draft report - European Parliament

EUROPEAN PARLIAMENT
1999
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2004
Committee on Development and Cooperation
PROVISIONAL
2001/2158(COS)
14 December 2001
DRAFT REPORT
on the Commission Communication concerning the proposal for a Council
decision on the adoption of the position of the Community within the ACP-EC
Council of Ministers regarding the settlement of all ACP HIPC LDCs’ special
loans remaining after full application of HIPC debt alleviation mechanisms
(COM(2001) 210 – C5-0394/2001 - 2001/2158(COS))
Committee on Development and Cooperation
Rapporteur: Mario Mantovani
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INDEX
Page
PROCEDURAL PAGE.......................................................................................................... 4
MOTION FOR A RESOLUTION.......................................................................................... 5
EXPLANATORY STATEMENT ............................................................................................
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PROCEDURAL PAGE
By letter of 25 April 2001 the Commission forwarded to Parliament its Communication on the
proposal for a Council decision on the adoption of the position of the Community within the
ACP-EC Council of Ministers regarding the settlement of all ACP HIPC LDCs’ special loans
remaining after full application of HIPC debt alleviation mechanisms (COM(2001) 210 –
2001/2158(COS)).
At the sitting of 3 September 2001 the President of Parliament announced that she had
referred this proposal to the Committee on Development and Cooperation as the committee
responsible and to the Committee on Budgets for its opinion (C5-0394/2001).
At its meeting of 3 September 2001 the Committee on Development and Cooperation
appointed Mario Mantovani rapporteur.
It considered the Council proposal and the draft report at its meetings of … .
At the latter/last meeting it adopted the motion for a resolution by ... votes to ..., with ...
abstention(s)/unanimously.
The following were present for the vote: ... chairman/acting chairman; ... and ..., vicechairman/vice-chairmen; ..., rapporteur; ..., ... (for ...), ... (for ... pursuant to Rule 153(2)), ...
and ... .
The explanatory statement will be presented orally in plenary sitting.
On 1 October 2001 the Committee on Budgets decided not to deliver an opinion.
The report was tabled on ....
The deadline for tabling amendments will be indicated in the draft agenda for the relevant
part-session/is ... on ... .
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MOTION FOR A RESOLUTION
European Parliament resolution on the Commission Communication regarding the
proposal for a Council decision on the adoption of the position of the Community within
the ACP-EC Council of Ministers regarding the settlement of all ACP HIPC LDCs’
special loans remaining after full application of HIPC debt alleviation mechanisms
(COM(2001) 210 – C5-394/2001 - (2001/2158(COS))
The European Parliament,
–
having regard to the Commission Communication regarding the proposal for a Council
decision on the adoption of the position of the Community within the ACP-EC Council
of Ministers regarding the settlement of all ACP HIPC LDCs’ special loans remaining
after full application of HIPC debt alleviation mechanisms (COM(2001) 210 – C5394/20011)
–
having regard to Article … of the … Treaty,
–
having regard to Rule 47(1) of its Rules of Procedure,
–
having regard to the report of the Committee on Development and Cooperation (A5-xxx),
–
having regard to the ACP-EU Association Agreement and, in particular, Article 66
thereof,
–
having regard to the 'Jubilee 2000' campaign and, in particular, the request put forward
by the Vatican,
–
having regard to the Cairo Declaration and the action plan adopted at the Africa-Europe
Summit (3-4 April 2000),
–
having regard to the UN Millennium Summit Declaration (6-8 September 2000),
–
having regard to the Brussels Declaration and the action plan adopted at the Third UN
Conference on the Least-Developed Countries (20 May 2001),
–
having regard to the G8 declarations, in particular those issued at Cologne (June 1999)
and Genoa (July 2001),
–
having regard to the Council decision of 6 July 1998 concerning exceptional assistance
for the heavily indebted ACP countries (98/453/EC),
–
having regard to the ACP-EU Joint Assembly’s resolutions on the debt burden in the
ACP countries, which were adopted on 24 September 1998 in Brussels,
–
having regard to its past resolutions on poor countries’ external debt, in particular
resolutions A4-0382/97 and B5-0417, 0420 and 0428/2000,
1
OJ C …
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–
