EUROPEAN COMMISSION Brussels,14.6.2018 SWD(2018) 337 final COMMISSION STAFF WORKING DOCUMENT



IMPACT ASSESSMENT

Accompanying the document Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL establishing the Neighbourhood, Development and International Cooperation Instrument



Proposal for a

COUNCIL DECISION



on the Association of the Overseas Countries and Territories with the European Union including relations between the European Union on the one hand, and the Greenland and the Kingdom of Denmark on the other ('Overseas Association Decision')



Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL



establishing the Instrument for Pre-Accession Assistance (IPA III)



Proposal for a

COUNCIL REGULATION



establishing a European Instrument for Nuclear Safety complementing the Neighbourhood, Development and International Instrument on the basis of the Euratom Treaty {COM(2018) 460 final}

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{COM(2018) 461 final}

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{COM(2018) 465 final}

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{COM(2018) 462 final}

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{SEC(2018) 310 final}



Table of contents 1.Introduction 1.1.Context 1.2.Scope 2.Summary of current programmes and lessons learned 2.1.Summary of EU external action programmes 2.2.Key findings from evaluations 2.3.Feedback from stakeholders 3.THE CHALLENGES AND OBJECTIVES 3.1.Main challenges and new political priorities to be addressed by the new programme 3.2.Objectives of the programmes of the next MFF 4.Programme structure and priorities 4.1.Proposed changes to the EU’s external action 4.2.Structure of the broad instrument 4.2.1. Geographic programmes 4.2.2. Thematic programmes 4.2.3. Rapid response component 4.3.Justification for the changes 4.4.Which instruments should be replaced by the broad instrument?

4.5.Prioritisation 5.Delivery mechanisms of the intended funding 5.1.Implementation modalities 5.2.Delivery methods 6.How will performance be monitored and evaluated? 6.1.Monitoring arrangements 6.2.Data provisions and sources 6.3.Evaluations Annex 1: Procedural information Annex 2: Stakeholder consultation Annex 3: Evaluation results Annex 4: Broad instrument - description of the programmes covered Common Implementing Regulation Annex 4a Additional information on Macro-Financial Assistance Annex 4b Additional information on the External Lending Mandate Annex 5: Additional Information on IPA Annex 6 Additional information on CFSP Annex 7 Additional information on the Overseas Association Decision (OAD) and the Greenland Decision Annex 8 Additional Information on Humanitarian Aid Annex 9 Additional Information on Union Civil Protection Mechanism Annex 10 Additional Information on Support to the Turkish Cypriot Community

Annex 11 Additional Information on Instrument for Nuclear Safety Cooperation Annex 12 Minutes of the Inter-service Steering Group Meeting, 23 March 2018 Glossary Term or acronym Meaning or definition ACP African Caribbean and Pacific APF African Peace Facility CBSD Capacity building in support of security and development CIR Common Implementing Regulation CFSP Common Foreign and Security Policy CSO Civil Society Organisations DAC Development Assistance Committee DCI Development Cooperation Instrument EDF European Development Fund EFI External Financing Instrument EFSI European Fund for Strategic Investments EIDHR European Instrument for Democracy and Human Rights EIB European Investment Bank ENI European Neighbourhood Instrument IcSP Instrument contributing to Stability and Peace INSC Instrument for Nuclear Safety Cooperation IPA Instrument for Pre-Accession MFA Macro Financial Assistance MFF Multi-annual Financial Framework MTR Mid-Term Review OECD Organisation for Economic Cooperation and Development OCTs Overseas Countries and Territories ODA Official Development Assistance PI Partnership Instrument SDG Sustainable Development Goals TEU Treaty on European Union TFEU Treaty on the Function of the European Union TF Trust Fund UMIC Upper Middle Income Countries USD United States Dollars



1.Introduction 1.1.Context As stated in the Reflection paper on the future of EU finances (June 2017), the world has become a more challenging place since the establishment of the EU’s current spending plan 2014-2020 (otherwise known as the Multiannual Financial Framework (MFF)). It is now characterised by an increasing fragility, brought about by numerous crises in the EU’s neighbourhood and beyond. Regional conflicts, terrorism, economic inequalities and growing migratory pressures, are all part of this new reality, compounded by population growth, climate change and environmental degradation. Distant crises have not only far-reaching regional consequences, but often impact on the lives of EU citizens. At the same time, the diversity of partners with which the EU cooperates has become much more apparent. More partners, including some with large populations, are graduating out of the Development Assistance Committee's official development assistance (ODA) eligibility criteria . Other countries have made progress on poverty reduction, only to see it eroded due to economic and environmental shocks. Others are conflict-prone least developed countries that remain locked in fragility and poverty. This evolving landscape is also defined in the Global Strategy “Shared vision, common action: a stronger Europe”. As stated in the Strategy, the new challenges and priorities faced by the EU’s external action highlights the need to examine the distribution of EU finances. Today, the EU’s external action budget equates to around 6% of the total EU budget (9% if the 11th European Development Fund is included). In line with the requests from the European Parliament’s resolution of 6 July 2016, this budget had to be reinforced in recent years to tackle humanitarian and other emergencies around Europe and beyond, increasing amounts of displaced people, and a number of complex crises that are set to continue. The Commission’s communication on a new, modern MFF for an EU that delivers efficiently on its priorities post 2020 (February 2018), reinforces the high level of ambition for external action and that the EU must be able to deliver on its international goals and the expectations of EU citizens. They have shown concern about poverty reduction, migration, terrorism and external security threats in general and prefer that these issues to be tackled at the European level. They expect Europe to play a leading role in the world and to manage the effects of globalisation. They want the EU to defend democracy, the rule of law, human rights, and sustainable economic development and to project stability and security, in particular in Europe’s immediate neighbourhood. The policy framework for external action provides the basis for the EU to respond to these challenges and expectations. This framework includes international commitments such as the 2030 Agenda for Sustainable Development, the Paris Agreement on Climate Change, and the Addis Ababa Action Agenda. Within the EU, the Treaty provisions on external action are now complemented by the EU Global Strategy, the new European Consensus on Development, the renewed EU-Africa Partnership, the reviewed European Neighbourhood policy and the European Consensus on Humanitarian Aid, amongst others. Looking ahead, the EU’s external action should build on what works well today while also anticipating the challenges of tomorrow. In line with the Rome declaration, the EU’s future external actions should help enable a Europe that is safe, secure, globally stronger, prosperous and sustainable.

On 2 May 2018, the European Commission adopted its proposals for a new MFF for 2021-2027. Under these proposals, the Neighbourhood, Development and International Cooperation Instrument (NDICI) will have a budget of EUR 89.5 billion over this period, of which EUR 300 million will be allocated to the European Nuclear Safety Instrument complementing the NDICI on the basis of the Euratom Treaty. 1.2.Scope This impact assessment covers the current heading 4 programmes in order to provide a comprehensive picture of EU external action. It reflects the decisions of the MFF proposals and focuses on the changes proposed to the heading in comparison with the current set-up. The main changes envisaged under the next MFF, in line with the Reflection paper on the future of EU finances (June 2017), and the Communication from the Commission to the European Parliament and to the Council (February 2018) are: 1.Merging several external instruments into a broad instrument, namely: DCI, EDF, EIDHR; ENI; IcSP; INSC, PI, and the CIR, as well as several budgetary guarantees currently under the European Fund for Sustainable Development (EFSD), the European Investment Bank’s (EIB) external lending mandate (ELM) and the Guarantee Fund for external action. The broad instrument should include: a prominent neighbourhood window, a strong focus on migration including in the cushion for emerging challenges and priorities and provisioning for Macro-Financial Assistance. 2.Integrating the current extra-budgetary EDF into the EU budget, including the EDF’s ACP investment facility. Table 1. List of current external action instruments 2014-2020 and those proposed for 2021-2027 Instrument 2014-2020 Instrument 2021-2027 External action Development Cooperation Instrument (DCI) Neighbourhood, Development and International Cooperation instrument, together with the European Instrument for Nuclear Safety Cooperation complementing the Neighbourhood, Development and International Cooperation Instrument on the basis of Euratom Treaty European Neighbourhood Instrument (ENI) Partnership Instrument for Cooperation with Third Countries (PI) European Instrument for Democracy and Human Rights (EIDHR) Instrument contributing to stability and Peace (IcSP) European Development Fund (EDF), including ACP investment facility and excluding African Peace Facility Instrument for Nuclear Safety Cooperation (INSC) European Fund for Sustainable Development (EFSD) External Lending Mandate (ELM) Guarantee Fund for external action Macro-Financial Assistance (MFA) Overseas Countries and Territories Cooperation with Greenland, Overseas Countries and Territories Cooperation with Greenland Humanitarian Aid Humanitarian Aid Common Foreign and Security Policy Common Foreign and Security Policy Support to Turkish Cypriot community Support to Turkish Cypriot community Pre-Accession Assistance Instrument for Pre-accession Assistance (IPA) Instrument for Pre-accession Assistance (IPA) Crisis Response Union Civil Protection Mechanism RescEU Investing in People and European Values European Solidarity Corps European Solidarity Corps EU Aid Volunteers initiative Instruments outside the MFF headings Emergency Aid Reserve Emergency Aid Reserve (internal and external) Off budget Common Foreign and Security Policy – Operations with Defence Implications (Athena Mechanism) European Peace Facility European Development Fund – African Peace Facility This impact assessment satisfies the requirements of the EU’s financial regulation in respect to preparing an ex-ante evaluation for the proposal of a new, broad external financing instrument and other external instruments under heading 4. 2.Summary of current programmes and lessons learned 2.1.Summary of EU external action programmes Today, heading 4 covers EU external action with the exception of actions financed by the 11th EDF and the Athena mechanism which are not funded from the EU budget but from direct contributions from EU countries. A description of the programmes under heading 4 can be found in the annexes. The EU has an external action budget for 2014-2020 of EUR 96.5 billion. The external action takes place in partner countries outside the EU but also protects citizens’ interests and safety. Through the instruments under heading 4, the EU plays an important role in the promotion of, amongst others: human rights, stabilisation, development, humanitarian aid, security, trade, as well as the fight against climate change and the protection of the environment (including through ocean governance).

