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DOCUMENTS "COM"
COM (80)107
V ol.1980/0035

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COMMISSION OFTHEEUROPEAN COMMUNITIES
~~evCOM(80)107 final
Brussels,'24thApril1980
- • •
1** . -■A.
'r"' -
COMMISSION COMMUNICATION TOTHECOUNCIL
ONTHEIMPLEMENTATION OFCOMMUNITY AIDTOTHEACPSTATES
ANDTHEOCTANDOD-SITUATION AT31DECEMBER1978
(Communication presentedinaccordance withArticle25
oftheInternalAgreement onthefinancing and
administration ofCommunityaid)
COM(80)107final

-1-
Itisforeseen under Article 25(4 )ofthe,Internal Agreement onthe
financing and administration ofdevelopment did accorded bythe Community
that the Commission shall inform the Council ofhow the Community aid is
used bythe ACP States ,the OCT orany other recipients and^how projects
financed with this aid are utilized bythe recipients .
The purpose ofthis report istoprovide the Council ,with preliminary
information onthe subject ,onpoints not already covered inthe report
which the Commission transmits tothe ACP/EEC Council ofMinisters under
the provisions ofArticle 41ofthe Lome Convention .Itisthefirst
report asthe Lome Convention of28February 1975 and the Decision of
29June 1976 onthe Association ofthe OCT entered into force on
1April 1976 and operations were therefore slow ingetting under way in
1976 and V .t Forthis reason ,the report covers aperiod of
33months ,from 1April 1976 to31December 1978 .
The Commission proposes to .give anaccount ofhow Community aid has
been used during thefirst 33months ofthe fourth EDF'soperations
byreviewing inchronological order the successive stages of
implementation -from the financing decision right tothe end ofan
operation .
 
 *

A.FINANCING AGREEMENTS
1„Asat31December1978,313.financingagreementstotalling
1C-2054800QEUAhadbeensignedorwef#abouttobe.Ofthistotal,
sixagreementsinvolving 5640000EUAconcernedtheOCT.
2.■Thenormal.procedureforthesigningoffinancingagreements Asthe
writtenprocedure,whichconsistsofforwardingthedocument,already
signedbytheMemberoftheCommissionresponsiblefordevelopment
policy,tothecompetentauthorityoftheACPState(normallythe
ambassadoraccreditedtotheEuropeanCommunities).Duringtheperiod
underreview,167agreementstotalling340612000EUAweresignedin
accordance withthisprocedure.
Thereare,however,twootherproceduresofamoreformalnature:
i.theorganization ,atCommissionheadquarters ,offormalceremonies
atwhichtheambassadors ofanumberofrecipientStatesare
invitedtosignthedocumentswiththeMemberoftheCommission-
responsiblefordevelopment policy.Since1976105agreements
totalling497021000EUAhavebeensignedinthisway.Itis
alsopossibletotakeadvantageofthepresenceinBrusselsofa
HeadofStateorGovernment orMinisterofan.ACPStatetosign
-,afinancingagreement *Fourteenagreementstotalling
.104323000EUAweresignedinaccordancewiththisprocedure;
ii.thesigningofthedocumentsinthe-ACPStateconcerned "onthe
occasionofavisittothatcountrybythePresidentofthe
CommissionortheMemberoftheCommissionresponsible .Inthe
periodunderreview27agreementstotalling78592000EUAwere
signedinaccordancewiththisprocedure.
3.Theperiodelapsingbetweenthefinancingdecisionandthesigning
ofthefinancingagreementvaries,butmaybeestimatedatfourweeks
onaverage. •
Thisperiodissometimesreducedtoaminimumwhen,forinstance,a
formalsigningceremonyisorganisedatCommissionheadquarters thevery
dayafterabatchofprojectshasbeenapproved.
Thewrittenproceduremayalso-inaverysmallnumberofcases-take
longerthanfourmonths.Thesedifficulties arisemainlywiththe
smallnumberofACPStateswhichdonotdelegatesufficient powerto
theirambassadortotheEuropeanCommunities :thesigningprocedurethen
hastoincludeexamination bythenationalauthorities inthecapital
oftheACPStateconcerned (asinthecaseofKenyaandEthiopia\n

particular),andthisisamajorcauseofdelay.TheCommission has
notfailedtopointouttotheauthorities concernedthedrawbacksof
suchasystem,explainingthatthisdelayintheimplementation of^
projects,whichinparticular hamperstheexecutionofpayments,is
ultimatelyprejudicial totheveryinterestsoftherecipient ACPState*.
B.FINANCING CONTRACTS (SPECIALL0ANS).'
,1.WiththeentryintoforceoftheLomeConvention theresponsibility
fordrawingupandnegotiating loancontracts (whichmaybeaccompanied
byguaranteecontracts)wasentrustedtotheCommission alone.Asin
thepast,theEuropeanInvestment Bankremainsresponsible forrecovering
theloan.
>' ' i
At31December1978theCommunity hadenteredintocommitments totalling
268044000EUAforspecialloansvis-a-vistheACPStates.
Bythesame,date52financingagreementstotalling 239231000EUAhad
beensigned,whichconfirmsthediligence shownbytheCommission's
departments informalizing theCommunity'scommitment .
Similar :.<contractsforspecialloanstotalling 134869000EUAand
7guaranteecontracts hadbeensigned.Overthesameperiod24other
loancontractstotalling 83533000EUAand5guaranteecontracts hadbeen
drawnupbytheCommission'sdepartments buthadyettobesigned.
2.Thesefiguresshowthatwhilethedrawing-up andsigningof-financing
agreements donotintrinsically presentanyproblems,thenegotiation and
signatureofaloancontracttakesmuchlonger4,forthefollowingreasons:
(a)ontheCommission side,itsdepartments inherited,ashasalready
beenpointedout,powerspreviously heldbytheEuropeanInvestment
Bank,whichinitially meantaconsiderable amountofworkin
formulating negotiating procedures,adifficulty compounded bythe
lownumberofstaffinvolved.
(b)ontheACPStates'side,acertainamountofcircumspection was
shownwithregardtocontractswhichtheseStateswerehardlyused
toformulating-particularly thenewmembers,whowerenearly ,all:
represented inthenegotiations byextremelyfastidious lawyers.

-4-
Bethatasitmay,inordertocopewiththeLackofstaffin
particular,theCommission drewupmodelcontractscontaining general
provisions (no"m?llynon-negotiable )andspecialprovisionstailored
toeachspecificoperationwhichintheoryweretheonlyonessubject
tonegotiation .Theserationalization measuresmadeitpossible,et
theendoftheperiodunderreview,toshortenthetimelapsebetween
theadoptionoffinancingdecisions andthesigningofthefinancing
agreements andloancontracts.
C.TENDERING PROCEDURES
(a)At31December 1978135international invitations totender
totalling anestimated 462millionEUAhadbeenissuedunderthefourth
EDF.
Theamountinvolvedineachinvitationtotenderaveraged3422000EUA.
Inassessingthisaverageaccountmustalsobetakenofthelowest,and
highestfigures,whichrangefrom: •
1i6000EUAto8500000EUAinthecaseofsupplycontracts,and
from882000EUAto30million EUAinthecaseofworkscontracts.
Oftheoverallnumberofinvitations totender,15,totalling
199millionEUA,wereissuedfollowing apreselection procedure.
ThesefiguresshowthatthefourthEDFdidnotbecomefullyoperational
inthisareauntiltheendof1978.
(b)Publicityisoneofthelynchpinsofthecompetitive tendering
procedures anditmustbenotedthat"enlargement "inthisfieldunder
thefourthEDFwascarriedoutwithoutmajordifficulty :
i.onthepartofthenewMemberStates,thankstothevaluable
functionperformedbytheinformation officesinLondon,Dublin
andCopenhageninpassingontherelevantdata;
ii.andalsoonthepartofthenewACPStates,which,onthewhole,
compliedcloselywithourpublicityprocedures (bycontributing
tothedraftingofnoticesofinvitations totenderand
distributing noticesofinteresttoneighbouring ACPStates).
(c)TheCommission alsotookactionofitsowntowidenthefield
ofcompetition ;~
i.bytakingscrupulous caretouncoverdiscriminatory provisions
ininvitationtotenderdossiersatthedraftingstageandby
gettingtheACPStatestomaketheappropriate ratifications ;

