Commission communication to the Council for the continuation and consolidation of the 'EC Investment Partners (ECIP)' financial instrument for the countries of Latin America, Asia, the Mediterranean region and South Africa
Date: 1994-07-27
Institutions: European Commission
Subjects: EU financial instrument, Latin America, Mediterranean region (EU), South Africa, small and medium-sized enterprises

COMMISSION  OF THE  EUROPEAN  COMMUNITIES 

COM(94)  358 final 
Brussels,  27.07.1994 
94/0190  (SYN) 

COMMUNICATION  FROM  THE  COMMISSION  TO THE  COUNCIL 

for  the  continuation  and  consolidation  of  the EC  Investment  Partners  (ECIP) 
financial  instrument  for  the  countries  of  Latin  America,  Asia, 
the Mediterranean  region  and  South  Africa 

Proposal  for  a 
COUNCIL  REGULATION  (EC) 

on  the  implementation  of  the EC  Investment  Partners  financial  instrument 
for  the  countries  of  Latin  America,  Asia, the Mediterranean  region 
and  South  Africa 

(presented  by  the  Commission) 

COMMUNICATION  FROM THE COMMISSION  TO THE COUNCIL 
FOR THE 
CONTINUATION  AND  CONSOLIDATION  OF THE 
EC INVESTMENT PARTNERS  (ECIP) FINANCIAL  INSTRUMENT FOR THE 
COUNTRIES  OF LATIN AMERICA. ASIA.  THE MEDITERRANEAN  REGION 
AND  SOUTH AFRICA 

I. 

INTRODUCTION  -  SUMMARY 

II. 

HISTORY  AND  DESCRIPTION  1988-1994 

III. 

ASSESSMENT 

IV. 

PROPOSAL 

V.  MANAGEMENT,  MONITORING AND  ANTI-FRAUD  PROVISIONS 

VI. 

COORDINATION  WITH  OTHER  EC  PROGRAMMES 

VII.  PROPOSED  DECISION 

I. 

INTRODUCTION  -  SUMMARY 

The  rationale  for  ECIP  as  a  development  tool  strengthening  links  between  the  Union  and 
Asia,  Latin  America  and  Mediterranean  countries  is  strengthened  because  foreign  direct 
investment  flows  to  developing  countries  have  grown  considerably  in  importance  as  a 
source  of  finance,  as  well  as  technology  and  management  skills  for  developing  countries. 
Eight  years  ago  the  lion's  part  (56.4%)  of  the  total  net  resource  flows  to  developing 
countries  was  official  development  assistance.  Today  private  flows  are  the  most  important, 
accounting  for  55%  of  the  total  net  resource  flows.  After  bond  lending,  foreign  direct 
investment  is  the  most  important  private  flow.  In  absolute  terms  foreign  direct  investment 
flows  to  developing  countries  reached  more  than  $35  billion  in  1993,  compared  to  only 
$6.5  billion  in  1985. 

Good  policies 
trade  and  capital  market 
liberalization  are  bringing  an  increasing  number  of  developing  countries  into  the  main 
stream  of the  world  economy. 

in  developing  countries  and  world-wide 

Firms  from 
industrial  countries,  through  foreign  direct  investment,  and  private  and 
institutional  investors  though  portfolio  investment,  are  directing  an  important  part  of  their 
resources  to  developing  countries.  The  main  reasons  for  this  are  to  penetrate  fast  growing 
and  expanding  markets  (NAFTA,  ASEAN,  MERCOSUR),  participation  in  privatization 
deals  and  having  access  to  the  booming  stock  markets  of  the  emerging  economies  in  Asia 
and  Latin  America. 

Developing  countries  compete  vigorously  for  these  financial  flows  through  creating  an 
enabling  business  environment:  sound  macro  economic  policies,  open  and  competitive 
markets  and  fair  legal  and  tax  systems  are  key  in  this  regard.  The  benefits  of  this  comes 
in  the  form  of  access  to  international  capital  and  joint  ventures  with  foreign  partners  in 
particular,  which  has  proved  to  be  a powerful  vehicle  for  access  to  up-to-date  technologies, 
improved  skills  and  know-how  as well  as  more  effective  access  to  international  markets. 

The  European  Community's  industry  is  participating  in  this  process.  This  movement  is 
infrastructure,  are  opened  up  for  participation 
gathering  steam  as  new  domains,  such  as 
by  foreign  private  interests  At  the  Asian  Development  Bank's  annual  conference  held  in 
Nice  in  April  of  this  year,  it  was  estimated  that  investment  needs  in  infrastructure  projects 
in  Asia  alone  are  as much  as  $1  000  billion  during  the  next  five  years;  a major  part  of  this 
will  be  implemented  through  privatization  schemes  involving  foreign  companies  in  joint 
venture  deals. 

The  Asian,  Latin  American  and  Mediterranean  countries  are  all  keen  to  benefit,from 
investment  promotion  schemes  such  as  ECIP  and  the  recently  set  up  ALINVEST  and 
MEDINVEST  schemes. 

ECIP  has  been  particularly  effective  and  responsive  to  the  needs  of  developing  ALAMED 
countries  in  the  promotion  of  joint  ventures  between  local  companies  and  European 
partners.  Since  its  inception  in  1988  a total  of  909 projects  have  been  approved. 

1988 to  mid  1994 

Asia 

357 

Latin  America 

Mediterranean 

300 

236 

All  regions  incl 
multi-regional 
909 

The  most  successful  countries  are  Mexico  (86),  India  (65),  China  (59),  Indonesia  (50)  and 
Morocco  (38).  Note  that  China  became  eligible  only  in  February  1992,  and  now  accounts 
for  the  highest  demand  for  ECIP  resources.  Please  see  Annex  II  for  a table  showing  ECIP 
amounts  approved  by  facility  1988-93. 

ECIP's  success  can  be  in  no  small  part  attributed  to  the  very  concept  of  the  scheme, 
which  ensures  that  it  operates  in  a  decentralized  fashion  complementary  to  Member  States' 
promotion  schemes.  Crucial  in  this  is  the  network  of  almost  100  financial  institutions, 
which  includes  the  largest  and  most  dynamic  banks  from  our  Member  States  and  third 
countries. 

The  ECIP  instrument  belongs  to  EC  development  policy  but  at  the  same  time  it  is 
consistent  with  and  supports  the  Community's  industrial  strategy  since  it  acts  as  a  catalyst 
for  European  direct  investment  flows  to  developing  countries,  thereby  strengthening  the 
links  between  Europe  and other  dynamic  continents. 

The  legal  basis  for  the  ECIP  instrument  is  presently  Council  Regulation  (EEC)  No  319/92 
of  3 February  1992  which  expires  on  31  December  1994.  The  Commission  now  proposes 
a  new  Council  Regulation  in  annex  to  this  Communication  in  order  to  continue  and 
consolidate  the  implementation  of  the  ECIP  instrument  after  1994.  This  proposal  maintains 
the  essential  characteristics  of  the  existing  instrument: 

-  promotion  of joint  venture  investments  of  mutual  interest; 

-  decentralized  and  flexible  management  through  a  network  of  financial  institutions 

and  investment  promotion  agencies;  and 

- 

the  coherence  of  the  instrument  which,  through  four  financing  facilities,  covers  all 
the  stages  in  the  creation  of  a joint  venture  from  (1)  project  identification,  to  (2) 
feasibility  study  and  pilot  project,  to  (3)  capital  financing  to  (4)  management 
assistance  and  training. 

The  proposal  includes  some  minor  improvements  in  the  conditions  relating  to  the  finance 
made  available  under  each  of  the  facilities  and  also  includes  specific  provisions  for 
reinforcement  of  the  Commission's  management  and  control  of  the  funds,  ongoing 
monitoring  and  evaluation  of  the  actions  financed,  and  coordination  with  other  EC 
instruments  for  economic  cooperation  and  promotion  of  investments.  These  proposals  take 
account  of  the  Opinion  of  the  Court  of  Auditors  on  the  implementation  of  the  instrument 
delivered  to  the  Council  in  December  1993,  and  of  the  Independent  Appraisal  forwarded 
to  the  Council  and  Parliament  in  April  1994. 

In  addition  to  the  eligible  countries  of  Asia,  Latin  America,  and  the  Mediterranean  region, 
it  is  proposed,  in  accordance  with  the  Conclusion  of  the  General  Affairs  Council  of 
19 April  1994,  to  extend  the  instrument  to  South  Africa  also  as  an  eligible  country. 
Additional  financing  for  South  Africa  would  need  to  be  provided. 

II. 

HISTORY  AND  DESCRIPTION  1988-1994 

The  ECIP  instrument  began  in  September  1988  as  a  pilot  experiment  with  limited 
budgetary  means  (ECU  30  million  for  three  years).  Initially,  the  Commission  did  not 
propose  a  specific  legal  basis  for  this  instrument.  Instead  ECIP  was  defined  on  the  basis 
of  Article  205  of  the  Treaty  of  Rome,  and  of  the  cooperation  agreements  with  the 
developing  countries  of  Asia,  Latin  America  and  the  Mediterranean.  The  European 
Parliament  provided 
its  margin  of  manoeuvre 
(Non-Obligatory  Spending).  In  December  1990,  the  Commission  proposed  to  the  Council 
a  further  phase  of  reinforcement  for  the  ECIP  instrument,  by  means  of  a  specific 
regulation,  and  on  3  February  1992 
the  ECIP  Regulation 
(EEC)  No  319/92  containing,  in  essence: 

the  necessary  credits  from  within 

the  Council  adopted 

confirmation  of  the  characteristics  which  had  ensured 
since  1988; 

the  scheme's  success 

in 
increase 
an 
ECU  1 000  000; 

the 

financing 

limit  per  project 

from  ECU  500  000 

to 

a  more  precise  definition  of  objectives  and  the  procedures  in  order  to  reinforce 
efficiency  and  ensure transparency;  and 

regular  monitoring  and  evaluation  of  the  management  and  impact. 

The  programme  depends  on  a  network  of  financial  institutions  (FI)  in  the  EC  Member 
States  and  in  the  ALAMED  countries  to  promote  and  administer  the  four  financing 
facilities.  At  present  there  are  95  FI  in  the  ECIP  network  which  have  been  chosen  after 
Commission  Decision  preceded  by  consultation  of  the  Council. 
In  addition,  for  Facility 
1,  organizations  representing  groups  of  companies  (such  as  investment  promotion  bodies, 
federations  of  industry  and  chambers  of  commerce)  are  also  eligible  to  present  and 
administer  projects  for  financing  under  ECIP. 

The  Commission  has  signed  framework  contract  agreements  with  the  financial  institutions 
(FI)  in  the  ALAMED  countries  and  in  the  European  Community.  ECIP  relies  on  the 
services  of  these  FI  to  assess  project  proposals  and  to  present  them  to  the  Commission  for 
appraisal  and  approval,  to  arrange  legal  documentation  with  the  companies  and  to  handle 
the  ongoing  administration  of  the  transactions.  This  allows  the  companies  to  apply  for 
ECIP  finance  through  an  FI  of  their  choice, possibly  near  to  their  centre  of  operations.  For 
the  specific  actions  under  Facility  1,  organizations  representing  a  group  of  companies  can 
work  with  the  Commission  directly. 

