Various Documents considered by the Committee - European Scrutiny Committee Contents

9 The European Neighbourhood Policy Instrument



European Court of Auditors Special Report: "Is the New ENPI Successfully Launched and Achieving Results in the Southern Caucasus (Armenia, Azerbaijan and Georgia)?"

Legal base
Deposited in Parliament9 February 2011
DepartmentInternational Development
Basis of considerationEM of 24 February 2011
Previous Committee ReportNone
To be discussed in CouncilTo be determined
Committee's assessmentPolitically important
Committee's decisionCleared


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.


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 for full details of the European Neighbourhood Policy and for full details of the funding mechanism. Back

47   See 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 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.


50   The full text of the statement is available at Back

51   The full text of the statement is available at Back

52   See for the Council Conclusions. Back

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