Reply to Recommendation 1273 (1995) on the Social Development Fund of the Council of Europe (1994-1995)
Doc. 7491
14 February 1996Communication from the Committee of Ministers
Adopted by the Committee of Ministers on 8 February 1996 at the 557th meeting of the Ministers' Deputies
1. The Committee of Ministers has taken note of Parliamentary Assembly Recommendation 1273 (1995) on the Social Development Fund of the Council of Europe (1994-1995) and welcomes the ongoing interest taken by the Assembly in the activities of this major financial institution.
2. The Committee of Ministers has already informed the Parliamentary Assembly of certain recent developments in the running of the Fund's organs. The further information requested, in connection with questions raised in Assembly Recommendation 1230 (1994), is appended.
3. As far as the Assembly's exhortations to member State governments are concerned, the Committee of Ministers can assure the Assembly that it has drawn the attention of the governments to sub-paragraphs (i), (ii) and (iii) of paragraph 7 of the Recommendation, which entail political choices for each individual State concerned.
4. As regards the manner in which the task entrusted to the Fund is fulfilled, referred to in paragraph 7(iv) of the Recommendation, the Committee of Ministers informs the Assembly that the Governing Body of the Fund adopted, on 19 December 1995, Resolution 288 (1995), laying down a number of criteria which are to guide the actions of the Fund's organs, along the lines recommended by the Assembly. The text of Resolution 288 (1995) is also appended to the present reply. In this respect, the Committee of Ministers wishes to inform the Assembly that it has invited the Fund's member States to make voluntary contributions to the Fund's "selective trust account" to enable this to function, in particular, for the financing of projects in Bosnia and Herzegovina. The Committee of Ministers has also invited the member States of the Social Development Fund to give the required guarantee to such projects.
5. Finally, the Committee of Ministers is able to assure the Assembly that appropriate contact has been made with the European Investment Bank, the European Bank for Reconstruction and Development, the World Bank and the European Commission with a view to gathering information and developing links between these institutions and the Social Development Fund. Ad hoc co-operation concerning technical assistance in conjunction with the European Union's PHARE programme has been established.
Appendix
1.Additional information regarding Parliamentary Assembly Recommendation 1230 (1994)
The Chairman of the Governing Body of the Fund, Mr Romeo dalla Chiesa, attended the 515th (accompanied by Chairman K. Nars and Governor R. Alomar) and 526th meetings of the Ministers' Deputies on 23 June 1994 and 25 January 1995 and informed the Committee exhaustively on recent developments at the Fund.
The Chairman of the Governing Body took part in the Assembly debate on the Social Development Fund in June 1995, after having participated in the meeting of the Commission on Migration, Refugees and Population on the Fund on 7 April 1995. The Chairman also held information meetings with the rapporteurs dealing with questions concerning the Fund and members of the bureaus of the Commissions of Migration, Refugees and Demography, of the Commission on Economic Affairs and Development and the Social, Health and Family Affairs Committee.
Administrative Council Resolution 1313 (1993) was modified in March and in July 1995 as a reaction to the sharp drop in loan applications following the adoption of Resolution 1313. The first modification, whilst remaining within the limits set by Article II of the new Articles of Agreement, widens the Fund's fields of activity notably by including certain types of projects serving the protection of the environment and rural development; the second modification, in line with the practice of other international financial institutions, enables the Fund to make global disbursements through certain intermediary institutions for the implementation of more complex "programmes", in particular in the fields of support for small and medium enterprises, social housing and aid after natural disasters.
The "Handbook" on project preparation and monitoring has been approved by the Administrative Council and widely distributed to member States. It is currently being reviewed to take into account the above-mentioned modifications of Resolution 1313. In addition to the "Handbook", the Fund has published a simplified documentation explaining project eligibility criteria and application procedures.
The review of the stock of projects which have been approved, but not yet financed, has led to a reduction of the stock from 2.3 bn ECU to 1.7 bn ECU of which almost
half are still problematic. The Governor has therefore established a "task force" under the authority of the Vice-Governor elect, Mr. Murtfeld, to ensure that loans for suitable projects can be disbursed.
Some rules of staff regulations are currently being adapted to meet the specific needs of the Fund and give more legal security to staff. The amendments will be submitted for approval to the Administrative Council. With a view to greater stringency, conditions for the granting of contracts of definite or indefinite duration are being defined clearly. The organisational structure of the Fund's operational services has been strengthened, both through reorganisation and through the creation of new posts in the 1994, 1995 and 1996 budgets, in particular concerning development, projects, treasury and internal control. New information technology has been introduced, and all staff members have received the requisite training. Regulations concerning housing loans for staff members and end-of-year premiums have been adopted by the Administrative Council.
