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COUNCIL OF

THE EUROPEAN UNION



Brussels, 19 January 2009 





5504/09



ACP 17

DEVGEN 11

RELEX 50

COEST 21

COLAT 3

COASI 12

COAFR 21

COMAG 2



COVER NOTE

from:	Secretary-General of the European Commission,

signed by Mr Jordi AYET PUIGARNAU, Director

date of receipt:	19 January 2009

to:	Mr Javier SOLANA, Secretary-General/High Representative

Subject:	Commission Staff Working Paper - Supporting democratic
governance through the governance initiative: a review and the way
forward



Delegations will find attached Commission document SEC(2009) 58 final.

________________________

Encl.: SEC(2009) 58 final

	COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 19.1.2009

 SEC(2009) 58 final

.

COMMISSION STAFF WORKING PAPER

SUPPORTING DEMOCRATIC GOVERNANCE THROUGH THE GOVERNANCE INITIATIVE: A
REVIEW AND THE WAY FORWARD

TABLE OF CONTENTS

1.	Introduction – purpose of this report	  PAGEREF \h _Toc219692886 \*
MERGEFORMAT  2 

2.	EU support for democratic governance	  PAGEREF \h _Toc219692887 \*
MERGEFORMAT  2 

3.	The 10th EDF Governance Initiative	  PAGEREF \h _Toc219692888 \*
MERGEFORMAT  2 

3.1.	The review: scope and method	  PAGEREF \h _Toc219692889 \*
MERGEFORMAT  2 

3.2.	The governance profile	  PAGEREF \h _Toc219692890 \* MERGEFORMAT  2


3.3.	The programming dialogue	  PAGEREF \h _Toc219692891 \* MERGEFORMAT 
2 

3.4.	The Governance Action Plan (GAP)	  PAGEREF \h _Toc219692892 \*
MERGEFORMAT  2 

3.5.	The tranche – differentiation and financial incentive	  PAGEREF
\h _Toc219692893 \* MERGEFORMAT  2 

3.6.	Governance and political dialogue (Article 8 of the Cotonou
Agreement)	  PAGEREF \h _Toc219692894 \* MERGEFORMAT  2 

3.7.	Contribution to aid effectiveness	  PAGEREF \h _Toc219692895 \*
MERGEFORMAT  2 

3.8.	Next steps	  PAGEREF \h _Toc219692896 \* MERGEFORMAT  2 

	Assessment and analysis	  PAGEREF \h _Toc219692897 \* MERGEFORMAT  2 

	Mid-term review	  PAGEREF \h _Toc219692898 \* MERGEFORMAT  2 

4.	Conclusions and lessons learned	  PAGEREF \h _Toc219692899 \*
MERGEFORMAT  2 

Annex 1 - Guidelines – Governance within the 10th EDF aid allocation
criteria	  PAGEREF \h _Toc219692901 \* MERGEFORMAT  2 

Annex 2 -	Methodology for the support study by consultants and the
review of the Governance Initiative	  PAGEREF \h _Toc219692902 \*
MERGEFORMAT  2 

Introduction – purpose of this report

The Council conclusions of 17 October 2006 welcomed the Commission's
Communication and initiatives regarding: the “Governance Initiative
for the ACP countries and the strategy for Africa" and requested the
Commission and Member States to engage in a joint review process on the
proposed Governance Initiative, with regular expert-level cooperation,
and produce a report by the Commission to the Council in 2008. 

The Council also provided guidance to frame and deepen the debate on the
links between democratic governance and EU development policy. 

Poverty reduction and the Millennium Development Goals (MDGs) will not
be achieved without decisive progress in democratic governance. MDGs can
not be achieved by financial resources alone. Governance is critical for
building an effective developmental state because it strengthens the
consensus on how we are governed. The Commission Communication on
Governance (2003) provides for a holistic approach to governance and
development in its policies and programmes. The EU Consensus on
Development sets out the EU Approach and contribution to addressing
enhancing governance through identifying good governance, democracy and
respect for human rights as internal to the process of sustainable
development and as major objectives of EU policy. The EU provides
substantial assistance to governance through the European Development
Fund (EDF), as well as, through the geographic and thematic programmes
of the EU Instruments for external assistance under the EU-budget such
as the Development Cooperation Instrument (DCI), the European
Neighbourhood Policy Instrument (ENPI), the Instrument for Stability
(IfS), the European Initiative for Democracy and Human Rights (EIDHR),
etc. 

