REPORT FROM THE COMMISSION on the International Fund for Ireland pursuant to Article 6 of Council Regulation (EC) No. 2236/2002 {SEC(2004) 1196}

The European Union's long standing support for the peace process in Northern Ireland has been best exemplified by its commitment to the International Fund for Ireland (IFI) since 1989 and the PEACE Programme since 1995. This commitment recognises the long-term nature of the peace process' objectives, which have been widely supported over the years by the European Parliament, Council and Commission.

Council Regulation (EC) No. 2236/2002 [1] provides the current legal basis for the Community contributions for 2003 and 2004. Article 6 of that Regulation sets out the necessary elements for an assessment of the need for support beyond 2004, and its submission to the EC Budgetary Authority (European Parliament and Council of the European Union). This report and its annexes build on the 2001 Report on the International Fund for Ireland [2], and fulfil the requirements for the assessment mentioned above.

[1] Council Regulation (EC) No. 2236/2002 of 10 December 2002 concerning Community financial contributions to the International Fund for Ireland (2003-2004).

[2] Communication from the Commission: Report on the International Fund for Ireland pursuant to Article 5 of Council Regulation (EC) No. 214/2000 - COM(2001) 548 and SEC(2001)1579 of 1 October 2001.

Since the 2001 Report, devolution has been suspended in Northern Ireland. The political and social situation of the region remains fragile and the continuing level of violence and division calls on the EU to sustain its efforts to promote peace and reconciliation in this part of the European Union. On 18 June 2004, the European Council adopted the following Presidency's conclusion in reference to the Northern Ireland peace process [3] : "The European Council takes note of the current difficulties in the peace process in Northern Ireland and supports the efforts of the two governments in seeking to re-establish the devolved institutions. In order to support these efforts, the European Council calls on the Commission to examine the possibility of aligning interventions under the PEACE II programme and the International Fund for Ireland with those of the other programmes under the Structural Funds that come to an end in 2006, including the implications in financial terms."

[3] Presidency Conclusion No. 47- Brussels European Council 17-18 June 2004; Council of the EU No.10679/04 (CONCL 2) of 18.06.2004.

Past European Commission reports have acknowledged the very positive contribution of the IFI's activities to peace and reconciliation in Northern Ireland and the Border Region of Ireland thereby fulfilling its objectives, namely to promote economic and social advance, and to encourage contact, dialogue and reconciliation between nationalists and unionists throughout Ireland.

The current round of EC Structural Funds Programmes (in particular the PEACE Programme), which are the major instruments to promote economic and social progress in the region, present new opportunities for the IFI. The priorities set by both IFI and EC Programmes complement each other and this high potential for synergies needs to be further harnessed. In particular, while the IFI targets mainly economically disadvantaged areas, the PEACE Programme targets a list of areas, groups and sectors identified as "most affected by the conflict". Similarly, the cross-community and/or cross-border dimension(s) could become explicit selection criteria for all IFI programmes, as they now are for all PEACE priorities.

The ongoing strategic review of the IFI activities augurs well for a "repositioning" in favour of community-based activities with a strong reconciliation dimension. Although the methods and the financial scale of the IFI and EC Programmes remain quite different, it is expected that the ongoing strategic review will allow the IFI, together with its donors, to make progress along these lines.

***

The UK and Irish Prime Ministers wrote to the President of the European Commission in May 2004 requesting an extension of the EC contributions to the IFI and a continuation of the PEACE Programme for two years (2005-2006). Romano Prodi responded that the Commission was keen to maintain these efforts as these European interventions have a genuine added-value in bringing communities together to address shared economic and social problems and opportunities.

As reinforcing the solidarity between Member States and between their peoples is a core EU objective, it is therefore important for the EU to remain committed to these objectives, alongside other international donors, and to renew its contribution to the IFI.

In this context, the Commission believes that funding after 2004 should continue to be provided on the basis of the observations made in this report, which could be reflected either in the future Council Regulation on the EC contribution to the IFI, or through other appropriate means of co-operation between the Commission and the IFI.

COMMISSION STAFF WORKING DOCUMENT

Annex to the Communication from the Commission

on the Report on the International Fund for Ireland pursuant to Article 6 of Council Regulation (EC) No. 2236/2002

{COM(2004) 633 final}

TABLE OF CONTENTS

1. Introduction

Since the 1960's, political divisions and inter-community violence have dominated Northern Ireland, impacting also on the Republic of Ireland.