Table 2. Funding baseline Heading 4 instruments and EDF EUR millions (2014-2020) – contributions 28 Member States EUR millions (2021-2027) – contributions 27 Member States EUR millions 2021-2027 (per year) – contributions 27 Member States Instrument for Pre-accession assistance (IPA II) 12.138,63 10.621 1.52 European Neighbourhood Instrument (ENI) 16.496,26 14.434 2.06 Development Cooperation Instrument (DCI) 19.947,59 17.454 2.49 Partnership Instrument (PI) 958,53 838,71 119,9 European Instrument for Democracy and Human Rights (EIDHR) 1.306,56 1.143 0.16 Instrument contributing to Stability and Peace (IcSP) 2.365,85 2.070 0.30 Instrument for Nuclear Safety Cooperation (INSC) 325,321 284,656 40.67 Greenland Decision (GD) 217,8 190,575 27,23 Common Foreign and Security Policy (CFSP) 2.121,24 1.856 0.27 Macro-financial Assistance (MFA) 294,843 257,988 36,86 Guarantee Fund for External Actions 1.627,67 1.424 0.20 Humanitarian aid 7.553,60 6.609 0.94 Union Civil Protection Mechanism 122,827 107,474 15,35 EU Aid Volunteers initiative (EUAV) 126,02 110,268 15,75 European Fund for Sustainable Development (EFSD) 350 306,25 43,75 11th European Development Fund, including the Overseas Countries and Territories Decision 30.506,00 26.02 3.72 Common Implementing Regulation (not a financing instrument but a Regulation for the implementation of some of the above instruments) N/A N/A N/A The baseline shows the amounts designated to each instrument for the 2014-2020 period. Based on these amounts, the table also highlights how much would be allocated to each instrument if nothing were to change except for the United Kingdom’s withdrawal from the EU. The main consequences of the United Kingdom’s withdrawal on the EU’s external action would mean a 12.5% reduction for all instruments except the European Development Fund to which the United Kingdom contributes 14%. The EU is able to deploy a wide array of external instruments in support of conflict prevention and peace building, and is one of the biggest donors in this area. It is committed to assisting the most vulnerable people caught in natural or man-made disasters. The EU actively promotes and defends human rights when engaging in relations with non-EU countries in its external actions. To the east and south of the EU, in accordance with Article 8 of the Treaty on European Union (TEU), the EU has developed a specific relationship with neighbouring countries, with the aim of establishing an area of prosperity and good neighbourliness, founded on EU values and characterised by close and peaceful relations. The EU aims to build effective partnerships with its neighbours in support of a more stable EU Neighbourhood, promoting democracy, good governance and human rights while opening trade and cooperating in policy areas, including on migration and visa issues. Through its enlargement policy, the EU also largely contributes to meeting the broader European objectives of ensuring stability, security and prosperity in the immediate neighbourhood of the EU. Through this policy, the EU supports beneficiaries in adopting and implementing the political, institutional, legal, administrative, social and economic reforms required to comply with EU values and to progressively align to EU rules, standards, policies and practices with a view to EU membership. The EU’s commitment to the enlargement policy was also confirmed by the recent Commission Communication putting forward a credible enlargement perspective for and enhanced EU engagement with the Western Balkans. Through its development cooperation policy, the EU contributes to reducing global poverty, ensuring sustainable economic, social and environmental development, and the promotion of democracy, the rule of law, good governance and the respect of human rights. Together, the EU and its Member States constitute the world’s largest development aid donor, providing more than 50% of assistance worldwide. EU institutions alone provide around 10% of total ODA. The EU and its Member States are also the world’s largest donor of humanitarian aid, assisting people affected by a wide range of crises including protracted conflict situations and forgotten crises. It provides emergency, life-saving, needs-based humanitarian assistance to people, particularly the most vulnerable, hit by man-made or natural disasters. The EU also coordinates European civil protection assistance during worldwide disasters.

The EU promotes its further interests on the world scene. It builds multilateral relationships to promote the development of collective responses to common challenges. It promotes access to partner country markets, boosting trade, investment and business opportunities. It also supports the external projection of its internal policies and works on enhancing widespread understanding and visibility of the EU especially by means of public diplomacy. 2.2.Key findings from evaluations Relevance: the mid-term review report (December 2017) of ten of the external financing instruments, the ex-post evaluation reports on MFA and the mid-term review on the EIB external lending mandate all concluded that the external action instruments were overall fit for purpose and positive trends were emerging in relation to the achievement of objectives. The mid-term review report has shown that whilst the enabling nature of the current instruments means they cover most needs and goals of EU external action, in the future they would benefit from better reflecting a number of developments such as: the new policy framework including the universality of the 2030 Agenda, the migration/refugee crisis, and the external projection of internal policies. Also, more consideration needs to be given to the links between development and security and the overall level of ambition for peace and security in external action. The principle of graduation in certain instruments (i.e. the DCI) had intentionally left a gap in the EU’s ability to cooperate with upper middle income countries through bilateral cooperation. As situations in those countries may call for such support (e.g. the persistent presence of poverty or post-crisis situations), it was found that the EU should pursue cooperation with all countries including more advanced developing countries and strategic partners, in line with the universal coverage of the 2030 Agenda. The importance of promoting fundamental values and human rights is at the core of the instruments. However, findings point to the difficulties to promote and take this agenda forward in some countries, and to the shrinking space for civil society organisations in many countries as well. This makes it challenging to work on these issues and highlights a tension between promoting this agenda versus partners’ priority interests. In the current context of multiple crises and conflicts, the EU needs to be able to react swiftly to changing events. However, for certain instruments, responsiveness was hindered by a lack of financial flexibility. When new priorities emerged, problems were encountered when trying to reallocate funds within the instruments under the budget as large quantities had been tied up through long-term programmes. As stated in the mid-term review report, flexibility needs to be built-up and the balance between long-term commitments and short-term actions should be reassessed. Coherence: There are many types of coherence needed across the external financing instruments including: coherence between one instrument’s component parts, coherence between different instruments and coherence with other donors. Overall, the mid-term review report notes mixed findings on coherence from past experience. In terms of coherence within the instruments, findings were satisfactory because efforts had been made to revise guidelines. There was some level of coherence between the instruments but the multiplicity of programmes sometimes led to overlapping actions and complex cooperation with more advanced developing countries. In addition, the separation between geographic and thematic approaches sometimes resulted in inconsistent responses at country level. Feedback from EU delegations showed they had difficulties to manage and exploit complementarities and create synergies between the instruments. Overall, it was considered that the EU was missing opportunities for coordinated strategies for a given country/region. In terms of coherence with Member States, findings note the potential for joint programming to be further strengthened. However, this would require more commitment in certain cases from partner country governments and Member States.

Box 1. Examples of overlapping programmes The EFSD and ELM can both provide EU budget guarantees for similar objectives in the same regions. Also the geographic and thematic instruments/programmes such as the EDF and the thematic programmes under the DCI can cover the same areas in certain countries. Added value: the mid-term report shows that the EU provides added value through the external financing instruments compared with the actions of EU countries in a number of ways including: (a)The EU's competence or expertise in a given field; (b)The EU's position as a supranational entity, and the relative neutrality, political influence and leverage this potentially entails; (c)The geographical spread of some instruments including the presence in fragile contexts where there are fewer development partners and less funds available, (d)The scope of the instruments and modalities (such as budget support, grants, indirect management, blending facilities and rapid decision-making for crisis response); and (e)The ability of the EU to lead on joint actions (i.e. joint programming and joint implementation), especially with Member States. Effectiveness: the mid-term review report points to positive trends emerging in relation to achieving results. However, difficulties in measuring achievements were noted. For example: there was often limited information on monitoring systems mentioned in the instruments; there was a lack data (including on baselines) to measure if the instruments were on track to meet some of their (particularly high level) objectives; as well as an understanding that many external factors (e.g. partner country policies and other donors) influence the achievement of the objectives. Box 2. Examples of results supported with EU cooperation: -Public administration reform in Georgia -90% reduction in poverty in Vietnam over the last decade -Stabilisation of Colombia after the peace agreement In terms of mainstreaming EU priorities, significant progress was noted in the areas of climate change and environment. Mainstreaming human rights including gender equality and women’s empowerment was considered as work-in-progress, with partner governments sometimes showing a lack of interest or resistance to these areas. Efficiency: while overall organisational performance was found to be efficient, some actors considered that the implementation of some instruments was administratively burdensome. At times the Commission was perceived to be more focused on process rather than on policy objectives and results. Lessons learned from other donors: beyond these recent findings, there was an OECD DAC peer review of the EU’s development cooperation in 2012. The review came up with a set of recommendations with regard to the architecture, rules and procedures of the EU's external financial instruments. For example, the OECD called on the EU to further simplify and modernise its cooperation, by reducing the number of budget lines, aligning rules of DCI and EDF, streamlining approval procedures and building more coherence between regional and thematic programmes. The EU was asked to become more effective, timely and flexible both at programme level and at aggregate level of the whole set of instrument architecture. The latter was particularly asked for in situations of fragility and crisis, in which the OECD saw significant room for improvement.

