51997IE0596

Opinion of the Economic and Social Committee on 'Development aid, good governance and the role of the socio-economic interest groups` (97/C 287/10)

On 23 November 1995 the Economic and Social Committee decided, in accordance with Rule 23(3) of its Rules of Procedure, to draw up an opinion on 'Development aid, good governance and the role of the socio-economic interest groups`.

The Section for External Relations, Trade and Development Policy, which was instructed to prepare the Committee's work on this matter, adopted its opinion on 15 April 1997. The rapporteur was Mr Strauss and the co-rapporteur Mr Masucci.

At its 346th plenary session (meeting of 28 May) the Committee adopted the following opinion by 82 votes in favour and two against.

1. Summary of principal recommendations

1.1. Good governance is central to sustainable development and a necessary prerequisite if aid channelled through governments is to be used effectively. It should therefore become a criterion in determining the amount of funds allocated to each country. Good governance should itself be a major aim of cooperation aid and it should also become an 'essential element`. (Points 2.7, 4.9, 4.10, 9.3).

1.2. Greater support should be given to democracy-building institutes (Points 4.6, 4.16, 5.6).

1.3. A critical component of good governance is citizens' participation in the affairs of state. The EU's ability to encourage this would be facilitated if at least certain aspects of the partnership principle were to continue. (Points 2.5, 6.9).

1.4. Much greater efforts are required by the partners to improve the organizational capacity of the social interest groups. More funds should become available from the EU budget to strengthen civil society. (Points 6.8, 6.14).

1.5. Delegations should make information an decentralized cooperation aid more generally available. To promote this aid, delegates should bring together representatives from ACP administrations and socio-economic interest group. (Points 6.9, 6.11).

1.6. Indicative programmes should only be agreed if the decentralized cooperation content conforms with the intention of the revised Convention. Payment of the second tranche of funds should be conditional on good progress having been made on such aid projects. In future, funds should be specifically earmarked for decentralized cooperation. (Point 6.13).

1.7. Decentralized cooperation will only succeed if there is a radical reform of grant administration whereby the authorities are put in a position to process and monitor a multitude of small applications. The application procedures need to be simplified. (Points 8.1, 9.4, 9.5).

1.8. There is a close link between the quality of governance and corruption. Member States need urgently to implement the OECD recommendations on bribery in international business transactions. To reduce the incidence of corruption the Commission should play a more prominent role in the choice of development programme, the design and management of projects and simplify the tender procedures. Where corruption is confirmed and no action is taken against officials involved, EU funding should be reviewed; where contracts have been obtained corruptly they should be cancelled and any grant money repaid. (Points 5.2, 5.7, 5.11).

2. Introduction

2.1. The Economic and Social Committee continues to support economic and financial aid to the developing countries. As stated in an earlier Opinion ['Lomé IV Convention - Mid-term Review` CES 1017/93 fin ()] such aid is a practical expression by which the relatively rich countries can help the poorest people in the world to become less poor. Not only is this necessary for its own sake but, given the interdependence of nations, the wealthier states have much to gain from a reduction in poverty in developing countries. The Committee calls on Member States to increase and not reduce overseas aid. Poverty is a prime cause for political instability. When it leads to armed conflict, neighbouring countries are adversely affected by sometimes massive migratory movement and the international community is asked for emergency aid and peace keepers. Commerce is disrupted. The wealthier nations cannot afford to relax their efforts to help developing countries. At the same time they have a duty to ensure that scarce aid resources are focused on activities which in their view will effectively promote structural stability and economic development.

2.2. The opinion is primarily concerned with EU cooperation aid to ACP states, but many of its conclusions apply to development assistance generally.

2.3. When the Lomé Convention was first concluded it was thought that the provision of development aid would by itself lead to sustainable economic growth, reduce poverty and promote political and social stability. Events have confounded these aspirations, particularly with regard to the African ACP states. Since 1975 when the first Lomé Convention was concluded, aid from the EU, together with bilateral assistance from Member States, has amounted to $91 billion gross (), accounting for 39 per cent of all official aid to ACP countries (currently the proportion is about 50 per cent). Yet out of 66 of the 70 ACP countries for which this data is available, GNP per head () has advanced by more than 15 per cent in only 24 countries over that twenty year period, while in 12 it has remained virtually unchanged and in 30 it has actually declined ().