The Governance Initiative provides for an evolution of this approach to
governance by emphasising dialogue and incentives rather than sanctions
by constructing an agreed 'contractual' relationship with the Governance
Action Plan (GAP).This report draws the first conclusions 24 months
after the adoption of the Council conclusions, the setting-up of the
governance profiles, the launching of the governance incentive tranche
under the 10th European Development Fund (EDF) and the allocation of
€2.7 billion to this instrument. It assesses the technical aspects of
the process and its impact on the way in which the European Commission
(EC) and the EU support partner countries’ efforts on the path to
democratic governance. 

EU support for democratic governance

Concept and approach 

The EU approaches governance from many angles, including political,
economic, environmental, cultural and social aspects. Democratic
governance spans a broad range of issues, such as respect and promotion
of human rights and fundamental freedoms, democratisation and
citizens’ involvement in the political process, the rule of law and
access to justice, gender equality, human security, access to
information, management of migration flows, access to basic public
services, effective, transparent, responsive and accountable State
institutions, sustainable management of resources and promotion of
sustainable economic growth and social cohesion. All levels of
governance – local, national and international – are relevant. All
these aspects are interlinked and must be addressed in a holistic,
balanced and comprehensive way. Democratic governance processes cannot
be reduced to one specific component. 

There is no magic recipe to promote democratic governance other than
partner governments’ and public/private institutions’ commitment to
reform. The central issue is not that donors classify the governance
situation in a given country as “good”, “bad”, “weak” or
“strong” and allocate aid accordingly. It is more important to focus
the discussion on methods and approaches to support governance
processes. Promoting democratic governance and supporting partner
countries’ efforts are an integral part of cooperation strategies.
Respect for ownership, dialogue between partners and a focus on
incentives for result-oriented reforms are the main principles of EU
support for governance. 

Incentives 

In order to put this approach into practice and build on existing
support, the European Commission launched the “Governance Initiative
for ACP countries and Africa” in 2007 and an ENP “Governance
Facility” for countries neighbouring the EU. 

The Governance Initiative for ACP countries and Africa is two-pronged: 

First, it is a new incentive mechanism that gives ACP partner countries
access to additional funding, based on their commitments to achieve
tangible results in their democratic governance reform programmes.
€2.7 billion from the 10th European Development Fund were reserved for
such incentives: the “governance incentive tranche”. 

Second, under the Governance Initiative, the EU will also continue to
provide political and financial support for the African Peer Review
Mechanism (APRM), with due regard for the African countries’ ownership
of the process. The EU is providing support for the process and the
reforms it generates at national level. 

Meanwhile, under the European Neighbourhood Policy (ENP), which also
covers certain North African countries, a Governance Facility has been
in operation since 2007. This Facility provides additional financial
support to certain neighbouring partner countries covered by the
European Neighbourhood Policy (ENP) based on an assessment of the
progress made on implementing the broadly defined governance aspects of
the ENP Action Plans, with particular emphasis on the “core”
governance issues: democratic practice, respect for human rights and
fundamental freedoms and the rule of law. It is thus in line with the
European Consensus on Development and, while adapted to the specific ENP
tools – the ENP Action Plans - has an approach which is consistent
with the Governance Initiative. The ENP Governance Facility, based on
Articles 2(1) and 7 of the European Neighbourhood and Partnership
Instrument, provides funding, in addition to national allocations, to
those partner countries which are assessed to have made the most
progress in implementing the governance-related objectives of their
agreed reform agenda as set out in their ENP Action Plans (which contain
both general and specific commitments on governance-related reforms). 

Dialogue 

The 2006 Council conclusions on governance and the Governance Initiative
stress the importance of regular political dialogue between the EU and
partner countries in all regions. This should cover every aspect of
democratic governance in order to facilitate mutual understanding of the
reforms needed and also to guide possible support measures. The
Governance Initiative aims at creating incentives for a deeper political
dialogue focused on governance. 

Strengthening the framework

The EC approach to democratic governance builds in part on the
experience gained from launching the first large-scale operation in the
field, based on a “contract for reform and good governance” with
partner countries supported by additional financial resources. 

Democratic governance requires a State that is capable of delivering key
functions, accountable to its people and, lastly, responsive to the
needs and express wishes of its people. It can be seen at many levels
from the national to the community. Local authorities and civil society
are key drivers to make the state more accountable. Poverty reduction
and long-term development are best promoted within a framework of
democratic governance: a method which promotes inclusive
decision-making. Democratic governance is not determined by any specific
set of institutions but is characterised by an agreed set of principles
– rule of law, accountability, fair representation and effective
participation and voice as well as a set of values which recognise the
individual and collective human rights.

