European union AFD by Agence Française de Développement

Agence Française de Développement

EUROPEAN UNION

Rehabilitation and renovation of neighborhoods in Tunisia © Augustin Legall

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AGENCE FRANÇAISE DE DÉVELOPPEMENT

A partnership strategy rooted in the European integration process Neven MIMICA, European Commissioner in charge of International Cooperation and Development

“In order to maximise the impact of aid, we will have to fully harness the potential of donor coordination and (loan-grant) blending”

Agence Française de Développement and the European Union address the global challenges of sustainable development and the fight against poverty by promoting a partnership strategy. It is firmly rooted in the European integration approach which aims to:

Enhance mutual knowledge between European institutions and AFD;

Propose a European and innovative response to development financing;

Strengthen the dialogue in the field between European Union Delegations and AFD agencies in order to provide coherent, high-quality and ambitious aid for environmental protection and social progress.

Feed into the European debate in order to promote the European Union’s values and support operational flexibility. Since 2007, AFD has implemented over EUR 3bn of concessional loans with the contribution of EUR717m of European grants from the various loan-grant blending facilities and delegated cooperation. These partnerships have generated over EUR 11bn of investments for sustainable development. The close consultation prior to these cofinancing operations has led to a very practical implementation of the principle of the division of labor between donors.

Increasingly important partnership EU funds managed by AFD for partner countries between 2008 and 2014 (total in EUR M)

717 543 325 138 5

2008

2009

2010

182

2011

2012

2013

2014

In 2013, with EUR 56bn, the European Union (EU institutions and Member States) was the world’s largest donor for Official Development Assistance.

Key dates 1941: 1941: Creation of the Caisse Centrale de la France Libre, which went on to become Agence Française de Développement (1998).

2005: Paris Declaration on Aid Effectiveness and adoption of the European Consensus on Development.

1957: The Treaty of Rome created the European Development Fund (ACP and French overseas territories).

2007 : Adoption of the European Code of Conduct on Complementarity and Division of Labor.

2001: EuropeAid Cooperation Office merged with Development DG (2011).

2008 : AFD, accredited by the European Commission, was authorized to manage European funds. The Council adopted principles governing loan/grant blending.

2009: High Representative of the Union for Foreign Affairs, European External Action Service, policies aligned with the EU’s external action. 2011: “Agenda for Change”, new European foreign aid policy. 2012: Launch of EU-Member State joint programming in 12 pilot countries. 2014: AFD and EU cofinanced 128 projects together on five continents.

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Enhancing mutual knowledge between AFD and European institutions Common agenda France redefined the principles and priorities of its international solidarity policy following a process launched during the Development Conferences in 2012, which ended in 2014 with the adoption of the first law on the orientation and programming of France’s foreign aid. The overhaul of France’s international solidarity policy largely converges with what was conducted by the European Union, which in 2011 adopted the “Agenda for Change”.

The commitment made by the Council and European Parliament to earmark at least 20% of the European budget to the fight against climate change is fully in line with the mandate of AFD, which by committing EUR 2.4bn of “climate” finance in 2013 alone, is one of the main international public financiers of the fight against climate change.

Fight against poverty

Law on development and international solidarity, France, 2014

Concentration of aid Role of private sector Consistency of policies Gender equality

Differentiated partnerships Reduction of inequalities “Climate” finance Neighborhood and Africa priority

Agenda for Change, European Union, 2011

From complementarity to joint innovation Agence Française de Développement has the activity of a donor, similar to that of the DG Development and Cooperation (DEVCO), except the latter operates exclusively through grants, whereas AFD offers a wide range of financial tools, including grants, sovereign and non-sovereign loans and guarantees, and risk sharing mechanisms mobilized to encourage local banks to allocate loans for investment, job creation and social and environmental responsibility. Innovative cofinancing mechanisms have been set up on the basis of this complementarity, for example, loan-grant blending facilities.

Human and financial resources pooled DG DEVCO shares its competence for programming of EU external aid with the European External Action Service and its network of 145 EU Delegations (EUDs) and is responsible for its implementation. The EUDs are responsible for identifying and appraising projects financed with national budgets, procurement, the disbursement of funds and the supervision, evaluation and audit of projects. These activities are very similar to those of AFD. In 2014, the two institutions agreed on an extensive mutual opening up of the training programs of AFD and DEVCO. This is an effective way of facilitating mutual comprehension and cooperation on the field.

