Select Committee on European Scrutiny Thirty-Seventh Report

7 EC Development Assistance in 2005



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COM(06) 326

Annual Report 2006 on the European Community's Development Policy and the Implementation of External Assistance in 2005

Legal base
Document originated22 June 2006
Deposited in Parliament27 June 2006
DepartmentInternational Development
Basis of considerationEM of 11 July 2006
Previous Committee ReportNone
To be discussed in Council17 October 2006 General Affairs and External Relations Council
Committee's assessmentPolitically important
Committee's decisionNot cleared; further information requested


7.1 The overall objectives of European Community development policy and external assistance are set out in Article 177 EC. Each year, the Commission produces an annual report on the activities carried out thereunder.

The 2006 Annual Report

7.2 This Report is on the activities under the European Community's development programme during 2005. It consists of a short Executive Summary, intended for a variety of observers including the general public, with the extensive main report annexed to it in the form of a Commission Staff Working Document.

7.3 The Commission says that 2005 centred on five main issues:

—  a renewed commitment to the achievement of the UN Millennium Development Goals (MDGs). EU Member States agreed to a collective ODA target of 0.56% GNI in 2010, raising collective ODA from $43 billion in 2005 to €63 billion in 2010. "Policy coherence for development" commitments will associate 12 policy areas (e.g., trade, agriculture, transport, energy) with MDG objectives and timeframes.

—  a new tripartite development policy statement, the "European Consensus on Development", endorsed by the European Parliament, the Council and the Commission, and complemented by an EU strategy for Africa, which is designed to offer a "step change" in support to Africa, in terms of both quantity and quality, and to help Africans become the main players in their development.

—  further development of the EU's partnership approach, whereby countries are offered a framework for their relationship with the EU which is "both collaborative and adapted to their situation". 2005 saw major steps in the strengthening of these partnerships with Western Balkans countries, Russia, Latin America and the ACP (Africa, Caribbean and Pacific) countries, and has also been a key year for the European Neighbourhood Policy. With the ACP, a new European Development Fund was agreed on €22,682 million for 2007-13.

—  the political dimension of aid and external assistance, using aid as leverage for political dialogue, or funding specific actions devoted to strengthening the rule of law and respect for human rights. The EU is "increasingly seen as a key player" in election observation: about 1000 observers deployed in 2005 in Afghanistan, Burundi, Guinea-Bissau, Lebanon, Liberia, Ethiopia, the Democratic Republic of Congo, Venezuela and Sri Lanka. Revision of the ACP Cotonou Agreement enhanced the political dimension and included commitments on counter-terrorism and countering WMD proliferation. Programmes were initiated with the CIS, the Mediterranean countries and sub-Saharan Africa on more effective management of migration flows.

—  the requirement for faster and better aid delivery. The Paris Declaration, signed by EU Member States and the EC in 2005 along with over 25 development agencies and involving nearly 100 countries, "has made a key contribution in that area and its benefits will soon be visible". The Commission "continued to shift its focus from input to outcome and impact issues as they affect the process of delivering aid" stemming from the 2001-04 reforms of external assistance management. 2005 was a record year for commitments — €8 billion, up 16% on 2004 — and delivery — €6.2 billion, compared with €5.7 billion in 2004: up 44% and 50% respectively on 2001. The percentage of ODA destined for low-income countries has grown from 32%/€1.5 billion in 2000 to 45.8%/€3.2 billion in 2005. Implementation decreased from nearly 5 years in 2000 to 3.32 years in 2005. The Commission's "results-oriented monitoring system, which is based on regular on-site assessments by independent experts, show a clear trend towards steady improvement in quality. In particular, the scores for both the efficiency and sustainability of projects and programmes have increased substantially since 2001." Proposals for simplifying both the legal basis for external assistance and the Commission's internal procedures have been taken forward, as have preparations for country and regional Strategy Papers in the framework of the 2007-13 Financial Perspectives and in co-operation with the beneficiary countries, Member States and other donors.

7.4 The main report begins with a discussion of the strategic framework. Section 2 describes in some detail each of the geographical programmes. There is an assessment of the EC's contribution towards poverty reduction and the achievement of the MDGs. This is followed by a description of the co-operation between the EC and Member States and other donors and an overview of portfolio performance. Finally, conclusions are drawn and perspectives for the future presented.

7.5 Section 3 examines thematic programmes and mainstreaming of cross-cutting issues. These are: democracy and human rights; human and social development; environment and sustainable development of natural resources, including energy; non-state actors in development; food security; migration and asylum; conflict prevention; crisis management and mine actions; including the Peace Facility; drugs; and equality between men and women.

7.6 Section 4 contains two "feature articles" on special topics: trade and development; and education as a priority sector in the EC's external assistance.

7.7 Section 5 describes EC aid management and assesses the efficiency and effectiveness of EC co-operation. It notes progress in 2005 on qualitative issues in aid management and that the Commission refined its key performance indicators, which measure financial management, quality and speed. Developments in means of delivering aid are described, as well as efforts to simplify EC procedures. Relations and partnerships with international organisations are also analysed. Efforts to support new Member States' development policies, including training and public awareness are noted.

7.8 Section 6 describes the results-oriented monitoring systems, noting that more monitoring missions were completed in 2005 than in 2004, and providing evidence of a steady improvement in the performance score of EC-financed projects and programmes over time.

