region have developed through domestic effort, trade

and access to private financial flows – with little aid.

Andris Piebalgs, European Commissioner responsible for development told an

ASEM conference in Yogyakarta, Indonesia, on May 26, the changes prompted by

Asia’s rise demand a rethink of EU development aid to the region. “We can’t

treat China the same way as Cambodia,” he said.

“In some countries it is about putting in place basic services, in others it is about

accompanying growth, jobs and development…we will listen to countries needs

and adapt our instruments and cooperation,” the Commissioner told the 200

high-level Asian and European experts and officials as well as representatives of

international organizations and civil-society groups, attending the meeting in

Yogyakarta.

Certainly, poverty-alleviation is still an over-arching global challenge. An

estimated 1.4 billion people continue to live in extreme poverty and, according to

the World Bank, the current global economic crisis will take a serious toll, with as

many as another 53 million people being thrust into living on less than $1.25 a

day, the definition of “extreme poverty”.

The meeting in Indonesia noted countries’ commitment to pursue the goal of

poverty eradication and achieve the anti-poverty Millennium Development Goals

(MDGs), adopted by world leaders in 2000 - and which call on developed

countries to set aside 0.7 per cent of their GNI (gross national income) for

Official Development Assistance (ODA) by 2015.

The current economic crisis has shown that aid is still very important in poorer

Asian countries such as Afghanistan where it represents about 45% of GDP. But

in larger countries, aid accounts for much less in terms of GDP: in India, 0.18%

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and in Indonesia, 0.24%. In addition, progress in achieving the MDGs is patchy,

a point likely to be made when world leaders meet in New York for a review

conference in September this year.

Sustainable development hinges on more than aid. As Koos Richelle, Director

General for Development at the European Commission pointed out in Manila, aid

has “never got countries out of poverty.” Growth and development comes from

“the policy of the country and efforts of the people,” he said.

Crucially, ensuring growth requires the mobilization of a range of “non-aid”

policies to support development. It is conditional on good governance –

including fair taxation and anti-corruption action - adopted by national

governments. The focus is on political and economic reform and building market

economies. Development cannot be imposed from outside, it has to be “owned”

by countries. Developing countries have to implement the correct policies and

strategies, involving both state and non-state actors.

“We wish to work in a spirit where countries take ownership of their own

development…we don’t have any longer a donor-recipient approach but work as

equal partners in a challenging global village,” said Piebalgs.

In other words, development cooperation is no longer about charity, it is about

enlightened mutual self-interest. As China has illustrated, in an inter-connected

globalised world, an increase in prosperity in one country or region translates

into rising trade, investments and sales in other parts of the world.

ASEM provides a good framework for innovative and creative thinking on how to

make aid more effective, ensure better coordination among donors, facilitate

trade and encourage open markets. Encouraging private investments and

financial flows, fostering public-private partnerships, bolstering the work of civil

society actors and ensuring policy coherence so that all international policies

work in the same direction – namely to reduce poverty, hunger and disease – are

important.

“Smarter aid”, ie assistance that is more selective, innovative and effective, has

to be the name of the game.

These and other issues need to be explored further within the ASEM context.

First, because the EU is the largest provider of ODA in the world, giving almost 4

billion euros a year in assistance to the less well-off Asian countries which are

members of ASEM.

Second, there are still many people living in extreme poverty in Asia.

Third, there is a compelling need for stronger cooperation and coordination

between the EU and Asian countries which are also aid donors, including Japan

and China and also India.

Fourth, the EU and Asian countries need to reassess whether aid development

cooperation should continue to play a significant role in Asia’s middle income

countries and emerging economies – China, India, Indonesia, Malaysia and

Thailand – or whether it is time to look at other ways of raising development

resources.

At a time when overall aid resources are limited, there is an argument in favour

of focusing development funds on poorer Asian countries. This does not mean

ignoring the plight of poor people in Asia’s middle-income countries; but it does

require that more creative thinking is used to raise funds in such nations.

“EU aid should act as a catalyst for additional investment,” Pielbags told the

meeting in Yogyakarta, “…it should be used in a way that one euro generates two

or more additional euros.” Having given a 200 million euro grant to Indonesia’s

Ministry of Education and announced the setting up of an Asian Investment

Facility, Piebalgs also said Europe would work to unlock the power of trade and

investment, support infrastructure projects but also help countries in health and

education.

The meeting in Yogyakarta underlined that “Europe and Asia are engaged in a

multi-dimensional partnership that goes beyond aid.” The ASEM 8 summit in

Brussels on October 4-5 will provide another opportunity for Asian and European

leaders to elaborate on forging a new partnership which goes further – much

further – than aid.