24.8.2006   

EN

Official Journal of the European Union

C 200/1

I-VII

1-11

1-5

6-11

12-49

12-31

12-16

17-23

24-26

27-31

32-49

32-41

42-47

48-49

50-57

50-52

53-57

58

CSP

Country Strategy Paper

EC

European Community

ECU

European Currency Unit

EIB

European Investment Bank

ENP

European Neighbourhood Policy

ENPI

European Neighbourhood and Partnership Instrument

EuropeAid

EuropeAid Cooperation Office

GDP

Gross Domestic Product

MEDA

Measures to accompany the economic and social reforms in the Mediterranean non-member countries

MED-Committee

Advisory Committee of Member States for the Mediterranean region

NIP

National Indicative Programme

SAF

Structural Adjustment Facility

TA

Technical assistance

I.

In 1995 the EU and 12 Mediterranean countries decided on a new phase in their relationship, called the ‘Barcelona Process’ or the ‘Euro-Mediterranean Partnership’. The main aim is to develop different aspects of the partnership, including the political, economic and financial, and social and cultural dimensions (see paragraphs 1 and 2).

II.

The MEDA programme is the EC's main financial instrument for the implementation of the Euro-Mediterranean Partnership, with more than 8 000 million euro allocated for the period 1995 to 2006. At the end of 2005 about 7 000 million euro had been committed for different projects and programmes, and some 4 000 million euro had been spent (see paragraphs 3 to 5).

III.

The Court has audited the MEDA programme, to determine whether it actually contributes to economic reform and social development in the partner countries, and whether the Commission's management of the programme is adequate (see paragraphs 6 to 11).

IV.

Regarding the MEDA programme's contribution, the EC support has:

V.

Concrete results, after more than 10 years of MEDA, are so far rather limited as many projects have not yet been completed. For most MEDA countries the impact of the EC support is to be found not so much in its financial importance as in its attempts to address sensitive policy reform issues and support poorer segments of populations (see paragraphs 27 to 31).

VI.

The Commission's management of the MEDA programme has clearly improved since the early years and can be considered as satisfactory, as programming efforts now result in a more even allocation of resources over time, preparation periods are becoming shorter and disbursements have increased significantly. Contributing factors to these improvements are an increase in the number of projects and programmes, a larger share of budget support in the total programme and the overall positive effect of devolution on project preparation and implementation by delegations. Other improvements include more systematic monitoring and evaluation and more intensive dialogue and coordination with local counterparts and other donors. The most common cause of implementation delays remains procurement problems (see paragraphs 32 to 49).

VII.

With the MEDA Regulation coming to an end in 2006 and the new European Neighbourhood and Partnership Instrument coming into effect in 2007, the Court recommends that the Commission should:

1.

After some 20 years of increasing cooperation, on trade and development issues in particular, between the EU, its Member States and the 12 Mediterranean countries concerned, the Conference of EU and Mediterranean foreign ministers held in Barcelona (November 1995) decided on a new phase of ‘partnership’, also called the ‘Barcelona Process’ or the Euro-Mediterranean Partnership (1).

2.

The Declaration adopted at the Barcelona Conference formulated three domains for the partnership, with the related key objectives, as follows:

3.

The MEDA programme is the EC's main financial instrument for the implementation of the Euro-Mediterranean Partnership, the legal basis for which was provided by Council Regulation (EC) No 1488/96 of 23 July 1996 (2). The Regulation describes a wide array of support measures to be undertaken in support of efforts by Mediterranean partners to reform their economic and social structures and mitigate any negative consequences which may result from economic development. A total reference amount of 3 424,5 million ECU was provided by the Regulation for the period 1995 to 1999.

4.

Following an evaluation of the Regulation in 1999, it was amended by Council Regulation (EC) No 2698/2000 (3), which is generally referred to as the MEDA-II Regulation. This Regulation provides a reference amount for the period 2000 to 2006 of 5 350 million euro. The amendment also added another area of activities to be supported (Improvement of conditions for the underprivileged), and it streamlined certain decision-making procedures.

5.

Total actual commitments made for the years 1995 to 2005 amount to some 6 900 million euro, and actual disbursements for the same period to some 4 000 million euro. A more detailed overview of commitments and disbursements by country for the period 1995 to 2005 is included in Annex I.

6.

In the period August to December 2005 the Court carried out an audit of the MEDA programme, on the basis of the following questions.

7.

The main aspects examined under the first question include programme relevance and focus, degree of ownership, capacity-building and results achieved.

8.

The main aspects considered for the second question are speed and efficiency of programming, preparation and implementation, monitoring and evaluation, and donor coordination.

