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DIRECTORATE GENERAL FOR INTERNAL POLICIES

POLICY DEPARTMENT D: BUDGETARY AFFAIRS

THE STRATEGIC IMPACT AND COST-EFFECTIVENESSOF EU BUDGET SUPPORT WITH REGARD TO

SUPPORTING DEMOCRATIC TRANSITIONS INSOUTHERN MEDITERRANEAN COUNTRIES

VOLUME IICOUNTRY REPORTS

AbstractThis study analyses to what extent the EU budget support provided to Egypt, Tunisia andAlgeria has changed due to the Arab Spring and to what extent the EU budget support hascontributed to the democratic transitions in those countries. Furthermore, the studyprovides information on (i) how resolutions of the European Parliament regarding Egypt,Tunisia and Algeria have been translated into the EU budget support provided to thosecountries, (ii) how the monitoring and reporting systems of the effects of those budgetsupport operations have been organised and to what extent respect of human rights andgender issues have been taken into account in the budget support programmes.

IP/D/ALL/FWC/2009-056 28/10/2013

PE 490.679 EN

This document was requested by the European Parliament's Committee on Budgets. It designated MsNadezhda Neynsky and Ms Franziska Katharina Brantner to follow the research study.

AUTHOR(S)Mr Martin VAN DER LINDEDr Zine BARKAMr Yassine HAMZAMr Alaa SHAHEENMs Anja WILLEMSEN

ECORYS Nederland BVWatermanweg 443067 GG RotterdamThe Netherlandswww.ecorys.nl

RESPONSIBLE ADMINISTRATORMr Alexandre MATHISPolicy Department on Budgetary AffairsEuropean ParliamentB-1047 BrusselsE-mail: [email protected] support: Ms Catarina DUARTE GOMES

LINGUISTIC VERSIONSOriginal: EN

ABOUT THE EDITORTo contact the Policy Department or to subscribe to its newsletter please write to:[email protected]

Manuscript completed in October 2013.Brussels, © European Union, 2013.

This document is available on the Internet at: http://www.europarl.europa.eu/studies

DISCLAIMERThe opinions expressed in this document are the sole responsibility of the author and do notnecessarily represent the official position of the European Parliament.

Reproduction and translation for non-commercial purposes are authorized, provided the source isacknowledged and the publisher is given prior notice and sent a copy.

The strategic impact and cost-effectiveness of EU budget Support with regard tosupporting democratic transitions in Southern Mediterranean Countries

Volume II - Country Reports____________________________________________________________________________________________

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CONTENT OF VOLUME II - COUNTRY REPORTSCONTENT OF VOLUME II - COUNTRY REPORTS 3

LIST OF TABLES 5

LIST OF ABBREVIATIONS 6

VOLUME II-A - EGYPT COUNTRY CASE STUDY 7

1. INTRODUCTION 9

2. POLITICAL CONTEXT 10

2.1. Overview of changes in political power 10

2.2. Democracy in Egypt 10

2.3. Human rights, respect of the rule of law and freedom of expression 12

2.4. Governance in Egypt 13

2.5. Some conclusions and the way ahead 14

3. ECONOMIC CONTEXT 15

4. THE EU PROGRAMME OF COOPERATION 17

4.1. The Country Strategy 2007-2013 17

4.2. The National Indicative Programme 2010-2013 18

4.3. Changes after the revolution 18

4.4. Other types of support provided by the EU of relevance for the study questions 19

5. BUDGET SUPPORT PROVIDED TO EGYPT 21

5.1. Budget support provided by the EU 21

5.2. Budget support provided by other donors 23

6. EUROPEAN PARLIAMENT RESOLUTIONS TARGETING EGYPT 25

7. MAIN FINDINGS AND ANSWERS TO THE STUDY QUESTIONS 26

7.1. Summary of main study findings 26

7.2. Answers to the study questions 26

VOLUME II-B - TUNISIA COUNTRY CASE STUDY 30

1. INTRODUCTION 31



3.1. Macro-economic performance in recent years 34

3.2. Quality of Public Finance Management 35

3.3. Economic prospects for coming years 36


4.1. The Country Strategy Paper 2007-2013 37


Policy Department D: Budgetary Affairs____________________________________________________________________________________________

4


4.4. The Action Plan 2014-2017 of the Association Agreement 40

4.5. Other support provided by the EU of relevance for the study questions 40

4.6. Brief summary of the evaluation of the EU Country Strategy 41

5. BUDGET SUPPORT PROVIDED TO TUNISIA 42



6. EUROPEAN PARLIAMENT RESOLUTIONS ABOUT TUNISIA 49


7.1. Summary of findings and conclusions 50


VOLUME II-C - ALGERIA COUNTRY CASE STUDY 56

1. INTRODUCTION 57




3.2. Quality of Public Finance Management. 61



4.1. The Association Agreement 63





5. BUDGET SUPPORT PROVIDED TO ALGERIA 66




6.1. Summary of main findings and conclusions 69


REFERENCES 73

ANNEX A1 LIST OF PERSONS MET IN BRUSSELS 76

ANNEX A2 LIST OF PERSONS MET DURING THE MISSION IN EGYPT 77

ANNEX A3 LIST OF PERSONS MET DURING THE MISSION IN TUNISIA 79

ANNEX A4 LIST OF PERSONS MET DURING THE MISSION IN ALGERIA 81



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LIST OF TABLESTABLE 1Selected macro-economic indicators of Egypt, 2008-2013 15

TABLE 2Key macro-economic indicators of Tunisia, 2008-2013 34

TABLE 3Pillars and objectives of PAR-2 44

TABLE 4Policy Development Loans provided by the WB to Tunisia in 2009-2012 47

TABLE 5Key macro-economic indicators of Algeria, 2009-2013 61

TABLE 6Allocations and Financing Decisions of the NIP 2007-2010 (Algeria) 64

TABLE 7Allocations and Financing Decisions of the NIP 2011-2013 (Algeria) 64


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LIST OF ABBREVIATIONS

CSO Civil Society Organisation

DAC Development Assistance Committee

EC European Commission

EP European Parliament

EU European Union

ENP European Neighbourhood Policy

GBS General Budget Support

GDP Gross Domestic Product

IMF International Monetary Fund

NGO Non Governmental Organisation

OECD Organisation for Economic Cooperation and Development

PEFA Public Expenditure and Financial Accountability

SBS Sector Budget Support

SPRING Support for Partnership, Reform and Inclusive Growth

UN United Nations

USAID United States Agency for International Development



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VOLUME II-A - EGYPT COUNTRY CASE STUDY

1. INTRODUCTION 9


2.1. Overview of changes in political power 10

2.2. Democracy in Egypt 10

2.3. Human rights, respect of the rule of law and freedom of expression 12

2.4. Governance in Egypt 13

2.5. Some conclusions and the way ahead 14



4.1. The Country Strategy 2007-2013 17


4.3. Changes after the revolution 18

4.4. Other types of support provided by the EU of relevance for the study questions 19

5. BUDGET SUPPORT PROVIDED TO EGYPT 21



6. EUROPEAN PARLIAMENT RESOLUTIONS TARGETING EGYPT 25

7. MAIN FINDINGS AND PRELIMINARY ANSWERS TO THE STUDY QUESTIONS 26

7.1. Summary of main study findings 26

7.2. Preliminary answers to the study questions 26


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1. INTRODUCTIONIn December 2012, the Directorate-General for Internal Policies of the European Parliament awardedECORYS a contract for carrying out a study entitled: 'The Strategic Impact and Cost-Effectiveness of EUBudget Support with regard to Supporting Democratic Transitions in Southern MediterraneanCountries: case studies'. Three case studies had to be carried out, namely in Egypt, Tunisia andAlgeria.

This report presents the results of the Egypt Country Study. The Country Study consisted of a reviewof relevant documents and interviews with different stakeholders to discuss the EU cooperationprogramme with Egypt and Budget Support in particular.

The Country Study has been carried out by Martin van der Linde, Anja Willemsen and Alaa Shaheen. Afield mission to Egypt took place between the 24th and 29th of March. The authors would like toexpress their thanks to all individuals who gave their time to meet with them during this period –particularly the staff of the Delegation of the European Union, representatives of the Ministry ofPlanning and International Cooperation, staff of USAID and the World Bank as well as representativesof the civil society (see Annex A1).

This report consists of seven chapters. This introduction is followed by two chapters in which a briefoverview of the political and economic context in Egypt is presented. Chapters 4 and 5 are devoted toa description and analysis of respectively the EU’s programme of cooperation with Egypt and theBudget Support provided to Egypt. Chapter 6 contains an overview of the Resolutions of theEuropean Parliament dealing with Egypt. The main findings and answers on the Study Questions arepresented in the last chapter.

The text for this report has been written in May/June 2013. Developments and events which haveoccurred after June 2013 were not part of the analyses and are not reflected in the text.

This report does not necessarily represent the opinions of the EU Delegation in Egypt or any of theother respondents.


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2. POLITICAL CONTEXT

2.1. OVERVIEW OF CHANGES IN POLITICAL POWEREgypt has been a republic since 1953 with long term subsequent presidential eras of Gamal AbdelNasser, Anwar el-Sadat and Hosni Mubarak. Following the protests in Tunisia, the Arab Springdemonstrations began on 25 January and ran for 18 days in Egypt. The protest is widely believed tohave been instigated by dissatisfaction with the authoritarian style of governance, wide gaps inincome levels, high level of unemployment, human right violations and corruption, etc., articulated inthe core protestor slogan of ‘bread, freedom and social justice’. President Hosni Mubarak steppeddown on February the 11th of 2011 and the Supreme Council of the Allied Forces assumed theresponsibilities of the Presidency of Egypt.

During 2012, the state of emergency1 was ended and various elections were held, including thepresidential elections in which Mohamed Morsi of the Freedom and Justice Party (the political arm ofthe Muslim Brotherhood) defeated Ahmed Shafiq, the former Prime Minister of the Mubarak regimewho temporarily held the position of prime minister after the revolution, by a small margin. After theelections, the newly elected President took over power from the Supreme Council of allied Forces.

2.2. DEMOCRACY IN EGYPTDuring the Mubarak administration the existence of the emergency law and other laws such as the1999 Associations Law provided the context to silence political dissent. The 2005 elections marked astep forward in the democratisation process in Egypt. For the first time, the elections wereadministered by electoral commissions under full judicial supervision and observed by the local civilsociety. Moreover the constitutional amendment of May 2005 changed the presidential election intoa multicandidate popular vote instead of a popular validation of a candidate nominated by thePeople’s Assembly, leading to the first multi-candidate election in Egypt. When Muslim Brotherhoodmembers were allowed to run for parliament as independents in 2005, they won 88 seats, or 20 % ofthe People’s Assembly. This prompted another constitutional amendment, which made it difficult forcandidates unaffiliated with a registered party to run for parliamentary seats. As a consequence at thenext parliamentary elections in 2010, only one seat was won by the Muslim Brotherhood.

Political Parties and opposition after the revolution

Following the 2011 revolution, the Supreme Council of Allied Forces opened the opportunity for theregistration of new political parties. The Freedom and Justice Party, the political arm of the MuslimBrotherhood was registered as an official party in 2011 as well as the Salafist party Al-Nour, whichaims at strict application of the Sharia law. The Egyptian Islamist group Al-Gama’a Al-Islamiyya,considered being a terrorist organization by the United States and the European Union, also formedits political party, the Building and Development Party. However, it has garnered less support thanother Islamist parties.

Countering the Islamic parties has been the formation of the National Salvation Front coalition, theEgyptian Popular Current, and the Free Egyptians Party, which won 15 seats in the parliamentary

1 The state of emergency lasted for 31 years from 1967 to 2012, except for a 18-month break in 1980. The state ofemergency was imposed during the 1967 Arab-Israel War.



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elections of 2011. However at present the (liberal/ left) opposition is considered weak andfragmented2.

Elections of 2011 and 2012

After the revolution, parliamentary elections (for the People’s Assembly) were held late 2011 andearly 2012, giving the Islamic political parties a strong lead in the parliament with 29 % of the seats forthe Salafist Al-Nour Party and 38 % for the Freedom and Justice Party. Although the Supreme Councilof the Allied Forces barred foreign monitors, they allowed foreign 'observers'. The elections wereconsidered the first free national election3 in Egypt since the overthrow of the monarchy in 1952 with54 % of 50 million eligible voters having turned out for the election. However, the parliament waseventually deemed unconstitutional by the Supreme Constitutional Court and thereby dissolved4,which implied that new elections had to be held.

Recently, the Administrative Court suspended the new parliamentary elections set for April 2013,after calling into question the constitutionality of the electoral and political rights practice law, andreferred the law to the Supreme Constitutional Court. The parliamentary elections are now scheduledfor the fall of 2013. In the meantime the Shura council (see here under) took charge of the legislativefunctions of the Parliament based on a constitutional amendment approved by the President.

The Shura Council5 elections were held in January and February 2012. As in the People’s Assembly,the dominant forces were the Freedom and Justice Party, which won 105 of 180 electable seats, andthe Al Nour party, which won 45 seats. An additional 90 members (one third) are appointed by thePresident. The Free Egyptians Party boycotted the elections, citing irregularities in the parliamentaryelections. The second phase of the Shura elections saw a turnout of only 12.5 %, likely due to voterapathy after several months of elections as well as calls to boycott the Shura elections.

The presidential elections were held in June 2012 and had a turnout of 43.4 % in the first round.Morsi won with a small majority of 51.73 % in the second round.

2 Iba Abdo, Clingendael Institute, Egypte in de greep van de Moslimbroeder, International Spectator,February 2012.3 Minor violations were observed, but did not affect the final outcome according to foreign observers. The Carter Centre,

an observer noted that irregularities during the People’s Assembly elections included 'incorrect implementation ofprocedures put in place to ensure confidence and transparency in the process, administrative mistakes which led to last-minute legal challenges resulting in costly rerun elections across many jurisdictions and a general uneven enforcement of thelaw and regulations'.

4 The constitutional court has dissolved the People's Assembly on the grounds of the absence of equal competitionopportunity between political parties and individuals contesting. Many, and particularly Islamists, viewed the decisionas a coup as many of the judges were appointed by Mubarak. Despite President Morsi’s attempt to revive the assemblyafter coming to power, the assembly remains dissolved and Egypt awaits for new parliamentary elections in 2013.

5 The Shura is the second chamber or upper house of the parliamentary system. Articles 194 and 195 of the Constitution,stipulate that the Shura Council is tasked with the study and proposal of what it deems necessary to consolidatingnational unity and social peace and protecting the alliance of the working forces of the people.


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Constitutional changes

In November 2012, a new Constitution was presented and circulated before the conduction of areferendum in December 2012. The Constitution was widely criticized by the secular and liberalopposition and the international community because, in their views, the draft Constitution containedtoo many provisions restricting human rights including children’s and women’s rights andfundamental freedoms, and provisions inspired by religious considerations. One of the set-backs tothe freedom of civil society was a clause that: (i) forbid the creation of independent unions, whichhave traditionally been an important force in anti-government protests, (ii) required a single unionper field, and (iii) stipulated that unions should fall under the auspices of the government.

The Constitution preserved the broad powers of the president, as was the case under the regime ofthe former President Mubarak, including the appointment and dismissal of various governmentofficials, and maintained the clause that ensured that the military budget would remain secret andundisclosed to the public6.

With a low turn-out of 32.9 % of eligible voters, 63.8 % voted in favour of the Constitution. Theopposition continues to call for the re-writing of the Constitution by an Assembly morerepresentative of Egypt’s population.

2.3. HUMAN RIGHTS, RESPECT OF THE RULE OF LAW AND FREEDOM OF EXPRESSIONAccording to the 2013 annual World Report of Human Right Watch, Egypt’s serious human rightsproblems remained after Mubarak stepped down, including police abuse and impunity, restrictionson freedom of expression, association, and religion, and limits on the rights of women and workers.Multiple accounts of torture and excessive use of force by the security forces have been documentedand disseminated by human rights groups and individuals across a variety of social media networksand websites. Such reports indicate a continuation of tactics common to Mubarak administration’streatment of dissenters.

Respect of the rule of law

Egypt scored consistently poor on indicators measuring the status of the rule of law in differentindexes. There were major setbacks in 2010 related to compromised judicial independence7. After therevolution several presidential actions have undermined the rule of law. In November 2012, PresidentMorsi made a presidential declaration, granting himself additional executive powers and putting hisdecisions beyond judicial oversight, while also setting a date for the constitutional referendum. Inface of great public dissent, President Morsi reversed much of the declaration. The President’sdecision to dismiss the previous Mubarak-era Prosecutor General and to appoint a new Prosecutor-General was dismissed by the Court as null and void in March 2013.

Under the administration of President Mubarak, the wide presence of police and security forcesdeterred criminal activities including sexual harassment in public spaces. After the withdrawal of asignificant number of security forces from the streets after the revolution, harassment in Egypt hasbecome steadily worse. Reports from Human Right Watch state that a number of incidents of violenceagainst protesters over the past year have not been properly investigated.

6 The Egyptian Armed Forces are estimated to own between 25 and 40 % of the Egyptian economy, according to someestimates.

7 Rule of law quick Scan Egypt, The HiiL Rule of Law Quick Scan Series is published by HiiL The Hague Netherlands, 2012.



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Freedom of expression and the media

Under the Mubarak administration, freedom of press and expression was limited. Althoughnewspapers could publish articles critical about the administration, they could, in the aftermath, bethreatened or charged by the government.

Under the Morsi administration, opposition members and media have been critical about actionstaken by the president. As a response the Muslim Brotherhood, started to criticize the media andIslamist protests have taken place at Media Production Cit. Moreover, Egypt has witnessed a series ofaccusations of 'incitement' of Egypt’s media figures such as the summoning of a popular Egyptiantelevision satirist because of allegations that he insulted President Morsi and the Islam8.

Independence of Civil Society Organisations

Before the revolution, room to manoeuvre for Civil Society Organisation was perceived to be smallalthough the laws as regards the establishment and operations of Non-Governmental Organisations(NGO) were flexibly applied. In December 2011, 17 non-governmental organizations were raided andclosed by the government (then controlled by the Supreme Council of Allied Forces), which claimedthat the organizations were unregistered and operating as agents of foreign countries. Many of theseorganizations have sought licensing since the incident, but have not been granted licenses from thestate. Delays in approval are caused by the on-going political struggle between the Freedom andJustice Party/Muslim Brotherhood, Armed Forces, security services etc. The situation with the NGOlaw reflects that there is a chaotic production of competing draft laws, but none of these actuallyaccommodate the interests of NGOs. For example the new draft law on NGOs issued by the Ministryof Insurance and Social Affairs in December 2012, augments government restrictions and regulationsof NGO funding while restricting many key activities of NGOs, such as polls, surveys, and focusgroups.

2.4. GOVERNANCE IN EGYPTIn 2010, Egypt scored relatively weak on Government Effectiveness indicators9 that measureperceptions of 'the quality of public services, the quality of the civil service and the quality of policyformulation and implementation, and the credibility of the government's commitment to such policies'.

The revolution has not (yet) improved that situation, to the contrary. Respondents indicate thatdecision making processes have become very slow and not transparent as nobody wants to takeresponsibility. High turnover of staff and ministers is also a large problem, which has limited theimplementation capacity of different ministries. For instance the Ministry of Transport has had ninedifferent ministers since the revolution. Moreover, it is felt that policy making is (too much) influencedby ideological, cultural and sometimes religious considerations.

8 US State Department spokeswoman Victoria Nuland expressed 'concerns that freedom of expression is being stifled', andthat the Egyptian authorities were selectively prosecuting individuals accused of insulting the government, while failingto prosecute individuals responsible for violent and fatal attacks on anti-government demonstrators. Mr.Nuland notedthe event as a 'disturbing trend of growing restrictions on freedom of expression'.