In 1985, 13 years before the Belfast/Good Friday Agreement (April 1998), the Anglo-Irish Treaty provided for the two Governments to "co-operate to promote the economic and social development of those areas of both parts of Ireland which have suffered most severely from the consequences of the instability of recent years" and "to consider the possibility of securing international support for this work".

This gave birth in 1986 to the International Fund for Ireland (IFI), an independent international organisation with its own governing body.

The European Community has been contributing to the IFI since 1989. In 2003, European Union support represented 44 % of annual contributions to the Fund and 39,5 % of cumulative contributions to date.

Council Regulation (EC) No. 2236/2002 (ANNEX I - "The IFI Regulation") provides the current legal basis for the Community contributions for 2003 and 2004. Article 6 of that Regulation sets out the necessary elements for an assessment of the need for support beyond 2004, and its submission to the EC Budgetary Authority (European Parliament and Council of the European Union).

This report and its annexes build on the 2001 Report on the International Fund for Ireland [4], and fulfil the requirements for the assessment mentioned above. Since the 2001 Report, devolution has been suspended in Northern Ireland. Given the ongoing fragility of the process, this report includes an assessment of the need for continuing contributions beyond 2004.

[4] Communication from the Commission: Report on the International Fund for Ireland pursuant to Article 5 of Council Regulation (EC) N°214/2000 - COM(2001) 548 and SEC(2001)1579 of 1 October 2001.

2. Survey of the IFI's Activities

2.1. Overall Description of the IFI

2.1.1. Objectives and Priorities

The IFI was established in December 1986 following agreement between the British and Irish Governments (ANNEX II). The agreement sets out the IFI's principal objectives:

* to promote economic and social advance, and

* to encourage contact, dialogue and reconciliation between nationalists and unionists throughout Ireland.

The IFI is required to maximise the economic and social benefits of its expenditure in conformity with the relevant policies of both Governments.

The agreement sets out the following priorities for the IFI:

* stimulation of private sector investment, in particular by means of venture capital initiatives;

* projects of benefit to people in both parts of Ireland;

* projects to improve the quality and conditions of life for people in areas facing serious economic and/or social problems; and

* projects to provide wider horizons for people from both traditions in Ireland through industrial training and work experience overseas.

Approximately 75 % of the IFI's resources shall be distributed in Northern Ireland.

2.1.2. Organisation and functioning

The UK and Irish governments jointly appoint a Chairman and a Board of six members, which oversee the direction and operation of the IFI (ANNEX III). The Board is appointed for a three-year term [5] and is representative of the communities in both Northern Ireland and the Border Countries of Ireland. It meets on average four times per year, alternating between the two parts of the island. Representatives of the EU and donor countries [6] participate in Board meetings as Observers.

[5] The present Board will be eligible for re-appointment on 28 February 2006.

[6] United States, Canada, New Zealand and Australia.

The Board is also assisted by an Advisory Committee of officials appointed by, and representative of, the two governments. The Advisory Committee meets prior to Board meetings to prepare advice for the Board and its two Joint Chairmen (or deputies) also attend Board meetings.

A Secretariat, based in Belfast and Dublin, co-ordinates and administers the work of the IFI. It consists of seconded civil servants from both administrations, under two Joint Directors-General.

The IFI's main programmes are administered on a daily basis by joint Programme Teams, which draw together relevant expertise from Government Departments and specialist agencies, North and South (ANNEX IV). These teams work within written guidelines under the direction of Designated Board Members (DBMs).

In addition, a team of 10 Development Consultants act as local contact points and assist in project development (ANNEX V).

The IFI Board makes the final decision on all matters, including project applications. Following approval, direct responsibility for project processing is divided between the Secretariat, consultants and government departments, acting as IFI agents.

2.1.3. Budget

The IFI's legal status is similar to that of a trust or a foundation.

Since its inception, the IFI has received approximately EUR 712 million (current prices). The United States is the largest contributor (59 %); the EU contributes about 40 % of total committed resources, and the remainder comes from Canada, Australia and New Zealand (ANNEX VI).

The estimated IFI budget for 2004 was EUR 47.3 million at current prices (£ 33.3 million): the United States contributing 51.6 % (US$ 18.5 million); the EU 47.7 % (EUR15 million) and Canada 0.6 % (Can$ 0.33 million). Contributions from New Zealand and Australia are not assured.

General administration expenses, organisational costs and provisions for the Secretariat are met by the UK and Irish Governments.

