Examination of Witness (Questions 125
- 139)
THURSDAY 6 JULY 2000
MR JURGEN
SCHUELER
Chairman
125. Good morning, Mr Schueler. We are the International
Development Select Committee of the House of Commons. We last
came here in 1998 when Mr Philippe Soubestre had just been appointed
to the position of Director and I think he left some months ago,
did he not, at the end of last year?
(Mr Schueler) The situation is that Mr
Soubestre left at the end of February and since then there has
not been nominated a new Director General. According to the rules
of the House it is the most senior Director who has to assume
this task and this means acting Director-General and that is the
honour which I have to assume for the time being.
126. In fact the organisation has only been
in existence, has it not, officially for a year or less?
(Mr Schueler) The SCR has been decided in 1997. It
has been physically established at the beginning of July 1998.
It became physically operational in September 1998.
127. That is what I remember.
(Mr Schueler) So if you met him at that time it was
at the very beginning. You want to raise questions or are you
expecting an expose«? Anyhow, I have brought you documentation.
128. Thank you. We would like to go straight
into questions but we would also like to have your presentation.
We have been doing some study on your work. We now want very much
to carry our study forward. Perhaps we could probe the questions
of your presentation by asking you questions so that we pick out
the things that we would be particularly interested in talking
to you about because we only have a very short time with you.
One of the things that we have noticed is that the Communication
on the Reform of the Management of External Assistance says that
"the SCR is now starting to deliver concrete improvements.
Last year, the growth in outstanding commitments declined for
the first time since 1990 and absolute levels of commitments and
payments were at record levels. However, a difficult transition
and unclear allocation of responsibilities between geographical
DGs and the SCR have reduced the benefits of the new arrangements".
I was wondering whether you could expand on those remarks, Mr
Schueler. What difficulties were encountered in the transition
of the creation of SCR? What were the problems in the allocation
of responsibilities between the geographical Directorates-General
and the SCR? To what extent have these been overcome with the
reform of the Commission? How is the SCR planning to avoid further
such difficulties in implementing the recommendations of the Patten
communication? That gives you an opportunity to tell us.
(Mr Schueler) Thank you very much for this question
which as a matter of fact covers to a large degree the rationale
of the reform of the policy concerning external assistance. The
difficulties of the SCR at the very beginning can be reduced to
a number of three. The first difficulty was purely a difficulty
of institution building. This institution building meant that
a new SCR had been constructed out of two major sources, ie, before
that there were, according to the definition, four or five Directorates-General
in charge of external aid. There was to a very limited extent
the old Directorate-General in charge of foreign relations, DG1,
which was mainly China. Then there was DG1A basically in charge
of external aid to Central and Eastern Europe, programmes Phare
and TACIS mainly, and later in the history of the programmes for
the Balkans, abbreviated as OBNOVA, with a number of special elements.
129. We have got these lists here. That is the
old Commission.
(Mr Schueler) This was the former, and then there
was DG1B in charge of external relations to the Mediterranean,
Asia and Latin America. It was more or less subsequent to the
fall of the Berlin Wall that the role of the European Union and
the European Commission with it changed so fundamentally in external
aid. I remember as if it were yesterday. At that time I was on
the staff of one of the German Commissioners in charge of the
budget, by the way, and within a couple of weeks it had been decided
to provide aid for Eastern and Central European countries which
was the beginning of the Phare programme with rates of increase
from 500 to 700 million euros at the time to one billion. The
structures for doing this were just not there. The only experience
(and it was a well established experience) came from the ACP side.
Until that time external aid was provided by DGVIII. They had
the development fund, they had the staff, they had the knowledge,
they had the experience and, what is of particular importance,
they had the network of qualified officials within the delegations
in ACP countries which could manage the external aid on the ground,
which is an important aspect of the reform approach. At that time
in the political quarters there was a discussion about the fact
that we could not give all our potential to Eastern and Central
Europe. There had to be an equilibrium. This equilibrium meant
that aid had to be provided first to the Mediterranean and then
Latin America was added. You can imagine which were the Member
States that the Commissioners particularly interested in and Asia
became not very important. Practically at the same time, and this
was another picture, the whole picture changed within two years.
