Special report No 10/2003 concerning the effectiveness of the Commission's management of development assistance to India in targeting the poor and ensuring sustainable benefits, together with the Commission's replies
Date: 2003-06-19
Institutions: European Court of Auditors
Subjects: EU aid, India, development aid, report

5.9.2003

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concerning the effectiveness of the Commission’s management of development assistance to India
in targeting the poor and ensuring sustainable benefits, together with the Commission’s replies

SPECIAL REPORT No 10/2003

(pursuant to Article 248(4), second subparagraph, EC)

(2003/C 211/02)

CONTENTS

Paragraph

Page

GLOSSARY OF ACRONYMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Budgetary significance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Development cooperation programme . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Court’s audit

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

OBSERVATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Targeting the poor

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Sustainability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Sector-wide approach and coordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

New country strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CONCLUSIONS AND RECOMMENDATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Overall conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Targeting of the poor needs explicit attention at all stages . . . . . . . . . . . . . . . . . . . . . . . . .

Sustainability would benefit from more systematic attention and realistic planning . . . . .

Sector-wide approach needs closer donor coordination . . . . . . . . . . . . . . . . . . . . . . . . . . .

Agriculture and natural resources management to remain part of country strategy . . . . . .

I-VI

1-10

1-4

5-6

7

8-10

11-47

11-21

22-37

38-44

45-47

48-61

48-49

50-53

54-56

57-59

60-61

The Commission’s replies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

22

23

24

24

24

25

25

26

26

27

29

30

30

30

31

31

31

32

33

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GLOSSARY OF ACRONYMS

ALA

BAIF

DPEP

EC

GNP

Asia-Latin America

Bharatiya Agro Industries Foundation

District Primary Education Programme

European Community

Gross National Product

KHDP

Kerala Horticulture Development Project

KMIP

NGO

ODA

OECD

PESLE

Kerala Minor Irrigation Project

Non-governmental organisation

Official Development Assistance

Organisation for Economic Cooperation and Development

Programme for the enrichment of school level education

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SUMMARY

I.
Cooperation between the European Community and the Republic of India goes back at least 30 years
and is presently governed by the Cooperation Agreement of 1994. Some 70 % (or 481 million euro) of the
EC’s financial assistance disbursed over the period 1990 to 2001 was provided for development cooperation
activities (the remainder covering a number of other areas including food aid and humanitarian aid). These
activities included a large number of agricultural and rural development projects, as well as two sector-support
programmes for education and health (see paragraphs 1 to 7).

II.
The Court has examined eight of these projects and programmes, in particular to see how they are
targeting the poorer sections of the population, what chances there are that the benefits will be sustained
beyond the end of the EC-financed activity, and what kind of donor coordination activities take place (see
paragraphs 8 to 10).

III.
The Court concludes that the Commission’s management has been reasonably successful in targeting
the poor and in addressing sustainability for the majority of the eight projects/programmes audited in India.
More systematic attention for these issues throughout the whole project/programme life cycle could, however,
have improved the results (see paragraphs 11 to 37).

A sector-wide approach can offer certain advantages over a project-based approach. These include
IV.
more closely harmonised, coherent policies and strategies, wider impact and better chances of sustainability.
Such an approach also requires that donors have sufficient confidence in the capacity of the beneficiary’s
administration to manage sector-wide programmes and to account for their implementation, results and costs.
However, up to now there has not been a true sector-wide approach in the Indian education and health sector
programmes. Only the EC has so far been prepared to support a sector-programme approach in India, while
other donors operate through a project-based approach. As a result, it has not been possible to establish com-
mon accountability and reporting systems in these nationwide programmes. For the above reasons, opportuni-
ties to create synergy and efficiency through a truly coordinated sector-wide approach have not materialised.
Whereas inter-donor coordination in the education sector programme has resulted in a well-appreciated sys-
tem of joint review missions, for the health sector, more informal channels for coordination were used (see
paragraphs 38 to 44).

V.
The EC’s new country strategy for cooperation with India does not fully apply the approach outlined in
the Commission’s recent communication on fighting rural poverty, as it limits EC intervention to the health
and education sectors, leaving aside other key sectors (agriculture, natural resources management) identified
in that communication as needing to be addressed if rural poverty is to be tackled successfully (see para-
graphs 45 to 47).

VI.

The following recommendations are made on the basis of the Court’s observations and conclusions:

— ‘targeting the poor’ as well as ‘sustainability’ should be given more systematic attention throughout the

life of a project/programme (see paragraphs 53 and 56),

— chances of sustainability would improve if projects/programmes were allowed an appropriate implemen-
tation period from the outset, in combination with regular reviews, and included a proper exit strategy
(see paragraph 56),

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— when considering contributing to a sector programme through budget support, the Commission (together
with other donors) should ensure both beforehand and — later — in the course of implementation, that
the direction on public finance (including reporting, accounting and auditing systems) taken by the coun-
try concerned is satisfactory. In a situation where capacity-building is unlikely to ensure adequate account-
ability for unearmarked budget support, the Commission should consider other forms of support (see
paragraph 59),

— in the light of its overall poverty reduction objective, the Commission could make its new EC-India coun-
try strategy more comprehensive by addressing important issues like agriculture and natural resources
management (see paragraph 61).

INTRODUCTION

Background

1.
The basic legal framework for the EC cooperation with
India currently in force is the ‘ALA Regulation’ of 1992 (1) which
describes the aims of the Community’s development and coop-
eration policies and the main areas of assistance. Article 4 of the
Regulation states that ‘financial and technical assistance shall be
targeted primarily on the poorest sections of the population …’

2.
More specifically, cooperation with India is governed by
the Cooperation Agreement on Partnership and Development,
which entered into force in August 1994 (2), replacing the earlier
cooperation agreements of 1973 and 1981. According to Article 16
of this agreement, which deals in particular with development
cooperation, projects and programmes are to be targeted on the
poorer sections of the population. Particular attention is to be
given to rural development with participation of the groups to be
targeted and, where appropriate, the involvement of qualified
non-governmental organisations. Cooperation is to pursue project
and programme efficiency, sustainability and respect for the en-
vironment.