2.1.4. Activities

The IFI has committed over EUR 700 million to 5350 projects (ANNEX VII) across various programmes and schemes (ANNEX VIII) which can be grouped under three headings: the regeneration of deprived areas, community capacity building and economic development

The 2001 Review of the Programme found that the IFI had supported 4,400 projects supported, committed EUR592 million (£394 million), levered EUR1.88 billion (£1.25 billion) of funds and created 37,500 jobs. Other findings were:

* 91% of commitments have been to projects in Designated Disadvantaged Areas;

* Over 11,000 people have participated in cross-community and cross-border groups;

* 121 strategic alliances have been supported between businesses in Northern Ireland and the border counties and businesses elsewhere in Europe or in North America, Australia and New Zealand;

* 2.65 million square feet of small business workshop accommodation has been created;

* Nearly 2,100 companies have been involved in cross-border sectoral development programmes;

* More than 10,200 young people from disadvantaged areas have participated in the Wider Horizons Programme.

The IFI has adapted itself to a changing environment, moving away from mainly supporting major capital investments to concentrate approximately 30% of its resources on people-centred projects; education related interventions have become an increasingly common feature.

2.2. EU Involvement in the IFI

The IFI differs from EC Structural Funds' forms of assistance in that it is an independent international organisation. The European Commission (through the Director-General for Regional Policy) has observer status in the IFI, along with other donor countries.

In March 1999, the Berlin European Council recognised the need for exceptional support in Northern Ireland and the Border Counties, agreeing to continue the PEACE Programme for a further 5 years; the EU contribution to the IFI was renewed at the level of EUR 15 million per year from 2000 to 2002.

Following the Commission report to the Budgetary Authority in 2001, the EU renewed its financial contribution to the IFI over 2003-2004.

The annual EU financial contributions to the IFI have been:

* 1989-1994: EUR 15 million

* 1995- 1997: EUR 20 million

* 1998-1999: EUR 17 million

* 2000-2002: EUR 15 million

* 2003-2004: EUR 15 million [7]

[7] Council Regulation (EC) N° 2236/2002.

3. Recent audits of IFI activities

The European Court of Auditors and the European Commission (DG REGIO) have carried out audits and on-the-spot checks of the IFI, as reported in the 1999, 2001 and 2002 reports to the EC Budget Authority.

The most recent audit in November 2003 noted action by the IFI to address issues raised in the course of previous audits, such as the IFI's assessment of procedures at secretariat and agent level, and the forthcoming implementation of a new computerised information system to replace manual ledgers.

However, other matters continued to require the attention of the Board:

* The lack of uniform guidelines for management of IFI programmes and an instructions manual for the Fund.

* To avoid double funding the IFI and the bodies that manage Structural Funds should undertake a systematic exchange of information.

* Decommitment exercises should be more frequent, and particularly thorough before the closure of annual accounts. Decommitment procedures should be strengthened.

The IFI response stated that it would not be practicable and cost-effective to produce uniform guidelines for all programmes and considered there to be no weaknesses in the decommitment procedures currently in force. However the IFI accepted the need to examine possible improved cooperation between the IFI and other funders.

The Commission will continue to monitor these issues, in particular potential situations of unused funds requiring de-commitment.

In addition, the IFI is audited by its own accountants (Price Waterhouse Coopers) and by the two governments. The results are presented in the annual report, which is approved by the Board.

The IFI also regularly commissions evaluation studies of the impact of its activities from external consultants, such as the external review due the end of 2004 as part of its overall repositioning process.

In July 2003 USAID conducted a review of the Fund's projects - from both sides of the border and all the Fund's major programme areas. They concluded that despite the challenge of the internal and external social, political and economic environment in which the IFI operates, the Fund has demonstrated that it is capable of promoting conflict, dialogue and reconciliation between the two communities. USAID will conduct another inspection [8] of the IFI's activities in autumn 2004 to follow up an earlier 2001 audit.

[8] To fulfil requirements set out in the 1997 USAID Grant Letter of Credit.

4. IFI activities and EU Structural Funds

4.1. Matching Objectives

The IFI and EC Programme PEACE have complementary priorities and objectives [9]. The strategic aim of PEACE - namely to reinforce progress towards a peaceful and stable society and to promote reconciliation - is one of IFI's principle objectives, while both initiatives share a number of complementary areas on which they focus:

[9] The PEACE Programme is classified as an Objective 1 Operational Programme in the period between 2000 and 2004, for a total amount of EUR 531 million (80 %: Northern Ireland; 20 %: Border Region of Ireland).