Accordingly, it would be appropriate to agree the principles of how to
promote democratic governance. This would consolidate and enhance the
concept of governance, which was the subject of a Commission
Communication in 2003 and Council conclusions in 2006. The importance
attached to EU development policy should translate into: (i) a
harmonised political approach, at EU level, to democratic governance and
(ii) additional coordinated support for partner countries’ reform
efforts (depending on the credibility of the reform process). This
harmonisation of the political approach will need to be pursued at EU
level. 

The 10th EDF Governance Initiative

The review: scope and method

The main steps of the process can be summarised as follows:

A “governance profile” (GP) has been established by the European
Commission in association with EU Member States for each ACP country. It
is an analytical tool that gives an overview of nine areas of governance
and helps to identify the main weaknesses, the priority areas and the
needs for reform. 

The conclusions drawn from the profile are shared, as appropriate, with
the partner government in the programming dialogue. The partner country
is encouraged to give relevant, ambitious and credible commitments to
reform and to put forward a “Governance Action Plan” (GAP). 

A qualitative assessment of the GAPs presented by partner countries,
focusing on their relevance in the light of the main weaknesses
identified in the GP and on their ambition and credibility, determines
allocation of this financial incentive, which is integrated into and
tops up the overall country allocation. 

The GAP is attached to the Country Strategy Paper in order to formalise
in a “contract” this “incentives based on commitments” approach.

An amount of €2.7 billion has been set aside for this instrument, of
which €2.22 billion has been allocated to 70 ACP countries. The funds
were used to “top up” the existing financial commitment earmarked
under the A envelope rather than identified separately as a specific
allocation. 

This section assesses the allocation process and its main steps, with
particular focus on the tools (governance profiles, programming
dialogue, Governance Action Plans and the incentive tranche itself) and
how they are used in practice. 

The findings and conclusions are the result of the work of a Joint
Commission/Member States reference group supported by a team of
consultants who carried out a survey based on responses to
questionnaires by a broad range of stakeholders. Workshops with
representatives of civil society and with experts from the European
Commission and from EU Member States and discussions with other
stakeholders and development partners also provided relevant input. 

The governance profile

The Commission, Member States, partner governments and development
partners perceive the governance profile as comprehensive and rigorous
in design and robust in content. It generally provides a relevant and
accurate analysis and, therefore, is a useful diagnostic tool, which
helps to identify priorities for reform that the Commission and EU
Member States can discuss with partner governments. Member States
generally consider that their involvement in preparation of this first
set of governance profiles was adequate. 

A number of process- and content-related issues will need to be
addressed in the future: 

The guidance for preparation of the governance profiles from Commission
headquarters was considered insufficient by Commission Delegations and
Member States. The timeframe for preparation of the profile has been
insufficient and the allocation of human resources to this task has not
been optimum. This, combined with limited or unsystematic information
from EU Member States’ capitals to their embassies and field offices
in partner countries, has complicated European Commission Delegations’
task of consolidating an EU governance analysis in some partner
countries. Based on this experience, the European Commission and EU
Member States should compile a comprehensive manual on how to prepare
and update governance profiles, along with the relevant
awareness-raising tools and training material. 

Some of the questions integrated into the governance profile could be
reformulated or expanded and specific questions could be added to assess
the underlying causes of weak governance, to sharpen the focus on
informal institutions, enhance a focus on international obligations and
to give a better picture of the dimensions of fragility (conflict,
peace, security and State-building) and of the links between governance
and security. The sources of information and links provided in the
template to facilitate completion of the profile need to be updated,
integrating internationally used sources but also access to local
indicators and governance assessments. This revised guidance will draw
on the work being done by the Commission on the elaboration of sector
governance assessments. 

Joint work by European Commission/EU Member States experts on these
issues seems necessary to consolidate the profile as the EU analytical
tool, to improve its quality and robustness and to facilitate the
potential use of the profile for analytical purposes in non-ACP partner
countries and regions.

There has been substantive work done recently by OEDC/DAC on Governance
Assessments in light of the rapidly increasing production and use of
these tools. This will be used in the revision of the guidance on the
governance profile to highlight its value added to other existing and
ongoing governance assessments in and by the partner countries and on
how it has been aligned to such national processes and assessments.

The programming dialogue

The governance incentive process rewards political will for reforms and
is therefore intended to facilitate dialogue on governance. This should,
in turn, result in better integration of governance into cooperation
strategies, based on the analysis provided in the governance profile and
the willingness for reform demonstrated in the Governance Action Plans. 

