9 The European Neighbourhood Policy Instrument
| (32498)
6163/11
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| European Court of Auditors Special Report: "Is the New ENPI Successfully Launched and Achieving Results in the Southern Caucasus (Armenia, Azerbaijan and Georgia)?"
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| Legal base | —
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| Deposited in Parliament | 9 February 2011
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| Department | International Development
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| Basis of consideration | EM of 24 February 2011
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| Previous Committee Report | None
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| To be discussed in Council | To be determined
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
9.1 The European Neighbourhood Policy Instrument (ENPI) was introduced
in 2007 as the main EU external assistance instrument for the
European neighbourhood region, replacing the previous Technical
Aid to the Commonwealth of Independent States (TACIS) and Euro-Mediterranean
Partnership (MEDA) instruments. It covers Eastern Europe, the
South Caucasus, the near Middle East, and North Africa. It is
designed to support the implementation of the European Neighbourhood
Policy in those areas. For 2007-2013 the financial envelope for
ENPI is €11.1281 billion (£9.58 billion).[46]
9.2 The European Court of Auditors carries out audits,
through which it assesses the collection and spending of EU funds
and examines whether financial operations have been properly recorded
and disclosed and legally and regularly executed. Also, via its
Special Reports, it carries out audits designed to assess how
well EU funds have been managed so as to ensure economy, efficiency
and effectiveness.[47]
The European Court of Auditors Special Report
9.3 This Special Report No 13/2010 examines the programming
and first annual programmes for Armenia, Azerbaijan and Georgia
under the ENPI. The document also contains the Court of Auditors'
recommendations, and the European Commission's responses to the
Report.
9.4 The Report concludes that the first phase of
ENPI programming in the South Caucasus had mixed results. The
key conclusions are that: there were some weaknesses in the planning
process for the first year's programmes, with a need for a more
rapid and coherent planning process; the 2007 programmes have
had mixed results, with reform strengthened in vocational training
in Armenia, some progress in public finance management in Georgia,
but little progress in confidence building measures in Abkhazia
or in the energy sector in Azerbaijan.
9.5 The Armenia 2007 Annual Action Programme was
for €21 million (£18 million), with a €16 million
(£14 million) Sector Budget Support programme for "Support
to poverty reduction through reforms in vocational education and
training" (VET), and €5 million (£4.3 million)
for twinning projects. The Report concludes that the reform process
in vocational education and training was strengthened as a result
of the programme. It accepts that a reduction of the second tranche
of budget support spurred the government of Armenia to take further
action. But the Report also argues that the sector remains underfunded,
so the progress is "fragile". In consequence, the Court
recommends increased national level support for vocational training
reform in Armenia.
9.6 The Azerbaijan 2007 Annual Action programme allocated
€19 million (£16.4 million), €14 million (£12
million) of which was for an Energy Reform budget support programme,
and €5 million (£4.3 million) of which was for twinning.
The Report assesses that progress in renewable energy and energy
efficiency has been unsatisfactory, and that in the two years
following the 2007 financing decision, there had been very little
progress. The Commission points out that this was due to delays
in Azerbaijan adopting its own new mechanisms for implementing
the programme, and that the second tranche of this programme was
released only in June 2010.
9.7 The Georgia 2007 Annual Action Programme was
for €24 million (£21 million), made up of €16 million
(£14 million) in sector budget support for public finance
management reforms, €4 million (£3.4 million) for rehabilitation
in the Georgian/Abkhazian conflict zone, and €4 million (£3.4
million) for twinning projects. The Court reports that there has
been modest progress in public finance management, but no progress
in rehabilitation and confidence building. On public finance management,
the programme suffered initially from a lack of engagement on
the Georgian side, and the second tranche was reduced. Since 2009,
progress has been better, with Georgia adopting an audit strategy
despite previous hostility to this idea. There was less progress
in rehabilitation and confidence building, as the war with Russia
in August 2008 severely damaged the peace process. The prevailing
situation has meant that EU programmes in Abkhazia and South Ossetia
have not been able to go ahead. The Report also recommends more
rigorous assessments of conditions in budget support programmes,
and the use of instruments other than ENPI for confidence building
measures.
