ANNEX
NOTES OF INTERNATIONAL DEVELOPMENT COMMITTEE VISIT
TO BRUSSELS 2-3 DECEMBER 1998
Wednesday 2 December at 1245 hrs
Lunch with Members of the European Parliament
Development and Cooperation Committee
Present:
Mr Michel Rocard MEP, Chairman
of the Committee
Mr Tony Cunningham MEP, Member of the Committee
Lord Plumb MEP, Member of the Committee
Ms Glenys Kinnock MEP, Member of the Committee
Mr Michel Rocard MEP, Chairman of the Committee
Mr Rocard was concerned that the European Development
Fund has been omitted from the Agenda 2000 document, and was therefore
unlikely to be included in any discussions on the future of the
EC development cooperation budget in the Council of Ministers.
Since its establishment in 1975, the Lomé
Convention had been the dominating element of the engagement of
the EC with developing countries. The level of funding for the
Lomé Convention had remained fairly constant, in real terms,
since 1975.
The remainder of the EC's development cooperation
programme had developed over time, and in addition to the African
, Carribean and Pacific countries, it now included countries in
the Mediterranean region and Central and Eastern European Countries
(CEECs).
It was difficult accurately to assess the overall
impact of the EC's development cooperation expenditure and policies
over the past 20 years. It was certainly true that without the
EC's efforts, at least six more countries would be in a state
of starvation than was the case today. Further, for every $1 spent
on basic needs within Africa, the EU contributed $25.
Two-thirds of the grants given to African countries
for development purposes were recycled and returned to Europe.
One of the main reasons for this was the tendency for contracts
for projects to be awarded to European companies rather than local
businesses. The Committee was generally agreed that development
grants should not be recycled in this way, and that using local
companies in development projects would not only address this
problem, but would also be more efficient.
Working to improve the quality and effectiveness
of EC aid was obviously very important. However, it was important
to bear in mind the symbolic political significance of the volume
of aid delivered to each region. If the EC was seen to cut the
volume of aid to any particular region in the interests of efficiency,
or indeed any other reason, there would be a "political earthquake".
It was unfortunate that there remained tensions between
the various regional priorities of member states, which led to
complications in the allocation of the budget to regional Directorates-General.
Lord Plumb MEP
The EU/ACP Assembly which met twice a year was often
regarded merely as a delegation. In fact it had been established
by Treaty and had a formal obligation to act as an instrument
of linkage between the EU and ACP countries.
Debt was an extremely important issue to be addressed,
in view of the fact that for each £1 of aid, £3 was
paid back to the donors in debt repayments.
The EU and its 15 member states made a significant
contribution to development - around 30 billion ecu - compared
to the USA which donated 10 billion ecu per year.
Glenys Kinnock MEP
A new formula for a banana trade agreement had been
proposed, further to the rejection of the previous proposal by
the USA. The new version had been judged by legal experts in Brussels
to meet WTO requirements. The USA, however, had now threatened
unilateral sanctions against the EU.
Glenys Kinnock was concerned that Agenda 2000, in
listing proposed priorities for External Action (Category 4) expenditure
from 2000 to 2006, made no mention of poverty or of Sub-Saharan
Africa, but had merely stated that the priorities outlined should
not be pursued at the expense of the poor.
The Committee had not been invited to comment formally
on Agenda 2000 or the new Financial Perspective. If the proposed
date for agreement of the Financial Perspective was adhered to,
there would be no such opportunity, as the Committee was not scheduled
to meet before that date (January 1999). The Budget Committee
would be producing a Report on the whole of the Financial Perspective,
but Glenys Kinnock was very concerned about the prospect of the
Financial Perspective being agreed without any input from the
Development and Cooperation Committee.
Mr Tony Cunningham MEP, Member of the Committee
Mr Cunningham had written the Committee's Report
on the 1999 Preliminary Draft Budget. Many budget lines had to
be cut in order for the budget to comply with the Financial Perspective.
It was estimated that an additional 125 million ecu would be required
simply to ensure that current levels of funding were maintained.
As a result of the constraints imposed by the financial perspective,
the budget proposed cuts to a number of developmental budget lines,
including a 50 per cent cut to the budget line aimed at protecting
tropical forests, a 20-30 per cent cut in the gender budget and
similar cuts elsewhere (including the AIDS budget line). Cuts
of such magnitude would result in many programmes being lost.
The Committee had been successful in reversing the proposed cuts
in the budget line for tropical forests.
The Financial Perspective for 2000-2006, once agreed,
would determine the Commission's annual expenditure for seven
years. The Commission was obliged to propose annual expenditure
in accordance with the priorities set out in Agenda 2000. It was
therefore crucial that Agenda 2000 included development priorities.
It was reasonable to suggest that an input into the Financial
Perspectives was more important that an input into the annual
budget process.
Glenys Kinnock, MEP
Bidding within the same budget category between the
political priority of accession and developmental priorities distorted
the budget allocation process. It was therefore a good idea to
move all pre-accession aid to a separate category, with Category
4 devoted to development cooperation.
The huge underspends on programmes such as Tacis
and Phare were ridiculous, and should be taken into account in
future budget allocations. The fact that this did not occur demonstrated
the political commitment of member states to enlargement and close
neighbours. This led to programmes lower in the scale of political
priorities, such as development cooperation with developing countries,
being paralysed or reduced.
The Committee was in favour of budgetisation of the
European Development Fund. The Council had resisted the proposal.
Parliament and the Commission were in agreement that a budgetised
EDF would be more efficient and would reduce the duplication of
negotiations, procedures and project management in ACP countries.
Some argued that inclusion of the EDF in the Category 4 budget
would lead to a reduction in resources. This was thought to be
unlikely - the level of resources would not be reduced, and more
value for money would be obtained through increased efficiency.
