The European Union (EU) comprises 15 Member States: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, The Netherlands, Portugal, Spain, Sweden and the United Kingdom. The Treaty on European Union, ratified in November 1993, provides a mandate for ensuring that EC and Member States policies are complementary and co-ordinated.

The EU has four general bodies :

In terms of EU policy for development aid, the European Commission (EC), as the executive body of the EU, is the most important. The EC works through its 24 Directorate Generals, which handle specific areas of EU policy. Later in this chapter financial instruments for Southern NGOs, DG I (external relations), DG VIII (development) will be closely examined.

The Maastricht Treaty, passed in 1993, established a legal basis for development co-operation objectives. It provides for the following:

The European Union's aid and co-operation policy is concerned with developing countries and Central and Eastern European countries (CEE). Specific instruments and policies for aid are defined for large geographic zones and vary accordingly.

EU aid falls into two broad categories1:

Food aid 23%

Asia and Latin America 20%

Mediterranean countries 19%

NGOs 7%

Humanitarian relief 19%

others, incl. environment 11%

Regional agreements with the African, Caribbean and Pacific countries (ACP)

The Lomé IV convention, which came into effect on January 1, 1991 and is to be renegotiated every five years, controls the co-operation between the EU's fifteen member states and the seventy countries of Africa, the Caribbean and the Pacific. Some of the convention's chapters cover such topics as the environment, local enterprises and decentralised co-operation.

A National Indicative Programme (NIP) is defined in co-operation with the national authorities of each country concerned and determines the orientation and direction of priority actions within the EU's programmes. This allows the beneficiary countries to have greater autonomy than in previous Lomé treaties. The agreements with ACP countries account for 65% of the financial aid allocated to developing countries.

These agreements relate to the countries of Maghreb (Algeria, Morocco and Tunisia) and Machrek (Egypt, Israel, Jordan, Lebanon, Syria, and The Palestinian Territories), Cyprus, Malta and Turkey. This aid represents 14% of the European budget for developing countries.

Since 1990, this aid has been governed by a co-operation policy with the developing Mediterranean countries. This is known as the "Renewed Mediterranean Policy" and it has set up financial protocols that have been contractually agreed with each country.

Since the eighties, the EU also provides technical and financial aid to Asian and Latin American countries. In contrast to the co-operation controlled by the previously described regional agreements, this is a reduced form of co-operation in which the European Commission makes unilateral decisions. Its operational method is determined on an annual basis and takes into account such conditions and factors as human rights and environmental impact.

Apart from these bilateral instruments and programmes, the EC has developed specific horizontal programmes to support development actions realised by local parties according to the principles of decentralised co-operation.

In 1994, aid granted by the EU to the developing countries represented 36% of global public aid for development.

As mentioned before, two General Directorates are particularly relevant and are potential intermediaries for Southern NGOs when seeking finances from the EU:

The General Directorate for External Economic Relations (DG I) is responsible for relations with other countries; the North/South unit for economic development and co-operation in Latin America, Asia, Mediterranean countries and Central and Eastern Europe.

The General Directorate for Development (DG VIII) is responsible for co-operation with the ACP countries, and for the formulation of principal financial instruments. It should be noted that the European NGOs have a specific partner on this board, namely the "co-financing" unit.

Within each of these boards one can find:

In addition, the European Commission has delegations in each country, which are responsible for the realisation of technical and financial co-operation.

The financial resources for Southern NGOs are governed principally by two financial instruments:

The preparation process for HABITAT II highlighted the need for the European Community to adopt an urban policy to guide its development assistance to Southern towns and cities.

Although an official policy is still lacking, one can see a growing interest within the EC and the EP to address urban dimensions of sustainable development. Most development programmes of the EU have had a primary focus on supporting rural development, but in recent years, some started to gain greater experience with urban programmes and projects. For example, the EU budget line, "Environment in developing countries", provides financing for NGOs' activities and prioritises improvement of the urban environment.

