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Brussels, 17.3.2010

COM(2010)103 final

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT

Biennial Report on the Special Framework of Assistance for Traditional ACP suppliers of Bananas

SEC(2010)331

INTRODUCTION

The Special Framework of Assistance (SFA) for traditional ACP suppliers of bananas was created in 1999 in order to help those suppliers to adjust to changing international competition and expired in December 2008. It targeted 12 traditional banana-supplying countries: Belize, Cameroon, Cape Verde, Côte d'Ivoire, Dominica, Grenada, Jamaica, Madagascar, Saint Lucia (henceforth St Lucia), Saint Vincent and the Grenadines (henceforth St Vincent), Somalia and Suriname. In total, some €376 million were granted under the SFA scheme.

The objectives were either improving the competitiveness of traditional ACP banana producers, or, if this were no longer feasible, supporting diversification. The aim was to be achieved by projects designed to

- Increase productivity,

- Improve quality,

- Adapt production and marketing to the EU’s quality standards,

- Establish producers’ organisations focusing on improvements in marketing as well as on the development of environment-friendly production methods, including fair-trade,

- Develop marketing strategies designed to meet the requirements of the EU common organisation of its market,

- Assist producers in developing environment-friendly production methods, including fair-trade,

- Support diversification wherever the competitiveness of the sector is not sustainable.

The yearly country allocations were based on the competitiveness gap compared with third country suppliers and on the importance of banana production for the economy of each ACP country[1]. The annual budget has gradually decreased from €44.5 million (1999) to €29.2 million (2008). Until 2003, the allocation key was designed to provide more support to countries suffering from a larger competitiveness gap. As of 2004, a reduction coefficient rewarded countries that achieved competitiveness gains.

LEGAL BASIS

On 22 April 1999 the Council adopted Regulation (EC) No 856/1999[2] establishing a Special Framework of Assistance for traditional ACP suppliers of bananas. On 22 July 1999 the Commission adopted Regulation (EC) No 1609/1999[3] laying down detailed rules for implementation.

In 2007 and 2008 the budget line amounted to €28.67 million and €29.226 million respectively. The Commission Decisions fixing the country amounts were adopted on 23 April 2007[4] and 21 April 2008[5].

Article 9 of the Council Regulation specifies that “ by 31 December 2000, and every two years thereafter, the Commission shall present a report, accompanied if appropriate by proposals, on the operation of this Regulation to the European Parliament and the Council ”. This report covers 2007 and 2008[6] and is accompanied by a Staff Working Document.

MARKET INFORMATION

The European Union (EU) is the largest consumer and importer of bananas in the world. Compared to 2007, in 2008, 5 416 449 t. (referred to below as t.) of bananas were consumed in the EU (+3.5%), of which 4 848 889 t. (+3.7%) were imported from third countries and 567 560 t. (+2.3%) were of domestic origin. In 2008, the USA imported 3 976 146 t. of bananas, a decrease of 0.7% over the previous year. Almost all bananas imported by the US were of Central and South American origin (ACP bananas representing 0.003% of total imports).

The EU banana market is supplied by Most Favoured Nation (MFN) countries (mainly Central and Southern American countries), African, Caribbean and Pacific (ACP) countries, and domestic producers.

In 2008, MFN bananas consumed in the EU were 72.5%, while ACP bananas accounted for 17% and EU production for the remaining 10.5%. The main MFN suppliers of bananas were Ecuador, Colombia and Costa Rica, with 1 328 033, 1 278 133 and 893 395 t. of imports. During the same year, the main ACP suppliers were Cameroon, Côte d'Ivoire and Dominican Republic, which exported 279 530, 216 583 and 170 396 t.

Cape Verde, Grenada, Madagascar, and Somalia no longer export bananas to the EU.

EU TRADE REGIME

Since 1 January 2006, the EU applies an MFN tariff of €176/t. to banana imports, in line with the EU's commitments to move from its previous quota system to a tariff-only regime. Statistics monitoring the impact of the new regime on imports show that it maintains market access conditions, with increased imports.