2.4. It is now realized that economic growth is itself dependant on structural stability. This rests 'on a situation involving sustainable development, democracy and respect for human rights, viable political structures and healthy social and environmental conditions with the capacity to manage change without resort to violent conflict` ().

2.5. It follows that good governance is central to economic and social progress. Good governance is characterized by political accountability through the ballot box, an independent judiciary, a civil service that can manage the business of state, the transparent and proper running of the government's finances and the facility for civil society to participate effectively in the formulation and implementation of social and economic policies.

2.6. This last factor is naturally of particular importance to the Economic and Social Committee. There is now an urgent need for more effective measures to promote the active participation of the socio-economic partners in development programmes and policy determination generally.

2.7. It is almost self-evident that good governance is a necessary prerequisite if aid channelled through the authorities is to be used effectively. It is not acceptable for aid to be corruptly diverted, where it might contribute little to development, or used where a minimum of accountability does not exist. Indeed, it is questionable whether official development aid should go to countries where governments do not strive to manage resources, particularly locally raised revenues, in an accountable and transparent way. Good governance should therefore become a prime criterion for aid allocation. It is the political and economic uncertainty arising from malgovernance that hinders inward flows of capital into many ACP states. There can be little doubt that as good governance is established private investment funds will flow more strongly. In time these should outweigh any official aid, if experience in east and south-east Asia is any guide.

2.8. The findings of this opinion were arrived at after analysing a survey conducted in 1996 of the experience of the ACP socio-economic interest groups and after the 20th Annual Meeting of representatives of the ACP/EU economic and social interest groups where many ACP representatives emphasized that good governance was a sine qua non for development. The opinion also takes into account many of the views expressed at a special hearing held in Brussels in September 1996 to which representatives from European and international organizations were invited.

3. The Lomé Convention: experience and recent modifications

3.1. The European Union has, for historical reasons, assumed a special responsibility for development in the now 70 African, Caribbean and Pacific (ACP) states. A large part of EU aid to ACP countries is governed by the Lomé Convention. This provides for a partnership between the donor and recipient governments. In addition to special trade concessions, the EU channels development aid to ACP governments. Under the partnership procedure, the Union allocates funds to each state. Governments are supposed to draw up national indicative programmes (NIP) for the programmable portion of their EDF aid which are then agreed with the EU, and within these the Union and the ACP authorities will settle individual development projects. In practice, the EU involvement in drawing up and implementing the NIPs is considerable where ACP administrative capacities are inadequate.

3.2. The aim of the convention is to promote economic and social development in a spirit of true partnership between the EU, the ACP governments and, with the introduction of decentralized cooperation, also with civil society, i.e. the ACP citizens and their institutions.

3.3. Over the years, it has become ever more apparent that the aims of the convention are not being fully realized. On the European side it has become increasingly difficult to be convinced that the indicative programmes put forward and implemented by governments have resulted in the best use of scarce development funds.

3.4. This change in perception led the European Union to insist on changes to the Lomé IV Convention at the mid-term review. Apart from important administrative changes, the revised Convention, signed in Mauritius in November 1995, added the application of democratic principles, consolidation of the rule of law and good governance to the existing reference of enjoyment of fundamental rights. While respect for human rights, democratic principles and the rule of law were made 'essential elements` - aid and other cooperation measures can be suspended if an essential element is flouted - good governance is not specifically included in this provision by name.

3.5. Meanwhile, ACP governments became vexed that in their dealings with the EU the partnership concept was tending to revert more to the traditional donor/recipient relationship. Newly independent nations were particularly sensitive to interference in what was perceived as their internal affairs and frequently felt that national sovereignty was being infringed. As a separate issue, with the progressive lowering in world tariffs, the EU's trade concessions were becoming ever less relevant.

3.6. At the same time, although there has been some easing, the Union continued to restrict the import of sensitive products, principally certain agricultural commodities and textiles, which are often the mainstay of ACP exports.

3.7. For purposes of this opinion, an important modification is that the revised Convention made ECU 80 million available for incentive financing for institutional and administrative reform measures with a view to democratization and the rule of law. These measures include actions designed to promote good governance. The importance of incentive finance is that it is available over and above the total programmable financial allocation. That means that if an ACP State seeks aid for this type of reform all or part of it could be available in addition to projects financed under the normal national indicative programme.