EU proposals for the HABITAT II Agenda emphasised the following :

In order to contribute to the debate within the EU, EDRC (Environment and Development Resource Centre, Brussels) held an "International Experts Meeting on Europe's Role in the North-South Dimensions of Urban Environment and Development" at the European Parliament in May 1996. EC officials as well as representatives of member states agreed that a new EU policy on sustainable urban development should be built on the activities of EU Member States and the experience of existing international co-operation programmes.

In 1976, due to a Parliamentary initiative, the first credit allocated to the co-financing of European NGO activities entered in the European budget. Since then, the European Commission has considerably diversified the resources available to NGOs. In the last decade, NGOs have become an external institutional group within the community institutions that administer the largest budget.

However community aid for NGOs remains insignificant when compared to the total finances allocated for development by the EC. In 1994, the total volume of funds from community budget resources used by NGOs was 803 million ECU ($957 million), which represented 77% of the total EU's budget lines and an increase of at least 14% in comparison with 1993. This increase can be explained partially by the growth in volume of co-financed actions realised by Northern NGOs (an increase of 48% between 1992 and 1994).

The total amount available in budget lines in 1994 were 1,070 million ECU ($1,275 million). Within this, 163 million ECU ($194 million) reached Southern NGOs. In 1994, the three principal budget lines, Co-financing, Food aid, and Emergency aid, accounted for 60% of the budgetary credits allocated to NGOs (103 million ECU; 174.5 million ECU; 320 million ECU) respectively).

Despite the efforts made by Southern NGOs, it seems that in practice access to the EU's credit is easier for European NGOs than for their Southern counterparts. Of the European Commission's budget of 803 million ECU($957 million) absorbed by NGOs in 1994, 80% or 640 million ECU ($762 million) was channelled to European and International NGOs (co-financing, developmental education in Europe, food and humanitarian aid reserved for European and International NGOs). The volume of finances within budget lines available to Southern NGOs remains very small (between 0% and 5%).

Among Southern NGOs that receive financial aid, intermediary NGOs and NGO networks and federations seem to receive priority compared with grassroot organisations or local groups, in spite of the latter's significant experience in developmental actions.

Those responsible within the Commission and the local delegations of the EU in Southern countries mention a number of obstacles to the financing of Southern NGOs:

Budget 1995: 162.5 million ECU ($193.5 million)

Budget 1996: 174.0 million ECU ($207 million)

EU policy encourages developmental actions of NGOs and the solidarity between European populations and those in developing countries through:

Project-financing is based on co-financing between the NGO, the European Commission and occasionally other financiers. Decisions concerning co-financing are taken by the Commission in Brussels after consulting the technical division - the person responsible for the country's geographic unit and the country's EU delegation. The system allows the Commission to pay 50% of the European NGOs " local partners" project costs. Projects are preferred if the NGO guarantees that at least 15% of the costs will be met by private European financing. Long-standing NGO beneficiaries are entitled to a yearly grant that enables them to finance small scale projects costing 1,000 to 15,000 ECU ($1,200 - 17,800), which have to be validated at a later date.

For Southern NGOs, a partnership with a European NGO is necessary within the framework of this budget line. The European Commission is not able to respond directly to requests submitted by organisations or associations in developing countries. A partnership with a European NGO is an irreversible step in getting recognition from the Commission and thus eligibility for community financial aid.

The average community contribution to projects proposed by NGOs under this budget line is 207,000 ECU ($246,000). The EC contributes financial support to projects with a maximum duration of five years and a financial requirement of between 1,000 and 500,000 ECU ($1,200 - 600,000) Projects lasting more than one year must have a maximum budget of 150,000 ECU ($179,000) per year.

Examination of the records has revealed that numerous co-financed projects directly finance Southern NGOs (institutional support), while the European NGO operates either in a financing or a support role. European NGOs always present the project-proposal and are the only institution legally responsible to the EU. It should also be mentioned that without the initiative of its European NGO partner, the Southern NGO does not receive the co-financing contract signed by the EU. On the other hand, a financing or partnership contract can be drawn up between the two NGOs.

It often occurs that projects originating from the same Southern NGO are presented by NGOs from different European countries and thus become financed by different EC administrators. Unfortunately, Southern NGOs are forced to divide what are quite possibly coherent programmes into sub-programmes in order to receive financing within the framework of this procedure.

