Committee Reports::Report - Advisory Group of the Joint Committee on European Affairs::04 February, 2003::Report

In compiling this report the Advisory Group was given every assistance by those we contacted. The openness and speed with which people responded to our enquiries is much appreciated. In particular we would like to record our appreciation to the NGOs who made written submissions, to the officials of the Department of Foreign Affairs, to Ambassador Anne Anderson and her colleagues in the Irish legation in Brussels, to Commissioners Patten and Nielson and to Mrs Mary Robinson. We wish to record special thanks to Ms Dympna Hayes of the Department of Foreign Affairs who acted as Secretary of the Group and to Ms Eileen Sweeney of Congress for her help. We hope that the report will be of assistance to the Oireachtas Committee for European Affairs and we thank the Committee for the privilege of advising them in this matter.

Report of the Advisory Group to the Joint Committee on European Affairs

Introduction

On 31^st July last, on the proposal of Mr. Gay Mitchell TD, Chairman of the Select Committee on European Affairs (now a Joint Committee), an advisory group was set up to report to the Committee under the following terms of reference;

Terms of Reference

1.“To examine the role of the European Union (EU) in its relations with developing countries, especially given the HIV/AIDS crisis in some of these countries, their debt burden, food shortages and international trade arrangements, and to report to the Committee on European Affairs by 31 December. Such a report should present workable and practical proposals, capable of obtaining broad Oireachtas party political support, on the ways and means of the EU acting in greater solidarity with the developing countries and leading the world in this regard, and to provide proposals for consideration by the Committee for recommendation to the Government for possible incorporation as part of the programme of the Irish Presidency of the EU in 2004.”

Composition of the Advisory Group

2.Dr Garret Fitzgerald, Mr. David Andrews SC, Mr. David Begg, (Chair) Mr. Noel Dorr, Ms Bride Rosney. Ms Dympna Hayes acted as Secretary to the Group.

Work Methods of the Advisory Group

3.The Group met six times. The Group had bilateral consultations with EU Commissioners Nielson and Patten; former UN High Commissioner for Human Rights, Mrs. Mary Robinson and senior management from Ireland Aid. Views were also sought from a wide range of Irish development NGOs and formal submissions were subsequently received from Dochas, Concern, Trocaire and Oxfam Ireland. In addition a number of individual members of the Group had the opportunity to discuss these issues with Mr. Jim Wolfensohn, President of the World Bank, during his recent visit to Dublin.

Nature of the Report

4.Given the extremely broad terms of reference the Group decided to give specific focus to certain aspects with a view to identifying a small number of proposals which would;

As required by its terms of reference the Group were facilitated with a general overview of EU Development Policy ranging from its governing provisions, how it is funded and managed, to priorities for the EU in the allocation of its funding.

The complexity of EU development policy and the range of issues encompassed, is already evidenced in the following paragraph from a recent OECD/DAC Peer Review of European Community.

“The organization of EC development co-operation has evolved within a larger context of EU political change. Broader European political issues, including relationships with ex-colonies, preparation for the pre-accession countries and the proximity of the crisis in the Middle East or the Balkans, have led to today’s geographic programmes of external assistance and development co-operation. This range of political mandates has fostered organizational compartmentalization, and the evolution of a complex array of different organizational procedures, relationships, and implementation perspectives.”

•‘Other issues’- Development Finance, Untying aid, Enlargement, US Millennium Charge Account, Governance, EU relations with the UN, IFIs (International Financial Institutions) and other international organisations

Each of these areas was examined with a view to identifying the ‘issues’; describing the scope of current EU policy approaches; indicating challenges for the EU; and identifying possible options to meet those challenges. Finally, possible actions for the Irish Presidency to promote specific options were considered and are outlined in this document.

Chapter 1

Governing Provisions for EU Development Cooperation

Legal Basis

1.While the development cooperation policy of the European Union dates back to the Treaty of Rome in 1957, which created the European Economic Community, it is only since the Treaty on European Union (Maastricht) came in to force in 1993 that development cooperation has enjoyed a specific legal basis (Articles 177-181 of the Maastricht Treaty.).

2.The Maastricht Treaty introduced development co-operation as an explicit part of European policy, providing both a juridical basis and broad objectives. The key articles ( 177-181) provided that the Union policy, which is to be complementary to the policies pursued by its MS (Member States), shall foster:

•The sustainable economic and social development of the developing countries, and more particularly the most disadvantaged among them;

•The smooth and gradual integration of the developing countries into the world economy;

These articles also include the objective of developing and consolidating democracy and the rule of law, and respect for human rights and fundamental freedoms.

3.The Treaty of Nice did not provide for any changes to the Articles 177-181 of the Maastricht Treaty.

4.However the Convention on the Future of the European Union has the potential to instigate a fundamental overhaul of the Treaties of the European Union. The task of the Convention is to pave the way for the next Intergovernmental Conference (IGC) in 2004. It will consider key issues for the future of the EU institutions and the effectiveness and coherence of the Union’s external polices including development cooperation.

Instruments

5.The EU’s development cooperation is implemented via a wide panoply of legal and financial instruments¹, reflecting the heterogeneous nature of the Union’s relations with the countries concerned. The legal instruments are either unilateral, or convention-based relating to the conclusion of international agreements, in particular the association agreements which can be bilateral or multilateral.

Operational framework

6.At operational level, development policy is determined by the European Council of Ministers and the European Commission. The Commission has approved and referred over recent years a number of Communications on development policy to the Council of Ministers, which in turn has issued several Resolutions regarding policy.

7.The Joint Statement by Commission and Council (Nov. 2000) on the Community Development Policy², which builds on the Treaty provisions as outlined above is regarded as the key EU policy on development issues. This Statement focuses on poverty reduction as an overarching objective of EC development cooperation, outlining a new framework for the Community’s development policy, and setting it in the international context, specifically the OECD/DAC and the World Bank Comprehensive Development Framework, or the IMF/World Bank Poverty Reduction Strategy Papers.

