EU development aid still benefits eu firms



Jul 25, 2009


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EU development aid still benefits EU firms, says report

(Reuters) - European development assistance designed to boost the fortunes of poor nations are still largely benefiting European firms, a report published on Tuesday showed.

Monitoring in Namibia, Ghana, Uganda, Bangladesh, Nicaragua and Bolivia showed that 60 percent of major contracts funded by rich countries' development aid are awarded to firms in donor countries.
"Donors continue to procure in a way that favors big firms from rich countries," said Nuria Molina, director of Euro dad, the European Network on Debt and Development, which published report named "How to spend it."
OECD states in 2001 took some first steps to end a practice of making development aid conditional on funds being spent on contracts awarded to firms from the donor country.
Yet at least 17 percent of all international aid is still tied to such conditions, with many instances of tied aid persisting in Europe, according to the report.
In 2009, Greece made 67 percent of its aid conditional on benefits for local contractors; Austria tied 54 percent of its aid; Portugal 39 percent and Germany 27 percent, the report said.
"Our calculations suggest that 69 billion dollars annually, more than 50 percent of total official development assistance, is spent on procuring goods and services for development projects from external providers," the report said.
"Procurement practices determine which private firms from which countries receive aid-funded contracts, in turn determining who reaps the benefits," the report added.
The World Bank and OECD have long supported moves to untie aid, arguing that awarding contracts locally is a more efficient use of funds and improves the fight against poverty.
"When aid is spent on local supplies and projects, it can have enormous multiplier and leverage effects," the report said.
Yet concerns about corruption and lack of transparency in how funds are distributed in some poor countries means it is often easier to award contracts to firms from developed countries, EU development commissioner Andris Piebalgs said at the unveiling of the report.
"We will continue further action on untying, and further efforts to ... strengthen and increase the use of country (procurement) systems on the basis of predictable and feasible solutions," Piebalgs told campaigners and journalists. (Reporting by Juliane von Reppert-Bismarck; Editing by Myra MacDonald) (Created by Myra MacDonald)

Sorce: Reuters Africa

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