The review shows a strong focus on governance throughout the 10th EDF
Country Strategy Paper (CSPs). Compared with the 9th EDF, there is an
incremental increase in governance as a focal sector and better
understanding and use of governance diagnostics in the programming by EC
staff, both in the field and at headquarters. In cases such as Cameroon,
Rwanda, Ghana, Angola and Guinea-Bissau, the findings of the governance
profile and the commitments in the Governance Action Plan are
mainstreamed well in the relevant Country Strategy Paper, both in the
decision on whether or not to make governance a focal sector and in the
specific governance activities proposed. In other cases (Senegal, Papua
New Guinea and Sierra Leone) this integration is less visible. In the
case of Democratic Republic of Congo, the incentive tranche process has
contributed to more consistent programming between EU, bilateral and
other donors. 

Stronger coordination in this matter will be ensured in the future, by
further linking the outputs and processes of the Governance Initiative
(Profile, Action plans, joint monitoring, political and programming
dialogue) with those of the geographic and thematic programmes of the EU
Instruments for external assistance (DCI, ENPI, IfS, EIDHR etc.). 

The Governance Action Plan (GAP)

Integration of the GAP into the CSP can be conceptualised as a
“contract” between the EC/EU and the partner country. 

The review found that the Governance Action Plans are usually relevant
to the problems identified in the governance profile and are viewed as a
constructive basis for reform. However, the quality of the Plans is
variable and some lack specific action, indicators, timetables and means
of verification. The majority of the Plans are based on existing
national policy documents, although some include new measures. Key
documents, such as the Poverty Reduction Strategy paper (PRSP) or
African Peer Review Mechanism (APRM) Plan of Action, are sometimes
perceived as not adequately reflected in the GAPs. There are also
several cases where the Governance Action Plan has been drafted in
addition to pre-existing donor/government processes for discussion and
joint monitoring of governance reforms. Existing policy and governance
strategies should be used by the Government to formulate the GAPs. In
the case of APRM plans of action, while the number of countries is at
present limited, there is a need to use this as the basis but not
substitute for the GAP. 

Involvement of in-country civil society and development partners in
identification of the reforms to be put forward in the Governance Action
Plans has been limited, often due to time constraints, but also because
preparation of the Governance Action Plan was not well integrated into
preparation of the overall CSP, where civil society is consulted and
involved. Issues related to the limited capacity of partner governments
to prepare Governance Action Plans were noted: in practice many
governments have found the process burdensome, difficult and
time-consuming, particularly in cases where existing reform plans had to
be summarised into the indicative template proposed in the guidelines.
Capacity constraints will be of crucial importance in the implementation
phase and support through EC and other donor’s programmes will
maximise chances of success.

The tranche – differentiation and financial incentive

The level of incentive tranche per country was determined by a
qualitative assessment of the Plan. This qualitative assessment was
double-checked by a quantitative assessment (scores for the relevance,
ambition and credibility of each commitment or group of commitments).
Qualitative assessments of every Governance Action Plan were prepared by
Commission headquarters and sent to Delegations for discussion with EU
Member States’ representatives in the country. After this assessment
was agreed in the country, it was presented and discussed in the EDF
Committee and the incentive tranche was added to the draft CSP which, in
turn, was presented to the EDF Committee for its opinion and then signed
between the Commission and the partner country. 

The overall result of this allocation (excluding specific “APRM”
bonuses and/or “functional cross-country cooperation on governance”)
for the 67 countries that have presented a Governance Action Plan is as
follows: 

5 Plans – 10% incentive tranche; 

12 Plans – 20% incentive tranche;

47 Plans – 25% incentive tranche;

3 Plans – 30% incentive tranche.

Individual assessments and the amount of incentive tranche allocated to
each country have not been made public. The Governance Action Plans
assessed are attached to the CSP and, therefore, are public documents. 

This process has been criticised by many stakeholders during the review
process, in particular for lack of transparency and because it leads to
a purely political exercise. Many stakeholders feel that the financial
result of the exercise reflects this dominant political dimension and
that there is not enough differentiation between countries, reflecting
the underlying quality of the Governance Action Plans. The difference
between levels of incentive tranche (10/20/25/30%) is often considered
too small. 

The incentive nature of the financial allocation is also questioned.
Comparison between the size of the additional tranche and national
income and total aid receipts clearly shows that the financial
significance of the governance incentive tranche is modest. For nearly
all the ACP countries the incentive tranche is equivalent to less than
0.5% of gross national income (the average figure is 0.29%). Expressed
as a percentage of official aid, the governance incentive tranche is
slightly higher. 

