Explanatory Memorandum to COM(2011)840 - Financing instrument for development cooperation - Main contents
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| dossier | COM(2011)840 - Financing instrument for development cooperation. |
|---|---|
| source | COM(2011)840  |
| date | 07-12-2011 |
The number of people living in poverty continues to be a major problem in developing countries. While significant progress has been achieved, most developing countries remain off-track for the achievement of the Millennium Development Goals (MDGs) and are not able to successfully embark on the path of sustainable development in all its senses, economic, social and environmental, the latter including climate change mitigation and adaptation.
To aggravate the situation, global challenges continue to be prominent and developing countries were hit hard by the succession of recent crises resulting inter alia in social and economic instability, increased migration, food insecurity and an increased vulnerability to external shocks, among other effects. It is increasingly recognised that environmental and natural resources, vital for sustainable socio-economic growth, are increasingly at risk from climate change and rapid population growth. This may exacerbate an already fragile situation in many developing countries and risk undoing certain development achievements.
The EU remains committed to helping developing countries to reduce and ultimately eradicate poverty. To achieve this objective, the Development Cooperation Instrument (DCI) Regulation was established for the 2007-2013 period with the primary and overarching objective of eradicating poverty in partner countries and regions. It consists of three categories of programmes: (i) bilateral and regional geographic programmes covering cooperation with Asia, Latin America, Central Asia, the Middle East and South Africa; (ii) thematic programmes covering the following issues: investing in people, environment and sustainable management of natural resources including energy, non-State actors and local authorities, food security, and migration and asylum; and (iii) accompanying measures for sugar-producing countries.
The current DCI regulation expires on 31 December 2013. The various reviews undertaken of the DCI have acknowledged its overall added value and its contribution to the achievement of the MDGs, but have also highlighted certain shortcomings. New challenges, together with the priorities set out in the Europe 2020 Strategy and the latest EU development policy, have prompted the Commission to make a proposal to review and adapt the DCI Regulation in line with the communication “A Budget For Europe 2020” of 29 June 2011 and with the communication 'Increasing the Impact of EU Development Policy: An Agenda for Change' of 13 October 2011.
Contents
Public Consultation
The Commission held a public consultation on future funding for EU external action between 26 November 2010 and 31 January 2011. This process was based on an online questionnaire accompanied by a background paper What funding for EU external action after 2013?. In general, the replies did not suggest the need for a substantial change in the current structure of the existing instruments. Nevertheless, several issues were identified and were accordingly taken into account in the drafting of the new DCI Regulation:
· A majority of the respondents (around 70%) stated that EU financial intervention provided a substantial added value. Respondents stated that the EU should make good use of its comparative advantage linked to its global field presence, its wide-ranging expertise, its supranational nature and its role as a facilitator of coordination.
· Nearly all respondents (92%) supported a more differentiated approach, tailored to the situation of the beneficiary country, in order to increase the impact of EU financial instruments. In line with this, differentiation between the beneficiary countries is strengthened.
· There was wide support among respondents for exploring conditionality based on the beneficiary country's respect for human rights, minorities, good governance and diversity of cultural expressions (78%), and on the quality of its policies and of its ability and willingness to implement sound policies (63%). The proposed Regulation recognises the importance of national development plans as well as jointly developed EU strategies as the basis for cooperation. It also emphasises the basic EU values and principles and thus strengthens the conditionality and mutual accountability.
· A significant majority of respondents support increased flexibility in implementation, in particular for tackling transregional challenges, which is seen as being hampered by the ‘geographical limitation’ of individual instruments (EDF being limited to ACP countries, the DCI to Latin America, Asia, Central Asia, Middle East and South Africa, and the ENPI to neighbourhood countries). The proposed Regulation provides for implementing activities of trans-regional importance and groups the different thematic axes to increase flexibility and simplify the implementation.
· A majority of respondents agreed that joint programming and co-financing with Member States (and possibly with the beneficiary countries) could increase the impact and coherence of EU external action, simplify the delivery of aid and reduce overall transaction costs. This is duly addressed in the proposed Regulation.