-5-
ii.byorganizing briefing trips tothe new ACP States and meeting
representatives ofthe various specialized departments concerned
(those responsible for contracts inthe various ministries ,
members oftender hoards ,etc.);
iii.byorganizing briefing sessions inthe Member States themselves for
the industrial circles involved incontracts financed bythe EDF,
* whoresponded well todocumentation such asthe newedition ofthe
brochure onfirms' access tocontracts financed bythe EDF or
the programme ofcontracts envisaged under the fourth EDF;
iv.bysending out missions tocertain ACP States specifically todraw up
invitation totender dossiers for major operations and toaccompany
site visits and briefing sessions for tenderers . This happened in
connection with the following projects :the CIMAO clinker -production
plant (Ivory Coast ,Ghana and Togo ),the Tana River hydroelectric
project (Kenya ),the Mukungwa hydroelectric plant (Rwanda ),etc.
(d)Thedifficulties encountered inthe implementation ofthe competitive
tendering procedures applicable tointernational invitations totender as
regards r/'~ gnationals ofthird countries toparticipate incontracts ,
asproviaeo tor inArticle 56(3 )ofthe Lome Convention ,deserve
particular attention .
This problem ,which affects the ACP States inSouthern Africa r-but also
concerns other ACP States with special geographical Location ,such asthe'
Pacific countries -had led the Commission toconsider anumber of
solutions tobeexamined with the Member States which would beaimed at
making technical adjustments torationalize the procedure for introducing
derogations inthis field . This approach ,proposed asanexperiment in
March 1978,initially involved :
• /
i.making itpossible ,inthe case ofsupply contracts ,torequire two
quotes from tenderers ,based onthe origin ofthe supplies ;
ii.providing ,inthe case ofworks contracts ,for :
aninvitation totender open tothird country firms tobeissued
before the financing decision sothat the price was known atthat
stage ofthe procedure ,or -
fixing a"higher price threshold "allowing the competent authorities
some measure oflatitude inawarding the contract .

-6-
These proposals were dicussed onanumber ofoccasions within the
Council 'sACP-FIN Working Party . Some Member States 1delegations were
distinctly hostile tothe Commission 'sproposals for reasons todowith
ths geopolitical environment of ACP States inSouth Africa ,asaresult
ofwhich the Commission hadtomodify itsInitial approach . Following
many discussions itpresented acompromise proposal toextend the
two-quote system toimports ofcertain plant ,equipment and materials
involved inworks contracts.' These measures were not accepted bythe
Council ,and the Community hadtobecontent ,inthe negotiations for
the new Convention ,with amuch vaguer text ,which did not,however ,
exclude the possibility ofthe two-quote system infuture providing
the EDF Committee with the information itneeded todecide ,with ,full
knowledge ofthe facts ,onderogations forthird countries based on
higher costs .
2-^££®i£I2£®d_ij3vitat ions_to_tender
At31December 1978 47invitations totender byaccelerated procedure
had been issued ,totalling 26333 000 EUA,i.e. anaverage of560 000 EUA
per invitation totender . Here again itisimportant togive the highest
and lowest figures for invitations totender issued under this procedure -
1750 000 EUA and 17.000 EUA. The former figure isofparticular note
inthat itcomes close tothe 2000 000 EUA threshold laid down bythe
Lome Convention . Inaddition ,during the period under review 53
invitations totender for works contracts estimated atbelow 2000 000 EUA
were issued :since 47ofthese were byaccelerated procedure itcan be
concluded that the ACP States made maximum use ofthis method ,which the
Lome Convention did not institute but simply enlarged upon .
3.§xcegt ions_to_the_invitat ion_to_tender_rule
At31December 1978 290 contracts totalling 56.6 million EUA had been
awarded bymutual agreement orafter restricted consultation .
Atthe same date 206 operations totalling 72.5 million EUA had been
carried out bypublic works departments ,the favourite area forthis
method ofexecution being agricultural projects .
Inview ofthe scale and number ofthe operations for which anexception
has been made tothe general rule ofinvitations totender the question
may beasked whether the conditions laid down bythetexts (emergency ,
small scale ofproject orspecific nature ofservices toberendered )
have always been met.

-7-
Indeed ,the period during which fourth EDFoperations were getting
under way coincided with thestart oftechnical relations with the new
ACP States and the establishment ofnew Delegates intheir posts and
therefore there wa9 aninerease inths number efrequests made fer .
exceptions from the normal practice ofinternational invitations to
tender sothat projects could bestarted sooner . The Commission
adopted anunderstanding attitude towards this situation for the very
first projects put forward bynew ACP States but subsequently reacted
against excessive laxity inthis respect ;inacircular dated
21March 1978 itreminded all Delegates ofthe need tosee that the
basic principles governing the method ofawarding contracts under the
Lome Convention were respected . This reaction was necessary particularly
asexperience had shown that the normal competitive tendering procedure 1
was ultimately the quickest method ofplacing contracts -which tends to
prove that the argument often invoked infavour ofapplying derQgations ,
namely that they would speed things up/has not always been the real
reason forrestricting competition .
D. RESULTS OF COMPETITIVE TENDERING PROCEDURES
1.St--M "esonpartieipation
Thestatistics onparticipation (see table below )show acertain
geographical imbalance .
Country4th EDF I
Works
ContracteSupply
ContractsTe^hnical
CoopérationContracteTotal !
Contracta j
Value In iValue ] Valuó LÉ Value LU
Gernany 30.244 |20.498 !5,07 ^24.262 21.75 75-004 ;M
Belgiua 26.388 8,lll 2.375 2.9h 12.207 10,94 40.970 7.9Q
Franca 96.357 |29M 20.558 M 17.273 Γ5.48 134.168 !5.8
Italy 38.781 11.93 4-949 13.510 12,11 57.240 ;!.°1
Luxembourg2.641 2.37 2.641 °.51
Betbarlanda 7-279 2,24 2.121 2,59 10.211 9.15 19.611 3,7?
Denaark 41 |°.°5l 3-497 3,14 3.538 0,6®
United 8.184 2.51 13.618 iΓΜ3 11.595 10,39 33-397 I6.44
Lingdon
Ireland 1.561 1.40 1.561 0,34
ACP-OCT 118.089 36.3Q 12.031 J4.71 14.808 13,27 ;144.928 7,9
Third 5.593 6.84 5-5931,0»
Countri ce
Total I325.32 * 100 81.784 100IU.565 100 518.671 100 !
These figures ,which take account ofcontracts actually awarded ,do
not include the invitation totender estimates referred toabove ,
which have not yetall resulted inthe placing ofcontracts .