3.
Following the signing of the Cooperation Agreement, an
EC-India cooperation strategy to the year 2000 was agreed in
December 1994. This document sets out general strategies for
development as well as for economic cooperation. It states that
the EC’s support for development in India should have a strong

impact on the alleviation of poverty, which is considered one of
the most critical issues. It also indicates that the EC’s cooperation
programme will support the implementation of appropriate sec-
tor policies as well as development projects.

4.
A new strategy paper for the period 2002 to 2006 was
being prepared at the time of the audit and was formally approved
by the Commission in August 2002 (3). The paper defines the
elimination of poverty as the overall guiding principle governing
EC cooperation activities in India. The Commission will continue
its cooperation with the Central Government through the sectoral
support programmes in elementary education and health and
family welfare. In addition it plans to develop a special partner-
ship with one Indian State and to spend available resources mainly
in that State, with elementary education and basic health as the
core areas.

Budgetary significance

5.
Total disbursements on all cooperation activities during
the 12-year period 1990 to 2001 amounted to 657 million euro,
an annual average of about 55 million euro. This includes dis-
bursements under all relevant budget lines, including develop-
ment and economic cooperation, humanitarian and food aid,
non-governmental organisations (NGOs) programmes, and sev-
eral other, minor, programmes. As can be seen in Table 1, over
70 % of total disbursements was spent on development coopera-
tion.

(1) Council Regulation (EEC) No 443/92 of 25 February 1992 on finan-
cial and technical assistance to and economic cooperation with the
developing countries in Asia and Latin America (OJ L 52, 27.2.1992).

(2) OJ L 223, 27.8.1994.

(3) Written procedure E/1642/2002 (COM(2002) 3117 of 14 August

2002).

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Disbursements on cooperation activities in India, 1990 to 2001

Table 1

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

Total

(in million euro)

43

34
2
2
4
1

30

13
5
8
3
1

45

21
2
18
4
—

29

14
3
8
4
—

48

37
4
3
4
—

47

37
4
1
4
1

81

73
1
0
5
2

82

71
2
2
5
2

45

35
1
1
6
2

73

60
2
1
8
2

50

31
3
8
6
2

84

55
3
16
7
3

657

481
32
68
60
16

Total disbursements, all relevant bud-
get headings
of which on:
Development cooperation
Economic cooperation
Humanitarian and food aid
Cofinancing with NGOs
Other budget headings

Source: Data provided by EuropeAid.

Disbursements on development cooperation totalled
6.
481 million euro over the same period, an average of 40 million
euro per year. From the detailed data in Table 1 it can be seen that
the level of disbursements on development cooperation activities
increased significantly over the six-year period 1996 to 2001
(annual average of 54 million euro), compared to the preceding
six-year period (annual average of 26 million euro). This change
is directly related to the introduction of the sector-support pro-
grammes for education (in 1994) (1) and health (in 1998) (2). The
EC is an important grant donor to India. Nevertheless, its aid is
modest in relation to the overall Official Development Assistance
(ODA) received by India (which amounted to approximately
1 500 million US dollars per year including soft loans during the
period 1997 to 1999) and in relation to the amounts invested by
India itself. ODA as a percentage of India’s GNP amounted to only
0,3 % over the same period (3).

Development cooperation programme

7.
The 2001 portfolio of the Commission’s development
cooperation activities under implementation in India can be sub-
divided into three broad types of activities:

— 12 agricultural and rural development projects implemented

by government agencies,

— two sector-support programmes, one for education, which is
to come to an end in 2003 (but is to be followed by a new
programme), and one for health and family welfare,

— four projects, implemented by large Indian and non-Indian
NGOs, three of which focus on rural development and one
on education.

(1) Tranche payments of 20, 40, 40 and 40 million euro were made in

1994, 1996, 1997 and 1999, respectively.

(2) Tranche payments of 16, 7, 14 and 27 million euro were made in

1998, 1999, 2000 and 2001, respectively.
(3) OECD website: ‘Recipient aid at a glance, India’.

The Court’s audit

8.
The objective of the Court’s audit was to determine whether
the Commission has managed the programme of development
assistance to India effectively. The audit focused on the following
key questions:

— has the Commission ensured that its projects/programmes

target the poorer sections of the population?

— has the Commission managed its projects/programmes in a
manner that ensures that they will be sustainable (4)?

— has the Commission created — together with the other main
donors — effective coordination mechanisms in order to
ensure that coherent approaches are followed in the sectors
which are supported?

In addition,

9.
The audit included the examination of eight development
projects/programmes covering all three types of activities, as
described in paragraph 7. In view of their size, the two sector-
support programmes in education and health were both
included (5).
twelve) government-
implemented projects were selected, as well as two (out of four)
NGO-implemented projects. These eight activities represent 74 %
of the total value committed (660 million euro) of the Commis-
sion’s ongoing development cooperation projects/programmes in
2001 for India. The full list of projects/programmes audited is
shown in Table 2, together with budgetary information.

four (out of

(4) An activity is considered sustainable when it is able to deliver benefits
to the target group for an extended period of time, after the main
assistance has ended.

(5) The official titles of the two sector programmes are: Sector Pro-
gramme for the Development of Primary Education and Support for
Health and Family Welfare Sector Development. In the report they
will be referred to as the sector programmes for education and health
respectively.

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Table 2

Projects/programmes audited

Name of project/programme

Year of signature
of Financing
Agreement

Actual period of
implementation

Commitments

Disbursements
as per 1.12.2002

(in million euro)

AGRICULTURAL AND RURAL
DEVELOPMENT PROJECTS BY
GOVERNMENT AGENCIES

Doon Valley Integrated Watershed
Management Project (Doon Valley)

Kerala Horticulture Development Project
(KHDP)

Kerala Minor Irrigation Project (KMIP)

Sidhmukh and Nohar Irrigation Project

NGO-IMPLEMENTED PROJECTS

Transfer of technologies for sustainable
development (BAIF)

Programme for the Enrichment of
School Level Education (PESLE)

SECTOR-SUPPORT PROGRAMMES

Sector Programme for the Development
of Primary Education (DPEP)

Support for Health and Family Welfare
sector development

1991

1992

1992

1993

1995

1999

1992-2001

1993-2002

1994-2000

1994-2001

1996-present

1999-present

23

29

12

45

20

11

1993

1994-2003

150

1997 + 2001

1998-present

200 + 40

Total

530

23

26

6

40

15

4

149

67

330

10.
Project files, both in Brussels and in the Commission’s
Delegation in Delhi, were examined and Commission officials
were interviewed. Audit visits were carried out to all eight projects/
programmes selected, during which discussions were held with
Government of India and State government officials, the Comp-
troller and Auditor-General of India, as well as with representa-
tives of the implementing organisations. On several occasions
meetings were also held with project beneficiaries.