9.

Economic reform and social development include support for economic transition and the establishment of a Euro-Mediterranean free-trade area (e.g. trade improvements, job creation and private sector development), operations in support of reform programmes (e.g. in financial services and public administration), upgrading of economic infrastructures, particularly in the sectors of transport, energy, rural and urban development, and improvements to social services, especially in the areas of health, family planning, water supplies, sanitation and housing.

10.

The audit work included visits to Egypt and Morocco, where a selection of projects and programmes was audited and discussions were held with Delegation staff, local authorities, project managers, technical assistants and other donors. In addition a desk review of projects and programmes in Jordan was carried out. The audit focused on projects funded under MEDA I and II. Projects funded through the old Protocols (4), the regional component of the MEDA programme, or through horizontal and thematic budget lines were not included in this audit. The complete list of projects and programmes examined under the audit is included in Annex II.

11.

Finally, the audit also examined relevant evaluation reports, prepared on behalf of the Commission, including the Mid-term evaluation of the MEDA-II programme, which was completed in 2005. This evaluation has concentrated on two main questions, i.e. how relevant is the MEDA II programme and how effective/efficient are MEDA II management and implementation arrangements. These questions were divided into several sub-questions, for each of which an appropriate evaluation approach was designed, including an extensive documentary review and numerous interviews in the Commission's Headquarters and in the two countries visited (Tunisia and Egypt). The Court has analysed this evaluation in relation to its own audit and has concluded that it provides sufficient basis to use the evaluation results as corroborative evidence for its own audit findings (see also paragraphs 46 and 47). Where relevant reference is therefore made to this mid-term evaluation.

12.

All projects examined in the three countries covered by the audit were relevant to the MEDA objectives (5) and in line with the respective country's national development objectives. Confirmation of this observation can be found in the Commission's own mid-term evaluation of the MEDA-II programme, which concluded that the relevance of the programme was satisfactory.

13.

In all three countries the complete portfolio of EC support has been a mix of interventions aiming at economic reforms and social development, with Egypt and Morocco showing a fair balance between these two different areas, while in the case of Jordan the emphasis has been more on economic reforms.

14.

However, because the MEDA objectives and possible support measures are rather widely defined in the MEDA Regulations, the question is whether in practice the Commission has focused its support, which could increase the coherence of the support.

15.

In two of the three countries examined (Egypt and Jordan) there has been a clear tendency to focus support on a limited number of sectors and through a limited number of interventions. In the third country, Morocco, this has not really been the case, as EC support has been spread over a larger number of interventions covering many different sectors, particularly during the MEDA-I period and with a slight improvement during MEDA-II (6).

16.

Meanwhile the Commission has formulated a new external relations policy towards the neighbouring countries called the European Neighbourhood Policy (ENP). Under this policy a new financial instrument (the European Neighbourhood and Partnership Instrument) should become effective in 2007, replacing several other instruments including MEDA. As a first step towards implementing the ENP, specific Action Plans are being drawn up for all the partner countries. Given that these Action Plans set out a full set of priorities covering all areas of cooperation (7), the forthcoming series of country strategy papers (covering the period 2007 to 2013) may have to focus on a more limited number of areas of intervention.

17.

One of the generally accepted principles for effective aid is the encouragement of ownership (i.e. that the intended beneficiaries should have responsibility and control over projects and programmes at all stages) (8). Therefore, in considering whether the MEDA programme actually contributes to economic reform and social development in the participating Mediterranean countries, a second point of attention in the audit was whether the Commission has encouraged ownership of its programmes by the recipient governments.

18.

One way of doing that is to replace the traditional project support by general budget support, whereby the recipient government and the donor agree on certain activities to be implemented (often policy reform measures) but instead of being used to cover specific expenditure the donor funds are paid directly into the government treasury. The decision to use budget support also depends, of course, on fulfilment of certain conditions, such as the existence of a certain standard of public finance management (9). This method of delivering aid funds is generally considered to encourage a sense of ownership on the part of the recipient government, although it cannot ensure this (for an example of a budget support programme and the type of conditions involved, see Box 1).

Box 1Example of budget supportTrade Enhancement Programme, Egypt (40 million euro)Programme objectives

19.

The audit showed that in all three countries there had been a clear increase in the use of the budget support instrument, and the statistical data included in the mid-term evaluation also confirmed that this was the case for all MEDA countries combined (10). However, in Morocco there are also a large number of traditional projects, including a number of projects providing infrastructure and equipment, that by their very nature do not really encourage ownership, contrary to projects which are more concerned with training and institution-building.

