Michael Dauderstädt (ed.)
EU Eastern Enlargement
and Development Cooperation
The upcoming accession of eight
post-communist states in central and eastern Europe to the EU
will alter the relationship between them, the enlarged EU and
the developing countries.
This issue looks back at the development
of Poland, Czech Republic and Hungary
from a role of donor to recipient and back to donor since 1989,
their current relations with the Third World, and their likely postaccession influence on the policy of the EU towards developing
countries.
November 2002
2
Note on the authors:
Pawel Baginski, Ministry of Foreign Affairs, Poland
Michael Dauderstädt, Friedrich-Ebert-Stiftung, Germany
Petr Halaxa, Institute for International Relations, Czech Republic
Petr Jelinek, Institute for International Relations, Czech Republic
Judith Kiss, Institute for World Economics, Hungary
Jan V. Krouzek, Institute for International Relations, Czech Republic
The editor wants to thank Josef Füllenbach and Michael Hofmann of the Federal Ministry for Economic
Cooperation and Development for suggestions and support.
The contributions by the authors from candidate countries have been copy-edited by
James Patterson. The contribution by Michael Dauderstädt has been translated into English by Andrew Sims .
A German version is also available in the series „Politikinformation Osteuropa“ No.107.
ISBN: 3-89892-125-5
Contact:
International Politicy Analysis Unit
International Dialog
Friedrich-Ebert-Foundation,
D-53170 Bonn
Fax: 0228/883-625
e-mail: [email protected]
3
Michael Dauderstädt (ed.)
EU Eastern Enlargement
and Development Cooperation
Contents
Michael Dauderstädt
Eastern enlargement and development policy....................................................................... 5
Central and eastern Europe and the Third World – a look back at the past ..................... 5
Eastern European aid policy................................................................................................ 6
The impact of EU accession... .............................................................................................. 8
... on the candidate countries................................................................................................ 8
... and on the EU .................................................................................................................... 9
Paweł Bagiński
Poland ...................................................................................................................................... 12
The North–South dialogue in Polish foreign policy ......................................................... 12
Before 1989 ....................................................................................................................... 12
After 1989 ......................................................................................................................... 13
Poland’s development cooperation.................................................................................... 14
Bilateral ............................................................................................................................ 16
Multilateral....................................................................................................................... 16
Poland’s external relations and EU accession .................................................................. 18
Trade with countries of the South ..................................................................................... 18
Conclusions.......................................................................................................................... 19
Petr Halaxa, Petr Jelinek and Jan V. Krouzek
Czech Republic ....................................................................................................................... 20
Planning and delivery of Czech aid – summary of present practices and institutional
structure............................................................................................................................... 20
Criteria for providing aid ............................................................................................... 20
Sectoral selection criteria ................................................................................................ 20
Planning and delivery of bilateral aid............................................................................ 21
Present institutional structure ........................................................................................ 22
Planned institutional system ........................................................................................... 23
Multilateral aid.................................................................................................................... 23
Mandatory and voluntary contributions....................................................................... 23
The UN and its agencies .................................................................................................. 23
Other international organisations.................................................................................. 24
4
Activities prior to EU accession ......................................................................................... 24
Trade between the Czech Republic and developing countries 1993–2000 .................... 25
Asia.................................................................................................................................... 26
Africa ................................................................................................................................ 27
Latin America .................................................................................................................. 27
Europe............................................................................................................................... 28
The Generalised System of Preferences and its impact on Czech trade with the least
developed countries ......................................................................................................... 28
Conclusions on trade ....................................................................................................... 29
Judit Kiss
Hungary................................................................................................................................... 30
The main principles and objectives of the Hungarian development cooperation
strategy................................................................................................................................. 30
The main priorities of development cooperation policy .................................................. 30
The present state of development cooperation in Hungary ............................................ 31
The main strategic issues of development cooperation.................................................... 32
The financing of development cooperation....................................................................... 33
The tasks of institution building ........................................................................................ 34
Trade with developing countries ....................................................................................... 35
The impact of EU accession on Hungary’s relations with developing countries .......... 39
5
Michael Dauderstädt:
Eastern enlargement and development policy
The upcoming accession of what will probably be eight post-communist states in central and
eastern Europe to the EU will alter the relationship between them, the enlarged EU and the
developing countries. As in many other policy fields, the candidates are already taking up
elements of the development policies normal in the EU or expected by the EU as they prepare
for membership. At the latest when they join, or possibly following a subsequent transition
period, they will have to adapt fully to EU rules. And they will then have the possibility themselves to influence the future policy of the EU on developing countries. This article looks
back at the development of the major candidate countries from a role of donor to recipient and
back to donor since 1989, their current relations with the Third World, and their likely postaccession influence on the policy of the EU towards developing countries.
Central and eastern Europe and the Third World – a look back at the past
The communist countries of the former Eastern Bloc, the so-called “Second World”, competed with the Western “First World” for influence in the Third World. The instruments they
used to achieve this included those of trade and development policy.1 In addition to bilateral
co-operation, they also participated in multilateral aid in the context of their UN membership.
Poland and Hungary (as well as Romania, which is not considered further here) were also
members of the International Monetary Fund (IMF) and the World Bank even before 1989.
The rapid advances in industrialisation of the Eastern Bloc countries in the 1950s and 1960s
acted as a model for many developing countries and resulted in the copying of centralised
economic planning policies in many Third World states. At the same time, the aid from the
Eastern Bloc was concentrated on countries pursuing a socialist development model and a
foreign policy which was at least neutral or sympathetic to the Eastern Bloc (exception: Turkey, which was one of the leading recipients of loans). The level of aid stood at 0.06 % of
GDP in the eastern European countries in 1980 (0.14 % in the case of the Soviet Union),
lower than the OECD level. The foreign trade of the communist countries was in any case
controlled by the state. The countries of central and eastern Europe mainly exported industrial
goods and imported raw materials and agricultural products.2
The collapse of communism was followed by a re-ordering of the state structures in central
and eastern Europe, massive economic upheaval and an equally drastic change in foreign relations. Whereas Poland and Hungary (and Romania and Bulgaria) retained their state identity, Czechoslovakia, Yugoslavia and the Soviet Union disintegrated and the candidate countries of the Czech Republic, Slovakia, Slovenia, Latvia, Lithuania and Estonia emerged as
new, independent states with their own foreign, development and trade policies. All of these
countries quickly acceded to the World Bank, the IMF and – from 1995 – the WTO (cf. Table
1). In the mid-1990s, the Czech Republic, Hungary, Poland and, somewhat later (2000), Slovakia became members of the OECD, marking their formal inclusion in the group of donor
1 Cf. the regular monthly reports on “development policy activities of communist countries” which appeared
regularly in the 1970s (with different titles from 1977) from the research institute of the Friedrich Ebert
Foundation (editor: Henrik Bischof); Heinrich Machowski/Siegfried Schultz (eds.) “RGW-Staaten und Dritte
Welt. Wirtschaftsbeziehungen und Entwicklungshilfe” Bonn 1981.
2
Cf. Heinrich Machowski/Siegfried Schultz (eds.) “RGW-Staaten und Dritte Welt. Wirtschaftsbeziehungen und
Entwicklungshilfe” Bonn 1981, pp. 13 ff.
6
countries. In reality, the aid received by them, especially from the EU, has far exceeded the
aid provided by them.
Table 1: Membership of international organisations (year of accession)
Country
IMF
World Bank OECD
WTO
Estonia
1992
1992
1999
Latvia
1992
1992
1999
Lithuania
1992
1992
2000
Poland
1986
pre 1989
1996
1995
Czech Republic
1990/93
1993
1995
1995
Slovakia
1990/93
1993
2000
1995
Hungary
1982
pre 1989
1996
1995
Romania
1972
pre 1989
1995
Bulgaria
1990
1991
1996
Slovenia
1993
1993
1995
Source: EBRD Transition Report 1998 for OECD, WTO; Michael Dauderstädt, A Comparison of the Assistance
Strategies of Western Donors, in: Transformation. Leipziger Beiträge zu Wirtschaft und Gesellschaft No. 3,
December 1996, pp. 51 ff. for IMF and World Bank
In view of the severe decline in national income in the first phase of the systemic change, it
was no surprise that these countries largely discontinued their aid, especially as their political
objectives from the Cold War period had disappeared. Foreign trade with developing countries also changed in the course of a transition which entailed a massive reorientation of eastern European foreign trade away from the Eastern Bloc to the West and particularly the EU. If
one disregards statistical differences (the categorisation of developing countries in eastern
Europe in the 1990s generally did not coincide with the system applied in the OECD, the
weight of the developing countries in the trade of the candidate countries initially declined
substantially and then stabilised. However, this relatively stable small share – of a foreign
trade which was rising in overall terms – did imply an absolute increase in imports and exports. In fact, imports rose faster than exports and all three major candidate countries have
appreciable trade deficits with developing countries, mostly resulting from trade with emerging Asian economies.
Eastern European aid policy
Having overcome the transitional crisis and commenced preparations for EU accession, the
candidates (again) launched their own development policy activities. The volume of funding
remained modest. As Table 2 shows, the countries spent an average of no more than 0.03 %
of gross domestic product (GDP) on development co-operation; by way of comparison, the
OECD average is almost ten times higher. The OECD members amongst the candidate countries have already begun to adapt to the normal rules of the Development Assistance Committee (DAC).
7
Table 2: Expenditure of the candidate countries on development co-operation
Country
Year
Amount
Share of GDP
Amount in 2001
(€ ’000)
(in %)
(€ ’000) *
Estonia
1999
450
0.009
470
Latvia
2001
70
0.0012
no data
Lithuania
2002
27
0.00025
29
Poland
2000
40,000
0.026
48,700
Czech Rep.
2000
17,000
0.03
34,000
Slovakia
2000
6,360
0.03
2,000
Hungary
1999
13,000
0.025
29,000
Slovenia
2000
2,500
0.00014
2,950
Source: Léna Krichewsky “Development Policy in the Candidate Countries” Trialog Vienna 2002, OECD “Development Cooperation Report 2001”, Paris 2002 and article by Judit Kiss in this issue
*European Commission, Progress Reports 2002; all amounts refer to 2001, except Lithuania (2002); in the case
of Slovakia, the figure refers to additional humanitarian aid.
All of the countries mix bilateral and multilateral aid. In the case of the Czech Republic, multilateral aid accounts for almost two-thirds of the total; in Poland for just over half, in Slovakia for almost three-quarters and in Hungary for as much as 85 % in 1999.3 The Baltic countries are also involved in trilateral co-operation with Canada in the former Soviet Union. Furthermore, most of the countries also provide humanitarian aid.
The regional focus of the development co-operation is appreciably different from that of other
OECD countries. The candidate countries concentrate their bilateral aid on other postcommunist countries, particularly in the former Soviet Union and in the Balkans. Hungary
operates sizable aid programmes for the Hungarian minorities in its neighbouring states, particularly Romania, but these do not count as official development aid. Slovenia gives almost
all its aid (95 %) to the former Yugoslavia and (5%) to Albania. The regional distribution occasionally shows some traces of the communist past, e.g. in the form of aid for Angola, Viet
Nam or Yemen. One sectoral emphasis is on the experience of transition (e.g. in the case of
Hungary and Poland), with the advanced countries in transition advising those lagging behind
in eastern and south-eastern Europe. Other policy fields often mentioned are agriculture, environment and infrastructure.
The objectives of the development co-operation of the candidate countries reflect the blend
familiar from the traditional donor countries: foreign and economic policy interests on the one
hand, and development policy ideals on the other – these are not necessarily contradictory.
