What About Italy?

 

Italy and the Millennium Goals

At the Millennium Summit in 2000, world leaders committed themselves to the achievement of 8 Millennium Development Goals (MDGs) by 2015.

Read what record Italy has on aid, trade, debt and what the Italian people think

Italy and the Global Deal

Both rich and poor countries agreed to work towards the eradication of extreme

poverty and hunger, the elimination of gender inequalities, the prevention of environmental degradation, the prevention and treatment of HIV/AIDS, and the provision of education, healthcare and clean water. Since then the MDGs have had a catalytic effect on global development, because of their simplicity, accessibility, and because progress against them is easily monitored.

The MDGs involve a Global Deal between rich and poor countries: poor countries pledged to reform policies, improve governance, and to channel resources to development objectives, as embodied by the first 7 Goals.  Rich countries, for their part, promised to deliver more and more effective aid, faster and deeper debt relief, and fairer trade rules. Rich country commitments are, in particular, outlined in the 8th Goal.

So how well is Italy doing in meeting its part of the Global Deal?

Italy’s record on aid

Aid volume

  • On aid volume, Italy is the worst performing country of all the OECD donor countries with official development assistance (ODA) in 2004 representing only 0.15% of gros national income (GNI). This is less than a third of the EU-15 average country effort (at 0.46%), and even worse than the United States.
  • In absolute volume, Italian ODA was $2.5 billion in 2004, which makes it around a third of the size of Germany’s aid budget and even smaller than Sweden’s.
  • At the EU Barcelona Summit in 2002, Italy committed to increasing its ODA to 0.33% of GNI in 2006.  Italy continues to hold to this target even though it appears unrealistic – it requires more than a doubling of aid over 2004 levels.
  • In May 2005, Italy joined other EU-15 countries in a commitment to increase ODA and achieve the international target of 0.7% of GNI by 2015.  The EU-15 set a minimum intermediate target of 0.51% for individual countries for 2010.  Unlike other EU-15 countries, Italy has not yet announced a detailed implementation schedule for achieving this commitment.

While Italy’s commitment to increasing aid volumes in future years is good news, Italy

continues to fail to translate this into concrete budgetary allocations and expenditures.  Further, the planned increases represent significant budgetary and administrative challenges. This is particularly the case as debt relief has formed a significant component of recent ODA levels, and will be largely exhausted by 2006.  Political will at all levels be necessary to achieve Italy’s commitments.

Aid quality

  • Italy can be commended for the very high share of its ODA going to low-income countries. In 2002-03, 61% of Italian ODA was allocated to the least-developed countries (LDCs).
  • The pro-LDC focus of Italian ODA reflects a concentration in sub-Saharan Africa with 61% of Italy’s ODA going to this region in 2002-03. The country programs for Mozambique and the Democratic Republic of Congo are by far the largest.
  • Unfortunately, Italy has a high share of tied aid when compared with other European donor countries. In 2003, only 78% of aid to LDCs was untied, leaving Italy down at 14th place among the 21 OECD countries that supply information on untying.

Italy lacks a strategic vision for its own development cooperation. A clear strategy based around strong support for the MDGs among the Italian public and with an explicit focus on poverty reduction is needed urgently; a new development law is being drafted and this provides the ideal opportunity. A poverty-focused strategy would allow a more strategic allocation of aid resources. One example of how Italian aid lacks poverty focus is that $40 million is spent on education, but very little on primary education.

Italy also needs to make a number of institutional changes to aid administration.

First, Italy needs to assign authority for development cooperation at a high political level. Second, Italy needs to build the professional institutional capacity for development cooperation, either by strengthening existing capacity within the Ministry of Foreign Affairs, or by creating a separate agency. Until such capacity is in place, increases in aid flows in line with commitments should be directed towards multilateral agencies. Finally, more programs need to be decentralized to qualified staff at the country level. This will help to improve the quality of aid in a number of ways – most importantly by enhancing local ownership.

While Italy hosted the first high-level international conference on the harmonization of aid, little has been done to improve the implementation of Italian aid.  Indeed, numerous procedures coexist even within Italian bilateral aid.  There is significant scope for improving efficiency by improving collaboration and coordination among all Italian official and non-governmental development institutions.

Italy’s record on debt relief

In recent years, Italy has been active on debt relief in response to strong interest in the issue in civil society and the church – spearheaded by the Jubilee 2000 campaign.  This led to the adoption of a law on debt cancellation in 2000.  The 2000 law was innovative for its time, going beyond international measures such as the HIPC (highly indebted poor countries) initiative.  For example it cancelled 100% of commercial debt (as well as aid-related debt) and covered all low-income countries and not just HIPC countries.

On the downside, however, implementation has been much slower than initially planned.  Plus, Italy has relied on debt relief to bolster otherwise dwindling ODA figures.  Achievement of the MDGs requires fresh resources, which means additional aid funds, not just debt relief – in Italy’s case this has been missing.

More recently, at the G8 Gleneagles summit in July 2005, Italy signed a proposal to cancel 100% of the debt stock owed to the IMF, the World Bank and the African Development Bank for eligible HIPCs.  This proposal was recently adopted by all Member States at the Annual Meetings of the World Bank and IMF.  While the proposal still only covers a limited number of countries, and would only provide limited financial benefit to them, it is a step in the process of multilateral debt cancellation which has proved particularly difficult.

Italy’s record on trade

As part of the European Union (EU), Italy implements the European Union’s common agricultural and trade policies.  These policies are implemented and initiated by the European Commission but heavily influenced by Member States.

Most problematic is agricultural policy which provides subsidies for both the production and export of agricultural commodities, which lower world prices and limit earning opportunities for farmers and rural communities in poor countries.  Support levels are slowly declining as a result of gradual reform of the common agricultural policy.

Nevertheless, in 2004, public support for producers in the EU still represented 33% of gross farm receipts – this is above the OECD average.  There is also a gradual shift towards the use of less distorting forms of producer support, notably a shift away from market price support and output-based payments, but these still form the majority of support.  Nevertheless, total support to the agricultural sector costs the EU countries 1.2% of GDP.  Considering that the average EU-15 country only spends 0.46% of national income on ODA, the level of agricultural support is staggering.

Italy remains a quiet supporter of the status quo on agricultural policy, with its farmers benefiting from important subsidies on products such as tomato concentrate and olive oil.

Almost all exports from the least developed countries face duty and tariff-free access to the European Union market.  While there are only a few exceptions to this free market access, three products which are important agricultural products for poor countries – sugar, rice and bananas – were excluded in order to appease vested interests in the EU.  For example, Italian farmers have a strong interest in maintaining protection on rice.

In addition, strict rules still make it difficult for goods from poor countries to gain access to the EU market.  In the textiles sector, for example, rules of origin prevent poor countries which import fabric to produce clothing from exporting this clothing to the EU.  Italy, along with Portugal, is resistant to changing this problematic policy.

For poor countries which are not among the least developed, market access can still be restricted due to high tariffs, particularly on manufactured goods where tariffs on poor country exports are often higher than equivalent tariffs on goods from rich countries.

Italian public opinion

Italian public opinion is very supportive of ODA – in fact support levels are among the highest in rich countries.  While the Italian public knows relatively little about development, they now have the second highest level of public awareness of the MDGs in the EU, after only Sweden.  This awareness of the MDGs shows how public information and education on development issues can have a real impact.  The Italian government should invest more on information and education on development issues.