Production of opium for medical purposes in Afghanistan (debate)
The next item is the report by Mr Cappato, on behalf of the Committee on Foreign Affairs, with a proposal for a European Parliament recommendation to the Council on production of opium for medical purposes in Afghanistan.
rapporteur. - (IT) Madam President, ladies and gentlemen, in this report we propose that Parliament should take the initiative and make a proposal to the Council, primarily in the context of the common foreign and security policy, on the issue of opium production in Afghanistan.
Our starting point is the realisation that the results achieved to date are inadequate. There has been a 50% increase in the production of opium used to produce heroin over the past two years. It seems that we are unable to find an effective means of reducing this enormous production mountain, all of which then goes to enrich not the growers, the farmers, of course, but the large international drug mafias, the terrorists and the Taliban.
The report also starts from another premise: that at the same time there is in fact a very severe lack of access to painkillers. Some 80% of the world's population has no access at all to painkillers. Of course, the two issues could be regarded as completely separate, but I believe it is the job of political institutions to be pragmatic and hence to understand that, faced with this enormous volume of production used for heroin - whilst a product from the same agricultural origin is in very short supply - it ought to be possible, as it were, to combine the two points of departure.
The amendments put forward in the Committee on Foreign Affairs and by Mrs Gomes on behalf of the Socialist Group in the European Parliament, as well as those tabled by the Group of the European People's Party (Christian Democrats) and European Democrats in plenary, have helped to ensure that the proposal on the table today is not an alternative one, that is, a negative proposal calling for the policy pursued hitherto to be replaced overnight.
What we are asking of you, of the Council and of the Commission, is to conduct an experiment, to run some pilot projects converting part of the crop currently used to produce heroin to produce painkillers instead. On the demand side too, policies could be launched to try and take painkillers to continents such as Africa and Asia which are practically bereft of any such medicines.
That is why the report, as it emerged from the Committee on Foreign Affairs and taking into account the proposed amendments, seems to me fundamentally well-balanced. It proceeds from a very simple assumption, namely that it is probably - I believe definitely - easier to cooperate with farmers if we propose converting part of their output to legal ends, rather than simply coming along with a policy of eradicating, fumigating and destroying plantations. That response in fact creates yet another reason for conflict with local populations and has proved counterproductive and unhelpful, at least until now.
I therefore hope that, beyond the understandable official line taken by Europe's governments and the Afghan Government, asserting the need to fight opium production, beyond that official line we might send out another message, and the European Parliament is perhaps freer than others to make such a proposal. We have already assumed this responsibility and I hope we will reassert it tomorrow at the vote. We are freer than others to propose that alternative experiments be carried out and assessed pragmatically, not ideologically.
Every one of us here has his or her own ideas about international politics and drugs, and about international policies in Afghanistan. This report is not intended as an ideological proposal, but as a practical attempt to help find a solution for what really is a global tragedy.
Member of the Commission. - Madam President, I too would like to say thank you very much to Mr Cappato - tante grazie!
I welcome this very timely debate on the drug problem - and particularly on Afghanistan's drug problem - which, as we know, is a major complex issue in the political and security context.
We recently had a lot of discussions in New York. There were a number of very important discussions during the UN General Assembly with President Karzai, with UN Secretary-General Ban Ki-moon, and with a host of countries. These focused exactly on this whole complex question.
Tonight's discussion contributes to the wider debate on Afghanistan's reconstruction, but also on the role of drugs. Let me also commend you for setting up the EP Delegation for relations with Afghanistan. We are taking a keen interest in your work and consider it very important that you have done this.
Afghanistan's drug industry does indeed pose an enormous challenge to progress in state building. The latest United Nations Development Programme (UNDP) report makes for troubling reading. Both poppy cultivation and processing capacity have, unfortunately, increased significantly. Afghanistan's southern provinces are most affected, with 70% of all the production. The strong link between the insurgency and the drug economy hardly comes as a surprise. However, we must not overlook the positive developments, especially in the more stable parts of the country, where there have been real improvements in health and education, as well as economic growth.
Thirteen provinces in northern and central Afghanistan are indeed poppy free. That, at least, is very promising, and something on which we can build. The Cappato report gives a complete picture of this situation - and I should thank you for your encouraging remarks on what the Commission is doing - and it also points, quite rightly, to Afghanistan's responsibility for tackling the opium industry. On that we are in absolute agreement.
Yet I must say that I cannot share - at least not yet - the conclusions reached in the report, which proposes to legalise the opium poppy for medical purposes, albeit on a trial basis. At first sight that may be an appealing proposition, but unfortunately there are no simple answers to Afghanistan's complex drug problem.
Let me share with you some of my concerns. Countries like Australia, Turkey and India, which are already producing raw opium for medical purposes, usually have effective law enforcement and also an absence of widespread conflict. Even then, implementation is very difficult. Where such conditions are not being met, opium cultivated legally is promptly diverted, as we have seen in Peru and Bolivia. Obviously, in the case of Afghanistan, licit cultivation would, we fear, simply add to illicit cultivation instead of replacing it. Also, the legal production of opium remains unappealing to local farmers as their revenues would only be around 25-30% of what they can now obtain on the black market.
The implementation of such a scheme is complex, and only feasible with subsidies for quality monitoring and the distribution of medical products. Should we support this with taxpayers' money? The Afghan Government, which is notoriously weak and has weak institutions, unfortunately does not at the moment have - and that is why I said 'not yet' - the capacity to oversee such a scheme.
In some parts of the country, there is simply no governance, let alone good governance, at the moment. This applies notably to the unstable southern provinces, where the bulk of opium is produced. Finally, the Afghan Government itself has firmly ruled out - and this is an important argument - any licit production of opium.
Against this backdrop, the political message in this report does not really send the right signal to our Afghan partners. It might even backfire. The hard and undeniable truth is that reconstruction in Afghanistan will need much more time and resources. It will also require stamina, if we want to bring lasting development to this war-torn country.
Progress in state building is only possible with more resolve, including from Afghanistan's political leadership, notably at the local level. That was, by the way, the message we gave in New York. I agree it is high time to visibly tackle corruption. We have not only said this, but are also trying to help in this by building up a good judicial system and having a police force that really works, in order to convince ordinary Afghans who often remain sceptical.
There is a clear way ahead. It is through Afghanistan's national drug control strategy, which has been endorsed by the international community and contains all the elements needed. This really deserves our unequivocal support, being a comprehensive strategy that includes interdiction, public information, prosecution of known drug dealers and the promotion of local development.
Where such a careful policy mix has been used, farmers have already abandoned poppy cultivation, sustainably. In that context, the Commission considers that a proposal to legalise the opium poppy might simply undermine the work it is currently doing in other sectors, notably concerning the rule of law and policing.
on behalf of the PPE-DE Group. - (IT) Madam President, ladies and gentlemen, I have no doubt whatsoever that Mr Cappato, with whom I have been friendly for a long time, is trying desperately to contribute to the fight against drugs in the world and to help the unfortunate young or older people who are suffering close to death and who can be assisted with drugs. Regrettably, however, I cannot go along with him.