Collection and use of Expertise
The Commission performed an internal review of different reports (evaluations, audits, studies, mid-term reviews). The review looked at what worked and what did not work, and drew lessons for the drafting of the financial instruments.
The review showed that the current DCI contributed to progress towards the MDGs in developing countries. The DCI's implementation modalities, such as budget support and the 'sector-wide approach', have allowed deeper cooperation with partner countries and more efficient division of labour through co-financing between donors.
Nevertheless, the review identified several shortcomings.
· Different internal EU policies are increasingly becoming part of the EU's external action. In line with the 'Europe 2020 Strategy' and the Lisbon Treaty, mutual reinforcement of internal and external actions was needed. The existing architecture was inadequate to allow the Commission to intervene effectively on a sufficient scale. Grouping different thematic axes under one heading will significantly improve the situation.
· In some cases the thematic programmes were too fragmented to respond to global crises (e.g. the food price crisis, avian flu) or to international commitments made at the highest political level (e.g. biodiversity and climate change). The use of the thematic envelope therefore needed more flexibility through grouping the different thematic programmes and allow for a more coherent and comprehensive long-term engagement with global public goods and challenges, and to react to the various shocks affecting the poorest.
· The current DCI Regulation covers a wide range of developing countries, from the Least Developed Countries to Upper Middle Income Countries. The recent increase of economic and social disparities amongst partner countries and the development of new objectives call for improved differentiation. The proposed new Regulation provides further guidance on differentiation by allowing the EU to concentrate grant aid where it is needed most and where it will have greatest impact. To complete the policy mix, the Commission proposes creating a new instrument (Partnership Instrument) to address the objectives that go beyond pure development assistance.
· Supporting cross-regional initiatives has proved difficult given the current architecture of external assistance instruments. This was particularly the case in implementing the Joint Africa-EU Strategy. The new DCI regulation provides a better legal basis for the implementation of the Joint-Africa EU Strategy.
· In the present DCI Regulation, the provisions on fragile states and countries in post-crisis situations are insufficient: they underestimate the need to support political processes that strengthen the rule of law and governance. Addressing transition challenges requires a set of responses at country level, based on specific needs and related to a common strategy (a holistic approach). The new Regulation takes better account of these challenges and tackles the rigidity of the decision-making process in fund allocation, programming and implementation.
· The current DCI Regulation contains indicative allocations for each region, without any unallocated funds. This reduces the scope for mobilising resources to respond to unforeseen needs (new political priorities, natural or man-made disasters, etc.). The new Regulation proposes leaving some funds unallocated to be used as a response to unforeseen events.
· Finally, the current programming and implementation process for the DCI was assessed as too complex. It does not allow the EU programming cycle to be aligned to those of its partners, it does not facilitate joint programming with Member States and it does not allow swift adjustments if required. All these shortcomings have been directly addressed in the new DCI Regulation.
Impact Assessment
The Commission carried out an Impact Assessment (IA) that considered 3 basic policy alternatives: maintaining the DCI Regulation without any amendment (option 1) and two alternatives for amending the DCI on each problem identified in the current DCI (Options 2A and 2B).
Option 1 was not accepted because it would not solve the problems identified. Sub-options A and B under Option 2 solve the identified problems to different extents, each having particular political and other implications. The IA concluded that sub-options B is better as it:
· brings the DCI objectives into line with the latest trends in EU development policy;
· differentiates clearly amongst partner countries;
· enshrines good governance, democracy, human rights and the rule of law in EU assistance;
· facilitates the implementation of the Joint Africa-EU Strategy;
· streamlines the thematic programmes to provide the necessary flexibility;
· ensures flexible mechanisms to facilitate a more effective EU response to rapidly evolving situations in crisis, post-crisis and fragile states;
· enhances the flexibility of fund allocations; and
· improves the effectiveness of EU aid by simplifying and making programming and implementation procedures more flexible, facilitating joint programming and aligning EU assistance with partner countries' programming cycles.
