Select Committee on European Communities Thirty-Third Report


The Environment of Russia and the New Independent States



  147.    Through the Know How Fund and through political and economic co­operation with others, the UK plays an important role in sustaining transition and in equipping the partner countries to avoid or contain some of the adverse effects of current changes. The DFID booklet Support for Transition Countries: A New Strategy[51] states that "increased attention to the environment in the transition countries will mean increasing the share of our resources devoted to it". Asked whether this was actually happening, and the extent to which the increased share would be channelled through the EU, Mr Alan Coverdale said that the Environmental Know How Fund was increasingly being supplemented by resources from the main Know How Fund. KHF strategies were being prepared for each country; the strategy paper for Russia was the most advanced and would be recommending increased attention to environment projects. Through the negotiations on the new Tacis Regulation, DFID would look to influence the Commission to allocate an appropriate share of its own resources to environment projects. As to whether the increased emphasis on environment reflected a demand from the NIS partners, Dr Reynolds (DETR) commented that the position varied from country to country, and that there was an issue of convincing NIS decision makers that environmental improvement and economic growth were not in conflict with each other (QQ 162, 165).

  148.    DFID provided examples of the kind of co­operative activity in which the KHF was involved:

     The large Vodokanal project for St Petersburg, working with the water company there; the KHF has already provided support for a water development plan, which the EBRD is co­ordinating with six other member states. The project management stage is now completed, and is moving on to a corporate development programme, again jointly with the EBRD.

     A training programme on project preparation for the Moldovan government, in co­operation with the Moldova Tacis office.

  149.    DFID and DETR work closely together on environmental matters in the transition countries (QQ 153-40), and the activities of the EKHF are gradually merging with those of the main KHF. In general it has suited the DETR for the DFID to administer the money made available to the EKHF and to handle the project management involved in that money. At the same time, the DETR is well informed on the wider environmental framework and the Environment for Europe process, so the two departments complement each other well in this field.


The European Bank for Reconstruction and Development and the World Bank

  150.    The EBRD said it had found the input from Tacis extremely beneficial in facilitating its environmental objectives through financial intermediaries (FIs). The EBRD programme of "environmental diligence" framework contracts with environmental consultants to assist FIs had had a positive impact. FIs had been able to reject or restructure environmentally harmful projects and to require that borrowers complied with local environmental standards and regulations, thus reinforcing the work of the environmental agencies concerned (pp 1-2).

  151.    The selection process for potential projects submitted by the EBRD had improved within the previous two years; before that almost a year could be taken up with the various phases of submission, approvals, etc. Since 1996, many of these phases were now being delegated to the EBRD, provided it adhered to all the agreed procedures. All the checks were now done within the EBRD, subject to annual auditing by the European Court of Auditors; the resulting decisions were therefore being reached more rapidly. Under the agreement between the Bank and the Commission, there had to be a minimum of seven companies on any short-list. This was quite a large number, especially when up to two of the seven could link up to form a consortium. Also, as things developed, it was frequently difficult to find seven suitably qualified companies in certain specialised fields in the environment. The Bank found this situation unsatisfactory and was pursuing it with DG 1A (Q 14).

  152.    An important part of the EBRD's mandate remained the improvement of the environment and use of energy resources. The Bank foresaw a substantial increase in the need for technical assistance in the NIS; it would therefore be seeking to shift more of its activities in the environmental and municipal infrastructure field towards the NIS, since it was in this field that they were particularly deficient. It was also critical for private sector development. Donor organisations and international financial institutions, however, could play only a limited, though catalytic, role. Hitherto Tacis had been used principally to provide technical assistance with public sector operations: an opening up of Tacis to support, on a selective basis, private sector operations in order to achieve stated environmental objectives in the NIS could considerably strengthen the Tacis programme's catalytic role in the environmental and other fields (pp 3-4).

  153.    The World Bank also works closely with the Commission on Tacis programmes. The 1997 Memorandum of Understanding between the Commission, the EBRD and the World Bank in relation to the pre-accession process for the CEECs (see paragraph 94) could provide a model to be applied to the NIS. In the EBRD's view, if Tacis could at some point make funding available for investments, it was possible that EBRD could use the existing co-financing model for the pre-accession countries as a basis for a co-financing agreement for the NIS; this was a move which they would wish to encourage (Q 12).

