Official development aid as the contribution of the European Union to achieving

sustainable development illustrated by the case of the Millennium Development Goals

Katarzyna Czech, PhD

University of Economics in Katowice, Poland, 40-267 Katowice, ul Pułaskiego 25
katarzyna.czech@ue.katowice.pl

Abstract:
The pursuit of the Millennium Development Goals (MDGs) is a response of the
international community to increasing disparities in the living standards observed in the
global economy. An important factor facilitating the achievement of the MDGs was Official
Development Assistance, donated primarily by the European Union member states. The study
is an attempt at the evaluation of the role that Official Development Assistance played in the
achievement of the Millennium Development Goals and, as a consequence, the
implementation of sustainable development in the poorest regions of the world. The pursuit
of the Development Goals before and after 2015 relies, to a large extent, on the effectiveness
of financial backing programmes, in which the European Union is a leading donor.

Key words: Millennium Development Goals, sustainable development, Official

Development Assistance

Conference Topic: Economie

Introduction
Sustainable development is a development model characteristic of the global economy. It
stems from the redefinition of the classic development model, which led to social and
economic stratification in and between many societies as well as to environmental
degradation. The financial crisis of the 2000’s only exacerbated these problems. The scale of
stratification observed in the modern global economy led to the formulation of quantitative
targets that needed to be achieved in order to counteract widening disparities between living
conditions in different regions of the world. The achievement of the goals, however, often
relies on external financial aid. These targets were initially adopted as the Millennium
Development Goals (MDGs) in 2000.
The study undertakes an attempt to evaluate the significance of the EU’s official
development aid for the achievement of the Millennium Development Goals and, as a result,
the implementation of sustainable development in the poorest regions of the world.
The primary thesis proposes that the pursuit of the Development Goals before and after
2015 depends on the effectiveness of financial aid schemes, in which the European Union is a
leading donor.
The study uses descriptive analysis and statistical data analysis.

Worldwide initiatives supporting sustainable development illustrated by the case of the

Millennium Development Goals
The beginning of the new millennium encouraged commitments also on the international
arena. The new concept of development was reflected in the Millennium Development Goals
formulated in 2000. The MDGs are the consequence of the resolutions adopted during the
UN summit and signed by the leaders of 189 countries. They were defined as eight time-
bound commitments, pursued by the signatory countries until their achievement in 2015 and

42
aiming to counteract adverse effects observed in the global economy.1 The quantitative
indicators, developed for the MDGs, were to monitor progress in achieving the desired
outcomes.2 They embrace the issues relating to health, environment and social problems.3
Goal 1 aims to eradicate extreme poverty and hunger. Commitments adopted within this
goal aim to halve, by 2015, the number of people whose income is less than one dollar a day
and the number of people who suffer from hunger.
Goal 2 involves providing universal education at the primary level. The commitment aims to
give all boys and girls an opportunity to complete a full course of primary schooling by 2015.
Goal 3 promotes gender equality and woman empowerment. It is reflected in the
commitment to eliminate gender disparity in terms of access to primary and secondary
education by 2005 and in all levels of education by 2015.
Goal 4 was set in order to reduce child mortality by decreasing the under-five mortality rate
by two thirds between 1990 and 2015.
The pursuit of Goal 5 involves the improvement in healthcare provided to mothers by
reducing a maternal mortality rate by three quarters between 1990 and 2015.
Goal 6 concerns combating HIV/AIDS, malaria and other communicable diseases by halting
the spread of HIV/AIDS and reducing the number of new HIV infections and by reversing
the incidence of malaria and other major diseases by 2015.
Goal 7 is to ensure environmental protection by integrating the principles of sustainable
development into national strategies and programmes; the application of methods reversing
the loss of environmental resources should halve, by 2015, the proportion of the population
without sustainable access to safe drinking water and, by 2020, achieve a significant
improvement in the lives of at least 100 million slum dwellers.
The establishment of a global partnership for development is Goal 8. Its achievement
involves developing further an open, rule-based, predictable, non-discriminatory trading and
financial system.
The achievement progress for the MDGs varies both in terms of what goals were
achieved and to what degree as well as how successful particular countries were in their
pursuit of the MDGs. The goals involving eradicating extreme poverty, providing access to
clean and safe drinking water, and improving the lives of slum dwellers, were achieved
before the year 2015. It is likely that by the end of 2015 the goals on gender equality in
primary and secondary education and the reduced incidence of malaria will also be achieved.
In terms of the number of countries pursuing particular goals, the highest number tend to
experience problems with reducing child and maternal mortality and the availability of basic
sanitation. In terms of the regions involved with the MDGs, the countries that are struggling
to achieve the goals are the countries in Sub-Saharan Africa. 4
Undoubtedly though, the progress achieved in the pursuit of the MDGs, irrespective of its
assessment, can be partly attributed to financial aid granted to the poorest countries by the
developed economies, including the EU member states.