The  Commission,  in  appraising  and  deciding  the  actions  to  be  financed,  verifies  the 
soundness  of  the  investment,  quality  of  the  promoters,  mutual  interest  for  the  EC,  the 
contribution  to  the  development  of  the  ALAMED  country  concerned,  and  the  compatibility 
of  the  action  with  the  various  aspects  of  Community  policies.  In  principle,  all  sectors  of 
the  economy  are  covered  -  industry,  services,  agriculture,  mining  or  others.  However, 
certain  sectors  such  as  arms  production  and  gambling  houses,  are  excluded  ex  ante.  ECIP 
is  a  source  of  finance  only,  which  means  that  the  Commission  does  not  itself  offer  direct 
technical  assistance  and  that  it  never  interferes  with  the  management  of  the  project. 
Private  operators  maintain  complete  control. 

ECIP  aims  at  small  and  medium-sized  companies  but  operations  from  larger  companies  are 
also  eligible  in  order  not  to  neglect  the  indirect  positive  impact  on  SMEs  (especially  by 
way  of  technology  transfer,  sub-contracting,  and  supply  relationships)  due  to  the  creation 
of joint  ventures  between  large  enterprises.  Large  multinationals  may  not  benefit  from  the 
scheme. 

The  nature  of  the  finance  available  under  ECIP  includes  grant  money  for  identification 
projects  (Facility  1),  interest-free  advances  for  preparation  of  projects  (Facility  2)  and  for 
human  resources  development  (Facility  4),  and  equity  or  equity-loans  for  investment 
(Facility  3). 

The  four  ECIP  Facilities  offer  financial  assistance  to  facilitate  all  the various  stages  of joint 
venture  creation  as  follows: 

FACILITY  1: Identification  of  projects  and  partners 

Under  this  facility  ECIP  has  cofinanced  projects  by  means  of  a  grant  of  up  to  50%  of  the 
cost  of  the  project  (subject  to  a  maximum  grant  of  ECU  100  000),  the  remaining  50%  to 
be  raised  by  the  initiator(s)  of  the  project. 

Eligibility 

This  facility  is  only  available  to:  organizations  which  represent  a group  of  companies,  such 
as  chambers  of  commerce,  federations  of  industry,  other  professional  agencies  and  financial 
institutions  from  the  ECIP  network.  Facility  1 is not  available  for  individual  firms  wishing 
to  undertake  study  work  on  a specific  investment  project. 

The purpose  of  this  facility  is to: 

• 

• 

• 

identify  specific  sectors  in  one  or  a  limited  number  of  eligible  countries  that  have 
investment  potential; 

identify  EC  firms  which  have  technology  and  financial  resources  for  involvement 
in  Joint  Ventures; 

identify  local  firms  which  would  be  suitable  candidates  for  partnership  in  Joint 
Ventures  with  European  investors; 

• 

inform  companies  on  both  sides  of  the  opportunities  and  organize  business 
meetings  between  potential  partners. 

Under  Facility  1 two  main  types  of  projects  are  financed: 

• 

• 

Studies  to  provide  a  given  sector  of  the  EC  with  basic  information  on  investment 
opportunities  in  one  country  or  in  a selected  number  of  target  countries. 

Seminar  or  "workshop"  projects  to  bring  together  a  number  of  potential  partners 
both  from  the  EC  and  from  the target  country. 

FACILITY  2: Preparations  for  the  creation  of  a specific  joint  venture 

Under  this  Facility  ECIP  has  cofinanced  projects  through  an  interest-free  advance  to  be 
converted  later  either  into  a  grant,  a  loan  or  equity  depending  on  the  outcome  of  the 
project.  The  advance  covers  up  to  50%  of  the  cost  of  the  project  subject  to  a  maximum 
EC  advance  of  ECU  250 000. 

The  type  of  activities  eligible  for  Facility  2 are the  following: 

final  identification  and  selection  of  a  partner; 

feasibility  studies; 

market  studies; 

drawing  up  of  a business  plan; 

setting  up  of  a pilot  production  unit; 

manufacture  of  prototypes. 

The  aim  of  Facility  2  is  to  permit  the  company  to  gather  all  the  elements  which  will  make 
the  project  bankable  and  which  will  allow  it  to  go  ahead  to  invest  in  an  EC/ALAMED 
joint  venture. If  the project  does not  lead  to  further  investment  within  a period  of  two  years 
after  its  completion,  the  advance  can  be  converted  into  a  grant.  The  beneficiary  must 
specifically  apply  for  this  and  he  must  explain  the  reasons  for  the  failure.  If  the  project  is 
successful  and  it  leads  to  an  investment,  it  should  carry  its  own  costs,  including  study 
costs,  and  therefore  the  advance  must  be  reimbursed  or  capitalized.  This  facility  is  open 
to  local  or  European  firms,  acting  either  individually  or jointly,  wishing  to  look  into  a joint 
investment  project  in  an  eligible  country.  Interested  companies  must  apply  via  one  of  the 
Financial  Institutions  in  the  ECIP  network  who  filter  and  appraise  the  proposal  before 
presenting  it to  the  Commission  for  decision. 

FACILITY  3: Financing  of  capital  requirements 

The  purpose  of  this  facility  is  to  provide  capital  for  new  Joint  Ventures,  for  expanding 
existing  ones,  or  for  new  investment  by  local  companies  working  under  a  licensing 
agreement  with  EC  firms.  This  facility  is,  as  regards  the  EC  partners,  reserved  as  a priority 
to  small  and  medium-sized  companies.  The ECIP  financing  can  be  up  to  20% of  the  capital 
of  the  Joint  Venture  project  subject  to  a  maximum  ECIP  investment  per  project  of 
ECU  1 million. 

ECIP  has  cofinanced  projects  by  providing  finance  to  the  FI  which  in  turn  provides  the 
funding  to  the  company  on  behalf  of  the  EC.  The  EC  relies  on  the  FI  to  act  as  an 
intermediary  and  it  also  requires  the  FI  to  cofinance  the  company  with  the  same  amount 
as  the  EC  and  on  similar  terms  and  conditions.  By  imposing  this  "matching  obligation", 
ECIP  ensures  that  the  FI  is  involved  with  the project  on  a permanent  basis. 

ECIP  finances  the  company  during  its  start-up  phase  and  tries  to  sell  its  share  or  to  ask  for 
reimbursement  of  the  loan  after  a  period  of  about  5 years,  or  sooner  if  the  Joint  Venture 
partners  so  wish.  ECIP  does not  interfere  with  the  management  of  the  company. 

Joint  Ventures  in  the  ALAMED  countries  between  partners  from  the  EC  and  a  local 
operator  are  eligible  for  Facility  3.  The  facility  is  also  available  for  direct  investments  by 
local  companies  which  operate  under  a licensing  agreement  with  an EC  company. 

FACILITY  4: Training  or  management  assistance  to  Joint  Ventures 

Under  Facility  4  ECIP  has  cofinanced  projects  by  way  of  an  interest-free  loan  to  the 
Financial  Institution  which  on-lends  the  money  on  a  back-to-back  basis  on  the  same 
conditions  to  the  Joint  Venture  or  to  the  company  operating  under  a  licensing  agreement. 
The  ECIP  loan  can  be  up  to  50%  of  the  cost  of  the  project  (subject  to  a  maximum  ECIP 
contribution  of  ECU  250  000).  The  Commission  requires  the  intermediary  FI  to  cofinance 
the  project,  with  the  same  amount  as ECIP. 

The  maximum  total  ECIP  financing  under  all  the  facilities  for  an  individual  project  is 
ECU  1 000  000. 

III. 

ASSESSMENT 

ECIP  has  shown  rapid  and  continued  growth  in  the  numbers  and  ECU  volume  of  financing 
requests  and  approvals  from  1988  to  the  present.  The  number  of  project  requests  has 
steadily  grown  from  57  in  1988/89  to  408  in  1993.  The  number  of  projects  approved  in 
1988/89  was  39  and  this  figure  rose  to  271  in  1993.  The  value  of  ECIP  financings 
approved  in  1988/89  was  ECU  3.43  million  and  rose  rapidly  to  ECU  29.16  million  in 
1993.  ECU  39  million  in  total  are  available  for  commitment  credits  for  ECIP  during  1994, 
and  ECU 42  million  are  requested  for  1995. 

As  provided  for  at  Article  9.2  of  the  present  ECIP  Regulation  (319/92)  the  Commission 
commissioned 
independent  appraisal  by  consultants  whose  report  was 
forwarded  to  the  Council  and  Parliament  in  April  1994  and  which  concluded,  in  summary, 
that  ECIP : 

in  1993  an 

is  successful  and  in  growing  demand  from  economic  operators  and  from  the  Financial 
Institutions  which  implement  the  scheme; 

has  met  its  principal  objective  of  promoting  mutually  beneficial  EC/local  Joint  Venture 
investments  in the  ALAMED  developing  countries;  and 

that  the  complete  characteristic  of  the  instrument  offering  four  financing  facilities 
managed  together  covering  all  stages of  the  creation  of joint  ventures  is  essential. 

(Annex  III  to  this  document  provides  a  summary  of  the  conclusions  and  recommendations 
of  this independent  appraisal.) 

The  evaluators  made  proposals  for  specific  minor  improvements  to  the  financing  conditions 
of  the  facilities:  and  they  also  made  some  specific  recommendations  as  regards  the 
operations  of  the  scheme  as  regards  the  need  to  decentralize  administrative  routine 
procedures  even  more  to  the  Financial  Institutions  in  order  to  facilitate  the  implementation 
further  and  to  allow  the  Commission's  staff  to  reinforce  and  accentuate  their  attention  to 
policy  and  evaluation  issues. 

Furthermore,  in  December  1993, as provided  for  in  Article  9.3  of  the  ECIP  Regulation,  the 
Court  of  Auditors  also  presented  an  opinion  on  ECIP  to  the  Council  on  which  the 
Commission  commented  and  replied  in  March  1994.  The  Court  concluded  that:  "ECIP 
meets  a real  need  which  the  market  ignores,  or  of  which  it  takes  only  "inadequate  account" 
...  and  that  "To  the  extent  that  the  Community  legislator  and  the  Commission  wish,  within 
the  framework  of  development  aid  policy,  to  persevere  with  promoting  investment  in  the 
private  sector  by  means  of  the  ECIP  instrument,  steps  should  be  taken  to  set  up  a  suitable 
structure".  Annex  IV 
to  this  document  gives  a  summary  of  the  conclusions  and 
recommendations  included  in the  Opinion  given  by  the  Court  of  Auditors. 

The  present  proposal  for  a  revised  and  improved  Council  Regulation  for  ECIP  addresses 
the  Court  of  Auditors'  comments,  takes  account  of  the  evaluators'  recommendations  by 
proposing  minor  improvements  in  the  financing  facilities,  and  in  particular  it  includes 
specific  provisions  to  handle  the  burgeoning  project  management  task  for  the  Commission 
which  is resulting  from  the  success  of  ECIP. 

IV.  PROPOSAL 

The  Commission  proposes  to  the  Council  to  renew  and  improve  the  ECIP  Regulation 
according  to  the  text  provided  in  Annex  I  to  this  Communication.  This  text  provides  for 
minimal  changes  in  each  of  the  financing  facilities  combined  with  particular  attention  to 
decentralization  and  reinforcement  of  the  Commission's  management  and  monitoring 
increased  coordination  with  other 
capacity 
EC  programmes  and  instruments  of  economic  cooperation  (see  also  section  VI  below). 