Chapter 2

Management and Implementation of EU Development Policy

1.A large number of the criticisms directed against EU development policy have tended to centre on:

•complicated nature of the procedures used overlapping of responsibilities across Directorates

At one point in the 1990s the complex decision-making and budget process resulted in a backlog of €20bn in unspent funds across both the Community budget and the EDF (European Development Fund).

2.In parallel with the process of policy reform that led to the Joint Commission/Council Statement of November 2000, the Commission also launched a programme of reform of the management of external assistance in May 2000. Since then, the Commission has embarked on an ambitious and comprehensive process of reforming the management of external aid, and of its own internal structures.

•A new office, called EuropeAid,³^* with overall responsibility for community aid, was established on 1 January 2001. Consequently, the managing of external assistance projects, from the identification of projects to monitoring of their implementation and evaluation are under a single administrative structure.

•EuropeAid Cooperation Office is managed by a Management Board currently chaired by Commissioner Chris Patten with Commissioner Neilson as its Chief Executive. Commissioners Gunter Verheugen, (Enlargement) Pascal Lamy (Trade)_and Pedro Solbes Mira (Economic and Monetary Affairs) are members of the Board.

•EuropeAid now manages 80% of the EU’s external assistance, amounting to more than €9 billion annually in aid projects around the world, helping to significantly reduce inconsistency and overlap in the programming and delivery of aid.

3.There has also been decentralization of responsibility, referred to as deconcentration, from Brussels to EU delegations in the field, and the deployment of more staff to developing countries to deliver the programme on the ground. The process is due to be completed by end of 2003.

4.In addition, there has also been a change to the system of centralized financial control to a more flexible approach, with more individual responsibility and greater scope for collaboration with other donors. There is now activity-based budgeting, matching resources to priorities. Other steps taken to improve quality include more consistent use of country strategies and the establishment of an Inter-Service Support group responsible for scrutinizing the quality of all EU external programmes.

The EU has already identified a marked improvement in EU performance as regards aid delivery as is evident, for instance, in the Union’s operations in the Balkans, and in its speedy mobilisation of assistance for Afghanistan.

Chapter 3

EU Funding for Development

1. Financial Instruments

The Community Budget is the general financial instrument and the appropriations for development cooperation are granted according to two main approaches i.e. geographic and thematic. There are two additional specific financial instruments; the European Development Fund- the EDF and the European Investment Bank- the EIB. The EDF is fed by contributions from Member States with each five year Fund allocated in line with the relevant African, Caribbean and Pacific (ACP) Agreement. The EIB grants loans in the wider context of external relations. The spending of EU aid funds is divided among predominantly three Commissioners:

•Development Commissioner Nielson is responsible for the EDF and the humanitarian agency ECHO;

•External Affairs Commissioner Patten is responsible for development funding to Asia, Latin America, Russia and the CIS, the Balkans and the Middle East;

•Enlargement Commissioner Verheugen is responsible for the Phare and Tacis funds directed to the accession countries and Eastern Europe

2. Volume of ODA (Official Development Assistance)

The EU (Commission and Member States) is by far the largest provider of Official Development Assistance in the world. For example, it provided €27 billion in 2000, representing more than 50% of all OECD aid; the Commission accounts for 10% of international ODA and 20% of the combined EU figure.

By Comparison, the total ODA figures for the US and Japan in 2000 were $10 billion (US) and $13.5 billion. (Japan)

The situation is similar as regards humanitarian aid. Here the Union’s (Commission and Member States) contribution represents 50% of global humanitarian aid; Community aid alone represents half the EU contribution based on an average annual budget of €500 million.

3. EU commitments from Barcelona/Monterrey (Mexico), March 2002

Since the UN Conference on Financing for Development in Monterrey in March 2002, the EU is committed to a significant increase in ODA. The EU’s agreement to set an interim target of at least 0.33% for all MS by 2006, so that collectively an EU average of 0.39% may be reached, is important as it takes on board the idea of interim targets en route to 0.7% as a useful means of promoting increases in ODA. The Commission and the UK Treasury examined the figures and estimated that the EU commitment should translate into additional ODA of $7 billion p.a. by 2006 and that between 2002 and 2006 the EU would spend an additional $20 billion on ODA. The impact of the new members who will not initially be significant contributors to the budget, will be to bring down the EU average; the overall effect however, will be small.

4. Unspent monies

The EDF, set up by the Lome Convention, is the main channel of EU aid to African, Caribbean and Pacific (ACP) countries. The Cotonou Agreement established the 9^th EDF with a total value of €13.8 billion; Ireland’s share of this is €86 million over the lifecycle of the fund up to 2007. The 9^th EDF will not come into force until Cotonou is ratified. In the meantime previous EDFs, such as the 6^th, 7^th and 8^th EDF are still in existence and have not been depleted. It is estimated that over €10 billion remains unspent (i.e. €10 billion has never been called up from MS). The Commission has given an undertaking to MS to spend the remaining balances by 2007 and is reforming its management of EU development assistance (see Chapter 2) to deal with the inefficiencies, which have led to large unspent balances.

In 2004 there will be a review of the performance of the 9^th EDF; MS have indicated that €1 billion of EDF contributions could be withheld if the management performance of the Commission is unsatisfactory. The Advisory Group also considered the impact of the lack of parliamentary oversight of the EDF under current arrangements which may be a constraint to the efficient disbursement of funds. The Advisory Group felt that the budgetisation of the EDF i.e. bringing the EDF within European Parliamentary control would also provide for dialogue between the Parliament and partner countries as well as improving the overall administration of the funds. A related point brought to the attention of the Group is the present EDF structure which impedes the effective achievement of its objectives. Consideration could be given to the re-structuring of the EDF to free up its operations by removing existing constraints to the deployment of EDF resources. The Advisory Group decided that it did not have enough information on this complex and technical issue to include it in its recommendations.