-8-
These results elicit the following remarks :
(a)Ifall contracts are considered the' geographi cal imbalance ,unlike
that obg&rved 1nthe cai© ofthethree previous Funds ,isnot marked by
the clear predominance ofone country but rather byfour areas of
concentration ,between 25% and 28%,11% and 15%,3%and 8%and less
than 1%.
(b)These figures clearly give only animperfect picture ofthe fourth
EDF (the.re isalong way togobefore even the half-way stage isreached )
since itdid not become what may beconsidered fully operational until
the end of1978 . Asthe large number ofprojects already approved
gradually reach the execution stage this will probably balance out the
results more .
(c)Itis,however ,important tostress the already significant degree
ofparticipation bythe ACP States' firms and public works departments .
This shows that the arrangements made tohelp them under the Lome
Convention are now fully effective .
Itistrue that sofar these results have been achieved without the price
preferences introduced for both works and supply contracts really having
tobeapplied . Account must also betaken ofthe increase -already
pointed out-inthe number ofoperations carried out bypublic works
departments and the relatively high number ofminor contracts oflittle
interest toforeign firms ,these being factors which areparticularly .
characteristic ofthe starting-up phase ofprojects .
Y
Anassessment ofthe actual statistics ofcompetitive tendering must not
overlook two other aspects inherent inthe procedure for awarding contracts :
i.There has fortunately -been only one instance where the Commission has
had toaward acontract toatenderer other than that proposed bythe
national authorities . This shows that the authorities are playing
the game byrespecting the verdict ofcompetition .Itwc.talso be
said that ,inthe rare instances ofconflict inthis
intervention bythe Delegates has enabled asatisfactory bunion to
bereached bysettling the differences inthe interests ofboth the
Community ,asthe provider offunds ,and the country receiving aid
from it;

-9-
ii.Inmorethan50%ofthecases,however,thechoiceofcontractor ~
hasbeenapprovedbytheDelegates onbehalfoftheCommission .
Thisprovesthatthedecentralization measures'introduced for.
thepurposesofimplementation oftheLomeConvention arealso
workingproperly,sincetheconditionslaiddownforsuch
delegationofpowershavebeenfullyrespected (lowestbid
recognized asbeingeconomically themostadvantageous ,keeping
withinthecostestimate).
E.CONTRACTS „
1.Duringtheperiodcoveredbythisreport,primarycommitments
(financingdecisions )enteredintoforalltheACPStatesandtheOCT
amountedto1653million EUA.
Underthesedecisions,atotalof612projectswerethesubjectof
secondary commitments (contractsconcluded )worth986millionEUA.
(a)Theseresultsmustbeseeninthelightofthefollowingtwofactors
i.It-U">uldbepointedoutthatcertainfinancingdecisions,suchas
relatingtomicroprojects andexceptional aid,whichinvolve
alargenumberofminoroperations extendingoveraperiodof
time,result"inasinglesecondary commitment equivalent tothe
totalamountoftheproject;
ii.Otheroperations,however,suchasStabextransfers,risk-capital
operations andinterest-rate subsidies,whichalsogiverisetoa
singlesecondary commitment,arecharacterized ,unlikethe
precedingoperations,bytherapidmobilization offunds.These
operations,numbering 111,arealsoincludedintheoverallamount
ofsecondary commitments butmustbeaddedtothe612operations
referredtoabove.
(b)Examination ofthesefigures'showsthat,comparedwithprimary
commitments (1653millionEUA),secondary commitments (986millionEUA)
accountfor59.6%oftheamountcoveredbydecisions..If,however,*
thevalueoftheoperations describedintheprecedingparagraph
(amountingto252.8millionEUAasat31December1978)issubtracted
fromthetotalamountofsecondary commitments thispercentagewillbe
foundtobeonly44.3%,whichgivesaclearerideaoftheprogressmade
onprojectsintherecipientcountries. ,
IftheseresultsarecomparedwiththoseobtainedunderthethirdEDF
itwillbefoundthatattheendofnearlythreeyearsofoperations
secondary commitments accountedfor48.7%ofoverallcommitments .This11.

-10
fact would tend toshow that ,inthe field ,commitments are not
following financing decisions asclosely asinthe past . This overall
trend should infact bequalified according toindividual States
aswill beexaplined below (v. (c)).
β
Ifthe analysis isextended totake indisbursements ,the primary
commitments /secondary commitments /disbursements "pipeline may be
assessed inthe light ofthe following percentages :
i.out ofthe total credits implemented ,disbursements (572 million EUA )
account for 34.6% ofprimary commitments (1653 million EUA).
If,however ,the amounts which were mobilized rapidly (interest-rate
subsidies ,Stabex ),that is207million EUA,are deducted from the f
overall figure this lowers the percentage to25.2% ;
ii.according tothe two methods ofassessing the figures referred to
above disbursements account for 58% and 45.5% respectively of
secondary commitments (986 million EUA).
(c) Abreakdown byrecipient country shows that the countries inrespect
ofwhich secondary commitments account for more than 50% ofprimary
commitments are former AASM ,except inthe case ofZambia (76%),where
the situation is,however ,attributable tothree exceptional aidprojects
totalling 16.8 million EUA out oftotal decisions involving 34million EUA.
The countries with arate lower than 50% are nearly all new ACP States .\
For these countries ,such asBotswana ,Grenada ,Guinea ,Guyana and
Liberia ,secondary commitments amount toLess than 30% ofprimary commitments .
This situation stems basically from certain difficulties encountered by
ACP States which are not asyet completely familiar with EDF procedures .
Itmust also benoted that intwo former associated states -Ivory Coast
andMauritius -disbursements still represent less than 10% 6fcommitments .
These poor results are attributable either ;toinefficiency onthe part of
the national authorities concerned (see bellow )ortothe fact that the
financing decisions were approved relatively late bythe Commission
(Ivory Coast ).
2.Asalogistical aid toproviding information onthe financial situation
ofprojects EDF accounts were progressively transferred ontothe Commission 's
computer inLuxembourg asfrom the end of1976 inorder tomeet the
following objectives :
-rationalization ofworking methods , ,
-wider distribution offinancial statements ,
-compilation ofstatistics from the basic data .

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(a)RatlonaLijation_of_work2ng_methods
Computerization hasobligedthedepartments concernedtodealina
uniformmannerwithaccountsdataoftheSamekind.Thesourcesof
errorshavedecreased andtheinterpretation ofresultihaaImproved
significantly bothcentrally andatDelegationlevel.
(b)W2der_di_stribut2on_of_statements_of_ac count_and_of_stat2stics
Themechanization oftheaccounting procedures makesitpossibleto
producefinancialstatements denominated inunitsofaccountonprojects
andcontracts andtocirculate themtotheDelegates andNational
Authorizing Officersresponsible forexecutingprojects.Thissystem
automatically ensuresthattheaccountsagreeatthevariouslevelsof
management .Thevarioussupervisory bodies(FinancialControland
CourtofAuditors)automatically receiveacopyofthemonthlybalance.
(c)Comgij^ation_of_stat2Stics_from_the_basi c_data
Thebasic-accountsdatahavebeenaugmented byanumberofitemsofuse
bothto"ia.•■mentandforstatistical purposes."Hence,itispossible
toextr\.i'omstatements ofaccountmanyitemsofinformation concerning
theexecutionofprojects.Althoughstillinitsinfancythisprogramme
isfullofpossibilities forthefuture.Since30September 1978a
three-monthly statement hasbeenpublisheddescribing,bycountryor
territory,thestateofprogressofeachprojectonwhichafinancing
decisionhasbeentaken.ThemembersoftheEDFCommitteeregularly
receivethesestatements .
Asanasidetotheseremarksabouttherationalization oftheCommission 's
workingmethodsitmaybeofinteresttopointoutthatfinancially-biased
visitstothenationalauthorities ofeachofthenewACPStates,modelled
onthosemadetoexplaintheproceduresfortheawardofcontracts (see
above),wereorganizedduring1976bytheDirectorate-General for
Development inorderto:
Texplaintothenewrecipients EDFprocedures regarding :
thedesignation andpowersoftheNationalAuthorizing Officers,
thefinancial management oftheEUAcredits,
-negotiate andconcludeagreements togovernpayingagents 1relations
withtheCommission .
Thesebriefingvisitsweregreatlyappreciated bythenationalauthorities
ofthecountriesconcerned,fortheydemonstrated theCommission's
desiretosetupthevariousexecutiveagenciesrequiredtoenableprojects
tobeactuallystartedassoonastheyhadbeenapprovedbytheCommission .