  154.    From informal discussions with DG 1A it was learned that further agreements on co­operation between the European Commission and the World Bank were due to be signed shortly. The World Bank indicated that talks were in progress on further collaboration with the Tacis programme, which it hoped would provide it with "the constructive means to assist (its) clients in managing the inherited and future environmental problems as they grapple with the formidable task of economic transition" (p 102).

Co­ordination between Tacis programmes and other forms of Official Development Assistance

  155.    DFID's evidence made the point that the environmental demands of the NIS region were so huge that there was wide scope for a range of donor organisations to play a part. The technical assistance provided by Tacis and bilateral donors, combined with the investment funding of the World Bank and the EBRD, ought in principle to be mutually reinforcing; but the May 1997 Tacis Interim Evaluation reported evidence of a lack of co­ordination between donors.[52] The UK Know How Fund works in close co­operation with the main world agencies active in the transition countries—the International Monetary Fund, the World Bank, the EBRD, the European Investment Bank and many others, on which the UK is represented. In the field of the environment, the World Bank and the EBRD will tend to be the main partners with the KHF in promoting major investment in environmental improvement, while the KHF itself can promote the substantial body of British expertise and technology which may be brought to bear on these problems (p 37; QQ 162, 169).

  156.    Mrs Holm (DG 1A) felt that in the environment field there was now quite effective co­operation and co­ordination between Member States, thanks largely to the activities of the Project Preparation Committee (PPC)—the informal network of donors set up within the framework of the Environment for Europe process (see paragraph 89) (QQ 98-100). This was confirmed by DFID, who also stressed the importance of the Environmental Action Programme Task Force (QQ 171-2).

  157.    NGOs, however, complained that many Tacis projects appeared to be approved without reference to (or even in ignorance of) previous or current projects covering the same ground, whether under Tacis or under other development assistance programmes. Dr Hindson (Field Studies Council) said that Ukrainian colleagues had highlighted the lack of co­ordination as one of the biggest problems with donor agencies, including the Commission (Tacis), individual EU Member States and the United States. One colleague had said that "very often they were doing the same things with the same people and making the same mistakes" (Q 270). NGO representatives in Ukraine and Russia made similar comments to Sub-Committee C. DFID were, however, sceptical about the suggestion this problem of co­ordination could be improved by the setting up of a common database of development assistance projects in the NIS and CEECs. Dr Reynolds (DETR) said that the informal PPC network worked better; databases tended to be a historical record of projects rather than data on what was actually happening at the moment (QQ 173-4). According to DG 1A, the Commission had no mandate for assuming such a role (see paragraph 180).


The Council of Ministers

  158.    We received a number of criticisms of Council procedures: for example, there were complaints about excessive crawling over detail by the Tacis Management Committee; also about programmes coming to the Committee at unreasonably short notice.[53] DFID made the point that Tacis was constrained by the administrative procedures imposed upon it by the 1977 Financial Regulation covering all EC programmes, which Mr Lowcock said was widely criticised by Member States for being inflexible and making it difficult for the Commission to run programmes properly (p 38; Q 185).

Current views in the Commission

  159.    Members of Sub-Committee C visited Brussels in July 1998 for informal discussions with the Commission (DGs 1A and XI). Mr Timo Summa, Head of Directorate C (Tacis) explained that DG 1A were still finalising their proposals for the new Tacis Regulation , which at the time he expected would be ready to go to the Council, after "inter-service" consultation, in November; since then, we have learned from DFID that the timetable has slipped and that the Commission has yet to submit the draft Regulation to the Council.

  160.    Mr Summa said that the Community enlargement process had put huge strains on the Directorate-General, and had left the staff dealing with the NIS under great pressure. Staff turnover had been "sky high", which had made it very difficult to provide continuity of supervision of projects, for which the typical cycle was three years. Too many consultants were engaged on work which the Commission ought to be doing itself. The ratio of consultants and contract staff to permanent staff was between 80 and 90 per cent (compared with the 10 per cent which would be regarded as healthy in private industry).

