Select Committee on European Scrutiny Twenty-Ninth Report

5 EC Technical Assistance Projects in the Commonwealth of Independent States



European Court of Auditors' Special Report No. 2/2006 concerning the performance of projects financed under TACIS in the Russian Federation

Legal baseArticle 248(4) EC
Document originated
Deposited in Parliament2 May 2006
DepartmentInternational Development
Basis of considerationEM of 11 May 2006
Previous Committee ReportNone; but see HC 34-xxiii (2005-06), para 15 (29 March 2006)
To be discussed in CouncilTo be determined
Committee's assessmentPolitically important
Committee's decisionCleared, but further information requested


5.1 The legal basis under which this document was prepared is Article 248(4) of the Treaty establishing the European Community, which empowers the Court of Auditors to submit observations, particularly in the form of special reports, on specific questions.

The Court of Auditors' Report

5.2 In its report, the Court explains that after the break-up of the Soviet Union, the European Union devised a technical assistance programme for the countries of the newly created Commonwealth of Independent States (CIS). The objective of this programme, named TACIS, is to promote the transition to market economics and to reinforce democracy and the rule of law in the recipient countries. Two Council Regulations covering the period 1991-99[11] made available approximately €4,221 million for assistance to the partner countries of Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Mongolia, the Russian Federation, Tajikistan, Turkmenistan, Ukraine and Uzbekistan; the current Council Regulation ((EC, Euratom) No 99/2000 of 29 December 1999) earmarks €3,138 million for TACIS from 2000 to 2006.

5.3 In addition to these Regulations, the Court notes that:

  • relations between the European Union and the TACIS countries are based on Partnership and Co-operation Agreements (PCAs) signed between the EU, Member States and individual partner countries;
  • the External Relations directorate-general (RELEX) is responsible for the programming of TACIS in co-operation with the partner countries;
  • implementation is subsequently defined in multi-annual Country and/or Regional Strategy Papers and Multi-annual Indicative Programmes (for the national programme as well as the regional or multi-country programmes), based on priorities discussed in the TACIS Committee (Member States representatives and chaired by the Commission);
  • the Europe Aid Co-operation Office (EuropeAid) currently transforms the MIPs into annual or bi-annual Action Programmes (APs) in dialogue with the TACIS national co-ordinators, relevant ministries and other organisations in the beneficiary countries and after internal consultation within the Commission, including with the TACIS Committee; and
  • these documents are completed by financing memoranda (agreements between the EU and the beneficiary countries on the projects to be financed) and planning documents pertaining to the individual projects (Terms of Reference, ToR).

5.4 Thus, "at all levels of the programming and project identification stages the Commission and the beneficiary countries should agree on the priorities and the projects. Therefore all documents mentioned above from the MIPs down to the ToRs have to be discussed and signed by representatives of the Commission and of the beneficiary countries. EuropeAid has overall responsibility for the management of the project cycle, from project identification to project appraisal, financing, project implementation and evaluation".[12]

5.5 The Court then explains that in 2000 the Commission embarked on a major reform of the management of its external aid programmes,[13] whose main objective was to make significant improvements to the speed and quality of EC external aid, and where the key component was the extensive devolution of aid management tasks and responsibilities to the Commission's Delegations. As a result of this devolution, the Delegations became responsible for project preparation, contracting, and financial and technical implementation, with the role of the central services in Brussels developing from direct management of projects towards monitoring and supporting Delegations.

5.6 The Russian Federation is the largest TACIS beneficiary, having received about 40% of all funding under the programme, i.e., about €200 million annually. The Court notes that:

"the European Union's policy towards the Russian Federation is geared towards: contributing to strengthening the rule of law through the development of efficient institutions as well as effective legislative, executive and judicial systems; improving the investment climate; enhancing legislative harmonisation with the EU; and co-operating in the fields of justice and home affairs, environment and nuclear safety. These measures should help create the conditions for sound economic growth in the Russian Federation, and developing a true partnership with the EU. The PCA between the European Union and the Russian Federation regulates the political, economic and cultural relations between the EU and the Russian Federation. It was signed in 1994 and entered into force on 1st December 1997 for an initial period of ten years. The Commission and the Russian authorities are in the process of devising a new instrument for the period after the expiry of the present PCA".[14]

