Communication from the Commission to the Council and to the European Parliament - Untying: Enhancing the effectiveness of aid
Date: 2002-11-18
Institutions: European Commission
Subjects: EU aid, EU policy, developing countries, development aid, terms for aid, third country

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 18.11.2002
COM(2002) 639 final

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND TO THE
EUROPEAN PARLIAMENT

Untying: Enhancing the effectiveness of aid

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND TO THE
EUROPEAN PARLIAMENT

Untying: Enhancing the effectiveness of aid

Introduction

1.

2.

3.

4.

The debate on untying of aid has long been at
the centre of discussions on
development policy. In the last few years, a consensus has emerged on the
international scene that the practice of tying the granting of aid, directly or indirectly,
to the purchase of goods and services procured by means of that aid in the donor
country reduces its effectiveness. It is generally recognised that the untying of aid is
an important factor in a coherent pro-poor development policy.

The untying of aid is an important
issue in the debate on the coherence and
effectiveness of aid efforts and the credibility of donors. On the one hand untying is
perceived to be a strong indication of generosity and solidarity. On the other hand –
and perhaps a more pertinent feature – it is seen to enhance the transparency and
accountability of aid management and delivery. It could therefore have an important
effect in reducing the scope for corruption and mismanagement. It is also seen as an
element that fosters participation of developing countries in the management of
programs and projects. Far from being a rhetorical concept, the full implementation
of the concept of untying of aid - without loopholes and lacunae - could have
substantial concrete development
impacts in the field. The donor community is
therefore called upon to carefully analyse its potential impact. This will require full
transparency in application and a prompt response to any request for information.

Untying of aid improves aid effectiveness. As only project aid can be tied, untying
would also make it easier to move towards sector or budget support by lessening the
link in each Donor country between aid and commercial interest, a major cause of
inertia. It is also often said that the full application of aid untying would increase the
value of Official Development Assistance (ODA) through more cost effective
supplies, thereby effectively increasing the amount of financial resources available
for development activities. This concept of “increase of ODA through better value
for money” is supported by the World Bank's estimate that full untying could lower
the transaction cost of aid by up to 25%. The Development Assistance Committee of
the OECD (DAC) follows the same line by estimating that this reduction may reach
15% to 30% of the costs1.

It is, furthermore, also widely argued that tied aid has a negative impact by providing
supplies incompatible with those provided by other donors for the same sector in the
recipient country. Tied aid may also come from a mix of trade considerations or
protectionism, putting it in contradiction with the commonly accepted concept of
“ownership“ by the recipient country and leading to an overly donor driven
approach.

1

OECD Observer, Policy Brief "Untying Aid to the least Developed Countries", July 2001.

2

5.

6.

7.

8.

2

3

4

5

6

Despite these widely accepted assumptions concerning positive impacts through cost
reduction, we lack complementary information on the other potential positive effects
of untying. Those include issues such as the positive impact of untying on country
ownership and the impact on the ability of developing country companies to
participate and compete effectively in a fully untied market for the procurement of
goods and services for development purposes. Additional issues are the effect of full
untying -
including among all developed and developing countries - on the
development of local markets in developing countries; the potential existence of a
marginal degree of untying i.e. a certain degree of openness above which there are
only marginal gains; the impact of tied aid such as the granting of aid linked to
additional policies for which the supplies are exclusively produced in the donor
country. We are also not entirely clear about possible effects of untying in terms of
balancing the effort amongst donors, of influencing the level of support by public
opinion (in particular the taxpayers), and of the evolution of aid flows.

The Donor Community is committed to continuing the debate on the impact of
untying, as well as on the link between untying and quality, effectiveness and
visibility of aid. The OECD has over the years spent considerable time on the subject
both in analysis and in its relevant political forum, namely the Development
Assistance Committee (OECD/DAC). This work found its first concrete expression
in the “Recommendation on Untying ODA to least developed Countries “ adopted by
the OECD/DAC in May 2001 after long and difficult negotiations. The Commission
regards this recommendation as a good political signal, a first, but insufficient step in
the right direction. The recommendation – due to its many conditions, limitations and
loopholes – has only a very limited impact on a marginal amount of ODA.

