Communication from the Commission to the Council and the European Parliament - Towards the full integration of co-operation with ACP countries in the EU budget
Date: 2003-10-08
Institutions: European Commission
Subjects: ACP countries, Community budget, European Development Fund, aid policy, budget policy, inclusion in the budget

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 8.10.2003
COM(2003) 590 final

COMMUNICATION FROM THE COMMISSION
TO THE COUNCIL AND THE EUROPEAN PARLIAMENT

Towards the full integration of co-operation with ACP countries
in the EU budget

TABLE OF CONTENTS

1.

2.

2.1.

2.2.

2.3.

2.4.

3.

3.1.

3.2.

3.3.

3.4.

3.5.

4.

4.1.

4.2.

4.3.

5.

6.

Executive summary...................................................................................................... 3

The context................................................................................................................... 5

Aid effectiveness - an international agenda ................................................................. 5

EU Co-operation: Budget plus EDF ............................................................................ 5

EU Co-operation: Budget versus EDF......................................................................... 7

Supporting the reform agenda of the Commission ...................................................... 8

The political desirability of change: opportunities offered by budgetisation .............. 9

Integrating the ACP into EU external relations - a move towards normality .............. 9

Countering the risk of political marginalisation of the ACP ..................................... 10

Stronger legitimacy for an effective EU aid policy ................................................... 10

Further effectiveness gains......................................................................................... 11

Efficiency gains.......................................................................................................... 12

Concerns raised in connection with budgetisation..................................................... 13

Maintaining the quality of the partnership with ACP countries ................................ 13

Maintaining the aid commitment to ACP countries................................................... 14

From special “financing keys” to the general “budget key” ...................................... 14

An ambitious but feasible agenda .............................................................................. 15

Conclusions: A political and practical opportunity for change.................................. 16

2

1. 

EXECUTIVE SUMMARY

Enlargement  with  ten  new  Member  States  (MS)  will  make  the  year  2004  one  of  historical
importance for the European Union. The Intergovernmental Conference on Treaty reform, due to
start  work  in  October  2003  on  the  basis  of  the  proposals  of  the  European  Convention,  will
provide the EU with a Constitution bringing its role and its institutions in line with its new status.
The Commission will have launched the debate on  the financial framework after 2006, i.e.  for
the first full period of the enlarged EU. Co-operation with countries in Africa, the Caribbean and
the Pacific (ACP) is also high on the 2004 agenda, the Convention recommending budgetisation
of EU/ACP co-operation. Negotiations will start in 2004 on possible amendments of  the  ACP-
EC Partnership Agreement (Cotonou Agreement). At the same time, the Community will have to
determine the future level of resources to support financial co-operation with ACP countries after
the  expiry  of  the  current  financial  protocol  for  the  ninth  European  Development  Fund  (EDF).
Although  the  two  financial  issues  -  the  general  financial  framework  and  the  successor  to  the
ninth EDF - may appear to be rather technical, their political importance is very high and they
are intrinsically linked with the role the enlarged EU will identify for itself in the future.

The  Commission  is  of  the  opinion  that,  in  this  context,  it  is  both  politically  desirable  and
opportune  to  normalise  the  financial  framework  for  the  Community's  assistance  to  ACP
countries  and  Overseas  Countries  and  Territories  (OCTs).1  The  change  will  end  the  system  of
successive EDFs and enable the financing of EU-ACP co-operation to be fully incorporated into
the general budget system, i.e. into the annual EU budget and into its medium-term programming
frame: the financial perspectives. The combination of upcoming events in 2004 gives  the ideal
opportunity to do so.

The EDF has been the main financing instrument since 1958 for the EC’s co-operation with the
ACP  and  OCTs.  The  EDF  is  of  a  particular  nature:  inter-governmental  in  its  funding  and
managed by the Commission outside the general budget, but with the European Parliament (EP)
granting  the  discharge.  It  has  maintained  a  separate  financial  regulation  and  its  own
implementation  arrangements  over  the  years,  differing  from  the  ones  applied  to  external  aid
financed  from  the  general  budget.  Furthermore,  the  resources  of  the  EDF  have  continued  to
originate  from  financial  contributions  from  the  Member  States  with  a  different  cost-sharing
formula from that of the general budget. The contributions had to be negotiated at each renewal
of the Financial Protocols for a five-year duration.

However understandable this peculiar set-up may have been some 50  years  ago, nowadays the
advantages of a separate, specific fund have eroded. ACP countries and OCTs increasingly run
the  risk  of  being  marginalised,  mainly  because  they  are  detached  from  the  mainstream
discussions and priority-setting at the level  of the European  Union.  The  present  situation  is  an
anachronism: why should one single element (EDF) of one full Community policy (development
co-operation)  continue  to  be  managed  outside  the  general  budget,  outside  full  parliamentary
participation and be based on specifically negotiated partition keys for Member States, other than
those agreed for their contributions to all other Community expenditure?

1 

References made in this document to the ACP countries will include reference to the OCTs.

3

                                                
Budgetisation  of  the  EDF  has  been  discussed  more  than  once  in  the  past,  the  last  time  during
negotiations preparing the ninth EDF. In spite of a positive reaction from most Member States,
no final consensus could be reached at that stage. The Commission then declared that it would
prepare a communication on the advantages and drawbacks of budgetisation2.

The present document responds to that commitment. It notes that both from a policy angle and
from a practical point of view, great opportunities present themselves through budgetisation:

(cid:1)  At  the  Barcelona  Summit  in  March  2002,  the  Union  made  a  promise  to  work  towards
harmonisation  of  (donor)  procedures  and  practices  and  to  come  up  with  concrete  results
before  2004.  Budgetisation  would  be  a  concrete  step.  Efficiency  gains  would  be  reached  in
recipient  countries,  which  presently  receive  resources  from  the  Community  according  to
different  rules.  Unified  procedures  would  also  deliver  significant  advantages  in  terms  of
coherent  management,  rationalisation  of  comitology  between  the  Commission  and  the
Member States, and simplification of tasks for Commission staff, both at headquarters and in
delegations, and would fit perfectly into the restructuring of the external relations sector that
started in 2000.

(cid:1)  The  effectiveness  of  Community  aid  to  ACP  countries  would  improve  through  budgetary
discipline  and  more  flexible  reallocation  mechanisms.  Combining  all  development  co-
operation resources in the general budget would facilitate regional co-operation between ACP
and  non-ACP  developing  countries  and  make  for  greater  synergy.  It  would  increase  the
attention  given to  ACP countries in the EU  development  debate.  Annual  discussions  on  the
budget  by  the  Council  and  Parliament  have  become  the  main  forum  for  debate  on  the
substance  of  development  policy,  the  political  priorities  of  the  Union  and  their  resource
implications.  Budgetisation  would  bring  co-operation  with  ACP  countries  more  to  the
frontline  and  enhance  its  legitimacy  through  authorisation  by  the  European  Parliament.  The
ACP-EU Joint Parliamentary Assembly would gain additional influence through its members
in the European Parliament.

(cid:1)  Funds  would  be  available  rapidly  (after  adoption  of  the  necessary  regulation(s)  by  the
European  Council  and  Parliament),  without  the  need  to  wait  for  ratification  of  a  financial
protocol by 25 (or more) EU Member States and two thirds of the ACP Countries.

