11 Untying EC development aid
| (25604)
8881/04
COM(04) 313
| Draft Regulation on access to the Community Development Assistance
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| Legal base | Articles 179 and 251 EC; co-decision; QMV
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| Document originated | 26 April 2004
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| Deposited in Parliament | 4 May 2004
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| Department | International Development
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| Basis of consideration | EM of 18 May 2004
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| Previous Committee Report | None; but see (24015) 14526/02; HC 63-xi (2002-03), para 8 (5 February 2003)
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| To be discussed in Council | By Autumn 2004
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
11.1 The 2001 report of the Development Assistance Committee (DAC)
of the Organisation for Economic Co-operation and Development
(OECD) reflected the longstanding discussion on ways to improve
the effectiveness of aid, particularly whether aid should be freely
available to purchase goods and services from substantially all
countries, i.e. untied, or whether it should be restricted to
procurement in certain countries, i.e. tied. By then, an international
consensus had emerged that tying aid, directly or indirectly,
to the purchase of goods and services in the donor country reduced
its effectiveness: World Bank studies had estimated such "transaction
costs" at as much as 30% of total project cost. Untying
aid in order to achieve higher impact at lower cost would also
increase transparency and accountability and therefore reduce
the scope for corruption and mismanagement. But reaching agreement
among the DAC's 23 members on giving effect to this consensus
proved difficult.
11.2 The DAC finally adopted a recommendation on
untying aid to Least Developed Countries (LDCs) in May 2001.
The Commission called this a good political signal, a first, but
insufficient step in the right direction", in view of what
it described as a very limited focus on the LDCs, almost one third
of which were in conflict or pre- or post-conflict situations,
and the fact that it did not cover food aid and its transport.
By contrast, Community aid had been untied to a significant degree
for more than 25 years: under the 6th, 7th and 8th European Development
Funds (1985-2000), the ACP (Africa, the Caribbean and Pacific)
countries were awarded 23.6% of the contracts, amounting to 1.4
billion; in addition, Community aid was progressively directed
towards balance of payments and budgetary support, which is entirely
untied.
11.3 The Commission nevertheless committed itself
to implementing the spirit and objectives of the DAC Recommendation,
and began drawing up a comprehensive approach, going well beyond
the Recommendation (which the EU had also subsequently committed
itself to implementing). This was put forward in the Commission
Communication, "Untying: Enhancing the effectiveness of aid",
of 18 November 2002. The Government welcomed the proposals, urging
the Commission to complete arrangements for implementing the DAC
Recommendation promptly. We agreed with this view, and cleared
the document in February 2003.[37]
It has taken since then for implementation arrangements, giving
effect to the Commission Communication, to be devised and agreed.
The draft Regulation
11.4 The current draft Regulation sets out these
arrangements. It:
- amends all existing Community
aid instruments (listed at Annex 1 of the Regulation; some 26
in all, 14 thematically-based and 12 geographically-based). As
the Commission explains, "this proposal represents one single
Regulation defining the access to all Community aid to be implemented
in all the basic acts governing external assistance that fall
under the EC budget. In future, all instruments will contain
a simple reference to this regulation". Amending existing
such instruments "horizontally" will standardise Community
implementation of the principles and conditions for such access;
and
- expands the current arrangements for access by
developing country partners, Member States, candidate countries
and members of the European Economic Area, by establishing conditions
for access by other developed country donors, on a reciprocal
basis.
The Government's view
11.5 The Government restates its welcome for the
untying of all the Community's development instruments, as consistent
with both its own commitment to work for multilateral untying
and the EU's pledge at the Monterrey Conference on Financing for
Development. As the Parliamentary Under-Secretary of State at
the Department for International Development (Mr Gareth Thomas)
notes in his Explanatory Memorandum, opening access to contracts
to non-EU DAC members on a reciprocal basis "gives an international
lead and offers a practical basis for other donors to consider
further progress to build on the DAC Recommendation". He
also notes that a single, "horizontal" regulation to
amend all the existing Community instruments concerned and to
govern all new instruments "represents the most efficient
solution".
Conclusion
11.6 We welcome these steps by the Commission
towards untying Community external assistance, and clear the document.
37 (24015) 14526/02: see HC 63-xi (2002-03), para 8
(5 February 2003). Back
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