-12-
Insomecountries,however,consideration shouldbegiventorepeating
suchvisitsororganizing seminarsinviewofthedifficulties encountered
bythenationalauthorities,ashasalreadybeenstressed,in
assimilating andapplyingourrulesinpractice.
Nevertheless ,theappointment ofasingleNationalAuthorizing Officer
ineachcountrycanbeconsidered anappreciable resultofthesefirst
visits,showingthatourpartners,inunderstanding theneedtodeal
withasinglepersonifprojectsaretobemanagedrationally,have
respectedthespiritandnotjusttheletteroftheLomeConvention .
3.Iftheadjustments madetoestimates whenprojectsandprogrammes
arepresentedtothedecision-making authorities areignored,totalcost
overrunsattheprojectexecutionstageareinsignificant giventhat
relativelylittleheadwayhasyetbeenmadeonmostfourthEDFprojects.
Atthemomentitisthereforeprematuretoexpressanopiniononthe
problemofoverspending duringexecution,exceptinthefollowing cases:
(a)Attheprojectexecutionstage,inotherwordsafterthesigningof
thefinancingagreementbutbeforetheinvitationtotenderwasissued,
theRwandeseGovernment agreedtoexemptmaterials fromcertaintaxesin
ordertocounterthelikelihoodofoverspending ontheMukungwa
hydroelectric project.
Asimilarsolutioninvolvingexemption fromtaxesattheinvitation to
tenderstagewasarrivedatinthePeople'sRepublicoftheCongofor
theprojectentitled"BridgeovertheNiariatLoudima".
Inbothofthesecasesitwaspossibletoavertthethreatofoverspending
ontheprojectbudgetorontheamountestimatedfortheworksthanksto
thesetaxexemption measures.Itshouldbepointedoutherethatthe
-Governments tendtoconsiderthislossofrevenueastheirfinancial
contribution totheproject,whichisquiteunderstandable .
Moreover,ithasfreennotedthatinthecaseofcofinancedprojects
exemptionfromtaxesissometimes aCondition,ifnotaprerequisite ,for
participation byotherbodiesordonorcountries.
(b>Otherproblemsinvolvingoverrunsonprojectbudgetshavebeen
resolved :
i.eitherbyusingthereservesearmarkedforcontingencies andcost

-13-
escalation where the amounts stipulated inachapter ofthe
financing agreement were being exceeded (this therefore involves
transferring sums within theproject allocation ,asinthe case
ofthe project entitled "Development ofthe Moro-Naba
backwater inUpper V olta ";
ii.orbycutting back onthetargets set inthe financing agreement
(e.g. inthe case ofthe project fornutritional rehabilitation
centres inUganda the number ofunits *was reduced from 10to3).
Itshould bepointed out inthis analysis ofthe measures taken incases
ofoverspending onprojects that ,tocut costs ,governments are ■
increasingly tending ,particularly inthe case ofagricultural projects ,
tohave the work carried out bypublic works departments ,participation
intheproject then being restricted totheavailable appropriation in
view ofthe absence ofsuch constraints aswould result from the
conclusion ofcontracts .
4.Under the Lome Convention andits implementing texts there are anumber
ofprovisions foraccelerating the execution ofcertain types ofoperation
akin toir amme aid. There isuncertainty about the scope ofsuch
measure ., .idinparticular about whether they are really executed faster
than project aid. '
(a)Emergency aidprojects are implemented more rapidly than projects
financed normally bygrant aid. The main reason isthat these projects
are generally exempt from the invitation totender procedures precisely
because ofthe emergency nature ofsuch operations . This initial
advantage isnot,however ,always carried through tothe execution stage ,
for some countries receiving this aid have been slow ,not tosay
negligent ,inpresenting and approving the cost estimates that are
essential before operations can bestarted . Experience shows that the
flexibility ofthe procedures used nevertheless accelerates the rate of
disbursement and,hence ,ofexecution . ,
(b)Inthe case ofmicroprojects theoverall primary commitment / ^
secondary commitment and secondary commitment /disbursement rates are
respectively 66.5% and 61.3% . Inactual fact ,since 80% ofthe project
appropriation may bemobilized once the estimate iscommitted asan
advance ,aperiod oftime isneeded tojustify (bymeans ofareport or
record )the use towhich these funds are put and toenable the balance to
bepaid . The amounts paid out donot therefore reflect the real state
ofexecution ofthe project .
* \
(c)Stabex operations are characterized byatransfer accompanying the
financing decision ,which demonstrates the rapid nature ofthis type of
operation .

-14-
(d)Tradepromotion programmes donotseemtobeimplemented anymore
rapidlythannormalaidoperations inviewofthedifficulties
encountered inorganizing sucheventsanddelaysbyparticipants in
settlingthefinancialsideofoperations .Thus,only37.7%ofprimary
commitments havesofargivenrisetosecondary commitments .
F.DISBURSEMENTS ANDDISBURSEMENT PROCEDURES
1.FourthEDFexpenditure enteredfortheperiod
,1April1976to31December1978<asshowninthe
balancesheetforfinancialyear1978)amountsto 572inEUA
Itisnecessarytoaddtothisamounttheshare
for"paymentstoberegularized "underthe
fourthEDF,amountingto 40mEUA
Thelatteramountcanbebrokendownasfollows:
-advancetotheEAC 16mEUA
-advanceforawardholders 10mEUA
-expenditure enteredas"provisional", ,
whichwillnotbecome"final"until
approvedinaccordance with
Article12oftheFinancial
Régulation 14mEUA
40mEUA
Overallexpenditure therefore amountsto 612mEUA
Forthe1977financialyeartherelevant
expenditure enteredonthebalancesheet
amountedto 252mEUA
By.addingtothatamount,usingthesame
criterionreferredtoabove,paymentsto
'beregularized,viz 49mEUA
Anamountof 301mEUA
isobtained,inotherwordsanincrease,for1978,of 311mEUA

-15-
Since the European Development Fund agreed tofinance all local
expenditure total disbursements cover both external and local expenditure .
Owing tocertain technical constraints ,inparticular the lumping together
ofthe different Funds into asingle peel ofeash while they arestill
being used ,the Commission isnot able togive exact figures onthe
breakdown between external and local expenditure . Besides ,tomake
apercentage breakdown between local and external spending where the
volume ofexpenditure involved is,relatively speaking ,low compared
with the overall amount offunds committed and contains 30% of
disbursements under Stabex would not,atthe present stage ofexecution ,
have any conclusive significance .
Ashas already been pointed out,the volume ofdisbursements made in1978
was considerably upon1977 :while inthe middle ofthe year the Commission
had been obliged not tocall inthe second tranche ofcontributions tothe
Fund from the Member States the situation changed during the third quarter .
This trend should continue and even grow stronger inthe immediate future ,
since the volume ofdisbursements recorded inthe first three months of1979
istwice that for the corresponding period of1978 . This situation shows
that after aperiod offeeling their way the r>wACP States today seem to
have ?-1r.-ted the relevant EDF procedures very well „
2.The Lome Convention brought major changes indisbursement procedures
since the texts stipulated that anaccount would have tobeooened onbehalf
ofthe Commission ineach ACP State for making external payments inthat
State , Under the Yaounde Conventions the Commission had accounts only in
the Member States . This obligation toopen accounts inevery ACP State
has added considerably tothe work involved inmanaging the assets .
Initially ,the Commission drew upastandard model for disbursement
agreements which would comply with the banking practices normally followed
both inthe new (English speaking )ACP States and inthe former AASM ..
The Commission ,text was drawn upafter detailed consultations ,in
particular with the Bank ofEngland ,and was generally accepted ,subject to
some minor ,purely formal amendments ,byall the financial establishments
towhich itwas submitted .
(a)Generally speaking ,accounts opened onbehalf ofthe Commission are
kept inthe books ofthe central banks ofthe ACP States . The only
exceptions tothis rule have been inStates where the central bank has

