Operationalisation of Development Policy Objectives in Finland's International Development Co-operation

GOVERNMENT DECISION-IN-PRINCIPLE
22 February 2001

1. INTRODUCTION

The goals of Finland’s international development cooperation and Finland’s development policy were revised in 1996 and 1998. Finland’s relations with developing countries are considered as comprehensively as possible, aiming at coherent goals in foreign and security policy, trade policy and development cooperation. Development cooperation’s role as a significant part of foreign policy is underlined. Within the totality of the development policy objectives, reduction of poverty, prevention and mitigation of environmental problems , and promotion of equality, democracy and human rights constitute the basic elements in the promotion of global peace and security.

Towards the end of 2000, the Ministry for Foreign Affairs conducted an assessment of Finland’s policy on relations with developing countries and development organisations. Its purpose was to make sure that the policy guidelines are translated into concrete action in Finland’s bilateral and multilateral development cooperation. The present document, entitled Operationalisation of Development Policy Objectives in Finland’s International Development Cooperation, is based on that work. The document identifies measures to further enhance the practices of development cooperation. Such measures include the introduction of clearer criteria for selecting partner countries and instruments of cooperation, elaboration of Finland’s objectives and strategic tools in multilateral development organisations, and consolidation of the economic and administrative resources available for international development cooperation.

Finland’s development cooperation is guided by two documents in particular: Finland’s Policy on Relations with Developing Countries from 1998, and Decision-in-principle on Finland’s Development Cooperation from 1996. According to the latter, the goals of Finnish development cooperation are:

  • alleviation of widespread poverty
  • prevention of global environmental threats
  • promotion of equality, democracy and human rights.

Finland’s Policy on Relations with Developing Countriesanswers the challenges of globalisation. It aims to reconcile the objectives of Finland’s foreign and security policy, trade policy and international development cooperation. The policy paper covers a wide selection of possible tools: political and economic dialogue focusing, inter alia, on open and good governance and on economic growth grounded on the principles of market economy; development cooperation; commercial and economic tools; cultural cooperation; capacity building; and influencing public opinion. In addition to the goals laid down in the Decision-in-principle, the policy draws attention to the following two objectives in the relations between Finland and developing countries:

  • increasing global security
  • increasing economic interaction.

In the Programme of Prime Minister Lipponen’s second Government, international development cooperation has been defined in the following terms:

The Government's aim in development cooperation policy will be to strengthen preparedness in developing countries to prevent conflicts and to improve security and well-being. The Government is committed to a comprehensive policy of reducing poverty, combating global threats to the environment and promoting equality, democracy and human rights in the developing countries. Finland participates in the resolution of the debt problem of the world's poorest countries. The Government will increase its appropriations for development cooperation and aims to reach the level recommended by the United Nations when the economic situation so permits.

 2. BILATERAL DEVELOPMENT COOPERATION

With regard to grant assistance in the form of projects and programmes, Finland’s main partner countries in 1999 were Mozambique, Nicaragua, Tanzania, Vietnam, the Federal Republic of Yugoslavia, Namibia, Bosnia and Herzegovina, Nepal, the Palestinian Autonomous Territories and Ethiopia. If other forms of bilateral cooperation (such as humanitarian aid, interest subsidies and support to development cooperation conducted by non-governmental organisations) are considered as well as cooperation in the form of projects and programmes, the ten most important partner countries are the Federal Republic of Yugoslavia, Mozambique, China, Tanzania, Nicaragua, Bosnia and Herzegovina, Vietnam, Namibia, Ethiopia and Nepal. Cooperation with the Federal Republic of Yugoslavia consists of cooperation in the form of projects and programmes in Kosovo. This is complemented by extensive humanitarian aid and programmes related to reception of refugees. The use of concessional credits, in turn, has made China a major partner country.

After the Decision-in-principle of 1996, cooperation has expanded, based on the so called flexibility principle, in the Republic of South Africa, the Palestinian Autonomous Territories, Kosovo and other parts of the Federal Republic of Yugoslavia, Bosnia and Herzegovina and East Timor. Short-term presence in these countries has been justified by the importance of prevention and mitigation of conflicts and support for national reconciliation. Such presence is, however, meant to last only a limited period of time.