5. Where the EC spends its development budget

Under the Community budget, up to €7 billion per year is spent on development. EC aid is administered by the Commission, and is funded either through the Community Budget or through the EDF, a special fund outside of the budget for African, Caribbean and Pacific countries. Ireland contributes approximately €12 million per year to the EDF and €50 million per year to the Community Budget.

DFID (UK Department for International Development) have produced the following table, which shows the allocation of EU aid measured by the number of poor people in each region;

6. Evolution of EU development Funding

EC development policy is one component in the EU’s external action, along with trade policy and CFSP (Common Foreign and Security Policy). With the expansion of the Union’s role and responsibilities as a global player over the past decade, there has been a corresponding enlargement of the Community’s aid programmes in respect of geographic scope, priorities, instruments and financial resources. There is however no diminution in the EDF budget. Development assistance based on political imperatives (Phare, Tacis) or international emergencies (Kosovo, East Timor) has become a predominant feature of the EU’s external assistance, a development generated in large measure by the effort to develop CFSP. This has increased the need to coordinate actions closely within the CFSP framework, including with the High Representative. There has also been a shift towards economic cooperation and regional trade agreements, with reinforced political partnerships that involve mechanisms for dialogue on human rights and governance. This applies not only to EU agreements with the Mediterranean or Latin America and Asia countries (MEDA, ALA) but also to the traditional ACP partners in the Cotonou Agreement. The result has been that while the volume of the EDF has, over the years, in real terms remained the same, it now represents a much smaller portion of a significantly bigger overall budget. (Details of the overall EC budget for external relations for 2000-2006 is attached at Annex 2).

Chapter 4

UN Millennium Development Goals

1.189 members of the United Nations agreed a framework for global development at the Millennium Summit held in September 2000 in New York. The Millennium Declaration adopted at the Summit included pledges to achieve eight goals, known as the Millennium Development Goals (MDGs) each with time-bound measurable targets so that the international community can gauge the progress of their achievement. At the time this represented an unprecedented consensus by world leaders on the major global challenges of the 21st century as well as a common commitment to meet these challenges. At the Durban Conference on Racism, August-September 2001 the US modified its substantial commitment to these goals.

3.Countries will be helped by the UN Secretariat to prepare and publish their own progress reports with the aim of creating political change at a regional and national level as the achievements are compared. The former Dutch Minister for Development Cooperation, Ms Eveline Herfkens, has been charged with the task of advising on the promotion of the Goals.

4.The EU as the largest donor of ODA has a major role to play in the achievement of the MDGs. By taking the lead and using the MDGs as an overarching framework for its development policy with the key target of poverty reduction - the EU can set an example to other international donors. Efforts have already begun to achieve progress towards these objectives. In 2000 the EU placed poverty reduction as an overarching objective for the EU’s development policy. A key contribution to the achievement of the MDGs will be the mobilisation of resources. However the EU’s commitment to the MDGs goes beyond the use of the aid budget and the promotion of increased ODA funding. Given the importance of lessons learned for building up institutional capacity, the Advisory Group felt that the Commission should consider taking on a limited direct operational role principally in order to build institutional knowledge of what works in practice on the ground and to build the capacity to scale up development activities. Macro-economic issues including the WTO Doha Agenda need to be addressed to ensure that the outcome is beneficial for developing countries so that an ‘enabling’ environment for the achievement of the MDGs is created.

5.The Commission will most likely carry out an assessment of EU contribution towards achievement of the MDGs during the coming year in the context of the next Annual Report on EC External Assistance, due in Autumn 2003.

Chapter 5

The Background Context for the Irish Presidency including Major Conferences and “Rendezvous” anticipated up to July 2004

1.The Group has identified a number of relevant ‘events’ including those planned during the current Greek and forthcoming Italian Presidencies of the EU, which are likely to play a key role in defining the environment for Ireland’s presidency of the EU. In terms of development policy these include:

General

•Management of Development issues within External Relations in post-Seville context and at the IGC

•Follow-up to Monterrey (Financing for Development) and Johannesburg (World Summit on Sustainable Development) Conferences

Trade

ACP

Food Aid

2. Furthermore, whatever Commission communications and proposed Regulations are presented in or before our Presidency will greatly influence the development debate during Ireland’s semester; the Commission will begin to prepare the work programme for the Irish Presidency in the development area early in 2003. The main elements of the work programmes for the Greek and Italian Presidencies include the following;

•Implementation of WSSD (World Summit on Sustainable Development) including EU’s comprehensive sustainable development strategy

•Communication on regional integration and cooperation in the context of EC. Development Policy

While Greece has not indicated that it will adopt any overarching development theme for its Presidency, any theme to be selected by the Italian Presidency may also affect our Presidency options.

Chapter 6

Possible Priority Issues for the Irish EU Presidency in the Area of Development Cooperation

The Group identified a number of possible priority areas for the Irish EU Presidency including;

1.1AIDS is a new and almost invariably lethal disease which has now become a global pandemic. According to UNAIDS, (the Joint UN Programme on HIV/AIDS) some 65 million people have contracted the disease over the past two decades and up to 25 million of these have already died. There is no sign that a cure for the disease is even on the horizon.

1.2Up to now the ravages of the disease have been greatest in sub-Saharan Africa but there is reason to think that its devastating effects may soon be felt in a major way in other areas such as China, India and Russia⁵.

