The EU’s new approach to funding regional cooperation
Financial support to regional cooperation and integration remains a key building block in the EU’s foreign and development policy toolkit. Looking at lessons from past practice, designing effective programmes will require a more sophisticated understanding of what drives regional agendas and should be geared towards producing a higher impact rather than higher disbursement rates.
Regional integration is one of the cornerstones of the European Union’s (EU) development and international cooperation policy and is an area where the EU is seen as having a real added value and know-how in international cooperation. Support to regional integration and cooperation has featured at the centre of the ACP-EU partnership since the first Lomé Convention signed in 1976. Even a seismic event like Brexit is likely to change the EU’s focus on funding regional cooperation. The recently released Global Strategy for the EU’s Foreign and Security Policy also clearly cements the priority of regional level engagement in the EU’s aim to promote a security, prosperity, democracy and rules-based global order. However, EU support to regional cooperation does not happen in a void and has experienced challenges in the past. For example, ACP countries have a long history of commitments and efforts at regional integration, and although progress has been achieved in all ACP regions, aspirations have not translated into effective implementation. The European Commission’s support to regional integration in the ACP has also faced important shortcomings, leading to very low aid disbursement rates in the 10th European Development Fund (EDF). Reasons identified point to a lack of managerial capacity among regional organisations (ROs), overlapping memberships, a lack of progress in implementing regional agendas at a national level, and protracted negotiations of the Economic Partnership Agreements (EPAs). Other reasons relate more directly to the EC’s management capacity, the EU’s perceived lack of a strategic vision, absence of appropriate governance structures for managing regional cooperation, limited synergies between national and regional programming, and weak monitoring systems.
Faced with a sobering reality, and under increasing pressure to deliver better results and show value for money, the EU decided to overhaul its approach to regional cooperation in the 11th EDF for the period 2014-2020. Learning from the past was indeed a key driver in the 11th EDF new programming orientations for regional cooperation. Several key innovations were introduced, some of which have been qualified as a 'paradigm shift'. The diversification of the choice of implementing partners, beyond Duly Mandated Regional Organisations (DMROs), recognises that regional cooperation processes can be initiated and driven by actors other than regional organisations and releases DMROs from time- and capacity-consuming tasks, allowing them to focus on their political role and their core mandates of coordination, guidance and supervision. The use of direct management, together with a significant amount of funds channelled through blending facilities, could also improve disbursement rates. The EU has also created regional steering committees made up of relevant stakeholders, which could potentially improve the efficiency of EDF programming, formulation and delivery. Finally, the EU has taken steps to improve the EU delegations’ capacity to deal with regional cooperation, notably by clarifying the roles and responsibilities of national and regional delegations and improving coordination between them. EU support to regional integration through the EDF in brief The EU is currently implementing its 11th European Development Fund which covers the period 2014-2020 with a budget of €30.5 billion (up from the 8th EDF’s €782 million from 1996-2001). The funds go to ACP countries through both national and regional programmes. The 11th EDF counts five regional indicative programmes, covering five ACP regions. The 11th EDF regional programming orientations and allocations are decided in line with the fundamentals of the Cotonou Partnership Agreement and the EU’s development policy embodied in the Agenda for change. Financial allocations to different priority sectors were the following:
The EU’s new approach to funding regional integration, devised for the 11th EDF, can be in some ways considered as a paradigm shift. Some of the innovations are very likely to effectively address identified aid management problems and improve disbursement rates. However, it is still unclear whether this new approach will produce better results in terms of regional integration. The new approach to regional cooperation under the 11th EDF would appear to offer generic solutions to generic problems, rather than being a tailored approach in response to the different national, regional and sectoral political economy dynamics that influence regional integration. The absence of a clear theory of change and a mechanism for benchmarking regional integration would seem to be major weaknesses, with clear implications for the ability to measure and capture results. As a further point, five-year cooperation cycles are likely to be too short for producing results in regional integration. Direct access may not deliver results in terms of the domestication of regional integration agendas, unless it is underpinned by a solid political economy analysis of the national incentives for pursuing regional cooperation, and unless the regional dimension of regional challenges is acknowledged and addressed. Steering committees, which focus largely on formal institutions and aid-management issues, are unlikely to generate the high-level political action that is required to push the regional integration agenda forward and are probably not the right tool for enabling the EU to identify opportunities for supporting more flexible, informal, regional arrangements with a strong potential to drive regional integration processes forward. Blending may be a far more risky and complex enterprise, requiring the EU to take serious account of the drivers of and barriers to transnational infrastructure development, particularly during the project planning stage. The new EDF blending framework may not necessarily broaden the scope for increased ownership of blending operations by beneficiary countries, given the limited space available to national and regional actors for leading the implementation of blending projects. The African Development Bank is the only regional financial institution that qualifies as a lead financier. There are also concerns about the EC’s ability to manage blending in a ‘politically savvy’ way.
