Chapter 1. Objectives, Principles, Guidelines and Eligibility
Article 55. Objectives
The objectives of development finance cooperation shall be, through the provision of adequate financial resources and appropriate technical assistance, to support and promote the efforts of ACP States to achieve the objectives set out in this Agreement on the basis of mutual interest and in a spirit of interdependence.
Article 56. Principles
1. Development finance cooperation shall be implemented on the basis of and be consistent with the development objectives, strategies and priorities established by the ACP States, at national, regional and intra-ACP levels, Their respective geographical, social and cultural characteristics, as well as their specific potential, shall be taken into account. Guided by the internationally agreed aid effectiveness agenda, cooperation shall be based on ownership, alignment, donor co-ordination and harmonisation, managing for development results and mutual accountability. In particular, cooperation shall:
(a) promote local ownership at all levels of the development process;
(b) reflect a partnership based on mutual rights and obligations;
(c) emphasise the importance of predictability and security in resource flows, granted on highly concessional terms and on a continuous basis;
(d) be flexible and appropriate to the situation in each ACP State as well as adapted to the specific nature of the project or programme concerned; and
(e) ensure efficiency, coordination and consistency.
2. Cooperation shall ensure special treatment for LDC ACP countries and duly take into account the vulnerability of landlocked and island ACP countries. In addition, the specific needs of post-conflict countries shall also be addressed.
Article 57. Guidelines
1. Operations financed within the framework of this Agreement shall be implemented by the ACP States and the Community in close cooperation, the concept of equality between the partners being recognised.
2. The ACP States shall be responsible for:
(a) defining the objectives and priorities on which the indicative programmes are based;
(b) choosing projects and programmes;
(c) preparing and presenting the dossiers of projects and programmes;
(d) preparing, negotiating and concluding contracts;
(e) implementing and managing projects and programmes; and
(f) maintaining projects and programmes.
3. Without prejudice to the provisions above, eligible non-state actors may also be responsible for proposing and implementing programmes and projects in areas concerning them.
4. The ACP States and the Community shall be jointly responsible for:
(a) establishing, within the joint institutions, the guidelines for development finance cooperation;
(b) adopting the indicative programmes;
(c) appraising projects and programmes;
(d) ensuring equality of conditions for participation in invitations to tender and contracts;
(e) monitoring and evaluating the effects and results of projects and programmes; and
(f) ensuring the proper, prompt and efficient execution of projects and programmes.
5. The Community shall be responsible for taking financing decisions on projects and programmes.
6. Unless otherwise provided for in this Agreement, all decisions requiring the approval of either Party shall be approved, or be deemed approved, within 60 days of notification by the other Party.
Article 58. Eligibility for Financing
1. The following entities or bodies shall be eligible for financial support provided under the Agreement:
(a) ACP States;
(b) regional or inter-state bodies to which one or more ACP States belong, including the African Union or other bodies with non-ACP State members, which are authorised by those ACP States; and
(c) joint bodies set up by the ACP States and the Community to pursue certain specific objectives.
2. Subject to the agreement of the ACP State or ACP States concerned, the following shall also be eligible for financial support:
(a) national and/or regional public or semi-public agencies and departments of ACP States, including Parliaments, and, in particular, their financial institutions and development banks;
(b) companies, firms and other private organisations and private operators of ACP States;
(c) enterprises of a Community Member State to enable them, in addition to their own contribution, to undertake productive projects in the territory of an ACP State;
(d) ACP or Community financial intermediaries providing, promoting and financing private or public investments in ACP States;
(e) local decentralised authorities from ACP States and the Community; and
(f) developing countries that are not part of the ACP Group where they partici- pate in a joint initiative or regional organisation with ACP States in conform- ity with Article 6 of Annex IV to this Agreement.
3. Non-state actors from ACP States and the Community which have a local char- acter shall be eligible for financial support provided under this Agreement, accord- ing to the modalities agreed in the national and regional indicative programmes.
Chapter 2. Scope and Nature of Financing
Article 59.
Within the framework of the priorities established by the ACP state or states concerned at both national and regional levels, support may be given to projects, programmes and other forms of operations contributing to the objectives set outin this agreement.