EUR

7.8

EUR

AFD commitments in 2013

DEVCO commitments in 2013

Private sector role in development AFD and the European Union share the conviction that the private sector is a major actor in development and a formidable driver in terms of meeting the considerable needs of communities, in particular via job creation and the provision of goods and basic services to the poorest. The two partner institutions are seeking comple-

mentarity between public and private actions for development. For its joint actions with the EU and private sector, AFD benefits in particular from the expertise of its Private Sector, Banks and Local Authorities Department and from its subsidiary PROPARCO.

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Proposing a European and innovative solution to development financing Since 2007, AFD and the European Commission have taken the step towards innovative operational cooperation by implementing mixed mechanisms combining European grants with AFD loans.

3 2

2010 Investment Facility for Central Asia (IFCA)

2008

Neighbourhood Investment Facility (NIF)

1 2012

2012 Investment Facility for the Pacific (IFP)

Caribbean Investment Facility (CIF)

6 2010 Latin America Investment Facility (LAIF)

5 2007 EU-Africa Infrastructure Trust Fund (ITF)

2012 Asian Investment Facility (AIF)

Geothermal energy

Tramway, Morocco

Yourte, Khorezm desert, Uzbekistan

In the aftermath of Typhoon Bopha, Compostela Valley, New Bataan, Mindanao

Niamey, Niger

Water management, Mexico

Geothermal power generation in Dominica: AFD is assisting Dominica in the implementation of an appropriate institutional framework via a EUR 6.5m concessional loan to the Dominican State and EUR 2m grant from the EU Caribbean Investment Facility. This project could lead to the construction and operation of geothermal power plants with a capacity of approximately 100 MW, which will benefit Dominica, but also Guadeloupe and Martinique via the creation of an electricity interconnection.

Construction of the Rabat tramway: by connecting the two cities of Rabat and Salé, the tramway, which is cofinanced by AFD (EUR 45m loan) and EU Neighbourhood Investment Facility (EUR 8m grant), addresses the strong growth in travel, while respecting the environment, and reclaims urban space, which suffers from car traffic. This infrastructure strengthens economic and social cohesion in the cities of rabat and Salé.

Energy, water and sanitation in Uzbekistan: AFD and the EU, seeking to promote regional balances and climate issues in Central Asia, have started appraising several projects with the aim of fostering green and inclusive growth in Uzbekistan.

Climate resilience in the Philippines: the cofinancing by AFD (EUR 150m), Asian Development Bank (EUR 250m) and European Commission (EUR 4m) aims to build the capacities of local authorities to increase their climate resilience.

Power distribution grid in Niger: at the request of the Nigerien authorities, AFD and the European Union are participating, via a EUR 11m ITF grant, in financing programs which aim to scale up power generation in order to support economic development and the people’s access to electricity.

Supporting the national integrated water management policy in Mexico: two loan agreements totaling EUR 200m have been signed by AFD and KfW with the Mexican Government to support the water reform. The program specifically aims to increase the water sector’s resilience to climate change. It has benefited from a EUR 10m grant from the EU Latin America Investment Facility.

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Loan-grant blending facilities The facilities are financed by grants from the EU and Member States. Thanks to a leverage effect of up to 17, they make it possible to unblock loans from public and private institutions for development projects, lower the cost of borrowing for beneficiaries, and support projects with a technical assistance component. This innovative cofinancing mechanism, which is especially used for infrastructure projects

and measures to support small and medium-sized enterprises, can also meet needs in social sectors, such as health and education. Its added value: resources are pooled to finance projects on a larger scale and with a better quality in terms of economic, social and environmental sustainability.

