Oireachtas Joint and Select Committees
Wednesday, 12 February 2014
Joint Oireachtas Committee on Foreign Affairs and Trade
Scrutiny of EU Legislative Proposals
We are dealing today with issues relating to the European Development Fund, EDF. The committee has received a number of Commission proposals in relation to the EDF including COM (2013) 445, Council Regulation on the implementation of the European Development Fund and COM (2013) 660, Council Regulation on the Financial Regulation applicable to the 11th European Development Fund. The committee will hear today about how these different proposals relate to each other. We will then discuss the Government structures in place for the EDF and how the EDF is linked to the Irish Aid programme and other EU external relations instruments. Members will be aware that the EDF dates back to 1957 when the Treaty of Rome made provision for its establishment, with a view to granting technical and financial assistance, initially to African countries which at that time were still colonised and with which some member states have historical links.
The first EDF operated from 1959 to 1964. The EDF for 2014-2020 will be the 11th such fund. During the same period, EU external relations have developed and deepened to include programmes of assistance for pre-accession countries, the European neighbourhood policy and co-operation with third countries in terms of development co-operation and for the promotion of democracy and human rights worldwide. Irish Aid programmes have also grown and developed during this period. It is important that all of these programmes and funds do not operate in isolation from each other but that linkages between them maximise the benefits that can be achieved. Therefore, part of this discussion will centre on these synergies and linkages.
The committee will engage today with officials from the Department of Foreign Affairs and Trade. I welcome Mr. John O'Grady, Ms Deirdre Lyster and Mr. Tony Cotter from the multilateral section of Irish Aid. I now invite Mr. Cotter to make his opening statement.
Mr. Tony Cotter:
I thank the Chairman and members of the committee for inviting us here today to discuss the 11th European Development Fund, EDF. The EDF is the main instrument for delivering EU development assistance to the African, Caribbean and Pacific, ACP, group of states. The European Union funds its development co-operation programmes through the Union’s external relations financial instruments on the one hand and the EDF on the other. The external relations instruments are funded through the EU budget and the EDF is funded through direct assessed contributions by member states. Each EDF is concluded for a multi-annual period and the 11th EDF will cover the period 2014 to 2020. Total funding for the 11th EDF will amount to €30.5 billion. Ireland’s contribution, based on a contribution key of 0.94%, will be €286 million.
The EDF legislative package consists of four main components, the first of which is the internal agreement, which was negotiated under the Irish Presidency, has been signed by all member states and is in the process of being ratified by them. The internal agreement sets out the overall funding that will be provided within the multi-annual period of the EDF and individual member states’ share of the contribution, known as the key. The second part of the legislative package is the implementation regulation, which sets out how the EDF will be administered, including the responsibilities of the EDF committee, of which Ireland is an active member. The implementation regulation also establishes objectives and eligibility criteria, the general framework for allocating funds, programming and implementation. Negotiations on the text of the implementation regulation are ongoing within the ACP working group in Brussels.
The third component of the EDF legislative framework is the financial regulation.The regulation determines the detailed rules for the payment of the contribution of member states to the fund, as established by the internal agreement. The text of the financial regulation has been negotiated by the Brussels-based African, Caribbean and Pacific, ACP, working group and will be formally adopted once all EU member states have formally ratified the internal agreement. The overarching principle of the proposal on the financial regulation is maximum alignment with the financial regulation applicable to the general budget of the Union and its rules of application.
The fourth and final part of the legislative package is the overseas association decision, which establishes a partnership to support the overseas countries and territories' sustainable development as well as to promote the values and standards of the EU in the wider world. The overseas association decision was agreed under the Lithuanian Presidency in December 2013.
The EDF operates in each of the ACP countries on the basis of a multi-annual country strategy paper, CSP, which is jointly agreed with the partner country government and with other stakeholders, including EU member states. The CSP is operationalised by annual action programmes, AAPs, which detail the sectors and projects being targeted on a yearly basis. These CSPs, AAPs and other financial proposals to be funded from the EDF are discussed at the EDF committee, which meets regularly in Brussels and where Ireland is represented.
The EDF is subject to annual review by the European Court of Auditors. The Court of Auditors checks that EU funds, including those spent on development activities, are correctly accounted for and spent in compliance with the relevant rules and legislation, with due consideration for achieving best value for money, irrespective of where the funds are spent. The EDF consistently achieves an annual statement of assurance from the Court of Auditors.
The European Parliament is responsible for discharging the EDF’s accounts, further to the Court of Auditors annual review. The Parliament discharged the accounts for the year ending 2011 in 2013 and the procedure to review the accounts for year ending 2012 is under way.
