EN Official Journal of the European Union CE 88/94

(2004/C 88 E/0100)

WRITTEN QUESTION E-2551/03

by Avril Doyle (PPE-DE) to the Commission

(4 August 2003)

Subject: EU failure to disburse overseas aid

Following recent reports that the EU has accumulated EUR 20 billion in unspent aid funds over the past decade despite consistently high levels of investment need in developing countries, can the Commission advise on the reasons why available money was not spent on worthwhile projects by the European Development Fund?

Furthermore, can the Commission explain what measures are being put in place to remedy this situation and provide for a more effective and efficient distribution of funding to implementing partners?

Answer given by Mr Nielson on behalf of the Commission

(28 October 2003)

Unspent aid funds (EDF)

At the end of 2002, a total of EUR 32,4 billion had been made available through the ‘live’ (6th, 7th and 8th) European Development Funds (EDF), and of this figure, EUR 29,9 billion had been committed, meaning that formal decisions had been taken to go ahead on specific projects. So in fact EUR 2,5 billion had been allocated but not committed.

The Union is obliged under the Cotonou Agreement to be active in all African, Caribbean and Pacific (ACP) signatory States, including in countries where other donors may not wish to work. A large part of the funds provided under the Agreement is earmarked to each ACP State on a national basis. However, co-operation may subsequently have to be reduced or suspended with some countries for political (non-respect of the ‘essential elements’ of the Cotonou Agreement, human rights, democratic principles and the rule of law) or practical reasons (civil wars, security situation etc). This means that commitments for specific projects may be difficult or impossible to approve. EUR 1,7 billion of the EUR 2,5 billion mentioned above are currently earmarked for countries which are or have been in crisis. These funds remain allocated to the country. Their use depends on the resolution of the crisis which gave rise to the problems in using funds.

Once a decision is taken to finance a project, contracts have to be awarded, and the funds are paid out as work progresses or as conditions are met. Of the EUR 29,9 billion committed at the end of 2002, EUR 21,6 billion had been paid. Most of the remaining EUR 8,3 billion will be paid out as projects are completed. The problematic element of the EUR 8,3 billion of unspent commitments is the ‘sleeping’ commitments on which the Commission has seen no financial movements (i.e. contracts or payments) on the project in the last two years and money which remains unpaid even though specific projects were approved (committed) before 1997 (‘old’ commitments). For the EDF, the Commission estimates this problem to represent EUR 1,4 billion — a rather small proportion, of the total EDF moneys allocated to ACP countries (6th, 7th and 8th EDF) — but is of course pursuing an extremely active policy to reduce this figure.

All these figures have been reported to the Parliament and correspond broadly to those for the ALA and Meda programmes. It should be noted in this context that, by their very nature, all pluri-annual programmes contain an inbuilt ‘delay’ between initial commitment and final payment.

All donors have large amounts of ‘unpaid’ commitments as all donors have to get programmes and projects agreed before contracting and payments can start. For the Commission, this amount gets larger at the start of a new EDF cycle (i.e. in 2003 for the 9th EDF) when a large number of new projects are being agreed (committed). The Commission's unspent commitments are close to the average in Member States. In assessing the Commission's performance the particularly restrictive Union budgetary and legal contexts also have to be taken into account.

Action being taken

The External assistance reforms launched in 2000 have been far-reaching — notably in the setting up of the EuropeAid Office and the ambitious programme of devolving project responsibility to Commission delegations. The Peer Review undertaken by the Organisation for Economic Co-operation and Development (OECD) Development Assistance Committee concluded in June 2002:

The EC has made substantial progress since January 2001 with organisational and management reforms of its development and humanitarian aid system. Of particular note are improvements to accountability at all levels, the introduction of the Country Strategy Papers process, the speedy and efficient delivery of humanitarian aid, the clarification of the links between relief and development, improved evaluation systems, and progress in the decision-making process with Member States and with devolution of authority to field offices.

Devolution

The ‘devolution’ of project management responsibilities is today operational in 45 Delegations, covering essentially our country based programmes in Europe, Mediterranean, Asia and Latin America. Attention is now focussed on the remaining 30 Delegations of the third wave this year 2003, coming essentially from the ACP region.

In this context, it should be noted that, on average, Commission officials deal with a certain amount of resources measured in multiples of EUR 10 million of aid per year. Their colleagues in a Member State administration handle an average amount that is three to seven times lower.

Freeing up (decommitting) the ‘old and sleeping’ EDF commitments

In 2002 the total amount of pre-1997 old and sleeping EDF commitments was reduced by EUR 310 million and estimations for the year 2003 indicate a further reduction of EUR 470 million. The pre-1995 backlog of old and sleeping commitments has been cut by 76 %.

Untying of aid

The Commission has made an ambitious proposal on the important question of untying aid from national (commercial) interests. The Commission considers that the untying of aid would reduce the administrative burden on its partner countries, thereby facilitating quicker and more efficient aid delivery.

Budgetisation of the EDF

The EDF should be an integral part of the general budget of the Community and subject to Parliamentary scrutiny. This would provide a single legal framework for the management of development funds and offer substantial efficiency improvements allowing Commission staff to focus more attention on establishing the cooperation and dialogue with partner countries necessary for efficient implementation, and spending less time dealing with complex procedures. A Commission Communication to the Parliament and the Council setting out the full rationale for this approach was adopted on 8 October (1).

Organisational restructuring

The proximity of the end of the Commission's mandate, the conclusions of the Convention and the ongoing work of the IGC render the launch of a new phase of external assistance reform inopportune at this stage. However, it is the duty of the present Commission, in light of its experience and of the orientations emerging from the Convention, to carry out an analysis of the most efficient organisation of its external relations services in their entirety, for the benefit of the next Commission.

Flexibility

Community development assistance is being managed following a complex system of ‘comitology’, financial regulations and thematic budget lines, which consumes an enormous amount of scarce Commission staffing resources and considerably lengthens decision-making procedures. Every financial proposal will soon have to be translated into 21 languages. This leaves some scope for further efficiency reforms involving the Commission, Member States and the Parliament.

(1) COM(2003) 590 final.