12.
On the other hand, at the operational level four of the
eight audited projects/programmes gave clear definitions identify-
ing poor, disadvantaged people as their target group (1). The health
sector programme was less specific in its design, with its target
group defined as ‘women and children’, but during its implemen-
tation more specific targeting measures were introduced. The
other three projects’ objectives were formulated in terms of tech-
nical outputs, but it appears that mostly disadvantaged categories
of the population have benefited from these projects.

OBSERVATIONS

Targeting the poor

13.
Under the education sector programme specific achieve-
ment targets were set for girls and Scheduled Caste and Scheduled
Tribal children. During the implementation period the definition
of disadvantaged groups was enlarged to include working chil-
dren and the disabled. Close attention was paid to these target
groups by the regular review missions, which monitored the sec-
tor programme.

The 1992 ALA Regulation set out a policy of targeting
11.
development cooperation on the poorest sections of the popula-
tion. During the period covered by the audit, the Commission had
not developed definitions or indicators to describe or identify fur-
ther the intended target groups, either at the overall policy level,
or in the Commission’s strategy document for India of 1994.

(1) This was the case in the two rural development projects Doon Valley
and BAIF, the education sector programme DPEP and the NGO-led
education project PESLE.

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The programme not only established more than 28 000
14.
schools in the EC and World Bank-supported districts of the
(former) State of Madhya Pradesh for about 1,2 million children,
but also introduced educational reforms (including parents’ par-
ticipation) in a newly created decentralised environment. The
result was a substantial increase in enrolment of children from the
target group, a decrease in drop-outs and an increased literacy
rate.

For the two rural development projects ‘Doon Valley’ and
15.
‘BAIF’ a choice was made at the design phase to focus on improv-
ing the quality of life of poor, rural people. Subsequent choices
determined the areas, villages and individual beneficiaries and the
types of intervention needed (1). Even with such a clear targeting
focus from the start, continuous monitoring was necessary, as the
poorest people were very difficult to reach in practice. In the
Doon Valley project the objectives to stop land degradation and
to improve farming methods in combination with conscious
management of natural resources have been achieved in an area
covering some 300 villages with a population of about 400 000
people. In the BAIF project, 26 000 families (with a final target of
33 000) have so far benefited from activities to increase agricul-
tural production, to stimulate small-scale income-generating activi-
ties and to set up family-health-based projects (sanitation, nutri-
tion). An important achievement in both projects was also the
establishment of peoples’ organisations in the villages for manag-
ing the development process.

16.
The PESLE project started recently and is geared toward
improvement of the quality of education. Although this has a
relatively wide scope, an important number of activities explicitly
target tribal or minority groups and children in urban slum areas.

17.
The health-sector programme’s objective was to improve
the quality of public health by reforming its organisational struc-
tures and procedures, including a deconcentration of the manage-
ment. Although no clear targeting of the poor was formulated in
its design, an overall improvement of the public health system is
expected to benefit poor people. During implementation mea-
sures were taken to direct the programme towards specific disad-
vantaged parts of the country, e.g. certain States with poor health
indicators or urban slum areas. However, the terms of reference

for the monitoring component, under which regular reviews are
to be carried out, contain no reference to specific targeting objec-
tives.

The three agricultural projects (2) had defined their tar-
18.
gets in technical terms, i.e. the number of irrigation schemes to
be realised, the number of kilometres of irrigation canals or the
surface in hectares of agricultural land. The number and type of
beneficiaries was thus defined by the physical intervention and
not the result of specific attempts to target poor people in par-
ticular.

19.
The main objective of the Kerala horticulture project was
to provide supplementary income to Kerala’s farmers by increas-
ing the production of horticultural crops and by improving the
marketing of these crops. The project covered (as planned) some
40 000 commercial farmers, who, according to a project review
mission, were not considered to belong to the poorest category
of farmers in the State. The exact status of the project beneficia-
ries was apparently difficult to assess due to a lack of socio-
economic surveys.

20.
Although in the preparatory phase of the Kerala ‘Minor
Irrigation’ project it was stressed that priority should be given to
the poorer districts in the State, this did not materialise, either in
the financing agreement or in the implementation phase. How-
ever, the realised area under irrigation (about 7 000 hectares
against a planned total of 20 000 hectares) in relation to some
13 000 farmers involved, indicates that most of the beneficiaries
are small farmers.

21.
The Sidhmukh and Nohar irrigation project is a technical
irrigation infrastructure project for an area of about 110 000
hectares. The project area is within a region of the State of Raj-
asthan, which is regularly affected by drought and is considered
to be a poor area. The beneficiaries are all the farmers in the
project area, who can be serviced by the gravity-based irrigation
system, without further distinction.

Sustainability

22.
According to the EC-India Cooperation Agreement on
Partnership and Development (3), a key issue to pursue in the
cooperation is the sustainability of projects and programmes. An
activity is considered sustainable when it is able to deliver benefits
to the target group for an extended period of time, after the main
assistance has ended. The sustainability of an activity can be
affected by various factors, such as technical, financial and envi-
ronmental issues, by the institutional and management capacities
involved, or by the policy environment surrounding the activity.

(1) For Doon Valley the target group consisted of those households which
mainly rely on off-farm biomass resources (in particular the forest) to
sustain their livelihood. For BAIF the target group consisted of fami-
lies with a annual family income below 6 000 Indian Rupees, whereas
the official poverty line at the time was defined as 11 000 Rupees.

(2) Kerala Minor Irrigation, Kerala Horticulture and Sidhmukh and Nohar

irrigation.

(3) OJ L 223, 27.8.1994, already discussed in paragraph 2.

