Select Committee on European Scrutiny Thirty-Seventh Report

40 Financing Development Cooperation




COM(06) 19




COM(06) 20




COM(06) 21




COM(06) 18




COM(06) 23




Commission Communication: The Thematic Programme "Non-state Actors and Local Authorities in Development"

Commission Communication: Thematic Programme for Environment and Sustainable Management of Natural Resources including Energy

Commission Communication: Thematic Strategy for Food Security

Advancing the food security agenda to achieve the MDGs

Commission Communication: Investing in people: Communication on the thematic programme for human and social development under the Financial Perspectives 2007-2013

Commission Communication: Thematic Programme for the promotion of democracy and human rights worldwide under the future Financial Perspectives (2007-2013)

Draft Council Regulation establishing a Financing Instrument for Development Cooperation

Legal baseArticles 177, 179(1) and 251 EC; QMV; co-decision
Deposited in Parliament9 October 2006
DepartmentInternational Development
Basis of considerationEM of 6 October 2006
Previous Committee Report(a)-(e) HC 34-xx (2005-06), para 5 (1 March 2006)

(f) None

To be discussed in Council16-17 October 2006 General Affairs and External Relations Council
Committee's assessmentPolitically important
Committee's decisionCleared


40.1 At present the EC's External Actions spending is funded from a multitude of diverse instruments and budget lines. As part of the 2007-13 Financial Perspective, the Commission proposed in 2004 that all External Actions spending should be grouped under one heading (Heading 4) and, within this, should be divided into instruments (or regulations) covering the main subject areas: Pre-accession Assistance, European Neighbourhood and Partnership (ENPI), Development Cooperation and Economic Cooperation, Stability, Humanitarian Assistance and Macro-Financial Assistance, the first four of which would be new. We examined the Commission's Communication which sets the framework for these instruments and the associated draft Council Regulations relating to the proposed Instruments on 1 December 2004. During 2005 we considered them on several further occasions, eventually recommending them for debate in the European Standing Committee. That debate took place on 10 November 2005.

40.2 The situation now is that the Development Cooperation and Economic Cooperation instrument was split, between Economic and Development Cooperation, leading to a situation in which the Development Cooperation Instrument (DCI) is now one of nine external action instruments setting out how EC funds will be spent on development issues under the next Financial Perspective (2007-13). It continues to form part of Heading IV of the EC budget. All instruments are at different stages of finalisation, with the aim of becoming operational on 1 January 2007 or shortly afterwards.

The Development Cooperation Regulation

40.3 The Parliamentary Under-Secretary of State at the Department for International Development (Mr Gareth Thomas) explains the present situation in his helpful Explanatory Memorandum of 5 October 2006. He says that in July, COREPER (the Committee of Permanent Representatives) reached a political agreement on a Common Position on the DCI. However, he explains that at the time, the expectation was "that this would be challenged by the European Parliament (EP) in a drawn out second reading". But following "intense negotiations over the summer, it emerged however that an agreement was within reach that could meet both EP and Council concerns, and which was also acceptable to the Commission"; which agreement was reached on 3 October, based on a revised Common Position and a letter from the EP, both of which are attached to his Explanatory Memorandum. The revised version of the July Common Position will go to the 16-17 October General Affairs and External Relations Council (GAERC) for adoption. "The EP will subsequently approve the Common Position without amendments in their first Plenary following the GAERC [i.e., during the week commencing 23 October] in a swift second reading agreement. This process should enable the Instrument to enter into force at the start of 2007."

40.4 The DCI covers funding for development activities in Asia, Latin America, South Africa, Central Asia and the Middle East, at country and regional level. It also contains funding for five thematic programmes — migration and asylum; non-state actors and local authorities; environment and energy; investing in people; and food security — thus effectively replacing the five of six "thematic" Commission Communications issued in 2005:

—   5834/06: Thematic Programme for human and social development;

—  5835/06: Thematic Programme Non-State Actors and local Authorities in development;

—  5836/06: Thematic Programme for environment and sustainable management of natural resources including energy;

—  5837/06: Thematic Programme advancing the food security agenda to achieve the UN Millennium Development Goals (MDGs); and

—  6297/06: Thematic Programme for the promotion of democracy and human rights.[94]

which the Minister says will not now be taken to Council for adoption. As he notes, with regard to the last of these, a separate Instrument for Democracy and Human Rights has been established "at EP's insistence".

40.5 Country, regional and thematic strategy papers will be prepared for the duration of the Instrument. Mid-term reviews are foreseen, as well as annual action programmes spelling out in detail what the programmes will achieve in a given year. All these strategies, reviews and yearly plans will be adopted by Member States in management committees. The Instrument also sets out the type of aid modalities which can be used, how programming should take place, management arrangements and possible beneficiaries and partners.

40.6 The overarching aim of the Instrument is to eradicate poverty in the context of sustainable development, including pursuit of the Millennium Development Goals, as well as to promote democracy, good governance, respect for human rights and the rule of law. Within this, the DCI sets out a range of possible areas for co-operation under geographic programmes such as education, health, trade, water and energy, infrastructure and rural development. It also identifies specific areas for each region.

