European overseas aid slightly increases but lags behind global trend

By Natalia Alonso, Oxfam’s EU Head of Office

Bwalia 'Bottom' Hospital in Lilongwe by Abbie Trayler-Smith

The latest figures from the OECD seem promising but hide an uncomfortable truth. Donors have collectively increased their development aid spending, but most of Europe’s wealthiest governments still fail to meet promises designed to alleviate global poverty and slash economic inequality.

Overall, the EU-19 contribution to overseas aid has increased a little and some countries like the UK and Sweden have increased their contributions. However, a closer look at some of Europe’s wealthiest countries proves worrying. Key donors like France (-9.8%), Netherlands (-6.2%), Belgium (-6.1%) and Portugal (-20.4%) have slashed aid and spurned their own development pledges.

It is this slowdown by key countries which has led to Western Europe performing slightly worse than the global trend. The EU-19 delivered €51.3 billion or 0.42% of their national income as overseas aid in 2013, which reveals a €42 billion funding gap to meet their 0.7% target by 2015. This long-standing commitment lies at the heart of the UN flagship Millennium Development Goals (MDG) set to expire next year.

Slashing aid has a real human cost leading to fewer teachers and nurses in the world’s poorest countries. European aid saves lives every year and is irreplaceable.

The irreplaceable nature of aid is seen when we look at the European Commission’s aid spending in 2012. The budget totalled €13 billion, representing an important share of government revenue in poor countries including 23% in Sierra Leone, 22% in Comoros, 19% in Burundi, 18% in Malawi, 13% in Madagascar and 12% in Togo.

It is vital that European countries continue to support robust aid projects, refusing to replace it with alternative methods of finance with the developing world. Unlike aid, other sources of development finance like foreign direct investment or loans are not designed to get people out of poverty. Aid is designated to help poor countries raise their own resources for basic services like health and education by helping strengthen their tax systems.

Against the backdrop of broken aid promises by some of the Europe’s richest countries, innovative ways to raise money for development are absolutely crucial. The 11 EU countries who agreed to implement a financial transaction tax (FTT) this year must spend part of the revenues to help fight poverty and climate change. Europe can also crackdown on tax dodging which drains $950 billion out of poor countries every year.

The staggering cost of armed violence to Africa

By Martin Butcher is Oxfam’s Policy Advisor on Conflict and Arms

As the fourth EU-Africa summit takes place in Brussels, we note that the theme “Investing in People, Prosperity and Peace” reflects exactly Africa’s needs, and emphasizes Oxfam’s concerns about armed violence and conflict in Africa which are at the base of the decade-long campaign for the Arms Trade Treaty (ATT) to curb the irresponsible arms trade.

Oxfam research that was published in our report Africa’s Missing Billions showed that between 1990 and 2007 the cost of armed violence and conflict to Africa was $300 billion – approximately the same as the aid money that flowed into the continent during that time. Losses continue at around $18 billion a year. Conflict shrinks the economies of affected African countries by at least 15% a year.

This is a tremendous sum of money, enough to solve the continents’ problems of HIV and AIDS, or to address Africa’s needs in education, clean water and sanitation, and prevent tuberculosis and malaria.

There are the obvious direct costs of armed violence – medical costs, military expenditure, the destruction of infrastructure, and the care for displaced people – which divert money from more productive uses. The indirect costs are even higher. Economic activity falters or grinds to a halt. Income from valuable natural resources ends up lining individual pockets. Conflict brings inflation, debt, and reduced investment, while people suffer from unemployment, lack of public services, and trauma. Inequality rises, bringing further social problems in its wake. Compared to peaceful countries, African countries in conflict have, on average:

• 50 per cent more infant deaths;

• 15 per cent more undernourished people;

• Life expectancy reduced by five years;

• 20 per cent more adult illiteracy;

• 2.5 times fewer doctors per patient; and

• 12.4 per cent less food per person.

Serious armed violence, and particularly civil war, also erodes the institutions of civil society. Family, community, and inter-community links are severed, and a culture of violence spreads. In one current example, Oxfam staff in the Central African Republic observed children in Bangui earning money for their family by selling hand grenades for the equivalent of 50 cents each.

At least 95 per cent of Africa’s most commonly used conflict weapons come from outside the continent, for example, the Kalashnikov AK-47 assault rifle, few of which are made in Africa. In the Central African Republic, Seleka rebels were armed with weapons trafficked from elsewhere in Africa. Anti-balaka militias are armed with home-made arms and older military weapons. One thing is clear – none of the arms were manufactured in the Central African Republic. And few entered the country legally.