  161.    Despite that, he felt that Tacis was performing significantly better than in its earlier years. There were now more worthwhile proposals than there was money to fund them. Machinery within the NIS was now producing good ideas, and there was healthy internal competition for funding. Although some consultants continued to pursue their own agenda without carrying their clients with them (for which a number had been struck off the Commission's list), feedback was increasingly favourable as consultants gained more experience of working in the former Soviet Union. Tacis co­ordinating units were now fully involved in drawing up terms of reference for projects, and NIS governments had to provide "statements of endorsement".

  162.    DG 1A had been working closely with the World Bank, EBRD and other international financial institutions: for example, 5 mecu (£3.5 million) had been committed to a joint programme with the World Bank of feasibility studies in the environmental field in Ukraine and Russia; and a grant of 23 mecu (£16.1 million) had been provided to EBRD to prepare investment assistance, especially in Russia. The small and medium-sized enterprise (SME) sector was seen as the key to fast development in Russia: savings ratios were high, but export of capital was a major obstacle to investment.

The new Common Service Directorate for the management of external assistance

  163.    Although DFID regarded the setting up of the new Common Service Directorate, or "Service Commun Relex" (SCR) (see paragraph 74 and footnote), as an internal matter for the Commission, they had a number of concerns. In particular, they were concerned that the project cycle would be split in two, with policy, project identification and design the responsibility of DG 1A, and contracting, monitoring and evaluation left to the new service. Nevertheless, the Department felt that the service had the potential to bring about improvements in procedure and management, and could pave the way to a reversion to a single Directorate-General managing all external assistance programmes; also they had confidence in the Head of Service designate, M Phillipe Soubestre, and knew that he was alive to the possible problems (p 38; QQ 196, 199).

Relations between DG XI and DG 1A

  164.    DG XI (as the Directorate-General responsible for environment) has a particular responsibility for the part of the Tacis programme which involves setting up the proposed new Regional Environment Centre in Russia, and has a general interest in integration of environment with other Community policies, including Tacis. In a separate informal discussion with members of the Sub-Committee during their visit to Brussels, DG XI staff had a number of criticisms:

     Tacis staff were resistant to policy guidance from DG XI

     a top-down approach within DG1A made co­operation between DG XI and DG 1A difficult

     DG XI were pinning their hopes for improvement upon the new Tacis regulation (imminent)

     small Tacis projects seemed to get better results and DG XI shared the concern that small and medium-sized projects may be being squeezed out

     environmental funds (as in Phare) were seen by DG XI as the way forward—revolving funds were also worth considering

     institution building was one of the main aims of the Tacis programme, yet little progress had been made in seconding advisors to NIS ministries, for example

     the fundamental need in the environment protection field was investment in properly institutionalised systems of control and enforcement: much of the environmental monitoring so far in the NIS had been "useless"

     NGOs in the NIS were often made up of the most altruistic, intelligent and expert local people, but they lacked an institutionalised constituency base.

The European Environment Agency

  165.    DFID said that the Government supported the idea that the European Environment Agency should build on its work with the Phare countries and to extend co­operation to the Tacis area, in order to improve the state of environmental reporting on Europe as a whole (p 40). In its own evidence, the Agency said that its long-term aim was to have in place mechanisms for comparable data collection in the whole of Europe for a number of main topics. This was intended to pave the way for an indicator based on progress in the state of the environment for the fifth pan-European Ministerial Conference in 2002. It had put a number of proposals to DG XI for moving towards this goal, including preparations for a co­ordinating meeting in Moscow in mid-1999, to be organised by the Russian Federation as announced at the Århus Conference. The Agency pointed out that co­operation with the NIS would need to be externally financed "for an extended period" (pp 96-97).


Transparency, Staffing and tendering procedures

  166.    Many NIS organisations had a negative view of DG 1A, as being remote, understaffed and lacking in transparency. This was echoed by WWF and the Field Studies Council (p 58; QQ 209, 277). The Ukrainian Government's memorandum said that the annual cycle of programme approval and lengthy tendering procedures were "very frustrating" (p 101): Dr Yaroslav Movchan (Deputy Minister for Environmental Protection and Nuclear Safety, Ukraine) and Dr Vyacheslav Magmedov (Head of the Ministry's International Relations Department) told members of Sub­Committee C that Tacis was "a very closed process" and that there was a lack of transparency in relation to drawing up terms of reference and the awarding of contracts. Staff of the EU delegation in Kiev mentioned that Ukrainian officials had problems identifying who did what in the Commission. Mrs Natalya Ryabtseva, Head of the Ukraine Government Tacis Co­ordinating Unit, and colleagues said that when Tacis first started in Ukraine there was little understanding of goals on either side. There was now a better understanding in Ukraine of the aims of Tacis and an appreciation that it was not just a technical programme but was also about changing attitudes. Recently the Commission had improved transparency by explaining to the Co­ordinating Unit the reasons for projects being rejected.