(see  also  section  V  below),  and 

to 

TV a  Objective 

It  is  proposed  to  retain  ECIP's  principal  objective  which  is  to  promote  investments  of  a 
mutual  interest.  The  complete  nature  of  the  instrument,  offering  four  facilities  covering 
all  the  stages  in  the  creation  of  a  Joint  Venture,  should  be  maintained.  The  flexible  and 
decentralized  management  system  should  be  retained  and  reinforced  (see  V  below). 
Coordination  with  other  EC  programmes  for 
investment  promotion  and  economic 
cooperation  can  be  improved  (see  VI  below).  And  following  the  suggestions  of  the 
consultant's  Independent  Evaluation  and  of  the  Court  of  Auditors,  small  changes  in  the 
financing  conditions  and  eligibility  for  the  facilities  are  proposed. 

IV.b. 

Improvements  in  the four  financing  facilities 

Facility  1.  It  is  proposed  to  enlarge  the  scope  of  this  facility  to  cover  privatization 
infrastructure  projects  also  (e.g.  in  the  energy,  transport,  environment  and  utilities  sectors) 
being  developed  by  ALAMED  governments  according  to  the  Build  Operate  Transfer 
(BOT)  or  Build  Operate  Own  (BOO)  formula.  In  allowing  ALAMED  governments  and 
public  agencies  direct  access  to  Facility  One  funding  they  could  finance,  with  an  EC 
consultant  who  would  often  be  an  EC  economic  operator  in  the  sector,  the  evaluation, 
preparation  and  tender  documents  for  a  joint-venture  privatization  BOT-BOO  project. 
Later  in  the  implementation  of  the  project,  EC  operators  would  remain  eligible  under 
existing  ECIP  criteria to  request  Facility  2, 3 or  4 finance  to  help  implement  the  project. 

Facility  2.  In  order  further  to  improve  the  quality  of  the  actions  financed,  particularly  as 
regards  the  identification  of  a  joint  venture  counterpart  it  is  proposed  that,  within  the 
existing  overall  financing  limit  for  Facility  2  (ECU  250  000)  by  interest-free  advance,  a 
grant  element  of  ECU  10 000  be  included  to  allow  financing  of  50% of  the  costs  of  a pre-
feasibility  mission  by  the  final  beneficiary  as  a preliminary  to  financing  the  full  feasibility 
study  or  pilot  project.  As  before  under  the  existing  ECIP  Regulation  if  the  results  of  a 
study  do  not  lead  to  a joint  venture  the  ECIP  funding  under  Facility  2  can  be  converted 
into  a grant  at  the  Commission's  discretion,  in  which  case  the  study  document  becomes  the 
property  of  the  Commission  and  can  be  made  available  to  other  potential  investors  (see 
Section  VI  below). 

Facility  3.  As  requested  by  many  economic  operators,  and  by  the  financial  institutions, 
supported  by  the  recommendations  of  the  Independent  Evaluation  and  of  the  Court  of 
Auditors,  it  is  proposed  to  allow  indirect  medium  and  long-term  subordinated  loans  to  be 
eligible  for  ECIP  Facility  3  financing  and  not  to  limit  such  funding  to  equity.  The 
Commission  has  not  taken  up  the  suggestion  of  the  Independent  Consultant  to  set  up 
Investment  Funds  for  Facility  3,  since  Facility  3  should  remain  a  subsidiary  facility  which 
supplements  the  scheme  and  should  not  become  a main  focus  of  it. 

Facility  4.  In  order  to  improve  the  use  of  this  facility,  which  has  been  relatively  modest 
up  to  now,  it  is  proposed  to  change  the  financing  conditions  to  a  grant,  on  condition  that 
only  the  costs  of  training,  technical  assistance  or  management  expertise  provided  by 
external  sources  will  be  eligible  for  ECIP  funding.  This  latter  provision  will  ensure  the 
"additionality"  of  the  actions  financed  and  while  the  financial  institutions  will  still  be 
intermediating  the  finance  they  will  not  be  required  to  cofinance  the  actions. 

10 

IV.c.  Geographical  coverage 

In  addition  to  the  eligible  countries  of  Asia,  Latin  America,  and  the  Mediterranean  region, 
it  is  proposed,  in  accordance  with  the  Conclusions  of  the  General  Affairs  Council  of 
19  April  1994,  to  extend  the  instrument  also  to  South  Africa  as  an  eligible  country. 
Additional  financing  for  South  Africa  would  need  to  be  provided. 

It  is  to  be  noted  that  in  other  non-ALAMED  regions  other  EC  financing  instruments  exist 
(Phare:  JOPP,  T A O S,  Lomé:  CDI)  and  reinforced  coordination  with  these  instruments  is 
proposed  below  (see  VI). 

V 

MANAGEMENT.  MONITORING  AND  ANTI-FRAUD  PROVISIONS 

The  Commission  does  not  propose  to  set  up  an  independent  agency  to  manage  ECIP,  as 
was  suggested  by  the  Court  of  Auditors,  since  it  wants  to  retain  the  present  option  for 
the  creation  of  an 
subsidiarity  and  decentralization  which  could  be  weakened  by 
"EC  Finance  Corporation".  Still,  the  Commission  does  make  specific  provision 
in  the 
the  management  and  monitoring  while 
to  reinforce 
proposed  Regulation 
retaining  the  essentially  decentralized  administration  system  using  financial  institutions  and 
investment  promotion  agencies. 

(Article  9) 

Three  specific  additional  measures  are  proposed  under  the  new  Regulation: 

(1) 

(2) 

External  technical  assistance  (TA)  may  be  used,  after  normal  Commission  tendering 
procedures,  so  that  this  TA  can  carry  out  the  many  basic,  routine,  information  and 
dossier-processing  tasks  which  are  inherent  in  an  instrument  involving  so  many 
countries,  financial  institutions,  and  final  beneficiaries.  The  Commission  will  retain 
responsibility  for 
the 
general  promotion  of  the  instrument,  and  the  quality  control  and  evaluation  of 
impact.  As  regards  Article  9  of  the  Regulation  it  is  proposed  to  provide  up  to  5% 
of  the  ECIP  budget  to  finance  this,  on  condition  that  the  actions  financed  are 
directly  linked  to  the  special  nature  of  the  ECIP  instrument  and  are  of  benefit  to 
the  ALAMED  countries  and  South  Africa. 

the  final  appraisal  and  decision  on  all  actions  financed, 

As  is  accepted  practice  for  other  actions  financed  by  the  development  cooperation 
chapters  of  the  Budget,  a  contract  shall  be  placed  (after  OJ  publication  and 
C.C.A.M.  adjudication)  with  an 
international  firm  of  accountants  to  execute  a 
complete  year-end  financial  audit  of  the  books  of  a  sample  of  the  ECIP  financial 
institutions,  and  the  Facility  1  beneficiaries  of  ECIP  in  order  to  verify  the  ECIP 
balance  sheet  and  revenue/expenditure  account  as  at  31  December  each  year.  The 
accountants  will  reconcile  the  ECIP  financial  statements  with 
the  Commission 
Revenue  and  Expenditure  account  and  ensure  the  correct  inclusion  of  the  ECIP 
balance  sheet  into  the  Commission  balance  sheet.  This  exercise  will  be  repeated 
annually  from  1995  for  the  year-end  closure  of  ECIP  accounts. 

(3) 

Specific  provision  will  be  made  in  the  framework  agreements  and  the  specific 
financing  agreements  for  anti-fraud  measures,  in  particular  a  mechanism  for  the 
recovery  of  advances  which  are  not  fully  justified  after  the  annual  audit. 

11 

The  Commission  proposes  to  retain  the  existing  reporting  provisions  and  to  make  them 
concomitant  with  the new period  of  validity  of  ECIP  as  follows: 

(a) 

to  send  to  the  European  Parliament  and  to  the  Council,  by  30  April  each  year  at 
the  latest,  a  progress  report  showing  the  projects  selected,  the  appropriations 
granted  and  the  repayments  to  the  general  budget  of  the  European  Communities 
and  including  annual  statistics  for  the  previous year;  and  to 

(b) 

forward  the  results  of  an  independent  appraisal  of  the  instrument  to  the  European 
Parliament  and  the  Council  every  five  years. 

The  Commission  remarks  that  under  Article  188c  of  the  Treaty  establishing  the  European 
Community  the  Court  of  Auditors  has  powers  to  audit  and  deliver  an  opinion  on  the 
implementation  of  the  instrument. 

VI. 

COORDINATION  WITH  OTHER  EC  PROGRAMMES 

In  addition  to  the  internal  coordination  within  the  Commission's  services  as  regards  the 
respective  actions  to  be  financed  under  ECIP  and  other  EC  economic  cooperation 
programmes  (such  as  AL-INVEST,  MED-INVEST  and  the  Asia/EC  Business  Info  Centres) 
the  Commission  will  set  up  specific  arrangements  to  diffuse  and  exploit  the  information, 
partner  lists,  and  studies  financed  under  Facilities  1  and  2  of  ECIP  through  the  networks, 
outlets  and  information  systems  in  the  AL-INVEST  focal  points,  the  MED-INVEST 
offices,  the  Asia/EC  Business  Info  Centres  and  the  networks  and  systems  managed  by 
DG XXIII  and  III  within  the  EC  such  as  BCNET,  BRE  which  will  allow  SMEs  further  to 
improve  their  effective  access to  the  benefits  of  ECIP. 

The  Commission  will  continue  to  enhance  coordination  between  ECIP  and  the  European 
Investment  Bank  with  particular  regard  to  the Mediterranean  region. 

VII. 

PROPOSED  DECISION 

The  Commission  proposes  that  the  Council  should  continue  and  consolidate  the  ECIP 
instrument  by  adopting  a  new  regulation  -  the  text  of  which  is  proposed  in  annex  -  to  take 
effect  from  1 January  1995. 

Annexes: 

I. 
II. 
III. 

IV. 

V. 