The EU included a clear commitment to further discussions on untying of aid in its
negotiation platform for the International Conference on Financing for Development
(FFD) 2. In the outcome of FFD the international community committed itself3 to
“Support and enhance recent efforts and initiatives, such as untying of aid..” Untying
of aid was thus recognised in Monterrey as one of the possible means to improve the
effectiveness of these flows.

The European Community itself has a long track record in dealing with the elements
of untying, due to the openness of its development programmes to the Member States
and to an increasing degree, to beneficiary countries. Such elements of untying were
included its development programmes since the first Yaoundé Convention in 19634.
In the mid 90s, as part of its political dialogue with the European Parliament5, the
European Commission reaffirmed its support for the concept of untying and its
potential role in the improvement of development policy6. This document intends to
consolidate the Commission's approach and to clarify the current state of play
regarding the Untying of Community Aid.

Monterrey, Mexico, 18-22 March 2002
paragraph 43 of the “ Monterrey Consensus “
Convention of Yaoundé I between the EC and its Member States and the Associated African and
Malgache Countries, 1963.
Reply to question from EP n°1618/96 - Mr Howitt, OJ 1996, C322/95
The Commission presented in 1991 a first Communication on untying (SEC(91)2273 Final of the
25/11/1991) and debates occurred without concrete results in the Development Councils of the
04/05/1992, 18/11/1992, 25/05/1993 and 28/11/1997.

3

9.

This Communication presents the Commission’s approach to untying (Part I) and
addresses the state of play regarding the untying of Community Aid (Part II). It then
analyses the issues linked to the untying of the Members States’ bilateral aid
(Part III) and ends with concrete recommendations (Part IV).

Part I. A vision of untying

10.

11.

12.

Since the first Lomé Convention7, the spirit of Community Aid has been based on
partnership, which is centred on the concept of ownership. Partnership and
ownership cannot only be treated as statements of mutual respect and recognition.
They also carry concrete implications on the concept of untying. The debate on
untying cannot only be a debate between donors, solved within donor fora. It implies
necessarily a high level of involvement of the recipient countries. Since its
foundation, and based on the belief that the quality of the dialogue with partners is
the key to successful development policies, Community Aid has put the recipient
country firmly at the centre. Therefore, the European Commission has been eager to
create a space in the dialogue on untying for the Developing Partner Countries and to
introduce an element of decision from their side.

The Communication on the European Community's Development Policy8 refocused
Community activities on several priorities amongst which are Regional Integration
and Institutional and Capacity Building. Both have been recognised by the
International Community as key elements in the fight against poverty and for the
sustainability of development in all regions as well as conflict prevention. The
European Community’s own experience leads it to take an active and leading role in
these areas. Therefore, in a coherent approach, the European Commission has been
concerned that untying of Community Aid must be used as a tool to cross-fertilise
and support the potential of these two elements.

One of, if not the main, aim of untying is the improvement of the effectiveness of
ODA flows and their impact. The DAC Recommendation on untying recognises, as a
principle, the objective of achieving a balance of efforts among the DAC Members.
It also acknowledges that achieving a balance in effort sharing is a legitimate and
important concern for governments, parliaments and public at large9. It is essential
that the means employed for untying do not create any distortion of competition
between the most advanced donors and those still finding their way. Such a distortion
could send a mixed message to the most generous donors and, consequently, create
negative consequences for the level of ODA. This places the untying of aid firmly
within the debate on financing for development and advocates for the internationally
agreed target of 0.7% of GNI.

13.

The untying of aid is not an isolated concept. It is part of the ongoing debate on aid
effectiveness and the harmonisation of donors’ policies and procedures. It should be
recalled that the European Council of Barcelona committed the European Union to

7

8

9

It

The Convention of Lomé I (1973) between the European Community and the African, Caribbean and
Pacific (ACP).
launched five generations of Partnership Agreements between the EC and
ACPsovereign states.
Communication from the Commission to the Council and the European Parliament, 'The European
Community's Development Policy", 26 April 2000, COM (2000) 212 Final
OECD, The DAC Journal Development Co-operation 2001 Report, 2002, Volume 3 n°1, p.43

4

taking concrete steps in the harmonisation of procedures and co-ordination of
policies before 200410.