(cid:1)  Budgetisation provides an opportunity to modernise relations between the ACP and the EU,
by shifting from an  ad hoc financing system based partly on historical links towards a  fully
EU-financed system. It would avoid specific and difficult negotiations on EDF contributions
every  five  years.  A  single  system  of  burden  sharing  between  Member  States  would  exist,
instead  of  having  two  separate  mechanisms  which  will  become  all  the  more  difficult  to
manage  in  an  enlarged  union  with  25  Member  States.  In  view  of  all  the  interests  at  stake,
EDF-based discussions clearly run the risk of being marginalised.

In  this  context,  the  Commission  has  conducted  its  analysis  with  a  view  to  preparing  decision-
makers  for  the  important  choices  to  be  made  in  the  coming  months.  The  communication
confirms that full budgetisation is expected to produce a positive change by establishing political
and  budgetary  normality,  as  well  as  further  simplification  and  harmonisation  of  procedures,
without putting at risk the qualitative achievements of the 45-year-long co-operation with ACP
states. The communication  ends  with a brief road map  demonstrating  that  the  agenda  for  fully

2

Council of the European Union, Ref. 14084/99 of 14 December 1999.

4

                                                
incorporating  ACP  aid  into  the  general  budget  from  2007/2008  onwards3  is  feasible  provided
action is undertaken immediately.

2. 

THE CONTEXT

2.1.  Aid effectiveness - an international agenda

During  recent  years,  development  policy  has  seen  a  new  momentum,  both  at  EU  and  at
international level.

Several  major  conferences  have  taken  place  within  the  UN  system,  notably  the  Millennium
Summit  in  September  2000,  the  “International  Financing  for  Development  Conference”  in
Monterrey and the “World Summit on Sustainable Development” in Johannesburg, which were
held in 2002. These have resulted in a shared set of norms, recognised principles and values, and
a global agenda. The essential objectives of development policy are set out in the “Millennium
Development  Goals”  (MDGs),  the  central  aim  of  which  is  to  eradicate  poverty.  The  main
principles  and  good  practice  of  development  co-operation,  such  as  “partnership”  and
“ownership”  of  recipient  countries  in  their  own  development  process,  are  now  common
international  language.  The  Monterrey  Consensus  further  stressed  the  need  for  enhanced
effectiveness  of  Official  Development  Aid  (ODA),  inter  alia  by  reducing  transaction  costs,
harmonising  donor  procedures,  untying  aid  and  applying  the  most  suitable  aid  delivery
mechanisms adapted to the needs of developing countries. The  need for resource predictability
was also recognised.

In this overall context, the European Union has committed itself4 to reducing transaction costs:
concrete  steps  on  co-ordination  of  policies  and  harmonisation  of  procedures  are  to  be  taken
before  2004,  both  at  EC  and  at  Member  State  level,  in  line  with  internationally-agreed  best
practices.

Full budgetisation of co-operation with ACP countries and harmonisation of procedures vis-à-vis
all developing countries are the most obvious concrete steps in this direction, given the fact that
ACP  countries  are  currently  confronted  with  different  systems  and  procedures  in  their
development programmes supported by the Community.

2.2.  EU Co-operation: Budget plus EDF

At present, the development assistance provided by the European Union is administered through:
(1) the EU budget, (2)  the European Development Fund,  (3) EU Member  States’  programmes.
Part  of  this  overall  assistance  is  channelled  through  international  agencies  (World  Bank,  UN,
etc.). In addition, the EIB has been an important source of capital for developing countries.

Through the channels mentioned above, the EU as a whole provides half of global development
assistance  (around  USD  29  billion  in  2002)  to  the  countries  reporting  to  the  OECD-DAC  (see
Annex 1 - Table 1). Approximately one fifth of this aid is managed by the Commission on behalf
of the Community.

3 

4 

The first financial protocol officially covers the period March 2000–March 2005. However, it entered into
force only in April 2003, due to delays in the ratification procedure. The Cotonou Agreement specifies that
the resources of the first financial protocol will cover the period 2000-2007. This means that the new funds
would have to be available at the latest from 1 January 2008.
European Council Conclusions on the International Conference on Financing for Development, 14 March
2002.

5

                                                
In 2002, total disbursements for Community external aid were €6.3 billion (see Annex 1 – Table
2), of which €4.4 billion came from the EU budget and €1.9 billion from the EDF.5 Out of the
€4.4  billion  from  the  budget,  around  €650-700m  per  year  benefits  the  ACP.  The  budget  lines
support  activities  in  areas  such  as  humanitarian  aid,  human  rights,  food  aid  or  co-financing  of
NGOs.  Co-operation  with  certain  present  (South  Africa)  or  new  (East  Timor)  members  of  the
ACP group is also covered by the budget, as are a significant number of international fisheries
agreements and assistance through the Rapid Reaction Mechanism.

Today, the Community is a donor operating in almost all developing countries in the world, but
with  two  different  systems.  Aid  in  non-ACP  developing  countries  is  managed  according  to
general budget regulations exclusively,  whereas aid  to ACP  countries  is  managed  according to
general  budget  regulations,  on  the  one  hand,  and  the  Cotonou  Agreement/EDF  regulations,  on
the other.

On entry into force of the Cotonou Agreement on 1 April 20036, the following resources were
available for co-operation with ACP countries and OCTs:

(cid:1)  Under the 6th, 7th and 8th EDFs, a total of €32.8 billion (including transfers from preceding
EDFs), of  which  €30.2  billion  was  committed  and  €21.8  billion  disbursed.  €2.6  billion  was
thus still available for new commitments and €11 billion for disbursements.

(cid:1)  Under the 9th EDF: €12.5 to €13.5 billion for ACP countries (depending on the decision of
the Member States on the availability of a “conditional one billion”), €175 million for OCTs
and  €125  million  for  implementation  costs  incurred  by  the  Commission.  A  total  amount  of
€12.8 to €13.8 billion is thus available under the 9th EDF.

Thus, more than €15 billion were available for new commitments for the period 2003-2007 and
more than €23 billion for disbursements.

The  graph  in  Annex  1-  Table  3  shows  the  1989-2002  trend  in  commitment  decisions  and  in
payments from the EDF. Commitments were on average more than €3 billion per year during the
first three  years following the entry into force of the 8th EDF (1998), going down in 2001 and
2002, which is a normal phenomenon in the EDF system, given its five-year financial protocols.

It is, however, important to focus on payments, which show the effective delivery of resources
and  which  are  the  reference  in  the  ODA  data  produced  by  the  OECD-DAC  (Development
Assistance  Committee).  An  analysis  of  the  data  in  Annex  1-  Table  3  shows  that  the
Commission's  reform  of  the  management  of  external  assistance  since  2000  has  started  to
improve delivery of EDF resources. While the average level of disbursements oscillated around
the level of €1.5 billion per year over the period 1996-2000, since 2001 an average level of €2
billion  per  year  has  been  reached.  Despite  these  improvements,  disbursements  effectively
achieved  have  remained  short  of  expectations  and  their  level  is  still  far  from  the  Community
objectives of committing and disbursing €3.0 to €3.5 billion per year under the EDF.

5 

6 

The bulk of the EDF is  used for  ACP countries.  A  small  part,  approximately  €20-30  million  per  year,  is
used for Overseas Countries and Territories.
OJ L 317 of 15.12.2000, p. 3 and OJ L 83 of 1.4.2003, p. 69.