Proposed  text  for  a new  Council  Regulation  for  ECIP 
Table  of  ECU  amounts  approved  by  Facility  under  ECIP  1988-93 
Summary  of  the  conclusions  and  recommendations  of  the  Independent  Appraisal 
of  ECIP 
Summary  of  the  conclusions  and  recommendations  of  the  Court  of  Auditors' 
opinion  on  the  implementation  of  ECIP 
"Fiche  Financière" 

12 

Additions  or  changes  from 
Regulation  (EEC)  No  319/92 
are  underlined 

ANNEX  I 

Proposal  for  a 

COUNCIL  REGULATION 

(EC) 

on  the  implementation  of  the  EC  Investment  Partners  financial  instrument 
for  the  countries  of  Latin  America,  Asia,  the  Mediterranean  region 
and  South  Africa 

THE  COUNCIL  OF  THE  EUROPEAN  UNION, 

Having  regard  to  the  Treaty  establishing  the  European  Community,  and  in  particular 
Article  130w  thereof; 

Having  regard  to  the  proposal  from  the  Commission(1), 

In  cooperation  with  the  European  Parliament, 

Whereas  the  Community  is  implementing  financial,  technical  and  economic  cooperation 
with  the  developing  countries  of  Latin  America,  Asia  and  the  Mediterranean  region,  and 
with  South  Africa; 

Whereas  in  order  to  strengthen  such  cooperation,  it  is  necessary,  inter  alia,  to  encourage 
mutually  beneficial  investment,  particularly  by  small  and  medium-sized  enterprises  (SMEs); 

Whereas  the  Council  has  reached  a  consensus  on  the  importance  of  the  role  of  the  private 
sector  in  the  development  process; 

Whereas joint  ventures  and  investment  by  Community  undertakings  in  developing  countries 
can  bring  certain  benefits  for  these  countries,  including  the  transfer  of  capital,  know-how, 
employment,  the  transfer  of  training  and  expertise,  increased  export  possibilities  and  the 
meeting  of  local  needs; 

Whereas  a  three-year  pilot  scheme  was  launched  in  1988  to  promote,  via  an  EC  Investment 
Partners  (ECTP)  financial  instrument,  the  creation  of joint  ventures  between  the  Community 
and  countries  of  Latin  America,  Asia  and  the  Mediterranean  region  and  was  continued  and 
extended  for  a  further  three  year  trial  period  from  1  January  1992  by  Council  Regulation 
(EEC)  No  319/92(2); 

Whereas  the  Court  of  Auditors  delivered  an  opinion 
to 
Article  9(3)  of  Regulation  (EEC)  No  319/92  on  the  implementation  of  the  ECIP  financial 

in  December  1993  pursuant 

(1) 
(2) 

OJ  No  C 
O J No  L  35,  12.2.1992,  p.  1. 

13 

Whereas  the  European  Parliament  and  the  Council  have  considered  the  results  of  the 
independent  appraisal  forwarded  to  them  in  March  1994  in  conformity  with  Article  9(2) 
of  Regulation  (EEC)  No  319/92  which  concluded  that  ECIP  has  met  its  principal  objective 
of  promoting  mutually  beneficial  investment  by  Community  and  local  operators  in  EC/local 
joint  ventures  in  the  countries  of  Asia.  Latin  America  and  the  Mediterranean,  and  that  the 
ECIP  instrument  should  be  further  continued  and  reinforced; 

Whereas  the  Council  adopted  on  25  February  1992  Regulation  (EEC)  No  443/92(3)  on 
financial  and  technical  assistance  to.  and  economic  cooperation  with,  the  developing 
countries  in  Asia  and  Latin  America  and  on  29  June  1992  Regulation  (EEC)  No  1763/92(4) 
concerning  financial  cooperation  in  respect  of  all  Mediterranean  non-member  countries; 

Whereas  the  continuation  and  extension  of  the  instrument  is  therefore  necessary  in  order 
that  full  use  may  be  made  of  the  possibilities  of  mutually  beneficial  action  in  the  countries 
of  Latin  America,  Asia  and  the  Mediterranean  region; 

Whereas  the  Council  on  19  April  1994  concluded  that  to  encourage  EU  investments  in 
small  and  medium-sized  companies  in  South  Africa,  advantages  equivalent  to  the  ECIP 
(EC Investment  Partners)  or  its  follow-up  instrument  could  be  granted  to  South  Africa,  and 
that  specific  financing  of  this  instrument  would  be  provided  to  that  end. 

Whereas  the  broadest  possible  participation  by  undertakings  in  all  Member  States  should 
be  encouraged; 

Whereas  all  the  Member  States  should  be  encouraged  to  participate  in  the  promotion  of 
their  investments  in  the  countries  of  Latin  America,  Asia,  the  Mediterranean  region  and 
South  Africa  through  financial  institutions  specializing  in  development, 

HAS  ADOPTED  THIS  REGULATION. 

Article  1 

1. 

2. 

As  part  of  its  economic  cooperation  with  the  countries  of  Latin  America,  Asia,  the 
Mediterranean  region,  and  South  Africa,  the  Community  shall  operate  special 
cooperation  schemes  aimed  at  promoting  mutually  beneficial 
investment  by 
Community  operators,  particularly  in  the  form  of joint  ventures  with  local  operators 
in  the  countries  eligible. 

Account  being  taken  of  their  respective  possibilities  and  needs,  SMEs  will  receive 
priority  in  application  of  the  scheme,  while  large  multinational  undertakings  will 
be  ineligible. 

(3) 

(4) 

O J N oL  52, 27.2.1992, p.  1. 
O J N oL  181, 1.7.1992, p. 5. 

14 

Article  2 

The  EC  Investment  Partners  (ECIP)  financial  instrument,  hereinafter  referred  to  as  the 
'instrument',  shall  offer  four  kinds  of  financing  facility  covering: 

1. 

2. 

3. 

4. 

grants  for  the  identification  of  projects  and  partners,  not  exceeding  50% of  the  cost 
of  the  operation  up  to  a  ceiling  of  ECU  100  000;  however,  where  the  operation 
relates  to  the  preparation  of  a privatization,  or  a  Build  Operate  and  Transfer  (BOT) 
infrastructure,  utilities  or 
or  a  Build  Operate  and  Own  (BOO)  scheme 
environmental  services  where  an  eligible  country  government  or  public  agency  is 
the  beneficiary  this  facility  may  be  increased  to  100%  of  the  cost  of  the  operation 
up to  a ceiling  of  ECU  200  000  (Facility  No  1); 

in 

interest-free  advances  for  feasibility  studies  and  other  action  by  operators  intending 
to  set  up joint  ventures  or  to  invest,  not  exceeding  50% of  the  cost  up  to  a  ceiling 
of  ECU  250  000,  within  which  pre-feasibility  costs  of  ECU  10 000  maximum  may 
be  financed  by  grant  (Facility  No 2); 

licensing 
capital  requirements  of  a  joint  venture  or  a  local  company  with 
agreements,  in  order  to  meet  investment  risks  peculiar  to  developing  countries, 
through  participation  in  the  provision  of  equity  or  subordinated  loans  not  exceeding 
20%  of  the  joint  venture's  equity  and  subordinated  loan  capital  up  to  a  ceiling  of 
ECU  1 million  (Facility  No  3); 

grants, not  exceeding  50% of  the  cost  up to  a  ceiling  of  ECU  250  000, for  training, 
technical  assistance  or  management  expertise  of  an  existing  joint  venture,  or  joint 
venture  about  to  be  set  up,  or  of  a  local  company  with  licensing  agreements 
(Facility  No 4). 

The  aggregate  amount  made  available  under  Facilities  Nos  2,  3  and  4  may  not  exceed 
ECU  1 million  per  project. 

Article 3 

1. 

2. 

1. 

The  financial  institutions  shall  be  selected  by  the  Commission,  further  to  the 
opinion  of  the  Committee  defined  in  Article  8,  from  among  development  banks, 
commercial  banks,  merchant  banks  and  investment  promotion  bodies. 

Financial  institutions  which  have  submitted  proposals  in  accordance  with  the 
criteria  defined  in  Article  6  will  receive  fees  in  accordance  with  arrangements  to 
be  determined  by  the  Commission. 

Article  4 

With  regard  to  Facility  No  1  set  out  in  Article  2,  financing  applications  may  be 
submitted  either  directly  to  the  Commission  by  the  institution,  association  or  body 
carrying  out  the  identification  of  partners  and  projects,  or  through  a  financial 
institution. 

15 

2. 

3. 

4. 

5. 

6. 

1. 

In  the  case  of  Facilities  Nos  2,  3  and  4  set  out  in  Article  2,  applications  may  be 
submitted  by  the  undertakings  concerned  solely  through  the  financial  institutions 
defined  in  Article  3.  Community  funds  for  the  participating  undertakings  shall  be 
applied  for  and  provided  exclusively  through  the  financial  institution. 

With  regard  to  Facility  No  2  set  out  in  Article  2,  the  financial  institutions  and 
undertakings  shall  be  required  to  share  the  project  risk;  where  the  action  is 
successful,  however,  the  Community  contribution  may  be  increased  to  100%  of  the 
cost  for  SMEs. 

In  the  case  of  Facility  No  3  set  out  in  Article  2,  the  financial  institutions  shall 
provide  financing  at  least  equal  to that  provided  by  the  Community. 

In the  case of  Facility  No  4  set  out  in  Article  2, only  the  costs  of  training,  technical 
assistance  and  management  expertise  provided  bv  external  sources  shall  be  eligible 
for  finance  under  this  facility. 

Framework  agreements  signed  by  the  Commission  with  the  financial  institutions 
shall  explicitly  stipulate  that  the  Court  of  Auditors  has  the  power,  in  accordance 
with  Article  188c  of  the  Treaty,  to  audit  the  operations  of  these  institutions  with 
respect  to  financial  projects  funded  by  the  general  budget  of  the  European 
Communities. 

Article 5 

awarded  under 

the 
Contributions 
circumstances  and  pursuant  to  Article  2,  be  either  grants  or  interest-free  advances, 
or  participations  in  the  provision  of  equity  or  subordinated  loans. 

shall,  depending  upon 

instrument 

the 

Participation  in  the  equity  or  subordinated  loans  shall  in  principle  be  acquired  by 
the  financial  institutions  on  their  own  behalf.  However,  in  exceptional  cases, 

where  the  Financial  Institution  cannot  intervene  in  its  own  name  for 
regulatory  or  legal  reasons  or  because of  its  statutes; or 

the  Community's  direct  financial  participation 

where 
to 
reinforce  in  a  decisive  manner  the  capacity  of  the  promoters  to  raise  other 
financial  resources  which  could  not  normally  be  mobilized  due  to  the 
particular  political  situation  or  to  specific  legal  obstacles  in  the  host  country 
of  the joint  venture; 

is  necessary 

the  Commission  may  instruct  a  financial  institution  to  hold  a  direct  participation 
on  the  Community's  behalf. 

Only  projects  with  a  particular  development  or  environmental 
significance  for  technology  transfer  shall  qualify  for  such  direct  participation. 

impact  or 

the  joint 
The  commercial, 
undertakings  set  up  under  the  instrument  shall  be  taken  exclusively  by  those 
undertakings. 

investment  and  financial  decisions  of 

industrial, 

16 

2. 

3. 

4. 

For  Facility  No  2  set  out  in  Article  2,  interest-free  advances  shall  be  reimbursed 
according  to  the  arrangements  to  be  determined  by  the  Commission,  on  the 
understanding  that  the  final  repayment  periods  are  to  be  as  short  as  possible  and 
shall  in  no  instance  exceed  five  years.  Such  advances  shall  not  be  refundable 
where  the  actions have  produced  negative  results. 

For  Facility  No  3  set  out  in  Article  2,  participations  by  virtue  of  this  instrument 
shall  be  disposed  of  at  the  earliest  opportunity  once  the  project  becomes  viable, 
having  regard  to  the  Community's  rules  of  sound  financial  management. 