3.8. Closely linked to institutional and administrative reform is the development of decentralized cooperation. This approach to aid aims at giving formal recognition to the vital role of civil society in development. An essential feature of decentralized cooperation is the use of public funds (i.e. EDF monies) for development projects where financial and managerial responsibility is transferred from central government to a range of non-state operators.

3.9. While recognizing the value of such cooperation, ACP governments were at the mid-term review reluctant to extend its scope, and particularly to exclude decentralized cooperation aid out of national allocations from the prerogative of the national authorizing officers. Progress in the field of decentralized cooperation under Lomé will continue to depend on the good will of national governments.

3.10. However, in response to the Union's insistence, the ACP states have in a separate joint declaration (Annex LXXX to the revised Convention), stated that:

'with a view to encouraging the participation of the agents of decentralized cooperation in Fund projects and programmes and to ensuring that their initiatives are taken into account in the formulation and in the implementation of indicative programmes ACP states will endeavour to organize exchanges of view with such agents. The ACP states and the Commission will also endeavour to provide information necessary for their participation in the implementation of the programmes`.

3.11. The revised Convention makes it possible for organizations in the ACP countries and their counterparts in the Community to combine in the management and part-financing of projects. It will in future be possible to support decentralized cooperation from indicative programmes or counterpart funds up to ECU 300 000 per project or programme.

4. Good governance

4.1. One definition of good governance is that it 'promotes the legitimacy, accountability and competence of the process of government, along with respect of human rights and the rule of law. This encompasses the legislative, administrative and judicial functions of government at all levels, the working of institutions outside government and the influence of society in both government and non-government institutions` (). Another puts it more briefly as the 'transparent and accountable management of economic and social resources for the management of society` ().

4.2. Good governance requires that political leaders are committed to these aims. It also depends vitally on enhanced human capacity through training and education of members of governmental institutions (e.g. politicians, judges and lawyers and civil servants) and of the socio-economic interest groups and opinion formers such as persons engaged in employer, farmer, trade union, women and professional organizations, and in the media.

4.3. There is increasing recognition that sustainable development will be largely driven by the private sector. Lack of good governance hinders the emergence of this crucial element for future growth by providing an uncertain and unpredictable environment in which SME's cannot flourish and which discourages other entrepreneurs and investors.

4.4. Whereas good governance tended to focus on administrative matters, the politics of governance and the existence of democratic institutions with their checks and balances have now come to the fore.

4.5. Under a system of political accountability, governments are dependent on the good will of voters. They can be dismissed when they have lost the trust of the electorate to be replaced by alternative leaders. A corollary to this is the existence of political parties. In many ACP states, the nurturing of such parties and raising their competence is central to the promotion of democracy. The Commission cannot finance political parties and it is difficult to aid institutions-building directly when this is perceived as a threat by governments. Such help has therefore to be given at arm's length.

4.6. The EU has a number of national democracy-building institutes (foundations) which provide assistance in creating and strengthening pluralistic democratic institutions in developing countries. They may be either publicly or privately funded or both.

4.7. The Committee recommends that the Commission should liaise closely with these institutes. They have experience in aiding political development projects. They draw up projects with political parties and organizations in developing countries often together with their European counterpart. The institutes then finance the execution of the project. In the Committee's view, the work of these foundations requires greater support from the Commission.

4.8. The democracy-building institutes also provide help to strengthen the capacities of independent media, trade unions and other non-governmental organizations. EU aid should become more readily available to the foundations for this type of capacity building.

4.9. The achievement of good governance in sub-saharan Africa is complicated by the frontiers of states having been delineated quite arbitrarily by the ex-colonial powers, often irrespective of tribal or ethnic affiliations.

4.10. The enhanced role given by the revised Convention to good governance is to be welcomed, particularly that appropriate schemes will qualify for incentive finance. Given its pivotal importance to development, the promotion of good governance should become a major goal of development aid. In any future convention the quality of good governance should become a critical criteria in determining the value of cooperation aid allocated to each ACP country. A critical consideration should be the transparency of public finance.

4.11. The Committee regrets that good governance has not become an essential element. It urges that this omission be made good in any future aid convention. Meanwhile where indicative programmes are not properly implemented, either through deliberate governmental maladministration or corruption, the second tranche of finance under the Convention should be withheld. A suitable alternative route for aid in such circumstances would be the recognized voluntary aid agencies, whose allocation of EU funds could be enhanced.