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In line with the Commission’s own requirement (1), the Court has
examined whether during the preparation phase the Commission
has assessed the various relevant factors influencing the sustain-
ability of a proposed activity. In addition, the Court has examined
to what extent the Commission has given continuous consider-
ation to the sustainability issue during implementation.

The project has achieved most of its immediate targets.
27.
However, the future activities of the recently established follow-up
structure to the project, the Vegetable and Fruit Promotion Coun-
cil of Kerala, were not clear at the time of the audit visit in March
2002, with several important issues still awaiting clarification
and/or decision. Similarly, the financial sustainability of the agro-
processing factory established under the project was far from cer-
tain.

The audit has shown that in five (2) of the eight audited
23.
projects/programmes the issue of sustainability was explicitly
considered during the design phase. The environmental and insti-
tutional sustainability aspects, however, were usually not well
documented in the different project proposals. In most cases sus-
tainability, particularly the institutional aspect, received more
consideration during the implementation. This can be seen from
the various activities undertaken in all the projects/programmes
to involve beneficiaries and to mobilise local communities by
encouraging them to set up various types of beneficiaries’ organi-
sations.

24.
In the case of the Kerala Minor Irrigation Project (KMIP),
sustainability issues received explicit attention in the design, for
example the economic feasibility of schemes, the importance of
operation and maintenance of schemes and the planning of farm-
ers’ involvement.

The project experienced serious delays in achieving its
25.
physical targets during the first three years, due to the institu-
tional weakness of the State government implementing agency.
Even after the project was extended, more attention was given to
the construction of additional schemes than to consolidation
activities such as training farmers in operation and maintenance.
As a result, at the end of the project more than 60 % of the estab-
lished beneficiary farmers’ associations were deemed still to be
dependent on support from the project. Their chances of survival
are therefore far from certain.

28.
The main sustainability issue for the Sidhmukh and Nohar
Irrigation Project relates to the future maintenance of the newly
constructed irrigation canals and related structures. As responsi-
bility for the maintenance of the primary and secondary canals
lies with the Irrigation Departments of the participating States,
this will depend on sufficient budgetary allocations by the respec-
tive States.

29.
In the same project it was planned to set up water users’
associations, and make them responsible for part of the mainte-
nance and to charge water users’ fees. However, this was not orga-
nised during the project period, and the irrigation department
intended to involve farmers only once water was flowing through
the channels. As for financial sustainability, the water charges that
are to be collected have initially been set at such a low level that
they will only cover about 25 % of the maintenance cost.

30.
The two rural development projects Doon Valley and
BAIF have been the best examples among the audited activities of
working towards sustainable development. They included features
such as community participation in planning and implementing
activities, community organisation, promotion of sustainable
management practices and support in establishing income-earning
activities.

In the Kerala Horticulture Development Project (KHDP)
26.
sustainability issues were not an obvious feature of the design
phase. They received greater emphasis in the two-year work plan
for the extension period. In practice the project followed a par-
ticipatory approach by establishing self-help groups of beneficia-
ries, which, in principle, should help to improve its chance of
sustainability.

31.
The health sector programme’s focus on institutional sus-
tainability is clear, with its emphasis on various capacity-building
measures. However, it is noted that the institutional cooperation
component, foreseen in the financing agreement, only started in
April 2002, i.e. in the fourth year of the programme’s operation.

financing proposals

(1) According to the project cycle management methodology, adopted in
1992 by the Commission,
for projects/
programmes should include an assessment of sustainability. See also
the Court’s Special Report No 21/2000 on the management of the
Commission’s external aid programmes, paragraphs 28 to 30 (OJ C 57,
22.2.2001). (The financing proposal for a development project or
programme is the internal Commission document, prepared by Com-
mission staff and presented to the Advisory Committee of Member
States’ representatives, on which the financing decision of the Com-
mission is based.)

(2) Kerala Minor Irrigation, Sidhmukh and Nohar Irrigation, Doon Val-

ley, BAIF and the health sector programme.

32.
In the case of the education sector programme, sustain-
ability was not a stated objective at the design stage. However,
sustainability became an important concern during the imple-
mentation and through the review missions. The programme
achievements in Madhya Pradesh, the State which actually ben-
efited from the EC funds, were considerable. The institutional
reforms carried out in the State and the State’s commitment to
provide education for all children mean that the outlook for sus-
tainability in Madhya Pradesh is promising.

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Financial sustainability of

the national programme
33.
remains a longer-term issue, especially given that States, many of
which are having fiscal difficulties are expected to contribute 25 %
(up from 15 %) of the funds necessary for the new programme.

of the above arguments, the new provision will generally make it
more difficult to build sustainability into the activities.

34.
In the Programme for the Enrichment of School Level
Education (PESLE) consideration of sustainability issues is so far
not well developed. The local core partners are mostly small NGOs
whose financial sustainability is not guaranteed. Even though in
some cases the quality of work is considered very good, the real
difficulty is to mainstream any improved methods and innovative
strategies into larger education systems.

35.
The Court found that in most of the activities audited
developing sustainable structures was a crucial factor determin-
ing whether or not individual project/programme achievements
will be continued over a period of time. Thus, the earlier the
organisation of community participation was undertaken and
built into the project approach, the better the prospects for a sus-
tained impact at the end of the project/programme.

36.
An issue which the Court found to have an impact on
sustainability is the planned duration of projects/programmes.
The majority of the projects/programmes examined went through
one or more extensions of their implementation periods. Even
with such extensions several projects still came under time pres-
sure towards the end. It appears that the period of time needed
for implementation is systematically underestimated in the prepa-
ration phase. When project periods are subsequently extended,
the administrative process that arranges this is usually slow and
cumbersome, often having a negative impact on project imple-
mentation. Also, projects under time pressure tend to give prior-
ity to attaining short-term, physical targets, at the expense of
longer-term, and possibly less visible, factors, such as institutional
capacity building (1).

37.
In this respect it should be noted that the EC’s revised
Financial Regulation (2), which applies from 1 January 2003, con-
tains a provision limiting the period during which contracts may
be concluded. This is likely to reduce the implementation period
allowed for development cooperation activities. In its opinion on
the proposal for the new regulation, the Court considered this to
be unsuitable in the context of development aid because the
maximum implementation period seems too short (3). In the light

(1) For example KMIP, see paragrah 25.
(2) Council Regulation (EC, Euratom) No 1605/2002 of 25 June 2002 on
the Financial Regulation applicable to the general budget of the Euro-
pean Communities, Article 166 (OJ L 248, 16.9.2002).