Part II: Untying of Community aid

14.

15.

16.

17.

The European Commission indicated at the DAC High Level Meeting in April 2001,
inter alia,
the spirit and the objectives of the DAC
recommendation, while complying with the policies and procedures defined at the
Community level and in the partnership agreements”.11

that “it will

implement

the Commission,

In February 2002,
in its Communication to the Council and
Parliament, for the preparation of the International Conference on Financing for
Development (Monterrey, Mexico, March 2002) committed itself to implementing
the DAC recommendation. The Communication further stated that: “the MS should
decide to fully untie bilateral aid amongst the 15 Member States and vis-à-vis all
their partners in the developing world, while maintaining the existing system of price
preference of the EU-ACP framework”.

In March 2002, in its conclusions relating to the preparation of the Conference in
Monterrey and in order to improve the efficiency of ODA, the European Council
(Barcelona Conclusions, paragraph 7, c) decided: “to implement
the DAC
recommendation on untying of aid to Least Developed Countries and continue
discussions in view of further untying”.

The commitment was retained in the outcome of the Monterrey Conference and
reconfirmed in the plan of implementation adopted at
the World Summit on
Sustainable Development
(Johannesburg, South Africa, August 2002). The
Commission reiterated its commitment to the Barcelona Conclusions on the occasion
of the DAC Peer Review of Community Aid12.

State of play on the untying of Community aid

18.

Community aid has been untied to a significant degree for more than 25 years. Calls
for tender are open to the fifteen Member States and to all 7113 ACP countries
without distinction between LDCs and other developing countries for projects
financed by the EDF, to all Mediterranean partner countries under the MEDA
programme and to the beneficiary countries for Asia and Latin America (ALA). This
openness of calls for tender had concrete consequences under the 6th, 7th and 8th EDF
(1985-2000), as it made it possible for the operators of the ACP countries to gain
23.6% of the contracts, amounting to
1.415 billion. Moreover, Community aid is
progressively directed at balance of payments and budgetary support, which, by
definition, is entirely untied.

€

10

11

12

13

European Council Conclusions on the International Conference on Financing for Development,
Barcelona, March 14, 2002.
Commission decision [PV(2001)1519] of 11 April 11th, 2001
OECD/DAC Peer Review of the EC Aid, Paris, 6 June 2002
There will be 77 ACP countries when the Cotonou Agreement will enter into forth.

5

19.

In accordance to its commitments, and along the lines presented above,
the
Commission has introduced new provisions in favour of further untying in its
proposals for the current renewal of the ALA regulation and the Regulation on
Communicable Diseases and Reproductive Health14. The revision of
the EC
Financial Regulation15 has conducted to the introduction of the necessary elements to
allow further untying of Community Assistance. Its implementing modalities are still
under discussion.

The Commission's approach to the DAC Recommendation

20.

21.

While commending the DAC efforts to promote untying and achieving this first step,
the Commission recognises the limitations of its Recommendation. By exclusively
focussing on Least Developed Countries (LDCs) and excluding Food Aid and its
transport, the scope of the Recommendation is clearly limited. According to DAC's
own estimates, the amount of untied aid is expected to increase to only 2% of total
ODA. The most optimistic estimates predict the untying of three-quarters of ODA to
the least Developed Countries (USD 5.5 billion) which would correspond to 10% of
the total ODA. Moreover, the logic underlying the Recommendation is regarded as
unsatisfactory.

The European Commission is particularly concerned with the distinction in terms of
untying between Least Developed Countries and other developing countries and its
cumulative effect on the already limited scope of the DAC Recommendation. The
impact of this limitation is further worsened by the fact that almost one third of the
LDCs are in conflict or in post/pre conflict situations where aid delivery is extremely
difficult and limited. In fact, if only the DAC recommendation was implemented the
the Community
distinction established by that recommendation would compel
question one of the elements of the EU-ACP partnership, the preferences, which the
operators of the ACP countries benefit from in terms of procurement. Such a change
would be contrary to the contractual obligations undertaken by the EC and would in
addition constitute a step backward from the current situation. Furthermore, this
distinction seems to go against the current aims of harmonisation and simplification
of procedures.

