Select Committee on European Union Minutes of Evidence

Examination of Witnesses (Questions 200 - 215)



  Q200  Lord Tomlinson: If I can just move on to the question of the impact of some of the EU instruments because if we just go back to where we started you produced the three scenarios—full engagement, selective engagement or no engagement—and I think it is clear that if it were the selective engagement the main mechanism we have got, the TIM, would in fact be finished.

  Mr Mingarelli: Not necessarily.

  Q201  Lord Tomlinson: I thought you implied it in what you were saying that you might have to suspend the Temporary International Mechanism.

  Mr Mingarelli: Not necessarily.

  Q202  Lord Tomlinson: That being the case, clearly in the recent run the TIM has been a successful instrument because it has been the only instrument really, but what do you think are the instruments that have historically and can in the future make the most significant contribution to advancing the cause of peace in the Middle East?

  Mr Mingarelli: We have a number of instruments. First of all—

  Q203  Lord Tomlinson: — But not to enumerate them, which ones are the successful ones, which historically have been the most successful and which do you anticipate being the most successful?

  Mr Mingarelli: I am not sure that we should necessarily look at history because we are a new actor as the EU and we are developing constantly new tools and instruments. We have currently a new tool which might be powerful, our Neighbourhood Policy, in which we have developed action plans with both the Palestinian Authority and Israel. Under the action plan we have a number of levers in order to push both partners in certain directions, and we will have to use these ENP action plans as soon as we can. We have to use the Barcelona Process as well. As I told you, we have a number of meetings either at ministerial level or at senior official level dealing with a number of important issues which we can narrow the gap between the parties on important issues. So for me the main instruments which exist today are the action plans and the Neighbourhood Policy, the EuroMed partnership, and then the range of assistance instruments starting with TIM.

  Q204  Chairman: Under the Neighbourhood Policy as far as these action plans are concerned, there has been a recent decision I think by the Council that countries in this category are able to take part in a large number of EU policies directly. Do you see that applying to not merely Palestine and Israel, which we are thinking about here, but also other neighbouring countries in that cluster of countries in the Middle East? Is that something that is likely to occur in the near future?

  Mr Mingarelli: Indeed it will occur. This possibility has been offered to all the European Neighbourhood Policy (ENP) partners. This means most countries of Maghreb and Mashrek are eligible under our Neighbourhood Policy and some of these countries are well-placed to use this possibility. Here again it will probably be a way to bring them around the same table to discuss important issues because a political process can move only by discussing the issues related to the final status—Jerusalem and the borders—but you can build confidence by handling more and more concrete issues. If you want to look back at history let us look back at our history at the way the EU has developed, pooling our coal and steel resources to address a specific problem, and I think that in the Middle East we should not neglect the possibility of bringing partners closer by ensuring strong co-operation on issues like management of water resources, for instance, or trade facilitation. There is a potential there which today has not been fully exploited but with the development of the new instruments under the EU and no longer under the Member States we can maybe make some progress in this regard.

  Q205  Lord Crickhowell: It is all very desirable but not many of the neighbouring countries have exactly been eager sometimes to get around the table. How do you move them into a more positive reaction? You clearly are seeing this as a potential. I have only joined this Committee relatively recently but my impression is that they have not exactly been eagerly embraced generally in the area, so are you suggesting that there is really going to be rather a change of pace on this? How do you think you are going to achieve it?

  Mr Child: With the European Neighbourhood Policy in general it is true that we have different expectations, different levels of ambition and different priorities with the different partners. It is a relatively new policy and we have been working on it for only a few years, but it does, as Hugues has said, offer very considerable scope for closer and more effective relations with all the different countries. In terms of access to EU agencies and policies I suspect that Israel as a partner is going to be better placed and more ready to take up that sort of opportunity than say the Palestinian Authority which is still very much focused on what we can do through our financial assistance of institution-building and supporting the basic structures of government. To come back to Lord Tomlinson's question, whatever the political environment in which we are working and whichever of the three scenarios that we are talking about, the more we can do to re-engage with the sustainable long-term institution-building supporting of the structures of the government in Palestine the better, of course working within the political constraints that we face. Already we are working with some of the more independent organisations and the office of President Abbas. Incidentally, one of the biggest success stories of EU support to the Palestinians over time has been the work we have done with the Independent Election Commission which has really made that one of the most credible and successful institutions in the Palestinian landscape, and I think that is a good example. So I hope that within the constraints that Hugues has described and very much with the hope that the actions of the new Government will enable us to engage on as broad a canvas as possible, but of course within the conditions of the Quartet that we will be able to take that work forward. We have also been working through the Partnership for Peace with civil society actors, so looking beyond government, and that that has been something which has been productive and which I hope can continue. We have also been doing things like police training and customs training. I do not know whether Hans would like to add something on this but there is a lot of practical work with the less political and more operational bits of public administration machinery which are vital for the success of Palestinian society. Within that the Rafah crossing, although an ESDP mission, has been operating with considerable support from Community policies in terms of the training and longer-term supporting measures that are needed ultimately to (we hope) equip the Palestinians to take a bigger role in managing their own borders. I think that is something else that we must continue and we are also starting to look, in discussion with the Americans, at what might be possible at the Karni crossing point, and that comes back to what you said earlier about the importance of the freedom of movement and access agreement and providing an economic lifeline to the Palestinian population. The third element, which is also linked to what Hugues said earlier, is through the Neighbourhood Policy and the EuroMed structures and before the Hamas Government came along we had taken some quite concrete steps to get three-way talks going between the EU, the Palestinians and the Israelis on trade issues. That is something which in the right political context could also make an important contribution.

