57th ACP Council of Ministers

Mid-term review in perspective

The mood at the 57th ACP Council of Ministers last November in Brussels was unquestionably one of tremendous apprehension for the future, what with the imminence of the conclusion of the GATT negotiations with scarcely any ACP input and the rumours concerning the future of the Lomonvention.

The anxiety over GATT arose from what one minister called 'the banana experience', referring to the success by Latin American banana producers in raising the banana issue in Geneva. A GATT panel, set up at their instigation, had called into question the 'legality' of the Banana Protocol of LomV and another was examining the February 1993 decision of the Council of the European Union on a Single Market banana regime. That regime, it should be recalled, is skewed in favour of ACP producers. The Council found these developments worrying, estimating ACP preferences as a whole in the Union under threat and the Lomonvention itself under attack.

It did not come as a surprise that, despite the tremendous pressure at the talks with many unresolved issues among the major players (the December 15 deadline was only three weeks way), the Council's newly-elected Chairman, Dr Kwesi Botchwey, Ghana's minister of finance, still found it useful to make an urgent appeal to the ACP States to make their presence felt in Geneva before the deadline. Each country, he said, should participate actively in the final round, especially where the meetings affected the Lomonvention, to ensure that their interests were taken into account.

Mid term review of the Convention

Although the Council was under no similar great pressure about the forthcoming review of LomV, the issue provoked no less a passion, and the need to move faster was lost to no one.

Although this was the last ACP Council before the beginning of negotiations in May, the view among ministers was that there was no need for a formal response to the Commission's proposals on the review since the final negotiating mandate of the Commission has not yet been established by the Council of the European Union. Nevertheless, the Commission's paper and the various interpretations given to it in many quarters were constantly referred to during the debate on the midterm review.

The ministers observed that there were areas of common interest between the ACP States and the Commission but that both sides appear to differ on the means of arriving at solutions to the problems that have been identified. Some ministers talked of not accepting direct or indirect conditionality on aid. Others expressed fears about interference with ACP sovereignty and about an end to the equal partnership concept of the Lomonvention.

The occasion of Vice-President Marin's address to the Council offered an opportunity to set the record straight - plainly and frankly. Mr Marin was first welcomed to the Council by Dr Botchwey who told him that the ACPs have some indications of what 'thoughts were going through the minds of the Commission', and that they were concerned that 'our long association with Europe should be safeguarded through these turbulent times'; that meant preserving 'our hardwon concessions and privileges'.

In his speech, Mr Marin reiterated his oft-repeated statement about how the geopolitical and economic situation which governed the old international order has been profoundly upset and why it was necessary to take 'the bull by the horns' and adapt to the new world situation. The Commission's proposals were precisely aimed at doing that to save the Lomonvention. The Commission's attitude, he said, can be summarised like this: 'Things must change in order to continue'.

Mr Marin then outlined briefly the aims of some of the Commission's proposals which are of most concern to the ACPs. He thought there was a need to:

- state in the Convention the principles of democracy, the rule of law and good governance, thus strengthening what is already in the text of LomV on Human Rights and reflecting what is now widely accepted and being put into practice in many ACP States, even in very difficult circumstances;

- fine tune the instruments of dialogue between the ACP States and the European Union through a series of measures, one of which has given rise to scepticism or totally negative reactions in many quarters: namely the one aimed at creating greater flexibility on programming. On this, the Commissioner for Development said he wanted to clarify any misunderstanding: The Commission aces not intend to call into question the basic principle of dialogue between the European Union and the ACP States, but, he continued, 'the current rigidity in the system which sometime leads to the holding up of very important funds and to delays in the implementation of programmes and projects impels us to propose changes in the modality though not in the principle of application'. Conscious of the need to improve the speed in the process of implementation of operations, the Commission, he added, wants to have a certain autonomy with regard to the technical assistance needed in the preparation of projects and programmes. This is neither aimed at removing responsibility from the ACP States nor calling into question their sovereignty in the choice of development strategy and their power of decision, particularly in the crucial phases of identification and management of programmes and projects.