22.

Food Aid is excluded from the scope of the DAC Recommendation, which refers to
"discussions and agreements in other international fora governing the provisions of
food aid, bearing in mind the objectives and principles of this Recommendation".

14

15

In its proposal for a new ALA Regulation, COM (2002) 340 final, the Commission has already inserted
a provision on the untying of aid as regards all Member States, the candidate countries and, for
cooperation in their respective regions, the Asian and Latin American developing countries, as well as
further untying, on a case-by-case basis, for developed countries (cf. Article 9). While already in line
with the Commission’s earlier approach to untying, this proposal could be further strengthened, in light
of this Communication and any additional elements related to untying that will result from the debate
on this in the Council. Discussion of Article 9 of the Commission’s ALA proposal should meanwhile be
put on hold in Council. This will avoid any delays in the adoption of the regulations due to the debate
on untying. Similar course of action will be pursued for the adoption of any other legal basis that could
shortly came into discussion
The new Financial Regulation has been adopted in the Regulation of the Council n°1605/2002 of
25/06/2002 (OJEC L 248 of 16/09/2002). It will enter into force on the 01/01/2003.

6

The Food Aid Convention16, which might be the appropriate forum for discussion
and agreement, has not yet taken the required concrete steps towards untying17. The
European Commission reaffirms the extreme importance of food aid for countries
and populations that suffer under food emergencies. Food aid should only be
provided if it is the most effective and appropriate means of assistance based on an
evaluation of the needs and as much as possible respecting local nutritional habits. It
is important
types of food aid and purposes, and to
distinguish between food aid and food security objectives and to recognise their
potential impact on vulnerable countries capacity, local agricultural development,
regional and local markets. The European Commission is advocating a complete
untying of food aid and food aid transport and proposes to introduce these elements
in the future re-negotiations of the Food Aid Convention.

to consider the different

23.

The Commission in its declaration attached to the DAC Recommendation (see
Annex II) has clearly expressed its commitment to reaching the goals contained in
the Recommendation without necessarily committing itself to this limited scope. In
fact, Community Aid is already untied to a high degree, which goes further than the
impact of the DAC Recommendation. Community aid has already reached a high
level of untying as it is already completely untied to the 15 Member States, and
partially untied to the Candidate Countries, the Members of the European Economic
Agreement, and to most developing countries.

Implementation of the Commission's approach

24.

25.

In order to further untie Community aid, the policies and procedures defined at
Community level and the partnership agreements18 require changes to the legal bases
of a whole set of financial instruments of Community aid. It may, inter alia, imply
changes to the EDF Financial Regulation, Annex IV of the Cotonou Agreement,
geographical financial instruments (CARDS, MEDA, TACIS and ALA regulations)
as well as other development related financial instruments. The list of relevant texts
to be changed is attached in Annex III.

These changes require the consultation and agreement of the Council and the
European Parliament and in some cases the Partner Countries. These amendments
will have to be applied to each instrument. They also depend on the time schedule
inscribed in each instrument. The case of the EDF depends on the entry into force of
the Cotonou Agreement and will imply a new negotiation with the ACP countries
leading to their approval. Due to the above-mentioned procedures and constraints
there are two methods for the Commission to introduce these changes. The first one
is the revision of each instrument, one by one, in a step-by-step approach based on
the insertion of common concepts. The second one is the establishment of an
instruments and that could be
Horizontal Regulation that will applies to all
completed in specific and requested case by a limited revision of some instruments.

16

17

18

The Food Aid Convention, in its Article IX(e)(i) requires "that provision of food aid is not tied directly
or indirectly formally or informally, explicitly or implicitly to commercial exports of agricultural
products or other goods and services to recipient countries.
The Present Food Aid Convention from 1999 was extended until June 2003 and only refers to the issue
of tied food aid in relation to commercial exports.
As stated in the Commission's declaration attached to the DAC Recommendation.

7

26.