Regrettably, I repeat, I am not of the rapporteur's opinion. I believe the problem stems from the fact that his proposal concerns Afghanistan, a state where insecurity could not be any greater. Yes, Iraq is perhaps less safe, but Afghanistan is hardly the place to begin trying to convince farmers to abandon what for them is the very lucrative cultivation of poppies and switch to crops that are fairer, more Old Testament-like and more in tune with the civilised farming practices we are all familiar with.
The report itself makes perfectly plain that the largest quantity of drugs in the world, about half, comes from Afghanistan and that opium growing is illegal in Afghanistan. Even though it is illegal, however, that country is the source of half of the raw materials needed to kill our young people or make them fall prey to drug traffickers who, as we know, draw them into the use of drugs, which harms them and society as a whole.
I believe that there is only one effective weapon to combat all drug traffickers, beginning with the Afghan farmers who in my opinion are the first drug traffickers. Our inability to control and monitor them means that the only way to fight drugs is through prevention, and hence by helping to reduce opium-growing as much as possible.
For this reason the PPE-DE Group opposes this part of Mr Cappato's report, and I think that what I am saying now must be clear to everyone, whatever tomorrow's outcome may be.
(The President cut off the speaker)
on behalf of the PSE Group. - (PT) I must congratulate the rapporteur, Mr Cappato, not only on this very useful report but also on his readiness to accept contributions in order to get as wide-ranging an agreement as possible.
His original intentions were laudable as he was trying to kill two birds with one stone: legalising poppy cultivation and opium production for medical purposes would not only have ended heroin production in Afghanistan but also the lack of painkillers worldwide.
Unfortunately, we came up against several practical problems, such as the fragility of the Afghan institutions and their inability to regulate opium production, the uncertainty as to the economic viability of such a scheme and the danger in allowing the reintroduction of opium in some of the thirteen Afghan provinces which have stopped production.
My Group's amendments tried to refocus the report on the essential element: the fight against opium production in Afghanistan which is affecting not only Afghanistan but also neighbouring countries. The drugs illegally produced from this opium constitute what some call the true weapons of mass destruction, particularly in Europe.
In the fight against opium production, we must be sensitive to the individual characteristics of the various Afghan regions. Only a combination of measures will be successful. Firstly, the corruption permeating the Afghan central administration, particularly the Interior Ministry and police, must be eradicated as this has paralysed all policies to combat opium production. Secondly, the 30 or so main drug traffickers identified in a 2006 UN and World Bank report must be sought, captured and put on trial so that this murderous trafficking can be stopped. Thirdly, NATO must support the Afghan operations to fight this trafficking, by destroying laboratories and stores and preventing drug transports. Fourthly, the poppy eradication actions must be carefully and selectively applied and concentrated in areas where farmers have real alternatives.
This brings us to the points of agreement with the rapporteur. We all oppose indiscriminate fumigation of poppy plantations, as has been advocated by the US, which will simply swell the ranks of the Taliban without substantially altering the production of heroin.
Finally, in the context of a package of measures to deal with the Afghan drug problem, the rapporteur's proposal for a pilot project for the legal production of opium-based analgesics should be studied. More than anything, this report tries to encourage the European Council to be creative and daring in the fight against heroin production in Afghanistan. There are no easy solutions to this problem, but we know that the terrorism and violent obscurantism advocated by the Taliban and Al-Qaeda will only be defeated when Afghanistan is freed from the clutches of drugs.
I am about to end, Mr President. This report must be viewed as an urgent appeal to the Member States not to spare any efforts in the economic and political reconstruction of a country which has been so badly affected by bloody conflicts and which is so important for regional and global security.
Madam President, I speak on this matter in a personal capacity, and not on behalf of my Group.
The production of illicit opium in Afghanistan has flourished since US and allied forces have been in that country. This despite the setting-up of various anti-drug-production authorities and anti-narcotic programmes, sometimes using large amounts of EU taxpayers' money.
So it is obvious, even to the blind, that the Afghan people will go on producing opium come what may. The reason for this is quite simple. The world's anti-narcotic agencies are growing in size, number and expertise, and they are doing their job more effectively. They are therefore managing to confiscate larger amounts of drugs. However, since the demand from drug-addiction sufferers remains unaltered and since criminal drug traffickers continue to make huge profits from the illegal supply of opium to these sick people, the price of opiates goes up and the profits from dealing in opium increase.
Therefore, the Afghan people are just following basic liberal market principles. They are increasing their production in order to meet illicit trade demand and in order to increase their profits. So it is a pure fallacy to expect that sponsoring more opium control programmes in Afghanistan is going to have any significant effect.
The only way to deal effectively with opium production in Afghanistan, and elsewhere for that matter, is to deal with the drug problem globally. The only common-sense way to do that is to legalise drugs and recognise that drug addicts are not criminals, but sick people who need help.
If those addicts were offered therapeutic drugs in a controlled medical setting, then the chance of avoiding serious side-effects, as well as the chance of achieving detoxification, would be much improved. At the same time, the enormous criminality involved in drug trafficking would vanish, and all anti-drug police agencies would be scrapped, leading to phenomenal budgetary savings.
The logic of this is so basic, but politicians worldwide are having difficulty seeing it.
on behalf of the UEN Group. - (IT) Madam President, ladies and gentlemen, the issue addressed by Mr Cappato's report is extremely delicate and requires careful appraisal by the European Parliament to avoid putting forward misguided and disastrous solutions, albeit motivated by good intentions.
I wish to highlight two points. Firstly, to increase the production of opium and its derivatives in Afghanistan could compromise the country's reconstruction and the already difficult stabilisation of the rule of law in that unfortunate region. Secondly, the increasing production of opium - up by 30% this year - has not been matched by an adequate anti-drugs strategy.
For these reasons I think the proposal put forward in the report is absolutely unacceptable, and I would stress that:
1. the necessary quantities of morphine are already being produced in Afghanistan under special licences and subject to supervision by the United Nations drugs agency and the Afghan Government's Ministry of Counter Narcotics;
2. the International Narcotics Control Board maintains that there is already a worldwide surplus of opiates for medical use;
3. large-scale legal production of morphine would lead to more drugs being produced; these would ultimately meet the demand for drugs on the world market. Once they were placed on the market cheaply they would be available to all.
We should instead oppose drugs - always and in every case and by all means - from production, to trafficking, to illegal distribution. Demand should be curbed through a value-based policy and through ongoing, widespread prevention work and information campaigns, especially among young people.