During this period, bananas originating in least developed countries (LDCs) have enjoyed duty and quota free access to the EU market under the Everything But Arms (EBA) initiative. The same applies since 1 January 2008, to bananas originating in ACP countries which have concluded agreements establishing, or leading to Economic Partnership Agreements (EPAs). All non-LDC ACP countries that exported bananas in 2007 initialled or signed an interim or full EPA.

Financial Decisions

Budget line 2007

After approval of the Financing Proposals, the 12 Financing Agreements were signed in early 2008 for €28.67 million (Table 1).

Some 42% of the funds are dedicated to improving the competitiveness of the banana export sector in 4 beneficiary States and 58% of the funds to diversification in 8 beneficiary States (Charts 1 and 2).

Budget line 2008

After approval of the Financing Proposals, the 12 Financing Agreements were signed in early 2009 for €29.23 million (Table 1).

Table 1: Banana Budget Line 21 06 05 (ex B7-8710) |

1999 – 2008 |

Allocations (€) | Commitments (€) | Payments (€) | RAC (€) | RAC % | RAL (€) | RAL % |

Belize | 27 719 000 00 | 21 749 415.38 | 15 959 198.62 | 5 969 584.62 | 22% | 11 759 801.38 | 42% |

Jamaica | 42 625 000.00 | 34 656 171.84 | 27 664 349.83 | 7 968 828.16 | 19% | 14 960 650.17 | 35% |

Dominica | 52 503 000.00 | 39 472 434.09 | 22 441 384.45 | 13 030 565.91 | 25% | 30 061 615.55 | 57% |

St Lucia | 71 623 000.00 | 50 239 673.65 | 33 004 820.80 | 21 383 326.35 | 30% | 38 618 179.20 | 54% |

St Vincent | 51 093 000.00 | 41 290 569.20 | 23 600 296.00 | 9 802 430.80 | 19% | 27 492 704.00 | 54% |

Grenada | 5 500 000.00 | 3 887 119.97 | 3 224 044.47 | 1 612 880.03 | 29% | 2 275 955.53 | 41% |

Suriname | 21 767 000.00 | 16 315 936.67 | 12 176 565.69 | 5 451 063.33 | 25% | 9 590 434.31 | 44% |

Ivory Coast | 34 546 000.00 | 22 655 888.96 | 15 333 367.71 | 11 890 111.04 | 34% | 19 212 632.29 | 56% |

Somalia | 13 698 000.00 | 12 350 524.26 | 9 301 680.17 | 1 347 475.74 | 10% | 4 396 319.83 | 32% |

Cape Verde | 4 100 000.00 | 1 053 727.00 | 776 332.15 | 3 046 273.00 | 74% | 3 323 667.85 | 81% |

Madagascar | 3 500 000.00 | 2 000 000.00 | 1 800 000.00 | 1 500 000.00 | 43% | 1 700 000.00 | 49% |

GRAND TOTAL | 375 951 000.00 | 281 020 642.64 | 195 151 162.19 | 94 930 357.36 | 25.3% | 180 799 837.81 | 48.1% |

IMPACT MONITORING

General

An external evaluation commissioned in 2008 and completed in the first quarter of 2009, involved missions to 8 countries (Belize, Cameroon, Côte d'Ivoire, Dominica, Jamaica, St Lucia, St Vincent and Suriname). In general the results reported for the Eastern Caribbean apply also for the 4 countries not visited.

On-going programmes were evaluated in terms of:

- Relevance and validity of objectives

- Validity of medium-term response strategies per country

- Efficiency and effectiveness of SFA

- Results and impacts of planned activities on the competitiveness of the exporting banana producers

- Results and impacts of planned diversification activities on (ex-) banana planters and (ex-) banana sector workers

- Sustainability of programmes

Relevance of c ountry strategies

Strategies enhancing competitiveness have proven their relevance and were clear and achievable in those countries which 1) demonstrated strong commitment to this goal; 2) had favourable agronomic characteristics; 3) already had highly commercially structured sectors and 4) were in a position to transform the banana sector into a more technological and commercial sector (Belize, Cameroon, Côte d'Ivoire, Suriname and, initially, Jamaica). Their SFA programmes prioritised increasing productivity, improving product quality and environmental friendliness, training, niche marketing etc. Their strategies also recognised changing market conditions and needs.

