Select Committee on European Scrutiny Thirty-Seventh Report


39 Development Assistance and Governance

(27791)

12572/06

COM(06) 421

+ ADDS 1 - 3

Commission Communication: Governance in the European Consensus on Development — towards a harmonised approach within the European Union

Commission Staff Working Documents

Legal base
Document originated30 August 2006
Deposited in Parliament11 September 2006
DepartmentInternational Development
Basis of considerationEM of 5 October 2006
Previous Committee ReportNone; but see (26737) HC 34-v (2005-06), para 3 (12 October 2005) and (24951) HC 63-xxxvii (2002-03), para 13 (12 November 2003)
To be discussed in Council16-17 October 2006 General Affairs and External Relations Council
Committee's assessmentPolitically important
Committee's decisionCleared, but further information requested

Background

39.1 Last October, we considered the proposed joint declaration by the Council, the European Parliament and the Commission on EU Development Policy sought to update the 2000 EC Development Policy Statement (DPS) in the light of subsequent development commitments, such as the Millennium Development Goals and the Monterrey Summit on financing for development. The first part set out a framework of objectives and principles on the basis of which the Member States and the Community commit to "a common vision". The second provided guidelines for the implementation of EC aid, outlining the role of the Commission and proposing a differentiated approach to implementing EC aid depending on the contexts and needs of each partner country or region, along with concentration on a number of broad themes and a variety of means by which to implement assistance.

39.2 Given the importance of the context — with Member States and the Community providing 55% of global ODA — and the fact that it would guide all Community development assistance over the next Financial Perspective, we recommended it for debate in European Standing Committee B.[92] That debate took place on 17 November 2005. By the time that the new European Consensus on Development was adopted by the December 2005 European Council, a number of significant changes had been made as a result of discussions with both Member States and the European Parliament. Poverty eradication was established as the overarching objective for EU official development assistance in all developing countries; the least developed and low-income countries were to be given priority in terms of overall resource allocations; and renewed attention would be given to promoting policy coherence for development. It was made clear that development is a shared competence, not a single EU Policy; the Commission would engage in a broader range of areas in response to the needs of partner countries, but guided by the principle of concentration on a limited number of sectors in-country in which the Community is considered to have a comparative advantage.

39.3 As the Commission notes in its introduction, poverty reduction and the MDGs will not be achieved without decisive progress in the areas of economic, social, environmental and political governance; with the European Consensus on Development setting out the EU's approach and contribution, "identifying good governance, democracy and respect for human rights as integral to the process of sustainable development and as major objectives of EU development policy".

The Commission Communication

39.4 Accordingly, the Communication proposes that the Community and Member States agree principles and actions for EU dialogue and co-operation with developing countries on governance, with the objective of gradually developing "a coherent common approach to promoting all aspects of democratic governance".

39.5 The document is divided into three sections followed by short conclusions. There is an accompanying Staff Working Paper comprised of four annexes. These provide: examples of recent and ongoing programmes and dialogue on governance with a focus on fragile states; the template of the Governance Profile to be used to assess African, Caribbean, and Pacific (ACP) countries' performance on governance; an overview of the African Peer Review Mechanism (APRM);[93] and a list of acronyms used. There is also the summary of an evaluation of the approach outlined in this Communication, noting that "operations in this policy framework will help make EU support for democratic governance processes in the development cooperation sphere more consistent and have an incentive effect on partner countries, thereby contributing to the achievement of the Millennium Development Goals" .

39.6 The first section of the Communication describes what the Commission means by governance — multi-faceted, requiring a broad approach and being more than just tackling corruption — and highlights a number of key issues:

—  a partnership-based approach, based not on imposing standardised approaches but on dialogue with individual partner countries, conducted jointly by the Commission and Member States represented on the ground, and ownership, but also with evaluation of progress made and appropriate action in the event of bad governance;

—  addressing the dual problems of political legitimacy and capacity-building, by promoting the gradual establishment of participatory approaches by governments with non-state actors in designing their development strategies;

—  the importance of using the budget support mechanism in reinforcing the role of democratic institutions;

—  developing new, complementary preventative approaches to fragile states; and

—  the need to harmonise approaches within the EU and other international players, including the BRICS (Brazil, India, China and South Africa).

39.7 The second section proposes a "Governance Initiative" for the 78 African, Caribbean and Pacific (ACP) countries. It would be used to allocate €3 billion (£2.02 billion) of funds from the 10th EDF. €2.7 billion (£1.82 billion), called the "incentive tranche", linked to the EC's Country Strategy Papers for EDF10 which will set the framework for EC development assistance to the ACP countries. The remaining €300 million (£202 million) would target regional support, with a particular focus on the African Union (AU) and the APRM. Six steps for determining access and monitoring progress are set out in detail.

39.8 The final section describes EC current and planned dialogue and programmes on governance in the European Neighbourhood, Latin America and Asia.

39.9 The Conclusions consist of four proposed principles to guide EU work on governance and two proposed actions. The principles state that improving governance is a means to achieving the MDGs and reiterate that a broad approach to governance is needed based on dialogue and country ownership. The actions are regular dialogue between the EU and the partner country about governance issues and financial support for governance-related activities via the Governance Initiative.