9.8 The Court also makes the general observation
that assistance programmes were not sufficiently guided by structured
dialogue with partner countries due to the lack of EU Delegations
in Azerbaijan and Armenia and the inability of partner countries
to coordinate different interests within their governments. It
therefore recommends that the new European External Action Service
be used to strengthen the links between strategic and design phases
in programming, to rationalise programming documents throughout,
as well as to set out clearer priorities in them.
9.9 In line with the European Consensus on Development,[48]
the Commission looked to use Sector Budget Support as its preferred
delivery mechanism. The Report concludes however that the move
to this was insufficiently prepared and recommends that Sector
Budget Support is used more selectively and with improved preparation.
The Commission responds that Sector Budget Support was selected
to address the need for sector-wide reform with real country ownership,
and in preference to the more disparate project-based approach
used previously in the region.
9.10 The Court further recommends that there should
be more support to public administrations. On this, the Commission
points out that from 2011 there will be a Comprehensive Institution
Building Programme as part of the Eastern Partnership.[49]
The Government's view
9.11 In his Explanatory Memorandum of 24 February
2011, the Minister of State at the Department for International
Development (Mr Alan Duncan) describes the Report as a useful
and insightful contribution to the ongoing process of improving
the effectiveness and results of EU assistance, particularly in
the European Neighbourhood.
9.12 He notes that the Commission has continued to
evolve its approach and has also taken steps to improve the capacities
of partner countries to deal with EU assistance, with full EU
Delegations in each of the three countries of the South Caucasus,
which he says is welcome.
9.13 The Minister fully agrees with the Report that
budget support should be used more selectively, where there is
real ownership of reforms by partner governments, and that there
should be greater transparency and better reporting in budget
support programmes. The Commission has taken some steps in this
regard, and we will continue to assist in the process of improving
the methodology of budget support where needed.
9.14 The Minister also agrees with the need for clearer
links between the political, strategic and programme levels in
the process, and for simplified programming documents with more
stringent, focussed prioritisation, transparent benchmarking and
clear conditionality The Minister also accepts that ENPI should
primarily be an instrument to support medium term reform, but
says that he will continue to push for greater flexibility within
EU assistance instruments to be able to react to emerging situations.
9.15 The Minister concludes by noting that:
— as
a Report on past activity, there are no direct implications;
— the Report will be discussed in Council
in the coming weeks but, as is customary with Court of Auditors
reports, not voted on.
Conclusion
9.16 Although the Report raises no particular
questions per se, we are nonetheless reporting it to the
House because of the possible wider application of the lessons
to be learned not just for the Eastern Partnership but also—in
the light of the crisis in North Africa—to the Mediterranean
component of the EU's Neighbourhood Policy.
9.17 With regard to the former, we note that on
23 February the President of the European Council issued a statement
noting that, although recent developments had concentrated political
attention to the South, the EU could not afford to forget about
the Union's Eastern neighbourhood; and that, regarding the planned
summit with the EU's Eastern Partners later this year, the EU
would need to ensure that it gained new momentum and focused on
strategic issues as well, such as democracy, good governance,
and progress in some of the unresolved conflicts, and not easily
forget mutual commitments made on the respect for the principles
of democracy, the rule of law and human rights.[50]
The establishment of full EU Delegations in each of the three
countries of the South Caucasus will no doubt help. So, too, will
an appropriate resolution of the uncertainty hanging over the
future of the EU Special Representative for the South Caucasus,
about which we hope to hear from the Minister in the not too distant
future.