Irish Aid engages very actively with the EDF. The geographical focus and aims of the EDF are closely aligned with those of Irish Aid. The EDF is the primary EU funding instrument for sub-Saharan Africa and has a strong focus on poverty eradication and on fragile and conflict-affected states. Current European Commission proposals envisage over 91% of the 11th EDF funding being allocated to Africa, which includes significant allocations for our key partner countries. For example, Mozambique is set to receive €734 million, Ethiopia €712 million, Tanzania €626 million, Uganda €578 million, Malawi €560 million, Zambia €484 million, Sierra Leone €376 million and Liberia €279 million.
Acting together enables all member states, including Ireland, to benefit from the EU’s wide geographical representation in third countries that is unmatched by any individual member state. We can, through our support for EDF programmes, complement the work Irish Aid is already doing, especially in the social sectors, and also contribute to programmes where Ireland does not have a comparative advantage, such as infrastructure and private sector development.
EDF programmes significantly complement Irish Aid’s work in our programme countries. For example, in Malawi, the focus on water and sanitation in the 2013 EDF annual action programme is crucial to improving nutrition and complements the scaling-up nutrition work with which Ireland has been centrally involved. Similarly in Tanzania, where Irish Aid’s programme has a strong focus on agriculture, the EDF-supported southern agriculture growth corridor initiative, SAGCOT, aims to promote the participation of smallholder farmers in the development of agriculture value chains.
Irish Aid has been a long-standing supporter of Ethiopia’sproductive safety nets programme. As chair of the PSNP donor working group in 2010, Ireland fully supported an allocation of €58 million under the 2010 EDF annual action plan to the programme. It was designed to reduce the vulnerability of 8.29 million chronically food insecure people through conditional transfer of resources for labour intensive public works, and unconditional transfers in direct support of labour poor households.
Ireland’s engagement with and oversight of the European Development Fund is managed through our membership of the European Development Fund committee. In the context of discussions at the committee, we obviously take a particular interest in the eight Irish Aid partner countries supported by the EDF. In advance of meetings, we consult our missions in partner countries to ensure that, to the greatest extent possible, there is complementarity between the EDF and the approach of Irish Aid’s bilateral programmes in our partner countries.
The EDF's programming is also informed byAn Agenda for Change, the EU development co-operation policy that was adopted in 2012. A key aim of the policy is that the EU should sharpen the sectoral and geographical focus of its aid programmes. This is resulting in a concentration of aid on those sectors, countries and regions where the EU has comparative advantage. Also, the application of the concept of differentiation will ensure aid resources are allocated to those countries most in need. Ireland has consistently articulated support for the differentiated type of approach. In the context of the 11th EDF, it will see an increase in resources allocated to the least developed and low income countries, reduced funding for middle income countries and an increased geographical focus on sub-Saharan Africa. As well as seeking to ensure the relevance of the EDF's policy and programming approaches to Ireland's bilateral development priorities, Irish Aid engages in issues of oversight and governance of the EDF through our participation in the EDF committee.
The EDF has also been subject to a number of major external assessments of its performance. The European Commission carried out a performance review of the EDF in 2011. It acknowledged the difficulty in directly attributing development results and, more particularly, progress towards achieving the millennium development goals, MDGs, precisely to the various funding sources. It concluded that the EDF had made a very substantial contribution to assisting ACP countries in progressing the MDGs.
The UK’s multilateral aid review, also in 2011, concluded that the EDF represents very good value for money for UK aid. It is one of only nine funding mechanisms, out of the 43 multilateral organisations assessed, that attained the categorisation. The review highlighted the EDF's ambitious objectives, strong financial accountability processes, clear and transparent resource allocation procedures based on need and performance, and long programming cycles offering a high degree of predictability and a full range of instruments.
The OECD Development Assistance Committee's, DAC, peer review of EU aid in 2012 also reported positively on the EDF. It highlighted its flexibility and adaptability to changes in the political and economic climate. I am aware the Oireachtas Joint Committee on Foreign Affairs and Trade met the DAC peer review team last week and the team spoke positively of the engagement.
Irish Aid is increasingly conscious of the potential which EDF funds may have for Irish business. Obviously the EDF budget is very significant. We are starting a one year pilot project with IBEC. The intention is to furnish IBEC with early information on programmes approved by the EDF committee and IBEC, in turn, will transmit the information to Irish businesses. The aim of the pilot project is to raise awareness among Irish companies of the potential available for EDF programmes. The wish and hope is that, in due course, Irish companies will successfully tender for EDF contracts. Perhaps we can speak further about that aspect later in this session.
In conclusion, I hope I have provided a useful, if brief, overview of the legislative package governing the 11th EDF. I also hope I have demonstrated the synergies between the EDF and Ireland’s bilateral programme and outlined the governance arrangements that underpin the EDF. I thank the committee for this opportunity to talk about the process of implementing the 11th EDF, its governance and how its aims and objectives align closely with those of Irish Aid. We will do our best to answer questions members may have.