Reducing the number of budget lines would also increase
efficiency, but there were some key political lines which should
be maintained, such as the Nigeria budget. Some politically-motivated
budget lines, such as the Chile budget line (introduced under
the rule of Pinochet), became obsolete and should therefore be
removed. In some cases there were several budget lines reflecting
similar priorities, such as land mine clearance. There were 13
budget lines for mine clearance. One proposal for the rationalisation
of budget lines was to consolidate these into a single budget
line.
Mr Michel Rocard, MEP, Chairman of the Committee
The European Union had a low level of staff per £10
million in development cooperation expenditure. The World Bank
had the most luxurious ratio of staff / budget, national parliaments
delivering aid to former colonies had a slightly lower ratio,
and the European Union had one third of the World Bank level of
staff per £10 million, and half the level of national administrations.
Mr Rocard was keen to support efforts to bring together
Parliamentarians from member states. He would advocate such a
meeting during the German Presidency of the EU.
Wednesday 2 December at 1330 hrs
Meeting with UK Members of the Development and
Cooperation Committee
Present: Winifred
Ewing MEP, Glenys Kinnock MEP, Tony Cunningham MEP, John Corrie
MEP
Glenys Kinnock, MEP
The Development and Cooperation Committee was not
invited to provide input into discussions on the Financial Perspective.
If the current date for agreement of the Financial Perspective
was adhered to, the Committee would not be able to have an input.
It was possible that the decision would be delayed for a month,
in which case the Committee would be able to get involved in discussions.
There was no mention of the poorest countries in
the Commission priorities as outlined in Agenda 2000. If the EU
was to contribute to the achievement of agreed targets, such as
the DAC 2015 targets, then there would have to be a reorientation
of agreed objectives. Neither the Phare or Tacis programmes had
human development targets such as were present in other categories.
The ACP region was also losing out as staff were moved from DGVIII
delegations to CEEC delegations.
Within the European Parliament there were strong
links between parliamentarians and NGOs. NGOs attended Committee
meetings on a regular basis. Similarly the Committee enjoyed excellent
access to key people in other multilateral institutions such as
the World Bank.
Whilst the Development Council only met twice a year,
relevant ministers also met more regularly on an ad hoc basis
(for example, to set objectives).
Underspends were a key issue to be addressed. Both
the Phare and Tacis programmes had been underspending in recent
years. In 1996, Phare and Tacis had only spent 74 per cent of
their appropriations. The Court of Auditors had also drawn attention
to the Meda programme which had been spending only 69 per cent
of its budgetary allocations, with expenditure in Egypt, where
several projects had completely failed, at only 48 per cent of
the budget.
The creation of a separate budget category for pre-accession
expenditure would lead to an opportunity for clearer objectives
for the remainder of Category 4 expenditure to be agreed, without
discussion being diverted to the political priority of accession.
The Commission was experiencing problems as a result
of the newly established Common Service Directorate. There had
been a number of criticisms of the current system in as much as
"the right hand did not know what the left hand was doing",
and the Commission was generally seen as not "having got
it right yet" in terms of increasing the speed and efficiency
of disbursements or project management.
The Parliament and Commission would support the budgetisation
of the European Development Fund. The Council was opposed to this
proposal because member states were not willing to relinquish
control over EDF expenditure.
Tony Cunningham, MEP
The Commission lacked the necessary expertise for
some of its policies to be fully implemented. For example, despite
a commitment at the Madrid summit to mainstream gender issues
into all programmes, the Commission only had two members of staff
with expertise in this area. DFID could assist in providing Detached
National Experts (DNEs).
Not all development funds were dispersed through
governments. For example budget line B-7 6 set aside some 200
million ecus for NGOs.
The Committee was keen to stress that lots of excellent
projects were funded by the European Union. The assumption that
all EC aid was lower quality than bilateral aid was simply not
true. But the system was not perfect. Increased coordination between
donors and within the EC could go some way to increasing the impact
of EC development cooperation work.
The Commission often had a preference for large-scale
projects. Such projects were easier to control and were more tangible
in their results. For example road construction was easier to
quantify than more abstract projects such as literacy.
If large amounts of money were freed up as a result
of underspends, it would be possible to transfer the funds elsewhere
in the budget. If the funds were not spent by the 31 January,
the funds were returned to national Treasuries. Whilst in the
UK (and Denmark) underspends returned to the development ministries,
in the vast majority of the EU member states, undisbursed funds
reverted to the finance ministries.
He noted a recent shift away from ACP countries towards
prioritising Central and Eastern European countries. One reason
for this shift in focus was that some Mediterranean member states
felt threatened by North African and Middle Eastern countries
(for example, by possible immigration). African countries did
not have similar clout.
The Committee was extremely concerned that developing
countries in regions such as Africa and Asia were not included
as Commission priorities, and were merely included as a saver.
The Committee wanted to see the budgetisation of the EDF as part
of a concerted move to include ACP countries as a Commission priority.
Every political grouping in the European Parliament would be putting
a strong case for the inclusion of developing countries as an
Agenda 2000 priority.
Certain budget lines had been established to reflect
current political objectives. For example, the Latin American
budget line had never been cut because Spain regarded it as a
political priority. At present time there were concerns as to
who among member states is advocating sub-Saharan African countries
in discussions.
Winifred Ewing, MEP
Noted that aid to ACP countries is generally well
spent. A body of expertise had been built up in EC delegations
over the years that belies recent scare stories in the press.
Problems in sub-Saharan Africa (such as Aids) were often perceived
as being insurmountable which has meant that it was hard to enthuse
non-Committee MEPs.
One weakness within the EU was a lack of cross fertilisation
of useful ideas. There should be mechanisms to ensure that successful
projects could be replicated elsewhere. For example, Ms Ewing
had seen excellent pre-famine networks in operation in Mali.