1.3UNAIDS has estimated that by the end of 2001 up to 9 percent of all the inhabitants of sub-Saharan Africa between the ages of 15 and 49 were HIV carriers. In four countries of the region more than 30 percent of the adult population was infected. Throughout this region AIDS is now a humanitarian disaster of catastrophic proportions. In addition to the large-scale human suffering and loss of life which it causes, it has become a major factor in inhibiting development and causing serious social breakdown.

1.4HIV/AIDS is clearly a key theme for EU action and for Ireland Aid. Ireland has led on this issue in the EU-Africa Dialogue and has also underlined our bilateral commitment to the issue with the development of a strategic focus, a major expansion of our resource commitments and a repeated political commitment to combating HIV/AIDS. The European Commission is an important international stakeholder in the international fight against HIV/AIDS. The EU and its member States together constitute the largest contributors to HAP (Health, Aids and Population) programmes in developing countries and have made a substantial and increasing level of investments in these activities over the last decade. EC commitments to HAP totaled €4.2 billion over the period 1990-1999 of which €700 million was committed in 1998 alone. An approximate total of €2.6 billion went to African states. The Commission has revised its policy framework to improve the coherence of its response. It plans to allocate increasing volumes of financial resources to HIV/AIDS programmes.

1.5A programme for Action for HIV/AIDS, malaria and tuberculosis was approved by the EC in February 2001. This provides the policy framework for a coherent EC response to these three diseases for the period 2002-2006. In this context the European Commission has been closely involved in the development of the Global Fund to fight AIDS, Tuberculosis and Malaria (GFATM €60 million from the Community Budget and €60 million from the 6^th and 7^th EDF). It is their intention to continue to contribute to the GFATM throughout the implementation period of the EC programme for Action on Communicable Diseases (2002-2006).

1.6The Commission has played an important role in strengthening coordination between Member States in their response to HIV/AIDS. It is playing an important role in efforts to reduce the price of pharmaceuticals and of stimulating investment in research and development for drugs that primarily affect the poor in developing countries. (Commissioner Lamy has recently launched an EU initiative to break the current deadlock on WTO access to medicines for major diseases and other public health problems.) The Commission played an important role in negotiating the UN Declaration on HIV/AIDS and was instrumental in the establishment (and support of) the Global Fund for Aids, TB and Malaria. Attempts have been made also to improve the internal (institutional) structures of the Commission with a view to improving the effectiveness of their support to HIV/AIDS and the health sector. (A more detailed paper on HIV/AIDS is attached as Annex 3).

1.7While all of these efforts must continue, it is right to recognise frankly that it is - and will probably continue to be - very difficult to make any real progress in combating the AIDS pandemic, unless sustained efforts are maintained.

1.8As noted above, there is no cure in sight although a variety of retroviral drugs can have a helpful palliative effect. President Bush in his State of the Union address on 28 January announced substantial new funding for such drugs which can now be provided at a cost of hundreds rather than, as heretofore, thousands of dollars. However even this much lower cost may well exceed the annual income of the poorest people in many developing countries. There is a further serious problem about delivery on the ground. Such treatments as are available for the disease may well require the person concerned to take a cocktail of drugs regularly and to show a degree of knowledge and discipline in doing so which is beyond the capacity of many young, poor and uneducated people in the developing world.

•HIV/AIDS is essentially regarded as a health problem by the EU rather than a broad threat to development. Policy response to HIV/AIDS is situated within the Programme of Action for Communicable Diseases.

•An essential focus for EU development policy in the area of HIV/AIDS on the needs of the least developed countries to the neglect of other countries/regions highly affected or threatened by the epidemic

•Sub-optimal internal communication/cooperation between different Directorates within the Commission and also between the Commission (in Brussels) and its delegations (in developing countries).

•A disconnect between EU development policies (which prioritise health and HIV/AIDS) and their translation into support for EU country strategies and programmes of support at country level.

•A substantial disconnect between what is committed by the EU for HIV/AIDS programmes in developing countries and what is actually disbursed.

•Grossly inadequate levels of financial and technical resources available to the Commission and to delegations at country level to ensure EU funds for HIV/AIDS activities are effectively programmed and implemented at country level

•There is a need for a regular review of the appropriateness of current policy frameworks, especially in view of the highly dynamic nature of the HIV/AIDS pandemic and the international response

1.5Options identified by the Advisory Group which might form the basis of an approach by the Irish Presidency for redressing current constraints are;

•Propose a full revision of the current approach of the EU to HIV/AIDS - from regarding it as health issue to one that pervades all aspects of development i.e. HIV/AIDS is fully mainstreamed across all EU development policies and programmes

•In view of the enormous growth of the pandemic in Eastern Europe, the lack of political will to address it, the threat this presents to economic and social development in this region (and to the EU in general), and the lack of a definitive response in the EU to date, the Irish Presidency might advocate that the EU should revise its current policy framework, contribute funding and catalyse political interest in responding effectively to HIV/AIDS among accession states, , the Irish Presidency could advocate for an accelerated and more coordinated and coherent response by the Commission and by MS to the global pandemic

•With a view to improving the efficiency and effectiveness of resources allocated by the EC for HIV/AIDS programmes, the Irish Presidency could advocate further reform of EC structures to facilitate greater communications between Directorates, the contracting of additional technical capacity, improved linkages between the Commission and its delegations and improved budget management

2.1In November 2000, the Joint Commission/Council Declaration on the EC’s development policy set out for the first time that the principal aim of the Community’s development policy is to reduce poverty with a view to its eventual eradication. The Declaration states that aid should be allocated where it has the greatest chance of reducing poverty efficiently and sustainably. Consequently least developed and low income countries will be given priority in the allocation of resources, taking account of their efforts to reduce poverty, their needs, their performance and their capacity to absorb aid. The policy statement by OECD-DAC Ministers meeting on 25-26 April 2001 further endorsed the poverty focus of EC development assistance. The Advisory Group recommends however that in addition, among middle income countries, encouragement and attention should be concentrated on those in which the proportion of poor people continues to be high and which are fully committed to implementing coherent poverty reduction strategies.