I welcome Mr. Cotter and his colleagues. I welcome his off-script comments at the end when he spoke about the possibilities that may emerge for our economic development and for business working in conjunction with the EDF. That is welcome. If Sir Humphrey from "Yes Minister" was looking for EU jargon, he would have looked at this programme. Mr. Cotter had to make the presentation within the constraints of how it is framed and using different terminology. It is quite confusing.
Mr. Cotter is positive about the benefits of this mechanism of disbursing EU funding. I accept it fully and Mr. Cotter makes the point well that acting together enables all member states, including Ireland, to benefit from the EU's wide geographical representation in third countries, which is unmatched by any individual member state. That is welcome. Mr. Cotter mentioned cases in which we do not have the capacity or in which Irish Aid work can be complemented. The school in UCC dealing with developmental issues appeared before the committee and seems to have a great reach in regard to medicine, education, sanitation, agricultural development and the transfer of knowledge. Can Mr. Cotter see a role for the school in UCC contributing to, and benefiting from, the EDF programme?
In his concluding remarks, Mr. Cotter mentions that the 11th EDF would see an increase in resources allocated to the least developed and low-income countries. That is where the focus should be and I welcome that development. An agenda for change was adopted only in 2012 and it is possibly too early to determine whether it has been successful or if it has given an edge to particular policies. If there has been any feedback or review of the policy, I would like to hear it. Do all EU member states contribute to the EDF? Does this programme come within the remit of the European Commissioner for international development?
We are all in agreement that we want to see this area fully transparent and accountable. Over the past five years, a number of assessments have come up with positive conclusions on the performance of the EDF. Some of the reviews referred to the fact that EU aid remains fragmented between EU instruments, the EDF and the budget and between national, regional, thematic and horizontal levels of action in the EU and member states' bilateral programmes. I am making the same point as Deputy Brendan Smith. They are saying that things are positive but that there are difficulties. If there is to be anything positive from today's meeting and Mr. Cotter's report, it is that we would like to hear how we can improve the system.
There are concerns about multinational companies and the view that they are getting away with tax dodging due to a lack of financial transparency or a lack of political will. There has been mention of the so-called double Irish arrangement and the allegation that by designating its office in Ireland in Cork, Mr. Cotter's county, Apple pays a tax rate equivalent to 1.9%. What can we do about that? Christian Aid estimates that tax dodging by wealthy multinational companies costs poor countries €160 billion a year and many of them are among the least developed countries. Do the witnesses agree that the EU must, as part of the package, fully commit to tax justice? We must also look towards mutually beneficial trade. I want to hear that we are trying to remove the loopholes in European law and in Irish law. What role can the committee play in this respect?
One of the big concerns is biofuels. The EU has been positive in providing some leadership but the concern of many developing countries is that European countries are going to these developing countries, including many countries the EDF is funding, and using fertile land that had previously been used for growing food. This increases the price of food locally. There is a contradiction in what we are doing. What can we do about this? Everyone wants to see more sustainable policies and to deal with climate change but we have a crazy system of countries buying carbon credits. It does not do anything to help our planet. It only encourages wasteful products and practices. Do the witnesses agree that Ireland needs to give greater leadership in this area? We are talking about pulling back on the previous agreement, particularly in respect of biofuels.
Haiti has been rocked by political instability, earthquakes and hurricanes. Can the witnesses give an overview of the EDF's involvement in that country and what is emerging?
I had questions when I arrived but the presentation was so comprehensive that it left nothing to be said. I am a relatively new member of the committee and I often wondered to what extent we had an input into how the money we gave to Europe was spent on aid. I was surprised it is such a significant figure. In the overall context it may not be huge but it is a big lump out of our total budget. It seemed very important to me that it complements our bilateral programmes and I am pleased to see it does.
Mr. Cotter made a point in connection with trade and informing IBEC about the value of the EDF money. Although it is important to stay away from the idea of aid for trade, it seems this is a good idea and I suspect other countries have been doing it for years. It is good that we get in and let people know as quickly as possible. Many Irish companies would be ideally placed to tender for these projects. We should be in there with other EU countries, who have probably been doing it for years.
I have now got my head around the acronyms, CSP, ACP and EDF, but I do not know how the witnesses keep going. The point about aid is whether it makes a difference.
It comes down to how we measure that effectiveness. As the witnesses know, the Association of European Parliamentarians with Africa, is involved with that and monitors Irish Aid in two countries. What was said about the performance review the European Commission did was a little bit alarming. It gave a general acknowledgement of the good but also referred to the difficulty of directly attributing development results and, more particularly, towards the millennium development goals. It could give the impression this money continues to go in but that we are not really sure of the effect of this money. There are goals which can be measured. For example, if we give money to educate a certain number of girls, we can go to the schools and get the results. There is a greater need to look at the effectiveness of this money. Considerable amounts of money are going into some of these countries. Does this include direct funding to governments? While the other might be more manageable to measure, sometimes the direct funding that goes to governments is not. I know there are concerns about funding and administration costs and ensuring they are within reason.
