Wheres European Unions Aid Headed

Written by Malcolm Subhan | Updated: Aug 24 2002, 05:30am hrs
Brussels: If you think that the only disputes between India and the 15-nation European Union are over bed linen and other "dumped" products, think again. Development cooperation has also strained relations between New Delhi and Brussels, to the point, in fact, where the EU would rather deal with individual state governments than with the centre. The relationship is much more cordial when it comes to economic cooperation, the other arm of India-EU cooperation. As Indias largest trading partner and most important source of direct investment, the EU feels it has a special responsibility to help the country implement second generation economic reforms.

Both New Delhi and Brussels are agreed that the private sector should play a leading role in economic cooperation. This is already the case as regards their joint initiative for enhancing trade and investment in eight economic sectors, from food processing to biotechnology. The key players here are Confederation of Indian Industry and Federation of Indian Chambers of Commerce and Industry, with their European counterparts, whenever possible. India-EU development cooperation is focused on supporting poverty reduction projects and sector programmes aimed at improving basic social services, in the framework of the 1994 India-EU cooperation agreement. Primary education was the first sector programme supported by the EU, with a grant of EUR 150 million.

The EU has now agreed to support the governments Sarva Shiksha Abhiyan elementary education programme with a grant of EUR 200 mn. It has also committed EUR 240 mn to a government programme to provide better and more accessible health services for women and children. EU support for non-governmental organisations includes a grant of EUR 13 mn to CARE, for example, to improve living conditions in a tribal society in Andhra Pradesh.

The EU now plans to provide about EUR 225 mn for the 5-year period from 2002 to 2006, for development and economic cooperation. The aim is to underpin and catalyse the Indian governments efforts to improve human development and economic performance, so as to benefit everyone. The sum is roughly comparable with those which the EU plans to provide China and Indonesia over the same 5-year period. China would receive EUR 250 mn, half of it in order to help Beijing meet its World Trade Organisation obligations and reform its social security system. Indonesia would receive EUR 216 mn for basic health, education and the sustainable management of its natural resources. Pakistan would receive EUR 165 mn, essentially for geo-political reasons, although this sum would be looked at again next year.

India remains the largest single recipient of EU funds for development and economic cooperation. Even so, on a per capita basis, these funds amount to just EUR 0.05, as compared to EUR 0.15 for Asia as a whole in 1998. The EUs share of Official Development Assistance is only a small fraction of the total ODA received by India, which was less than half a percent of the countrys GDP between 1991 and 1999. The challenge for the EU indeed for all donor countries and agencies clearly is to make a measurable impact in a country with a population of one billion, 35 per cent of which was below the national poverty line in 1999, according to the World Bank.

The answer favoured by the European Commission, the EUs executive arm, is to concentrate the bulk of the remaining resources for the next five years on one, eventually two, Indian states. The selection would be made jointly with the centre and interested state governments that meet certain criteria, basically a commitment to reduce red tape and enhance transparency in the administrative process; confront corruption, and promote local and foreign investment.

For the EC, the need to concentrate development efforts in selected "reform minded" states is accepted by major donors, such as the UK, the World Bank and the Asian Development Bank. As a very small but "quality" donor, the EU obviously wants to make a measurable impact on poverty reduction in India. But its determination to deal with a single state government also reflects a growing frustration in its dealing with the central government. This was particularly noticeable in the discussions on the EUs contribution to the Government of Indias programme for universal elementary education. For the EU, the sum at stake EUR 200 mn was substantial in absolute terms. For the Indian side, it was insignificant in relation to the total cost of the project, much of which was being borne by the government. It therefore wanted the EU to pay the amount into the central treasury, leaving it to the government to make the most effective use of it. India, after all, is the worlds largest democracy, with high calibre civil servants.

The EU, however, must exercise a measure of control on how its contribution is used, given that it is responsible to European taxpayers. Hence the ECs decision to concentrate on a single state, even while continuing its cooperation with the centre in health and elementary education. New Delhi has proposed that the EU cooperate with one or all three of the newly created states of Chattisgarh, Uttaranchal and Jharkhand, as well as Jammu & Kashmir, Rajasthan, Assam and Sikkim.

India-EU relations are very different when it comes to economic cooperation, although the EUs readiness to help India integrate its economy regionally and globally seems to overlook the fact that Indian economists and economic operators, especially in high-tech sectors, enjoy a global reputation. Indeed, the EU-India science and technology agreement of 2001 offers Indian researchers equal access under EU-funded scientific cooperation instruments. The EU is ready to work with the centre in creating an enabling macroeconomic environment, through the exchange of technology and expertise in the regulatory sphere. It will also consider new sector-specific economic cooperation actions which are supported by industry, such as the establishment of an environmental technology centre. All this is in line with the agenda for action adopted at the second India-EU Summit held in New Delhi last November, with its focus on economic cooperation. The activities to be undertaken under the action programme include developing trade and investment and strengthening the multilateral trading system.