Wednesday 2 December at 1600 hrs
Mr Ken Collins MEP, Member of the Agenda 2000
Steering Group
The Agenda 2000 Steering Group had been established
to address the sequencing of the various legislative stages of
Agenda 2000 referring to Structural Fund reform. There were 19
separate items within Agenda 2000, but the overarching document
was to be agreed by consent procedure. The consent procedure did
not allow any opportunity for amendments - amendments to various
elements of the document could be carried out individually. This
meant that there was a danger that each element would be agreed
separately, in chronological order, without reference to other
items in Agenda 2000. This was clearly not the best way to achieve
a consistent and comprehensive outcome.
In response to this potential incoherence in the
legislative process, the Conference of Committee Chairmen had
devised a procedural structure and timetable to contain Agenda
2000, ensuring that each element was agreed in a sensible order,
and most crucially, that the consent procedure was the last vote
taken. The Steering Committee included the Chairmen of all the
Parliamentary Committees involved in Structural Fund reform: the
Foreign Affairs, Regional Affairs, Social Affairs, Agricultural,
and Fisheries Committees, and the Chairman of the Conference of
Committee Chairs, and was chaired by the President of the Parliament.
The Group focussed on legislative coordination rather than the
content of the legislation.
Wednesday 2 December at 1630 hrs
Mr Terry Wynn MEP, Member of the European Parliament
Budget Committee
The omission of development as a priority in Agenda
2000 was a "glaring error".
In order for the Agenda 2000 priorities to be agreed,
there had to be an Inter-Institutional Agreement on the Financial
Perspective. The Inter-Institutional Agreement (IIA) was agreed
between the Parliament and the Council of Ministers and referred
both to spending targets and to agreements on legislative and
procedural matters relating to the Commission's expenditure for
7 years. The present IIA was due to expire in 1999.
If a new Financial Perspective was not put in place
for 2000-2006, expenditure would be agreed on an annual basis
according to Article 203 of the Treaty of European Union. This
would afford more power to Parliament, but would mean that no
guiding principles or priorities had been agreed, so expenditure
would be determined annually within no longer-term framework,
which would lead to haphazard budgetary allocations. It was therefore
very important that the new Financial Perspective was agreed.
There was a major incentive for the Council to complete
negotiations before the end of the Parliament in May 1999. If
this did not happen, negotiations would have to begin again after
the establishment of the new Parliament, which would inevitably
mean that a new Financial Perspective would not be agreed on time.
This placed Parliament in a strong bargaining position as, under
Article 203, the budget would have to be agreed on a year by year
basis, giving the Parliament a bigger say.
Mr Colom I Naval, the Rapporteur of the Committee,
represented Parliament in negotiations between Parliament and
the Council leading to the IIA. This offered an opportunity for
meaningful parliamentary input into the process.
The Development and Cooperation Committee was not
formally invited to comment on Agenda 2000 or the Financial Perspective.
However, there was nothing to stop the Committee from feeding
in comments through the Budget Committee.
It was generally agreed that pre-accession assistance
should be consolidated into a separate budget category.
Resources could be moved between budget lines within
each category of expenditure. Mr Wynn proposed an increase in
flexibility for funds to be moved between categories without having
to following lengthy and complicated procedures.
The Budget Committee had the final say on non-compulsory
(ie non-agriculture-related) expenditure, which amounted to 52
per cent of the EC budget, and was therefore a key instrument
for genuine parliamentary influence to be exerted.
To keep the EDF separate from other External Action
expenditure was foolish. It meant that Parliament had no influence
over the EDF budget, other than approval of its accounts. The
Council did not want to relinquish its control over the EDF, and
therefore opposed its budgetisation.
It was important to bear in mind that budgetisation
of the EDF would cost the UK an extra 500 million ecu, because
its contributions would have to increase to match those of other
member states. Germany would have to pay an estimated 700 million
ecu more, and France would be able to decrease its contribution
by 900 million ecu. These estimates were based on current contributions
of member states to the EDF if resources were allocated in the
same ratio as for the budget.
On the whole, money not spent was returned to member
states. Such returns were reduced by transfers between budget
lines within each Category. Transfers within Categories could
take place at any time. Towards the end of each year (around August),
there was usually a "global transfer" including movements
of resources between various budgets.
In the Preliminary Draft Budget for 1999, the Council
of Ministers had added 100 million ecu to the budget; the Budget
Committee then removed these (additional) funds from the draft
budget. The Council of Ministers subsequently reinstated 48 million
ecu to the programme. In response to this latest proposal, the
Budget Committee had decided that the additional funds should
be placed in reserve until it was clear that there was a capacity
to spend them.
In theory it was clear that programmes which underspent
should not have subsequent increases to their budgets if the capacity
to spend had not improved. However, budget allocations did not
take place in sterile conditions, and were dictated by political
priorities as well as pragmatic reasoning. For example, there
was a clear lack of capacity to spend the South Africa budget,
but this had been maintained due to its political significance.
Similarly, Southern MEPs would not support cuts to the MEDA budget.
314 votes (50 per cent + 1) had to be obtained in
order to get the IIA through Parliament. A consensus between the
two main parties was necessary to achieve the requisite majority.
The problems associated with the Human Rights Foundation
had now been resolved. There had been a problem with the legislative
basis for its expenditure which, Mr Wynn was confident, had been
resolved.
Rationalising the budget lines would not lead to
any real difference in expenditure patterns: there would be fewer
budget lines, with additional commentary including the priorities
of those lines which were removed. The main difference would be
better accountability and transparency.
