Brussels, 11.7.2001
Max van Den Berg
European Parliament
ASP4 H242 Rue Wiertz
B-1047 Brussels
Tel. ++.32.2.2845669
Fax. ++.32.2.2849669
Email:
For detailed information contact Mirjam van Reisen at
1.Introduction and Background
2.Towards an output oriented approach - making the budget 'DAC compatible'
2.1.New Nomenclature
2.1.1.Simplifying the Budget
2.2.Sectoral output targets in the regional budget lines
3.Appropriations for 2001
3.1.Implementation and deconcentration
1.Introduction and Background
The EU aid programme has been heavily criticised for its lack of poverty focus. Little progress had been made to shift resources to social sectors, particularly basic health and education. The focus of the EU programme has become increasingly directed towards non-LDC countries. As Rapporteur for the Development Committee for the Budget 2001, Max van den Berg set out to ensure that the overall objective for the development budget lines would have a stronger focus on poverty eradication. This would be achieved by
- an emphasis on Least Developed Countries (LDCs) and,
- within developing countries, the need to double resources made available for basic education and health.
Additionally the capacity of the European Commission to implement the aid programme has been inadequate. The analysis arrived at in the discharge procedure 1998, which took place during the year 2000, pointed to weaknesses in the budget, among other things. The Development Committee observed that the budget-lines for development co-operation tended to suffer from:
- a lack of precise definition, and a lack of concrete targets, on the one hand;
- an over-specification of very small budget lines, on the other hand.
The conclusion of the Rapporteur was that a better balance should be struck with regards to the level of detail introduced in the budget. While adequate precision should be achieved regarding the political guidance given by Parliament, Parliament should refrain from managing implementation through budget-lines in areas that ought to be tasks for the European Commission, the EU's executive.
The objectives set for the budget 2001 were therefore to:
- double the budgets available for basic health and education in developing countries;
- ensure appropriations for LDC's be maintained at 2000-level;
- ensure adequate implementation of the budget.
In order to achieve these objectives a number of technical changes needed to be made to the budget. These changes sought for the 2001 budget were intended to:
- put an end to the proliferation of budget lines for development aid;
- enhance the effective political control over the budget lines for development aid.
This report intends to give a broad overview of the changes achieved in the 2001 budget.
2.Towards an output oriented approach - making the budget 'DAC compatible'
The OECD Development Assistance Committee (DAC) endorsed a classification system at its meeting on 14 September 1999 that entered into effect as of that date. The classification system was developed at the request of DAC Member States wanting a harmonised reporting system for ODA output.[1] This would enable a results-oriented approach in development aid, related to the internationally agreed targets that seek to half the proportion of people living in absolute poverty by 2015. A number of DAC Member States have implemented the newly developed system. The European Commission had done so for the EDF, but had not adopted the system for aid to other regions.
The Rapporteur strongly believed that all EU aid would benefit from adopting this system with reports on the purpose of aid being made through a classification by sector of destination. It would make the budget and implementation of internal EC aid policies more consistent and mutually compatible. It would also make the reporting of the EC aid programmes more consistent and compatible with the other EU Member States, as well as other DAC Members. This is particularly relevant in the context of the EU aid programme which, according to the Treaties, is intended to be complementary to Member States programmes. Complementarity can only be achieved if information on the activities of the EU programme can be compared with those of the Member States.
Concretely the Rapporteur decided that specific output targets should be set in the budget lines with a geographic destination, in accordance with DAC guidelines. Additionally a revised nomenclature would make the overall budget compatible with the categories agreed by the DAC.[2] Once this was be achieved it would be an important step to creating greater focus in and more transparency of EU development policy - and help in determining its comeplementarity with Member States' programmes.
2.1.New Nomenclature
The new nomenclature introduced in the budget 2001 seeks to make a first step towards making the budget consistent with the main categories identified by the DAC. Therefore the nomenclature relating to sectoral lines were changed into a new structure, which is summarised below. In political terms the rapporteur intended to give greater emphasis to ensuring that sectoral areas related to social services would become visible, since investment in these sectors has proven to be essential for poverty eradication.