PEACE [10] // IFI [11]

[10] Financial tables approved for 2000-2004 in the Commission Decision C(2001)638 of 22 March 2001, as last amended by Commission Decision C(2003)5348 of 23 December 2003. The split does not include Technical Assistance.

[11] IFI Annual Report Accounts 2003.

1. Economic Renewal (30.7 %) // 1. Economic Development (54.5 %)

2.Social Integration, Inclusion and Reconciliation (22.5 %) // 2. Community Capacity Building

(19 %)

3.Locally-based Regeneration and Development Strategies (17.3 %) // 3. Regeneration of Deprived Areas

(26 %)

4.Outward and Forward Looking Region (5 %) //

5.Cross-border Co-operation

(15 %) //

The IFI Regulation requires that the EC contribution be used for cross-border or cross-community projects, complementing activities or funding from PEACE. However whilst all projects seeking assistance from PEACE need to demonstrate how they intend to develop cross-community reconciliation and mutual understanding, a cross-community dimension is only explicitly required for some IFI programmes.

Approximately 75% of the Fund's resources are spent in Northern Ireland and its assistance is targeted on "Designated Disadvantaged Areas" (231 wards, representing 40 % of Northern Ireland's wards and 36 % of its population). The PEACE Programme, in contrast, applies impact indicators based on "disadvantaged areas" [12] in Northern Ireland and the "Combating Poverty" index in the Border Region of the Republic of Ireland.

[12] Defined as a mix of interface areas, areas affected by violence and areas of deprivation.

As regards beneficiaries, the IFI assists basically the same categories of people as the PEACE Programme [13]. Where projects can be funded by both IFI and EC programmes, the IFI policy is to be the "first money on the table" although it may offer a lower financial contribution [14]. Compared to the EC programmes, the IFI processes applications quickly using streamlined selection procedures, and is more flexible in responding to emerging needs and opportunities as its budget is decided annually.

[13] The PEACE Programme explicitly targets those belonging to areas, sectors, groups or communities that have been 'most affected by the conflict', and which do not necessarily correspond to those most deprived in economic and social terms.

[14] See maximum rates of intervention in ANNEX VIII.

4.2. Organising Co-ordination between IFI and EU Programmes

The IFI Regulation provides that the EC contribution should be used in such a way as to "complement the activities financed by the Community Structural Funds, and especially the activities of the PEACE Programme". Coordination between the two initiatives is important in order to share best practice and to avoid exceeding the 75% maximum threshold of EU assistance for any project funded both by the IFI and an EC Programme [15].

[15] Article 29 of Regulation (EC) 1260/1999.

The current coordination arrangements include participation of the European Commission at all IFI Board meetings and their receipt of papers of the IFI Advisory Committee meetings [16], and the attendance of representatives of the IFI as observers at the Monitoring Committees for Community Support Framework for Northern Ireland; PEACE Programme; Building Sustainable Development Operational Programme; and INTERREG III-A for Northern Ireland and Ireland Community Initiative.

[16] Exchange of letters IFI/Commission : Letter to C. Trojan, 28 June 1994.

At an operational level, Government Departments coordinate their role as Agent for the IFI, and simultaneously, as Implementing Body under the PEACE Programme, enhancing the coordination of IFI interventions.

Whilst the IFI Secretariats and the PEACE Managing authority take into account each other's activities, both organisations are considering how this can be further enhanced. Examples include the establishment of co-ordination points at all levels between both organisations and database information exchange.

The Commission believes that both organisations need to share project selection procedures and information more comprehensively. This is essential when the same project sponsors apply for funding from both from the IFI and an EC Programme. Exchange of data applications (e.g. sharing business plans or cost benefit analysis) would accelerate the selection procedure and develop a coordinated response so applicants would not face overlapping selection criteria and requirements.

Current EC programmes have developed comprehensive physical and financial monitoring and reporting systems and the IFI could benefit from regular access to this monitoring data for projects funded. This would address the risk of double counting programme impact, which undermines any attempt to carry out thorough and accurate evaluation studies.

4.3. IFI Strategic Review for a "repositioning"

In 2003 the IFI launched a strategic review of its programmes, with an aim to "reposition" itself on more "community-based" activities. A draft paper assessing options was presented to the Board in March 2004. The Board approved a framework for a strategic review of its activities, in order to:

* expand the Community Bridges Programme;

* agree new structural arrangements with the Community Relations Council and Department of Education in Northern Ireland to facilitate the introduction of new programmes aimed at improving community relations;

* explore the potential for programmes that would assist with integrating education;

* establish a Neighbourhood Regeneration Programme by merging the Community Regeneration Improvement Special Programme (CRISP) and Community Economic Regeneration Scheme Programme (CERS);

* better exploit the Business Enterprise Programme's potential to interact with other IFI programmes e.g. placements for young people from the Wider Horizons or Knowledge through Enterprise for Youth (KEY) Programmes;

* conclude the Urban Development Programme.