A comparative evaluation of EC and European NGO co-financing in 1985 has shown the necessity to reduce the direct influence of European NGOs in project preparation and execution, and to strengthen institutional and organisational capacities of Southern NGOs.

Since 1988, some projects presented for co-financing by the European NGOs that are oriented towards the institutional support of Southern NGOs are the subject of a new experimental procedure. This basically consists of EC co-financing up to a maximum of 50% of the Southern NGO's total annual budget. It can cover a variety of the organisation's expenses, including activities for the beneficiaries, running costs or investments.

The projects presented to the Commission by the European NGO are studied on the basis of a total annual work programme and are not based on specific projects. The Southern NGO's activity reports, accounts, and balances of the last three years are also required. The Southern organisation, which is the beneficiary, has to justify its system of using funds based on accounts, balances and reports covering its entire field of activities. These institutional support projects have a maximum duration of two years.

An evaluation of 25 projects financed up to 1991 revealed that the majority of the Southern organisations are intermediary NGOs and that a small proportion of them operate on a national scale. Grassroot organisations and local groups rarely benefit from this procedure. Common characteristics of the Southern organisations that have benefited from these support funds are:

While the European Commission holds an important role in formulating EU policy for development aid, the European Parliament, separate from the EC, favours the formulation of numerous budget lines: those related to co-operation with NGOs, with the Arab countries, with public health and the environment in developing countries, support to democratisation and the battle against drugs.

It should be noted that the average budget, per project, is often quite substantial (200,000 ECU = $238,000). NGOs that have not always had the capacity to manage such large amounts can seek assistance from a European NGO in the presentation of the project-proposals or in financial management.

Allocation 1995: 13.2 million ECU ($15.7 million)

Allocation 1996: 15 million ECU ($17.8 million)

Funding is intended for the support of sustainable development processes and for projects which ensure that the environmental dimension is fully incorporated into the development process.

Activities need to fit into the following criteria:

Eligible activities include pilot projects, environmental impact studies for current and future development projects, the drawing up of guidelines and instruments or project evaluations. Seminars and conferences may be financed if they form part of a broader programme.

The total budget for this line is almost equally shared between DG I and DG VIII. Each administers its own programmes but uses the same directives. DG I seems to be more restrictive since they do not accept research projects and give priority to projects in the areas of urban environment and biodiversity.

The budget line is open to NGOs, universities, research centres, and consultants in the EU and in developing countries.

Requests should be submitted in the first quarter of each year, since the funds available are limited and quickly used up. Co-financing and contributions from the applicant is desirable. In exceptional circumstances, funding may be 100%. Contributions range from 100,000 to 1 million ECU ($120,000 - 1.2 million).

Allocation 1995: 14 million ECU ($16.7 million)

Allocation 1996: 19 million ECU ($22.6 million)

The purpose of this budget line is to: promote respect for human rights; support and encourage democratisation and good governance and foster citizens' participation in public life in developing countries. In addition, legal assistance for strengthening capacities of local associations is given, as well as support for the development of an independent, pluralist and responsible media. Priority is given to support of vulnerable groups such as ethnic minorities, women and children. All developing regions are covered with the exception of Latin America, to which funds are allocated from a different line.

The line is open to institutions and NGOs in developing countries as well as to European NGOs which have priorities for programmes conducted in partnership with a Southern organisation.

Under this budget line exist a number of sub-budget lines based on thematic and/or geographical considerations. A few budget lines relevant to this book are listed below. For more information, please contact the NGO Liaison Committee in Brussels.

A small number of budget lines are reserved exclusively for NGOs in some developing countries, the geographic budget lines.

B7-320 European Programme for Reconstruction and Development in South Africa 1996 allocation: 160 million ECU ($190.6 million)

Due to the political changes in this country, the EU established official relations with the new South African government and changed the name of the programme in 1995. The programme aims to contribute to the elimination of discrimination and marginalisation which has resulted from the policy of apartheid, and to promote reconciliation between the communities of South Africa. Priority areas are:

This programme is open to South African NGOs. A micro-project programme intended for local NGOs has been created and will be managed by the Transitional National Development Trust (TNDT). Criteria for the selection of projects have been defined and can be obtained from the TNDT or from the EC Delegation in South Africa.