Governance and political dialogue (Article 8 of the Cotonou Agreement)

The Governance Initiative is intended to encourage political dialogue,
provide the diagnostics for key governance issues and enhance the
political will for reform. The review indicates that the Governance
Initiative is viewed positively by the Commission and the EU Member
States in terms of its potential impact on the political dialogue. The
contribution made by the Governance Initiative to the political dialogue
is seen as a potential benefit rather than one that has already been
reaped. Practice and procedures for political dialogue vary greatly. In
most cases governance is part of the political dialogue when such a
dialogue exists. If terms of reference are agreed, governance issues
feature as high priorities. It would be opportune to develop a further
standard methodology for regular assessment of Government commitments
and the incorporation of results of this exercise into political
dialogue.

Contribution to aid effectiveness

The Governance Initiative is also linked to the application of the Paris
Principles on Aid Effectiveness and the harmonisation of Member
States’ policies on governance. This is achieved both by creating
incentives for dialogue on governance to enhance ownership and alignment
with the aid of the Governance Action Plans and by using the tranche
allocation to bolster the reforms identified as priorities of the
government and thus an enhanced focus on results. In many countries the
Initiative has improved discussion between EU donors on governance
issues and led to clearer diagnosis and a sense of greater shared
understanding of the main challenges. Some EU Member States have
indicated that their own country strategies had drawn on insights from
the governance profile. But apart from information sharing and joint
analysis, in general discussion of the governance profile and Action
Plan has not yet led to enhanced donor coordination, joint action, joint
monitoring or joint dialogue. 

Next steps 

Assessment and analysis 

On the basis of the review the guidelines for preparation of the
profile, GAP and other stages should be updated to provide greater
clarity, inclusiveness and transparency, as well as, more focused
content. Secondly, guidelines should be drawn up on how the profile and
Governance Action Plan should be monitored and included in the annual,
mid-term and end-of-term reviews. And, thirdly, political dialogue on
governance issues should be stepped up, be more systematic and regular
and be seen in a more strategic long-term perspective. 

Mid-term review 

The 10th EDF provides for a mid-term review in 2010 and an end-of-term
review of the Country Strategy Papers in 2013 (Cotonou Agreement, Annex
IV, Article 5). Governance needs the same visibility and integration in
the monitoring process as in the programming process. The guidelines
which the Commission will draw up for the monitoring process will,
firstly, identify governance as a separate and strongly weighted
dimension of performance. Secondly, they will use an integrated
assessment of the governance situation, including progress on the
political dialogue, the trajectory of the governance situation and
implementation of the “contract”, i.e. the Governance Action Plan.
And, finally, with governance being the key to aid and development
effectiveness, it is important to monitor governance aspects in relation
to other aspects of development performance.

Conclusions and lessons learned

“The Governance Initiative for ACP countries and Africa” has laid
the foundation for most ACP countries to commit themselves to implement
governance reforms in different areas. For Africa in particular, this
approach has furthermore led to an enhanced Africa/EU dialogue on
governance issues in the framework of the Joint Strategy and Action Plan
for 2008-2010. 

The Governance Initiative (the process, the instruments and the tools)
is innovative and well adapted to the EU policy approach to supporting
democratic governance. The European Commission does not claim to have
found the “magic recipe” leading to “good governance
everywhere”, but, more modestly, to have launched an initiative that
has good potential to promote reforms owned by partner countries and to
facilitate dialogue between partners. 

The incentive tranche was allocated over a period of less than 24 months
between mid-2006 and mid-2008. In such a relatively short time, the
Commission has led an EU process which has developed a system producing
extensive outputs, including substantial improvements in European
Commission/EU analysis of governance challenges, with an impact on
programming and dialogue on governance. It is obviously too early to
assess the outcome of the Governance Action Plans. 

The main shortcomings of this Governance Initiative process lie in the
uncertainties and changes in the method in the months immediately after
the process was launched. When the allocation methodology was decided,
the programming process had already been launched: in many cases, the
timeframe did not allow proper implementation of every aspect of this
method. This did not provide for the highest level of ownership by ACP
countries nor allow in all cases for consultation with key actors
including parliaments or civil society. Further, this did not provide
for sufficient development of a methodology and process to monitor and
assess progress in commitments. This has had a direct impact on the
challenges related to ownership, the alignment and harmonisation with
other existing governance assessments in the respective partner country
and inclusion of all stakeholders concerned. 

These problems must be avoided in the next stages of the work, which
consist of preparation and adoption of the method for monitoring
implementation of the Governance Action Plans with a view to integrating
governance into the 10th EDF mid-term review.