6

                                                
2.3.  EU Co-operation: Budget versus EDF

The EDF, being set up as a fund, has a number of significant features that distinguish it from the
Budget.

Once an overall amount for a five-year EDF allocation has been agreed between the EU Member
States and between them and the ACP countries, it is contractually determined between the EU-
MS  in  the  “Internal  Agreement”7  and  between  the  EU-MS  and  the  ACP  countries  in  the
Financial  Protocol8  annexed  to  the  Cotonou  Agreement.  This  protocol  needs  to  be  signed  and
ratified by all Member States and two thirds of the ACP countries, which normally takes several
years.  The  amount  is  available  to  ACP  countries  only  after  ratification.  Once  available,  it
becomes  a  spending  objective,  which  means  that  uncommitted  and  non-disbursed  balances
remain in the Fund until they are fully used. For this reason, there are still old balances from as
far back as the 6th EDF, which have ultimately been transferred to the 9th EDF.

The  EU  budget,  in  contrast,  obeys  the  annuality  rule.  Annuality  is  common  practice  for
government  budgets. Spending  authorisations are valid  for  a  year.  If  not  committed  during  the
year,  authorised  appropriations  lapse  at  the  end  of  the  year.  However,  annuality  of  the
authorisations  by  the  budget  authority  representing  the  taxpayers  is  complemented  by  other
arrangements  which  allow  for  the  multi-annual  dimension  needed  for  sound  public  finance
programming.  The  multi-annual  dimension  in  the  EU  framework  essentially  consists  of  a
financial framework generally agreed for 5 to 7 years and financial reference amounts included
in programme regulations. In the case of regulations co-decided by the EP and the EU Council –
which will be the applicable model after budgetisation – the latter provide a solid guide for the
Commission and the budget authority, which have undertaken not to depart, in the annual budget
process, from such multi-annual amounts save under very restrictive circumstances.

The  Fund  approach  leads  typically  to  cyclical  ups  and  downs  in  the  overall  commitment  and
disbursement  pattern.  It  provides  the  ACP  countries  collectively,  and  also  individual  countries
after  notification  of  an  allocation,  with  a  certain  “flexibility  over  time”,  meaning  that
commitments and disbursements can be either front-loaded or deferred without immediate risk of
losing the amount promised.

The budget model, on the other hand, allows similar flexibility provided the appropriations not
used  for  countries  with  absorption  difficulties  in  a  particular  year  can  be  used  for  countries,
regions  or  global  initiatives  for  which  financing  can  be  brought  forward.  For  a  programme
covering a very large number of countries – which is the case for the ACP region - it is highly
unlikely that such flexibility would not work. The indicative allocations to countries under multi-
annual strategies are obviously not affected by this flexibility within a given budget year, unless
a country cannot absorb allocated appropriations consistently over an extended period.

The  contractual  nature  of  the  Fund  and  the  certainty  of  the  overall  allocation  have  often  been
seen  as  advantages  in  comparison  to  the  Budget.  Experience  with  the  Fund  since  its  inception
shows however that the actual aid delivery  as measured by disbursements has not reflected the
level  of  secured  allocations.  This  has  been  conducive  to  building  up  uncommitted  and  non-
disbursed balances for which the Member States carry forward a legal obligation to contribute.
The reasons for this include the lack of absorption capacity and the lack of flexibility in the EDF
system  itself.  Moreover,  the  spending  objective  secured  by  allocations  has  not  provided  an
incentive for swift implementation.

7 
8 

OJ L 317 of 15.12.2000, p. 355.
See footnote 6.

7

                                                
As a consequence of the fact that several EDFs overlap in their implementation and as closures
of programmes and projects lead to frequent de-commitment of resources which remain within
the  various  EDFs,  the  Fund  approach  requires  regular  reallocation  decisions.  The  amounts
available  for  re-allocations  and  re-commitments  are  constantly  changing,  which  makes  neither
for  efficient  management  nor  clarity  on  the  amounts  available.  In  certain  cases,  notably  in
respect  of  unspent  balances  and  unallocated  resources  of  old  EDFs,  the  creation  of  new
allocations  is  subject  to  approval  by  the  ACP-EC  Council  of  Ministers.  The  procedure,  which
includes  a  Commission  decision,  approval  by  COREPER,  adoption  by  the  EU  Council  of
Ministers, a debate in the ACP-EU Development Finance Co-operation Committee and adoption
by the ACP-EU Council of Ministers, takes normally no less than six months.

Finally, the Cotonou Agreement stipulates for the EDF a specific type of co-management by the
Commission and the ACP countries. Ownership and co-management are also important features
of  budgetised  co-operation.  Therefore,  country  programmes  are  always  prepared  in  close  co-
operation  with  the  authorities  of  the  beneficiary  states.  And  as  regards  implementation,  the
Financial  Regulation  applicable  to  the  general  budget  includes  the  model  of  decentralised
implementation  by  the  beneficiary  third  country,  provided  its  financial  management  system
adheres  to  a  number  of  criteria  related  to  sound  financial  management.  EC  aid  programmes
follow  those  rules  in  all  other  regions  of  the  world  without  major  difficulties.  For  one  ACP
country, i.e. South Africa, co-operation is already de facto budgetised as it benefits from annual
budget appropriations under a specific Regulation, which also determines the total amount for a
multi-annual timeframe (currently 2000 to 2006).

2.4. 

Supporting the reform agenda of the Commission

Budgetisation  of  the  EDF  is  also  in  line  with  the  objectives  of  reform  of  the  management  of
external  assistance,  launched  by  the  Commission  on  16  May  2000.  In  aiming  to  improve  the
speed and quality of aid delivery, major emphasis was put on strengthening the programming of
aid, creating the EuropeAid Co-operation Office, devolving project management responsibilities
to  the  Commission's  delegations  and  producing  a  package  of  measures  to  improve  financial
management.  Reform  of  the  external  relations  sector  was  of  course  part  of  the  wider  internal
Commission  reform  process,  an  important  part  of  which  was  the  new  Financial  Regulation
applicable as of 2003.

As regards the ACP countries specifically, the devolution process should be completed by mid-
2004. Devolution has proven to be more difficult to finance in the case of the ACP countries than
for other regions financed through the budget. The latter benefit from programme appropriations
authorised  by  the  budgetary  authorities  for  technical  assistance  and  administrative  support
expenditures. Such flexible budgetary response to support implementation cannot be made in the
context of the EDF. Indeed, administrative funds are determined every five years in the “Internal
Agreement”, and any changes would require ratification by all Member States. Currently, those
funds  are  insufficient  to  support  the  reform.  The  Commission  therefore  had  to  launch  the
devolution  operation  in  ACP  delegations  without  having  the  formal  assurance  of  the
corresponding financial resources required for 2006-2007. It is hoped that the ACP partners will
provide that assurance as soon as the question can be formally addressed, i.e. by late 2004. The
amount earmarked for administrative support expenditure in the Internal Agreement for the 9th
EDF is equivalent to barely 1% of the operational budget whereas external aid within the budget
can rely on 3%.

8

3. 

THE  POLITICAL  DESIRABILITY  OF  CHANGE:  OPPORTUNITIES  OFFERED  BY
BUDGETISATION

3.1. 