Referring to the main object of the review - the second Financial Protocol, Vice-President Marin intimated that, in preliminary exchanges of opinion between Member States of the Union and the Commission, 'some voices have been raised' to the effect that the level of financial commitment will depend, to a large extent, on progress made in the modernisation of the Convention. He warned that, in this period of economic recession, European public opinion was, more than ever before, paying attention to development funds being used more effectively and in a transparent manner.

Following interventions by Dr Paul Robertson, Jamaica's minister of foreign affairs and foreign trade (for the Caribbean) and Mr Abbey Kafumbe-Mukasa, Uganda's deputy-minister of finance, both articulating regional concerns, Mr Marin re-affirmed the uniqueness of the Lomonvention which he described as the result of 'geopolitical sedimentation'. He, however, pointed out that the ACPs were now in serious competition with other economic poles of the world. It was necessary to fight and to do that 'we have to be more efficient... and give the Lomonvention the highest degree of confidence'. Given the great achievements made in implementation over the past four years and the experience gained, it was necessary to introduce 'what has been happening in reality' into the Convention.

In general, ACP ministers felt reassured by the Commissioner on several points, but considerable scepticism remained over the concept of 'co-management'. Perhaps that will disappear when Mr Marin returns, as he has promised, probably around February, to the ACP Council to present the same 'financial memorandum' es he has sent to Council of the European Union. The memorandum, he said, will enable the ACP States to see for themselves the virtues of the Commission's proposals.

Other matters

The end-of-year ACP Council being traditionally devoted mainly to internal matters, ministers had before them a heavily loaded agenda. Through the able chairmanship of Dr Botchwey, intervention time was considerably reduced and such issues as the budget of the ACP Secretariat and member states' financial contributions were easily disposed of. There were, however, other very important issues in the relations between the ACP States and the European Union which retained the attention of the Council. They included: inevitably bananas, beef, commodities and sugar.

On bananas, a compte-rendu of the developments at GATT and the moves being made by the ministerial committee on bananas was given by the Jamaican representative, Dr Robertson. In it, he revealed that since 1 July 1993, when the Single Market regime took effect, ACP States have had significant losses in export earnings. These were brought about because of severe turbulence in the market created both by the deliberate manipulation of large multinational firms and by the dislocations normally associated with transition from one regime to another. In view of this, the Council urged Member States of the Union to honour what it called 'their common commitment' to the smooth operation of the new banana regime and to ensure that ACP traditional suppliers are not placed in a situation less favourable than previously. It further called on the Union to approve the Commission's proposal for special technical and financial assistance to the ACP banana industry to enable it to restructure and modernise so that it can compete effectively in the Union and on the world market.

On beef, the Burkina Faso representative, Ambassador Salifou Rigobert Kango, drew the attention of the Council to 'dumping' and what he called 'unfair competition' from the European Union in beef production and marketing in the Sahel. Since 1984, he claimed, the EU has been spending huge sums of money subsidising meat exports to West Africa to the extent that locally produced beef, for example, costs CFA 300 per kilo more in Abidjan than beef imported from Europe. He congratulated those NGOs whose pressure on the Union had led to the reduction by 15% of exports of certain categories of meat.

The Council agreed to call on the European Union and 'in particular the Commission to look urgently into appropriate measures to be taken in order to reduce the level of subsidy in beef and veal exported to West Africa' and to request financial and technical assistance to ACP producer states to encourage both local production and the achievement of self-sufficiency in the sector.

In the area of sugar, the Council adopted a resolution which noted that the ACP States' acceptance of the 1992/93 price offer represented a freeze. It would be difficult to accept any price that does not reflect the economic difficulties facing the producing countries. This should be taken into account in fixing the prices for the 1993/94 period. The Council again drew the attention of the Union to the danger of making any offer in GATT that could affect the future implementation of the Sugar Protocol. It urged the Union, on the other hand, to accept as soon as possible Zambia's invitation to visit the country to assess its ability to respect any delivery obligation that would be required of it under the Protocol.