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Successful diversification stems from a mix of macro, meso and micro-level initiatives. The countries' economic diversification agendas were unspecific, multi-sectoral and had varying priorities and time frames; programmes would have benefited from clearer guidelines.

On diversification, the evaluation found that:

- Too many projects and programmes were designed/implemented (e.g. in 2008 St Lucia had 64 on-going interventions valued at €69 million).

- Too many areas were targeted, e.g. tourism, roads, private sector development and agricultural development, reducing the prospects for any significant impact.

Impact

The banana industry plays a crucial role in Belize, Cameroon, Côte d'Ivoire, Dominica, Jamaica, Suriname, St Lucia and St Vincent. In Dominica, St Lucia and St Vincent, banana exports represented 18.1%, 19.7% and 22.3% of the countries' total exports in 2006 (FAO 2008). By comparison, the banana sector accounted for 9% and 7% of exports by Cameroon and Côte d'Ivoire.

The SFA programmes have made valuable contributions to improving the competitiveness of Belize, Cameroon, Côte d'Ivoire and Suriname, offering them stronger prospects for survival in a more liberalised environment.

The share of traditional Caribbean suppliers declined from 52.3% of total ACP banana imports in 1992 to 13% in 2008. At the same time, African imports rose from 37.4 % of total ACP bananas in 1992 to 59% in 2008, and exports from the Dominican Republic (not an SFA beneficiary) and Belize rose from 10% of total ACP bananas in 1992 to 28% in 2008.

Suriname is a success story. Also thanks to SFA support, the industry has been revived and transformed into an efficient exporter, the only traditional ACP producer to register positive export growth in 2006 - 2008.

The evaluation report suggests that activities can be expected to be sustainable over the short to medium term. Whether Belize, Cameroon, Côte d'Ivoire and Suriname can remain competitive under a different tariff schedule will depend almost entirely on their capacity to increase productivity beyond 2009.

It is too early to ascertain what effects SFA support has on economic stability and diversification since only about 50% of allocations have been disbursed as of end 2008. Also, the larger diversification investments are in physical infrastructure-related activities (roads, buildings etc) with considerable time lags before efficient utilisation of these assets can be achieved.

The impact could not be quantified as 1) changes in EC financial rules led to slower disbursements and time extensions for roughly half of the activities under SFA 2003 - 2005; 2) the Objectively Verifiable Indicators for some countries e.g. Côte d'Ivoire and Cameroon, were not adequately developed and could not be used to assess impact, and 3) monitoring and data collection systems were not in place to generate cumulative information on expected and/or actual results, e.g. Belize.

However, as a result of SFA support, the Eastern Caribbean States are now focussing on prerequisites for successful economic diversification. This shift away from traditional dependency on bananas to other opportunities is now embedded in their development plans.

The current focus on strengthening essential infrastructure (St Vincent and Dominica), improving rural education (Belize), private sector development (St Vincent and St Lucia), incorporation of ICT education in school curricula, tourism master planning and social support systems will eventually produce positive results. Diversifying countries are now much more committed to building capacity to diversify on a sustainable basis.

The SFA programmes had a positive effect on target populations and communities, by funding specific social investments (i.e. Social Investment Funds, rural development schemes, education and health).

In the competitiveness-oriented countries, the banana sector is now more closely aligned to market requirements and EU environmental policies and standards. Market-dictated production protocols (e.g. EurepGAP and ISO 14001) have improved on-farm working conditions, enhanced prospects for soil conservation and reduced the negative environmental impact. In order to obtain European certification, producers were forced to use inputs more rationally and to reduce overall use of agrochemicals, packaging materials, machinery, and power.

The sustainability of diversification initiatives depends on the governments' commitment to incorporate those activities into annual budgetary allocations and expenditure plans. The evaluation found that diversification countries are using SFA resources to build national capacities to address broader and longer term economic diversification challenges and goals.

CONCLUSIONS AND RECOMMENDATIONS

The Commission made efforts to speed up execution while preserving quality, completed the adaptations required in ongoing SFA projects and reviewed/programmed those approved in 2006, 2007 and 2008. Actual disbursements from all SFA programmes increased from €21 million in 2006 to €46 million in 2008. Disbursement of all programmes will be completed in 2012 (apart from ex post evaluations and audits).