Post-MDGs – new proposals on monitoring sustainable development globally

Development goals for the coming years have had to be redefined for two major reasons:
first, the achievement of the MDGs is not entirely satisfactory, and second, development
disparities have been steadily increasing in the recent years. On the other hand, it is the
progress achieved in a number of areas defined in the MDGs that has become an incentive to

1
Cf. eg. http://www.un.org/millenniumgoals
2
Indicators of Sustainable Development: Guidelines and Methodologies, UN New York, October 2007, pp.6-7
3
Ibidem
4
Ending Poverty and Sharing Prosperity, Global Monitoring Report, World Bank 2014/2015, World Bank
Group, IMF Waschington 2015, pp. 13-34

43
formulate reviewed targets. Following multi-lateral negotiations within the framework of
“Post-2015 negotiations” and “2015 Time for global action, for people and planet”, the
United Nation Development Programme (UNDP) proposed the Sustainable Development
Goals (SDGs). The SDGs might, on one hand, continue the work done on the MDGs, while
on the other hand, they should become the signposts mapping the road to achieve, even more
effectively, new goals, which have a chance to reduce the scale of or eliminate certain
problems affecting the poorest regions of the global economy. Another programme is another
opportunity to improve living conditions in the poverty-stricken regions. This idea was
expressed by Helen Clark, UNDP Administrator, who said that “world leaders have an
unprecedented opportunity this year (2015) to shift the world onto a path of inclusive,
sustainable and resilient development”.5
The SDGs to be achieved in the next 15 years focus on six major areas, within which 17
specific goals were defined and quantitative targets were set. The areas embrace:6
• People: to ensure healthy lives, knowledge and the inclusion of women and children
• Dignity: to end poverty and fight inequalities
• Justice: to promote safe and peaceful societies and strong institutions
• Partnership: to catalyse global solidarity for sustainable development
• Planet: to protect our ecosystems for all societies and our children
• Prosperity: to grow a strong, inclusive and transformative economy
The “2030 Agenda for Sustainable Development”, adopted in September 2015, defines
the goals and principles on how to pursue them in detail.7 It also underlines that never before
have the world leaders unanimously committed to such a comprehensive programme.8
Simultaneously, decisions were made concerning the rules for financing the programme.
These decisions, crucial for the success of the programme, were taken in Addis Ababa as
soon as July 2015 as the Plan of Action Addis Abeba. This financial programme defines the
contribution to the pursuit of the 2030 Agenda at the level of 0.7% of GNP for the developed
economies and 0.15-0.2% for the developing countries.9 The allocation of sufficient funds is
one of the critical success factors for the programme adopted for the next 15 years.