(3) Court of Auditors, Opinion No 2/2001 on a proposal for a Council
Regulation on the Financial Regulation applicable to the general bud-
get of the European Communities, paragraph 63 (OJ C 162, 5.6.2001).

Sector-wide approach and coordination

It is generally accepted by the Commission (4), as well as
38.
by many other donors, that a sector-wide approach to certain
development cooperation activities is in principle preferable to
the more traditional project-based approach as it encourages more
harmonisation and coherence in sectoral policies and strategies.
Nationwide sector programmes, such as those supported by the
Commission for education and health in India, offer the advan-
tage of reaching much larger numbers of people, and thereby hav-
ing a much wider impact. As these programmes are implemented
and supported through existing government channels, with funds
provided in central and State governments’ budgets, the local
ownership of such sector programmes increases the chances of
sustainability.

39.
Under a sector-wide approach all interested parties jointly
agree to support and finance a particular sector programme with
the government responsible for implementation. Donors contrib-
ute to the programme often without earmarking their funds for
specific components. The government together with the donor
community formulates the objectives, the target groups and the
organisation of the programmes, including issues like definition
of performance indicators, disbursement conditions and mecha-
nisms on monitoring, reporting and auditing.

By refraining from a multitude of arrangements for each
40.
of the donors, a more efficient process is possible under a sector-
wide approach than in a donor-fragmented project approach. A
consequence of this approach is that donors cannot trace how
their funds have been used specifically. Donors should therefore
have sufficient confidence in the capacity of the beneficiary coun-
try’s administration to manage sector-wide programmes and to
account for their implementation, results and costs.

41.
However, the audit has shown that there has not been a
full-fledged sector-wide approach in the national education and
health sector programmes. In India, only the EC has so far sup-
ported a subsector programme approach with budgetary aid. All
other donors, while supporting the same sectors, have operated
through a project-based approach, allocating their funds to spe-
cific components and/or geographic destinations, to ensure a
direct control on the utilisation of their funds.

(4) See the Commission’s Communication COM(2000) 212 final on the

EC’s development policy.

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As a result, it has not been possible to establish common
42.
accountability and reporting arrangements for the nationwide
programmes in education and health. In the case of the educa-
tion programme this constraint was largely overcome by allocat-
ing the largest part of the EC funds to this sector through a body
specifically created for the duration of the programme in one
single State. For the health programme no such arrangement was
made and it is to be noted that the Commission had not been able
to obtain from the Government of India up-to-date and audited
financial statements on the overall health programme.

However, the Commission has not fully followed this
46.
approach when designing its new country strategy for India. The
Commission has proposed to focus its support to India for the
next five-year period in particular on the health and education
sectors. Even though poverty in India is described as a predomi-
nantly rural phenomenon, with three out of four poor people liv-
ing in rural areas (3), the Commission’s strategy does not address
specific rural poverty problems in the areas of agriculture and
natural resources management.

The main coordination activity for the education pro-
43.
gramme has been a system of semi-annual joint review missions,
whereby teams of donor and government representatives visit
programme activities in a selection of participating States. This
system of joint reviews was generally deemed to have a positive
effect on the implementation of the programme, as it brought
together a pool of expertise and allowed the Commission and
other donors to look at the programme as a whole, rather than
just at the States that received finance from them. Otherwise
coordination has been on an informal basis.

In the case of the health programme no such system of
44.
joint reviews or other formal coordination mechanisms involv-
ing other donors exist. The Joint Steering Committee, set up under
the EC-India agreement on this programme, could have become
an effective coordination instrument, as other donors are also
invited to attend, but in practice it is mainly a meeting place for
Indian and EC representatives and technical advisers. Informal
meetings of donors involved in the health sector have taken place.

47.
The Court’s audit findings confirm the Commission’s own
judgement (4) that some of its rural and natural resources devel-
opment projects in India, especially the more technically oriented
ones, may have uncertain prospects for sustainability. However,
the two rural development projects examined can be considered
as quite successful in terms of achieving sustainable development
for the very poor in a direct way. Both projects have undertaken
a variety of activities aimed at the different aspects of rural pov-
erty, such as increasing the productivity of land and water, natural
resources management, family health and community health
activities, empowerment of women and community participa-
tion. However, the new strategy does not indicate whether any
follow-up will be given to these successful rural development
projects.

CONCLUSIONS AND RECOMMENDATIONS

New country strategy

Overall conclusion

45.
With poverty reduction as the central objective of the
Community’s development policy (1), the Commission has recently
identified a need to address rural development concerns more
systematically and comprehensively (2). This is because, as it has
been stated, poverty and hunger are mainly rural problems, and
environmental degradation is becoming increasingly severe in
rural areas and is closely connected to rural poverty. In order to
tackle rural poverty several sectors need to be addressed, of which
agriculture, health and education and natural resources manage-
ment are of particular importance. The communication then goes
on to present the EC’s policy and approach to rural development
in developing countries, integrating the objectives of poverty
reduction, food security and sustainable natural resources man-
agement into a coherent framework.

(1) COM(2000) 212 final, page 5; see also the European Community’s
Development Policy — Statement by the Council and the Commis-
sion, 10 November2000.

(2) COM(2002) 429 final: Communication from the Commission on

fighting rural poverty.

48.
The Court concludes that the Commission’s management
has been reasonably successful in targeting the poor and in build-
ing in sustainability for the majority of the eight projects/
programmes audited in India. More systematic attention for these
issues throughout the whole project/programme life cycle could,
however, have improved the results.

Extensive donor coordination efforts have taken place to
49.
establish a system of joint review missions within the education
sector programme. Nonetheless, the EC has so far been virtually
alone in fully supporting a sector programme approach in India
and in this respect present donor coordination leaves consider-
able scope for improvement.

(3) The EC-India Country Strategy Paper 2002 to 2006, paragraph 3.2.2.
(4) EC-India Country Strategy Paper 2002 to 2006, paragraph 4.1.

