EUROPEAN COMMUNITIES INVESTMENT PARTNERS
REGULATION
(21002)
6047/00
COM(99) 726
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Draft Regulation regarding the closure and liquidation of projects
adopted by the Commission under Council Regulation No. 213/96 on
the implementation of the EC investment partners financial instrument
for the countries of Latin America, Asia, the Mediterranean region and
South Africa.
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| Legal base: |
Article 179(1); co-decision; qualified majority voting
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| Document originated:
| 31 January 2000 |
| Forwarded to the Council:
| 31 January 2000 |
| Deposited in Parliament:
| 24 February 2000 |
| Department: |
International Development |
| Basis of consideration:
| EM of 13 March 2000 |
| Previous Committee Report:
| None |
| To be discussed in Council:
| No date set |
| Committee's assessment:
| Politically important |
| Committee's decision:
| Not cleared; further information requested
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Background
11.1 The financial instrument known as the
European Community Investment Partners (ECIP) instrument promotes
EC/local joint venture private investments in the developing countries
of Asia, Latin America, the Mediterranean and South Africa. It
dates back to 1988, but the latest Regulation, No. 213/96 of 29
January 1996[36],
expired on 31 December 1999. During that time, financing worth
291.7 million euro was approved.
11.2 The Commission says that it is carrying
out a long term reassessment of the purpose of the instrument
and its operational design. This, it says, will:
- take account of the sudden evolution of the international
economic and investment environment;
- take account of the views and experience of the
financial institutions and the business operators who have been
essential to the success of the instrument to date; and
- identify measures to simplify and improve the
financial management of ECIP. Better co-ordination in a transparent
manner of ECIP with other similar EU instruments is also necessary.
The Commission says:
"Since 1988, when ECIP
began, the Commission has developed a wide gamut of other investment
promotion and financing programmes for developing countries (ALINVEST,
ASIAINVEST, MEDA, JOP, JEV and the instruments addressed to the
ACP countries) which have purposes related to ECIP. ECIP's positioning,
co-ordination and possible synergies with these other EU programmes
are also being re-assessed. The design of a single instrument
addressing all developing countries, which will include mechanisms
to adapt to local conditions will be considered".
11.3 It will not be possible to put forward
a new Regulation to provide financing for a "substantially
revised and improved" ECIP before mid-2000 and, given the
time it takes for co-decision measures to be adopted, the Commission
thinks it very unlikely that this will be in force before 2001.
11.4 The proposal it now puts forward is
for a Regulation to cover the winding down and closure of the
portfolio of those projects for which the Commission has already
adopted a financing decision under the Regulation which expired
on 31 December. The steps covered include the amendment of contracts
already signed and the use of outside technical assistance, such
as audit and the Technical Assistance Bureaus. It will extend
any action required under the expired Regulation to 31 December
2001.
The Government's view
11.5 In her Explanatory Memorandum of 13
March, the Secretary of State for International Development (The
Rt. Hon. Clare Short) comments:
"Despite having some
reservations about the effectiveness and efficiency of ECIP, the
UK Government is in favour of the programme.
"The UK Government fully supports the Commission
in its proposal to honour the contracted commitments. In the past,
however, companies have made investments before a contract has
been signed, knowing that the Commission will pay once the contract
is signed. This is encouraged in the ECIP Manual issued by the
Commission which says that costs incurred after the receipt of
the application will be met. When the regulation expired, there
were some companies that had made investments without contract
(it was suggested that there are 153 un-contracted agreements).
The Commission does not propose in the new Regulation to honour
those commitments. Although the legal position of these payments
is as yet unclear, to not honour them will severely damage the
Commission's credibility.
"The first step must be to establish the exact
legal position of agreed, but not contracted, ECIP payments. The
Commission then must not be allowed to damage its credibility
as a vehicle to encourage private sector investment in the developing
world by walking away from the ECIP."
11.6 The Minister says that the draft Regulation
is under discussion in the Development Council Working Group and
will go to the Development Council later this year.
Conclusion
11.7 The Commission's decision to review
this financial instrument is to be welcomed. We would regard this
as a routine proposal which we would not report to House, but
for the extraordinary situation to which the Secretary of State
draws our attention.
11.8 There may be a good reason why this
particular instrument is drafted so as to cover only those projects
for which the Commission has already adopted financing decisions,
but we are surprised to learn that no provision has been made
to cover the "uncontracted agreements". We take these
to be those projects approved by the Commission's Steering Committee
and note the Secretary of State's comment that the procedure adopted
is actually encouraged in the Commission manual on ECIP.
11.9 The practice whereby partners on
development projects have been expected to spend money well before
reimbursement is in sight has become widespread in recent years
because it offers the Commission and the partners a route for
getting on with the business without waiting for completion of
the laborious process of obtaining a formal contract. An example
of the Commission's attitude can be found in a letter of 27 March
on Mozambique from the Secretary of State to the Chairman of the
International Development Committee in which she quotes a representative
of the European Community Humanitarian Office (ECHO) as telling
the DFID mission in Maputo that, as at 10 March, no funds, of
the proposed 8.25 million euro over a six month period, had been
physically disbursed to implementing partners. She says:
"The conclusion of
contracts for the funds ear-marked for Mozambique is still underway;
in the meantime ECHO is relying on NGO pre-financing arrangements
to ensure quick start-up of activities".
11.10 We ask the Government to seek confirmation
from the Commission that it has no intention of making provision
for the companies which do not have contracts and, if this is
confirmed, or the Government continues to believe that this is
the situation, whether:
- the Government will vote against the proposal
unless other provision is made, either in it or through other
measures;
- other Member States, sufficient to form a
blocking minority, will also oppose it;
- the Government believes that the action proposed
by the Commission could be regarded by the European Court of Justice
as breaching the "legitimate expectation" of the companies
concerned; and whether
- it is aware of any British companies which
are likely to be affected.
11.11 Until we have received the Government's
response, we shall not clear the document.
36 OJ No. L 28, 6.2.96, p.2. Back
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