The European Union’s support for sustainable development

The failure of the Lisbon Strategy to achieve success necessitated the redefinition of the
EU goals in terms of sustainable development. In response to the difficult situation in almost
all EU member countries, which is the result of both the financial crisis and new economic
conditions shaped by the evolving world economy and globalisation, “Europe 2020 – A
strategy for smart, sustainable and inclusive growth” was adopted in March 2010.10
This is the strategy the priorities of which embrace smart growth, ensuring the
development of the knowledge- and innovation-based economy, sustainable growth,
supporting the economy by using the resources more effectively than before, making it more
5
United Nations Sustainable Development Summit on 25 September 2015,
http://www.undp.org/content/undp/en/home/mdgoverview/post-2015-development-agenda/ (accessed on
30.09.2015)
6
The road to dignity by 2030: ending poverty, transforming all lives and protecting the planet Synthesis report
of the Secretary-General on the post-2015 sustainable development agenda
7
Transformer notre monde : le Programme de développement durable à l’horizon 2030, NU, Assemblee
Generale, Soixante-dixième session, Points 15 et 116 de l’ordre du jour, 18 septembre 2015, p.5
8
Ibidem, p.6
9
Cf. eg. L’Assemblée générale approuve le Programme d’action d’Addis-Abeba sur le financement du
développement, http://www.un.org/press/fr/2015/ag11663.doc.htm (accessed on 20.09.2015)
10
Europe 2020. A strategy for smart, sustainable and inclusive growth, COM (2010) 2020 final version,
Brussels 3.03.2010

44
environmentally friendly and more competitive at the same time, and inclusive growth,
strengthening the economies of high employment and ensuring social and territorial cohesion.
Notably, the European Union is the signatory to all international agreements on
sustainable development and implements regional strategies that include SD principles in the
scope and to the degree that are relevant to its needs.

The EU as an Official Development Assistance donor – an attempt at the evaluation

The experiences in the formulation and fulfilment of global sustainable development
goals indicate the necessity to grant financial backing to the countries at the lowest
development levels. This a sine qua non condition for effective action aiming to achieve SD
goals for this group of subjects. Hence, the importance of financial commitment form the
developed countries. However, the financial crisis, which in 2007 affected all important
actors in the world economy, caused that the scale of financial aid had decreased and the
donors defaulted on their earlier commitments.
This primarily concerned all the Millennium Development Goals. In many regions, their
targets can only be reached with external aid and backing. Such backing is definitely
provided by Official Development Assistance (ODA). It should be noted, however, that ODA
is only one of the forms of providing financial aid. It is distinguished by its concessional and
public character, as opposed to other forms such as private grants, other official flows, private
flows at market terms. Importantly, aid provided within ODA is crucial for low-income
countries, where it accounts for over 80% of the financial aid that is transferred to them.
ODA aims to support economic growth and build welfare in the developing countries. It
can come as a donation, a subsidy or a loan granted to public sector institutions in the
developing countries by international organizations and government institutions of the
developed countries. It may also be granted as a material or technical contribution. Aid in this
form is offered to the beneficiaries from list of the OECD – Development Assistance
Committee (DAC).11
The EU is the largest ODA donor, particular member states, however, have varied
contributions to total EU aid both in relation to their GDP and in absolute terms.
Although, in recent years, many member states have decreased the amounts granted in
contributions to ODA as a percentage of GDP, the overall value of aid coming from the EU
countries to ODA has grown steadily. In 2004 it was USD 92 billion, in 2008 – USD 145
billion, in 2011 – USD 160 billion, and finally in 2013 – nearly USD 170 billion.12
Moreover, in 2013 the EU, as the largest ODA donor, contributed 52.69% of total aid in
this form. In comparison, the other major donors are the US (23.32%), Japan (8.57%),
Norway (4.13%), and Canada (3.66%).13
The most important beneficiaries of the aid granted by the EU member states are such
countries as Afghanistan, India, Myanmar, Ethiopia, Morocco, Syria, Pakistan, Mozambique,
Kenya, and Bangladesh, whereas the region where the EU provides aid of the highest value is
the South Saharan region.14
In order to increase the effectiveness of aid granted within the ODA framework, the
principles regulating the allocation process were formulated:15
11
https://data.oecd.org/oda/net-oda.htm#indicator-chart
12
Data source OECD 2014
13
Ibidem
14
Ibidem
15
Communication from the Commission to the Council, the European Parliament and the Economic and Social
Committee as of 12 April 2005 – Speeding up progress towards the Millennium Development Goals - The
European Union’s contribution [COM(2005) 132 final version – not published in the official journal].
http://europa.eu/legislation_summaries/development/general_development_framework/r12533_pl.htm (accessed
on 10.04.2015)