A more cheerful note in an otherwise gloomy Council was struck in a report on commodities presented by the Ugandan representative. Since the Council last met, an International Cocoa Agreement with economic clauses has been signed and an Association of Coffee Producers has come into being in the margin of the Coffee Council. The decision by the newly formed Association to draw up and implement a 20% export retention scheme has already resulted in an improvement of up to 50% in the price of coffee.

The Council welcomed these developments. However, because some of the ACP cocoa producers have either not signed the cocoa agreement or, having signed, have not yet ratified it, the Council urged them to do so before the 28 February 1994 deadline.
It also urged Members States of the Union to do likewise. The Union, it said, should do more to ensure that a new International Coffee Agreement with economic clauses is concluded before the next coffee season.

Augustin OYOWE

Development Council

- Poverty alleviation gets top priority
- Need for better aid coordination
- A new approach for LomR>- A new member welcomed to the ACP Group

Aid donors should regard action to combat poverty as a basic component of development, rather than lust as one other aspect of their cooperation work, since chronic poverty is one of the central problems of the developing countries and not a secondary effect of underdevelopment. This was the message sent out by the European Union's Council of Development Ministers at their latest half-yearly meeting in Brussels. And there was an equally firm message to the governments and societies of states which receive development aid: 'The objective of reducing poverty can be achieved in each country only on the basis of a clear and lasting political will based on national consensus and directed In particular towards reducing the uneven distribution of the benefits of growth and unequal access to productive resources and social services. 'The poor must be helped to develop the capacity to provide for their own needs and be involved in the process of political, economic and social decision-taking, since 'democratisation processes, the rule of law and proper public administration (...) are important conditions for the fight against poverty.'

A resolution from the Council says that action to combat poverty should be a central theme in dialogue with the developing countries, especially the least advanced among them, and in cooperation agreements between them and the Community. Aid and action must be targeted on the poorest or most vulnerable sections of the population, and women must be fully involved in ail measures to alleviate poverty, since the part they play is often decisive in ensuring that such polices, and development measures in general, are effective.

Poverty has generally persisted in the developing countries over the last ten years and even worsened in some, especially in sub-Sahn Africa. Among the reasons for this, ministers singled out debt and trends in commodity prices, and admitted that the policies pursued so far had been inadequate.

The Vice-President of the European Commission, Manuel Mann, who is responsible for development cooperation, reported briefly on progress in the top priority areas for policy coordination between the EU and its Member States: health, food security, education, population policy and women in development. Written reports on these will be produced over the next year.

There has long been pressure in some quarters for action to rationalise aspects of the European Union's food aid policy. NGOs recently reported, for example, that subsidies for exports of EU meat to various West African countries were putting farmers in the Sahel out of business. Food aid given in cash equivalent, not in kind, would stimulate local production and markets. At December's Development Council the subject came up again, when the representative of Belgium said food aid should be given only in real emergencies and not as a form of indirect budget assistance; it should not be seen as a way of offloading the Westrn world's surpluses. Reviving an old suggestion, Denmark thought it would be a good idea if a joint Council on agriculture and development could be held to consider the effects of the EU's own common agricultural policy on farmers in the developing countries. But objections from other Member States scotched this suggestion.

Ministers were in favour of EU participation in the World Health Organisation's AIDS control programme and wanted a coordinated approach to the forthcoming Cairo conference on world population. They believed that the role of women in development must be taken into account, as a matter of course, in all development programmes.