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Targeting of the poor needs explicit attention at all stages

would usually be in the interest of the projects/programmes and
their chances of sustainability, their administrative processing was
generally slow and cumbersome, with a negative impact on imple-
mentation.

Specific objectives and/or measures to target poor, disad-
50.
vantaged groups were included in three of the six projects, in the
education programme and, albeit more indirectly, in the health
programme.

Recommendation 2

51.
In particular, the rural development projects offered clear
opportunities for direct individual targeting of poor people. How-
ever, for a number of other projects, the choice of a certain type
of intervention because of related technical or geographical limi-
tations (e.g. irrigation) reduced the scope for targeting specific
groups of beneficiaries.

52.
Sector programmes offer the advantage of reaching far
greater numbers of beneficiaries and, potentially, much larger tar-
get groups. In sector programmes, by nature different from
projects, individual activities are not always well defined at the
outset. This means that during implementation specific measures
have to be taken to ensure that the programmes’ benefits will
reach the intended beneficiaries.

Recommendation 1

53.
The objective of targeting the poorest sections of the
population should be incorporated and operationalised from the
very beginning of the identification phase and it should continue
to be pursued during the implementation phase. Monitoring and
evaluation activities need to focus on the effectiveness in respect
of targeting the poor.

Sustainability would benefit from more systematic attention
and realistic planning

54.
In five of the eight projects/programmes audited suffi-
cient attention was given to sustainability aspects during the
design phase. In most cases attention improved during implemen-
tation, especially as regards the institutional sustainability aspect.
All the projects/programmes audited had worked towards setting
up various types of beneficiaries’ organisations, but the sustain-
ability of such institutions was a weak point.

56.
All relevant aspects of the sustainability of projects/
programmes should be given explicit and detailed attention from
the design phase onwards and should be closely monitored
throughout the implementation period. Chances of sustainability
would improve if projects/programmes, especially when involv-
ing institutional capacity building or reforms and human resources
development, were allowed an appropriate implementation period
from the outset in combination with regular reviews being car-
ried out. A specific phasing-out period for implementing a clear
exit strategy should also be included.

Sector-wide approach needs closer donor coordination

57.
A sector-wide approach offers certain advantages over a
project-based approach, including the potential for a more har-
monised and coherent set of policies and strategies, wider impact,
more local ownership and better chances of sustainability. Such
an approach also requires that donors have sufficient confidence
in the capacity of the beneficiary country’s administration to
manage sector-wide programmes and to account for their imple-
mentation, results and costs. However, in practice there was no
sector-wide approach, and therefore no common reporting,
accounting and auditing systems, in the nationwide education
and health sector programmes. For the education programme this
constraint was overcome by the allocation of the EC funds to a
single State and by the creation of specific structures in that State.
For the health programme no such arrangement was made and
the Commission had not been able to obtain from the Govern-
ment of India up-to-date and audited financial statements on the
overall health programme.

58.
In the case of the education sector programme inter-
donor coordination took place through a well-appreciated system
of biannual joint review missions. For the health sector more
informal channels for coordination were used.

Recommendation 3

55.
In most cases time estimates for the required implemen-
tation period were too optimistic, leading to an increased focus
on completing the short-term physical targets and to requests for
extension of the implementation period. Although extensions

59.
When considering contributing to a sector programme
through budget support, the Commission (together with other
donors) should ensure both beforehand and — later — in the
course of implementation, that the direction on public finance
(including reporting, accounting and auditing systems) taken by

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the country concerned is satisfactory (1). Where necessary, sup-
port to build up institutional capacity in these areas should be
provided in addition to the specific sector support. In a situation
where capacity building is unlikely to ensure adequate account-
ability for unearmarked budget support, the Commission should
consider other forms of support.

(agriculture, natural resources management) identified in that
communication as needing to be addressed if rural poverty is to
be tackled successfully.

Recommendation 4

Agriculture and natural resources management to remain
part of country strategy

60.
The new EC-India country strategy paper does not fully
apply the approach outlined in the Commission’s recent commu-
nication on fighting rural poverty, as it limits EC intervention to
the health and education sectors, leaving aside other key sectors

In the light of its overall poverty reduction objective the
61.
Commission could make its new EC-India country strategy more
comprehensive by addressing important issues like agriculture
and natural resources management. Successful approaches in
these areas, as developed in some of the Commission’s projects,
could be promoted as models, to be applied in the government’s
own poverty reduction strategies and programmes.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 19 June 2003.

For the Court of Auditors

Juan Manuel FABRA VALLÉS

President

(1) Similar observations have been made by the Court in its Special
Reports concerning structural adjustment facilities and macrofinan-
cial assistance: Special Report 5/2001 on counterpart funds from
structural adjustment support earmarked for budget aid (OJ C 257,
14.9.2001); and Special Report 1/2002 on macrofinancial assistance
to third countries and structural adjustment facilities in the Mediter-
ranean countries (OJ C 121, 23.5.2002). In May 2002 the Commis-
sion’s EuropeAid Cooperation Office adopted a guide on the manage-
ment of budget support operations, which recommends such prior
verification of local conditions before granting budget support.

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THE COMMISSION’S REPLIES

SUMMARY

I.
In 30 years of development cooperation with India the Commission’s strategy has evolved from sup-
port financed through counterpart funds (e.g. Operation flood) and rural development projects to sector
programmes in health and education which support the Government’s reform agenda, good governance and
improved service delivery. The decision to move away from the classical rural development projects was based
on the experience that individual projects, although often achieving the objectives, tended to have limited and
localised impact, with little influence over policy.

Community cooperation with India has therefore benefited from a dynamic learning exercise, whereby experi-
ences from ongoing projects have fed into the development of new strategies.

IV.
Commission-managed programmes in health and education aim, inter alia, to encourage the Indian
authorities to move towards a sector-wide approach in addressing social development issues. In this frame-
work, efforts are made to enhance donor coordination, to reduce transaction costs and to increase aid effective-
ness. A key to progress in this area is increased Government ownership which can be built up through capac-
ity building and dialogue. The Commission’s guidelines on sector-support programmes adopted in February
2003 attach particular importance to donor coordination. The intensification of this coordination will be a
key task for the newly devolved Delegation of the Commission in India.