The normal objectives like good governance and respect for human rights, sustainability and
integration into the world economy also emerge as criteria for the selection of recipients and
projects.
The continuing relatively low status of development policy in the candidate countries finds
expression not only in the tiny proportion of spending in terms of GDP, but also in the organisational and institutional set-up. State development policy is not, as in Germany, guided and
administered by a separate government ministry, but – as also in most major donor countries –
by departments in the foreign ministries. However, other government ministries are often involved in project management. The non-governmental development co-operation of the
3
Based on OECD figures for the Czech Republic, Poland and Slovakia; the figures for Hungary are based on the
article by Judit Kiss in this issue.
8
NGOs is also at a very early stage of development, since this entire sector did not start to
emerge until after 1989. NGOs are already very active in Poland and Hungary in particular.
The UNDP supports this development, e.g. via a Trust Fund under the Emerging Donors Programme.
The impact of EU accession...
The prospect of EU membership has already influenced the trade and development policy of
the candidate countries and will continue to have a major impact on these policy fields once it
becomes a reality. At the same time, it can be assumed that the new members will in future
participate in the shaping of the relevant EU policies. Let us first consider the candidate
countries and then the EU itself.
... on the candidate countries
The candidate countries need to adopt the acquis communautaire of the EU in the fields of
trade and development policy. The relevant chapter 26, “Foreign Relations”, which covers
these policy fields, has been provisionally closed in the accession negotiations with all the
candidates. Nor do the Progress Reports of the EU indicate any substantial conflict. Most of
the adjustments refer to trade policy, albeit less with respect to developing countries and more
with regard to other countries in central and eastern Europe with which the candidate countries have free-trade agreements. Thanks to the WTO membership, the other effects are limited. In some cases, the tariffs of the candidate countries are actually lower than the EU’s external tariff. Here, accession will make imports from non-EU countries more expensive. In
other cases, however, the tariffs are higher (cf. Table 3). Specific technical, administrative and
fiscal barriers will disappear, and this may make access easier for trading partners in the Third
World, since they will be able to use the EU procedures familiar to them. The candidate
countries will have to apply the Generalised System of Preferences (GSP). In so doing, they
will in some cases have to grant trade preferences to emerging economies whose per-capita
income is higher than their own.
Table 3: Tariffs of the candidate countries compared with the EU’s external tariffs
Country
Average MFN
Farm products Fish products Industrial products
EU
6.3
16.2
12.4
3.6
Estonia
3.2
14.9
3
0
Latvia
4.2
13
7.9
1.7
Lithuania
5.3
15
3.8
2.4
Poland
15.1
33.8
18.5
9.9
Czech Rep.
6.1
13.4
0.1
4.5
Slovakia
6.1
13.2
0.1
4.4
Hungary
11.7
30.9
14.8
7
Slovenia
8.9
(8.9)*
6.7
8
Source: European Commission, Progress Reports 2002
*The data in the Progress Report are unclear.
When the candidate countries take over the Cotonou Agreement (the successor to the Lomé
Convention), they will also have to grant the ACP countries the relevant preferences and implement the liberalisation under the “Everything but Arms” programme. The same goes for
the Mediterranean agreements and the Barcelona Process and for a host of other bilateral and
multilateral agreements between the EU and individual developing countries or regional
trading blocs (e.g. Mercosur). An effective involvement of the new members in the bodies
9
envisaged for many of these agreements is likely to prove problematic in terms of the scarce
resources of qualified experts, particularly in the smaller countries. In the course of the accession negotiations, the positions taken by the candidates and the EU in the Doha Round are
already being co-ordinated.
In the field of development aid itself, the candidate countries will not only have to contribute
their own share of the EU budget, but will also have to pay into the European Development
Fund (EDF), which is financed by contributions from the individual member states, although
they will probably not start doing so until the tenth EDF (the current ninth fund runs until
2007). There are no fixed rules on the contributions by the member states to the EDF, but the
current total of € 13.5 billion corresponds to about 0.15 % of the GDP of the EU. If the new
members were to make anything like a proportionate contribution, this would imply a substantial rise in their currently low spending on development co-operation. These questions are
being addressed in the accession negotiations in Chapter 29 (budget) – tellingly, this chapter
has not yet been closed with any of the candidates.
There are at present no binding EU rules on the level of bilateral development aid of the
member states or on total spending. However, guidelines on this were adopted at Monterrey
(0.33 % share of GDP by 2006), and the implementation of these necessitates some considerable adjustments even in the existing EU members. They would represent a massive multiplication of the current spending levels by the new members.
As in many areas of international policy, the implementation of certain standards4, particularly in the international arena, depends not only on the degree to which they are accepted, but
also on the interests and capacities of the relevant countries, i.e. the states and their societies.
Accession to the EU will mobilise individuals and organisations in the candidate countries
and will promote the formation of institutions which for their part will then influence national
policy in the direction of a further development of co-operation with the Third World. This
includes the implementing organisations and experts as well as the action groups and NGOs
concerned with development policy. Their pan-European networking will reinforce their capacities and influence.
... and on the EU
Even without a direct prospect of EU enlargement, the radical changes in central and eastern
Europe gave rise to a debate in the early 1990s on whether the Third World and development
policy might become less important for Europe.5 The reasons for this were the end of the Cold
War (which had been a key motivation for the emergence of development as a policy field in
the first place), the reduced economic interests and the priority of a stabilisation of the poor
neighbouring regions. It was indeed possible to see a relative decline in the weight of the developing countries as trading partners and recipients of investment and aid. But there was no
massive or sudden drop.
Instead, the traditional interests won the day in the EU once again. With the Barcelona initiative, the south-western member states corrected the eastern orientation of the EU in the mid1990s with a new programme for the Mediterranean countries. The development policy com
4
Cf. Tanja A. Börzel and Thomas Risse “Die Wirkung internationaler Institutionen. Von der Normanerkennung
zur Normeinhaltung”, in: Markus Jachtenfuchs, Michèle Knodt (eds.) “Regieren in internationalen Institutionen”
Opladen 2002, pp. 141-181
5
Cf. Michael Dauderstädt “Development Policy ’92: Farewell to the Third World” (Friedrich Ebert Foundation,
Eurokolleg Series) Bonn 1992
10
munity was able to successfully defend its policy field both bilaterally and multilaterally. The
relative stabilisation in central and eastern Europe resulted in a redistribution of priorities:
crisis areas in eastern and south-eastern Europe like the Balkans, the Caucasus or central Asia
are increasingly being included in the traditional tasks/areas of development policy, and the
traditional developing countries (some of which have since become more prosperous emerging economies and belong to the OECD) have, together with these countries, become the
subject of a development policy which regards itself more as the domestic policy of a globalised world. This trend is likely to consolidate further following 11 September 2001.
The EU is a major pillar of this global domestic policy. But its specific regional and sectoral
priorities, its instruments and institutions are the result of a long historical development which
in many cases derives from the colonial era which ended just after the foundation of the EEC.
It is this history which results in the bias towards the ACP countries and the Mediterranean
region. Changes in the Third World, shifts in the general debate on development policy and,
particularly, the earlier enlargements of the EU have further altered and influenced the structures of European co-operation. The coming enlargement will also have an impact, but in
view of the small weight (particularly in terms of national income and foreign trade) the effect
will be modest.
This means that hardly any more major diversions of trade are likely, since liberalisation has
already occurred to a large extent and the level and structure of trade between the EU and the
candidate countries is already close to the state one would expect according to gravitation
models. Thanks to the membership of the WTO, no more significant changes are to be anticipated in trade policy. However, accession will end certain special rights for countries in transition. In future rounds of negotiation, some of the new EU members (e.g. Estonia) could advocate a less protectionist policy, whilst others could tend to call for greater protection – depending on the pressure to adapt and on the underlying position on economic policy. The candidates could, with some plausibility, insist that trade facilitations should be granted only to
genuinely poor (i.e. poorer than the candidate countries) partners in the Third World. In the
important field of agriculture, the interests of the candidate countries in protection from imports of tropical and subtropical fruits (olives, wine, citrus fruits) are less than was the case
when the EU enlarged southwards. Things could be more difficult with grain, meat or dairy
products, although significant supplies of these products only come from a few countries in
southern Africa and America (Argentina, South Africa, etc.). Where the EU applies quotas to
imports (e.g. bananas), there will have to be an expansion or redistribution.
In the field of aid policy, the candidate countries are likely, with the best will in the world,6 to
lay claim to a lengthy period in which they, as poorer countries, have to make a smaller contribution than other EU members. In this respect, they are also likely to influence the position
taken by the EU at international negotiations if there is no corresponding advance agreement
on internal burden-sharing. With regard to the regional orientation, it can be assumed that the
new members will have little sympathy for the traditional structures of EU co-operation and
may call for a modification of the ACP co-operation towards an extension to all poorer developing countries, such as the inclusion of their own historical partners like Viet Nam or Yemen
if the latter also desire this. They will also have a greater interest in co-operation with southeastern Europe, the Caucasus and central Asia. In the course of the package deals usual in the
EU, they may call for greater Community efforts there before they give the go-ahead for
measures in regions of less interest to them (Africa, Latin America). In an extreme case, the
new members could insist on a re-evaluation of the policy field in the EU and demand an ori
6
Cf. for example the comments of the Polish Government on Monterrey cited by Baginski in this issue
11
entation towards narrower economic and security interests, in order primarily to develop and
to stabilise the nearer EU neighbourhood.
The EU, its member states and the NGOs active in them will probably have to work for quite
some time on supporting the establishment of development policy institutions and organisations, as well as the training of the relevant personnel in the candidate countries (or rather new
member states). Multilateral projects on which all the existing members, partners outside the
EU and new members co-operate could and should draw on the special expertise, experience
and capacities of the post-communist countries. The EU must also have an interest in coordinating the involvement of the new members in international organisations in such a way
that the weight of pan-European interests is enhanced there.
12
Paweł Bagiński: Poland
In 1989 Poland embarked on a process of profound system transformation. The structures of
the planned economy had proven their inefficiency and were incapable of reform. The first
democratic government began to construct the foundations of a market economy in the
knowledge that the initial result would be a sharp decline in living standards. So-called “economic shock therapy”, linked with the name of then Minister of Finance Leszek Balcerowicz,
was implemented. After a couple of years the first positive effects of this courageous decision
could be discerned, and by the mid-1990s the Polish economy had one of the highest annual
growth rates in Europe. Rapid GNP growth was accompanied by the development of different
parts of the economy, propelled mainly by the private sector. This positive transformation was
reflected in Poland’s accession to the OECD in 1996, and to NATO in 1999. In 1998 the Polish government commenced negotiations with the European Union, which should be concluded by the end of 2002, with EU membership following in 2004. After EU accession Poland will have access to significant assistance which, properly used, should further accelerate
national development.
From the point of view of the geopolitical and geostrategic North–South relationship, Poland,
like other Central European countries, has always been part of the North. During the period of
“real socialism” the communist countries (although they wanted to play the role of middleman
between developed Western states and developing countries) were perceived by the “South”
as the poorer, relatively undeveloped part of the developed “Northern”, “rich” part of the
globe. However, taking into account the character of the socialist economies, restrictions on
foreign trade, and lower productivity and living standards, the former Eastern Bloc countries
were not able to participate actively in economic relations between North and South. Only the
economic transformation of the 1990s, and approaching EU accession in particular, has given
them an opportunity to participate fully in the global economy. This coincides with a new,
more comprehensive approach to global issues in the 1990s, as well as Poland’s growing involvement in the UN.