Subordinated  loan  repayment,  the  realization  of  participations  and  interest  and 
dividend  payments  will  generate  renewable  funds  which  will  be  held  on  deposit  by 
the  financial  institutions  on  behalf  of  the  Community  and  will  be  managed  in 
accordance  with  the  requirements  of  the  instrument  and  pursuant  to  the  principles 
of  sound  management,  security  and  yield  appropriate  to  the  investment.  These 
funds  will  be  allocated  for  the  operations  of  the  instrument  or  will  bear  interest  at 
market  rates  and  will  be  used  in  such  a  way  as  to  curtail  use  of  funds  from  the 
general  budget  of  the  European  Union  for  operations  under  the  instrument.  All 
assets  held  by  the  financial  institutions  are  to  be  paid  back  to  the  Community  if  the 
institution  ceases  to  be  associated  with  the  instrument  or  if  the  instrument  ceases 
to  operate. 

Article  6 

1. 

Projects  shall  be  selected  by  the  financial  institution  or,  in  the  case  of  Facility  No 1 
set  out  in  Article  2,  by  the  Commission  and  the  financial  institution  in  the  light  of 
the  appropriations  adopted  by  the  budget  authority  and  on  the  basis  of  the 
following  criteria: 

(a) 

the  anticipated  soundness  of 
promoters; 

the 

investment  and 

the  quality  of 

the 

(b) 

the  contribution  to  development,  in  particular  in  terms  of: 

impact  on  the  local  economy; 

creation  of  added  value; 

creation  of  local jobs; 

promotion  of  local  entrepreneurs; 

transfer  of 
techniques  used; 

technology  and  know-how  and  development  of  the 

acquisition  of  training  and  expertise  by  managers  and  local  staff; 

implications  for  women; 

17 

creation  of 
exploiting  employees; 

local  jobs 

in  circumstances  which  do  not 

involve 

impact  on  the  balance  of  trade  and  balance  of  payments; 

impact  on  the  environment; 

manufacture  and  supply  to  the  local  market  of  products  hitherto 
difficult  to  obtain  or  substandard; 

use  of  local  raw  materials  and  resources. 

2. 

The  final  financing  decision  shall  be  taken  by  the  Commission,  which  shall  verify 
compliance  with  the  criteria  set  out  in  paragraph  1  and  compatibility  with  the 
various  aspects  of  Community  policies  and  the  mutual  benefit  to  the  Community 
and  the  developing  country  concerned. 

Article  7 

Countries  eligible  shall  be  the  developing  countries  of  Latin  America,  Asia  and  the 
Mediterranean  region  which  have  previously  benefited  from  Community  development 
cooperation  measures  or  which  have  concluded  regional  or  bilateral  cooperation  or 
association  agreements  with  the  Community,  and  South  Africa. 

Article  8 

1. 

2. 

The  Commission 
Regulation.  . 

shall 

implement 

the 

instrument 

in  accordance  with 

this 

In  carrying  out  this  task,  the  Commission  shall  be  assisted,  as  appropriate,  by  the 
Committee  set  up  under  Article  15  of  Regulation  (EEC)  No  443/92  or  by  the 
Committee  referred  to  in  Article  7(1)  of  Regulation  (EEC)  No  1763/92.  and  these 
Committees  shall  deal,  for 
to 
South  Africa,  until  such  time  as  a  specific  committee  dealing  with  financial  and 
economic  cooperation  with  South  Africa  is  designated. 

the  purposes  of  ECIP.  with  matters  related 

3. 

The  following  shall  be  adopted  under  the  procedure  laid  down  in  paragraph  4: 

the  choice  of  financial  institutions  in  the  light  of  their  experience  and 
aptitude  for  making  a  preliminary  selection  of  the  projects  in  accordance 
with  the  criteria  set  out  in  Article  6; 

revision  of  the  amounts  and/or  financing  conditions  under  each  facility  and 
the  aggregate  amount  available  under  Facilities  2T  3  and  4  as  laid  down  in 
Article 2. 

18 

4. 

With  regard  to  the  matters  mentioned  in  paragraph  3,  the  representative  of  the 
Commission  shall  submit  to  the  Committee  a  draft  of  the  measures  to  be taken.  The 
Committee  shall  deliver  its  opinion  on  the  draft  within  a  time  limit  which  the 
Chairman  may  lay  down  according  to  the  urgency  of  the  matter.  The  opinion  shall 
be  delivered  by  the  majority  laid  down  in  Article  148(2)  of  the  Treaty  in  the  case 
of  decisions,  which  the  Council  is  required  to  adopt  on  a  proposal  from  the 
Commission.  The  votes  of  the  representatives  of  the  Member  States  within  the 
Committee  shall  be  weighted  in  the  manner  set  out  in  that  Article.  The  Chairman 
shall  not  vote. 

The  Commission  shall  adopt  the  measures  envisaged  if  they  are  in  accordance  with 
the opinion  of  the  Committee. 

If  the  measures  envisaged  are not  in  accordance  with  the  opinion  of  the  Committee, 
or  if  no  opinion  is  delivered,  the  Commission  shall,  without  delay,  submit  to  the 
Council  a  proposal  relating  to  the  measures  to  be  taken.  The  Council  shall  act  by 
a  qualified  majority. 

If,  on  the  expiry  of  one  month  from  the  date  of  referral  to  the  Council,  the  Council 
has  not  acted,  the  proposed  measures  shall  be  adopted  by  the  Commission. 

5. 

Furthermore,  the  Committee  may  examine,  at  the  Commission's  initiative  or  at  the 
request  of  one  of  its  members,  any  question  connected  with  the  implementation  of 
this  Regulation,  in  particular: 

information  on  the projects  funded  over  the previous  year; 

the  terms  of  reference  of  the  independent  appraisal  provided  for 
Article  9; 

in 

any  other  information  which  the  Commission  wants to  submit  to  it. 

In  order  to  ensure  consistency  of  cooperation  and  to  improve  complementarity 
between  operations,  the  Commission  and  the  European  Investment  Bank  shall 
exchange  any  relevant  information  on  financing  that  they  envisage  granting. 

Article  9 

The  Commission  shall  send  to  the  European  Parliament  and  to  the  Council,  by 
30  April  each  year  at  the  latest,  a progress  report  showing  the  projects  selected,  the 
appropriations  granted  and  the  repayments  to  the  general  budget  of  the  European 
Communities  and  including  annual  statistics  for  the  previous  year. 

The  Commission  shall  forward  the  results  of  an  independent  appraisal  of  the 
instrument  to the European  Parliament  and the  Council  every  five  years. 

6. 

1 

2. 

19 

3. 

4. 

Without  prejudice  to  the  responsibilities  of  the  Commission  and  the  Court  of 
Auditors  as  laid  down  in the  Financial  Regulation  applicable  to  the  General  Budget 
of  the  European  Communities  the  Commission  shall  obtain  each  year  an 
independent  financial  audit  of  the  financial  institutions  and  of  the  Facility  1 
beneficiary  organizations.  The  Commission  shall  make  specific  provision  in  the 
framework  and  specific  financing  agreements  for  anti-fraud  measures,  in  particular 
a  mechanism  for  the  recovery  of  advances  which  are  not  fully  justified  after  such 
audit. 

Use  of  external  technical  assistance  may  be  made,  as appropriate,  on  condition that 
the  technical  assistance financed is  directly  linked  to  the  special  nature of  the ECIP 
instrument  and  is  of  direct  benefit  to  the  ALAMED  countries  and  South  Africa. 
The  costs  of  such  technical  assistance  shall  be  limited  to  5%  of  the  budgetary 
credits  available,  not  including  the  fees  paid to the  financial  institutions  which  shall 
be imputed to the credits allocated to each individual  action  financed. 

This Regulation  shall  enter into force  on  1 January  1995. 

Article  10 

This  Regulation  shall  be  binding 
Member States. 

in 

its  entirety  and  directly  applicable 

in  all 

Done  at Brussels, 

For the Council 
The President 

20 

ANNEX 

II 

ECIP - Financing requests approved - cumulative  1988-1993 

Facility  1 
Facility  2 
Facility  3 
Facility  4 

Number  of  approvals 

Approved  amounts  in  ECU 

Number  %  of total 
35% 
55% 
7% 
3% 

2 63 
4 08 
52 
24 

Amount 
1 3 . 1 1 2 . 6 78 
4 1 , 4 2 6 , 9 49 
2 1 , 3 4 1 , 1 33 
3 . 2 2 1 , 1 19 

% of total 
17% 
52% 
27% 
4% 

Average  ECIP 
financing  amount 
4 9 , 8 58 
1 0 1 , 5 37 
4 1 0 . 4 06 
1 3 4 , 2 13 

Total  1 9 8 8 - 1 9 93 

7 47 

100% 

7 9 , 1 0 1 , 8 79 

100% 

1 0 5 , 8 93 

21 

ANNEX  III 

SUMMARY  OF  THE  CONCLUSIONS  AND  RECOMMENDATIONS 
OF  THE  INDEPENDENT  APPRAISAL  OF  ECIP 

INTRODUCTION 

Article 9.2 of the Council Regulation (319/92) for ECIP required the Commission to, quote: 
"forward the results of an independent appraisal of the instrument to the European Parliament and 
the Council by 31 March 1994 at the latest." unquote. 

A contract to do this was placed with the SEMA Group (Belgium) after publication of an 
international invitation to tender in the Official Journal of the European Communities (J.O. No 
C230 of 26.08.93).  After 98 formal expressions of interest in the contract had been received  from 
consultants from all 12 EC member states, 21 formal bids were received by the due date and 
evaluated by the Commission's services and, after formal consideration by the Comité Consultative 
des Achats et Marchés (CCAM), the contract was placed with SEMA.  The procedures applied 
conform with Council Directive No 92/50/EEC of 18th June 1993 relating to the coordination of 
procedures for the award of public service contracts. 

The Commission sent the report to the Council and the Parliament in May 1994 as required by the 
ECIP Council Regulation, and reminded the Council and the Parliament that the Appraisal is the 
independent opinion of the consultants, and that the Commission does not necessarily endorse or 
agree with its conclusions and recommendations. 

SUMMARY EXTRACTS FROM THE CONCLUSIONS AND RECOMMENDATIONS 

CONCLUSIONS 

ECIP is very successful with a rapid and permanent growth. 

ECIP has met its objectives of promoting mutually beneficial investments. 

ECIP has a complete characteristic aimed at covering all the stages of the creation of joint ventures 
including financing the provision of equity. 

ECIP has a term impact or an indirect impact because the best way to support the joint ventures is 
to finance the project for which there is practically no other source of  financing. 

ECIP also has a direct impact through Facility 3. 

ECIP contributes to the development of the economies of eligible countries. 

The leverage effect is considerable and permits to better evaluate the development impact of ECIP. 

ECIP contributes to the improvement of the image of the European Union in the countries of 
eligible zones (ALAMED). 

ECIP obtains a global degree of satisfaction going from good to very good from the different 
categories of participants. 

22 

ECIP is ending its period of youth and  adjustment. 

The pilot phase gave ECIP its present  form. 

The period  1992-1993 permitted to detect its residual weakness. 

1994 has to be the year of last minute adjustments  of the operational modes of ECIP and the 
adjustment  of efficient  solutions for the problems encountered within the frame of the Facility 3. 

The creation of joint ventures is a slow process which could extend itself easily over a three year 
period: 

12 to  18 months between the request of Facility 2 and the end of the study; 

ECIP foresees two years to judge on the success of the Facility 2 resulting in the creation of 
the joint venture; 

1994-1995 should result in the creation of many joint ventures. 