In the past few years, Finnish grant assistance in the form of projects and programmes has been at the level of approximately FIM 500 million. Assistance is divided between a large number of countries (34 countries in 1999), it is composed of fairly small programmes (about FIM 13.5 million per country, with disbursements exceeding FIM 50 million only in the case of Mozambique) and Finland is involved in several sectors with relatively small inputs in the partner countries.

2.1. Selection of partner countries

The partner countries for bilateral development cooperation fall into two categories: (i) long-term partner countries; and (ii) other partnerships. Some of the partner countries may be in the process of transition from one category to the other.

Two partnership categories

Description Long-term Partner Countries Other Partnerships
Duration
  • sustained partnership
  • duration determined case by case
Nature of cooperation
  • reduction of poverty is the main objective (though thematic cooperation is not excluded)
  • active and continuing participation in dialogue with the partner country at various levels
  • provision of resources for the implementation of government programmes
  • cooperation is targeted thematically, e.g. environment, good governance, equality, human rights, conflict prevention and mitigation , transition to democracy, HIV/AIDS, international trade issues
  • support is channelled to the development of personnel and other resources in public administration, the private sector and the civil society
Instruments of cooperation
  • political dialogue with the government of the partner country
  • partnerships are based on government-to-government development programmes and projects (bilateral projects and programmes)
  • in addition, a wide range of other tools are used (including commercial and economic cooperation)
  • the administrative foundation of cooperation is specified in an Agreement on General Terms and Procedures for Development Cooperation
  • cooperation through NGOs, as well as humanitarian, multilateral, and commercial and economic cooperation
  • depending on the situation in the partner country, government-to-government programmes and projects may also be involved

 

Presence
  • normally a Finnish diplomatic mission in the partner country
  • normally through multilateral and EU organisations, non-governmental organisations, etc., in cases when Finland does not have a diplomatic mission in the country

Bilateral cooperation in the form of projects and programmes is limited to selected long-term partner countries where Finland can exercise the continuing, active presence and dialogue that this instrument requires. For other countries, a suitable range of instruments is tailored, making use of other alternatives. This categorisation allows flexibility but, at the same time, a clear setting of boundaries. The aim is to improve the management of flexibility. The criteria applied in the selection of long-term partner countries are presented below.

Criteria for long-term partner countries

Criteria Criteria for long-term partner countries
Need for assistance
  • poverty (an LCD country or a low-income country)
Commitment to development
  • the country systematically harnesses available resources to poverty reduction by promoting economic growth based on the principles of market economy, by expanding universal access to basic services, such as primary health care and education, and by promoting equal distribution of income
  • the country's economic policy provides an enabling environment for development cooperation
  • the country makes determined efforts to advance democracy and equality and to reduce corruption
  • the government of the country is committed to improving the human rights situation
  • the country invests in sustainable use of natural resources and in the protection of the environment
  • the country endeavours to be integrated into the world economy and international trade systems in order to promote its own development agenda
  • the country promotes peaceful development in its region
Prerequisites for Finland’s assistance
  • Finland has a diplomatic mission in the country
  • Finnish actors have experience of cooperation with the country and possess expertise that the country needs
Prerequisites for effectiveness
  • Conflicts, or the threat of acute or imminent conflicts, do not hamper cooperation
  • the administrative capacity of the country is at a level which allows effective use of the resources made available through the cooperation
  • experience of the effectiveness of cooperation is positive

Operational implications:

In its bilateral development cooperation, Finland concentrates on fewer partner countries and larger country programmes. The majority of bilateral grant assistance is channelled to long-term partner countries. The main objective of the cooperation is to reduce poverty. To attain this objective, the promotion of gender equality must be accorded a central role in all cooperation.

