In the past, too often official development aid failed to have the effect of spurring economic growth and reducing poverty. We have learned much over the past decade how to raise aid the effectiveness of aid, notably through focusing our support to poor countries with good policy environments, promoting country ownership and better coordination and harmonisation among ourselves. Indeed, aid effectiveness has risen significantly. In this light it is unfortunate that (net) aid volumes fell throughout most of the 1990s and exceeded the 1990 level only in 2002 (US$ 58 billion).

At the Monterrey Conference on Financing for Development in 2002, the EU pledged to work out a timeframe for each member to reach the UN target of 0.7 percent of GNP, with an intermediary target of 0.39 percent of 2006. This and other aid pledges made at the conference should result in around US$ 20 billion of additional aid by 2006. Encouraging but not enough. Indeed, on current trends, most Millennium Development Goals will not be met by many countries in 2015. Shortfalls are especially serious with respect to public health goals – child and maternal mortality, access to safe drinking water and basic sanitation. We therefore agree with World Bank President James Wolfensohn (FT, 26 April 2004) that there is an urgent need to scale up action by all parties. The international community should be more ambitious to catalyze and support reform in developing countries. At least an additional US$ 50-60 billion need to be raised to achieve the MDGs. As countries improve their policies and institutions, this amount could be used effectively by developing countries. This is well-spent taxpayers’ money.

We believe in equal burden-sharing among donors and urge other countries to formulate a convincing timeframe to raise aid levels to the UN norm that was set some 35 years ago. Norway, Denmark, Luxembourg, Sweden and the Netherlands have already reached the UN target, while Belgium, France and Ireland have prepared a timeframe to reach this level within the next ten years. We call upon other countries to show the same ambition and sense of responsibility.

Finally, an increase in foreign aid is necessary, but not sufficient to reach the MDGs. If we provide an opportunity with one hand, but withhold one with the other, progress will remain limited. Aid should be accompanied by trade. Estimates show that a pro-development outcome of the Doha Round could increase real income in developing countries by US$ 350 billion by 2015, roughly equivalent to the entire GDP of Sub-Saharan Africa. The bulk of these potential gains arise from liberalization in agriculture. We hope that the recent offer of the EU to cancel all export subsidies on agricultural products will trigger substantial progress in the Doha negotiations.

By
Per-Kristian Foss, Minister of Finance, Norway
Jean-Claude Juncker, Minister of Finance, Luxemburg
Gunnar Lund, Minister for International Economic Affairs and Financial Markets, Sweden
Thor Pedersen, Minister of Finance, Denmark
Didier Reynders, Minister of Finance, Belgium
Gerrit Zalm, Minister of Finance, the Netherlands