In the longer term the review considers that following issues should be addressed:

* review the Newradiane Programme (Research and Development between Ireland and North America or Europe);

* review the boundaries for the integrated areas in the Wider Horizons Programme and strengthen the follow-up study of participants to assess the impact of the programme in achieving its aims;

* examine the potential for a new reconciliation programme building on the successes of Wider Horizons;

* conclude the Community Property Development Scheme Programme (CPDS);

* examine the Community Leadership Programme and options for 2005 on completion of mapping exercise.

Overall, the IFI wishes now to further enhance its impact on the "reconciliation" between the two main communities. Some of its programmes have already gone a long way along this path, such as the Communities in Transition Programme, but the operational methodology needs to be defined. The Commission has therefore encouraged the IFI to exchange experiences with PEACE Managing authorities and implementing bodies.

The Commission believes that in order to avoid duplication with other sources of funding the IFI should determine, for each of its programmes, whether it seeks specific objectives not necessarily supported by other EC programmes. Alternatively, the IFI should enhance its role as funding partner seeking a leverage effect ("first money on the table") without becoming a competitive source of funding.

In addition, the Commission considers positive that some of the proposals under study such as the Pilot programme for integrated schools could address some acute needs of the region. However, the benefits of other proposals such as "large flagship projects" and "tourism facilities which would record and celebrate the history of migration by both traditions" under the Tourism programme are less clear, particularly in light of the economic difficulties encountered by IFI-funded Interpretative Centres in Northern Ireland.

In operational terms, the repositioning draft paper shows reliance of the IFI on government departments to deliver its individual programmes. This situation may raise potentially contentious issues as to the legal nature and functioning of the IFI vis-à-vis the UK and Irish governments (e.g. State aids, conflict of interest), on which the Commission has already alerted the IFI Board. However now that the CERS and CRISP programmes are closed it is likely that the use of government departments as agents will diminish. In parallel, an extended PEACE programme is expected to move towards an ever increased role of NGOs and local partnerships in its delivery - which is considered an essential element for trust-building in Northern Ireland.

Finally, further simplification and administrative economies of scale could be envisaged to harness its cross-border potential, facilitating North/South exchanges of experiences and integrated approaches to local development. The IFI should consider further steps to merge similar programmes such as the rural development (e.g. BTV) or youth/education related programmes (e.g. Wider Horizons).

5. Publicity and information

The IFI acknowledges support of all its donors (regardless of their level of contribution or the regularity of their payments) by means of standard references in press releases, published literature (Annual Report, information brochures, and published reports) and on its website. Reference to donors is also made in speeches made by the Chairman or Board members and in briefings given to visitors to IFI projects. The Commission representation offices in Belfast and Dublin maintain regular contacts with the IFI and are invited to all IFI project launches.

Nevertheless as the origins of the IFI were in the US in the mid 1980s, there remains a sense in the community both North and South that the Fund is a US supported organisation, despite the generous funding from the EU since 1989 and the continuing insistence of the Fund that all projects recognise and publicise the Community's contribution. The Commission will increase the profile of the EU presence in the IFI's activities more significantly, above all in cases where co-financing by the EU and IFI occurs.

6. Conclusion and Proposals

The European Union's long standing support for the peace process in Northern Ireland has been best exemplified by its commitment to the IFI since 1989 and the PEACE Programme since 1995. This commitment recognises the long-term nature of the peace process' objectives, which have been widely supported over the years by the European Parliament, Council and Commission.

The political and social situation of the region remains fragile and the continuing level of violence and division calls on the EU to sustain its efforts to promote peace and reconciliation in this part of the European Union. On 18 June 2004, the European Council adopted the following Presidency's conclusion in reference to the Northern Ireland peace process [17] : "The European Council takes note of the current difficulties in the peace process in Northern Ireland and supports the efforts of the two governments in seeking to re-establish the devolved institutions. In order to support these efforts, the European Council calls on the Commission to examine the possibility of aligning interventions under the PEACE II programme and the International Fund for Ireland with those of the other programmes under the Structural Funds that come to an end in 2006, including the implications in financial terms."