Finland’s long-term partner countries are Egypt, Ethiopia, Kenya, Mozambique, Namibia, Nepal, Nicaragua, Peru, Zambia, Tanzania and Vietnam. Cooperation programmes can be significantly expanded in those poorest countries which show increasing commitment to development and where the prerequisites for effective development cooperation improve. Such partner countries include Mozambique and Vietnam. In the course of the next 3 to 7 years, long-term bilateral grant assistance in the form of projects will be phased out in middle-income countries such as Egypt, Namibia and Peru, and mainly other cooperation instruments will be taken into use. In Kenya, Nicaragua and Zambia, compliance with the criteria of cooperation based on bilateral grant assistance will be actively monitored. Finland has launched pilot projects and programmes with Burkina Faso and Honduras, and, if these prove to be successful, the countries may become partners of long-term cooperation.

 

With other partner countries, Finland will focus on thematic programmes which reinforce the capacities needed for successful national and internationally supported developmental activities. This cooperation will also be guided by the goals set for Finland’s international development policy but, as a rule, other instruments than government-to-government cooperation projects and programmes will be used.

Regional cooperation will be used to support development processes in which several partner countries participate simultaneously. This cooperation is carried out in collaboration with regional cooperating institutions , which are responsible for the planning and implementation of the development processes. Regional cooperation is intended to address problems which cannot be solved by means of national development programmes only. Special attention is given to support for regional integration and security. Finland supports regional cooperation in the SADC area, Central America, the Mekong area and Central Asia.

2.2 Instruments of bilateral cooperation

The cooperation is based on political dialogue and consultations on cooperation with the partner countries. The countries’ political, economic and cultural relations and their development cooperation are discussed extensively in the political dialogue. This dialogue is premised upon the criteria within which Finland has established the partnership, including commitment of the partner country’s government to poverty reduction and promotion of democracy, equality, human rights and good governance, as well as the economic policy pursued by the partner country and environmental issues. Finland encourages the partner countries to engage in genuine dialogue and to call attention to their own priorities.

In close cooperation with other international actors, Finland supports the long-term partner countries' own development efforts. Finland will participate in the formulation and implementation of sectoral programmes and poverty-reduction strategies in cases where the policies expressed in them converge with the goals Finland has set for its international development policy and provided that the partner country is considered to possess adequate capacity and be committed to good governance. In countries where direct sectoral or general budgetary support is not yet possible, Finland supports projects which are in line with the partner country’s set priorities. Those responsible for project administration try, as far as possible, to build on and further develop the partner country’s own administrative structures and procedures.

Programme and project cooperation is complemented by a variety of other instruments of cooperation, such as funds for local cooperation and cooperation with non-governmental organisations.

Cooperation with non-governmental organisations is seen as a way to help bring up the points of view of the civil society in all development processes supported by Finland. In addition, the know-how of established non-governmental organisations must be seen as an increasingly significant source of potential in government-to-government development cooperation. Where the criteria of government-to-government cooperation are not met, non-governmental organisations play a key role as an alternative channel of cooperation.

Operational implications:

Finland’s goal in bilateral, multilateral and EC cooperation is increased coherence and complementarity. The purpose of international coordination is to reinforce the notion that the partner country is in charge of the delineation and leadership of its own development processes. The coordination provides Finland with essential information about the roles and contribution of national and international partners, and Finland determines its own contribution on the basis of the added value that our participation in the processes entails.

To enhance the impact and effectiveness of the cooperation, Finland will focus on fewer and larger efforts. In each long-term partner country, cooperation in the form of projects and programmes of cooperation between the governments will be focused on no more than three sectors or three development programmes. The sectors or programmes of cooperation will be chosen through dialogue with the partner country. The choice of programmes and sectors will be based on the priorities set in the poverty-reduction strategy adopted by the partner country, on the one hand, and on the Decision-in-principle on Finland’s Development Cooperation and Finland’s Policy on Relations with Developing Countries, on the other. The final decisions will be made on the basis of an analysis about the added value that may be obtained from Finland’s participation in the development processes.