4.12. A key requirement in any state is a civil service of integrity and professional calibre which is independent of sectoral interests. It must be technically competent, be able to offer independent advice and critical feedback to political leaders. A very real difficulty is that many ACP leaders have not encouraged the development of scrupulous and independent civil services. Without their commitment the attainment of good governance will not be possible and progress will not be sustained.

4.13. There are, however, encouraging signs that the rulers of ACP states increasingly recognize that good governance is essential for peace and social and economic development.

4.14. Improving governance is a long-term process. There can be no universal blue-print on how it can be achieved. Nor can there be a universal prescription on what form of aid is best to further it. The Committee is, however, firmly of the view that good governance aid, payable under the incentive finance provision, should only be authorized if there is some evidence that states have embraced the aims of reform as set out in point 4.1. It would, for example, be misguided to help to train official accountants unless there is also a commitment to transparent government finance. It may, for instance, be necessary to help establish a Court of Auditors.

4.15. As with other forms of aid, good governance assistance should, as a general rule, only be given in response to specific requests. At the same time EU delegates should actively promote good governance by guiding ACP administrations to adopt practices which have proved successful in other countries, and particularly in African states. They could informally point to the advantages that would accrue from improved governance to the country in question, and to the government concerned. By being in a position to facilitate the means by which progress could be achieved, delegates might be listened to sympathetically. The World Bank has adopted this procedure with some success.

4.16. Given the extremely sensitive nature of advising and aiding an administration on how to achieve good governance, it could well be that ACP states would more readily accept aid and advice from the Union and certain specialized NGO's than from individual Member States.

4.17. Good governance aid need not be particularly costly. In fact it could give a good return on expenditure compared with other forms of aid. Apart from training and relatively simple communication equipment, most of the assistance would be in the form of advice such as the design of transparent public procurement programmes and public accounting systems. Advice should, the Committee believes, not be contracted out to management consultants, but could be managed by the specialized democracy building institutes or specialized NGOs (see point 4.6) or by the delegations themselves. It is realized that delegations are already short of staff, but experts on good governance practices could be seconded temporarily to delegations. There is a large number of experienced administrators who would be eminently suitable for short-term attachment to delegations. Such arrangements could forge closer links between the delegate and the country he/she is accredited to.

5. The fight against corruption

5.1. There is a close link between the quality of good governance and the incidence of corruption; with good governance the scope for corruption is lessened. Bribery is, of course, not peculiar to developing countries. Indeed in north-south business contacts the corruptors are often from the north.

5.2. It therefore is of cardinal importance to curb the activities of the corruptors, often EU citizens. A start has been made in the EU agreeing in September 1996 on an anti-corruption protocol. But this affects only bribery in the EU and then only EC financial interests. EU taxpayers who support cooperation aid are increasingly concerned that most Member States allow tax deductions for bribes paid in developing countries by their exporters, which not only negates the beneficial aspects of aid but also means that illicit payments are subsidized by the same taxpayers.

5.3. There is now an urgent need for all Member States to implement the OECD Recommendations on bribery in international business transactions. The most important of these would make it possible to prosecute in Member States' courts citizens who have taken part in corrupt practices in third countries. Also, it should no longer be possible to obtain tax breaks for bribes paid abroad. Appropriate anti-corruption legislation should quickly be introduced by Member States. Until the EU is seen to curb the corrupt activities of its own nationals abroad, it is in no position to lecture ACP administrations.

5.4. Corruption is particularly debilitating in ACP countries because it holds back development, undermines the fabric of society and negates the Convention's aim of improving standards of government. In developing countries, the opportunity for corruption is so great because people in authority often earn inadequate salaries and have to rely on additional sources of income. Corruption may arise more often from poverty than greed.

5.5. 'Grand corruption` negates the development process. Under this type of corruption projects are designed and selected which meet the interest of promoters rather than the most pressing needs of the country concerned. It covers corruption in the management of cooperation programmes where it raises costs and can materially reduce the usefulness of a project through contractors, for example, not honouring quality specifications.