In a country like Afghanistan, given the conditions in which it currently finds itself, the solution proposed by this report could be regarded as an indication of surrender and defeat; it could also thwart the efforts being made by the international community, the European Union, the United Nations and the reconstruction agencies in Afghanistan through programmes to diversify away from opium plantations and into other crops, supported by financial incentives.
Finally I would just mention that the International Narcotics Control Board has approved the Afghan Government's decision rejecting the proposal to legalise illicit opium poppy cultivation and reiterating its commitment to comply with its international treaty obligations.
on behalf of the Verts/ALE Group. - (ES) Madam President, I want to begin by emphasising that this report is extremely important, timely and courageous. The two emergencies to which it refers both merit political attention and a political response that they clearly have not yet received.
While the security situation and the situation regarding opium production in Afghanistan are increasingly worrying, the need to supply analgesics on a global scale is one of the greatest humanitarian emergencies of our time, although unfortunately it is also one of the most ignored.
The rapporteur, Mr Cappato, did not have an easy task with this report and it is thus all the more remarkable, and I again reiterate both my support and that of my Group. As he himself said, although the link between the two issues is not simple, nor necessarily immediate, it is our responsibility as politicians to analyse the complex realities in order to find complex solutions to the complex problems. That is exactly what this report does.
As regards security in Afghanistan, there is no doubt that it must be a priority if we want to implement reconstruction and development programmes with future guarantees. The problem, however, is that certain armed groups are funded precisely as a result of the lack of regulation of opium production. We also know that there is illegal cultivation and trafficking of opium, which accounts for 40% of Afghanistan's gross domestic product.
In the light of this situation, I think it is appropriate at least to study and take account of initiatives such as those of the Senlis Council, which is proposing a system to authorise the cultivation of opium for medical purposes in Afghanistan. This would focus mainly on the production of painkillers such as morphine and codeine, which could also be sold to other countries that currently have little or no access to these types of vital medicines as a result of preferential trade agreements.
It is unfortunate that this proposal, at present and in real terms, does not have stronger support from the Commission or the Afghan Government itself. Even more worrying is the fact that the measures being touted as alternatives often consist of chemical eradication, as stressed over and over again by the US authorities. If this measure were to be carried out, it would give the Taliban a new argument to defend its positions and eventually would most likely result in the farming communities ending up as rebel camps.
It would also have very serious health and environmental repercussions. It is clear right from the start that aerial spraying, which is presumably what is proposed for Afghanistan, guarantees that the contamination will extend to the humans who live in the treated areas and surrounding areas. This was demonstrated at the start of year when this practice was used by Colombia to fumigate cocaine production along the border with Ecuador, with the latter consequently taking a complaint and case to The Hague.
I am not an expert and obviously this chemical issue is much more complex, but I believe that at this stage we should be well aware of some of the disasters caused by napalm and depleted uranium. We should not repeat this a third time and I hope that we do not.
(SK) Production of opium must be controlled. The entire international community must concern itself far more with control of opium production everywhere in the world. Efforts undertaken so far by the UN and its Economic and Social Council (ECOSOC), as well as by the World Health Organization, to regulate the use of opiates for the treatment of pain are necessary but still insufficient. At the same time the international community must not allow an unrestrained use of opiates and their misuse by drug addicts.
In my opinion it is our duty not to give up the fight against the misuse of hard drugs that quite clearly destroy their users' lives. Neither do I support the notion that society should supply addicts with drugs instead of trying to re-educate them and return them to reality. What exactly is the Cappato report about? According to one point of view, the international community suffers from a lack of availability of opiates, or might suffer from such a shortage in the near future, and it is therefore necessary, under certain conditions, to buy this drug from Afghanistan.
It is true that opiates are needed for the treatment of various illnesses, for post-operative pain relief and, last but not least, for the treatment of people with malignant diseases. However, this theory suffers from several fundamental defects that cannot be ignored in the present situation. Firstly, the current political situation in Afghanistan is unstable. In Afghanistan it is necessary to fight the Taliban on the one hand and to side with the opium black market on the other hand. This black market has a decisive impact not only on the Afghan economy but also on Afghan politics and foreign relations. I have serious doubts and worries over this and I will explain now why in my opinion such an approach cannot work. Projects involving legal poppy cultivation for the purpose of opium production will not work because the International Narcotics Control Board can only impose sanctions on a country afterwards but the country will be losing a part of the crops to the black market.
International demand is constant. The Afghan Government is not capable of acting as the sole manager of opium crops. It is clear that under these circumstances the Government will lose the fight against traffickers. Competition will increase the price of opium and farmers who grow poppies legally will turn to the black market. In addition to that (and this is very important) Afghan prices are not competitive compared with Australia where one kilo of morphine costs USD 56, India where it is USD 159 or Turkey where it is USD 250. In Afghanistan the price can go up to USD 450 per kilo.
Regarding the use for medical purposes, if Afghan opium were to be used in medical products, this would only add to further over-saturation of the market in this area. I am about to finish, Madam President. I will oppose any support by the EU and its Member States for poppy cultivation in Afghanistan for at least four reasons: insufficient infrastructure, absence of economic competitiveness, huge expansion in the wrong direction and, finally, there is no lack of opiates on the world markets at present.
(PL) Madam President, Commissioner, I should like to begin by thanking Mr Cappato for his work on this report. The report posed a great challenge as it attempts to respond to one of the most difficult problems in the contemporary world.
Opium production in Afghanistan is increasing year on year. According to the latest annual report, opium production is now double what it was two years ago. In practice, Afghanistan currently has a monopoly of the supply of the deadliest drug in the world. It accounts for 93% of world production of opiates. Our President is numbered amongst those who believe that Afghanistan's fate is our common cause. The heroic struggle of the Afghan people during the Cold War period contributed to the spread of freedom across the contemporary world and to the fall of the Iron Curtain in Europe. The European Union is now honour bound to provide Afghanistan with military, administrative and economic assistance.
This also involves assistance in combating the production of drugs in Afghanistan. It should be remembered that the main incentive for Afghan growers to produce opiates is financial profit. This should be borne in mind when devising the European aid programme aimed at resolving the problem. That is why I particularly wished to commend Mr Cappato on the courageous proposals he makes in this report. They may well help to resolve the situation in question.
One of these proposals involves offering aid through the introduction of a pilot scientific project for the production of poppies for medical purposes which will allow for further research into the extent to which awarding licences can contribute to poverty reduction, diversification of the rural economy, general development and improved security. In a nutshell, this is not about moralising but about the European Union making an effective contribution to resolving this problem in Afghanistan.
(RO) According to the 2007 Afghanistan opium survey, conducted by the UN Office on Drugs and Crime, opium production reached a record of 8,200 tons, representing 93% of the world production of opiates. Thus, 40% of the gross domestic product in Afghanistan resulted from production of and illegal trade in opium, involving 2.9 million people in this process. Despite this fact, only 10 countries consume 80% of the opium derivatives legally available in the world, while in over 150 countries serious treatment insufficiencies generated by the illegal trade in opium have been found.
