20 Financing EU external action:
11th European Development Fund
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(33530)
18431/11
+ ADDs 1-2
COM(11) 837
(b)
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18480/11
+ ADDs 1-2
COM(11) 836
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Commission Communication: Preparation of the multiannual financial framework regarding the financing of EU cooperation for African, Caribbean and Pacific States (ACPs) and Overseas Countries and Territories (OCTs) for the 2014-20 period (11th European Development Fund)
Council Decision on the position to be adopted within the ACP-EU Council of Ministers concerning the multiannual financial framework for the period 2014-20 of the ACP-EU Partnership Agreement
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| Legal base | (a) —
(b) Articles 209(2) and 218(9) TFEU; QMV; European Parliament to be informed
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| Department | International Development
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| Basis of consideration | Minister's letter of 13 May 2013
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| Previous Committee Reports | HC 83-i (2013-14), chapter 8 (8 May 2013); also see HC 428-xlviii (2010-12), chapter 12 (25 January 2012), HC 86-v (2012-13), chapter 6 (20 June 2012) and HC 86-xxxiv (2012-13), chapter 2 (6 March 2013); also see (33244) 15560/11 + ADDs 1-2: HC 428-xli (2010-12), chapter 6 (9 November 2011)
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| Discussion in Council | To be determined
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| Committee's assessment | Politically important
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| Committee's decision | Cleared; further information requested
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Background
20.1 The European Development Fund (EDF) is the main instrument
for delivering EU assistance for development cooperation under
the Cotonou Agreement with ACP States and for financing EU cooperation
with the OCT. The EDF is funded outside the EU budget by the
Member States on the basis of specific contribution keys. Each
EDF is concluded for a multi-annual period. The 10th EDF Internal
Agreement, establishing the resources of the 10th EDF and their
share in broad sub-categories, covers the period 2008-13, and
includes provisions on implementation and financial monitoring.
As the current 10th EDF period will expire at the end of 2013,
the Communication and proposal for a Council Decision were produced
in January 2012, to start discussions on the EU's plans for 2014-20.
The Commission Communication
20.2 The Communication includes a draft EDF11 Internal Agreement.
The proposed overall figure for EDF11 is set at €34,275.6
million. The UK's share would be 14.33%. The Commission will
present proposals for the Implementing and Financial Regulations
at a later stage.
The draft Council Decision
20.3 The draft Council Decision is based around the proposed
Internal Agreement, and embodies the position to be taken by the
EU in discussion at the EU/ACP Council of Ministers; once agreed
with the ACP, it will then form a new annex to the Cotonou Agreement
(and thus form part of the EU's External Action: Heading 4 of
the EU budget).
20.4 The Communication and Council Decision are
part of a total package covering Heading 4 of the EU budget, on
External Action, involving a range of other financial instruments
(pre-accession finance, European Neighbourhood Partnership, etc.).
20.5 As noted in more detail in our previous
Report, in June 2012, we agreed to a Partial General Approach
in order to enable the Presidency to begin negotiation with the
European Parliament on the EDF and the other main external action
financial instruments — but without prejudice to the financial
amounts, and with all documents retained under overall scrutiny.
20.6 In her latest update, on 17 April 2013,
the Parliamentary Under-Secretary of State for the Department
for International Development (Lynne Featherstone), explained
that the EDF element had been de-coupled from the rest of the
process, and was now due to be adopted at the 28 May "Development"
FAC, to enable a joint EU-ACP decision to be adopted at the 6-7
June annual joint ministerial meeting.
20.7 As the only figures in the draft Council
Decision are those set out in the annex to the draft chapter,
we asked the Minister to provide the corresponding figures that
were now to be inserted in this annex, and to indicate if she
was happy with the breakdown. We also endorsed the Minister's
opposition to the notion that the money available for development
assistance should be reduced in order to increase the percentage
spent on Commission support costs and asked to know what this
percentage was for the current EDF, and if there was any good
reason why it should be exceeded in EDF11. Finally, in order
to ensure that there is time for any questions that may arise
to be debated prior to any further decisions by the Council, we
asked her to provide:
- a list of all the external
action and other instruments that are currently under discussion/negotiation,
and where each of them is in the discussion/negotiation process
(European Parliament or relevant Council working group);
- a summary of the state of play on them in the
various discussions/negotiations; and
- an indication of when she expected to be able
to provide us with revised draft texts and her views on them.
20.8 In the meantime, we retained the documents
under scrutiny, and drew our Report to the attention of the International
Development Committee.[79]
The Minister's letter of 13 May 2013
20.9 The Minister says that, "following
weeks of intense negotiation", Member States came to an agreement
within the ACP working group on figures for the 11th EDF Internal
Agreement on Tuesday 7 May.