39.10 The Governance Profile in Annex 2 of the Staff Working Paper will help the Commission assess the quality of governance in each ACP country and provide the basis for dialogue with the government to identify benchmarks and targets for improvements in governance, thereby helping to determine the allocation of the €2.7 billion (£1.82 billion) under the Governance Initiative.

The Government's view

39.11 In his 5 October 2006 Explanatory Memorandum, the Parliamentary Under-Secretary of State at the Department for International Development (Mr Gareth Thomas) says that the UK is committed to supporting good governance as stated in the recent White Paper "Making Governance Work for the Poor". He welcomes the policy shift away from unilateral EC analysis and programming and towards a common European understanding of governance trends and reform priorities, but one which recognises that it is neither realistic nor desirable to impose standardised approaches. He supports the emphasis on poverty reduction as the over-riding objective of EU development policy, with good governance as a key complementary objective, and also welcomes the use of the EDF10 programming process to encourage improved governance in ACP countries.

39.12 He further welcomes the broad definition and approach to governance and recognition that strengthening governance is more than tackling corruption; the emphasis on budget support as a means of strengthening government systems; and the importance attached to harmonisation and alignment. He agrees that democratic governance is more effectively supported through dialogue rather than through sanctions and conditions and that country ownership of governance reforms is important.

39.13 He also agrees with the Commission that new, complementary approaches must be explored when dealing with fragile states, building on the OECD-DAC Principles of Good International Engagement in fragile states, and will ask the Commission to track and report on work in fragile states.

39.14 He discusses the Governance Profiles (19 themes organised into nine assessment sections covering: democratic governance, rule of law, control of corruption, government effectiveness, economic governance, internal and external security, social governance, international context and quality of partnership. Two marks are given at the end of each section; scales that quantify the level of performance and whether performance is improving, deteriorating or remaining much the same; based primarily the World Bank Institute's "Governance Matters" indicator set) and notes the role of DFID in convincing the Commission that the Profile should be shared with partner governments. "This will ensure that partner governments understand the basis for allocation of the 'Incentive Tranche' and so increase the Commission's ability to positively influence their governance policies."

39.15 This "Incentive Tranche", he explains, will account for around 12% of the 10th EDF funds managed by the Commission, for the full six years of EDF10. He had some concerns about the six-stage process to calculate the "Incentive Tranche", related primarily to the sequencing of the different steps, the use of quality controls and at what stage, and how, the Commission, Member States and the partner government would be involved in agreeing, discussing and responding to the Governance Profile. The Commission have provided satisfactory answers and undertaken to provide an overview of all the Profiles and details of "corrective factors" whenever they are applied. The Commission is scheduled to present the results of the exercise, including the allocation of the "Incentive Tranche", to Member States for discussion and approval in Spring 2007.

39.16 He goes on to say that Governance Profiles are already being completed by the Commission in the ACP countries as part of the EDF programming process, with Member States, including the UK where represented, actively involved. The Commission have agreed to the principle of a review of the whole process next year, and he will press for this to be reflected in the Conclusions of the 16-17 October General Affairs and External Relations Council.

39.17 He welcomes the proposed financial support to the APRM and the specific section on Africa, especially given that Human Rights and Governance are among the focal sectors of the EU-Africa Strategy agreed in December 2005. The Communication and proposed actions should help deliver the specific commitments in the Strategy, including supporting good governance programmes at country level and building the capacity of the AU, APRM, democratic institutions such as national and regional parliaments, and civil society.

39.18 Finally, he says that as part of its country assistance planning process, DFID will undertake an analysis of governance in its priority partner countries and build on, and further support, existing national and donor-government dialogue on governance. The analysis will help to identify trends in governance and inform the choices made over the use of aid resources.

Timetable

39.19 EU Development Ministers are expected to agree Conclusions at the 16-17 October General Affairs and External Relations Council. The Conclusions are also expected to be reflected in the stocktake on the EU-Africa Strategy at the December 2006 European Council.

Conclusion

39.20 We agree that governance, broadly defined, is central to development, and that the approach proposed in the Commission would appear to be soundly based.

39.21 However, as the Minister makes clear, the Governance Profile process and the "Incentive Tranche" will be central to making it an effective reality. We should therefore be grateful if the Minister would write to us, firstly after the 16-17 October General Affairs and External Relations Council, to confirm that the Conclusions do indeed reflect his aspirations in this regard; and then next Spring, when the Governance Profile exercise to which he refers has been completed and presented to the Council, with his observations thereon.

39.22 We also take this opportunity to remind the Minister that we are expecting him to write to us also concerning the stocktake on the EU-Africa Strategy, ahead of the December European Council.




92   See headnote. Back

93   Under the auspices of the African Union, prominent Africans are nominated by member countries and appointed by their respective Heads of State to the APRM (African Peer Review Mechanism) review panel, to promote policies, standards and practices in favour of political stability, economic growth, sustainable development, human rights and regional integration.

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