5.6. These and other aspects of corruption are dealt with in a paper () drawn up by Transparency International, an apolitical non-governmental organization, which has been submitted to the European institutions, including the Economic and Social Committee. The Committee shares the view that governments should be assisted by the EU to combat corruption through advice, for example on drafting anti-corruption legislation and setting up programmes to encourage ethical conduct of those most exposed to the risk of corruption.

5.7. As regards financial and technical cooperation, the EU should in the future be more directly involved in the choice of programmes and monitor the technical design of projects to ensure that they serve the real needs of the country's population. As for the management of cooperation programmes, the EU is normally only the financier, the beneficiary country being the contracting party. There is a need for the EU to tighten up the management of development programmes. This calls for greater direct involvement by the delegation or their appointed independent consultants.

5.8. These recommendations may require more staff to be attached to some delegations. Frequently staff could be recruited locally and the additional cost should be more than offset by cost saving through the maintenance of quality standards.

5.9. In supporting these proposals the Committee is mindful that EU aid is paid for by European taxpayers. They have a right to expect the Commission and the beneficiary government to ensure that funds are used effectively to alleviate poverty and promote sustainable development. Public support for such aid is declining in part because there is a widespread perception that much aid is misappropriated. Where corruption is confirmed and no appropriate action is taken against officials by the beneficiary state, EU funding for projects should be reviewed.

5.10. Under the partnership arrangements it is the Commission which draws up the short lists of tenders for development contracts. The short lists are submitted to ACP states which can add or delete potential tenderers from the list. Since it is alleged that in some states certain firms are deleted because it is known that they make no unauthorized payments, the Committee believes that it should no longer be open to ACP administrations to delete tenderers without having rigorously to justify any deletion.

5.11. The Committee welcomes that in 1991 the EU rules for the award of tenders were tightened to make it possible to blacklist firms known to have been involved in corruption. It would support the adoption by the Commission of the World Bank practice by which any contracts obtained corruptly would be cancelled and any grant money would have to be repaid.

5.12. There is also an urgent need for the current tender application procedure to be simplified without compromising financial transparency. The current procedure appears so complex that suitable firms may be deterred from responding to tender invitations. Others are forced to hire specialists to draw up tenders. This raises costs and can, through the activities of these specialists, lead to the illicit securing of contracts.

5.13. Encouraging ACP states to reduce corruption in their domestic affairs is an even more delicate and difficult task. A civil service of integrity is of pivotal importance to good governance. In many ACP states the honesty of officials is suspect. A multiplicity of rules and regulations governing every aspect of commerce and much else, together with low civil service rates of pay, is conducive to corruption. As stated in point 5.6, when requested, the EU should be ready to assist ACP states to enhance the ethical conduct of civil servants. It is also important to ensure that under structural adjustment programmes the salaries of civil servants remaining in employment is adequate.

6. The role of socio-economic interest groups and decentralized cooperation

6.1. The involvement of civil society in the affairs of state is an essential element of good governance. Indeed, a critical role of government is to involve the people in its decision-making. The representatives of the ACP/EU socio-economic interest groups have at successive annual meetings asked that the ACP social partners be consulted by their governments in the drawing up of national indicative programmes and that they play an advisory role in sectoral development programmes. So far, their requests have largely been ignored.

6.2. To assist in the drawing up of this Opinion, a questionnaire was sent to the ACP participants of the 1995 annual meeting of the socio-economic interest groups. The results of the questionnaire are tabulated in the Appendix. The response rate to the questionnaire exceeded 70 %. It is clear that many governments are reluctant to share information with civil society and take it into their confidence or ask for its views. Replies indicated for example that only 16 % of the respondents' organizations have been consulted by governments on the drawing up of indicative programmes or in the framing of particular development projects. In their comments most respondents emphasized the need to move towards a tripartite approach (the EU, the ACP authorities and the socio-economic interest groups) to ensure that limited funds were used to the best effect and reached those most in need. Again, only just over one half of the organizations had been consulted by their administrations on policy-making in their sectors. To the Committee it seems strange that most ACP governments are so reluctant to take advantage of the undoubted expertise that professional organizations have to offer. By taking these organizations into their confidence the ACP authorities would strengthen their own position. The lack of sustained economic development in many ACP states is at least partly attributable to the lack of a trusting working relationship between the rulers and their citizens.