Integrating the ACP into EU external relations - a move towards normality

A series of arguments were used in the past to plead in favour of maintaining ACP expenditure
in a particular fund outside the budget, with ad hoc financing keys and with an own set of rules.
They  have  progressively  lost  relevance  in  the  present  external  political  and  co-operation
framework.

The  first  EDF  goes  back  to  1958.  At  that  time,  the  international  context  and  status  of  EU
integration were completely different. The then EEC (European Economic Community) had no
external  and  security  policy,  had  no  system  of  own  resources,  and  Member  States  still
maintained  institutional  links  with  many  of  the  countries  concerned.  The  EDF  was  set  up  to
respond to the challenges of that time. It did so very well for many years, but today's context is
substantially different.

The ACP  group  of countries has  enlarged  and  developed.  So  has  the  EU.  Development  policy
has been defined at EU level and partnership agreements have been signed over the  years with
almost all regions and countries in the world: the Mediterranean, Latin America, Asia, etc. These
agreements,  like  the  Cotonou  Agreement,  broach  a  range  of  subjects  of  common  interest:
political dialogue, trade arrangements, democracy objectives, etc. They are complemented by a
complex  institutional  framework  at  international  level  where  important  decisions  having  an
impact on the ACP group are taken: the WTO, the G-8, the UN, etc. Today, the European Union
has  reached  a  level  of  integration  and  assumes  global  responsibilities  which  involve  collective
relations with all  regions of the world, independent  of historical  links with individual  Member
States.

Financing  outside  the  budget  traces  its  origin  to  the  period  before  the  introduction  of  the  own
resources system. But even after its introduction in 1973, Member States decided to continue the
EDF system in which they had to negotiate their contributions (the “financing keys”) at regular
intervals.  Such  a  system  initially  permitted  rather  generous  increases  in  the  overall  envelopes
from one EDF to the next, as some Member States took a particular interest in the ACP region
and  were  ready  to  translate  that  particular  interest  into  a  larger  funding  effort  at  Community
level. However, recently the increases in EDF funding have levelled off (see Annex 1 – Table 3)
and negotiations on the financing of the last EDFs have proven to be difficult.

For the successor to the 9th EDF, which will involve at least 25 Member States with the majority
of the new Member States in the lower range of EU-GNI per capita, negotiations are unlikely to
become  any  easier.  A  perpetuation  of  negotiated  financing  keys  for  funding  EU  co-operation
with a specific region of the world - external relations of the Union à la carte - runs counter to
the spirit of the European integration process.

Budgetisation of the EDF, on the other hand, means that it will be financed by the general system
of own resources, which serves all budget expenditure, be it for internal or external programmes.
Financing will have gained independence from voluntary, negotiated contributions under  an ad
hoc system and therefore provide better prospects for continuity. For the Member States, it will
mean  that  financial  co-operation  with  ACP  countries  will  really  be  at  EU  level,  reflecting
obligations  as  part  of  EU  membership  without  further  manifestation  of  initial  preferential
interests and links. This will in turn help the new Member States to subscribe to the funding of
EU-ACP development aid from 2007/2008 onwards.

9

3.2.  Countering the risk of political marginalisation of the ACP

The  Lomé  Conventions  and  now  the  Cotonou  Agreement  have  established  special  relations
between the European Union and the ACP. In the same vein, separate financing of co-operation
from  a  dedicated  Fund  has  been  seen  as  a  privileged  position  of  the  ACP  countries.  This  was
indeed the case as  long as  co-operation  programmes  with  the  ACP  were  dominating  European
external aid. With the expansion of the Union’s external relations, the conclusion of co-operation
agreements with many other regions and the increase in external aid under the Budget, separate
funding is no longer a privilege, rather the opposite: a Fund based on voluntary contributions and
determined as a result of national viewpoints. In the new and dynamic context of the European
Union, ACP countries run the risk of being left on the sidelines because of the particularity of the
EDF system: a combination of intergovernmental and EU institutional elements rather than a full
component of the comprehensive EU system.

Being at the heart of democratic decision-making, the annual readings on the Budget in both the
Council  and  Parliament  have  become  the  main  forums  for  debate  on  the  substance  of
development  policy,  the  political  priorities  of  the  Union  and  their  resource  implications.
Similarly,  the  medium-term  Financial  Perspectives  determine  the  resource  implications  of  the
political vision for Europe. Not being part of the budget, co-operation with the ACP countries is
notoriously excluded from one of the most important political decision-making processes of the
Union.  Instead,  the  Member  States  debate  and  decide  on  resources  among  themselves  without
the involvement of Parliament once every five  years. The already significant risk that relations
with ACP countries will be marginalised in comparison with other economically more advanced
regions of the world is exacerbated by its lack of visibility in the political arenas of the Union.
Budgetisation of the EDF will bring the ACP fully into the political process of the Union and put
the relationship with them on an equal footing with other regions. The influence of the ACP-EU
Joint Parliamentary Assembly will be enhanced through its members in the European Parliament.

3.3. 

Stronger legitimacy for an effective EU aid policy

An  effective  and  credible  EU  development  effort  towards  the  Millenium  Development  Goals
(MDG)  needs  a  coherent  political  decision-making  process.  Neither  informed  political  and
managerial  choices  nor  spending  plans  can  be  made  adequately  when  budgets  are  fragmented
over separate sources of funding with different decision-making structures and time schedules. A
basic  requirement  for  overall  aid  effectiveness  is  to  provide  political  and  economic  decision-
makers with the means by which informed and comprehensive choices can be made. The budget
authority and citizens would also obtain, after budgetisation, a global, more accurate picture of
EU  external  actions  and  of  EU  development  policy,  based  on  a  coherent  and  comparable
presentation  of  budgets.  Decision-making  is  likely  to  become  more  consistent,  as  it  will  take
place in a unified political process rather than a divided one. The overall commitment to poverty
reduction will be easier to pursue and also to trace in a coherent budgetary frame.  In technical
terms, the principles of budgetary unity and universality would be complied with.

Not being part of the Budget, the EDF is currently not subject to authorisation by the European
Parliament.  Yet  the  EDF  covers  an  important  policy  domain  of  the  EU,  for  which  the  Treaty
explicitly specifies the co-decision procedure – an obvious contradiction. Because of its political
importance,  as  well  as  of  its  financial  scale,  the  EDF  should  be  subject  to  comprehensive
parliamentary involvement just  like all other EU  expenditure on external policy.  Integration of
the EDF into the general budget would eliminate this anomaly. The legitimacy of  co-operation
with the ACP partners will be strengthened  by  the European Parliament  being  able to exert its
full governance from the authorisation of the expenditure up to the discharge. Overall, external

10

aid at the level of the  Union would  gain  in transparency  towards  the  European  citizen  and  the
taxpayer.

Development co-operation under Cotonou will only be secured as a true EU policy instrument in
a budgetised context, without negotiation of financing contributions detached from the political
processes  of  the  Union.  Development  aid  to  the  ACP  countries  must  be  part  of  the  normal
responsibility of being an EU Member State for it to have the legitimacy of being an expression
of the collective responsibility of the EU.

3.4.  Further effectiveness gains

Over  and  above  mainly  political  and  institutional  considerations,  the  Commission  expects
incorporation into the budget to provide a framework conducive to further effectiveness gains.