We should emphasize that the main source of finance of the Taliban and terrorist groups is illegal drug trafficking. Moreover, the actions to eradicate or destroy drugs, which are sponsored by the international community, are used by the tribal political and military leaders for their own benefit and for eliminating competition. Based on the things stated so far, I am convinced that a strategic and balanced approach of the process of reducing and controlling opium production should involve social and economic alternatives to favour the establishment of a rule of law and democratic institutions in Afghanistan. This is why such an action could represent one of the basic solutions for preventing and eradicating terrorism.
Madam President, I consider that an anti-drug plan in Afghanistan, consisting in the control of opium quantities by using them to obtain analgesics and other derivatives, might represent one and not the only alternative economic solution and a means of reducing poppy cultivation.
(PL) Madam President, I should like to begin by congratulating Commissioner Ferrero-Waldner on the outstanding performance by the Altenburg Boys' Choir that we have just heard. I am truly impressed.
I must now turn to less pleasant subjects, however, namely the Cappato report. Members who took the floor earlier persisted in quoting the figure of 40% of GDP because that is the proportion of Afghanistan's GDP that is allegedly generated by the production of narcotics. That figure has been accepted but I should like to emphasise that a year ago our representatives in Afghanistan clearly stated otherwise before Parliament's Committee on Foreign Affairs. They maintained that the proportion of GDP is above 50% which is even higher. I am reluctant to provide explanations, but at least 10% of the population of Afghanistan lives off drug production and trade. We should also recognise that soldiers from the international forces are involved in this trade, along with Americans based in the country.
I consider this to be a risky proposal, although I do of course accept it has certain underlying advantages. I am firmly convinced, however, that the proposal will actually result in legalisation of the trade in drugs rather than of medical aid.
(IT) Madam President, ladies and gentlemen, it is not a matter simply of observing that 92% of opium in the world is produced in Afghanistan but of noting the upward trend: in 2001, according to data from the UN drugs agency, 8 000 hectares were given over to opium growing while in 2006 it was 165 000; 185 tons were harvested in 2001, 6 100 in 2006.
This obviously means that the current strategy of destroying crops by fumigation solves nothing. Rather, it has social consequences that will subsequently cause opium production to spiral. Crops other than opium poppies are destroyed, so farmers become ever poorer and end up in the hands of drug traffickers, namely the Taliban and the warlords sitting comfortably in government.
The goal is therefore to provide farmers with support which at least initially must be at the same financial level as now, freeing them from dependence on drug traffickers. This plan will not solve the problem, of course, but no one is claiming that it will. We are talking about an experiment in a limited area, and it could not be otherwise in a war-torn country where land is controlled by rival gangs. It nevertheless constitutes a step forward, in that at least part of that opium will not end up as heroin, but as morphine. That, I believe, is beneficial for the West and the entire world.
Besides, I think we must clarify the fact that there is already provision for morphine production. I am not aware, Commissioner, that all these problems exist in India and Turkey; if so, regulation is needed. The resolution before us, however, envisages a regulatory role for international bodies: not over Afghanistan as a whole, which is unmanageable at present, but over an extremely limited area.
Furthermore, international medical associations are making plain that there is still a need for morphine today, not only in the South of the world, but paradoxically in the North too. It must of course be sold at official prices, but it is a painkiller and in my opinion everyone is entitled to it, including African people and poor people. If we are talking about expense, it undoubtedly costs less to take action of this kind and to place price controls on morphine, rather than deciding to destroy crops using the existing methods which get us nowhere.
One last comment: I welcome the fact that this has been a pragmatic debate, not an argument between those wishing to liberalise or legalise drugs and prohibitionism. We are trying to take practical, pragmatic action to assist part of the Afghan population.
Madam President, it is important that substances derived from opium, like diamorphine (also known as heroin), are available for medical purposes, especially pain relief, but poppy cultivation provides the Taliban terrorists with 20-40% of their funds, which enables them to kill NATO soldiers. Regrettably, Afghan opium production increased 34% this year and constitutes over 90% of global supply.
Troops from my country, the UK, are leading the fight against the Taliban as part of the NATO-led International Security Assistance Force (ISAF). They do not have the mandate or the manpower to police a large-scale poppy-growing medical project - or, for that matter, to eradicate the crop. They have got quite enough to think about dodging bullets, without becoming part-time market-gardeners.
However, I do have some sympathy, as a doctor, with the arguments put forward by the British Medical Association, which does support cultivating poppies - under strict supervised conditions - to ensure the ready supply of analgesics. My UK parliamentary colleague, Tobias Ellwood MP, has done much to develop a plan of a six-year period of tapered replacement of poppy crops in Afghanistan by cash crops diverting the opium production for medical use.
Therefore, we should at least explore the idea of a very limited pilot licensing scheme, mindful of the danger of it being hijacked by the Taliban for illegal purposes. Any trial will, inevitably, have to be confined to a very small area. It will need support from a range of partner organisations if it is going to work. We certainly cannot divert our brave troops from their vital task of fighting terrorism, but it might just have some beneficial effects all round.
On the issue of EU-Afghan aid, we need a far more coordinated approach by the EU to developing Afghan infrastructure and fighting corruption; otherwise, the Taliban will indeed prevail, as we are barely containing the Taliban in the south of the country.
The West must wake up to the realities of Afghanistan. International bodies are not coordinating their activities properly. The rampant corruption of the Afghan Government means that provinces are losing patience with President Karzai's Government in Kabul.
The current centralised model of government does not suit the diversity of interests and ethnicities across the country, which has never had a tradition of strong central government in the past. The provinces are currently given no operational funding to pursue objectives separate from Kabul. No long-term economic plan is being followed to harness the plentiful water supply, 92% of which - shamefully and ludicrously - runs out of the country. Construction of dams and irrigation systems would allow industrial-scale growth of fruit and vegetables.
Afghanistan was once upon a time famous for its pomegranates, now very much 'in' with the health food lobby. Building a much needed railway system would help ship such goods onto the international market.
If the country is to be rescued from political and economic disaster, much still urgently needs to be done, Madam Commissioner.
Madam President, as someone who has long opposed fumigation to eradicate drugs as inefficient, often counterproductive and always with damaging side effects to human health, I am sorry that this resolution combines this position with what I believe to be a misguided attempt to encourage licit opium production in Afghanistan. This resolution quotes the Senlis Council report suggesting a global poppy shortage; but that is not poppy, it is poppycock. The International Narcotics Control Board shows world stockpiles of licit opiates equivalent to two years' demand, whilst London-based Johnson Matthey, the largest producer of morphine in the world, attest to a world surplus of more than 250 tonnes.