2.2Most donors spend the majority of their aid in low-income countries; nine of the fifteen EU MS spend more than 70% of their aid in these countries.

2.3Thirty years ago, the EC provided most of its development assistance to the poorest countries. This came from the EDF which relies on voluntary contributions from MS - there was virtually no external expenditure from the EC budget itself. Since then, major new programmes have been established for Asia, Latin America, the former Soviet Union, the Mediterranean and the Balkans. However, future increases in EU development aid should be concentrated on the poorest countries.

2.4The Joint Commission/Council Development policy statement and associated reform initiatives provide a positive base on which to build efforts to reverse the current trend in the share of assistance to low income countries. The Advisory Group identified the following as possible action points for the Irish Presidency;

•Adoption of resource allocation criteria - resources for ACP states are currently allocated on the basis of need as defined by specific criteria. The Commission is considering proposing similar criteria for other regions. With suitable criteria the countries most in need of development assistance would receive most assistance

•the next Financial Perspective - the negotiation for the next Financial Perspective will set the amounts and allocation of EC funds for 2007-2013. This is an opportunity for increasing the proportion of social allocation of funds to regions where the largest numbers of poor people live

•The Convention on the Future of Europe, which is reviewing the purpose of development programmes, their ability to provide added value and the instruments used to implement them.

3.1The EU maintains a political relationship with African countries mainly through the political dialogue mechanisms under the EU-Africa dialogue and under the Cotonou Agreement. The EU’s CFSP provides a further mechanism for interaction with African countries. (Details of these mechanisms are attached as Annex IV)

The Advisory Group recommends that the Irish Presidency approach Africa within the framework of the mechanisms for EU-Africa political dialogue and focus on issues around conflict prevention and good governance and how the EC promotes both issues through its cooperation with Africa.

3.2It is now accepted that maximizing the poverty impact of aid requires an increased focus on results which in turn will inevitably lead to a tendency on behalf of donors to concentrate their aid on ‘good performers’. The challenge will be to ensure an appropriate balance between poverty and performance criteria so that poor countries with good governance policies will receive the utmost support. For example, the recent US initiative to set up a Millennium Challenge Account has detailed eligibility criteria which will demonstrate whether countries are curbing corruption, spending more on education and health and following free market policies. (The US proposal is covered in more detail in Section G of Chapter 5).

3.3New Partnership for Africa’s Development (NEPAD) was motivated by a growing dissatisfaction though the 1990s with the limited success of development efforts, and a recognition that failures in governance played a large part in the continent’s stagnation. The NEPAD is committed to bringing about the longer-term political changes that would entrench the rule of law, good government and business codes among participating countries. They are using the novel mechanism of peer review, whereby governments will voluntarily submit to criticism by fellow Africans according to commonly agreed standards. The critical test for NEPAD will be how it implements the mechanism of “peer review”. Donors are tending to see NEPAD’s handling of recent events in Zimbabwe and the Ivory Coast as test-cases for NEPAD’s effectiveness. While NEPAD is still seeking agreement on implementation, it does not to date appear to have made a substantial impact on either of these situations

The Advisory Group considered that it may be too early to take any further initiative in this area. NEPAD is an African-owned initiative and it is important at this stage that African countries themselves have the space to develop the peer review mechanism. If the EU or the broader donor community is seen to attempt to drive the peer review process forward, it is unlikely to succeed.

3.4Commissioner Nielson has announced that this year he will present a paper on governance to define a consistent and common EU approach to governance-related issues While governance issues are being given increased priority within EU co-operation strategies on the basis of an analysis of problems and needs for institutional development the Advisory Group considered that an approach should be elaborated which would include the roles of civil society, independent media and local democratic institutions. As indicated earlier, Cotonou now provides a mechanism to address not only issues around human rights, democracy and the rule of law, but also corruption.

3.5Working with NEPAD, former UNHCHR Mary Robinson is engaged in a pilot project designed to give the governance dimension in NEPAD a ‘lift off’. Participating countries are required to develop an implementation strategy for an inter-state peer review mechanism for governance, which would include the participation of both the Secretariats of NEPAD and the African Union as well as African academics. The strategy would involve governments and civil society working together in close co-operation with donors and institutions to develop national capacity around the rule of law and democratic governance in the police, the judiciary and the prisons as well as promoting grass-roots awareness and ownership of human rights norms. There may be scope for the EU to support ongoing efforts under the auspices of the new international NGO, Ethical Globalisation, headed up Mrs. Robinson.

3.6An important aspect of the development challenge in Africa is the persistence of armed conflict throughout the continent; 20% of the African population live in affected countries. The EU is committed to addressing the issue of conflict in its development programmes, including the Cotonou Agreement.

3.7The EU has adopted a common position on conflict prevention, management and resolution in Africa, the primary goal of which is to enhance African conflict prevention capacity. In this context, the European Commission has earmarked funding of €10 million to support the African Union Peace Fund. Conflict prevention is also a priority of the EU-Africa dialogue and is likely to be a major focus of the Lisbon Summit. The Danish Presidency launched a discussion of how the EU’s various policy instruments might be made more coherent in order to strengthen the EU’s capacity to influence developments in Africa.

4.1Coherence concerns the need to ensure that the objectives and impacts of different policies and agreements do not contradict or undermine each other. The nature and extent of EC development cooperation as described in Chapter 4 paragraph 6, has led to inconsistencies with MS’s policies; and between EC development policy instruments and other Community policies such as the CAP (Common Agricultural Policy) and external policies such as trade. In an effort to remedy these inconsistencies the Maastricht Treaty set out the importance of the three Cs - Complementarity, Co-ordination and Coherence. Maastricht resulted in a significant amount of EU development cooperation being subject to consultation or to assent by the EP (European Parliament) in an effort to ensure the 3 Cs; the EDF, which is funded by voluntary contributions of Member States, falls outside the EU Budget and European Parliamentary control.