45
 • ownership of development concepts – according to this principle, developing
countries should assume leadership in implementing policies involved in the granted
aid. These countries should take on ownership of the process aiming to support their
efforts in strengthening their society. The process should seek involvement of all
stakeholders at the national level, including national parliaments and civil societies,
which would ensure the achievement of the objectives of development aid;
• transparency in relations to resources. The allocation of funds by donors should occur
in a transparent manner. The standards should comprise timely information transfer,
especially during the negotiations on aid granting, also on the subject of expenses, and
the adoption of the policy of automatic disclosure of all information; additionally the
receipient countries should also be obliged to ensure that the funds are used for the
purpose that they were allocated for and that all transactions are public;
• accountability – funds should enter the state budget so both donors and recipients are
accountable for how the funds are granted. Budgetary aid should be based on a
country’s solid plan of combating poverty, which increases the accountability of the
country by involving the national parliament, civil society organisations, independent
judiciary, and mass media;
• predictability – in order to use the funds effectively, countries should know what
funds and when they will receive;
• cost efficiency – funds should reach a recipient country without excessive
transactional costs.
The significance of MDGs and subsequent programmes in the EU policies is reaffirmed
by the Regulation of the European Parliament and of the Council of 11 March 2014, which
aligns the EU policies for development cooperation and international initiatives with the
MDGs.16
The results of the analysis indicate that in the years 2004-2014 a vast majority of the EU
member states increased a baseline of Official Development Assistance in their Gross
National Income (GNI), on the other hand, however, the increase was very insignificant in
most cases. The exception is the United Kingdom, which doubled the individual baseline of
ODA/GNI from 0.36% in 2004 to 0.7% in 2014. In the case of six countries, the baseline
went down in the analysed period of time, which is confirmed by the data in Table 1.17
Only four out of 28 EU member countries (Denmark, the Netherlands, Luxemburg, and
Sweden) reached the baseline of 0.7% of ODA/GNI. If in 2011 the only country whose ODA
exceeded 1% of GNI was Sweden (1.02% of GNI), in 2012 this value was reached only by
Luxemburg (1% of GNI). The commitments for particular EU countries in 2015 range from
1% of GNI for Denmark, Luxemburg, and Sweden, to 0.33 of GNI for the countries that
joined the EU in 2004 and 2007, and 0.7% for the remaining member states. Table 1 shows
the amounts of development aid contributed by particular EU member states in the years
2004-2013 and the forecasts presented by the European Commission or the countries
themselves for the years 2014 and 2015. The data also reveal the likely size of the gap caused
by the difference between commitments and achievable financial plans. The significant
difference, amounting to EUR 37 billion, is mainly the result of the financial crisis and has

16
Regulation (EU No. 233/2014 of the European Parliament and of the Council of 11 March 2014 establishing a
financing instrument for development cooperation for the period 2014-2020, EU Official Journal L77/45,
17
Council conclusions on Annual Report 2014 to the European Council on EU Development Aid Targets,
Brussels, 19 May 2014, p.5

46
not been prevented despite the proposal of the European Commission taking into account the
difficulties caused by the crisis.18 An increased effectiveness in the pursuit of the MDGs,
according to the recommendations of the European Commission, should be achieved through
targeting aid at the countries and populations failing to make significant progress on the
MDGs, including the countries with an unstable situation and the countries with the lowest
development levels.19
Another interesting aspect is a different scale of aid, which is the consequence of varying
development levels between the “old” EU countries (15) and the new member states. In the
analysed period of time, the individual baseline for ODA measured as % of GNI amounted to
0.42-0.52% for the former group, whereas the new member states reached the baseline of
0.1% ODA/GNI, which is shown in Table 1.