Wednesday 2 December at 1715 hrs
Meeting with members of the NGO Liaison Group
Present:
Simon Stocker, Eurostep
Jo Brew, WIDE, (Network Women In Development Europe)
James Mackie, NGO Liaison Committee
The Liaison Committee of NGOs was an umbrella organisation
of NGOs involved in working with the EC.
Simon Stocker introduced a paper produced by Eurostep
(a group of NGOs) on the Commission's proposals for the new Financial
Perspective 2000-2006.
The central objective of the paper was to raise the
profile of poverty eradication as a priority for EC external action
expenditure.
The EC external action budget, as a multilateral
program, necessarily reflected the priorities of member states.
It was important to recognise that development programmes of multilateral
donors such as the EC were not of the same nature as those of
bilateral donors, and that priorities of member states in relation
to multilateral programmes and their own bilateral programmes
often differed. The EC budget was broader in scope than the bilateral
programmes of individual member states, addressing nearly all
the countries in the world.
The development corporation objectives of the European
Union were set out in the Treaty of European Union under Title
17, Article 130u.
One of the proposals put forward by NGOs was to differentiate
within Category 4 expenditure the proportion of aid being delivered
to countries on parts I and II of the DAC list.
Discussion of the current Financial Perspective (1993-99)
had taken place separately from discussions on contributions to
the EDF. As a result of increased allocations to the MED and CEEC
regions during discussions on the Financial Perspectives, member
states had been less willing to meet increased contributions to
the EDF. Consequently, donations to the EDF had been reduced.
In future years, the EDF and Financial Perspective should be discussed
together as part of an overall coherent strategy.
Pre-accession aid should be removed from the bulk
of development assistance allocated under Category 4. The Commission
should also examine ways in which Category 4 expenditure could
be increased (for example, by reducing the funds allocated to
agriculture).
NGOs also wanted to see better reporting and evaluation
mechanisms, and a clearer relationship between EC and bilateral
programmes.
One problem associated with the use of the development
budget was the slow disbursement of funds. The capacity of the
EC to disburse the allocated volumes of aid had been called into
question over recent years. The creation of the Common Service
(SCR) might go some way to addressing this issue, but NGOs were
concerned that the SCR represented a management solution to what
was essentially a political problem - ie the fact that member
states placed undue emphasis on the volume of aid distributed
to various regions, rather than the effectiveness or quality of
the work carried out, and this led to over-allocation to regions
which were considered politically important.
In most instances, funds that were not allocated
were returned to national treasuries. NGOs would like see underspends
used for development purposes. One suggestion was that undisbursed
funds which had been allocated to the EC for development purposes
should be used to finance the HIPC initiative.
The need for humanitarian assistance could not be
forecast. The humanitarian aid budget should, therefore, not be
reduced below its current levels.
James Mackie
NGOs tended to respond to Commission priorities for
NGO expenditure, and tendered for resources offered. Some NGOs
also took the initiative to approach the Commission for funding
themselves.
It was acknowledged that some competition for EC
funding did exist between NGOs.
NGOs were accountable through their Trustees both
to those who invested time and money in NGOs, and those with whom
NGOs worked in developing countries. It was recognised that transparency
and accountability of NGOs was important and needed to be improved.
The Liaison Committee had a charter describing ways
in which NGOs should behave and setting out standards that should
be expected of them.
The Liaison Committee had 15 members - 1 for each
member state - selected from national NGOs. Committee members
met five times a year. The Committee also met regularly with representatives
of the Commission, for example a meeting had recently taken place
with the Director-General of DGVIII. An annual general meeting
was also held with greater numbers of delegates (nine each from
larger member states, and three from smaller member states). There
were also a number of specialist groupings (for example a group
of financial experts that met three times a year and held regular
meetings with budget line managers). An annual forum took place
with ECHO on humanitarian aid.
To date no meetings had been arranged with the Comité
de Direction.
The NGOs enjoyed a good relationship with parliamentarians,
who often took NGO suggestions on board. It was unfortunate, however,
that the Development and Cooperation Committee was relatively
weak in comparison to others, such as the Budget Committee.
The EC development budget was supposed to complement
the activities of member states. In reality, the relationship
was less clear. Member states would often have specific political
priorities that they would bring with them. For example Spain
has focussed on Latin American countries, France on the ACP, the
UK on the ACP and Asia, and the Nordic countries had traditionally
had a strong poverty focus.
For their part, NGOs were tackling poverty on two
levels: first through projects on the ground, and secondly through
advocacy — trying to increase the poverty focus of European
aid. In examining ways in which the EC development programmes
could be targeted to benefit the poorest, the importance of a
gender perspective had to be acknowledged. Seventy per cent of
the poorest people (those on less than one dollar a day) were
women. Following the Beijing plan action, the EU had agreed a
gender resolution. The gender perspective had been translated
into programmes to some degree, but more still needed to be done.
NGOs were recommending the simplification of budget lines; however,
the budget line for gender had to remain intact.
NGOs saw themselves as filling gaps between emergency
funding and development funding: with the Commission putting increased
emphasis on bilateral programmes, some NGOs were worried that
the gaps might reappear.
The issue of late payments was extremely serious.
1998 had been the worst year for a long time because the reorganisation
of the Commission, along with increased public scrutiny of EC
expenditure and consequent increased pressure for accountability,
had resulted in extra delays in payments. The problem had been
further exacerbated by increased public scrutiny of ways in which
the Commission spent money. A knee-jerk reaction to criticisms
of Commission expenditure had been to tighten up procedures. As
a result, the system was starting to seize up.
Whilst it was important to have systems of scrutiny
in place, recent concern had led to EU technocrats increasing
their power and, in effect, making policy decisions.
Jo Brew
A gender perspective was essential in tackling poverty.
NGOs were generally in favour of a rationalisation
of budget lines. It was, however, important that some, such as
the gender budget line, remained in place until such issues were
sufficiently well-integrated into regional programmes.
