9 EC Development Assistance in 2005
| (27619)
10875/06
COM(06) 326
+ ADD 1
| Annual Report 2006 on the European Community's Development Policy and the Implementation of External Assistance in 2005
|
| Legal base | — |
| Department | International Development
|
| Basis of consideration | Minister's letter of 26 March 2007
|
| Previous Committee Report | HC 34-xxxvi (2005-06), para 7 (11 October 2006)
|
| Discussed in Council | 17 October 2006 General Affairs and External Relations Council
|
| Committee's assessment | Politically important
|
| Committee's decision | Cleared. Tag to any debate on EU development policy
|
Background
9.1 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
9.2 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.
9.3 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 timeframe.
- 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, 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 of €22,682 billion 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 2001-2004
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 2007-2013 Financial
Perspectives and in cooperation with the beneficiary countries,
Member States and other donors.
9.4 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 cooperation
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.
9.5 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.
9.6 Section 4 contains two "feature articles"
on special topics: trade and development; and education as a priority
sector in the EC's external assistance.
9.7 Section 5 describes EC aid management and assesses
the efficiency and effectiveness of EC cooperation. 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.
9.8 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.
9.9 Finally, section 7 contains annexes enumerating
EC assistance and financial tables.
The Committee's previous consideration of the
Report
9.10 We considered the report on 17 October 2006
on the basis of an 11 July 2006 Explanatory Memorandum, in which
the Secretary of State noted a number of improvements, which we
likewise welcomed. Indeed, we felt that there were 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. We felt that, while performance could no doubt
be further improved, it did seem to indicate that the 2000-20004
reforms were bearing fruit.
9.11 We also endorsed his comments on what still
needed to be done — in particular, given the level of taxpayer's
expenditure involved and the importance of outcomes, what he had
to say about the need for ever greater focus on measuring and
demonstrating effectiveness. Despite all the improvements he noted,
we felt it in many ways extraordinary that, as he puts it, still
"one cannot easily determine what goals have been set and
what progress has been made in achieving these". We found
it notable that, although a third of the executive summary was
devoted to illustrating how the Commission delivers "More,
Better, Faster Aid", it nonetheless still admitted that,
welcome improvements notwithstanding, "in general, evaluations
point to long delays in implementation and highlight the rigidity
and slowness of Commission procedures".[23]
9.12 We also noted that there was 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
new 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 were hinted at in the Report, when the
Commission noted that its targets were not reached largely due
to political and specific in-country issues. We therefore found
it all the more striking that the Secretary of State had 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. We
noted that this was something upon which the Court of Auditors
also commented in its annual report on the financial management
of the 6th-9th European Development Funds
in 2005, which we considered elsewhere in that Report.
9.13 We therefore asked the Secretary of State:
- if he was satisfied with the
Commission's capacity in this regard and, if not, what further
improvements he will be seeking;
- to write to us after the upcoming
"development" GAERC with an outline and the main conclusions
of the discussion of the Report;
and in the meantime kept the document under scrutiny.
The Minister's letter
9.14 In his 26 March 2006 letter, the Parliamentary
Under-Secretary of State at the Department for International Development
(Mr Gareth Thomas) begins by apologising for the lateness of his
reply, which he says the Secretary of State asked him to send
on his behalf. He says this "was due to an oversight on our
behalf, linked to the summer recess". He then refers to the
changes that he is in the process of making to improve the Department
for International Development's scrutiny process, and that he
has "asked the new Head of our European Union Department
to prioritise this issue".
9.15 He then turns to the issues raised in our earlier
Report, to which he responds as follows:
"You asked if the Secretary of State is
satisfied with the Commission's capacity to assess and control
the risk of financial mismanagement. We are satisfied in this
regard. The Commission has financial management systems which
minimize the risks associated with development assistance.
"The need to implement principles of sound
financial management is set out in the Financial Regulations for
both the European Development Fund (EDF) and the general budget.
