5 EC Technical Assistance Projects in
the Commonwealth of Independent States
| (27450)
8686/06
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| European Court of Auditors' Special Report No. 2/2006 concerning the performance of projects financed under TACIS in the Russian Federation
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| Legal base | Article 248(4) EC
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| Document originated | —
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| Deposited in Parliament | 2 May 2006
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| Department | International Development
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| Basis of consideration | EM of 11 May 2006
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| Previous Committee Report | None; but see HC 34-xxiii (2005-06), para 15 (29 March 2006)
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| To be discussed in Council | To be determined
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| Committee's assessment | Politically important
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| Committee's decision | Cleared, but further information requested
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Background
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.
Conclusions
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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