Table 1 Official Development Assistance of the EU countries – selected elements

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
% of GNI % of EUR
GNI Million
Austria 0.23 0.52 0.47 0.5 0.43 0.30 0.32 0.27 0.28 0.28 0.43 0.42 1,386
Belgium 0.41 0.53 0.50 0.43 0.48 0.55 0.64 0.54 0.47 0.45 0.44 0.43 1,745
Bulgaria - - - - 0.04 0.04 0.09 0.09 0.08 0.10 0.11 0.13 5
Croatia - - - - - - - - 0.03 0.07 0.06 0.06 27
Cyprus 0,03 0,09 0.15 0.17 0.17 0.20 0.23 0.16 0.12 0.11 0.13 0.13 19.5
Czech Republic 0.11 0.11 0.12 0.11 0.12 0.12 0.13 0.12 0.12 0.11 0.12 0.11 156
Denmark 0.85 0,81 0.80 0.81 0.82 0.88 0.91 0.85 0.84 0.85 0.84 0.83 2,269
Estonia 0.05 0.08 0.09 0.08 0.10 0.10 0.10 0.11 0.11 0,13 0.15 0.15 30
Finland 0.37 0.46 0.40 0.39 0.44 0.54 0.55 0.53 0.53 0.55 0.55 0.52 1069
France 0.41 0.47 0.47 0.38 0.39 0.47 0.50 0.46 0.45 0.41 0.48 0.48 10,971
Germany 0.28 0.36 0.36 0.37 0.38 0.35 0.39 0.39 0.38 0.38 0.37 0.37 11,008
Greece 0.16 0.17 0.17 0.16 0.21 0.19 0.17 0.15 0.13 0.13 0.11 0.09 170
Hungary 0.07 0.11 0.13 0.08 0.08 0.10 0.09 0.11 0.1 0.10 0.10 0.10 94
Ireland 0.39 0.42 0.54 0.55 0.59 0.54 0.52 0.51 0.48 0.45 0.43 0.38 554
Italy 0.15 0.29 0.20 0.19 0.22 0.16 0.15 0.20 0.13 0.16 0.17 0.20 3,152
Latvia 0.04 0.06 0.08 0.11 0.11 0.11 0.10 0.13 0.13 0.08 0.07 0.07 19
Lithuania 0.06 0.07 0.06 0.06 0.07 0.08 0.06 0.07 0.08 0.12 0.11 0.11 41
Luxemburg 0,79 0.79 0.89 0.92 0.97 1.04 1.05 0.97 1.0 1.00 0.96 0.93 324
Malta 0.18 0.17 0.15 0.15 0.20 0.18 0.18 0.25 0.23 0.20 0.19 0.19 14
the Netherlands 0.73 0.82 0.81 0.81 0.80 0.82 0.81 0.75 0.71 0.67 0.61 0.62 3,990
Poland 0.05 0.07 0.09 0.10 0.08 0.09 0.08 0.08 0.09 0.10 0.10 0.10 407
Portugal 0.63 0.21 0.21 0.22 0.27 0.23 0.29 0.31 0.27 0.23 0.22 0.21 341
Romania - - - 0.07 0.09 0.08 0.07 0.09 0.08 0.07 0.08 0.09 134
Slovak Republic 0.07 0.12 0.10 0.09 0.10 0.09 0.09 0.09 0.09 0.09 0.10 0.10 77
Slovenia 0.10 0.11 0.12 0.12 0.13 0.15 0.13 0.13 0.13 0.13 0.12 0.12 44
Spain 0.24 0.27 0.32 0.37 0.45 0.46 0.43 0.29 0.15 0.16 0.17 0.13 1,408
Sweden 0.78 0.94 1.02 0.93 0.98 1.12 0.97 1.02 0.99 1.02 1.0 1.0 4,557
U.K. 0.36 0.47 0.51 0.36 0.43 0.51 0.57 0.56 0.56 0.72 0.7 0.7 14,961
UE-25/27/28 0.30 0.34 0.35 0.32 0.34 0.35 0,36 0.34 0.39 0.41 0.42 0.43 58,607
UE-15 0.45 0.5 0.51 0.49 0.52 0.54 0.55 0.52 0.42 0.44 0.45 0.46 57,484
UE-10/12/13 0.08 0.1 0.11 0.1 0.11 0.11 0.11 0.12 0.10 0.10 0.10 0.12 1,122
Source: EU ODA levels in 2012 and towards 2015, Information note to the EU member states , Council of the
EU General Secretariat, 063/13 DEVGEN, 04.04.13, s.5, "Union européenne", in OECD, Coopération pour le

