Tuesday, May 17, 2011

Still dodging the question: The Commission Responds To Our Aid Report (Part 2)

As promised, here is Part 2, which focusses on the Commission's second response to our two-part series on EU aid - this time our report looking specifically at the EU's approach in North Africa and the Middle East, the follow up to our briefing on the EU external aid budget taken as a whole.

In our previous post we noted that the Commission completely failed to engage with the main recommendation in our earlier report - that national contributions to aid funding should be made voluntary - and suggested why it chose to dodge the question. But in this post we'll take up some of the more detailed points raised by the Commission's two responses, which you can read in full here and here.

Firstly, there's the issue of 'budget support'. Over the last ten years, the EU has been increasingly relying on delivering its aid in the form of 'budget support', meaning that the money is transferred directly to the treasuries of recipient countries, rather than being committed for individual projects. Budget support can be either 'general' or 'sector-specific'. In 2009, 35% of the money allocated via the EU's Neighbourhood Policy (ENP) was in the form of sector budget support.

The Commission says in its response to our aid report that it "provides budget support only to certain governments in the developing world that meet minimum conditions of governance and good administration."

However, the Commission then fails to explain how Ben Ali’s Tunisia and Mubarak’s Egypt – where people took to the streets to protest against these regimes’ autocratic and corrupt rule – were able to fulfil the Commission’s criteria on transparency, democracy and good governance, given that in 2009 alone they were allocated €61.3 million and €107.7 million respectively in direct budget support funding by the EU.

The Commission writes:

“It goes without saying that in a number of countries…the EU has often felt frustrated by the lack of political reforms, stifling of civil society, and violation of human rights or dominance of the state…However, the serious shortcomings of a government do not justify isolating a population, punishing its youth and leaving it only in the hands of despots or dictators.”

But this still does not explain the Commission's history of dealing directly with illegitimate regimes via budget support, rather interacting with civil society groups.

To be fair, the Commission insists that it “has funded civil society to a large extent,” for example via the European Instrument for Democracy and Human Rights (EIDHR). However, we can’t help noting that €141 million to develop 14 projects in the EU’s Southern neighbourhood between 2007-2010 is dwarfed by the direct support to now discredited regimes in the area. The Commission's Annual Action Programmes show that, over the same period, a total €394 million in the form of budget support was committed to Egypt alone.

Secondly, the Commission has defended its financial and auditing controls, saying, in particular, that:

"In order to achieve clarity about the outcomes of aid in a certain country or in a particular sector like health or education, the European Commission contracts a higher level evaluation to carry out an examination across a number of projects and programmes."

However, the Commission’s response to our report on EU aid to North Africa and the Middle East shows something went very badly wrong in the evaluation of a €40 million project in the Occupied Palestinian Territories. Between 2006 and 2007, the Commission allocated €40 million to pay for power sold to local electricity companies operating in the area, with the aim of ensuring Palestinians received uninterrupted power supplies. In our report, we cite from an independent evaluation of the EU’s MEDA II funding programme for Mediterranean countries carried out by a network of European audit firms - an evaluation contracted by the Commission.

The evaluation raises two important concerns. Firstly, the auditors write, “We do not have the documentation to record disbursements” - in other words, the auditors had no idea where the cash went. Secondly, they note that
“by providing meta-level support, in the form of payment of invoices for power sold to the local electricity companies, the European Commission is not directly engaging in issues of who pays what for their electricity at a retail/consumer level. Funds generated at that level could be used to subsidise any element of the operations in West Bank and Gaza, including activities which might further destabilise the area.”
The Commission is now dismissing this evaluation, saying that a separate international audit firm “was able to confirm that all claims submitted for payment were eligible.” Extraordinarily, the Commission goes on to explain that
“The evaluators [the ones we quote in our report] were given access to the Commission's financial records system for contracts in the external relations field. It is therefore difficult to say why they could not find this data which was available for them…The comments quoted in the report were made by independent evaluators based on incomplete information.”
But here's the thing, the Commission actually signed off the evaluation, saying that it provided “credible and substantiated findings and conclusions”. The Commission is contradicting itself in so many ways that it's almost an achievement. What's clear is that this example inspires little confidence in the auditing and monitoring systems that the Commission claims are at the heart of its efforts to "identify the results of its aid".

Another issue we raise in both our reports concerns a €10 million grant given to the Italian Interior Ministry to train Libyan 'law enforcement authorities' and prepare them better to tackle illegal migration to Italy and other Southern EU member states. The project's expected results included: "Special units trained/able to gather intelligence information by debriefing the illegal migrants detected"; and "technical equipment provided to improve the operational capacity of the relevant Libyan agencies in charge of border and migration management, search and rescue operations, investigation."

The Commission argues that "retrospectively this spending was particularly pertinent given the current situation in the Southern borders of the EU." We're suprised the Commission is willing to defend training Gaddafi's 'authorities' for any purpose - especially given Gaddafi's resort to effectively blackmailing the EU on migration issues.

Also on Libya, the Commission says "contrary to what is stated in the Open Europe report, the EU has never 'opened' an association agreement with Libya." In fact, we said, "in 2008, the EU opened negotiations on a possible association agreement with Libya" and we make it very clear that talks were suspended. The point is that the talks were opened as late as 2008.

The Commission also fails to come up with an adequate defence of why it chooses to fund so many cultural projects and initiatives in Mediterranean countries whose added value remains, according to us and the Netherlands' Europe Minister, dubious. In the response to our aid report, we read that “cultural and creative industries, as well as cultural tourism, create jobs and economic growth on an important scale.” This may be true, but then the Commission should at least try to explain how this applies to, for example, the €22,500 for a Europe Day Concert or the €9,500 German folk band concert, both in Jordan - in addition to a range of other projects promoting European culture.

Finally, we note that, as was the case with our earlier aid report, the Commission has decided not to engage with some of the key suggestions we make, including: making aid to Mediterranean countries voluntary and granting the EU’s Southern neighbours full market access, which would involve lifting tariff quotas on agricultural products and scrapping the EU’s complex rules of origin.

A real shame that once again the Commission has chosen to avoid the real issues in this hugely important area. Instead, it opted for a response riddled with contradictons and inconsistencies - which largely served to vindicate our conclusions rather than refute them.

As much as we like being vindicated, we would prefer if the Commission instead engaged in a grown-up discussion about how we can better target EU aid. Everyone would gain from that, not least the world's poor.

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