5.7 Finally, the Court says that the audit objective was "to assess whether the Commission had managed the TACIS projects in the Russian Federation in such a way that these projects had been effective". To achieve this the Court audited a sample of projects in order to determine (i) the extent to which the projects' objectives had been achieved and (ii) how far projects were sustainable. In its audit the Court followed the stages of the Commission's system of Project Cycle Management (PCM): programming; project identification and planning; project financing; project implementation and evaluation. 29 contracts (projects) out of a total of 275 from the contracting year 2000 or later were chosen, with an expiry date no later than the end of 2003 (the most recent projects for which sustainability could be assessed); these projects were financed under the Action Programmes 1997-2000, and implemented mainly in 2002 and 2003; the total value audited was over €56 million out of "a total population" of €109 million.

5.8 The Court's findings and the Commission's response are helpfully summarised in his 10 May Explanatory Memorandum by the Parliamentary Under-Secretary of State at the Department for International Development (Mr Gareth Thomas), as follows:

"The Court concluded that nine of the audited projects achieved their objectives. In eight cases the objectives were partially met and in twelve cases they were not achieved. While the Court did not assess the performance of TACIS projects as positive, it did find that contractors and consultants ('monitors') met requirements.

"The Court found that smaller projects were more successful as their objectives were often more clearly identified. Also, projects in the regions generally performed better than projects with central ministries, due to a greater level of beneficiary commitment and ownership.

"The main weaknesses were related to project management, including lessons learning, and to problems with needs assessment and project identification. To improve the effectiveness of future assistance to Russia the Court made the following recommendations:

"a) Shorten the programming process and base all projects on more meaningful dialogue between the Commission and the Russian authorities.

"b) Ensure that project objectives are agreed between the Commission and the recipient and are specific, measurable, achievable, realistic, and timed.

"c) Rigorously apply the Project Cycle Management (PCM) methodology which includes the obligatory use of logical frameworks to present the mutually agreed objectives.

"d) More effective assessment and evaluation of completed projects.

"The Commission's response points out that the majority of the projects achieved their objectives fully or partially and believes that its support has helped to broaden the level of co-operation between the EU and the Russian Government. While recognising the weaknesses, it notes that the projects under review were affected by the financial crisis in Russia at the end of the 1990s, when dialogue was particularly difficult.

"Their response also notes that internal EC reforms over the period 2002-2005 have increased the effectiveness and relevance of its external assistance. In particular, the devolution of external assistance management to in-country delegations has helped to engage the Russian Government in dialogue over the full project cycle. The delegation in Russia has also established a system of 'peer group perusal' to review project objectives and terms of reference before they are approved.

"The Commission observes that EC assistance to Russia has reduced over recent years as high commodity prices have enabled Russia to fund its own reforms. For the future, this smaller programme will focus on the EU's new Common Spaces policy framework with Russia (Common Economic Space, Common Spaces of Justice, Liberty and Security, Common Space of External Security, Common Space of Research and Education, including Culture). The EU is in the process of agreeing a new instrument, the European Neighbourhood and Partnership Instrument (ENPI), for continued assistance beyond 2007."

The Government's view

5.9 The Minister observes that "the EU is a major partner of Russia, providing substantial support to the country through its Community programmes" and welcomes this support "since around one third of the population have been living in poverty for much of the period following on from 1991". He continues as follows:

"We welcome the Court of Auditors' audit, and other monitoring and evaluation processes, that seek to improve the effectiveness and risk management of this substantial and important support. In particular, we agree with the Court that programmes should be based on a genuine dialogue with partners, which includes agreeing clear, shared objectives. We also consider the Project Cycle Management (PCM) process crucial, including applying lessons learnt to improve the effectiveness of assistance.