RECOMMENDATIONS 

The existence of ECIP is necessary because the instrument satisfies  a need poorly covered or not 
covered at all by the other financial instruments available in the international market. 

The general objective of the promotions for mutual interest investments of Community operators 
must remain the essential being of ECIP, specially in the form of joint ventures with local 
operators in the eligible countries concerned. 

ECIP is a complete instrument covering all the stages in the creation of a joint venture, from the 
project identification, the feasibility study and the equity financing to the training; the coherence of 
the instrument must be maintained by keeping together the four facilities which make its 
originality. 

ECIP should extend its area of action. 

ECIP should review its agreements with EIB and co-ordinate its action with those of other 
Commission financial instruments and programmes. 

ECIP is integrated in the multiple actions of the Commission in favour of SMEs, specially the 
programmes of the DG XXIII (BRE, BC-NET, Europartner-ship, Euro Info Centre) and other 
actions at the DG I (Medinvest and Alinvest); ECIP should maintain the priority of the scheme's 
application to the SMEs. 

ECIP should not neglect, however, the indirect impact on the SMEs from the creation of joint 
ventures between enterprises of a large size, specially by way of sub-contracting and supplies. 

ECIP should maintain its flexibility and adapt itself to the size of the proposed investments  (judged 
compatible with the risk level associated with them), to the financial viability of the project 
estimated by the FI, and to the contribution, in short and middle term, to the local economy 
development, rather than, to the size of the partners; the participation of large enterprises  should 
not constitute a reason to reject a project. 

23 

Facility  1 - Projects and partners  identification 

To bring closer together the management of ECIP and MED and AL-Invest should allow the 
extension of Facility  1 to the search of European intermediary organisations likely to give aid to . 
similar organisations from eligible countries to accomplish studies, seminars or "technical shops" 
financed by means of accepted projects within the frame of Facility 1. 

Facility 2 - Investment feasibility  studies 

Should extend its area of action in three directions: 

the realisation, by the enterprises from eligible countries, of prefeasibility  applications 
including an attractive and realistic presentation of their joint venture project and of their 
enterprise; this application would reinforce their credibility with the European enterprises in 
the search of a potential partner to carry out a feasibility  study; 

the final search for a partner when the feasibility  study has given positive results, but the 
enterprise which has initiated the project finds itself without a partner to create the joint 
venture, as a consequence of a sudden defaulting  of one of the partners  (bankruptcy, 
renouncement, incompatibility revealed during the study,...); 

the financing of certain research and development projects that may as the pilot projects, lead, 
at middle term, to the creation of a joint venture with a real technological transfer by the 
productive use of the results obtained; 

The co-financing  of Facility 2 should ideally be based on a mixed mechanism including: 

the total reimbursement in case of failure or non diffusion  of the study's results; 

the gradual transformation  in subsidy according to the partial results obtained and of the 
actions undertaken; 

the transformation  in subsidy in the case of prefeasibility  studies or of search of partners 
when a feasibility  study has given positive results, as well as in case of creation of a joint 
venture. 

As it is difficult  to implement this mixed mechanism, the simple transformation  in subsidy, except 
in the case of the study's confidential  results, seems imperative.  An intermediary solution would 
consist to grant an additional income to the FI which would be linked to the reception at the final 
report of each action together with a commentary by the FI of the results obtained and the possible 
future  actions; 

Facility 3 - Financing the capital requirements of joint ventures: 

The system could take the form of an Investment Fund which could be at a first stage, regional 
(Latin America, Asia, Mediterranean Region) and later on national if the legislation authorise it. 
This Investment Funds - regional or national - would be largely open to international  organisations 
(FI, Commercial banks, investment banks, institutional investors, insurances, retirement  funds,...). 
ECIP would be the reference  shareholder with minority participation of about  15%.  No other 
shareholder will have a higher percentage. 

Investment Supervision Counsel.  Besides a role of control of the investments made, this Counsel 
under the presidency of ECIP, would have a role of lobbying at the Commission to favour the 
ECIP  instrument. 

24 

Facility 4 - Development of Human Resources 

The application area of Facility 4 should involve two types of complementary actions: 

the creation of a restructuration fund allowing to aid the rehabilitation of the personnel 
affected  by the creation of a joint venture and provoking profound  changes within the local 
enterprise, reinforcing the role of ECIP in the economic development of the countries 
concerned. 

the financing of the technical assistance furnished  by the European intermediary organisations 
to their correspondents in the eligible zones (see Facility  1  above). 

And an adapted training is often the best guarantee for success of a new joint venture; the direct 
participation of ECIP should therefore be transformed  in subsidy for training and support made by 
the personnel of the European partner ensuring the know-how transfer to the new company; to 
recourse to external consultants should be limited to the strict minimum when the European 
enterprise cannot ensure it because of limited human resources. 

Participation of "Countries almost Members": 

The enlargement of the area of action of ECIP to the member countries of the European Union put 
at equal level the enterprises of all countries that may benefit from the financing of ECIP; the 
"countries almost members" will be the first to benefit because their enterprise could easily implant 
themselves in our countries; 

Equally, the opening of ECIP to financing the three party joint ventures in Eastern Europe and the 
Republics of the ex-USSR constitute an additional encouragement to those countries that have 
applied for membership in the European Union and take the necessary measures to prepare their 
membership to the Customs Union, in the one hand and the European Union, in the other hand. 

Decisional and Decentralisation Process: 

i 

The Commission could authorise certain FI to finance without reference to the Commission within 
the frame  of Facilities  1, 2 and 4, projects responding to the following conditions: 

concerning projects to create joint ventures in one of the zones, presently covered by ECIP; 

do not belong to sectors of activities having political implications at the level of the 
Commission (agro-industry, textile, fishing,  information technology,...); 

do not go beyond a ceiling of 75.000 ECU for the Facility  1  and  125.000 ECU for the 
Facilities 2 and 4; 

to meet, as any project submitted to the approval of the Steering Committee, the conditions of 
viability and of contribution to the development of eligible countries. 

- 

- 

For the projects of Facility 3, the decision process could be automatically delegated to the 
Investment Funds created in each geographical zone; same thing for the Facility 4 projects  which 
derived from  investments made by the funds  and that may be financed from their resources 
(participation liquidation, transfer  of credit line balances not used). 

25 

Management resources and technical  assistance 

While the Commission's management to date, with very limited resources, has been effective,  due 
to the success and growth of the instrument the implementation in the future  of an efficient  system 
of information  and follow-up  of projects implies a total and permanent availability of management 
and a large flexibility of human resources according to the work load.  So it is necessary to 
implement an external technical assistance support service for ECIP so that the Commission can 
solve its present management crisis.  This would be responsible for the operational management of 
the instrument while the Commission keeps all the decision power related to the regulation policy 
and functioning  of the instrument as well as the control of the projects submitted to them. 

(Complete copies of the Independent Appraisal have already been sent to DGs I, II, III, XVIII, 
XIX, XX, XXIII and the  S.J.) 

26 

SUMMARY  OF THE  CONCLUSIONS AND RECOMMENDATIONS 
OF THE  COURT  OF AUDITORS'  OPINION 
ON THE  IMPLEMENTATION  OF  ECIP 

ANNEX  IV 

Introduction 

At the  Council's  request  the  existing  ECIP  Regulation  (319/92)  includes  at  Article  9  para  3  the 
following  provision quote  : "The Council  shall ask the  Court of Auditors to deliver an opinion on 
the  implementation  of  the  instrument  by  31  December  1993."  unquote.  Accordingly  the  Court 
audited  ECIP  during  1993  and  presented  their  opinion  (N°  12/93)  to  the  Council  in  December 
1993. This  annex summarises  below the principal  conclusions  and  recommendations  of the  Court 
as  regards  ECIP,  and  the  Commission's  management  thereof.  The  Commission  provided  the 
Council in March  1994 with its comments and replies to the Court which in particular showed how 
the  existing  ECIP  Regulation  (319/92)  and  the  Commission's  implementation  thereof  are  in 
conformity with the Financial Regulation applicable to the General Budget of the EC. 

Court's  conclusion 

Quote : 

Court of Auditor's conclusion on ECIP 

"The  ECIP  instrument  meets  a  real  need  which  the  market  ignores,  or  of  which  it  takes  only 
inadequate account. This is especially true with regard to finance provided under Facilities N°  1, 2 
and 4. This instrument, which is in addition to the others already set up by the Community,  reflects 
developing  countries  eagerness  to  obtain  technology  transfers  through  the  setting-up  of  joint 
ventures. 

The  Commission  has  nevertheless  come  up  against  the  difficulty,  which  it  has  been  unable  to 
resolve, of managing a banking instrument while, at the same time, complying with budgetary  law 
and  the  rules  of  public  accounting.  The  implementation  of the  instrument  has  suffered  from  this 
difficulty. 

During the first few years, the Commission concentrated its energies on setting up a network which 
was  large  and  diverse  in composition  in  order  to  implement  the  instrument.  The  enquiry  showed 
that the Commission does not have sufficient  resources to manage such a large network  effectively. 
In this respect, the situation  is all the more unsatisfactory  as the Commission has not been able to 
provide  itself with the tools  for  collecting  and  processing  the  information  which  is  necessary  for 
effective  decentralised management and for checking the way Community funds  are used. 

27 

The results obtained in terms of the setting-up of joint ventures with the aid of Facility n°3  finance 
are  modest,  much  more  modest  than  is  suggested  by  the  Annual  Report  published  by  the 
Commission  in  1992.  The  figures  given  in  this  Report  do  not  refer  to  the  number  of  contracts 
actually  signed,  let  alone  operations  carried  out,  but  only to  the  decisions  taken  by  the  Steering 
Committee.  As  for  companies  which  it  was  possible  to  set  up  with  the  aid  of  funding  provided 
under Facilities N°  1 or 2, but not Facility N°  3, the Commission did not have at its disposal, any 
more than did the Fis which were visited, sufficient  information  to check whether  such  companies 
actually existed and, if so, how many of them there were. 

To the  extent that  the  Community  legislator  and the  Commission  wish,  within the  framework  of 
development aid policy, to persevere with promoting  investment  in the private  sector by means  of 
the ECIP instrument, steps should be taken to set up a suitable structure. For this sort of operation, 
this  could  be  a  legally-recognised  specialist  body  subject  to  commercial  law,  but  also  to  the 
supervisory  authority  of the  Commission  and to the  auditing  powers  of the  Court  of Auditors,  in 
accordance with Article 87 of the Financial Regulation." unquote 

Court of Auditor's specific remarks as regards adoption of the ECIP regulation (EEC) 319/92 

Quote  : "Article  209  of the EEC  Treaty  stipulates  that  : "The  Council,  acting  unanimously  on  a 
proposal  from  the  Commission  and  after  consulting  the  European  Parliament  and  obtaining  the 
opinion of the Court of Auditors, shall : 

(a)  make  Financial  Regulations  specifying  in  particular  the  procedure  to  be  adopted  for 

establishing and implementing the budget and for presenting and auditing accounts; 

(b) 

determine  the  methods  and  procedure  whereby  the  budget  revenue  provided  under  the 
arrangements  relating  to  the  Communities'  own  resources  shall  be  made  available  to  the 
Commission...". 

The opinion of Court of Auditors which is provided for in this Article is an important obligation, in 
the absence of which the lawfulness  of such a Regulation is questionable. 