I refer to emergency funding. Looking at what is happening in the Central African Republic and in so many other places, how is that dealt with? I am glad to see I am no longer a sole voice on biofuels and tax justice.
Deputy Crowe and I have just returned from Europe, having looked at how it operates and its structures. When one hears eurosceptics, etc., one should argue that they should look at the humanity of the European Union, as a 28 nation group. It is prepared to put €30.5 billion into the alleviation of hunger and development programmes, mainly throughout Africa, but also in the Caribbean and in the Pacific. It is a flag the EU should wave very high. I am very proud we are a member of the EU and that all 28 affiliated nations contribute, as part of their social responsibility to mankind, substantial sums of money.
Having said that, I cannot help but see Irish Aid's influence in the documentation, and I might embarrass officials by saying that. It is quite incredible that we, as a small country, have impressed our neighbours in Europe with how we have professionalised the delivery of aid over many decades. Although I may be wrong, I would argue that it is clearly replicated in the formula being produced and the spending assigned to the various countries. It is fascinating to see so much money is going to our programme countries. I see the hand of the Irish working away in the background in the formulation of policy.
What is really fascinating is our contribution as a nation - €286.77 million - and our programme countries include Tanzania, Mozambique and Ethiopia. Our total contribution is €286.77 million and the total payment alone to Mozambique's development programme is €734 million. It is vastly in excess of what we, as a nation, are doing. Before I read this documentation, I was going to ask about the degree of collaboration between Irish Aid programmes and the European Union.
I refer to the United Nations framework proposals post-2015. As enthusiastic as I am about the collaboration between Ireland and Europe, how do the witnesses think things will pan out when it comes to the United Nations programme post-2015? We may not have the same clout. Do the witnesses think the programmes will merge in some way on the world scene?
I really like this employment enhancement scheme. It sounds very productive and the witnesses might give us a little more insight into it. Presumably, there are labour intensive projects where people are fed or some money is given to those labouring under these schemes.
This committee met the OECD delegation, which spoke about reviewing our work in Malawi. The partners reviewing us are Portugal and Austria. I think we reviewed Portuguese aid programmes. I did not know the DAC also monitors EU-funded development programmes.
This is a fantastic report and I congratulate all involved in the monitoring and preparation of the programme at EU level. Our officials have a hand in not only preparing and working on the programmes but also in monitoring the spending and reviewing the work going on.
I congratulate Mr. Cotter on looking so well after hiding out in Clare for the past year. I presume that only applies to him and that his two colleagues were hiding out elsewhere during the course of the championship.
The extent to which there is accountability for spending has become hugely important in this country and throughout the European Union. My colleague, Deputy Olivia Mitchell, mentioned aid for trade but we are not supposed to go there. To what extent do other European countries benefit or otherwise from trade with the counties to which the European Union donates aid? We are not supposed to go there but it might be no harm to inquire into that. It is not that I am, in any way, parochial but it is no harm to inquire occasionally.
Like, I am sure, all of my colleagues, I have experience, in the context of immigration issues, of dealing with the embassies of the some of the African countries which are beneficiaries and some of them are not very helpful to people who were their own people. I would like that to be borne in mind. From time to time, we have occasion to deal with these embassies which are perfunctory, to say the least, and, at worst, downright rude and uncaring towards their own people and unwilling to accept any kind of remonstration at all, so I would like that to be borne in mind.
I refer to aid for trade. There is a strong Chinese influence in African countries and there is a doubt about the extent to which they abhor aid for trade. I am anxious to know if we, as Europeans, are being treated equally.
Deputies Eric Byrne and Olivia Mitchell mentioned the substantial fund we contribute in quite difficult circumstances. The position here should be to look at the European Union's commitment to the European Development Fund, which is considerable. It is hugely important there is full accountability and a clear indication of good spending, good practice and efficacy in terms of distribution and administration and those for whom it is intended benefit directly. It would be one thing if the budget was small but it is a very large one of €30.5 billion and it can have a huge impact.
If it is administered badly it can have a negative impact not only on the economies of the donor countries but on public perception. Does the same standard of accountability apply to aid from the European Development Fund as to bilateral aid?
The third component of the European Development Fund framework is financial regulation. The regulation determines the detailed rules for the payment of the contributions from member states to the fund as established by the internal agreement. The text of the financial regulation has been negotiated by the Brussels-based African, Caribbean and Pacific working group and will be formally adopted once all the new members have been formally notified. Has everybody agreed to contribute? Does everybody agree that the contribution should be subject to scrutiny and accountability?