9.18 Regarding decisions on the future of the
countries in the EU's Southern Neighbourhood, the President of
the Council said on 23 February that they must be made by their
citizens; that the EU's responsibility is to help; that the EU
will adapt its Neighbourhood policy in order to develop and strengthen
democratic institutions, giving civil society every opportunity
to strengthen the economy, reduce poverty, and address social
injustices; and will lend its "full support to the transition
processes towards democratic governance, pluralism, improved opportunities
for economic prosperity and social inclusion, and strengthened
regional stability."[51]
9.19 The President of the Council's statements
closely followed extensive prior discussion of the situation in
the EU's Southern Neighbourhood by the Foreign Affairs Council,
which affirmed that it is for the people of these countries to
choose their future and that the EU stands ready for a new partnership
in its relations with the countries of the region to support the
process towards democracy, rule of law, socio-economic development
and strengthened regional stability, on the basis of shared principles,
cooperation and local ownership.
9.20 In reporting this to the Committee, the Minister
for Europe (Mr David Lidington) said that in the discussion on
EU neighbourhood policy, the Foreign Secretary:
"said the key to the EU's response to these
issues was not more money, but better and more rigorous use of
existing funding combined with initiatives on trade, institution
building and people-to-people contacts [and] welcomed the inclusion
of clear language on conditionality in the agreed Conclusions."
[52]
9.21 Given that the EU's most recent adaptation
of its policy towards the Southern Neighbourhood—the Union
of the Mediterranean—has failed so far to get off the runway,
these points seem to us to be well made, and, at least so far
as the "more rigorous use of existing funding" is concerned,
would no doubt find favour with the European Court of Auditors
too.
46 See http://ec.europa.eu/world/enp/welcome_en.htm
for full details of the European Neighbourhood Policy and http://ec.europa.eu/world/enp/funding_en.htm
for full details of the funding mechanism. Back
47
See http://eca.europa.eu/portal/page/portal/eca_main_pages/home
for full details of the ECA's work. Back
48
The European Consensus on Development, which was agreed in 2005, identifies
shared values, goals, principles and commitments which the European
Commission and EU Member States will implement in their development
policies, in particular: reducing poverty-particularly focusing
on the Millennium Development Goals, and thus challenges such
as sustainable development, HIV/AIDS, security, conflict prevention,
forced migration, etc., to bring about equitable globalisation;
development based on Europe's democratic values-respect for human
rights, democracy, fundamental freedoms and the rule of law, good
governance, gender equality, solidarity, social justice and effective
multilateral action, particularly through the UN; developing countries
being mainly responsible for their own development: national strategies
developed in collaboration with non-government bodies, and mobilising
domestic resources; EU aid to be aligned with these national strategies
and procedures.
See http://ec.europa.eu/europeaid/what/development-policies/european-consensus/index_en.htm
for full details. Back
49
In spring 2009, the EU launched a new policy towards its Eastern
neighbours, the Eastern Partnership (EaP), with Armenia, Azerbaijan,
Belarus, Georgia, and Ukraine. Joint ownership, differentiation
and conditionality are key principles of the new policy. The new
Partnership foresees stronger political engagement with the EU,
namely: far-reaching integration into the EU economy with deep
free trade agreements; easier travel to the EU through gradual
visa liberalisation, accompanied by measures to tackle illegal
immigration; enhanced energy security arrangements; increased
financial assistance. Discussions aimed at setting specific objectives
of cooperation will be conducted within four thematic platforms:
democracy, good governance and stability; economic integration
and convergence with EU sectoral policies; energy security; and
contacts between people. The EaP also envisages strong support
for partners' reform efforts through a new Comprehensive Institution-Building Programme,
and a new multilateral framework to address common challenges.
Back
50
The full text of the statement is available at http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/ec/119451.pdf. Back
51
The full text of the statement is available at http://www.consilium.europa.eu/uedocs/cms_Data/docs/pressdata/en/ec/119450.pdf. Back
52
See http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/EN/foraff/119435.pdf
for the Council Conclusions. Back
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