There is strong evidence that the 11th EDF regional programming process was largely prescriptive and heavily dominated by the EU, in particular by DG DEVCO. ACP actors, notably DMROs, were largely excluded from the drafting of programming orientations, the initial sector analysis, priority setting and sector allocations. The allocation of funds to different sectors in different regions appears to have revolved around DEVCO’s objective to secure a maximum allocation of EDF regional funds to the new blending facilities. There is also little evidence that the choice of sectors and the distribution of funds among sectors corresponded with a regionally tailored political economy analysis of the incentives and the available capacity for meaningful regional action. Such a prescriptive programming approach is difficult to reconcile with the principles of ownership and co-management underpinning the Cotonou Partnership Agreement. It has also prevented the EU from ensuring a close alignment of its regional programming with the political and economic realities of the various regions. The creation of an EU Emergency Trust Fund on migration - created by the EU in November 2015 and drawing massively from EDF funds, including €395 million from the regional and national programmes - also illustrates the trend to recentralise the management funds away from ACP countries and regions, in accordance with the EU’s pressing (internal) political priorities. DMROs had little room for manoeuvre to resist this. As a result, they have now lost control of programming, management and spending of those RIP funds that have been pooled with the new Emergency Trust Fund.
The EU has long-standing relations with many regional organisations across the world, spanning a wide range of policy areas, including trade, security, and global public goods. EU support for regional cooperation and integration are likely to remain important building blocks in the EU’s future foreign and security policy toolkit, and given the importance of the EU as a political and financial sponsor of regional integration, it is likely that the EU will continue to prioritise, and even increase, its support to regional integration. The current review of the European Consensus on Development and the evolving discussions on the ACP-EU partnership beyond 2020 present important opportunities where evidence from practice of previous policy frameworks will need to be considered. While expectations about the role played by the EU as a global actor are running high, the EU will need to demonstrate its added value and cannot afford not to continue to learn lessons as to how it can support regional integration more effectively. Our study identifies the following pointers for future high-impact EU support to regional integration related to ACP countries and beyond:
This article was published in GREAT Insights Volume 5, Issue 4 (July/August 2016).
Regional integration is one of the cornerstones of the European Union’s (EU) development and international cooperation policy and is an area where the EU is seen as having a real added value and know-how in international cooperation. Support to regional integration and cooperation has featured at the centre of the ACP-EU partnership since the first Lomé Convention signed in 1976. Even a seismic event like Brexit is likely to change the EU’s focus on funding regional cooperation. The recently released Global Strategy for the EU’s Foreign and Security Policy also clearly cements the priority of regional level engagement in the EU’s aim to promote a security, prosperity, democracy and rules-based global order. However, EU support to regional cooperation does not happen in a void and has experienced challenges in the past. For example, ACP countries have a long history of commitments and efforts at regional integration, and although progress has been achieved in all ACP regions, aspirations have not translated into effective implementation. The European Commission’s support to regional integration in the ACP has also faced important shortcomings, leading to very low aid disbursement rates in the 10th European Development Fund (EDF). Reasons identified point to a lack of managerial capacity among regional organisations (ROs), overlapping memberships, a lack of progress in implementing regional agendas at a national level, and protracted negotiations of the Economic Partnership Agreements (EPAs). Other reasons relate more directly to the EC’s management capacity, the EU’s perceived lack of a strategic vision, absence of appropriate governance structures for managing regional cooperation, limited synergies between national and regional programming, and weak monitoring systems.
New approach to 11th EDF regional programmes
Faced with a sobering reality, and under increasing pressure to deliver better results and show value for money, the EU decided to overhaul its approach to regional cooperation in the 11th EDF for the period 2014-2020. Learning from the past was indeed a key driver in the 11th EDF new programming orientations for regional cooperation. Several key innovations were introduced, some of which have been qualified as a 'paradigm shift'. The diversification of the choice of implementing partners, beyond Duly Mandated Regional Organisations (DMROs), recognises that regional cooperation processes can be initiated and driven by actors other than regional organisations and releases DMROs from time- and capacity-consuming tasks, allowing them to focus on their political role and their core mandates of coordination, guidance and supervision. The use of direct management, together with a significant amount of funds channelled through blending facilities, could also improve disbursement rates. The EU has also created regional steering committees made up of relevant stakeholders, which could potentially improve the efficiency of EDF programming, formulation and delivery. Finally, the EU has taken steps to improve the EU delegations’ capacity to deal with regional cooperation, notably by clarifying the roles and responsibilities of national and regional delegations and improving coordination between them. EU support to regional integration through the EDF in brief The EU is currently implementing its 11th European Development Fund which covers the period 2014-2020 with a budget of €30.5 billion (up from the 8th EDF’s €782 million from 1996-2001). The funds go to ACP countries through both national and regional programmes. The 11th EDF counts five regional indicative programmes, covering five ACP regions. The 11th EDF regional programming orientations and allocations are decided in line with the fundamentals of the Cotonou Partnership Agreement and the EU’s development policy embodied in the Agenda for change. Financial allocations to different priority sectors were the following:
- Regional economic integration receives 59% of the regional aid envelope, 70% of which goes to blending (of grants and loans). Other objectives pursued under this heading include trade and business enabling environments, EPA implementation and capacity building, and boosting private sector participation.
- Climate change, resilience, environment, food security and natural resource management receive 20% of regional funds. This is in line with the EU’s overall commitment of spending at least 20% of budget on climate-related activities.