having regard to the Commission’s Communication and its proposal for a decision
(COM(2001)210 final – C5-0394/01),
–
having regard to the report of the Committee on Development and Cooperation (A5-…),
A. whereas, in many cases, the amount of development aid received by some of the
countries affected by the debt crisis is less than the amount which those countries pay out
in order to service their debt,
B. whereas most of the countries deemed by the IMF and the World Bank to be highly
indebted poor countries (HIPC) are ACP countries, and whereas the debt burden in those
countries is a major obstacle to social and economic development,
C. whereas poverty in many developing countries is likely to worsen as the September 11
2001 events have deepened the pre-existing global economic slowdown,
D. whereas, in order to break the poverty spiral in which the HIPCs are trapped, peace must
be established as a first step, so as to enable the resources released by means of debt
alleviation to be used effectively; in a war situation (such as prevails in Angola,
Colombia, Sierra Leone and Palestine, amongst other countries) it is obvious that
development plans are bound to fail,
E. whereas efforts to mobilise additional debt relief should be seen as part of the total effort
to strengthen resources in support of social and human development objectives and
targets,
F. whereas in the Göteborg Declaration and the Laeken Conclusions the Council reaffirmed
the EU’s commitment to achieving the official UN objective of allocating 0.7% of GDP
to development aid and whereas, in preparation for the holding of the UN ‘Financing for
Development’ (FfD) Conference in March 2002 and the Earth Summit (to be held in
September 2002 in Johannesburg), a specific timetable (accompanied by the necessary
measures) should be drawn up for the purpose of achieving that objective,
G. whereas human development is essential as a means of upholding human rights and
whereas basic, fundamental rights such as the right to life, employment and well-being
are in their turn the basis of human development,
H. whereas, although Parliament has no powers where the EDF is concerned, it receives
financial information thereon each year and is responsible for granting annual approval of
the Commission’s management in respect of EDF implementation,
1.
Points out that, in recent years, many loans have been granted to the ACP countries to
enable them to finance their debt or the interest on existing loans and not for the purpose
of fresh investment, and that this vicious circle, which leads to an increase in poverty,
must be broken;
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2.
Welcomes the proposal submitted by the Commission, which supplements the other
initiatives undertaken for the benefit of the least-developed countries along the lines
advocated by Parliament and which will enable the poorest ACP countries to make some
progress in the fight against poverty;
3.
Regrets the fact, however, that it was not formally consulted regarding that proposal,
4.
Considers that the enhanced HIPC initiative is still inadequate in the current context of
economic globalisation, even though it acknowledges the failure of earlier programmes
based on purely on macroeconomic strategies and is designed to establish a link between
debt alleviation and poverty reduction (a formula based on the Poverty Reduction
Strategy Papers) by making the eligibility criteria more flexible;
5.
Advocates supporting alternative efforts to revise the debt sustainability thresholds from a
human development perspective;
6.
Considers that the public-debt relief process should be speeded up and deepened in
countries which apply the principles of good governance and give priority to poverty
eradication;
7.
Stresses that long-term debt sustainability will depend upon the maintenance of sound
economic policies, strengthened debt management and the provision of appropriate
financing; in this context, and in connection with the various medium- and long-term
support initiatives, the special links which exist between certain Member States (and in
general the most highly industrialised countries) and certain HIPCs could play a crucial
role in the period which comes after the economic adjustment and transition stage
following the cancellation of a debt, with a view to ensuring that those HIPCs are
gradually incorporated into the international economy;
8.
Considers that improving the effectiveness of public expenditure is the most appropriate
way of ensuring that the resources released by means of debt alleviation (together with
other resources and external aid) contribute effectively to poverty reduction;
9.