Within that time 1A was established, 1B followed with a delay
of something like 18 months to manage the aid for Mediterranean,
Latin America, Asia. These were the major sources for constructing
the SCR, ie, the financial Directorates which were there had been
extracted from 1A, had been extracted from 1B, had been extracted
to a much more limited extent because they did already have to
make sacrifices before, from DGVIII. That was the core of the
new SCR. The target behind this was creating, with the means of
the Commission (and the Commission can create Directorates-General)
a kind of Directorate-General which would have special tasks comparable—we
have a special office of publication, we have a special statistical
office for these offices which are practically Directorates-General.
There are some special rules concerning management. They have
a certain facility for hiring expertise, for statisticians, mathematicians
and so on. That was the vision of how things might develop already
at that time. This staff was not considered as being sufficient
in qualifications. There was a real lack (which is still existing
today) of staff qualified in financial management and financial
control/audit. I got the request to be transferred to this Directorate-General.
At that time I had about 10 years of financial management and
10 years of financial control behind me, so basically I am a financier
in this business. That was the institutional building aspect of
creating the SCR. This meant also that a lot of re-shuffling had
to be made. There was still a shortage of financees. The people
concerned with development problems in the countries as such were
relatively numerous. At the same time there were problems with
the control authorities. That was the third problem which made
the staffing difficult. The control authorities, in particular
the European Court of Auditors, in conjunction subsequently with
the European Parliament, the Committee on Budgetary Control, were
having a particular eye on some of the areas concerning external
relations, and the very rapid build-up led to what is human, that
there were also some deficiencies and these deficiencies were
in particular in the area of human aid and in the area of humanitarian
aid and in the area of Mediterranean policy, MEDA at the time.
If you remember the press reviews at the time, finally there were
four cases which were fatal for the Santer Commission, of which
two were aid to third countries, Mediterranean and humanitarian
aid. There was a need for substantial work of training, of re-training
for many of those people, and of improving the regulatory framework.
The first point is the institution building point. The second
point is, as compared with previous periods, there was a political
discussion about the regularity of the transaction. SCR had been
managed for quite a time in some areas which has naturally meant
certain delays in implementation and together with this there
was a very clear-cut need for reforming the regulatory framework
substantially. We had at that time about 43 different procedures
on calls for tenders.
130. That is right.
(Mr Schueler) You remember that point?
131. Yes, I do.
(Mr Schueler) We had the whole regulatory framework
in that context first in the form of internal instructions and
now we are working out from the existing financial regulations
what is possible. Now we are in the phase of re-shuffling the
financial regulation, re-structuring and modifying the financial
regulation in order to get a more clear-cut responsibility, a
higher transparency and in particular a standardisation of procedures.
There will still remain certain differences according to the size
and the category, so we have called for tenders for works, which
have by nature much higher financial volumes than services, or
consulting activities and such kinds of things. This distinction
will remain but within this distinction there will be standardised
procedures. Higher transparency means everything with modern technical
means will be published in the Internet. The results will be on
the Internet, total transparency on who obtained and who did not
obtain, and responsibility, ie those who provide for the calls
for tender, sign the contracts and sign the financial commitments.
That is the total procedure which at the very beginning, as I
said, required an enormous amount of training, re-training, re-shuffling
of staff, organisation of the staff, and for the time being the
experience which has been made (and I gather Patrick may have
talked about that) is the cut of the project sizes which was in
reply to your question, one of the major problems which we had
at the time. I wonder whether you are aware of this.
132. Yes.
(Mr Schueler) The project cycle starts according to
the history of countries with a country strategy, and then there
is a programme, then this programme contains a certain number
of guidelines and at a given time these guidelines lead to the
identification of projects. This identification of projects has
to lead to an appraisal, then the commitment of the budgetary
means, then a call for tender has to be done. Then there is the
real implementation of the project accompanied by the auditing
and controlling procedures and evaluation accompanies that, and
there is a final evaluation which will be incorporated into a
new programme, and that is how the project cycle is closed. The
cut of the project cycle is still at this time a task of the reform
in the way that the budgetary commitments are done within the
political DGs, ie, the identification of projects and the budgetary
commitments are not done by those who sign the contracts and to
whom the payments are made and who follow the implementation.
