Presentation for the 5th Pacific Water Conference. By Mr. John STANLEY Head of the EU Technical Office in Samoa.

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1 Presentation for the 5th Pacific Water Conference By Mr. John STANLEY Head of the EU Technical Office in Samoa. 1

2 What is the European Union? The EU is unlike anything else it isn't a government, an association of states, or an international organization. Rather, the 27 Member States have relinquished part of their sovereignty to EU institutions, with many decisions made at the European level. The European Union has delivered more than 60 years of peace, stability, and prosperity in Europe, helped raise our citizens' living standards, launched a single European currency (the euro), and is progressively building a single Europe-wide free market for goods, services, people, and capital. The 27 EU Member states in 2010 had a combined population of 501million compared to 310 million for the USA. 2

3 List of Countries by GDP. Taken from data largely compiled by the International Monetary Fund 2011 (from Wikipedia website) Country/Region GDP (millions of US$) World 69,899,225 [5] European Union 17,610,826 [5] 1 United States 15,075,675 2 China 7,298,147 n2 3 Japan 5,866,540 4 Germany 3,607,364 5 France 2,778,085 6 Brazil 2,492,907 7 United Kingdom 2,431,310 8 Italy 2,198,732

4 EU as a Development Partner. More than half the money spent throughout the world on helping Developing Countries comes from the European Union and its member states. The aims of this development aid is to reduce poverty, develop democratic values and support national strategies and procedures. 4

5 The EU in the Pacific The hub for the EU in the Pacific is the EU Delegation in Fiji which covers 11 pacific Island countries and 4 overseas territories with sub offices in New Caledonia and Samoa. There are also EU Delegations in Papua New Guinea (with two sub office in the Solomon Islands and Vanuatu) and Timor Leste. 5

6 Why is the EU in the Pacific? Historical Reasons? Some member states have had and continue to have interests in the region, resulting in several countries being members of the ACP & OCT groups. Trade interests. Political Interests. Development interests. 6

7 Three fundamental values The Guiding Principles for EU external action are translated into three fundamental values: respect of human rights promotion of democracy respect of the rule of law

8 EU Development Assistance to the Pacific. Projects in the Pacific: EDF10 + EU budget + ongoing EDF9 project (EUROS) EDF 10 ( ) EDF+EU budget Country Total of which budget support Climate Change* Human Rights Gender Other sectors Total EDF+EU budget GCCA Other, incl. DRR and FLEGT Water and Sanitation Energy COOK ISL. 3,920, ,000 3,150, ,000 3,920,000 FIJI - 1,867, ,000 15,100,000 17,255,144 KIRIBATI 20,440,000 3,000,000 10,900,000 4,100,000 2,440,000 20,440,000 MARSHALL ISL. 6,360, ,000 5,560, ,000 6,860,000 MICRONESIA 8,300,000 7,470, ,000 8,300,000 NAURU 2,700,000 2,300, ,000 2,700,000 NIUE 3,690,000 2,850, ,000 3,690,000 PALAU 2,900,000 2,470, ,000 2,900,000 PAPUA NG 104,650,000 6,000,000 5,950,000 1,550, , ,650, ,467,880 SAMOA 48,210,000 43,410,000 3,000,000 43,410,000 79,685 4,800,000 51,289,685 SOLOMON ISL. 40,115,000 17,700,000 2,800,000 2,475,000 19,885,000 79, ,561 20,805,000 46,583,129 TIMOR-LESTE 91,229,604 4,000,000 5,800,000 1,080, , ,592, ,578,921 TONGA 14,997,026 11,208,000 1,025,000 5,708,000 8,764,026 15,497,026 TUVALU 7,300,000 1,500,000 4,900,000 2,400,000 7,300,000 VANUATU 23,000,000 12,820,000 3,200,000 1,400,000 95,000 23,490,000 28,185,000 TOTAL National 377,811,630 86,638,000 19,000,000 14,670,000 88,045,000 31,538,000 3,577,136 1,344, ,791, ,966, PACIFIC REGION 114,000,000 11,400,000 34,200,000 43,800,000 2,646,024 87,900, ,946, Intra-ACP for Pacific 89,900,000 8,000,000 42,000,000 6,600,000 7,300,000 26,000,000 89,900,000 Pacific OCTs 70,000,000 22,210,000 17,068,100 26,980,000 5,227,819 49,275,919 TOTAL PACIFIC 651,711, ,848,000 38,400, ,938, ,625,000 87,865,819 6,223,160 1,344, ,691, ,088,728 8

