Communication from the Commission to the Council, the European Parliament and the European Economic and Social Committee - Governance and development
Date: 2003-10-20
Institutions: European Commission
Subjects: EU policy, case study, cooperation policy, developing countries, development aid, economic and social cohesion, governance, human rights, institutional reform, sustainable development

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 20.10.2003
COM(2003) 615 final

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL, THE
EUROPEAN PARLIAMENT AND THE EUROPEAN ECONOMIC AND SOCIAL
COMMITTEE

GOVERNANCE AND DEVELOPMENT

TABLE OF CONTENTS

1.

2.

2.1.

2.2.

2.3.

2.4.

2.5.

2.6.

2.7.

2.8.

2.9.

Introduction .................................................................................................................. 3

Dialogue on governance: main issues and basic principles ......................................... 5

Poverty reduction ......................................................................................................... 5

Ownership by partner countries ................................................................................... 6

Policy dialogue............................................................................................................. 7

Security......................................................................................................................... 7

Human rights and good governance clauses: consultation procedures ........................ 8

Corruption .................................................................................................................. 10

Migration.................................................................................................................... 12

Sector-wide approaches and mainstreaming .............................................................. 12

Budget support ........................................................................................................... 13

2.10.

Trade........................................................................................................................... 14

2.11.

The business sector..................................................................................................... 15

3.

4.

4.1.

4.2.

4.3.

4.4.

5.

Current country owned practices and approaches...................................................... 16

Towards a more dynamic and proactive approach..................................................... 17

A Policy Agenda for Governance .............................................................................. 17

Difficult partnerships.................................................................................................. 20

Post-Conflict Situations.............................................................................................. 24

Effective partnerships................................................................................................. 27

Conclusion.................................................................................................................. 31

2

1. 

(1) 

(2) 

INTRODUCTION

The  structures  and  the  quality  of  governance  are  critical  determinants  of  social
cohesion  or  social conflict,  the  success  or  failure  of  economic  development,  the
preservation or deterioration of the natural environment as well as the respect or
violation  of human  rights and  fundamental freedoms. These  linkages  are  widely
recognised  throughout  the  international  community  and  show  how  governance
matters for development.

The  UN  Millennium  Declaration  states  that  creating  an  environment  that  is
conducive  to  development  and  to  the  elimination  of  poverty  depends,  inter  alia,
on good governance within each country, on good governance at the international
level  and  on  transparency in  the  financial,  monetary  and trading systems.  In the
Monterrey Consensus Heads of States agreed that good governance at all levels is
essential  for  sustainable  development,  for  sustained  economic  growth  and  for
poverty  eradication.  Governance,  democratisation  and  development  are  equally
linked  in  the  EU  general  objectives  as  defined  in  the  Treaties,  in  the
Commission’s “White paper on Governance”1 as well as in the May 2002 Council
conclusions. In addition, a number of Communications and policy papers that are
relevant from a  governance perspective have been produced by the Commission
during the last years2.

(3) 

Governance  is  a  key  component  of  policies  and  reforms  for  poverty  reduction,
democratisation  and  global  security.  This  is  why  institutional  capacity-building,
particularly in the area of good governance and the rule of law is one of the six
priority areas for EC development policy that is being addressed in the framework
of EC programmes in developing countries.

(4)  While there is no internationally agreed definition of governance, the concept has
gained  importance  and  over  the  last  ten  years  all  development  partners  have
expanded  their  work  in  that  field.  Also  the  Community  has  financed,  in  a
pragmatic  way,  a  number  of  programmes  in  this  broad  area  of  activity  over  the
last  years.  Governance  concerns  the  state’s  ability  to  serve  the  citizens.  Such  a
broad approach allows conceptually to disaggregate governance and other topics
such  as  human  rights,  democracy  or  corruption.  Governance  refers  to  the  rules,
processes,  and  behaviour  by  which  interests  are  articulated,  resources  are
managed, and power is exercised in society. The way public functions are carried
out, public resources are managed and public regulatory powers are exercised is
the major issue to be addressed in that context. The real value of the concept of
governance  is  that  it  provides  a  terminology  that  is  more  pragmatic  than
democracy,  human  rights,  etc.  In  spite  of  its  open  and  broad  character,
governance  is  a  meaningful  and  practical  concept  relating  to  the  very  basic
aspects of the functioning of any society  and political and social systems.  It can

1

2

COM (2001) 428 final; 25.07.2001; Report from the Commission on European Governance, COM
(2002) 705), 11.12.2002
For  example,  Communication  on  EU  Proximity  Policies  vis-à-vis  its  Neighbouring  Countries
(“Wider  Europe”  (COM  (2003)104  final  of  11  March  2003)  and  Communication  on  Human
Rights in the Mediterranean Region (COM (2003)294 final of 21 May 2003)

3

                                                
(5) 

(6) 

be described as a basic measure of stability and performance of a society. As the
concepts of human  rights, democratisation and democracy, the rule  of  law,  civil
society,  decentralised  power  sharing,  and  sound  public  administration  gain
importance and relevance as a society develops into a more sophisticated political
system, governance evolves into good governance. Today governance is generally
used as a basic measure of quality and performance of any political/administrative
system.

Art  9.3  of  the  Cotonou  Partnership  Agreement  provides  an  interesting  approach
jointly  agreed  between  the  ACP  signatory  states  and  the  EU.  “In  a  context  of  a
political  and  institutional  environment  that  upholds  human  rights,  democratic
principles and the rule of law, good governance is the transparent and accountable
management of human, natural, economic and financial resources for the purpose
of  equitable  and  sustainable  development.  It  entails  clear  decision-making
procedures  at  the  level  of  public  authorities,  transparent  and  accountable
institutions,  the  primacy  of  the  rule  of  law  in  the  management  of  resources  and
capacity building for elaborating and implementing measures aiming in particular
to preventing and combating corruption”.

Good  governance  is  first  and  foremost  a  domestic  issue.  Inadequate  domestic
policies in many countries, not only in developing countries, have played a major
part notably in widening the gap between the poor and the rich, both within and
between  countries  and  regions.  Thus,  good  governance  at  all  levels  of  the
international  system  -  national,  regional,  multilateral  levels  –  is  crucial  to  a
legitimate,  effective  and  coherent  global  governance  system.  The  global
governance  deficit  has  been  addressed  continuously  in  recent  years  through
various initiatives and dialogue at the multilateral level, driven in particular by the
United  Nations,  i.a.,  by  the  Commission  on  Global  Governance,  and  more
recently,  by  the  Financing  for  Development  Conference  in  Monterrey  and  the
WSSD  Summit  in  Johannesburg.  The  EU  has  actively  participated  in  this
dialogue. Global governance issues are also subject for dialogue between the EC
and  some  important  third  partner  countries,  such  as  China,  Russia,  India  and
Brazil.  From  a  EU  perspective,  good  governance  also  involves  the  need  to
continue  improving  policy  coherence  in  all  relevant  areas,  such  as  for  example,
environment, trade or agriculture.

(7) 

Good  governance  is  key  to  the  effectiveness  of  development  assistance,  and
towards the achievement of objectives towards which we should strive. However,
achieving  good  governance is a  process. Therefore, as long as  good  governance
has  not  been  achieved,  pragmatic  approaches  must  be  pursued  to  support
progress.  Indicators  should  not  in  this  context  be  considered  as  a  simple  list  of
issues  to  be  included  in  a  scoreboard  aimed  at  setting  up  a  purely  governance
based  selectivity,  but  rather  as  a  tool  to  mainstreaming  governance  in  all  EC-
financed interventions and strategies.

(8) 

This Communication focuses on capacity building and dialogue on governance in
different types of situations. Cases of effective partnerships will be considered, as
well as difficult ones and post-conflict situations.

4

(9) 

On  the  basis  of  lessons  learned  from  EC  and  other  donors’  approaches  to
governance,  of  partner  countries’  views  and  their  own  experiences,  this
Communication aims at identifying practical ways.

–  to build capacity for governance and increase partner countries’ ownership of

the formulation of the relevant reform programs;

–  to ensure synergies and coherence between the different EC and EU policies

and instruments;

–  to reinforce the partnerships for development on a country or regional basis,
in  order  to  achieve  co-ordination  between  donors’  priorities  and  partner
countries’  agendas  through  the  policy  dialogue  as  well  as  complementarity
between donors

–  to  contribute  to  the  protection  of  human  rights  and  to  the  spreading  of

democracy, good governance and the rule of law

By  doing  this,  the  Communication  will  guide  the  EU  approach  in  the  area  of
governance and development, identify  the type  of measures to be supported  in
different situations and contribute to the international debate on these issues. A
handbook will help translate this policy approach into practice.

2. 

DIALOGUE ON GOVERNANCE: MAIN ISSUES AND BASIC PRINCIPLES

2.1. 

Poverty reduction

(10)  Governance has become an essential ingredient of development co-operation and

is now an integral part of the Poverty Reduction Strategy processes.

(11) 

It is both a question of effective mobilisation, representation and empowerment of
the  civil  society,  particularly  the  poor,  and  a  question  of  effective  capacity  of
public institutions and administrations to define and deliver the required policies.
In  many  developing  countries,  poverty  reduction  depends  largely  on  whether  or
not public institutions can perform the  following  functions,  efficiently  and  in an
accountable manner:

–  enable  poor  people  to  raise  their  standard  of  living  and  to  strengthen  their

capacity to increase incomes and assets,

–  ensure their access to public services,

–  guarantee  people’s security and  access  to  means of  redress,  and  protect  and

promote their rights.

(12)  Marginalisation is an aspect of poverty in itself and empowerment is instrumental
in reducing poverty.  Major issues to be addressed  include promoting power and
influence  of  poor  people  in  society  through  an  enabling  political  process,
promoting participation for women and men through focusing on the institutional
rules,  norms  and  practices  from  which  rights  and  privileges  derive,  specifically
addressing  the  gender  biases  that  they  may  embody.  Operationalising  inclusive

5

approaches  and  promoting  social  inclusion  should  be  part  of  any  pro-poor
governance  agenda  in  order  to  give  voice  to  and  reflect  the  perspectives  of  the
minorities, the excluded groups and the poorest in the policy making process.

(13)  Participatory approaches will also ensure enhanced intergenerational equity based
on sustainable development, where environment is a key component together with
the  social  and  the  economic  pillars.  Non-state  actors  and  civil  society
organisations’  participation  in  all  the  stages  of  the  development  process  and
involvement in policy debates at country level will contribute to bring these issues
to the discussions3.  This  is  also  relevant  on  social  policy  related  matters.  Social
policy  is  a  productive  factor  and  contributes  to  sustainable  development.  Social
dialogue and the involvement the organisations of employers and workers in the
design and implementation of social and employment policy and the functioning
of the labour market institutions can be a driving force behind successful reforms
having an effective impact on the day to day life of  citizens.  A  key  factor  to  an
effective  implementation  of  such  an  agenda  is  a  proper  education  effort  in  the
context of the emerging knowledge based economy, including access to ICT so as
to  reduce  and  avoid  the  digital  divide.  In  this  context,  a  dedicated  and  specific
international  scientific  and  technological  co-operation  effort  can  help  achieve
such  an  objective.  The  6th  EU  Framework  Programme  for  Research  and
Technological Development provides for such a scheme.

2.2. 

Ownership by partner countries

(14) 

In-country  dialogue  on  governance  is  essential  to  build  country-driven  reform
programmes in a context of legitimacy and accountability.