Council Regulation (EEC) N° 319/92 contains various provisions relating to the implementation of 
the general budget  of the EC which  confer  upon  it the nature  of a  Financial  Regulation.  For this 
reason,  in  order  for  the  adoption  of  this  Regulation  to  be  valid,  it  should,  in  accordance  with 
Article 209 of the EEC Treaty, have been  submitted to the Court  of Auditors  for  a prior  opinion. 
Such an opinion was all the more essential  since, as  has been  shown  in paragraphs  29 to  40, the 
provisions in question depart perceptibly form the rules of financial orthodoxy which are reiterated 
in the Financial Regulation of 21 December  1977." Unquote 

(Complete  copies  of the  Court  of Auditor's  Opinion  and  the  Commission's  Replies  have  already 
been sent to DGs I, II, III, XVIII, XIX, XX, XXIII and the  S.J.) 

28 

FINANCIAL STATEMENT 

ANNEX  V 

1.  Title  of  operation:  Measures 

to  encourage  Community 

the 
developing  countries  of  Latin  America,  Asia  and  the 
Mediterranean  region  and  in  the  Republic  of  South  Africa. 

investment 

in 

EC Investment  Partners  financial  instrument 
(+  ancillary  and  support  costs) 

2.  Budget heading  involved: B7-5000 

3.  Legal basis: 

Council Regulation  (EEC) applicable from  1 January  1992 to 31 December  1994, on 
the EC-International Investment  Partners  financial  instrument  for  countries  of  Asia, 
Latin America and the Mediterranean  region.  Regulation  319/92 of 3 February  1992 
( O J N oL  35,  12.2.1992). 

The Commission  proposal  to the Council  is for  continuation  of the ECIP Regulation 
beyond  31.12.1994  with  minimal  changes  and  the  addition  of  South  Africa. 

4.  Description of operation: 

4.1  General  objective 

To encourage  economic  cooperation  between the Community  and third  countries by 
assisting  direct  investment  by  Community  firms,  particularly  SME, by  the  creation 
of joint  ventures  with  firms  in  Asia,  Latin  America,  the  Mediterranean  region  and 
South  Africa.  To  encourage  by  this  means  the  transfer  of  know-how,  production, 
technology  transfers,  employment  and  recovery  of  the  balance  of  payments. 

4.2  Period  covered  and  arrangements  for  renewal  or  extension 

Indeterminate 

5.  Classification  of expenditure  or revenue 

5.1  Compulsory/Non-compulsory  expenditure 
5.2 Differentiated/!^'on-differentiated appropriations 

6.  Type  of expenditure  or revenue 

100% subsidy 
Subsidy for joint financing  with other sources in the public and/or private sector 
Interest subsidy 
Other: 

- Interest-free advances 
- Equity participation 
- Loans 

Should  the  operation prove  an economic  success,  is  there provision for  all or 

29 

part of  the Community  contribution to be reimbursed?  Reimbursements  are to 
be held  on deposit  by  the financial  institutions  acting as ECIP fund  managers 
for  the Commission  (see Article  5(4) of  Council Regulation  (EEC) No  319/92 
of  3 February 1992). 

Will  the proposed  operation cause any  change in  the  level  of  revenue?  If  so, 
what sort of  change and what  type  of  revenue  is  involved? 

Revenue  collected  -

Re-use 

7.  Fraud prevention  measures; Results  of  measures taken 

Normal  Commission  controls, plus control  by the participating  financial  institutions 
under  their  own  responsibility  and  external  evaluation.  A  firm  of  accountants  will 
also carry out an independent  audit, each year, on behalf of the Commission.  Special 
provisions have been  included  in  all  framework  contracts  and financing  agreements 
for  any  unjustified  advances  to  be  reimbursed  automatically  after  the  annual  audit. 
In view of each operation's relatively  low cost compared to the extent of the liability 
of  the  financial  institutions,  audit  is  likely  to  be  thorough. 

8.  Elements  of  cost-effectiveness  analysis 

8.1  Specific  and  quantified  objectives;  target  population 

See point  4.1 

8.2  Grounds  for  the  operation 

This  operation  aims to: 

foster  the development of the partner countries through the creation of productive 
jobs,  the  transfer  of  risk  capital,  and  the  transfer  of  technological  and 
management  know-how  (the  investments  that  facilitate  the  above  should  also 
take  account  of  the  market  viability  of  the product); 

stimulate  the  role  of  the  private  sector  in  the  development  of  the  partner 
countries  so  as to  enhance  their  economic  efficiency; 

spur private and public economic operators in the Community  into helping those 
countries to develop, especially against the backdrop of the budgetary  constraints 
facing  the  Community  and  Member  States. 

The  operation  will  tend  to  provide  leverage  for  a  small  Community  budget  to 
mobilize  a  larger  flow  of  private  sector  capital.  It  will  also  make  Member  States' 
efforts  in this  area more  effective  and they  will  benefit  from  the  effects  of  synergy, 
with  several  projects  and  programmes  combined  into  one  single  project.  Since  the 
projects  will  be  initiated  by  economic  operators  and  screened  by  the  participating 
financial  institutions, the operation  will  allow a great many projects to be covered  at 
little  administrative  cost  to  the  Commission. 

Note  also  that  the  instrument  will  result  in  repayments  to  the  Community  budget, 

30 

Note  also  that  the  instrument  will  result  in  repayments  to  the  Community  budget, 
thereby  adding  to  its  cost-effectiveness. 

8.3  Monitoring  and  evaluation  of  the  operation 

8.3.1  There  are  two  types  of  indicator:  (a)  of  development  and  (b)  financial 

(a)  The  contribution  to  development  will  be  assessed  on  the  basis  of  the 

following  criteria: 

impact  on  the  local  economy; 
creation  of  added  value; 
creation  of  local  jobs; 

- 
- 
- 
-  promotion  of  local  entrepreneurs; 
- 

- 
- 

transfer  of  technology  and  know-how  and  development  of 
techniques  used; 
acquisition  of  training  and  expertise  by  managers  and  local  staff; 
implications  for  women; 
local  jobs 
creation  of 
exploiting  employees; 
impact  on  the  balance  of  trade  and  balance  of  payments; 
impact  on  the  environment; 

- 
- 
-  manufacture  and  supply  to  the  local  market  of  products  hitherto 

in  circumstances  which  do  not 

involve 

the 

difficult  to  obtain  or  substandard; 
use  of  local  raw  materials  and  resources, 

(see  Article  6  of  Council  Regulation  No  319/92  of  3.2.1992). 

(b)  The  conditions  for  cofinancing  by  the  private  operators  and  financial 
institutions  and the consequent  obligation  to  share the  risk,  will  ensure  the 
financially 
financial  viability  of  each  project. 
successful  projects  will  provide  an  indicator  of  the  success  of  operations. 

The  percentage  of 

8  3.2  Details  and  frequency  of  planned  evaluations 

In  addition  to  appraising  and  evaluating  each  operation,  the  Commission  is  to 
provide  the following  formal  evaluations,  assisted  by  the financial  institutions, 
in  1994: 

By  30  April  of  each  year  at  the  latest,  the  Commission  will  send  a  progress 
report  to  Parliament  and  to  the  Council  showing  the  projects  selected,  the 
appropriations  granted  and  the  repayments  to  the  general  budget  of  the 
European  Communities,  including  annual  statistics  for  the  previous  year. 

The  Commission  will  forward  the  results  of  an  independent  appraisal  of  the 
instrument  to  the  European  Parliament  and  to  the  Council  every  five  years. 

An  independent  firm  of  accountants  will  carry  out  an  annual  financial  audit. 

8.3.3  Assessment  of  the  results  obtained 

See  8.3.2  above. 

31 

8.4.1  The  operation  is  incorporated  in  the  DG's  financial  programming  for  the 

relevant  years. 

8.4.2  The  instrument  is  a  key  factor  in  economic  cooperation  policy  with  the 
countries  of  Asia,  Latin  America,  the Mediterranean  and  South  Africa. 

8.4.3  The  principal  uncertainties  with  a  possible  bearing  on  the  specific  results  of 

the  operation  are: 

the macroeconomic  situation  and the investment  climate in the EC and in 
the  countries  concerned; 
the private operators'  and financial  institutions' demand and  requirements 
in  relation  to  the  investment  vary  according  to  factors  outside  the 
Commission's  control. 

9.  Financial  impact 

9.1  Method  of  calculating  total  cost  of  operation  for  1995  budget  (link  between 

unit  costs  and  total  cost) 

The  proposed  increase  puts  into  effect  a political  will  to  increase  aid  in  this  sector 
in  accordance  with  the policy  proposed  in  document  COM(90)575  of  7.3.1991  and 
confirmed  by  Council  Regulation  No  319/92. 

The instrument  is based on a network  of financial  institutions in the Community  and 
third  countries.  In  addition  to  their  duty  to  propose  projects  to  the  Commission, 
these  institutions  have  to  cofinance  projects  (or  help  raise  the  cofinancing).  The 
network  of  financial  institutions  currently  (July  1995)  consists  of  more  than  95 
members  and  others  are  due  to  be  recruited  to  help  complete  the  network.  Taking 
into  account the ceiling fixed  per operation  (ECU  1 million), theoretically  an annual 
appropriation  of ECU  50 million  could easily be used up depending on  requirements 
in the regions concerned.  In fact  there has been  a marked  acceleration  in the rate of 
submission  of applications (the rate of progression  in the number of projects per year 
=  +  100% per year  1989-1993). 

The  breakdown  of  commitments  by  region  is  expected  to  be  in  the  following 
approximate  proportions:  Asia (37.5%), Latin  America  (37.5%)  and  Mediterranean 
(25%). 

32 

9.2 

Itemized  breakdown  of  cost 

Breakdown 

Budget  94 

Asia 
Latin  America 
Mediterranean 

TOTAL 

14 625 
14 625 
9  750 

39 000 

ECU  million 
PDB  95 

15 750 
15 750 
10 500 

Var. 
i n% 
108% 
108% 
108% 

42 000 

108% 

ECU  million 
For  South  Africa,  the additional  appropriations  will  be  obtained  by  redeployment 
(transfer  from  B7-5070) 

Breakdown 

Budget  94 

PDB  95 

South  Africa 

1 000 
(by  transfer) 

Amount  to 
be  fixed 

Var. 
i n% 

" 

9.3  Operating  expenditure  for  studies,  expert  meetings,  etc., included  in  Part  B 
(see Annex  III (a) to the Commission  communication  of  22.04.1992,  attached 
in A nnex  VIII) 

ECU  million 

Breakdown 

Budget  94 

PDB  95 

-  Studies 
-  Expert  meetings 
-  Conferences  and  congresses 
-  Information  and  publications 
-  Technical  assistance 
TOTAL 

300 000 

200 000 
350  000 

850 000 

300 000 

400 000 
400  000 
1  000 000 
2  100 000 

Var. 
i n% 
100% 

200% 
114% 

247% 

33 

9.4  Schedule  for  multiannual  operations  whose  basic  instrument  contains  an  "amount 

deemed  necessary" 

- 

amount  deemed  necessary:  ECU 

million 

period:  1995  and  subsequent  years 

Accumulated 
position 
end  1993 
(0 

Budget 
1994 

Prelim 
draft 
budget 
1995 

ECU  million 

INDICATIVE  PLAN 

1996 

1997 

1998 

1999 

TOTAL 

43  823** 

39  000 

42  000* 

60  000* 

70  000* 

80  000* 

N.B. 

and 
subs,  yrs 
100  000* 

ECU million 
For  South  Africa,  the  additional  appropriations  will  be  obtained  by  redeployment 
(transfer  from  B7-5070) 

Breakdown 

Budget  94 

PDB  95 

Var. 
i n% 

South  Africa 

1  000 
(by  transfer) 

Amount  to 
be  fixed 

*#  including  ECU  5 000  000  of  appropriations  carried  over  from  1992 

Annex:  1995  financial  statement  for  item  B7-5070 

34 

FICHE  FINANCIERE 

Annex 

I. 