The Commissioner is right to argue that conditions in Afghanistan would not allow Afghan farmers to benefit. This is just one of many forced assumptions in the draft resolution. Opium poppy is grown on less than 4% of agricultural land. Licit cultivation would add to illicit cultivation, not replace it. According to the independent Asia Foundation survey, 80% of Afghan people oppose this drugs trade. The Afghan Government opposes it, President Karzai calling opium 'the enemy of humanity'. Just weeks before the time for sowing poppy, it would send precisely the wrong political signal.
I have every respect for the rapporteur, but on this issue, I regret, the House will divide. Poppy for medicine is a beguiling phrase; but the truth, instead, is that opium funds the violence and insecurity in Afghanistan. Poppy for corruption and terrorism would be the more apt phrase.
(PL) Madam President, Commissioner, I should like to express my support for the proposal for a European Parliament recommendation to the Council on production of opium for medical purposes in Afghanistan. I also wish to congratulate the rapporteur on his courage. Combating the illegal trade in drugs is one of the major global challenges of the contemporary world. The European Union should organise its activities in such a way as to try and effectively control drugs and reduce the supply of drugs in the world on the one hand and, on the other, to increase the availability of analgesics and bring down their prices.
The proposal to legalise opium production to meet the needs of the international pharmaceutical industry may well be a useful way of attaining the aforementioned aims. Following the example of Turkey and Australia, licences could also be granted in Afghanistan for the cultivation of poppies used to produce useful analgesics such as morphine or codeine. The specific conditions prevailing in Afghanistan must be taken into account, however, if licensing is to go ahead.
Afghanistan is the main supplier of the raw material for the production of opiates in the world. Opium production and trade in Afghanistan have become an important factor in the growth of GDP, the basis of cross-border trade, the main source of income for growers and the only way for most of society to access land, work, and credit. Legalising poppy growing in Afghanistan will make sense only if the right conditions are created. The security situation must improve and the country become politically stable if the national authorities are to ensure effective control of the opium production process. Effective democracy has to come about and state credits be made available to farmers. In addition, the conduct of economic activity should be regulated.
(SV) Madam President, I want to begin by thanking Marco Cappato for an interesting report. I am responsible on the LIBE committee for the long-term budget for the drugs programme. On that committee we are trying to be practical in our work on how we in the EU can reduce harmful use and supply. I therefore think that the debate on Afghanistan is crucial, because it is the origin of the majority of the heroin (93%) that kills our young people on the streets. If it is possible through production of opium for medical purposes to reorganise control and production for some farmers under EU and UN supervision, then let us say yes to the project. This is coming from me, someone from Sweden, which has a very strong anti-drugs programme and drugs policy. Unfortunately I do not think that it is enough, but we must of course also look at other possibilities, such as energy production. However, the farmers need jobs and livelihoods, and we in the European Parliament must therefore take responsibility and demand more action. We will be replacing 40% of the GNP, and we need to take responsibility for that! As regards paragraph 1(a) calling on the Council to oppose the use of fumigation as a means of eradicating the poppy, I take a different view. I think that we must also look at it in order to break the deadlock we now find ourselves in, with nothing happening. Lastly, a few words on overproduction. It does not mean that there is a greater need for analgesics among the world's poorest, among women and children. They use very few analgesics compared with us in the EU. So let us take a global view and find constructive solutions in the EU and the UN together with Afghanistan, to support peace and democracy and to combat terrorism and drugs. Thank you.
(IT) Madam President, ladies and gentlemen, I should like to say something about the demand side and something about the supply side.
On the demand side, Mr Tatarella, who is no longer with us, and Mr Howitt raised the problem of overproduction: the fact that the opium currently available actually exceeds demand for processing into opiates for drugs. That is true, but it is true only of current demand levels.
What the report attempts to address is potential demand. Some 80% of the world's population has no access whatsoever to painkillers, even for the commonest operations, for amputations or for the care of cancer sufferers. That is what we are talking about, and the International Narcotics Control Board bears partial responsibility for the absence of a global policy to promote painkilling drugs.
On the supply side, I would take the liberty of saying to the Commissioner that this proposed pilot project would indeed cost money, resources from the taxpayer. That is true, but the existing policy costs huge amounts of taxpayers' money.
The problem is simple, therefore. What we are asking you to check is whether it is more difficult and more costly to go in and forcibly uproot crops from one area which will then very probably be moved to the adjoining area, or else to buy up that harvest and process it on the spot, under supervision by the international community, so that it cannot be used to produce heroin but is used there and then to produce medicines. The second alternative is less costly, in my opinion, including for European citizens and taxpayers.
Member of the Commission. - Madam President, I think it was a very interesting discussion. Again, I appreciate Mr Cappato's courageous idea. But, again, let me also argue and say: yes, it is true that our strategy has not yet been successful. But, as I said before, it is not only a strategy with regard to drugs; it is a hugely complex situation. We are in a post-conflict situation and, of course, all the different elements are there: NATO, the European Union and the UN. We had these meetings in New York exactly on this matter.
Now let me come back to the drugs question. There are indeed problems on the demand and on the supply side. On the demand side, there is, at this moment, no demand for additional licit opium for medical purposes according to the International Narcotics Control Board. And I hear that world demand is indeed fully met now, and Turkey and India had to cut their production in 2005 and 2006. The stockpiles were so high that they would last worldwide for two years. That is one point. I understand your saying that maybe people in other parts of the world do not even have the possibility of having medical treatment without pain relief. I understand that. But this is something that you are taking out of context. These are the realities today.
On the supply side, let us also look a little at the proportions. Afghanistan is, as some colleagues have said, the country that produces the highest share of opium and drugs: 8 200 tonnes. If it were even allowed to produce legally, there would only be a possibility for a small amount and that would only be very small. So, even if there were a possibility, I think that would represent only five tonnes of opium production. Now, comparing 8 200 tonnes to five tonnes: this is nothing! So you see, neither on the supply side nor on the demand side is there a real balance.
Therefore, apart from this very complex situation, I think your idea is courageous; I agree. But I think that, for Afghanistan, it is maybe not useful at this stage. On the contrary, I think what we have to do as a strategy is to have a combination of sustaining Afghanistan's long-term development and offering farmers alternatives to poppy cultivation, combined with improved governance. So the focus will be on justice and police, as we will try to do and as we have started doing.
We have also been at the forefront on the rural livelihood agenda and helping to support legitimate employment. To this end, the European Commission is also supporting the Afghan Government's National Drug Control Strategy through supply-control and demand-reduction initiatives and the improvement of governance. For instance, we have been supporting the Law and Order Trust Fund, up to now with some EUR 135 million, while a sum of EUR 70 million is planned for the next two years.