The North–South dialogue in Polish foreign policy
Before 1989
Since the Second World War Poland has pursued cooperation with countries from all continents, including developing countries. It has tried to develop intensive economic relations and
has supported – within the framework of international organisations and international conferences – multilateral activities aimed at resolving complex global issues, such as environmental and demographic problems and the development gap between North and South. The
development of good relations with the countries of Africa, Asia, and Latin America has been
facilitated by two important historical factors: (i) Poland has never had overseas colonies, (ii)
Poland has always, at least verbally, supported the developing countries’ right to selfdetermination. On the other hand, due to the moderate size of the Polish economy, its socialist
regime, and its lack of experience in cooperating with countries outside Europe, Polish relations with developing countries in the period of “real socialism” were hindered by the fact that
the country’s aspirations were incommensurate with its means.
Poland’s own economic problems and limitations in relation to cooperation with other countries (resulting from the policy of communist Poland, especially under martial law in the
1980s) impelled it to greater activity in promoting economic security and confidence-building
13
measures in international economic relations. Poland supported, and sometimes initiated, proposals very similar to the ideas of the New International Economic Order which were popular
in the countries of the South in the 1970s. Poland particularly approved of commodity price
stability, technology transfer to the South, debt reduction, commercial preferences for the
least developed countries, and also the need to take into account both economic and social
factors in global development.
Supporting the general principle of increasing the volume of development aid to the South,
the authorities of communist Poland emphasised above all the former colonial powers’ responsibility for the development of their former colonies, as well as the need to redirect a significant proportion of the resources otherwise absorbed by the nuclear arms race towards development purposes. Because of its lack of other means Poland’s development policy consisted at that time mainly of supply of investment equipment and technical know-how, commercial credits and educational opportunities.
It should be emphasised that before 1989 Poland did not have its own, sovereign foreign policy and it pursued, to a large extent, the interests of the communist bloc in the developing
countries. This meant that Poland provided assistance mainly to Southern countries which had
embarked on the “socialist path of development” and pursued a policy aligned with Soviet
global interests. However, the achievements of that period in relations with Asian, African,
Latin American, and Caribbean countries (notably in trade) cannot be neglected.
After 1989
After the commencement of the transition in 1989 Polish involvement in the development of
North–South relations diminished. On the one hand, this stemmed from the need to devote all
available means to the process of system transformation, while on the other hand, Poland’s
relations with its closest neighbours had to be established on a new basis and the country had
to be anchored within the framework of the Euro-Atlantic institutions, especially the Council
of Europe, the OECD, and the European communities. This represented an important challenge for Polish diplomacy. The thorough transformation of Polish enterprises has not favoured the development of economic contacts with the South because the new market orientation inevitably emphasises competitiveness primarily in Western markets. Modernisation
constitutes an enormous drain on resources, forcing the Polish authorities to further reduce
already limited development assistance. In fact, Poland has concentrated primarily on obtaining foreign assistance for itself. The foreign economic assistance provided to Poland in the
first half of the 1990s, particularly in the form of debt reduction and grants and loans for enterprise transformation and infrastructure projects, combined with a sound domestic policy,
has contributed to the success of Polish reforms. To a large extent Poland is now a well functioning market economy, which, according to the European Commission in 1997, will be able,
in a mid-term perspective, to face the challenges of EU accession.
In the second half of the 1990s, under the influence of international political changes (such as
global conferences organised under the auspices of the United Nations or accession to the
OECD), as well as the rapid pace of economic growth, Poland increasingly viewed the problems of developing countries within the framework of its external relations as a whole. Economic growth was 6–7 per cent a year, and the country had fully regained the confidence of
foreign investors and had begun to be recognised by some Western donors as a model for its
neighbours. At that time the first principles of Polish development policy were outlined. Plans
to step up the country’s engagement in international development cooperation were accompanied by activities aimed at renewing political, economic, social, and cultural ties with many
14
countries of Africa, Asia, and Latin America. The renewal of cooperation with Latin America
was partly based on historical links with this continent (which for many years has been the
final destination of Polish emigrants), and also on the growing importance of the region due to
the planned American Free Trade Agreement. The Latin American states have also become
more and more interested in Poland, especially because in the institutions of an enlarged
European Union it will have a similar position to Spain, a traditional partner of the region. In
the case of Asia, the impressive economic development of this region (despite temporary crises in the late 1990s) represents a window of opportunity for Polish enterprises and a great
opportunity for investment cooperation. As far as African countries are concerned, activities
in recent years on this continent aimed at speeding up economic development and poverty
reduction (see New Partnership for African Development or NEPAD), alongside the importance of the continent to the European Union, constitute fertile ground for future Polish participation in Euro-African dialogue.
Although the Euro-Atlantic orientation will continue to be central for Polish foreign policy,
there is an increasingly widespread conviction that Poland cannot afford to overlook intensive
contacts, at all levels, with the rest of the world. This is rendered particularly important by
globalisation and enhanced economic and other interdependences.
Poland’s development cooperation
In May 1999 Minister of Foreign Affairs Bronisław Geremek confirmed to the deputies of
the Polish parliament that Poland would gradually increase its activities aimed at resolving
global development issues. The main policy aim in this field would be to support the economic, social, and political progress of developing countries and countries in transition. Minister Geremek also announced the commencement of work on a comprehensive development
cooperation strategy and stressed the need to create a suitable institutional mechanism responsible for aid management and delivery.
Addressing the UN General Assembly’s Millennium Session, 15 September 2000, Geremek’s
successor as Minister of Foreign Affairs, Władysław Bartoszewski, underlined that a new
approach to development was required and that there was no more important challenge than
sustainable global development, including poverty eradication, particularly in the least developed countries (LDCs). According to the Minister, success in this area necessitates broad use
of the principle of solidarity in international economic relations. Development and poverty
eradication can no longer be approached only in technical terms. A coherent and effective
policy would include, apart from financial and technical assistance, support activities in education, culture, good governance, the rule of law, democratic institutions, and so on. Bartoszewski also stated that Poland supported the European Union proposal concerning the abolition by all WTO members (especially the most industrialised among them) of customs duties
on almost all products exported by the least developed countries.
In January 2001 the Government of Poland adopted the document “Assumptions of Poland’s
participation in the Stability Pact for South-Eastern Europe”, in which three objectives of development assistance to the region were formulated: (i) strengthening the process of democratisation and respect for human rights, (ii) supporting economic stabilisation, and (iii) continuing humanitarian aid. In the Polish Parliament, 6 June 2001, Minister Bartoszewski
stressed, in the context of a presentation of the main directions of Polish foreign policy, that
Poland would develop political dialogue with important (from the point of view of Polish
economic interests) countries in Africa, Asia, and Latin America, striving at the same time to
15
encourage them to invest in Poland. In his statement at the UN Conference in Monterrey on
Financing for Development in March 2002 the Polish deputy prime minister and Minister of
Finance Marek Belka underlined the importance of adopting the Monterrey Consensus and
emphasised that the Government of Poland and Prime Minister Leszek Miller considered cooperation with the developing countries as a foreign policy priority. He added that Poland
would increasingly expand assistance for developing countries, taking a holistic view covering trade, debt relief, technical assistance, and integrating private investment flows.
The main objective of Poland’s development policy is to support the economic and social
progress of developing countries and countries in transition. In particular, Poland’s development activities are aimed at supporting post-war rehabilitation, enhancing human rights, promoting human capacity building, strengthening the institutional capacity building of local
government, and reinforcing civil society, and education and health care systems. In the years
to come Poland also intends to a greater extent to integrate goals and principles elaborated by
the international community, including Millennium Development Goals, in its development
policy. In the short term poverty eradication should be made the focus of Poland’s comprehensive development cooperation strategy based on partnership, ownership, and mutual responsibilities of developed and developing countries.
The development assistance provided by Polish governmental and non-governmental organisations is concentrated on the Balkan states, other countries in transition, and selected developing countries. The Minister of Foreign Affairs accepted the initial choice of Vietnam, Kazakhstan, and Yemen as prospective priority partners of Poland’s development cooperation.
The following factors were taken into account when selecting primary recipient countries:
existing project proposals, intensity of previous links with Poland, and prospects for maintaining them in the future, as well as the existence of a Polish diplomatic mission in the country in question. Countries in transition predominate in terms of the number of assistance programmes, delivered mainly by NGOs. The large share of Southern countries in Poland’s development cooperation results from the important debt reduction initiatives undertaken by the
Ministry of Finance in respect of developing countries. However, most Polish NGOs involved
in developing assistance projects have declared that they intend to concentrate their efforts on
neighbouring countries and they do not seem much interested in the developing countries for
the time being.
To begin with, Poland’s development cooperation system was limited to scholarship programmes, debt relief, soft loans and cooperation with international organisations. Since 1999,
however, the Ministry of Foreign Affairs and the Polish Know-How Fund (a para-governmental body set up under the auspices of the Ministry of Finance to transfer abroad Polish expertise gained from economic transformation), have implemented new forms of development
cooperation. This extension of activities consisted in launching a number of technical assistance projects for countries such as Vietnam, Albania, Macedonia, and Yugoslavia. These
projects have focused on the transfer of Polish experience of system transformation, mainly in
the form of workshops and conferences on different topics concerning the functioning of market-economic institutions (such as the Warsaw Stock Exchange, Polish Securities Commission, insurance companies), Polish tax system reforms, development of local government, and
building civil society. Projects related to health care (Kosovo, Albania, Kazakhstan, Venezuela), education (Kosovo, Albania, Indonesia, Cambodia, Vietnam), and poverty eradication
have also been initiated.
16
Humanitarian assistance programmes also constitute an important part of Polish development
activities. In 2000 they mainly took the form of food supplies (Mongolia, Moldavia), medicine and medical equipment supplies (Lebanon, Palestine), and sending rescue teams (Hungary, Romania). In 2001 Poland provided important humanitarian aid to Ukraine (after a devastating flood), India, Peru, and El Salvador, after severe earthquakes. Poland also participated in international action aimed at reconstructing Afghanistan and helping Afghan refugees
in Iran and Pakistan. In 2001 Poland earmarked more than USD 100 thousand for bilateral
assistance programmes in Afghanistan.
Since the establishment of its development cooperation system Poland has made voluntary
contributions to international organisations such as the World Food Programme, the UN High
Commission for Human Rights, the UN High Commission for Refugees, and the International
Committee of the Red Cross. For some years Poland has also been co-financing the Ignalina
International Decommissioning Support Fund.
Table 1 Polish development assistance 1998–2001 (USD million)
Official Development Assistance – ODA
Bilateral
Europe
Africa
of which:
north of the Sahara
south of the Sahara
America
of which:
North and Central
South
Asia
of which:
Middle East
South and Central
Far East
Bilateral Total
1998
1999
2000
2001
3.59
1.71
6.75
1.05
3.35
0.9
1.34
0.67
0.3
1.0
0.30
0.2
0.7
0.25
0.2
0.6
3.42
0.11
0.56
0.29
0.2
0.1
8.08
0.1
0.2
6.59
0.1
3.4
5.13
0.17
0.12
28.40
1.4
1.7
2.7
13.67
2.0
2.1
1.1
14.65
0.8
2.3
1.5
12.81
24.24
2.26
1.90
30.70
2.79
1.59
0.68
5.06
3.21
1.36
1.10
5.67
3.10
1.64
11.01
15.76
2.68
2.00
0.16
4.84
Total ODA
Official Aid – OA
More advanced developing countries
CEECs/NIS
18.75
20.32
28.57
35.54
0.07
10.09
0.15
16.76
0.10
10.92
0.08
8.22
Total OA
10.16
16.91
11.01
8.30
Total ODA and OA
28.91
37.23
39.59
43.84
Multilateral
UN and specialised agencies
World Bank group
Other agencies
Multilateral Total
Over the last four years Poland’s foreign assistance has grown systematically, despite the
temporary slowdown of its economy. In 1998 Poland provided assistance to developing
17
countries and countries in transition in the amount of USD 29 million, which increased to
USD 37 million USD in 1999 and nearly USD 40 million in 2000. In 2001 public expenditure
on foreign assistance programmes and projects amounted to more than USD 43 million, of
which more than USD 35 million (81 per cent) was spent on Official Development Assistance
(ODA) to developing countries. An increase in the assistance earmarked for Asia in 2001 is
partly due to the important preferential loans for two countries from this area (Yemen and
Vietnam).