In the case of the sector programme of Support for District Primary Education Programme (DPEP), and the
Support to Health and Family Welfare Support Programme (HFWSP), arrangements in relation to reporting,
accounting and auditing are carried out in accordance with the financing agreement signed between the Com-
mission and the Indian Government.

Widening these arrangements towards a common framework incorporating all donors in the sector is part of
the ongoing dialogue. The establishment of such a framework will be facilitated, notably in the health sector,
by a move by other key donors from a project to a sector-wide approach.

V.
Inadequate health and education facilities are key aspects of rural poverty and it is now generally agreed
by all donors in India that by strengthening these two sectors a maximum impact on poverty reduction can be
achieved. By selecting these two sectors as priority areas of its new strategy (which received strong support
from the EU Member States), the Commission aims to achieve maximum impact without diluting its efforts in
too many different sectors or approaches. Moreover, important synergies are expected to be created with the
ongoing sector programmes in health and education in the future partner States.

The Commission’s development communication identifies six key sectors for poverty reduction but this does
not mean that all six need to be taken on board for each new programme. The policy gives the Commission
the possibility, in dialogue with the recipient country, to agree on the sectors that are most appropriate for the
country in question.

The Commission takes note of the Court’s recommendations concerning the objectives of targeting

VI.
the poorest sections of the population and sustainability.

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Since 1992 the Commission uses the ‘Methodological guide’ and other project cycle tools such as the logical
framework approach. It is therefore now standard practice to build sustainability aspects (including exit strate-
gies) into Community development projects and programmes.

The Commission takes note of the Court’s recommendation on sector programmes which is being imple-
mented both under the Guide to the programming and implementation of budget support for third countries
adopted in March 2002 and the Guidelines for European Commission Support to Sector Programmes adopted
in February 2003.

The Commission considers that there are strong reasons for concentrating its resources on the health and
education sectors. In addition, the future State partnerships that the Commission intends to develop should
provide a holistic reform package which could add a rural and natural resource dimension to the education
and health activities.

INTRODUCTION

Over 30 years of development cooperation with India,
3.
Community strategy has evolved from rural development projects
and counterpart funded support (e.g. Operation flood) to sector-
support programmes in health and education which support the
Government reform agenda, good governance and improved ser-
vice delivery. The decision to move to sector-support programmes
resulted from the experience that individual projects, whilst often
achieving set objectives, tend to have a limited and localised
impact, with little influence over policy.

6.
In a economy the size of India, it is not the amount of aid
that is so critical as the fact that the Commission is engaging in
dialogue with a major world player and partner about larger policy
issues (of which education and health policy are part).

OBSERVATIONS

as well as in monitoring terms, on making the existing system
more accessible, affordable and adequate to the poor, particularly
where it is currently weak in this respect (e.g. slum areas, back-
ward States). The allocation of 50 % of the balance funds under
the Sector Investment Programme for the fiscal year 2001/02 to
the most needy States is a further illustration of this key inherent
concern of the programme.

18 and 19.
The Kerala Minor Irrigation, Kerala Horticulture
and Sidhmukh and Nohar Irrigation projects were proposed to
the Commission as technical interventions designed to address
the needs of beneficiaries in poorly developed areas. It is inherent
in the nature of the physical intervention — in this case infra-
structure investments — that a pure targeting of below–poverty-
line beneficiaries and an exclusion of
the above-poverty-
line populations from the benefits of the intervention (irrigation)
cannot take place. It is now recognised by all donors in India that
there is a need to build much more proactive mechanisms for
ensuring more equitable benefit distribution in such infrastruc-
ture projects.

11.
Article 4 of the 1992 ALA Regulation (Financial and
Technical Assistance to Asia and Latin America) states that Com-
munity aid shall target primarily the poorest sections of the popu-
lation. It furthermore identifies women, children and ethnic
minorities as warranting special attention.

This is the reason why the Commission has moved away from
this approach. In the more recent projects, the poor are explicitly
targeted and baseline surveys and participatory assessments are
usually factored into a ‘Year 0’ of project implementation.

The Commission agrees with the Court that ‘Doon Val-
15.
ley’ and ‘BAIF’ both constitute good examples of including ‘target-
ing the poor’ and ‘indicators’ in the design phase.

20.
The Kerala Minor Irrigation project is an old one where
more attention was given to meeting technical targets (see also
point 18). However, indirectly the project managed to target the
small landholders which belong to the poor.

17.
The purpose of the health sector reform and programme
is not to develop a special health system for the poor, as experi-
ence proves that this generally results in a poor health service.
‘Improving the quality of the public health system’ has therefore
terms
from the outset

focused inherently,

in operational

Poverty targeting has been more focused in recent programmes

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The Commission is pleased to note that the Court
22 and 37.
concluded (paragraph III of the summary) that the Commission’s
management has been reasonably successful in addressing sus-
tainability.

The deadline for signing contracts (Financial Regulation,
37.
Article 77(2) and 166(2) (sunset clause)) and the deadline for
implementation (Financial Regulation Article 77(3)(1)) are two
different elements. The Commission considers both deadlines to
be essential tools for ensuring sound financial management and
more efficient budget implementation.

26 and 27.
The institutional structure of the Kerala Horticul-
ture Development Project was transformed during the course of
the project. The Commission has taken initiatives to ensure the
financial sustainability of the agro-processing factory. As a result,
the factory has been able to get the highest level of certification
and is well poised to ensure future growth.

The abovementioned provisions were adopted by the Legislative
Authority; the Commission is committed to respect the new regu-
lation and is making major efforts to improve implementation of
external actions and to reduce the backlog of old and dormant
commitments. These new rules are much-needed tools in view of
reaching these objectives.

The delegation is organising a final evaluation in September 2003
and is continuing its dialogue with the VFPCK (Vegetable and
Fruit Promotion Council of Kerala) and the NAPC (Nadukkara
Agro Processing Company) with a view towards supporting both
in seeking to achieve financial sustainability.

Donors should also be ready to assist beneficiary coun-
40.
tries to strengthen their capacity to manage sector-wide pro-
grammes. This is a key feature of donor support to sector-wide
approaches.

Recovery costs were kept at a level commensurate with

29.
the project beneficiaries’ ability to pay.