(15)  Not only Parliaments and institutions other than the central government, but other
in-country  stakeholders  (representatives  of  political,  social  and  economic
interests,  as  well  as  municipal  and  other  decentralised  authorities)  play  an
important role in this dialogue. Each of these actors has the potential  to provide
valuable input and contribute to country-led comprehensive  assessments on  pro-
poor governance reform programmes with clearly identified needs, priorities and
objectives.

(16) 

(economic 

Involvement  of  supranational  or  regional  bodies  as  well  as  assessments  at
regional level can help  in all the areas  for which there is  a  clear  regional  added
value 
security),  or  when
transboundary  issues  are  concerned,  which  is  often  the  case  for  environment-
related  matters  in  particular  for  the  joint  management  of  transboundary  natural
resources.

integration,  conflict  prevention, 

3

Communication  on  NSA  participation  in  EC  development  policy  (COM  (2002)  598  final  of  7
November 2002)

6

                                                
2.3. 

Policy dialogue

(17)  Policy dialogue should consist of regular ongoing contacts between partners also
addressing all governance-related issues of common and mutual interest.

(18)  There  is  a  tendency  to  focus  on  dialogue  with  countries  when  there  is  a
crisis/problem,  on  an  ad  hoc  basis,  or  in  response  to  specific  events.  This  may
give  a  negative  connotation  to  the  political  dialogue  from  partner  countries’
perspective.  More  regular  policy  dialogue  should  allow  the  establishment  of
shared  agendas  and  lead  to  the  joint  definition  of  priority  areas  of  co-operation
including  on  governance-related  matters,  on  the  basis  of  each  partner  country’s
needs in a flexible way.

(19) 

(20) 

If  properly  linked  to  EU  co-operation  programmes  and  priorities,  the  policy
dialogue  can  contribute  to  promoting  a  stable  and  democratic  political
environment, to peace building processes, and to security. It should include ways
and  means  to  build  these  objectives  into  EU  assistance  programmes  and  to
encourage partner country governments to pursue these objectives as an integral
part  of  their  overall  development  strategy.  The  policy  dialogue  combined  with
appropriate  assistance  is  being  used  by  the  EU  in  a  number  of  difficult
partnerships.

Indicators  are  important  tools  for  monitoring  and  evaluation  as  well  as  to
improving  the  quality  of  programmes  and  interventions.  Governance  indicators
are  only  relevant  if  they  are  elaborated  and  assessed  in  a  participatory  manner,
with  the  effective  involvement  of  relevant  stakeholders,  through  a  transparent
process  driven  by  the  partner  country.  They  should  cover  all  aspects  of
governance  and  not  be  limited  to  those  fields  directly  linked  to  a  given  reform
programme.  They  should  illustrate  policy  design,  service  delivery  outcomes,
transparency in public finance management, gender equity, respect and promotion
of human rights, democratic principles and rule of law. Each indicator must at the
same  time  be  specific  enough  to  suggest  an  appropriate  institutional  solution.
Indicators  that  simply  point  out  a  problem  in  a  sector  that  may  involve  many
institutions and policies at the same time, without suggesting any solution are less
useful.

(21)  However  developing  appropriate  processes 

identify  and  agree  upon
governance-related indicators remains a challenge. Considerable joint donor work
on governance indicators is currently underway via the OECD/DAC’s network on
governance  (GOVNET),  where  all  major  donors  are  represented.  The  EC
participates  in  the  GOVNET  and  is  co-financing  an  OECD-led  project  on
governance indicators.

to 

2.4. 

Security

(22)  Security is directly linked to development: there is no development in chronically
insecure environments. Conversely governance failures with roots in poverty, are
a  key  contributing  factor  to  outbreaks  of  violent  conflict.  Security  is  key  to
regional  stability,  poverty  reduction  and  conflict  prevention.  One  of  the  main
citizens’  expectations  is  that  the  State  is  able  to  guarantee  their  security  of  life,
property, political, economic and social rights.

7

(23)  The concept of security is increasingly understood not just in terms of security of
the state, but also embraces the broad  notion of human security,  which  involves
the ability to live in freedom, peace and safety. Security must be seen both as  a
national interest and as part of the individual rights. Security systems reform is an
integral component of good governance. Effective management, transparency and
accountability of the security system are necessary conditions for the creation of a
security environment that upholds democratic principles and human rights. Hence
working  towards  good  governance  and  sustainable  peace  requires  a  successful
in  post-conflict
process  of  reform  of 
environments.

the  security  system,  particularly 

(24)  The  "security  system"  is  defined  by  OECD  as  encompassing:  a)  the  state
institutions which have a formal mandate to ensure the safety of the State and its
citizens  against  acts  of  violence  and  coercion  (e.g. the  armed  forces,  the  police,
paramilitary  forces,  the  intelligence  services  and  similar  bodies);  and  b)  the
elected  and/or  duly  appointed  civil  authorities  responsible  for  control  and
oversight  of  these  institutions  (e.g.  the  Parliament,  the  Executive,  defence
ministries, and judicial and penal systems). Reform of core security actors such as
the military, paramilitary, police as well as its civilian oversight structures, are of
fundamental  importance  to  create  safe  security  environments  and  to  keep  the
security sector permanently subject to the same governance norms as other parts
of  the  public  sector  and  military  forces  under  the  political  control  of  a  civilian
authority. These institutions are part of a broader security picture and dependent
on  the  existence  of  effective  justice  and  law  enforcement  institutions.  Security
system  reform  must  thus  be  linked  to  efforts  undertaken  to  strengthen  national
and  local  rule  of  law.  Interventions  in  the  following  categories  can  have  an
influence  on  the  Security  system  reform:  Armed  forces  and  intelligence;  Justice
and  internal  security  apparatus;  Non-state  security  forces;  Civil  oversight
mechanisms;  Civil  management  bodies;  Civilian  capacity  building;  Regional
initiatives; Initiatives to demilitarise society

(25)  Global security and international terrorism have also an impact on development.
In addition to providing support to partner countries in the context of the UNSC
Resolution  1373,  development  assistance  can  contribute  to  fighting  against  the
international terrorism by focusing on poverty reduction and reducing inequality.

2.5. 

Human rights and good governance clauses: consultation procedures

(26)  Since  the  early  1990s,  a  human  rights  "essential  element"  clause  has  been
systematically  included  in  EC  agreements  with  third  countries,  including  trade
and co-operation accords and association agreements. Such clauses stipulate that
respect  for  fundamental  human  rights  and  democratic  principles  underpins  the
internal and external policies of the parties and constitutes an "essential element"
of the agreement. In the event of a breach, a range of measures can be considered,
with  the  provision  that  their  application  should  respect  the  principle  of
proportionality  between  the  breach  and  the  degree  of  reaction.  These  measures
include:  alteration  of  the  contents  of  co-operation  programmes  or  the  channels
used;  reduction  of  cultural,  scientific  and  technical  co-operation  programmes;
postponement  of  a  Joint  Committee  meeting;  suspension  of  high-level  bilateral
contacts; postponement of new projects; refusal to follow up partner’s initiatives;
trade  embargoes;  suspension  of  arms  sales,  suspension  of  military  co-operation

8

(27) 

and suspension of co-operation. The inclusion of essential elements’ clauses is not
intended  to  signify  a negative  or  punitive  approach.  They  are  meant  to  promote
dialogue and positive measures, such as joint support for democracy and human
rights,  the  accession,  ratification  and  implementation  of  international  human
rights  instruments  where  this  is  lacking,  as  well  as  the  prevention  of  crises
through the establishment of a consistent and long-term relationship.

In the case of the Cotonou Partnership Agreement4, 77 ACP countries and the EU
agreed to set up consultation procedures linked to the respect for the key elements
of  the  Partnership.  Article  9  of  Cotonou  states  that  respect  for  human  rights,
democratic  principles  and  the  rule  of  law  constitute  its  essential  elements,  and
good  governance,  its  fundamental  element.  Article  96  foresees  that  in  cases  of
violation of one of those essential elements one party can invite the other party to
hold consultations (a similar procedure  had been introduced  for  the  first  time in
1995,  through  article  366a  of  the  revised  Lome  IV  Convention).  Consultations
under article 96 aim at examining the situation with a view to finding a solution
acceptable to both parties. If no solution is found, or in emergency cases, or if one
party refuses the consultations, appropriate measures can be taken. Suspension of
co-operation  is  in  this  context  a  measure  of  last  resort.  Appropriate  measures,
which should be proportional to the violation of an essential element, are intended
to give a clear signal to the government regarding the respect of art. 9.

(28)  Prior to the introduction in 1995 of the consultation procedure, co-operation was
de  facto  fully  or  partially  suspended  for  a  number  of  countries.  Since  1995,
consultations have so far been used in 12 cases, involving 10 ACP countries5 A
recent  example  relates  to  Zimbabwe  where  consultations  were  undertaken
pursuant  to  Article  96  of  the  ACP-EC  agreement,  following  which  targeted
sanctions  were  applied,  including  freezing  of  funds  and  assets  of  individual
members of the Government, a ban on their travel/transit, and a ban on exports of
equipment for repression and training related to military activities.6

(29)  On  the  basis  of  the  experience,  some  key  elements  for  the  success  of
consultations,  i.e.  to  finding  a  solution  acceptable  by  the  two  parties  and/or
implementing the measures necessary to remedy the situation, can be highlighted.
The basic framework should be formed by: (a) the commitment of the authorities
to  return  to  a  situation  of  normality  is  fundamental,  in  particular  after  a  coup
d’état, and (b) the coherence of EU position and co-ordination between donors. In
order to ensure a proper monitoring of the process, the concrete violations of the
essential elements must be identified, the sectors in which corrective measures are
required from the authorities must be defined and a close political dialogue is to
be kept during and after the formal meeting of consultations. Finally, the adoption
of  positive  measures  such  as  the  strong  and  active  EU  involvement  in  the
crises/conflict resolution is necessary.

4

5

6

OJCE L 317, 15.12.2000
Niger,  Guinea  Bissau,  Togo,  Haiti,  Comoros,  Ivory  Coast,  Fiji,  Liberia,  Zimbabwe  and  Central
Africa Republic
Council Common Position and Council Regulation 310/2002 of 18th February 2002

9

                                                
(30)  The Commission is exploring ways in which to use the human rights’ clause more
effectively. The idea of using it to establish dedicated working groups on human
rights with third countries is being piloted.  In 2003 a Sub-group on Governance
and  Human  Rights  was  established  for  the  first  time  under  the  Co-operation
agreement  with  Bangladesh.  The  group  provides  an  opportunity  for  in-depth
exchanges on human rights’ issues between EU and Bangladeshi officials. Its first
meeting  took  place  on  19  May  2003  in  Dhaka  and  addressed  a  wide  range  of
issues,  including  the  death  penalty,  the  judicial  system,  support  to  electoral
processes  and  the  creation  of  a  Human  Rights’  Commission.  The  possibility  of
providing  further  support  for  human  rights’  projects  was  also  explored.  In
addition, the Communication on “Reinvigorating EU actions on human rights and
democratisation with Mediterranean partners”7 also draws on the clause in order
to pioneer a more developed approach to human rights and democratisation in the
region.  The  Communication  identifies  ten  areas  for  improvement  including  the
development  of  National  and  Regional  Action  Plans  on  Human  Rights,  a  more
operational  focus  on  human  rights  in  political  dialogue  and  greater  attention  to
human  rights  and  democratisation  issues  in  CSPs  and  National  Indicative
Programmes.