The basic set-up of the nomenclature is now as follows:
Table 1: Nomenclature 2001, Development Aid
Number / Regional lines / Sectoral linesB7-1 / EDF
B7-2 / Food aid (including emergency aid)
B7-30 / Asia
B7-31 / Latin America
B7-32 / Southern Africa
B7-4 / Mediterranean countries
B7-5 / Eastern Europe and Central Asian countries, including Balkan
B7-6 / Sectoral lines, of which:
B7-6000
B7-6002 / NGOs
Decentralised co-operation
B7-62
B7-620
B7-622
B7-624
B7-626 / Multisector and cross-cutting issues*
Environment
Gender
Child discrimination
Sex tourism
B7-63
B7-6310
B7-6211
B7-6212
B7-6313 / Social Infrastructure and Services*
Drugs
Poverty-related diseases
Aids
Basic Education
B7-65 / Co-ordination, Evaluation, Inspection
B7-70 / Democracy and human Rights
* The Commission can shift funds within budget lines under one heading.
2.1.1.Simplifying the Budget
In order to achieve this rationalisation, several budget lines have been combined. The suppression of lines has not been at the expense of Parliament's political priorities. Budget lines related to gender, children and decentralised co-operation, for instance, which the European Commission had abolished in its Draft Provisional Budget, were reinstated. Emphasis that the Development Committee desired to give to issues so far neglected or ignored in the budget, such as Communication Technology, people living with disabilities, small enterprises and poverty related diseases, have been achieved by introducing these in the comments of already existing regional budget lines.
Where possible budget lines have been merged, or moved under one heading, enabling the Commission to implement these with some increased flexibility, as long as this can be politically justified. For instance, seven separate lines on promoting the defence of human rights and fundamental freedoms (B7-7) have been completely merged. Regional destination of these lines have now been determined in the comments. This gives the Commission much greater flexibility in implementation as long as it implements the regional distribution set in the new budget lines' comments.
By simplifying the budget the Parliament has adequately responded to concerns of the Commission that the proliferation of budget lines had become unmanageable. At the same time it has enable Parliament to create new instruments for taking better political control for the output of ODA. This orientation on results is very much in line with current thinking on new directions for Development Aid. Once the result-oriented approach becomes a normal feature of EU aid, and policy and programming give greater clarity on targets and outcome, a further rationalisation of the budget might be feasible.
2.2.Sectoral output targets in the regional budget lines
International targets have been set to reduce the proportion of absolute poverty by the year 2015. From these targets it follows that more ODA resources should be shifted to investment in social services. Since the largest part of the EU aid programme is organised on a regional basis, it follows logically that targets for output in specific sectors should be set as an instrument to guide policies towards these regions. This makes the budget more results-oriented and more transparent for the public.
The Rapporteur recognised that shifts have to be made gradually and targets should be based on trends for actual implementation by the Commission. On request the Commission provided annual figures for actual implementation in sectors during 2000 as an annex to the PDB 2001. Based on these figures shifts were proposed and adopted by the Budget Authority for the 2001 Budget.
The output targets identified in the Budget 2001 are given in annex 2. The Budget Authority specified that these targets may vary between countries on the needs identified in the programming exercise and that the Commission may justify deviations from the global targets, provided that they are properly substantiated in an annual report to the European Parliament.
The comments accompanying the targets request the Commission to provide annually an overview of actual commitments for the previous year, in percentage terms, in a working document accompanying the Commission's budgetary proposals. The working document should also include commitment and payment forecasts. For the EDF the budget states explicitly that these forecasts should be in line with the agreement that the EDF be exhausted by 2006.
The introduction of output targets and the increase achieved in targets set for social sectors in the regional lines, ensures that aid to basic health and education will be doubled in 2001.[3]
3.Appropriations for 2001
The Rapporteur set out to safeguard the budget lines for development aid at 2000 levels. Also the Development Committee insisted that the new costs resulting from aid requirements for Kosovo and the democratisation process in Serbia should not be financed from aid destined for the poorest countries. This objective has been achieved in the 2001 Budget, with the exception of the Meda programme. While the Council sought to cut Meda with €150 million in commitment appropriations, the final budget that Parliament approved included an increase of € 40 million of commitment appropriations over the cuts proposed by the Council.