Considers that whatever additional funds governments obtain through debt relief should
be allocated to social projects by means of plans agreed with donors and civil society, so
as to increase social expenditure in areas such as basic education and primary health care,
Aids and other measures designed to reduce poverty;
10. Recommends that the drawing up of Poverty Reduction Strategy Papers should be a
transparent, participatory process in which civil society is involved in determining
development priorities;
11. Notes that Poverty Reduction Strategy Papers provide a vehicle for structuring
partnerships with donors and a framework for the interventions of donors and other
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partners to ensure that external support is well integrated into national programmes;
12. Calls on the Commission and the Member States to offer technical assistance to the ACP
countries so that they can devise debt-management schemes (to include internal debt as
well) and to establish mechanisms which will ensure that the proceeds of debt relief are
invested in human-development programmes along the lines of the model devised by the
UNDP, namely National Partnership Facilities which could provide a basis for
coordination between donors and MFIs (Multilateral Financial Institutions), so as to
enable the use of the resources released to be monitored;
13. Points out that the success of the initiative designed to help the HIPCs calls for
coordination between the various donors and creditors and that, when debt-relief plans
are implemented, the burden of such an operation must be fairly distributed;
14. Urges banks and financial institutions of industrialised countries to increase their
efficiency in delivering aid, to remove bureaucratic obstacles and harmonise their
procedures in order to reduce delays and transaction costs to a minimum;
15. Considers that, since not all the EU Member States are represented within the G8 group,
the EU should coordinate Community proposals within that group, the World Bank and
the IMF, so that it can offer significant financial support for debt relief, consistent with its
role as the world’s largest donor;
16. Considers that, taking into account recent events, the HIPC initiative should provide for
additional assistance at the completion point if there has been fundamental change in a
country’s economic conditions due to exceptional external circumstances,
17. Considers that trade is an important source of growth and poverty reduction and that
greater access to markets would provide a major boost to development,
18. Calls on the MFIs, the WTO and other multilateral organisations involved in the
Integrated Framework Initiative to increase the trade-related technical assistance which
they provide to the least-developed countries so as to help them to overcome the internal
obstacles to trade integration;
19. Recognises that for most low-income countries the availability of Official Development
Assistance remains an essential supplement to domestic resources mobilisation and
foreign investment if growth and poverty reduction goals (2015 targets) are to be
achieved; therefore stresses the need to reach the 0.7 percent ODA/GNP target; a tangible
proposal and a specific timetable put forward by the major industrialised countries (those
belonging to the G8 group) would send out a forceful message designed to involve the
international community in the success of the Monterrey Conference and in the very
future of development cooperation;
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20. Calls once again for the EDF to be incorporated in the EU’s overall development budget,
since this would significantly increase the transparency, the profile and the consistency of
the EU’s external actions;
21. Instructs its President to forward this resolution to the Commission, the ACP-EU
Council, the UN, the IMF and the World Bank.
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EXPLANATORY STATEMENT
Introduction
The problem of external debt and the ability to service the interest payable on that debt
continues to be one of the basic features of economic development in the ACP countries. The
highly indebted countries (most of which are located in Africa) allocate on average 40% of
their annual budgets to debt servicing, which reduces their ability to offer their people basic
social services such as healthcare and education. Paradoxically, the development aid provided
by the EU and its Member States to the world's poorest countries is on occasion not even
sufficient to cover the cost of servicing their external debt.
For this reason there have been repeated calls, both within the Joint Assembly and within
Parliament itself, for a revision of the various political options available for addressing and
resolving the issue and, at the same time, stimulating economic growth and improving the
living standards of the peoples affected. Parliament has more than once urged the EU and its
Member States to take the initiative and to promote a more ambitious strategy within the
international financial institutions in order to bring about faster, deeper and broader reduction
or cancellation of the poorest developing countries' debt (see in particular Resolutions A40382/97, B5-0417, 0420 and 0428/2000)
Miscellaneous Initiatives
The main categories of external debt are public- or private-sector debts, bilateral or
multilateral debts and short- and long-term debts. They may be classified as loans granted
under preferential terms (e.g. 0.7 % interest rate) for development purposes or granted in the
form of non-bank export credits, e.g. for guaranteed exports.
Traditionally, the bodies responsible for cancelling or renegotiating debts have been the Paris
Club (bilateral public debts) and the London Club (private debts). The Paris Club may grant a
reduction of up to 67%.
In 1996 it became obvious that such initiatives were not enough to resolve the debt crisis and
that certain countries continued to be burdened by an unsustainable debt. The HIPC initiative
was then launched in order to extend the scope of the earlier initiatives, a figure of up to 80%
being achieved. For the first time the relief of debts contracted with the World Bank and the
IMF, and of other multilateral debts, was included.
What is new about this initiative is the wish to strive for coordinated international cancellation
of debt, including multilateral debt, whereas earlier initiatives were concerned essentially with
bilateral public debts within the context of the Paris Club. Another new feature is the
inclusion of the criterion of 'sustainable' debt defined on the basis of the relationship between
the size of the accumulated debt and the level of exports.