2.6. 

Corruption

(31)  The  fight  against  corruption  is  increasingly  part  of  the  international  and  EU
agenda for poverty reduction. In the Global Programme against Corruption run by
the UN, corruption is defined as the abuse of power for private gain and includes
the  entire  public  and  private  sector  (“corruption  is  every  transaction  between
actors  from  the  private  and  public  sectors  through  which  collective  utilities  are
the
illegally 
government’s credibility and the legitimacy of democracy.  It is very often  a  tax
on  the  poor.  Because  the  formal  processes  are  violated  or  by-passed,  good
governance is undermined. Corruption during general or local elections or within
parliament  reduces  accountability  and  representation,  corruption  within  the
judiciary negates the rule of law, and corruption within the public sector leads to
unfair  distribution  of  social  services.  A  feature  of  good  governance  is  that
institutions and processes all combat corruption and corrupt behaviour.

into  private  gains”).  Corruption  undermines 

transformed 

(32) 

International  experience  from  development  co-operation  directed  specifically  at
corruption  prevention  has  shown  that  to  make  an  impact,  combating  corruption
ought  to  be  done  within  the  framework  of  broader  support  to  strengthen  good
governance  and  democratisation  processes.  Civil  society,  the  mass  media,  the
office of the public prosecutor and the judiciary, the financial administration (its
processes such as auditing and control) should all be strengthened, the procedures
for  official  procurement  as  well  as  the  public  service  appointment  processes
should  be  transparent,  and  effective  Parliamentary  accountability  should  be
ensured.

7

Communication on Human Rights in the Mediterranean Region (COM (2003)294 final of 21 May
2003)

10

                                                
(33)  Tolerance  of  corruption  is  not  compatible  with  co-operation  partnerships.  But
corruption is  difficult to measure  and  to assess. This issue  can therefore be  best
addressed  in  the  context  of  the  regular  dialogue  between  partners  in  order  to
assess  the  efforts  made  by  the  country  concerned  in  fighting  corruption  by
considering  the  changes  underway,  the  continuity  of  progress  achieved  and  the
quality  and  determination  of  efforts  undertaken  by  the  authorities  to  implement
appropriate  measures  and  reforms.  The  views  expressed  by  civil  society  will
contribute to this process and should explicitly be taken into account at all stages.

(34)  An  important  step  was  taken  in  the  Cotonou  Agreement  in  that  regard,  which
could  constitute  an  example  for  future  agreements  with  other  third  countries  or
regions. The negotiations on the broader concept of good governance resulted in a
two-pronged approach: on the one hand, a commitment to good governance as a
fundamental  and  positive  element  of  the  partnership,  a  subject  for  regular
dialogue  and  an  area  for  active  Community  support;  and  on  the  other  hand,  an
agreement to consider that serious cases of corruption, including bribery  leading
to  such  corruption,  would  constitute  a  violation  of  that  element  calling  for
appropriate  measures  to  remedy  the  situation.  The  consultations  procedure
defined  in  Article  97  is  to  be  applied  not  only  in  cases  of  corruption  involving
Community funds but also more widely, in any country where the Community is
financially involved and where corruption constitutes a serious obstacle to result-
oriented  development  strategies.  It  is  thus  not  confined  to  cases  of  corruption
directly  affecting  EC  financial  co-operation  activities.  This  is  important  in
particular  when  considering  the  fungibility  of  public  finances.  These  provisions
reflect  a  strong  commitment  of  the  parties  to  take  the  appropriate  measures  to
prevent and combat corruption. They show that corruption is a shared and not an
unilateral concern.

(35)  Another  case  in  point  is  represented  by  Latin  America.  The  fight  against
corruption  is  a  regular  subject  for  the  dialogue  and  special  co-operation  in  this
field  currently  under  negotiation  with  Central  America  and  the  Countries  of  the
Andean  Pact.  The  Madrid  Political  Declaration  (EU-Latin  American/Caribbean
Summit,  Madrid,  16-17  May  2002)  contains  the  commitment  to  strengthening
democratic  institutions  ,  the  rule  of  law,  judicial  systems,  the  promotion  and
protection of Human Rights, as well as the fight against corruption and organized
crime.  Furthermore,  the  new  generation  of  the  EU  bilateral  Agreements  with
Latin  American  countries  will  contain  the  firm  commitment  to  the  principles  of
good governance.

(36)  The  way  in  which  fighting  corruption  is  articulated  in  CSPs  and  NIPs  is  to
address  the  institutional  causes  of  corruption  or  an  environment  that  tolerates
corruption by providing capacity building to institutions and to non-state actors as
well  as support to improve  the  regulatory  framework.  This  issue  is  in  particular
dealt  with  in  countries  where  corruption  is  as  a  major  development  problem
(according to sources such as Transparency International) and fighting corruption
is part of the Government agenda. The Commission has funded five projects with
TI to develop anti-corruption  strategies  at regional  and  country  level  in  the  past
three years.

11

(37)  The  recent  Commission  Communication  on  a  comprehensive  EU  policy  against
corruption8,  calls  on  EU  institutions  and  Member  States  to  make  more  effort  to
combat this form of crime. With regard to EU’s relations with third countries, the
Commission  suggests  the  inclusion  of  10  general  principles  into  national  anti-
corruption strategies of EU acceding and candidate countries as well as other EU
partners.  This  includes  preventive  and  repressive  measures,  as  well  as  codes  of
conduct and incentives for the private sector and the establishment of white lists.
At  the  global  multilateral  level,  further  progress  also  is  expected  through  the
future UN Convention against corruption, which will adopt a comprehensive and
multidisciplinary  approach  by  balancing  the  need  for  the  establishment  of  a
functional  mechanism 
for
institutionalisation of effective preventive measures.

recovery  of  assets  with 

the  need 

the 

for 

2.7.  Migration

(38)  Sound  management  of  migration  is  also  a  factor  in  ensuring  overall  good
governance.  If  carefully managed, migration can be a positive factor  for  growth
and success of developing countries. One of the basic principles of improving the
management  of  migration  is  that  it  requires  joint  effort.  Dialogue  between  the
country of origin and the countries of destination needs to be intensified and co-
operation needs to be developed in a spirit of partnership. The principles set out in
the 3 December 2002 Communication on migration and development provide the
framework  for  the  strengthening  of  the  dialogue  on  migration  with  developing
countries.  By  promoting  good  governance  the  EU  is  addressing  one  of  the
important root causes of migration.

2.8. 

Sector-wide approaches and mainstreaming

(39)  An  increased  use  of  sector-wide  approaches  to  good  governance,  with  budget
support or other financial mechanisms, such as basket funding, can contribute to
broaden ownership, and to improve co-ordination and efficiency.

(40)  Sector Programmes require an approved sectoral policy document integrated in an
overall strategic framework (such as PRSP), a sectoral medium term expenditure
framework and an annual budget, and a co-ordination process amongst donors led
by Government. A good governance analysis can be applied at all these stages.

(41)  Governance related interventions can also follow a sector-wide approach, and are
particularly relevant for administrative reforms (Public Sector Reform Programs,
Decentralisation,  Security  System  Reform,  Reforms  of  the  Judiciary,  etc.).  This
may include working with non-state actors.

(42)  Mainstreaming Institutional Capacity Building in Sector Programmes contributes
to  good  governance.  Mainstreaming  in  areas  such  as  transport,  health  or
education,  takes  place  through  support  to  the  relevant  institutions  on  policy
formulation, monitoring and implementation, as well as for the programming and
management of the budget.

8

COM (2003) 317 final; 28.05.2003

12

                                                
2.9. 

Budget support

(43)  The  EC  has  first  started  to  provide  budget  support  to  economic  reform
programmes  to  ACP  countries  some  15  years  ago  in  the  context  of  structural
adjustment  programmes  agreed  by  the  countries  with  the  Bretton  Woods
Institutions.  More  recently,  budget  support  is  becoming  increasingly  used  in
regions outside the ACP.

(44)  One of the pre-requisites for effective budget support is adequate, or improving,
public  financial  management.  Budget  support,  by  providing  funding  linked  to
agreed  outcomes  (based  on  indicators  of  progress)  in  better  public  financial
management,  creates  additional  incentives  for  reform.  By  providing  funding
through national budgets, it also gives the Commission a stake in the dialogue on
budget  systems.  Annual  reporting  on  results  helps  to  strengthen  domestic
accountability,  and  the  increasing  use  being  made  in  EC  budget  support
operations of countries’ own regular reporting to Parliament aims to improve the
quality  and  content  of  these  reports,  and  thus  to  promote  Parliamentary
accountability  of  Government.  It  also  helps  to  reduce  some  of  the  extreme
pressures on national budgets, which are in themselves often a source of difficulty
for public financial management

(45)  The  Commission’s  approach  to  budget  support,  linking  volumes  to  the
achievement  of  agreed  outcomes  in  poverty  reduction  and  public  financial
management, also adds a further set of incentives for improved internal dialogue
between  Treasuries  and  the  key  line  Ministries,  since  Treasuries  have  a  new
interest  both  in  the  results  line  Ministries  deliver  and  in  ensuring  that  they  are
fully  funded.  By  providing  accompanying  capacity-building  support,  moreover,
budget  support  operations  help  to  improve  the  ability  to  implement  agreed
improvements.

(46) 

In  addition,  budget  support  can  help  to  tackle  those  areas  of  public  financial
management where the aid process may in itself create problems for governments.
Off-budget project aid is rarely captured in national planning systems, and almost
never  in  accounting  ones.  Budget  support  provides  funding  through  those
systems.  This ensures  that resource  planning is done  on  the  basis  of  a  complete
picture,  rather 
investment
expenditures  are  funded  off-budget  by  donors  and 
their  recurrent  cost
implications may be invisible to planners. It also ensures that the picture national
Parliaments receive is complete, without the omissions and distortions which off-
budget donor flows create. This also helps to improve domestic accountability.

the  partial  vision  available  when  most 

than 

(47)  Major  achievements  of  these  reforms  include  in  many  countries  a  sustainable
reduction  of  budget  deficits,  the  elimination  of  discretionary  tax  and  tariff
exemptions, which have been interfering with the creation of a level playing field
for  private  sector  actors,  and  increasing  the  stability  of  the  banking  sector  by
stopping  the  practice  of  political  loans.  However,  at  the  same  time,  it  became
increasingly  clear  that  reforms  cannot  be  bought,  that  their  benefits  have  not
sufficiently benefited the poor and that  they  need sufficient  support  (ownership)
in  the  country.  Since  1999,  the  structural  adjustment  programmes  have  been
replaced by support to national Poverty Reduction Strategies.

13

(48) 

In the PRSP context, the good donor practice is that donor aid should support and
be  aligned  to  a  country-owned  reform  programme  and  its  translation  into  the
budget.  In many PRSP countries,  donors  agree  on  joint  frameworks  which  state
the  principles  that  guide  budget  support,  and  describe,  often  in  matrix  form,  on
which  reform  areas  and  desired  results  they  intend  to  focus  their  dialogue  with
governments.  Improving  economic  governance  by  increasing  the  effectiveness,
efficiency  and  transparency  of  public  expenditure,  and  improving  social  service
delivery  to  the  poor,  are  major  elements  of  that  dialogue  between  donors  and
governments.  Most  PRSP  countries  have  started  to  improve  sustainability  of
public  spending  by  introducing  a  medium  term  focus  with  Medium  Term
Expenditure or Budget Frameworks (MTEFs/MTBFs). There is also an increasing
use of tracking surveys that follow social sector expenditure to see to what extent
central government funds reach the final beneficiary.