  167.    The Field Studies Council, whilst recognising the value of much Tacis's efforts in the NIS area, felt that for NGOs there were still problems of inflexibility, delays in decision-making, late payments and paucity of detailed knowledge amongst Tacis personnel: if these problems could be removed, relations between Tacis and NGOs would be much improved. Dr Hindson said that Tacis compared unfavourably with the Know How Fund and the international grants fund of the National Lottery Charities Board, whose application procedures (including forms) were much more user-friendly than those of Tacis; there were lessons to be learned from how these and other donor agencies could offer a simpler and speedier process, more locally focused, and relying on and trusting local expertise (QQ 274, 291).

  168.    According to Mr Summa, the creation of the Common Service Directorate would cause "many, many headaches" in the short and medium term. Of the 160 staff engaged in Brussels on Tacis work, half would be going to the Unit but leaving behind well over 50 per cent of the current workload. Even as at present constituted, DG 1A had insufficient staff resources for the task, whether in Brussels or in the field—a view which is held by outsiders too. Movement of staff was considered excessive, and overseas staff tours too short. DFID commented that staffing was not entirely within the Commission's control. Perceiving these difficulties, the Department had been arranging secondments of national experts to various parts of the Commission (including DG 1A) in key areas in order to improve its effectiveness (Q 185; pp 38, 44).

  169.    Mr Pinkett (Hampshire County Council) agreed that Tacis procedures could be daunting at first, but they become less so as partners became more familiar with them (Q 47). DFID referred to a speeding up of contract procedures for the Phare programme, which might point to similar changes with Tacis (p 40); on Tacis procedures generally, Mr Lowcock said that the Department's judgment was that Tacis stood up relatively well in terms of transparency and propriety, but compared with many other development agencies it stood up less well in terms of flexibility, speed and general effectiveness. The Department would therefore like to see a greater streamlining and more flexibility in Tacis procedures, including those relating to procurement, contract letting and the handling of small projects in particular; they also would like to see greater consistency between Tacis procedures and those which applied to other development programmes managed by the Commission—at the moment the Commission had a wide variety of differing procedures which imposed additional costs for all concerned. One of the major tasks of the new Common Service Directorate would be to address these issues (QQ 183, 185).

  170.    The EBRD was asked whether consultants and other organisations who had already done work on Tacis programmes were precluded from submitting tenders for subsequent contracts financed by EBRD and other IFIs. Ms Derichs explained that the Procurement Policies and Rules of the EBRD stated that "where a firm or its affiliates or parent company, in addition to consulting, also has the capability to manufacture or supply goods or construct works, that firm or its affiliates or its parent company normally cannot be a supplier of goods or works on a project for which it provided consult services". For this reason firms who had carried out feasibility studies or provided technical assistance were normally precluded from submitting tenders for subsequent contracts financed by the EBRD and other IFIs, because they were seen to have privileged prior information. This was considered a normal safeguard by the Bank (QQ 23-26).

  171.    The EBRD did not support the idea that in drawing short lists and in awarding contracts a kind of proportionality should exist between the size of the contribution from a particular member state and the number and size of contracts which that member state might wish to receive over a period of time. The criteria used by EBRD related to technical quality, staff quality and the background of the company concerned and not to national contributions (Q 22). DG 1A also denied that such a policy existed, although they said that they tried to achieve a reasonable geographical distribution of contracts (QQ 110-1).