The last time development policy complementarity and the practicalities of operational coordination between the European Community and the Member States were debated was in 1984, but the subject is bound to become a burning issue again now that the treaty on European Union has come into force. Under the Treaty, Community policy in the sphere of development cooperation has to complement the policies pursued by the Member States; this extends to coordinating their polices and consulting each other on their aid programmes in international organisations and conferences. Where the Member States are concerned, this includes the World Bank and the International Monetary Fund, on whose boards the Community as such is not represented. The Treaty entitles the Commission to take any useful initiative to promote this coordination (though any proposal it makes must, of course, still be adopted by the Council before it can be acted on). The Development Council decided, however, that Council resolutions would be the prime means of laying down guidelines and lines of action for the Community and the Member States in their respective policies. In other words, national governments are not willing to allow the Commission or the European Parliament a greater consultative or advisory role in policy coordination. Even so, the Commission's representatives are to work with those of the Member States in recipient countries as the main channel for operational coordination on the spot. This will promote greater coherence in discussions by either party with the local authorities. Pilot projects in coordination are to be run in three or four developing countries, although the Council did not decide which. Exchanges of information about projects, informal meetings of Directors-General for Development and contacts between experts in particular fields, notably officials of the European Community's Humanitarian Office (ECHO) and national humanitarian aid departments, will serve to make coordination more efficient.

In the end, the feeling left by the Council's resolution was that there is still an underlying problem of inadequate coordination between the Member States themselves, whether for lack of political will or lack of a structure. In any case, with some Member States set to cut their development aid budgets, there is going to be less to coordinate at all in future. And the question of whether or how to take a coordinated stance in international bodies was left unresolved. As to the EU's development cooperation policies complementing those of the Member States, which is seen as the next stage on from coordination, the Council merely noted that this needed to be worked out in greater detail before a workable policy could be arrived at.

The previous Development Council, in May 1993, decided to use European Development Fund money to finance a rehabilitation programme for certain African countries recovering from natural or man-made disasters. December's Development Council heard that of the ECU 100 million earmarked, ECU 84 m had been paid out by 2 December and the rest was committed but could not, under the Financial Regulation governing Commission payments, be paid until the work concerned had been carried out. The Council concluded that rehabilitation programmes should be decided case by case and in consultation with the United Nations and other donors, but the Community's procedures should be simplified so that it could act faster. Funding should come from the EDF and the Community budget; the 1994 budget in fact includes ECU 45 million for rehabilitation, which will go some way to meeting the cost of the projects still needed, intimated by NGOs (who usually carry them out) at between ECU 250 and 350 m.

The Council considered a report on progress towards the midterm review of the LomV convention, which is to begin by May of this year. The report was drawn up by a working party set up by the Committee of Permanent Representatives, the Member States' Ambassadors to the KU, to prepare a negotiating brief for submission to the EU's General Affairs Council later in December. National delegations supported the Commission's proposals in several areas. They agreed that the Convention should include a 'democratic clause' making respect for democracy (and not just human rights) a condition of EU aid for ACP countries. The Belgian Presidency, the Commission and some Member States thought a clause explicitly suspending aid for non-observance was essential, while others preferred positive measures and consultation to unilateral sanctions and said they would not tolerate the ACP countries being treated more severely in this regard than other developing countries, especially those in ASEAN and Eastern Europe, with which the Community had cooperation agreements.

There was general agreement that financial aid planning needed to be more flexible, at a time when all the Member States were having to rein in their budgets. The Commission proposes, and the Member States have accepted, that national indicative programmes should be divided into yearly instalments, payment of each instalment being dependent on how well previous tranches have been used. This would prevent build-ups of unused money which cannot be put to use elsewhere and persuade taxpayers that their contributions towards aid were being used more effectively. The financial guarantees which recipient countries enjoyed would remain, but they would be expected to show proof of their capacity to absorb EU funds in the interests of their own peoples. As the President of the Development Council, Eric Derycke, put it, the intention of the Member States was chiefly to make ACP states share more of the responsibility for their development. Care must be taken, however, to avoid marginalising the least developed countries.