20.

As for the budget support operations completed so far, measures were implemented satisfactorily and disbursements were made without major delays or problems. From this one can conclude that in these cases local authorities have actually ‘assumed ownership’ of the reform programmes.

21.

However budget support is not the only instrument for providing support. Policy reforms often need complementary actions, such as training or certain types of equipment, for which the traditional project approach is better suited, as is also the case when the objective is to provide targeted support for a certain population group or region, e.g. through rural development.

22.

In such a project situation ownership can also be encouraged, not only ownership by local authorities, but also by the people benefiting from aid-supported activities. A positive example was found during the audit in Morocco, in the case of a rural development project in the Central Atlas mountains. A participative approach was followed vis-à-vis the local population, which meant that all local partners were fully involved in the whole process of preparing and implementing the local development plans. It was evident that this approach was contributing to the success of the project activities (see Box 2).

Box 2Example of project supportRural Development in the Central Atlas Mountains, Morocco(Khénifra Project, 15 million euro)Project objectives

23.

In the end the decisive factor for increasing ownership lies not just in the aid delivery modality, but in local authorities openness to the idea and process of reform. This was also demonstrated by several projects/programmes included in the audit, where progress clearly improved after a beneficiary institution became fully involved or a new minister took a stronger interest in a particular programme.

24.

Another important factor that will affect whether the MEDA programme actually contributes to economic reform and social development in the participating Mediterranean countries is that of local institutional capacity to plan and implement reform programmes and other development activities. The audit examined whether the Commission contributes to the building up of this capacity.

25.

Practically all projects/programmes audited in the three countries included capacity-building measures or components. In a number of cases capacity-building within the participating institutions is even the main objective of the intervention (11).

26.

A specific area of an administrative nature where local institutional capacity has been in need of strengthening is procurement by government bodies, but applying EC procedures. As will be further discussed in paragraph 39, problems with procurement have been a major cause of delays in the implementation of projects.

27.

The audit has examined a sample of projects from the three countries (see Annex II) in order to assess whether the intended results, as defined in individual financing agreements, were being achieved.

28.

Overall, the results after more than ten years of MEDA are so far rather limited, because many projects/programmes, including a substantial number of MEDA-I projects/programmes, were still ongoing at the time of the audit, and their final results could not yet be determined (12).

29.

For those projects and programmes that started under MEDA-I (1995 to 1999), and had been completed or were nearing completion, the intended results are generally being achieved, although not 100 % in all cases. Most projects/programmes under MEDA-I got off to a very late start, partly because the regulatory framework for MEDA-I was only ready at a late stage, but also because many projects experienced delays during their start-up phase as a result of long tendering procedures. They subsequently ran out of time, and needed one or more extensions to the original project duration (10 out of 11 projects/programmes examined) in order to accomplish (most of) the planned activities. Ten of the 11 MEDA-I projects/programmes examined were still being implemented at the time of the audit (end of 2005).

30.

For most of the MEDA-II projects/programmes it was still too early to make a proper assessment of their results at the time of the audit. The budget support operations were usually proceeding according to schedule, but projects, that needed to procure technical assistance services, and sometimes also equipment or works, were easily susceptible to delays. Several projects examined were already expecting time constraints to develop as a result of the so-called D+3 rule, which restricts the period during which contracts can be signed (see further information in paragraph 41).

31.

For most of the MEDA countries, the impact of EC support cannot be attributed to its financial importanceas- the total EC support is only very limited in comparison with these countries' GDP and usually represents less than 1 % of the government's budget. This is certainly the case for two of the three countries covered by this audit (13). The impact of the EC support lies more in its attempts to address and support reform issues (e.g. health finance system, industrial modernisation, banking sector reform, Customs improvement) and to encourage Governments to tackle such issues, as well as in its willingness to support the poorer, underprivileged segments of a populations. The EC support is therefore often of a qualitative and innovative nature, the impact of which is difficult to quantify.

32.

For the MEDA-I period programming and project preparation started late. The MEDA Regulation itself was only adopted in 1996, and the first indicative programmes covered the years 1996 to 1998. As a result, the commitments were concentrated in a few years, and sometimes in a few large projects or programmes only, e.g. the four MEDA-I commitments for Egypt ranged from 100 to 250 million euro, commitments for Jordan included two structural adjustment facilities (SAF) of 100 and 80 million euro respectively, and Morocco's commitments included a SAF of 120 million and a road project of 80 million euro.

33.