  Q206  Lord Lea of Crondall: You have mentioned infrastructure and co-operation on infrastructure and the Israelis having a different role in it from the Palestinian Authority. I am wondering in your role as midwife, as I read it, to more joint action, is there a thought in your mind about a joint board between Israel and the Palestinians for reviewing infrastructure? If not, why not? Is it because of the fragmentation in the West Bank? How would you see this process creating some unified solutions on infrastructure in the West Bank?

  Mr Child: Grand institutional structures tend to attract political attention which can then make their smooth and effective functioning difficult, so I have not heard of any such plan; I do not know whether colleagues have. That does not stop there having to be some rather obvious, pragmatic, day-to-day co-operation between Israeli and Palestinian actors at a non-political level on the whole question of delivering utilities, of waste disposal and things about daily life where Palestinian municipalities who in the past, even those which had Hamas leadership, were in fairly frequent and operational contact with their Israeli counterparts just to manage the cross-border story. I would like if possible to ask Hans to add a little bit more about the concrete side of our co-operation and whether there are things he would like to add on the discussion.

  Mr Duynhouwer: In terms of concrete actions we have been undertaking, there is this autonomous body, for example, work with the judiciary council where we have been doing training. We are going to work with the Palestinian monetary authority on their internal management information system. We have been working of course with customs and we have been providing funds which will allow for the better management of customs revenues, so that is all directly relevant in terms of nation-state building. We have been working extensively in terms of internal financial control with the ministry of finance. This has been a big project with very good results in terms of internal audit and financial control. We are also now envisaging extending that to external control where a lot still has to be done. These are all examples where we work in terms of capacity building outside the autonomous body and also inside the Palestinian Authority. I suppose that when conditions are right we will resume that as soon as possible.

  Q207  Chairman: That point also goes back to the point about the European Neighbourhood Policy action plan; as far as that is concerned, I understand that is currently suspended or is it still operational?

  Mr Mingarelli: Our action plan with the Palestinian Authority has never been implemented for obvious reasons.

  Q208  Chairman: The one with the Palestinian Authority has not been implemented?

  Mr Mingarelli: No, it has not been implemented.

  Q209  Chairman: But who would have to make the decision in order to start implementing it.

  Mr Mingarelli: It is the absence of the administrative capacity on the Palestinian side and the contacts policy of the EU which made it impossible to implement the various actions spelt out in the action plan. If we manage now to strengthen the institutions of government it will be possible then to implement this action plan.

  Q210  Chairman: But that would be a decision which would be made where?

  Mr Mingarelli: It will depend on our degree of engagement with the new Government. If we are in a position once again of having political contacts and providing some kind of assistance, for instance technical assistance for capacity-building and institution-strengthening purposes, it is clear that sooner or later we will be in a position to have a dialogue on the various policies covered by the action plan with the various ministers and we would be in a position to implement the action plan, so all will depend upon the degree of engagement that our political masters decide to grant us.

  Q211  Lord Tomlinson: I just want to ask a question and it straddles a couple of the things that we have already been discussing and I want to try to draw a link between them for my own peace of mind. Fatah was widely perceived as being corrupt. If we have the selective engagement option it would be used exclusively to Fatah ministries. Do you really believe that the creation of the Palestinian Unity Government produces such a pressure on Fatah that there would be a perception of a reduced Fatah propensity to fraud in the future? If you want to answer it off the record I would understand.

  Mr Child: On the record I would say that we have worked extremely hard both in the past and we will continue to do so in the future—and Hans will know this even better than I—to ensure that the way that we are managing the money that we give to the Palestinian Authority is controlled in a highly effective and careful way, irrespective of suspicions that we might have about any particular faction's propensity to any sort of thinking, and we will continue to do that. I think the more important answer to the question that you put is what Hugues said at an earlier stage which is that we are certainly not approaching the Palestinian Authority with a mind to support any particular faction or group.