[17] Presidency Conclusion No. 47- Brussels European Council 17-18 June 2004; Council of the EU No.10679/04 (CONCL 2) of 18.06.2004.

Past European Commission reports have acknowledged the very positive contribution of the IFI's activities to peace and reconciliation in Northern Ireland and the Border Region of Ireland thereby fulfilling its objectives, namely to promote economic and social advance, and to encourage contact, dialogue and reconciliation between nationalists and unionists throughout Ireland.

The current round of EC Structural Funds Programmes (in particular the PEACE Programme), which are the major instruments to promote economic and social progress in the region, present new opportunities for the IFI. The priorities set by both IFI and EC Programmes complement each other and this high potential for synergies needs to be further harnessed. In particular, while the IFI targets mainly economically disadvantaged areas, the PEACE Programme targets a list of areas, groups and sectors identified as "most affected by the conflict". Similarly, the cross-community and/or cross-border dimension(s) could become explicit selection criteria for all IFI programmes, as they now are for all PEACE priorities.

The ongoing strategic review of the IFI activities augurs well for a "repositioning" in favour of community-based activities with a strong reconciliation dimension. Although the methods and the financial scale of the IFI and EC Programmes remain quite different, it is expected that the ongoing strategic review will allow the IFI, together with its donors, to make progress along these lines.

***

The UK and Irish Prime Ministers wrote to the President of the European Commission in May 2004 requesting an extension of the EC contributions to the IFI and a continuation of the PEACE Programme for two years (2005-2006). Romano Prodi responded that the Commission was keen to maintain these efforts as these European interventions have a genuine added-value in bringing communities together to address shared economic and social problems and opportunities.

As reinforcing the solidarity between Member States and between their peoples is a core EU objective, it is therefore important for the EU to remain committed to these objectives, alongside other international donors, and to renew its contribution to the IFI.

In this context, the Commission believes that funding after 2004 should continue to be provided on the basis of the observations made in this report, which could be reflected either in the future Council Regulation on the EC contribution to the IFI, or through other appropriate means of co-operation between the Commission and the IFI.

7. ANNEXES

ANNEX I: Council Regulation (EC) No. 2236/2002

ANNEX II: Agreement establishing the IFI

ANNEX III: Participants in Board Meetings and responsibilities

ANNEX IV: IFI Agents

ANNEX V: IFI Development Consultants

ANNEX VI: Donor Contributions

ANNEX VII: List of Projects which have received aid from the IFI (July 2001- June 2003)

ANNEX VIII: Programme descriptions

ANNEX IX: Maximum rates of IFI intervention

ANNEX I

>REFERENCE TO A GRAPHIC>

>REFERENCE TO A GRAPHIC>

>REFERENCE TO A GRAPHIC>

ANNEX II

AGREEMENT

BETWEEN THE GOVERNMENT OF GREAT BRITAIN AND NORTHERN IRELAND AND THE GOVERNMENT OF IRELAND CONCERNING THE INTERNATIONAL FUND FOR IRELAND [18]

[18] Consolidated working copy of the Agreement as last amended 10 October 2000.

The Government of the United Kingdom of Great Britain and Northern Ireland and the Government of the Republic of Ireland:

Desiring to promote the economic and social development of those areas of both parts of Ireland which have suffered most severely from the consequences of instability and to secure international support for this work;

Recognising that an international Fund is an important expression of international support for the shared commitment to peace, stability, dialogue and reconciliation in the island of Ireland and for the successful implementation of the Multi-Party Agreement, reached at Belfast on 10 April 1998;

Recognising that serious under-employment and multiple deprivation create an environment in which instability can flourish, and that instability and conflict in turn create conditions which are inimical to social and economic progress;

Recognising the damage caused to both parts of Ireland by that instability;

Have agreed as follows:

Article 1

The International Fund for Ireland is hereby established by the two Governments for the purposes and in the manner set out in this Agreement.

Article 2

The objectives of the Fund are to promote economic and social advance and to encourage contact, dialogue and reconciliation between nationalists and unionists throughout Ireland.

Article 3

In pursuance of these objectives, the Fund shall stimulate private investment and enterprise, supplement public programmes and encourage voluntary effort, including self-help schemes. In the voluntary sphere, special emphasis shall be placed on supporting economic and social projects sponsored by men and women of goodwill throughout Ireland who are engaged in the task of communal reconciliation. The need to maximise the economic and social benefits of the Fund in Ireland shall be an overriding consideration in making disbursements from its resources and these disbursements shall be consistent with the economic and social policies and priorities of the respective Governments. Because of the special problems in Northern Ireland associated with the instability of recent years, approximately three-quarters of the resources of the Fund shall be spent there.