Chapter 4, Article 4 of the EDF Regulation states, 'EDF resources
shall be used in accordance with the principles of sound financial
management, that is to say, in accordance with the principles
of economy, efficiency and effectiveness.' The role of authorising
and accounting officers are set out and segregated, and the applicable
rules for each are enumerated. Requirements for procurement, hiring
of staff, and internal and external audit requirements are also
set out. The Financial Regulation applicable to the general budget
spells out a similar set of financial controls.
"In addition, the Commission operates a
mandatory 24 point internal control standard. Of particular importance
are requirements regarding:
- risk analysis and management (where the standard
is that 'Each DG shall systematically analyse risks in relations
to its main activities at least once a year, develop appropriate
action plans to address them and assign staff responsible for
implementing those plans');
reporting improprieties (staff must not suffer
discrimination when they fufil their responsibility to report
any impropriety in a financial transaction);
recording exceptions (where the standard is that
'all instances of overriding of [financial] controls or deviations
from accepted policies and procedures under exceptional circumstances
must be documented, justified and approved at an appropriate level
before action is taken');
recording and correction of internal control
weaknesses;
audit reports (where the standard is that 'Each
DG shall review annually the recommendations made and action taken
in response to audit reports by the Internal Audit Service, its
own internal audit capability and the European Court of Auditors,
define appropriate action plans to remedy and monitor the implementation
of those plans');
internal audit capability (where the standard
is that 'Each DG shall establish or have access to a competent
and properly staffed internal audit capability with an annual
work programme based on risk assessment'); and
annual review of internal controls.
"As noted in the internal control standard,
the Commission relies upon its own internal audit service. This
service provides opinions, advice and recommendations. It audits
internal control systems in order to assess their effectiveness
and, more generally, the performance of Commission departments
in implementing policies, programmes and actions with a view to
bringing about continuous improvement.
"Financial controls are further considered
and strengthened by the European Court of Auditors. The Court
has as its main task auditing the accounts and the implementation
of the budget of the European Union (including the EDF) with the
aim of improving financial management.
"Finally, it is worth commenting on the
structures of the European Commission with regard to development
cooperation. Beginning in 2001, the Commission began to 'deconcentrate'
(decentralise) much of their programme management to their in-country
Delegations. In 2002, when reforms were just beginning, only 24%
of the value of the European Development Fund portfolio was managed
by Delegations. In 2005 (the last year for which data are available),
that number had risen to 82%. Moving financial authority close
to the site of operations will help to minimize financial risk.
"Also in 2001, EuropeAid was created in
order to promote sound and accountable technical, financial and
contractual management of Community aid. These reforms have helped
to improve the quality of projects and outcomes, as noted in the
2004 Court of Auditors' Report on Deconcentration".
9.16 The Minister also includes the Council Conclusions,
which are at Annex 1 of this Report. He says that, while the Conclusions
welcome the Annual Report, they also "emphasise the need
for continuing improvements in many of the areas which have been
highlighted to the Committee in the past (including in the Explanatory
Memorandum on the Report)". In particular, he notes that
the Conclusions:
"encourage the Commission to adopt a forward
look when drafting the Report, rather than only commenting on
issues in the calendar year under consideration. The Commission
is also encouraged to set out annual objectives explicitly, and
to provide an assessment on achievement of these objectives. In
particular they invite the Commission to make a clear link from
the description of activities to the achievement of the Millennium
Development Goals. The Council also invites the Commission to
provide a more explicit description of the implementation and
effects of the Paris Declaration on Aid Effectiveness".
9.17 Finally, on the question of untied aid, he says:
"all Commission aid to least developed countries
and all technical assistance is untied. In total, this is 30%
of Commission aid. Budget support and aid channelled through multilateral
institutions is also completely untied. This is another 40% of
Commission aid. The remaining part of Commission aid is partly
untied. Companies from countries which have untied their own aid
are allowed to bid on Commission projects.
"There are a few exceptions to these rules,
made in the interests of developing countries. For example, sometimes
the Commission provides support to help a region to economically
integrate. In these cases, only companies from the region will
be eligible to bid on these projects. This is to encourage these
companies to pursue business activities in other parts of the
region".
