18 European Development Fund in 2004 and
forecasts up to 2009
| (26173)
15291/04
COM(04) 763
| Commission Communication: estimate of commitments and payments and of contributions to be paid by the Member States for 2004 and 2005 and forecast of commitments and payments for 2006 to 2009
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| Legal base | Article 8 of the Financial Regulation of 27 March 2003 on the 9th European Development Fund
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| Document originated | 19 November 2004
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| Deposited in Parliament | 3 December 2004
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| Department | International Development
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| Basis of consideration | EM of 30 November 2004
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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 | Cleared
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Background
18.1 The Cotonou Agreement, signed in Benin in June 2003, is the
successor to the Lomé Agreement, and the latest such development
assistance agreement between the EC and the ACP (African, Caribbean
and Pacific) countries. It seeks to create a more favourable context
for sustainable development and poverty reduction, and to reverse
the processes of social, economic and technological marginalisation
in the ACP States. Political dialogue between the Community and
each of the partner States (or regions) will play a key role in
determining the nature and objectives of the assistance provided.
The Agreement is based on respect for human rights, democratic
principles and the rule of law, and on good governance. It also
establishes special consultation procedures and appropriate sanctions
for dealing with human rights violations and serious corruption.
It seeks to encourage greater participation by civil society,
the private sector and trade unions, with a view to advancing
democratic processes and transparency and ensuring that cooperation
projects prove more effective than in the past.
18.2 Through a €13.5 billion European Development
Fund (EDF) covering the Agreement's first five years, the Community
will support the ACP governments in their attempts to create a
"balanced macro-economic context", expand the private
sector and improve both the quality and coverage of social services.
Regional integration among the ACP States themselves is also an
important objective, so as to facilitate their integration into
the global economy. Gender equality will be systematically encouraged
at every level. In many countries, sustainable management of the
environment and of natural resources will be promoted. The system
of trade preferences which the Community had previously granted
to the ACP states will gradually be replaced by a series of new
economic partnerships based on the progressive and reciprocal
removal of trade barriers, as part of a broader strategy to improve
the ACP States' ability to attract private sector investment.
The Commission Communication
18.3 The Communication is a document produced annually
under the European Development Fund (EDF) Financial Regulation.
It provides financial information to Member States regarding commitments
and payments in 2004, justification for the extent of calls for
contributions for the next EC financial year (2005), and estimates
of the total annual expenditure in each of the following four
years from 2006 to 2009.
18.4 The Communication says that the overall commitment
forecast for 2004 remains at €3,185m (£2,215.8m) as
predicted in May 2004. This total includes funds managed by the
European Investment Bank (EIB). The downward revision of the EIB
2004 forecast, from €500m (£347.9m) to €355m (£247m),
is compensated for by an upward revision for funds managed by
the Commission, from €2,875m (£2,000m) to €3,500m
(£2,435m). In the EIB's case, the change is attributed to
delays between contract signature and payment; in the Commission's,
to the increased rate of payments under the current EDF as it
reaches full implementation.
18.5 The total sum required from Member States for
2005 is €2,855m (£1,986.2m) — up from €2,440m
(£1,667.5m) in 2003. The UK's EDF contribution is 12.69%,
so it will contribute €362m (£251.8m) — an increase
from the UK's 2003 contribution (€189m/£131.5m).
18.6 The Commission's EDF expenditure forecasts peak
in 2006 at €3,400m (£2,365.4), which is when the greatest
number of programmes under this EDF will be active. Thereafter
expenditure tails off as programmes near completion in years 2007-2009
(€3,100/£2,156.7m, €2,900m/£2,017.5m and €2,650m/£1,843.6m
respectively). The Commission and the EIB believe that they will
manage to commit all remaining EDF funds by 2007 (including those
transferred from previous EDFs) and that they will be fully spent
by 2009, but only if the political and macro-economic conditions
in the ACP countries allow for that to happen.
18.7 The Minister notes that the Communication does
not take into account any future decision on use of the remaining
€750m (£521.8m) of the "conditional" €1bn
(£696m). "Use of these funds", he says, "will
require a further Council decision following conclusion of the
performance review of the 9th EDF. This is expected by March 2005."
The Government's view
18.8 In his 30 November 2004 Explanatory Memorandum,
the Parliamentary Under-Secretary of State at the Department for
International Development (Mr Gareth Thomas) says that "the
report is helpful in that it shows an upward trend in the level
of expenditure in the EDF", which he amplifies thus:
"Slow disbursement of EC funds either
under EDF or the main EC Budget has been a major criticism by
the UK in the past. Improved levels of disbursement are a direct
result of reform efforts carried out since 2000. Deconcentration
of programme implementation to the field has played an important
role in achieving this. It has also helped in improving the accuracy
of Commission forecasts. We will encourage the EIB to improve
the accuracy of its forecasts to a comparable level. In parallel,
we will press the Commission to continue to make progress in improving
the impact and effectiveness of EC aid, (not dealt with in this
Communication), building on the reforms to date."
18.9 He then points out that the Communication "also
notes that success in committing and disbursing funds depends
on the absorption capacity of the ACP countries" and goes
on to say that "the mid-term review of EDF country and regional
programmes is currently underway and provides an opportunity to
reallocate funds to countries that are performing well. We are
participating in this process, both in country and in Brussels,
in order to promote efficient and effective use of EDF funds".
Conclusion
18.10 When considering last year's Communication,
we noted the Minister's expectation that "deconcentration"
(i.e. devolving greater responsibility for programme implementation
to in-country EC Delegations) would have a positive effect. It
is gratifying that this has been the case.
18.11 But it is still also the case that full
and effective implementation of this, the Ninth European Development
Fund, will depend not simply on deconcentration but also on absorption
capacity in the ACP member states. €1 billion was held back
at the beginning of the programme, with its subsequent disbursement,
in part or in whole, to be dependent on the outcome of a performance
review mid-way through the programme cycle. Earlier this year
we cleared the release of €250 million of this for the first
stage of the EU Water Facility for ACP countries.[61]
We note that the review is due by March 2005, and look forward
to hearing from the Minister on the outcome and on any consequential
proposals for the release of any or all of the remaining €750
million. In the meantime, we clear this document.
61 (24491) 8864/03 (25313) 5757/04: see HC 42-xii (2003-04),
para 14 (10 March 2004). Back
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