In 2001, according to OECD criteria, Poland provided foreign assistance to more than 90
countries. However, in the majority of cases this assistance was limited to scholarship grants.
Yemen, Lithuania, Belarus, Kazakhstan, Vietnam, Ukraine, and the Federal Republic of
Yugoslavia were among the major individual recipients of Poland’s development assistance.
Although Poland has been a member of the OECD since 1996, it is still not a member of the
OECD Development Assistance Committee (DAC), participating only as an observer. However, this gives Poland an opportunity to benefit fully from the rich OECD experience in development cooperation. Participation in the DAC’s activities allows Poland to profit from the
experience of other OECD donor countries as well as to employ the guidelines and recommendations elaborated and adopted by this organisation. Polish representatives take part in the
seminars and conferences organised by different OECD development bodies. The documents
published by the OECD Secretariat, especially the Development Cooperation Directorate, are
of major importance in the construction of Poland’s new development cooperation strategy.
Every year since 1999, the Ministry of Foreign Affairs has produced, in accordance with
OECD/DAC statistical directives, a statement of Polish development assistance. Again annually, some basic information about Polish activities in this area is published in the OECD Development Cooperation Annual Report. Poland aspires to be a full-fledged member of the
Development Assistance Committee in the near future.
Polish development cooperation is highly decentralised among a number of different institutions, including the ministries of Foreign Affairs (responsible for grant-funded technical assistance and training projects), Finance (in charge mainly of financial assistance to developing
countries), Education, and Health, as well as agencies and non-governmental organisations.
Until the creation of the new institution which will manage, on behalf of the Government of
the Republic of Poland, development cooperation issues, the pivotal role in this area falls
within the responsibility of the Department of the United Nations System and Global Affairs
in the Ministry of Foreign Affairs. The Department deals with the conceptual guidelines of
Poland’s development cooperation, as well as with the practical supervision of foreign assistance projects and programmes. These projects and programmes are implemented either by
the Ministry itself or, more frequently, by non-governmental organisations acting on behalf of
the Ministry, using public funds specially allocated for the purpose. Polish embassies and
missions to international organisations are also involved in the process of implementing projects abroad. Ministry of Foreign Affairs aid projects are financed from a special budget line,
and the Minister of Finance, at the instigation of the Minister of Foreign Affairs, puts the
funds at the disposal of the implementing institution.
For the last two years or so development cooperation activities have been implemented on the
basis of the most recent model of Poland’s development cooperation system. In 1999 the first
draft document entitled “The Strategy of Development Cooperation” was elaborated within
the Ministry of Foreign Affairs. In connection with changes in the global development cooperation environment, however (including adoption of the Millennium Development Goals)
and the progressive integration of Poland in the European Union, work is continuing on a new
18
version of the document, which should be presented to parliament for debate by the end of
2002. The experiences of different OECD countries are also being drawn upon in the course
of drafting Poland’s new development strategy.
Poland’s external relations and EU accession
In the document “Partnership for Membership”, elaborated in the process of consultation with
the Polish authorities, the European Commission stressed that, as regards the chapter on external relations, preparations must be made to apply, on accession, the Community’s various
cooperation and preferential agreements, multilateral and bilateral commercial policy commitments and its autonomous commercial defence instruments. At the same time, conflicting
national legislation must be repealed. Preparations must also be made to apply, on accession,
the Lomé trade regime to the ACP states and, together with other member states, to finance
the European Development Fund. Customs legislation must also be aligned with that of the
EU and fully implemented.
As regards negotiations with the EU, the official position of the Polish government is that
Poland will adopt the acquis communautaire on 31 December 2002 (declared date of readiness for accession) and will not apply for any transitional period in the chapter on EU external
relations. This means that on accession all agreements between Poland and third countries
concerning areas of EU responsibility will be dissolved and automatically replaced by the
bilateral and multilateral agreements of the EU. This concerns, among other things, the General System of Preferences (GSP), the Lomé Conventions, and the Cotonou Agreement, as
well as free trade agreements between the EU and third countries. On accession the European
acquis in this area will be directly implemented. Poland is also ready to cooperate with the EU
in presenting common positions towards third countries within the OECD and WTO forums,
as well as at international conferences.
Trade with countries of the South
Poland’s trade relations mostly involve OECD countries; the countries of Asia, Latin America, and Africa are not strongly represented. However, in an increasingly globalised world
economy, Poland is very interested in developing trade cooperation with countries from all
continents, particularly those offering significant opportunities to Polish firms. Polish trade
cooperation has been shaped by WTO membership since 1995, as well as by some bilateral
agreements, including, among other things, free trade provisions. In the 1990s Poland concluded free trade agreements with a number of developing countries, including Israel and
Turkey. After EU accession the rules and mechanisms of the EU’s Common Trade Policy will
replace all the aforementioned agreements.
For Polish trade Asia is the most important “Southern” region of the world. Trade between
Poland and Asian countries (including the Middle East, but not Japan, Israel, and Cyprus)
amounted in 2001 to USD 5.3 billion, of which Polish exports constituted USD 954 million,
while imports amounted to USD 4.37 billion, giving Poland a trade deficit of USD 3.4 billion.
Asia accounts for 2.6 per cent of Polish exports and 8.7 per cent of Polish imports. The main
Polish trading partners in Asia are China, India, Singapore, Thailand, Malaysia, and South
Korea.
Trade between Poland and Africa in 2001 amounted to USD 954 million. Poland exported
goods and services worth USD 518 million and imports were worth USD 436 million. Trade
with Africa is not very important in Poland’s trade balance: 1.43 per cent of exports and 0.9
19
per cent of imports. Among the major trading partners are the North African countries of Algeria, Morocco, and Egypt. Poland also maintains commercial relations with Nigeria, Liberia,
and Ivory Cost.
For the last couple of years trade relations with Latin America have been stable: USD 970–
1,300 million per year. Exports have been growing slowly but surely, reaching USD 440
million in 2001. Imports from Latin America have been growing much more rapidly, from
USD 700 million in 1996 to USD 908 million in 2001. Traditionally, the lion’s share of trade
is with Brazil, Mexico, Venezuela, and Argentina.
Conclusions
Since 1989 Poland has concentrated its diplomatic and commercial activities on the countries
of the northern hemisphere. Relations with developing countries, including its engagement in
resolving global development issues, were significantly curtailed in the first half of the 1990s
and have not yet returned to previous levels. Indeed, over the same period Poland, alongside
other Central and Eastern European countries, competed with many southern-hemisphere
countries for foreign economic assistance. It is inevitable that the position of southernhemisphere countries in Polish foreign policy to a certain extent reflects their international
political and economic status. However, many important factors linked to globalisation and,
above all, EU integration will favour Poland’s engagement in many regions of the world:
membership of the most important economic organisation in the world not only will make
Poland more active on the global stage, but also will extend the scope of its cooperation with
many developing countries.
20
Petr Halaxa, Petr Jelinek and Jan V. Krouzek: Czech Republic
The Czech Republic became a member of the OECD in November 1995, since which time it
has become an emerging donor country. Efforts have been made gradually to improve the
effectiveness and volume of Czech aid to partner countries and to “graduate” to the status of
OECD/DAC donor country and emulate EU member states in this area.
Planning and delivery of Czech aid – summary of present practices and institutional structure
The Czech Development Aid programme is organised and implemented in accordance with
Government Decision No. 153/1995 “Principles for providing Czech development assistance”, which sets broad goals and criteria for the support of developing countries.
Criteria for providing aid
The major objective concurs with the efforts of the international community and concentrates
on eliminating poverty and supporting sustainable development in less developed parts of the
world. The Czech Republic supports the international development goals which emerged at
UN international conferences in the 1990s, subsequently endorsed by the UN Millennium
Summit in 2000. The Czech Republic also fully supports the Development Agenda adopted at
the WTO Ministerial Conference in Doha in 2001 and the Monterrey Consensus passed at the
international conference on financing for development in 2002.
The basic criteria for the selection of partner countries are that they have their own development policy and use their own resources to support Czech activities. The other selection criteria include:
·
·
·
·
·
·
·
·
·
the urgency of aid;
good governance and respect for human rights;
equal access for all (regardless, for example, of gender) to education and health care;
environmental protection and quality of life;
suitable infrastructure for programme implementation;
integration into global economy;
promotion of new, innovative technologies;
tradition of diplomatic relations with the Czech Republic;
coordination with other donors.
Sectoral selection criteria
Development aid programmes focus on sectors or subsectors in which the Czech Republic
might have a comparative advantage. These sectors include health care, education, and selected aspects of infrastructure and environment. This focus corresponds with the conclusions
of the World Summit in Copenhagen in 1995, where the donor countries committed themselves to devoting 20 per cent of their bilateral aid programmes to social development if recipients committed 20 per cent of their national budgets. The Czech Republic also complies
with the initiatives and recommendations of the EU, the OECD, and other international organisations (with the emphasis on environmental projects and support for regional cooperation).
21
Table 1 Geographical and sectoral priorities for 2002–2007
Territory
South-East Europe
Priority countries
Yugoslavia (with Kosovo),
Bosnia and Herzegovina, Macedonia
Sectors
good governance, refugees,
infrastructure (energy, transport), environmental protection, regional cooperation
Countries of the former USSR Uzbekistan, Ukraine, Kaenvironmental protection,
zakhstan
transport, refugees, nuclear
security
Near and Middle East
Lebanon, Palestine, Yemen
environmental protection (hydrology, biodiversity), infrastructure (energy, transport)
South, South-East and East
Vietnam, Mongolia, Afghani- infrastructure (energy, transAsia
stan
port), environmental protection (hydrology, geology),
good governance, agriculture
Sub-Saharan Africa
Namibia, Angola, Mali,
agriculture (rural developBurkina Faso, Ethiopia
ment), education, health care
(HIV/AIDS), environmental
protection (hydrology, geology)
Latin America
Nicaragua, Salvador, Bolivia prevention of natural disasters
(geology, forests), education
Planning and delivery of bilateral aid
Currently, annual bilateral aid flows can be estimated at about USD 10 million. The budget is
divided among ten line or sectoral ministries which are responsible, under the coordination of
the Ministry of Foreign Affairs, for the identification and preparation of development aid
projects, as well as their implementation and evaluation. The procedure usually follows the
following pattern. The line ministries submit project proposals to the Ministry of Foreign Affairs based on proposals identified in the field by various stakeholders – private and state
companies, non-profit and civic organisations, institutions, universities, and so on. In cooperation with the Development Centre (hosted by the Institute of International Relations, Prague) the Ministry of Foreign Affairs screens the proposed projects and, jointly with lineministry representatives, carries out an appraisal, rejecting projects which are not eligible due
to poor project design, policy, or financing constraints. The shortlist of project proposals is
then incorporated into the overall aid package (including a small number of Ministry of Foreign Affairs projects) which is submitted to the government for final approval and financing.