There you have a split of responsibility and a shift of the emphasis
of responsibility which is a continuous problem. You do not have
this unicity of an authorising officer who signs contracts, who
commits and who signs the payments. That is the problem which
comes back in this form of organisation. The reform project comprises,
and with this I am addressing the second part of the document
which I brought forward to you—
133. And that presumably is how you are going
to proceed from now with the new Patten proposals, is it?
(Mr Schueler) Yes.
134. When will the SCR assume the responsibility
for these?
(Mr Schueler) From identification onwards.
135. I see. In Chris Patten's new responsibilities
put upon the SCR when will you assume those responsibilities,
or have you already done so?
(Mr Schueler) We are about to prepare that. The decision
on the details has to be taken by the end of this month.
136. So soon?
(Mr Schueler) Oh yes. We are pretty advanced. I will
take an example. SCR's responsibility has to start from the identification
of projects onwards, so the basic theory is that programming is
a political decision. It is done by politicians. They provide
some guidance but the real identification of projects is a work
of development, of economists and of engineers. That is done within
the SCR and it is implemented within the SCR. That is the basic
philosophy behind it. That means that those officials who did
the identification so far, who did the appraisal, who did the
financial commitments, have to be shifted to the SCR with their
tasks.
137. That is interesting. I have always wanted
to have that.
(Mr Schueler) The way is now what we finished last
night at 10 o'clock, identification of the precise functions,
the tasks and the posts and, if possible, the officials attached
to it. As you can imagine, for many of them the provision now
to go into the very dreary disciplinary work of making precise
commitments, of checking contracts precisely, which is for some
of them (not for all of them) a source of tremendous joy. We did
this job very efficiently in a first phase with DG enlargement.
They do Phare and the enlargement also with the Mediterranean
countries—Malta, Cyprus and Turkey. It was a work which
went efficiently in that sense, that for this area the old-fashioned
big project cycle has been maintained because the way these countries
are supported is mainly the way of the structural funds, ie, it
is a way by programmes and by partnership implementation of the
beneficiary country and the Commission. It is a different approach.
For this 43 officials from the SCR have been shifted from Enlargement
in order to implement the programmes in accordance with the rules
of structural funds in this new Directorate-General. That has
been done. External aid however is following different rules and
the model that you know behind the SCR is the model which we have
in most Member States, that the technical practical financial
implementation is left to a kind of an agency. The project cycle
you will find on page 13 and there you have the different phases
which I have just presented to you and the consequences of the
co-operation to be arranged with different DGs. I wonder whether
I have now replied to your question about what were the difficulties
because I would now like to address how we would like to overcome
them. One of the major aspects is that we have to do more training
in the area of development management and financial management.
138. And you will have to increase your staff,
will you not?
(Mr Schueler) And we have to increase our staff.
139. By transferring them from other places?
(Mr Schueler) The analysis behind this is the following.
Basically there are three important sources. The first two are
not increases. The first is what I told you, the shift of officials
following their tasks. This is nothing other than a shift. It
is not an increase. We are hoping that we will have some economies
of scale. I will give you an example. There are five important
committees: TACIS, OBNOVA, ALA, Mediterranean and Humanitarian
Aid. Each of them has its secretariat within a DG. This is something
where you can rationalise by having one unit in charge of secretarial
work. There is space for economies of scale and it is envisaged
like that. At least I am fighting in that direction and to the
extent that I am supported I am grateful. It is basically a shift.
The second is the technical assistance offices. There is tremendous
pressure from the European Parliament to dismantle the technical
assistance offices. This you will find on page 15. These are about
540 people working in statistical offices and doing work which
has to continue mainly at the technical level, ie, engineering
level or financial work, such kinds of things. Of these we consider
that a little bit more than 200 would have to work within the
new SCR on the site in Brussels whereas a little bit more than
300 would have to go on the spot in the different delegations
to do the implementation on the spot. To assist I come to the
different elements. The basic thing is, as I said, to change the
project cycle in such a way that we can do the identification
for which we need these parts. The third composition of staff
would mean additional staff and there I have to be very precise.
You will meet different figures but the order of magnitude that
we need about 180 additional staff. I come back to the figures.
It is a figure between 200 and 300 officials who have to be shifted
from the geographical DGs to the SCR. This is not an increase.
There are a little bit more than 300 who have to be shifted from
the technical assistance offices to the SCR. It is not an increase.
It is only from the point of view of organisation but the work
is done.
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