In line with the arguments presented above and in the first part of
this
Communication, the European Commission has opted for the first method and will
introduce the following elements of untying into the legal bases of all development
related financial instruments:

Horizontal (thematic) budget-lines

–

–

Untying towards all Developing Countries,

Untying towards all Developed Countries under the condition of reciprocity by the
third country and the agreement by the recipient country.

Geographical budget-lines

–

–

–

27.

28.

29.

Untying towards Developing Countries on a regional basis,

Untying towards all Developed Countries under the condition of reciprocity by the
third country and the agreement by the recipient country.

Possibility of further untying on a case by case basis19,

–

–

considering specific geographical circumstances,

taking into account specific thematic circumstances.

In this regard, the candidate countries and the countries of the European Economic
Area (EEA)20 are assimilated to the EU Member States21.

The issue of untying of Community Aid is also relevant in the context of the efforts
to create a more stable and effective partnership with the United Nations and other
international organisations. Specific circumstances as referred to above could also be
seen to exist in the context of joint management of programs and projects in the
sense of Art. 53.1 c) of the new Financial regulation as well as in the yet to be
established strategic partnerships with selected United Nations Agencies, Funds and
Programs. This would equally require changes to the legal bases to be introduced at
the occasion of the revision of the relevant legal texts.

The approach proposed by the Commission goes far beyond the scope of the current
DAC Recommendation and will lead to an almost complete untying of Community
Aid. The whole of EC Aid would be untied immediately towards 16 out of 23 of the
DAC Members, 32 developed countries and 151 developing countries as a group for
the thematic budget lines and on a regional basis for the regional instruments. In
addition the whole of EC aid would be untied to all other third countries under the
condition of reciprocity and the agreement of recipient country. The requested
agreement from the recipient country is fully in line with the internationally agreed
principles of ownership. The requested reciprocity follows
from the DAC
Recommendation itself, its universalism for the Donor community and its agreed

19

20

21

The specific circumstances of issues, which are to be addressed, may justify such an extension, if
through such an extension the EC can increase cost-effectiveness of its actions.
Norway, Iceland and Liechtenstein. Agreement on the European Economic Area, Oporto 2 May 1992
The assimilation refers to “access to public procurement procedures in the Community”

8

principle in favour of a balanced share of effort. It
multilateral disciplines at World Trade Organisation (WTO) level.

is also coherent with the

Part III: Situation of EU bilateral aid

30.

Community aid is one complementary component of the development effort of the
EU alongside bilateral aid from the Member States. That bilateral aid effort is based
on a separate set of rules and procedures adapted to the specificity of development
assistance. It must however respect the EC Treaty and applicable Community Law.
Both the EC Treaty on free movement of goods and services and the EU Public
Procurement Rules prohibit any criteria that discriminate in favour of national
enterprises and against operators established in other EU countries. Tied bilateral aid
may be in breach of EC competition law and Internal Market rules and infringe on
the non-discrimination principle inscribed in Article 12 of the EC Treaty. Following
complaints,
the Commission is therefore investigating the regime applied to
development aid by Member States and has recently launched infringement
proceedings against certain Member States
the Public
Procurement Directives. The following elements attempt to outline the different legal
issues, arising from the practice of aid tying by Member States. It needs to be clearly
understood that all these references refer to the untying of aid among EU MS.

in particular under

Application of Community rules on State aid

31.

In order to constitute State aid within the meaning of Article 87(1) of the Treaty, a
measure must be attributable to a Member State, and involve the use of State
resources in a selective manner, which confers an advantage on certain undertakings
resulting in a distortion of competition and an effect on trade between Member
States. Provided that it mets all these conditions, tied aid would constitute State aid,
and would therefore need to be notified to the Commission in accordance with
Article 88(3). In assessing such aid,
in
particular, to the OECD arrangement on guidelines for officially supported export
credits.

the Commission would have regard,

Tied Aid may affect internal trade

32.

The Treaty rules, in particular Articles 28 to 30 and 4922, are applicable to the public
procurement launched by the competent authorities of the Member States on their
territory or in a recipient third country. The Commission believes that, if Member
States impose a clause of national origin, this would prevent EU operators from other
Member States from participating in the procurement and would therefore affect the
internal trade23 even if the good or service was provided to a third country. Tied aid
which,, restricted the procurement practices in relation to goods and services, could
thus infringe Articles 28 and 49 and may not be covered by any derogation.