POSTE  : B7-5070 

INTITULE DE L'ACTION : Programme d'actions concernant l'Afrique  du Sud 

crédits autorisés  1994 

crédits demandés 1995 

engagements 
110 

paiements 
94 

engagements 
100 

paiements 
82 

variation  en % 

engagements 
9,1 

paiements 
-12.8 

en. millions  d'écus 

o. 

BASE LEGALE : Néant 

(Conclusions  of 

the 

General  A f f a i rs  Council  of 

19th  A p r il  1994) 

DESCRIPTION DE TACTION 

4.1.  Objectifs  spécifiques  de l'action : 

Cette  action  est  destinée  principalement  à  l'aide  des populations  d'Afrique  du  Sud,  victimes  du 
système  de l'Apartheid.  Travaillant  dans  le  cadre  établi  en  Septembre  85  lors  de  la  session du 

aux  victimes  de  l'Apartheid  Une  assistance  financière  devait  être  envoyée  sur  place  via  des 
organisations  non  violentes  présentes  en  Afrique  du  Sud, notamment  les  égalises.  Ainsi  quatre 
chaînes d'assistance furent sélectionnées : 

le Conseil des Eglises sud-africaines (S ACC) 
la Conférence  des Evêques Catholiques sud-africains  (SACBC) 
le Kagiso Trust 
les S5Tidicats 

La  Commission  ayant condamné l'Apartheid,  il s'était  avéré impossible  d'établir  des liens  directs 
avec ces organisations, c'est pourquoi l'assistance financière  leur fut fournie  via  des organisations 
non-gouvernementales  européennes. 

Etant donné le changement de situation politique en Afrique  du Sud et le fait  que la  Commission 
ait  ouvert  en  Février  1991 un  bureau  de  coordination  du  Programme  à  Pretoria,  un  accord  fut 
établi  avec  les  4  organisations  ci-dessus  selon  lequel  elles  ne  bénéficieraient  plus  d'un  accès 
exclusif  aux fonds  disponibles à travers le Programme  Spécial.  Ainsi,  la  Commission  cherche  à 
élargir  l'éventail  des  institutions  avec  lesquelles  elle  coopère  en  vue  de  dynamiser  l'orientation 
"développement"  de son Programme Spécial. 

La  sélection  des  projets  proposés  en  vue  d'un  financement  par  le  Programme  Spécial  se  fait 
individuellement par la Commission.  Une approbation du bureau  de coordination  à Pretoria, une 
consultation  appropriée  des  ambassades  des  Etats  membres  en  Afrique  du  Sud  ainsi  que  des 
experts  des Etats membres  à Bruxelles  précèdent la  décision.  Le  financement  communautaire  à 
travers  ce  programme  ne  retient  aucun  projet  soutenant  les  activités  d'organisations  politiques. 
Seuls  les  projets  de  nature  pacifique  et non  violente  peuvent  être  sélectionnés,  parmi  ceux-ci, 
citons  les  projets  de  formation  et  d'éducation,  d'aides  diverses  dans  le  domaine  sanitaire, 
d'assistance  juridique,  visant  à  permettre  aux  populations  noires  d'Afrique  du  Sud  de  dépasser 
leurs  difficultés  et  de  prendre  part  au  développement  de  la  société.  Depuis  le  début  du 
Programme  en 1986, un total de 536 projets  a été approuvé jusque fin  1992, ce qui représente un 
engagement total de 246,1 millions d'écus. 

Durée : elle dépendra des développements politiques dans le pays. 

35 

- 

Population visée par l'action  : les gens défavorisés  souffrant  du régime de l'apartheid. 

5. 

CLASSIFICATION DE LA  DEPENSE/RECETTE 

5.1 

DNO 

5.2.  CD 

6. 

TYPE DE LA  DEPENSE/RECETTE 

Les interventions engagées au titre de cette ligne budgétaire sont pour la plupart financées  à 
environ 80% par la Communauté. 

Cette aide pourvoit notamment des actions dans le domaine de l'éducation  et de la formation, dans 
le domaine du développement rural, de la santé et dans le domaine social et humanitaire. 

Sont également couverts les frais  de l'assistance technique nécessaires à l'exécution  de ces 
mesures ainsi que le coût de l'instruction et du suivi des dossiers. 

7. 

]NCroENCEFMANCrERESTJ0R.LESCRED^^SD,r^^ERVENTION: 

7.1.  Mode de calcul  : 

Les candidatures des projets reçues par le Bureau de coordination à Pretoria en Janvier 1993 
étaient au nombre de 70.  On estime qu'entre 50 et 60 projets parviennent au bureau chaque mois. 
Le budget de 90 millions d'écus sera engagé totalement pour la fin  de l'année  1993. 

La situation récente en Afrique  du Sud a fait évoluer le Programme Spécial vers une approche 
plus orientée sur le développement  Un financement plus important est donc requis pour des 
projets de développement rural, de santé, d'éducation et de formation, ainsi que pour des projets 
concernant l'environnement et le rôle des femmes dans le développement 

Le Programme de Bourses pour  1993. décidé en  1992, et d'environ 70 millions de Rand (19,5 
raillions d'écus).  Suite aux augmentations des inscriptions universitaires en 1993 (se situant entre 
15 et 30%), un montant d'environ  90 millions de Rands (24,6 millions d'écus)  devra être prévu 
pour le programme boursier en  1994.  L'éducation  de base pour les adultes nécessitera  également 
un financement plus important. 

Importance politique : 

Souscrivant aux déclarations exprimées par le Conseil européen en décembre  1989 à Strasbourg, 
par les Ministres des Affaires  Etrangères en février  1990 à Dublin, et rappelées par le Conseil 
Européen en décembre  1990 à Rome, la Commission estime que ce programme devrait être 
soutenu. 

Lors de sa réunion les  14 et 15 décembre  1990, le Conseil européen a déclaré son intention 
"d'intensifier le programme des mesures positives et de l'adapter aux nécessités  de la nouvelle 
situation,...". 

36 

Les Ministres  des Affaires  étrangères réunis  dans le cadre  de la coopération  politique  européenne 
le 20 février  1990  à Dublin,  ont apporté leur soutien  à cette  déclaration. 

Les  négociations  actuellement en cours  entre les différents  acteurs politiques  en vue de la  création 
de structures  de transition, suivies par des élections  démocratiques,  donnent une  nouvelle 
impulsion  à continuer  ce programme.  H convient maintenant  de soutenir  au maximum  les  forces 
pacifiques  anti-apartheid.  Un  effort  accru s'avère  à présent nécessaire puisque  l'évolution 
pacifique  repose sur des bases fragiles.  La présente proposition  de la Commission pour  1994 
répond  à ces  impératifs  politiques  et techniques. 

8. 

DISPOSITIONS  ANTI-FRAUDE  PREVUES DANS  LA PROPOSITION  D'ACTION: 

Contrôle  de la  Commission  et acceptation  du contrôle de la Cour des comptes  par  les 
bénéficiaires. 

9. 

ELEMENTS  D'ANALYSE  COUT-EFFICACITE 

9.1.  Objectifs  et cohérence avec la programmation  financière  : 

Objectifs  spécifiques  : 

Dans  le  cadre  de  l'adaptation  de Programme  Spécial  à l'évolution  de  la  situation  en  Afrique 
du  Sud  et  tenant  compte  des  déclarations  politiques  de  la  part  de  la  Communauté,  la 
Commission poursuivra la mise en oeuvre du  programme 

en  orientant  l'aide  sur  des programmes  axés  sur  le  développement  plutôt  que,  comme 
par le passé, sur des projets  à dimension  politique; 

en réalisant  des micro projets par  auto-assistance; 

en accordant une importance accrue aux projets  éducatifs,  etc.; 

Certains  estimations  font  état  dnn  besoins  de  15  à  20  milliards  d'écus  pour  élever  la  qualité 
des logements,  de la santé et de réducation  au niveau moyen  dont jouit la population  blanche 
de l'Afrique  du  Sud. 

Objectif  général  : 

Aides spécifiques  dans le domaine du  développement. 

9.2 

Justification  de l'action par rapport à une  alternative qui permettrait d'atteindre  les  mêmes 
objectifs  : 

Le rôle  que la  Communauté  exerce dans  le  cadre  de la Convention  de Lomé  en Afrique  ne 
lui  permet  pas  de  rester  silencieuse  à  l'égard  des  problèmes  de  l'Afrique  du  Sud.  La 
Communauté  est  donc  pratiquement  obligée  d'intervenir.  Son  intervention  pourrait  être, 
soit la continuation  des actions réalisées  à ce jour dans le cadre du Programme  Spécial,  soit 
une antre formule  permettant un soutien  à la population  défavorisée  en Afrique  du  Sud. 

37 

11 est évident qu'on devrait attendre préalablement l'adoption  d'une nouvelle institution et 
finalement  l'instauration  dnn  eouvernement  post-apartheid  issu  des  élections  "fiée  and 
fair". 

" 

Aussi longtemps  que ces conditions n'ont pas été remplies, il n'y  a pas  d'autres  alternatives 
permettant  une  modification  du  financement  actuel.  La  Commission  ne  peut  pas  rester 
inactive devant les besoins de plus en plus grands. 

Concernant  les  effets  dérivés,  l'action  communautaire  contribue  à  l'établissement  des 
relations publiques fondées sur la confiance et la reconnaissance. 

Quant à la question de la subsidïarité, les constations faites  sur place font  ressortir que les 
efforts  des  Etats  membres  des  autres  pays  sont  insuffisants  pour  répondre  aux  besoins. 
C'est  pour  ces  raisons  d'ailleurs  que  le  programme  en  question  est  réalisé  en  étroite 
collaboration avec les gouvernements des Etats membres. 

9.3  Suivi et évaluation  de l'action 

Ne peuvent être considérés comme indicateurs de performance  que des résultats obtenus à 
long terme : 

Affaibilïssement  des souffrances  humaines 

formation  et éducation aboutissant à un réel exercice de responsabilités dans la vie 
économique par la population noire. 

Quant aux modalités et à la périodicité de l'évaluation, celîes)ci sont réalisées par des 
contrôles réguliers et notamment des sondages portant sur environ  10% des projets. 

38 

ISSN 0254-1475 

COM (94) 358 final 

DOCUMENTS 

EN 

U  01 

Catalogue number : CB-CO-94-376-EN-C 

ISBN 92-77-72231-2 

Office for Official Publications of the Europem Communities 

L-2985 Luxembourg 

39