4.2The EU has made a systematic effort to improve policy coherence with development objectives. The EU has already taken an important step forward in providing enhanced access for the Least Developed Countries (LDCs) - which include the poorest countries in the world (40 of the 49 LDCs are ACP countries)- through its “Everything But Arms” initiative. This initiative is an important example of how further policy coherence is being sought between trade and development policies in the external relations area.

4.3In general it is difficult to identify an initiative in this area against the background of discussion of these sensitive issues in the WTO context, which should be well advanced by the time of Ireland’s Presidency. The WTO Doha Ministerial meeting in November 2001 decided to launch a new WTO round, the Doha Development Round, comprising both trade liberalization and new multilateral trade rules, underpinned by commitments to substantially strengthen assistance to help developing countries build their trading capacity. The negotiations will last three years - until January 2005. Doha also decided to interpret the Trade Related Intellectual Property (TRIPS) Agreement in a manner that ensures that WTO members can take action to protect public health and in particular to combat the effects of the HIV/AIDS pandemic. Overall, Doha enables the WTO to play a fuller role in the pursuit of economic growth, employment and poverty reduction, in global governance, and in the promotion of sustainable development, while improving the conditions of worldwide trade and investment.

4.4The issue of coherence has been addressed in the Joint Commission/Council Statement on development policy and in Cotonou. A central element of Cotonou is the Economic Partnership Agreements (EPAs); negotiations for these new trading arrangements will start in September 2002. Along with the Commission, Ireland will be responsible for managing these complex trade negotiations during its Presidency.

The Advisory group felt that there would be little added value from an initiative from the Irish Presidency in this area against the background of discussion of these sensitive issues in the WTO, which should be well advanced by the time of our Presidency. Moreover, Ireland’s own credibility on this topic would present an additional difficulty.

The following section on Treaty Amendment addresses a number of issues which are also relevant to the promotion of coherence with EC development and other policies.

5.1The Advisory Group believe that the key issue to be addressed is how to maintain the centrality of the development objectives of the Community in a possible situation of continuing integration of the different policy areas. As outlined in Chapter 1, there is already a clear Treaty basis for the EU’s development policy in the existing Treaties. However, the Convention on the Future of Europe is currently considering Treaty change and the question arises in this context as to whether it might be opportune to revisit Treaty language on development. The Convention is due to report in June 2003, and its finding will be taken up by an Intergovernmental Conference of the EU member States thereafter. This IGC may be in progress or may complete its work during the Irish Presidency in the first half of 2004.

5.2The question of Treaty amendment has arisen in the External Affairs Working Group of the Convention which has presented its report to the plenary of the Convention before Christmas. The Working Group, while recognising that development policy has its specific purposes, which are reflected among the principles and objectives of EU external action, underlines the need for ensuring coherence between development cooperation and other aspects of EU external action as well as external aspects of internal policies, since development assistance should be considered as an element of the global strategy of the Union vis-à-vis third countries. Ideas for Treaty amendments on development policy have arisen in the context of revisiting the Principles and Objectives of the EU in External Relations/CFSP area in general, and as regards specific commitments on the purposes and principles of the EU’s development policy.

5.3The Advisory Group suggests that the Treaties could define development cooperation as an EU policy area with its own specific objectives and to endow this policy with a legal standing in the Treaties similar to other areas of EU external policy, including the CFSP. The above could be achieved building on the language of Article 178 of the Maastricht Treaty so that it could serve as a guiding principle. Art. 178 says aThe Community shall take account of the objectives referred to in Article 177 (the development objectives) in the policies that it implements that are likely to affect developing countries. However the he Treaties could state that the central objective of EU development policy is that of poverty reduction, targeting the poorest countries in particular, in line with the UN Millennium Declaration. Another might be to transfer Article 178 up to the early provisions of the Treaty and perhaps to strengthen its wording -as was done in the Amsterdam Treaty for environmental protection.

5.4 Furthermore the Preamble to the Treaty could recognise the EU’s global responsibility, and its solidarity with developing countries. In this regard, EU development cooperation policy is currently based on the political objective of promoting respect for human rights and fundamental democratic principles, and good governance, as set down in Article 177 of the Maastricht Treaty.

5.5The EU’s development policy could also seek to contribute actively to the objective of conflict prevention, based on the Gothenburg Programme of Action. In this context the Union should use all means at its disposal including political dialogue, and consultations in cases which involve violations of human rights and democratic principles or serious corruption. This would require improved cohesion and closer cooperation between development policy and CFSP.

5.6Finally the Advisory Group suggests that the Union could promote a trade and development policy centred on regional integration, on the basis that this is a source of political stability and peaceful economic development and will help developing countries to benefit from the global economy.

6.Debt Relief and the European Union’s relations with the International Financial Institutions (IFIs)

6.1The Heavily Indebted Poor Countries (HIPC) Initiative was launched in September 1996. It represented a concerted effort by all donors and multilateral creditors to tackle the problem of external indebtedness of low-income countries. However the original initiative fell short of the need for total debt relief, and a review in 1998 pointed to the need for an enhanced initiative, agreed in 1999. The boosted HIPC 11 includes more debt relief for a greater number of countries, faster debt relief, and a retroactivity and closer linkage between debt relief and poverty reduction. It also includes bilateral and multilateral debt. The EU as a creditor, has recently granted a further €60 million debt relief in addition to the €360 million already earmarked for debt cancellation for EU loans through the EIB. As a donor, the EU channels its assistance amounting to €734 million through the HIPC Trust Fund which is managed by the World Bank, in favour of African, Asian and Latin American countries.