The public consultation confirmed that the credibility of the Governance
Initiative depends heavily on actual implementation of the Governance
Action Plans. A sound methodology needs to be prepared to ensure proper
monitoring and “standard, objective and transparent” (European
Consensus) performance assessment, within the framework of the relevant
provisions of the Cotonou Agreement, combining regular political
dialogue between partners with the review mechanisms provided for in the
Cotonou Agreement. Member States will continue to be consulted on this
issue. For performance assessments to be results-based, Member States
and ACP partners will be consulted on the development of appropriate
indicators. The credibility of the plans may be increased by associating
all democratic actors in the countries concerned, in order to
institutionalise proposed reforms further into the national political
debate. This would include regular political dialogue between partners
and the review mechanisms foreseen in the Cotonou Agreement, which
includes consultation of in-country Civil Society.

The Governance Initiative process should further develop its potential
for contributing to a comprehensive approach to aid effectiveness, donor
coordination and harmonisation of EU Member States’ policies,
strategies and programmes to support democratic governance. The tools
available offer a good opportunity to go well beyond “information
sharing” and engage in joint analysis and joint responses in the areas
of governance, within donor-wide coordinating mechanisms where these
exist. 

The Governance Initiative process was launched one year before the
Commission Communication and Council conclusions on an EU response to
situations of fragility. Although the incentive tranche method
integrates fragility into the assessment of Governance Action Plans, the
particular governance challenges in countries facing situations of
fragility could be better reflected in the profile, which should focus
more on security and institution-building in order to develop its
potential for shaping the EU response to fragile situations where
State-building is of primary importance.

The governance incentive process and the APRM must jointly develop more
intensive interaction. EC support for the APRM has focused on the
process and on the reforms generated at country level. The European
Commission has tried to provide “neutral” support for the process.
This has included a contribution to the UNDP-managed Trust Fund for
operation of the APRM Secretariat and support for national structures in
African countries reported by some Commission Delegations (Tanzania and
Ghana). An extra 5% under the incentive tranche was allocated to
countries that had completed the APRM process (Ghana, Rwanda and Kenya).
The European Commission has been observing developments in the APRM and
has adapted the method accordingly, so that the incentive tranche can be
distributed in a way that reflects the state of play of the APRM and
provides balanced support for it. Ways to develop a “continental”
dimension to the incentive tranche should be explored within the Joint
Africa/EU Partnership on Democratic Governance and Human Rights. Lessons
learned in this respect could be replicated in the Caribbean and Pacific
regions. 

The incentive created by the tranche is primarily political:
encouragement for the partner country to engage in a political dialogue
on governance and to formalise its political commitment for reform in a
“contract”. The European Commission will continue working with EU
Member States, so that they can adhere more explicitly to this political
dimension of the incentive tranche process, the governance profile can
become the EU reference for the governance analysis and the Governance
Action Plans can become the EU reference for the regular dialogue on
governance reforms. The political dialogue on governance issues should
be stepped up, be more systematic, inclusive and regular and be seen in
a more strategic long-term perspective. The EU should set clear
objectives which it wishes to achieve via the political dialogue on
governance issues. The profile and GAP have the potential strongly to
influence the content of the political dialogue and also to help with
defining the objectives of the dialogue in a donor-wide context.
However, this conclusion on the incentive nature of the Initiative is
still tentative as the Annual Operational Reviews in 2009 (AORs) and Mid
Terms Review (MTR) in 2010 of EDF 10th have not been completed. The
methodology for the AOR and MTR will provide for an assessment of the
fulfilment of the commitments as well as a positive trajectory of change
on democratic governance.

The “financial incentive” offered by the 10th EDF Governance
Initiative alone remains modest. In order to reinforce this dimension,
EU Member States should explore more actively the relevant proposals
formulated in the 2006 Communications. These include (i) an increase in
bilateral programmes in coordination between the Commission and Member
States and (ii) extra funding added to the NIPs and disbursed within the
framework of the NIPs managed by the Commission. 

The European Commission and EU Member States have developed a very
constructive working relationship at expert level. Joint work on
governance must continue, not only to fine-tune existing tools
(governance profile) or discuss ways of integrating governance within
the 10th EDF methodology for the MTR, but also with a view to both
expanding joint work to regions other than the ACP countries and
including other development partners and stakeholders. This would be
developed on the basis of the assessment of the impact of the Governance
Initiative and the lessons learnt from the implementation of the
existing ENP Governance Facility. 