Budgetisation  will  subject  ACP  expenditure  to  the  annuality  principle.  Appropriations  will
become  part  of  a  yearly  assessment  and  yearly  authorisation  by  the  Council  and  Parliament,
which  is  a  powerful  incentive  for  continuous,  year-by-year  progress  with  implementation.  The
pattern of commitments will become more regular. The build-up of unspent funds will be more
easily identified and likely to be addressed earlier and more forcefully.

With more flexibility within the ACP group, temporary absorption difficulties in some countries
will  be  more  easily  compensated  by  bringing  forward  financial  commitments  in  others.  The
overall  amount  ultimately  spent,  and  the  development  support  effectively  provided,  can  thus
more easily reach the potential level established through the multi-annual frame of reference for
resource allocation.

Incorporation into the budget will fully subject EDF to those management principles applicable
to  the  general  budget.  These  are  more  constraining:  financing  agreements  will  have  to  be
concluded  at  the  latest  during  the  year  following  that  of  the  budgetary  commitment,  and
individual contracts implementing such financing agreements will have to be concluded no later
than 3 years following the date of the budgetary commitment. Funds not contracted on time will
lapse.  These  principles  applicable  to  the  general  budget  are  also  present  in  the  financial
regulation applicable to the 9th EDF, but in a less stringent way.

Annuality and stricter sunset clauses do not mean that budgetised EU-ACP co-operation would
lose  its  multi-annual  nature,  its  predictability  and  the  protection  of  its  overall  funding.  Budget
programmes  also  operate  within  a  predictable  and  multi-annual  frame.  But  predictability  does
not amount to an unconditional guarantee, as the budget frame includes rules – reinforced since
2003 - which act as an incentive to progress with commitments, contracts and payments and help
to  avoid  excessive  gaps  between  promises/commitments  and  effective  implementation.  These
stronger incentives will complement efforts which are undertaken by the Commission and ACP
countries to strengthen institutional capacity in the delivery of aid.

After incorporation of the EDF into the budget, all major geographical programmes will be part
of  the  budget  structure.  From  a  technical  point  of  view,  this  will  make  for  greater  synergy
between those programmes centred on  a geographical/country approach and  those programmes
pursuing thematic objectives. It will facilitate the discussion on the optimal relation between the
two  types  of  instruments.  Co-operation  programmes  with  the  ACP  have  generated  a  wealth  of
experience  and  best  practice,  which  are  worth  transferring  to  other  co-operation  programmes
with other developing regions. Separate systems are an obstacle to cross-fertilisation between the
various programmes.

11

Incorporation  of  the  EDF  into  the  budget  will  facilitate  co-operation  between  regions.  The
current  financial  co-operation  instruments  with  Africa  are  mainly  the  EDF  for  Sub-Saharan
Africa, the individual programme for South Africa and the MEDA programme for North Africa.
This situation creates a particular problem when support for the African Union and its initiatives
is sought. A similar difficulty arises with the growing complexity and comprehensiveness of EU
relations  with  Africa.  Overcoming  the  fragmentation  of  financial  instruments  available  for  the
external relations of the Union would certainly benefit a more coherent and effective EU-African
policy. Without prejudice  to  the unity of  the  ACP group, a  similar  gain  in  coherence  could  be
brought about for Caribbean countries in relation to Latin America and for the Pacific group in
relation to Asia.

Finally, recent experience has shown that the budget can respond faster to new  needs and new
priorities, including those which are at the very heart of the problems of the ACP region. This is
partly  because  the  annual  decision-making  aspect  of  the  budget  process  allows  more  frequent
updating.  It  is  also  because  of  the  active  involvement  of  the  budget  authority  in  the  choices.
Recent examples are the faster response from the budget side in contributing to global initiatives
such as the Global Fund to Fight AIDS, Tuberculosis and Malaria (Global Fund) or reproductive
health.  Also,  in  certain  cases,  dealings  with  ACP  countries  in  a  post-crisis  situation  could  be
resumed more easily through the budget programmes than through EDF. Flexibility mechanisms
are  available  within  the  EDF  too,  but  in  general  their  set-up  requires  longer  and  more
cumbersome procedures.

3.5.  Efficiency gains

For the Commission, being an institution with tight restrictions on its human and administrative
resources  available  for  aid  implementation,  efficiency  gains  are  an  important  aspect  of
budgetisation.  Although  difficult  to  quantify  accurately,  there  is  little  doubt  that  the
incorporation  of  all  ACP  aid  into  the  budget  will  provide  for  more  efficient,  i.e.  more  cost-
effective  operations.  It  will  allow  a  certain  amount  of  duplication  to  be  removed  which  is
currently imposed on the various operators and stakeholders, be they the Commission, Member
State delegates, ACP partners, participating NGOs or contractors.

Implementation  of  external  assistance  under  the  EU  budget  and  under  the  EDF  have  been
harmonised  as  much  as  the  different  concepts  and  legal  frameworks  allow.  In  spite  of  these
efforts, differences still exist in the respective financial regulations for the budget and for the 9th
EDF.  The  Commission  must  therefore  continue  to  apply  two  different  sets  of  management
procedures  with  different  distributions  of  responsibilities  between  the  Commission  and  partner
countries  and  must  maintain  two  quite  different  accounting  systems.  When  staff  is  transferred
from  one  type  of  co-operation  to  another  they  need  to  be  retrained.  Different  co-operation
methods are reflected in the organisation structure of the Commission and thus lead, de facto, to
insufficient mobility of staff between the regions. Moreover, for decades, both the Commission
and the Member States have duplicated their co-ordination efforts.

Incorporation of the EDF into the Budget will give the Community the opportunity to use one set
of  procedures  that  applies  to  all  co-operation  activities.  This  would  put  an  end  to  the  current
situation where the same ACP countries receive  aid from the same  administration according to
two  different  mechanisms.  It  will  greatly  facilitate  devolved  management  by  the  ACP
Delegations  as  compared  to  the  current  situation  where  they  have  to  master  two  sets  of
procedures.

12

Not only are different programmes managed according to two different systems, often the same
activities are funded by two different sources. Humanitarian aid to the ACP region provided by
the  Humanitarian  Aid  office  (ECHO)  is  funded  first  by  the  budget  and  –  where  such  support
cannot  be  financed  from  the  EU  budget  -  ECHO  can  appeal  for  EDF  funds  in  line  with  the
provisions of the Cotonou Agreement. The EC contribution to the Global Fund to Fight AIDS,
TB and Malaria is currently funded from both the EDF and the budget. Other examples could be
added. All these cases imply duplication  in financing  decisions,  legal  commitments,  payments,
etc.  With  all  ACP  aid  under  the  budget  it  will  clearly  be  possible  to  devise  a  more  efficient
response system to humanitarian crises and global challenges affecting both ACP and non-ACP
developing countries.

EDF  financial  protocols  need  to  be  ratified  (with  delays  of  up  to  three  years)  and  this  has,  in
certain  cases,  exacerbated  the  systemic,  irregular  trends  in  the  ensuing  commitments  and
payments.  By  removing  the  need  for  ad-hoc  negotiations  on  the  financing  of  the  EDF  and  by
moving to annual appropriations, budgetisation of the EDF would provide for a more regular and
continuous pattern of implementation and consequently for smoother capacity utilisation in the
delegations.

4. 

CONCERNS RAISED IN CONNECTION WITH BUDGETISATION

4.1.  Maintaining the quality of the partnership with ACP countries

EU-ACP relations  have  developed  over  the  past  45  years  into  an  "acquis"  with  ownership  and
partnership  as  important  cornerstones.  Will  this  "acquis"  be  preserved  in  the  case  of
budgetisation or is the Fund a necessary element of this "acquis"?

The answer to this is clear: the Fund is a historical, not a substantive element in the privileged
relations between the ACP and the EU. The agreement signed in Cotonou is an expression of this
partnership. It was designed to  give, after 40  years of  co-operation, a new impulse to common
EU-ACP  relations.  It  was  not  easy  to  define  a  new  structure  for  a  genuine  partnership  which
aims to tackle the essential challenges of poverty reduction, conflicts, threats to the environment,
as  well  as  the  risk  of  economic  and  technological  marginalisation.  The  renewed  partnership  is
innovative  at  different  levels:  the  objectives,  the  nature  of  the  partnership  and  the  means  of
attaining the objectives. It will continue to govern ACP-EU relations to the same extent as in the
past.

But the instruments of co-operation need renewing: the Cotonou Agreement introduced several
new  ideas  for  improving  effectiveness  and  efficiency  of  the  financial  mechanisms,  such  as
enhanced  review  mechanisms,  including  the  mid-term  review.  Although  further  improvements
could be obtained in a 'fund' system, budgetisation can make a further profound difference whilst
at  the  same  time  preserving  the  quality  of  the  relationship.  Commitments  to  individual  ACP
countries  will  continue  to  be  made  on  the  basis  of  programmes  prepared  and  approved  with
them. In every country, the Government will continue to be closely associated with multi-annual
indicative  programming,  the  preparation  of  annual  action  plans,  and  programme  and  project
definition, preparation and implementation issues. The ownership of our partners in co-operation
is taken for granted by the Community, and the challenge will remain as it has always been for
ACP  countries:  to  exploit  to  the  best  of  their  development  needs  the  opportunities  offered  to
them through EU support and the strong partnership that has been built over the years, which can
be seen as a reference for all EU co-operation programmes.

13

As regards financial management, the general rules applicable for external  actions will equally
apply. These provisions include the decentralised management mode under which the authorities
of the partner countries can be entrusted with a number of financial management competencies
provided a number of criteria relating to the quality of the government financial systems are met.

4.2.  Maintaining the aid commitment to ACP countries

Will budgetisation challenge the financial commitment of the EU towards the ACP? How would
the overall financial volume be guaranteed and will there be a predictable commitment to ACP
countries?

An  analysis  of  the  history  of  the  EDF  has  illustrated  that  the  actual  delivery  of  aid  to  ACP
countries  has  been  consistently  below  commitments,  thus  leading  to  an  accumulation  of
significant  unspent  balances.  The  guarantees  provided  by  the  Fund  have  largely  remained
promises. The Member States themselves have recognised this and have made provisions in the
Financial Protocol allowing them to set a time limit on new financial commitments against the
9th EDF.

Budgetisation, on the other hand, will mean that EU co-operation with the ACP will be based,
like  all  budgetary  programmes,  on  proper  Community  legal  bases,  that  is  to  say,  regulations
adopted  in  co-decision  by  the  Council  and  Parliament.  Relevant  financial  provisions  will  be
incorporated in these legislative acts, laying down the financial contribution for the programme
for its entire duration. Predictability will remain, with the regulation providing the multi-annual
frame of reference for financial resources and a basis for entering expenditure in the budget each
year.  The  Interinstitutional  Agreement  between  the  European  Parliament,  the  Council  and  the
Commission establishes that the annual budget procedure should comply with the multi-annual
programmed amount unless new, objective, long-term circumstances arise for which explicit and
precise reasons  are  given,  with  account being taken of  the  results obtained  from  implementing
the programme.

As regards the overall multi-annual budget to be entered in the relevant regulation(s) and into the
next  (post-2006)  financial  framework,  the  Commission  intends  to  propose  financing  which  is
commensurate with the international commitments the EU has subscribed to. This means that the
amounts  which  it  intends  to  include  in  the  ‘budgetisation  proposal'  will  aim  as  a  minimum  at
maintaining the total level of support to the region currently provided through the EDF  and be
guided by the general evolution of EU GNI. A consensus will be sought with the ACP partners
whilst at the same time meeting the prerogatives of the EU budget authority.

4.3.  From special “financing keys” to the general “budget key”

Budgetisation will lead to an increase in the use of own  resources.  However, this is purely the
effect  of  channelling  the  respective  amounts  for  co-operation  with  ACP  countries  through  a
different  system.  Budgetisation  as  such  has  no  effect  on  the  global  amount  to  be  paid  by  the
Member States.

Does budgetisation imply a risk of reaching the own resources ceiling?

During  2000-2002,  disbursements  under  EDF  represented  on  average  0.021%  of  EU-GNI.
Furthermore,  an  EDF  disbursement  capacity  in  line  with  its  commitments  capacity  for  the  9th
EDF would have represented on average around 0.031% of GNI in that same period. This level
of improved disbursement should as a minimum be targeted after budgetisation.

14

These amounts should be seen against the own resources ceiling. That ceiling is currently set at
1.24% of GNI,  while  the  level  foreseen by the PDB 2004 is  at  0.99%  of  GNI  for  EU-25.  The
question  of  whether  or  not  to  modify  the  existing  own  resources  ceiling  as  a  consequence  of
budgetisation  is  to  be handled in  a  different  forum,  namely  the  post-2006  financial  framework
discussions.

The  financing  keys  negotiated  by  the  Member  States  for  their  contributions  to  the  EDF  differ
from the budget keys, be it the marginal budget key (the GNI key) or the average key (all own
resources  combined).  Therefore,  the  general  temptation  is  to  conclude  that  budgetisation  will
lead to a certain redistribution of the financial contribution between the Member States and, over
and  above  that,  try  and  calculate  this  redistribution  in  terms  of  winners  and  losers.  This  is,
however, a static and therefore wrong approach. Budgetisation will not change the contributions
to the ongoing funds: existing agreements will have to be served along the terms agreed. And, as
regards the keys for future contributions, it is impossible to predict what the outcome would be
of any future  negotiation  with  at  least  25  participants.  Nor  can  it  be  taken  for  granted  that  the
system of financing the EU budget will remain unchanged.

In  this  context,  it  is  worth  noting  that  the  differences  between  the  Member  States'  EDF
contributions and their relative wealth (as reflected by the GDP/GNI keys - see Annex 1 – Table
4) grew between the 6th and the 9th EDFs.

5. 

AN AMBITIOUS BUT FEASIBLE AGENDA

The  coming  eighteen  months  will  see  significant  changes  in  the  European  Union,  which  will
provide  a  rare  opportunity  for  addressing  the  question  of  budgetisation.  The  major  milestones
are:

First, in October 2003 the Intergovernmental Conference on Treaty Reform will start its work on
the basis of the draft Treaty establishing a Constitution for Europe, as adopted by the European
Convention. The Convention has recommended the budgetisation of EU-ACP co-operation and
the  draft  Constitution  proposes  a  legal  framework  ready  to  host  fully  budgetised  EU-ACP  co-
operation9.

Second,  the  financial  framework  for  the  period  after  2006  is  under  preparation.  A  first
communication  from  the  Commission  is  expected  by  the  end  of  2003.  In  the  case  of
budgetisation, the financial framework should include all expenditure necessary for ACP/EU co-
operation after 2006.

Third, the enlargement process is entering its final phase, with 10 new Member States due to join
the  EU  in  2004.  They  will  immediately  accede  to  the  Cotonou  Agreement,  but  they  will  only
participate in its financing after the end of the present financial protocol.

9 

Working  Group  VII  on  External  Action,  Final  report  to  Members  of  the  Convention  (CONV  459/02  of
16.12.2002, point 9. on Development Cooperation Policy): "There was a high degree of support in favour
of the integration of the European Development Fund (EDF) into the overall EU budget and thus making it
subject to the same procedures applicable to other areas of financial assistance. Such integration  must be
accompanied by improvements to the effectiveness and poverty focus of EU development programmes in
general, and should not reduce the volume of aid directed towards ACP countries". The draft Constitution
adopted in July 2003 by the Convention is in line with this recommendation.

15

                                                
The  period  covered  by  the  9th  EDF  comes  to  an  end  in  2007.  The  Commission  therefore
proposes that, instead of seeking to secure a 10th EDF separately funded by 25 or more Member
States,  the  2007/2008  budgets  should  be  the  start  of  budgetised  ACP  financing.  Although  this
seems at first sight remote, it is an ambitious objective as preparatory work in a number of areas
will have to start by this year.

The most significant implications and preparations are:

(1) 

(2) 

In  terms  of  Community  instruments:  (a)  the  inclusion  of  full  ACP  co-operation  in  the
next financial framework for the period after 2006: the Commission is to present its first
ideas on this by the end of 2003; (b) the adoption of a multi-annual legal basis for future
ACP/EU co-operation in the form of a joint EP/Council regulation with a prime financial
reference  amount:  a  proposal  should  be  ready  by  2005,  after  consultation  of  the  ACP
States, and a decision should take place by the end of 2006.

In respect of the provisions governing the ACP-EU partnership: changes are to be made
to those technical implementation arrangements in the Cotonou framework which differ
from  the  budget  arrangements.  These  changes  relate  to  provisions  in  the  body  of  the
Cotonou Agreement as well as the annexes, meaning that transitional arrangements will
have  to  be  decided  by  the  Joint  Council  of  Ministers  while  awaiting  ratification  of  the
revised texts. The financial protocol (Annex 1 to the Cotonou Agreement) will no longer
be  needed  as  future  funding  will  be  secured  through  the  financial  provisions  of  a
regulation.  EU  proposals  on  items  to  be  negotiated  will  be  presented  to  the  ACP  by  1
March 2004. The Internal Agreement and the EDF financial regulation will no longer be
needed for future spending, as technical implementation arrangements will be established
in the new legal basis and the provisions of the  general financial texts applicable to the
budget will apply.

(3) 

As  regards  existing  EDFs,  a  transitional  period  will  apply.  During  this  period,  existing
EDFs  (6th  to  9th)  will  continue  to  be  financed  in  accordance  with  the  existing
contribution keys rather than through the general own resources system. The Commission
will nevertheless seek to ensure that the transition period is kept to a strict minimum so
that  the  full  benefits  of  budgetisation  can  materialise  as  soon  as  is  feasible.  The
Commission will present the relevant proposals by the end of 2003.

An indicative “road map” with more detail is given in Annex 2.

6. 

CONCLUSIONS: A POLITICAL AND PRACTICAL OPPORTUNITY FOR CHANGE

There  are  no  substantive  reasons  to  maintain  the  anomaly  of  a  separate  fund  outside  the
framework of the budget. The risks of fully integrating ACP co-operation in the EU budget are
marginal while the  overall  implications are clearly  positive. The  burden  of  proof  should  be  on
those  wanting  to  maintain  the  present  situation  of  exception  rather  than  on  those  advocating
asituation  in  line  with  normality.  The  risks  and  the  costs  of  maintaining  a  separate  fund  are
indeed real.

The main advantages relate to the increased possibility of taking the right decisions at the right
time, within a single and truly European framework.

16

Furthermore, harmonisation of management procedures is expected to bring benefits in terms of
effectiveness and efficiency. Budgetisation would even help to extend the strong points of EU-
ACP co-operation to other parts of the world.

The qualities of the Cotonou Agreement (ownership, partnership, common objectives) as well as
the long-standing intensity  of  relations between the EU and  the  ACP  region  will  not  be  called
into question by budgetisation. The ACP has been a privileged partner of the EU since 1958, and
it will continue to be high on its agenda in the future.

The time is right to opt for budgetisation given the upcoming deadlines: the Intergovernmental
Conference to revise the Treaties, the revision of the Cotonou Agreement and the presentation of
proposals  for  the  post-2006  financial  framework.  The  agenda  is  feasible,  even  though  tight.  A
substantial legislative programme will have to be launched within the coming months. But it is
worth  the  effort:  the  EU/ACP  partnership  with  its  very  special  character  and  its  ambitious
objectives can only be reinforced if it has at its disposal an up-to-date financial tool which offers
better prospects for progress towards the Millennium Development Goals.

The  Commission  therefore  invites  the  Council  and  the  European  Parliament  to  support  the
approach proposed in the present communication for budgetisation of EU – ACP/OCT financial
co-operation from 2007/2008 onwards.

The  first  vital  deadlines  are  very  close.  Therefore,  the  Commission  informs  the  Council  and
Parliament that it has to begin preparations for all proposals for which upcoming deadlines are
close (the most important of them are shown in the road map) with a view to allow budgetisation
to take place.

17

ANNEXES

Annex 1: Key figures

(1) 

EU part in net ODA (official development aid) 1985-2002

Aid disbursements
in million of USD

EU ODA in % of 
total ODA

EC 
in % of EU 
ODA

DAC total

EU

Av. 1985-86
Av. 1990-91
2000
2001
2002

32.296
54.813
53.734
52.336
56.991

14.570
29.549
25.273
26.290
29.093

EC

1.704
3.343
4.912
5.961
6.502

MS

12.866
26.226
20.361
20.329
22.591

EU

45,1
53,9
47,0
50,2
51,0

EC

5,3
 6,1
  9,1
11,4
11,4

MS

39,8
47,8
37,9
38,8
39,6

11,8
11,3
19,4
22,7
22,3

ODA in %
of GNI

EU ODA in %
of GNI

DAC 
total
0,33
0,31
0,22
0,22
0,23

EU

0,45
0,42
0,32
0,33
0,34

EC

MS

0,053
0,048
0,062
0,075
0,076

0,397
0,372
0,258
0,255
0,264

Source: International Development Statistics OECD-DAC

Note: EU figures  refer to Member  States  contributions,  incorporating their share of
EDF,  EIB  and  EU  budget.  EC  figures  include  EDF,  EIB  and  EU  budget.  ODA
includes  loans  under  certain  conditions;  as  a  consequence,  a  number  of  EIB  loans
qualify  for  ODA  and  are  included  in  the  EC  total  as  well  as  a  number  of  bilateral
loans which are included in the Member States total.