Part Five, Title III, Chapter 1 of the Treaty of the Functioning of the European Union, provides the legal framework for cooperation with partner countries and regions. The proposed DCI Regulation is based in particular on Article 209 of the Treaty, and is presented by the Commission in accordance with the procedure laid down in Article 294. The Joint Statement by the Council and the Representatives of the Governments of the Member States meeting within the Council, the European Parliament and the Commission on European Union Development Policy: ‘The European Consensus’, of 20 December 2005, the communication of 13 October 2011 'Increasing the impact of EU development Policy - An Agenda for Change' as well as any future communication establishing basic orientations and principles for the Union's development policy, and any subsequent conclusions or modifications thereto, will provide the general framework, orientations and focus for the implementation of this Regulation.
The EU is in a uniquely impartial position to deliver part of the EU's external assistance on behalf of and with Member States, giving it enhanced credibility in the countries where it operates. Many Member States do not have the capacity and/or the willingness to develop global external instruments. Intervention at EU level is therefore the best way of promoting EU overall interests and values globally and ensuring a worldwide EU presence. With 27 Member States acting with common policies and strategies, the EU has the critical mass to respond to global challenges, in particular in relation to achieving the MDGs. Since the objectives of the proposed Regulation cannot be sufficiently achieved by the Member States alone and can therefore, by reason of the scale and coverage of the action, be better achieved at EU level, the EU may adopt measures, in accordance with the principle of subsidiarity as set out in Article 5 of the Treaty.
The proposed new Regulation also strengthens the coordination capacity and facilitates joint programming with the Member States, ensuring efficient division of labour and effective aid delivery. The EU's development policy and that of the Member States must complement and reinforce each other. To that end, EU assistance should focus where it can have greatest impact, having regard to its capacity to act at a global scale and respond to global challenges. In accordance with the principle of proportionality, as set out in Article 5 of the Treaty, the proposed new Regulation does not go beyond what is necessary to achieve its objectives.
The proposed new Regulation will operate taking into consideration the external dimension of EU sectoral policy priorities, ensuring coordination and enhancing synergies, in line with the objectives laid down in the Regulation, and in compliance with the aforementioned legal and policy framework.
The Commission proposes to allocate €96 billion for the 2014-2020 period for the external instruments. The allocation proposed for DCI is €23 294.7 million. The indicative yearly budget commitments for the DCI are given in the table below. The indicative financial allocations per individual DCI programme are given in Annex VII of the Regulation. It is planned that no less than 50% of the programme for Global Public Goods and Challenges will be spent on climate change and environmental objectives and at least 20% on social inclusion and human development. Globally, in line with the Communication 'Increasing the impact of EU Development Policy: an Agenda for Change', a continued support for social inclusion and human development is foreseen through at least 20% of the Union's development aid. Finally, this Regulation intends to contribute to addressing at least 20% of the Union's budget to creating low carbon and climate resilient societies, as provided for in the Commission communication 'A Budget for Europe 2020'.
To ensure its predictability, funding for higher education activities in third countries in the context of 'Erasmus for All' programme will be made available, in line with EU external action objectives, through 2 multi annual allocations only covering the first 4 years and the remaining 3 years respectively. This funding will be reflected in the multiannual indicative programming of the DCI, in line with the identified needs and priorities of the countries concerned. The allocations can be revised in case of major unforeseen circumstances or important political changes in line with the EU external priorities. The provisions of the 'Erasmus for All' Regulation (EU) No [--] of the European Parliament and of the Council establishing 'Erasmus for All' will apply to the use of those funds.
Development Cooperation Instrument*| 2014-2020
2 716,| 2 903.| 3 100.| 3 308.| 3 525.| 3 751.| 3 23 294.7
*Current prices in million €
5. MAIN ELEMENTS
Simplification
A priority for the Commission in this new Regulation, as in other programmes within the context of the Multiannual Financial Framework (MFF), is to simplify the regulatory environment and facilitate the access of Union assistance to partner countries and regions, civil society organisations, SMEs, etc to the extent that they contribute to the objectives of the Regulation.
External instruments will be simplified by delineating them more clearly and reducing overlaps between them, so they are individually identified with clearly defined policy objectives.