Implementation of the Joint Africa/EU Partnership on Democratic
Governance and Human Rights provides good opportunities for closer
cooperation, including the ongoing work within the relevant EU
Implementation Team (co-chaired by Germany and Portugal) and the future
work of the Informal Joint Expert Group, involving African countries and
institutions, EU institutions and representatives of civil society from
Africa and the EU. 

The forthcoming informal Ministerial-level meeting on 29 January 2009
will be useful opportunity to continue the debates on options to support
democratic governance within the framework of EU development policy and
cooperation with developing countries. 

ANNEXES

Annex 1 - Guidelines – Governance within the 10th EDF aid allocation
criteria 

The 10th EDF is significantly larger than the 9th. That makes it
possible to ensure a minimum of continuity and predictability by
allocating to each country a potential programmable amount which, on a
year-on-year basis, will be not lower than the amount under the 9th EDF,
while differentiating based on needs and performance. 

The amount available for the A envelopes of the NIP (€13.5 billion) is
allocated in two phases: (1) initial allocation, based on quantitative
needs and performance criteria (€10.8 billion); (2) governance
incentive tranche, based on the quality of the partner country’s
reform agenda, assessed in terms of its relevance, ambition and
credibility (€2.7 billion). 

Governance incentive tranche

The quantitative model does not integrate, in any comprehensive way,
in-country democratic governance processes which are critical for aid
effectiveness in fighting poverty. Introduction of a “governance
incentive tranche” enables the ACP States to top up the initial
allocation, based on their willingness to undertake reforms in this
area. 

First step 

An analysis of the democratic governance situation in each ACP country
is made, based on a detailed questionnaire allowing the Commission to
establish a “governance profile” in close cooperation with the
Member States represented locally. Democratic governance is defined
broadly and encompasses nine areas. The analysis covers both the current
situation and recent trends. The Commission Delegations, in coordination
with the Member States represented locally, identify the main
weaknesses. In order to ensure a standardised process and comparable
results, the analyses are then harmonised by the Commission at
headquarters.

Second step 

The Delegation shares the outcome of the analysis, i.e. the main
weaknesses identified and possible priorities for reform, with the
partner country. In the context of the programming dialogue, the
government is invited to draw up a list of commitments (a “Governance
Action Plan”) to be attached to the Country Strategy Paper. These
commitments can be based, at least partially, on existing reform plans,
such as those included in the poverty reduction strategy papers or
identified in the framework of the African Peer Review Mechanism or
similar initiatives. 

The commitments in turn are evaluated by the Commission in cooperation
with the Member States represented locally, based on the three following
criteria:

Relevance: do the proposed reforms address the principal weaknesses
identified in the governance profile?

Ambition: does the answer address the various dimensions of the problems
identified or is it only limited and partial, reflecting weak political
willingness to tackle the root causes of the problem?

Credibility: are there intermediate and final, objectively measurable,
results-oriented indicators and is there a precise timetable for
implementation of the reforms which makes it possible to monitor the
progress achieved? This criterion could possibly also include past
performance and recent trends in governance in order to assess the
political credibility of the proposed reforms and the political
willingness to implement them.

Quantification of the incentive tranche 

The qualitative assessment of governance is supported by quantitative
elements, in the form of scores, again in order to standardise the
process and to facilitate comparability across countries. Each of the
main weaknesses identified and that should be addressed is given a
country-specific weighting, reflecting its relative importance on the
basis of the analysis of the situation. The level of relevance of the
reform agenda of the partner country’s Governance Action Plan can be
assessed as basic, intermediate, high or exceptional. A similar
evaluation can then be made for the ambition and credibility criteria.

When assessing the Governance Action Plan, special attention must be
paid to countries coming out of a crisis or in a situation of fragility.
The scope and depth of the problems to address are so broad that
numerous fields of governance can be considered relevant, even though
some may deserve more attention than others. Although the ambitions of
the Governance Action Plan may appear weak or intermediate in absolute
terms, they may be high in relative terms, taking into account the
particularly difficult and challenging environment, and therefore merit
specific support. Similarly, while the internal consistency and
credibility of the Governance Action Plan may appear disappointing,
allowance has to be made for the context of structural fragility in
which it will have to be implemented.