6.3. In Africa, there may be cultural factors which complicate discussions and consultations between government and civil society. Decisions are traditionally taken by men. Many governments focus internal consultations on the elders. Such factors may help to explain why, although in Europe it is recognized that the involvement of society in policy making is the key to good governance, Annex LXXX to the revised Convention merely states that ACP countries will 'endeavour to organize exchanges of view` on the formulation and implementation of the indicative programmes. However, the critical link between citizens' participation in the affairs of state and sustainable development must be brought home to governments. The Committee is of the view that certain aspects at least of the partnership principle should be largely continued in any future development aid convention, so that the EU has the means to facilitate the further participation of the socio-economic interest groups in their countries' development. In this connection it will be important to promote cross-ethnic/tribal groups as part of conflict prevention.

6.4. The Committee shares the Commission's belief that decentralized cooperation aid should be given a fillip to release the potential in human resources that is held back in many ACP states by central governments. Decentralized cooperation involves the transfer of financial and administrative responsibility and implies the launching and execution of EU-financed development programmes from central government to a range of other participants. Its aim is to enable civil society to become more self-reliant and to promote human development. The Committee regrets that the discussions concerning this aspect of aid were particularly difficult at the mid-term review. Given the importance of greater participation by the socio-economic interest groups in the affairs of state, it has for long held the view that decentralized cooperation should be given much greater scope for action and more direct access to financing.

6.5. However, the ACP states insisted that their governments be directly involved in all EDF spending. They were also afraid that if they loosened control, activities might be promoted that escaped the management of the country's authorities.

6.6. In its 1994 report on the implementation of decentralized cooperation the Commission states that the Lomé Convention, with its emphasis on states and national authorizing officers, 'is not conducive to wider participation, which is why decentralized cooperation is still relatively untried` (). This view is borne out by comments made in our survey from which it is clear that most governments have so far failed to implement decentralized cooperation and have not provided information on it and support to the social partners. Although 75 % of the respondents knew of the existence of development aid in their sector only 29 % had applied for finance with the majority having being turned down. Many respondents criticized the need for government approval for projects which would often be rejected because of vested interests. This, in turn, discourages the designing of projects and applying for aid.

6.7. From comments in reply to our questionnaire, it is clear that to strengthen their institutional role the socio-economic interest groups often require legal recognition, administrative and technical training, access to much more information and greater opportunity for dialogue and interaction with the social partners.

6.8. The Committee is of the view that significantly greater efforts need to be directed to improve the organizational capacity of the social interest groups. Although many respondents were aware of the availability of capacity enhancing aid, eligibility criteria and the general procedures for applying remained unclear to most groups.

6.9. As regards aid that might be available to develop specific parts of the economy, in our survey only 20 % of the respondents' organizations had been provided by their governments or delegations with any information. Given governments' general reluctance to emphasize decentralized cooperation it is all the more important for delegations to make information on this subject widely available.

6.10. In promoting decentralized cooperation good rapport between delegations and the socio-economic interest groups is critical. It is therefore with concern that the Committee notes that although the majority of the ACP economic and social partner organizations appear to have had some contact with delegations, EU officials were perceived as remote, often showing a lack of interest. This made organizations feel even more marginalized.

6.11. There is a role for delegations to bring together representatives of government and civil society and make a start to a tripartite relationship to which many ACP socio-economic interest groups attach considerable importance. It would also enable delegations to explain the complex philosophy underlying decentralized cooperation aid and give information on the modalities of this type of aid. Delegates, too, should play a role in bringing together local authorities from the EU and ACP states to discuss common problems.

6.12. The revised Lomé agreement provides for greater recognition of decentralized cooperation in indicative programmes. The programming of the second five-year period of the current Convention is already well advanced, but the Committee is most concerned that disbursement is lagging behind because the Convention has still not been ratified by sufficient partners. Indications are that the majority of programmes provide for this type of cooperation. Following the 28 May 1996 conclusions of the Presidency on Decentralized Cooperation, delegates should take a lead and engage in policy dialogues with representatives of civil society and governments to ensure that intentions (only a few of which have been quantified) are transformed into action.

6.13. Indicative programmes should only be agreed if the decentralized cooperation content conforms with the intentions of the revised Lomé Convention and the above-mentioned Council declaration. Payment of the second tranche of Lomé funds should be conditional on good progress having been made on decentralized cooperation projects. In a future convention funds should be specifically earmarked for decentralized cooperation.