9 How is EU Aid Delivered to Recipient Countries? There are essentially two very different modalities: 1. Projects. The traditional modality with contracts awarded following EU rules & procedures. 2. Budget Support. A new approach to Aid Delivery, but one which more donors such as AusAID and NZ AID are moving more towards. 9

10 Definition of Budget Support Definition determined by OECD/DAC in 2006: BS is a method of financing a partner country s budget through a transfer of resources from an external financing agency to the partner country s national treasury. The funds thus transferred are managed in accordance with the recipient s budgetary procedures. But it is not a blank cheque. Eligibility criteria and disbursement conditions have to be met. EU-BS guidelines: BS=transfer of financial resources to the National Treasury of a partner country following the respect by the latter of agreed conditions for payment

11 Eligibility criteria of EU budget support Relevant and credible national or sector development strategy Stability oriented macro-economic policy Relevant and credible PFM reform programme Publication of the budget (transparency and oversight of the budget) During formulation, the relevance and credibility of the Government s policies and strategies will be assessed. During implementation, emphasis will be put on progress made.

12 Flow of Funds of Budget Support Partner Country s Central bank External Assistance Foreign Exchange Reserves Treasury Account Taxes & non tax revenues Conditions for Disbursement: 1. General Conditions 2. Specific Conditions Budget Implementation through partner country s Public Financial Management system Funds are 100% fungible, this means that competition exists between Government Departments and that EU Funds can no longer be Identified.

13 BS implies use of country systems Alignment with government policies and action plans Planning, monitoring, reporting done by the Government Partner government is responsible for management and use of funds; Use of the Public Finance Management system Internal control and auditing done by the Government

14 EU Delegations responsible for: Effective policy dialogue Monitoring of fundamental values, eligibility criteria, performance criteria and disbursement conditions Monitoring of risks associated with country systems Providing assistance for capacity development (Technical Cooperation Facility etc). 14

15 Eligibility criteria of EU budget support Relevant and credible national or sector development strategy Stability oriented macro-economic policy Relevant and credible PFM reform programme Publication of the budget (transparency and oversight of the budget) During formulation, the relevance and credibility of the Government s policies and strategies will be assessed. During implementation, emphasis will be put on progress made.

16 Three Types of Budget Support Good governance and development contracts (GGDC), aimed at promoting a national development strategy and national level reforms. Normally done in conjunction with other Development Partners whenever possible. Sector reform contracts (SRC), aimed at strengthening implementation of sector policies and reforms and at improving service delivery State building contracts (SBC), aimed at strengthening fragile states, ensuring vital state functions and basic public services and supporting transition towards democratic governance.

17 Two types of Criteria to be met for release of EU funds Fixed Criteria 1. Macroeconomic Stability. 2. PFM Reform. 3. Sector Progress (if Sector Reform contract). 4. Budget Transparency. Variable Criteria Payment = Progress in Reaching Target x Allocation Note: There are other conditionality's linked to Human Rights etc.

18 Consequence of moving from Projects to Budget Support. Increase in ownership/strategic planning by Governments. Change in procurement procedures (from EU to Government procedures). Greater consistency/predictability of flow of funds to Government. Need for Greater NSA capacity to supervise government policy formulation, budget preparation, PFM Reform and budget expenditure. Greater flexibility for the use of funds as all payments are FUNGIBLE (funds do NOT have to be used by the sector). Ease of management by EU and Governments, usually one lump sum payment per year.

19 Pacific Countries Where budget Support is On-Going or envisaged in the near future. 1. Samoa (Water & Sanitation) 2. Toga (Renewable Energy) 3. Cook Islands (Sanitation) 4. New Caledonia (Vocational Training) 5. Pitcairn (Tourism) 6. Solomon Islands (General Budget Support). The amounts of money involved are substantial, for example under the 10 th EDF ( ) Samoa is to receive over EUR 40 million! But not all is relevant to the Water Sector!

20 Thank You for listening. Any Questions?

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