Doc. 8378

19 April 1999

Council of Europe Social Development Fund: activities and outlook

Recommendation 1378 (1998)

Reply from the Committee of Ministers

adopted at the 667^th meeting of the Ministers’ Deputies (7-9 April 1999)

The Committee of Ministers shares many of the views expressed in Recommendation 1378 (1998). Out of consideration for the specific status of the Organs of the Social Development Fund, it has sought the opinion of the Governing Board before adopting this reply.

ad. Paragraph 1:

      The Fund’s Organs have approved the awarding of a Fund financial contribution in the form of a grant of a maximum of EUR 1.5 million over two years (1999 and 2000) to finance work to prepare and support projects as part of the Council of Europe’s activities involving social cohesion. The Fund’s contribution will be clearly allocated to specific projects in fields that fall within the Fund’s priority objectives and are in line with the provisions of Article II of the Statute. The Administrative Council has stressed that the money must be used for studies that produce projects and not for general studies, and that no new bureaucracy should be created. The Fund set up a “social cohesion” antenna at the Council of Europe in June 1998 to help strengthen co-operation in this area.

      In November 1997, the Fund announced that an additional ECU 1 billion would be allocated over a three-year period for funding job-creation projects.

      The Administrative Council has widened the project eligibility criteria and the lending procedures in the job-creation and vocational-training fields in particular, as well as in other social sectors such as health, the environment, improvement of living conditions in disadvantaged urban areas and the protection and rehabilitation of the historical heritage, with a view to enabling the Fund to increase its volume of lending for projects in these fields in line with the wishes of the Heads of State and Government.

ad. Paragraphs 2 to 5:

      The Committee of Ministers, like the Fund Organs, shares the Assembly’s disappointment at the low percentage of projects involving aid to refugees and other priority fields and stress that the Fund is at the disposal of its member States to grant loans in these priority fields at their request and subject to compliance with the procedures in force and the financial-equilibrium criteria established by the controlling Organs. Even if, formally speaking, the Fund can only fund projects that are submitted to it by its member States, various exceptional measures have been undertaken (see response to Paragraph 7.iv.c below); and now the Organs of the Fund are, with the full support of the Committee of Ministers, giving urgent consideration to the dramatic humanitarian situation resulting from the Kosovo crisis and the means of providing assistance.

The threefold development strategy which the Assembly outlined for the Fund, namely:

-       refocusing activity on its priority objectives,

-       striving for a better geographical and financial distribution of its loans portfolio, and,

-       extending its operations in central and east European countries,

      was reasserted by the Fund Organs at their annual Joint Meeting in Sintra in June 1998 in connection with the annual updating of the medium-term development plan.

      With regard to Paragraph 5, Poland, Latvia, the Czech Republic and Slovakia have joined the Fund since August 1998 and the Fund now has thirteen central and east European member countries. Official requests for accession conditions have been received from Albania and Ukraine. Contacts with the other countries mentioned in the Recommendation are continuing.

ad. Paragraph 7.i:

The Committee of Ministers takes note of the Assembly's Recommendation to urge those member States of the Council of Europe which have not yet done so, to join the Fund at the earliest opportunity.

ad. Paragraph 7.ii:

The question of inviting the European Union to join the Fund is being considered by the Committee of Ministers, and was the subject of consultation with the representatives of the European Union at the 13th Quadripartite meeting on 10 February 1999. The Fund already co-operates closely with the European Union, among other things, in identifying projects in the context of the enlargement of the Union.

ad. Paragraph 7.iii:

      The Committee of Ministers takes note of these recommendations addressed to the Fund member States but recalls that it is for those member States, rather than the plenary Committee of Ministers, to react to them. The Fund Organs have been discussing these issues since the Joint Meeting in Sintra in June 1998 and the Governor has submitted preliminary reflections to the Fund Organs. This issue is under discussion in the competent Organs and will be an important topic of the Fund Joint Meeting to be held in Slovenia on 28-30 June 1999.

ad. Paragraph 7.iv.a and b:

      The Handbook on project preparation indicates that the Fund has always been willing to take these costs into consideration.