-16-
refused toact aspaying agent ,onthe grounds that technically itwas
poorly equipped tocarry out these tasks anditself suggested having
them carried out byabank experienced intransactions ofacommercial
nature (Suriname ),orwhere acentral bank does not yet exist and,in
that ease ,paying agent agreements have been eoneluSfd ,auajact "toa
number oftechnical amendments ,with the Treasury (Seychelles ).
For ACPStates inthe franc zone the negotiations were greatly facilitated
and simplified bythe existence oftwo central banks ,the Banque Centrale
des Etats deI'Afrique Centrale (Central Bank ofthe Central African
States )and the Banque Centrale des Etats deI'Afrique deI'Ouest
(Central Bank ofthe West African States ),which are both regional
institutions . Inboth cases asingle agreement involving anumber of
States was concluded with asingle body .
(b)the Commission 'saccounts opened inthe ACP States are denominated in
aEuropean currency . All accounts opened inthe franc zone countries
are funded with French francs ;those opened inthe ACP States which were
formally Belgian dependencies are denominated inBelgian francs ;the
account opened inSuriname isdenominated inGuilders . However ,the
accounts opened inthe new ACP States have ,generally speaking ,been
denominated inPounds Sterling orin -German Marks (roughly the same number
ineach ); the account opened inMadagascar isinGuilders and that opened
inMauritania inGerman Marks .
(c)Only one ACP State has so/far found itimpossible toimplement all
the mechanisms provided for inthe textS ;proposed bythe Commission for
making payments inlocal currency . That State isKenya ,whose negotiators
felt that certain provisions ofthe country 'sconstitution prohibited
payments inKenyan shillings from being made directly toKenyan residents
bydebiting the Commission account with the central bank . Inparticular ,
they asserted that itwas .absolutely necessary forall external aid to
bechannelled through the Kenyan Treasury before actually being used .
They therefore preferred tohave prefinancing carried out bythe Treasury
and torequest repayment subsequently bydebiting the Commission account .
Itwould seem that following experience with such practices the Kenyan
authorities are prepared ,inview ofthe delays encountered ,toaim at
greater flexibility inorder tobring themselves into line with the
practices that are common toall the other ACP States .
(d)Thetexts ofpaying agent agreement ?specify that the Commission 's
account istobedebited atthe exchange rates obtaining onthe date of
payment . This point gave rise todifficulties with Jamaica ,which atthe

-17-
end ofApril 1977 introduced two exchange rates -anofficial rate
(the "basic rate ")and a"special rate",involving the immediate
devaluation ofthe Jamaican Dollar byaround 30%.
Despite repeated moves the Commission failed in1977 tohave the special
rate applied toitfor the sale ofits German Marks tothe Jamaican
central bank . The situation has,however ,returned tonormal ;on
9May 1978 the basic rate was abandoned and there isnow only one exchange
«rate inforce iriJamaica . .
(e)The Commission does not have any obligation toopen accounts inthe
0CT/0Dinorder tomake payments inlocal currency inthose countries
and socontinues tomake such payments via its paying agents inEurope -
the Bank ofEngland ,the Caisse Centrale deCooperation Economique and
the Algemene Bank Nederland .
.(f)Itshould beadded that,inorder tocope with the increase inits
workload ,the Commission has had torationalize its working methods in
sofar aspossible and,inpractice ,has had tocall for the active and
vigilant cooperation ofthe Delegates inmonitoring the assets in
Commiss' ;">n counts inthe States where they are posted . Most ofthe
Delegatw „,after anumber ofreminders ,have understood the need to
perform these purely executive tasks . .
3.With the entry into force ofthe European unit ofaccount itisnow
uptothe Commission alone ,under the provisions ofthe Financial
Regulation ,towatch over the trend ofexchange risks affect ing European
Development Fund assets .
Under the Yaounde Conventions atleast part ofthese exchange risks was
borne bythe Member States :the contributions paid bythe Member States
into the special Commission accounts opened with the Treasuries ofthe
Member States were covered byanexchange guarantee ^slong asthe funds
inquestion remained inthe special accounts .
The Member States are now released definitively from their obligations
bypaying their contributions intheir own currencies onthe basis ofthe
exchange rates obtaining onthe date when contributions fall due.
) - • • -
Intheory itisthen uptothe Commission toseethat these cash sheets
retain their initial value interms ofthe unit ofaccount until such
time asthey are used for payments . Inactual fact,however ,there isno

-18-
waytheCommission canensurethis,forthefollowingreasons:
(a)Thecontributions shouldbepaidonfixeddatesbutcertainMember
States-unfortunately someofthosewhosecurrencies arefallingin
valueontheforeignexchangemarket-donotmeettheirobligations
punctually .WhentheCommissionfinallyreceivesthecontributions
payabletoitbytheMemberStatesitcanthereforeonlyrecordthe
trendsintheunitofaccountvalueofitscashassetscomparedwith
thevalueinunitofaccounttermsinitiallyanticipated .
(b)TheMemberStates'contributions totheEuropeanDevelopment Fund
aremadeonaproratabasisinaccordance withascheduleof
contributions .Thisschedulediffersfromthatusedtodetermine the
composition oftheEuropeanunitofaccountbasket.If,therefore,
alltheMemberStatesweretopaytheircontributions onthesetday
theCommission wouldbeobligedtoarbitragethevarioussumsreceived
assoonaspossible,inordertoredistribute theminaccordance withan
allocation keycorresponding exactlytothatoftheEUAbasket.The
onlywayavailableatpresentofensuringthatthecashassetsretain
theirvalueinEUAtermswouldbetousethemwithcarebeingtakento
ensurethatthevariousamountsoftheMemberStates'currencies making
upthoseassetsarespentinaccordance withthebasket'sallocation key.
(c)Aspointedoutabove,alargepartoftheFund'sassetsisspread
among40financialestablishments despitethecarebeingtakenbythe
departments tokeepthefundingofCommission accountsintheACPStates
atthelowestpossiblelevel.
ItisafactthatspreadingtheCommunity'sassetsfarandwideovera
largenumberofaccounts,particularly onessituatedthousandsof
kilometres fromBrussels,precludes anypossibility ofarbitrage and
obligestheCommission simplytorecordtheeffectsofexchangerate
movements ontheseassetsuntilsuchtimeastheyareusedwithoutbeing
abletotakeanyremedialaction.Oneofthecausesoftheexchangerisk
bornebytheEDFassetswouldbeobviatediftheMemberStateswereto
respectmorestrictlytheirobligations topayonaspecifieddate,but
itwillalwaysbenecessaryfortheCommissiontoseetoitthat,after
thecontributions havebeenpaid,itsassetsinunitsofaccountarenot
erodedcomparedwiththeinitialvalueofthoseassets.Inthisfield
theCommission,whichspentmanymonthsconductingdifficultnegotiations
withfinancialestablishments inEurope,managedtoconvincecertain
peopleoftheimportanceofexperimenting withaccountsdenominated in
EUA.TheDirectorate-General forDevelopment immediately seizedupon