Summary: The lessons show that the EU’s external programmes are largely relevant and functioning well in terms of the content it covers, instead the main issues relate to how the instruments are structured. A fragmented approach has led to a complex landscape of instruments with limited flexibility to respond to emerging challenges. Further information from studies, evaluations and consultation activities including on Humanitarian Aid, the External Lending Mandate and Macro-Financial Assistance can be found in the annexes. 2.3.Feedback from stakeholders When drafting the evaluation documents that fed into the mid-term review report, three types of consultations with stakeholders took place. Evaluators carried out around one thousand structured or semi-structured interviews with EU officials and representatives from EU institutions, Member States and partner countries. Several technical workshops to present and discuss the draft evaluations were held with participants from the European Parliament, Council working groups, Member States committees, and civil society organisations and local authorities. An open public consultation was held in early 2017. It aimed at gathering feedback from stakeholders on the findings emerging from the evaluations of the instruments and on the future external action instruments after 2020. The main messages emerging from the consulted stakeholders are summarised below. Further details are available in Annex 2. Flexibility: stakeholders agreed that the new financing instruments should be more flexible to respond to unforeseeable challenges and crises. In particular, they underlined the need to facilitate the shifting of funds across regions and among aid modalities. However, it was also underlined that increasing flexibility should not come at the cost of weakened predictability, country ownership and less focus on achieving long-term development objectives. To ensure flexibility and predictability some respondents argued in favour of having sufficient reserves. Coherence: stakeholders considered it necessary to ensure greater coherence between the internal and external policies of the EU, as well as between the external instruments themselves. Some emphasized the need to strengthen complementarity and synergy between geographical and thematic instruments. Others argued that the Sustainable Development Goals (SDGs) provides the most appropriate basis for increasing coherence between internal and external policies. Most recommended that the EU take a leading role in improving complementarity between various stakeholders both inside and outside the EU. On the structuring of future instruments, stakeholders agreed that the combination of geographic and thematic instruments delivers positive results. They emphasized that the value of geographically structured instruments lies in their capacity to address the specific needs of partner countries in a tailored manner. This is crucial given the diversity of the challenges and needs across these countries. While being in favour of having both geographic and thematic programmes, stakeholders also drew attention to the need for more complementarity. Some respondents highlighted the risk of overlap whereby the same policy objectives are funded by multiple instruments. Respondents also called for a clear delineation between instruments, while underlining the need to ensure that geographic and thematic programmes exploit cross-sectoral synergies and linkages between themselves. Simplification: the EU was strongly encouraged to further simplify the overall architecture of the instruments. The EU should also continue its efforts to simplify cumbersome administrative and financial procedures. It was emphasised by civil society and local authorities that procedures and rules currently in place have important implications for the ability of civil society and local authorities to become more involved in development cooperation. Leverage: there was an agreement amongst stakeholders that innovative financing instruments can play an important role in leveraging public and private financing for EU external assistance. Positive findings on the leverage effects and financial additionality of such instruments emerging from the recent evaluation on blending are considered encouraging. However, civil society respondents raised concerns about private sector priorities overriding poverty reduction objectives in partner countries.

3.THE CHALLENGES AND OBJECTIVES 3.1.Main challenges and new political priorities to be addressed by the new programme As set out under the context (section 1.1), global circumstances have evolved since the start of the current MFF in 2014. Security: the Global Strategy has spelled out fundamental external challenges that are likely to persist over the course of the coming decade and may dominate external action under the next MFF. These include terrorism and hybrid threats; economic volatility and extreme poverty in least developed countries and fragile states; and energy security. In many countries, decisive support in security and defence is essential for effective development, while at the same time development is crucial for sustained peace. Stability/resilience: over the next decade, Europe will continue to be surrounded by unstable regions in the neighbourhood and beyond. The move towards more resilient states and societies is both a major objective and a challenge. Migration: stability issues go hand in hand with continuous migratory pressures and challenges of forced displacement. For the coming years, Europe's relative economic affluence will be a strong pull factor for migrants, particularly from sub-Saharan Africa, a region experiencing constant growth in forcibly displaced people, triggered by various conflicts and protracted crises. The depletion of natural resources aggravated by climate change is becoming an additional factor of forced displacement and therefore migratory pressure. Strategic partners: New players such as China have enhanced their external outreach, and more countries have moved to upper middle-income status, with different cooperation needs and expectations. Consequently, there is a risk that unless new cooperation activities with such countries are put in place, the EU could lose part of its leverage to promote international values globally, while opportunities for building alliances are increasing, supported by other forms of cooperation. Human rights: there is a growing number of countries that do not share the universal values of open and democratic societies. Shrinking spaces for civil society and challenges to the universal acceptance of human rights may continue to increase. Environment and climate change: The impact of environmental degradation and climate change has already exposed large parts of the world’s population to natural disasters. In the future, climate change is expected to increase the frequency and magnitude of such natural disasters around the world. Addressing this challenge will require cooperation with major economies including those not currently eligible for EU bilateral cooperation. Information and communication technologies (ICT): ICTs are powerful enablers of inclusive growth and sustainable development. However, a lack of connectivity remains a major obstacle to development in many developing countries, notably in rural and remote areas, especially in Africa. Moreover, limited competition can often make digital technologies inaccessible and unaffordable for a large part of the population.

Simplification: with more than 15 instruments, many of which have the same legal base, heading 4 could be regarded as overly complex compared to other headings. For example, heading 2 currently has six times the level of funds but less than half the number of instruments. The number of instruments has created obstacles in the use of funds across regions and themes due to each instrument’s different scope and rules. From the perspective of partner countries and implementing partners, the complicated legal framework has created a multiplication of procedures that need to be followed. Coherence: the previously mentioned evaluations have identified a number of challenges related to coherence and synergies, such as weaknesses in assuring coherence between geographic programmes and global (thematic) programmes. In the past, the EU has tried to use ad hoc solutions to overcome fragmented approaches. For example, a pan-African programme was created in 2014 to respond to continent-wide issues in Africa but in reality, it has added another layer of programmes for the African region on top of the EDF and the DCI thematic programmes. The creation of further ad hoc tools and instruments should be avoided in the future in favour of more integrated approaches. Several of the challenges mentioned above, including on migration and climate change, straddle the line between the EU’s internal and external policies. Looking ahead strong coordination between internal and external expenditures will be needed to ensure consistency. Flexibility, resources and leverage: the current volume of financing for external action has been stretched to the limits with all margins of flexibility exhausted. This is not only due to recently emerging challenges such as migration and security but also because of Member States' and citizens’ expectations that the EU can do more in external relations. Such pressures and demands on the external budget illustrate the need to build in more flexibility into the budget so that the EU can mobilise its resources more swiftly in the face of evolving contexts. To deliver on the aid volumes needed to meet the SDGs by 2030 will be a significant challenge. Broad estimates of current flows of development finance and the estimated annual costs of meeting the goals point to a persistent gap in resources. The United Nations conference on trade and development estimates that meeting the SDGs will cost approximately USD 333 billion to USD 466 per year. At the same time, the most recent Organisation for Economic Cooperation and Development report shows that in 2016 total ODA reached a peak of USD 142.6 billion, less than half of the estimated needs . This underlines the importance of ensuring increased resource mobilisation to meet development needs. In line with the European Consensus on development and the Reflection paper on the future of EU finances, the EU will also need to employ innovative financing mechanisms to leverage additional public and private funds. 3.2.Objectives of the programmes of the next MFF In accordance with Articles 8 and 21 of the Treaty on European Union, the specific objectives of the broad instrument should cover those mentioned below: (a) To support and foster dialogue and cooperation with third countries and regions in the Neighbourhood, in Sub-Saharan Africa, in Asia and the Pacific, and in Americas and the Caribbean; (b) At global level, to consolidate and support democracy, rule of law and human rights, support civil society organisations, further stability and peace and address other global challenges including migration and mobility; (c) To respond rapidly to: situations of crisis, instability and conflict; resilience challenges and linking of humanitarian aid and development action; and foreign policy needs and priorities. In order to measure progress towards achieving these objectives, while at the same time responding to the lessons learned about the lack of monitoring information (e.g. indicators) at instrument level, indicators would be set, see section 6 for examples.