Usually about two-thirds of the proposed projects are continued from the previous year. Subject to overall government budget approval the aid package is usually approved with minimum changes. It is to be noted that the financing available for the next financial year (that is,
the financial ceiling for the package) is usually communicated to the Ministry of Foreign Affairs by the Ministry of Finance by the middle of the current year and the Ministry of Foreign
Affairs joins with the line or sectoral ministries to weigh project proposals for the next year in
light of this (interministerial taskforce in September–November). Apart from the ministries no
other parties or stakeholders are allowed to participate in the appraisal exercise, since the
ministries are made responsible by the government (in the course of approval of the package
22
in December of the current year) for the implementation of the projects. The necessary funds
for implementation financing are transferred directly by the Ministry of Finance to the line
ministries, which report on the implementation results to the Ministry of Foreign Affairs by
the end of the next year (early December). Neither the Ministry of Foreign Affairs nor the
Ministry of Finance are under any pressure from Parliament or the still rather weak development constituency to increase the aid budget. The institutions and companies which implement the aid projects are appointed by the line ministries, which transfer the appropriate funds
to them after public tender, progress reporting, billing, and so on. (Decree No. 199/1994 on
public contract bidding is applicable here.) Delayed approval of the budget and the consequent chain reaction of transfers of funds can result in project commencement delays of several months in the field, interruption of long-term project implementation, and/or re-phasing
by several months (the planning horizon for foreign aid is one year only) and difficulties for
end-users in the field, as well as the implementing institutions. The Ministry of Foreign Affairs has tried to review this situation, but the Ministry of Finance, with one or two line ministries, has so far overruled it. The possibility of multi-year financing will again be raised with
the Ministry of Finance at the end of 2002. Currently, about 80 development projects are implemented in over 40 countries in four continents.
Based on an evaluation of the above process and the effectiveness of the ODA projects during
the years 1996–2000 the Development Centre, with the Institute of International Relations,
Prague, prepared a set of recommendations for changes in the strategic framework of Czech
ODA. The Ministry of Foreign Affairs used some of these recommendations to formulate by
the end of 2001 the new “Concept of the Czech Republic Foreign Aid Programme for 2002–
2007”, which was approved by the government on 23 January 2002. This concept provides an
assessment of the positive and negative results of Czech ODA, reviews international development targets, and sets territorial and sectoral priorities and principles for the gradual transformation of Czech ODA, in two stages, into an OECD/DAC- and EU-compatible system,
strengthening the coordinating role of the Ministry of Foreign Affairs, using as a vehicle the
Development Centre in stage one of the process and the Development Agency in stage two.
Present institutional structure
The supreme coordinating body under the Competence Act is the Ministry of Foreign Affairs.
It carries out this coordinating role by means of regular interministerial meetings which draw
together the representatives of line ministries entrusted with the development and implementation of projects. Since September 2001, the Foreign Ministry’s advisory body on development cooperation issues has been the Development Centre at the Institute of International
Relations, Prague.
The role of the Ministry of Foreign Affairs can be summarised as follows:
· the preparation of conceptual documents related to foreign development cooperation;
· the submission of an annual aid plan and annual evaluation report to the government;
· cooperation with partner countries and coordination of activities with international institutions;
· statistical reporting and provision of information on development cooperation in the
Czech Republic.
Since 1999, the UNDP project “Promotion of Capacities for International Development Cooperation” has been implemented in the Czech Republic. The project’s main goal is to help
the Czech Republic step up from emerging donor to advanced donor. Owing to its success and
benefits, especially in development education and research, the project has been extended
23
until 2003 with the objective of making the Development Centre at the Institute of International Relations fully operational.
The Development Centre’s role can be summarised as follows:
· assessment of proposals for country strategies and long-term programmes, and screening
of specific projects;
· cooperation with the relevant ministries on project planning and evaluation;
· cooperation with Czech implementing institutions (advisory services);
· cooperation with implementing development agencies in other donor countries;
· organisation of development training (project cycle management);
· coordination of development research in international development cooperation.
Planned institutional system
The medium-term concept of the Czech Republic’s foreign development aid takes into account the country’s accession to the EU and therefore envisages the establishment of a Development Agency as the authority responsible for the planning and implementation of Czech
foreign development aid. The legal status, form of management, and executive powers of the
Development Agency are currently being discussed by the ministries concerned. A proposal
for the corresponding institutional provision of foreign development aid following the country’s accession to the EU will be presented to the government by the end of 2003. The Ministry of Foreign Affairs also plans to establish a Foreign Aid Council as an advisory body for
the Foreign Minister in the sphere of development and humanitarian aid. This council will
serve as an umbrella organisation for representatives of the Czech development constituency
from the ranks of government and non-governmental institutions, political parties, the academic community, the media, trade unions, and civil society.
Multilateral aid
Mandatory and voluntary contributions
In addition to bilateral development aid, the Czech Republic contributes to the development
activities of a number of international organisations. In 2001, these contributions amounted to
approximately USD 15 million. The prospective share of this multilateral element in official
foreign aid should come to roughly one-third under the medium-term concept. The Czech
Republic monitors the effectiveness of the funds it grants and the compatibility of the activities of international organisations with the goals, principles, and territorial and sectoral priorities of Czech development cooperation. Multilateral aid can therefore suitably complement
and initiate bilateral projects. Besides mandatory subscriptions stemming directly from membership of international organisations, the Czech Republic provides voluntary contributions to
various agencies every year. This mechanism is mainly used in the system applied by the UN
and its agencies.
The UN and its agencies
Since the dissolution of the Czechoslovak federation, the Czech Republic has been contributing to 16 UN programmes and funds. In 2001, development donations to the UN system
amounted to CZK 75 million. The most important programmes in this respect are: United Nations Development Programme (UNDP), United Nations Children’s Fund (UNICEF), United
Nations Population Fund (UNFPA), United Nations World Food Programme (WFP), United
Nations Volunteers (UNV), United Nations Environment Programme (UNEP), United Nations Relief and Works Agency (UNRWA).
24
Other international organisations
The Czech Republic is also involved in multilateral cooperation under the aegis of the Bretton
Woods institutions. It makes contributions, for example, to the World Bank, the International
Development Association (IDA), the International Bank for Reconstruction and Development
(IBRD), and the Multilateral Investment Guarantee Agency (MIGA). In 2001, development
donations to the World Bank group came to almost CZK 230 million. Other international
funding includes the Poverty Reduction and Growth Facility (PRGF), the Heavily Indebted
Poor Countries Initiative (HIPC), and the Global Environmental Facility (GEF). Within the
framework of environmental protection, the Czech Republic is party to several international
agreements (for example, CITES, the UN Convention to Combat Desertification, and the UN
Framework Convention on Climate Change).
Activities prior to EU accession
The Development Centre of the Institute of International Relations, Prague, prepared a study
on the possible impact of EU membership on Czech development aid. Using this study’s results an official document “Overview of anticipated rights and duties of the Czech Republic in
foreign development assistance on accession to the European Union” was prepared by the
Ministry of Foreign Affairs in January 2001 and presented to the government along with the
medium-term concept. The purpose of this document was to inform the government of Community development policy and to outline the legislative, financial, and organisational aspects
of the Czech Republic’s preparation for EU membership in this area. Negotiations are also
under way with the European Union on the accession conditions. Issues of development aid
are part of the preliminary closed chapter on “External Relations”. The financial aspects have
still to be negotiated. Table 2 presents projected ODA expenditure, including contributions to
the EU communal aid budget in 2000–2007.
Table 2 Foreign aid budgets: projection for 2002–2007
Year
1996
1997
1998
1999
2000
Foreign aid
projects
531
650
326
326
345
2001
350
2002* 350
2003* 500
2004* 500
2005* 750
2006* 1 100
2007* 1 600
Note: * Estimated.
Index
–
1.2
0.5
1.0
1.1
1.1
1.0
1.4
1.0
1.5
1.5
1.5
(reduction by 50 % during 1997)
Contributions to
Intl org.
EU
400
–
400
–
400
–
400
600
400
600
400
600
400
600
Czech ODA
Total
750
750
900
1 500
1 750
2 100
2 600
of this
multilateral
58 %
58 %
50 %
70 %
61 %
53 %
45 %
ODA/GDP
Ratio
0.037 %
0.036 %
0.042 %
0.068 %
0.077 %
0.090 %
0.108 %
EU accession will make the Czech Republic a member of the world’s largest donor community. Participation in the system of Community development aid will mainly entail accession
to the Cotonou Agreement, participation in the financing of the European Development Fund,
25
harmonisation of customs preferences for developing countries, and, in accordance with a
new undertaking of EU members, ODA contributions of at least 0.33 per cent of GNP as of
2006, resulting in an EU average of 0.39 per cent. The Czech Republic’s accession to the EU
will have both a financial and an organisational impact on Czech development assistance. On
the other hand, during the pre-accession period the Czech Republic will have to implement
EU and OECD/DAC compatible technical standards for PCM (Project Cycle Management)
and develop or introduce compatible legislation required in respect of ODA (this involves
over 80 directives and decisions).
Among the opportunities for the Czech Republic when it becomes involved in Community
development assistance will be the ability to have some influence on where this is channelled.
If the organisation of bilateral and multilateral development assistance is suitably implemented, the two elements (Czech and community) will complement each other. Czech firms
and NGOs will be able to participate in the implementation of projects financed out of the
European Development Fund and community annual budget.
Trade between the Czech Republic and developing countries 1993–2000
Although developing countries7 are not particularly important trading partners for the Czech
Republic, their position is not insignificant: nearly 6 per cent of Czech imports came from the
developing world, which also accounted for more than 3.5 per cent of Czech exports in 2000.
On the other hand, one cannot disregard the fact that developing countries had a much more
important role in Czech foreign trade in the past.
A gradual reduction in the developing countries’ share in Czech foreign trade can be discerned from 1991,8 when the import share of developing countries was close to 11 per cent
and that of exports exceeded 15 per cent.9 By 1993 the share of developing countries was 3.24
per cent of imports and 8 per cent of exports,10 and by 2000 exports to developing countries
7
For the definition of “developing countries” the OECD classification from 2000 (as presented, for example, in
the DAC Statistical Reporting Directive (DCD/DAC (2000) 10)) was followed. In fact, the 2000 definition is
used even for earlier periods, because otherwise the differences in the classification of certain countries would
reduce the value of the statement. The only deviation from the OECD classification was in the case of Slovenia,
Malta, and Croatia, which were not considered to be developing countries (in conformity with the classification
of the Czech Ministry of Finance as presented in Annex 13 of the External tariff). If Russia, Ukraine, and Belarus are considered as developing countries (as the Czech Ministry of Finance does) then the share of developing countries in Czech imports was 13.22 per cent in 2000 (12.97 per cent in 1993) and in exports 5.71 per cent
(13.08 per cent).
8
Foreign trade statistics were not published separately for the Czech and Slovak Republics before 1991. The
value of the data published for 1989 in the Statistical Yearbook of the Czech and Slovak Federal Republic
(1990) is further reduced because it does not include Albania, Cuba, Vietnam, Mongolia, China, Yugoslavia,
North Korea, Laos, Cambodia, and South Africa as developing countries. On the other hand, the Statistical
Yearbook classifies, for example, South Korea as a developing country. See Statistická ročenka České a Slovenské federativní republiky 1990 (Prague: SNTL, 1990), pp. 462–8.