-19-
this opportunity tonegotiate ,atthe end of1978,with financial
'establishments inBelgium ,France andItaly ,the opening onbehalf of
the Commission ofaccounts inwhich large amounts of EDF resources are
entered .
Since inthe past the exchange risks towhich EDF monies were ,subject
were particularly appreciable inatleast two ofthe Member States
concerned the opening of EUA accounts inthose two States isbound to
make asignificant contribution tosolving adifficult technical
problem facing the Commission now that the Member States nolonger
grant exchange guarantees immediately they paytheir contributions .
Aswith any other type ofrisk the Commission can donomore than take
precautionary measures -notably bysetting aside a"provision "for what
ithas calculated the risks tobe,i.e. byfreezing part ofthe Fund 's
monies asa"provision for exchange risks ". Itgoes without saying that
one day the ACP States ,dissatisfied atseeing the EDF monies reduced by
various amounts ,may come toquestion this practice .
Tocomplete the picture ,itshould bespecified that the rate ofinterest
generateo u-European Development Fund monies deposited with certain
paying .>inEurope will depend onthe rate ofinflation inthe
Member States where such monies are deposited . All th-ings remaining
equal ,creditor interest should partly cover any exchange losses .
6. CONTROL AND INSPECTION
1.Commi ss2on_De^egat2ons
(a)Overa Il_gol2c ^:external representation ,status ofthe EAC'.
During 1976 and 1977 the Commission embarked upon aprocess ofdefining
more closely and coordinating the various external representation measures
ithadfelt obliged totake inorder tocope with needs asand when they
arose .
Afirst communication onthe subject was transmitted tothe Council on
22July 1977 (COM (77)368 final )and wasentitled "External representation
medium-term policy ". Asecond communication (COM (78)66final ),addressed
tothe Council on9March 1978 ,-supplemented the preceding one bysetting

-20-
outwaysofstrengthening cooperation betweentheCommission'sexternal
officesandtheMemberStates'diplomatic missionsandbydealingwith
themeasureswhichtheCommissionitselfproposestotakeinorderto
improveharmonization oftheinternalmanagementofthevarioustypesof
externaloffices.
Inlinewiththisapproach,inMarch1978theCommissioninstructed an
interdepartmental workingpartyconsistingofrepresentatives ofthe
Secretariat-General andDGsI,VIII,IX,X(Spokeman'sGroup),XIX
andXXtoexaminewaysofmakingprogressinbringingintolinethe
Commission'svariousmethodsoforganizingitsrelationswiththeexternal
offices.InAprilitalsoaskedforareporttobepreparedonall
staffturnoverproblemsaffectingtheDelegations .
Theworkingpartytransmitted itsreporttotheCommission on
17November1978;itsuggested anumberofimprovements tothe
administration oftheexternalofficesandproposednewguidelines for
achieving convergence betweentheEACsystemandthearrangements forthe
externaloffices.
Morespecifically asregardschangesinthestatusoftheEAC,theCommission
alsosubmittedtotheCouncilaproposalforaregulationrelatingtothe
creationofaEuropeanAgencyforCooperation (COM(78)93finalof
9March1978).
Thetextwasaimedattransforming theexistingstructures oftheEuropean
Association forCooperation,anassociation established in1964under
Belgianlaw,intoapublicCommission agencysetupbytheCouncilonthe
basisofArticle235oftheTreaty.
Whiletheassociation setupin1964toprovidetheCommission departments
withthenecessaryassistance inselecting,recruiting andmanaging
overseasstaffwasanundoubted successwitheveryonepleasedtoacknowledge
itsflexibility andeffectiveness ,ithastobeadmittedthatthetrendof
development policy,thewideningofthefieldofactivityandtheamountof
capitalinvolvedmakeitnecessarytosetup~aslightlydifferent
organization whichmeetsthefollowingbasicobjectives :
i.Theresponsibilities assumedcomeunderthepublicauthorities :
onlyapublicstructure canbearsuchresponsibilities ;
«
ii.Flexibility andautonomyofmanagement areessentialforadministering
staffpostedincountries thousandsofkilometres fromheadquarters :
onlyarelatively independent structure canreacttosituations
immediately,asisnecessaryforlong-range management .

-21-
Inorder tomeet the two basic criteria summarized above ,the Commission
proposed tothe Council that aEuropean Agency forCooperation beset up,
ab.udget ofaround 35million EUAperyear ;inaddition toheadquarters
staff ,itspersonnel would also comprise thestaff oftheDelegations and
thetechnical cooperation personnel made available togovernments attheir
request .
AstheCommission pointed out initscommunication :,"Inshort ,theAgency
will benot somuch anew creation -asthe legal transformation ofan
existing instrument ".
The Commission proposal wasdiscussed bythe relevant European Parliament
committees (Committee onDevelopment and Cooperation and Committee on •
Budgets ).
InSeptember 1978 the Council 'sACP/FINWorking Party held apreliminary
discussion onthis proposal .
Inaddition ,the Court ofAuditors drew up,atthe request ofMembers of
theEuropean Parliament ,areport ontheoperation ofthe EAC,which it
transmitted tothe Commission on16October and tothe Council on25October .
On19C r1978 ,inorder totake account insofar aspossible ofthe
observations made byMembers ofParliament andthe Court ofAuditors ,the
Commission notified the Council andParliament ofchanges inits initial
proposal regarding the following aspects :
t
(1)Theconditions that would govern thedrawing-up andadoption ofthe
Agency 'sbudget andthe auditing ofitsaccounts were specified in
theexplanatory memorandum ;
(2)Article 17ofthedraft Council regulation wasreworded sothat the
Delegates andtheAgency 'sheadquarters staff would betreated as
temporary Community staff andtheAgency 'sother expatriate personnel
would becovered bystaff regulations drawn upbyanalogy with those
ofthetemporary staff .
During itsMay 1979 session Parliament delivered itsopinion onthis new
proposal ,based onthe reports drawn upbyitsrelevant two committees .
While giving qualified acceptance totheprinciple ofsetting upan
Agency ,Parliament suggested that Article 17,dealing with thearrangements
envisaged forthe Delegates andheadquarters staff ,should bereworded and
that thearrangements applicable toother staff should beamended .

-22"
(b)Commission Délégations
The process ofestablishing the Delegations following the entry into force
ofthe Lome Convention was spread mainly over the years 1976 and 1977 .
In1978 the accession offurther States tothe Convention entailed the
opening ofanew Delegation (for Papua New Guinea ). Before the various
phases ofthis expansion are explored indetail itshould benoted that
the extension ofCommission overseas representation did not mean just a
considerable increase inthe workload ,,but,more importantly ,aprofound
change inthe working habits ofthe departments concerned (new language ,
new laws,etc.).
Sta_ff_recrui^tment _and_mana3ement
i.Commission Delegates :preselection procedures were organized back
inSeptember 1975 ;in1976 the increase inthe number ofDelegations
from 22to41made itnecessary torecruit another 18Delegates and
topromote one adviser from within . In1977 and 1978 following
staff movements (people leaving ,etc.)and the opening ofanother
# Delegation six new Delegates were recruited (in1978 they numbered 42).
Certain Delegate posts were awarded toofficials ofthe Commission and
other institutions ,who were seconded forthat purpose (6officials
inalI).
Accelerated training schemes run both inBrussels and inthe overseas
postings helped prepare the newcomers for taking uptheir duties .
ii.Advisers andstaff attached toDelegations
The number ofadvisers andstaff attached toDelegations rose from
134 in1975 to214 in1977 and 224 in1978 . Extensive advertising
campaigns were conducted inthe specialized press and aimed at
university circles and national authorities inorder torecruit the
staff .
With regard tothe economists attached tothe Delegations and technical
assistants ,itisinteresting tonote that in1975 and 1976 there
were 1745 applicants ,from among whom 114 were selected tofill the
vacancies inquestion . Here too,moves were made tosecond officials
onthe grounds ,that itwas inthe interests ofboth the Delegations
and the persons concerned ,besides which this was apractical example
ofthe Commission applying thestaff mobility policy which itwishes
topromote .