Use of consultants

  172.    As we have mentioned, a widespread criticism of Tacis is that the use of consultants, acting for the Commission or international financial institutions, is difficult to reconcile with the "people to people" concept. Another recurrent theme is the allegedly excessive amount of Tacis project costs that goes in consultants' fees, leading to a perception that too great a proportion goes to Western firms. Consultants are also criticised for failing to identify real needs, or for responding to them with standard packages not properly tailored to NIS conditions. All this leads to what the Interim Evaluation Report refers to as "consultant fatigue". It is suggested that consultants do not invest sufficient time and intellectual effort in understanding the needs, attitudes and traditions of their clients; their value for money is therefore suspect. Dr Magmedov, for example, was critical of consultants who came with insufficient background on Ukraine and its particular problems. A related complaint is that having obtained a contract on the strength of its principals' track record, a consultancy firm will then send out junior and inexperienced staff to do the work. Ms Golder (WWF) felt that Tacis had become "consultant-led"; limited capacity within the Commission had led to over-reliance on consultants for tasks which DG 1A ought to be doing itself (Q 254). It was also easier to give funds to one Western consultancy than to a consortium of NGOs (p 58). She said that WWF and national experts in Russia resented the way in which Western consultants gained access to NIS research work which they then fed back to the Commission in reports for the purpose of securing funding (Q 255).

  173.    DFID explained how difficulties of working in the NIS could have the effect of increasing project management costs considerably (p 39). On the positive side, although consultants could be expensive, the larger firms could offer competent management skills, practical knowledge of the market economy, wide geographical experience and access to highly specialist knowledge. Mr Coverdale conceded that the image of foreign experts in the NIS was occasionally negative, but suggested that this had "more to do with ill-designed projects which do not yield benefits commensurate with the cost of the Western experts going in than it has to do with the use of consultants per se." (Q 189). Mr Lowcock was concerned that Commission had insufficient internal technical expertise for addressing effectively questions of project design and selection of consultants (Q 193).

  174.    DG 1A reported, in informal discussion with Sub-Committee C, that there had been a steady increase in the use of local expertise, which had been relatively weak at the start of the Tacis programme (with the exception of the nuclear safety field). Fees payable to experts in Moscow were beginning to approach western levels but were much lower elsewhere (cf paragraph 134). They did not, however, favour prescribing a target split (of say 50/50) between Western and Eastern partners. Availability of experts from Central and Eastern Europe was limited by buoyant local markets.

  175.    In the process of bidding for contracts, it would be normal to find a mixture of large consulting firms with much smaller, perhaps more specialised companies. As Tacis does not refund the often considerable expenses incurred by companies during the bidding process (even to the successful candidate), there may be an in-built advantage to those larger firms which can draw on substantial funds, though the accumulated expenses may be shared when a smaller firm joins a larger one as part of a consortium.[54] Mr Mark King (EBRD) said that it did slightly worry him that the market for Tacis consultancies tended to be dominated by relatively few large firms, but it was a reflection of their quality. The Bank did try to diversify as much as possible by encouraging smaller companies to bid, as a safeguard against complacency and to keep prices competitive (QQ 19-29).

  176.    Mrs Holm (DG 1A) said that it was usually only the larger firms that were judged to be competent enough to be invited to tender for projects in the "restricted tender" category (i.e. between 200,000 and 10 mecu), although DG 1A did try to find new firms to put on the short lists. Smaller firms, however, were often used for projects of less than 200,000 (the "restricted agreement category") (Q 103.)

  177.    One of the recitals to the 1996 Tacis Regulation calls on the Commission to "try to diversify between firms, organisations and institutions". According to DFID, this was inserted in response to nationalistic pressures from certain Member States. If the words were to remain in the new Regulation, the Department would like to see them interpreted as requiring diversification between smaller and larger firms, and between profit making and non-profit making organisations (including NGOs), rather than as an excuse for national quotas of contracts. The Department was also unhappy with the way the rules in Annex III of the current Regulation prohibited the Commission from taking previous experience of Tacis work into account when shortlisting tenders (p 44).

  178.    There were also some criticisms of the quality of the advice given by DG 1A to consultants and contractors. DFID felt that although basic documentation was normally satisfactory, problems did arise when companies needed to clarify points in order to get a better understanding of what the partner countries and the Commission wanted: "we are often told that in practice it is quite difficult to get answers to some of the key questions" (Q 184).

Financial allocations for purchase of equipment for Tacis projects

  179.    One of the points raised by Dr Movchan and colleagues at the Environment Ministry in Kiev was that the requirement that equipment purchases had in general to be kept within 20 per cent of the total budget for a Tacis project was unnecessarily restrictive and could have the effect of frustrating the purpose of the project. The same point was made by, among others, Ms Marina Korobeinikova[55] in St Petersburg. The limit could be a particular problem with projects that were heavily dependent on information technology, as is true of many environmental programmes with their need for data collection and analysis.