Other members have referred to the number of acronyms. One paragraph is full of acronyms, and while it may save ink, that is all it does. I believe in using the full description instead of referring to the African, Caribbean and Pacific countries as ACP, the annual action programmes as AAPs and the European Development Fund as the EDF. I would prefer that we revert to using the words in full. That is not a criticism of the presentation.
Some African countries are particularly vulnerable at present. When aid is being approved from the European Development Fund, is account taken of the country's Government and governance? The annual action programme were designed to reduce the vulnerability of 8.29 million chronically food-insecure people through conditional transfer of resources for labour-intensive public works and unconditional transfers in direct support of labour-poor households. I think a case can be made for co-financing in cases in which the country in question can afford to contribute. Some countries have a wealth of natural resources and cognisance should be taken of that when distributing aid. We should encourage countries that are able to make a contribution to do so in accordance with the incoming aid. That would be reassuring to the European Union. It would also give recipient countries an opportunity to identify the area in which aid is most appropriate.
I welcome the witnesses. It is difficult to come up with an original question. The budget for the 11th EDF is €30.5 billion. How does that compare with the budget for the tenth EDF?
I agree that it is important that the Court of Auditors check and monitor the EU funds. How is the aid provided to recipient countries monitored? Was the previous aid programme effective in the countries referred to in Mr. Cotter's report?
Mr. Tony Cotter:
The team will do its best to answer the questions. I will explain the history of the EDF before I deal with questions on fragmentation. Back in 1957, during the process of establishing a European Community, France and Germany were particularly anxious to have a fund for development in their extra-territorial territories. The other members states at that time which did not have such territories were not as enthusiastic, and the compromise that was arrived at was the establishment of the EDF but outside the acquis communautaire. In other words, it was an intergovernmental arrangement rather than a community arrangement. The EDF is the only EU instrument that is intergovernmental in nature. As the Deputy might know, there have been proposals in the past to bring the EDF into the community spend, but that issue will be revisited again in 2020 when the Cotonou Agreement comes up for negotiation.
The agenda for change was referred to in the context of fragmentation and this is all about the European Union focusing on a select number of priority areas in each individual country so that there is greater impact for the EU spend in those countries.
I agree with Deputy Durkan, who raised the issue of jargon in the context of EU legislation. EU legislation is somewhat like the Holy Trinity; it is a bit of a mystery. One would want to be an international lawyer to comprehend the EU legislation. In general terms, the overall objective of this legislation, which is intergovernmental in nature, is to make it compatible with EU law and to make the financial regulations instruments as similar and as close as possible to the regulations that apply to European Union funds.
The principle of differentiation will see increased resources for low-income fragile countries, which are a particular priority for Irish Aid. I am pleased to say that differentiation will mean an increase in resources under the 11th EDF allocation to least developed and low-income countries, from 79.5% under the tenth EDF to 85.3% under the 11th EDF, and a decrease in resources allocated to upper-middle-income countries from 5.3% to 2%. The 11th EDF is going in the right direction in that it is concentrating on countries with the least income and on fragile states. That is very welcome from an Irish perspective.
Accountability is very important. There is a concern on the part of all member states to ensure that there is accountability. As Deputies have pointed out, the EDF budget is very significant. In response to Senator Mullins, the budget for the six years of the tenth EDF was €22 billion. It is important that there is proper accountability for this funding. That is a matter of interest not only for Ireland but for the other member states, such as Germany, which contributes €5.2 billion to the EDF, and France, which contributes €5.4 billion to the EDF. We rely on European Union mechanisms such as the European Court of Auditors, which conducts an annual audit on the EDF to ensure the money is properly accounted for and spent in compliance with the rules and legislation.
Overall, the EDF, compared with other EU bodies, has a good record and has consistently gained an annual statement of assurance from the European Court of Auditors. The European Union has also introduced a result-oriented mechanism which essentially means it engages external evaluators to make site visits to projects, to assess and monitor the projects and report back on their efficiency and effectiveness. Also the European Union has a separate independent evaluation office which conducts evaluations of the work and projects conducted under the EDF.
The EDF is also subject to a discharge by the European Parliament on foot of the annual report of the European Court of Auditors. The European Parliament has an annual look at the European Development Fund and has an opportunity to debate and comment on the report furnished by the European Court of Auditors. Member states are also very conscious to ensure maximum value for money so far as the EDF spend is concerned. The EDF committee in Brussels regularly reviews and monitors the performance of the Commission to ensure that as far as possible the EDF fund is administered in the best way possible.
