Select Committee on European Scrutiny Thirty-Ninth Report


8 Cotonou Agreement: the 10th European Development Fund

(27384)

7625/06

COM(06) 132

Draft Decision on the position to be adopted by the Community within the ACP-EC Council of Ministers concerning the multiannual financial framework for the period 2008-2013 and the modifications to be inserted in the Agreement revising the Partnership Agreement between the members of the African, Caribbean and Pacific Group of States of the one part, and the European Community and its Member States, of the other part, signed in Cotonou on 23 June 2000 and revised in Luxembourg on 25 June 2005.

Legal baseArticle 300(2) and 310 EC; unanimity
Document originated17 March 2006
Deposited in Parliament24 March 2006
DepartmentInternational Development
Basis of considerationMinister's letter of 6 July 2006
Previous Committee ReportHC 34-xxv (2005-06), para 11 (19 April 2006); see also HC 34-i (2005-06), para 37 (4 July 2005)
Discussed in Council17 July 2006 General Affairs and External Relations Council
Committee's assessmentPolitically important
Committee's decisionCleared (reported on 19 April); further information requested then, now provided.

Background

8.1 The European Community (EC) and African, Caribbean and Pacific (ACP) Partnership Agreement signed in Cotonou on 23 June 2000 (the "Cotonou Agreement") replaced the Lomé Agreement. It began on 1st March 2000 for a period of 20 years, with five-yearly reviews. The first review was conducted between May 2004 and February 2005 by the Commission, which negotiated on behalf of EU Member States on the basis of directives agreed by the Council, and culminated in ACP and EU Ministers signing a revised Agreement at the ACP-EC Joint Ministerial Council on 24-25 June 2005. The revisions fell into three categories:

  • New political and security concerns: new Articles concerning the fight against terrorism, combating the proliferation of weapons of mass destruction and co-operation with the International Criminal Court;
  • Co-operation strategies: making the UN Millennium Development Goals[29] the focus of ACP-EU co-operation and new provisions regarding support for ACP States facing post-conflict and post-natural disaster situations; and
  • Implementation procedures: clarifying the respective roles and responsibilities of ACP States and EC Delegations, including the management of resources in crisis situations, along with updating some provisions of the European Investment Bank (EIB)-operated Investment Facility, project-related technical assistance, and EIB remuneration and procurement rules.

8.2 The European Development Fund (EDF) is the main channel for EC aid to Africa, Caribbean and Pacific countries. It is separate from the main EC budget. Member States provide money using a different contribution key to the main budget and the Commission manages and disburses the money on their behalf. When we cleared the agreed changes on 4 July 2005,[30] we noted that a new multi-annual financial framework (MAFF) starting from 1 January 2008, for five or six years, had yet to be agreed. At that time, the Minister noted that ACP States would receive a sum at least equivalent to that of the €13.8 billion (£9.34 billion) 9th EDF, with additional sums based on Commission estimates to take account of the effects of inflation, EU growth and enlargement. With the Commission's initial calculations still under discussion, the Minister considered it too early to say what implications the new financial framework might have for the Government, but pointed out that the Council Decision on the new framework would be subject to a separate scrutiny process.

The Council Decision

8.3 We considered the Council Decision on 19 April. By then, the Commission's proposal for EDF 10, of €22,682 (£15,795) million, had been approved at the December European Council and communicated to the House by the Secretary of State for International Development in a Written Statement on 20 December 2005. The Council Decision gave effect to this agreement, with a view to its adoption as the Community position (and, it was hoped, its acceptance by ACP partners) at the 1-2 June EU-ACP Ministerial meeting.

8.4 The main elements are: €18,940 (£13,189.4) million (83.5% of the total envelope) to finance national and regional indicative programmes; €2,242 (£1,561.2) million (9.9%) for intra-ACP and inter-regional programmes; and €1,500 (£1,044.6) million (6.6%) to finance the Cotonou Investment Facility which is managed by the European Investment Bank. Germany (20.5%), France (19.55%) and UK (14.82%) are the largest shareholders. The UK share is equivalent to €3,361.5 (£2,340 million: rising from £318 (€456.6) million in 2008 to £426 (€ 611.7) million in 2013).