New governance for regional loan-grant blending facilities Commission Secretariat

Commission Secretariat

Discussion on project portfolio and technical approval Commission European External Action Service Financial institutions

Project note of financial institution

Final project note of financial institution + Letter of Agreement from EU delegation

Operational Board ommission C European External Action Service Member States Financial institutions (observers)

RE-SUBMIT NO Financing agreement and contract signing

Commission financing decision

YES

Delegated cooperation AFD is one of the 24 European agencies accredited by the Commission and eligible to manage EU funds through its own procedures for the benefit of development partners. Consequently, in addition to grants from blending, AFD received EUR 250m of delegated funds from the Commission between 2008 and 2014, i.e. 21% of the total amount of funds delegated by the Commission over the period (EUR 1.2bn). AFD has itself transferred EUR 48m to the Commission, i.e. 20% of total transfers made to the Commission. Added value of delegated cooperation: transaction costs reduced, impact maximized and greater European visibility. By increasing delegation of funds (EU-AFD) and transfers (AFD-EU), the two institutions have shown the way in terms of complementarity and the division of labor between European donors.

Haiti © Chantal Regnault

Example of a project in West Africa The project for a high-voltage interconnection between Ghana and Burkina Faso, and its extension towards Southern Ghana, cofinanced by the EU, AFD, EIB and World Bank, illustrates the specificities and advantages of loan-grant blending:

Ownership: This project is part of the ECOWAS priority program for regional power generation and transmission.

Poverty reduction approach: Energy is provided by pooling resources at regional level.

Additionality: The grant provided by the EU ultimately allows the allocation of soft loans from financial institutions by reducing the cost of financing for the National Electricity Company of Burkina Faso (Sonabel) and by funding a technical assistance mission in Ghana.

Sustainability: AFD’s non-sovereign loan (without a guarantee from the State of Burkina Faso) is a sign of the confidence in the relationship with the partner country and with sector actors.

Division of labor: Financial institutions request an EU grant together, which implies joint preparatory work and donor coordination for the entire project.

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Strengthening the dialogue in the field between European Union Delegations and AFD agencies The new governance for loan-grant blending facilities came into force in 2014 and focuses on collaboration between AFD agencies and European Union Delegations.

AFD European Union

145

agencies

150

countries of operation

Joint programming

Trust funds

Joint programming was introduced by the “Agenda for Change” in 2011 and is promoted at the highest political level. It has a number of advantages: European integration, European visibility, enhanced aid predictability, increase in opportunities for more joint initiatives in the field, division of labor, simplification of procedures, and reduction of transaction costs. The EU and Member States have set out to take up the challenge of programming their aid together. This provides very interesting prospects, which AFD is working for in an operational manner.

The European Union’s new Financial Regulation (2012) aims to extend the range of tools of the European aid system by authorizing the European Commission to create and manage a trust fund designed to mobilize various sources of EU financing and collect contributions from Member States, as well as from donors from third countries. This innovation, which offers the possibility of pooling European resources, expertise and implementation capacities, has the full support of AFD.

Bêkou Fund in the Central African Republic To date, the EU’s “Bêkou” trust fund for CAR has a budget of EUR 64m to assist the population of the Central African Republic, both in the emergency response phase (humanitarian aid) and in the more long-term development assistance phase. This fund aims to avoid the desynchronization between emergency humanitarian responses and development responses in order to avoid inconsistencies in public policies in the long term. A new type of European aid coordination has come about via this instrument with the pooling of not only resources, but also of competences for interventions. The first contributions to the Bêkou trust fund stand at EUR 41m from the European Commission, EUR 10m from France, EUR 10m from Germany and EUR 3m from the Netherlands.

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Feeding into the European debate in order to promote European Union values, operational flexibility and effectiveness Strengthening the dialogue with Members of the European Parliament Workshops are organized on a regular basis in order to strengthen mutual knowledge between AFD and Members of the European Parliament, particularly the Committee on Development. They provide the opportunity to present the diversity of AFD’s activities and intervention tools, its European activities, and its participation in the process for the division of labor between European aid actors and for the construction of a European development finance architecture, to MEPs, their teams and Parliament administrators.

AFD’s events at the European Parliament Opening of the “Objectif Développement” photo exhibition in November 2013

Conference on the international action of local authorities in October 2014

Following a tour in major cities in France and Africa, AFD’s “Objectif Développement” exhibition was opened in Brussels by Jacques Moineville, AFD’s Deputy Chief Executive Officer. The “Objectif Développement – A New Look at the South” exhibition was set up at the European Parliament from 25 to 29 November 2013.