22

23

Ex Articles 30 to 36 and 59 EC Treaty
Court's case law acknowledged that distortion of trade between the EU and third country may also
affect intenal trade.

9

Application of the Public Procurement Directives

33.

34.

Unless a procurement is covered by the Directives' specific exemption clause for
international agreements (cf. Below) EU Public Procurement Directives apply to
procurement undertaken by a contracting authority24 of a Member State whether or
not financed by bilateral development aid, where the estimated value of the contract
is equal to or above the relevant thresholds. Contracts falling into this category must
be awarded in accordance with the procurement procedures in the Directives and
they may not be awarded excluding operators established in other EU Member
States, EEA countries and Europe Agreement countries.

When the authority of a third country tenders the contract, the Directives do not
apply, unless the third country authority acts on behalf of and for the account of a
contracting authority of a Member State. In the Commission's view, in the latter case,
Embassies or national bodies located in the recipient country would be covered by
the Directives. Failure to apply the procedures of the Directives would thus constitute
an infringement of EC law actionable by the Commission and by economic operators
subject to EC law having or having had an interest in obtaining a particular public
supply, service or works contract and who has been or risks being harmed by an
alleged infringement and by economic operators from EEA countries and Europe
Agreement’s countries.

Exemption clause for international agreements

35.

The Directives contain a derogation clause exempting procurement for the supply of
goods, supply of services, and supply of works awarded "in pursuance of an
international agreement between a Member State and one or more non-member
these exceptions only apply to agreements concluded "in
countries". However,
conformity with the Treaty"25. As argued above, clauses discriminating against
suppliers from other EU countries wold not fulfil this condition. Moreover, in those
cases where this international exemption would apply, this would still impose an
obligation on the Member State to notify the agreement to the Commission26.

Exemption in the Government Procurement Agreement

36.

Both GATT and GATS Agreements contain clauses excluding Government
Procurement from their main provisions. At WTO level,
tied aid is currently
excluded from the scope of the Government Procurement Agreement (GPA)27

24

25

26

27

Contracting authority within the meaning of the Public Procurement Directives are “the State, regional
or local authorities, associations formed by one or more of such authorities or bodies governed by
public law”, where “bodies governed by public law” are defined as “any body” established for the
specific purpose of meeting needs in the general interest, not having an industrial or commercial
character, and having legal personality, and financed, for the most part, by the State, or regional or local
authorities, or other bodies governed by public law; or subject to management supervision of those
bodies; or having an administrative, managerial or supervisory board, more than half of whose members
are appointed by the State, regional or local authorities or by bodies governed by public law”.
Article 4(a) of Directive 93/36/EEC of 14 June 1993, Article 5(a) of Directive 92/50/ECC, Article 5(a)
of Directive 93/37/EEC
Reply to EP question n° 3104/95 OJ C45/1, 1998
Agreement on Government Procurement (GPA), OJ L 336/273, 1994. The parties to the agreement are:
the EC and the 15 Member States, Canada, Hong Kong, China, Israel, Japan, Rep of Korea,
Liechtenstein, the Netherlands (for Aruba), Norway, Singapore, Switzerland and the USA.

10

concluded in the context of the Uruguay Round28. The acceptance of these principles
does not however, preclude that tying of aid could infringe EC internal market rules.

Impact of the decentralisation

37.

When a procurement financed by a Member State is undertaken under the sole
responsibility of an authority of the third country recipient, which does not act on
behalf of and for the account of a contracting authority of a Member States, neither
the Public Procurement Directives nor the Treaty applies. It could furthermore
happen de facto that29, in the absence of obligation, that no untying is applied.

Part IV: Recommendations

38.

39.

40.

41.

42.

28

29

The information on the impact of full and unrestricted untying among all donors on
the effectiveness of aid, the allocation of resources and the structures and actors of
development
is insufficient. The Commission suggests initiating comprehensive
work on this at European level.

