From MEDA I to MEDA II: what's new ?
Regional-European Union, Economics, 5/3/2001

The External Relations Directorate General and the new Regulation

The MEDA Program, which is the financial instrument of the Euro-Mediterranean Partnership, has reached its second phase, dubbed 'MEDA II'. Under the 1996 'MEDA I' Council Regulation, more than 3,400 million euro were committed for the period 1995-1999. MEDA's legal framework for the period 2000-2006 has now been shaped by a new Regulation adopted by the EU Council of Ministers late last year. An indicative figure of 5,350 million euro has been earmarked by Ministers for MEDA II.

Within the European Commission a strategic role is played by the 'External Relations' (RELEX) Directorate General in implementing the new regime. Patrick Laurent heads the 'Horizontal Matters' Unit in RELEX's 'Middle-East and Southern Mediterranean' Directorate. 'Euromed Special Feature' asked him how the new Regulation changes the way the MEDA Program operates.

At the Marseilles Ministerial Conference last November, participants deemed it necessary to strengthen the link between the MEDA Program and the implementation of reforms initiated by the Mediterranean Partners under the Association Agreements. How can this be supported by the new 'MEDA II' Regulation ? Before answering your question, I would like to look at MEDA II's underlying logic. The new Regulation was meant to be much more program-oriented and strategic than its predecessor. MEDA I operated on the basis of a single series of programming papers (three-year indicative programs) and of individual projects being presented to the MED Committee in large numbers, each being assessed on its own merits but without taking into account the broader strategy. MEDA II is based on the assumption that providing the MED Committee with annual financing plans (one for each country that receives bilateral aid and one for regional aid) brings in a more strategic approach and more efficient management. These financing plans fit into a programming process consisting of two series of upstream strategic papers: medium-term Indicative Programs (triannual as with MEDA I) and long-term Strategy Papers. Thus the analysis for each Partner starts with a fairly general approach then gets down to a sectoral approach at three-year plan level and finally determines concrete operations to be implemented at financing plan level. Through this more structured programming process the Union's financing choices will be made clearer and more demanding. The Marseilles Conference noted that, five years after the start of the Barcelona Process, much had been done but that efforts had been spread too thin and that it was now necessary to strengthen the link between the MEDA Program and the implementation of reforms initiated by the Mediterranean Partners under the Association Agreements. It is an open secret that the pace of reforms in the Mediterranean is not rapid enough, which has a negative effect on growth in all the Partners. Therefore it is essential that the Partners that follow the path of reforms as provided for and supported by the Association Agreements reap the benefits. Encouragement by the EU will henceforward be more differentiated than in the past. But strategic choices will be made in partnership as within the process leading to the achievement of Barcelona's goals each Partner starts from a situation of its own. In this respect under MEDA II we will strive to intensify economic dialogue with the Partners at bilateral as well as regional level.

MEDA II should be crucial to preparing the Euro-Mediterranean free-trade area to be set up by 2010. How can the new system facilitate this process ? This question is closely linked to the previous one. The pace of preparations for the free-trade area depends on Association Agreements being put in place and with the recent initialing of the Egypt Agreement, the critical mass has been reached. The focus is now on negotiating Agreements with Algeria, Lebanon and Syria. But with these agreements as with the ones already in force, it will always be a matter of planning implementation of reforms under the Association Agreements in the most efficient way. The new mechanism aims at setting up action programs with a clearer focus on the two broad priorities underlying the gradual introduction of the free-trade area, i.e. economic transition and socioeconomic accompanying measures. In line with the Marseilles guidelines, more emphasis will be given to guidelines likely to accelerate growth (trade facilitation, liberalization of services, regulatory framework convergence, good governance matters) whilst at the same time taking into account the social aspects of transition (promoting education and vocational training, the role of women in economic life and more broadly the status of women in Mediterranean society, social safety net systems).

How can refocusing of the MED Committee's work from discussing projects to examining programs improve the efficiency of procedures ? Does the experience gained from programs implemented within the EU or in other parts of the world give any guarantees in this respect ? The basic programming idea which has been fitted into MEDA II came from our experience in the PHARE and TACIS countries (Eastern Europe and the former USSR). For those regions a series of programming papers is determined with the beneficiary country, leading in the end to an annual financing plan to be implemented by the country itself. We transpose part of this approach to the Mediterranean as we define a series of three strategy papers (long term, medium term, annual) and we want to substantially increase the Partners' sense of ownership of actions to be financed on their territory.

Ideally, we would like to develop a method by which the Partners themselves would be able to implement part of the operations. The streamlining of procedures will come about in both quantitative and qualitative terms. Quantitatively, the MED Committee will no longer have to work on 60 to 70 projects a year. When fully in gear, it will concentrate on regularly examining a relatively limited number of programming papers, thus being able to better study strategic aspects. In qualitative terms, projects whose maturity can permit near-instant implementation will be fitted into the annual financing plan - the most practical document of all. This will be an important step towards improving MEDA's efficiency because previously the MED Committee was often submitted projects with varying degrees of maturity.

How can greater account of the special characteristics of each Partner be taken within the MEDA II Program, as Ministers in Marseilles considered necessary ? This will be done through intensification of the programming dialogue, i.e. bilateral dialogue on programming between the Commission and beneficiary Partners. We must admit that such dialogue has sometimes remained dormant for a while. We intend to reactivate it where necessary by organizing a yearly session on economic policy dialogue on the one hand, and a continuing coordination process between the Commission Delegation in the Partner and local authorities on the other.