  Mr Mingarelli: Once again our purpose should be to support the democratic process and not to back the so-called moderates against the so-called extremists our objective should be to assist the democratic process. It is nevertheless true, to be frank, that it is a problem and it could produce undesirable effects if we just focus on assisting and backing ministers of one faction.

  Lord Crickhowell: This has been worrying me ever since you spoke about the options right at the beginning—and I know I come from a different world of a Cabinet which had collective responsibility and so on—because I find it very difficult to have a picture of talking to one lot of ministers in a government but not another. I suppose one objective of doing it that way is that you can put more and more pressure on Hamas as they come in and they are forming ministries and it might move them, but if you get to a position where you are actually only talking to one group of ministers and not to others it seems to me that is an extremely dangerous situation and not a helpful one. You did say at one time I think that that was probably the most likely option to find yourself in. Throughout this meeting I have been sitting worrying about it. It seems to me a potentially very dangerous option because here you have had an election, helped by the instruments of the EU and so on, which has produced a result which the EU does not much like and then you get into this position where you are saying we will talk to one lot of ministers and not another. Can you make me less unhappy at the end of the meeting about that prospect than I have been throughout it?

  Q212  Lord Tomlinson: I fear not!

  Mr Mingarelli: We are working as best we can in the political environment in which we find ourselves. I think we have to be clear about that. There are quite obvious reasons why the Quartet and the European Union has taken the position it has about working with a Hamas-led Government which was not willing to meet the Quartet conditions. I hope that with the move towards a National Unity Government that this will lead to a step-by step improvement in the political environment which will enable us to reach out to as much of the Palestinian Government as is willing and able to meet the Quartet principles.

  Q213  Chairman: It is of course quite important that a number of the most important ministries to which contact has already been made have been held by ministers who are neither in Fatah or in Hamas but are technocrats and that facilitates the co-operation I suppose and perhaps you would like to say something about whether that is in fact the case.

  Mr Child: I would just say that Mrs Ferrero-Waldner did indeed speak to Mr Fayyad on the telephone yesterday and it is clear that in the finance ministry, where we hope we can return to the sort of single treasury account set-up that existed in the past, he will resume the political position that he used to play in the past when he was working in a government under Mr Arafat.

  Chairman: We have touched upon the Temporary International Mechanism but I think Lord Chidgey could pursue it a little further.

  Q214  Lord Chidgey: We have indeed touched on the impact of the EU in quite some scope, if I may say so, but what I would like you to do, if you would Mr Child, is to try and summarise for us some of the most important features. If I could throw you some bullet questions maybe you could give us some relatively straight forward answers, if possible. Has the TIM process proved effective in stabilising or ameliorating the deepening crisis in the Palestinian territories? That is the first point. Secondly, should its scope be extended and then what mechanisms and safeguards—and you have touch on this already with Lord Tomlinson about the question of fraud—but can you give us any specific steer, guidance or reference to the measures that the Commission has implemented for the detection and prevention of fraud and misappropriation of EU funds? You did say that the Commission has taken steps but is there anything on the record that you could quote as a demonstration of that?

  Mr Child: I have brought, as I indicated earlier, some additional documentation on the operation and activities of the TIM which I think includes some of the background also on the control measures, which you may find helpful in your future work, and I am sure that Hans would be able to give you some additional information on that. Just to give you bullet answers, to your first question I think that in the political environment in which we are working TIM is effective and in fact is the only game in town as far as bringing much-needed support to the Palestinian people who were suffering very seriously under the effects of the political crisis and the economic isolation that they are facing, and so I think that, yes, it has been successful. As you will know, we have already from the initial stages extended quite a lot the scope of the TIM into new areas of activity and I think that it has been encouraging that we have had the continued backing both of the Quartet and also of the Member States and the European Union for that evolution of its role. As I indicated earlier, I do not think that the TIM, as its name suggests, is something which can be a permanent feature of the landscape. It is an extremely costly instrument which does not create the sort of lasting effects in terms of building up the Palestinian system of government which we would all like to see, and so I would much prefer us to be, as we develop new ideas for a new sort of international support mechanism for the Palestinians, starting to work in new ways more directly in capacity-building and institution-building with the Government rather than doing the sort of things that have been covered up to now in the TIM in a yet more elaborate or extensive way. I would like Hans to say a few words about the financial controls.