20.10 She continues as follows:
"From the €30.506 billion (£26.327
billion) total, allocations for envelopes are as follows:
- "€29.089 billion
(£25.104 billion) allocated to the ACP States (previously
€28.943 billion in my last letter);
- "€0.364 billion (£0.3146 billion)
allocated to OCTs (previously €0.343 billion in my last letter);
- "€1.052 billion (£0.9083 billion)
allocated to the Commission for support expenditure (previously
€1.220 billion in my last letter);
"The revised draft Council Decision further
breaks this down and includes the following figures:
1. "€31 589 million
(£27 261 million) overall financial assistance available
to the ACP States within this multiannual financial framework
as specified in points 2 and 3.
2. "€29 089 million
(£25 104 million) for ACP States in EDF11:
a) "€24 365 million
(£21 027 million) to finance national and regional indicative
programmes of individual ACP States.
b) "€3 590 million
(£3 089 million) to finance intra-ACP and inter-regional
cooperation with many or all of the ACP States.
c) "€1 134
million (£0 979 million) to finance the EIB Investment
Facility. This amount is split between a €500 million
(£431.5 million) endowment for the EIB to use innovative
financial instruments, and a €634 million (£547
million) subsidy envelope to support investments with grants
for Technical Assistance or Interest Rate Subsidies.
3. "Up to €2 500
million (£2 157 million) to be made available by the
European Investment Bank (EIB) in the form of loans from its
own resources. This does not require funds under the EDF11, but
represents a ceiling for EIB lending under a guarantee from EU
Member States."
20.11 The Minister then says that, since her
previous letter, a reduction has been negotiated in Commission
support expenditure of €168 million — "a direct
result of strong pressure by the UK, working with like-minded
states to push the Commission to reduce and justify the proposed
increase". The Minister continues her explanation as follows:
"The percentage of the current EDF spent on
Commission support expenditure is 3.2%. This was made up of 1.9%
from EDF10 funds and a further 1.3% which was drawn from the EU
budget. For transparency, under EDF11 the full amount of these
costs will be accounted for within the EDF agreement itself.
The Commission has said that it will not be drawing on the EU
budget in the way it did under EDF10 and we have secured a commitment
to transparency around this in the EDF Internal Agreement itself.
"Member States have been calling for the Commission
to improve performance in a number of key areas and in order to
recognise the extra work this entails the final deal for EDF11
support expenditure represents a real-freeze at 3.2% plus an additional
0.25% ring-fenced within the Internal Agreement specifically for
reforms on results, monitoring and evaluation. It is important
to note in addition that these are measures which DFID would typically
associate with programming rather than administrative costs and
are key priorities for us identified in DFID's Multilateral Aid
Review.
"I am happy that this small increase means that
we have kept support costs as low as possible, without compromising
on quality and results reforms that will improve the performance
of EDF11. The Commission has furthermore agreed to reassess the
support costs budget throughout EDF11 and identify efficiency
savings where possible. Again, this commitment has been secured
within the text of the Internal Agreement."
20.12 The Minister then seeks to explain one
further change in the breakdown of EDF11 funds as given in the
draft Council Decision, as follows:
"The EDF provides funds to the EIB Investment
Facility for private and financial sector development, as well
as infrastructure projects in the ACP regions. EDF funds are
used for lending activities and to provide interest subsidies
and technical assistance to borrowers. The Commission's original
proposal for the EIB Investment Facility in EDF11 included a replenishment
of funds used for interest rate subsidies and technical assistance
of €600 million (£518 million), but no replenishment
for lending activities. The EIB Investment Facility is a revolving
fund, which reinvesting [sic] loan repayments and is financially
self-sustainable; therefore no further funds were anticipated
to continue its activities. However, the EIB now propose a replenishment
of €500 million (£431 million) to develop innovative
financial products, such as first loss guarantees and impact investing.
We support this proposal as the EIB's performance under EDF10
has been good and it will bring additional funds to investing
in frontier markets, where funds are in short supply and there
are good opportunities to unlock further private capital."
20.13 Overall, the Minister professes herself
"therefore happy with the breakdown of EDF11 funds as outlined
above".
20.14 Finally, in order to avoid delay to the
signing of the EDF Internal Agreement, the Minister proposes that
she should deal with the Committee's request for an update on
all other external assistance instruments of EU budget Heading
4 in a separate letter, and undertakes to write on this matter
at the earliest possible opportunity.
Conclusion
20.15 We are grateful to the Minister for
this full outline of the final EDF figures and breakdown, and
commend her for her success in containing and making more transparent
the support cost element.
20.16 We are content for her to provide the
response to our third request (c.f. paragraph 20.8 above) separately,
provided that doing so at "the earliest opportunity"
does not jeopardise the time available to us to pursue any questions
that may arise about the draft texts of all the external action
and other instruments that are currently under discussion/negotiation
and, if appropriate, send them for debate prior to any further
decisions by the Council.
20.17 In the meantime, we now clear the Commission
Communication and the draft Council Decision.
20.18 We are also again drawing this chapter
of our Report to the attention of the International Development
Committee.
79 See headnote: HC 83-i (2013-14), chapter 8 (8 May
2013). Back
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