9 Worldwide Governance Indicators, Kaufmann et al., 2010.


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2.5. SOME CONCLUSIONS AND THE WAY AHEADThe 2011 Egyptian revolution - with the popular slogan 'bread, freedom, and social justice' - called forthe step-down of Hosni Mubarak and the end of the state of emergency. Although Mubarak hasstepped down after the mass protests, calls for freedom and social justice remain as Egypt’s economydeteriorates and violations of human rights remain. Many people are disappointed about the resultsof the revolution. During 2012, Egypt continued its democratic transition to which the Egyptianauthorities had committed themselves after the revolution, through the orderly organisation ofelections, the end of the state of emergency and the smooth transition from military to civilian rule.However the winning Freedom and Justice Party, the political arm of the Muslim Brotherhood, hasnot yet developed a democratic way of governing the country.

Egypt is still in a transition period, with no consensus yet about the direction where to go. Thepolitical unrest and internal struggles are also shown by the fact that President Morsi reversed fivesignificant presidential decrees, within his first five months in power, including the reversed decisionsto reinstate Parliament after it was declared unconstitutional by the Supreme Constitutional Courtand to instate price increases on a variety of goods and energy.

The above presented overview of the political context makes clear that the final outcome of thepresent political processes, which will take years, is difficult to predict. At the moment the process isnot clearly and uniformly moving towards a stronger democratic governance structure. Various actorsand factors are trying to pull the process in sometimes different directions. Several of the personsinterviewed feel that international pressure but also sharing of democratic experiences could to someextent influence the democratisation process in a positive way.



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3. ECONOMIC CONTEXTEgypt’s economy is the second largest economy in the Arab world (after Saudi Arabia) with theservices sector, including tourism and shipping services of the Suez Canal, and Industry as the largestsectors. The Gross Domestic Product (GDP) in Egypt amounted to USD 229 billion in 2011, which isUSD 2,781 per capita10 (respectively about EUR 167 billion and EUR 2,030 per capita).

Over the past two decades, the economy and the living standards of the vast majority of the Egyptianpopulation improved, although in an uneven manner, which has widened the income gap. TheHousehold Income, Expenditure and Consumption Survey of 2010/2011 showed that the povertyrate11 increased from 21.6 % in 2008/2009 to 25.2 % in 2010/2011. Conversely, the extreme povertyrate declined from 6.1 % to 4.8 % in the same period12.

Table 1: Selected macro-economic indicators of Egypt, 2008-2013

2008 2009 2010 2011 2012 2013

Real GDP growth (%) 7.2 4.7 5.1 1.8 2.2 2.0

Inflation (%; consumer price index) 18.3 11.7 11.4 9.9 8.4 10.9

Current account balance (% GDP) 0.5 -2.3 -2.0 -2.6 -3.1 -2.1

Overall fiscal balance (% of GDP) -8.0 -6.9 -8.3 -9.8 -10.7 -11.3

Source: IMF (2013), Regional Economic Outlook Middle East and North Africa, May 2013.Note 1: Figures of 2013 are projections.Note 2: No recent data available from an IMF article IV consultation. Latest consultation dates from April 2010.

During the period 2005-2010 Egypt recorded an average growth of real GDP of 6 % per year, buteconomic growth has declined to 1.8 % in 2011 and 2.2 % in 2012 (see table 2) as a result of thepolitical instability in the country, the international financial crisis and reduced foreign directinvestments. Tightening of financial markets impedes access to capital for Egyptian enterprises anddampened global demand lowered revenues from exports and income from the Suez Canal. Incomefrom the tourist sector decreased as well due to the decreasing numbers of tourists, caused by theinternational economic crisis and political instability in Egypt. Following the sharp drop in tourismrevenues the current account deficit of the Balance of Payments reached a record USD 6.5 billion in2011 (about EUR 4.7 billion); and is estimated to amount to almost USD 8.4 billion in 2012 (about EUR6.1 billion) due to the sharp deterioration of the trade balance. Meanwhile the Egyptian Pound haslost more than 15 % of its value against the US dollar pushing inflation up to more than 10 % in 2013.Moreover, the government budget deficit is steadily increasing from 6.9 % of GDP in 2009 to anexpected 11.3 % in 2013. The negative macro-economic trends cause great concerns and requireswift action from the Government.

10 http://data.worldbank.org/indicator/NY.GDP.PCAP.CD.11 Poverty defined as less than 2 USD per day and extreme poverty as less than 1.25 USD per day.12 http://www.worldbank.org/en/country/egypt/overview.


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Economic outlook

At present Egypt’s economy is still suffering from the economic downturn and the government facesnumerous challenges how to restore growth and market and investor confidence. Moreover politicaland institutional uncertainty continues to negatively affect economic growth. The economicslowdown contributed to a rise in unemployment, which stood at 13 %13 at the end-December 2012,with 3.5 million people out of work. The government faces a major challenge in managing the statebudget, including the need to reduce the public wage bill and the subsidies, items that account formore than half of all public expenditures. The government needs to reduce public spending tomoderate the deficit, which is expected to widen to 11.3 % of GDP14 in the fiscal year ending in June2013. However, the Government is hesitant to take that step in view of the upcoming election.Measures to further reduce fuel subsidies planned for April 2013 have now been postponed to laterthis year.

The political instability has prolonged the approval process of Egypt’s request for a USD 4.8 billion(about EUR 3.6 billion) stand-by arrangement from the International Monetary Fund (IMF) whichwould open the door for substantial external donor financing, including budget support. The IMF isdiscussing an economic reform programme with the government calling for stronger fiscaladjustment and reduction of subsidies. The negotiations are however advancing slowly because ofthe Government's resistance to the austerity measures needed to get the budget deficit undercontrol.

In April 2013, it was announced that Qatar has pledged USD 3 billion with Libya contributing also USD2 billion, Saudi Arabia USD 1.5 Billion and Turkey USD 1 billion (respectively about EUR 2.3 billion, EUR1.5 billion, EUR 1.1 billion and EUR 0.8 billion) financial support, removing some of the sense ofurgency about obtaining the IMF loan.

Quality of public finance management

In 2009, the quality of public finance management was assessed on the basis of the PEFAmethodology15. The overall picture of the scores for the 28 indicators showed that the quality ofEgypt’s public finance management is 'modest' and that there is a lot of scope for improvement. Outof the 28 scores, there were: 3 A scores, 6 B or B+ scores, 10 C or C+ scores and 6 D or D+ scores16.

The Government of Egypt has not developed and articulated an ‘official’ Public Finance ManagementReform Programme, but has (informally) adopted a plan for improvement of public financemanagement made by the IMF Fiscal Department in May 2012. This plan is now used as a guidancefor designing public finance management reform initiatives.

13 According the records of the Government of Egypt, in reality this might be higher.14 IMF economic outlook MENA, 21 May 2013.15 PEFA: Public Expenditure and Financial Accountability. See 'Performance de la gestion des finances publiques en Tunisie',

Rapport final, juin 2010. A report issued by the EU, the World Bank and the African Development Bank.16 A is the highest score and D the lowest possible score.



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4. THE EU PROGRAMME OF COOPERATIONThe legal basis for EU’s relation with Egypt is the Association Agreement which was signed in 2001and entered into force in 2004, followed by the establishment of a joint EU-Egypt Action Plan in 2007in the context of the European Neighbourhood Policy (ENP).

4.1. THE COUNTRY STRATEGY 2007-2013The EU Country Strategy Paper 2007-2013 identified three main priority objectives for thecooperation based on Egypt’s national development plans as well as the strategic interests of the EU:

Supporting Egypt’s reforms in the areas of democracy, human rights, good governanceand justice;

Developing the competitiveness and productivity of the Egyptian economy;

Ensuring the sustainability of the development process with effective social, economic andenvironmental policies and better management of natural resources.

According to the Evaluation of European Commission’s support to Egypt, economic reform and socialdevelopment have been long-term cooperation priorities whilst the support to democratisation,strengthening human rights and the rule of law, including strengthening of civil society organisationshave become clear objectives in the 2007-2013 Country Strategy Paper. Under the three priorities anumber of cross-cutting issues are also be taken into account including gender equality, goodgovernance and climate change.

The Commission has allocated a total amount of EUR 1 billion to support the priorities of the CSP inthe period 2007-2013, drawing on resources from the European Neighbourhood and PartnershipInstrument. In the 2007-2010 National Indicative Programme a total of EUR 558 million was allocatedto support the three priorities with sustainable development (mostly health and education) receivingmost of the funding and about seven per cent (EUR 40 million) allocated to support Egypt’s prioritiesfor political reform, in particular enhancement of the effectiveness of institutions entrusted withstrengthening democracy the rule of law and the fight against corruption, including the Ministry ofJustice and civil society organisations. During the 2007-2010 period the EU was the largest foreigndonor in the area of promotion and protection of human rights17 with programmes focussing onsupport to the National Council for Human Rights, the National Council for Women and the NationalCouncil for Childhood and Motherhood.

Mid-term review of the Country Strategy Paper

In 2009, the CSP underwent a mid-term review to assess whether the Country Strategy Paper stillreflected the realities of EU-Egypt relations and to identify key lessons for improvement. Overall, itwas found that the main objectives remained valid. In terms of effectiveness the review had difficultyto capture the results of the various interventions due to limited measuring and monitoring of theoutcomes and impact at the level of the final beneficiaries and to attribute these to the EUcontribution in a specific area. Nevertheless the mid-term review acknowledged that overall progressof the implementation of reforms in Egypt had been limited so far, but the trend is encouraging, witha stronger commitment to economic reforms, increasingly to social reforms, and to a lesser extent to

17 Evaluation of European Commission’s Support with Egypt – Country level Evaluation, December 2010


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political reforms, although opening up the political dialogue in this area can be seen as great stridesforward.

4.2. THE NATIONAL INDICATIVE PROGRAMME 2010-2013Subsequently the Country Strategy Paper informed the National Indicative Programme for2010-2013, which had a proposed budget allocation of EUR 449 million, with an increased allocationfor support of reforms in the area of democratisation (EUR 50 million). The new programme intends tocontinue support to the same priorities in the area of democracy, human rights and justice as duringthe period 2007-2010. Also support in the other two priority areas follows on from the first NationalIndicative Programme, with specific support for sector reforms in the transport, energy, water andeducation sectors and local community development.

In terms of commitments the financial allocation for the 2007-2010 period has been fully utilised witha topping up of an additional EUR 20 million. In February 2013 the commitments for 2011-2013amounted to EUR 292 million, with a balance of EUR 157 million.

4.3. CHANGES AFTER THE REVOLUTIONThe revolution and following events halted the dialogue on the Association Agreement between theEU and Egypt for two years. Only in November 2012 a Task Force event with representatives from theEU and the Government of Egypt took place. Subsequently the different technical sub committeesmeant to oversee the implementation and monitoring of the different chapters of the Joint ActionPlan, started again early 2013. According to the EU Delegation not much has changed in thecooperation programme with Egypt because of the revolution. All programmes and projects havebeen continued although the implementation has been delayed considerably because of the changeof government.

After the EU-Egypt Task Force meeting of November 2012, the EU announced that it would provideadditional financial support to Egypt for a total amount of nearly EUR 800 million. This amountincludes EUR 303 million in grants (EUR 90 million from the Spring Fund, EUR 50 million as a grantfrom the Macro Financial Assistance programme and the balance from the NeighbourhoodInvestment Facility) and EUR 450 million in the form of a loan from the Macro Financial Assistanceprogramme.

Another important spin-off of the political changes in Egypt is that the EU has started to prepare aState Building Contract for the provision of General Budget Support amounting to EUR 200 million(EUR 110 million from the 2011-2013 National Indicative Programme plus the above mentioned EUR90 million Spring Funds). Further details are provided in section 5.1.

The EU Delegation is currently preparing jointly with five Member States (France, Germany, Italy, UKand Spain) a transitional European Neighbourhood Instrument programme covering two years(2014-2015). The programming document will be based on the expiring EU-Egypt Action Plan. Havinga transitional programme will provide time for preparing and negotiating a programme for the2016-2020, which should be aligned with Egypt’s planning processes and next National DevelopmentPlan.

Furthermore, since the revolution and the political changes, the Delegation of the EU is investingmore time in enhancing the dialogue with civil society organisations and supporting and echoing thevoice of the civil society.



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4.4. OTHER TYPES OF SUPPORT PROVIDED BY THE EU OF RELEVANCE FOR THE STUDYQUESTIONS

The total EU support to civil society in Egypt is EUR 20 million, broken down as follows:

The EU Delegation is currently financing a portfolio of 50 actions worth more than EUR 17.3 millionfunded by the European Instrument for Democracy and Human Rights, the Cultural Cooperation ofthe European Neighbourhood and Partnership Instrument, the Migration Thematic Programme, theDevelopment Cooperation Instrument and the new Civil Society Facility, which was created in 2011 asa response to the Arab Spring. In the period 2011-2012 in total EUR 1.5 million was made availablethrough the Civil Society Facility, while also the funding from the European Instrument for Democracyand Human Rights for Egypt was raised with 1 million.

In addition, support is also given to Civil Society Organisations through the Instrument for Stability.This is a new instrument introduced during the Arab Spring (2011). The Fund, which is providingsupport for urgent problems, does not provide fixed allocations per country. Funds are in principleavailable for NGOs but also for governmental institutions. In 2011, in total five projects wereapproved and funded for a total of EUR 3 million.

The NGO sector in Egypt has always been quite large and active and EU support programmes existsince many years. The priority areas covered under these programmes did not change significantlyafter the Revolution, since they were already covering a wide and ambitious human rights agenda,such as the fight against torture, improvement in women's rights, rights of the minorities etc. Afterthe revolution the situation of NGOs has become much more restrictive with different powers pullingin different directions. In this on-going struggle, pro-democracy civil society organisations are notbeing defended. This has made the use of EU instruments focused on NGOs much more difficult.Three of the NGOs which have been approved for EU funding in 2011 are still waiting the necessaryapproval from the Government of Egypt to allow the receipt of foreign money. Moreover NGOs havebecome more careful to apply for foreign funding in order to avoid being accused of supporting theimplementation of foreign political agendas.

Egypt gets also EU-funding via the Support to the Association Agreement Programme. The thirdProgramme started in October 2010 with a budget of EUR 20 million, while the fourth Programme hasstarted in December 2011 with a budget of EUR 10 million. These Support to the AssociationAgreement Programmes finance both technical assistance projects and institutional twinning.Subject to agreement with Egyptian institutions, the future twinning portfolio will also encompassgovernance oriented projects, which could focus on inter-ministerial coordination, and onindependent media regulation. SAAPs are being funded out of the financial envelopes of the NIPs.The funds of these Support to the Association Agreement Programmes are part of the financialenvelopes of the National Indicative Programmes.

Finally, Egypt is also being supported by the TAIEX programme (Technical Assistance and InformationExchange) and the SIGMA programme (Support for Improvement in Governance and Management).Both instruments are funding small activities which could be the starting point of larger twinningprojects. Since November 2012 six requests for Technical Assistance and Information Exchange havebeen received from among others the Ministry of Justice, Parliament and the State Council. Thesesupport activities are managed by DG Enlargement. Some examples of funded activities are:

A mission from an expert from the French Parliament to support the Shura Council;

A workshop on the Law on Freedom of Information;


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A mission of three experts to support the National Council of Women to draft a law onviolence against women’;

A study visit for establishment of a Legal Aid Office;

A workshop on fundamental rights organised by the Egyptian State Council.



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5. BUDGET SUPPORT PROVIDED TO EGYPT

5.1. BUDGET SUPPORT PROVIDED BY THE EUAccording to the Country Strategy Evaluation of 2010 there has been a shift from large-scale technicalassistance programmes to budget support since 2004. Budget support has proved to be successful inareas where the Government has started reforms and has been willing to involve donors. Use of thebudget support instrument has also been made possible by the high level of control exercised by theMinistry of Finance over public funds and the Government’s consideration for new reforms to improvepublic finance management and for moving toward higher fiscal discipline18.

Since 2007 Sector Budget Support (SBS) is provided as part of the support programmes for theEducation, Health, Transport, Energy and Water sectors, areas which were not found to becontroversial. The five on-going SBS programmes in these sectors were all formulated before therevolution and have been disbursed in multiple tranches based on the EU’s general eligibility criteriafor receiving budget support (stability of the macro-economic framework, efficiency of Public FinanceManagement and the implementation of national/sector strategies) and specific disbursementsconditions related to a matrix with specific programme targets.

The Mid-term review of the Country Strategy Paper concluded that the Commission’s support ofreforms using budget support has enabled the implementation of reform measures affecting theinstitutional, regulatory and managerial framework of key sectors (customs, trade, water, education,health) and had successfully opened a dialogue with the Government of Egypt on sector policy issuesand selected public finance management issues and had strengthened donor harmonisation.Nevertheless Sector Budget Support, in fact managed by the Government of Egypt as a projectmodality, did not influence the policy and budgeting frameworks of sector operations. Monitoring ofthe budget support operations takes place on the basis of monitoring reports provided by theministries involved, which are discussed during the steering committee meetings. Monitoringconcentrates on the implementation of reform measures and does not involve monitoring of theeffectiveness and impact of the reforms at beneficiary level.

The implementation of the SBS operations has been seriously delayed in 2011 and 2012 because of therevolution, lowered capacities of agencies and ministries and frequent changes of ministers. The boxon the next page provides an overview of the implementation of the five on-going SBS operations.

Additionality (increase of the total sector budget due to the SBS) is not an objective of the EU sectorbudget support, but the Government of Egypt has often de facto earmarked an equivalent amount offunding in its budget for projects in the related sector.

18 Evaluation of European Commission’s support with Egypt, Country level evaluation, 2010.


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BOX 5.1. OVERVIEW OF EU FUNDED SBS PROGRAMMES IN EGYPT

SBS for Education was signed in May 2008 (EUR 117.5 million and 2.5 million technical assistance and anadditional EUR 20 million in 2009 through an addendum, 3 tranches). Two of the three annual tranches werereleased in respectively October 2008 and November 2009 (in total EUR 83 million). In 2010, problems arose inachieving the targets set for the third tranche, on the one hand because the targets for this first SBS foreducation (as well as the underlying strategic sector plan) were too ambitious and on the other hand becauseof lowered capacity of the Ministry. This last problem increased after the revolution because the newgovernment provides insufficient (political/policy) support to the national development plan for education.The third tranche has still not been disbursed whilst the agreements will end in May 2013.

SBS for transport was signed in March 2009 (EUR 75 million + EUR 5 million technical assistance, 3 tranchesof which 2 are variable). The first fixed tranche was disbursed in 2009 (EUR 15 million) and the second tranchein 2010 to the amount of EUR 20 million with the remaining EUR 10 million added to the third tranche. Thethird tranche has not yet been disbursed. Short and long term technical assistance was foreseen in the originalFinancing Agreement. The team was put in place in January 2011, but had to be evacuated immediately for 6months because of political unrest. It actually started functioning in the second half of 2011. Before therevolution the programme was very much on track because the minister was fully supporting the programme.The new ministers are less familiar with it and attach less importance to a correct and timely implementationof the programme. The donor partner group for transport, chaired by the Ministry of Transport, is since 2012trying to engage (again) in a policy dialogue.

SBS for Health was a follow-up of funding of health projects. The agreement was signed in October 2010(EUR 107.7 million and EUR 2.3 million technical assistance; 4 tranches). It is focused on primary health care.The first fixed tranche (EUR 20.7 million) was paid immediately after signing the agreement. Disbursement ofthe second variable tranche (EUR 29 million) was planned for 2012 but has been delayed with more than oneyear. Some of the indicators are on track (e.g. Investment and equipment) and monitoring results show anupward trend of all health indicators. The policy dialogue and reporting were halted in 2011 and 2012because of the revolution and the departure of the deputy Minister and his core team responsible for PrimaryHealth Care.

SBS for Energy was signed by the EU in December 2011 and by the Government of Egypt in January orFebruary 2012 (EUR 26 million + EUR 4 million technical assistance, 3 tranches). The programme wasformulated before the revolution and the new Government confirmed the agreements. The first fixed trancheof EUR 10 million was disbursed in May 2012, the second variable tranche of EUR 8 million was planned to bedisbursed in the first quarter of 2013, but will be delayed to the first quarter of 2014. The delay of the secondtranche is not caused by the political changes. Most conditions for second tranche release are already more orless achieved, but one condition which has a weight of 25 % (electricity law) not yet.

SBS for Water was signed in December 2011 (EUR 110 million + EUR 10 million for technical assistance, 3tranches). The draft of programme was already approved by the Government before the revolution and theFinancing Agreement was planned to be signed in January 2011, which did not happen because of therevolution. During 2011 some of the benchmarks and indicators were redesigned because the newgovernment found them too ambitious/ politically sensitive. Important adaptations were: i) plans for public-private partnerships were cancelled, ii) plans for modifying the cost recovery strategy were cancelled and iii)more funds were reserved for technical assistance particularly to tackle the problem of water unaccounted for.Disbursements are planned for the first quarter of 2012, the first quarter of 2014 and the last quarter of 2015.The first tranche was actually disbursed in September 2012.



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Budget support operations prepared after the revolution

As mentioned above, in the second half of 2012 and the first half of 2013 the EU was preparing a StateBuilding Contract for the provision of General Budget Support amounting to EUR 200 million. Via sucha contract, the EU aimed to provide political and financial support to the new government (installed inJune 2012) in order to help it financing the quickly increasing budget deficit and to help stabilising thepolitical situation in the country.

It was envisaged that the State Building Contract would consist of two disbursements. The firstdisbursement would be made after the government would have taken a number of prior actionsrelated to fiscal transparency, economic governance, and social protection. The second disbursementwould be made on the basis of progress achieved as regards some indicators related to those prioractions, as well as achievement of certain targets regarding good governance and strengtheningdemocracy and the rule of law.

The World Bank and the African Development Bank were also preparing budget support for theGovernment of Egypt. As preconditions for disbursing their budget support, they intended to use thesame prior actions as the ones mentioned her above for the first tranche of the EU support.

Formally an agreement between the IMF and the Government of Egypt as regards a stand-by creditwas not an explicit precondition for signing the State Building Contract, but considering Egypt’seconomic and financial challenges it would be difficult to provide budget support in the absence ofsuch an agreement. The World Bank and the African Development Bank intended to make a closer linkby making the signing of a budget support agreement dependent on a stand-by credit agreementbetween the IMF and the Government of Egypt.

Negotiations between the EU and the Government on the specific conditions as regards goodgovernance, democracy and rule of law, including a law on NGOs in line with international standards,were still on-going in April/May 2013. The preliminary discussions were used to explore possibilities fora number of selected governance subjects to be included in the matrix of indicators and targets.Government representatives informed the study team that the Government was prepared to enter intoa policy dialogue with the EU on economic, social and also political and governance issues so that aState Building Contract could be concluded. The Government emphasised that the targets should bemutually agreed. However, because Egypt was politically still in a transitional period, it was not easy toformulate such mutually agreed targets.

The EU also offered EUR 500 million Macro Financial Assistance to Egypt in the form of a loan ofEUR 450 million and a grant of EUR 50 million. Signing of that financing agreement is subject to Egypthaving reached a Stand-by Credit agreement with the IMF. The Macro Financial Assistance was beingprepared by EC Directorate General for Economic and Financial Affairs (DG ECFIN).

5.2. BUDGET SUPPORT PROVIDED BY OTHER DONORSThe State Building Contract being negotiated by the EU and the Government of Egypt in the first half of2013 would be provided as part of a joint GBS programme, to which also the World Bank and theAfrican Development Bank would contribute. The Word Bank would provide GBS in the form of aDevelopment Policy Loan, which would probably consists of two tranches to be disbursed in a periodof 18 months. In April 2013, a first tranche of USD 700 million was being discussed. Required prioractions (conditions) of that first tranche would be focussed on economic governance and socialprotection issues. The amount of the second tranche was not yet known, nor the focus of the prioractions. The African Development Bank had planned two annual tranches of each USD 500 million. The


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GBS operations of the World Bank and the African Development Bank (AfDB) would not includeconditions related to political (democracy) issues. Japan and France have also been approached by theEgyptian Government to provide Budget support or development loan type support. These are underconsideration but less likely to materialise.

USAID planned to provide a so called cash transfer of USD 450 million (about EUR 342 million) as part ofthe USD 1 billion aid package (about EUR 0.76 billion) announced by President Obama after therevolution in Egypt. Cash transfers can be used to buy USA goods and/or to repay debts received fromthe USA Government. Because of these strong restrictions on the use of the funds, these cash transferscannot be labelled as GBS. USAID is not participating in the consultations about the GBS matrix withperformance indicators, but it is kept informed and in some cases consulted. The USA Cash TransferProgramme will be linked to the stand-by credit agreement with the IMF, with USD 190 million (aboutEUR 144 million) to be disbursed on the conditions that the Government of Egypt has announced thatit strives to reach an agreement with the IMF. This condition has been met and the funds weredisbursed at the end of March 2013. The remaining USD 260 million (about EUR 198 million) would bedisbursed on the basis of signing the IMF agreement and the submission and official announcement bythe government of the (economic and social) reform programme concluded with the IMF. Cash transferprogrammes are not provided to regimes which have a non-democratic regime, but democracypromotion is not an explicit objective of the cash transfer programmes. However, the focus on politicalconditions is increasing and mid-March 2013 the USA Senate discussed possible political conditions ofnew aid allocations to Egypt.



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6. EUROPEAN PARLIAMENT RESOLUTIONS TARGETING EGYPTEuropean Parliament resolutions targeting Egypt after the revolution

In 2011, 2012 and the first quarter of 2013 the following EP resolutions targeting Egypt were adopted:

1 European Parliament resolution of 17 February 2011 on the situation in Egypt;

2 European Parliament legislative resolution of 6 April 2011 on the draft Council decision on theconclusion of an Agreement in the form of a Protocol between the European Union and the ArabRepublic of Egypt establishing a dispute settlement mechanism applicable to disputes under thetrade provisions of the Euro-Mediterranean Agreement establishing an Association between theEuropean Communities and their Member States, of the one part, and the Arab Republic of Egypt,of the other part (13762/2010 – C7-0372/2010 – 2010/0229(NLE));

3 European Parliament resolution of 27 October 2011 on the situation in Egypt and Syria, inparticular of Christian communities;

4 European Parliament resolution of 17 November 2011 on Egypt, in particular the case of bloggerAlaa Abd El-Fattah;

5 European Parliament resolution of 16 February 2012 on Egypt: recent developments(2012/2541(RSP));

6 European Parliament resolution of 6 March 2013 on the situation in Egypt (2013/2542(RSP)B7‑0100/2013).

The different resolutions, except the resolution of 6 April 2011, call for specific actions on the side ofthe Egyptian authorities and other actors such as the Union for the Mediterranean but also the EU andits Member States to support the rule of law, to protect human right and to promote democraticprocesses.

Most important is the recent resolution of March 6th 2013 urging the European Commission to fullyhonour the commitments made to Egypt and to speed up the delivery of financial support to thecountry; but stressing also the importance of putting into practice the ‘more for more’ principle, in theEU’s relations with the Egyptian Government. It is stated that the EU should withhold budget supportfrom Egypt unless the Government makes significant progress with human rights, democracy and therule of law. The EU should set clear conditions for its aid to Egypt, following the 'more for more'principle, and in particular when it steers away from democratic reforms and respect of human rightsand freedoms.

Influence on the EU budget support

It is too early to assess the extent to which EP resolutions have influenced EU budget support as thenegotiations for the State Building Contract (SBS) are still on-going. Nevertheless the EU intends toinclude a number of political conditions as a lever for democratic reforms including a condition thatthe Government of Egypt should draft a NGO law in accordance with international standards.


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7. MAIN FINDINGS AND ANSWERS TO THE STUDY QUESTIONS

7.1. SUMMARY OF MAIN STUDY FINDINGSEgypt is currently in a political, economic and social transition phase and there is no consensus yetabout the direction where to go. During 2012, Egypt continued its democratic transition to which theEgyptian authorities had committed themselves following the revolution through the orderlyorganisation of elections, ending the state of emergency and the smooth transition from military tocivilian rule. But since then, the democratisation process in Egypt has entered a difficult phase withlittle progress and also some setbacks. The final outcome of the present political processes, which willtake years, is difficult to predict. At the moment the process is not clearly and uniformly movingtowards a stronger democratic governance structure.

Egypt’s economy is still suffering from a severe downturn that contributed to a rise in unemployment,and is in need of foreign assistance to finance the quickly increasing budget deficit and to helpstabilising the political and social situation in the country. Discussions with the IMF about a stand-byarrangement are on-going. The government is however reluctant to introduce the required strongfiscal adjustment measures, including reduction of subsidies, before the parliamentary electionsplanned for the third quarter of 2013. The EU is currently negotiating a State Building Contract with theGovernment of Egypt for the provision of GBS with a value of EUR 200 million as part of a bigger jointbudget support programme, including the World Bank and the African Development Bank. Anagreement between the IMF and the Government of Egypt as regards a stand-by arrangement is inpractice seen as a precondition for starting that joint GBS operation.

The content of the EU’s cooperation programme with Egypt has not changed very much because ofthe revolution. The most important change is the preparation of the State Building Contract for theprovision of GBS. Furthermore, more funds have been made available for providing support to CivilSociety Organisations. All other programmes and projects, including SBS operations, have been and arebeing continued although the implementation has been delayed considerably because of the politicalunrest and the change of government and ministers.

Different activities funded with resources from the National Indicative Programme and from specificinstruments (increased with a few million Euros from the Arab Spring Fund) are supporting civil societydevelopment. After the revolution, the situation for NGOs has become much more restrictive withdifferent forces pulling in different directions. In this on-going struggle, pro-democracy civil societyorganisations are not being defended. Furthermore, the Support to the Association AgreementProgramme is supporting NGOs, parliament, the Ministry of Justice, the women council etc. and as suchthat Programme is expected to contribute to strengthening democratisation processes in Egypt.

7.2. ANSWERS TO THE STUDY QUESTIONS1. In which way and to what extent has EU budget support changed in recent times to take account

of the Arab Spring events and growth of democracy in Egypt?

The five on-going SBS programmes were formulated before the revolution and have not beenmodified as a response to the Arab Spring events and the growth of democracy. The SBS programmesare focussed on sector specific objectives, whose relevance for socio-economic development in thecountry is not directly influenced by the broader political environment. However, the implementationof the SBS programme for education is very much affected by the changed political environment. Afterthe revolution, certain aspects of the national development plan for education are being questioned bythe new political leaders because of, ideological, cultural and sometimes religious considerations. As aconsequence the new government provides insufficient (political/policy) support to the national



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development plan for education. This is affecting the implementation of the budget supportprogramme which is based on that national development plan.

The preparation of a State Building Contract started after the revolution and will include politicalconditions to promote democratisation processes19. However, the negotiations are still on-going andconclusions cannot yet been drawn. It is expected that the State Building Contract will be a onetimearrangement. Egypt is not a logical candidate for general budget support and can under normalcircumstances finance its own budget.

2. In which way and to what extent have EP resolutions targeted to Egypt been translated into theEU budget support?

The revolution and following events halted the dialogue on the Association Agreement between theEU and Egypt for two years. Only in November 2012 a Task Force meeting with representatives fromthe EU and the Government of Egypt took place. Subsequently the different sub committees startedagain early 2013. As mentioned, the negotiations about the State Building Contract are still on-going. Itis expected that this programme will include political conditions which are coinciding with a number ofrecommendations made in the EP resolutions. The EP resolutions did not address issues which aredirectly relevant for the SBS programmes, as the disbursement conditions and the policy dialogue ofthe SBS programmes are sector specific.

3. To which extent have the concrete effects of budget support provided to Egypt been monitored?

Monitoring of the five sector budget support operations takes place on the basis of monitoring reportsprovided by the ministries involved, which are discussed during the inter-ministerial steeringcommittee meetings or in the case of the SBS for water during the meeting of the Sector Policy SupportProgramme Steering committee20. The different inter-ministerial steering committees consist of theMinistry of International Cooperation, Ministry of Finance and the involved line ministries and includesthe EC delegation in Egypt (either as full member or as observer).

These steering committees should play a central role in the policy dialogue and should review theimplementation and monitoring reports. However, they have hardly met in 2011 and 2012 (or not atall), due to the political instability, changes of ministers, etc., except the Steering Committee forTransport, which has continued to function in those years, and the indicators of the transport sectorprogramme are monitored regularly. The Steering Committee of the Water Sector has restarted itsactivities and functions well now, but the sector does not yet have a good reporting system. There arealso well-functioning Development Partners Sector Groups for Transport and Water.

19 In August 2013, after the fieldwork and the analyses of this study had been finalised, the European Court of Auditorsissued a report entitled 'the EU cooperation with Egypt in the field of governance', based on an audit carried out in 2012.That Auditors’ report contains also a number of observations, conclusions and recommendations regarding budgetsupport in Egypt. The Auditors conclude, among others, that budget support has contributed too little to strengthen themanagement of public finances and to directly addressing corruption. These issues have not been analysed in detail bythe present study. Nevertheless, it is worth keeping in mind that a SBS programme can (mostly) only contribute toimproving public finance management and to reducing corruption at sector level. Addressing these issues at nationallevel should be part of the agenda of a GBS programme and/or specific programmes and projects aimed at strengtheningpublic finance management and reducing corruption.

20 The Steering Committee of the SBS for the water sector comprises all programme stakeholders including several agenciesinvolved in water.


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The other three Steering Committees (for health, education and energy) are presently being revitalised.The Ministry of Health produces its own internal monitoring report (in Arabic) about Primary HealthCare (the focus of the SBS programme) and sends each year a progress report as regards the budgetsupport indicators to the EU Delegation. The Ministry of Education does not produce regularlymonitoring reports as regards the SBS performance indicators. Monitoring is done by an externalmission of experts, mobilised by the EU Delegation.

The Steering Committees should monitor the implementation of the programmes based on the agreedperformance matrix of (annual) specific targets and conditions and means of verification. It shouldhowever be noted that most conditions and targets of the SBS programmes are in fact inputs (e.g.measures to be taken by the Government) or direct outputs of Government actions and activities, whilethere are very few outcome and impact indicators. This implies that monitoring of SBS programmes ismainly focussed on input and output indicators and does not involve monitoring of the effectivenessand impact of the reforms at beneficiary level.

4. To what extent have democracy promotion, respect of human rights, gender mainstreaming,gender budgeting and poverty reduction objectives been reached by the budget support tool?

The five SBS programmes do not include (disbursement) conditions as regards democracy andrespect of human rights but some (in) direct contributions to democracy promotion can be identified,in particular as regards strengthening the role of communities in the management of public servicesfacilities. For instance, the SBS programme for health supports (indirectly) the strengthening of theinvolvement of communities in the management of the Primary Health Care Centres. Although noseparate performance indicator has been established in this respect, Health Centre ManagementCommittees exist and are generally functioning well and are part of the Primary Health Care Packagereferred to in the performance indicators. Besides, it is mentioned that the measurement of communitysatisfaction with the quality of health services in the Household Survey could also be seen as an aspectvan democratisation.

In the same vain, the SBS for the water sector could contribute to democratisation through theimproved functioning of Water Users Associations and the Water Boards.

The SBS programme for education is focused on providing equal access opportunities for all layers ofthe population to all educational levels and includes specific indicators on gender issues such asaccess for girls who are not included in the system or have dropped out. However the full achievementof this indicator is less certain now, because the National Development Plan for Education does not getsufficient support from the new government, which is affecting the effectiveness of the budgetsupport programme in education. Nevertheless, the expected long term effect of improved educationwill contribute to increased empowerment of the people, stronger demand for democracy andincreased capacities to participate in democratic structures.

In general the SBS programmes promote democratisation by increasing transparency (pre-conditionfor accountability), improving access to information, encouraging decentralisation and increasing thedemocratic content of public policies (better taking account the needs and opinions of the population).

The impact of these five budget support programmes on poverty reduction can only be assessed onthe basis of an in-depth impact evaluation, which is beyond the scope of this study. However, ingeneral terms it can be argued that the contributions of the SBS programmes to improved education,health and (clean) water supply services strengthen most likely the poverty reduction effects of thoseservices. The SBS programmes for transport and energy have most likely first an effect on the economicgrowth potential of the country, which may subsequently have an indirect effect on poverty reductionvia trickling down effects (effects of economic growth on the income levels of the poor).



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As mentioned above, the SBS operations do not include result indicators for evaluating the outcomesof the supported policy reforms. The SBS programmes were thus implemented without monitoring theextent to which they might have contributed to the overall intended impact such as improvedgovernance, poverty reduction, etc. The evaluation of European Commission’s Support with Egypt(2010) did also not draw any explicit conclusion in this respect.


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VOLUME II-B - TUNISIA COUNTRY CASE STUDY

1. INTRODUCTION 31










4.4. The Action Plan 2014-2017 of the Association Agreement 40


4.6. Brief summary of the evaluation of the EU Country Strategy 41

5. BUDGET SUPPORT PROVIDED TO TUNISIA 42



6. EUROPEAN PARLIAMENT RESOLUTIONS ABOUT TUNISIA 49


7.1. Summary of findings and conclusions 50




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1. INTRODUCTIONIn December 2012, the Directorate-General for Internal Policies of the European Parliament awardedECORYS a contract for carrying out a study entitled: 'The Strategic Impact and Cost-Effectiveness of EUBudget Support with regard to Supporting Democratic Transitions in Southern MediterraneanCountries: case studies'. Three case studies had to be carried out, namely in Egypt, Tunisia and Algeria.

This report presents the results of the Tunisia Case Study. The Country Study consisted of a review ofrelevant documents and a one-week mission in Tunisia during which many interviews were conductedwith different stakeholders to discuss the EU cooperation programme - and budget support inparticular - with Tunisia.

This Country Case Study has been carried out by Martin van der Linde and Yassine Hamza. A fieldmission to Tunisia was carried from 4-8 March 2013. The authors would like to express their thanks toall persons interviewed, for spending their time, providing information and sharing their views with theStudy Team, particularly the staff of the Delegation of the European Union, representatives of theMinistry of Planning and International Cooperation, staff of other Development Partners, andrepresentatives of Civil Society Organisations (see annex A3). Of course, only the authors areresponsible for the content of this report and the opinions and views expressed in this report may notbe shared by the Delegation of the EU or other persons interviewed.

This report consists of seven chapters. This introduction (chapter 1) is followed by two chapters inwhich a brief overview of the political and economic context in Tunisia is presented. Chapter 4 andchapter 5 are devoted to a description and analysis of respectively the EU’s programme of cooperationwith Tunisia and the Budget Support provided to Tunisia. Chapter 6 contains an overview of theResolutions of the European Parliament dealing with Tunisia. The main findings and answers on theStudy Questions are presented in chapter 7.


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2. POLITICAL CONTEXTThe former president Ben Ali took power in 1987 through a 'coup d’état'. Although he was ‘elected’ in1989, there was no real democratic system and political parties were forbidden until 1999. In that yearBen Ali was re-elected, followed by multi-party elections for the National Assembly. Since then, therehas been a democratic political system in a formal sense, but the political power was stronglycentralised at the level of the Presidency, while the RCD party21 dominated the National Assembly,supported the President, and had a strong influence in key sectors of society (media, civil societyorganisations, etc.). During the presidential elections of October 2009, Ben Ali was re-elected with89.6 % of the votes. However, dissatisfaction with the political system, the authoritarian rule of thecountry, lack of transparency in the management of public affairs, price increases of basic necessitiesand high unemployment rates sparked off a period of social unrest in the second half of 2010, whichculminated into the revolution of January 2011 and the departure of Ben Ali.

A Government of National Unity was formed at the end of January 2011, but popular unrest remainedand the Government had to step down after about 5 weeks. Subsequently a former minister was askedto form an Interim Government and to prepare elections, which were initially planned for July 2011, butfinally held in October 2011. The Interim Government took a number of measures aimed at improvinggovernance and transparency and removing systems of control of civil society. The law on Freedom ofAssociation was revised as well as the legal framework to allow public access to information.Restrictions on access to Internet were also removed, while the legal framework for publicprocurement was revised in order to improve efficiency and transparency and an independentcommission to investigate corruption and embezzlement during the regime of the previous presidentwas installed.

In total 52 % of the people entitled to vote participated in the elections of October 2011. The electionswere declared free and fair by international observers. Seventeen political parties are now representedin the Assembly, which has 217 members. Ennahda, a moderate Islamic party, became the biggestparty in the Assembly with 89 seats (37 % of the votes). It has formed a coalition with two other parties,namely the Congress for the Republic (CPR), a non-religious party with 29 seats (9 % of the votes) andEttakatol, a socialist party with 20 seats (7 % of the votes). This coalition has formed a coalitionGovernment which has a clear majority in the Assembly. It was agreed that Ennahda would supply thePrime Minister, the CPR the President of the Republic (Moncef Marzouki) and Ettakatol the chairman ofthe National Assembly (Mustapha Ben Jafaar). The new coalition Government, led by Hamadi Jebali asPrime Minister, was confirmed by the Assembly in December 2011.

One of the important tasks of the Constituent Assembly is the preparation and adoption of a newConstitution, after which new elections will be held. Initially it was expected that the new Constitutionwould be ready and adopted within a year, but the process is delayed due to political, legal andtechnical issues. It is now expected that the Constitution will be ready and adopted in the second halfof 2013, after which new elections can be held22.

During 2012 it appeared that the new division of political power was not stable, and that thegovernance of the country was not strongly based on democratic principles. Moreover there was littleprogress with drafting a new Constitution (as already mentioned above) and the overall security

21 RCD: Rassemblement Constitutionnel Démocratique.22 Adoption of the new Constitution by the Constituent Assembly requires a two-third majority. If that qualified majority is

not obtained, the drafting committee will make modifications and the revised version will again be submitted to theAssembly. If also that revised version will not get a two-third majority, the draft Constitution will be submitted to anational referendum, where a simple unqualified majority would be sufficient for adoption of the Constitution. It is notclear what will happen in case the Referendum will reject that version of the new Constitution.



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situation in the country deteriorated because of the increasing influence of religiously motivatedSalafist groups and the emergence of militia groups, operating under the name 'Ligue de Protection dela Revolution', which are trying to take control of public life at local level (and also to frustrate thefunctioning of non-religious political parties).

In February 2013, the Secretary General of one of the opposition parties was assassinated. That tragedyand the political instability have sparked of a number of new changes in the political landscape. EarlyMarch the Prime Minister Jebali resigned and the former Minister of Internal Affairs (also member ofEnnahda) was nominated as the new Prime Minister. He formed a new Government consisting ofministers of the previous Government and new ministers without a clear political affiliation(technocrats). At the time of writing this report (end of May 2013), nothing has been communicated yetas regards the state of preparation of the new Constitution, the new Election Law, the date of the newelections and the nomination of an election council.

The above presented brief overview of political events makes clear that (i) the political situation inTunisia is still quite unstable, (ii) a genuine democratic governance system has not yet been establishedand (iii) the final outcome of the present political processes is difficult to predict. Many observersexpress the opinion that the biggest achievement of the revolution is the freedom of expression,association and the media, but that the establishment of real democracy is not yet assured and that thepolitical situation is still quite unstable. There are also concerns about the high proportion of Ennahdaloyalists among the newly appointed Governors, high level public officers and directors of publicagencies and enterprises. It is feared that Ennahda is aiming at controlling the government apparatusand the political arena, which will then frustrate the functioning of a free and fair multi-partydemocracy. Moreover, the economic situation has not yet improved and is probably worse than beforethe revolution for many Tunisians (see next chapter). Swift action is needed to improve politicalstability, to anchor the newly established multi-party system, to improve the economic situation and tolaunch a comprehensive employment generation strategy.


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3. ECONOMIC CONTEXT

3.1. MACRO-ECONOMIC PERFORMANCE IN RECENT YEARSIn the three years before the revolution, the Tunisian GDP grew modestly with 4.5 % in 2008, 3.1 % in2009 and 3.0 % in 2010 (in real terms, see table 3). The revolution had very negative consequences forthe Tunisian economy. Real GDP growth was negative in 2011 (minus 1.8 %), but there was a modestrecovery in 2012 with a 2.7 % growth rate.

The Government budget deficit was manageable in the years 2008-2010 (minus 1.7 % of GDP onaverage) but deteriorated substantially in 2011 and 2012 (respectively minus 3.5 % of GDP and minus7.3 % of GDP23). The same happened with the Balance of Payments and the foreign exchange reservesof the country. While the latter was still equal to 6.0 months of imports at the end of 2009, it dropped to4.7 months at the end of 2010 and 3.5 months at the end of 2011 with a minimal recovery projected forthe end of 2012 to 3.7 months (see table 2). The increase of the deficit was caused by an increase ofexpenditures, mainly due to the fact that (i) the government had increased subsidy schemes after therevolution of January 2011 and (ii) the weakening of expenditure control after a new Government hadtaken office in 2011.

Due to the increase of the Government deficit, the total of the Government debts increased also to 45.7% of GDP at the end of 2012 and is expected to increase further to 50.5 % at the end of 2012. About 60% of the debts are foreign debts and 40 % are domestic debts.

Table 2: Key macro-economic indicators of Tunisia, 2008-2013

2008 2009 2010 2011 2012 2013

Real GDP growth (%) 4.5 3.1 3.0 -1.8 2.7 3.5

Inflation (%; consumer price index) 4.9 3.5 4.4 3.5 5.0 4.0

Government revenues (% of GDP) 23.8 23.1 23.3 24.7 23.8 23.0

Government expenditures (% of GDP) 24.8 26.1 24.4 28.2 30.8 28.1

Government deficit (% of GDP) -1.0 -3.0 -1.1 -3.5 -7.0 -5.1

Government debts (% of GDP) 43.3 42.9 40.5 44.4 45.7 50.5

Debt service ratio (% of export GNFS) 8.6 11.9 10.5 11.7 10.4 9.8

Trade balance (% of GDP) -8.9 -8.5 -10.3 -10.4 -11.1 -11.4

Foreign direct investment (% of GDP) 5.7 3.3 3.0 0.9 2.5 2.8

End of year reserves in months ofimports of goods and services

4.0 6.0 4.7 3.5 3.7 3.8

Source: IMF (2012), Tunisia: 2012 Article IV consultation – Staff report.Note 1: figures of 2011 are estimates; figures of 2012 and 2013 are projections.Note 2: Government revenues and government debts excluding grants and privatisation receipts.

23 More recent estimates point at a deficit of 5.6 % in 2012.



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The trade balance (import and exports of goods and services) is worsening as well from a deficit ofabout 8.7 % of GDP in 2008 and 2009, to more than 10 % in 2010 and 2011 and more than 11 % in 2012and 2013. This is accompanied by a drop in Foreign Direct Investments from 5.7 % of GDP in 2008 to0.9 % in 2011 with a partial recovery to a projected 2.8 % in 2013. The level of foreign exchangereserves dropped from 6 months of imports at the end of 2009 to 3.5 months at the end of 2011.

The deterioration of the macro-economic situation in 2011 was caused by the political instability, slow-down of economic activities, decreased number of tourists, decrease of exports to the Euro zone, rapidincrease of government subsidies and weakened governance and management capacities of the newGovernment (including at the level of the Ministry of Finance, which is responsible for budgetmanagement). There has been some recovery in 2012, but the indicators have not yet returned to thelevels from before the revolution. In particular, the Government budget deficit and the trade balancedeficit give cause for concern. Although the levels of the macro-economic indicators are not yet 'veryalarming', the recovery from the 2011 crisis is only partial and there are still negative trends. Swiftaction from the Government is therefore needed in order to redress the macro-economic situation.However, re-establishing government capacities and control of the government budget usually takestime, while the present political uncertainties and instability are also not helpful.

In April 2013, the Tunisian Government reached a staff-level agreement with the IMF concerning aStand-by Arrangement for 24 months for a maximum amount of USD 1.75 billion (about EUR 1.35billion), in order to help reducing pressure on the Balance of Payments and the exchange rate. Theproposal was approved by the IMF Board on 7 June 2013.

3.2. QUALITY OF PUBLIC FINANCE MANAGEMENTIn 2009/2010, the quality of Public Finance Management in Tunisia was assessed on the basis of thePEFA methodology24. The overall picture of the scores of the 28 indicators was quite favourable: 7 Ascores, 14 B or B+ scores, 6 C or C+ scores and only one D+ score25. The study concluded that theTunisian Public Finance Management system functions quite well and in most cases in conformity withinternational standards. Budget execution, budget comprehensiveness and the accounting systemwere generally of good quality. Medium term expenditure planning, budget credibility, the budgetclassification system and the external audit system were classified as less strong elements of the PublicFinance Management system.

Presently the Government is working on further improvements of the Public Finance Managementsystem, notably:

Drafting a new Organic Budget Law, which will facilitate, among other things, the introduction ofprogramme budgeting;

Drafting action plans for further improvement of (i) public procurement, (ii) internal control and(iii) external control;

Carrying out a review of the financing system of local governments.

24 PEFA: Public Expenditure and Financial Accountability. See: 'Performance de la gestion des finances publiques en Tunisie',Rapport final, juin 2010. A report issued by the EU, the World Bank and the African Development Bank.

25 A is the highest score and D the lowest possible score.


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3.3. ECONOMIC PROSPECTS FOR COMING YEARSWhether or not economic growth in Tunisia will return to the level of before the revolution (4.5 % ofGDP) and preferably higher, will much depend on the political stability in the country and the capacityand political will of the Government to implement effective economic and social policies, which will besupported by the majority of the population. Creation of sufficient employment, in particular for theyouth, will be crucial for restoring political stability and economic growth. With renewed politicalstability, it may be expected that many economic factors will improve (foreign direct investments,tourist sector incomes, production in other sectors, the trade balance, etc.), which will contribute to theresumption of economic growth.



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4. THE EU PROGRAMME OF COOPERATION

4.1. THE COUNTRY STRATEGY PAPER 2007-2013The EU’s Country Strategy Paper 2007-2013 for Tunisia has been formulated in 2006. It provided thestrategic framework for the cooperation between the EU and Tunisia for using the funds available forTunisia from the European Neighbourhood and Partnership Instrument. It is worth mentioning thatTunisia was the first Mediterranean country that signed an Association Agreement with the EU in 1995,and it was one of the first five Southern Mediterranean countries that made an EuropeanNeighbourhood Policy Action Plan in 2005.

The EU’s strategic objectives for the cooperation with Tunisia during the years 2007-2013 are:

Supporting political reforms concerning democracy, human rights, the rule of law and soundinstitutional governance;

Supporting reforms of the justice system and the management of migration and asylum;

Creation of the right conditions for private investments;

Creation of the right conditions for the three components of sustainable development:environmental concerns, social equity and economic growth);

Developing education, training and scientific research;

Consolidating social programmes while balancing the budget;

Facilitating trade in goods and services;

Developing transport infrastructure based on safety and security;

Developing the energy and information society sectors.

4.2. THE NATIONAL INDICATIVE PROGRAMME 2007-2010The total envelope of the National Indicative Plan 2007-2010 for Tunisia amounted to EUR 300 million(EUR 75 million per year on average). The use of this envelope was focussed on:

Economic governance, competitiveness and convergence with the EU;

Human resources and improvements of employability;

Sustainable development.

The envelope was planned to be used for:

Strengthening economic governance and competitiveness, phases 1 + 2 EUR 127 million;

Support to vocational training and higher education EUR 65 million;

Support to the energy and environment sectors EUR 43 million;

Support to the Action Plan of the Association Agreement EUR 30 million;

Measures to facilitate trade EUR 23 million;

Reinforcing scientific and technological cooperation EUR 12 million.


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The envelope available for 'Strengthening economic governance and competitiveness' (EUR 127 million)was meant to be provided in the form of budget support with the objective to 'improving governanceand making the public administration more efficient and the economy more competitive'. Envisagedspecific objectives (results) were:

A balanced macro-economic framework conducive to growth and economic integration with theEU;

Modern, transparent, efficient target-based planning and management of public finances andconsolidation of the regulatory framework for auditing;

An increase in private domestic and foreign investments;

A simplified, transparent and incentive-based institutional, legal and regulatory system forprivate-sector development, which promotes alignment with the EU, and;

A sound, efficient and effective financial sector.

4.3. THE NATIONAL INDICATIVE PROGRAMME 2011-2013The National Indicative Plan 2011-2013 includes a brief 'mid-term' review of the country strategy 2007-2013. It is observed that the implementation of the Action Plan of the European Neighbourhood Policy(ENP) is advancing well, particularly as regards the economic, social and sectoral issues. As regards thepolitical issues, it is noted that there is a continued dialogue in two sub-committees of the AssociationCommittee dealing respectively with 'human rights and democracy' and 'justice and security'.Furthermore, the review noted that EU’s financial support is more and more provided in the form ofGeneral Budget Support (GBS) and Sector Budget Support (SBS), because the Government of Tunisiahas the capacity to plan and manage its own development activities.

The envelope of the National Indicative Plan 2011-2013 for Tunisia amounted originally to EUR 240million (EUR 80 million per year on average). It was decided to focus the use of those funds on four ofthe nine priorities mentioned in the Country Strategy 2008-2013, namely; (i) employment creation, (ii)supporting economic reforms, (iii) strengthening economic competitiveness, and (iv) support to theJustice Sector. More precisely it was planned to use the funds for:

The Programme for Economic Integration (GBS) EUR 85 million;

Strengthening the competitiveness of enterprises EUR 80 million;

Employment generation and social protection (SBS) EUR 55 million;

The support programme for the Justice Sector EUR 20 million.

The Programme for economic integration was in fact a GBS programme of which the first phase wasfunded under the National Indicative Plan 2007-2010 and started in 2009, while the second phasewould now be funded under the National Indicative Plan 2011-2013. Furthermore, it was envisagedthat the support for Employment Generation would be provided in the form of Sector Budget Support.

In 2011, after the revolution, the EU decided to increase the envelope on the National Indicative Plansubstantially to EUR 390 million in order to provide additional support to the new Government(s): anincrease of EUR 150 million. The increase of the envelope and the changed political, economic andsocial context meant that the actual allocation of funds in 2011 and 2012 was different from what wasforeseen in the National Indicative Plan 2011-2013.

In 2011, a total amount of EUR 150 million has been allocated to the following projects andprogrammes:



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Support for Economic Recovery (GBS) EUR 100 million;

Strengthening the competitiveness of the services sector EUR 20 million;

Support programme for less favoured areas EUR 20 million;

Programme to support the Association Agreement and the Transition EUR 10 million.

The Support for Economic Recovery (EUR 100 million) is a new GBS programme (called Programmed’Appui à la Relance - 1), which had replaced the originally planned Programme d’Appui à I’Intégration.The project for strengthening the competitiveness of the Services sector had already been formulatedbefore 2011 and the revolution has not changed its scope and content. The support programme forless favoured areas (EUR 20 million) has been formulated after the revolution in order to take specialinitiatives addressing employment and social problems being at the root of the social unrest whichhave triggered the revolution, and in order to address the new needs of Tunisia especially as far as thepoorest regions are concerned. The programme consists of three components, namely: (i) facilitatingtemporary jobs creation and contributing to the economic integration of unemployed people throughhigh labour intensive works and local economic development leading to job creation and to companydevelopment, (ii) rehabilitation of poor urban districts and (iii) support to micro-finance institutions.Finally EUR 10 million has been allocated as an additional funding for Programme to support theAssociation Agreement and the Transition.

In 2012, a total amount of EUR 160 million has been allocated to the following projects andprogrammes:

Support for Economic Recovery (GBS) EUR 68 million;

Support programme for the Justice Sector EUR 25 million;

Rehabilitation of poor urban districts EUR 33 million;

Programme for improving health services in less favoured areas EUR 12 million;

Increase of funding of the Support Programme of the Association Agreement

and for Transition EUR 15 million;

Civil Society Support Programme EUR 7 million.

The Support for Economic Recovery (EUR 68 million) is the second phase of the new GBS programmestarted in 2011 (called Programme d’Appui à la Relance-2). The support to the Justice Sector (EUR 25million) had already been planned before the revolution. The decisions to allocate funds for therehabilitation of poor urban districts (topping up of the project started in 2011) and the programme forimproving health services in less favoured areas are clearly triggered by the wish to help solvingproblems which were at the root of the revolution. Finally, the increase of funding of Programme tosupport the Association Agreement and the Transition is meant for – among others- making fundsavailable for a new component of that programme, namely ‘support to the process of democratictransitions', while the start of the Civil Society Programme is aimed at boosting Civil SocietyOrganisations, which had a very difficult time under the previous regime. It is believed that support toCivil Society Organisations constitutes an important support to the process of democratic transition.

This brief overview of allocations made in 2011 and 2012 shows that the cooperation between the EUand Tunisia has changed quite drastically. The available envelope for 2011-2013 has been increasedwith 63 % and the funding for social sector activities and the support to Civil Society Organisations


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have increased dramatically. Moreover GBS funding has almost doubled (compared to the initialNational Indicative Plan 2011-2013).

4.4. THE ACTION PLAN 2014-2017 OF THE ASSOCIATION AGREEMENTThe system of making Country Strategy Papers and National Indicative Programmes will be replaced bycountry specific Single Support Frameworks based on an Action Plan for the years 2014-2017. ThatAction Plan has been endorsed by the EU-Tunisia Association Council in November 2012. Such ActionPlans cover all relations between the EU and the country concerned: political, economic, social,scientific, cultural, etc.

The draft Action Plan for Tunisia contains a long list of possible areas of cooperation and activities.Later on a choice will be made on which issues the financial and technical cooperation will be focussed.The long list of possible areas of cooperation suggests that political issues will play a more prominentrole than in the Country Strategy Papers of the past (such as democracy promotion, improvinggovernance, respect of human rights and the rule of law, strengthening the justice sector andimproving security, migration, anti-corruption strategies, etc.).

4.5. OTHER SUPPORT PROVIDED BY THE EU OF RELEVANCE FOR THE STUDY QUESTIONSThe following three financing instruments are presently being used by the EU Delegation to supportCivil Society Organisations in Tunisia, namely:

The European Instrument for Democracy and Human Rights. In 2011, for the first time anallocation of EUR 2 million was made available for Tunisia. On the basis of a Call for Proposalsprocedure, ten projects have been selected, related to the monitoring of elections, training ofpolitical parties, supporting the freedom of expression, promotion of democratic values,promotion of human rights, etc. Another EUR 1 million has been made available in 2012, whichhas been allocated to 7 projects. Also in 2013 an amount of EUR 1 million will be provided;

The Instrument for Stability. An amount of EUR 2 million has been made available for Tunisiafollowing the Arab Spring revolution. In principle it is a once-only funding facility. The EUDelegation has identified 7 beneficiaries / projects, all related to the preparation of democraticelections, the development of Civil Society Organisations and promotion of citizen’s to play anactive role in the formulation of the country’s reform programme;

The Non-State Actors programme. Before the Arab Spring revolution, the Non-State Actorsprogramme was very small in Tunisia because the former Tunisian government was not in favourof that type of funding of non-state actors. Before 2011 only four rural development projects hadbeen funded. In 2011, after the revolution, the EU made a budget of EUR 2.5 million available,which has been allocated – on the basis of a Call for Proposals procedure - to about 10 differentprojects. In order to maximise the resources available immediately after the revolution, the 2011call for proposals included the 2012 allocation of the Non-State Actors programme for Tunisia, sothat no new envelope was available in 2012. Moreover, priority is given to the EuropeanInstrument for Democracy and Human Rights and the Instrument for Stability, which have amuch stronger governance and democracy promotion focus than the Non-State Actorsprogramme, which is much more focussed on social and economic development activities.



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4.6. BRIEF SUMMARY OF THE EVALUATION OF THE EU COUNTRY STRATEGYAn evaluation of the cooperation between the EU and Tunisia during the years 1996-2008 has beencarried out in 2009/2010. Some of the findings and conclusions relevant for this study are:

During 1995-2008, 43 % of all EU aid for Tunisia was provided for macro-economic stabilisationand reform, notably in the form of general budget support, 25 % was used for social sectordevelopment. 16 % for private sector development, 14 % for management of natural resourcesand 2 % for governance and support to Civil Society Organisations;

There has been a good mix of budget support, investment projects, technical assistance andinstitutional cooperation projects;

The budget support programmes were generally well managed. There was also a goodcooperation with the World Bank and the African Development Bank as regards the provision ofbudget support;

The cooperation with the EU had contributed to maintaining macro-economic stability andstrengthening public finance management;

EU support for primary and secondary education has shown remarkable results;

EU support for improving governance and strengthening the democratisation process had beencharacterised by a difficult dialogue with the Government of Tunisia about freedom ofexpression and association and strengthening the rule of law. The EU got little access to the CivilSociety Organisations and providing EU support directly to those organisations was hardlypossible. Consequently budget lines available for that purpose were hardly used (Non-stateactors programme, European Instrument for Democracy and Human Rights, etc.);

The EU had provided little support for strengthening local governments.


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5. BUDGET SUPPORT PROVIDED TO TUNISIA

5.1. BUDGET SUPPORT PROVIDED BY THE EUGeneral Budget Support

In the years 2007-2009, the EU has funded three GBS operations in Tunisia, namely:

The Programme d’Appui à la Compétitivité26 of which the financing agreement was signed inOctober 2007. It consisted of EUR 39 million GBS and EUR 2 million for Technical Assistance. Itwas aimed at improving the performance of public administration, restructuring the publicsector among others by privatising various public enterprises, and promoting the developmentof public-private partnerships. The first fixed tranche of EUR 9 million was disbursed shortlyafter signing the financing agreement. The other two tranches of EUR 15 million each havenever been disbursed, because the disbursement conditions had not been met. Thoseconditions were related to: (i) setting up an electronic communication and data managementsystem as regards private sector development, (ii) liberalisation of agro-food production andmarketing chains, (iii) restructuring and privatisation of public enterprises and (iv) promotion ofpublic-private partnerships. In 2013, the programme is subject of a modifying decision in orderto reorient the programme towards the new situation in Tunisia and in particular towardsstrengthening public administration at the local level.

The Programme d’Appui à la Gestion Budgétaire par Objectifs27 of which the financingagreement was signed in December 2008. It consisted of EUR 29 million GBS and EUR 1 millionfor Technical Assistance. It was aimed at supporting the Government of Tunisia to introduce asystem of programme budgeting and management in the Public Finance Management system.The first fixed tranche of EUR 9 million was disbursed shortly after signing the financingagreement and the second tranche in November 2010 (EUR 9.5 million out of the available EUR10 million). The last variable tranche of EUR 10 million will be disbursed in 2013 with a delay ofclose to two years. The delay is caused by (i) the fact that the ambitions of the disbursementconditions were too high28 and (ii) the revolution and the change of Government, which hadinterrupted the policy dialogue for quite some time;

The Programme d’Appui à l’Intégration29 of which the financing agreement was signed in July2009. It consisted of EUR 49 million GBS and EUR 1 million for Technical Assistance. It was aimedat strengthening the integration of Tunisia in the world economy and improving the businessclimate in Tunisia, including easier access to finance. This programme was part of a jointbudget support operation with the World Bank and the African Development Bank. The firstfixed tranche of EUR 24 million was disbursed in November 2009. The second variable tranchewas disbursed in December 2010: EUR 18 million out of the available EUR 21 million. The lasttranche of EUR 4 million plus the balance of EUR 3 million of the second tranche were disbursedin September 2011. Furthermore, in July 2011 the Programme d’Appui à l’Intégration wastopped up with an amount of EUR 17.1 million, which was also disbursed in September 2011.This additional funding originated from a financing facility of the EU to support countriesaffected by the international economic and financial crisis (which had started in 2008). But the

26 Competitiveness Support Programme.27 Support programme for budget management by objectives.28 There are 19 performance indicators most of them related to the introduction of programme budgeting.29 Integration Support Programme.



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time of signing that financing agreement and the disbursement of the funds was such that itwas in fact additional financial support for the new Government in office after the revolution.

In 2010, a new joint budget support operation was being prepared in collaboration with the WorldBank and the African Development Bank under the name Programme d’Appui à l’Intégration et àl’Innovation30. That programme was in fact meant to be the successor of Programme d’Appui àI’Intégration in terms of objectives, focus and scope. However, because of the political instability inthe second half of 2010 and the revolution of early 2011, the preparation process came to a standstill.

Shortly after the revolution of January 2011, the World Bank, the African Development Bank, theAgence Française de Développement and the EU decided to provide swiftly General Budget Support tothe newly installed Government in order to help financing social support programmes and actions topromote economic recovery. It was decided not to re-activate the preparation of the Programmed’Appui à l’Intégration et à l’Innovation, but to start a fresh approach taking into account the newpolitical, economic and social context in Tunisia. The new joint GBS operation was called Programmed’Appui à la Relance (PAR)31.

The overall objective of that programme was to support the formulation and implementation of theUrgency Programme for Economic and Social Recovery launched by the Interim Governmentinstalled after the revolution. The Government envisaged taking 17 measures/initiatives in thefollowing areas: (i) improvement of security, (ii) employment creation, (iii) economic recovery, (iv)regional development, and (v) launching specific social action programmes. The four DevelopmentPartners and the Government of Tunisia had agreed that the financing agreement would be signedand the budget support would be disbursed when the Government had taken 20 precisely definedprior actions related to (i) improving governance, (ii) strengthening the financial sector, (iii)employment creation and decreasing regional inequalities, and (iv) strengthening social publicservices.

It should be noted that there is a substantial difference between this Programme d’Appui à la Relanceand the previous Programme d’Appui à l’Intégration and (envisaged) Programme d’Appui à l’Intégrationet à l’Innovation in terms of scope and content. While the latter two were programmes more or lessexclusively focussed on economic development issues, the Programme d’Appui à la Relance had amuch broader agenda, including also governance and social sector issues. Furthermore, theeconomic actions were much more clearly focused on employment creation and economic recovery.

The financing agreements of the Programme d’Appui à la Relance were signed in July 2011 (WorldBank) and September 2011 (EU), implying that the prior actions had been taken, and most of thefunds were disbursed in the second half of 2011 (USD 500 million – about EUR 365 million - providedby the World Bank, USD 500 million provided by the African Development Bank, EUR 185 millionprovided by the Agence Française de Développement and EUR 100 million provided by the EU; see alsosection 5.2). The EU support for the programme consisted of EUR 99 million GBS and EUR 1 millionTechnical Assistance. The GBS component was disbursed in the form of two fixed tranches: EUR 55million in November/December 2011 and EUR 44 million in December 2012. The first fixed tranchewas disbursed on the basis of fulfilment of the standard three GBS eligibility criteria (satisfactoryimplementation of (i) a national development strategy, (ii) a stability oriented macro-economic policy,and (iii) a programme for improving Public Finance Management), and implementation of the above

30 Integration and Innovation Support Programme.31 Recovery Support Programme.


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mentioned 20 prior actions. According to the Financing Agreement (and the annexed Technical andAdministrative Provisions), the disbursement conditions of the second tranche would be determinedlater on (after contract signature), in close consultation with the Government of Tunisia and the threeother Development Partners. Later on it was decided to disburse that second tranche of this firstProgramme d’Appui à la Relance on the basis of the same conditions as the funds of the secondProgramme d’Appui à la Relance (see here under).

In 2012, the EU, the World Bank and the African Development Bank started the preparation of thesecond Programme d’Appui à la Relance. In terms of objectives and content, this second Programmed’Appui à la Relance had the same orientations as the first one. The purpose of this second Programmed’Appui à la Relance was to support the new Government – installed after the elections of October2011 – to implement its economic and social programme formulated for 2012. More precisely, theoverall objective of this second Programme d’Appui à la Relance was formulated in terms ofsupporting the process of political transition and contributing to socio-economic stability andsupporting the implementation of measures for improving governance. An interesting point is thereference made in this objective to supporting political transition32. The matrix of measures to betaken by the Government of Tunisia included 23 measures, which were grouped under three pillarsand seven specific objectives, as shown in table 3 (see hereunder). The 23 measures had to be takenby the Government before the financing agreements could be signed and before the funds could bedisbursed (one single tranche disbursement). This was a common approach of all three donorsinvolved (EU, World Bank and African Development Bank). It is worth noting that the scope of theGovernance pillar is limited to Public Finance Management, strengthening the Justice Sector andanti-corruption measures. The Governance pillar of the first Programme d’Appui à la Relance had abroader scope and the EU envisages broadening the scope of that pillar again in the third Programmed’Appui à la Relance (see hereunder).

Table 3: Pillars and objectives of PAR-2

PILLARS OBJECTIVES

Economic growth and employmentcreation

Improvement of the business climate and competitiveness; Strengthening and development of the financial sector; Improvement of the functioning of the labour market,

implementation of employment creation programmes andsupport for tertiary education.

Regional development and socialinclusion

Strengthening regional development and Local Governments; Implementation of social protection programmes and

improvement of social services.

Governance PFM reform; Strengthening the Justice Sector and anti-corruption measures.

32 The precise text in French of the objective reads as follows: 'Il a pour objectif, à court terme, d’appuyer le processus detransition politique qui devrait s’achever fin 2013 en contribuent à garantir la stabilité socio-économique et, dans uneperspective de moyen terme, d’appuyer la formulation et la mise en œuvre de mesures structurelles permettant de jeter lesbases d’un nouveau mode de gouvernance et de gestion des affaires publique compatibles avec une croissance de long termeplus forte et plus inclusive'. (See page 2 of the Technical and Administrative Provisions).



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The financing agreement of the EU’s contribution to the second Programme d’Appui à la Relance wassigned in December 2012. The funding consisted of EUR 63 million budget support and EUR 5 millionTechnical Assistance. The budget support component has been disbursed in the form of one fixedtranche in December 2012. According to the new terminology of the EU (see the EU’s new budgetsupport guidelines of 2012), this budget support was labelled as a State Building Contract.

The EU Delegation envisages preparing a third Programme d’Appui à la Relance during 2013, againjointly with the World Bank and the African Development Bank. The programme may have a durationof two years with a fixed tranche in the first year and a variable tranche in the second year. Most likelythe three pillars of the second Programme d’Appui à la Relance will be maintained, while the EUintends to broaden the scope of the Governance Pillar. Discussions about scope and content were inMarch 2013 (time of the mission) still in a preliminary stage, and at that time in fact delayed becauseof the unstable political situation (change of the composition of the Government, delay with draftingthe new Constitution, postponement of the elections, see chapter two).

Sector Budget Support

The support to the water and education sectors (part of the National Indicative Plan 2007-2010) isbeing provided mainly in the form of Sector Budget Support (SBS). More precisely, the EU support tothe Sector Programme for Integrated Water Management amounts to EUR 57 million for the years2012-2015 and consists of EUR 50 million SBS and EUR 7 million for Technical Assistance. The SBSwould be disbursed in the form of one fixed tranche of EUR 10 million in the first year, and a fixedtranche and a variable tranche in each of the subsequent years of respectively EUR 5 million + EUR 10million, EUR 5 million + EUR 10 million and EUR 5 million + EUR 5 million. The first (fixed) tranche hasbeen disbursed in December 2012. The delay was caused by the time needed to fulfil thedisbursement conditions. Disbursement of the second year tranches (fixed and variable) are nowplanned to take place in 2014.

Formulation of this Policy Support Programme for the water sector had started in 2009. It was afollow-up of 30 years of project support provided by the EU to this sector. The formulation of theprogramme was interrupted by the political instability in the second half of 2010 and the revolutionand change of government early 2011. Discussions were re-opened in February 2011 andsubsequently the Financing Agreement was signed in September 2011. Content of the programme,including objectives and performance targets, had already largely been defined before therevolution. After the revolution only minor issues have been modified. The only major change wasthe addition of a disbursement condition as regards the functioning of the Agricultural DevelopmentGroups responsible for managing irrigation water within the irrigation schemes.

In addition to the three general budget support eligibility criteria, there are two sector specificdisbursement conditions for each of the fixed tranches and six performance criteria used fordetermining the amount of the variable tranches to be disbursed. None of these conditions andcriteria have a specific link to democratisation, except the conditions as regards the functioning of theAgricultural Development Groups (already mentioned here above). Strengthening the role andfunctions of such kind of user groups strengthens the democratic structure of the Tunisian society.

The present EU support programme for vocational training and higher education consists of EUR61.3 million SBS and EUR 3.7 million Technical Assistance for the period 2011-2013. Formulation ofthat support programme started in the last quarter of 2009 and the Financing Agreement was signedin December 2010. The SBS would be disbursed in the form of one fixed tranche of EUR 17 million inthe first year, a fixed and a variable tranche of respectively EUR 7 million and EUR 14 million in the


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second year and a fixed and variable tranche of respectively EUR 7.3 million and EUR 16 million in thethird year. The first fixed tranche has actually been disbursed in July 2011. Disbursement of the fixedand variable tranches planned to be disbursed in the second year (2012), is delayed because thedisbursement conditions were not met in time. Disbursement is now foreseen to take place at theend of June 2013.

In addition to the three general budget support eligibility criteria, there are a few sector specificdisbursement conditions for the fixed tranches and 11 performance criteria used for determining theamount of the variable tranches to be disbursed. None of these conditions and criteria have a specificlink to democratisation. This sector support programme for vocational training and higher educationis a follow up of five SBS operations for various levels of the education sector in Tunisia during theyears 2000-201033.

Evaluation of the budget support provided by the EU

The budget support provided by the EU to Tunisia during the years 1996-2008 has been evaluated in2009/201034. The main conclusions of that evaluation were:

EU budget support had provided a positive contribution to Tunisia’s economic and socialdevelopment;

GBS has proven to be the most appropriate method for supporting the main economic reformsand has been the only instrument for providing a forum for close dialogue on the main aspectsof formulation and implementation of those reforms;

SBS has been useful in supporting reform in the education sector, but the coordination andharmonisation of the various donor programmes and projects supporting the sector was 'verylimited, if not absent';

There was a good complementarity between budget support and project support funded bythe EU;

The policy dialogue with the GoT and harmonisation with other donors was very good in caseof GBS, but less so for SBS;

GBS has helped Tunisia to combine macro-economic stability with growth, to improveeconomic governance, to boost the private sector (although weaknesses still persist as regardsthe business environment and liberalisation of markets) and to liberalise foreign trade (taxreform and tariff dismantling);

SBS contributed to the significant achievements in reforming secondary and higher educationand vocational training. However results in terms of higher levels of employment were stilllimited.

33 Support programme for the reform of primary education (2000, EUR 40 million). Support for the modernisation ofhigher education (2004, EUR 48 million), Support for the reform of secondary education (2005, EUR 30 million, Supportfor the vocational training sector (2007, EUR 30 million) and the Support Programme for matching education toemployment in Tunisia (2008, EUR 65 million). Years mentioned are the years in which implementation had started.Source: Evaluation of the European Commission budget support operations in Tunisia between 1996 and 2008.

34 The final report dates from March 2011. See: Evaluation of the European Commission budget support operations inTunisia between 1996 and 2008, carried out by DRN.



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5.2. BUDGET SUPPORT PROVIDED BY OTHER DONORSThe World Bank

Since 2009, the World Bank has provided every year a Development Policy Loan to the Government ofTunisia. Such a loan belongs to the category of budget support modalities. The titles and amounts arementioned in table 4 hereunder. The loan of 2009 was disbursed in two tranches in 2009 and 2010,while the other three loans were single tranche disbursements. All these Development Policy Loanswere part of operations carried out jointly with the EU and the African Development Bank, while theAgence Française de Développement participated in 2011 as well. All disbursements were made on thebasis of a series of prior actions to be taken by the Government. The World Bank envisages tocontribute also to a third Programme d’Appui à la Relance in 2013, but as reported earlier, discussionsabout scope and content of that programme were delayed (in March 2013) because of the unstablepolitical situation (see section 5.1).

After the revolution of 2011, the World Bank wanted to provide quickly support to the newGovernment in order to help stabilising the political and economic situation. That’s why thepreparation of the Development Policy Loan of 2011 started already in February 2011 - in closecollaboration with the three like-minded donors: the EU, African Development Bank and AgenceFrançaise de Développement - and disbursement of the loan took place in July 2011. Furthermore, theannual loan amount has been stepped up considerably (on average USD 150 million per year in 2009and 2010 and USD 500 million per year in 2011 and 2012).

Table 4: Policy Development Loans provided by the World Bank to Tunisia in 2009-2012

YEAR TITLE AMOUNTS INMILLIONS OF

USD

2009 Integration and competitiveness development policy loan (support toPAI). Two tranches of USD 125 each released in November 2009 andDecember 2010).

250

2010 Employment development policy loan. 50

2011 Governance and opportunity development policy loan (support to thePAR-1)

500

2012 Governance, opportunity and jobs development loan (support to thePAR-2)

500

The World Bank appreciates very much the joint approach with the other donors (EU, AfricanDevelopment Bank and Agence Française de Développement), because it contributes to donorharmonisation, division of tasks and increased leverage. Within the joint approach, each donor has itsown areas of interest and priorities. For instance the EU can focus on certain issues which cannot beaddressed by the World Bank, such as freedom of association and the media, promotion of the rule oflaw, protection of human rights, increasing the financial transfers to Local Governments, liberalisationof internet, etc. These issues are too political for the World Bank. Apart from the transfer of funds, thepolicy dialogue is as important. Through that dialogue, the GBS donors are supporting forces infavour of reform and modernisation within the Government of Tunisia.


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The African Development Bank

The African Development Bank has also co-funded the Programme d’Appui à l’Intégration and the firstand second Programme d’Appui à la Relance, while it intends to co-fund also the third Programmed’Appui à la Relance. Its contribution to the Programme d’Appui à l’Intégration amounted to USD 250million (about EUR 183 million), disbursed in two tranches of USD 125 million each in respectively2009 and 2010. The African Development Bank contribution to the first and second Programmed’Appui à l’Intégration was USD 500 million each (about EUR 365 million), disbursed in one tranche inboth cases (the same as the World Bank contributions). All contributions from the AfricanDevelopment Bank are loans.

The Agence Francaise de Développement

The Agence Française de Développement has contributed to the first Programme d’Appui à la Relanceonly (a concessional loan of EUR 185 million). The Agence Française de Développement is not used toprovide budget support and has not provided budget support to the Government of Tunisia before. Itdoes not intend to provide further budget support, because its vocation is to provide project loans.The contribution of the Agence to the first Programme d’Appui à la Relance was announced after themulti-donor meeting organised in 2011 by the Interim Government at which it requested funding forits Urgency Plan. Pressure from the French Ministries of Foreign Affairs and Finance (the shareholdersof the Agence Française de Développement) to provide quickly funding to the newly installed InterimGovernment, has most likely played a role in deciding to provide budget support.

The contribution of the Agence to the first Programme d’Appui à la Relance was split up into twotranches. The first tranche of EUR 85 million was disbursed in June 2011 on the basis of achievementof certain targets of indicators related to employment creation. The second tranche was disbursed inJanuary 2012 on the basis of the achievement of certain targets of indicators related to financialsector reform. All these targets and indicators were part of the joint performance matrix agreed bythe Government and the donors. The Agence did not focus on governance indicators because policydialogues about improving governance is not part of the mandate of the Agence Française deDéveloppement.



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6. EUROPEAN PARLIAMENT RESOLUTIONS ABOUT TUNISIAEuropean Parliament resolutions about Tunisia after the revolution

Since the Tunisian revolution in January 2011 up to the first quarter of 2013, the European Parliament(EP) has adopted two Resolutions concerning Tunisia, both in 2011. The content of those twoResolutions are briefly summarised hereunder:

1. European Parliament Resolution of 3 February 2011 on the situation in Tunisia. In thatresolution the European Parliament, among others, (i) expresses its solidarity with theTunisian people and their legitimate democratic aspirations, (ii) gives its strong support to thedemocratic process, (iii) calls on the High Representative to promote the establishment of atask force to meet Tunisia’s needs in terms of assistance for its democratic transition, (iv) callson the High Representative to support the electoral process by sending an electoralobservation mission, (v) calls on the Council, the Commission and the High Representative tobe ready to redirect - and if necessary increase – funding under the various financialinstruments for EU-Tunisia cooperation, (vi) calls on the Commission and the EuropeanInvestment Bank to make provision for support to Tunisia in the form of loans with interestrate subsidies, (vii) calls on the Commission to encourage, also financially the provision byEuropean civil society of support and assistance to Tunisian civil society, and (viii) urges theEU to draw lessons from events in Tunisia and to revise its democracy and human rightssupport policy.

2. European Parliament Resolution of 15 December 2011 as regards the case of ZachariaBouguira. In that Resolution, the EP urges the Tunisian Authorities to guarantee ZacharieBouguira - who had filmed acts of violence by the police against football supporters – acorrect judicial process and to shed light on the serious human rights violation of which hewas the victim. The EP also calls on the High Representative, the European External ActionService and the Commission to continue to support Tunisia during this democratic transitionprocess by giving priority to drawing up a programme to support the reform of the securitysector, in particular the police, and a programme to support the reform of the judicial sector.

Influence on the EU budget support

In the two Resolutions mentioned above, no specific reference is made to the provision of budgetsupport to Tunisia. Besides that, various elements of the Resolution of 3 February 2011 have beenimplemented, such as (i) sending an electoral observation mission, (ii) redirecting - and if necessaryincreasing - funding under the various financial instruments for EU-Tunisia cooperation, (iii)increasing support to the Tunisian civil society and (iv) organising the EU-Tunisia Task Force meetingheld on 28 and 29 September 2011.


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7.1. SUMMARY OF FINDINGS AND CONCLUSIONSAfter the revolution of January 2011, a process of democratic transition started. After the elections ofOctober 2011, a Constituent Assembly was formed (among others charged with preparing andadopting a new Constitution) and a three-party coalition formed a new government. During 2012 andthe first quarter of 2013, it appeared that the new division of political power was not stable, and thatthe governance of the country was not strongly based on democratic principles. Presently it isdifficult to predict what the final outcome of the present political processes will be. There are alsoconcerns that Ennahda - presently the biggest political party - is aiming at controlling thegovernment apparatus and the political arena, which will then frustrate the functioning of a free andfair multi-party democracy. Many observers express the opinion that the biggest achievement of therevolution is the freedom of expression, association and the media, but that the establishment of realdemocracy is not yet assured and that the political situation is still quite unstable. Moreover, theeconomic situation has not yet improved and is probably worse than before the revolution for manyTunisians. Swift action is needed to improve political stability, to anchor the newly established multi-party system, to improve the economic situation and to launch a comprehensive employmentgeneration strategy.

In 2011, soon after the revolution, the EU decided to increase the envelope of the National IndicativePlan substantially from EUR 240 million to EUR 390 million in order to provide additional support tothe new Government and to the process of democratic transition. Apart from this increase of 63 %,also the allocation of available funds across programmes and projects changed considerably incomparison with the original planning presented in the National Indicative Plan. For instance thefunding of social sector activities and the support to Civil Society Organisations was increaseddramatically, while GBS funding has been almost doubled compared to what was proposed in theinitial National Indicate Plan 2011-2013. Examples of new programmes and funding goals are:

Rehabilitation of poor urban districts;

Improving health services in less favoured areas;

Support to the Association Agreement and to the Transition;

Civil Society Support Programme;

Reform of the Justice sector.

The use of three other EU budget lines for supporting Civil Society Organisations and Non-StateActors has also changed quite drastically after the revolution. Before the revolution, the Governmentof Tunisia gave very little room to manoeuvre to those organisations and the Government was quitereluctant allowing foreign donors to provide support to them. The new Government removed thoserestrictions and the EU decided to step up its support to Civil Society Organisations and Non-StateActors with the objective to strengthen their capacities to play a role in democratic governance of thecountry. The EU increased therefore the funding of the Non State Actors programme in Tunisia andstarted also funding via the Instrument for Stability and the European Instrument for Democracy andHuman Rights.

In the years 2007-2009, the EU has funded three GBS operations in Tunisia. In 2010 a new joint GBSoperation was being prepared in collaboration with the World Bank and the African DevelopmentBank. Because of the political instability in the second half of 2010 and the revolution of January 2011,the preparation process came to a standstill. Shortly after the revolution, the World Bank, the AfricanDevelopment Bank, the Agence Française de Développement and the EU decided to provide swiftly



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General Budget Support (GBS) to the newly installed Government in order to help it to finance socialsupport programmes and actions promoting economic recovery.

This new budget support operation (called Programme d’Appui à la Relance) was quite different fromthe previous operations - including the one being prepared in 2010 - in terms of scope and content.While the previous programmes were more or less exclusively focussed on economic developmentissues, the Programme d’Appui à la Relance had a much broader agenda, including also governanceand social sector issues. Furthermore, the economic actions were much more clearly focused onemployment creation and economic recovery.

In 2012, a similar joint budget support operation was carried out under the name Second Programmed’Appui à la Relance. The EU supported that programme in the form of a State Building Contract (seethe new Budget Support Guidelines of 2012). The EU Delegation envisages preparing a thirdProgramme d’Appui à la Relance in 2013, again jointly with the World Bank and the AfricanDevelopment Bank. However, discussions about scope and content of that programme were delayedin March 2013 – when this mission visited Tunisia - because of the unstable political situation at thattime (change of the composition of the Government, delay with drafting the new Constitution,postponement of the elections, see chapter two).

The EU is also providing Sector Budget Support (SBS) to the education and water sectors. The presentSBS programme for vocational training and higher education is a follow up of five SBS operationsprovided by the EU for various levels of the education sector in Tunisia during the years 2000-2010.Formulation of that new SBS programme for the education sector started in the last quarter of 2009and was finalised well before the Arab Spring Revolution of January 2011. Thus, those political eventshave not influenced the design and content of that SBS programme, and its objectives and approachhave also not been modified after the revolution. However, the political instability, change ofgovernment and reshuffling of ministerial responsibilities has delayed the start of the programme in2011. Moreover, these factors have also caused a noticeable weakening of the management,operational and implementation capacities of the responsible ministry. As a result, the responsibleministry could not fulfil the disbursement conditions for the second year tranches timely.

Formulation of the SBS programme for the water sector had started in 2009. The formulation of theprogramme was interrupted by the political instability in the second half of 2010 and the revolutionand change of government early 2011. Discussions were re-opened in February 2011 andsubsequently the Financing Agreement was signed in September 2011. Content of the programme,including objectives and performance targets, had already largely been defined before therevolution. After the revolution, the only major change was the addition of a disbursement conditionas regards the functioning of the Agricultural Development Groups responsible for managingirrigation water within the irrigation schemes.

7.2. ANSWERS TO THE STUDY QUESTIONS1. In which way and to what extent has EU budget support changed in recent times to take

account of the Arab Spring events and growth of democracy in Tunisia?

The Tunisian revolution of January 2011 and the subsequent change of government have had asubstantial influence on the General Budget Support (GBS) provided by the EU to the Government ofTunisia. Before 2011, the objectives of the GBS were more or less exclusively focussed on economicdevelopment issues, while the GBS programmes of 2011 and 2012 had a much broader scope. Theyincluded also objectives and performance indicators as regards improving governance and social


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sector policies and programmes. Furthermore, the economic objectives were much more clearlyfocused on employment creation and economic recovery.

Furthermore, the level of GBS funding from the EU has increased drastically. During the years 2007-2009, three GBS agreements were signed with a total value of EUR 121 million and implementationperiods of 3 years, which means on average about EUR 40 million per year. In 2011 and 2012, threeagreements were signed (including topping up of an old agreement) with a total value of EUR 185million. All these funds were disbursed in 2011 and 2012, which means on average EUR 93 million peryear.

Scope and content of the two Sector Budget Support (SBS) programmes have hardly been changedbecause of the revolution. These SBS programmes were formulated well before the revolution andthey are focussed on sector specific objectives, whose relevance is not directly influenced by thebroader political environment.

Apart from the influence of the political changes on the budget support programmes (which is thefocus of the question), it is worth mentioning that – because of the political changes in Tunisia – thetotal envelope of the National Indicative Plan for Tunisia has been increased from EUR 240 million toEUR 390 million, and that a number of new projects and programmes have been started focussed onfunding social sector activities and providing support to Civil Society Organisations. Moreover, the EUfunding of Civil Society Organisations and Non-State Actors via the Instrument for Stability, theEuropean Instrument for Democracy and Human Rights and the Non-State Actors Programme hasalso been increased substantially after the revolution (see sections 4.3, 4.5 and 7.1).

2. In which way and to what extent have EP resolutions targeted to Tunisia been translatedinto the EU budget support?

Since the revolution, the EP has adopted only two resolutions regarding the situation in Tunisia (seechapter 6). Although they do not deal directly with the provision of budget support to theGovernment of Tunisia, a few aspects of the Resolution adopted on 3 February 2011 are of relevancefor this study. In that Resolution, the EP calls on the Commission, among other things, (i) to send anelectoral observation mission, (ii) to redirect - and if necessary increase – funding under the variousfinancial instruments for EU-Tunisia cooperation, and (iii) to increase support to the Tunisian civilsociety. As shown in the previous chapters, these requests have been followed up by theCommission.

3. To which extent have the concrete effects of budget support provided to Tunisia beenmonitored?

Monitoring of the two most recent GBS programmes has been focused on the continuous eligibilityof Tunisia for receiving budget support, on the basis of the four general eligibility criteria applied bythe EU: (i) quality of the national development policies, (ii) stability oriented macro-economic policy,(iii) satisfactory progress with improving the quality of Public Finance Management, and – since 2012– (iv) budget transparency. That monitoring is being done by the Delegation of the EU, in closecooperation with the other donors providing GBS (World Bank, African Development Bank andAgence Française de Développement).

Furthermore fulfilment of the specific conditions for disbursement of individual tranches has beenmonitored by the Delegation of the EU and the Tunisian Ministry of Planning and InternationalCooperation. All these specific conditions were in fact prior actions to be taken by the Government ofTunisia. As required prior actions, they were part of the (short term) effects of the GBS. The Ministry of



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Planning and International Cooperation is also chairing a GBS Steering Committee composed of allstakeholders (mainly ministries) and charged with monitoring all the specific conditions.

Monitoring of the medium to long term effects (outcomes and impact) of the GBS programmes isbeing done in the context of the continuous dialogue with the Tunisian authorities in collaborationwith the other budget support donors. However, it should be noted that some of the outcomes andin particular the impact can only be measured in the medium to long term. In the Technical andAdministrative Provisions of the programme, it is stipulated that the programme will be subject of anexternal evaluation after the end of the implementation period, which will be particularly aimed atestablishing the outcomes and impact.

The four donors who have provided GBS in the context of the first and second Programme d’Appui à laRelance, are regularly organising joint preparation and monitoring missions. One particular mission isusually charged with both the monitoring of an on-going programme and the preparation of a newprogramme. Furthermore, the World Bank makes always an 'Implementation Completion and ResultsReport' after the closure of each annual GBS operation. The EU usually participates in the missionscharged with making such a report.

The SBS for Integrated Water Management is providing support to the implementation of theNational Strategy for Integrated Water Management. That strategy is implemented by the Ministry ofWater and Environment and monitored by a Technical Commission of the National Water Committee.That Commission meets in principle every trimester and once a year with the donors supporting thesector. That annual meeting discusses the annual review report of the implementation of the NationalStrategy for Integrated Water Management.

The specific conditions for the disbursement of the tranches of the SBS provided by the EU arederived from the National Strategy for Integrated Water Management. Achievement of the targets ofthe disbursement conditions is monitored by a Monitoring Commission composed of the Ministry ofPlanning and International Cooperation, the Ministry of Agriculture and Environment, the Ministry ofFinance and the Delegation of the EU. That Commission meets in principle at least twice a year.

The SBS for vocational training and higher education is providing support to three different sectorministries: the Ministry of Higher Education and Research, the Ministry of Education and the Ministryof Vocational Training and Employment. Each sector ministry is responsible for monitoring theimplementation of its own component of the programme and has to produce an annual monitoringreport. Furthermore, a Monitoring Commission has been established, composed of the three sectorministries, the Ministry of Planning and International Cooperation, the Ministry of Finance and theDelegation of the EU. That Commission is monitoring the performance indicators and disbursementconditions of the SBS programme.

4. To what extent have democracy promotion, respect of human rights, gendermainstreaming, gender budgeting and poverty reduction objectives been reached by thebudget support tool?

In accordance with the new EU policy on budget support (since 2012), the fundamental values(democracy promotion, rule of law and respect of human rights) are being assessed before preparingbudget support operations and monitored throughout the implementation of budget supportprogramme. However, the relationships (in terms of cause-effects) between providing GBS anddemocracy promotion and respect of human rights are rather indirect.


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Governance issues have got a more prominent role in the recent GBS programmes (the first andsecond Programme d’Appui à la Relance) than in the preceding GBS programmes of the years 2007-2009, but improving governance does not automatically promote democracy and/or strengthen therespect of human rights. However, there are some five governance issues addressed by the firstProgramme d’Appui à la Relance that could contribute positively to democratisation of the Tunisiansociety as well as the respect of the rule of law, namely:

Adoption by the Cabinet of Ministers of a new draft law on Associations, with the objective topromote the freedom of association;

Adoption by the Cabinet of Ministers of a series of new principles and regulations aimed atremoving obstacles for the public to get access to information from public sector organisations;

Adoption by the Cabinet of Ministers of a draft law on the establishment of a TemporaryJudicial Body replacing the High Council of Magistrates;

Decision by the Minister of Justice leading to the creation of a Judicial Unit specialised ineconomic-financial files, and;

Adoption of a decree-law concerning the creation of the national anti-corruption commission.

The Delegation of the EU envisages broadening the scope of the governance component of the newState Building Contract that will be formulated in 2013.

Furthermore, it can be argued that GBS could indirectly promote democracy via the following twomechanisms:

GBS is strengthening the recipient government through financial and political support. Whenthat Government is promoting democracy and the respect of human rights, GBS will indirectlycontribute to promoting democracy and the respect of human rights as well. However, asshown in chapter 2, it is not yet possible to draw conclusions as regards the outcome of thepresent political processes in Tunisia;

Democracy promotion and respect of human rights are two fundamental values of the EUsupport and are 'aspects to be considered' when providing GBS in the form of a State BuildingContract (see section 2.3 of the synthesis report). As such they are also subjects of the politicaldialogue between the EU and the GoT. It is the aim that that political dialogue will have apositive influence on the efforts of the recipient Government to promote democracy and torespect human rights. Whether or not this mechanism works in the case of Tunisia is difficult tosay at this stage because, as said here above, the outcome of the present political processes inTunisia is still uncertain.

The two SBS programmes do not include specific (disbursement) conditions as regards democracy,respect of human rights and gender issues, except one disbursement condition of the SBSprogramme for Integrated Water Management aiming at strengthening Agricultural DevelopmentGroups, which will be in charge of water management at village level. Strengthening these kind ofuser groups can be considered as an improvement of the democratic governance structures in theTunisian society.

Neither the GBS programmes nor the two SBS programmes pay specific attention to gender issues.The impact of these budget support programmes on poverty reduction can only be assessed on thebasis of an in-depth impact evaluation, using the budget support evaluation methodology endorsedby OECD/DAC. Such an evaluation is beyond the scope of this study. In this context it is worthmentioning that the evaluation of the budget support provided by the EU to Tunisia during the years1996-2008 (see section 5.1) has concluded that the EU budget support provided a positive



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contribution to Tunisia’s economic and social development. However, that evaluation did not drawexplicit conclusions as regards the impact of the budget support on poverty reduction.


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VOLUME II-C - ALGERIA COUNTRY CASE STUDY

1. INTRODUCTION 57







4.1. The Association Agreement 63





5. BUDGET SUPPORT PROVIDED TO ALGERIA 66



6. MAIN FINDINGS AND ANSWERS ON THE STUDY QUESTIONS 69

6.1. Summary of main findings and conclusions 69




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1. INTRODUCTIONThe Directorate-General for Internal Policies of the European Parliament has awarded ECORYS acontract for carrying out a study entitled: 'The Strategic Impact and Cost-Effectiveness of EU BudgetSupport with regard to Supporting Democratic Transitions in Southern Mediterranean Countries: casestudies'. Three case studies had to be carried out, namely in Egypt, Tunisia and Algeria.

This report presents the results of the Algeria Case Study. The Country Study consisted of a review ofrelevant documents and a one-week mission in Algeria during which many interviews wereconducted with different stakeholders to discuss the EU cooperation programme – and budgetsupport in particular - with Algeria.

This Country Case Study has been carried out by Martin van der Linde and Dr Zine Barka. The fieldmission to Algeria was carried from 14-18 April 2013. The authors would like to express their thanks toall persons interviewed (see annex A4), for spending their time, providing information and sharingtheir views with the Study Team, particularly the staff of the Delegation of the European Union,representatives of the Algerian ministries, staff of other Development Partners and representatives ofCivil Society Organisations. Of course, only the authors are responsible for the content of this reportand the opinions and views expressed in this report may not be shared by the Delegation of the EU orother persons interviewed.

This report consists of six chapters. This introduction (chapter 1) is followed by two chapters in whicha brief overview of the political and economic context in Algeria is presented. Chapter 4 and chapter5 are devoted to a description and analysis of respectively the EU’s programme of cooperation withAlgeria and the Budget Support provided to Algeria. The main findings and answers on the StudyQuestions are presented in chapter 6.


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2. POLITICAL CONTEXTHistoric overview

From Independence in 1962 up to 1988, Algeria had a one-party political system. The country wasruled by the socialistic National Liberation Front. A multi-party system was instituted in 1988. The firstround of the parliamentary elections held in December 1991 showed unexpected success for theIslamic Salvation Front. Subsequently, the Algerian army intervened and postponed the secondround of elections, because it was afraid that the country would be ruled by extremist Islamic forces.After the aborted elections of 1991, the Haut Conseil de l’Etat, dominated by the military, took controlof governing Algeria from 1992 to 1994. In 1994, Zeroual was nominated as President of Algeria andthe Conseil National de l’Etat - a non-elected body constituted by representatives of the publicadministration, trade unions, professional organisations and political parties - functioned as thelegislative body from 1994 to 1997.

The authority of the Haut Conseil de l’Etat (1992-1994) and of President Zeroual (from 1994 onwards)was challenged by political groups dissatisfied with the abortion of the election process in 1991.Moreover the army was cracking down on the Islamic Salvation Front and its supporters wereattacking government and civilian targets. Fighting escalated into an armed conflict, resulting in over100,000 deaths during the last decade of the previous century.

Abdelaziz Bouteflika won the presidency in 1999, with the backing of the army. Internal reconciliationdeveloped during the turn of the century and a relatively stable political period started, withgradually increasing standards of living (on average), supported by the substantial increase ofhydrocarbon export revenues. Bouteflika was re-elected for a second term in 2004 andoverwhelmingly won a third term in 2009 (after the limit on the number of presidential terms hadbeen lifted by an amendment of the Constitution in 2008). Bouteflika gained 90 % of the votes, whilethe turnout was as high as 74 % (% of eligible voters, who had actually voted).

The latest parliamentary elections have been held in May 2012. About 43 % of the eligible votersparticipated in the elections. The National Liberation Front, the ruling party since Algeria’sindependence in 1962 and party of the President, won again a majority of the parliamentary seats(48 %35: 220 out of 462), while the RND (close to the National Liberation Front and supporting thePresident) was second in size (68 seats). The Green Alliance, a trio of moderate Islamic parties36, isthird in size and obtained 48 seats. On the basis of those elections, a new Government was formed inSeptember 2012, led by Prime Minister Abdelmalek Sellal. Implementation of the 2009-2014development plan launched by President Bouteflika, remains to be the top priority of the newgovernment.

Provincial elections were held in November 2012 and the next presidential elections will be held in2014.

Influence of the Arab Spring

Algeria has also been affected by the Arab Spring, but not with the same intensity as Tunisia andEgypt. Political unrest developed early 2011 – including demonstrations and riots - because ofdissatisfaction with the increase of the costs of living, high level of youth unemployment and theweak democratic nature of the political system. Responding to this political unrest, the President

35 This percentage distorts the reality of the political preferences of the population, due to the high electoral thresholdand the high number of parties participating in the elections but not having reached the electoral threshold.

36 Movement of Society for Peace (MSP), Islamic Renaissance Movement and Movement for National Reform (El Islah).



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announced in April 2011, a number of political reforms in April 2011 and a revision of theConstitution, decided to lift the emergency situation37 (which had been in force for about 20 years)and increased government salaries and subsidies on basic necessities. The political reforms included:revision of the electoral code, setting a minimum of one-third of the seats of elected assemblies forbeing held by women, furthering decentralisation, avoiding that one person would have more thanone political mandate and revision of the laws on associations and the media. While most of thereforms were welcomed, the new laws on associations and the freedom of media were criticised ofbeing too restrictive38. The process of revising the Constitution is delayed. A special Committee is nowworking on a draft.

Although there was unrest in Algeria resulting from economic and political grievances, there was nostrong pressure for dramatic political changes. That could be explained by Algeria’s negativeexperience with the civil conflict in the 1990s, the relative prosperity of the country compared toother countries in the region and the 'negative' examples of violence and political instability incountries such as Egypt, Libya, Yemen and Syria. Nevertheless, the discontent about the authoritarianrule of the country, the dominance of the National Liberation Front, the bureaucracy, the corruptionand the increase of the costs of living cannot be ignored. These facts and sentiments, if notaddressed, could fuel political discontent and pressure for political changes in the near future.

37 Although demonstrations are still forbidden in Alger.38 The new law on associations has been approved by the National Assembly in 2012, but the new law on the media is still

in draft.


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3. ECONOMIC CONTEXT

3.1. MACRO-ECONOMIC PERFORMANCE IN RECENT YEARSAlgeria’s economy is dominated by the hydrocarbon sector. In 2011, 69 % of the Governmentrevenues originated from the hydrocarbon sector (including transfers from the Oil RevenueStabilisation Fund) and the sector supplied 98 % of the country’s export revenues. Many years of highhydrocarbon export prices and prudent management of the related revenues have resulted in theaccumulation of fiscal resources in an Oil Revenue Stabilisation Fund, containing an amount equal toabout 90 % of the total annual government expenditures in 201139, while the foreign exchangereserves have increased to a level equal to about 38 months of import value (at the end of 2011). Thegovernment budget has also a large influence on the domestic economy: in 2011, the governmentexpenditures were equal to 41.3 % of the GDP.

As a reaction to the political unrest during the Arab Spring, the Government has dramaticallyincreased the public sector wages and the subsidy schemes. This has led to an increase of inflation(8.4 % projected for 2012) as well as a substantial drawn down from the Oil Revenue StabilisationFund for financing the budget deficit. In the medium to long term, this level of the governmentbudget and this pattern of funding the government budget are not sustainable.

The evolution of a number of macro-economic indicators is presented in table 5. A few highlights ofthat table are:

Real GDP is growing modestly at a rate of about 2.5 % to 3.5 % per year. There is no particularnegative influence from Arab Spring events in 2011. In recent years, the non-hydrocarbonsectors have performed better (5 to 6 % growth) than the hydrocarbon sector (negative growthrates). This is somewhat surprising because the investment climate is considered to be quiteweak in Algeria, and the government is blamed by many observers for not having a policy andstrategy as regards promoting economic growth, diversifying the economy and promotingprivate investments;

The Government revenues are very high (as a % of GDP), due to the regular annual oil and gasrevenues and due to specific transfers from the Oil Revenue Stabilisation Fund in order tofinance (anticipated) deficits. The increase from 2009 to 2011 is mainly caused by an increase ofthe transfers from the Oil Revenue Stabilisation Fund;

The Government expenditures are also very high (as a % of GDP). In 2012 about 32 % of thegovernment expenditures were transfers and subsidies. The increase of the expenditures in2011 and 2012 was caused by substantial increases of the government salaries and thesubsidies;

The present level of expenditures and revenues results in a gradual depletion of the OilRevenue Stabilisation Fund, and is thus not sustainable in the medium term. The size of thatfund has shrunk from 43.1 % of GDP in 2009 to 35.8 % of GDP in 2012;

The current account of the Balance of Payments is comfortable, slightly positive and increasingsince 2009;

39 The Oil Revenue Stabilisation Fund has been established in 2000. All oil and gas revenues emanating from thedifference between the actual export price and a reference export price, are transferred to that Fund. Othergovernment revenues from the oil and gas production are part of the fiscal revenues of the Government in the yearconcerned. The reference export price was USD 19 per barrel from 2000 to 2008 and USD 37 since 2008. The actualexport price was about USD 80 per barrel in 2010, USD 110 in 2110 and 2011.



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The level of foreign exchange reserves of the country is extremely comfortable and is stillincreasing to more than the value of 40 months of imports.

Table 5: Key macro-economic indicators of Algeria, 2009-2013

2009 2010 2011 2012 2013

Real GDP growth (%) 1.7 3.6 2.4 2.5 3.4

Inflation (%; consumer price index) 5.7 3.9 4.5 8.4 5.0

Government revenues (% of GDP) 36.7 36.5 40.0 39.3 37.7

Government expenditures (% of GDP) 43.5 38.3 41.3 42.9 39.0

Government budget balance (% of GDP) -6.8 -1.8 -1.3 -3.6 -1.3

Reserves Oil Stabilisation Fund (% of GDP 43.1 40.2 37.2 35.8 34.7

Government debts (% of GDP) 10.4 11.1 11.0 9.9 8.9

Current account balance (% of GDP) 0.3 7.5 9.9 8.1 7.0

Foreign direct investment (% of GDP) 2.5 3.5 2.0 1.7 2.0

End of year reserves in months of importsof goods and services

35.2 33.9 38.2 40.2 41.7

Source: IMF (2012), Algeria, 2012 Article IV consultation – Staff report.Note 1: figures of 2011 are preliminary; figures of 2012 and 2013 are projections.

Because of the strong financial position of the country, no use has been made of IMF assistance sincemany years. In fact the last Stand-by arrangement dates from the period 1995-1998. Presently Algeriahas no financial liabilities to the IMF.

For the same reason (strong financial position), the Government of Algeria decided in 2006 to stopcontracting foreign loans and to accelerate repayment of outstanding loans. Presently, all foreignloans have been repaid. That policy implied that also Development Banks like the World Bank, theAfrican Development Bank and the European Investment Bank, could no longer provide new loansand that outstanding loans were repaid before schedule. Since then, they can only provide grantmoney for relatively small technical assistance projects.

3.2. QUALITY OF PUBLIC FINANCE MANAGEMENT.In 2010, the quality of Public Finance Management in Algeria was assessed on the basis of the PEFAmethodology40. The overall picture of the scores of the 28 indicators can be qualified as 'justsatisfactory': 6 A scores, 6 B or B+ scores, 7 C or C+ scores, 5 D or D+ scores, while 4 indicators got noscore by lack of information41. The study concluded that the Algerian Public Finance Managementsystem functions reasonably well as regards some aspects and is weak in other aspects. Some of theweak aspects were: too many delays with payment of invoices, no medium term expenditureplanning based on objectives, no up to date information on budget execution, too much delay and

40 PEFA: Public Expenditure and Financial Accountability. See: 'Evaluation de la gestion des finances publiques, PEFA Algérie',Rapport final, juillet 2010, Réalisé par Linpico.

41 A is the highest score and D the lowest possible score.


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insufficient coverage of external control, and absence of a strategic plan for strengthening PublicFinance Management.

Although there are presently various useful activities being implemented aiming at strengtheningPublic Finance Management, a strategic plan with a clear and realistic action plan is still lacking.

In the context of preparing a sector budget support programme (see chapter 4), the EU has financedthe above mentioned PEFA assessment. This has been the start of a constructive policy dialoguebetween the Delegation of the EU and the Ministry of Finance about improving the Public FinanceManagement system. This in turn has led to the start of a technical assistance project funded by theEU, aimed at supporting the Ministry of Finance to formulate and implement a 'Strategic plan for themodernisation of Public Finance Management' and to set up a Coordination Unit for theimplementation of that plan. The project started mid-2012, will last 3 years and has a budget ofEUR 5 million42.

3.3. ECONOMIC PROSPECTS FOR COMING YEARSWhile Algeria’s external position will remain strong in the coming years, Algeria will be facing thefollowing economic challenges in the short to medium term:

To stop the growth of the public sector wage bill and to reduce the subsidies, so that the needto stop the depletion of the Oil Revenue Stabilisation Fund presently mainly caused by usingfunds for current expenditures (the wage bill and subsidies);

To improve the business climate so that private sector investments (including foreign directinvestments) in the non-hydrocarbon sectors will improve;

To boost employment levels in all sectors of the economy;

To strengthen public finance management.

42 Part of the second P3A programme (see table 4.1).



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4. THE EU PROGRAMME OF COOPERATION

4.1. THE ASSOCIATION AGREEMENTThe Association Agreement, signed by the EU and Algeria in 2002 and entered into force in 2005, isthe framework for the political, economic, social and cultural cooperation between the EU andAlgeria. However, translating that Agreement into a European Neighbourhood Policy (ENP) ActionPlan takes a lot more time than originally foreseen. A Road Map accompanying the AssociationAgreement was signed in 2008, in which a series of activities were planned. Late 2011, Algeriaexpressed his interest in resuming talks about drafting an ENP Action Plan. The process of draftingsuch an Action Plan was still on-going in April 2013.

4.2. THE COUNTRY STRATEGY PAPER 2007-2013The EU’s Country Strategy Paper 2007-2013 for Algeria has been formulated in 2006. It provided thestrategic framework for the cooperation between the EU and Algeria for using the funds available forAlgeria from the European Neighbourhood and Partnership Instrument.

The EU’s strategic objectives for the cooperation with Algeria during the years 2007-2013 are:

Supporting political reforms concerning democracy, human rights, the rule of law and goodgovernance;

Supporting reforms of the justice system, management of migratory flows and the fight againstcrime and terrorism;

Promoting economic diversification and improving the investment climate;

Creation of favourable conditions for sustainable development (environmental, social andeconomic);

Developing education, training and scientific research;

Strengthening social programmes while balancing the budget;

Facilitating trade in goods and services;

Developing safe and secure transport infrastructure.

4.3. THE NATIONAL INDICATIVE PROGRAMME 2007-2010The total envelope of the National Indicative Programme 2007-2010 for Tunisia amounted to EUR 220million (EUR 55 million per year on average) of which about EUR 184 million has actually been used.The use of this envelope was focussed on the following objectives:

Economic growth and employment;

Improvements in basic public services;

Reform of the justice system.

Original and actual allocations (financing decisions) of the available envelope are presented in table6. In the National Indicative Programme no mention was made of an intention to consider budgetsupport as a financing modality. However, later on it was decided to provide the funding for theSecond Phase of Support to the Water and Sanitation Sector in the form of sector budget support(see chapter 5 for more details).


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Table 6: Allocations and Financing Decisions of the National Indicative Programme 2007-2010 (inmillions of EUR)

PROGRAMME/PROJECT ORIGINALALLOCATIONS

FINANCINGDECISIONS

Development of small and medium scale enterprises 40.0 40.0

Diversification of the economy 25.0 17.5

Modernisation of the national employment agency 24.0 14.0

Second support programme for the implementation of theAssociation Agreement

24.0 29.0

Reorganisation of the health service and hospital reform 30.0 15.0

Support to higher education 30.0 21.5

Second phase of support to the water and sanitation sector 30.0 30.0

Modernisation of the prison system 17.0 17.0

Total 220.0 184.0

4.4. THE NATIONAL INDICATIVE PROGRAMME 2011-2013The total envelope of the National Indicative Programme 2011-2013 for Algeria amounts to EUR 172million (EUR 57.3 million per year on average), of which about EUR 157 million has been allocated(financing decision level) so far to specific projects and programmes (April 2013). Original and actualallocations (financing decisions) of the available envelope are presented in table 7.

Table 7: Allocations and Financing Decisions of the National Indicative Programme 2011-2013 (inmillions of EUR)

PROGRAMME/PROJECT ORIGINALALLOCATIONS

FINANCINGDECISIONS

Socio-economic development in poor rural areas in the North-East 20.0 20.0

Transport sector reform 38.0 13.0

Reform of the fisheries sector 30.0 15.0

Third support programme for the implementation of theAssociation Agreement (P3A-III)

30.0 30.0

Environmental protection 34.0 34.0

Protection and valorisation of cultural heritage 20.0 21.5

Promotion of youth employment - 23.5

Total 172.0 157.0Note: In April 2013, Financing Decisions for Socio-economic development, Reform of the fisheries sector, P3A-III andEnvironmental Protection had not yet been taken, but were being prepared.



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Three other programmes are presently still being formulated, namely:

ENP Agriculture and Rural Development for Algeria EUR 10 million;

Internal market surveillance and reinforcement EUR 5 million;

Governance strengthening of non-governmental entities EUR 10 million.

The last mentioned programme will be funded with the EUR 10 million made available in 2011 fromthe SPRING facility, topping up the allocation of the National Indicative Programme.

Looking at the difference between the original allocations proposed in the National IndicativeProgramme and the actual allocations, it can be concluded that the allocations for the transport andfisheries sectors decreased, while new allocations have been made for promotion of youthemployment, agricultural and rural development and governance support for non-governmentalentities. These new choices can be considered as a response to the changing political, economic andsocial context since 2011.

The support for the environmental protection programme will be provided in the form of SectorBudget Support (see chapter 5 for further details). Funding of the other support programmes will beprovided in the form of project aid.

4.5. OTHER SUPPORT PROVIDED BY THE EU OF RELEVANCE FOR THE STUDYQUESTIONS

The following three financing instruments are presently being used by the Delegation of the EU tosupport Civil Society Organisations in Algeria, namely:

The European Instrument for Democracy and Human Rights. In 2012, the budget availablefor Algeria amounted to EUR 810 000, while it was EUR 600 000 in the previous years. Use of the2012 budget will be determined in the second trimester of 2013 on the basis of a Call forProposals procedure;

The Non-State Actors programme. In 2012, the budget available for Algeria amounted to EUR480 000, while the total budget for the years 2010 and 2011 amounted to EUR 750 000. Also inthis case, use of the 2012 budget will be determined in the second trimester of 2013 on thebasis of a Call for Proposals procedure;

The Civil Society Facility. In 2012, Algeria got for the first time an allocation of EUR 300 000from the Civil Society Facility. The original plan was to use that amount for funding theestablishment of a Resource Centre for Civil Society Organisations. However, the preparation ofthe establishment of such a Centre took more time than foreseen, and the available envelopewas added to the Call for Proposals for the Non State Actors funds (see above). It is envisagedthat the 2013 envelope of the Civil Society Facility (EUR 400 000) will now be used forestablishing that Resource Centre.


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5. BUDGET SUPPORT PROVIDED TO ALGERIA

5.1. BUDGET SUPPORT PROVIDED BY THE EUAs mentioned in chapter 4, the support for the Water and Sanitation Sector is being provided in theform of Sector Budget Support (SBS), while the presently being prepared support for environmentalprotection will also be provided in the form of SBS.

The EU does not provide General Budget Support (GBS) to the Government of Algeria. The issue ofwhy not providing GBS is not discussed in the official programming documents, but on the basis ofthe interviews, the following arguments for not providing GBS can be distilled:

The Government of Algeria does not need additional budgetary resources, because it hassubstantial financial reserves in the Oil Revenue Stabilisation Fund. The present fiscal deficit(recurrent revenues minus total expenditures) can be financed by drawing from that Fund and,moreover, the deficit can and should be reduced by reducing subsidies and the wage bill;

Most probably the Algerian Government is not really interested in a broadly oriented macro-economic policy dialogue with donors in the context of a GBS programme;

The amount of GBS that the EU could provide would be insignificant in relation to the totalbudget of the Government of Algeria, which would mean that there would be very littleleverage in a policy dialogue.

Sector Budget Support for water and sanitation

The SBS for the water and sanitation programme is a follow up of various years of project supportprovided by the EU to the water and sanitation sector since 2006. After many years of project support,it was felt that a new approach and a new aid modality was needed in order to be able to discusspolicy, strategy and institutional issues with the recipient ministry and to contribute to improving thesector policies, strategies and institutions. This was in fact the main rationale of the change from aproject approach to a SBS approach. During the interviews, both the Delegation of the EU and theMinistry of Water Resources have confirmed that this rationale (assumption) has become reality andhave expressed their satisfaction with this new form of cooperation. Besides SBS, it was felt that asizeable technical assistance component would also still be useful. One third of the availableenvelope will be used for that purpose (see hereunder).

The SBS programme for water and sanitation has been formulated between mid-2009 and mid-2011.The second year of the preparation process was almost entirely focussed on defining a matrix ofperformance indicators. In total 14 meetings have been held, which is evidence of the intensity of thepolicy and strategy dialogue. The political unrest in the beginning of 2011 (mild Arab Spring) has notinfluenced the content and design of the programme.

The Financing Agreement of this 'second support programme for the water and sanitation sector' wassigned in July 2011 and consists of EUR 20 million SBS and EUR 10 million Technical Assistance andhas a duration of four years. The SBS will be disbursed in three tranches: a fixed tranche of EUR 6million at the end of the first year and two variable tranches of EUR 7 million each in the secondquarter of the third and fourth year. The fixed tranche has indeed been disbursed in December 2011and the first variable tranche will be disbursed in September 2013 (assessment of disbursedconditions was being prepared in April 2013). All major stakeholders (Ministry of Water Resources,Ministry of Finance and the EU Delegation) are quite satisfied with the on-going SBS programme, inparticular because of its contribution to the introduction of an innovative policy management andoperational management approach (programme budgeting, medium term planning, performance



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oriented management, monitoring and evaluation of results, greater involvement of beneficiaries andCivil Society Organisations, etc.). The financial component of the SBS is of secondary importance,because the amount is small compared to the total government budget for water and sanitation.

Next to the three general disbursement conditions (satisfactory implementation of the sector policy,maintenance of macro-economic stability and satisfactory progress with Public Finance Managementreform), there are in total 17 specific performance conditions that will determine the amount of thevariable tranches to be disbursed. Some of those specific conditions are:

Establishment of an inter-ministerial coordination mechanism for water and sanitation;

Approval and implementation of a National Water Plan and a National Sanitation Plan;

Setting up a system of Medium Term Expenditure Frameworks for the sectors;

Carrying out a study on institutional rationalisation of the sector;

Improving the internal audits of the National Sanitation Office and the Ministry of WaterResources;

Establishing and starting a training centre for the sanitation sector;

Putting in place a computerised information system of the sewerage network;

Equipment of the central laboratory of the National Sanitation Office.

Monitoring and coordination

There are two Monitoring Commissions which meet regularly: one for monitoring the disbursementconditions (performance indicators) of the SBS programme and one for the Technical Assistance.There is also a Donor Coordination Group for Water, Sanitation and Environment, which meets everytrimester. There is no system of regular meetings of the Ministry of Water Resources and all donors ofthat sector, where a joint policy dialogue could be conducted and all activities could be coordinated.

According to the Ministry of Water Resources, a lot is being done to monitor the performance of thesector and its institutions. An important monitoring instrument is the Performance Contracts signedby the various Agencies responsible for water supply and sanitation and the Ministry of WaterResources. Furthermore a system of performance audits will be set up within the Ministry of WaterResources and the National Sanitation Office. That is also the subject of two of the disbursementconditions of the SBS.

Sector Budget Support for environment

Preparation of a 'support programme for the environmental sector policy' (NIP 2010-2013) started in thefirst quarter of 2012 (no previous EU engagement in that sector). The Action Fiche of that supportprogramme has been approved in August 2012. According to that Action Fiche, the programme willconsist of EUR 24 million SBS and EUR 10 million technical assistance. The SBS will consist of threevariable tranches to be disbursed in the second, third and fourth year (most probably the maximumamount of each tranche will be EUR 8 million). Eleven envisaged results have been mentioned in theAction Fiche, but these have not yet been endorsed by the Ministry of Environment. Workshops arepresently being held aimed at defining performance criteria and disbursement conditions. TheFinancing Agreement of this programme is planned to be signed in the last quarter of 2013.


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Sector Budget Support and public finance management

An important spin-off of these SBS programmes is the involvement of the EU in the Public FinanceManagement dialogue. One of EU’s preconditions before starting the SBS programme for water andsanitation was to carry out an assessment of the quality of Algeria’s Public Finance Managementsystem on the basis of the PEFA methodology43 in order to get a clearer view of that quality and toidentify areas where further improvement would be needed (see also section 3.2). That preconditionand the realisation of the PEFA assessment have initiated a constructive dialogue and cooperationbetween the Ministry of Finance and the EU Delegation as regards strengthening Public FinanceManagement. An interesting point is also that the Ministry of Water Resources and the Ministry ofEnvironment have been chosen as test ministries for the try-out of some Public Finance Managementinnovations.

5.2. BUDGET SUPPORT PROVIDED BY OTHER DONORSNone of the other donors is providing budget support or has provided budget support to Algeria inthe recent past. More in general, the overall level of support from donors for developmentcooperation programmes in Algeria is small in any case, because of the comfortable financial positionof the Government and the level of development of Algeria. Moreover, as already mentioned inchapter 3, Development Banks (e.g. World Bank and African Development Bank) and FinancingInstitutions (e.g. Agence Française de Développement) were forced to reduce their activities in Algeriaconsiderably after the Government had decided in 2006 to stop contracting new loans. This meansthat these banks cannot provide budget support loans.

43 The name PEFA originates from ‘Public Expenditure and Financial Accountability’.



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6.1. SUMMARY OF MAIN FINDINGS AND CONCLUSIONSAccording to the various stakeholders interviewed by the Study Team, the political events of the ArabSpring have had no large influence neither on the programme of cooperation between the EU andthe Government of Algeria nor on the individual activities. The most notable change is probably theincreased attention paid to involving Civil Society Organisations and the beneficiaries of the variousdevelopment programmes and projects in the design and implementation of those programmes andprojects. This is a change which affects all programmes and projects funded by the EU and could bequalified as a contribution to the ‘democratisation of public governance’ in Algeria, something that wasimpossible to envisage in Algeria only three years ago.

A few more specific remarks as regards the possible influence of the Arab Spring on some of thecooperation instruments and of those instruments on democratisation processes:

The formulation of the Sector Support Programme for Water and Sanitation – which will bepartly funded with SBS - was started well before the Arab Spring. It was and is based on sectorspecific objectives which are not directly linked to political reforms and democratisationprocesses. This Programme is therefore not specifically influenced by the political events and itis not specifically focussed on contributing to political reforms and democratisation processes.However, it can be argued that the new type of results-oriented management, the emphasis ontransparency in planning and results achieved and the efforts to involve the Civil SocietyOrganisations and beneficiaries in policy, planning and evaluation, contribute to the‘democratisation of public governance'. As such, that sector programme contributes todemocratisation in Algeria;

The same applies to the Support Programme for the Environment Sector, which is presentlybeing formulated and which will also be partly funded with SBS;

The instruments for providing support to Civil Society Organisations (European Instrument forDemocracy and Human Rights, Non State Actors Programme and the Civil Society Facility) areall focussed on strengthening the Civil Society Organisations and their activities, and as suchthey are expected to contribute to strengthening democratisation processes in Algeria.However, that was already the case before the Arab Spring and – according to the Delegationof the EU - the Arab Spring has not really changed the focus of these financing instruments andthe type of activities being funded. The only noticeable change is the start of funding via theCivil Society Facility in 2012;

Also the focus of the Support Programme of the Association Agreement and the type ofactivities being funded, have not really been influenced by the Arab Spring events. ThatSupport Programme is funding mainly economic cooperation activities;

The Governance Support Programme presently being formulated, which will be funded withthe EUR 10 million from the SPRING facility, could constitute a closer link with democratisationprocesses. However, the Study Team could not yet get access to documentation about thisprogramme. so that conclusions cannot yet be drawn.44

44 The Study Team was promised to get a copy of the Action Fiche once it has been approved by the EU Head Quarters.


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6.2. ANSWERS TO THE STUDY QUESTIONS1. In which way and to what extent has EU budget support changed in recent times to take account

of the Arab Spring events and growth of democracy in Algeria?

The EU is only providing Sector Budget Support (SBS) for the Water and Sanitation Programme inAlgeria, while a SBS programme for the environment sector is being prepared. The EU does notprovide GBS to the Government of Algeria.

The formulation of the SBS for Water and Sanitation had been started well before the Arab Spring. Itwas and is based on sector specific objectives which are not directly linked to political reforms anddemocratisation processes. The content and scope of this SBS programme has therefore not beenchanged because of the Arab Spring events in Algeria (which were in any case relatively 'modest' incomparison with some other countries in the region).

Formulation of the SBS programme for the environment sector has started in the first quarter of 2012– thus after the Arab Spring events - and is still on-going. At this stage there is too little informationavailable for drawing conclusions as regards the influence of the spin-off of the Arab Spring.

2. In which way and to what extent have EP resolutions targeted on Algeria been translated intothe EU budget support?

Since early 2011, the European Parliament (EP) has adopted only one resolution specifically related toAlgeria. That resolution, adopted on 13 September 2012, dealt with the EU-Algeria agreement onscientific and technological cooperation. Thus, there is no EP resolution targeted on Algeria andbeing of direct relevance for this Country Case Study.

3. To which extent have the concrete effects of budget support provided to Algeria beenmonitored?

At operational level, the SBS programme for water and sanitation seems to be well monitored. Thereare two monitoring commissions which meet regularly: one for monitoring the disbursementconditions (performance indicators) of the SBS programme and one for the Technical Assistance.Thus, concrete effects in terms of meeting the targets of the disbursement conditions are wellmonitored.

Less information is available as regards monitoring the outputs, outcomes and impact of the nationallevel sanitation programmes45. According to the Ministry of Water Resources, a lot is being done tomonitor the performance of the sector and its institutions. The Ministry has concluded performancecontracts with the various Agencies responsible for water supply and sanitation in the country.Furthermore a system of performance audits will be set up within the Ministry of Water Resourcesand the National Sanitation Office. Setting up that system of performance audits is the subject of twoof the SBS disbursement conditions.

45 EU support is specifically targeting the sanitation sub-sector.



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4. To what extent have democracy promotion, respect of human rights, gender mainstreaming,gender budgeting and poverty reduction objectives been reached by the budget support tool?

The SBS programme for water and sanitation does not include specific objectives, activities or(disbursement) conditions as regards democracy, respect of human rights and gender issues.

Also no mention is made of user group structures, which could contribute to strengthening theinstitutional/organisational structure of the Algerian society and to 'democratisation of the governanceof public affairs'. The SBS programme for environment is still being formulated, that’s why, at thisstage, little can be said about the link with democracy, respect of human rights and gender. TheAction Fiche of the programme includes a few general references to these issues, but nothingconcrete has been proposed yet in terms of activities, expected results and/or disbursementindicators having a direct relation with the issues mentioned in this question.

The impact of these sector budget support programmes on poverty reduction can only be assessedon the basis of an in-depth impact evaluation, using the budget support evaluation methodologyendorsed by OECD/DAC. Such an evaluation is beyond the scope of this study. Moreover, it is tooearly to be able to establish impacts, because the SBS programme for sanitation has started more orless recently (mid 2011), while the SBS for the environment sector has not yet started.


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Algeria

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Commission européenne, 2011 (b), Instrument européen pour la démocratie et les droits del’homme, appel à propositions restreint, budget 2010.

Commission européenne, 2013 (a), Les acteurs non-étatiques dans le développement, appel àpropositions restreint, budget 2012.

Commission européenne, 2013 (b), Instrument européen pour la démocratie et les droits del’homme, appel à propositions restreint, budget 2012.

Délégation de l’Union Européenne en Algérie, 2010, Rapport annuel de la coopération UE-Algérie, 2009.

Délégation de l’Union Européenne en Algérie, 2012, Rapport annuel de la coopération UE-Algérie, 2011.

Délégation de l’Union Européenne en Algérie, Rapport annuel de la gestion des financespubliques 2010/2011.

European Union, no date, Algeria Strategy Paper 2007-2013 & National Indicative Programme2007-2010.

IMF, 2013, Algeria 2012 Article IC consultation.

Limpico, 2010, Evaluation de la performance de la gestion des finances publiques.

Union européenne, document non daté, 30 ans de coopération 1979-2009.

Union européenne, document non daté, Programme indicatif national 2011-2013.

World Bank, 2011, Country Partnership Strategy for the People’s Republic of Algeria for FY 11-14.


76

ANNEX A1 LIST OF PERSONS MET IN BRUSSELS

European Parliament

MATHIS Alexandre, Policy Department D;

BERGMÜLLER, Florian, Assistant MEP BRANTNER Franziska (Member of the Committee ofBudgets);

STANULOVA Maya, Assistant MEP NEYNSKY Nadezhda (member of the Committee of Budgets);

BEUGELINK Annemieke, Policy Department D;

TOPALOVA Velyana, Budgetary Affairs Secretariat.

European Commission, EuropeAid

FEIGE, Thomas, Head of Sector Magreb;

LIBERATI, Monica, Head of Sector Maskrek;

BODIN, Olivier, Unit A4, Budget support, Public Finance and Macro-economic analysis;

CHOMEL, Jean-Louis, Head of the Audit and Control Unit (R2);

JAGIELLO, Isabella, Cooperation Officer Tunisia;

RAYMAEKERS, Mark, Cooperation Officer Algeria.



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ANNEX A2 LIST OF PERSONS MET DURING THE MISSION IN EGYPT

European Delegation to the Arab Republic of Egypt

LIDOU Armelle, First counsellor, Head of section Human Rights, Civil Society and Governance;

GARAGNANI Laura, Head of cooperation;

APOSTALOVA Nataliya, Deputy head of delegation;

ULENS Wim, Attaché, Programme manager PFM, Macro-economy and Budget Support;

BUDRY Patrice, Programme manager Human rights, Civil Society and Governance Section;

TORPPA, Riikka, Attaché, Programme manager Trade, economy and Budget Support;

MUNUERA VINALS, Gabriel, First Counsellor, Political Affairs, Press and Information;

BOTTA Aide, Programme Officer Education Sector;

DESTEXHE Pierre, Programme Officer Health Sector;

EL BELTAGU Ahmed, Programme manager for the Energy and Transport SBS;

BADR Ahmed, Programme Manager for Water SBS.

Ministry of Planning and International Cooperation, Cabinet of the Minister

ABDEL-MALEK Talaat, Senior advisor to minister for aid effectiveness;

BASIOUNY Ebtehal, Senior Economic Expert, Team Leader in charge of cooperation with theEuropean Commission;

MELGUI Lamia, Senior Economic Researcher, EU desk officer.

World Bank

PINELLI Adrieni, Operations officer (Egypt, Yemen, Djibouti) World Bank;

USAID Egypt

TOBBALA Salwa, Decentralization and Local Governance Advisor, Office of democracy andgovernance;

KAMEL Alil, Senior Economic Advisor, Policy- Private Sector Office;

WILLIAMMEE Jeremy, Democracy -governance Officer, Office of Democracy and Governance;

WHITE Clinton D, Regional controller, Global Finance Management Center;

MATTA Matta G, Senior Financial Specialist;

LOFTI Nevine M, Senior Economist, Programme Office.


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Maat for peace, Development and Human Rights

OKEIL Ayman, Chairman;

EL KARIM Walaa Gad, Programme Director.

NAZRA

HASSAN, Mozna, Head of NAZRA, Women empowerment NGO.

OTHERS

Prof. HELAL Hany, Former minister of Higher education and Research 2005-2011;

Dr. EL SAWI Ali, Professor Political Science at the Cairo University and member of theFoundation 'Parliamentary Think Tank'.



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ANNEX A3 LIST OF PERSONS MET DURING THE MISSION IN TUNISIA

Délégation de l’Union européenne en Tunisie

MERITAN Régis, Conseiller;

LEMOINE Francis, Chargé des programmes de l’appui budgétaire et de la gestion des financespubliques;

POMMIER Denis, Chargé de l’appui budgétaire pour le secteur de l’eau;

MOUCHIROUD Michel, Chargé des programmes d’appui à la société civile;

KLUZER Lorenzo Kluzer, Premier Conseiller et Chef Section Politique, Information et Culture;

LYAMOURI Abdelaziz, Chargé des programmes sociaux.

Ministère de l’Investissement et de Coopération Internationale (MICI)

BETTAIEB, Alaya, Secrétaire d’Etat MICII;

Mme HAMZAOUI, Kalthoum, Directeur de la Coopération Euromed, MICI;

Mme EL ELJ j Raïda, Chef de service, MICI.

Ministère des Finances

OURIR Ridha, Trésorier general;

Mme KHEDIMI Dorsaf, Comité général du budget, représentant de la DG de Synthèse etd’analyse des dépenses;

OUHIBI Lotfi, Réprésentant de la DG des ressources et des équilibres;

Mme KALTHOUM Sonai, représentant de la DG de la coopération financière et de la dette.

Banque Centrale

ABDESSLEM, Mourad, Directeur de la Direction Générale des Statistiques;

CHERIF, Imed, Adjoint au Directeur du Financement et des Relations Extérieures;

ARFAOUI, Faouzi, Sous-Directeur du Financement Bilatéral et Multilatéral.

Agence Française de Développement.

LEHANNEUR Benoît, Directeur adjoint;

Mme MATHLOUTHI-DALI Yamina, Economiste.

Banque mondiale

Cyrille Bellier, Banque mondiale.


80

Université de Tunis

CHOUIKHA Larby, Professeur en Communication et Media à l’Université de Tunis, et Membre del’Instance Supérieure Indépendante des Élections de 2011.

Directway Consulting

SAIDANE, Ezzeddine, Conseiller financier, ex-membre de la Commission d’Etablissement desfaits de corruption et de malversation de l’ancien régime.

Journaliste

JOURCHI, Slaheddine, journaliste et chercheur, ex-premier vice-président de la LigueTunisienne de Droits de l’Homme.

Unité de Gestion du Programme de l’Appui à l’Accord de l’Association et la Transition et duPlan d’action du Voisinage (UGP3A).

AKROUT Salem, Directeur Général;

BRA Kamel, Coordinateur general.

Association de Développement Solidaire (ADS)

MEDDEB Radhi, Président de l’Association de Développement Solidaire (ADS) et de l’Institut deProspectives et d’Etudes du Méditerranée (IPEMED).



81

ANNEX A4 LIST OF PERSONS MET DURING THE MISSION IN ALGERIA

Délégation de l’Union Européenne en Algérie

MARTINS Paulo, Premier Conseiller, Chef des Opération de Coopération;

BERTRAND Philippe, Attaché de coopération, appui budgétaire, gestion des finances publiqueset macro-économie;

Mme FAVRET Silvia, Chargée d’aide et de coopération, section développement durable etemploi;

VAN DER ELST Antoine, Attachée de Coopération chargé du P3A;

DI BIASIO Elena, Chargée de Coopération Internationale, Responsable pour NSA, EIDHR et CivilSociety Facility (CSF);

DEVAUX Stéphane, Chargé d’aide et de coopération internationale.

Ministère des Affaires Etrangères

ISSAAD Mourad, Sous-directeur du Partenariat avec l’UE, Direction générale Europe;

ASHASHE Lyamine, Conseiller, Chef du bureau de Programmation de la Coopération, Directiongénérale Europe;

SOUMANI, Conseiller, chargé de la coopération avec l’UE;

Ministère des Finances

DJEMIAI Abdelmalik, Directeur de la Coopération et des Relations Économiques Internationales;

BOUHARAOUA Ali, Sous-directeur Europe Communautaire;

NAMANE Hocine, Cadre de la Direction générale du Budget;

LOUAHADJ Sid-Ahmed, Cadre de la Direction générale de la Planification et de la Prospective;

IKENE Ferhat, Cadre de la Direction générale du Budget.

Ministère de l’Eau

Mme HAMDAOUI Fadila, Directrice de la Planification et des Affaires Économiques;

NADEI Ahmed, Directeur des Ressources Humaines, de la Formation et de la Coopération;

Mme HAMMOUCHE Hassina, Directrice du projet Eau-II.


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Banque Africaine de Développement

DIARRA-THIOUNE Assitan, Représentante résident de la BAD en Algérie;

BENBAHMED Tarik, Macro-économiste.

Ambassade de France

Philippe Marquand, Attaché de coopération institutionnelle.

Ligue Algérienne pour la Défense des Droits de l’Homme (LADDH)

Dr NAILA Djabria, Secrétaire Générale; M. ABDELATIF, Vice-président; Mme DABOUZ, Maître; M. KHELIL Abdelmoumeme, Directeur des programmes.

Association Nationale des Finances Publiques - ANFiP

SADOUDI Ahmed, Vice-président de l’ANFIP et ex-Directeur général du Budget de l’Algérie.

Groupe industriel CEVITAL

REBRAB Issad, Président du Groupe industriel CEVITAL.

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