Article 60. Scope of Financing
The scope of financing may include, inter alia, depending on the needs and the types of operation considered most appropriate, support to:
(a) measures which contribute to attenuate the debt burden and balance of payments problems of the ACP countries;
(b) macroeconomic and structural reforms and policies;
(c) mitigation of adverse short-term effects of exogenous shocks, including instability in export earnings on socioeconomic reforms and policies;
(d) sectoral policies and reforms;
(e) institutional development and capacity building;
(f) technical cooperation programmes; and
(g) humanitarian and emergency assistance including assistance to refugees and displaced persons, interventions linking short-term relief and rehabilitation with long-term development in crisis or post-crisis situations,
and disaster preparedness.
Article 61. Nature of Financing
1. The nature of financing shall, inter alia, include:
(a) projects and programmes;
(b) credit lines, guarantee schemes and equity participation;
(c) budgetary support, either directly, for the ACP States whose currencies are convertible and freely transferable, or indirectly, from counterparts funds generated by the various Community instruments;
(d) the human and material resources necessary for effective administration and supervision of projects and programmes;
(e) sectoral and general import support programmes which may take the form of:
(i) sectoral import programmes through direct procurement including financing of inputs in the productive system and supplies to improve social services;
(ii) sectoral import programmes in the form of foreign exchange released in instalments for financing sectoral imports; and
(iii) general import programmes in the form of foreign exchange released in instalments for financing general imports covering a wide range of products.
2. Direct budgetary assistance in support of macroeconomic or sectoral reforms shall be granted where:
(a) well-defined poverty-focused national or sector development strategies are in place or under implementation;
(b) well-defined stability-oriented macroeconomic policy established by the country itself and positively assessed by its main donors, including where relevant the international financial institutions, is in place or under implementation; and
(c) public financial management is sufficiently transparent, accountable and effective.
The Community shall align on the systems and procedures specific to each ACP country, monitor its budget support with the partner country and support efforts of partner countries to strengthen domestic accountability, parliamentary oversight, audit capacities and public access to information.
3. Similar direct budgetary assistance shall be granted gradually to sectoral policies in substitution for individual projects.
4. The instruments of import programmes or budgetary support defined above can also be used to support eligible ACP States implementing reforms aimed at intra-regional economic liberalisation which generate net transitional costs.
5. In the framework of the Agreement, the funds earmarked under the multi-annual financial framework of cooperation under this Agreement, own resources of the European Investment Bank (hereinafter referred to as the Bank) and where appropriate other resources drawn from the European Community's budget, shall be used to finance projects, programmes and other forms of operations contributing to the achievement of the objectives of this Agreement.
6. The funds provided under the Agreement may be used to cover the total costs of both the local and foreign expenditure of projects and programmes, including recurrent cost financing.
Title II. FINANCIAL COOPERATION
Chapter 1. Financial Resources
Article 62. Overall Amount
1. For the purposes set out in this Agreement, the overall amount of the Community's financial assistance and the detailed terms and conditions of financing are provided for in the Annexes to this Agreement.
2. Should an ACP State fail to ratify this Agreement or denounce it, the Parties shall adjust the amounts of the resources provided for in the Financial Protocol set out in Annex I. Adjustment of the financial resources shall also apply upon:
(a) the accession to the Agreement of new ACP States which did not take part in its negotiation; and
(b) the enlargement of the Community.
Article 63. Methods of Financing
The methods of financing for each project or programme shall be determined jointly by the ACP State or States concerned and the Community by reference to:
(a) the level of development, the geographical situation and economic and fi- nancial circumstances of these states;
(b) the nature of the project or programme, its economic and financial return as well as its social and cultural impact; and
(c) in the case of loans, factors guaranteeing their servicing.
Article 64. On Lending Operations
1, Financial assistance may be made available to or through the ACP States concerned or, subject to the provisions of this Agreement through eligible financial institutions or directly to any other eligible beneficiary. Where financial assistance is granted to the final recipient through an intermediary or directly to the final beneficiary in the private sector:
(a) the terms and conditions on which the assistance may be made available by the intermediary to the final recipient or directly to the final beneficiary in the private sector shall be laid down in the financing agreement or loan contract; and
(b) any financial benefit accruing to the intermediary from the on lending transaction or resulting from direct lending operations to the final beneficiary in the private sector, shall be used for development purposes on the conditions laid down in the financing agreement or the loan contract, after taking into account administrative costs, exchange and financial risks and the cost of technical assistance given to the final recipient.