  Mr Duynhouwer: Perhaps on the results of the TIM when I saw your question I ran back again to the Quartet statement of 9 May which more or less triggered all that, where it was mentioned that the TIM would be a mechanism limited in scope and duration, which operates with full transparency and accountability and ensures direct delivery of assistance to the Palestinian people. I think all along these principles have been guiding us. We made that operational in our own concept paper of June last year where we said that it should have a quick impact on the lives of the Palestinian people by ensuring that essential services can continue to be delivered and by injecting money into the economy. If you look at the various windows you can see that this is exactly what we have been doing. Under window two, as is explained in the documentation we have prepared, we estimate that about 1.3 million Gazans have benefited from our aid through the fact that we have been providing fuel for back-up generators so that essential services—health, education—could continue. Another objective has been to facilitate a matching level of donor support, including that of Arab donors. I think that is an aspect where we have been extremely successful. We have had great success in working with the Member States. The Commission contributed about €110 million last year. That amount has been matched by contributions from the Member States. That is absolutely unheard of. There is not a single other project where Member States have moved that fast in matching the contributions of the Commission, and I think that is a real European success, and it is not much underlined but I think deserves to be emphasised. In terms of control measures, of course from the very start this has been our biggest concern. We all know the history so we were very well aware of that. In designing the various windows we paid utmost attention to that. If I take window two for example, the delivery of fuel to the Gaza power plant, we have been working with an international auditing firm which worked on the basis of agreed audit plans starting from the delivery up to the payment. We have agreed the process with them step-to-step, so when the fuel entered into Gaza, when it was delivered from the Gaza hub to the Gaza power plant, we described in detail what sort of control measures had to be implemented in order to have the level of control we wanted to have and to make sure that the fuel was not redirected to other purposes which we did not want. We have been working on the basis of audit plans which we believe will give us a very high level of assurance. It is the same for window three, payment of social allowances, where we have been working again with an international audit firm which has been doing all sorts of checks—ex ante, ex post—in terms of beneficiaries. We have been working through an international bank, as you know, which was in charge of checking compliance with various regulations in terms of fraud, money laundering, et cetera, and all that we believe has given us a very high degree of assurance. Also in terms of payment we have paid directly into the bank accounts of the beneficiary concerned and if they did not have a bank account we made sure that they had to show their identity card so that we were certain that the right person was reached. In brief those are the sorts of measures that we have implemented. I could show you informally audit plans which clearly demonstrate the sort of measures that we have implemented to get the necessary assurance.

  Lord Chidgey: Is this something you might wish to take up later?

  Q215  Chairman: I would just like to ask one question because you, Mr Child, in beginning to answer this talked about the cost of operating through the TIM rather than operating in other ways and making use of the mechanisms of the state, and of course there has been critical comment that certain banks have found this an interesting revenue-gaining exercise (although I do not know how profitable it has been for them). Is there any way in which the costs can be brought down because obviously they do seem to have been very substantial?

  Mr Child: There was some public comment a few weeks ago raised I think by one NGO in the United Kingdom which highlighted the bank charges in particular which had been paid in managing this money. I think it was unfortunate that those statements were made without first coming to check all the detail of the facts with us. We subsequently did have some discussions with that NGO and were able to explain to them and bring them to a better understanding of what we were doing, in particular the comparisons with the normal costs of making any international payments either in the European Union or elsewhere, which were entirely comparable. We also have to recognise that we are working in an environment where there is a relatively small number of active financial institutions capable of taking on this task and that as a proportion of the amounts of money that we were handling they were at a surprisingly low and realistic level. I understand that the NGO in question may have seen this opportunity to make a broader political point. To some extent I regret that it was done at the expense of the one vehicle of assistance to the very acute humanitarian needs of the Palestinian populations that we are helping and which they too are most preoccupied about for obvious reasons.

  Chairman: Thank you very much. I think it was helpful to get that answer from you because obviously it did cause some concern. Although there are a lot of other things which we could raise with you, we had for instance an interesting article in the Financial Times recently from one of our colleagues and a former colleague of yours Lord Patten, where he pointed out some of the risks of continuing with the blockade, but that is something which we will be pursuing with him when he comes to give evidence before our Committee after the Easter break. I would very much like to thank you, Mr Child, and your colleagues for having come and met the Committee this afternoon. In trying to do a study as a Sub-Committee dealing with the European Union and its foreign policy, it is very helpful to us to be able to come to Brussels and to have an opportunity to talk to people who are having to deal with these problems all the time. We realise what a complicated task you have ahead of you and we obviously wish you well and hope that one can choose perhaps the more optimistic option rather than the middle option when things come to be carried out. We will be preparing our report. We will of course send you a transcript of this evidence and in due course we will send you a copy of the report which we make to the House of Lords. Again, thank you very much indeed.

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