8.5 At that time, there were still ongoing discussions in the ACP Working Group on the way in which the Member States and the Commission would jointly manage EDF 10 ("comitology issues" in Euro-speak), essentially revolving around the size of the Commission's management charges and the value of individual projects above which Member State approval would be required, with this latter bound up in separate but related discussions within the Council and with the European Parliament over, in particular, the scope of the proposed new Development and Economic Co-operation Instrument. The Minister also noted some unresolved issues regarding the sub-envelope to finance intra-ACP and inter-regional cooperation, and the continuing endeavour by the Commission (abetted by some Member States) to keep the option open of "budgetising" the EDF at a later stage in the 2008-13 period.

8.6 In conclusion, we noted that:

—  though these were not unimportant issues, they were basically managerial, and that the quantum and the main components of EDF 10 were essentially a good outcome and unlikely to change;

—  most importantly, Member States were to approve the Country and Regional programmes upon which 83% of EDF 10 would be spent;

—  the House would have an opportunity to debate this central component of the EU's relations with the developing world, to which the UK contributes nearly 15%, when the Agreement came before it for ratification;

and also endorsed the Minister's determination to re-affirm the long-held UK position, in the face of the continuing endeavour by the Commission (abetted by some Member States) to "budgetise" the EDF by keeping this option open in the amended agreement.[31]

8.7 In clearing the Council Decision, we asked the Minister to keep us informed on the negotiations on these "managerial" and "budgetisation" issues.

The Minister's letter

8.8 The Parliamentary Under-Secretary of State at the Department for International Development (Mr Gareth Thomas) has now done so in his letter of 4 July 2006. In addition to updating us on "recent significant developments on negotiations of the Multiannual Financial Framework (MAFF) and the other EDF 10 implementing documents", he incorporates further information requested by the House of Lords Select Committee on the EU about three issues: the allocations between countries; the Africa Peace Facility; and a conditional funding tranche.

8.9 The Minister says that the Commission has yet to finalise the allocations to individual ACP countries and regions. The indications were, however, that Africa would receive a slightly higher share of the funds compared to EDF 9 (90.6%) while the Caribbean and the Pacific regions would receive slightly lower shares; and that on the basis of this information around 90% of the baseline allocation funds are likely to go to Low-income Countries. He continues as follows:

    "The €300 million (£208.2m) earmarked for the African Peace Facility will be allocated using the same procedure as under EDF 9. The allocation process is triggered by a request to the European Commission from the African Union or the relevant sub-regional organisation for support for a particular operation. Once the Commission is satisfied with the proposal, they seek political approval to support the mission from the EU Council of Ministers — usually via the Political and Security Committee.[32] Assuming approval is granted, the EDF Committee is asked to approve a financing proposal. The €300 million is included under the heading of Intra-ACP cooperation. An additional €300 million has been set aside in a Reserve under that heading in case the Council decides during the review of the Peace Facility envisaged for 2010 to provide a further €300m for 2011-2013 from the 10th EDF.

    "The 9th EDF included a conditional €1 billion, half of which is being used to fund the Water Facility. Member States made the release of the funds to the Commission conditional on improved performance of the EDF. There is no similar 'conditional' funding under the 10th EDF. However, Member States are able to increase their contributions to the 10th EDF on an individual and voluntary basis, thereby providing a continuing incentive to the Commission to improve the EDF's performance.