2. Where the financing is undertaken through an on-lending body based and/or operating in the ACP States, it shall be the responsibility of that body to select and appraise individual projects and to administer the funds placed at its disposal under the conditions provided for in this Agreement and by mutual agreement between the Parties.
Article 65. Co-financing
1. The financial resources provided for in this Agreement may be applied, at the request of the ACP States, to co-financing undertaken in particular with development agencies and institutions, Community Member States, ACP States, third countries or international or private financial institutions, firms or export credit agencies.
2. Special consideration shall be given to the possibility of co-financing in cases where Community participation will encourage the participation of other sources of finance and where such financing may lead to an advantageous financial package for the ACP State concerned.
3. Co-financing may be in the form of joint or parallel financing. Preference shall be given in each case to the solution, which is more suitable from the point of view of cost effectiveness. In addition, measures shall be taken to coordinate and harmonise operations of the Community and those of other co-financing bodies in order to minimise the number of procedures to be undertaken by the ACP States and to render those procedures more flexible.
4. The process of consultation and coordination with other donors and co-financiers should be strengthened and developed, where possible, through the establishment of co-financing framework agreements and co-financing policies and procedures should be reviewed to ensure effectiveness and the best terms and conditions possible.
Chapter 2. Debt and Structural Adjustment Support
Article 66. Support for Debt Relief
1. In order to attenuate the debt burden of the ACP States and their balance-of-payment problems, the Parties agree to use the resources provided for under the multi-annual financial framework of cooperation under this Agreement to contribute to debt relief initiatives approved at international level for the benefit of ACP countries. The Community furthermore commits itself to examine how in the longer term other Community resources can be mobilised in support of internationally agreed debt relief initiatives.
2. At the request of an ACP State, the Community may grant:
(a) assistance in studying and finding practical solutions to indebtedness including domestic debt, debt-servicing difficulties and balance of payments problems;
(b) training in debt management and international financial negotiations as well as support for training workshops, courses and seminars in these fields; and
(c) assistance to develop flexible techniques and instruments of debt management.
3. In order to contribute to the servicing of the debt resulting from loans from the Bank's own resources, special loans and risk capital, the ACP States may, in accordance with arrangements to be made on a case by case basis with the Commission, use the available foreign currency referred to in this Agreement for such servicing, as and when debt repayment falls due and up to the amount required for payments in national currency.
4. Given the seriousness of the international debt problem and its impact on economic growth, the Parties declare their readiness to continue to exchange views, within the context of international discussions, on the general problem of debt, and without prejudice to specific discussions taking place in the relevant fora.
Article 67. Structural Adjustment Support
1. The multi-annual financial framework of cooperation under this Agreement shall provide support for macroeconomic and sectoral reforms implemented by the ACP States. In this framework, the Parties shall ensure that adjustment is economically viable and socially and politically bearable. Support shall be given in the context of a joint assessment between the Community and the ACP State concerned on the reform measures being undertaken or contemplated either at macroeconomic or sectoral level, and permit an overall evaluation of the reform efforts. To the extent possible the joint assessment shall be aligned on country specific arrangements and the support monitored on the basis of results achieved. Quick disbursement shall be an important feature of support programmes.
2. The ACP States and the Community recognise the necessity to encourage reform programmes at regional level ensuring that, in the preparation and execution of national programmes, due consideration is given to regional activities which have an influence on national development. To this end, support for structural adjustment shall also seek to:
(a) incorporate, from the beginning of the diagnosis, measures to encourage regional integration and take account of the consequences of trans border adjustment;
(b) support the harmonisation and coordination of macroeconomic and sectoral policies, including fiscal and customs areas, so as to fulfil the dual aim of regional integration and of structural reform at national level; and
(c) take account of the effects of net transitional costs of regional integration on budget revenue and balance of payments, either through general import programmes or budgetary support.
3. ACP States undertaking or contemplating reform at the macroeconomic or sectoral level shall be eligible for structural adjustment assistance, giving consideration to the regional context, their effectiveness and the likely impact on the economic, social and political dimension of development and on economic and social hardships being experienced.
4. The ACP States undertaking reform programmes that are acknowledged and supported at least by the principal multilateral donors, or that are agreed with such donors but not necessarily financially supported by them, shall be treated as having automatically satisfied the requirements for adjustment assistance.