9
Calculated on the basis of the data published in the yearbook on Czechoslovak foreign trade in 1991. Even in
this publication the definition of ‘developing countries’ does not conform to the OECD classification. Besides
the category of ‘developing countries’ it uses the category of countries with a system of state trade. It does not
describe South Africa, Yugoslavia, and Albania as developing countries, but South Korea, Hong Kong, Singapore, and Taiwan are regarded as developing countries. Calculations could not be carried out separately for foreign trade with the developing countries of the former USSR, because in 1991 the foreign trade yearbook gives
data only for the USSR as a whole. See Zahraniční obchod ČSFR v roce 1991 (Prague: Český statistický úřad,
1993), pp. 3–11.
10
Part of the difference might be ascribed to the use of different methods in the foreign trade yearbook in 1991
and in the period 1993–2000, published on the web pages of the Czech Statistical Office (www.czso.cz) and of
the Customs Office (www.cs.mfcr.cz).
26
had declined further to 3.54 per cent, but imports from developing countries had gradually
grown to 5.93 per cent. Czech exports to the developing world stagnated (in 1993 the Czech
Republic exported goods worth CZK 34 billion to the developing world and in 2000 the value
of its exports was 40 billion), while Czech imports from developing countries grew rapidly
(from CZK 14 billion in 1993 to 74 billion in 2000). As a consequence of this development
the balance of Czech trade with the developing world has changed from positive to negative.
However, there are significant differences between different parts of the developing world.
Asia
Czech trade with the Asian developing countries11 fully conforms to the abovementioned
pattern of stagnation of Czech exports and rapid growth of imports. The Czech Republic imported from the Asian developing countries goods worth CZK 7 billion in 1993, increasing to
CZK 53 billion in 2000. Czech exports, on the other hand, oscillated around the level of CZK
22 billion. China was the most important trading partner in the period 1993–2000, with imports growing rapidly from CZK 2.3 billion in 1993 to nearly CZK 27 billion in 2000. Trade
with India developed gradually during the same period, both imports and exports reaching
CZK 3 billion in 2000. Imports from South-East Asia grew rapidly as well. Between 1993 and
2000 imports from Malaysia rose from CZK 628 million to CZK 6.4 billion, while exports
stagnated (1.3 billion in 2000). Czech imports from Thailand increased from CZK 615 million
to more than CZK 3 billion between 1993 and 2000, while exports declined from CZK 2.2
billion in 1993 to CZK 500 million in 1999; however, in 2000 they rose again and exceeded
CZK 1 billion. Imports from Vietnam grew from CZK 148 million in 1993 to more than CZK
2.1 billion in 2000. Czech exports to Vietnam also grew, but at a much slower rate (from CZK
180 million in 1993 to CZK 407 million in 2000). Even trade between the Czech Republic
and Indonesia recorded a sharp increase in Czech imports (from CZK 380 million in 1993 to
CZK 2.4 billion in 2000). Another important Czech trading partner was the Philippines.
The Czech Republic further developed its trade with the former Soviet Republics of Central
Asia. Czech imports from Kazakhstan increased rapidly from a value of CZK 226 million in
1993 to CZK 4.7 billion in 2000, while exports oscillated around CZK 1 billion. Imports from
Uzbekistan rose from CZK 507 million to CZK 1.5 billion between 1993 and 1998, but fell
below CZK 1 billion thereafter. Czech exports to Uzbekistan stagnated and exceeded CZK 1
billion only in 1997.
Trade relations with the developing countries of the Middle East were characterised by a different pattern. The Czech Republic’s trade balance with Iran remained positive: exports did
not fall significantly below CZK 1 billion in 1993–2000, peaking in 2000 at almost CZK 3
billion; imports oscillated between CZK 100 million and CZK 300 million (nearing CZK 1
billion in 1996). A similar pattern developed in trade with Saudi Arabia: Czech exports exceeded CZK 1.3 billion in 2000, while imports were negligible. Imports from Lebanon were
also insignificant, but exports consistently exceeded CZK 1 billion. Czech exports to Syria
oscillated between CZK 1 billion and CZK 2 billion in 1993–2000, exceeding CZK 1.9 billion
in 1994, but falling to CZK 768 million in 2000. Imports from Syria were always lower than
exports and usually did not exceed CZK 100 million (imports from Syria rose above CZK 1
billion only in 1996). Czech trade with the Middle East contrasts sharply with its trade with
the rest of Asia.
11
We do not consider (in conformity with the OECD classification) Japan, South Korea, Taiwan, Hong Kong,
Singapore, Brunei, United Arab Emirates, Kuwait, Qatar and Israel to be developing countries.
27
Africa
Czech trade with North Africa as a whole developed differently from its trade with the Middle
East. Czech exports to the developing countries of North Africa12 exceeded imports by more
than twenty times in 1993 (Czech exports were worth CZK 5.8 billion and imports CZK 283
million). In 2000, however, Czech imports exceeded exports by more than CZK 2 billion (imports totalled CZK 5.2 billion and exports CZK 3.1 billion). The main reason for this development was the sharp increase in the volume of trade between the Czech Republic and Algeria. Czech exports to Algeria fell from CZK 800 million in 1993 to CZK 469 million in 2000,
while imports rose rapidly to more than CZK 4 billion in 2000. The main item in Czech imports from Algeria was oil. Although Czech exports to Egypt declined slightly (from CZK 4.4
billion in 1993 to CZK 2 billion in 2000), the trade balance with Egypt remained positive.
With Tunisia, however, the trade balance changed from positive (for example, the Czech Republic exported to Tunisia goods worth CZK 1.1 billion and imported goods worth CZK 28
million in 1995) to a slightly negative one (Czech imports from Tunisia were CZK 307 million and exports CZK 273 million in 2000).
A similar, but more graduated pattern characterises trade between the Czech Republic and
Sub-Saharan Africa. The Czech trade balance changed from positive to negative between
1993 and 2000 (imports were worth CZK 1.3 billion and exports CZK 1.7 billion in 1993,
although in 2000 they reached CZK 3 billion and CZK 2.2 billion respectively). The most
important trading partners in Sub-Saharan Africa were South Africa, Nigeria, Ivory Coast,
and Zimbabwe. The Czech trade balance with South Africa was slightly negative: imports
rose to CZK 1 billion, and although exports also increased, their value usually did not exceed
half that of imports. The only exception was 1996 when the Czech Republic exported to
South Africa goods worth more than CZK 3.5 billion. Czech imports from Nigeria grew
gradually after 1993 to peak in 1998 (CZK 570 million), but declined thereafter. Czech exports to Nigeria were usually about CZK 200 million a year. The Czech trade balance with
Ivory Coast was markedly negative: imports grew from about CZK 300 million to more than
CZK 500 million annually. The most important item was cocoa. Czech exports to Ivory Coast
usually remained well under CZK 100 million. Czech imports from Zimbabwe were also
much higher (in 1997 they came close to CZK 1 billion) than exports.
Latin America
The Czech Republic’s negative trade balance with Latin America mirrored that with Asia and
Africa. However, there were differences between Central America and the Caribbean (where
the Czech Republic had a positive trade balance in 1993–96) and in relation to South America
(where the Czech Republic had a negative trade balance during 1993–2000, the trade deficit
rising steadily from CZK 1.4 billion in 1993 to CZK 3.3 billion in 2000) CZK. The most important Czech trading partners in Latin America were Argentina, Brazil, and Mexico. The
Czech trade balance with Brazil was negative throughout 1993–2000, but the volume of trade
grew rapidly: Czech imports from Brazil rose from CZK 1 billion to more than CZK 4 billion,
while exports rose from CZK 445 million to CZK 1.8 billion. Czech imports from Mexico
also grew sharply (from CZK 122 million in 1993 to CZK 1.8 billion in 2000); exports fell
after 1993, but then rose again, reaching almost CZK 1 billion in 2000. Finally, although the
Czech trade balance with Argentina was negative in 1993 (imports CZK 1.2 billion; exports
over CZK 500 million), in 2000 exports and imports stood at CZK 400 million.
12
Libya is not considered as a developing country according to the OECD classification.
28
Europe
The pattern of Czech trade with European developing countries13 was positive. The most important trading partners were Yugoslavia and Bosnia: Czech exports to Bosnia and Herzegovina grew rapidly from CZK 73 million in 1993 to more than CZK 2 billion in 2000, while
imports stagnated, never exceeding CZK 100 million. Czech exports to Yugoslavia also rose
sharply (from CZK 136 million in 1993 to CZK 3.3 billion in 1998), while imports grew from
CZK 6 million in 1994 to CZK 675 million in 2000.
The Generalised System of Preferences and its impact on Czech trade with the least developed countries
The Czech Republic grants trade preferences for the import of goods and services from developing countries under the Generalised System of Preferences (GSP). Its rules were applied in
the former Czechoslovakia in 1989 by Federal Ministry of External Trade Regulation No. 69
on “Exemption of goods imported and originating from developing countries and the least
developed countries from customs duties”. The Generalised System of Preferences was also
integrated into the government regulation by which external tariffs were issued and duties on
goods originating from developing and the least developed countries set. Under the Czech
external tariff reduced (preferential) duties are applied on certain goods originating from developing countries; all goods originating from the least developed countries enter the Czech
Republic duty free. However, the application of these preferences is governed by a number of
conditions: for example, at least 50 per cent of the value of the goods must be added in developing or the least developed countries and the goods must be imported directly from a developing or least developed country.
Although the General System of Preferences gives special preferences for the least developed
countries, no country in this category became a major trading partner of the Czech Republic.
The least developed countries did not take full advantage of the opportunity presented by
trade preferences. Imports from the least developed countries to the Czech Republic grew
significantly in only a few cases: from Afghanistan they grew from zero in 1994 to CZK 13
million in 2000; from Bangladesh from CZK 20 million in 1993 to CZK 281 million in 2000;
from Benin from zero in 1996 to CZK 41 million in 2000; from Chad from zero in 1994 to
CZK 150 million in 2000; from Myanmar from CZK 1 million in 1996 to CZK 24 million in
2000; and from Nepal from CZK 3 million in 1993 to CZK 13 million in 2000. In some cases
it is difficult to assess whether there is a tendency towards long-term import growth because
of the short period during which growth occurred. Cases in point include Cambodia and Mali:
imports from Cambodia increased from CZK 1 million in 1998 to CZK 29 million in 2000,
while imports from Mali rose from CZK 1 million in 1998 to CZK 129 million in 2000. By
and large, however, imports from the vast majority of the least developed countries did not
grow for longer periods of time, and some remained negligible. In some cases an increase in
the volume of imports occurred only once, while in other cases imports grew for a time and
then fell again (this applies to Burkina Faso, Eritrea, Ethiopia, Guinea, Yemen, Laos, Madagascar, Malawi, Rwanda, Senegal, Sudan, Tanzania, Togo, Uganda, and Zambia).
13
Albania, Bosnia and Herzegovina, Yugoslavia, Macedonia, Moldova.
29
Conclusions on trade
The Czech trade deficit with developing countries grew during 1993–2000, a development
particularly fuelled by trade with Asia. The only regions of the developing world with which
the Czech Republic maintained a positive trade balance were the Middle East and the Balkans. The share of developing countries in Czech trade as a whole fell (from 5.62 per cent in
1993 to 4.79 per cent in 2000). Trade with the least developed countries remains marginal
despite the fact that their goods enter the Czech Republic duty free.