Thirdly, the Council agreed that management procedures in the existing Convention need to be streamlined to make aid more efficient, and were interested in the idea of extra financing being available as an incentive for projects in special priority areas such as the environment.

On the subject of EU red tape, Mr Marin said he thought that the procedural requirements in the Lomonvention which tied the Commission's hands were unreasonable in the modern day. The procedures under the Protocols with Mediterranean countries, for example, were much faster - and the ACP states were now in competition for aid with those countries, not to mention Eastern Europe, Latin America, Asia and the Middle East. On financing, the Commissioner reminded Ministers that the package agreed by the Edinburgh European Council in December 1992 implied spending of ECU 25 to 30 per head in Eastern Europe and only ECU 5 per head in the South. This was a political decision which meant that the EU's development cooperation instruments with the South, especially Africa, absolutely had to work properly. The spirit of Lomould only be safeguarded if the Convention were modernised.

In an exchange of views on relations with South Africa, Ministers discussed practical EU support for the elections announced for April 1994 and trusted they would take place as scheduled, with all political groups taking part. For relations thereafter, it would be for the Council to decide in due course whether, from Europe's point of view, Loma bilateral agreement between the EU and South Africa or cooperation via the Southern African Development Community would be the best framework.

The Council asked the Commission to look into the possibility of 'labelling' environmental and sustainable development projects being carried out in pursuance of the Rio Conference of June 1992, so as to make both governments and public opinion more aware of them.

The Italian delegation made a statement welcoming Eritrea to the ACP group, praising the work it was doing to promote good relations among its neighbours and calling on all governments to help the young nation and thereby promote peace and security in the region. _

Robert ROWE

CDI transformation supported by the private sector

Industrialists prepare for the LomV mid-term review

Restructuring of the Centre for the Development of Industry, including the introduction of private sector participation in the running of the CDI, is now firmly on the agenda. This was something which clearly emerged from the speeches delivered at a conference entitled 'Perspectives of Industrial Cooperation ACP-EC', held in Brussels on 9 December. The conference, organised under the auspices of the Belgian presidency of the European Union, indeed, called for a separation of the 01 from the ACP-EC institutions.

Unfortunately, the ACP presence at the colloquium was limited. The vast majority of participants came either from European enterprises and organisations or from the institutions of the European Union. The priorities of European and ACP companies were examined but there was little convergence over what was needed to revitalise the African economy.

Most of the European industrialists present wished the CDI to become a source of information on ACP markets and a training centre for the thousands of administrators which, in the eyes of the industrialists, Africa lacks.

A large number of the industrialists believe that corruption is one of the most important problems faced by African economies - even more important than the lack of trained administrators in government and industry. When a member of the Belgian private sector had finished his tirade against what he viewed as the 'corruption' of African officials, the conference hall of the Palais d'Egmont resounded with the applause of his peers. He was echoing the words of Maria Luisa Cassagnmagnago Cerretti, the co-President of the ACP-EC Joint Assembly, who had said in her opening address: 'Even if it is insidious, it is deep-rooted in the ACP countries.'

There was a general consensus on the need to enhance the powers of Chambers of Commerce vis-is the governments of ACP countries.

The ACP representatives felt that new structures for finance and partnership were needed. What was desired was a form of partnership which was based on the aims of profitability in the medium-term and of transferring technology. The President of the Paramaribo Chamber of Commerce and Industry in Suriname, Woei A Sioe, emphasised transfers of this kind. He said: 'You cannot impose development on a top-down basis by beginning with industries which depend on imports. We have our forests. The Rio Conference wants us to keep them. But we want to develop, so we need partnerships to guarantee the transfer of technology. Despite everything, in three years times our industries will be even more left behind by those in the West. What we need is protection.'

Eric Derycke, the Belgian Secretary of State for Development Cooperation, supported the idea of protection: 'There must be some form of protection or, at the least, support for the most vulnerable countries.'