But I must also say, since we have been concentrating on rural development, on health care and on justice, and also helping on the police and justice reform, plus alternative production, as the European Union and European Commission, we cannot do everything alone in Afghanistan. This I would like to say to the honourable Member Mr Tannock, because I think he is addressing only us, the European Commission and European Union, but there are many other important actors there. I think we all have to get our act together. This is what we are trying to do more and more through a very coordinated strategy, which, on the one hand, is going to combat drugs. But, again, I think that, maybe, it is too early.
The debate is closed.
The vote will take place tomorrow.


Asset management II (debate)
The next item is the report by Wolf Klinz, on behalf of the Committee on Economic and Monetary Affairs, on Asset Management ΙΙ.
rapporteur. - (DE) Madam President, since the adoption of the UCITS Directive in 1985, European fund markets have experienced meteoric growth. The directive has since been updated twice to take account of new market developments, and further modernisation is right at the top of next year's agenda.
Not least among the sources of the Commission's present reform project is the first resolution on asset management (Asset Management I) adopted by the European Parliament in April 2006, which set out the main elements of the reform package. I am grateful to the Commission for having adopted these recommendations and for its intention to have them implemented in a legislative instrument in the new year.
The present draft resolution, entitled Asset Management II, is similarly designed to pave the way for future initiatives on the part of the Commission. To this end the draft provides for numerous measures which go beyond the content of next year's planned revision package but which we deem necessary if the European funds industry is to become more competitive. The following are the main points:
Firstly, the Commission should consider an extension of eligible assets to cover property funds and hedge funds. Both products help to diversify the risk exposure of portfolios and offer attractive returns on investment. Besides scope for adding these products to portfolios, consideration should also be given to a European depository passport, which would give private investors direct access to these products. We welcome the establishment by the Commission of an expert group on open real-estate funds (OREFs) and its decision to conduct a study on non-harmonised retail funds.
Secondly, not only retail investors but also professional providers and institutional investors should be able to benefit fully from a single European market. There has never been any scope for these groups, who can effectively do without the traditional consumer protection mechanisms, to operate across borders without very public notification procedures. A European private placement regime can remedy that situation. It must be designed in such a way that it does not restrict the existing schemes, some of which are very liberal, in individual Member States. In order to guarantee this flexibility, Parliament is proposing that the CESR, the Committee of European Securities Regulators, should formulate recommendations for the organisation of such a regime. The next step would then involve examining whether that was sufficient or whether there was a need for a universally binding directive.
Thirdly, the range of investment products for retail investors is constantly increasing, but the available product information does not permit comparison of the relative merits of products. This is due in part to the highly fragmented legal framework in Europe. If individual investors are to make informed decisions, however, information requirements and disclosure obligations must establish some degree of comparability between competing products. The various industries should be able to compete on a level playing field under the same rules. For this reason we call on the Commission to review the existing legal frameworks for the various product categories and to present proposals as to how the situation can be improved.
The aim is not to make products fully comparable. Life assurance policies, certificates and funds differ intrinsically in their legal status and structure. The aim is rather to establish equivalent information requirements. Even maximum transparency, however, will count for nothing if investors do not possess at least a minimum level of knowledge about diverse financial products and the way they work. It is therefore the responsibility of the Member States to encourage education initiatives in this domain.
Fourthly, investors should be able to benefit not only from a wide range of products but also from low costs. At the present time, however, the European fund landscape is extremely fragmented, which breeds relative inefficiency and excessive costs, especially by comparison with competitor countries. The Commission is planning to create a legal framework next year for fund mergers. That is to be welcomed. The Commission, however, is disregarding one of the main obstacles to cross-border mergers, namely taxation. We therefore call for cross-border mergers to be treated in exactly the same way as national mergers for tax purposes; in other words, they should not create any additional tax liability for investors. We are not asking for any measures to be taken on tax rates or the like. We are merely asking for cross-border mergers not to be treated differently from domestic mergers.
Fifthly, Parliament will produce a separate report assessing the potential utility of a European legal framework for hedge funds and private equity. The Commission, however, should prepare itself to engage actively in the international discussions on these matters.
Lastly, I should like to thank my fellow committee members, especially the shadow rapporteurs from the other groups, for their close cooperation. I hope that the Commission, as it did the first time, will again embrace our proposals so that we can make the opportunities of the single European market fully available to both investors and the fund industry.
Member of the Commission. - Madam President, I would like to commend the Economic and Monetary Affairs Committee and, in particular, the rapporteur, Mr Klinz, for taking the initiative to elaborate an own-initiative report, and for the hard work put into that report. I would like to take this opportunity also to thank the European Parliament for its valuable contribution to the asset management debate. Parliament's previous report on asset management was also an excellent contribution to our work on the UCITS Directive.
A long process of analysis and consultation has, we believe, succeeded in building a strong consensus on what needs to be done and how. We should not overload our agenda, but we are not blind to other issues and problems. Today's report testifies to the wide range of other issues confronting the European funds industry. We have already started work in many of the areas highlighted in the present report. The aim is to build a robust body of evidence on which to base future decisions. We are glad to see that a careful impact-assessment-driven process is endorsed by Parliament. We strongly believe in that approach in the Commission. It would ensure that future initiatives respond to real needs and provide effective solutions. We are also applying this approach in our work on private placement. By May 2008, we plan to present a Commission communication assessing the need for, and the feasibility of, the European private placement regime.
The report before us today calls for speedy solutions to facilitate the cross-border passporting of retail non-harmonised funds. We are also looking carefully at this important issue, and will report to the Council and Parliament in autumn 2008. We hope that this report will bring some empirical basis to this complex discussion.
Sometimes, listening to this debate, we might have the impression that solutions are identified before a problem has been properly specified. We would caution against rushing to further enlarge the EU retail fund framework. UCITS 3 already permits a wide range of innovative strategies, including some types of alternative investment. We need to be clear about what is currently possible, and on whether risk management controls across the industry are up to scratch, before contemplating further enlargement of the retail fund framework. We understand the European funds industry's desire to explore its lead in innovation and financial creativity, but not at the price of investor confidence in the UCITS brand.
We acknowledge the concerns raised in the report with regard to the divergent regulatory requirements applicable to the distribution of substitute products, and stress that the Commission has an open mind on whether there is a substantive issue that needs to be tackled. Responses to the call for evidence launched in October will allow us to assess whether the existing regulatory patchwork results in a real and significant risk of investor detriment. In the light of responses and further follow-up work, the Commission will issue a communication in autumn 2008 on the need for EU-level action.
We welcome the report's acknowledgement of the positive contribution that hedge funds provide to the functioning of markets and corporate efficiency. Some recent industry-led initiatives to develop voluntary standards on best practices are a welcome and proportionate response to the demands for greater disclosure. We appreciate that Parliament also considers that international responses are needed in these highly globalised businesses.