3.1.Implementation and deconcentration
The lack of implementation has been seen as a central problem of EU aid. This results partially from a lack of human resources and insufficient expertise in key areas. So far, the budget has only dealt with this problem in an extremely haphazard manner, with some allocations for administration costs for some budget lines, but not for others. Moreover, levels of administration costs could vary greatly between budget lines, and there seemed to be no rational for the levels that had been set. Additionally the conditions of the administrative costs were not harmonised. A lack of deconcentration also made implementation less effective.
For 2001 the Rapporteur proposed that for all the aid budget lines administrative costs would be allocated and that this be done at the same level. The level introduced was 7% of the budget, which is a broadly accepted standard and internationally recognised norm in this area.
In the past problems were identified by the Court of Auditors in the way the Commission made use of experts to support its regular staff. The comments to the appropriations made available in this area in the 2001 budget clearly define what expenditure can be made in this area. The appropriations are intended to cover expenditure on technical and administrative assistance that the Commission will delegate to an implementing agency covered by Community law. In this context, the appropriation in question may cover expenditure on temporary support staff (auxilliaries, detached national experts, staff from employment agencies) recruited in connection with the groundwork - at headquarters - for deconcentration of programme management to Commission delegations in non-member countries. The appropriations made available to the Commission in this area are substantial.
4.Conclusions
For the budget 2001 the following achievements have been made:
- Budget lines for the poorest countries have been preserved at the levels of 2000, despite pressures to cut these resources by the Council;
- the nomenclature has been rationalised to put a stop to the proliferation of budget lines, and to bring the budget in line with the internationally recognised classification systems for categorising ODA output;
- A results-oriented approach has been introduced by setting sectoral targets within the regional budget lines - encouraging the programming direction currently followed by the European Commission;
- Targets for commitments in basic health and education have been doubled;
- Resources for implementation and administration of budget lines have been increased, harmonised and standardised according to international criteria.
5.Annexes
Annex 1: Classification by Sector of Destination[4]
The DAC system of classification[5] by sector identifies the following categories, which in total add up to all ODA:
Social infrastructure and services
Education
Of which Basic Education
Health
Of which Basic Health
Population and reproductive health
Water supply and sanitation
Government and Civil Society
Other social infrastructure and services
Economic infrastructure and services
Transport and storage
Communications
Energy
Banking and financial services
Business and other services
Production sectors
Agriculture, forestry and fishing
Industry, mining and construction
Trade and Tourism
Multisector/cross cutting
General environment protection
Women in development
Other multisector
Commodity aid and general programme assistance
Programme Assistance
Structural adjustment with World Bank/IMF
Developmental food aid
Other general programme and commodity assistance
Action relating to debt
Emergency Assistance
Relief food aid
Other emergency and distress relief
Administrative costs of donors
Support to Non-Governmental Organisations
Unallocated/unspecified
This classification is applied in the budget 2001 nomenclature and the sectoral targets spcified in the regional budget lines.
ANNEX 2 Output Targets Budget 2001
Annex 2A: Output Targets for Cooperation with ACP Countries and OCT-DOM Countries, encompassing B7-1, B7-11
Commitments in 2000 (%) / Output targets for CA in 2001 (%)Sectors / Sector / Sector
Subsectors / Subsector / Subsector
1. Social infrastructure / 23% / 35%
1a. Education / 4% / 10%
Of which basic education / (6%)
1b. Health / 8% / 10%
Of which basic health / (6%)
1d. Water supply and sanitation / 2%
1e. Government and Civil Society / 8% / 8%
1f. Other social infrastructure and services / 3% / 3%
2. Economic infrastructure / 35% / 23%
2a. Transport and storage / 33% / 21%
2b. Communications
2c. Energy
2d. Banking, finances and commercial services / 2% / 2%
3. Production sectors / 16% / 14%
3a. Agriculture, forestry and fishing / 7% / 7%
3a. Industry, mining / 6% / 4%
3b. Trade and Tourism / 3% / 3%
4. Multisector/cross cutting / 4% / 6%
4a. General environment protection / 4% / 4%
4b. Women in Development / 2%
4c. Other multisector
5. Commodity Aid and general programme assistance / 22% / 22%
6. Total / 100% / 100%
ANNEX 2B: Output Targets for Cooperation with Asian developing countries, encompassing B7-300 and B7-301
Commitments in 2000 (%) / Output targets for CA in 2001 (%)Sectors / Sector / Sector
Subsectors / Subsector / Subsector
1. Social infrastructure / 54% / 54%
1a. Education / 46% / 35%
Of which basic education / (10%)
1b. Health (includuing the fight against poverty-related diseases) / 1% / 10%
Of which basic health / (10%)
1c. Population and reproductive health / 3%
1d. Water supply and sanitation / 1% / 1%
1e. Government and Civil Society / 5% / 5%
1f. Other social infrastructure and services / 1%
2. Economic infrastructure
2a. Transport and storage
2b. Communications
2c.. Energy
2d. Banking, finances and commercial services
3. Production sectors / 11% / 11%
3a. Agriculture, forestry and fishing / 9% / 9%
3a. Industry, mining / 2% / 2%
3b. Trade and Tourism / 6% / 6%
4. Multisector/cross cutting / 14% / 14%
4a. General environment protection / 2% / 7%
4b. Women in Development / 7%
4c. Other multisector / 12%
5. Commodity Aid and general programme assistance / 21% / 21%
9. Support to Non Governmental Organisations / 10%
6. Total / 100% / 100%
ANNEX 2C: Output Targets for Cooperation with Latin American developing countries, encompassing B7-310 and B7-311
Commitments in 2000 (%) / Output targets for CA in 2001 (%)Sectors / Sector / Sector
Subsectors / Subsector / Subsector
1. Social infrastructure / 42% / 42%
1a. Education / 15% / 15%
Of which basic education / (6%)
1b. Health (includuing the fight against poverty-related diseases) / 10%
Of which basic health / (6%)
1c. Population and reproductive health / 5%
1d. Water supply and sanitation / 6% / 6%
1e. Government and Civil Society / 6% / 6%
1f. Other social infrastructure and services / 10%
2. Economic infrastructure / 5% / 5%
2a. Transport and storage
2b. Communications
2c.. Energy / 2% / 2%
2d. Banking, finances and commercial services / 3% / 3%
3. Production sectors / 37% / 29%
3a. Agriculture, forestry and fishing / 29% / 21%
3a. Industry, mining / 2% / 2%
3b. Trade and Tourism / 6% / 6%
4. Multisector/cross cutting / 9% / 9%
4a. General environment protection / 2% / 4%
4b. Women in Development / 5%
4c. Other multisector / 7%
5. Commodity Aid and general programme assistance / 7% / 5%
9. Support to Non Governmental Organisations / 10%
6. Total / 100% / 100%
ANNEX 2D: Output Targets for Cooperation with the countries of Southern Africa countries, encompassing, including South Africa, B7-32
Commitments in 2000 (%) / Output targets for CA in 2001 (%)Sectors / Sector / Sector
Subsectors / Subsector / Subsector
1. Social infrastructure / 38% / 40%
1a. Education / 1%
Of which basic education
1b. Health (includuing the fight against poverty-related diseases) / 20%
Of which basic health
1c. Population and reproductive health
1d. Water supply and sanitation
1e. Government and Civil Society / 17%
1f. Other social infrastructure and services
2. Economic infrastructure / 40% / 20%
2a. Transport and storage
2b. Communications
2c.. Energy
2d. Banking, finances and commercial services / 40%
3. Production sectors / 20% / 10%
3a. Agriculture, forestry and fishing / 20%
3a. Industry, mining
3b. Trade and Tourism
4. Multisector/cross cutting / 2% / 10%
4a. General environment protection
4b. Women in Development
4c. Other multisector / 2%
5. Commodity Aid and general programme assistance / 10%
9. Support to Non Governmental Organisations / 10%
6. Total / 100% / 100%
1