Finland takes an active part in the development of sectoral programmes and poverty-reduction strategies and supports their implementation. New forms of cooperation require that the systems related to management, decision-making and administration be further developed. It is also necessary to make further analyses of, and establish operational strategies for, the ways in which the different sectors and themes of cooperation contribute to the attainment of the objectives of development cooperation. In these analyses, attention must be paid not only to the traditional sectors and themes but especially to issues that have become highly topical in the development discussions of recent years, such as HIV/AIDS, globalisation, trade and development, support to the development of partner countries’ private sectors, and information and communications technology.

In order to better harness the potential of civil society, new ways of development cooperation will be developed in cooperation with non-governmental organisations. Actors in the local administration are also encouraged to take an increasingly active part in this cooperation. Attention is devoted to transparent and accountable administration in both the public sector and civil society participation.

Concessional credits will be channelled mainly to environmental sector and to social sector. The selection of the countries will be broadened in the future. The activities will be expanded and developed on the basis of the new legislation on concessional credits.The possibilities offered by the National Account for Risk-taking will also be used.

3. MULTILATERAL COOPERATION AND THE EC'S DEVELOPMENT COOPERATION

The overall disbursements to multilateral development cooperation have remained at approximately FIM 1.0 billion in the past few years. About 40% of the multilateral cooperation has been directed to the UN, the EU’s share being about one third, and that of international developmental financing organisations approximately 25%. Being a Member State of the EU, Finland has participated in the financing of the EC’s development cooperation since 1995. The European Development Fund (EDF) has received Finnish financing since 1998. There will be a marked rise in Finland's contribution to the EDF in the next five years.

Finland appreciates the complementary roles of the UN and the international financing organisations in their support of the developing countries. For international development dialogue, the UN is the appropriate leader. It has played a key role in the formulation of a common set of rules and goals and in the development of the Global Agenda. For the operationalisation and financing of the Global Agenda, development financing institutions are indispensable.

The international environmental policy regime is largely based on international environmental agreements. The implementation of these agreements in the developing countries is supported through special funds, international organisations, development financing institutions and bilateral development cooperation. Finnish support is channelled via all these mediums. The role of the Global Environment Fund (GEF) as the main financing mechanism is becoming stronger. As concerns projects carried out by the partner countries, the GEF can finance the share which corresponds to the global environmental benefit.

Operational implications:

 

Finland supports the clarification of the system of multilateral development financing. The goal is a clear division of labour between the various actors, taking into account the strengths and expertise of each organisation. We endeavour to respond to the challenge of being able to exert increasingly coherent influence on all forums.

Finland continues to give balanced support to the UN agencies and to the development financing organisations.

3.1. The UN System

The following four agencies are the main recipients of disbursements directed to the UN’s multilateral development cooperation: UNDP, UNICEF, UNFPA and WFP. Finland also supports many other UN agencies. Funds have been channelled to the UN agencies both in the form of non-earmarked general appropriations and as so-called thematic support, designated for either a specific programme or a particular theme. Appropriations are granted on an annual basis, which poses problems for the predictability and planning of the finances of the agencies.

Operational implications:

In the future, Finland will continue to emphasise the role of the UN system in international development cooperation and support the development of the division of labour within the UN system.

Finland will enter into multi-annual financing commitments with such UN agencies as it considers the most central (UNDP, UNFPA, UNICEF and WFP). UNAIDS will be given more support.

3.2 International financing institutions

The World Bank and regional development banks (the African, Asian and Inter-American Development Banks) are international development financing institutions. In the most recent replenishments, Finland has contributed most notably to the World Bank's IDA credits, the Nordic Development Fund and the regional development banks. In addition, Finland channels minor sums through a large number of special funds.

Operational implications:

Finland’s participation and share of financing is viewed in relation to the quality of the operation of the organisation concerned and to our opportunities to exercise influence.

The international development goals, established within the UN, will be given priority in dialogues, conducted with all development financing institutions, on the setting of objectives and practical implementation.

In the preparations for each round of replenishment negotiations and before a new term of membership in the board of directors, a strategy concerning the particular institution will be prepared to ensure that the objectives set for Finland’s development cooperation are met in the organisation. The precondition of future replenishments will be that the agencies prove that the present and projected granting of credits rests on an economically, socially and environmentally sound and sustainable foundation. Special attention will be paid in the negotiations that the future lending will not lead to an intolerable debt burden to the country later on.