- Governance, peace and security are allocated 15% of the regional funds. This amount should be seen in the wider context of complementarity between instruments; notably, the African Peace Facility which receives 25% of the separate intra-ACP envelope.
Positive innovations or generic solutions?
The EU’s new approach to funding regional integration, devised for the 11th EDF, can be in some ways considered as a paradigm shift. Some of the innovations are very likely to effectively address identified aid management problems and improve disbursement rates. However, it is still unclear whether this new approach will produce better results in terms of regional integration. The new approach to regional cooperation under the 11th EDF would appear to offer generic solutions to generic problems, rather than being a tailored approach in response to the different national, regional and sectoral political economy dynamics that influence regional integration. The absence of a clear theory of change and a mechanism for benchmarking regional integration would seem to be major weaknesses, with clear implications for the ability to measure and capture results. As a further point, five-year cooperation cycles are likely to be too short for producing results in regional integration. Direct access may not deliver results in terms of the domestication of regional integration agendas, unless it is underpinned by a solid political economy analysis of the national incentives for pursuing regional cooperation, and unless the regional dimension of regional challenges is acknowledged and addressed. Steering committees, which focus largely on formal institutions and aid-management issues, are unlikely to generate the high-level political action that is required to push the regional integration agenda forward and are probably not the right tool for enabling the EU to identify opportunities for supporting more flexible, informal, regional arrangements with a strong potential to drive regional integration processes forward. Blending may be a far more risky and complex enterprise, requiring the EU to take serious account of the drivers of and barriers to transnational infrastructure development, particularly during the project planning stage. The new EDF blending framework may not necessarily broaden the scope for increased ownership of blending operations by beneficiary countries, given the limited space available to national and regional actors for leading the implementation of blending projects. The African Development Bank is the only regional financial institution that qualifies as a lead financier. There are also concerns about the EC’s ability to manage blending in a ‘politically savvy’ way.
Reconciling with the principle of ownership
There is strong evidence that the 11th EDF regional programming process was largely prescriptive and heavily dominated by the EU, in particular by DG DEVCO. ACP actors, notably DMROs, were largely excluded from the drafting of programming orientations, the initial sector analysis, priority setting and sector allocations. The allocation of funds to different sectors in different regions appears to have revolved around DEVCO’s objective to secure a maximum allocation of EDF regional funds to the new blending facilities. There is also little evidence that the choice of sectors and the distribution of funds among sectors corresponded with a regionally tailored political economy analysis of the incentives and the available capacity for meaningful regional action. Such a prescriptive programming approach is difficult to reconcile with the principles of ownership and co-management underpinning the Cotonou Partnership Agreement. It has also prevented the EU from ensuring a close alignment of its regional programming with the political and economic realities of the various regions. The creation of an EU Emergency Trust Fund on migration - created by the EU in November 2015 and drawing massively from EDF funds, including €395 million from the regional and national programmes - also illustrates the trend to recentralise the management funds away from ACP countries and regions, in accordance with the EU’s pressing (internal) political priorities. DMROs had little room for manoeuvre to resist this. As a result, they have now lost control of programming, management and spending of those RIP funds that have been pooled with the new Emergency Trust Fund.
Implications for future EU support
The EU has long-standing relations with many regional organisations across the world, spanning a wide range of policy areas, including trade, security, and global public goods. EU support for regional cooperation and integration are likely to remain important building blocks in the EU’s future foreign and security policy toolkit, and given the importance of the EU as a political and financial sponsor of regional integration, it is likely that the EU will continue to prioritise, and even increase, its support to regional integration. The current review of the European Consensus on Development and the evolving discussions on the ACP-EU partnership beyond 2020 present important opportunities where evidence from practice of previous policy frameworks will need to be considered. While expectations about the role played by the EU as a global actor are running high, the EU will need to demonstrate its added value and cannot afford not to continue to learn lessons as to how it can support regional integration more effectively. Our study identifies the following pointers for future high-impact EU support to regional integration related to ACP countries and beyond:
- The EU’s ambitions for support for regional integration may need to be revisited in terms of what is feasible, based on a sophisticated understanding of where political traction lies and the potential capacity of technical and political actors to form coalitions and drive regional agendas, at national and regional levels. This means first and foremost, that the EU will need to invest many more resources in understanding the real political economy of regional integration in the various regions and sectors, beyond the easy explanations of ‘lack of political will’ and ‘capacity constraints’.
- The EU will need to pursue a respectful dialogue and ensure ownership, beyond simply aligning support with RO strategies, regional policies and treaties; these are often sponsored by donors, but lack the backing of member states and other stakeholders.
- Support strategies should be specifically tailored to the idiosyncrasies of different regions, sectors and sub-sectors, and geared to producing a higher impact rather than higher disbursement rates. The required transformation will entail revisiting and adapting the systems, incentives and capacities that are deployed to deliver high-impact support for regional cooperation.
- The EU may also need to instill a higher degree of realism, and match its ambitions with the lower capacity levels resulting from staffing cuts.
This article was published in GREAT Insights Volume 5, Issue 4 (July/August 2016).
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