NGOs had argued for a number of years for a framework
system to facilitate co-financing. At the present time some 200
million Ecus was available to NGOs through budget line B-76. Some
NGOs had been working with the Commission for over 20 years; a
similar system to that put in place by ECHO would therefore be
welcomed.
Thursday 3 December at 0930 hrs
Mr Enrico Cioffi, Director-General, DGIB
DGIB covered all aspects of the EU's work in South
and South-East Asia, Latin America, the Mediterranean and the
Middle East. This included political dialogue, preferential trade
agreements, and development- and economic cooperation.
The most important aspect of the work of DGIB was
the MEDA programme.
A Council Resolution of June 1997 had highlighted
the importance of coordination and coherence between the RELEX
Directorates-General. DGIB was currently working on proposals
for increased coordination. There were regular meetings at Commissioner
and Director-General level between the RELEX DGs. For example,
a recent meeting had discussed the future of multilateral trade
agreements. It was recognised that in such discussions the EC
must take full account of the links between trade liberalisation
and development.
The Common Service Directorate (SCR) would also contribute
to increased coherence.
An EC strategy for the Mediterranean and Middle-East
had been agreed at Barcelona in 1995. The aim of this strategy
was the creation of a Free Trade Area encompassing the EU and
Mediterranean basin, which would foster peace and stability in
the region. The partner countries included in the Barcelona process
were Morocco, Algeria, Tunisia, Syria, Lebanon, Jordan, the Palestinian
Authority, Egypt, Israel, Cyprus, Malta and Turkey.
The Commission did not have such a clear multi-annual
strategy for its development cooperation activities. Strategy
papers for Asia and Latin America and South and South-East Asia
were currently under discussion. These would outline a strategy
for several years.
It was expected that development cooperation with
Asian and Latin American countries would become increasingly regionalised,
with movements towards regional political and economic groupings.
The EU was a model to which others aspired. Regional cooperation,
for example in Africa, would better equip countries to cope with
the challenges of globalisation. In Africa, there was very little
internal trade - only a third of the trade between Africa and
Europe. The development of regional economic and political cooperation
was a first step for African countries towards increased competitiveness
and ultimate integration into the world economy.
Economic cooperation was not the main focus of the
work of DGIB. The main areas of concentration of development cooperation
were financing specific projects, institutional reform, structural
adjustment and budgetary support. As regards economic cooperation,
and particularly investment promotion, this was seen as being
in the mutual interest of the EU and developing countries. In
such areas, a small amount of money could have a disproportionately
significant impact. One million ecu of investment could lead to
a return of 7 million ecu and create hundreds of jobs.
Economic and development cooperation were not contradictory
but complementary. Most poor countries were keen to develop business
and trade links to increase their access to markets and create
jobs, which in turn led to poverty alleviation. All projects included
development criteria.
In some cases, the financial efforts of the EU was
not matched by a coherent political role, for example in the Middle
East peace process.
The reason that disbursements during a given year
were less than commitments for the MEDA programme was that MEDA
projects ran over several years, so commitments were disbursed
over several years and were therefore not reflected in the accounts
of the year in which the commitment was made. It was only possible
accurately to evaluate the difference between commitments and
disbursements at the end of all the projects. Financial envelopes
typically covered seven years, and expenditure for the financial
envelope was disbursed over up to ten years. It was expected that
if a comparison was made between commitments and disbursements
at a time when all projects under the financial envelope were
complete, only a minimal discrepancy would be found.
The commitments made under the MEDA programme usually
reached the limits given in the budget. For example from 1996
to 1998, the first three years of the current financial envelope,
about 95 per cent of the budget for commitments was committed.
This showed that, usually, there was not a problem with undercommitment.
There was an element of underspend which was due
to the greater financial risks inherent in the type of projects
funded under the MEDA programme, which included budgetary support
programmes rather than projects. All MEDA projects were agreed
with the recipient country, and then had to be approved by the
MEDA Committee which consisted of representatives of the Council
of Ministers.
Figures showing expenditure were published regularly,
and were also available on the Internet.
Mr Wells cited the figures given by the Court of
Auditors in its Report on EC expenditure during 1997, which showed
that the budget for commitments to the Mediterranean and Middle
East had been spent almost in full, but the budget for payments,
which was already much less than the budget for commitments, was
not fully spent - only 64 per cent of appropriations for commitments
had been disbursed. Mr Cioffi said that this was due to problems
of absorption in recipient countries. MEDA grants were given according
to specific conditions which must be met by recipient countries.
When these conditions were not met, the money was not disbursed.
The underspend therefore represented a saving of money which would
otherwise have been wasted. It was expected that 100 per cent
of the appropriations for payments would be spent in 1998, and
that in the long term, the full appropriation of the current financial
envelope would be spent.
The reason why more resources were not spent in the
poorer developing countries was that member states had decided
how to divide up the Category 4 budget according to their priorities.
The Commission was obliged to spend its budget in line with these
priorities.
The present allocation of between 300 and 400 million
ecu per annum allocated to Asia and Latin America was a considerable
sum and broadly in line with their capacity to absorb the aid.
The establishment of a multi-annual financial envelope for Asia
and Latin America would not be a good idea at the present time
because of a lack of absorption capacity among recipient countries.
Three decentralised programmes had recently been
launched in the Med region: a University programme, town regeneration
programme, and a media programme.
The creation of the Common Service Directorate-General
would be a positive step, its primary objective being the unification
and coordination of approaches across all types of projects and
programmes in the various regions covered by the RELEX DGs. The
new Directorate had only just come into operation, two months
ago, so it was too early to evaluate its effectiveness. It was
hoped that putting together the implementation of all RELEX DG
programmes and projects in one Directorate would improve efficiency
and this would probably improve rates of disbursements.