30
Judit Kiss: Hungary
The main principles and objectives of the Hungarian development cooperation strategy
Though Hungary’s economic potential and development lag behind those of the present EU
members, as an OECD member-country and as a candidate for the DAC (Development Assistance Committee) and EU membership, Hungary is trying to formulate its own development cooperation policy. Whilst previously the EU did not urge the establishment of an independent development cooperation system for the candidate countries, in 2000 the EU stated
the related institution-building tasks incumbent upon potential members. At the same time,
there is increasing pressure from both donor and recipient countries to become more actively
involved in the development cooperation process. However, it takes time to change from being a recipient into an effective donor.
Hungarian development cooperation policy is an integral part of the country’s foreign, economic, and financial policies; however, it should reflect the interests not only of the donor
country, but also those of the recipient countries and also the EU. It should at the same time
be integrated into the EU’s development cooperation policy.
The main objectives of Hungary’s development cooperation strategy are as follows:
· to preserve international peace and security, and to create regional stability;
· to promote sustainable economic and social development in developing countries, with
due regard for the least developed countries;
· to defend human rights and the principle of equality; strengthen the institutions of democracy and civil society; and improve the situation of national minorities;
· to increase the well-being of ethnic Hungarians living in neighbouring countries and
support the realisation of their ethnic identity;
· to promote social and economic development with special regard to basic needs,
health and education;
· to promote good governance;
· to protect the environment;
· to play an active role in the international development institutions;
· to obtain DAC membership.
The realisation of these goals – which we present in no particular order – requires a complex
approach: a balance should be attained between international commitments, expectations, and
national possibilities, as well as between global and national interests.
The main priorities of development cooperation policy
Hungarian development cooperation policy is based on both foreign-policy and economic
considerations. Among the foreign-policy priorities are Euro-Atlantic integration, regional
stability, and ethnic Hungarian minorities living in neighbouring countries. Consequently, the
main targets of Hungarian development cooperation policy and humanitarian aid are countries
of Central and Eastern Europe, although Hungary also provides assistance in the “classical
sense” – that is, to developing countries, the main target groups in this instance being situated
relatively close to Hungary, namely in the Near East and Central Asia, with the addition of
countries assisted by the OECD and the EU. Hungary’s position is that the geographical dis
31
tribution of development aid should be handled flexibly, that is, it should be adapted to the
changing international situation and revised from time to time. Long-term, project-type assistance should be bestowed on democratic countries with stable political and economic systems.
In addition to foreign-policy considerations, economic interests should be taken into account
in development cooperation decisions. In the case of the neighbouring countries it is in Hungary’s economic and foreign-trade interest to contribute to the stability and development of
the region. Within the framework of the Southern European Stability Pact Hungary made
available a non-repayable grant to the countries of the region, for which purpose the Hungarian Eximbank opened a concessionary credit window of €100 million. The proper form of
development cooperation for these countries is technical assistance (education, training, expertise), which can directly promote Hungarian investments.
Assistance given to developing countries should be based on foreign-policy, economic, and
humanitarian considerations. Although Hungary’s presence in the developing world has decreased significantly at both government and enterprise level since the start of the transition,
some Hungarian interests could justify the revitalisation of relations. The framework for development cooperation should be existing personal contacts and long-term traditions. Provision of credits should be considered on economic grounds as Hungary has accumulated “frozen” debts in a number of developing countries (Angola, Ethiopia, Nicaragua, Sudan,
Yemen). Debt relief or write-offs are options only in the case of the most severely indebted
countries.
Hungarian development cooperation should focus on those sectors and areas where Hungary
has a ‘comparative advantage’. These are the following:
· sharing Hungarian experience concerning political and economic transformation with
special regard to the establishment of democratic institutions, building a market economy, privatisation, supporting small and medium-size enterprises, good governance,
and so on;
· intellectual capital and knowledge-based assistance (for example, know-how, software);
· education at graduate and post-graduate level, training;
· health (planning and equipping hospitals, birth and epidemic control);
· agriculture and the food industry (seed improvement, animal breeding, plant protection, reforestation, biotechnology, agrometeorology, extension services, farm and food
industry planning, training of agricultural technicians and experts);
· water management (planning of reservoirs and dams, water cleaning, drainage, land
reclamation);
· development of infrastructure;
· environmental protection.
The present state of development cooperation in Hungary
At the moment, Hungarian development cooperation policy does not have an established institutional basis. Prior to the transition Hungarian development assistance – mainly technical
assistance – was conducted by TESCO, a government institution specialising in technical and
scientific cooperation with developing countries. During this period Hungary signed technical
and scientific cooperation agreements with 57 developing countries, mainly on ideological
and political grounds. The chief aim of the agreements was to pave the way for the export of
32
services; however, this goal was achieved only in some cases (Syria, Iraq, China, Vietnam,
Mongolia).
During the 1990s Hungary conducted its development cooperation on an ad hoc basis and in a
decentralised manner:
· Hungary provided Official Development Assistance (ODA) via multilateral channels,
through different international organisations (IMF, World Bank, UN institutions) in
the form of financial contributions, compulsory membership fees, and voluntary donations. In 1999 Hungary provided multilateral assistance in the amount of USD 4.6
million; USD 3 million of this was Hungary’s financial contribution to the budget of
the World Bank’s International Development Association (IDA).
· The amount spent on official bilateral assistance (foreign students studying in Hungary, sending and receiving experts, consulting work) was no more than USD 370,000
at the end of the 1990s.
· As far as humanitarian aid is concerned, it is difficult to measure its precise magnitude, as central budget sources (USD 430,000) are supplemented by donations from
NGOs, churches, and individuals.
· In 1999 Hungary provided USD 7 million as Official Aid (OA) to ethnic Hungarian
minorities living outside Hungary via the Office for Hungarians Living Outside Hungary.
It is clear that the resources which Hungary expends on development cooperation have been
very modest, and Official Development Assistance, provided on a bilateral basis, is at a very
low level.
The main strategic issues of development cooperation
One of the main dilemmas is whether to provide assistance to a large number of countries or
to concentrate limited resources on selected areas and projects for the sake of developing bilateral relations. The experience of small countries is generally that, in order to realise its
comparative advantages, the optimum path is specialisation in bilateral development cooperation. However, by participating in the ‘international division of labour’ as regards development cooperation – for example, in international projects – Hungary can take in more countries and increase the effectiveness of its aid activities.
As far as the form of development cooperation is concerned, efforts should be made to progress from simple, easily manageable forms of cooperation to more complex ones. First, priority should be given to low-cost forms of technical assistance (education, training, sharing
transition experiences) where Hungary can make use of its intellectual potential. In this way,
support for Hungarian commodity and services exports can be increased, while respecting
international commitments and regulations. In the medium term – in the coming five to ten
years – Hungarian development cooperation should be broadened to encompass project-type
assistance, which requires more resources and developed infrastructure for development cooperation.
Financial resources for development cooperation can be transferred through bilateral and/or
multilateral channels. In the experience of other donors, the share of bilateral channels is increasing at the expense of multilateral ones, as bilateral assistance serves the political and
economic interests of the donor country better and more directly, and creates direct links with
the recipient; in the case of multilateral aid the donor becomes “impersonal” and has little say
33
in how the aid is utilised. However, multilateral aid can be beneficial for the donor countries,
as their financial resources add up and so bigger projects can be financed. Although Hungary
does not wish to renounce multilateral assistance (in any case, its international commitments
make this impossible), preference will be given to bilateral assistance. Hungary would like to
increase its bilateral assistance at a faster rate than its contributions to international institutions and eventually approach a two-to-one ratio in favour of bilateral aid.
The financing of development cooperation
In Hungary, development cooperation is financed mostly from the central budget; however,
the aim is to involve NGOs and large enterprises with economic interests in the target countries in development cooperation to a greater extent.
The magnitude of financial resources assigned to development cooperation is determined as
follows:
· it should reflect the international reputation and conduct;
· it should take due account of economic means, but it should also be sufficient to realise development cooperation objectives;
· Hungary should approach the level of the OECD and the EU countries as far as the
proportion of GDP spent on development assistance is concerned;
· the value of development assistance should be significantly higher than in previous
years when it was granted on an ad hoc and decentralised basis;
· resources slated for bilateral development cooperation should grow at a higher rate
than resources expended on multilateral assistance.
The scale of development assistance will be determined annually by the Ministry of Finance
in cooperation with the Ministry of Foreign Affairs and the Ministry of the Economy, with
due regard to the development assistance/GDP ratio of the OECD and EU countries. Based on
Hungary’s development cooperation budget, the needs of recipient countries will be examined
and concrete bilateral development cooperation programmes elaborated.
In 1999 Hungary spent USD 12.4 million – that is, 0.025 per cent of GDP – on development
cooperation. In 2000 the development cooperation budget was increased by 70 per cent,
mainly in the form of more resources for the higher education of ethnic Hungarians ‘beyond
the borders’. In 1999 Hungary’s Official Development Assistance (ODA) equalled USD 5.4
million, of which 85 per cent or USD 4.6 million was spent on meeting multilateral commitments, while 15 per cent (USD 800,000) went on bilateral assistance and humanitarian aid.
USD 7 million was spent on Official Aid (OA) to assist Hungarians living outside Hungary.
In order to achieve the present OECD aid/GDP ratio of 0.25 per cent, Hungary must increase
its development cooperation budget to USD 121 million; in order to reach the EU average,
Hungary would have to spend USD 151 million a year on development cooperation. Assuming a 15-year catch-up period, Hungary would have to increase its development cooperation
budget by USD 10 million a year.
The 2003 budget plan envisages spending around USD 3.5 million as a contribution to IDA
and the IMF. The share of multilateral aid will increase by way of Hungary’s contribution to
the EU’s European Development Fund. The Hungarian contribution is estimated to be around
USD 13–15 million.
34
At the same time, Hungary - following the example of the other donor countries - would like
to increase the share and value of bilateral development assistance. According to preliminary
estimates, in 2003 Hungary will spend USD 6.32 million – around 0.01 per cent of GDP – on
bilateral development cooperation. This amount will be supplemented by humanitarian aid
financed by the Ministry of Foreign Affairs and the grant element of concessionary credits.
In order to harmonise Hungary’s development cooperation strategy and activity, it is necessary to concentrate development resource allocation. This task is assigned to the Ministry of
Foreign Affairs, with the exception of multilateral development cooperation: Hungary’s present financial contributions to the IMF and the World Bank are handled by the Ministry of Finance; the same would be advisable in the case of Hungary’s future financial contribution to
the European Development Fund. The assistance granted to Hungarian minorities living outside Hungary is financed from the budget of the Ministry of Foreign Affairs through the Office for Hungarians Living Outside Hungary.
The tasks of institution building
In order to implement Hungary’s development cooperation strategy and to participate in EU
development cooperation activity, appropriate institutions are needed. According to EU recommendations a special ministry or a separate department with professional, experienced officials should be established for this purpose. Correspondence between Hungarian and EU
development cooperation should be ensured.
In the leading donor countries and in the EU, development cooperation policy is implemented
by ministries of foreign affairs. As development cooperation policy is an integral part of foreign policy, it is obvious that it should be formulated and partly implemented by the Ministry
of Foreign Affairs in Hungary, too. Under the supervision of the executive (administrative)
state secretary a special department (in the long run an Office) will be established, with the
following tasks:
· activity related to development cooperation policy implementation (planning, tasks at
home and abroad, controlling, evaluation);
· coordination of development cooperation between ministries;
· handling financial resources for development cooperation and humanitarian aid;
· activities related to multilateral development cooperation (UN);
· preparation of medium-term strategic plans and annual action plans;
· making proposals for geographical and structural priorities;
· evaluation of development cooperation in the case of Hungary and partner countries;
· elaboration and realisation of a communications strategy directed towards Hungarian
public opinion;
· making proposals for staff appointments (officials, independent experts, volunteers);
· implementing the principle of transparency and accountability in all areas of development cooperation;
· preparing an annual report for the government.
