TOPIC : EU'S AID PROGRAMME TO THE ACP STATES

Critically assess the EU's aid programme to the ACP states

EU aid programme to the ACP states

In 1975 Fiji, Tonga and Samoa had been signatories to the first Lomé Convention. With the adoption of the Cotonou Agreement in 2000 the number of Pacific members of the ACP group grew to 14. The PACP group is dominated by Fiji and Papua New Guinea, the latter accounting for two-thirds of the total 7 million population. The average GDP per capita is € 1000, with five countries qualifying as low income developing countries - Kiribati, Samoa, Solomon Islands, Tuvalu and Vanuatu. Life expectancy is generally high, but there is considerable variation in the social indicators, with poor health facilities in some of the small or more fragmented island states.

As island economies the PACPs share a number of economic problems. Their isolation imposes high transport costs, which also inhibit the development of regional inter-island trade. At the same time their domestic markets are small, limiting competition and the ability of the private sector to exploit economies of scale. Similar problems are presented in the public sector, where there are high unit costs, but which have also tended to be disproportionately large employers. In the few areas where they are internationally competitive e.g. tourism and fishing, especially tuna, they are dependent upon foreign investment. At the same time they are relatively open economies, with their export sectors important relative to GDP and import duties an important source of government revenues. This makes them particularly vulnerable to external shocks generating income fluctuations. They are also faced with a shortage of skilled labour - although youth unemployment is a recurring problem (20% of the population is 15 - 24 years of age) - together with migration from outer islands to the urban centres and emigration to Australia and New Zealand. They are often therefore dependent upon migrant remittances and overseas assistance to sustain their finances.

During the 1990s the economic situation and political stability of several of the ACPs deteriorated, partly as a result of worsening terms of trade, rising external debt and the financial crisis in Asia. This took place in the context of the increasing 'globalisation' of their economies, with rising import consumption, increased migration and a move into services; particularly tourism and offshore finance. They are also subject to increasing international pressure for harmonisation of the regulation of their offshore financial centres and to move towards increased trade liberalisation; the current EU-ACP trade negotiations being symptomatic of this changing environment. Since 1996 most PACPs have commenced significant economic reform programmes, especially focused upon enhancing their private sectors (europa.eu/legislation_summaries).

The total aid received by the PACPs between 1980 and 1992 equalled 27% of their GDPs. Of this Australia provided 42 %, New Zealand 16% and the European Development Fund (EDF) 13 %. Since 1975 EC aid to the PACPs has included €645 million (m) for the National Indicative Plans (NIP), €165 m for the Regional Indicative Plans (RIP), €90 m ...