In summary, a lot has been achieved in the area of asset management. There is a long road ahead. New challenges constantly appear in this fast-moving business. However, we will do ourselves no favours by rushing into hasty and ill-prepared responses. We are glad to see that the Commission has, in Parliament, a valuable partner working towards the same goal, which is an integrated and efficient European fund market delivering for both industry and investors alike.
on behalf of the PPE-DE Group. - (FR) Madam President, in relation to this important own-initiative report on the Commission White Paper on investment funds, our position is that we have decided by general agreement to focus on the non-legislative aspects, given that the legislative proposal for revision of the UCITS III Directive will be tabled in early 2008. That said, the issues we have decided to address are vitally important to undertakings for collective investment in transferable securities.
There is a risk that extending the range of eligible assets to include open property funds and alternative funds could mar the excellent worldwide reputation of UCITS products and negatively affect their distribution both within the European Union and to third countries. To avoid any detriment to the investment fund industry in Europe, Parliament has asked the Commission to conduct an in-depth study of the possible consequences of including these non-harmonised retail funds among the assets eligible for branding as UCITS.
Investments in UCITS total thousands of billions of euros and account for around 80% of the investment fund market in Europe. The sector is impatiently awaiting revision of the UCITS Directive. To prevent any unnecessary and counter-productive delay with that revision, however, Parliament has clearly proposed that no extension of eligible assets should take place until legislative reform of the UCITS Directive is complete. On behalf of my group, I have consistently urged that line and I welcome the rapporteur's readiness to compromise.
The report also calls for the creation of a harmonised framework for private placements within the Union, and I fully support its recommendations on that point.
The private placement regime needs to be based on an accurate definition of qualified investors, as provided for in the MiFID Directive. Properly informed and qualified investors eligible to practise private placement should not, under any circumstances, face a bureaucratic surcharge as a result of rules that are not only unnecessary but actually counterproductive.
I have to oppose the Socialists' amendment calling for equivalence between Member States' systems of regulation and supervision in the context of applying the private placement regime, which would entail permitting reciprocal access to markets. This kind of equivalence across Europe is simply unrealistic.
I must also highlight one point on which my group and I disagree with the rapporteur. It concerns paragraph 19 on the question of so-called 'guarantee funds'. The very concept of these funds is controversial and we tried to protest at the mistaken definition of them. I hope we shall manage to lose that paragraph. I must nonetheless congratulate the rapporteur on the quality of his work, which enables us to prepare properly for the legislative proposal. It means we can now look forward with equanimity to the work that lies ahead next year.
on behalf of the PSE Group. - (DE) Madam President, may I say to Astrid that she should not always assume that Socialist motions will be untenable. Let me begin by warmly thanking the rapporteur, Mr Klinz, for his balanced report. I must tell the Commissioner that he need not always be so wary of overloading the agenda.
It is against the backdrop of the US financial and mortgage crisis that we are now dealing with the report on asset management. Not even the European Central Bank is able to assess the full extent of the damage this crisis has caused to the European financial system and to European banks. And there may - indeed there will - be more to come. The global financial market is already so closely intertwined that there was no way of protecting the Union from such speculative escapades, for which all of us must ultimately carry the can. Greedy bank executives, focused solely on shareholder value, still enjoy celebrity status, and the US rating agencies continue to do a roaring trade and to lead us up the garden path. Knee-jerk legislation, however, is never warranted. Nevertheless, there is a lot to be done in this field, and the Commission cannot leave the issue to resolve itself and let the market be.
One message I wish to highlight from the report is that more information and transparency lead to more consumer protection and greater consumer security. That is a very sound starting point. Another good thing is that the report refers to hedge funds and private equity, because more and more asset managers are investing in alternative investment products. Hedge funds, open real-estate funds and other retail products should therefore be included in the UCITS III Directive - a task that still lies ahead.
To my mind the very concept of asset management implies steady development, whether through investment certificates, pension funds, life assurance companies, banks or private asset management. Since 2003 we have had a directive on insider dealing and market manipulation. Its implementation has been totally inadequate. The fund industry in particular is always citing costly overregulation and refuses to extend its transparency and liability rules.
What we need here, Commissioner, is a clearly structured system that provides legal certainty. I am pleased that my proposal for an improved corporate governance clause has been accepted but regret the rejection of my motion on EU supervision of financial markets. We could and probably must think a bit further in this direction too, Commissioner.
It is nevertheless gratifying that a cross-party compromise was reached on the issue of guaranteed funds. When all is said and done, we should and must make every effort to ensure that speculation by asset managers is restricted and that Parliament, the Commission and the Council do not distinguish themselves by collective inertia. Commissioner, that was addressed to you. Go to it, and do it well!
on behalf of the ALDE Group. - (LT) I would like to point out that this report, though well-balanced and generally acceptable, does not in fact reflect true reality. The problem is that most of the financial institutions, as appears to be the case, judging from the data supplied, are not adhering to the rules and regulations we have recommended.
The main problem appears to be the abuse of the discrepancies occurring in these regulations. For this reason we must examine the report in the context of the other reports and documents, like MiFID, with the aim of finding some kind of compatibility. Another point that I would that like to highlight is that I support Mrs Lulling's opinion: UCITS is a good name, and we therefore need to be very careful about including new products in the portfolio.
Why is that? Because we do not know what these products are like. I am very sorry, but in this document, as well as in the Commission's proposal, the portfolios and interests of a retail investor and an institutional, professional investor appear to be slightly jumbled. Retail investors should have clear definitions and regulations. However, when we have both UCITS and alternative investment funds, the reality is that in my country, for example, they are mixed together and presented to the retail investor, who then does not understand what he is investing in.
That is why we must have clearer definitions and a document that is structured unequivocally. I do hope that next year the Commission will produce a document that is structured more clearly. We really must protect retail investors. Of course, private investors should have more rights, but these should be defined separately. We should not advise people to invest in alternative funds that have not even been defined. In my country any fund is branded alternative at present.
Madam President, first I would like to thank the rapporteur, Mr Klinz, for his own-initiative report and also for taking on board all the proposals and opinions of the other groups.
Harmonising the environment for asset management and products on the fund market can bring huge benefits to the European economy, as proven also by the 1985 UCITS Directive.
The UCITS Directive has become a huge brand globally. It sells well abroad. UCITS represent the basis for a robust fund market in Europe and they make the economy more buoyant through increased stability and the productive reinvestment of savings.
However, the topic of this report is not the UCITS revision, which is forthcoming and which we welcome. The report addresses, instead, non-harmonised retail funds that are outside the scope of UCITS, calling for a number of important measures.
I would particularly like to welcome the private placement regime, which was also mentioned by the Commissioner. Initiative is very instrumental in achieving the European market in non-harmonised funds.
Second, fee transparency is a long-due and underrated feature for increasing investor information. Other measures in the report go in the right direction as well, removing market distortions.