4.Programme structure and priorities The following section sets out the proposal for the future external action heading focusing in particular on the changes in relation to the current set-up. The guiding principle is to preserve what works well while improving what hinders the EU’s effectiveness to deliver on its policies and priorities. 4.1.Proposed changes to the EU’s external action Building on the lessons learned and stakeholder feedback that show that the instruments are largely relevant and delivering results, it is proposed that the content covered by the current instruments should largely continue. Instead, modifications and improvements should focus on how the instruments operate. In particular the main modification proposed is to streamline several instruments into one broad instrument. Included in the broad instrument would also be the EDF, which is currently outside the EU budget. It is therefore also proposed to integrate the EDF into the EU budget and by doing so, extend its flexibility features, to the extent possible, to all countries, including those currently covered by the DCI and the ENI. The flexibility features include its 20% reserve and multi-annuality in the form of carrying over unused funds and recommitments of uncommitted funds.



Chart 1. Current situation of heading 4 Chart 2. Proposed external action heading 4.2.Structure of the broad instrument The broad instrument should regroup the current actions of certain instruments under three components: geographic, thematic and rapid response actions. Within the first two components, defined regions and thematic priorities should be set-out, including dedicated amounts. Prioritisation within the third component should be made in accordance with the need to respond rapidly to emerging crises, build resilience and in line with foreign policy objectives.

Climate change, environmental protection and gender equality would be mainstreamed throughout.. Beyond the three components the instrument should provide a substantial cushion for emerging challenges and priorities. This should allow for an appropriate response of the Union in the event of unforeseen circumstances; for addressing new needs or emerging challenges, such as those linked to crisis and post-crisis situations, migratory pressure at the EU’s or its neighbours’ borders; or for promoting new international initiatives or priorities. The broad instrument should also provide for budgetary guarantees for lending operations to promote investment and macro-economic stability in partner countries. This will provide the legal basis for the guarantees required for financial operations under the current EFSD, ELM and MFA. The use of financial instruments and budgetary guarantees as an aid modality should be promoted by creating a one-stop shop/platform for financial instruments/blending and budgetary guarantee operations. The overall management should remain with the Commission. While recognising that the European Investment Bank is a key partner of the Commission and a natural actor for implementing these types of operation, the decisions to use lending operations through the European Investment Bank (particularly sovereign lending), which are currently carried our through the ELM, should be taken during the programming process and reflected in the programming documents. As regards Macro-Financial Assistance, although the funds should be provisioned from the geographic envelopes of the broad instrument, the current decision making applied today (full legislative procedure for every case of assistance to a third country) could continue to be used. The EU and its Member States have collectively committed to spend 0.7% of their GNI as ODA. The broad instrument, as well as all other external action instruments should contribute to this goal. The internal governance systems used today to decide how funding will be allocated to projects should continue and where possible be enhanced, notably when it comes to upstream work with all key Commission services and the European External Action Service. In the case of programming documents, Member States should continue to exercise control through committee procedures. The funds mobilised from the cushion for emerging challenges should also follow the standard Commission decision-making procedures. 4.2.1.Geographic programmes The broad instrument should mainly be implemented through geographic programmes. The geographic programmes would comprise country or multi-country actions. The potential beneficiaries of the programmes are all third countries (i.e. non EU countries). The only exception would be for candidate and potential candidate countries to avoid overlaps with the successor to IPA. This programme would succeed the current geographic programmes under the DCI, EDF, ENI and part of the INSC and PI. In line with political orientations from the Commission, it includes a prominent Neighbourhood window with a clear ring-fenced allocation. Furthermore, it will allow for conducting current thematic activities that are not global and pursuing EU economic and policy interests (including non-ODA classified actions) in all partner countries – including on the external dimension of internal policies. This would ensure more comprehensive programmes at country or regional level. The beneficiaries would be grouped into the following regions each with ear-marked amounts: -Neighbourhood -Sub-Saharan Africa -Asia and the Pacific

-Americas and the Caribbean 4.2.2.Thematic programmes A number of thematic actions currently financed by thematic programmes and taking place at country level will instead be covered under the geographic programmes. The remaining thematic actions should be complementary to the geographic actions and should address global and trans-regional initiatives supporting internationally agreed goals such as the Sustainable Development Goals or global public goods and challenges. The thematic actions would only be undertaken where there is no geographic programme (to ensure no overlaps), where there is no agreement on the action with the partner country concerned, or where the action cannot be adequately addressed by geographic programmes. The thematic component would merge the current thematic programmes under the DCI and the EIDHR (including election observation missions) and part of the PI. The potential beneficiaries would be all third countries and overseas countries and territories to ensure a global approach to common challenges. The thematic programmes will also cover actions that are political flagship initiatives. It should be linked to the universal agenda for the pursuit of the SDGs and the EU policy frameworks to implement them. In particular, actions under the thematic component should address actions linked to the pursuit of the Sustainable Development Goals at global level, in the following areas: (i) Human rights, democracy and Civil Society Organisations (including actions formerly covered by EIDHR and the CSOs part of the CSOs/Local Authorities programme). (ii) Stability and peace (currently covered by article 4 and 5 of the IcSP). (iii) Support to the preservation of global public goods (these programmes are currently covered by the global public goods and challenges programme and the Local Authorities part of the CSOs/LAs programme of the DCI, and some actions under the PI). 4.2.3. Rapid response component Rapid response actions should be complementary to geographic and thematic programmes. They should be designed and implemented to enable their continuity under those programmes, wherever relevant. This component would be dedicated to crises of a political, security or economic nature. It would provide rapid response capacity for crisis management and conflict prevention, resilience building, including linking relief, rehabilitation and development, and short-term foreign policy action. The potential beneficiaries of the component are all third countries and overseas countries and territories. This component would need to retain, and build on, the current modalities for fast, flexible and responsive actions, with funds that are immediately available. The component would include actions which: (a) contribute to stability and conflict prevention in situations of urgency, emerging crisis, crisis and post-crisis; b) contribute to strengthening resilience of states, societies, communities and individuals and to link humanitarian and development action;

c) address foreign policy needs and priorities. 4.3.Justification for the changes Reduced administrative burden As noted by the Commission and supported by feedback from partners, the current architecture of the external financing instruments is too complex. Streamlining a number of instruments into a broad instrument would provide an opportunity to rationalise their management and oversight systems therefore reducing the administrative burden for EU institutions and Member States. Having a simplified oversight system would allow the relevant institutions to have a better, more comprehensive view of EU external action. Instead of focusing on multiple programming processes, debates would be more focused on political objectives and engagement with external partners. Simplification does not mean there would be less scrutiny. The inter-institutional balance would be fully preserved. Rather, the budgetary and scrutiny powers of the European Parliament would be extended by the incorporation of the EDF into the budget. Fewer gaps and overlaps between instruments With lines between foreign and development policy, and between internal and external policies blurring, the challenges the EU is facing often cannot be contained within geographic and thematic boundaries. To respond to these challenges and support the implementation of universal goals such as the 2030 Agenda, a broad instrument would provide a more geographically and thematically comprehensive approach, facilitating the implementation of different policies in a trans-regional and multi-sectoral way. By merging several instruments, the EU would facilitate coherent responses, breaking down thematic and geographic silos and better enabling the exploitation of synergies. By ensuring thematic programmes will in principle only cover those actions that cannot be financed through the geographic component, or which need specific approaches (e.g. where approval by the counterpart cannot take place because of their global nature), the broad instrument would ensure a more systematic, integrated approach to its programming/planning. Overlaps between programmes would be eliminated, in particular where they might occur in relation to more advanced developing countries, and between the geographic and thematic programmes (i.e. the EDF geographic programmes and the DCI thematic programmes). Policy lines and operational needs would drive the programming rather than specific instrument (thematic/geographic)-based needs. At the same time, the broad instrument would also reduce the complex framework of interfaces between the EU’s external and internal policies. For example, on migration, while numerous instruments and ad hoc tools, such the creation of the EU emergency trust funds for Africa have helped the EU support this issue, the broad instrument would go further by ensuring full geographic coverage of support. The EU would be able to engage with partners in a more coherent way. The 2030 Agenda is based on equal partnerships that transform our way of cooperation and applies to all countries. A broad instrument would allow the EU to remove artificial boundaries to ensure a right policy mix for different countries and regions. Along these lines, the issue raised in section 2.2. on differentiation, including graduation, should be reviewed so that cooperation with upper middle income countries can be pursued through bilateral cooperation. Further, cooperation with industrialised countries should also be covered under the instrument, to ensure a coherent approach, notably through regional cooperation and rapid response activities for foreign policy. These funds should be limited to ensure no inverse impact on ODA figures. Finally, cooperation and joint programming with Member States would be enhanced since coordination would only be needed with fewer EU instruments. It is worth noting that by creating the broad instrument the EU will be mirroring more closely the set-up of the Member States who do not regulate their external spending according to different geographic and thematic instruments.