6.2Because of the situation of the HIPC process within the World Bank and IMF, even though the EU is a major donor in the area of debt, there is no common EU strategy on debt. nor does the EU have a ‘seat’ in the governance structure of the World Bank. EU MS are located in different constituencies. For example Ireland is in the same constituency as Canada and eleven Caribbean countries with no other EU MS.

7.1The EU’s agreement at Seville, in advance of the International Conference on Financing for Development held in Monterrey, Mexico last March, to set an interim target of 0.33% by 2006, so that collectively an EU average of 0.39% may be reached, is of critical importance as it takes on board the idea of interim targets en route to 0.7% as a useful means of promoting increases in ODA.

7.2The issue of monitoring of EU progress towards meeting the commitments has been discussed in considerable detail at this stage with those in favour falling on the usual lines i.e. those MS who favour making concrete progress towards the 0.7% target. Ireland has been to the fore in supporting a strong review mechanism and that the Commission should monitor progress towards the target and report back regularly to the Council. Ireland is one of a group of MS which includes Denmark, Sweden, Luxembourg, Netherlands and Belgium, whose aid has already reached the .33% benchmark and who have either given a concrete commitment to or have already reached the 0.7% of GNP to ODA target.

7.3The Advisory Group recommends that the Irish Presidency could consider requesting the Commission to provide a comprehensive report on progress by MS towards the commitments made at Monterrey. This would in effect be a mid-term review and should involve visits to all MS capitals to discuss progress, as was done prior to Monterrey. This was an issue where peer pressure proved very effective in the run up to Monterrey and this should be sustained. The importance of increasing aid volumes is unquestionable set against the background of the limited progress made thus far towards achievement of the MDGs and the worsening state of development in sub-Saharan Africa.

7.4The issue of untying aid was considered by the Advisory Group as an area of considerable potential for the Irish Presidency because of our position of untying all of our aid.

The European Commission however has just recently adopted a Communication entitled ‘Untying; Enhancing the effectiveness of aid’ containing proposals to untie all Community managed aid for developing countries. In particular the Communication advocates a complete untying of food aid and food aid transport, which are currently excluded from existing agreements, and proposes to introduce these elements in the future re-negotiations of the Food Aid Convention. Henceforth purchases such as food aid transport would be opened up to suppliers based elsewhere than in the donor country. The European Commission whose own aid has been untied to a high degree for the last 25 years has called for all other donors to follow this example. The Commission has already started infringement procedures over ‘tied aid’ practices of Denmark and Italy, on the grounds of their inconsistency with the EU’s internal market.

7.5The challenge for new member states will be to adopt and implement the acquis communautaire in relation to the Community’s development policies including to the Community budget. When they join in 2004 the candidate countries will be legally obliged to participate in development co-operation, taking on responsibility for the financing and implementation of EU development policies.

7.6As Ireland will be in the Chair when Enlargement takes place, it is important that we consider how to maximize on this in a development context. This is all the more apparent when we realise that new MS will be immediately obliged to take on the full development policy acquis (other than the EDF to which they will not have to contribute until 2006) and will, in most cases, be building a development cooperation programme from nothing, with limited institutional and political support. Ireland has already been approached by at least two of the new MS who see a potential model in our development programme and our general approach to development. The Irish Presidency needs to reflect on how we can help them to contribute to EC development policy and, in this regard, could seek to persuade them of the merits of the poverty reduction focus promoted by Ireland and like-minded countries.

7.7The Group also considered recent changes in the US administration of aid development which have particular relevance for the issue of the promotion of good governance.

On March 14, 2002, just in advance of the Monterrey Summit, President Bush announced “a new compact for global development” under which the US will increase its aid to developing countries by 50% which will result in a $5bn annual increase over current levels already being administered by USAID (the US Development Agency), by 2006. The funding is to be provided in the form of the Millennium Challenge Account (MCA) and from the outset the administration made it clear that potential funding for countries under the MCA would be linked to “sound policies” in those developing countries.

There will be a total of sixteen eligibility criteria, grouped under three broad headings, where countries seeking funding from the MCA must demonstrate a strong commitment to:

•sound economic policies that foster enterprise and entrepreneurship - more open markets, sustainable budget policies and support for individual entrepreneurship.

In the first instance only countries with per capita incomes below $1,445 will be eligible. Once the MCA is fully funded to the level of $5bn then it is proposed to open the fund to countries with per capita incomes up to $2,975. Countries that might meet the criteria of the MCA could include Bolivia, Mongolia, Senegal, Tanzania, Ghana, El Salvador, South Africa and Jamaica. Funding for the MCA will require Congressional approval and the first funds are expected to be allocated in 2004.

One of the most significant aspects of the MCA is that it will be operated by a new agency called the Millennium Challenge Corp., with final authority resting with a group of Cabinet Secretaries chaired by the Secretary of State.

While the Advisory Group considered that it is too soon to make any assessment of the new MCA process they do have concerns that there may be real risks of overlap and duplication of MCA and USAID.

7.8The European Commission places a high priority upon intensifying and enhancing its relations with the UN in the field of development. The European Commission already interacts with the UN in the area of operations and policy debate. Although progress has been achieved over the years, there is scope for improvement and for the development of a more effective partnership. For instance, there could be a shift in the emphasis on EC Cooperation with the UN system from the current ad-hoc, project-based collaboration to a more systematic and programmatic level. The mutual engagement of the EC and UN in a policy dialogue could be strengthened. This could be based on recognition of the added value and the core capabilities of the UN bodies in relation to the development policy priorities of the European Community.