A steady supply of ammunition is required to keep arms deadly, but little military ammunition is manufactured in Africa. A 2012 report showed that ammunition shipped by Iran was used in 14 African countries, though it was used by government forces in only four of these cases. The ammunition was supplied to governments who then sold it on illicitly, fuelling rebellions, civil wars, armed conflict, and criminal and inter-communal violence.

Africa desperately needs to stop the flow of arms. Our main tool for change will be the ATT adopted by overwhelming vote at the UN last year. The ATT provides for the first time a global framework to control to restrict the irresponsible trade in arms, and to subject the arms trade to control under provisions of IHL and human rights law.

To make the Treaty work mechanisms to control the import and export of arms must be established and made to work effectively. Stockpiles must be secure, and corruption addressed. Many African countries will need assistance with this, something the EU has already committed to provide. But it is not enough for the EU to say that their arms controls are perfect, that only Africa needs to act. Arms exports must be effectively implemented observing the spirit and the letter of the new Treaty.

The EU has a strong interest in peace, stability and economic growth in Africa. Africans and Europeans need to act together in partnership to achieve this vital goal.

A taxing problem: EU-Africa and illicit finance

By Natalia Alonso, Oxfam’s EU Head of Office and Javier Pereira, Action Aid’s Europe Advocacy Coordinator

The EU must seize an important opportunity this week to strengthen its ties with its neighbours to the south. At the centre of the Fourth EU-African summit in Brussels is the idea of cooperation, finding common ground on concerns that affect both regions. If that is indeed the aim, then one issue in particular should be at top of the agenda – how to tackle illicit financial flows. This is a scourge for everyone around the table.

Illicit financial flows are a problem which affects every country regardless of their global economic standing. A huge part of it is companies exploiting loopholes, pushing their profits off-shore in order to pay less tax. There are few countries which aren’t affected by the practice, whether it is Starbucks and Apple dodging millions in the UK or Associated British Food in Zambia. This is the reason the G20 asked the OECD, a think tank dominated by rich countries, to look into the problem and find constructive ways to tackle it.

Illicit financial flows are a big deal for the developing world too. Each year around $950 billion worth of money is drained from some of the world’s poorest countries, leaving gaping holes in their economies, hampering development in the process. This is seven times the volume of global overseas aid, making the figure not just morally reprehensible but self-defeating in the fight against poverty.

Sub-Saharan Africa is being particularly hard hit. If Ethiopia could capture just 10% of the money that loses each year through corporate tax dodging, it could enroll 1.4 million more children in school. African nations are losing nearly 2 per cent of their gross domestic product (GDP) as a result of companies fiddling the books through ‘trade mispricing’. If G20 nations were hit as hard by corporate tax dodging as Africa, they’d have a $1.2 trillion hole in their budgets.

We think it is promising that the OECD has paid such close attention recently to reforming global tax rules. But for any new measures to be truly effective it is vital that the countries that are most impacted are the same ones that be consulted the most closely. It is difficult, however, to imagine these reforms will have a global reach when only one African nation, G20 member South Africa, currently has a seat at the negotiation table.

The OECD’s proposals deal with the issue from the perspective of developed countries. There is little recognition being given to the priorities and needs of the developing world. Look at the recent agreement on a new international standard: the automatic exchange of information. This is a genuinely progressive decision that will allow the 20 wealthiest countries to automatically share tax information. How troubling therefore that poor countries will not receive any information that can help them fight tax dodgers because they cannot produce the required information themselves. This will result in a two-speed system: whilst most developed countries will have the capabilities to trade important tax information, those countries who stand to gain the most from the practice will be left in the dark.

Europe and Africa should also promote together greater transparency on who owns companies and where they pay their taxes, seriously assess the impact of tax incentives and remove those that are detrimental, and create a real global space to discuss tax reforms where poor can voice their needs.

A fairer tax system should also include innovative taxes, like a Financial Transactions Tax that 11 European countries agreed to implement this year. Part of the revenue should be spent on the fight against poverty and climate change, as a concrete engagement for the EU-Africa relationship.

The European Union is a key partner to Africa, so it is vital that any policies decided upon in the EU or the OECD are truly inclusive and work to the benefits of all. Accepting that this truly global problem needs a global solution is the first step.

Oxfam's EU Advocacy office in Brussels rss

Oxfam's EU Advocacy office in Brussels works to ensure EU policies and practices affecting poor countries have a greater impact on those most in need. Our work spans numerous policy areas including development aid, food security, climate change, and the provision of humanitarian assistance to victims of conflicts and natural disasters. more.

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