Simplification and reduction of transactional costs for partner countries and regions will also be achieved through flexible programming procedures allowing for the application of the principles of Aid Effectiveness. For instance, the Union may align to the national development plans of partner countries, thus eliminating the need for partner countries to negotiate EU-specific strategy papers to be adopted by the Commission and enabling a more focused analysis which could be included in the multi-annual programming document. Likewise, donor coordination and division of labour may be reinforced through joint programming with Member States.
The implementation rules are contained in the Regulation (EU) No [--] of the European Parliament and of the Council of [--] establishing the common rules and procedures for the implementation of the Union's instruments for external action.
Differentiation
The differentiated approach set out in the communication 'Increasing the Impact of EU Development Policy: An Agenda for Change' intends to enhance the impact of EU development cooperation by targeting its resources where they are needed most to address poverty reduction and where they could have the greatest impact. This should be implemented first in terms of eligibility to bilateral development cooperation programmes; and secondly in terms of aid allocation.
In principle, high income, upper middle income and other large middle income countries, which are on a sustainable development path and/or have access to large domestic and external resources to finance their own development strategies, would graduate out of bilateral aid programmes. The world is developing: the OECD/DAC list of ODA recipients (revised in 2011) shows that more than 20 countries have graduated from low-income to middle-income or from lower-middle income to upper-middle income categories, based on GNI per capita. Obviously this is only one indicator among others and application of the differentiation principle must also take account of human development, aid dependency and other aspects, including the dynamics of the development process.
In particular, many middle income countries are playing a new and growing role at regional and/or global levels. The EU should therefore adapt the nature of our relations with them, including our cooperation priorities and instruments. This should not lead to a weakening of our relationships, but rather to a more modern set of instruments. The EU should engage in new partnerships with countries that graduate from bilateral aid programmes, notably on the basis of regional and thematic programmes under the new DCI, thematic financial instruments for EU external action and the new Partnership Instrument.
Delegated Acts
It is proposed that flexibility be reinforced by using delegated acts in accordance with Article 290 of the Treaty to make it possible to amend certain non-essential elements of the Regulation that affects the subsequent programming (e.g. annexes on eligible countries, areas for cooperation and indicative financial allocation per programme for 2014-2020).
This section provides a detailed commentary, explaining the main ideas of the new DCI Regulation under each of the proposed articles.
Subject matter and Scope (Article1 Title I)
The only proposed change in Article 1 is to include the Pan-African Programme in the scope of the Regulation.
The Regulation thus covers all the developing countries, territories and regions except: the countries eligible for the Pre-Accession Instrument.
Objectives and General Principles (Title II) – Articles 2 and 3
Article 2 (Objectives and eligibility criteria) sets out the primary and overarching objectives of the Regulation and the characteristics of the Union’s geographic and thematic development cooperation. The objectives are in line with Article 208 of the Treaty, the aforementioned Commission’s communications "A Budget For Europe 2020 and “Increasing the Impact of EU Development Policy: An Agenda for Change”.
The Article provides for support for all forms of cooperation with developing countries. It requires fulfilling the criteria for Official Development Assistance (ODA) established by the OECD/DAC, subject to possible exceptions for the thematic and Pan-African programmes. For these programmes a 10% flexibility for non-ODA activities is foreseen to cover for expenditure which; although not strictly speaking ODA-compliant, may be required for the adequate implementation of actions under these programmes.
Article 3 (General Principles) sets out the main principles governing the implementation of the Regulation, which are democracy, respect for human rights and fundamental freedoms and the rule of law; differentiated approach towards the partner countries, taking into account their needs, capacities, commitments and performance, and potential EU impact; key cross-cutting issues (such as gender equality and women empowerment); strengthened coherence of EU external action; improved coordination with the Member States and other bilateral or multilateral donors; and a partner country-led and region-led development process with mutual accountability, through an inclusive and participatory approach to development, using effective and innovative cooperation modalities in line with OECD/DAC best practices and thus improving the impact of aid and reducing overlap and duplication.
Geographic and Thematic Programmes (Title III) – Articles 4 to 9
Article 4 (Implementation of Union’s Assistance) describes that the type of programmes under which EU assistance will be delivered.