Raising awareness of development issues is a priority for AFD, which regularly organizes conferences at the European Parliament to give representatives from political, academic and professional circles the opportunity to debate and dialogue with a broader public. Local Authorities Conference, European Parliament © Raymond Dakoua

AFD, founding member of the “Development Policy Forum”

Practitioners’ Network for European Development

Friends of Europe is an independent European think tank which addresses a number of European issues. AFD became a member in 2008, when the Friends of Europe “Development Policy Forum” was set up, alongside the World Bank, UN, German cooperation, European Commission, U.S. Mission to the EU and JICA – the Japanese development agency. The cycle of debates and roundtables focuses on development policies and seeks to gather experts from recognized organizations, including non-European organizations. It meets the increasing need for an appropriate and neutral forum to debate and analyze development policy issues in Brussels. High-ranking officials and AFD experts regularly participate in the conferences organized by Friends of Europe.

The Network was set up in 2007 under the impetus of AFD and its German counterpart KfW, in the context of the adoption of the EU Code of Conduct on complementarity and the division of labor. It has established a community of European bilateral actors, brought together on the basis of their operational expertise and able to maintain a permanent dialogue with the European Commission, which is a member. The informal Network comprises 14 actors and helps its members to advance work in diverse areas: for instance, in 2014, it produced a study on the division of labor in fragile States, mandated its coordinator to convey the voice of agencies within the task force responsible for preparing the Commission’s gender plan, and allowed a joint negotiation with the Commission on the new legal framework for delegated cooperation. Twice a year, the Network gathers the directors of member agencies, during its annual meeting and a high-level meeting in Brussels, to give impetus to and monitor the implementation of common strategies.

AGENCE FRANÇAISE DE DÉVELOPPEMENT

AFD, the Agence Française de Développement , is a public development-finance institution that has worked for seventy years to alleviate poverty and foster sustainable development in the developing world and in the French Overseas Provinces. AFD executes the French government’s development aid policies.

FFEM PROPARCO, AFD’s subsidiar y dedicated to private investment, promotes private investment in emerging and developing countries in order to boost growth, promote su stainable development and reach the Millennium Development Goals. Its financing is tailored to the specific needs of investors in the productive sector, financial systems, infrastructure and private equity investment.

The French Global Environment Facility / Fonds Français pour l’Environnement Mondial (FFEM) is a bilateral public fund initiated by the French Government in 1994. The FFEM secretariat and its financial management are entrusted to the Agence Française de Développement (AFD). The FFEM co-finances projects that encourage the protection of the global environment in developing countries. Its co-financing is exclusively done as grants and is used for the implementation of pilot projects that combine environmental protection and economic development in the recipient countries. The FFEM is an influential strategic instrument for the French policy on Official Development Assistance regarding global environmental protection. Its activities focus on the topics of biodiversity, international waters, the climate change, land degradation and desertification, persistent organic pollutants and the stratospheric ozone layer. By the end of 2013, the FFEM has co-financed 258 projects with €299m. Two thirds were spent on sub-Saharan Africa and the Mediterranean.

www.proparco.fr

www.ffem.fr

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@AFD_France https://twitter.com/AFD_France

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AFD REPRESENTATION IN BRUSSELS

5 rue Roland Barthes 75598 Paris Cedex 12 – France Tél. +33 1 53 44 31 31 Fax +33 1 44 87 99 39 www.afd.fr

37 square de Meeûs 7e étage 1000 Bruxelles Téléphone : +32 (0) 2 287 73 00 afdbruxelles@afd.fr

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Creation: Planet 7 – February 2015

In 2013, AFD committed €7.8 billion to projects in developing and emerging countries and in the French Overseas Provinces. These AFD-financed projects will provide schooling for children, improve maternal health, promote equality between men and women, support farmers and small businesses, and bolster access to drinking water, transportation and energy. These newly-funded projects will also help mitigate climate disruption by abating nearly 3.3 million metric tons of carbon dioxide-equivalent annually.

This publication was printed in an environmentally responsible manner using vegetable-based ink and PEFC™ paper (sustainable forest management).

Working on four continents, AFD has seventy-one field offices and bureaus, including nine in France’s overseas provinces and one in Brussels. The Agency provides financing and support for projects that improve living conditions, promote economic growth, and protect the planet.