The MEDA-II Regulation, which came into effect in 2001, included new programming rules. These rules were meant to speed up the process of programming, by allowing the proposed commitments for a particular year to be submitted to the MED-Committee once a year, in an annual financing plan with short project summaries attached (instead of individual project proposals submitted at various points in time).

34.

In addition a new series of Country Strategy Papers (CSP) was produced in 2001, covering the period 2002 to 2006, as well as new National Indicative Programmes (NIP) for 2002 to 2004. Since 2002 the actual commitments have followed these programming documents closely. In particular, from the 2002 to 2004 NIPs onwards project proposals have been formulated in a much more continuous manner, as can be seen in the Table. Total commitments for all countries together also show a more even distribution from 2000 onwards.

35.

The whole project preparation process involves a number of steps, starting from first identification, through detailed preparation, presentation to the Member States' advisory committee (the MED-Committee) to the Financing Decision taken by the Commission and up to the signing of the Financing Agreement by the Commission and the beneficiary authorities. The review of the projects/programmes included in the audit (see Annex II) showed that for the MEDA-II period this process was generally completed faster than it had been before (14). Contributing factors are the Commission's devolution of responsibilities from Headquarters in Brussels to its delegations, which has certainly increased their involvement in the preparation process, the whole streamlining of the programming process as described in paragraphs 33 and 34, and also a number of other management changes which have been part of the overall external aid reform (15).

36.

The audit has shown that procurement of services at the start of a project, usually for technical assistance (TA), takes necessarily a minimum of eight months from issuing the call for tender to signing the contract, but can sometimes take up to two or even three years (16). This can be the case when the tender fails, e.g. for lack of a sufficient number of valid offers, and has to be repeated. Start-up of TA-related projects therefore remains a time-consuming process, which is easily susceptible to delays. In this respect there is not much difference between MEDA-I and MEDA-II.

37.

Overall disbursements under the MEDA programmehave improved as from 2000, and even more clearly from 2002 onwards (see Table). The annual average disbursements over the MEDA-I period 1995 to 1999 reached 175 million euro per year, a figure which has tripled to an average of some 528 million euro for the six-year period 2000-2005. For 2004 and 2005 total disbursements were higher than the total new commitments made in these years, which means that from 2004 for the first time since the start of MEDA the cumulative total of outstanding commitments (17) has been reduced. For MEDA-I, after six years (1995 to 2000) cumulative disbursements reached 38 % of cumulative commitments, while for MEDA-II this percentage had increased to 46 %, also after six years (2000 to 2005). This is an indication that the speed of implementation has improved under MEDA-II. The MEDA-II Mid-term evaluation comes to a similar conclusion when it states that ‘the programme is reaching maturity in terms of its level of operations’ (18).

38.

Explanatory factors for this improved implementation are:

39.

This overall positive assessment does not mean that implementation is always without problems. Procurement problems are the main cause for delays in implementation. Of the projects/programmes examined in the audit, practically every one that includes a procurement component (for works, supplies or services), has experienced problems, and often delays, in this respect, for a variety of reasons. Many calls for tenders have had to be cancelled and repeated for lack of a sufficient number of technically valid offers. Procurement procedures are generally considered to be complicated and local project management units and tenderers are not always fully acquainted with them. In Egypt, for instance, small local contractors had problems complying with the administrative requirements for tenders, because all tender documents were in English. The rule that supplies have to be of European or Mediterranean origin poses another regular problem, especially when computer or electronic equipment is involved.

40.

The audit has shown that as a result of devolution Delegations, with their specialised finance and contracts staff now on the spot, can and do play an important role by helping project managers and local administrations to deal with the procedural aspects of procurement. For example, it was found that the Delegation in Morocco now organises information meetings prior to launching calls for tenders and has provided support to various parties concerned at different stages of the procedure. In Egypt the Delegation also helped to supervise and guide the tender process for an important construction component, which might otherwise have been cancelled for lack of time within the remaining project period. In addition the Delegation in Egypt was in the process of examining the possibility of having tender documents translated into Arabic.

41.

For most of the MEDA-II projects the so-called D+3 rule applies, which requires contracts for works, supplies or services to be concluded not later than three years after the date of the budgetary commitment (19). As a result of this rule several new projects that were about to start implementation at the time of the audit and include considerable procurement components and/or calls for proposals, appear to have only limited time left to complete these activities.

42.

Systematic appraisals are carried out at the macro-level by the EC's Delegations (e.g. quarterly macro-economic reports, regular trade reports, assessments for budget support programmes) and by others (World Bank, IMF), using standard macro-economic indicators, but it is difficult to assess the impact of the Commission's own support at this level.

43.