B7-321 "Rehabilitation in Southern Africa"

1996 allocation: 20 million ECU ($23.8 million)

Support for rehabilitation programmes in the field of environment, agriculture, fishing, health, education and training, demining, etc. in Angola and Mozambique.Financing can go up to 100% but a financial contribution from the NGO is appreciated. The amount requested for the projects should be between 600,000 and 800,000 ECU over twelve months. Most of the projects that are eligible for financing via this line have to be referred by the NGOs in collaboration with local or national bodies. This line is mainly used by the Northern NGOs. Only 7% of the projects are related to Southern NGOs.

B7-703 "Support for democratisation in the Latin American region"; allocation 1996: 14 million ECUThis line is open for direct financing of local private and public partners (NGOs, associations, indigenous organisations)

The European Union finances aid programmes through the annual Community budget on one hand, and through the European Development Fund (EDF) on the other. It is important to note that the EDF, which is agreed every five years, is managed separately from the annual budget. The utilisation of EDF resources is determined by the provisions of the Lomé Convention, notably, within its financial protocol. In 1994, the European Development Fund was granted 54% of Community Aid (10.8 billion ECU in the period 1991-1995 = $12.9 billion).

Aid coming from the Community budget is not managed and released under the same conditions as the EDF. Thus, while EDF resources are monitored and approved by the EDF Committee (made up of one representative from each Member State), the EU budget is controlled by the European Parliament. The latter does not have decision making powers with regards to the EDF.

Funding of NGO activities is subject to the terms and conditions of the National Indicative Programmes. Most financing of NGOs has been through the micro-projects scheme, where ACP countries have decided to have such a programme in their National Indicative Programme. NGOs also participate in programmes financed by EDF in sectors such as health, the environment and education. It is likely that an increasing number of National Indicative Programmes provide for the financing of NGO projects through decentralised co-operation.

Decisions for the utilisation of EDF resources at project level are taken jointly by the ACP State and the European Commission. NGOs wishing to obtain funding from the EDF should inform themselves on the working of the Lomé Convention and the contents of National Indicative Programmes.

This is aimed at supporting a wide range of small-scale projects implemented by Southern or European NGOs. The funds come from the EDF and are provided under National Indicative Programmes of the ACP countries. The Lomé Convention does not earmark a specific amount for micro-projects. The individual ACP state decides whether to allocate funds to a programme of micro-projects. The decisions have to be approved by the EDF Chief Authorising Officer in Brussels. Most of the EDF programmes are implemented by businesses and consultancies. NGO participation is quite rare but may occur in the form of sub-contracts.

Approximately half of the ACP States have a MPP within their National Indicative Programme. The most current themes are rural development, sanitary and social development, and actions favouring women. Despite the fact that local supportive NGOs have the right to supervise the realisation of a MPP with the authorisation of the State, it should be noted that, so far, they have never been entrusted with this task. Delegations supply quite limited information to NGOs.

However, some Northern NGOs have considerable experience in this field and have been engaged to offer technical assistance in the management of all the MPP's, as in the cases of Chad, Niger, Zambia, Senegal and Mali. This applies to the French AFVP and the Dutch SNV who have offered assistance.

Southern NGOs that wish to participate in MPP's should contact the local EC delegation and the MPP realisation units.

The budget line "Financial and technical assistance" (FTA) with the ALA/MED countries can be accessible to NGOs. Since 1992, a new regulatory text institutionalises the EU's relationships with the non-governmental parties in the ALA countries. It clearly states that these parties can propose projects to the EC that will benefit local bodies.

The Commission in Brussels takes the decisions on the financing of projects or programmes concerning the ALA/MED countries. This means that the delegations can't directly finance Southern NGOs without first receiving approval from Brussels.

Generally, EC grants through these channels are 100% of the project cost. There is a maximum of 150,000 ECU ($179,000) with a limit of 500,000 ECU ($596,000) for a long term project of 5 years. Considerable flexibility is allowed in the allocation of funds and the choice of a partner.

The project has to be introduced to the relevant geographic board in the EC office or delegation or to the office in charge in the country concerned.

In contrast to the Financial and Technical Assistance (TFA) for the ALA countries, for institutional and administrative reasons, only a few collaborations with NGOs are realised in the developing Mediterranean countries. As a result, co-operation with the developing Mediterranean countries is on a contractual basis in the form of financial protocols that submit the co-operation to the approval of its government institutes. It finances mostly government projects or multilateral bodies (UNICEF, ADB, etc.)

Decentralised co-operation is a new approach which the European Commission intends to encourage in its co-operation with developing countries. It aims to increase the role played by local bodies (NGOs, local authorities, trade unions, etc.) in EU co-operation programmes. It should not be seen as a new financing instrument, but rather as a different political approach to development co-operation. It establishes a clear link between the idea of participatory development and the promotion of democracy and human rights. The aim is no longer -as in the case of micro-projects- to support a large number of limited actions, but rather to promote co-operation between the various groups at the local level.

Within the framework of the co-operation agreements with the States, the EU has initiated a certain number of decentralised co-operation programmes.

According to the EU, these have the following objectives:

Target groups are:

The project decisions come under the specific framework of the various EU cooperations (bilateral regional agreements with the ACP countries; financial and technical aid to the ALA/Med countries).

In this way, all the countries, by using the different procedures, can benefit from decentralised co-operation actions. The agencies for realisation and administration are also different depending on each type and zone of geographic co-operation.

The local parties in the ACP countries are the principal beneficiaries of finances allocated by the EU. Decentralised co-operation projects can also be presented in partnership with European parties. If the project is approved, the European parties will be engaged to implement the project.

It is the responsibility of the decentralised parties to present projects to the EC delegation which will check whether it complies with the National Indicative Programme of the country concerned. If necessary, the delegation can decide to finance a feasibility study. When projects are being submitted for co-financing, a management delegation has to be formed for the decentralised local parties.

There are no particular conditions regarding the amount of financing that can be made available. However a contribution from the European partner is required for North/South partnerships. For the developing countries, it is preferable that the receiving party makes a contribution in cash or kind (personnel, materials, etc.).

A certain number of projects and programmes have been realised within the context of decentralised co-operation and have been supported by NGOs. They contribute to the financing of partnerships between equal decentralised parties in the North and South.

In terms of decentralised co-operation, two specific programmes are in progress in Benin and the Dominican Republic. Other programmes are being prepared in different countries (Madagascar, Niger, Cameroon, Zimbabwe, Mauritius, Nigeria, Senegal, etc.). It appears, however, that the elected actors are frequently Northern NGOs which interface with the local NGOs. In Cameroon, for instance, collaboration between a French NGO and the local NGOs has put a programme forward to the EDF supporting small economic initiatives and the urban environment.

These concern programmes that target the encouragement of skill-sharing and collaboration between individuals, groups and agencies in two of the Mediterranean basin regions.

Since 1992, these programmes have mobilised important civil society activists on the theme of partnership in specific fields of co-operation: the territorial authorities and urban planning and management (MED-Urbs), the universities and academies (MED-Campus), the economic operators (MED-Invest) and the media professionals (MED-Media).

All these programmes are now included in the MEDA programme called "Accompanying measures for the economic and social structural reforms in the developing Mediterranean countries". The NGOs of the beneficiary countries can take the initiative for actions that will probably be financed by credits from the MEDA programme.

Each of these sub-programmes allow the financing of a certain number of sub-projects of joint research, training, action, seminars and meetings, or the creation of services. Development actions are excluded from the MEDA field of intervention. The EC supports the co-operation networks ceated within the framework of the MEDA programmes if these networks are associated with at least two partners from two developing Mediterranean countries and at least two partners from EU member states.

There exists a well-defined procedure, established by the EU (form, detailed project description, deadlines to be kept, provisional budget, evidence of the involvement of local collectives).