"But the Commission rightly points to the changes that took place in the period 2000-2003. Firstly, in the way assistance was offered. The projects audited were designed prior to a reform of TACIS at the end of 1999. The new approach was still bedding down when the projects assessed by the Court were underway. We also believe that the setting up of the Moscow delegation has helped to increase efficiency in the way assistance is agreed and managed.

"Secondly, in the period of the Court's audit Russia was still feeling the effects of the 1998 financial crisis. Since Putin became President in 2000 there has been growing stability, but finding a suitable Government contact to take ownership of a TACIS project in 2000-2003 would have been difficult.

"However, there have been successes. The TACIS Small and Medium Enterprise development projects reached most of Russia's regions and created the small business consultancy industry from scratch. At least 100,000 people benefited from training and became professional consultants. Most of them had no access to business education before TACIS.

"Looking ahead to the new funding instrument for Russia — the ENPI, the UK is championing improved effectiveness. In particular the UK is seeking to ensure that the instrument will help the poor; allocate funding according to need and performance; ensure that lessons are used to improve future programmes; take account of partner countries' priorities and commitment; and improves coordination with other donors."

5.10 Finally, he says that there have been preliminary discussions of the report in the Council Working Group, and that the aim is to have the report adopted in Council by the end of May 2006.


5.11 As the Minister notes, there were a number of circumstances during the period in question that militated against better outcomes; also that, those mitigating circumstances notwithstanding, there have been successes — particularly in connection with business education and small and medium-sized enterprises.

5.12 The Minister also rightly draws attention to the major changes have been introduced in the management of EC assistance programmes since 2000, which we looked at most recently on 29 March when we considered three Commission Communications that, overall, comprise the Commission's "Aid Effectiveness Package", and all of which related to the central consideration of how to improve the effectiveness of the even larger volumes of aid that have now been committed by what was already, collectively, the biggest global aid donor.

5.13 That package has the UN Millennium Development Goals, Africa and poverty alleviation as its focal points. But, although discussions are still continuing with the European Parliament over the final shape of, and the financial envelope for, the new European Partnership and Neighbourhood Instrument, it can safely be assumed that substantial sums will still be involved. Although that instrument is geographical, it will also be used to pursue one or more of the EU's proposed Thematic Programmes, and particularly the one that will be devoted to the promotion of TACIS objectives upon which the Court's report is silent — the reinforcement of democracy and the rule of law — and about which there is considerable concern, not just in Russia but also in a number of the other TACIS beneficiaries. The Minister also refers to the "Four Common Spaces" framework that has taken over from the earlier PCA with Russia — an arrangement that will no longer require an annual report to the Council, and which will therefore lead to less, not more, transparency — which we considered on several occasions between July 2004 and July 2005[15] and which was debated in European Standing Committee on 20 October 2005, with the Committee agreeing that it provided "a valuable framework for the EU to achieve its objectives in its relations with Russia in the medium term".[16]

5.14 We have no wish to hold up clearance of this Report. But we are concerned at the prospect of sustained EC and EU expenditure with Russia and other important partners in the "Near Neighbourhood" where issues that concern the House are involved and where it is far from clear how the House will be able to scrutinise objectives and outcomes other than some years after the event. We should therefore be grateful if the Minister, or his Foreign and Commonwealth Office counterpart if appropriate, would let us know how this might be overcome. In particular, what scope will there be for scrutiny of the approaches to be proposed in the Country Strategy Paper and National Indicative Programme for Russia to which the Commission refers in its response to the Court?[17]

5.15 We now clear the document.

11   1991-1995: (EEC, Euratom) No 2157/91 of 15 July 1991, 1996-1999: (Euratom, EC) No 1279/96 of 25 June 1996. Back

12   Court of Auditors' Report, page 9. Back

13   Communication to the Commission on the reform of the management of external assistance, 16 May 2000, SEC(2000) 814/5.  Back

14   Court of Auditors' Report, pages 10 and 11. Back

15   See HC 34-i (2005-06), para 6 (4 July 2005). Back

16   Stg Co Deb, European Standing Committee, 20 October 2005, cols 3-28. Back

17   Court of Auditors' Report: page 3 of the Commission's response. Back

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