It is also very difficult to assess the Commission's impact at the level of the EU's strategic objectives as defined in the individual country strategy papers (CSPs), particularly when these objectives are described in fairly general terms, such as supporting the process of economic transition and supporting sustainable and balanced socio-economic development, and when no concrete indicators of achievement have been determined.

44.

The main monitoring by the Commission is at the level of individual projects/programmes, where systematic monitoring and evaluation efforts are undertaken and indicators are often used in the logical frameworks. The system of external monitoring visits now covers the majority of projects/programmes and provides a regular, external, assessment of project design, results, impact and chances for sustainability. Mid-term reviews and end-of-project evaluations are also carried out systematically for most projects/programmes.

45.

A good initiative has been to carry out evaluations of individual country strategies, as was done for Morocco in 2003 and for Egypt in 2004. This has provided useful information that can be taken into account in preparing the next country strategy papers and indicative plans. However, this exercise was so far limited to these two countries only.

46.

According to the MEDA Regulation the Commission has to evaluate the programme every three years. A mid-term evaluation for the MEDA II programme was therefore commissioned in early 2004, and a final report produced in July 2005 (20). A final evaluation for the MEDA programme is now scheduled for the second half of 2007.

47.

The main conclusions of the study, which coincide with the Court's own findings in most respects, are:

48.

The audit has shown that the Delegations in the three countries are all quite active in the process of coordination with other donors as well as with the beneficiary authorities. This is undoubtedly a result of the increase in staff capacity provided as part of the devolution process. In all the countries concerned regular meetings take place between the Commission and EU Member States. In addition there are similar systems of donor group meetings with thematic sub-groups, in which the Commission's Delegations often play an active role by chairing one or more such donor groups, depending on the specific sectors of interest.

49.

So far many of the coordination activities consist mainly of exchanging and compiling information on individual donor interventions and considerable scope exists for further coordination efforts in areas such as programming, implementation, monitoring and evaluation. However the Delegations have taken various initiatives to develop donor coordination and harmonisation activities further.

50.

The EC support provided through the MEDA programme to economic reform and social development in the Mediterranean partner countries has been relevant to the specific needs of the countries concerned and the objectives set for the Euro-Mediterranean Partnership. In two countries, Egypt and Jordan, support has been clearly focused on a limited number of sectors, but this was not the case in Morocco. As the new Action Plans under the European Neighbourhood Policy cover all areas of cooperation, further focusing will be necessary at the level of the country programming documents. The Commission has encouraged ownership through its increased use of budget support, but the project support modality will still be needed when a more specific, targeted type of assistance is required. Capacity-building measures are systematically included (see paragraphs 12 to 26).

51.

The overall results after more than ten years of MEDA are so far rather limited, as many of the early projects had a slow start, needed extensions and are not yet completed, while for most of the MEDA-II projects it is still too early to be able to assess their potential results (see paragraphs 27 to 30).

52.

Even when the total MEDA funds available are substantial, for most of the MEDA countries the impact of the EC support derives less from its financial importance and more from its attempts to address sensitive policy reform issues and support poorer segments of populations, where its impact is difficult to quantify (see paragraphs 31 and 43).

53.

The Commission's management of the MEDA programme has clearly improved since the early years and can now be considered as satisfactory, also taking into account procedural and external constraints. Programming efforts have resulted in a more even allocation of resources over time, preparation periods have become shorter, and overall disbursements have increased to a significantly higher level compared to the early MEDA period (see paragraphs 32 to 37).

54.

Contributing factors to these improvements are an overall increase in the number of projects/programmes under implementation, a larger share of budget support within the total programme, and the generally positive effect of devolution on the process of project preparation and implementation by delegations (see paragraph 38).

55.

The most common cause of implementation delays remains procurement problems, although Delegations have been actively looking for ways to contain such problems (see paragraphs 39 and 40).

56.

Because the Commission's management of the MEDA programme has exercised both patience and flexibility, by allowing project extensions and changes to designs where necessary, MEDA-I projects and programmes have generally achieved or will in the end achieve satisfactory results. The so-called D+3 rule, which has applied to projects since 2003, may prevent such long term commitment and flexibility, thereby reducing the chances of economic reform and social development producing sustainable results (see paragraphs 29, 30 and 41).

57.

Other improvements in the Commission's overall project management consist of more systematic monitoring and evaluation efforts and more intensive dialogue and coordination between Delegations and local counterparts and other donors (see paragraphs 42 to 49).

58.

With the MEDA Regulation coming to an end in 2006 and the new European Neighbourhood and Partnership Instrument coming into effect in 2007, the Commission should: