Development aid that returns nothing

When Greece announced its program for the economic reconstruction of the Balkans, the international community of development aid regarded it positively. It was Greece’s first significant move since joining the group of donor countries, while the amount of aid was very large: 550 million euros, which meant that much greater amounts could come from the national resources of Balkan states themselves, and also jointly from international organizations. Yet things developed differently, due to the hasty announcement of the effort and the Greek agencies’ lack of experience in planning and realizing a development aid program of that size. The main problem is that the Greek Plan for the Economic Reconstruction of the Balkans (ESOAB) effectively allocates every right of proposing, selecting and realizing projects exclusively to the recipient countries, while Greece retained only the right to approve or reject proposals. This means that recipient countries have control over the auctioning, the evaluation, the contractor choice, the project management, and the project monitoring, as well as being in charge of disbursal and payment of funds. This is a development aid plan that is unprecedently generous toward recipient countries and does not secure any returns for the donor. What does this mean? Let us look at two examples of countries donating development aid. A similar Italian program in the Balkans provides that at least 70 percent of the amount allocated is to be used by Italian companies for the planning and execution of the project. It also defined project priorities in detail, and in a way favorable to Italian interests. Spanish aid to those countries provides for project delivery, including proposals, planning and construction by Spanish companies. ESOAB was created in March 2002. It was started by the then Socialist government as the country’s first effort as a donor to incorporate the isolated private initiatives for development aid into a single plan for an overall development policy. It would last five years and provide for some 550 million euros in aid to be allocated to six countries (Serbia and Montenegro 265 million euros, including 15 million euros for Kosovo; the Former Yugoslav Republic of Macedonia 74.84 million euros; Romania 70.93 million euros; Bulgaria 54.79 million euros; Albania 49.89 million euros; and Bosnia-Herzegovina 19.53 million euros). In August 2002 the legal framework for the activation of ESOAB was completed with the signing, by then deputy minister for foreign affairs Andreas Loverdos, of bilateral development cooperation agreements with the six Balkan states. With those agreements each recipient country through its «national coordinator» submits projects for funding to the Greek Foreign Ministry. Today the competent deputy minister is Evripidis Stylianidis. The aid itself was distributed in three sections: The main chunk (79 percent or about 435 million euros) is for major projects, mainly public investments, 20 percent is for private projects, and 1 percent goes to very small projects. Only 2.5 percent of the public investment section has been absorbed. On the other hand, the private investment section was included in the investment incentives law, managed by the Economy and Finance Ministry. The tiny projects’ section is also going well, but refers only to projects worth up to 50,000 euros. These funds are being managed by Greek embassies in Balkan states. Because all rights (except for final approval) were allocated to the recipient countries, they submitted a large number of poor-quality proposals that could not be included in the ESOAB. Many of them overestimated and unsubstantiated the funds needed, and failed to include the essential accompanying studies regarding their transparency and harmonization with EU directives and their overall viability. The Greek side then had no option but to freeze the proposals until they were completed. The program also included no provision to secure at least some returns for Greece; for instance, to force projects that would serve Greece’s needs too, such as a highway project, to give the contracts to Greek companies or even to include projects (hospitals, museums) that would promote the image of Greece in the recipient country.

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