Article 4

In accordance with the objectives and criteria set out above, the Fund shall give priority on a value for money basis to the following:

a) the stimulation of private sector investment, in particular by means of venture capital arrangements using some of the resources of the Fund;

b) projects of benefit to people in both parts of Ireland, for example, improved communications and greater co-operation in the economic, educational and research fields;

c) projects to improve the quality and conditions of life for people in areas facing serious economic and/or social problems. Spending will be carefully targeted to need needs arising from factors such as high unemployment, under-developed social, health or education facilities, poor environment and sub-standard infrastructures;

d) projects to provide wider horizons for people from both traditions in Ireland including opportunities for industrial training and work experience overseas.

Article 5

1) The Fund is established as an international organisation of which the two Governments are members.

2) The Fund shall have legal personality. Its legal capacity shall include the capacity to contract, to acquire and dispose of property and to institute legal proceedings. In particular it shall have power to enter into agreements with any donor consistent with the provisions of this Agreement provided that neither Government has indicated any objection. The Fund shall be exempt from the payment of direct taxes.

Article 6

The Fund shall have as its sole principal organ a Board which will consist of a Chairman and not less than six other members. The Chairman and other members of the Board shall be appointed jointly by the two Governments. They shall serve on terms and conditions decided by the two Governments. Donors if they so wish may send observers to participate in Board meetings. The decisions of the Board shall be taken by a majority. The Board shall, subject to the approval of the two Governments, establish rules of procedure and operating rules. Under these rules, a power of the Board may be delegated to one or more of its members. Subject to this Agreement, the members of the Board shall act independently and shall not receive instructions from Governments as to the exercise of their powers.

Article 7

The Board shall consider applications for assistance from the resources of the Fund and, if the Board is satisfied that they fall within the purposes set out above, may authorise grants and loans to any authority or any person or association for the purposes set out in the foregoing Articles. The Fund shall also provide resources for the establishment of the two companies referred to in Article 9 below.

Article 8

The Fund may contribute to the resources of existing bodies specialising in the provision of venture capital to be used for purposes within Article 4 of this Agreement.

Article 9

The Fund shall also provide money for and initiate the establishment of two Investment Companies, one to be established in each part of Ireland, with a significant number of common directors and similar objectives, whose function will be to furnish venture capital for the private sector. Persons of established commercial experience especially in the international field shall be invited by the Board of the Fund to participate in the management of these Companies. Each of these Companies shall be concerned with ventures primarily in one of the two parts of Ireland and shall be registered there: but in appropriate cases, they may both support a venture or enterprise. The Companies shall identify the risk capital needs for ventures of existing or new industrial and commercial enterprises and will provide, on sound commercial criteria, equity capital or loans. The aim of the Companies shall be further to stimulate viable and self-sustaining growth in the private sector of the economies of both parts of Ireland.

Article 10

The Board shall be assisted by an Advisory Committee composed of representatives of the two Governments, in particular as regards all applications made to the Fund under Article 7. Representatives of the British Government shall include officials representing Northern Ireland Departments. The accommodation and secretarial services necessary for the proper functioning of the Fund, together with its general administrative and organisational expenses, shall be provided jointly by the two Governments.

Article 11

The Board shall appoint auditors who will annually audit the accounts of the Fund. The report of the auditors shall be published.

Article 12

The Board shall present annually a report to the two Governments, to the Northern Ireland Assembly and to donors to the Fund.

Article 13

This Agreement may be amended by a further Agreement between the two Governments.

Article 14

This Agreement shall enter into force on the date on which the two Governments exchange notifications of their acceptance of it except that Article 5(2) shall become effective only after the completion of any remaining steps necessary in that connection. [19]. The Agreement shall continue in force until terminated by mutual agreement or by one Government giving the other six months' written notice, and thereafter shall remain in force for as long as and to the extent necessary for an orderly disposal of any remaining assets of the Fund in accordance with the spirit of the Agreement in full consultation with the donors.

[19] The Agreement entered into force on 1 December 1986.

In witness whereof the undersigned [20], being duly authorised thereto by their respective Governments, have signed this Agreement.

[20] The Agreement was signed in Dublin by PAEDAR de BORRA (Peter Barry) and R. F. Stimson.

Done in two originals at both London and Dublin on the 18th day of September 1986.

