Proposal for a Council Decision on the position to be adopted by the Community within the ACP-EC Council of Ministers regarding the revision of the terms and conditions of financing for short-term fluctuations in export earnings (Annex II of the ACP-EU Partnership Agreement signed in Cotonou)
Date: 2004-02-12
Institutions: European Commission
Subjects: ACP-EU Convention, eligibility criteria, export revenue, financing

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 12.2.2004 
COM(2004) 68 final 

Proposal for a 

COUNCIL DECISION 

on the position to be adopted by the Community within the ACP-EC Council of 
Ministers regarding the revision of the terms and conditions of financing for short-term 
fluctuations in export earnings (Annex II of the ACP-EU Partnership Agreement signed 
in Cotonou) 

(presented by the Commission) 

EN 

   EN 

 
 
 
  
EXPLANATORY MEMORANDUM 

1.  INTRODUCTION 

Through  the  signature  of  the  ACP-EC  Partnership  Agreement,  the  Parties  recognised  that 
instability  of  export  earnings  may  adversely  affect  the  development  of  the  ACP  States  and 
jeopardise the attainment of their development requirements. A system of additional support 
in order to mitigate the adverse effects of any instability in export earnings was therefore set 
up  within  the  financial  envelope  for  support  to  long-term  development  in  accordance  with 
article 68.1 of the Cotonou Agreement. More precisely, support to mitigate adverse effects of 
instability  in  export  earnings  can  be  financed  under  the  national  allocations  to  cover 
unforeseen needs, the so-called B-allocations (Article 3.2 (b) of Annex IV of the Agreement), 
which is part of the long-term development envelope. 

The purpose of support in cases of short-term fluctuations in export earnings is mentioned in 
article  68.2  of  the  Agreement:  “…to  safeguard  macroeconomic  and  sectoral  reforms  and 
policies  that  are  at  risk  as  a  result  of  a  drop  in  revenue  and  remedy  the  adverse  effects  of 
instability of export earnings ...” 

2.  RESULTS 

Requests for support from a significant number of ACP States have been analysed according 
to the eligibility criteria mentioned in article 9 of Annex II of the Agreement. These requests 
were based on export statistics for years 2000, 2001 and 2002. 

TABLE: FLEX-SYSTEM, SUMMARY OF RESULTS (APPLICATION YEARS 2000, 2001 AND 2002)  

A) Number of countries which 
requested support under FLEX (at 
least one year) 

B) Number of countries which 
fulfilled criterion 1: a 10% (2% in 
the case of least-developed 
countries) loss of export earnings. 

51 

29 

 7 countries for 3  application years 
(2000, 2001 and 2002) 

8 countries for 2 application years 

14 countries for 1 application year 

68% of ACP countries   

38% of ACP countries      

C) Number of countries which 
fulfilled criterion1 and 2 (a 10% 
worsening in the programmed 
public deficit). 

6 

1 country for 3 application years 

8% of ACP countries 

2 countries for 2 application years 

3 countries for 1 application year 

SOLOMON ISLANDS: (Application years 2000, 2001 and 2002)  €7,25 mill  

GUYANA: (Application years 2000 and 2001)       €8,4 mill 

VANUATU: (Application years 2001 and 2002)    €1,7 mill 

 ZAMBIA: (Application year 2000)      €11,49 mill 

BURUNDI: (Application year 2001)   €3,18 mill  

MAURITANIA (Application year 2002)      €3,63 mill 

 Total support for FLEX: €35,65 million 

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3.  REVISION OF THE MECHANISM 

This proposal for a Council decision is treated independently from the Communication from 
the  Commission  on  the  revision  of  the  ACP-EC  Partnership  Agreement  because  of  their 
different scope and timetable to enter into force. 

Article 11 of Annex II of the Cotonou Agreement states that the provisions for financing for 
short-term  fluctuations  in  export  earnings  shall  be  subject  to  review  at  the  latest  after  two 
years of operation and subsequently at the request of either party.  

The  experience  of  the  first  years  of  application  of  the  new  system  (2000-2002)  shows  that 
relatively  few  countries  were  eligible  for  the  new  instrument.  In  order  to  improve  the 
functioning of FLEX and ensure it responds more adequately to its objectives, the eligibility 
criteria  should  be  simplified.  However,  the  main  principle  of  the  instrument,  support  for 
losses in Government revenues as a consequence of a shortfall in export earnings, remains. 

Two modifications are proposed: 

(1) The elimination of the benchmark of 10% worsening in the programmed public deficit as 
defined in Article 9.1 (b) of Annex II; 

(2)  The  extension  to  landlocked  and  island  ACP  States  of  the  special  clause  of  2%  loss  of 
export earnings in the case of least developed countries of Article 9.1 (a) of the Annex II. 