On trade generally and the impact of the EDF spend, as Deputy Maureen O'Sullivan mentioned, there are some aspects of the EDF spend which can be measured by the number of children in school, the number graduating to secondary school and the number of children leaving school. These can be directly assessed. One advantage of the EDF is the extent to which it gets involved in infrastructural projects. At one stage I had the pleasure of hosting Deputy Maureen O'Sullivan in Zambia. I will take Zambia as an example of where the EDF can have an impact but which may be more difficult to measure. Zambia is a land locked country, surrounded by nine other African countries. It has no direct access to the sea which means that its raw materials and its exports have to come by road. Air transport is too expensive. Zambia did inherit a railway system but it has fallen into disrepair.
Mr. Tony Cotter:
Not to the standard it should be. Imports to Zambia come by road and exports go out by road. The primary exports for Zambia are copper and maize. The routes used by Zambia are east to Mozambique; and from Mozambique, south east to Durban, south to Capetown or west to Namibia. The European Union uses the EDF to improve the roads system in these African countries in order to facilitate commerce and trade. Doing this increases the attractiveness of these countries for foreign direct investment and for private sector investment. So far as the spend on infrastructural areas is concerned it can have an immeasurable impact on the development potential of these countries but may not be as directly measurable as other areas.
I was asked if all member states contribute to the EDF. The answer is "yes". All member states contribute to varying degrees to the EDF.
Mr. Tony Cotter:
I should mention in that context that under the tenth EDF, Ireland's contribution key was 0.91% and under the 11th EDF it is 0.94% as there is a wish to move the percentages closer to what we pay under the EU budget. As our percentage for the EU budget is 1.14%, the general feeling is that the 0.94% agreed for the EDF in financial terms was a very good result for Ireland.
On the issue of trade, one very strong principle of Ireland's approach to development is that all our development aid is untied. That is a strong and central principle of Irish Aid and will be maintained in the future. It is a principle that is respected and acknowledged by the African countries where we have bilateral programmes. Other countries do not follow that principle. That is not to say that trade does not have a role where development is concerned. The whole development context has changed in the past 15 years.
In 2000 when the millennium development goals, MDGs, were introduced the largest development spend by far was overseas development aid, ODA. In the 15 years since, there has been a significant change in the sense that ODA is no longer the largest element of development funding. It is important funding for least-developed and fragile countries because, in many instances, those countries cannot attract funding otherwise. In the past 15 years there has been a change in the sense that countries such as China, India and Brazil have come on to the field. There has been a huge increase in domestic income. African countries have significantly and exponentially increased their domestic income. Huge charitable organisations such as the Clinton Foundation and the Gates Foundation, have entered the playing field so that there is a totally different environment now so far as development is concerned. Certainly there is a role for private sector involvement and foreign direct investment provided rules, principles and ethics are followed by companies going into the developing countries. That is very important.
There was a reference to taxation and capital flight from developing countries. As I have mentioned, domestic revenue is increasingly important and it is increasingly recognised that countries themselves have a responsibility for their own development and, in that respect, must maximise to the greatest extent possible their domestic income. Irish Aid, for its part, provides assistance for capacity building of revenue systems in developing countries. An example is our own Revenue Commissioners who have gone into Rwanda to help the revenue authorities in that country to improve its capacity.
Capital flights from developing countries remains a major obstacle. However, there is increased international co-operation to try to combat that particular activity. At G20 and other levels there is a recognition that other measures must be taken to combat capital flight from developing countries. In that respect Ireland has a good record, in the sense that under the Irish Presidency, we were instrumental in negotiating the EU accounting and transparency directive so as to require multinational companies, based in Europe, to report on the payments they make to developing countries for access to oil, gas and minerals. It is important that those payments are open and transparent and that the populations in the developing countries are aware these payments are being made. Other efforts are being made to complement co-operation between member states to promote better exchange of information on taxation issues and so on.
There was a reference to China. I can speak about China in relation to my experience in Zambia. It was very involved in Zambia and is very involved in Africa generally. It is involved in a very strategic way and in a long-sighted way from its own perspective. One attraction for Zambia is raw material, particularly copper. I mentioned that Zambia's exports leave the country through Mozambique, Namibia or South Africa.
From any of those countries, the boat in most instances is headed towards China. I read recently that China currently has a 25 year store of copper.
The other major area in which China is involved is land. Again, Zambia is a particular attraction for China because its agricultural potential is immense. Zambia is approximately ten times the size of Ireland and has a population of 13.5 million. Some 65% of Zambian land is arable, but only 14% is being cultivated. Irrigation multiplies the productivity of land by a factor of nine or ten. Less than 1% of arable land in Zambia is irrigated, despite the fact Zambia has the fifth highest source of fresh water in the world. Agricultural potential in Zambia is huge and China has recognised that and is beginning to purchase land there because it does not have sufficient arable land of its own to feed its growing population. The Chair will be interested to know that the chief executive of the biggest agricultural processing business in Zambia, the first indigenous company to launch on the London stock exchange, is a constituent of his and lives in Ogonnelloe. It is incredible the number of Irish people one meets when one travels through Africa. China's engagement is very strategic and I have outlined that.
