5. Effectiveness of development assistance
to India
| (24744)
11525/03
—
| Special Report No. 10/2003 concerning effectiveness of the Commission's management of development assistance to India in targeting the poor and ensuring sustainable benefits.
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| Legal base | — |
| Document originated | 18 July 2003
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| Deposited in Parliament | 28 July 2003
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| Department | International Development
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| Basis of consideration | EM of 26 August 2003
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| Previous Committee Report | None
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| To be discussed in Council | No date set
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| Committee's assessment | Politically important
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| Committee's decision | Not cleared; further information requested
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The document
5.1 The European Court of Auditors (ECA) assesses the effectiveness
of eight EC-financed development projects and programmes in India.
These are listed at Table 2 of its report as follows:
- Agricultural and Rural Development Projects by Government
Agencies
- Doon Valley Integrated Watershed Management Project (Doon
Valley);
- Kerala Horticulture Development Project (KHDP);
- Kerala Minor Irrigation Project (KMIP); and
- Sidhmukh and Nohar Irrigation Project.
- NGO-Implemented Projects
- Transfer of technologies for
sustainable development (BAIF); and
- Programme for the Enrichment of School Level
Education (PESLE).
- Sector Support Programmes
- Sector Programme for the Development
of Primary Education; and
- Support for Health and Family Welfare sector
development.
5.2 The Court looked particularly at how the projects
and programmes targeted the poor, their long-term sustainability,
and co-ordination among donors where a project had more than one
donor.
5.3 The report concludes that the Commission's management
has been reasonably successful in targeting the poor and in addressing
sustainability for the majority of the projects audited, although
more systematic attention to these issues could have improved
the results. It notes the potential advantages of sector-wide
approaches over project-based ones and that, up to now, there
have been no true sector-wide approaches in the Indian education
and health sectors. It also notes that it is generally accepted
by the Commission, as well as by many other donors, that a sector-wide
approach to certain development cooperation activities is, in
principle, preferable to the more traditional project-based approach.
Nation-wide sector programmes, such as those supported by the
Commission for education and health in India, offer the advantage
of reaching much larger numbers of people. As these programmes
are implemented and supported through existing government channels,
the local ownership of such programmes increases the chances of
sustainability.
5.4 The report notes that, by refraining from a multitude
of arrangements for each of the donors, a more efficient process
is possible than in a "donor-fragmented project approach".
One consequence, however, is that donors cannot trace how their
funds have been used. "Donors should therefore have sufficient
confidence in the capacity of the beneficiary country's administration
to manage sector-wide programmes to account for their implementation,
results and costs". In India, only the EC has supported
a sub-sector programme approach with budgetary aid. All other
donors, while supporting the same sectors, have operated through
a project-based approach, allocating their funds to specific components
and/or geographic destinations, to ensure direct control of the
use of their funds.
5.5 The Court says that:
"As a result, it has not been possible to establish
common accountability and reporting arrangements for the nation-wide
programmes in education and health. In the case of the education
programme this constraint was largely overcome by allocating the
largest part of the EC-funds to this sector through a body specifically
created for the duration of the programme in one single state.
For the health programme no such arrangement was made and it
is to be noted that the Commission had not been able to obtain
from the Government of India up-to-date and audited financial
statements on the overall health programme".
5.6 Co-ordination with other donors has taken place.
In the case of the education programme there has been a successful
system of semi-annual joint review missions, with teams of donors
and government representatives visiting programmes. No such system
has been put in place in the case of the health sector and more
informal mechanisms have been used.
5.7 The report suggests that the EC's new country
strategy for co-operation with India does not fully apply the
approach outlined in the Commission's recent communication on
fighting rural poverty,[9]
as it limits the EC's intervention to the health and education
sectors and does not include other sectors, such as agriculture
and natural resources management, that need to be addressed if
rural poverty is to be tackled successfully.
The Court's recommendations
5.8 The report recommends that:
- Targeting the poor and sustainability
be given more systematic attention.
The evaluation found that specific objectives and/or
measures to target the poor were included in three of the six
projects and in the education and health programmes. However,
the technical nature of some of the other projects reduced the
scope for targeting specific groups of beneficiaries. While sector
programmes offer the advantage of reaching far greater numbers
of beneficiaries, individual activities are not always well defined
at the outset. This means that special attention needs to be
given to targeting during the implementation of such programmes.
- Sustainability could be
enhanced if activities were allowed an appropriate implementation
period, if there were more regular reviews and if there was a
proper exit strategy.
The evaluation found that, in five of the eight interventions,
sufficient attention was given to sustainability aspects from
the outset and that, in most cases, the attention paid to sustainability
increased during implementation. However the sustainability of
beneficiaries' organisations was a weak point. The report suggests
that sustainability could be improved by adopting more realistic
implementation periods, regular reviews and specific phasing-out
periods with clear exit strategies.
