Policy paper

UK–Eastern Neighbourhood region development partnership summary, July 2023

Published 17 July 2023

Introduction

The International Development Strategy (IDS) places development at the heart of the UK’s foreign policy. It sets out a new approach to development, anchored in patient, long-term partnerships tailored to the needs of the countries we work with, built on mutual accountability and transparency. This approach goes beyond aid and brings the combined power of the UK’s global economic, scientific, security and diplomatic strengths to our development partnerships. Our four priorities are to deliver honest, reliable investment, provide women and girls with the freedom they need to succeed, step up our life-saving humanitarian work, and take forward our work on climate change, nature and global health. The Integrated Review Refresh (IR23) reiterates that sustainable development is central to UK foreign policy and sets out how the UK will go further and faster on development to reduce poverty and reinvigorate progress towards the SDGs. This Country Development Partnership Summary details how the IDS and IR23 will be put into practice with the Eastern Neighbourhood Regional Programme (Armenia, Azerbaijan, Georgia and Moldova).

Country context

Countries within the Eastern Neighbourhood Regional Programme (Armenia, Azerbaijan, Georgia and Moldova^{[footnote 1]}) are of critical strategic importance to the UK’s national security and prosperity, including UK energy interests in the Caspian. As recognised in the Integrated Review, countries in the region have faced significant and increased Russian interference aimed at undermining their democracy, economic independence, and preventing autonomous engagement with other countries, and with the EU and NATO. It is in the interests of the UK to ensure the region remains resilient to the threats posed by Russia and Iran.

Programming supports His Majesty’s Government policy objectives to strengthen strategic partnerships with EN countries, to bolster their short-term resilience to threats, deliver sustainable, long-term resilience to disinformation and lay the foundation for good governance and inclusive economic growth to lock in longer-term stability.

Context

The Eastern Neighbourhood Regional Programme (Armenia, Azerbaijan, Georgia and Moldova) includes a diverse set of countries. They are a mix of upper and lower middle-income countries with major strategic importance, due to their geographic location. Countries in the region share more than just geography, they also share a similar Soviet legacy.

The region faces a breadth of internal and external threats. Unresolved protracted conflicts (Abkhazia and South Ossetia, Nagorno Karabakh and Transnistria) have the potential to re-surface, as seen in Nagorno-Karabakh from 2022 to 2023, creating challenges for long-term reform and stability. It is also a testing ground for hybrid threats by Russia in the region and to the West more widely, which leave it vulnerable to malign influence and ultimately limiting economic, social and political development.

The Region has been impacted by the effects of the overspill from the war in Ukraine. The sanctions on Russia have had a complicated economic impact on the region, perversely boosting GDP in some case, for example, inward migration and a number of IT companies relocating to Armenia has had a positive impact on the economy.

Structural inequality persists and persistent elite-dominated corruption results in uneven and often non-inclusive economic development and divided societies. This is not helped, in some countries, by restricted or closing civic space, mass media which are subject to political pressure and self-censorship, and polarised politics.

Across the region, state capacity is generally weak. World Bank Worldwide Governance Indicators show weak public administration and poor transparency, accountability and corruption control in the region. These factors provide a permissive environment for serious and organised crime and risk democratic backsliding, including a rollback on the rights of key groups including women, girls and LGBTQI+ citizens. Through the Moldova Support Platform (MSP) - which brings together governments, International Finance Institutions (such as the World Bank and International Monetary Fund), and International Organisations - the UK supports Moldova’s stability and promotes European integration.   The UK co-leads with Romania the MSP’s anti-corruption pillar of work.

Poverty across the region is relatively low with 7% of Azerbaijan’s population and 12% of Moldova’s population below the poverty line. Georgia’s poverty rate (measured by the national poverty line) has more than halved during the period from 2020 to 2021. There is economic growth across the region with Moldova in the lead at 13.2, Georgia at 8.5, Armenia at 4.2 and Azerbaijan at 3.9. However, growth is frequently unsustainable, driven by the extractives sector (in some but not all countries) and is not generating inclusive growth with low levels of employment and low pay.