Thursday 4 December at 1100 hrs
Mr Erkki Liikanen, Commissioner, DGXIX
The Budgets Directorate-General was responsible not
only for Category 4 expenditure, but the whole of the Commission's
budget.
Priorities for 2000-2006
Accession would be a major challenge for Europe during
the period of the next Financial Perspective (2000-2006). Most
of the work would be carried out by the Phare programme, and this
would therefore be the main focus of EC external action expenditure.
Seventy per cent of Phare expenditure was directed
towards infrastructural work. The average size of Phare programmes
was increasing, and the number of Phare programmes was decreasing.
This was expected to lead to an acceleration in the disbursement
rate.
The remaining 30 per cent of Phare expenditure was
allocated to institution-building, including judicial, public
administration and public expenditure reform.
A second priority was the Mediterranean region.
The third priority was the states of the former Soviet
Union. These programmes operated under very difficult and unpredictable
circumstances. The EC was concentrating its efforts on preparing
the necessary framework for transition from controlled- to market-
economics. This included work to develop the rule of law, public
administration, and tax authorities. There was also a nuclear
programme in the former states of the Soviet Union. There were
64 Soviet-type nuclear reactors in the region, the weaknesses
of which had been exposed by the Chernobyl disaster. The programme
was aiming to carry out a feasibility study on each plant. This
was a 50 billion ecu operation, and was likely to be a very long
and difficult process.
A decision to cut any of these programmes would reflect
on the perceived priority attached to them by the member states.
It was of course important for budgets to be set at levels which
were "tight but right", but it must be borne in mind
when discussing EU expenditure that it was dictated not by the
Commission, but by member states in the European Council.
The Financial Perspective was very important because
it set the priorities according to which budgets would be allocated
for the next seven years. The Financial Perspective could not
progress without Parliamentary approval.
ECHO
In 1995, the financial management structure of the
European Community Humanitarian Office (ECHO) had been reformed.
This had included a separation between budgets and operations
management. The recently reported cases of fraud in ECHO referred
to the period 1993-95, before these reforms had taken place. At
the time, some financial management services were contracted out.
There was no longer any outsourcing of public administration work.
The fraud case referred to only 0.1 per cent of the ECHO budget
for the period.
The recent allegations of fraud in ECHO had, to some
extent, jeopardised the capacity of the Office efficiently to
process commitments. There was a risk that the amount of reporting
and auditing imposed on the Office could begin to become disproportionate
to its capacity and ability to carry out its work. This was unfortunate,
as on the whole, ECHO had been performing well, especially since
1995.
The Human Rights Foundation
Recent problems associated with the funding of the
Human Rights Foundation had arisen from doubts about the legal
basis for its expenditure. The problem had now been solved for
1998. The Human Rights Foundation would appear in the commentary
for the 1999 budget, but it still needed a legal basis which was
pending in the Council. The Commission would, in any event, try
to find ways to execute the budget lines in agreement with the
budgetary authority.
Pre-Accession Aid and the New Category Seven
It was now agreed in principle that all pre-accession
aid should be consolidated into a single budget category. This
policy agreement had not yet been formalised.
The Common Services Directorate (SCR)
The SCR was, in Mr Liikanen's view, the first step
towards an overall rationalisation and streamlining of EC expenditure.
One of the aims of the process was to reduce the number of procedures
for accessing money from 47 to seven.
Restructuring the Commission
It was expected that a new President of the Commission
would be elected in June 1999, with Parliamentary endorsement
in July. By October 1999, it was expected that the Commissioner
portfolios would have been allocated. Once these portfolios were
allocated, there would be no opportunity to amend them. There
would therefore be a two-month window of opportunity for restructuring
of the Commission to take place, between the election of the new
President and the appointment of Commissioners. Whether or not
this opportunity was taken would depend on the priorities of the
new President. The Commission would be preparing material for
the new President to assist in any restructuring, outlining feasible
options. The current screening operation would feed into any proposals
put forward by the Commission.
Late Payments
The Commission recognised that there were some delays
in payments to contractors and NGOs. As a result, the Commission
had taken the step of paying interest on late payments. It was
expected that the new SCR would contribute to an acceleration
in payments. A UK company had been contracted to carry out an
internal study of the extent and causes of late payments by the
Commission. This was expected to be completed by Christmas.
The 20/20 Compact
Mr Liikanen was not aware of any commitment to the
UN 20/20 Compact, which advocated mutual undertakings between
recipients and donors to spend a minimum of 20 per cent of domestic
budgetary and foreign aid resources on basic social sector improvements.
He was therefore not able to comment upon whether the EC met such
targets.
Thursday 3 December at 1215 hrs
Meeting with Mr Alberto Navarro, Director, ECHO
The EU was the biggest trade power in the world.
Together, the Commission and member states accounted for between
23 and 25 per cent of the world's total trade (and almost 40 per
cent taking account of intra-community trade). Over a quarter
of jobs in Europe were directly or indirectly related to trade.
The EU was by far the largest donor of development
assistance in the world. Together the European Union and its member
states accounted for between 53 per cent and 57 per cent of development
assistance. Of this total, some 15 per cent was disbursed by the
Commission with the remaining 85 per cent disbursed by members
states.
The European Union also provided over half of the
world's humanitarian aid, with member states accounting for 25
per cent, the Commission just over 25 per cent (through its humanitarian
office, ECHO), the US a further 25 per cent, and other donors,
mainly Norway, Canada, Japan and Switzerland, the rest.