More reactive to evolving needs and priorities The broad instrument will provide an opportunity to enhance the responsiveness and flexibility of EU actions. By reserving a substantial amount of un-allocated funds, the emerging challenges and priorities cushion, building on the successful experience of the EDF would provide more flexibility to shift funds more easily. These funds would be used according to needs for unforeseen events, new initiatives/priorities or to respond to migratory pressures at the EU’s or its neighbours’ borders. Such a precaution would allow for top-ups to the different regions/themes covered under the broad instrument, helping to ease the pressures on the external action budget as unforeseen events and new priorities emerge. The balance between flexibility and predictability should be ensured as the cushion for emerging challenges will exist alongside dedicated amounts per region. In today’s fast-changing world, the transfer of budgetary flexibilities to the broad instrument would allow the EU to better cope with unpredictable events. Under the broad instrument, EDF practices such as making sure non-committed funds and funds that have not been spent for a project/programme would still be available in subsequent years, would make the instrument more flexible. More funds will become available for new projects. Furthermore, based on current experience there is a sound justification for having a dedicated flexible component to cover a full range of security, humanitarian-development nexus, and political, economic and other issues where a rapid EU response is necessary. While lessons learned have shown the EU needs to be more agile in mobilising its funds, feedback from stakeholders has also shown the importance of balancing flexibility with predictable levels of funding. Such predictability is currently provided through certain partner-driven, long-term instruments (i.e. the DCI, EDF and ENI), which together account for approximately 70% of heading 4. The broad instrument should continue to provide a similar proportion of predictable funding through its geographic programmes. More focus on performance Concerning performance, in parallel to the broad instrument, a new IT platform will be created that will facilitate the encoding of results data at project level. This would help increase the availability of results data for monitoring, reporting and evaluation purposes. For further information on performance, see section 6. 4.4.Which instruments should be replaced by the broad instrument? With more than 15 external relations instruments currently under heading 4, not all can justifiably be replaced by the broad instrument. What follows is an analysis (advantages and disadvantages) of the instruments that are proposed to be replaced, mainly due to their common legal bases or similar objectives. European Development Fund Advantages of integrating the EDF into the broad instrument and therefore the EU budget: As the 11th EDF is the largest external instrument with a volume of EUR 30.506 billion, a broad instrument will be more meaningful if such a significant programme can be part of it. The possibilities of harvesting its previously mentioned flexibility features are much higher by bringing EDF on-budget into the broad instrument. The level of democratic scrutiny by the European Parliament will be enhanced with the EDF on-budget. Unlike the current arrangements, the same Parliamentary procedures would apply across all development cooperation. This would help strengthen the public legitimacy and political visibility of the EU's external assistance as a whole.

At the same time, the criticism that some EDF funding is being used to finance military expenditures as part of a “development instrument” will cease to be an issue. Expenditures related to military actions, which cannot be financed by the EU budget due to Treaty limitations, could be taken up under a new off-budget security fund (see further information on the security fund later in this section). EU external action would become more coherent. Artificial interfaces across instruments, in particular with regard to geographical, partner-oriented programming would be reduced. There would be increased transparency in the EU budget, covering all external action expenditure (except military related expenditure), therefore providing a better global picture. The merge into a broad instrument would also provide an opportunity to review the EDF's specific implementation procedures (e.g. the obligation to have a national authorising officer). There would also be no need for a separate EDF key - the contributions from Member States would be those made (in percentage terms) to the EU budget, as for any other programme. It should be noted that several efforts have already been made to align the two percentages so that now there is little difference between them. Disadvantages of integrating into the broad instrument: The political and financial implications of bringing the EDF on-budget include that the EU would lose its visible and symbolic financial basis for cooperation with African, Caribbean and Pacific countries. Implications for ACP partners include that they may see their relations with the EU as being downgraded as certain procedures would change. There could also be a risk that the broad instrument would receive less funding than the sum of the EDF and the other external action instruments combined. The EDF’s flexibility features may be lost if it is integrated into the EU budget and military related expenditure currently funded by the EDF’s African Peace Facility (AFP) could stop being funded for legal reasons. Conclusion: The advantages of integrating the EDF in the EU budget outweigh the disadvantages as long as partners can be reassured on the implications and certain preconditions can be met. The additionality of the EDF full amount for external relations must be ensured. Existing EDF flexibilities (e.g. large reserve and multi-annuality) should be imported as far as is possible within the annuality of the EU budget. Activities currently financed by the APF should continue through an off-budget mechanism. Development Cooperation Instrument Advantages of integrating into the broad instrument: There would be a reduction in the artificial interfaces between the DCI and the other external action instruments – in particular regarding the instruments that provide geographical, partner-oriented programming. For example, the Latin America and Caribbean region would be covered by one instrument instead of both the current combination of DCI and EDF. Global issues such as climate change would be better addressed in a coherent manner across all partner countries. Currently they are split between DCI geographic and thematic programmes, the EDF and the PI. Links between development, security, and migration, which are currently split across several instruments can be better ensured. Disadvantages of integrating into the broad instrument: There could be the perception of diluting the importance of development policy within a broader external action framework. Conclusion: The advantages of integrating the DCI outweigh the disadvantages as long as the DACability objective for a proportion of the fund and communication efforts are made to explain that placing the DCI in a broad instrument does not represent a “down-grading” in EU priorities. European Neighbourhood Instrument Advantages of integrating into the broad instrument: During the current MFF, the ENI has been one of the most stretched instruments in terms of funding due to multiple crises in its regions. A major advantage of being part of the broad instrument would be that the Neighbourhood would have access to the emerging challenges and priorities cushion in addition to ring fenced amounts. 98% of ENI actions are reported as ODA. As the pressure to continue actions that can be reported as ODA increases, merging within a broad instrument may provide scope for more flexibility in defining the actions to be financed. It would allow for easier cooperation between ENI, African and Asian neighbouring countries on issues such as migration and energy. Disadvantages of integrating into the broad instrument: A dedicated instrument for the Neighbourhood gives this policy a visible financial basis. Partner countries may be hesitant about the cooperation being merged into a broad instrument. This may create a negative political signal that will need to be addressed through appropriate communication.

Conclusion: The advantages of integrating the ENI outweigh the disadvantages as long as a prominent ring-fenced window for the Neighbourhood is kept and communication efforts are made to explain that (i) a merge does not represent a “down-grading” in EU priorities and (ii) the existence of distinct policies and strategies will be maintained ensuring political visibility. The same should apply to specific approaches and tools such as the more for more mechanism. Instrument contributing to Stability and Peace Advantages of integrating into the broad instrument: Including short-term crisis response, conflict prevention and CBSD actions under the IcSP within the broad instrument would reinforce further coherence and complementarity with other instruments, providing an enhanced coordination of activities at country level. Likewise, the coordination of the medium and long-term activities under the IcSP with the long-term/programmed activities from other instruments could be further reinforced. Links between security and development would also be enhanced. Disadvantages of integrating into the broad instrument: There is a risk of a loss of flexibility and distinctive modalities for crisis response and conflict prevention, reducing the EU's role and reputation in helping partners in crises and conflicts. Conclusion: As the disadvantages can be mitigated by ensuring that the IcSP’s specific focus and the existing flexibilities are maintained within a broad instrument, it is proposed to merge the instrument into the broad instrument. European Instrument for Democracy and Human Rights Advantages of integrating into the broad instrument: While it has limited funds compared to other external financing instruments, the EIDHR is at the core of the EU's values. As democracy and human rights are being put under greater stress, additional funding may be needed. As part of the broad instrument, democracy and human rights actions potentially have greater access to un-allocated funds. Boundaries with other instruments would be reduced and more integrated programming approaches and coherence with country actions would be possible. Disadvantages of integrating into the broad instrument: It could be perceived by some actors that putting the EIDHR in the broad instrument reduces the visibility of its actions. Conclusion: Overall, by ensuring financial visibility of democracy and human rights through ring-fencing inside the thematic programme together with the fast disbursing mechanism, the advantages of integrating the EIDHR inside the broad instrument outweigh the disadvantages. Partnership Instrument Advantages of integrating into the broad instrument: The PI’s integration into a broad instrument would help confirm that the promotion of political and policy issues in the EU and mutual interest, including external projection of EU internal policies, with no ODA requirements, is recognised as an integral part of a broad EU external action. Complementarity with other instruments would be enhanced, strengthening integrated approaches and coherence. For example, regional initiatives could be tackled in a more consistent and harmonised way regardless of the different levels of development amongst the countries.