Why and how: the UK’s development offer

Our work supports SDG 8 (decent work and economic growth), SDG 5 (gender equality) and SDG 16 (peace, justice and strong institutions). Our work through the Conflict, Stability and Security Fund (CSSF) tackles regional stability, one of the major barriers to development and poverty reduction.

Our development priorities in the Eastern Neighbourhood region are centred on:

1. supporting democratic reforms to build more inclusive economies, enabling citizens to have greater confidence in their democratic systems

2. supporting further Euro Atlantic integration and continued stability, focussing on the reforms required to deliver good public services, building institutional resilience against malign influence and capabilities in the security sector

3. supporting confidence building initiatives related to breakaway territories

As part of this, our programmes will utilise security partnerships, support free and fair elections, promote resolutions with the breakaway territories and encourage cross-party collaboration to prevent polarisation. The UK’s work also supports the inclusive growth of the region’s economy through:

• increasing public-private dialogue
• improving the business enabling environment
• supporting women’s economic empowerment
• supporting reform and opportunities in key sectors, including energy

The UK will work through our development partnerships to demonstrate that the Eastern Neighbourhood Region has alternatives to Russia and will use our development offer and our strong Defence and Security relationships, to promote progress in other areas in support of the Eastern Neighbourhood Region’s own priority reform areas.

Who we work with

Multilaterals, International financial institutions and other donor partners have been key partners, including: 

• the European Bank for Reconstruction and Development (EBRD)
• the World Bank (WB)
• the International Finance Corporation (IFC)
• the European Investment Bank (EIB)
• the European Union (EU)
• GIZ (German technical cooperation)
• United Nations Development Programme (UNDP)
• the United States Agency for International Development (USAID)

As well as key international NGOs such as National Democratic Institute, and local civil society organisations.

The UK is supporting the World Bank’s Governance and Institutions Umbrella Trust Fund to delivery projects across the region.

Key programmes

In Moldova, Georgia and Armenia, the Good Governance Fund Eastern Neighbourhood programme (GGF EN) is supporting more robust election processes, promoting economic and governance reforms to enable stable democracies and inclusive economic growth.

The GGF Eastern Neighbourhood programme’s stated outcome is “Governments increasingly protect, consolidate, and advance reform in selected GGF priority areas to improve inclusive and democratic governance reform and inclusive economic resilience with strengthened civil society and private sector engagement in reform; and strengthened partnership between UK and Eastern Neighbourhood countries and like-minded partners supports UK global campaigns.”

Russia’s war of aggression against Ukraine has increased the pressure on governments in the region, and UK support for pro-democratic reforms is essential to ensure governments can keep their promises to the public and end corruption. The War also accelerated the region’s progress towards EU membership, and UK support cuts across many of the key areas needed for countries to join.

The Conflict, Stability and Security Fund will deliver across two principal results areas: The top priority is to address hostile state threats (HST), in particular direct threats and malign influence in the Eastern Neighbourhood region. We will do this by strengthening cyber security, building capacity in defence and security institutions, countering Serious and Organised Crime/Illicit Finance and disinformation, and addressing the long-standing conflicts that can be destabilising to the region.

The second priority is to sustain its long-term work to advance UK objectives on Women, Peace and Security, including by working with government partners and leading grassroots civil society organisations to mainstream WPS principles and promote implementation of national action plans.

Top three spending programmes:

Programme	Outcome	Total budget	Timeframe
Eastern Neighbourhood Good Governance Fund (Moldova, Georgia and Armenia)	Reforms to business regulation and registration procedures, economic governance and public institutions support the development of an attractive business and investment climate in GGF countries. More effective governance, a reduction in corruption, and more accountable and responsive government. Informed and active populations that hold their governments to account. Enjoys access to and influence with governments, institutions, and organisations	£38 million	Financial year 2022 to 2025
Conflict, Stability and Security Fund (CSSF) - Eastern Neighbourhood Regional Programme	State and non-state actors more resilient to hostile threats in all domains. State and non-state actors make progress in delivering Women Peace and Security agenda in support of their own domestic and UK obligations under UNSCR 1325.	£8 million	Financial year 2023 to 2024
Conflict, Stability and Security Fund (CSSF) – Eastern Europe and Central Asia (EECAD) Resilience Programme	Strengthening states resilience and stability to state threats including cyber attacks.	£2 million	Financial year 2023 to 2024