A question was asked regarding employment and the EDF. I already mentioned the EDF spend on roads and road infrastructure. This funding by its nature creates local employment. Expenditure on major infrastructure projects such as roads, transport, bridges, customs facilities and so on creates employment opportunities locally. There is, therefore, an opportunity for Irish companies to engage in this. The amount spent under the EDF is significant. All of these contracts are published in the Official Journal of the European Union andit is open to businesses to tender for them and Irish companies can do so successfully. From my time in Zambia, I am aware that the Sisk group was very successful there and in Zimbabwe, South Africa and a number of other countries. There is a precedent whereby Irish companies have done this. What we wish to do is to raise awareness of this potential among the Irish business community. Obviously there are challenges in this. It is not simply a case of walking in, submitting a tender and getting a contract. One must become familiar with the local situation on the ground, but despite the challenges, there is potential. We want to make the Irish business community aware of the potential so that Irish companies will be successful in tendering for EDF contracts in the future.
Reference was made to the school in UCC. There is always a role and potential for schools and colleges to make a contribution in the developing world. Irish Aid has a scheme in place to foster partnerships between educational entities here and in the developing world and these can have a pragmatic and practical influence. Similarly, the Royal College of Surgeons in Ireland has a programme in place in sub-Saharan Africa, which provides training to surgeons in these African countries. This important programme ensures surgeons in these countries can get appropriate training in siturather than having to leave their country and come to a developed country for their training and becoming part of a brain drain. There is potential in the area of educational facilities, which have a role to play in developing countries.
In regard to the percentage of money that is given to our key partner countries, if we break down the 0.91% for the European fund roughly, what we allocate to our partner countries out of that is approximately €43 million or €44 million. Therefore, of all the money we give towards the European Development Fund, the amount that goes to the countries we have chosen as partner countries is relatively small. My other concern regarding the fund is that as our funding and budget for Irish Aid decreases, the amount we are committed to giving to the European fund increases. Therefore, the money this country has discretion over, whether we give it to Trócaire, Concern or an NGO or whether we target it as we wish towards a programme such as the AIDS programme in Zambia or education in one of the partner countries we have chosen, is limited. My concern is that what we control of our overseas aid budget has diminished enormously in the past number of years. The figure Mr. Cotter has provided of €286 million is close to 40% or 50% of our overseas aid budget. It is simply a matter of writing a cheque and out the door it goes to Europe, but only €40 million odd of it goes to the countries we are most concerned with. I am concerned that we are not in control of our aid budget any more.
There is no doubt that the EU accounting directive was a positive step forward. The question is who will ensure it is implemented and when will we see the practical and positive results. In other words, when will we see the new reporting by companies. In the same context, are there plans to extend the directive beyond the extractive industries?
I am a bit at sea in regard to Senator Daly's interpretation of the situation. I would think that being part of the European Union makes us part of a bigger bloc and much more. We are part of the €30.5 billion of aid. I presume the degree to which we control the spend is shared among our EU colleagues and, accordingly, benefits should accrue to us in terms of our membership of the European Union. I would not concede for a moment that we have little or no influence. We have considerable influence over what happens to the money we contribute.
The development of road networks is important in terms of transport and infrastructure. In regard to the TanZam railway, what would be the cost and benefit of restoring that? Is there a cost benefit analysis for that? This is rail as opposed to road infrastructure, but both are required. What would be the benefit of restoring the railway, for both the European aid programme and the country to which we are donating?
Mr. Cotter is correct with regard to Chinese investment in land and we have seen that at first hand. How does European Union aid compare with Chinese aid or that of other donors worldwide? The European Union is positive, supportive and has the right idea and motives, but perhaps not every other country may have. To what extent does the European Union get credit for its aid and do we expect comparative reciprocal arrangements to those of other countries providing aid in Africa?
The discussion has refreshed my memory about the Tanzania railway. In the early 1970s or late 1960s the Americans built the road which ran alongside the railway. I understand the Chinese were building a narrow gauge railway at the time. Is the road still there? Is the railway still there? Is that one of the projects funded?
Reference was made to other countries in the past trying to churn out little Englanders, little Germans, French, Italians and so on. They all had an agenda in the past. One of the positive things about Ireland's aid is that we have no hidden agenda. Mr. Cotter said our aid is untied. My argument is that it should not be untied in the sense that we want to see these countries emerging with the elimination of poverty, clean water and so on. However, we also want to have inclusive and more equitable societies and so on. If we are ticking boxes in any way in respect of what we are trying to do in these countries, these are the things we should aspire to.