At the G7 summit held in Cologne in June 1999 it was decided that the initiative agreed in
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1996 should be enhanced so as to deepen and enlarge its scope and speed up its effects.
Consequently, the Community and the ACP States decided in December 1999 to allocate
EUR 1 billion drawn from the EDF to the enhanced HIPC initiative.
Debt, poverty and development
The increase in the cost of debt servicing, combined with the steady fall in the price of basic
commodities, has caught many developing countries in the 'debt trap', the consequences of
which are many: quite apart from the dysfunctioning of the financial markets and the threat to
the financial stability of all those involved, the debtor countries obviously suffer, as do their
people who are required to carry the full burden of the debt since they are deprived of the
means of satisfying their basic needs, i.e. food, health care and education. The outflow of the
foreign currency needed in order to service the debt restricts the scope of the financial
autonomy needed for development to occur. A high level of indebtedness deters investors and
drives capital out of the country. The pressure exerted by the debt often requires countries to
produce single cash crops for export at the expense of traditional food crops, which only
aggravates poverty.
In other words, indebtedness leads to a spiral of poverty and arrested development in the
countries affected. In the past, however, the problem of third-world debt has not been
considered sufficiently from the point of view of its impact on development and poverty.
The 1999 G7 Cologne initiative was intended as part of an increased effort to reduce poverty.
However, people talk of a 'sustainable' level of debt by taking a certain percentage of a
country's exports as a reference figure without considering what each country actually needs
in order to be able to carry through its poverty-reduction strategies (health, education), and
they promote macro-economic incentives which are not necessarily of benefit to the poorest
people.
For this reason, debt sustainability should be defined in relation to the poverty situation in
each country. The starting point for this should be that the budget resources of each country
affected by the debt crisis should be allocated primarily to poverty reduction and human
development. The minimum amount of funding needed to meet this basic objective (basic
education and health care, Aids prevention, debt etc.) should be 'ring-fenced' for that purpose
and only some of the remaining resources should be regarded as being available for paying
off the external debt. In other words the debt-sustainability criterion should be defined in
relation to human development and not in relation to micro-economic sustainability criteria.
Community involvement and Parliament's position
From the outset the EU has supported the HIPC initiative and played a full part in it by
making funding available for the ACP beneficiary countries. By means of its decision of 6
July 1998 (on which Parliament expressed its views in its resolution A4-382/97) it undertook
to secure a debt reduction for all the ACP countries which opted for the HIPC initiative.
Following the adoption of the enhanced HIPC initiative in 1999 and the consequent easing of
the eligibility criterion, the retrospective application of further criteria, the increase in the
number of countries involved and the speeding up of the decision-making process, the cost of
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the initiative has risen, with the result that the repayments which are possible in accordance
with the abovementioned Council decision are inadequate. For this reason extra resources
need to be granted for the least-developed ACP countries.
Parliament has repeatedly stressed the need to establish a link between the carrying-out of
genuine economic reforms and the granting of debt relief, the latter being part of the fight
against poverty. In this connection, Parliament considers that human- and social-development
indicators should be used as criteria for determining whether or not a country is eligible for
debt relief or debt cancellation. It also considers that the countries affected should be offered
assistance to help them manage their debt, so as to ensure that they observe the principles of
democracy and good governance when using the resources obtained through debt relief.
The proposal under consideration
In order to give fresh impetus to the international consensus regarding debt reduction and to
respond to the international community's growing concerns regarding the increasing
marginalisation of the least-developed countries within the world economy, the Community is
now proposing full cancellation of the debts linked to any of the special loans granted to the
least-developed ACP countries under the first three Lomé Conventions which are still
outstanding following the introduction of debt-relief measures under the enhanced HIPC
initiative. Special loans, which are long-term loans devised on easy terms and granted to the
ACP countries under Lomé I to III, have not been issued since Lomé IV came into force.
For this reason the Commission is proposing to the Council a decision (the one contained in
the document with which Parliament's report is concerned) to be adopted by the ACP-EU
Council.
The Community's current involvement in the enhanced HIPC initiative takes into account the
debt relating to special loans and to risk capital but it requires the HIPC countries to use in the
first instance the funds allocated by the Community in connection with the initiative designed
to enable the debt linked to all outstanding special loans to be repaid before any start is made
on re-paying risk capital. In many of the ACP's least-developed countries this standard debtrelief mechanism within the HIPC initiative is enough to enable all special loans to be
cancelled, but this is not the case in all countries.