    "On 17 May the Committee of Ambassadors (COREPER) agreed the MAFF. The overall amount of direct financial assistance for the ACP countries will be €23,966m (£16,637.2m). The Overseas Countries and Territories (OCTs) will be allocated €316m (£219.4m) of which €286m (£198.5m) in grants. An additional €430m (£298.5m) will be for administrative costs. This gives a total of €24,712m (£17,155.1m). This breaks down between the €22,682m (£15,745.9m) agreed by the December 2005 European Council and €2,030m (£1,409.2m) in own resources for loans to be provided by the European Investment Bank (EIB) of which €2,000m is for ACP countries and €30m for the OCTs.

    "The €21,966m (£15,248.8m) grant funding available to ACP countries (€22,682m, minus OCT and administrative costs) will be divided as follows:
  • €17,766 m (£12,333.2m) is for national and regional indicative programmes (80.9%);
  • €2,700m (£1,874.3m) is for intra-ACP and inter-regional programmes (12.3%); and
  • €1,500m (£1,041.3m) will finance the Cotonou Investment Facility, managed by the EIB (6.8%).

    "Compared to the Commission's original proposal, there is a slight increase in the share going to the intra-ACP and inter-regional envelope at the expense of national and regional programmes. This is partly because of the funding for the Africa Peace Facility as set out above.

    "The UK and other Member States removed any reference to possible future budgetisation. Managerial issues remain unfinalised, reflecting the continuing negotiations on the Development Instrument with the European Parliament. The MAFF was agreed by Council as an 'A' point shortly before the ACP-EC Council of Ministers meeting in Papua New Guinea on 1-2 June where it was agreed by the ACP countries.

    "During the latter stages of the MAFF negotiations, the Commission requested that Member States agree to decommit any unspent funds from the 9th EDF and transfer them to the Reserve of the 10th EDF. The Government supports this idea providing that adequate safeguards are in place for the use of the money including agreement by unanimity of their use. In the event, the proposal was not approved. Instead, COREPER agreed a Statement noting that 'Based on the performance review in 2010 and a proposal by the Commission, the Council of the European Union will consider a decision by unanimity on the transfer of any funds de-committed from ACP projects funded out of the 9th and previous EDFs into the reserves of the 10th EDF.' This does not affect the sunset clause, and all funds from the 9th EDF still need to be committed by the end of 2007. Underspends may occur on some projects and so the Government believes that it is useful to retain the possible option of rolling over these funds to the 10th EDF. At the Council meeting in Papua New Guinea, the ACP highlighted costs related to the implementation of Economic Partnership Agreements and structural adjustment as priority areas for any rolled over funds."

8.10 The Minister concludes by saying that, following several months of negotiation, during which the Government "secured a number of changes to the original Commission text to reflect development best practice", the Internal Agreement on Financing — which sets out the operational modalities for MAFF, and a copy of which he includes with his letter — would be formally signed at the 17 July GAERC. Discussions on the Financial Regulation and the Implementation Regulation linked to the Internal Agreement on Financing had not started; the relevant documents "will be submitted to Parliament later in the year for ratification".

Conclusion

8.11 We look forward to scrutinising the relevant further documents which will conclude the management arrangements for EDF 10 in due course.

8.12 In the meantime, we are grateful to the Minister for this further information, which demonstrates that he has been able to secure further positive changes, particularly the removal of references to "budgetisation" and the retention of Member State involvement in the use of underspends on the 9th EDF.


29   The eight UN Millennium Development Goals (MDGs) that, in 2000, the UN set itself to achieve, most by 2015: eradicate extreme poverty and hunger; achieve universal primary education; promote gender equality; reduce child mortality; improve maternal health; combat HIV/Aids, malaria and other diseases; ensure environmental sustainability; develop a partnership for development - each with associated targets and benchmarks to measure progress. Back

30   See headnote. Back

31   See headnote. Back

32   The committee of senior officials from national delegations who, under article 25 of the EU Treaty, monitor the international situation in areas covered by the CFSP and, under the general responsibility of the Council, exercise political control and strategic direction of crisis management operations.

 Back


 
previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2006
Prepared 2 November 2006