40.7 With a budget of €16.897 million (£11.45 million) for seven years, the DCI represents the largest spending Instrument under Heading IV:

—  60% is allocated to geographic funding, with Asia receiving the largest share. Specific allocations are also established for each thematic programme;

—   €1.244 million is set to compensate sugar producers for the reform of the EU sugar regime, mainly benefiting ACP countries; and

—  €465 million has been included in the envelope for thematic programmes to benefit countries under the ENPI.

40.8 Measures will be classified as Official Development Assistance (ODA), according to the OECD Development Assistance Committee (DAC), "to the order of 100% for geographic programmes and 90% for thematic ones. Thematic programmes are not restricted to the DCI countries, as countries covered by the European Development Fund, including overseas territories, and by the European Neighbourhood Instrument (ENPI), can also benefit."

40.9 Several Declarations are attached to the Instrument. These cover: ensuring that 20% of country programme spending is on basic social services; sugar funding; the amount of thematic funding for ENPI countries; budget implementation matters; and the organisation of management committees under the Instrument.

The Government's view

40.10 The Minister professes himself "pleased to see an end to the lengthy and complex DCI negotiations". He recalls the several occasions during the negotiations upon which he wrote to the Committee to update us on progress, and that, subsequent to his Explanatory Memorandum on the initial Commission proposal in November 2004, it was jointly agreed that he should provide us with the final version of the Instrument prior to its formal adoption, as it had changed significantly during negotiations.

40.11 He also professes himself pleased with the final version of the DCI, and explains why as follows:

"In large part due to the strong position taken by the EP's Development Committee, and also partly owing to our substantive rewriting during the UK EU Presidency, we now have a very different document from two years ago. This is a collective achievement. On process, the extensive consultations with the EP, but also with the Commission, other Member States and development NGOs, have been valuable in creating awareness and interest around the development agenda and forging common views in Europe.

"On substance, we particularly welcome the fact that DCI is now:

  • Focused on developing countries only, for the geographic part;
  • Has poverty reduction and achieving the MDGs as the overarching objective;
  • Is solely based on the development articles of the Treaty (177-179);
  • Sets out appropriate policy directions for its geographic and thematic programmes;
  • Is based on best development practice and the EU Consensus on Development;
  • Gives priority to ODA eligible measures and least developed and low income countries in terms of overall resource allocation;
  • Establishes effective management arrangements for agreeing funding decisions which should improve overall effectiveness;
  • Establishes a participatory approach to development, where policy direction and aid implementation involves, first and foremost, the partner countries, but also non-state actors, EU institutions and the entire donor community; and
  • Sets out appropriate accountability measures in terms of evaluation of programmes and regular reporting and reviews of the Instrument".

40.12 He is also content with the overall policy direction of the Instrument:

"While we think that there is slightly more policy detail than is necessary, which makes the Instrument somewhat unwieldy and unfocused, we recognise the importance the EP attaches to this and cannot disagree with any of the details. In truth, this is also a reflection of the width and breadth of EC development cooperation and what we expect of it."

40.13 Turning to the thematic programmes, he says that the programme on investing in people "gives the right focus on health, education and gender equality"; that the environment and energy programme "has struck the right balance between the two, with an emphasis on the first area, which is also seen as complementary to actions taken under country programmes"; the "financial focus of the order of 85% for non-state actors under the programme for such actors and local authorities" is gratifying; and that the programmes on food security and migration and asylum "reflect well our priorities in these fields".

40.14 He says that the provisions for making most operations classifiable as ODA are important and supports the suggested benchmarks. Those operations that would not count as ODA would "mostly fall to the migration and environment and energy programmes (climate change, for example), but reflect activities that the UK Government supports overall".

40.15 He sees the Declarations as "largely explanatory additions" and says that:

"While we are not a strong supporter of sector benchmarking for aid allocations and prefer an approach based on partner country choices, we accept the EP's wish to see 20% of all country funding targeting basic social services. Spending on basic services is indeed a fundamental aspect of achieving the MDGs."

40.16 Finally, he says that "the EP's wish to strengthen their involvement in policy setting and strategy development has been settled in an exchange of letters among the institutions", with which he is "content".


40.17 It has, as the Minister illustrates, been a long and winding road. We are grateful to him and his Department for having been so assiduous in facilitating proper scrutiny at each stage. The outcome would appear to be satisfactory. The challenge now will be to make it work effectively in pursuit of the Millennium Development Goals.

40.18 It is accordingly appropriate that the European Parliament has ensured that there will be a mid-term review in 2009, which will be required to take of the findings of the Parliament's own prior examination of the operation of the Instrument "to identify any dysfunctional situations that may have arisen".[95] We look forward to considering the outcome of the review and the Minister's views thereon in due course.

40.19 We now clear the Regulation.

40.20 We also clear the thematic Commission Communications referred to above (documents (a)-(e)).

94   A sixth Commission Communication was issued as part of this group: 5854/0: "Thematic Programme on Cooperation with Industrialised and other High-income Countries under the future Financial Perspectives (2007-2013)"; see HC 34-xx (2005-06), para 5 (1 March 2006). Back

95   Undated letter from the Chair of the European Parliament Development Committee to the Chair of the COREPER, attached to the Minister's Explanatory Memorandum. Back

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