However - and coming back to UCITS' success - we must not get greedy here or mix things up hastily. I am, of course, referring to the debate on extending UCITS' scope to new asset classes such as open-ended real estate funds or funds of hedge funds. I do not think the time is right now to discuss these sensitive matters. We might end up with a more rigid regime, and we would probably find ourselves in a different financial market environment.
I also think it is very important to discuss the role of guaranteed funds. There is no such thing as a guaranteed fund. Our group wanted to have some flexibility. We do not think that having a capital adequacy regime for funds solves the problem. Guaranteed funds do not exist, and this kind of definition should be removed from the regime. That is why we have both put forward a proposal from the PPE-DE Group.
(FR) Madam President, Commissioner, I should like to thank the rapporteur for his text. The issues it tackles are recurring ones. For example, what exactly divides institutional and professional investors from private investors? Some people would have us think there is a sort of 'Great Wall of China' between the two. I am unconvinced, and recent events have shown the extent to which financial innovation spreads from one category of investor to another, right down to the individual saver. The fiction that we can design legislation entirely around the existence of two types of investor - enlightened, professional investors on the one hand and small savers on the other - is, in my view, a dangerous one. We are well aware of the gradual slippage of investment products. The notion of two kinds of investor is all very well but we need to recognise very clearly how we apply it.
The second question I would like to raise - which is also reflected in other texts concerning the financial markets - is about information for investors. This is obviously of key importance, yet we are starting from scratch because the complexity of financial innovation is something new that has not yet been properly acknowledged or confronted. To leave it at that, however, is not good enough: there is no substitute for responsibility on the part of those engaged in product placement and we need to remember that.
Thirdly, Commissioner, I have to say that I think you slipped up with regard to the connection between implementation of the MiFID Directive and the UCITS Directive. Does it make sense for the MiFID Directive to be implemented in the Member States before we even know how it will relate to the UCITS Directive? I think the current situation would be more balanced had we had proceeded otherwise.
With regard to taxation, the rapporteur has mentioned the implications for fund mergers. I think we also need to bear in mind the implications for product placement, which could be complicated by obstacles of a purely fiscal nature.
I should also like to say something about the Socialists' amendment because the reality of the market in these products differs between countries that produce them, countries that buy them and countries that both produce and buy them. We have introduced the concept of reciprocity, which would apply not only to opening markets and to market access but also to the nature of regulatory provision and supervision. I think these elements are essential because the idea of a non-EU country which only produced these products having access to our markets on any sort of terms simply because we had access to its market (which might well be of no interest to European consumers) seems either unrealistic or purely theoretical and I cannot accept it.
The rapporteur has suggested more than once that reciprocity would be in breach of WTO rules. But Commissioner, I ask you: what did we do when we recognised equivalence rules with the United States? That is precisely the approach we are asking you to take here. It is also suggested that the concept is unrealistic because we do not have harmonisation inside the European Union. If, however, negotiating equivalence with third countries encouraged us to establish a common standard of regulation and supervision inside the Union, would that not constitute substantial progress?
(HU) Thank you, Madam President. I hope I will be brief. As an Easterner, from an area that is poor in capital, I am not enraptured by the fact that everyone is now biting their nails to see what will happen with hedge funds or private equity when the UCITS is extended because this does not affect our own region at all, or at least will not for a good few years. Perhaps we will even experience something of this from the human side with property funds. But I would perhaps emphasise what I might expect from the audit, as an Easterner. One thing is that the banks, which very often operate as distributors within this mechanism and receive very large sums, should nevertheless be examined for some reason, since the sale cost currently accounts for 60% of total costs, and I note that in my region the banks are unbelievably profitable in this way. If we achieve something in this, we have taken a step forward.
The second thing is that the case of the MiFID inducement has also not said very much for transparency of costs since, for example, if a bank has the fund manager and the seller, we do not know what is going on in the in-house deal, and interestingly not even such in-house deals have been able to break down the different sale prices.
Thirdly, however, some Member States are doing a great deal or implementing provisions that virtually ensure that the custodian, the fund manager and their management keep their feet on the ground. In my country, or our countries, there are very many capable young people, and they are able to perform management activities, for example, at a good price and to very high quality, if they can, and I feel that relocation is in everyone's interests with a view to them coming onto the free market.
Finally, consumer protection. I acknowledge that training really is very important, but alongside it we must highlight tax matters. It cannot be that if I want to take out UCITS in another country, I will end up in a worse situation than if I did it in my own country. Thank you very much.
Madam President, I would like to thank Mr Klinz for this report. The European fund industry has made some big strides in recent years, and the UCITS Directive has been instrumental in this. But, while the fund industry has experienced rapid growth, it has much more potential. This potential can be unleashed through increased competition and mobility in the industry across the EU.
I would like to make some observations about the report. I can see merit in the recommendation to extend the scope of UCITS to invest in open-ended real estate funds and funds of hedge funds, but this should be dealt with, in my opinion, in a separate directive or legislative instrument. I also see merit in proposals to enhance the EU private placement regime and agree that the definition of eligible investors is crucial. It is important to note that, while the definitions contained in the MiFID and the Prospectus Directive offer a good starting point, there may be some additional issues which might also need to be addressed.
With regard to investment policy and risk management, I want to remind the Parliament that, while CESR is conducting a review of how the risk management process requirements of the UCITS Directive are implemented across Member States, it is not CESR's intention to harmonise these requirements. Certain key areas where divergent practices exist could be explored with the objective of a more harmonised approach. Guaranteed funds should be backed by capital advocacy requirements and this should be addressed by only allowing funds to be called guaranteed if they are backed by an adequate guarantee arrangement. I have concerns regarding any call for a depository passport that would result in the depository being established in a different state from that of the UCITS. This would create a regulatory gap because a UCITS and its depository would be subject to separate regulatory regimes, and complex legal issues might arise in the event of difficulties within the UCITS.
I thank my colleague for this report, which is a very useful one, and I hope that the Commissioner will be able to respond to the points I have raised.
Member of the Commission. - Madam President, Parliament's report shows that both our institutions' approaches to moving forward in the area of asset management are very much aligned. We also need future decisions to be based on a thorough analysis of impacts.
We both want efficient markets that respond to the needs and expectations of the European fund industry and European investors. Important efforts have been made in that direction. More important efforts are ahead of us. We are committed to delivering, but we should be cautious. We need to preserve the reforms and the repute of the UCITS brand. We need to take the time to involve and consult with all stakeholders, and we need to avoid unnecessary intervention that risks distorting the market but does not bring about noticeable benefits.
Only when all those conditions are met can we be confident that our decisions are up to the challenge. We look forward to further cooperation between our institutions in this very important area.
The debate is closed.
The vote will take place on Thursday, 13 December 2007.