The information on the relationship between untying of aid and moves towards
the harmonisation of procedures and the role of the recipient
decentralisation,
country is insufficient. The Commission proposes to initiate concrete initiatives with
the Member State and in the context of partnership.

The Commission will propose to integrate the approach on untying of Community
aid presented in this document into all relevant legal bases of development related
financial instruments of the Community.

The rules of the Internal Market and the Directives on Public Procurement apply to
part of the Member States Development aid. The Commission invites all EU actors
to comply with those rules.

Regarding contracts awarded by authority of the recipient country, where these do
not act on behalf of and for the account of a contracting authority of a Member State,
the Commission proposes an undertaking by Member States to untie aid and
systematically to insert a contractual clause in the instruments by which aid is
granted, obliging the authorities of the recipient country concerned to apply award
procedures based on the principles underlying the Public Procurement Directives,
namely the principles of equal treatment, transparency, mutual recognition and
proportionality.

The notes to Article 1 (1) of the GPA make clear that procurement made in connection with tied aid to
developing countries is not covered by the agreement: "Having regard to general policy considerations
relating to tied aid, including the objective of developing countries with respect to the untying of such
aid, this agreement does not apply to procurement made in furtherance of tied aid to developing
countries so long as it is practised by Parties". In the annexes describing the obligations of each party –
the European Community annex to the GPA28 stated that "the agreement shall not apply to contracts
awarded under: (…) an international agreement and intended for the joint
implementation or
exploitation of a project by the signatory States"
DAC Members have subscribed in the DAC Recommendations on Untying ODA to the Least
Developed Countries, May 2001, under Appendix 1 “Operational Procedures and Understandings” to
implement their commitment de jure but also de facto.

11

43.

The Commission recommends that ongoing efforts concerning the untying of aid
among all donors undertaken at the OECD/DAC should be continued and extended
in view of a complete untying including inter alia food aid and food aid transport,
based in particular on the principle of full reciprocity among donors.

12

ANNEX I

Coverage of the DAC Recommendation on Untying ODA to Least developed Countries
(May 2001)

The OECD/DAC recommendation of May 2001 proposes the untying – as of 1 January 2002
– of loans or grants to Least Developed Countries (49 countries) in the following areas only:

–

–

–

–

–

–

–

balance of payments and structural adjustment support;

debt forgiveness;

sector and multi-sector programme assistance;

investment project aid;

import and commodity support;

commercial services contracts, and

ODA to NGO's for procurement related activities.

Free-standing technical co-operation and food aid are excluded.

The recommendation does not apply to activities with a value of less than SDR 700,000
(SDR 130,000 in case of investment-related technical assistance).

13

ANNEX II

Commission's declaration attached to the DAC Recommendation on Untying ODA to
Least developed Countries (25 April 2001)

The declaration states that:

The Commission will propose to the MS to further untie Community aid, on a regional basis,
to Asian and Latin American countries without distinction between least developed and
others;

On a case by case basis, the Commission intends to open to all countries, developed or
developing, its procurement of services and pharmaceutical products essential in the fight
against HIV/AIDS, tuberculosis and malaria.

The Commission declaration is based on the Commission decision [PV(2001)1519] of
11 April 2001 which approves option 2 of the document [SEC(2001)623/3], where the
Commission is requested to:

–

–

–

–

–

–

congratulate the DAC for its efforts;

recognise the limitation of the DAC recommendation;

it will

the spirit and the objectives of the DAC
indicate that
recommendation, while complying with the policies and procedures defined at
the Community level and in the partnership agreements;

implement

announce that it will propose to extend rules on regional untying applicable to
ACP and MEDA countries to other regions in development. Community aid
would be untied between the 15 MS and the developing countries of each one
of the major regional groupings (Asia, Latin America, the Mediterranean and
ACP) under our regional agreements and co-operation programmes, without
distinction between LDCs and other developing countries, and for all forms of
aid;

utilise the possibility of opening up procurement to all developing countries,
based on the existing rules of the Community and on a case-by-case basis for
medicines and essential services in the fight against HIV/AIDS, tuberculosis
and malaria;

explore (for regional untying for ALA and medicines) the possibility of a
further opening, towards other OECD members.