Disadvantages of integrating into the broad instrument: The integration into a broad instrument might weaken the flexible and fast reaction approaches of the PI which allow it to respond to emerging needs and priorities of the EU, or to seize political windows of opportunity which depend on the political cycle in partner countries or on the dynamics of bilateral relations or inter-regional/ multilateral dialogues. Conclusion: Overall, the integration of the PI’s activities into a broad instrument presents a potential for coherence and synergies with other types of external action. The potential risks mentioned above can be mitigated by appropriate measures such as preserving PI approaches and visibility, in order for the advantages of integrating the PI inside the broad instrument to outweigh the disadvantages. Macro Financial Assistance Advantages of being into the broad instrument: The inclusion of MFA under the budgetary guarantee component of the broad instrument would ensure that the required provisioning arrangements for the guarantee of MFA lending operations would be in line with the provisions under the new financial regulation. Furthermore, it would allow for a more efficient management of guarantee resources pooled in the Common Provisioning Fund. Disadvantages of being into the broad instrument: Not having a specific legal base, but being based directly on the Treaty, MFA will continue to be governed by the ordinary legislative procedure, which requires the approval of the European Parliament and of the Council for each specific operation. This legislative and decision making process is different from the one envisaged for the broad instrument. This lack of alignment of procedures would therefore be against the objectives of streamlining and simplification in the broad instrument. Changing the current legal setup to enter into a single regulation would require intensive consultations with the co-legislators. Conclusion: It is more effective to keep MFA separate from the broad instrument due to its different legislative and decision making processes. MFA grants will continue to be treated under a separate budget line. However, including the provisioning arrangements for MFA in the budgetary guarantee component of the broad instrument, should help safeguard the important leverage capabilities of the MFA and allow for a more efficient management of provisioning resources. European Fund for Sustainable Development Advantages of being into the broad instrument: Integrating into the broad instrument would simplify the legal framework and efficiency of processes and operations. It would improve visibility delivered by the current fragmented instruments and facilitating better communication of impact and results. There would be a stronger policy alignment and complementarity of actions. Disadvantages of being into the broad instrument: It would be difficult to regulate distinct governance models within the same basic act. In the case of EFSD, governance bodies include the Member States and the European Parliament as an observer, which is not always the case for other financial instruments. Some confusion may be created because the broad instrument would concern investment structures beyond its coverage (e.g. pre-accession). Conclusion: The disadvantages of having the EFSD in the broad instrument can be overcome by ensuring the complexities of having an investment structure serving programmes beyond the broad instrument can be avoided by making cross-references in the relevant legal bases. External Lending Mandate Advantages of being in the broad instrument: The objectives of the ELM would be defined alongside and coherently with those of other instruments, in particular other budgetary guarantee instruments such as the EFSD in order to ensure maximum coherence and added-value of the EU's budgetary guarantees. This would avoid the current situation whereby two guarantee instruments exist (EFSD and ELM) which could theoretically support the same kinds of projects, one exclusively for the EIB and the other open to a range of international financial institutions. Positive experience with climate finance under the ELM could be imported into the new instrument, and the application of common standards (do no harm/Paris Agreement compatibility) would be harmonised.

Disadvantages of being in the broad instrument: The challenge will be to account for the governance specificities of the ELM while ensuring close policy alignment of the EIB's activities under the EU guarantee with EU objectives as well as complementarity with the EFSD. Conclusion: In order to unlock the value-added of including the ELM in the broad instrument while avoiding the disadvantages, it should incorporate certain features of the EFSD such as a governance structure which allows for more granular policy alignment of EIB projects (in the way of the EFSD Strategic Board or the European Fund for Strategic Investments investment committee). The objectives of the ELM should be defined in such a way as to clarify the complementarity between the EFSD windows and the ELM. For more detailed information see the annex on ELM. Common Implementing Regulation Advantages of integrating into the broad instrument: There will be enhanced clarity on the principles and policy framework that will apply during the implementation of the broad instrument. There will also be opportunities to further harmonise existing implementing articles that are currently included in the individual instruments but not in the CIR. Disadvantages of integrating into the broad instrument: Current specificities included in the CIR, such as support to people with disabilities could risk being diluted in a broader framework. Conclusion: As long as efforts are made to ensure the specific concerns in the current CIR are given attention in the broad instrument, the advantages of merging the CIR would outweigh the disadvantages. Programmes that should not be replaced under the broad instrument The following text justifies why the remaining heading 4 instruments should not be merged into the broad instrument, mainly due to their specific legal bases or objectives. Further information on these programmes can be found in the annexes. Humanitarian Aid The delivery of humanitarian aid is guided by the principles of humanity, neutrality, impartiality and independence. Humanitarian aid is provided solely on the basis of the needs of affected populations, regardless of any political, military or other objective. This is fundamental in order to secure access for humanitarian actors to all people in need while ensuring their own security in the field. A separate instrument for humanitarian aid is a safeguard which helps preserve the humanitarian principles and avoid confusion or blurred lines among different EU policies, political (or other) objectives and actors present in crises. The consequence of the principle of impartiality is the EU's commitment to a needs-based approach to humanitarian aid, to reach the most vulnerable, answer the most urgent needs and fulfil the humanitarian imperative. It should therefore be translated into a needs-based allocation of funding, which is better guaranteed with a clear separation between the source of humanitarian aid funding and other funding instruments, which may have legitimate political objectives, as is currently the case.

Humanitarian aid does not function like other instruments: it is governed by the emergency contexts and tight timeframes in which it must be delivered. The Humanitarian aid regulation and a specific budget line have made the humanitarian aid instrument more flexible in terms of programming than many others, in order to react to changing circumstances in crises and sudden onset crises. This has allowed the EU to be in the frontline of response to many of the most acute crises. A specific instrument therefore best matches the important operational necessity of reaching people before it is too late. Complementarity with the broad instrument will be ensured through actions that link development and humanitarian assistance (Linking Relief, Rehabilitation and Development, LRRD), e.g. in the context of the operationalisation of the humanitarian-development nexus and the resilience agenda. Union Civil Protection Mechanism The Union Civil Protection Mechanism (UCPM) has a specific mandate for prevention, preparedness and response to disasters both inside and outside Europe. The nature of the instrument is very specific and distinct from other external instruments insofar as it ensures the coordination of in-kind assistance provided by the participating states. Moreover, the external dimension of the UCPM is closely linked to humanitarian assistance provided by the EU. The UCPM has played an essential role in providing rapid assistance in the aftermath of natural disasters in many occasions (e.g. Nepal, Haiti, Peru, and Bangladesh), complementing the relief assistance provided by humanitarian aid. The close cooperation between the two instruments should be reinforced. With this in mind, the proposed reform of the UCPM tabled by the Commission in November 2017 tries to deepen this cooperation by facilitating the combined use of these instruments when responding to a disaster outside the EU. Integrating the UCPM (or its external component) into the broad instrument could undermine the capacity of the EU to provide disaster relief to third countries using the most effective combination of assistance according to context. The UCPM has close connections with other external instruments, namely IPA and the ENI. The cooperation between the UCPM and the ENI relates to prevention and preparedness programmes carried out in ENP countries, both in the South and the East. In addition to these programmes, the ENI also offers funding to neighbourhood countries from national allocations to cover prevention and preparedness activities (twinning programmes or technical assistance programmes). Instrument for Pre-Accession Assistance (IPA) IPA pursues objectives that are completely distinct from the remaining external action instruments as it aims to prepare countries to become EU Member States by supporting their accession process. The different nature of its objectives therefore argues in favour of it remaining separate. According to the IPA II mid-term review, the instrument is relevant and fit for purpose, in line with EU priorities and beneficiary needs and has demonstrated a high degree of flexibility. Only minimal changes would be necessary to clearly position it in the context of the new Western Balkans Strategy, and reflect the developments in the relations with Turkey. At the same time, more efforts should be put in place to ensure coherence and synergies with the broad instrument, in particular with respect to the thematic and non-programmable component. The complementarity of the instrument with other external financing instruments, notably EIDHR and IcSP has previously been good but coordination during both the planning and programming phase has not been sufficient. Close alignment between the programming cycles of IPA and the programmable parts of the broad instrument would facilitate complementarity. EU Aid Volunteers scheme The EU Aid Volunteers (EUAV) objectives are different to the broad instrument. The aim will be to enhance the engagement of young people and organisations in activities that will strengthen cohesion and solidarity in Europe and abroad. Instead it should be integrated into the European Solidarity Corps therefore extending its geographical scope. Both programmes are partially overlapping with a common overarching objective of involving young people and organisations in high quality solidarity activities. Integrating the activities of the EUAV within the European Solidarity Corps would provide clarity through a single entry point for different EU volunteering opportunities inside and outside the EU. Moreover, the integration of the two initiatives would present a good opportunity to simplify the procedures in line with the findings from the interim evaluation of the EUAV (2017).

Support to the Turkish Cypriot community This programme has its own legal basis and is based on article 352 TFEU (Council unanimity and European Parliament consent) whereas other EU external instruments are based on articles 209 and 212 TFEU. In addition, its duration is not linked to the MFF and it has no end date. Due to its unique nature and specific coverage, there is little scope for synergies with other instruments and the programme. Common Foreign and Security Policy (CFSP) The CFSP has its own legal base. Moreover, it is functionally different from the other instruments with the main focus being security. Actions funded under the CFSP are closely coordinated with other external instruments projects and programmes. The conceptual design and conduct of specific CSDP mandates is subject to dialogue and analysis involving the EEAS, the Commission (the Service for Foreign Policy Instruments) and the Council through PSC and the relevant working groups, which ensures strong coordination and synergy with other Union's programmes. Greenland and OCTs The OCTs and the Greenland Decisions should not be integrated in a broad instrument or to any other co-decided instrument due to their specific procedures of adoption: Council decision following consultation of the European Parliament. However, in order to streamline the number of programmes, they should be regrouped under one decision, which would include a ring-fenced envelope for Greenland. The Greenland and OCTs programme will be connected to the broad instrument through the latter’s thematic component. A number of OCT priorities include global challenges such as environment and climate change. Instrument for Nuclear Safety and Cooperation Nuclear safety is an important part of the EU external action and should continue to be part of a broad instrument. Nevertheless some nuclear activities are the competence of the Euratom Treaty, and the INSC has its own legal basis (Article 203 of the Euratom Treaty) which is not compatible with the ordinary legislative procedure. Analysis of the legal base has shown that if the INSC was merged into a broad instrument it would not be possible to continue the actions of the INSC to their full effect. As the INSC cannot be totally integrated into a broad instrument a separate instrument should be kept based on the Euratom legal base in order to pursue the current objectives of the INSC, complementing the broad instrument. Therefore actions carried out under this new instrument should be consistent with those of the broad instrument. Emergency Aid Reserve An enlarged emergency aid reserve would replace the current emergency aid reserve. It would cover crisis both inside and outside the EU. The current emergency aid reserve is a budget tool outside the normal allocation in the EU budget. It is intended to allow for a rapid response to specific aid requirements of third countries following events "which could not be foreseen when the budget was established, first and foremost for humanitarian operations, but also for civil crisis management and protection, and situations of particular pressure resulting from migratory flows at the Union's external borders where circumstances so require" (MFF Regulation 2014-2020).