2.10.  Trade

(49)  Governance at all levels is crucial for the integration of developing countries into
the  multilateral  trading  system,  and  for  the  creation  of  an  attractive  business
environment,  in  which  investment  and  trade  can  thrive.  It  is,  therefore,  vital  to
economic  development,  without  which  poverty  and  poverty-related  problems
cannot be tackled.

(50)  The integration of developing countries in the multilateral trading system not only
depends  on  meaningful  market  access  and  increased  domestic  production  of
tradable and exportable  goods and services. The domestic governance context is
key  to  taking  advantage  of  the  potential  which  globalisation  can  bring.  Only  if
developing countries have adequate institutional capacities and are willing to put
in  place  a  transparent,  predictable  and  effective  legal,  regulatory,  judicial,  and
institutional  environment, and are in  a  position  to  enforce  rules  and  regulations,
will  they  be  able  to  attract  sufficient  domestic,  regional,  and  international
investment. In recognition of this, the Commission has adopted a specific policy
framework for trade related technical assistance which provides the basis for co-
operation in this area9.

(51) 

In  relation  to  its  own  trade  policy,  the  EU  provides  developing  countries  with
preferential access to the EU market under the Generalised System of Preferences
(GSP). This system aims to support development by according lower tariff levels
to goods from developing countries than those applied to industrialised partners.
However,  these  preferences  may  be  withdrawn10  (as  is  currently  the  case  for
Myanmar)  in  cases  of  clear  governance  failures  such  as  use  of  prison  labour,
slavery  and  violation  of  the  right  of  association.  Furthermore,  the  GSP  also
provides  positive  incentives  through  additional  preferences  to  countries  which
have incorporated certain ILO conventions into national law and/or which ensure
sustainable  management  of  their  forests.  Thus  through  positive  and  negative
incentives the EU seeks to encourage good governance in trade related areas.

9

10

COM (2002) 513 final, 18.09.2002
Under Article 26 of the GSP

14

                                                
2.11.  The business sector

(52)  The promotion of social development in developing countries can, in general, not
be achieved on a sustainable basis through public sector alone. Private companies
can play an important role in this respect.

(53) 

In developing countries, weak governance (in terms of inefficient administrations,
lack of accountability and financial transparency, corruption, inefficient financial
systems  and  other  state  failures)  represents  a  major  disincentive  for  investment,
savings,  and  resource  mobilization  at  both  domestic  and  international  level.
Indeed a fast deteriorating governance could even trigger sudden capital outflows
and  capital  flight.  Given  that  the  tax-base  is  usually  very  small,  fiscal  revenues
often cannot finance adequately the health sector and other social services. Only a
strong sustainable economic growth can create the wealth needed to successfully
combat  poverty  and  to  make  it  possible  that  the  taxation  revenues  sustain  the
basic  foundations  of  the  public  sector.  A  dynamic  business  sector  is  key  to
economic  growth.  Foreign  Direct  Investment  (FDI)  can  play  a  crucial  role  in
developing  countries.  To  attract  FDI,  countries  must  build  an  enabling
environment.  Governmental  predictability,  accountability  and  transparency  are
part of this. So are the consistent application of sound economic policies and the
promotion of a stable macroeconomic framework coupled with a strong legal and
regulatory  framework  to  ensure  protection  from  state  coercion,  arbitrary  actions
and corruption. Both domestic and foreign investors need to be assured that their
assets will be secure and that contractual obligations will be upheld.

(54)  An  effective  public-private  sector  dialogue  and  partnership  is  important  to
promote sustainable development and should include issues such as human rights
and  Corporate  Social  Responsibility  (CSR).  CSR11  is  a  concept  whereby
companies integrate social end environmental concerns in their business activities
and in  interaction  with  their  stakeholders  on  a  voluntary  basis.  Voluntary  social
and environmental practices of business, going beyond companies' existing legal
obligations, can play a major role in filling the governance gap in an innovative
way. CSR is not a substitute, but a complement to hard law and social dialogue.
As such it must not be detrimental to public authorities' task to establish binding
rules, at domestic and/or at international level, for the respect of certain social and
environmental  or  reporting  standards.  Issues  such  as  implementation  of  Core
Labour  Standards,  the  development  of  human  resources  and  decent  work,
financial transparency, environmental protection, can all profit from a responsible
private sector engagement.

(55)  The  adoption,  in  August  2003,  of  Draft  UN  Norms  on  the  Responsibilities  of
Transnational Corporations and other Business Enterprises with regard to Human
Rights12 highlights the growing recognition  of  the responsibilities of business to
their  stakeholders.  The  Norms  are  a  set  of  ethics  guidelines  bringing  together  a
range  of  legal  obligations  for  companies  drawn  from  existing  human  rights,

11

12

COM  (2002)  347  final,  July  2002,  “Corporate  Social  Responsibility:  a  business  contribution  to
Sustainable Development”
Draft Norms on the Responsibilities of Transnational Corporations and other Business Enterprises
with regard to Human Rights. E/CN.4/Sub.2/2003/12/Rev.1

15

                                                
labour  and  environmental  standards,  as  well  as  providing  guidelines  for
companies operating in conflict zones.

(56)  The European Parliament, in passing a resolution on EU standards for European
Enterprises  operating  in  Developing  Countries:  Towards  a  European  Code  of
Conduct13
,  recognised  the  influence  the  European  private  sector  has  over  the
processes  of  development,  environmental  impact  and  human  rights  in  the
developing countries in which they operate.

(57)  The  OECD  Guidelines  for  Multinational  Enterprises  are  a  comprehensive  and
respected corporate responsibility instrument containing voluntary principles and
standards  for  responsible  business  conduct  in  areas  that  include  human  rights,
core labour  standards  and  anti-corruption  measures.  The  Guidelines  have  global
reach as they are recommended by the governments of the 37 adhering countries14
to multinational  enterprises based  in  those  countries  wherever  in  the  world  they
operate.  The  Commission  has  played  an  active  role  in  the  promotion  of  these
Guidelines.

3. 

CURRENT COUNTRY OWNED PRACTICES AND APPROACHES

(58)  The  launching  of  the  African  Union  (AU)  and  the  establishment  of  New
Partnership for Africa’s Development (NEPAD) have created a new pan African
level  of  governance  African  leaders  have  agreed  that  peace  and  security,
democracy,  good  governance,  human  rights  and  sound  management  are  among
the key conditions necessary for sustainable development and poverty eradication,
as well as for ending armed conflicts in the continent.

(59)  The NEPAD’s approach to governance is encapsulated in the Heads of State and
Government  Declaration  on  Democracy,  Political,  Economic  and  Corporate
Governance15.

(60)  One  of  the  features  of  the  initiative  is  the  African  Peer  Review  Mechanism
(APRM), which is an instrument voluntarily acceded to by Member States of the
AU as an African self-monitoring mechanism. Fifteen  African countries have so
far signed a Memorandum of Understanding to accede to the APRM process. The
purpose is to ensure that members’ policies and practices conform to the agreed
political,  economic  and  corporate  governance  values,  codes  and  standards
contained in the NEPAD Declaration. To accede to the peer review process, each
State  is  required  to  clearly  define  a  time-bound  Programme  of  Action  for
implementing  the  Declaration  on  Governance  including  periodic  reviews.  The
APRM could spur countries to consider seriously the impact of domestic policies,

13

14

15

Report on EU standards for European Enterprises operating in Developing Countries: Towards a
European Code of Conduct A4-0508/98
Adhering  countries  are  the  30  OECD  members  and  Argentina,  Brazil,  Chile,  Estonia,  Israel,
Lithuania and Slovenia. Latvia’s adherence is being completed and an application by Singapore is
being considered.
Assembly  of  Heads  of  State  and  Government,  38th  Ordinary  Session  of  the  Organization  of
African Unity, 8 July 2002, Durban, South Africa

16

                                                
(61) 

not  only  on  internal  political  stability  and  economic  growth,  but  also  on
neighbouring countries, as well as promote mutual accountability.

In other regions, there is a wide range of regional and subregional groupings, fora
and  arrangements  for  cooperation  addressing  governance  issues.  Governance
figures  prominently  on  the  Organisation  of  American  States  (OAS)  agenda
(including general reports to the General Assembly).  In the  area  of fight  against
corruption  the  OAS  has  for  example  set  up  a  comprehensive  follow-up
mechanism  to  the  Inter-American  convention  against  corruption,  including  a
specific  mechanism  for  associating  civil  society.  Democratic  governance  is  also
one of the five priorities for action that the Rio Group identified at its last Summit
in  Cuzco  (May  2003).  The  countries  confirmed  their  commitment  to  the
consolidation  of  democracy,  the  rule  of  law,  and  to  the  need  to  establish  more
efficient  political  systems.  The  same  could  be  said  in  Asia  where  governance
issues are high in the agenda of the Asian countries or their groupings, especially
in the aftermath of the Asian financial crisis. The debate in that part of the world
focuses  on  less  pervasive  and  direct  role  of  the  State  in  the  economy,
implementing  market-based  economic  principles,  fostering  regional 
trade
integration,  strengthening  the  domestic  financial  markets  and  enhancing  the
possibilities for a collective response to potentially destabilizing threats etc. The
regional  development  banks,  for  example  Asian  Development  Bank  (ADB)  and
the  Inter-American  Development  Bank  (IDB),  in  which  partner  countries  and
other  countries  in  the  respective  regions  are  majority  stakeholders,  and  which
have broad development mandates, also address governance issues (in the context
of, for example, the modernisation of the state and reforms of the public sector) as
priority areas in their policies and operations. Furthermore, in the particular case
of  IDB,  under  the  heading  "Modernization  of  the  State",  the  Bank  has  recently
developed  a  strategic  framework  for  State  reform  and  the  consolidation  of
democratic governance.

4. 

TOWARDS A MORE DYNAMIC AND PROACTIVE APPROACH

4.1. 

A Policy Agenda for Governance

(62)  Governance  can  be  approached  from  different  perspectives  in  different  country
situations. Policy prescriptions for difficult partnership, post conflict situations or
effective partnership situation will differ. Good governance is to be analysed and
promoted on a country-specific basis. It cannot be addressed on the basis of one-
size-fits-all  model  but  rather  on  the  basis  of  existing  situations.  This  involves  a
process  of  progressive  consolidation  of  accountable,  effective  and  democratic
institutions  and  an  open  dialogue  with  non-state  actors  including  economic  and
social  partners  and  other  civil  society  organisations.  Institutional  sustainability
and capacity building are the core elements of a governance agenda.

(63)  The  EC  has  –  through  its  presence  in  almost  all  developing  and  transition
countries, and through its policies and vast array of instruments – long experience
in  maintaining  both  assistance  to  and  dialogue  with  Governments  in  different
country situations.  In  all cases,  the  EC  policy  line  and  support  to  governance  is
integrated  in  its  normal  co-operation  instruments.  Depending  on  the  specific
country situation, this can include:

17

(cid:1)  dialogue,

(cid:1)  humanitarian assistance,

(cid:1)  the whole set of development assistance including:

–  support to institutional capacity building,

–  support to administrative decentralisation, electoral support, non-state actors,

–  support to activities in the area of human rights.