-23-
(2)Extenditure_and_mana2ement_of_egu2gment
1Expenditure leaptaheadbetween1975and1978:
From13725000u.a.In1975
itroseto19684000u.a.in1976
28710000EUAin1977,and
33420000EUAin1978,thatisa46%increasebetween1976and1977
anda16%increasebetween1977and1978.
Staffexpenditure playedabigpartinthisdevelopment butthecost
ofinstalling theDelegations andstaffwasfullyreflectedinthetotal
valueofmaterialandmoveablepropertyinventorized asat
31December1978,whichamountedtomorethan3500000EUA(compared
with193804u.a.in1975).
Solutions werefoundtospecialproblemsfacedbythenewDelegations,
inparticular asregardsinsurance andthesupplyofequipmentwhichit
issometimesdifficulttoobtainlocally.
^Bre^kr2_of_costs
TheJune1976estimatesputtheadministrative expensesoftheDelegations
(includingtheconsultancy firms)at97.345000EUA,brokendownasfollows:
(millionEUA)
Year ACP OCT ALLCOUNTRIES TOTAL
1976 12.723 0.858 1.234 14.815
1977 19.505 0.850 1.060 .21.415
1978 20.515 0.920 1.165 22.600
1979 22.565 1.015 1.270 24.850
1980(6months)12-405 ~0.560 0.700 13-665
TOTAL: 87.713 4.203 5.429 97.345
Theseassessments didnottakeaccountoftheforecastsforNigeriaand
PapuaNewGuinea(subsequently estimatedat2095000EUA),whichbrings
thetotalto99.440000EUA.
Theseestimates werebasedontheappropriation andnumberofstaff
envisagedfor1977.Theresultswerethenincreased by10%for1978/79
and1980.
Expenditure comprises :delegations andheadofficecostsaswellasexpenditure
ontechnicalassistance andstudentgrantsfinancedbytheEAC.

-24-
Afterthethirdyearofimplementation ofthefourthFundexpenditure
fortheACPcountriestotalledapproximately 57millionEUA,which
roughlyborresponds totheindicative programmeestimates.
Inviewoftheresultsobtainedsofarandthefactthattheappropr1at1on
for1979willprobablyexceedrequirements (thenumberofstafffor1979
shouldstaythesameasin1978)expenditure islikelytoremainwithin
theamountbudgetedforadministrative expenses.
Thereremains,however,anunknownquantitywhichisdifficulttoestimate,
namelythewaytheBelgianfrancislikelytomovevis-a-vistheunitOf
account.Between 1April1976(whentheestimates weremade)and
1April1978theparityoftheBelgianfrancfluctuated from43.7404to
39.425,adifferenceofapproximately 9.37%.
Between 1April1977and1April1978thedifferencewasonly3.50%.
Bethatasitmay,expenditure shouldbelimitedasfaraspossibleandany
complementary orsupplementary measuresshouldbematchedbyappropriate
financial resources .
2.fl[]3nci_al^contro_l
Atits363rdmeetingon10December1975,theCommission tookanumberof
measuresregardingfinancialcontrolofEDFoperations .
Thesemeasuresinvolved :
(a)thesecondmentofafinancialcontroller;
(b)on-the-spotinspection;
(c)inspection basedonrecords.
(a)Secondment_of afinancia^_control ler
TheCommissionofficialappointedtoperformthistaskwithinDGVIII
hasbeenworkinginthiscapacitythreedaysaweeksince21February1977.
Experience hasshownthisdecentralization measuretobeeffective,for
commitments ordisbursements notexceeding 50000EUAmaybeendorsed
directlybythesecondedfinancialcontroller .
(b)On;the-spot inspection
In1977and1978financialcontrolundertook anumberofmissionstothe
countriesconcerned,namelytoSuriname,theNetherlands Antilles,

-25-
Cameroon and Chad,Benin and Upper V olta ,Togo,Congo and Madagascar .
The main object ofthese missions carried out inconjunction with the
financial departments ofthe Directorate-General for Development was
tocheck that commitments made and the resulting projeet implementation
were inconformity with the provisions offinancing agreements .
During the missions theofficials concerned were able toassess the
organization and control methods ofeach ofthe Delegations visited
and audit the books and current accounts . These visits are useful ,
for they enable :
i.the controller toobtain abetter idea ofthe actual ,situation and,
hence ,ofthedifficulties encountered inexecuting certain projects ;
ii.the controller toappreciate the concerns and *requi rements ofthe
auditors and totake account ofthe observations orrecommendations
made .
Following each mission areport isdrawn upand communicated tothe Chief
Authorizing officer . Thelatter ,after consulting the relevant
departin jf DGVIII and the Delegates ,inturn passes onhis views or
remarks tothe Financial Controller *
Further control missions are scheduled for 1979 .
(c) onrecords
Since February 1977 the following must first beendorsed bythe Financial
Controller :
i.all commitment orcredit transfer proposals concerning contracts
1 that have been oraretobeconcluded ,
ii.expenditure authorizations tobemade inforeign currency via the
EDF accounting officer .
Onthe whole the above measures have sofar yielded good results .
Computerization ofthe EDF'saccounts has also made itpossible to
distribute account balances regularly to"the control departments ,thus
facilitating internal control and making forstricter management .

-26-
3.£ourt_of..Auditors
(a)Articles64etseqoftheFinancialRegulation applicabletothe
fourthEDFdetermine therulesgoverningthepresentation andauditing
oftheaccounts,thelatteroperationhavingbeencarriedoutsince
October1977bytheCourtofAuditors,whichsucceededtheAuditBoard.
WhenadoptingthisFinancialRegulation theCommission statedthatit
wouldtransmitregularlytotheCourtofAuditorsthefinancing and
transferdecisions andagreements andallperiodicstatementsrelating
tothefinancialexecutionofprojectsinprogress.
Finally,andmostimportantofall,theCommission agreed,soasnotto
holduptheworkoftheCourtofAuditors,thatthelattercouldcarry
outitsauditsatitsrequestnotwhenprojectswereclosedbutwheneach
contractsformingpartofaprojectwasclosed.
(b)AssoonasthenewCourtofAuditorswassetuptheCommission gave
thenecessaryinstructions toensuregoodrelations anddefinedtheterms
onwhichitsdepartments weretocollaborate insupervising expenditure
andrevenue.
AsearlyasJanuary1978theDirectorate-General forDevelopment was
approached bytheMemberoftheCourtofAuditorsresponsible formatters
relatingtodevelopment aidwithaviewtodefiningbycommonaccordthe
typeofinformation tobetransmitted totheCourtofAuditorsand,more
generally,thenatureofrelationsbetween DGVIIIandthiscontrolbody.
ThesetalksresultedinanexchangeoflettersbetweentheMemberofthe
Commission responsible forDevelopment andtheCourtofAuditors,towhich
wasannexedadetailedsummaryofthepointsofagreement.
*AcombinedefforttoimprovethemanagementofCommunityfundsenabled
/

-27-
fruitful collaboration tobestarted upbetween the controller and
the controllee . This collaboration wasparticularly inevidence on
the occasion ofthefirst on-the-spot control mission undertaken by
the Court ofAuditors inBurundi in1978s
H. CLOSURE OF OPERATIONS
The numbpr ofoperations closed under the fourth EDF isrelatively low ,,
even ifaccount istaken ofemergency operations and small-scale schemes
such asstudies preceding the execution ofprojects . The only exception
isStabex transfer operations ,the reason forthis being their special
nature . ^
This situation isnot abnormal inthe light ofexperience with the previous
EDFs .
Asalready pointed out above the fourth EDF did not become fully
operational until the .second half of1978,and will remain sothrough 1979
and the following years .Itistherefore quite premature tomake an
assessment now ofhow fourth EDF operations have been implemented .
X
 *