The decision which the Commission is submitting to the Council will enable all the ACP’s
least-developed countries which have reached their ‘decision point’1 under the standard HIPC
mechanism to be granted immediate payment in full of the cost of servicing the debt relating
to special loans.
Your rapporteur naturally welcomes this initiative, which supplements other actions
undertaken for the benefit of the least-developed countries and which will enable the problem
of the poorest countries’ indebtedness to be addressed effectively. However, certain
1
The country must adopt adjustment and reform programmes supported by the IMF and the World Bank and
pursue them for three years. At the end of this first phase the country's eligibility for debt relief is assessed by a
debt sustainability analysis (DSA) to determine the current external debt situation. If the country has established
a satisfactory track record of reform and sound policies it has reached the decision point where IMF/World Bank
will formally decide on country's eligibility, the amount and terms of the assistance based on actual data.
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procedure-related comments must be made.
Since the proposal for a decision has no effect on the Community budget but, rather, on
resources made available by the Member States under the Lomé Convention and on the EIB’s
own resources, Parliament has not been consulted officially and has merely been sent the
document for information purposes. Indeed, the Council has already adopted the position (it
did so at its meeting of 14 May 2001; the document was forwarded to Parliament on 25 April
2001) with a view to the holding of the Third UN Conference on the Least-Developed
Countries (14-20 May 2001). Although Parliament has no powers where the EDF is
concerned, it does receive financial information thereon each year and it is responsible for
granting annual approval of the Commission’s management in respect of EDF
implementation. In view of the wish to see the EDF included in the Community budget and
the precedent whereby the Council has freely chosen to consult Parliament regarding the
financial rules applicable to the development initiatives financed under the Lomé Convention,
your rapporteur considers that the Council could have consulted Parliament when drawing up
the proposal.
In any event, implementation of the proposed measure requires authorisation from the ACP,
since there are 60 million euros’ worth of EDF funds involved – although it may be inferred
from the discussions which took place during the 6 December ACP Council of Ministers
meeting that the Commission has already implemented the decision without awaiting the joint
decision. Furthermore, the ACP Council of Ministers has expressed its concern at what is
becoming a habit on the Commission’s part, namely awarding unassigned EDF Funds without
consulting the ACP Group and without taking into account the rules governing the decisionmaking process.
It is important that, in proceedings of this type, all the rules applicable in the decision-making
process be observed.
Debt management in the future
In view of the major impact which a high degree of indebtedness has on the development of
the countries affected, debt management assistance should be part and parcel of debt-relief
programmes, since this is in the interests of creditors themselves and of the financial markets.
In future the problem of indebtedness must be prevented from recurring by means of adequate
funding of programmes and projects. There is not much point in continuing to grant funding if
there are doubts regarding a country’s ability to make repayments, and particular attention
should be devoted to countries affected by natural disasters or those which are emerging from
a war.
The HIPC initiative is restricted to the most severe cases but it will not solve the debt
problem, since there are middle-income countries which could in future find themselves in a
similar situation and be in need of aid. For this reason, assistance would be advisable as a
means of helping countries to manage their debts (both internal and external) more
effectively.
It should be borne in mind that both the Lomé Convention (Article 241) and the Cotonou
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Agreement (Article 66) provide for the provision of technical assistance to the ACP countries
in order to help them manage their debt (including internal debt) and deal with debt-servicing
and balance-of-payments problems, so that they are able to monitor the public-sector external
loans more effectively and supervise the private-sector loans.
In this connection the Commission and the Member States should set up a formal system
which would enable advantage to be taken, for example, of the special relations which may
exist between a Member State and one of the poorest ACP countries, so that the latter
country’s management of its debt can be jointly monitored directly, with an eye to ensuring
that the principles of good governance are observed and that the financial benefits derived
from lower debt-servicing costs are invested in poverty-reduction initiatives. The system
should include on-the-spot checks. Poverty-reduction efforts must be monitored in order to
ensure that funding allocation, debt relief, aid and new funding all have the desired effect; the
National Partnership Facilities launched by the UNDP are a sound move in this direction. The
parliaments and organised civil society in the countries affected have an important role to play
in monitoring the new funding.
Furthermore, debt relief must not constitute a pretext for reducing development aid, since
effective development aid is the best solution to the debt problem.
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