31.
The institutional cooperation component of the health-
sector programme is now well on track. The start of this compo-
nent was dependent on the development and approval by all par-
ties concerned of the sector investment programme that laid the
basis for the process of reform and identified the different insti-
tutional entities (existing or to be created) concerned by the
reform.

It is the policy of the central Government through cen-
33.
trally sponsored schemes to foster progressively fiscal and public
finance reform at State level. The Commission supports this
policy.

34.
The Commission is aware of sustainability issues in the
Enrichment of School Level Education Programme (PESLE) and
this will be addressed in detail during the consolidation phase.

42.
For the Community health programme the financing
agreement states that regular auditing will be carried out under
the Government of India procedures. The Commission accepts
the Court’s observation that this arrangement has not been found
satisfactory in ensuring availability of timely and adequately
audited financial statements for this programme. The Commis-
sion therefore requested the mid-term review to look into this
matter and to provide recommendations on how accountability
and reporting arrangements could be improved. The Commission
received the draft report of the mid-term review in April 2003.
The report does contain a number of concrete recommendations
in this respect, which the Commission is in the process of discuss-
ing with the Government of India.

44.
Donors active in the health sector like the World Bank,
DFID, USAID and SIDA are invited regularly by the Ministry of
Health to the Joint Steering Committee meetings of the Commu-
nity programme. However, the response of the donors has gener-
ally been low key as none of them fund on a sector-wide basis.
Informal coordination mechanisms have been set up and all
donors and senior representatives of the Department of Family
Welfare regularly attend. On a formal basis, greater donor coor-
dination is taking place at the State and District level.

Since 1992 developing sustainable structures and involv-
35.
ing the community is common practice in Community develop-
ment policy.

Currently, there is an increasing consensus among the donor
community about the need for reforms in the health sector. There
are good indications that other donors would in future pursue the
reform strategy and participate in coordinated sector support.

36 and 37.
To avoid problems with requests for extensions
more recent projects and also the sector programmes were designed
with a longer implementation period (e.g. BAIF: nine years, SSA:
seven years).

46.
Inadequate health and education facilities are key aspects
of rural poverty and it is now generally agreed by all donors in
India that by strengthening these two sectors a maximum impact
on poverty reduction can be achieved. By selecting these two

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sectors as priority areas of its new strategy (which received strong
support from the EU Member States), the Commission aims to
achieve maximum impact without diluting its efforts in too many
different sectors or approaches. Moreover, important synergies
are expected to be created with the ongoing sector programmes
in health and education in the future partner States.

In the context of its reform of the management of exter-
55.
nal assistance, the Commission, through devolution to its Delega-
tions in the field and accompanying quality measures, attaches
special importance to greater realism in project/programme design.
This concerns in particular the setting of objectives and accom-
panying implementation timeframes.

The Commission’s development communication identifies six key
sectors for poverty reduction but this does not mean that all six
need to be taken on board for each new programme. The policy
gives the Commission the possibility, in dialogue with the recipi-
ent country, to agree on the sectors that are most appropriate for
the country in question.

In all cases, Community projects are followed up through

47.
final evaluations. The results will feed into the new strategy.

CONCLUSIONS AND RECOMMENDATIONS

51.
The project approach per se has geographical and the-
matic limitations with respect to targeting the poor and the Com-
mission is therefore moving towards a more holistic approach to
its poverty reduction strategy (State partnerships and sector-
support programmes).

52.
Sector programmes are disbursed against achieved bench-
marks for policy reform measures, not against individual activi-
ties. Monitoring indicators should show whether the poor have
been reached and benefited from the programme. Therefore, out-
comes rather than inputs and activities are stressed in the sector
approach.

Recommendation 1

53.
In line with Community Development policy and guide-
lines, the targeting of the poorest sections of the population is
common standard practice for all programmes and projects in
India and other countries.

54.
Within a project approach it is difficult to guarantee sus-
tainability of beneficiary organisations beyond the life of a project.
A sector-programme approach addresses
issue more
adequately through building ownership and increasing coherence
between objectives, spending and results.

this

Recommendation 2

Since 1992, the Commission uses the ‘Methodological
56.
guide’ and other project cycle tools such as the logical framework
approach. It is therefore now standard practice to build sustain-
ability aspects (including exit strategies) into Community develop-
ment projects and programmes.

57.
Donors should also be ready to assist beneficiary coun-
tries to strengthen their capacity to manage sector-wide pro-
grammes. This is a key feature of donor support to sector-wide
approaches.

For the Community health programme the financing agreement
states that regular auditing will be carried out under Government
of India procedures. The Commission accepts the Court’s obser-
vation that this arrangement has not been found satisfactory in
ensuring availability of timely and adequately audited financial
statements for this programme. The Commission therefore
requested the mid-term review to provide recommendations on
how accountability and reporting arrangements could be
improved. The Commission received the draft report of the mid-
term review in April 2003. The report does contain concrete rec-
ommendations in this respect, which the Commission is discuss-
ing with the Government of India.

Recommendation 3

59.
The Commission agrees with the Court’s recommenda-
tion which is being implemented both under the Guide to the
programming and implementation of budget support for third
countries adopted in March 2002 and the Guidelines for Euro-
pean Commission Support to Sector Programmes adopted in Feb-
ruary 2003.

60.
Inadequate health and education facilities are key aspects
of rural poverty and it is now generally agreed by all donors in
India that by strengthening these two sectors a maximum impact
on poverty reduction can be achieved. By selecting these two sec-
tors as priority areas of its new strategy (which received strong
support from the EU Member States), the Commission aims to
achieve maximum impact without diluting its efforts in too many
different sectors or approaches. Moreover, important synergies

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Official Journal of the European Union

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are expected to be created with the ongoing sector programmes
in health and education in the future partner States.

Recommendation 4

The Commission’s development communication identifies six key
sectors for poverty reduction but this does not mean that all six
need to be taken on board for each new programme. The policy
gives the Commission the possibility, in dialogue with the recipi-
ent country, to agree on the sectors that are most appropriate for
the country in question.

61.
As pointed out in the reply to paragraph 60, the Com-
mission considers that there are strong reasons for concentrating
its resources on the health and education sectors. In addition, the
future State partnerships that the Commission intends to develop
should provide a holistic reform package which could add a rural
and natural resource dimension to the education and health
activities.