Skeleton in the closet

The question of protection brings to light one of the skeletons in the closet of European policy with regard to the ACP and other developing countries. This is symbolised by the import of cheap European meat into West Africa, which threatens the traditional animal husbandry of the recipient countries, while at the same time the European Union finances projects aimed at improving livestock rearing in the region. According to George Rubagumya, Director of the Ugandan Investment Authority, 'we must find a compromise to rationalise production.' This debate also touches on the employment policies of the Member States of the European Union, a policy area which has never, to this day, been reconciled with European development policy. Patrick Guitard, a representative of French business, made a plea for European coherence: 'The integration of the European market with those of the ACP countries is in contradiction with other polices of the European Union, such as those set out at the GATT talks.'

There was an obvious separation between the case of the Caribbean and Pacific countries and that of Africa, in the realm of industrial development. Luis Ritto, from the industrial Cooperation Division in Directorate-General VIII of the European Commission, declared his conviction that 'the Caribbean and the Pacific islands are doing fine. Their institutions are good and we can have cooperation programmes with them through the CDI. Africa, on the other hand, is a lot more complicated.' He added: 'The ACP countries have not responded to our study on the protection of investment whereas Eastern Europe, one year later on, is taking up our proposals.'

The lack of investment in the ACP countries, especially in Africa, was one of the most important items on the agenda. Equity funding was suggested, amongst other solutions proposed by the delegates. It was noted, however, that family companies often do not show a profit on the balance sheet. In addition, in the case of private companies, the executives tend not to want to declare large dividends because these are taxed.

From the African financial sector, Sanou Mbaye, responsible for the private sector at the African Development Bank (which grants the majority of its loans to Morocco, Tunisia and Nigeria), said he could see continuing difficulties. Mbaye advocated regional integration as the solution to the economic problems of the African states. This, he said 'would require a convergence of development policies.' However, in the light of the fact that there are currently two hundred regional cooperation organisations which have yet to show any positive results, Mbaye admitted that 'there is no political convergence at present.' He considers the total absence of an internal banking sector to be a great hindrance. 'In Zaire, for example, the local banks have been eliminated. They were the only ones to lend in the medium and long term.'

Problems in external financing

The external financial sector remains problematic. These credit lines are very rarely used, according to Alistair Boyd, Assistant Chief Executive of the Commonwealth Development Corporation (CDC). Boyd is dissatisfied with the number of loans granted by the Development Finance Institutions (DFIs), such as the CDC. He said: 'Out of 198 projects financed last year by the DFIs, only 40 involved new enterprises.' Boyd reiterated the danger of ignoring the small and medium enterprises, which 'only represent 16% of the private enterprises financed by the DFIs. That is also in view of the fact that the private concerns receive only 40% of DFI financing, as opposed to the 50% granted to the public sector.'

Various ideas were suggested for improving the CDI. One such suggestion is for the CDI to assist small and medium enterprises in Europe and in the ACP countries by providing them with reliable information on the African markets, African businesses and sources of finance. This would reduce the additional costs of these companies, which can reach a high level of their total budget. At present, the majority of the CDI's clients have a turnover of between one and two million ECUs.

The possibility exists that the running of the CDI will be handed over to the private sector, with the exception of long-range policy. It is also possible that the CDI may be incorporated into DG VIII of the European Commission. Whatever the case, Eric Derycke, in the Belgian Ministry for Foreign Affairs says some form of decentralisation is certain 'for reasons of financial and administrative efficiency. All the CDI has managed to do so far is to provide guides for equipment supplies and to support training programmes on production and maintenance.'

Some restructuring of the CDI appears unavoidable given the popularity this idea enjoys amongst European businesses, the European institutions and within the organisation itself. All hangs on an agreement between the European Union and the ACP countries during the negotiations on the second part of LomV which will start at the beginning of 1994. Until such an agreement is reached, it remains to be seen if delocalisation and privatisation will become the central doctrines of a new partnership between the African, Caribbean and Pacific countries and the European Union.

Stewart YOUNG