Project management, monitoring and evaluation

  180.    At the Sub-Committee's informal meeting with DG 1A staff in Brussels a number of comments were made by Tacis Task Managers:

     Although Sub-Committee members who had visited Russia and Ukraine were surprised by the size of the Commission's in-country Monitoring Units (some 40 strong for Ukraine, Moldova and Belarus[56] and about 25 for Russia[57]), their activity accounted for only two per cent of the Tacis budget; the Task Managers in Brussels found their reports helpful for the purposes of assessing "the importance of the programme, its sectoral orientation, the competence of recipients" etc;[58]

     "Monitoring" was not an accurate description of what went on: NIS partners welcomed interaction with the sectoral experts in the Monitoring Units;

     The new Common Service Directorate was expected to improve standards of evaluation and follow-up during the project implementation phase, by bringing together and harmonising best practice within the Commission;

     The desirability of a database of Tacis and other technical assistance projects (see paragraph 157) was recognised, but the Commission had no mandate for compiling data other than on its own projects, except in Russia (where there was a G7 mandate for a combined database);

     Tacis was over-centralised: more authority should be devolved to the EU delegations in the NIS, as had been done with Phare, and more specialists were needed in the delegations;

     Delegation coverage of the NIS was inadequate: offices were needed in Baku and Tashkent, in addition to the one in Almaty which at present covered all the Central Asian republics;

     The role of the Tacis Technical Offices (manned mainly by consultants) had never been clearly spelled out vis à vis DG 1A, the EU delegations and the Monitoring Units.

  181.    Dr Hindson considered the EU was "one of the worst donor agencies for relying solely on a lot of written reports. The EU receives a vast amount of documentation that no one can possibly read. It bases the success of projects on what people say they have achieved in reports" (Q 284). DFID were of the view that the Commission needed more internal technical expertise for monitoring, rather than relying so heavily on consultants. They suggested there was a potential role here for the European Environment Agency (QQ 197, 203).

  182.    The recent separation of evaluation from monitoring has been mentioned in paragraph 82. The following comment was received from a member of a Tacis Monitoring Unit:

  "The evaluation now appears to be undertaken on a more random basis and also seems to have changed in that evaluation can select projects from the start of Tacis through to those recently commenced. This is different from the previous arrangement, when it was carried out usually between six and 18 months after project completion. My view is that this introduces some inefficiency as, obviously, the new teams will have no previous knowledge of the projects or their participants. Although the evaluators will discuss in some detail with the monitors who were involved, I believe that the inclusion of one of the monitors, either (national) or EU, could enhance the process."[59]


  183.    The absence of clear follow-on activity in so many Tacis programmes was a matter of general criticism, although it was evident that the Commission and IFIs were beginning to take this more seriously (Q 134). The EBRD attempts to monitor, on a regular basis, the follow-on effects of the programmes in which it has been involved, both in terms of individuals and resources. A good example would be the EBRD's Tacis environmental training programme for Financial Institutions. In this case, trained staff in environmental matters subsequently use their training to make sound decisions in terms of the environmental impact of the loans or investments for which they are responsible. In fact, a training received from the EBRD has become a positive asset in the career development of an increasing number of individuals in the Tacis area (QQ 32-33). The Environment Agency said that in all technical assistance projects with which it was involved it insisted that they were supported by viable long-term plans and clear implementation measures, and that they were capable eventually of becoming self-supporting (Q 327).

51   Department for International Development, Know How Fund, 1997. Back

52   This criticism has not been picked up in the 1997 Tacis Annual Report. Back

53   Informal comments by DFID, among others. Back

54   Information from the Specialist Adviser. Back

55   See paragraph 124. Back

56   Information given to members of Sub-Committee C by Tacis staff in Kiev, June 1998. Back

57   The monitoring team in Moscow consists of about 18 full-time members, with a number of regionally based Russian and EU short-term monitors who tend to look after the more distant regions in the Russian Federation (information from the Tacis Monitoring Unit, Moscow, November 1998). Back

58   Mrs Holm had already made a similar point in her oral evidence (Q 132). Back

59   Communication to the Specialist Adviser. Back

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