WRITTEN QUESTION E-2377/99

by Richard Howitt (PSE) to the Commission

(16 December 1999)

Subject: Tied aid

Following the measures taken by the Netherlands and British Ministers for Development with a view to the untying of aid from their development budgets and promoting local industry, could the Commission clarify what steps it has take to support private sector capacities in developing countries by increasing the access of local firms to aid contracts, thereby promoting exposure of the local private sector to international competition?

Answer given by Mr Nielson on behalf of the Commission

(6 January 2000)

The Community's policy has always been based on a wide participation of bidders from the beneficiary and Member States in aid contracts. Special efforts were undertaken, successfully, aiming to increase such participation. The future partnership agreement between the Community and the African, Caribbean and Pacific (ACP) countries will continue to represent a highly untied aid agreement, open to all signatories of the Convention and containing dispositions for preferential treatment of ACP companies in the competition for aid contracts.

More generally, in order to improve the private sector competitiveness in developing countries, the Commission has introduced a new strategy of support to private sector development in 1998. This strategy is based on the comprehensive approach aiming to improve the business environment, the local, financial and private sector, institutions and the capacities of individual companies(1).

For the implementation of its strategy the Commission provides a number of supporting facilities to ACP countries. For the analysis of the business climate in the ACP countries the programme Diagnos is introduced to help design a country or region-level strategy with emphasis on the determination of reform policies, but also including support at intermediary and micro levels. A demand-driven, cost-sharing facility, the Community- ACP business assistance scheme (EBAS) aims at increasing competitiveness of ACP enterprises and strengthening the capacity of private sector and non-financial intermediaries. To foster inward investment and economic co-operation, the programme Proinvest (under preparation), will aim at encouraging continuity and sustainability in investment and partnership promotion as a catalyst for business-to-business co-operation. Moreover, each country or region may in addition have included allocations for private sector development in the national or regional indicative programmes.

The Commission's support to the private sector runs in collaboration and co-ordination with the instruments provided by the European Investment Bank (EIB) and the ACP-EC Centre for the development of industry (CDI). Both institutions will have an enlarged mandate under the post LOME convention that is currently under negotiation. Co-ordination is sought with other donors, in particular with Member States, in implementing the strategy.

Finally, it should be kept in mind, that the difference between Member States aid and the Commission's aid on this point is, that Community aid is tendered in all 15 Member States (in addition to what is mentioned above).

(1) COM(98) 667 final.