ECHO was a good example of subsidiarity. Humanitarian
aid was an example of an appropriate area to be communitarised:
one entity was more effective in quickly disbursing aid than 15
separate member states, avoiding duplications and overlaps. For
example, in the wake of Hurricane Mitch, ECHO was able to allocate
15 million ecu to Central America with one single decision. Similarly,
ECHO ensured coherence. Emergency aid administered on a bilateral
basis frequently lead to shortages or surpluses in certain types
of expertise or in types of equipment due to poor coordination
between donors.
At the other end of the scale, ECHO also subscribed
to the principle of subsidiarity in implementation. Since 12 months
ago, ECHO no longer had any direct involvement in humanitarian
work. ECHO now worked entirely through NGOs and multilateral organisations
(Red Cross and UN agencies) already represented on the ground
and therefore better-equipped to assess needs and carry out the
necessary work. ECHO had previously channelled up to 15 per cent
of its resources directly. This had involved hugely complex procedures,
such as translating all documents into 11 languages and tendering.
In 1998, ECHO had dispersed some 520 million ecu:
70% through NGOs, 15% through the ICRC and Red Cross national
societies, and 15 per cent through UN agencies (mainly UNHCR,
WFP, and UNICEF).
Emergencies were, by nature, unpredictable. Accordingly,
under the Edinburgh Financial Perspective, ECHO was allocated
330 million ecu annually, with a similar amount placed in reserve.
Last year 150 million ecu of the reserve was used. Mobilisation
of the reserve was complicated, as requests to unlock funds placed
in reserve had to be authorised by the budgetary authority. ECHO
was therefore in favour of a reduction by half in the volume of
emergency resources placed in reserve - it had been proposed that
half of the reserves should be moved to ECHO's budget.
The European Union also had a (non-emergency) food
aid budget administered by DGVIII. This budget amounted to some
600 million ecus per year. In the personal opinion of Mr Navarro,
emergency food aid should be distributed by ECHO. This would reduce
the risk of duplication of efforts between different arms of the
Commission, and enable better coordination of efforts, and a consequent
increase in value for money.
ECHO was reasonably satisfied with the proposals
set out in the new Financial Perspective for 2000-2006.
ECHO also wanted to see one budget line, rather than
the five which existed at the present time covering separate regions,
because humanitarian assistance should not be subject to regional
priorities, but universal. There was, therefore, no need for division
of the budget among regions.
It was often the case that ECHO had to acknowledge
that, in certain conflict situations, some food aid (sometimes
up to 20-30 per cent) would be diverted to those who did not need
it. By seeking 100 per cent allocation and zero "seepage",
food aid would often reach no one. It had to be accepted that,
in some cases, getting some food to those who needed it meant
a small amount of seepage, unless politicians could ensure that
emergency aid could be effectively dispersed by the provision
of armed escorts or the deployment of a multinational force. All
conflicts were political in origin, so the solution had to be
political as well. The European Union needed a stronger Common
Foreign and Security Policy in order to complement, or even to
avoid or make unnecessary, the humanitarian aid effort.
Humanitarian aid could never be a solution to an
emergency. The EU needed to get more involved in political solutions,
otherwise others would take over and the EU would end up footing
the bill.
In terms of coordination with longer term development
assistance, ECHO had to take into account this final goal. For
example ECHO had left Haiti and Mozambique in 1998, and planned
to leave Niger and Mali in 1999. It had also to be acknowledged
that ECHO was unable, under the present division of labour inside
the Commission, to contribute significantly to rehabilitation.
For example ECHO was unable to fund the building of roads, bridges
etc.
The recent allegations of fraud in ECHO referred
to four contracts signed during the years 1993 and 1994. The amount
of money involved was yet to be determined by the judicial authorities,
but was estimated at around 400,000-600,000 ecu.
The allegations referred to a small number of specific
projects, and were not indicative of a generalised problem. Fraud
was nevertheless unacceptable at any level, especially in the
field of humanitarian work. ECHO was now better-equipped to process
and audit contracts, with an increased number of staff. The Commission
still had fewer staff per dollar of aid than any other international
institution or member state development department.
ECHO made judgements on a case-by-case basis on which
partner would be the most effective in any given situation. In
many cases, it was preferable to channel resources through NGOs
if possible, since it was generally cheaper and more cost-effective,
and NGOs often had better links with beneficiaries than other
donors.
Mr Navarro had never come across a totalitarian population,
only totalitarian dictators. It was important to design embargoes
in a sophisticated way in order to ensure they did not harm the
innocent civilian population. On the whole, all-encompassing embargoes
were morally unacceptable, as they did not harm the regime, but
the population.
Thursday 3 December at 1500 hrs
Meeting with Catherine Day, Director (Relations
with CEECs), Directorate-General IA
Present:
Catherine Day, Matthew Wyatt
Catherine Day welcomed the visit of the Committee.
She was anxious that the Commission should be accountable and
that member states should have an opportunity to share their concerns.
DG IA was responsible for the Phare programme. The
programme covered 13 countries: ten Central and Eastern European
Countries, and Albania, Bosnia and the Macedonia.
At Cannes, DG IA had been allocated 6.7 billion ecu
for the period 1995 to 1999. Under the new financial perspective,
the Commission had allocated 1.5 billion ecu per year from the
2000 to 2006. The financial envelope allocated to Phare was split
between national allocations and a multinational programme. Approximately
50 per cent was spent on each. Multinational programmes were important
as they allowed economies of scale (for example programmes to
combat drug trafficking).
DG IA had recently experienced problems with the
vagaries of the European budgetary process. Multi-annual planning
was difficult because budgets were allocated on an annual basis.
For example to fulfil the Cannes envelope, DG IA was required
to spend 1.7 billion ecu in 1999. As part of the current budgetary
process for 1999, however, Parliament had cut the budget by 200
million ecu.