As determined by Article 100 of the Agreement, Annex II may be revised, reviewed and/or 
amended  by  the  ACP-EC  Council  of  Ministers  on  the  basis  of  a  recommendation  from  the 
ACP-EC  Development  Finance  Cooperation  Committee. The Commission  proposes  that the 
Council adopt the attached decision on the position to be taken by the Community within the 
ACP-EC Council of Ministers regarding the revision of the terms and conditions of financing 
for  short-term  fluctuations  in  export  earnings  (article  9  of  Annex  II  of  the  ACP-EU 
Partnership Agreement signed in Cotonou) 

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Proposal for a 

COUNCIL DECISION 

on the position to be adopted by the Community within the ACP-EC Council of 
Ministers regarding the revision of the terms and conditions of financing for short-term 
fluctuations in export earnings (Annex II of the ACP-EU Partnership Agreement signed 
in Cotonou) 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  establishing  the  European  Community,  and  in  particular 
Article 310 in conjunction with the second subparagraph of Article 300(2) thereof, 

Having regard to the proposal from the Commission, 

Whereas: 

(1) 

(2) 

(3) 

Article  100  of  the  Partnership  Agreement  signed  in  Cotonou  on  23  June  2000  states 
that  Annex  II,  III,  IV  and  VI  of  the  Agreement  may  be  revised,  reviewed  and/or 
amended by the ACP-EC Council of Ministers on the basis of a recommendation from 
the ACP-EC Development Finance Cooperation Committee. 

Article 11 of Chapter 3 of Annex II of the Agreement states that the provisions in the 
Chapter  shall  be  subject  to  review  at  the  latest  after  two  years  of  operation  and 
subsequently at the request of either Party.  

The  system  of  additional  support  in  order  to  mitigate  the  adverse  effects  of  any 
instability  in  export  earnings  has  been  operational  for  two  years.  The  Community's 
position  within  the  ACP-EC  Council  of  Ministers  should  therefore  be  established 
regarding  the  revision  of  the  terms  and  conditions  of  financing  for  short-term 
fluctuations in export earnings. 

HAS DECIDED AS FOLLOWS:  

Sole Article 

The Community shall take the following position within the ACP-EC Council of Ministers on 
the  revision  of  the  terms  and  conditions  of  financing  for  short-term  fluctuations  in  export 
earnings, based on the attached draft decision of the ACP-EC Council of Ministers. 

Done at Brussels,  

For the Council 
The President 

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ANNEX 

Draft 

DECISION OF THE ACP-EC COUNCIL OF MINISTERS 

on the revision of the terms and conditions of financing for short-term fluctuations in 
export earnings (Annex II of the ACP-EU Partnership Agreement signed in Cotonou) 

THE ACP-EC COUNCIL OF MINISTERS, 

Having  regard  to  the  ACP-EC  Partnership  Agreement  signed  in  Cotonou  on  23  June  2000, 
and in particular, Article 100 thereof, 

Whereas: 

(1) 

(2) 

(3) 

The  importance  of  a  system  of  additional  support  in  order  to  mitigate  the  adverse 
effects  of  any  instability  in  export  earnings  has  been  emphasised  in  the  ACP-EC 
Partnership Agreement signed in Cotonou on 23 June 2000. 

In accordance with Article 11 of Annex II of the ACP-EC Partnership Agreement, the 
provisions of chapter 3 of this Annex on financing for short-term fluctuations in export 
earnings  shall  be  subject  to  review  at  the  latest  after  two  years  of  operation  and 
subsequently at the request of either Party.  

In  order  to  improve  the  functioning  of  the  system  on  financing  for  short-term 
fluctuations  in  export  earnings  and  ensure  it  responds  more  adequately  to  its 
objectives.  

HAS DECIDED AS FOLLOWS: 

Article 1 

Chapter 3 of Annex II is hereby amended as follows: 

Article 9.1 of Annex II shall be replaced by the following: 

“Eligibility criteria 

1. Eligibility for additional resources shall be established by: 

(a)  –  a  10%  (2%  in  the  case  of  least-developed,  landlocked  and  island  ACP  States)  loss  of 
export earnings from goods compared with the arithmetical average of the earnings in the first 
three years of the first four years preceding the application year; or 

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– a 10% (2% in the case of least-developed, landlocked and island ACP States) loss of export 
earnings  from  the  total  of  agricultural  or  mineral  products  compared  with  the  arithmetical 
average of the earnings in the first three years of the first four years preceding the application 
year for countries where the agricultural or mineral export revenues represent more than 40% 
of total export revenues from goods; and 

(b)  a  worsening  in  the  programmed  public  deficit  programmed  for  the  year  in  question  or 
forecast for the following year.” 

Article 2 

This Decision shall enter into force on the day of its adoption. 

Done at ...... 

For the ACP-EC Council of Ministers 
The President 

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