Article 5 (Geographic Programmes) covers the possible areas for cooperation and distinguishes between regional and bilateral cooperation. The principle of differentiation laid down in Article 3 will be applied. As a consequence, bilateral development assistance would be provided to those partner countries which need it the most, and lack the required financial capacities for their own development. Also, the differentiation principle takes into account the potential impact of the Union assistance in partner countries. Partner countries that shall benefit from bilateral development assistance are listed in Annex III. This Annex does not include countries 'graduated' according to the following criteria: partner countries representing more than 1% of the world's GDP and/or upper middle income countries according to the list of recipients of Official Development Aid (ODA) of the OECD/DAC are in principle excluded; however, additional criteria relating to their need and capacity is used, such as Human Development Index, the Economic Vulnerability Index and aid dependency, as well as economic growth and foreign direct investment. Also the reliability of the available data is taken into consideration.
All partner countries included in Annex I, however, would still benefit from regional and thematic programmes.
The Regulation does not restrict the areas of EU cooperation or intervention. Any listing of such areas is purely illustrative. Areas may be chosen because they are pertinent to achieving the aims laid down in the Treaty, to the EU's international obligations and commitments or to the specific objectives provided for in the agreements with partner countries and regions. They should nevertheless be proposed with reference to the EU's objective of concentrating assistance, with a view to ensuring that the EU's policy and the policies of the Member States complement each other as required under Article 208 of the Treaty and in the light of the Commission’s communications (in particular the Commission communication An Agenda for Change) and the appropriate Council and Parliament resolutions.
Article 6 (Thematic Programmes) covers the thematic programmes, whose general objectives and reach will be coherent with the overall purpose and scope of this Regulation, and the conditions under which the thematic programmes will be implemented.
Article 7 (Global Public Goods and Challenges) describes the Global Public Goods and Challenges thematic programme, which will target the main global goods and challenges in a flexible and cross cutting manner. The main fields of activities that will be pursued by this programme are further outlined in Annex V, and include, inter alia, environment and climate change, sustainable energy, human development (including health, education, gender equality, employment, skills, social protection and social inclusion as well as economic development-related aspects such as growth, jobs, trade and private sector engagement), food security and migration and asylum. This thematic programme will enable swift response in view of unforeseen events and global crises (e.g. the food price crisis, avian flu). It will reduce the fragmentation of the EU development cooperation and will allow for appropriate reinforcement and consistency of internal and external actions.
Article 8 (Civil Society Organisations and Local Authorities) describes the Civil Society Organisations (CSOs) and Local Authorities (LAs) thematic programme, which bases itself on the former Non-State Actors and Local Authorities programme. The focus of this programme has been sharpened with more attention given to capacity development of CSOs and LAs. The programme will promote an inclusive and empowered civil society and local authorities, increase awareness and mobilisation on development issues, and strengthen the capacity for policy dialogue on development.
Article 9 (Pan-African Programme) describes the Pan-African Programme that is being set up to implement the Joint Africa-EU Strategy (JAES). The programme will be complementary and coherent with other financial instruments, notably the ENI, the EDF and the thematic programmes under DCI. While ENI and EDF focus on interventions at the regional or national level in Africa, the Pan-African programme shall be used to provide specific support for the objectives of the JAES, supporting in particular activities of trans-regional, continental and trans-continental nature, as well as relevant JAES initiatives in the global arena. The Pan-African Programme will work in close cooperation/concertation with other instruments, and will concentrate on specific initiatives agreed in the framework of JAES and its Action Plans for which no alternative source of funding can be mobilised, thus ensuring the necessary coherence and synergy and preventing duplications and overlappings.
Programming and Allocation of Funds (Title IV) – Articles 10 to 14
Article 10 (General Framework for Programming and Allocating Funds) lays down the general framework for geographical and thematic programming, as well as for the allocation of the funds under this Regulation. In doing so, the allocation criteria identified in article 3 will be used. To ensure synergies and complementarity of the Union’s measures and those of the Member States, the Member States will be fully involved in the programming process. Consultation process will also include other donors and development actors as well as civil society and regional and local authorities.
