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The EC and Development Co-operation

This part of the Guidelines describes the EC financing structures for development cooperation, and the various funding instruments through which support can be obtained for waterrelated activity.

Introduction

The European Commission operates its programme of development cooperation alongside those of EU member countries and with their support. Co-operation is provided in the form of direct grants based on partnership agreements with recipient countries. EC co-operation has evolved over the 30 years since the Treaty of Rome embodied the principle of co-operation through partnership with Sub-Saharan African, Caribbean and Pacific (ACP) countries. The Treaty also established the European Development Fund (see below). The EC is presently the fifth largest DAC donor.

The EC’s grouping of recipient countries does not match those established by other international bodies or used by other donors or the OECD; their basis is purely historical, depending on links created by EU members with specific countries in the pre-independence past. The 70 ACP states do not form a geographically contiguous group and are all members of other geographically based regional organisations. Within the EC, responsibility for managing development co-operation is divided between three regionally defined Directorates-General (DGIA covering Eastern Europe and the former USSR; DGIB covering the Southern Mediterranean, Middle and Near East, Latin America and South and South-east Asia; and DGVIII covering the ACP states). Their mandates also cover foreign relations and trade which gives them a wider remit than other donor agencies. All the Directorates-General are organised slightly differently, and as already noted their regional coverage is unusual. Co-operation, which takes the form of grants, is provided through a wide range of funding instruments (see below) and extends beyond project assistance to cover ‘programmable aid’ which includes structural adjustment, risk capital, commodities support (Stabex and Sysmin)1, emergency aid and food aid.

1 Stabex provides compensation for losses of export earnings from non-metal commodities and Sysmin for mining.

There has been a general lack of public awareness of the value of EC assistance. As an innovative model of North-South co-operation, the Lomé Convention (see below) is little understood outside the European donor community. Because of the complexity and fragmentation of the programme, the influence of the EC in development issues may not have been as strong as that of other donors, even though its level of funding is relatively high. This chapter aims to provide an explanation of the EC approach to development financial support available.

The Lomé Convention

EC development co-operation started in 1958 with a five-year programme, followed in 1964 by the first Yaounde Convention between the EC and 18 associated states in Africa. A second Yaounde Convention was agreed in 1970, followed in 1975 by the first Lomé Convention which considerably extended EC assistance to cover the ACP countries. The Lomé Convention is an international aid and trade agreement between the ACP group and the EU, designed to support the development efforts of the 70 ACP states. Four such Conventions have been signed to date, at five-year intervals: Lomé I was signed in 1975, Lomé II in 1979, Lomé III in 1985, and Lomé IV in 1990.

The current Convention, Lomé IV, covers the ten-year period 1990- 2000 and is the most extensive development co-operation agreement in existence, both in terms of scope (aid and trade), and in the number of signatories. ACP co-operation, according to the Convention, is to be based on partnership, equality, solidarity and mutual interest. The Convention also recognises the principle of sovereignty and the right of each ACP state to define its own development strategies and policies, as well as its situation regarding the respect and promotion of human, social, political and economic rights.

Debate has now opened on future EU-ACP relations for the 21st century as the present Lomé Convention terminates in 2000. The conclusion of the GATT Uruguay Round and the creation of the World Trade Organisation have opened up world trade, making it necessary to review the preferential trade agreements negotiated under Lomé. Other international developments, notably the end of the Cold War and subsequent geo-political shifts have had a profound effect on all international activities including development co-operation. The longterm implications of these upheavals are still not fully assimilated or even understood, but they will have a bearing on the negotiations for any new Lomé Convention. This will ultimately rebound on programme and project funding, in the field of water resources management as in others. The EU has grown since Lomé IV was signed; three new countries with established commitments to developing countries have joined (Austria, Finland and Sweden). Further countries may join in the next few years; monetary union will also have an as yet unknown impact. Under the Maastricht Treaty, the EC and Member States are required to increase the co-ordination and complementarity of their respective aid programmes. Priorities for the new programme are set out in the EC Communication to the Council and European Parliament (October 1997), which identifies three priority areas for support: growth, competitiveness and employment; social policies and cultural co-operation; and regional integration. In all areas of co-operation there are three principles to be applied: strengthening institutionalsupport and helping build local capacities; adopting a gender-sensitive approach; and integrating the principles of conserving natural resources and protecting the environment. These Guidelines have included all these aspects as related to water resources.

Development co-operation with other regions

Although the ACP group is by far the largest recipient of EC co-operation, the EC also provides assistance to Asia, Latin America, the Mediterranean and Middle East (including parts of Southern Europe) and the Central and Eastern Europe and the Newly Independent States of the former Soviet Union (CEES/NIS).

In the 1990s EC co-operation with the southern Mediterranean countries and the Middle East increased significantly. A new regional Mediterranean Policy was adopted and the level of co-operation increased from ECU 1.8 bn (1986-90) to ECU 4.1 bn (1991-95, just over 12% of the total for this period). Co-operation in municipal water and wastewater treatment is important in this region.

The EC provided no development co-operation to Asia and Latin America (ALA) until the late 1970s. The European Council Regulation of 1981, revised and strengthened in 1992, is the official basis for budgetary allocations to ALA. Development co-operation with ALA is thus relatively recent. The level of commitments has grown from ECU 2.4bn (1986–90) to ECU 4.4 billion (1991–95, just over 13% of the total for this period). This is modest for the size of the region and amounts to only one third of resources allocated to the ACP countries. The main focus of water-related development activity in Asia has been irrigated agriculture and flood control. In Latin America, water-related activity includes water supply and sanitation, wastewater treatment, and irrigation. Framework Agreements are negotiated on an annual basis with ALA countries and these form the basis for action.

In the late 1980s, as the Cold War came to an end, the EC became a major donor to the Central and Eastern Europe and the Newly Independent States of the former Soviet Union (CEES/NIS) through the PHARE and TACIS programmes respectively and several budget lines. This region is of significant strategic importance to Europe and the volume of co-operation grew rapidly to ECU 9.7 billion during 1991–95 (29% of the total EC co-operation in that period). The EC contribution together with bilateral assistance from member countries accounts for 70% of all cooperation in this region.


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