In this respect MEDA is now a pacesetting regulation in terms of coordination on the ground between a Commission Delegation along with Member States' Embassies, and the relevant Partner country. The aim is to make Partners have a stronger feeling of ownership of programs and projects.

Coordination between bilateral and regional cooperation is among MEDA II's strong points. Can you explain how is will be improved ? Programming mechanisms should better organize synergy between bilateral and regional cooperation, and in both directions. A good regional program should generate operations at bilateral level and even help define relevant operations. Regional cooperation must act as a catalyst, in sharing experience and encouraging bilateral operations. To quote an example, the regional program on statistical cooperation (MEDSTAT) has made us aware of the real need to undertake the leveling up of some Partners' National Statistical Offices. We are looking at how best to proceed within the bilateral programming framework. But the main responsibility, sometimes the main difficulty, will lie with the Partners: in this case it will be up to national statistical authorities to succeed in having the leveling up of the statistical apparatus rated as a priority in bilateral cooperation.

This brings us to South-South cooperation, which is also supposed to get a boost. But such cooperation is not always easy to bring about. How can MEDA II help boost South-South cooperation effectively in practical terms ? Intensification of cooperation at regional and sub-regional level is crucial to Mediterranean Partners' deriving expected results from liberalization in the form of an increase in trade and investment with and within the region. This means in concrete terms boosting liberalization of trade in goods and services as well as convergence of regulatory frameworks in the fields of competition policy, public procurement, intellectual and industrial property, norms and standards. In practice, the Commission is about to implement a regional awareness-raising program ('Euromed-Market') on these concepts, which will lead to bilateral actions in priority areas chosen by the Partners. The Commission will also endeavor to encourage Partners to coordinate similar actions at sub-regional level. It has to be stressed in this regard that the bulk of Euro-Mediterranean regional cooperation is already plurilateral in nature because it normally brings together at least two EU Member States and two Southern Partners.

One of the aims of the MEDA II Regulation is to get more efficient programming. It is entering into force at the same time as a thorough external aid reform within the European Commission. How is this being put into practice and what is the role of the External Relations Directorate General in the process ? The designing of the MEDA II Regulation has in effect coincided with the Union's defining a comprehensive reform of its external aid. In many ways solutions incorporated in MEDA II allowed for moulding systems which are in the process of being extended to all other financial instruments. The External Relations Directorate General develops upstream programming papers, namely long term strategy papers and three-year indicative programs. Each year it places an 'order' with EuropeAid for defining corresponding financing plans, as it has a leading role in the programming dialogue with the Mediterranean Partners.

All the same, as we take into account each project cycle (see Special Feature No 20), our work with our colleagues at EuropeAid follows a kind of loop: programming is managed by the RELEX DG, implementation and its evaluation by EuropeAid and finally the evaluation of the aid is monitored by RELEX as feedback. Thus RELEX takes an interest in the way the operations it plans are implemented on the ground, so as to take this into account in its programming activities. The European Commission would like allocation of MEDA funding to take into account the Partners' real absorption capacity and their achievements in terms of implementation of the Program. How can this concern be reflected in practice, in a manner both effective and fair ? This issue lies at the heart of the indicative allocation of funds within MEDA II. In this respect MEDA I had already broken with the underlying logic of previous protocols. The main message in MEDA I, which had not always been well understood, was that no country had a right to a certain financial amount. Our approach is based upon competition between countries, between projects in the same country as well as between projects in the regional framework. The Commission's concern is twofold. One aspect is about very clearly focussing the EU's operations on those countries that follow the path of the Association Agreements and it is going to be reflected in indicative allocations. The other aspect is budgetary effectiveness and it is brought in at the level of program and individual project management. Programs or projects which would not be adequately implemented or whose financial execution would take too long would be such as to induce the Commission to consider rather drastic measures, with due respect, of course, for the procedures provided for in each financing convention. This is the idea that underlies automatic cancellation mechanisms for operations that remain unimplemented some time after the funds have been committed. This is very sound logic. It involves avoiding to block certain amounts of money, releasing them and directing them to those operations with the best executing performance.

Coordination with the other major European source of funding for the Mediterranean region, that is the EIB, was on the agenda when MEDA II was drawn up. How can it be ensured in practice ? MEDA II should in effect lead to a clear improvement in coordinating the Commission's operations with the EIB's. As to the Commission's interest rate subsidies on the EIB's environmental operations, they will effectively occur through incorporation into the national financing plans, which was not the case previously, interest rates subsidies will be granted by the Commission on the basis of the relevant environmental projects' own merits and through programmatic dialogue between the Commission and the EIB.

Another new element under MEDA II involves risk capital. Under MEDA I operations promoting risk capital were bilateral operations. Under MEDA II risk capital operations have become regional. They will be implemented through a multi annual allocation (the risk capital facility) whose specifications will be agreed jointly by the EIB and the Commission. The aim is to facilitate the mounting of plurinational risk capital operations, notably with a view to promoting South-South cooperation. There will be great difficulty in applying this approach, which is innovative, compared with its traditional predecessor, but it will be a major step if real progress is to be made in regional integration.

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