Mr. Tony Cotter:
I will take the last point first. I fully agree with Deputy Crowe on untied aid. Other countries will give aid but there will be conditions such as that the development specialist expertise should come from that country. There are other conditions to ensure that a certain benefit will accrue to the country that is giving the aid. When I use the term "untied", I mean we give all our aid untied. There are no conditions or expectations that development specialists or Irish personnel will be employed on foot of that aid. That is what I meant. I fully agree with Deputy Crowe that the entire purpose of our development assistance is to eradicate poverty and to promote sustainable development, good governance, human rights and the rule of law.
Mr. Tony Cotter:
It all depends on how a country approaches its development assistance. There is a long-standing tradition from Ireland and we have taken a particular policy approach. Our consistent policy approach has been that our aid is untied. As I have said, that is respected and acknowledged worldwide. Separately, and on a different track, that does not prevent us from seeking business opportunities for our business enterprises and this can complement the development assistance that is given.
I did not realise that I would encourage so much interest in railways. Anyway, in 1964 when Zambia got its independence, it inherited a very good rail network from the Chinese. Remarkably, Zambia has approximately 73 different dialects and languages and there is no word for maintenance in any of those languages or dialects. The railway system which the country inherited in 1964 has fallen into disrepair. Consideration is being given to moneys being spent to develop that railway system, because, like the road system, a modern up-to-date railway system would be of immense benefit to Zambia in getting in imports and getting out exports. Consideration is being given to that at this stage.
Senator Daly asked a more difficult question. The allocations I referred to in my opening remarks for the programme countries and the allocations that our programme countries get under the European Development Fund are country-specific. However, those countries also benefit from the regional spend on infrastructure projects, such as roads, energy systems, transport systems, all of which assist these countries and make them more attractive for foreign direct investment and business.
We believe that the European Union gives us advice on a global stage and by working together it is possible to get the maximum impact from a development spend. I set out in my opening statement how we see the EDF spend complementing our national spend. However, I am unsure whether I can answer all the reservations raised.
Mr. Tony Cotter:
In overall terms, the allocations that I referred to in my opening statement for these countries are specific country allocations, but there is a further spend under the EDF which would benefit these countries. In so far as the accounting and transparency directive is concerned, it is an EU accountancy and transparency directive and it will be implemented and monitored by the EU mechanisms.
I cannot be specific on the areas under consideration for expansion in the directive, but I assure the committee that there is increasing recognition at international level of the need to stop the illicit flight of capital from developing countries. I am aware that it has been discussed in such august surroundings as the G7, the G20, the European Union and the United Nations. There is an increasing international focus on the importance of addressing the matter and I am satisfied that in the time ahead we will see an expansion of the measures.
There is an issue with the reducing allocation that Ireland gives to Irish Aid outside of our EU commitment. As our aid budget drops, our EU commitment remains static because we are tied in at 0.94%. Therefore, as a country, our discretionary spending is dropping. That is my concern. Deputy Durkan seemed to be implying that if we had written one entire cheque to the EU it would be fine, but I do not believe that is a good foreign policy for the country.
Mr. Tony Cotter:
In so far as our discretionary and direct spends are concerned, against a difficult economic background but with the support of politicians across the board as well as public support, the budget for Irish Aid has been maintained at a high level, having regard to the extent of the economic downturn in the country. This is something that we acknowledge and it could not have happened without public or political support. Reference was made to the percentage of our spend. We are one of the top ten donors in the world per head of population. As a country, comparatively speaking, we have a high per head of population spend.
Mr. Tony Cotter:
I am unsure whether we will agree on the point. Anyway, we see the European Union spend as complementing our national spend. Given the size of the European Union budget and the areas where it can get involved, such as the infrastructural and other projects to which I have referred, it is an important spend for developing countries. This is because developing countries, as well as requiring support in respect of their social sectors - which, by and large, we concentrate on - must also have the benefit of the infrastructural spend on the roads, railways, bridges, customs facilities and all of the other areas which make them more attractive for foreign direct investment. We see the two spends as complementary rather than being in opposition to one another. I am unsure whether I can go further than that.
You will have to agree to differ on this because otherwise we will be going over and back all day, and I will not do that. Thank you very much Mr. Cotter, Ms Lyster and Mr. O'Grady for coming before the committee this afternoon. As you have seen, there has been good interaction with the committee. It is an area the members have a real interest in, particularly in respect of development aid. It accounts for a good deal of our work programme and will continue to account for a good deal of our work programme in the forthcoming year. You have dealt with most of the questions comprehensively and we thank you for that. We look forward to a continued relationship with you. The committee has now completed its consideration of COM (2013) 445 and COM (2013) 660.