6.14. In addition to EDF funding, good government grants and decentralized cooperation aid is available under the EC budget. However, the sums available are modest and have been used mainly for pilot projects. Even though under the revised Convention there will be pressure on ACP governments to include decentralized cooperation projects in their indicative programmes, the Committee believes that governments will continue to be reluctant to put forward viable projects drawn up by socio-economic interest groups, particularly those designed to raise their operational effectiveness. There should therefore be some increase in the relevant budget lines to permit these groups' access to funds for these purposes without having to receive the approval of governments. It is particularly important to increase the aid available under budget line B7 702 under which priority is given to projects covering, inter alia, the strengthening of civil society, support for vulnerable groups such as minorities and legal assistance for strengthening the capacity of local associations.

7. Grant application procedure

7.1. The current grant application procedure is so complex and time consuming that organizations and firms are frequently deterred from applying for decentralized cooperation and other forms of aid. The Committee endorses the Council's view (28 May 1996) that 'aid procedures and instruments must be sufficiently flexible to ensure that decentralized cooperation is given its proper place in the development programmes, so that local protagonists can participate`. There is now an urgent need for the Commission to simplify the procedure.

8. Delegation staff

8.1. The success of EU development aid depends not only on competent ACP administrations; it is conditioned also by delegation staff. Attention has, for example, been drawn to the pivotal role the delegate can play in promoting good governance measures. Grant application procedures could be simplified and delays reduced if authorization for relatively small grants were transferred from Brussels to delegations: currently, shortage of staff rules this out.

8.2. Funds to pay for extra staff to deal with financial and technical cooperation, be they expatriates or local, depend in practice on Member States augmenting the EDF, or on ACP partners agreeing to these funds being tapped. Recently the Commission was forced to reduce delegation staff by 18 administrators and it is far from clear how they can be replaced by local recruitment.

8.3. To make optimum use of staff, Member States and the EU should examine how their delegations could work more closely in administering aid projects. For decentralized cooperation to make real progress, it will be necessary to process a large number of relatively small grant applications. Member States' delegations may be able to assist in the necessary work.

8.4. The Committee is also concerned about the great variability of quality of delegation staff.. It is vital that delegations have staff of adequate calibre and the required skills.

9. Conclusion

9.1. The publication of this opinion should be seen as a contribution to the debate on the future of the Lomé Convention. Our recommendations require a more user-friendly convention and a change in administrative procedures to allow the processing and monitoring of a multitude of small grant applications.

9.2. The partnership concept between the EU and ACP states depends on developing nations having officials able to draw up and implement indicative plans. Where this capability is lacking the donors have perforce to draw up and even implement these plans. The partnership, therefore itself depends on adequate governance.

9.3. Future conventions should be more selective and conditional. It will be necessary to channel scarce development funds to activities which tackle the causes of poverty. Given the key importance of good governance, much greater emphasis should be given to it: not only should more aid be earmarked for good governance, but it should become an essential element in any new convention. Lest it be thought that such increased conditionality is an anachronism it should be stressed that this view is shared by many of our social partners in ACP countries. New forms of cooperation aid will have to be developed and more emphasis placed on some existing forms such as decentralized cooperation to strengthen democratic and human rights and consolidate the rule of law.

9.4. Turning to implementation, for decentralized cooperation and aid to SMEs to become significant, application procedures will have to be simplified so that local organizations and entrepreneurs are encouraged and effectively able to apply for assistance.

9.5. It is equally important that the authorities are in a position to process and monitor a multitude of small applications. Given the acute shortage of Commission staff, new methods will have to be introduced. Without radical grant administration reform decentralized cooperation cannot succeed and it is difficult to see how cooperation aid will reach SMEs and the social partners.

Brussels, 28 May 1997.

The President of the Economic and Social Committee

Tom JENKINS

() OJ C 352, 30. 12. 1993.

() 1975-1994.

() GNP per capita calculated at constant prices and adjusted for exchange rate variations (1975-1991).

() Source: Statistical office of EC - unit for relations with ACP and other countries.

() Communication from the Commission to the Council: The European Union and the issue of conflict in Africa: Peace-building, conflict prevention and beyond. SEC(96) 332 final.

() ODA.

() Prof. Tetzhaff.

() Transparency International - The fight against corruption: what the EU can do. Brussels 1995.

() COM(96) 70.

APPENDIX

>TABLE>