Technical  and  financial  instruments  include  projects,  sector  programmes  and
budget support, the  financing of  recurrent costs as well as technical assistance.
In all its interventions the EC seeks increased coherence,  complementarity and
co-ordination  with  EC  and  EU  Member  States  policies  as  well  as  with  other
donors to increase efficiency and to send consistent signals to the Governments
and to the populations living in partner countries.

(64) 

In  this  framework,  dialogue  should  be  used  to  ensure  a  regular  contact  with
partner countries and go beyond situations of imminent/ongoing crisis.  It should
include  a  regular  and  where  possible  joint  assessment  of  the  developments
relating  to  respect  for  human  rights,  democratic  principles,  the  rule  of  law  and
good  governance.  Closer co-ordination between the EU, the  Member  States  and
other donors can contribute to the efficiency of the dialogue.

(65)  Dealing  with  situations of difficult partnerships  is  an  issue  that the  international
community  should  continue  to  address.  Development  co-operation  with  these
countries  requires  specific  approaches  that  address  the  root  causes  of  the
problems,  which  are  very  often  linked  to  governance,  involving  a  range  of
measures tailored to the specific country context.

(66) 

In  governance-related  interventions  the  EU  should  consider  shifting  from  a
“project  approach”  to  a  sector  programme  approach  where  appropriate.  The
purpose  is  to  facilitate  the  elaboration  by  partner  governments  of  coherent
strategies and action plans, involving donors and other relevant stakeholders in a
unified process  and framework. The  sector-wide  approach constitutes an avenue
for harmonising donors’ practices and procedures, and to deal with issues such as
the recurrent costs in the public administration in a co-ordinated way.

(67)  To  improve  the  effectiveness  and  impact  of  EU  governance  interventions,  and
other  areas  of  development,  progress  towards  common  EU  policies  and
approaches,  country/regional  strategies  and  harmonisation  of  procedures  will  be
needed.  Overall  the  approach  of  EU  Member  States  to  governance  is  shifting
from an initial focus limited to economic processes and administrative efficiency
towards greater concern for issues of democracy, justice and participation. Other
bilateral and multilateral donors also reflect this experience. There appears to be a
general  shift  towards  more  country-wide  bilateral  co-operation  programmes.
Strengthening the institutional and legislative framework, to underpin institutional
sustainability,  democratisation  processes,  the  rule  of  law  and  respect  and
protection  for  human  rights  and  individual  freedoms  is  a  common  feature  of  all

18

EC interventions. These different fields constitute both sectors of intervention and
to  seek
cross-cutting 
complementarity and coherence with other bilateral donors and multilaterals.

the  CSP/RSP.  The  EC  will  continue 

issues 

in 

(68)  Using  indicators  on  governance  is  of  mutual  interest  of  partners.  They  can
facilitate in-country dialogue and country-led processes of reform of  governance
systems (electoral system, justice) as well as improve the quality of development
interventions.

(69)  Current  EC  approaches  to  governance  in  different  situations,  i.e.,  difficult
partnership,  post  conflict  and  effective  partnerships,  are  presented  below.  To
illustrate these approaches and to  provide policy  guidance  in  different areas  and
situations on the basis of lessons learned, case studies have been selected.

(70)  This  Communication  focuses  on  developing  countries  according  to  the  Joint
Statement  of  the  Council  and  the  Commission  on  Community’s  Development
Policy16.  However,  experiences  in  other  countries  and  regions  can  bring
interesting approaches and useful practices to be possibly shared across regions.

(71)  The Western Balkans can serve as an illustration of EU policy in a post-conflict

context.

WESTERN BALKANS

MAIN DEVELOPMENT CONSTRAINTS: The post-conflict situation and the legacy of
the Yugoslav Federation partition are the main features. In addition, specific institutional
complexities  were  induced  by  the  peace  arrangements  (e.g.  Tripartite  BiH,  New
constitution  for  Serbia  and  Montenegro,  Kosovo  under  UN  administration,  Ohrid
agreement in FYROM). The international community has been highly involved, with full
or partial administration of large entities (eg. UN mandates for BiH and Kosovo). Other
constraints  refer  to  the  need  to  set  up  entire  departments  of  administration  in  the
successor states (e.g. state border services), to border demarcation and controls well as to
the potential for disputes arising from propriety rights/cadastre issues. The region is also
confronted with more classic issues of transition from a socialist system to an effective
democracy  and  a  functioning  economic  market.  EU  aims  with  the  Stabilisation  and
Association  Process  (SAP)  to  help  these  countries  to  address  these  institutional
challenges, to enter into a partnership relation and gain back ownership and to progress
on the way to European integration.

MAIN  POLICY  RESPONSES/MEASURES:  At the  core  of  the  EU  policy  towards  the
region – the Stabilisation and Association Process (SAP) - is the acknowledgement that
these Western Balkans countries are potential candidates for EU membership (European
Council of Feira, June 2000, reiterated in Copenhagen, December 2002 and Thessaloniki,
June  2003)and  that  the  1993  Copenhagen  criteria17  will  continue  to  apply.  Support  to

16

17

Joint  Statement  of  10.11.2000;  Communication  on  the  European  Community’s  Development
Policy (COM(2000)212 final 26.4.2000)
Agreed  at  1993  Copenhagen  European  Council;  EU  membership  criteria  for  Accession  States
based on stable democracy, respect for human rights, the rule of law, the protection of minorities,
a  functioning  market  economy,  the  adoption  of  the  common  rules,  standards  and  policies  that
make up the body of EU law.

19

                                                
governance and institutional reform is thus predetermined by this wider perspective: the
Western  Balkan  countries  are  aiming  to  adopt  European  standards  in  the  political,
economic  and  legislative  sphere.  Most  notably,  the  EU  is  aiming  to  apply  the  very
valuable  experience  it  has  gained  from  the  enlargement  process  (experience  of  post-
communist  transition,  experience  of  transfer  of  EU  acquis  in  Central  and  Eastern
Europe).  The  approach  followed  is  comprehensive  and  encompasses  democratic
stabilisation  (incl.  protection  of  minorities,  return  of  refugees,  etc.),  possible
constitutional  reform,  the  rule  of  law  (including  police  and  judicial  reform,  anti-
corruption),  reform  of  public  administration,  economic  governance  (public  expenditure
management,  privatisation  process,  respect  of  property  rights)  as  well  as  capacity
building  to  comply  with  SAP  obligations  (i.a.  trade  facilitation  and  statistical  co-
operation).  Community  Assistance  under  the  CARDS  Programme  currently  allocates
40% of its resources to address the institutional challenges and institution building needs.
On an exceptional basis, EC macro-financial assistance (MFA) is provided in support of
the  Western  Balkan  economies  and  plays  a  significant  role  in  improving  economic
governance in these countries. In addition, the EC is developing its strategies in the field
of  Justice  and  Home  Affairs,  through  supporting  the  Western  Balkans  countries  to
strengthen their capacity to combat organised crime. Intense efforts are being put into the
development of integrated border management. Migration and asylum is also a key focus.

4.2. 

Difficult partnerships

(72)  Difficult  partnerships  are  characterised  by  a  lack  of  commitment  to  good
governance.  They  differ  from  weak  governance  cases,  where  the  Government
makes efforts and is committed, but capacity is weak and outcomes are limited.

(73)  Donors cannot afford to totally abandon poor performers or difficult partnerships
in  particular  for  three  main  reasons:  (1)  for  reasons  of  solidarity:  populations
should not pay the price for the lack of commitment by their governments; (2) for
reasons  of  security,  linked  to  the  dangers  of  isolating  a  country  and  of  leaving
extremists  and  terrorism  growing  in  failed  states;  (3)  for  reasons  of  aid
effectiveness in a longer term perspective, taking into account the potentially high
risks and costs associated with leaving a country for a long period (poverty rises,
institutions  collapse,  the  private  sector  if  any  is  paralysed,  etc).  There  are  also
risks  of  spillover  effect,  in  particular,  of  conflicts  spreading  to  neighbouring
countries or to the wider international community.

(74)  Therefore, instead of totally withdrawing from a given country, the EU and other
donors  should  find  alternative  entry  points  and  approaches  to  co-operation  with
the country concerned.

(75)  Difficult partnerships range from countries where the EC approach to governance
includes dialogue and financial support through various financial instruments, to
extremely difficult partnerships where co-operation has been suspended.

(76)  Entry points will be particularly difficult to find in the most extreme cases, where
‘appropriate measures’ or sanctions may have been taken or may be required by
the  international  community.  Even  in  these  situations,  the  following  kinds  of
activities can still be carried out:

20

(cid:1)  Humanitarian  assistance  or  food  aid,  provided  their  intrinsic  rationale
continues  to  be  respected  (access  for  all  affected,  regardless  of  political
orientation, gender etc.)

(cid:1)  Support to activities carried out by civil society organisations, e.g. in support

of human rights or aimed at covering the basic needs of the population.

(cid:1)  Political  initiatives  at  the  international  or  regional  level  with  the  aim  of

finding a durable solution to the crisis.

(cid:1)  In cases where Article 96 or 97 of the Cotonou Agreement or other relevant
consultation  procedures  have  been  implemented,  the  role  of  the  EC  is  to
monitor  the  agenda  of  corrective  measures  that  has  been  decided  including
those  that  the  partner  country  has  committed  itself  to  adopt.  After  the
consultations, the necessary adaptations to these measures have to be – where
possibly jointly  -  identified and assessed.  If the  consultations  are  successful
and  the  relevant  measures  are  effectively  implemented  by  the  Government,
these cases may gradually evolve into a more effective partnership.

(77) 

NORTH KOREA

MAIN  DEVELOPMENT  CONSTRAINTS  -  The  economic  and  social  situation  in  the
DPRK is in very bad state. International humanitarian assistance has helped to avert the
worst effects of famine and economic collapse, but are not enough to revive the economy
and  the  social  conditions  of  the  North  Korean  population.  Despite  some  economic
reforms  introduced  in  July  2002  (free  prices  and  salaries,  no  state  food  distribution
system, acceptance of farm markets), the foundations for a sustained economic recovery
do  not  exist;  the  DPRK  does  not  simply  have  the  resources  to  rebuild  its  agricultural,
industrial, infrastructure and social base. This situation can not be reversed without both
i) a commitment to policy and institutional reforms to put the economy onto a sustainable
growth path (the introduction of governance principles and rule of law, transparency and
social society which at  present do not exist); and  ii)  the building of  economic relations
with the international community in order to attract the trade, investment and economic
assistance needed to achieve economic development for the medium and long term. The
current North Korea nuclear crisis does not help the situation and until resolved, will not
allow for the necessary international economic support.

MAIN  POLICY  RESPONSES/MEASURES  -  Since  the  nuclear  crisis  broke  out  in
October  2002,  the  EU  continues  to  provide  humanitarian  and  food  aid  .  The  EU  has
provided a contribution of 283M€ in food and humanitarian aid to the DPRK since 1995.
Despite the current political situation, the GAERC of 18 November 2002 decided that the
EU should continue to provide North Korea with humanitarian assistance and food aid.

The  Country  Strategy  paper  for  the  DPRK  for  2001-2004  had  foreseen  15  M€  of
technical assistance projects to help North develop the necessary reform in its economy
though  a  vast  programme  of  training  and  institutional  building.  The  implementation  of
this economic cooperation assistance (which should have started with two pilot projects
worth  1  M€  each  in  the  fields  of  training  in  market  economy  principles  and  energy
efficiency and €15M for follow up activities), is suspended for the time being given the
current  political  situation.  But,  the  EU  stands  ready  to  enhance  economic  cooperation
with North Korea if the present crisis can be resolved in a satisfactory manner.

21

The EU has raised its concerns over the human rights situation in the DPRK during our
political  dialogue  meetings  with  North  Korea,  the  last  occasion  being  June  2002  in
Pyongyang. There had been some progress in our discussions and the DPRK had shown
a more constructive engagement in human rights talks, with positive comments on role of
NGOs  and  promises  to  resolve  outstanding  problems  on  their  working  conditions.  The
EU  requested  humane  treatment  of  returning  refugees  from  China,  as  the  latter  had
hardened  its  position  on  this  after  a  number  of  incidents  of  North  Korean  refugees
seeking  asylum  in  foreign  embassies  in  Beijing.  The  EU  tabled  a  Human  Rights
resolution on North Korea at the UN Commission of Human Rights session in Geneva.
This was adopted on 16 April.

(78) 

In less dramatic but still difficult partnerships, the EC policy line and support may
be  integrated  in  its  normal  co-operation  instruments.  The  main  priorities  are
usually the following:

(cid:1)  Maintain a regular dialogue with partner countries authorities

(cid:1)  Support to institutional capacity building

(cid:1)  Support to human rights and other governance related activities

(cid:1)  Projects  or  programmes  aimed  at  meeting  the  basic  needs  of  the  most
vulnerable groups, i.a., the improvement of service delivery to the poor  and
the  enhancement  of  civil  society,  in  particular  by  supporting  and  working
with non-state actors.

(79) 

ANGOLA

MAIN  DEVELOPMENT  CONSTRAINTS  -  After  28  years  of  civil  war,  which  have
prevented  stable  and  accountable  democratic  institutions  and  practices  to  evolve  in
Angola, this country still lacks of human resources and has a weak institutional capacity
in  the  post  conflict  situation.  The  basis  for  the  reorganisation  of  an  independent  legal
system is very fragile. There are particular problems related to the transparency of public
finances, such  as the  fact  that  a  large  part  of  oil  revenues  do  not  appear  in  the  budget,
which  means  that  the  revenues  from  Angola’s  vast  natural  resources  could  be  better
managed to the benefit of its own people. Civil society organisations are still very fragile
and  the  human  rights  record  remains  poor.  Corruption  is  widespread.  The  Government
and  the  EC  have  a  different  perception  of  current  priorities.  From  the  government’s
in  second  place  behind  physical
perspective, 
rehabilitation.  The  EC  expresses  serious  concerns  regarding  the  implementation  of  key
institutional  reform  programmes,  in  particular  of  the  justice  sector  and  public
administration.

institutional  reforms  come  only 

22

MAIN  POLICY  RESPONSES/MEASURES  -  In  tackling  governance  issues  in  Angola
three  different  aspects  are  relevant.  The  first  priority  in  the  post-conflict  situation  is  to
deal with emergency issues, i.e. mainly humanitarian assistance. Other issues must stand
back  at  this  stage.  Secondly  account  had  to  be  taken  of  the  new  context  in  which  co-
operation  takes  place,  i.e.  the  Cotonou  agreement  and  governance-related  international
commitments.  Hence  the  need  for  an  approach  ensuring  coherence  between  political,
development  and  humanitarian  aspects.  In  this  context  the  political  dialogue  comes  to
play, and in the case of Angola there has been a close interaction between the Common
Position instrument and the co-operation strategy (CSP/NIP). Taking into account these
aspects as well as the principle of linking relief, rehabilitation and development (LRRD),
which is the basis of the EC/Angola co-operation strategy, the approach taken is a step by
step/gradual approach, based on the evolving (post-conflict) situation in the country and
its transition from the relief to the rehabilitation stage. This general approach has led to a
selection of appropriate entry points and instruments. The Council Common Position of
25.6.200218 puts great emphasis on good governance as the instrument ensuring the link
between  political  and  poverty  reduction  related  aspects  of  co-operation.  It  provides  the
framework for the political dialogue. The lack of transparency of oil revenues is one of
the key elements of discussions between the  Government  and  donors.  The  Government
indicated  that  it  is  committed  to  a  fully  transparent  way  of  managing  the  budget.  The
positive statement by the Government is taken  as a possible point of entry for dialogue
on governance- related reforms. Regarding transparency of oil revenues, process similar
to Kimberley process19 could be considered. Discussions and development on the matter,
could  take  place  outside  classic  areas  of  co-operation  in  a  possible  “non-aid”  strategy.
The  “Publish  What  you  Pay”  initiative,  which  proposes  to  ensure  transparency  of  oil
revenues by obliging oil companies listed at stock exchanges in the EU or US to publish
their  payments  to  governments  in  third  countries,  could  be  a  useful  instrument  in  this
context.  The  same  goes  for  the  Extractive  Industries  Transparency  Initiative  (EITI),
launched by the UK in June 2003 and based on the “Publish What You Pay” initiative.
For the time being, Angola decided to be an observer only to this process.

(80) 

BANGLADESH

MAIN DEVELOPMENT CONSTRAINTS - Good governance has been identified as the
key  development  challenge  of  Bangladesh,  in  view  of  the  scale  of  the  governance
problems  and  the  adverse  effects  on  poverty  and  development.  The  situation  is
particularly critical in the area of political governance, where the most pressing topics to
be addressed are (1) a comprehensive anti-corruption strategy and the establishment of an
independent  and  effective  Anti-Corruption  Commission;  (2)  the  reform  of  the  criminal
justice  sector  including  a  comprehensive  reform  of  the  policing  services  and  the
separation  of  the  Judiciary  from  the  Executive;  (3)  Decentralisation  and  improved
effectiveness  of  local  government  services;  (4)  Institutionalisation  and  promotion  of
human  rights  and  the  set  up  of  an  independent  Human  Rights  Commission  and  an
Ombudsman.

18

19

OJEC L 167, 26.6.2002
Kimberley  process,  a  global  initiative  aimed  at  ending  trade  in  so-called  “blood  diamonds”  by
establishing that exported gems have not come from conflict areas.

23

                                                
MAIN  POLICY  RESPONSES/MEASURES  -  The  EC  has  a  two  pronged  approach,
acting  as  part of the  international  donor  community  and  as  bilateral  partner.  As  part  of
the  international  donor  community  the  EC  has  engaged  the  state  in  a  policy  dialogue
through  support  to  sector  wide  programmes.  At  bilateral  level,  the  2001  Co-operation
Agreement  has  increased  the  importance  of  Governance  in  EC  Bangladesh  relations.
Although funding for governance specific actions in the NIP is limited in proportion to
the scale of the problem, good governance is an substantial cross cutting issue in the NIP.
The  EC  has  recently  engaged  in  a  political  dialogue  with  the  state  that  is  proving
constructive  and  fruitful.  Since  the  dramatic  ‘Operation  Clean  Heart’  the  poor  state  of
governance is high on the political agenda of the EU institutions. While Bangladesh has a
certain  unease  about  the  public  reprimands,  recent  contacts  have  nevertheless  revealed
that the EU governance message is started to be taken more seriously.

4.3. 

Post-Conflict Situations

(81) 

In  many  cases,  the  state  institutions  in  a  post-conflict  situation  are  either  non-
functioning  or  even  non-existent.  They  have  seriously  limited  capacities  of
delivering  public  services.  A  cease-fire  or  a  peace  agreement,  which  constitutes
the  framework  for  the  country’s  rehabilitation,  includes  the  democratisation  and
national  reconciliation  processes  as  well  as  a  strategy  for  the  economic
development. A mechanism for the dialogue between the country representatives
and  the  donors’  community  is  usually  in  place.  It  is  intended  to  facilitate  the
discussions  between  partners  on  the  support  to  the  country  in  its  transition
towards the long-term development.

(82)  The main priorities to be dealt with in a post-conflict environment are usually the

following:

(cid:1)  the identification of the root causes of the conflict

(cid:1)  the ability and willingness of different actors’ (Government, Parliamentarian
and  Judicial  authorities,  political  parties,  civil  society)  to  address  the  root
causes of the conflict,

(cid:1)  the steps to be taken in the reconciliation process

(cid:1)  the  authorities’  willingness  to  address  governance  issues,  which  very  often
had  led  to  the  conflict,  and  which  may  remain  entrenched  in  the  post-war
environment

(cid:1)  linking relief, rehabilitation and development

(83) 

In order to promote pro-poor governance agendas and facilitate the political will
to  change  by  the  government,  donors  combine  dialogue  and  different  financial
instruments. They provide in parallel humanitarian aid, which is neutral and aims
to  address  peoples’  needs.  Co-ordination  between  donors  is  essential  for  an
effective, result oriented dialogue with the partner country.

24

(84) 

GUATEMALA

MAIN  DEVELOPMENT  CONSTRAINTS  -  The  main  constraints  are  the  slow
implementation  of  the  Peace  Accords  (PA)  signed  in  1996  and  the  lack  of  progress
towards  democratisation  and  economic  development.  Most  structural  causes  that  led  to
conflict are still unsolved. There is a lack of both institutional capacity and political will
to  implementing  the  reform  process  required  by  PA.  Other  main  problems  are  the
exclusion  and  discrimination  against  indigenous  people,  who  are  the  majority  of  the
population,  low  level  of  civil  society  participation,  especially  in  rural  areas,  threats
towards human rights activists and justice sector operations, corruption, drug trafficking,
money-laundering. A weak justice system and weak national police force are in contrast
with  the  mounting  lack  of  security  and  the  supposed  existence  of  parallel  power
structures.  On  the  economic  side,  the  very  skewed  income  distribution,  the  very  weak
taxation base and the low tax ratio in relation with the GDP must be addressed, including
through the taxation system reform.

MAIN  POLICY  RESPONSES/MEASURES  -  A  significant  part  of  EC  assistance
directed  to  governance  related  areas  (demobilisation  and  rehabilitation  of  the  former
guerrilla  and  armed  forces;  improvement  of  the  citizens’  security  by  creating  and
ensuring  the  functioning  of  civil  police;  strengthening  the  judicial  system;  giving  legal
protection  to  property  by  introducing  a  national  land  register;  support  of  the  National
Ombudsman  for  human  rights).  The  main  objective  of  CSP  for  2002-2006  is  to  create
and reinforce the necessary conditions for the Peace Agreement implementation.. The co-
operation agenda focuses mainly on the follow-up of the Consultative Group Meeting -
aimed  at  accelerating  the  PA  implementation  -  and  the  next  general  and  Presidential
elections  to  be  held  in  November  2003  including  the  realisation  of  a  EU  Electoral
Observation  Mission.  Guatemala  is  also  a  focal  country  for  the  European  Initiative  for
Democracy  and  Human  Rights  (EIDHR).  The  « Mesodialogo »,  a  permanent  forum  on
EC  co-operation  with  Guatemala  composed  by  the  EC,  EU  Member  States,  the
government and local and EU civil society organisation, support by the EC, needs to be
further  consolidate.  In  the  framework  of  the  CSP  2002-2006,  the  Mesodialogo  has
contributed  to  the  preparation  of  key  actions  aimed  at,  inter  alia,  reinforcing  the
participation  of  the  civil  society  and  consolidating  the  State’s  decentralisation  process.
The EC approach at bilateral level is complemented by the principle and objectives set by
the  so  called  San  José  Dialogue  between  the  EU  and  six  Central  America  countries,
which succeeded in contributing to the peace process and democratisation of the region,
and  was  consequently  re-oriented  towards  new  challenges  related  to  sustainable  and
equitable economic and social development, and to the deepening of economic linkages
between the two regions.

25

(85) 

RWANDA

MAIN  DEVELOPMENT  CONSTRAINTS  -  Between  1959  and  1994  ethnically  based
laws were introduced, and several massacres against tutsi and twa minorities took place,
creating  waves  of  refugees.  The  civil  war  broke  out  in  1990  with  the  invasion  by
Rwandan  militia  under  the  banner  of  the  tutsi  dominated  Rwandan  Patriotic  Army
(RPA).  Agreements  signed  in  1993  in  Arusha  included  the  formation  of  a  broad-based
government,  a  reduced  army  and  a  programme  of  transition.  However,  the  genocide  of
tutsis and moderate hutus started in April 1994 and made it impossible to implement the
agreements. The genocide led to the massive loss of human resources and the destruction
of  institutional  capacity  as  well  as  social  and  economic  infrastructure :  approximately
800.000 people were killed, 2.000.000 people fled to other countries and 1.500.000 were
internally  displaced.  The  consequences  of  war  and  genocide  have  been  at  the  root  of
Rwanda’s  social,  political  and  economic  problems  today.  Educated  layers  of  the
population  were  thinned  out  -  killed,  imprisoned  or  in  exile.  Securing  the  borders  has
imposed a heavy burden on the budget, as well as the debt burden. The cost of genocide
suspects’ imprisonment and the justice process including compensation for victims also
put  a  strain  on  the  budget.  The  cost  of  the  Rwandan  demobilisation  and  reintegration
program is also considerable. Rwanda has traditionally suffered  from  a scarcity of land
and high population pressure and the integration of thousands of ex-combatants will not
be  without  problems.  Rwanda  is  rebuilding  a  new  non-ethnic  based  identity.  The  key
issue  is  the  achievement  of  the  reconciliation  process  through  the  transition  to
democracy, through bringing to  trial those  accused of participation in the  genocide  and
through improving the human rights situation.

MAIN  POLICY  RESPONSES/MEASURES  -  The  EU  and  its  member  states  were
among the first international actors to acknowledge the post-genocide regime. During the
period  after  the  genocide,  EC  co-operation  was  focused  on  humanitarian  aid  and
rehabilitation. By late 1999 there were no longer pressing humanitarian needs in Rwanda
and ECHO withdrew from Rwanda. Donors have supported the Government's economic
Reform Programme and some of them, including the EC, have started providing budget
support  to  Rwanda.  Rwanda  reached  the  decision  point  for  the  HIPC  initiative  for
benefiting from the HIPC initiative.

The ongoing interventions focus on institutional support with technical/logistical support
for  the  Ministry  of  Finances,  the  general  population  census  and  support  for  good
governance and justice sector. The infrastructure component is focussing on water supply
systems  and  road  sector  management.  Finally,  the  macroeconomic  support  and  the
funding of rural micro-projects and urban labour intensive works have continued. The 9th
EDF  National  Indicative  Programme  has  been  signed  in  March  2003,  the  focal  sector
being rural development, including rural economy, as well as transports and water supply
in rural areas. The support to the government’s economic reform program will continue.
The importance of institutional capacity building, transition to democracy and justice and
the reinforcement of decentralised structures and civil society are also targeted.

26

The  political  dialogue  framework  is  the  EU  common  position20,  revised  every  year.  It
covers the internal situation aspects (justice of  genocide, human  rights,  democratisation
process,  …)  and  Rwanda's  foreign  policy  (involvement  in  the  DRC’s  conflict,  illegal
exploitation  of  DRC’s  natural  resources).  An  EU  Special  Envoy  for  the  Great  Lakes
Region  was  designed  in  1996.  Heads  of  Delegation  report  on  regular  basis  on  human
rights situation and on political issues. A new constitution was adopted by referendum on
4th  of  June  2003,  which  marks  the  end  of  the  transition  period.  Presidential  elections
through  direct  universal  suffrage  took  place  in  August  2003  and  were  observed  by  the
EU  and  even  if  some  irregularities  were  noted,  it  was  considered  an  important  step
towards  the  consolidation  of  the  democratisation  process.  To  complete  the  transition
process towards democracy, legislative elections took place end of September/beginning
of October 2003 and were also observed by the EU. The final report of the EU Election
Observer  mission,  which  will  cover  the  whole  electoral  process,  is  expected  by  mid-
October 2003.

4.4. 

Effective partnerships

(86) 

In  an  effective  co-operation  partnership,  the  Government  is  committed  to
development  objectives  and  to  the  internationally  agreed  targets.  National
institutions,  civil  society  and  donors  take  part  in  the  discussions  leading  to  a
national  development  (or  a  poverty  reduction)  strategy  that  is  progressively
implemented  by  the  Government  with  donors’  support.  The  expected  outcomes
depend largely  not  only on partner  country  commitment and political  will  or on
donors’ technical and financial support, but also on partner country capacities and
on  the  level  of  institutional  sustainability.  In  the  framework  of  the  normal
dialogue  with  the  partner  country  all  subjects  and  issues  related  to  co-operation
are regularly discussed in an open manner.

(87)  Priorities for action in effective partnerships should aim at ensuring that adequate
policies and pro-poor reform programs are  adopted and implemented in the area
of governance. The main priorities are usually the following:

(cid:1)  Ensure a continuous and effective dialogue with partner countries

(cid:1)  Provide support contributing to the strengthening of democratic governance,

citizens participation and access to justice

(cid:1)  Provide support to activities in the area of human rights

(cid:1)  Strengthening 

transparency,  accountability  and  effectiveness  of  state
institutions through  support  to  institutional  capacity-building  at  all  levels  in
the  area  of  good  governance  and  the  rule  of  law  including  public  service
reform  in  all  areas,  reform  of  the  security  system,  tax  reform  and
administration, budget process and auditing procedures, statistics etc.

20

OJCE L 285; 23.10.2002

27

                                                
(cid:1)  Integrate  institutional  support  in  the  other  sectors  of  the  co-operation

programmes

(cid:1)  Support  to  foster  civil  society’s  capacity  to  participate  in  policy-making

processes and debates

(88) 

MEDITERRANEAN REGION

MAIN  DEVELOPMENT  CONSTRAINTS  -  All  MEDA  countries  face  considerable
challenge,  both  politically  and  economically.  On  the  political  front,  most  countries
combine opaque governance practices with a poorly developed civil society. In economic
terms,  major  structural  reform  is  needed  in  the  region,  both  to  improve  the  growth
performance of the MEDA partners  and  create  jobs  for a rapidly  growing labour force.
Stabilising employment at the current high levels would indeed require a growth rate of
about  7  percent,  way  above  present  levels.  Failure  to  do  so  will  increase  poverty  and
heighten  social  pressures  with  important  repercussion  beyond  countries’  borders.
Transparency  of  the  markets  and  fight  against  corruption  represent  also  considerable
challenges. Migration is a key focus with the EU increasingly concerned over the flows
of illegal migrants both from and through the Mediterranean partners. For their part the
partners have complaints relating to the treatment of legally established migrants in the
EU. Finding an overall balanced approach to migration is our common challenge. Issues
related  to  the  fight  against  terrorism,  organised  crime  and  drug  trafficking  are  also
priorities. The situation regarding respect for human rights and democracy in the region
continues  to  give  cause  for  concern;  autocratic  regimes  and  poorly  developed  civil
society  lead  to  important  deficit  in  terms  of  respect  of  human  rights  and  democratic
principles.

MAIN  POLICY  RESPONSES/MEASURES  -  Institutional  reform  is  a  key-element  of
the  Euro-MED  partnership  both  at  multilateral  and  bilateral  co-operation  levels.  The
Barcelona  process  is  implemented  in  various  fora,  including  Euro-MED  Ministerial
Meetings,  the  Euro-MED  Committee  and  various  technical  groups  and  committees,
where issues related to governance are addressed (institutional reform, transparency and
open market, fair administration of justice, etc). As for the bilateral relations, institutional
reform is being developed through the association agreements, concluded with all but one
(Syria)  of  the  MEDA  partners.  These  agreements  provide  for  a  political  dialogue,  the
progressive  establishment  of  free  trade  with  the  EU  and  co-operation  in  a  number  of
economic, social and cultural areas.

In its Communication on Wider Europe-New Neighbourhood Initiative, the Commission
put forward an ambitious vision: the creation of an enlarged area of peace, stability and
prosperity  encompassing  the  neighbours  to  the  East  and  to  the  South  (Mediterranean
countries)  based  on  common  values  and  deep  integration.  In  return  for  progress  in
implementing political, economic and institutional reforms, the EU’s neighbourhood is to
benefit  from  the  prospect  of  closer  economic  and  political  links  with  the  EU.  This
objective is going to be implemented by means of Action Plans which will  cover, inter
alia,  reform  towards  strengthening  democracy  and  respect  for  human  rights,  good
governance and the rule of law.

Support  to  policy  reforms  and  economic  management  is  a  major  focus  of  EU  relations
with its Mediterranean partners, including through regular sessions of economic dialogue

28

conducted  both  at  the  bilateral  and  regional  levels.  The  dialogue  on  economic  policies
and  on  legal  and  regulatory  frameworks  is  combined  with  policy  assistance  which
includes  modernisation  of  the  budgetary  process  to  increase  transparency  and  control
mechanism  in  the  field  of  public  finance  and  institutions.  Appropriate  technical
assistance is also provided to facilitate the reform process.

Cooperation  in  the  area  of  Justice  and  Home  Affairs  in  the  Mediterranean  is  a  recent
phenomenon.  Foreign  Ministers  meeting  in  Valencia  in  April  2002  therefore  adopted  a
framework document for a Euromed programme in the area of judicial co-operation, fight
against terrorism, drug trafficking and organised crime, as well as co-operation on issues
relating to social integration of migrants, migration and movement of people. A regional
action plan on JHA matters was agreed at the Valencia Euro-MED Ministerial. Following
several  meetings  and  a  5-days  workshop  (June  2003)  with  MEDA  partners,  priorities
were defined. Experts and practitioners from MS and Mediterranean countries will now
work together to create common tools/programmes for the training of judges, prosecutors
and police in the main priority areas of terrorism, organised crime and money laundering.
JHA programmes have also been included in several National Indicative Programmes.

Human rights and democracy is being developed with the MEDA partners in the context
of  the  association  agreements,  the  EIDHR  initiative  and  under  the  MEDA  programme.
Most  recently,  the  Commission  has  adopted  a  Communication  on  Reinvigorating  EU
Actions on Human Rights and Democratisation with Mediterranean Partners, defining a
number of strategic guidelines in view of  developing  a comprehensive  approach to this
key issue.

(89) 

BURKINA FASO

MAIN  DEVELOPMENT  CONSTRAINTS  -  There  is  a  need  for  the  strengthening  of
institutional  capacity,  and  of  civil  society.  The  necessary  reform  of  the  legal  system  is
under  way.  Lack  of  natural  resources,  environmental  degradation,  drought  (Sahel
climate), as well as high dependency on agriculture (occupying 80 % of the active work
force  and  representing  40  %  of  GDP)  and  little  exports  diversification  are  all  major
obstacles to long term development. Another concern is the  limited  and sporadic  social
conflict.  Finally,  the  situation  in  the  region  may  have  consequences  in  economic  and
social terms as a large number of burkinabé are living in neighbouring countries.

MAIN POLICY RESPONSES MEASURES - Poverty reduction is at the forefront of all
EC  activities,  which  are  based  in  the  government-led  PRSP  process.  There  is  a  high
degree  of  consistency  and  convergence  of  the  various  types  of  EC  support  with  EU
Member  States  and  other  partners  interventions.  While  maintaining  its  support  for  the
consolidation of macroeconomic and sectoral policies,  the  partnership  strategy  between
Burkina Faso and the EU aims to strengthen support for the process of reforms through
the  consolidation  of  the  rule  of  law  and  devolution,  involving  greater  participation  of
beneficiaries. Main EC financed programmes, which focus on budget support, transports
and institution building, include the consolidation of the judicial system, an improvement
in  living  conditions  of  the  population  through  water  supply,  and  a  programme  of
decentralised  co-operation.  Burkina  Faso  also  benefited  from  aid  through  the  Budget
including i.a., cofinancing with NGOs, human rights, democracy, etc.

29

Burkina  Faso  was  also  the  pilot  country  for  a  new  approach  to  budget  support.  By
providing funds through the budget, this  makes  money  available  for  the  recurrent costs
(teachers’  salaries,  school  books,  drugs  etc.)  needed  to  make  investments  effective  in
reducing poverty. By using national budget systems it helps to reduce the acute shortage
of  funds  that  makes  good  management  practically  impossible.  By  linking  funding  to
progress  with  public  financial  management  it  provides  incentives  to  improve,  and
through  accompanying  capacity  building  support  it  makes  improvements  possible.  By
linking  other  funding  to  results  it  provides  an  incentive  for  government  to  shift  its
attention from inputs – what is spent where – to outcomes – what that spending achieves
in higher  enrolments,  exam pass  rates,  vaccination  coverage etc. This  helps  to  improve
administrative  governance  through  more  appropriate  incentives  and  accountability  for
results. In Burkina, the early budget support missions’ use of access to health services as
an  indicator  led  to  the  discovery  that  while  more  health  centres  were  being  built  the
number of people attending was declining because of the shortage of other inputs. This
discovery  led  to  a  refocusing  of  effort  in  the  health  service,  and  the  availability  of
additional recurrent cost budgets through budget support supported this reorientation. In
addition, by linking up with other donors in a joint process, the load on Burkinabe public
service from multiple donor missions is reduced – a major saving in a country of acutely
limited  administrative  capacity  –  and  by  providing  funds  through  national  budget
systems a unified planning and accountability framework is made possible.

(90) 

EASTERN EUROPE and CENTRAL ASIA

MAIN DEVELOPMENT CONSTRAINTS - In many of the countries of Eastern Europe
and  Central  Asia  the  institutions  and  thus  the  governance  are  still  weak.  The  various
measures  of  corruption  -  including  Transparency  International's  Corruption  Perception
Index  -  show  that  corruption  is  a  problem  in  many  of  the  NIS  countries.  This  is  also
evidenced by the business environment and enterprise performance survey of firms in the
region  conducted  by  the  EBRD  and  the  World  Bank.  The  civil  service  in  the  NIS
countries suffers from a number of shortcomings such as (a) the continued existence of
institutions whose functional and organisational structure has not been reformed; (b) the
need to create new organs and institutions from scratch that can perform newly defined
state functions; (c) or abolition of unnecessary functions; (d) incomplete and unreformed
legislation  governing  the  rights  and  obligations  of  civil  servants;  (e)  the  prevalence  of
widespread  corruption  within  the  state  administration  due  to  lack  of  transparency,
unaccountability and low salaries; (f) the weak or, at least under-utilised human resources
management capacity within public administration; (g) the lack of professionalism of the
public administration also hinges on certain important issues, such as low wages, lack of
incentives and the lack of possibilities for improving professional capacities.

MAIN  POLICY  RESPONSES  MEASURES  -  The  EU's  cooperation  objectives  are  to
build a partnership with the NIS in which respect for democratic principles and human
rights  and  the  transition  towards  market  economy  are  fostered  and  supported.  These
objectives are based on the Partnership and Cooperation Agreements (PCAs) with most
of these countries and the Common Strategies with Russia and Ukraine, and form part of
a proximity policy, reflecting the political and strategic importance of the  region to  the
EU. The strategic importance of this partnership is now increasing as the EU enlarges to
the  east.  For  Russia  and  the  Western  NIS,  special  attention  is  given  to  initiatives
addressing  major  cross-border  problems  including  organised  crime  and  corruption.
Administrative  reform  is  a  defining  factor  for  improving  governance  and  combating

30

corruption, as it addresses the root of the problem, i.e. the bureaucratic over-regulation of
economic  activity,  which  creates  the  opportunities  for  corruption.  A  key  long-term
priority of the Tacis programme is support for the reform of the public service, judicial
and  legal  reform.  Tacis  provides  policy  advice  in  areas  such  as  state  budget  reform,
regional finance reform, public procurement reform, regulations for preventing conflicts
of interest in the civil service, public access to information, legal status of civil servants
and  training  and  human  resource  management  in  the  civil  service.  The  European
Initiative  for  Democracy  and  Human  Rights,  in  the  NIS,  supports  the  promotion  and
strengthening of the rule of law, independence of the judiciary and human prison system,
promotion  of  good  governance  and  fight  against  corruption.  The  EU  works  in  close
cooperation  with  relevant  European  and  international  organisations  in  particular  the
Council  of  Europe,  OSCE  and  UN  in  the  field  of  governance,  money  laundering  and
fight against organised crime. In the framework of the OECD Anti-Corruption Network
for  Transition  Economies,  six  NIS  (Armenia,  Azerbaijan,  Georgia,  the  Russian
Federation,  Tajikistan  and  Ukraine)  have  recently  adopted  a  regional  plan  to  fight
corruption. The plan commits these countries to specific actions to increase integrity and
transparency in public services, promote corporate responsibility and accountability, and
allow active public participation in making reforms.

5. 

CONCLUSION

(91)  Governance has become an  important area for donors’  support  in  the  context of
development  co-operation  programmes  based  on  country-owned  strategies  in
recognition  of  the  primary  responsibility  of  national  authorities  and  the  role  of
domestic  policies.  It  refers  to  the  rules,  processes,  and  behaviour  by  which
interests are articulated, resources are managed, and power is exercised in society.
It  is  a  key  component  of  poverty  reduction  strategies.  Focusing  on  governance
implies working with governments, contributing to building their capacities in all
sectors  of  co-operation,  such  as  health,  education,  transport,  rural  development,
etc. It also entails specific support to administrative reforms, improvements in the
management of public finances , security systems, etc. It finally involves fostering
civil  society  and  encouraging  participatory  approaches  to  public  policies.  The
analysis  of  governance  at  country  level  provides  a  basic  measure  of  the  quality
and performance of the political and administrative system.

(92)  The  Cotonou  Agreement  reflects  this  overall  approach  and  constitutes  a  useful
reference for other EU agreements with third countries. It contains a commitment
to good governance as a fundamental element of the ACP-EU partnership, subject
for  regular  dialogue  and  identified  as  an  area  for  Community  support.  The
participation  of  non  state  actors  is  part  of  the  process.  It  also  contains  specific
provisions to deal with serious cases of corruption, which following consultations
may lead to appropriate measures.

(93)  Being  one  of  the  priority  areas  of  EC  development  policy  identified  in  the
November  2000  Policy  Statement,  governance  is  being  addressed  in  EU’s
external  action  through  a  broad  range  of  programmes  and  instruments.  Their
impact  on  poverty  reduction,  sustainable  development  and 
institutional
sustainability  largely  depends  on  the  quality  of  the  policy  dialogue  and  the
involvement  of  all  stakeholders  in  the  reform  processes.  The  EC  currently
manages  a  large  number  of  programmes  and  is  conducting  policy  dialogues  in

31

most  developing  countries  and  regions  (the  Mediterranean  region,  Asia,  Latin
America,  Africa,  etc)  that  illustrate  EU’s  action  to  improve  administrative,
economic and political governance in partner countries. Dialogue also takes place
at the multilateral level.

(94) 

In  dealing  with  governance,  the  EC  is  progressively  developing  a  policy
framework  building  on  Member  States’  and  other  donors’  experiences  and  best
practices. The policy agenda and the specific examples of interventions presented
in chapter 4  of  this  Communication  are  a  basis  for  further  debate  with  Council,
European  Parliament  and  partners.  They  provide  a  menu-approach  with  key
guiding principles which are to be implemented on a country-specific basis. This
Communication also suggests a pragmatic approach to governance, ways to apply
indicators and it confirms the need to use various types of political and financial
instruments in a consistent manner.

(95)  Progress should also be made on coordination and complementarity between the
EC and EU Member States by adopting common policy principles in this specific
area. The degree of overall consistency between EU Member States approaches to
governance appears to provide a good basis for this exercise.

(96)  On  the  basis  of  the  outcome  of  the  debate  with  Council  and  Parliament,  the
Commission  will  operationalise  the  above-mentioned  policy  principles  into
guidelines and a handbook aiming at helping delegations to consistently manage
EC  co-operation  programmes  related  to  governance.  The  CSP/RSP  process  and
their periodic reviews constitute the appropriate framework to link in a consistent
manner  EU  external  action  priorities,  instruments  and  allocations  at  country  or
regional level.

32

ACP

ADB

AU

APRM

BiH

CARDS

CSP

CSR

DAC

DPRK

DRC

EC

ECHO

EDF

EIDHR

EU

FYROM

GAERC

GOVNET

FDI

HIPC

IDB

LRRD

MTBF

MTEF

MEDA

ANNEX

Glossary

Africa, Caribbean and Pacific

Asian Development Bank

African Union

African Peer Review Mechanism

Bosnia-Herzegovina

EC Assistance Programme to the Western Balkans

Country Strategy Paper

Corporate Social Responsibility

Development Assistance Committee

Democratic Popular Republic of Korea

Democratic Republic of Congo

European Community

Humanitarian Aid Office of the European

Community

European Development Fund

European Initiative for Democracy and Human

Rights

European Union

Former Yugoslavian Republic of Macedonia

General Affairs and External Relations Council

OECD/DAC’s network on governance

Foreign Direct Investment

Highly Indebted Poor Countries

Inter-American Development Bank

Linking Relief, Rehabilitation and Development

Medium Term Budget Framework

Medium Term Expenditure Framework

EC Assistance Programme for Morocco, Algeria,

Tunisia (Maghreb), Egypt, Israel, Jordan, the

Palestinian Authority, Lebanon, Syria (Mashrek),

Turkey, Cyprus, Malta, Libya currently has observer

33

NEPAD

NIS

NGO

NSA

OECD

OAS

PA

RSP

Status

New Partnership for Africa’s Development

Newly Independent States

Non-governmental organisation

Non-state actor

Organisation for Economic Co-operation and

Development

Organisation of American States

Peace Accord

Regional Strategy Paper

SAN JOSE GROUP

Costa Rica, El Salvador, Guatemala, Honduras,

SAP

TACIS

UN

UNSC

WSSD

WTO

Nicaragua, Panama

Stabilisation and Association Process (Western

Balkans)

EC Assistance Programme for Armenia, Azerbaijan,

Belarus, Georgia, Kazakhstan, Kyrgyzstan,

Moldova, Mongolia, Russia, Tajikistan,

Turkmenistan, Ukraine, Uzbekistan

United Nations

United Nations Security Council

World Summit for Sustainable Development

World Trade Organisation

34