(2) 

Aid to ACP countries from budget and from EDF compared to total external aid

in millions €

Budget expenditure

Total H4
budget

for ACP
+ OCT

for
others

EDF 
expenditure 
ACP + OCT

Total
ACP-OCT 
expenditure

Total Budget 
+ EDF 
expenditure

Composition of Aid
to ACP-OCT in %

from
budget

from
EDF

Part of
ACP-aid
in total aid

(1)=(2)+(3)

(2)

(3)

(4)

(5)=(2)+(4)

(6)=(1)+(4)

(7)=(2)/(5)

(8)=(4)/(5)

(9)=(5)/(6)

Commitments
2001
2002
Payments
2001
2002

4.859
5.086

4.231
4.424

699
710

720
650

4.160
4.376

3.511
3.774

1.921
2.144

2.124
1.902

2.620
2.854

2.844
2.542

6.780
7.230

6.355
6.326

26,7
24,9

25,3
25,6

73,3
75,1

74,7
74,8

38,6
39,5

44,8
40,2

Source: Commission – DG BUDG + EuropeAid

Note: figures in this table exclude pre-accession aid

18

(3) 

EDF Commitments – payments 1989-2002

5.000.000

4.000.000

3.000.000

2.000.000

€
0
0
0

1.000.000

0

Decisions

of w hich HIPC

Payments

of w hich HIPC

Notes:

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

1.505.310

953.250

1.432.600

2.236.450

1.843.040

2.688.670

1.874.270

1.538.110

784.350

2.606.340

2.958.050

4.006.880

1.920.566

2.114.498

1.028.970

0

60.000

1.297.020

1.256.630

1.191.300

1.984.090

1.443.240

1.859.930

1.785.070

1.508.780

1.382.260

1.595.440

1.352.290

1.640.390

2.124.489

1.902.494

356.440

350.000

180.000

 Start of 7th EDF

 Start of 8th EDF

(cid:1)  Commitments: exclude decommitments

(cid:1)  Payments: before recoveries

(cid:1)  HIPC : Heavily Indebted Poor Countries (HIPC) Initiative

Potential capacity (in millions €)
Initial allocations 
6th EDF 1985-1990 =   7.500
7th EDF 1990-1995 = 10.940
8th EDF 1995-2000 = 12.840
9th EDF 2000-2005 = 13.800

2.188

2.568

2.760

Average / year
1.500

Effective realisations (in millions €)
Average / year

Commitments Payments

1989-1999

2000-2002

1.856

2.681

1.512

1.889

Source: 
COM(2003) 353 final – 13.6.2003 and COM(2002) 372 final – 9.7.2002

Information  on 

the  European  Development  Funds',

'Financial 

19

 
(4) 

Financing keys applied to 6th till 9th EDF (initial allocations) and GDP/GNI keys

Member States

6th 
EDF

6th EDF 
key

GDP weight 
in 1985

7th EDF 
key

8th 
EDF

8th EDF 
key

9th 
EDF

9th EDF 
key

M€

%

297
156

3,96
2,08

1.768
1.954
93
41
944
14
423
66
500

23,58
26,06
1,24
0,55
12,58
0,19
5,64
0,88
6,66

%

3,30
2,40

21,10
25,20
1,60
0,80
14,40
0,20
5,30
1,00
6,80

Austria
Belgium
Denmark
Finland
France
Germany
Greece
Ireland
Italia
Luxembourg
Netherlands (The)
Portugal
Spain
Sweden
United Kingdom
TOTAL

7th 
EDF

M€

433
227

2.666
2.840
134
60
1.418
21
609
96
645

%

3,96
2,08

24,37
25,96
1,22
0,55
12,96
0,19
5,57
0,88
5,90

M€

%
2,65
3,92
2,14
1,48
24,30
23,36
1,25
0,62
12,54
0,29
5,22
0,97
5,84
2,73
12,69
12.840 100,00

340
503
275
190
3.120
3.000
160
80
1.610
37
670
125
750
350
1.630

M€

%
2,65
3,92
2,14
1,48
24,30
23,36
1,25
0,62
12,54
0,29
5,22
0,97
5,84
2,73
12,69
13.800 100,00

366
541
295
204
3.353
3.224
173
86
1.731
40
720
134
806
377
1.751

GNI key 
general 
budget 2003
%
2,31
2,95
2,01
1,50
16,39
22,75
1,58
1,19
13,83
0,23
4,96
1,36
7,46
2,69
18,78
100,00

1.243
16,58
7.500 100,00

18,10
100,00

1.791

16,37

10.940 100,00

Note: The 1985 GDP weights are those which were known at that moment and which differ from
the weights currently published on 1985. The difference follows from a substantial upward revision
of GDP in a large Member state.

20

Annex 2: Road map: Deadlines for essential legislative steps

To give effect to budgetising the EDF a number of legislative measures have to be taken as well
as a number of decisions of political and of financial nature. The present roadmap identifies the
main of these measures and decisions as well as the deadlines by which they are bound.

October 2003

Adoption by Commission of present Communication.

Followed by discussion with Council and European Parliament.

December 2003

Communication on broad guidelines for the post-2006 financial framework.

Should provide for the financial implications of budgetising the EDF under
what is now called ‘Heading 4’ –external actions, on basis of the October
Communication.

December 2003

Presentation  by  Commission  to  Council/Member  States  of  items  to  be
amended in the Cotonou Agreement.

The budgetisation model pursued will require that provisions of Community
law replace some provisions of the Cotonou legal framework. The financial
protocol,  the  Internal  agreement,  the  EDF  financial  regulation  and  some
technical  elements  in  Cotonou  relating  to  implementation  will  either
become  redundant  or  will  require  amendment.  The  community  Own
Resource system will become applicable as well. Transition period foreseen
for existing EDFs.

February 2004

Presentation  to  ACP  of  EU  proposals  for  possible  amendments  to  the
Cotonou Agreement

ACP  only  to  decide  on  changes  in  Cotonou  (Internal  Agreement  &  EDF
financial regulations: decision by Member States).

May 2004- Feb. 2005

EU-ACP negotiations on amendments to the Cotonou Agreement

Decision  by  the  ACP-EU  Council  of  Ministers  on  transitional  measures
pending ratification.

May 2004 - Feb. 2005

Preparation  of  amendments  to  the  EDF  financial  regulation  and  internal
Agreement

Decision  by  EU-Council  on  revised  EDF  financial  regulation  and  Internal
Agreement

Eventual revision  necessary in light of changes to the Cotonou  Agreement
and for transition period 2008-2011 (depending on the decision taken with
regard  to  the  rules  to  apply  for  implementation  of  existing  EDFs  after
2007).

21

September 2005

Commission  proposal  for  EP-Council  regulation(s)  establishing  a  co-
operation programme with the ACP and OCTs.

Future  ACP/OCT  programmes  financed  out  of  the  budget  require  a  basic
EP/Council regulation (Internal Agreement  & EDF financial regulation  &
technical provisions of Cotonou concerning implementation  will no longer
be needed after budgetisation).

May 2006

Commission adopts preliminary draft budget for 2007.

Includes ACP budget structure.

December 2006

Adoption  of  basic  regulation(s)  for  ACP/OCT  co-operation  by  EP  and
Council.

Includes operations with South Africa and East Timor.

December 2006

Ratification  where  necessary  by  the  EU  and  ACP  of  changes  to  the  legal
bases.

January 2007/2008

Financial operations of a budgetised “EDF” can begin

2008-2011

Transition period for existing EDFs

Commitments  on  EDFs  no  longer  possible.  Payments  under  EDFs  to  be
continued.

22