14

Indicative list of the relevant regulations to be amended

ANNEX III

1

2

3

4

5

6

7

8

9

10

11

12

13

14

Council Regulation (EC) n° 1292/96 of 27 June 1996 concerning the policy and the
management of the food aid and of the supporting specific actions to food security

Council Regulation (EC) n° 1257/96 of 20 June 1996 concerning the humanitarian
aid

Council Regulation (EC) nº 1659/98 of 17 July 1998 relating to decentralised
cooperation

Council Regulation (EC) nº 1658/98 of 17 July 1998 relating to co-financing with the
non governmental organisations of development (NGO) European of actions in the
fields interesting the developing countries

Regulation (EC) nº 2494/2000 of the European Parliament and of the Council at its
meeting on 7 November 2000 pertaining to measures aiming to promote the
conservation and the durable management of the tropical forests and of the other
forests in the developing countries

Regulation (EC) nº 2493/2000 of the European Parliament and of the Council at its
meeting on 7 November 2000 pertaining to measures aiming to promote the full
integration of the environmental dimension in the development process of the
developing countries

Council Regulation (EC) nº 2836/98 of 22 December 1998 relating to the integration
of the questions of equality of the sexes in development co-operation

Council Regulation (EC) nº 2046/97 of 13 October 1997 relating to North-South
cooperation as regards fight against drugs and drug-addiction

Council Regulation (EC) n° 1484/97 of 22 July 1997 concerning aid for the
demographic policies and programs in the developing countries

Council Regulation (EC) nº 550/97 of 24 March 1997 relating to the actions in the
field of the HIV/AIDS in the developing countries

Council Regulation (EEC) n° 443/92, of 25 February 1992, relating to financial and
technical aid and to economic cooperation with the developing countries of Latin
America and of Asia

Council Regulation (EC) nº 2258/96 of 22 November 1996 pertaining to
rehabilitation and rebuilding actions for the developing countries

Council Regulation (EC) n° 1725/2001 of 23 July 2001 concerning the fight against
the anti-personnel land mines in the third countries other than the developing
countries

Regulation (EC) n° 1724/2001 of the European Parliament and of the Council at its
meeting on 23 July 2001 concerning the fight against the anti-personnel land mines
in the developing countries

15

15

16

17

18

19

20

21

22

23

24

25

26

27

Council Regulation (EC) n° 381/2001 of 26 February 2001 creating a fast reaction
mechanism

Council Regulation (EC) n° 976/1999, of 29 April 1999, fixing the requirements for
the implementation of the Community projects, other than those of development co-
operation, which, within the framework of the Community cooperation policy,
contribute to the general objective of development and of the consolidation of
democracy and the rule of law as well as with that of the respect of human rights and
of fundamental freedoms in the third countries

Council Regulation (EC) n° 975/1999, of 29 April 1999, fixing the requirements for
the implementation of the actions of development co-operation which contribute to
the general objective of development and of the consolidation of democracy and the
rule of law as well as with that of the respect of human rights and of fundamental
freedoms

Council Regulation (EEC) n° 3906/89, of 18 December 1989, relating to economic
aid for the Republic of Hungary and the people's Republic in Poland (PHARE)

Regulation (EC, EURATOM) n° 99/2000 of the Council at
29 December 1999 (TACIS)

its meeting on

Council Regulation (EC) n° 1267/1999 of 21 June 1999 (ISPA)

Council Regulation (EC) n° 1268/1999 of 21 June 1999 (SAPARD)

Council Regulation (EC) n° 2666/2000 of 5 December 2000 (CARDS)

Council Regulation (EC) n° 1488/96 of 23 July 1996 (MEDA)

Council regulation (EEC) n° 443/92 at its meeting on 25 February 1992 (ALA)

Cotonou Partnership Agreement n°483/2000 of 23 June 2000 (ACP STATES/EDF)

Council Regulation (EC) n° 2500/2001 of 17 December 2001 (pre-accession of
Turkey)

Council Regulation (EC) n°555/2000 of 13 March 2000 (Cyprus and Malta pre-
accession)

16