Conclusion
9.18 We are grateful to the Minister for this
further information, which is of the "better late than never"
variety. It is odd to find him explaining the delay in responding
to a request for this information made last October by referring
to an oversight linked to the summer recess (sic), which tends
to suggest that there is still some way to go before his department's
scrutiny performance attains a fully satisfactory level of performance.
9.19 The same might be said of the Commission
and the delivery of external assistance: the proof of the pudding
will be in the eating. We accordingly ask that, when he comes
to submit an Explanatory Memorandum on the 2006 Annual Report
later this year, the Minister pays particular attention to the
extent to which there is evidence of the Commission having improved
its performance in the ways that he and we would wish.
9.20 In the meantime, we now clear the document,
which we consider relevant to any debate on EC development policy.
Annex — Council Conclusions
on the annual report 2006 on the European Community's Development
Policy and the Implementation of External Assistance in 2005
The Council adopted the following conclusions:
"RECALLING the 2005 Joint Development Policy
Statement: "The European Consensus on Development" (JDPS);
RECALLING its conclusions of 21 November 2005 on
the Annual Report 2005 on the European
Community's (EC) Development Policy and the implementation
of external assistance in 2004;
THE COUNCIL:
1. WELCOMES the Commission's Annual Report 2006 on
the EC's development policy and the implementation of external
assistance in 2005 and NOTES with satisfaction the overall improvement
of the Annual Report, and in particular, the strengthened partnership
approach and results-orientation which show improved quality of
EC interventions;
2. NOTES that the JDPS adopted in 2005 provides a
basis to further develop the contents and the structure of the
Annual Report as a management and communication tool, and REITERATES
its invitation to the Commission to further improve the analytical
part of the Annual Report by showing contributions of EC assistance
to achievement of outcomes and impacts, including concrete examples;
3. INVITES the Commission in the 2007 Annual Report
to
- make a clear link from the
description of activities to the achievement of development policy
objectives as defined in the JDPS, including continued and enhanced
MDG-related analysis,
- set out explicitly its annual
objectives in the report and to provide an assessment on their
achievement,
- include highlights from the
Donor Atlas which are relevant to the achievement of development
policy objectives,
- after analysing the positive
achievements and assessing existing challenges, strengthen the
forward-looking contents of the Annual Report, by outlining improvements
of policies and programming, and
- include a more explicit description
of implementation and effects of the Paris Declaration as well
as, based on the biennial EU PCD report, a summary of achievements
as regards the policy coherence for development (PCD) commitments;
4. WELCOMES in particular the description of lessons
learnt from evaluations and INVITES the Commission to integrate
them into policy and programming processes;
5. NOTES with concern the decrease in effectiveness
and efficiency of EC contributions to Latin America, as reflected
in the results-oriented monitoring system, and INVITES the Commission
in the future to provide assessments on reasons behind major changes;
6. COMMENDS the Commission for the quantitative improvements
on its aid delivery in 2005 with respect to 2004 both in terms
of commitments (8 billion €, i.e. a 16% increase) and payments
(6,2 billion € last year, compared to 5,7 billion €
in 2004) and ENCOURAGES the Commission to keep up with its efforts
with a view to reducing the outstanding RAL;
7. WELCOMES the increase in share of low income countries
(LICs) in the overall resource allocation, NOTES that the share
of least developed countries (LDCs) has remained stable after
a decline in 2004, EMPHASISES the importance of the commitments
made for a specific focus on Africa and REITERATES the request
to report on measures to ensure greater impact on poverty and
inequality in middle income countries (MICs);
8. INVITES the Commission to further improve the
accounting of its ODA reporting to DAC, and to present the financial
statistics on the use of ODA in a way that provides information
on how the share of the areas for EC action identified in the
JDPS evolves over time, how EC contributions relate to the global
aid allocations by region and how the geographical distribution
responds to the needs and performance of the regions;
9. WELCOMES the presentation of the Annual Report
2006 in June and ENCOURAGES the Commission to enhance its efforts
to present the Annual Report at the earliest possible stage in
the future;
10. INVITES the Commission to draft the executive
summary as a strategic document with analytical and forward-looking
contents focusing on achievements, remaining challenges and opportunities,
and which serves as a public communication tool."
23 COM (06) 326 , page 11. Back
|