7.9 Finally, section 7 contains annexes enumerating EC assistance and financial tables.

The Government View

7.10 In his customarily helpful and informative Explanatory Memorandum of 11 July 2006, the Secretary of State for International Development (Hilary Benn) notes that this, the Community's sixth Annual Report, "is an important tool for accountability to the public, Member States and their Parliaments, and the European Parliament on the Commission's external assistance". He comments as follows:

"The Report takes into account several of our concerns expressed in previous years. There is now a more detailed breakdown of use of funds taking into account the income grouping of beneficiary countries, to enable a better tracking of the poverty focus of Community expenditure. The Report was also released earlier this year, in keeping with our desire for greater timeliness.

"More than in previous years, the Report focuses on the results of the Community's development assistance, that is to say, on the outcome or impact of its efforts, rather than just on the activities or outputs. However, we would encourage a further emphasis on results when discussing regions and themes. The Report could also include more concrete examples of outputs and impacts achieved by Community aid. 'Success stories' can go a long way to furthering public support for development activities.

"The Millennium Development Goals (MDGs) are referred to throughout the document, and in some cases there is a good analysis of the extent to which Community assistance is contributing to their achievement. However, we would like to see a clearer and more systematic link between EC aid and the MDGs made for each geographic region, and for each thematic spending activity. In addition, we would welcome an analysis of the extent to which EC development activities in middle income countries are contributing to achievement of the MDGs.

"The 2006 Annual Report is again a demonstration of the breadth and width of EC development actions, covering numerous countries, regions and themes, and pursuing many roles on behalf of the Member States. There is little doubt that a lot has been achieved. However, it is difficult to assess the extent to which the Commission actually fulfilled its goals with regard to development assistance during the reporting period.

"Previous reports offered links between the EC's Annual Programme of Action (for Development Assistance) and annual activities and outcomes. However, in 2005 the Commission did not prepare such a Programme of Action and the EC Annual Policy Strategy remains a broad document covering the activities of the Commission as a whole. As a result, one cannot easily determine what goals have been set and what progress has been made in achieving these.

"In keeping with our suggestions from previous years, the Report refers to the commitments which the Commission has made in the context of the 2005 Paris High Level Forum on Aid Effectiveness. There is also information on efforts to deliver more aid through programmes and budget support, which are considered a more effective method of delivering aid. We would have welcomed a table or text monitoring the EC's progress against agreed indicators, and even more explanation as to how the EC plans to change its activities in partner countries in keeping with the Paris Declaration commitments. For the future, this might include agreeing joint multi-annual strategies with EU Member States, opening joint offices, co-financing or jointly financing activities, among others.

"We welcome the preparation of a short, accessible Executive Summary suitable for a general audience. However, we would encourage the Commission to structure the summary so as to make it simpler to follow, to include clear examples of results, and to clarify the impact of Community aid on achievement of the MDGs."

7.11 Finally, the Secretary of State says that the Report will be considered at the 17 October 2006 General Affairs and External Relations Council (which is the second of this year's biennial "development" Councils).


7.12 The Secretary of State notes a number of improvements, which we likewise welcome. Indeed, there are some upon which he might also have been expected to comment, such as the developments towards the untying of aid to Least Developed Countries (whereby some 30% of all EC aid will now be untied) and the improvement in disbursement. No doubt this can be further improved, but it does seem to indicate that the reforms begun then are bearing fruit.

7.13 We also endorse his comments on what still needs to be done. In particular, given the level of taxpayer's expenditure involved and the importance of outcomes, we endorse what he has to say about the need for ever greater focus on measuring and demonstrating effectiveness. Despite all the improvements he notes, it is still in many ways extraordinary that, as he puts it, "one cannot easily determine what goals have been set and what progress has been made in achieving these". It is notable that, although a third of the executive summary is devoted to illustrating how the Commission delivers "More, Better, Faster Aid", it nonetheless still admits that, welcome improvements notwithstanding, "in general, evaluations point to long delays in implementation and highlight the rigidity and slowness of Commission procedures".[17]

7.14 There is much in the Report and the Secretary of State's comments on the increased use of direct budget support, whereby European taxpayers' money — in 2005, nearly 20% of total commitments amounting to €1.55 billion — is transferred into the coffers of the national authorities in recipient partner countries, for subsequent use in line with agreed development priorities and activities. The European Consensus on Development further confirmed this approach. Though the rationale is well understood, the corollary is an ever-greater need to ensure that mismanagement and misappropriation are prevented. Some of the challenges are hinted at in the Report, when the Commission notes that its targets were not reached largely due to political and specific in-country issues. It is therefore all the more striking that the Secretary of State has nothing to say about the Commission's ability to assess and control the risk of financial mismanagement — e.g., to evaluate the quality of public finance management before and during a budget support operation and identify, minimise and manage the risk of poor or fraudulent management of the disbursements of aid. This is something upon which the Court of Auditors also comments in its annual report on the financial management of the 6th-9th European Development Funds in 2005, which we consider elsewhere in this Report.[18]

7.15 We should accordingly like to know if the Secretary of State is satisfied with the Commission's capacity in this regard and, if not, what further improvements he will be seeking.

7.16 We should also be grateful if he would write to us after the upcoming "development" GAERC with an outline and the main conclusions of the discussion of the Report.

7.17 In the meantime, we shall keep the document under scrutiny.

17   COM (06) 326 , page 11. Back

18   See para 37 of this Report. Back

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