Concerning the Autonomous Pension Fund, the Governor has excluded the disputed possibility of withdrawing the contributions paid to the Fund before 10 years have elapsed without the staff member leaving the organisation.
For the future organisation of the Fund's pension scheme, an international call for tenders has been addressed to several specialised consultancy firms. In collaboration with the chosen firm, the Fund will study the legal form, decide on the manager and redefine the procedures of administration and control of the pension scheme.
The results of the investigation of projects financed between 1985 and 1993, carried out by the consultancy firm Price Waterhouse, were made available to the Fund's organs in September 1995 and received the appropriate follow-up.
The judicial and disciplinary proceedings against the former Governor and staff members are continuing. As far as the disciplinary proceedings are concerned, three staff members have lodged an appeal against their revocation with the Council of Europe Administrative Tribunal. The appeals were rejected by the Tribunal on 29 September 1995. Another case is pending before the said Tribunal.
The accession of Slovenia, Bulgaria and Lithuania took effect in February and July 1994 and January 1996 respectively. The Chairman of the Governing Body has pursued his efforts to inform potential candidates for accession, in particular in Central and Eastern Europe, of the Fund's possibilities. Visits in Romania and Latvia have generated strong interest and might result in accession in the course of this year.
The first two member States from the above-mentioned region, Slovenia and Bulgaria, have presented only one project to the Fund to date: Bulgaria requested, on 22 September 1995, a loan of USD 11 million for the restructuring of the health sector. In order to facilitate access to the Fund's loans, the Governor, in cooperation with the Secretariat, is organising a series of information workshops in the new and potential member countries. The first such workshop was held in Ljubljana in June 1995 and the second in Vilnius in November 1995.
As of 8 January 1996, following the accession of Lithuania, authorised capital stands at 1,306,719,000 ECU. This sum corresponds to the subscribed capital since Belgium, Denmark and Liechtenstein took part in the fourth increase in the capital, decided in 1990. Once the expected payments will have been made, paid-up capital will amount to 147 million ECU. Set-aside reserves amount (December 1995) to ECU 465 million (without the 1995 profits, standing at ECU 63.7 million as at 30.11.1995).
Since the reply to Assembly Recommendation 1230, no further social loans or loans through the Emergency Account have been made, as no voluntary contributions, required to trigger the Emergency Account mechanism, were made. The Fund's "soft loans window" (loans at preferential rates) has been reviewed in its entirety by the Administrative Council and replaced in December 1995 by a "Selective Trust Account". This Account shall receive both voluntary contributions and part of the Fund's profits and be used to subsidise the interest rates attached to some projects of high social relevance.
2.Resolution 288 (1995) adopted by the Governing Body of the Social Development Fund on 19 December 1995
The Governing Body,
Considering that the Social Development Fund is the financial expression of solidarity among the countries of the Council of Europe;
Recalling the discussions and decisions at its 144th and 145th meetings;
Having considered the Governor's memoranda on the revitalisation policy and on the programme for 1996 transmitted to it by the Administrative Council (CD/147/682/95);
Taking note of the results of the ex-post evaluation of projects financed between 1985 and 1993 carried out by PRICE WATERHOUSE and the measures taken as a consequence hereof;
Taking note of the decisions of the Administrative Council at its 177th and 178th meetings;
Taking note of the amendments to Resolution 1313 (1993) of the Administrative Council decided in March and July 1995;
1. welcomes the progress made to date in the revitalisation of the Fund's activities, and the establishment of the Selective Trust Account and notes that the discussion on the future strategy should appear on the agenda at least once a year;
2. takes note that the statutory objectives laid down in Article II of the new Articles of Agreement have set good criteria for the admissibility of projects by the competent bodies;
3. urges the Administrative Council, the Governor and the Secretariat to ensure that the Fund focuses on its priority fields (aid to refugees, migrants and displaced persons and to victims of natural and ecological disasters) and encourages accession to the Fund of all the Council of Europe's member States;
4. urges the Administrative Council, through a specific strategy, to propose appropriate measures to enable the Countries of Central and Eastern Europe to accede and actively participate in the Fund's activities;
5. aware that eventual assistance to non-member States in its priority fields should, in exceptional cases, be possible, decides to bring to the attention of the governments the fact that such assistance requires, inter alia, the appropriate guarantees;
6. reiterates the will of the Fund to contribute in the framework of international reconstruction programme to solving refugee problems in connection with Bosnia-Herzegovina and other countries of former Yugoslavia directly affected by the tragedy;
7. emphasises the necessity for the Fund to make itself better known in the international circles.