18
COM (2010) 159: Communication from the Commission to the European Parliament, the Council, the
European Economic and Social Committee, and the Committee of the Regions – A twelve-point EU action plan
in support of the Millennium Development Goals, final, Brussels, 21.4.2010
19
Progress made on the Millennium Development Goals and key challenges for the road ahead
accompanying the communication from the Commission to The European Parliament, The Council, The
European Economic and Social Committee and the Committee of The Regions, A twelve-point EU action plan
in support of the Millennium Development Goals, SEC(2010) 418 final, Brussels, 21.4.2010

47
développement 2011: Édition spéciale "50e anniversaire", OECD Publishing, Paris. 2012, DOI:
http://dx.doi.org/10.1787/dcr-2011-23-fr, Council conclusions on Annual Report 2014 to the European Council
on EU Development Aid Targets, Brussels, 19 May 2014, p.5

In 2014, total aid contributed within ODA by the EU countries reached USD 74.5 billion,
which accounted for 0.41% of their GNI. Among 19 member states, in 2014, nine reported an
increase in aid compared to the previous year – the highest rise occurred in Finland – 12.9%,
Germany – 12%, and Sweden – 11%. Some countries, however, considerably reduced their
transfer within ODA, with Spain limiting it by as much as 20.3%, Portugal – by 14.9%, and
France – by 9.2%. The EU as a whole reported a slight increase of 1.6% in its transfer to
ODA in 2014.
In terms of the effectiveness of aid transferred as ODA, the measurement method for
ODA will change after 2015. The change is caused by reduced interest rates, practically in
the whole world, which means that concessional loans have become an increasingly common
form of financing ODA. In December 2014, DAC/OECD reached a historic agreement on
how to modernise the measurement of development finance, including the definition of ODA.
The new measurement promotes transparency and increased accountability, while offering an
incentive for more and better allocation of resources transferred within ODA for the pursuit
of SDGs coming into force in January 2016. The changes involve:20
• transition from a cash-flow to a grant-equivalent system

• revision of the discount rates used for assessing the concessionality of loans

• revision of the minimum concessionality threshold for a loan to be included in ODA.

Undoubtedly, also after 2015, the European Union, in line with its development policies,
should continue to actively support, also financially, the developing countries in their pursuit
of goals aiming to improve the quality of life of their citizens.

Conclusion
Disparities between living conditions in particular countries and regions are widening.
Hence, a variety of initiatives have been implemented on a global scale for many years. They
aim to reverse these unfavourable tendencies. The complexity of the problems, however,
causes difficulties in achieving the set targets. This also applies to the MDGs, which allowed
for the implementation of many successful solutions, but not all the set goals have been
achieved. Therefore, ODA constitutes a significant contribution to the achievement of goals
aiming to improve the quality of life in the poorest regions of the world by pursuing
sustainable development, also after 2015. Financial aid coming from the EU, both within the
framework of MDGs until 2015 and towards DGs after 2015, is a necessary condition to
achieve the defined targets.
It should be noted, however, that a failure to achieve a satisfactory improvement in the
quality of life is definitely one of the reasons behind a rising wave of economic migration
accompanying refugees and may become a serious problem, especially for the European
Union. In this context, it is even more pressing to take such measures within the SG
framework in the coming years that would allow for the acceleration of socio-economic
development in the poorer regions.

Katarzyna Czech PhD, Department of International Economic Relations,

20
Understanding post-2015 development finance, OECD Better policies for better life,
http://www.oecd.org/fr/cad/financement-developpement-durable/understanding-development-finance.htm
(accessed on 10.08.2015)

48
 University of Economic in Katowice, Poland

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50
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