- Checking on institutional
capacity
When considering contributions to sector programmes
through budget support, the Commission, together with other donors,
should ensure beforehand that the country concerned has satisfactory
systems for reporting, accounting and auditing systems for managing
its public finances. It records in a footnote that it has made
a similar observation in a series of Special Reports, which it
lists.
Where necessary, additional support should be provided
to strengthen such institutional capacity. It recommends that
the Commission consider other forms of support if such capacity-building
is unlikely to ensure adequate accountability.
- The new EC-India country
strategy could be made more comprehensive by addressing issues
like agriculture and natural resources management.
The report suggests that the EC-India country strategy
may not be fully effective in addressing rural poverty as it limits
EC intervention to the health and education sectors. It suggests
that successful approaches in agriculture and natural resources
management, as developed in some of the Commission's projects,
could be promoted as models and applied in the Indian Government's
own poverty reduction strategies and programmes.
The Commission's reply
5.9 In its reply, the Commission explains that the
decision to move from project-based towards sector-based programmes
is based on thirty years of development co-operation. This has
shown that individual projects have tended to have limited and
localised impact, with little influence over policy. Commission-managed
programmes in health and education therefore aim to encourage
the Indian authorities to move towards a sector-wide approach.
Indian government ownership and 'intensification' of donor co-ordination
are key aspects of this.
5.10 The Commission explains that inadequate health
and education facilities are key aspects of rural poverty and
that there is general agreement that strengthening these sectors
will have a maximum impact on poverty. The new EC country strategy
received strong support from the Member States and focusing on
these sectors will help maximise impact and avoid diluting the
EC effort over too many sectors and approaches. The Commission's
development communication on fighting rural poverty identifies
six key sectors, but this does not mean that all six need to be
addressed in every programme. Those selected should be the most
appropriate for the country in question.
5.11 The Commission takes note of the Court's recommendations
concerning the objectives of targeting the poorest and sustainability.
It explains that, since 1992, it has used the standard 'Methodological
Guide' and other project cycle tools such as the logical framework
approach. It is therefore now standard practice for sustainability
aspects, including exit strategies, to be built into EC projects
and programmes.
5.12 The Commission also notes the recommendation
on sector programmes. It says that this is being implemented
under the March 2002 Guide to Programming and Implementation of
Budget Support for Third Countries and the February 2003 Guidelines
for European Commission Support to Sector Programmes.
5.13 The Commission considers that there are strong
reasons for concentrating its resources on health and education.
It notes, however that the future state partnerships that it
intends to develop should be built around a holistic reform package
which might add a rural and natural resource dimension to the
education and health activities.
The Government's view
5.14 The Minister of State at the Department for
International Development (Mr Hilary Benn) comments:
"There are no significant policy implications
connected directly to this report or the Commission's reply.
DFID is broadly content with the Court's findings and the Commission's
reply. With regard to the report's recommendations:
a) we support the emphasis given to the importance
of targeting the poor and to sustainability issues;
b) we agree that realistic implementation periods,
regular review and attention to exit strategies are important
aspects of sustainability, in the Indian context and elsewhere;
c) we agree that particular attention must be
paid to public finance aspects (including fiduciary risk) when
considering sector programmes;
d) we agree with the Commission's response on
the scope of the new EC-India strategy paper and support its intention
to maintain the focus on the health and education sectors. Broadening
the strategy to include agriculture and natural resource management
issues would mean a loss of focus and could result in a reduced
poverty impact.
"DFID is working closely with colleagues from
the Commission and other donor agencies in both the health and
education sectors and we have been encouraging the EC, other donors
and the Indian authorities to move towards broader sector-based
programmes in both sectors.
"The UK and other Member States were consulted
about the EC-India strategy paper (which was approved in 2002).
Given the relatively low level of funds available for the strategy
period, DFID supported the strong sectoral focus on health and
education. DFID's efforts to secure an increase in EC funding
for the strategy period were unsuccessful, but the Commission
have promised to review the budget in 2004/5."
Conclusion
5.15 We support the Commission and the Government
on the Commission's stated intention to maintain the focus of
its assistance to India on the health and education sectors.
A lack of focus has been a weakness of the EC's development policy
in the past.
5.16 We note, however, the Court's emphasis on
the importance of ensuring that satisfactory systems of financial
management are in place in the beneficiary country when considering
budget support. In India, it seems that all other donors have
reservations in this regard, leaving the EC as the only donor
to adopt a sector-wide approach. We ask the Minister whether
he is confident that the funds donated will be accounted for up
to acceptable standards.
5.17 Meanwhile we shall not clear this document.
9 (23776) 11658/02; see HC 152-xl (2001-02), paragraph
20 (30 October 2002). Back
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