Cooperation between the Ministry of Finance, the Bank of Finland, the rest of the state administration and the Ministry for Foreign Affairs will be intensified in order to bring about increasing coherence among the domestic actors in the field.

To enhance the effectiveness of activities, Finland is reducing its participation in small special funds, bearing in mind the potential added value of each of them.

Finland participates in efforts to solve the unsustainable debt burden of poor countries by supporting the HIPC debt initiative. In addition, Finland forgives its bilateral development credits to countries accepted to receive HIPC relief. Other possible debt relief measures will be discussed case by case.

3.3. Development cooperation of the EC

The EC’s general development policy coincides with Finland’s development policy. Finland strives to help translate the policy guidelines into practical action. Free from any colonial ties, Finland lays special emphasis on selective assistance to countries which are plagued by widespread poverty but simultaneously committed to reduce it. The EC should concentrate on promoting especially regional cooperation in developing countries and on projects that serve several countries. Community assistance should complement the international development cooperation conducted by the Member States and be implemented in cooperation with it.

Operational implications:

Finland promotes such decision-making and administrative procedures as are conducive to improved efficiency and effectiveness of the Community's development cooperation. A separate strategy will be devised to help this take place.

4. RESOURCES OF INTERNATIONAL DEVELOPMENT COOPERATION

4.1. Financing of international development cooperation

An opinion poll, which the Department for International Development Cooperation had made in the spring 2000, clearly showed that international development cooperation enjoys wide and markedly increasing support among the Finns. Several influential parties in Finland have recently called attention to the need to raise the level of funds allocated to international development cooperation. Parliament has also considered it important that the Government bring before Parliament a programme for achieving the objectives that have been set for enhanced funding of development cooperation.

In accordance with the Government Programme, Finland will raise the level of the funds for international development cooperation and endeavour to reach the recommended level established within the United Nations (0.7% of GNP), the economic situation permitting. It has been further agreed that the share of national income of 0.34 per cent, set in the budget of 1999, is the lower limit during the term of office of the present Government.

It may be difficult for Finland to respond to the growing financing obligations of the EU’s international development cooperation without any effect on bilateral and other multilateral activities.

4.2. Administration

International development cooperation is a part of the administration of foreign affairs, and its planning, implementation and supervision is administered as an integral element of the Ministry’s relations with developing countries. The administrative expenses are covered from the Ministry’s common operational appropriations. Expanding international development cooperation requires that additional resources be made available for the administration of development cooperation.

As the Ministry continues its organisational reform, it will make sure that the level of expertise related to the management and administration of development cooperation will be maintained and enhanced. It is important to reform the career system rapidly, taking also into account the long-term work experience and expertise accumulated by the civil servants in their development cooperation careers. At the same time, know-how related to the administration of development cooperation among the entire staff of the Ministry will have to be systematically developed.

The network of Finnish diplomatic missions in developing countries will be examined within the framework of our political and commercial goals and our development cooperation relations. As a rule, long-term development cooperation can be conducted only if there is a Finnish diplomatic mission in the partner country. In the future, bilateral development cooperation will be carried out in fewer long-term partner countries than before, and the country programmes will be more extensive. This may lead to the closure of an existing mission in some developing countries. In the event of new countries being chosen as long-term partner countries (West Africa, Central America), 1 to 2 new diplomatic missions may need to be set up in the next few years.

The Ministry for Foreign Affairs will develop its administration so that it can recruit a greater number of local experts to work on development cooperation. Furthermore, more advisors will be employed to meet the challenges arising from increasing work at the Ministry itself and in the diplomatic missions abroad.

Induction into the management and administration of international development cooperation is an essential part of the initial training of new civil servants (Training Course on International Affairs, KAVAKU). Civil servants working in the Divisions in Charge of Geographic Regions are given in-depth training in the administration of international development cooperation as part of the Ministry’s in-house training.

The Ministry for Foreign Affairs will promote active dialogue with the Government and Parliament on international development issues to strengthen parliamentary oversight.