The Commission adopted a Communication on “Building an effective Partnership with the United Nations in the Fields of Development and Humanitarian Affairs” on 2 May 2001. The General Affairs Council of 18 February 2002 proposed further work on strengthening the role of the EU in international relations particularly the scope and conditions of channeling EU cooperation funds through the UN system and new multilateral funds. A further Communication on the subject is due but not yet indicated for the Greek and Italian Presidencies and may fall during ours.

Chapter 7

Recommendations

Conclusions and Recommendations

From the beginning the Advisory Group interpreted its terms of reference as requiring it to bring forward a small number of practical initiatives which could add value to international development and which could be achieved during the Irish Presidency. The extensive consultations which we were privileged to have with leading practitioners confirmed our initial belief that there is no “magic bullet” to solve the major problems identified in our terms of reference. Every initiative considered revealed complexities, many of which are difficult to overcome. It must be recognised that Ireland will hold the Presidency during a time of unprecedented institutional change within the Union - enlargement, new Commissioners, European Parliament elections and the (possibly unfinished IGC) - making for a climate of what one leading player described as “marginal enthusiasm” for new ideas in the area of development policy during this period. It is also the case that there is no point in the Presidency putting forward ideas that the Commission does not have the capacity to accommodate.

Taking all these constraints into account we decided to focus in our recommendations on the Millennium Development Goals and on the impediments to their achievement on the grounds that the goals are universally accepted and do not need to be reinvented. We believe that some or all of the following, if implemented, would add value to the international development efforts of the EU:

•Development Funding - Ireland should use its Presidency to provide moral leadership to member states to make progress towards the commitments made at Monterrey in respect of the target of 0.7% of GNP for official development assistance. This, of course, would only be credible if Ireland could demonstrate that it intended to live by its own pledge in this regard. Our record is respectable but the departure from the agreed multi-annual commitments towards the 0.7% has diminished our credibility. To be credible in this area the Government must recommit and adhere to specific annual increases in our contributions in each of the next four years to 2007. Ireland could consider requesting the Commission to provide a comprehensive report on progress by MS towards the commitments made at Monterrey. This would in effect be a mid-term review and involve visits to all MS capitals to discuss progress, as was done prior to Monterrey. Peer pressure proved very effective in the run up to Monterrey and this should be sustained

•HIV/AIDS - Ireland could propose a full revision of the current EU approach to HIV/AIDS with a view to:

(a)Mainstreaming it as an issue which pervades all aspects of development and not just health;

(b)Addressing the enormous threat of a HIV/AIDS pandemic on our doorstep in Eastern Europe by incorporating them into the Phare and Tacis Programmes

•Poverty Eradication - Ireland, like a number of other member States, is concerned to ensure that EC development objectives and development spending remain focussed on poverty eradication and that any additional funding should be concentrated on poverty eradication. The Irish Presidency might consider promoting this approach. The Advisory Group recommend that this is a question which could be pursued in the context of the Orientation Debate on Effectiveness of External Assistance which takes place annually and will fall in 2004 under our Presidency.

•Governance - poor quality and bad governance are the greatest impediment to development and the fight against HIV/AIDS. The ways in which public functions are carried out as well as the way public resources and public regulatory powers are used are fundamental issues for poverty reduction. The support of the international community will be critical in promoting the governance dimension of NEPAD. If a pilot operation is instituted by a number of African countries as advocated by Mary Robinson’s Ethical Globalisation Initiative, the EU could support this effort by encouraging MS to join the mentoring support group to NEPAD.

•Administrative Effectiveness - Commissioner Neilson has announced his intention of presenting, later this year, a communication making a case for the budgetisation of the European Development Fund (EDF). This would mean that the EDF would be brought under the overall community budget and thus under the democratic scrutiny of the Parliament. This could allow for more flexibility in disbursement and avoid accumulating unspent funds. (The Advisory Group also considered the related issue of the present EDF structure as an impediment to its effectiveness. The Advisory Group decided that it did not have enough information or expertise to make a recommendation on the complex and technical issue of the possible re-structuring of the EDF. In any event the internal agreement between the MS on the management of the EDF will not expire until 2006.) The Commission should consider taking on a limited direct operational role principally in order to build institutional knowledge of what works in practice on the ground and to build the capacity to scale up development activities.

•Increasing Global Leverage - Ireland could promote the idea of the EU seeking a better institutional role in the International Financial Institutions (IFIs) on the grounds that enlargement will make the union a very substantial political entity with one of the world’s major currencies. This would give the Union the type of leverage necessary to help the World Bank/IMF to promote more human centered development policies;

The Irish presidency should take some initiative to facilitate the smooth transition of the new MS into EU development policy; this would also provide an opportunity to promote our own policy approach. An initiative in the area of development education which would seek to promote support for the objectives of EC development policy among political and civil society and the wider public in the new MS might be appropriate.

Report of the Advisory Group to the Joint Committee on European Affairs

Foreword

Report of the Advisory Group to the Joint Committee on European Affairs

Introduction

Terms of Reference

Composition of the Advisory Group

Work Methods of the Advisory Group

Nature of the Report

Chapter 1

Governing Provisions for EU Development Cooperation

Legal Basis

Instruments

Operational framework

Chapter 2

Management and Implementation of EU Development Policy

Chapter 3

EU Funding for Development

1. Financial Instruments

2. Volume of ODA (Official Development Assistance)

3. EU commitments from Barcelona/Monterrey (Mexico), March 2002

4. Unspent monies

5. Where the EC spends its development budget

6. Evolution of EU development Funding

Chapter 4

UN Millennium Development Goals

Chapter 5

The Background Context for the Irish Presidency including Major Conferences and “Rendezvous” anticipated up to July 2004

General

Trade

ACP

Food Aid

Chapter 6

Possible Priority Issues for the Irish EU Presidency in the Area of Development Cooperation

Chapter 7

Recommendations

Conclusions and Recommendations