The Staff Working Document includes an overview of the recommendations made in the 2006 Monitoring and Impact Evaluation Report (COGEA, 2006) and the actions taken. Across all 8 countries reported in the 2008 Monitoring and Impact Evaluation Report (HTSPE, 2009), there was marked progress in both competitiveness and diversification related issues.

Some progress towards improved competitiveness and increased diversification

The programmes made substantial contributions to achieving the objectives:

1. Improved competitiveness in Belize, Cameroon, Côte d'Ivoire and Suriname, although support could not compensate for the hurricane damage in Jamaica in 2005, 2007, and 2008.

2. Improved capacity for successful economic diversification in Eastern Caribbean and for agricultural diversification (where monitored) in Somalia, Cape Verde and Madagascar, although the full impact cannot yet be quantified.

In the competitiveness -oriented countries, the banana sector is now more closely aligned to market requirements and EU environmental policies and standards, establishing the basis for sustainable business development.

The implementation of recommendations made in the previous report has resulted in notable improvements in the timeliness and quality of implementation in Belize, Jamaica and the Windward Islands. This aspect was less relevant for both Cameroon and Côte d'Ivoire, which benefit from more diversified sources of finance and thus were less dependent on support.

In countries where diversification is a priority, efficiency suffered from a lack of focus, many very small investments, averaging around €1 - €1.5 million, with limited potential for real impact. Furthermore, linkages between the various initiatives are still limited and fragile.

The external evaluation recommended that ACP countries committed to diversification should review the contributions of their SFA portfolios to their economic diversification agenda at a macro level. This should include an assessment of the cohesiveness of such programmes and facilitate formulation/upgrading of each country’s diversification strategy, with clear priorities including the quantity and sources of financial resources needed to support and institutionalise key activities.

In order to improve both monitoring and evaluation of the impact of diversification programmes, it also recommended updating and improving the logical frameworks and their use as programme management tools to ensure that implementing agencies are continually aware of and working towards expected results and actively measuring agreed indicators.

Sustainability of ACP banana exports still fragile

The prospects for sustained competitiveness are largely dependent on 1) the outcome of ongoing international trade negotiations and 2) the capacity of countries to achieve further productivity gains and cost savings.

The strategies pursued by some countries have lacked a realistic assessment of challenges created by the international market situation and future potential implications of the conclusion of WTO and ongoing bilateral trade negotiations. Results can be delivered where countries 1) demonstrate strong commitment to adjust to international developments, 2) have favourable agronomic characteristics, and 3) already have highly commercially structured sectors.

Challenges remain for banana-exporting countries. They need to address them together and with international support. The international community, including the EU, has attached greater importance to assisting developing countries in increasing their competitiveness of the whole economy and making better use of international trade opportunities. EU Aid for Trade does not focus on just individual sectors. One prerequisite for success is to draw and update multi-stakeholder strategies for developing trade and integrating into the international trading system.

The SFA's implementation over ten years allowed recipient countries to plan strategically and will remain a useful reference point for future action.

[1] The methodology is detailed in Commission Regulation (EC) No 1609/1999 of 2 July 1999, OJ L 190, 23.7.1999, p. 14.

[2] OJ L 108, 27.4.1999, p. 2.

[3] OJ L 190, 23.7.1999, p. 14.

[4] Commission Decision C/2007/1744.

[5] Commission Decision C/2008/1424.

[6] The previous report covered 2005 and 2006: COM(2006)806 final.

[7] Quality standards are imposed by larger European retailers.

[8] RAC or Remainder to be Contracted indicates the percentage of funds allocated to the project for which no works, supply, services or grant contracts or programme estimates, have been signed.

[9] RAP or Remainder to be Paid indicates the percentage of funds committed or contracted in contracts but not yet been paid or disbursed.

[10] RAL or Remainder to be Liquidated indicates the (percentage of the) funds allocated to the programme not yet paid/disbursed. This includes the Remainder to be Paid (RAP) on existing implementation contracts.