The cost of institution building will be covered from the budget of the Ministry of Foreign
Affairs.
The development cooperation strategy guidelines will be outlined by a Ministerial Committee headed by the Minister of Foreign Affairs. All the relevant ministries will be represented
on this committee. Its main task will be to apportion financial resources for development co
35
operation and to indicate geographical and sectoral priorities. In tandem with the Ministerial
Committee an Expert Working Group will also be established.
Later on, the work of the Ministerial Committee will be supported by a Development Cooperation Advisory Board. It will consist of the representatives of the administration, civil society, and research institutions. The establishment of a specialised professional institution is
also under consideration.
The above-outlined organisational structure will be established for ODA-type development
cooperation with special regard to expanding bilateral activities. In order to establish an effective and transparent organisational structure, a registration system is needed which covers
all forms of official and unofficial development cooperation. The conditions for international
statistical data provision should also be secured.
Special attention should be paid to the training of experts specialising in development cooperation; for example, after EU accession Hungary will have to delegate development cooperation experts to the EU’s Development Committee. At first, the demand for development cooperation experts will be moderate, however, and can be met by domestic postgraduate education. Hungarian representative offices abroad should also play an active role in implementing
development cooperation policy.
In order to prepare itself for the role of donor, Hungary can make use of international support
given to transition economies. Under the aegis of the UNDP a special project is envisaged for
the establishment of an institutional and personnel database, the training of development cooperation experts at home and abroad, and the preparation of a communications strategy.
Trade with developing countries
As a consequence of the re-orientation of Hungary’s foreign trade towards the developed
14
countries, and especially the EU, the share of the developing countries has fallen significantly, despite an increase in foreign-trade turnover. The decrease was especially sharp on the
export side: between 1990 and 1996 Hungary’s exports to developing countries fell from USD
772.7 million to USD 475.7 million; the share of developing countries in Hungarian exports
decreased from 7.9 per cent to 3.6 per cent. Hungarian exports to developing countries increased from USD 503.5 million in 1996 to USD 898.8 million in 2000, but the export share
of developing countries stagnated at 3.2 per cent (see Table 1).
14
While in 1990, 36.4 per cent of Hungary’s exports were directed to the EU, in 2000 the same figure
was 75 per cent (83.5 per cent for developed countries as a whole).
36
Table 1: Hungary’s exports to developing countries
Year
Total exports
Exports to develop- Share of developing
(million USD)
ing countries (milcountries in total
lion USD)
exports (%)
1990
9 768.4
772.7
7.9
1991
10 186.9
856.6
8.4
1992
10 705.1
570.7
5.3
1993
8 906.9
483.7
5.4
1994
10 700.8
419.9
3.9
1995
12 867.0
500.6
3.9
1996
13 144.7
475.7
3.6
1996*
15 703.7
503.5
3.2
1997
19 099.9
509.4
2.7
1998
23 005.3
745.4
3.2
1999
25 012.5
784.6
3.1
2000
28 091.9
898.8
3.2
Note: * In 1996 a new statistical system was introduced. Since then the activities of customs-free zones have also
been included in the foreign-trade statistics.
Source: Own calculations based on data from the Statistical Yearbook of External Trade, 2000 (Budapest: Hungarian Central Statistical Office, 2001).
As far as Hungary’s imports from the developing world are concerned the decline was less
significant. Although Hungarian imports from the developing countries decreased a little in
the early 1990s, since the middle of the decade imports from developing countries have grown
threefold. Consequently, the share of developing countries in Hungarian imports returned to
pre-transition levels by 2000 (see Table 2).
Table 2: Hungary’s imports from developing countries
Year
Total imports
Imports from the Share of developing
(million USD)
developing countries countries in total
(million USD)
imports (%)
1990
8 822.8
856.9
9.7
1991
11 382.1
900.1
7.9
1992
11 078.9
466.3
4.2
1993
12 530.3
547.2
4.4
1994
14 553.8
655.0
4.5
1995
15 466.3
856.2
5.5
1996
16 208.9
921.0
5.7
1996*
18 143.7
1 091.3
6.0
1997
21 234.0
1 504.7
7.1
1998
25 706.4
2 146.6
8.4
1999
28 008.2
2 442.1
8.7
2000
32 079.5
3 151.4
9.8
Note: * In 1996 a new statistical system was introduced. Since then the activities of customs-free zones have also
been included in the foreign-trade statistics.
Source: Own calculations based on data of the Statistical Yearbook of External Trade, 2000 (Budapest: Hungarian Central Statistical Office, 2001).
37
As Hungarian imports from the developing countries grew dynamically, while exports fluctuated (see Chart 1), Hungary’s foreign-trade balance with the developing countries showed a
significantly increasing deficit (see Table 3): currently Hungary’s trade with developing
countries accounts for more than 55 per cent of its foreign-trade deficit. It is therefore in Hungary’s economic interest to revitalise trade with the developing countries, to regain markets in
the developing world, and to balance its foreign-trade turnover.
Chart 1 Hungary’s foreign trade with the developing countries (USD million)
3500
Imports
3000
Exports
2500
2000
1500
1000
500
0
1990
1991
1992
1993
1994
1995
1996
1996
1997
1998
1999
2000
Note: In 1996 a new statistical system was introduced. Since then the activities of customs-free zones have also
been included in the foreign-trade statistics.
Source: Own calculations based on data of the Statistical Yearbook of External Trade, 2000 (Budapest: Hungarian
Central Statistical Office, 2001).
Table 3 Hungary’s foreign-trade balance with the developing countries
Year
Total trade balance Trade balance with Share of developing
(million USD)
the developing
countries in total
countries (million
trade balance (%)
USD)
1990
945.6
–84.2
–
1991
–1 195.2
–43.5
3.6
1992
–373.8
104.4
–
1993
–3 623.4
–63.5
1.8
1994
–3 853.0
–235.1
6.1
1995
–2 599.3
–355.6
13.7
1996
–3 064.2
–445.3
14.5
1996
–2 440.0
–587.8
24.1
1997
–2 134.1
–995.3
46.6
1998
–2 701.1
–1 401.2
51.9
1999
–2 995.7
–1 657.4
55.3
2000
–3 987.5
–2 252.6
56.5
Source: Own calculations based on data of the Statistical Yearbook of External Trade, 2000 (Budapest: Hungarian Central Statistical Office, 2001).
The commodity structure of Hungary’s foreign trade with the developing countries is characterised by a large share of manufactured goods and machinery and transport equipment on
38
the export side. Currently, these two product groups account for almost 90 per cent of Hungary’s exports (see Table 4). Almost half of machinery and transport equipment exports are
made up of office machinery and automatic data processing machines, whilst 26 per cent is
electrical machinery, apparatus, and appliances.
Table 4 The commodity structure of Hungary’s exports to the developing countries (2000)
Commodity groups
Thousand USD %
I. Food, beverages, tobacco
87 484
9.7
0. Food and live animals
86 640
9.6
1. Beverages and tobacco
844
0.1
II. Raw materials
8 319
0.9
III. Fuels, electric energy
5 855
0.7
IV. Manufactured goods
183 461 20.4
5. Chemicals
91 390 10.2
6. Manufactured goods classified chiefly by materials
44 047
4.9
8. Miscellaneous manufactured articles
46 846
5.2
V. Machinery and transport equipment
613 722 68.3
75. Office machinery and automatic data processing machines
306 948 34.1
77. Electrical machinery, apparatus and appliances
Total exports
162 435
898 842
18.1
100.0
Source: Own calculations based on data of the Statistical Yearbook of External Trade, 2000 (Budapest: Hungarian Central Statistical Office, 2001).
Table 5 The commodity structure of Hungary’s imports from the developing countries
(2000)
Commodity groups
Thousand USD
%
I. Food, beverages, tobacco
248 58
7.9
0. Food and live animals
235 454
7.5
1. Beverages and tobacco
13 204
0.4
II. Raw materials
69 453
2.2
2. Raw materials, except fuels
59 700
1.9
4. Animal and vegetable oils, fats
9 753
0.3
III. Fuels, electrical energy
76
0.0
IV. Manufactured goods
445 475
14.1
5. Chemicals
49 319
1.6
6. Manufactured goods classified chiefly by material
172 583
5.5
8. Miscellaneous manufactured articles
223 565
7.2
V. Machinery and transport equipment
2 387 722
75.7
71. Power generating machinery
119 682
3.8
75. Office machinery and automatic data
650 441
20.6
processing machines
76. Telecommunications and sound recording and
421 289
13.4
reproducing apparatus
77. Electrical machinery
1 026 383
32.6
Total imports
3 151 434 100.0
Source: Own calculations based on data of the Statistical Yearbook of External Trade, 2000 (Budapest: Hungarian Central Statistical Office, 2001).
39
The commodity structure of Hungary’s imports from the developing countries is characterised
by a large share of manufactured products: almost three-quarters consist of machinery and
transport equipment, with manufactured goods making up 14 per cent. Within the machinery
product group the most important product category is “electrical machinery, apparatus and
appliances” which accounts for 32.6 per cent of total Hungarian imports from the developing
world (see Table 5).
As far as the relational structure of Hungarian foreign trade with the developing countries is
concerned, the ten leading export markets are (in descending order): Singapore (with 25.1 per
cent of Hungary’s total exports to developing countries), Taiwan (9.5 per cent), Brazil (6.6
per cent), Mexico (5.9 per cent), South Korea (4.3 per cent), Iran (3.6 per cent), Malaysia (3.2
per cent), Egypt (2.9 per cent), Saudi Arabia (2.7 per cent), and Hong Kong (2.3 per cent). In
2000 the ten leading markets absorbed around 64 per cent of Hungarian exports to developing
countries. The ten most important import markets are: South Korea (10.8 per cent of Hungary’s total imports from developing countries), Taiwan (7.2 per cent), Singapore (5.6 per
cent), Hong Kong (4.8 per cent), Mexico (3.8 per cent), Malaysia (3.6 per cent), Brazil (2.2
per cent), Thailand (1.4 per cent), Indonesia (0.6 per cent), and Uganda (0.5 per cent). In
2000, 40 per cent of total Hungarian imports from developing countries derived from the ten
leading partners. The figures show that the concentration of Hungarian trade with developing
countries is quite low, especially on the import side.
The impact of EU accession on Hungary’s relations with developing countries
In December 2000 Hungary closed Chapter 26 – on external economic relations – of the accession negotiations. In this chapter Hungary assumes an obligation to take over the acquis in
the field of external economic relations without any transitional period, that is, from the moment of accession. Hungary is aware that, after accession, all EU international commitments
must be taken over and all international agreements which contradict the acquis must be terminated: for example, the free trade agreements which Hungary signed with the CEFTA
countries in 1992, the EFTA countries in 1993, Turkey and Israel in 1997, and Estonia and
Lithuania in 1998. As far as relations with the developing countries are concerned, Hungary
also applies the General System of Preferences, so there will be no problem in taking over the
EU’s system of preferences and the commitments of the Lomé Conventions. Hungary hopes
that after accession - as a consequence of the application of the EU’s system of preferences,
taking over the obligations of the Lomé Conventions, participating in EU development cooperation, and implementing its own development cooperation policy - relations with developing countries will be revitalised and a more balanced foreign trade with these countries can be
realised.