It would be essential that a significant amount of the emergency and crisis response reserve is earmarked for external actions, in particular for humanitarian and emergency operations. European Peace Facility This would be a new proposal that would be financed outside the EU budget and therefore outside the broad instrument. In this facility, all existing military and security-related funding actions, that cannot be on-budget according to Article 41(2) TEU would be merged (i.e. APF that currently sits under the EDF, and other crisis management components, namely the Athena Mechanism). This off-budget facility would address the criticism that development funds are being misappropriated for security-related actions, while at the same time acknowledging the needs for funding military and security-related actions in/by partner countries, including Africa and beyond. This off-budget fund would have the following features: 1.Largely non-ODA actions in the military/security sector; 2.Greatly simplifies current arrangements and increases coherence and flexibility of those instruments covered; 3.Consistency between this facility and the non-programmable component and other security-related actions of the broad instrument. Security related expenditures that can already be funded under the budget should continue being implemented through the existing modalities in post-2020 situation. The fund should be governed by the principles of coherence and complementarity, ensuring full consistency and synergy with relevant external action instruments and measures under the EU budget, in particular the Common Foreign and Security Policy. The High Representative, the Council and the Commission will ensure that during each step of implementation, coordination and synergies between EPF funded actions and measures and other actions funded by the Union’s budget, is systematically sought to ensure relevance and complementarity in order to increase effectiveness and impact 4.5.Prioritisation Prioritisation of actions should be based on the policy framework and on the objectives of the broad instrument. During the planning/programming stage of the project cycle, allocation methods are used to determine envelopes for the partner countries. Currently, there are diverse methods to define financial allocations across the EU instruments, ranging from quantitative methodologies to pure qualitative indicators. For the EDF and DCI, the EEAS and the Commission services have developed a transparent methodology based on a quantitative model that uses a limited number of internationally agreed indicators, and foresees and adjustment based on the country situation and particularly evolutions in the political/security situation and the absorption capacity (demonstrated by past cooperation with the EU). The DCI, the Cotonou Agreement and the regulation implementing the 11th EDF specify that EU should allocate resources according to country needs, capacities, commitments, performance and potential EU impact; and that the EU must seek to target resources where needed the most to address poverty reduction, and where they can have the greatest impact, including in fragile countries. Where necessary and appropriate, the allocation methodology allows for adjustments on the basis of a qualitative assessment, reflecting elements such as commitments, performance, impact, inequality recent evolution in country political/security situation and its demonstrated absorption capacity. Subsequently the allocations are set in the multiannual programming/planning documents for each partner country/region.

For the Neighbourhood countries, Association Agendas, Partnership Priorities and other equivalent jointly agreed documents are key points of reference for setting the priorities for Union support to neighbourhood countries. Subsequently, the objectives and priorities together with indicative allocations are set in relevant multiannual programming documents. The ENI regulation specifies that support to countries shall take into account needs; commitment to and progress in implementing mutually agreed political, economic and social reform objectives; commitment to and progress in building deep and sustainable democracy; partnership with the EU, including the level of ambition for that partnership and absorption capacity and the potential impact of EU support. The EU's specific relationship with neighbourhood countries will also be reflected through the criteria governing the allocation of funds. For the EIDHR, the indicative overall financial allocations and allocations per priority area are made on the basis of strategies papers. For the IcSP, financing of actions takes into account the particular difficulties of the partner countries or regions concerned. For the PI, the methodology is not based on binding allocations but reflects the global scope and coverage of PI objectives. For the INSC, the geographical scope extends to all third countries, with a priority given to accession and neighbouring countries. 5.Delivery mechanisms of the intended funding The specific, diverse and rapidly changing context of EU external action requires the use of all the existing implementation modalities and delivery instruments currently used by the external financing instruments in order to pursue the policy objectives and operational priorities described early in this document. The existing choice of tools should be preserved both at the level of implementation and delivery method. In choosing the appropriate implementation modality and delivery method the EU will take into consideration the principles of subsidiarity and proportionality. Efforts will also be put in place to enhance leverage of public and private funds through the use of innovative financing as detailed below. 5.1.Implementation modalities The EU should continue relying on a variety of partners such as international organisations, Member States agencies and organisations, civil society organisations, national, regional and local authorities, international and development financial institutions in situations where they have a clear added-value, building on the experience achieved and the lessons learned. The new implementation framework should balance flexibility with predictability, so key partners can justify the continuous investment into competences and resources, which ultimately enable the smooth running of planned operations and the ability to react in crisis operations. In the context of external action, the EU can employ direct, indirect or shared management modes. In direct management, the EU (including when it acts through the EU Delegation or an executive agency of the EU) contracts directly with the final recipient. This management mode can be used to finance, among others, budget support operations, grants to civil society organisations and contracts assigned through procurement procedures for provision of services, works and goods. Erasmus+ also employs the direct management mode. In indirect management, EU funds are contracted through intermediaries (called entrusted entities). The entrusted entity is only allowed to channel EU funds to final recipients by way of grants, public procurement or financial instruments. The entrusted entity either uses the EU's rules or follows its own rules if they were considered to be equivalent in the ex-ante check known as a pillar assessment. Indirect management can be used with the following entrusted entities to serve specific purposes as follows: (a)With a partner country or an entity designated by it to strengthen ownership and alignment with national procedures in line with aid effectiveness principles. This is often used in the context of the Instrument for Pre-Accession;

(b)With an agency of a Member States or an EFTA country (Iceland, Liechtenstein, Norway, Switzerland) or, exceptionally, of a third donor country to reinforce donor coordination and harmonisation; (c)With an international organisation to make the best use of the comparative advantage of dedicated international organisations, foster long-term collaboration with key international partners and increase donor coordination and harmonisation; (d)The European Investment Bank which lends and provide guarantees and financial instruments in support of EU policies, often in conjunction with other forms of EU support (blending, ELM guarantee, ACP Investment Facility, etc; (e)An EU specialised (traditional/regulatory, hence not executive) agency. Member States 5.2.Delivery methods In accordance with the new European Consensus on Development, to reflect the framework set out in the 2030 Agenda and the Addis Ababa Agenda for Action, the EU and its Member States must adapt their approach to mobilise and make effective use of all means of implementation, including through innovative financing mechanisms. This requires a renewed focus on establishing an enabling and conducive policy environment at all levels. This includes mobilising and making effective use of domestic and international public finance, mobilising the domestic and international private sector, strengthening the capacity of partner countries to deliver change, stimulating trade and investment, fostering science, technology and innovation, as well as addressing the challenges and harnessing the positive effects of migration. In this context, the EU will continue to make use of the full range of existing delivery methods available such as grants, procurement contracts, programme estimates, budget support, trust funds, Technical Assistance and Information Exchange (TAIEX) and twinning, guarantees, loans and other financial instruments. At the same time the EU will seek to extend its toolbox to broaden the use of innovative financing mechanisms including through the use of policy based lending. The choice of the most appropriate delivery method will be policy driven and it will be guided by considerations concerning sound financial management, effectiveness, efficiency, flexibility, leverage, simplification, added value and focus on impact and results. For example, budget support has demonstrated its effectiveness in fostering policy dialogue, ensuring ownership, supporting key reforms and delivery of results in external action. Grants have proven essential to support civil society and private organisations as well as local authorities in delivering public services. Similarly, procurement contracts have favoured involvement of the private sector. TAIEX and twinning have granted the provision of specific expertise for public administration reforms. Finally, trust funds have ensured flexibility, responsiveness, visibility, leveraging and targeted approach towards achievement of policy objectives. At the same time, the EU will continue to use budgetary guarantees and financial instruments (based on the recently created External Investment Plan and the European Fund for Sustainable Development as well as a refocused ELM). With these tools, the EU will support the mobilisation of investments and leveraging of public and private funds worldwide. The EU should also continue to guarantee lending by international financing institutions and the EIB in support of EU external policy objectives. Similarly, MFA will continue to reinforce the EU's capacity to act in the neighbourhood region and pre-accession countries as it produces significant financial leverage. MFA goes beyond budget resources in providing loans, in addition to grants. MFA belongs to an area of shared competence and it complies with the subsidiarity principle as the objective of restoring short-term macroeconomic stability in third countries can be achieved more efficiently and effectively by the EU than by Member States individually. This removes the need for recipient countries to conduct multiple negotiations with different EU Member States. Furthermore, negotiating as a single entity improves the negotiating position of the EU vis-à-vis the recipient country and reduces the scope for contradictory policy programmes. Ex-post evaluations have also concluded that MFA centralised management by the Commission is more cost-efficient than the provision of financial support by Member States individually. It is important to distinguish MFA from budget support under regular, programmable instruments. The trigger for MFA are balance of payments crises. The primary purpose of MFA is to help beneficiary countries overcome such crises, which manifest themselves in a shortage of external financing. This is one of the major and specific as well as primary distinguishing characteristics of the MFA instrument, compared to other support instruments. In the future, the EU will continue its efforts to deliver its international cooperation in a flexible manner and through simple mechanisms and rules. In the current context of multiple crises and conflicts, the proposed broad external action instrument will have to be able to adjust swiftly to changing priorities and unforeseen events and to deliver rapidly on the ground. Sufficient legal, financial and procedural flexibility is needed to allow the EU to respond to the many challenges on the world stage. In this context, emergency procedures will ensure the quick EU capacity to respond to crises, the resilience building and the short-term foreign policy reaction with world- and scope-wide coverage (political, security, economic). Rules, regulations and management structures for quick response activities would have to retain their fast, flexible and responsive nature. This also includes actions aimed at operationalising the humanitarian and development nexus.