The Phare programme had originally concentrated on
the transition of economies from controlled to market-led, and
the rule of law. The programme had been overhauled in 1997 to
focus on the accession of the applicant states. Since the reform,
the programme had followed two main themes preparing countries
to take on the obligations involved in EU membership: investments
(assisting applicant countries achieve the aquis communitaire)
and institution building. Seventy per cent of funds were directed
towards the former, with 30 per cent directed towards institution
building.
The Phare program had also sought to improve the
speed with which contracts were allocated and the efficiency of
its work. Prior to 1997 the Commission had allowed three years
to sign a contract once a commitment had been made, and 12 months
to disperse the funds. Now, two years were allowed for the contract
and 12 months to disperse the funds. Contract-signing now tended
to be delayed until the project was ready to be implemented, thus
reducing the lag between contracts and disbursements, and reducing
the risk of project failure following contracting.
There were problems of underspend but in 1997 the
backlog of payments had stabilised for the first time (i.e. they
did not increase). In 1998 DG IA was hoping to reduce the backlog.
In order to address the problem of underspend, DG
IA was now clearer about what to do and what not to finance. DG
IA had also published a number of country strategies - "Accession
Partnership Agreements" (which were available on the Internet).
This meant that programmes were more focussed.
Payment rates were improving year on year. An examination
of payments made between 1995 and 1997 showed a considerable improvement
on the period examined by the Court of Auditors in its Report
on Phare and Tacis (1991 to 1997). Analysis of underspend depended
heavily on the period of time examined. It was true, however,
that during the period 1991-97, the figures in the Court of Auditors
Report showed an over-enthusiasm for privatisation, without a
realisation of what was really involved in such programmes, and
how difficult they would be to implement.
There were considerable difficulties in realising
what DG IA was trying to achieve. DG IA was targeting funds on
people and structures rather than on finite, tangible projects
such as roads.
In recent years, the Phare programme had also been
concentrating on providing partner countries with the necessary
expertise to design projects. Whereas, in previous years, Technical
assistance was required to achieve this, many partner countries
were now capable of designing their own projects.
The capacity of CEECs to absorb aid was also gradually
improving.
DG IA would welcome the introduction of a new Category
7 if it were to provide funding on a multi- annual basis. The
current annual budgetary process presented a number of difficulties
for Project Planning.
Letter to the Committee from Catherine Day, DGIA
(Directorate B), European Commission
I enjoyed the discussion with you and your colleagues
on the House of Commons' International Development Committee earlier
today, and hope that you found it useful.
I promised to provide further details on the point
you made with regard to the level of payments on private sector
development programmes in Latvia. You quoted from the Court of
Auditors' Special Report no 11/98, as published in the official
Journal of 3 November, which reported that payments of MECU 3.71
had been made against commitments totalling MECU 20.98 - i.e.
payments as a proportion of commitments totalled 18%. These figures
were correct at the end of 1997. In fact the level of payments
on these programmes as at 30 September 1998 had risen to MECU
8.7 - over 40% of total commitments. This compares, incidentally,
with a total for the whole Latvia programme of 60%, and for the
entire Phare programme of 66%.
I should also point out that the level of payments
against commitments depends to a very great extent on when the
commitments were made. Commitments were made for private sector
development programmes in Latvia in 1995, 1996, and 1997. The
table below shows that the 1995 programme is (virtually) fully
contracted and that payments are at a level of over 70%. The 1996
programme is fully contracted, but few payments against these
contracts have yet fallen due, and contracting against the 1997
programme is well underway (over 50%).
Latvia: Private Sector Development programmes. 30/9/98
Year |
1995
|
1996 |
1997
|
Total |
Commitments |
8.3
|
4.4 |
8.3
|
21 |
Contracts |
8.0
|
4.2 |
4.8
|
17 |
Payments |
5.9
|
0.9 |
1.9
|
8.7 |
Payments as % of commitments
|
71 |
20
|
23 |
41
|
These figures show clearly that our implementation
performance is much better than it appears to be at first sight
from the figures in the Court of Auditors' report.
But we are not complacent. As I pointed out when
I saw you, we carried out a major reform of Phare in 1997 in order
to improve its effectiveness and impact and to speed up implementation.
I enclose a copy of the 1997 Phare Performance Review, which provides
more information on these reforms. It is still early days, but
the indications are that these reforms are beginning to pay off.
Please do not hesitate to contact Matthew Wyatt (tel
2990607) or me if you or your colleagues would like any further
information or clarification.
Catherine Day, Director, DGIA , December 1998
Thursday 3 December at 1530 hrs
Meeting with Mr John Kjaer (Relations with NIS),
Directorate-General DG IA
The legal basis for Tacis was coming to an end next
year. It was hoped that the new regulation, when put in place,
would respond to a number of criticisms that had been levelled
at the program in recent years. The new regulations would also
provide an opportunity to look at the new political situation
in Europe.
Underspend was acknowledged as a problem, however,
backlogs were now coming down to levels normal for programmes
concerned with technical assistance.
The Tacis programme was different from the ACP insofar
as it was concerned with technical assistance rather than development
assistance . The Tacis programme was not so much concerned with
poverty alleviation as with assisting countries move from centrally
planned economies to market economies. This involved developing
legal and regulatory frameworks. Whilst some social sector reform
programmes had been undertaken (for example in Russia) the programme
had tended to concentrate on structural changes.
The need to improve performance in paying consultants
and others on time was recognised. The SCR was a response to this
problem. Other efforts to address the problem included an increase
in the number of staff working on payments, the implementation
of a set of uniform rules in contracts, and a reduction in the
number of payments under each contract.
In Russia, programmes tended to concentrate on private
sector development. Some work in the public and financial sectors
was involved in this. Twinning programmes, between public and
private institutions, had proved very successful in Russia.
In the states of the former Soviet Union, the emphasis
was more directed towards the rule of law.
| 