      Insofar as its limited resources allow, the Fund sends staff into the field to help upstream with the preparation of projects. It has set up (and subsequently strengthened) a Technical Advisory Directorate made up of experts in various fields relevant to Fund projects (migration, environment, engineering, housing construction, health and education, etc) who can provide such assistance, although they mainly conduct technical visits to monitor projects.

ad. Paragraph 7.iv.c:

      This use of the STA has been approved on a highly exceptional basis in two cases involving emergency aid projects for Bosnia-Herzegovina, which is not a member of the Fund. Given the limited funds on the account and the relatively high cost of guaranteeing loan principal, the STA is normally only used for providing interest-rate subsidies, for which there is a high demand from some of the Fund’s member countries.

ad. Paragraph 7.iv.d:

      Following contacts at the highest level and at operational level, co-operation with other intergovernmental financial institutions has been renewed through the co-financing of several projects with the World Bank and the EIB (in particular, in Bosnia-Herzegovina, Romania and Bulgaria). The Fund is in the process of negotiating a Memorandum of Understanding with the EBRD concerning co-operation between the two institutions. At operational level, the Fund has very regular contacts with the EBRD and it also co-operates closely with the World Bank and the EIB.

ad. Paragraph 7.iv.e:

      Contacts have been established with the UNHCR and several member States with a view to facilitating the funding of joint projects. In 1997, the Chairman of the Governing Board and the Governor met Mrs Ogata, the UN High Commissioner for Refugees. At operational level, a UNHCR/Fund contact group meets regularly to identify new projects. Concrete results have been achieved through co-operation with member governments and national institutions such as the German Kreditanstalt für Wiederaufbau, with which the Fund is financing a housing loan programme for refugees returning to Bosnia-Herzegovina as part of a housing construction and renovation strategy worked out with the UNHCR.

ad. Paragraph 7.iv.f:

      The awareness-raising efforts are continuing. One example was the conference organised in Prague in March 1998 under the aegis of the Parliamentary Assembly, at which the Fund was able to present its operational potential to a wide range of political and business figures from central and east European countries. A brochure has been published on the Fund’s work for refugees. The information files on the Fund’s potential for action are regularly updated and republished by the Development Department, which circulates them widely. The Fund also took part in the CLRAE Economic Forum in Bucharest in July 1998, in the Conference on Reconstruction and Development of the Republic of Croatia (Zagreb, 4-5 December 1998) and in other events such as the annual meetings of the World Bank and the EBRD, where the Fund’s representatives had the opportunity to contact many decision-makers from existing and potential member countries. In the course of their visits to the member States, the Chairman of the Governing Board, the Chairman of the Administrative Council, the Governor and the Vice-Governors all promote co-operation with the Fund, in particular in countries that have never or only rarely submitted projects and in the new member States.

ad. Paragraph 7.iv.g:

      The Fund’s priority fields of action are set out in Article II of its Articles of Agreement, as adopted by the Committee of Ministers of the Council of Europe. As aid to refugees and migrants is one of the two priority fields, many projects for Roma/Gypsies, where the latter are migrants or refugees, can already be regarded as falling within the Fund’s priority fields. However, since the Fund cannot itself initiate projects, it falls to the member States to submit and guarantee projects in this area.

ad. Paragraph 7.iv.h:

      The Fund has had intensified relations with the Parliamentary Assembly since 1993. The Chairman of the Governing Board has been involved in in-depth debate with the Assembly and the relevant committees, as was the case with the report by Mr Gross and Recommendation 1378 (1998).

      However, the Fund’s operational activities remain the responsibility of the Fund and its own Organs, which take due note of the recommendations that the Assembly regularly makes to them.

ad. Paragraph 7. v:

The Committee of Ministers endorses the appeal to draw attention to the Fund's potential for action and in this context recalls that the Fund is signatory to the Memorandum of Understanding concluded in March 1998 between the Commission and other financial institutions (EBRD, World Bank, etc.) which aims at co-ordinating activities in order to avoid overlap of co-financing.

ad. Paragraph 8:

      The Committee of Ministers notes the Assembly's appeal to urge its members to take action at national level to encourage their governments to implement the measures set out in Recommendation 1378 (1998).