5. Structural adjustment support shall be mobilised in a flexible manner and in the form of sectoral and general import programmes or budgetary support.
6. The preparation, appraisal and financing decision for structural adjustment programmes shall be carried out according to the provisions on implementation procedures of this Agreement with due regard to the quick disbursing feature of structural adjustment programmes. On a case-by-case basis, retroactive financing of a limited part of imports of ACP-EC origin may be permissible.
7. The implementation of each support programme shall ensure that the eligibility of ACP economic operators for access to the resources of the programme is as wide and transparent as possible and that the procurement procedures accord with the administrative and commercial practices in the state concerned, while ensuring the best possible price/quality ratio on imported goods and the necessary consistency with the progress achieved internationally for harmonising the procedures for supporting structural adjustment.
Chapter 3. Support In Case of Exogenous Shocks
Article 68.
1. The Parties recognise that macroeconomic instability resulting from exogenous shocks may adversely affect the development of the ACP States and jeopardise the attainment of their development requirements. A system of additional support in order to mitigate the short-term adverse effects resulting from exogenous shocks, including the effects on export earnings, is therefore set up within the multi-annual financial framework of cooperation under this Agreement.
2. The purpose of this support is to safeguard socioeconomic reforms and policies that could be affected negatively as a result of a drop in revenue and to remedy the short-term adverse effects of such shocks.
3. The extreme dependence of the ACP States' economies on exports, in particular from the agricultural and mining sectors, shall be taken into account in the allocation of resources, In this context, the least developed, landlocked and island, post-conflict and post-natural disaster ACP States shall receive more favourable treatment.
4. The additional resources shall be provided in accordance with the specific modalities of the support mechanism as set out in Annex II on Terms and Conditions of Financing.
5. The Community shall also provide support for market-based insurance schemes designed for ACP States seeking to protect themselves against short-term effects of exogenous shocks.
Chapter 4. Support for Sectoral Policies
Article 69.
1. Cooperation shall support, through the various instruments and modalities provided for in the Agreement:
(a) social and economic sectoral policies and reforms;
(b) measures to enhance productive sector activity and export competitiveness;
(c) measures to expand social sector services; and
(d) thematic and cross cutting issues.
2. This support shall be provided as appropriate through:
(a) sectoral programmes;
(b) budgetary support;
(c) investments;
(d) rehabilitation;
(e) training;
(f) technical assistance; and
(g) institutional support.
Chapter 5. Microprojects and Decentralised Cooperation
Article 70.
In order to respond to the needs of local communities with regard to development, and to encourage all agents of decentralised cooperation which are in a position to contribute to the autonomous development of the ACP States to put forward and implement initiatives, cooperation shall support, within the framework laid down in the rules and national legislation of the ACP States concerned and the provisions of the indicative programme, such development operations. In this context, cooperation shall support:
(a) micro projects at local level which have an economic and social impact on the life of the people, meet a demonstrated and observed priority need, and shall be undertaken at the initiative and with the active participation of the local community which shall benefit therefrom; and
(b) decentralised cooperation, in particular where such operations combine ef- forts and resources of decentralised agents from the ACP States and their counterparts from the Community. This form of cooperation shall enable the mobilisation of capabilities, innovative operating methods and resources of decentralised agents for the development of the ACP State.
Article 71.
1. Microprojects and decentralised cooperation operations may be supported from the financial resources of the Agreement. Projects or programmes under this form of cooperation may or may not be linked to programmes in the sectors of concentration of the indicative programmes, but may be a way of achieving the specific objectives of the indicative programme or the results of initiatives by local communities or decentralised agents.
2. Contributions for the financing of micro-projects and decentralised cooperation shall be made by the Fund, in which case the contribution shall not normally exceed three quarters of the total cost of each project and may not exceed the limit set in the indicative programme. The remaining balance shall be provided:
(a) by the local community concerned in case of micro-projects (either in kind or in the form of services or cash and adapted to its capacity to contribute);
(b) by the agents of decentralised cooperation, provided that the financial, technical, material and other resources brought in by such agents shall not normally be less than 25 % of the estimated cost of the project/programme; and
(c) exceptionally by the ACP State concerned, either in the form of a financial contribution or through the use of public equipment or the supply of services.