By combining the scores for the three criteria, four levels of incentive
tranche have been set:

An initial level of 10% for countries which, simply by accepting to
attach a Governance Action Plan to the Country Strategy Paper, have
confirmed their willingness to enter into a dialogue with the European
Commission on this issue, even though the relevance, ambition and
credibility of the Plan itself are of only basic or intermediate
quality;

A second level of 20% for countries whose Governance Action Plan is of
high quality on at least one or two of the evaluation criteria,
confirming that some of the issues identified as priorities are at least
partially addressed;

A third level of 25% for countries whose Governance Action Plans are of
high or exceptional quality for all the criteria: the plans are
relevant, ambitious and credible and can be used as a framework for the
dialogue on and monitoring of the democratic governance reforms;

A fourth level of 30% for countries whose Governance Action Plans are of
exceptional quality for all the criteria.

Countries with second- or third-level governance plans that have taken
additional measures to consolidate their governance agenda, such as
completion of the African Peer Review Mechanism, qualify for a bonus,
set at 5%. Similarly, countries that make additional commitments in
functional cooperation arrangements between ACP countries on democratic
governance may also qualify for topping-up of their incentive tranche,
which may not exceed 5% and will be funded from the incentive tranche
reserve. 

This approach puts the entire weight of the allocation decision on the
quality of the commitments, assessed by taking the present governance
situation and the main weaknesses identified as the starting point,
thereby confirming its incentive nature.

The incentive tranche is added to the initial allocation and, in
principle, will be allocated to the sectors already identified in the
NIP on the basis of the principles of unity of programming, of
concentration and of complementarity between donors. Similarly, the
monitoring will be integrated into the mid-term review, where possible
reallocations will be based on a global assessment of various
performance criteria (financial, sectoral, macro-economic and
governance-related) and affect the consolidated A envelope and not the
incentive tranche alone.

Annex 2 - Methodology for the support study by consultants and the
review of the Governance Initiative

The review provides for an assessment of the tools and key stages for
allocation of the governance incentive tranche (governance profile,
programming dialogue, Governance Action Plans and allocation
methodology). It analyses process-related issues (parties involved,
ownership by partner countries, etc.) and the impact at various levels
(alignment with the Paris Declaration, links with the PRSP, synergies
with the regular political dialogue under Article 8 of the Cotonou
Agreement, coexistence with the APRM, integration into the aid
programming process and link with the Country Strategy Papers) plus
possible options for integration into the review mechanisms for
cooperation with ACP countries.

Issues linked to the governance incentive tranche process in this review
have been addressed by the Commission in close collaboration with Member
States’ experts in workshops and an ongoing reference group of EU
Member States. 

Workshops with representatives of civil society, in-house seminars
within the Commission and bilateral consultations with key development
partners have provided very useful input to the review.

The review was supported by a survey based on questionnaires sent to EC
Delegations, EU Member States’ embassies and capitals, partner
governments, representatives of civil society and international
development partners. Over 139 responses were received, followed up by
interviews of key respondents, to which 65 responses were received from
EU MS embassies and country offices and 10 from EU MS capitals
supplemented by responses from 39 EC Delegations, 9 international
organisations, 3 non-EU donors, 5 civil society organisations and 9
partner governments. A study was undertaken by consultants which built
on these results. This was supplemented by in-depth analysis of country
case studies with a suitable geographic spread covering all ACP regions
showing different levels of political stability and receiving different
levels of allocation from the tranche.

	"Governance in the European Consensus on Development– towards a
harmonised approach within the European Union" – COM (2006) 421 final
of 30.08.2006

	"Governance and Development COM 2003, 615 final of 20.10.2003

	For details see Annex 1.

	Regulation (EC) No 1638/2006 of the European Parliament and of the
Council of 24 October 2006 laying down general provisions establishing a
European Neighbourhood and Partnership Instrument

	(1) Political governance: human rights, fundamental freedoms,
electoral process, constitutional democracy; (2) The rule of law:
judicial and law enforcement system; (3) Control of corruption;
(4) Government effectiveness: institutional capacity, public finance
management; (5) Economic governance: private-sector/market-friendly
policies, management of natural resources; (6) Internal and external
security; (7) Social governance: decent work, gender, HIV/AIDS;
(8) International and regional context: regional integration,
involvement in regional initiatives, migration; (9) Quality of the
partnership: political and programming dialogue.

	70 CSPs which where adopted, 3 do not include a GAPs, Bahamas, Côte
d'Ivoire and Somalia.

	See details on methodology in Annex 2.

	Political/democratic governance; Political governance and rule of law;
Control of corruption; Government effectiveness (including public
finance management); Economic governance (including investment climate
and management of natural resources); Internal and external security;
Social governance; International and regional context; Quality of the
partnership.

	As a reference point, the Commission used the composite “KKZ
governance index” developed by the World Bank Institute, which
provides useful information on the first six areas of governance.

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