Paragraph 4 foresees leaving a certain amount of funds unallocated in order to increase the flexibility of the instrument and the possibility of reacting to unforeseen events (new political priorities, natural or man-made disasters, etc.).
Article 11 (Programming documents for geographic programmes outlines the requirement and principles for preparing strategy papers for the countries and regions receiving an indicative allocation under this Regulation and, based on these, multiannual indicative programmes. The article also lists exceptions for when a strategy paper would not need to be prepared in order to simplify the programming process as well as to favour joint programming with Member States and alignment to the national programmes of development countries.
To ensure country ownership and principles of aid effectiveness, the strategy papers will be drafted in dialogue with the partner countries and regions, with relevant involvement of the civil society and regional and local authorities. Member States, as well as other donors, will be involved in line with Article 10.
The article also introduces the possibility of having a Joint Framework Document that would lay down a comprehensive Union strategy, of which development policy would be part of.
The prepared Multiannual Indicative Programmes (MIP) could be based on any programming documents identified in this article, except when the total allocation would not exceed 30 million EUR. MIPs can be adjusted through a mid term or ad hoc review, in view of achieved objectives as well as in light of newly identified needs, such as those resulting from crisis, post-crisis or fragility situations.
Article 12 (Programming for countries in crisis, post-crisis or fragility situation) emphasises the special needs and circumstances of countries in crisis, post-crisis or fragility situation, which ought to be considered at the time of drafting of all programming documents. Paragraph 2 of the Article 12 highlights the potential need for a swift response in such countries and foresees a special procedure (ex post comitology, Article 14(3)) for an ad hoc review of the strategy paper and of the multiannual indicative programme.
Article 13 (Programming documents for thematic programmes) describes the requirements and procedure for drafting the thematic programming documents. The Article also foresees a possibility of a mid term or ad hoc review, as necessary.
Article 14 (Approval of Strategy Papers and adoption of Multiannual Indicative Programmes) provides that multiannual programming documents (i.e. strategy papers, multiannual indicative programmes for partner countries and regions, and thematic strategy papers) will be adopted by the Commission after obtaining the opinion of a committee made up of representatives of the Member States and chaired by a Commission representative (the committee being established under Article 24 of this Regulation).
The Article also provides flexibility and simplification for cases in which there can be a derogation from the standard comitology procedures (e.g. no comitology used in case of technical adjustments or minor alterations of the overall allocations) and for cases where the comitology procedures could be applied after the adoption and implementation of Commission’s amendments (e.g. cases of crisis, post-crisis and fragility or in the cases of threats to democracy and human rights).
Final provision (Title V) – Articles 15 to 22
To make Union assistance more coherent and effective, and in particular to avoid programmes being split up among several different instruments, Article 15 (Participation by a third country not eligible under this Regulation) lays out the possibility to extend the eligibility of this Regulation to include all third countries, territories and regions, insofar as this contributes to the general objectives of the Regulation.
Article 16 (Suspension of assistance) lays down the procedure to be applied in the event of non-compliance with the principles set out in Title II and eventual suspension of assistance under this Regulation.
Articles 17 and 18 (Delegation of powers to the Commission) introduce the possibility of empowering the Commission to adopt delegated acts to amend or supplement the annexes I to VI(I) to this Regulation. Article 28 describes the characteristics and procedures of this delegation of power. The European Parliament and the Council will be notified simultaneously and instantly when the Commission adopts such a delegated act, and the act shall enter into force only if no objection has been expressed by the two institution within the period of 2 months (extendable by additional 2 months) from the notification.
Article 19 (Committee) establishes the relevant committee assisting the Commission in the implementation of this Regulation.
Article 20 (Financial provisions) sets the financial reference amount for the implementation of the Regulation.
Article 21 (European External Action Service) highlights that this Regulation is to be applied in accordance with the Council Decision establishing the organisation and functioning of the European External Action Service[7], in particular Article 9 thereof.
Article 22 (Entry into force) provides for the entry into force of the Regulation and its application from 1 January 2014, without setting an expiration date.