For the Government of the United Kingdom of Great Britain and Northern Ireland // For the Government of the Republic of Ireland:

GEOFFREY HOWE // NOEL DORR

ANNEX III

BOARD MEMBERS AND OBSERVERS

1. Members of the Board - Appointed 1 March 2003

Mr William T McCarter - Chairman

Mr Jackie Hewitt

Miss Helen Kirkpatrick

Ms Carmel Lynch

Mr John McDaid

Mr Eugene Murtagh

Ms Deirdre Ryan

2. Observers to the Board

Mr Graham Meadows (European Union)

His Excellency The Rt Hon Russell Marshall (New Zealand)

His Excellency Bob Halverson (Australia) to December 2002

His Excellency Dr John Joseph Herron (Australia) from January 2003

Mr Ed Gillespie (United States of America) to September 2003

Ms Peggy Noonan (United States of America) from November 2003

Mr Ted McConnell (Canada) to September 2003

Mr Cameron Millikin (Canada) from October 2003

3. Joint Directors General

Ms Orla O'Hanrahan (Dublin Secretariat)

Mr Alexander Smith (Sandy) (Belfast Secretariat)

4. Joint Chairmen of Advisory Committee

Mr Will Haire (North) to December 2003

Mr John Hunter (North) from January 2004

Mr Brendan Scannell (South)

JPA005(S)

ALLOCATION OF DESIGNATED BOARD MEMBERS

Public Relations // Chairman

Mr Murtagh

Audit Committee // Chairman

Miss Kirkpatrick

Miss Ryan

Investments Management // Chairman

Mr McDaid

Disadvantaged Areas Initiative

(including Rural Development) // Chairman

Mr Hewitt

Miss Kirkpatrick

Communities Initiative // Mr Hewitt

Ms Lynch

Mr McDaid

Urban Development // Mr Hewitt

// Miss Kirkpatrick

Ms Ryan

Business Enterprise & Technology // Mr McDaid

Ms Lynch

Mr Murtagh

Tourism // Ms Ryan

Miss Kirkpatrick

Mr Murtagh

Wider Horizons // Mr Hewitt

Ms Ryan

Mr Murtagh

Flagships // Chairman

Ms Lynch

Enterprise Equity Boards // Chairman

Miss Kirkpatrick

Mr Hewitt

Mr McDaid

Ms Lynch

Ms Ryan

Mr Murtagh

North America Investments Ltd // Chairman

Mr McDaid

ANNEX IV

IFI AGENTS

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ANNEX V

DEVELOPMENT CONSULTANTS -NORTH

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DEVELOPMENT CONSULTANTS - SOUTH

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ANNEX VI

DONOR CONTRIBUTIONS

(in millions)

The following table sets out donor contributions to the IFI in national currencies [21]

[21] Source: IFI

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ANNEX VII

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ANNEX VIII

PROGRAMME DESCRIPTIONS

The regeneration of deprived areas is a series of community-led and economically driven programmes that operate exclusively in the most disadvantaged areas. Cumulative project approvals to 30 September 2003 amounted to EUR 186.6 million. These include programmes to empower local communities on a cross-community basis in the most disadvantaged small towns and villages in Northern Ireland, to develop core economic projects for towns or villages in the Southern border counties and to support community-led projects which foster the economic and social regeneration of deprived rural areas.

The community capacity building is a series of programmes which seek to build capacity within the wider community, particularly in the most disadvantaged and underdeveloped areas. Cumulative project approvals to 30 September 2003 amounted to EUR 136.4 million. These include programmes to develop community leadership and infrastructure in selected deprived areas, to support organisations which promote dialogue and understanding, and to improve the employment prospects of young people by providing training and work experience whilst promoting mutual understanding and reconciliation.

The economic development is a series of programmes which encourage the development of the local economic base through community or private led initiatives that provide opportunities and jobs in key areas. Cumulative project approvals to 30 September 2003 amounted to EUR 326.4 million. These include programmes to create the conditions within which enterprise and business opportunities can flourish, to encourage economic regeneration by stimulating the tourism sector and to redevelop the commercial centres of town and villages to generate new economic activity.

In addition, the IFI introduced a Flagships Programme to support a small number of major projects of symbolic importance for the island as a whole, with the potential to make a significant contribution to social and economic regeneration.

It also helps Irish and Northern Ireland companies establish links with North America, Australia and New Zealand through various international links partnership programmes

ANNEX IX

RATES OF INTERVENTION AND MAXIMUM GRANTS

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