Finally, through the creation of the broad instrument the EU will continue to simplify the delivery mechanisms and the streamlining of their governing rules, thus making the existing toolbox even more fit for the implementation of geographical, thematic and horizontal actions. 6.How will performance be monitored and evaluated? 6.1.Monitoring arrangements During the mid-term review of the external financing instruments, a number of limitations regarding the monitoring of the EU’s external action were noted: 1.The instruments' objectives are highly ambitious (in line with the TEU) and require global efforts: success cannot be achieved by the EU alone. For example, the objective of poverty eradication depends on many factors that are outside the EU's control, such as: national government willingness and capacities to implement relevant policies, other aid providers, and the international context. 2.The wide-ranging nature of both the objectives and the partner countries covered (approximately 140 countries) makes the meaningful aggregation of data challenging. 3.Data collection can depend on sources outside of the EU, meaning there are implications, for example, on the timeliness of data. 4.As a result of the high level and broad nature of the objectives, the use of internationally agreed impact-level indicators such as the ones agreed for the Sustainable Development Goals have often been considered the most suitable method to measure the attainment of the instruments' objectives. However, such indicators are not directly attributable to the actions of the EU instruments meaning it is difficult to consistently measure the EU's contribution to results. A number of lessons learned were also highlighted during the review, namely: 1.The lack of information about monitoring in the legal base. 2.The lack of data to measure effectiveness of the instruments. In response to these lessons, the Commission will propose to use a number of key performance indicators in the legal base which will show how success towards the specific objectives will be measured. These indicators will mainly be focused at outcome/output level so the link with the EU’s contribution to results will be apparent. To help improve its collection of data, the Commission has launched: 1.An EU international cooperation and development results framework covering DCI, EDF, ENI, EIDHR, Greenland, and Article 5 of the IcSP. 2.Yearly results reporting exercises covering EU funded interventions ending in the previous year – as financed under the instruments above; 3.Similar performance frameworks with strategic and operational indicators for the IcSP (Articles 3 and 4) and the PI.

The frameworks will: -Be used to monitor the performance of the instruments, providing a clear link between the objectives and how they will be measured. -Include impact-level indicators (e.g. linked to the Sustainable Development Goals) as well as output and result (outcome) indicators, thus measuring the deliverables and direct effects of EU external action. -Allow for the preparation of implementation reports and evaluations after approximately three years of collecting results data. -As far as possible harmonise the common provisions with other EU budget programmes, including with regard to the climate mainstreaming methods. However it is worth noting not all results can be encapsulated in such frameworks. In particular results in implementing complex structural reforms cannot be easily aggregated and captured beyond the country or sector level. Examples of indicators used to measure the specific objectives could include the following. Unless stated otherwise, the indicators are drawn from the Commission’s results frameworks: (1)Rule of Law score (2)Proportion of population below the international poverty line (3)Number of women of reproductive age, adolescent girls, and children under 5 reached by nutrition programmes with EU support (4)Number of 1-year olds fully immunised with EU support (5)Number of students enrolled in primary and/or secondary education and training with EU support (6)Greenhouse gas emissions reduced or avoided (Ktons CO2eq) with EU support (7)Area of marine, terrestrial and freshwater ecosystems protected and/or sustainably managed with EU support (8)Number of firms and/or individuals with access to financial services with EU support (9)Political stability and absence of violence indicator (10)Number of processes related to partner country practices on trade, investment and business, or promoting the external dimension of EU internal policies, which have been influenced.

In terms of monitoring arrangements for joint programming, joint results frameworks (i.e. a list of indicators agreed between donors) can be used. These would measure the collective results of the donors participating in the joint programme. With the expected increase in joint programming going forward, the EU expects more use of joint results frameworks. 6.2.Data provisions and sources Data collected from EU funded interventions come from two main sources: -Secondary sources available at country level (e.g. country statistical office, international organisations collecting data at country/sub country level for internationally agreed indicators like the SDGs); and -Project monitoring systems set up by implementing partners to ensure adequate follow up of results and project performance. Only data not available from existing sources are collected by the latter and generally respond to project specific needs (for monitoring and evaluation purposes). Close coordination between the Commission and its implementing partner is ensured through the Commission’s operational managers to avoid any duplication of efforts at any level. Efforts are made to disaggregate data. Currently disaggregation by sex is possible for several indicators included in the above mentioned frameworks. For other categories: age, income, disabilities, data disaggregation remains a challenge particularly in the case of fragile countries. In line with the European Parliament’s call to establish consistent monitoring and evaluation procedures to track progress against objectives, Commission services are currently working together to establish an electronic system which will track project management, monitoring and evaluation via a single IT portal. This tool will use a consistent framework of indicators to assess performance and identify results across the broad instrument. Work on the portal is underway, with pilot testing planned for mid-2018, including with EU Delegations. The portal should be fully operational by the beginning of 2020. In addition, the portal will offer a single-entry point for all operational information and will allow external users including implementing partners to encode key information directly into the system. This means it will contribute to greater simplification and coherence in the coming years. In terms of indicators being monitored, most of them are commonly agreed at international level and therefore have a standard methodology. The same applies for those indicators used in the EU international cooperation and development results framework or similar frameworks used to report at sector level. Contextual indicators can also be defined and collected where appropriate. It will not always be possible to set targets for the indicators in the performance frameworks. For SDGs, targets are available and will be used. However, for a number of outcome indicators, as partner countries set their targets independently (or sometimes not at all), the setting of targets across countries and at instrument level would not be meaningful. In the case of political cooperation as well as the area of peace and security, which are prone to fast developments and changes, it would be inappropriate set targets ex-ante at the overall strategic level; targets need to be set at operational level within each single action. 6.3.Evaluations

For the broad instrument, evaluations will continue to take place at different levels as follows: 1)The evaluations of specific projects and programmes which will be managed by EU delegations and services responsible and cover a wide variety of actions, from relatively small or innovative projects, to large facilities mobilising significant amounts of funds. 2)Strategic evaluations, which cover general policies and strategies in countries and regions, and in sectors or themes, will be managed by the central evaluation services. 3)In addition to the two main categories of evaluations referred to above, an instrument level evaluation will be conducted only once sufficient data can be collected on performance. The instrument shall be evaluated according to the Better Regulation criteria and OECD-DAC good practice principles. In particular, the evaluation will look at the efficiency, effectiveness, added value, coherence and relevance of the instrument. The 3 levels are closely interlinked. The project and programme evaluations are essential sources of information for the strategic evaluations which in turn feed into the Instrument level evaluation. The planning of evaluations will be carefully coordinated so as to maximise coherence. The evaluations will use monitoring data, weighing it up and seeking to understand why and how the respective changes have been brought about. The project/programme evaluations will rely on monitoring systems set out at action level, while the instrument level and strategic evaluations will make use of the latter and of data collected as part of the results frameworks. The common principles and standards which will guide the way in which these evaluations will be conducted are defined in the evaluation policy for EU development cooperation. The specific evaluation approaches and methods to be used for the various types of evaluations are set out in the evaluation guidelines. As per these guidelines, most evaluations will apply a theory based impact evaluation approach, gradually building evidence to test the soundness of the intervention logic, actions, strategies, and instruments being subject to the evaluation. Experimental and quasi-experimental methods might also be used in some cases, in particular for pilot projects, which are to be scaled up significantly in the future. Applying such methods for a large number of evaluations is however not feasible, for several reasons: 1) They require extensive financial resources; 2) There are ethical issues involved given that such methods require the existence of a control group, comprising people who must not receive any similar support (from the EU or other actors) over the interv