-28-
CONCLUSIONS
The overall assessment that can bemade after thirty-three months of
implementation ofthe Lome Convention isfar from unsatisfactory -
especially ifthe situation atthe end of1978 iscompared with that
atthe end of1977 :total primary commitments accounted for 55% ofthe
overall fourth .EDF appropriation (3000 million EUA )against 36%;
with regard toprojects secondary commitments accounted for 44% of
primary commitments asagainst 21% and disbursements accounted for 46%
ofsecondary commitments asagainst 38%.
These figures show that while the increase isvery considerable atthe
level ofcommitments alone itisfar less soasregards the pipeline
between commitments and disbursements .
Admittedly ,this isnot aproblem peculiar tothe EDF.-Arecent OECD
analysis shows that forall DAC members the volume ofdisbursements
remained stagnant ,however ,which isfar from being the case with the EDF.
The Commission nevertheless wished toexamine ingreater detail why such
^aphenomenon hadoccurred inconnection with projects financed bythe
Community . With the aim ofbringing tolight all the possible causes it
was keen toinvolve inthis examination its "men onthe spot",the
Commission Delegates inthe ACP States . The following conclusions
therefore come largely from the Delegates' replies' toaconfidential
questionnaire addressed tothem bythe Brussels departments atthe end of
1978 .
1.The Delegates dismissed clearly certain possible causes straight away .
For instance : .
i.nearly all the Delegates acknowledged that they received adequate
instructions from Brussels andthat the decentralization ofpowers
was adequate ;
?ii.EDF procedures themselves were not called into question :itwas more
the way they were interpreted bythe Community 'spartners which gave
food for thought . Moreover ,this last point needs tobequalified
inthat for obvious political reasons the Commission had tokeep an
even balance inits financing decisions between projects for the old
associated countries and those for the new ACP States ;inmost cases ,

however ,the former were ready for rapid implementation while the
latter were not .
2.The underlying causes ofdelay ,inthe view ofthe Delegates ,centred
basically ontwo major points :
theprojects themselves ,
inefficiency onthe part ofthe national authorities ofthe ACP States .
(a)With regard tothe projects the following points were called into
question :
i.many projects ,mainly because ofthe lack ofpreparatory studies
"atthe project appraisal orfinancing decision stage ,were
simply not ready . This very significant cause ofdelay inthe
new ACP States was all the more alarming asitwas often combined
with anatural tendency onthe part ofthe recipient countries to
consider that the project was already onthe stocks whereas it
had merely been decided upon and had yet tobelaunched ;
ii.,;.rewere certain types ofprojects which ,bytheir very nature ,
took longer toexecute than others . This was the case with
integrated rural development projects ,where the delays ingetting
them under way were often stressed . Moreover ,itmay be
wondered whether the statistics onthe disbursements-commitments
pipeline are not distorted atthe outset inthat they bring
together commitments ,which .are bydefinition multiannual ,and
disbursements ,which are immediate . For instance ,when arural
development project isfinanced for which atime scale ofsix or
seven years isset atthe outset itmay seem wrong toexpress
annual disbursements asapercentage ofmultiannual commitments .
Statistically ,itwould probably becomplex ,inview ofthe
large number ofprojects ,tocompare disbursements inagiven
year with the proportion ofcommitments implemented during that
,year ,butitshould atleast bepointed out that .amajor
correction should bemade . Ifthis could bedone itwould
-radically alter the parameters ofthe "pipeline ".
(b)Inefficiency onthe part ofthe national authorities ofthe recipients
States was stressed bynearly all the Delegates asacause ofdelay .
Generally speaking the criticisms pointed tothe lack ofqualified
staff and equipment ,the dilution ofresponsibilities ,the

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aIL-too-frequentabsencesofthoseresponsible ,,excessivestaff
turnover,oftenasaresultofpoliticalcircumstances ,andfailure
bytheACPtounderstandfullytheroleoftheNationalAuthorizing
Officer,whointoomanyinstances wasregardedasamere
administrator efEDFfunds,andwhoseposition wastooweak
vis-£-vistheotherauthorities ..
Thecorollarytotbseoperational shortcomings wasthatinpractice
theDelegateinevitably replacedtheNationalAuthorizing Officer
tosomeextent.Therehavealsobeenmajor,unwarranted delaysin
theexecutionofprojects,particularly inthemanyexamplesrecorded.
/
Forinstancetherewastheroadprojectonwhichadecisionwastaken
rapidlyasaresultofpressurefromtheGovernment,thelatter
assertingthatitwasatoppriority.Thepreselection noticewas
issuedbackinSeptember 1977andtheinvitation totenderdossieris
readybutnothingconcretehashappenedsincethenbecausethe
Government hastakennostepstoexpropriate thenecessary land.
Thentherewasanotherroadprojectforwhichtenderswereopenedon
31March1978.Ayearlater,thecontracthadstillnotbeen
awardedtotheAfricanfirmselectedbecauseofitsfailuretopresent
thefinancialguarantees requiredbytheadministration .
Therewasaprojectforfivetechnicalcollegesinrespectofwhich
therelevantdepartment oftheACPStateconcernedheldontothe
letterofcontractforsixmonthswithoutanyvalidreason.
'Therewasthehospitalinrespectofwhichtheserviceordertostart
workwasnotgivenuntiltwoyearsafterthetendershatibeen
examinedowingtotheslownessofthenationalcontractsboardand
lengthywheelinganddealingtobringtheamountofthecontractdown
tothevolumeoffinancingavailable.
Therewasalsothebananaplantation setupfifteenmonthslate
becauseoftheauthorities' inabilitytoprovidethenecessaryland.

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3.Whileinthelongrunthesevarioussourcesofdelaymaydiminish
inimportance,eithergenerally asaresultofthenewACPimproving
theirassimilation ofEDFprocedures oratindividualprojectlevelas
aresultofbetterpreparation beforethefinancingdecisionand
strengthening oftheresourcesavailabletothenationalauthorities
bymeansofextensivetechnicalassistance,thereremainsoneother
factorwhichbeyonddoubtisoneofthelamentable featuresunderlying
thenegativeaspectsofthisassessmentofaidimplementation :the
inadequate numberofCommissionstaff.
Admittedly,thetransferofpowerstothenationalauthorities hasbeen
accompanied bydecentralization ofCommission powerstoitsDelegates,
whoaretohelpthenationalauthorities copewiththeirnewtasks.
TheDelegates,however,whoserolehaschangedfromthatofsupervisors
totheincomparably moredelicateoneofadvisers,aresometimesina
difficultpositionwhenitcomestopromptingtheirnationalcounterparts
intoactiondayafterday.Itisprobablethatsomeofthem,
particularly incountries wherethepoliticalsituationisprecarious,
tendtoseekrefuge,inacautious"waitandsee"attitude,behindthe
screenofthenationalauthorities' executiveresponsibility .Moreover,
while*hemmissionpridesitselfonbeingprobablytheonlyaid
organi/_..unintheworldtoemployasmanystaffinthefieldasatits
headquarters theinadequate numberofheadquarters staffisallthemore
Lamentable (inproportion tothatofthemajorinternational organizations )
especially asweareonlyjustabouttoembarkuponthefullyoperational
stageofimplementing thefourthEDF-atatimewhentheexecutionof
thethirdEDFhasyettobecompleted,atatimewhenitwillsoonbe
necessarytopreparetolaunchthefifthEDF,andatatimewhenthe
Directorate-General forDevelopment istolaunchimplementation ofthe
Mediterranean Agreements andtoadministerfully-fledged aidprogrammes
inthenon-associated developing countrieswithouthavingDelegations
inthefield.