Results highlights: UK support has included digitisation of public services (Georgia), enhanced access to support for people with disabilities (Moldova) and support for women’s economic empowerment (Armenia). In Armenia, UK support for women’s political participation through UNDP and in collaboration with other donors meant a 30% quota for women in local elections was adopted, leading to an increase of women representatives from 10.7% in 2020 to 31% in 2021. The UK supported media organisations to become financially stable in Moldova, which led to one independent, women-led media outlet increasing their sales revenue by 24% in 2020 compared with 2019. In Georgia, the UK’s support to the Investor’s Council with EBRD has been a welcome collaboration with the government, with around 90% of legislative amendments proposed by the council being adopted by the government. Highlights include laws and regulations on insolvency, an investment fund, access to finance, pension reform, a labour code, visas for migrant workers and agricultural land reform.

FCDO takes a robust approach to monitoring, evaluation and learning across the region, with an independent Monitoring Evaluation and Learning expert contracted to provide services to the programmes on demand. All programmes have specific results frameworks and theories of change to help to ensure activities lead to the outcomes and impact required. Each year all programmes are subject to an annual review. Individual projects will also have their own results framework and specific approach to tracking progress appropriate to the delivery mechanism of the project.

Financial information

Initial allocations have been set internally to deliver the priorities set out in the International Development Strategy (May 2022) and the Integrated Review Refresh 2023, based on the FCDO’s Spending Review 2021 settlement.

The department’s spending plans for the period 2022-23 to 2024-25 have been revisited to ensure His Majesty’s Government continues to spend around 0.5% of Gross National Income (GNI) on ODA. This was in the context of the significant and unexpected costs incurred to support the people of Ukraine and Afghanistan escape oppression and conflict and find refuge in the UK, and others seeking asylum. The Government provided additional resources of £1 billion in 2022 to 2023 and £1.5 billion in 2023 to 2024 to help meet these unanticipated costs. The Government remains committed to returning ODA spending to 0.7% of GNI when the fiscal situation allows, in line with the approach confirmed by the House of Commons in July 2021.

The country development partnership summaries include the breakdown of programme budgets allocated to individual countries for 2023 to 2024 and 2024 to 2025. These allocations are indicative and subject to revision as, by its nature, the department’s work is dynamic. Programme allocations are continually reviewed to respond to changing global needs, including humanitarian crises, fluctuations in GNI and other ODA allocation decisions.

These figures do not reflect the full range of UK ODA spending in each individual country/region. This is because they do not include spend delivered through core contributions to multilateral organisations - and country allocations do not include regional programmes delivered by the FCDO’s central departments. Other UK Government departments also spend a large amount of ODA overseas. Details of ODA spent by other UK government departments can be found in their Annual Report and Accounts and the Statistics for International Development.

FCDO Official Development Assistance allocation

Of regionally managed (for example, GGF, EN, ODA) spend in this region from 2022 to 23, 100% is marked as being principally or significantly focused on promoting gender equality and 4% is marked as being principally or significantly focused on disability inclusion.

Figure 1. Regionally Managed ODA Spend by Sector from 2023 to 2024: Governance and Institutions, 63%; Economic Development, 23%; Climate Change, 14%

Programmes	Allocated ODA budget for financial year 2023 to 2024	Indicative ODA budget for financial year 2024 to 2025
Good Governance Fund Eastern Neighbourhood and wider reform work	£6 million	£10 million
Humanitarian Regional (CMP)	£10.5 million (For Moldova)	Indicative budget to be confirmed in due course

1. See the Moldova Country Development Summary Paper that details specific support to Moldova outside of the regional programmes detailed here. ↩