Social and economic reform, governance and environment sector projects will be the strategic priorities for European Union development cooperation with China over the next five years. Around EUR 50 million (USD 46 million) per year is allocated for technical assistance projects, reaffirming the EU's place as one of China's most important donor agencies; and an ongoing decentralisation process is expected to reduce the bureaucratic delays for which it has in the past been notorious.

A country strategy paper confirming the new programme priorities is in the final stages of approval by the European Commission.

This will consolidate the programme's trend, over the last five years, away from the agriculture/rural development sector projects that were its initial mainstay.

EU-China cooperation began in the late 80s with the donation of butter, oil and milk powder worth EUR 100 million (USD 122 million at then exchange rates). Income from the sale of these products was re-invested in the Chinese dairy industry, with additional grant funding to build up dairy stocks, import milk processing equipment and provide technical assistance on product and market development. This programme has continued, with increased emphasis on restructuring the dairy industry and supporting smallholder producers. The current phase is billed for completion at the end of this year, but continued support for the dairy sector, or other agricultural sectors, may continue under the 'economic reform' rubric of the new country strategy.

The 1990s saw a number of other agricultural and fisheries development projects that are now completed or drawing to a close, with no plans for extension phases: prawn farming in Liaoning; fisheries in Fujian; maize and sunflower development in Jilin; intensification of crop production in Xinjiang; cashew farming in Hainan; conversion of marginal land in Jiangxi; improved irrigation and land reclamation in Ningxia; livestock development in Qinghai; potato development in Qinghai; water buffalo development in Southern China (the last two are included in the table linked above).

From 1991, the EU also provided EUR 7.9 million (then c. USD 9.6 million) to establish, in Beijing's central business district, a China-EU Centre for Agricultural Technology (CECAT). Equipped with state of the art conference facilities, audiovisual equipment and studio, and a middle ranking hotel, the Centre was conceived as a major hub of information and technology exchange that would link European agribusiness interests with Chinese farmers, policy-makers and agro-processing enterprises. Over the five years of the project, a staff team of Chinese and European specialists engaged in a range of market research, consulting and information services; but uptake of the Centre's conference, hotel and other facilities was low. A planned extension phase was to have concentrated on business support services and EU-China linkages, with an additional component to strengthen Chinese farmers' technical associations and cooperatives. But, fully five years after the extension was first mooted, final agreement has not yet been reached between the European and Chinese partners. Barring a thirteenth hour break-through, the project will now be shelved.

Rural headaches

The 1990s also saw EU efforts to move beyond relatively technocratic assistance in agriculture to more integrated rural development and poverty alleviation programmes.

In 1997, a pilot project of this kind was started in Yunnan's Honghe Prefecture. It began with participatory training in community planning and microfinance, but never got beyond the pilot phase. According to the EU Delegation in Beijing, the project was not pursued because of the management difficulties of such projects, and the present [programme] priorities. Others associated with the pilot phase have suggested, variously, that the project was started prematurely before a full financing agreement for follow-up activities was reached, and/or that it was not felt sufficiently to promote EU-China links.

Headaches in Honghe were as nothing compared to the migraine of Panam, in Shigatse Prefecture of the Tibet Autonomous Region. From the early '90s the European Commission began to plan an agricultural extension project in the county, with some social sector inputs, to complement a Chinese government 'one river, two streams' irrigation infra-structure development programme. The EU project was approved in 1994, but a subsequent article in a British newspaper triggered a storm of protest from Tibet solidarity groups and some European parliamentarians who alleged that the project would support Han colonisation of Tibetan areas, undermine the traditional, Tibetan rural economy, and degrade the natural environment. More sober critics pointed out that the investment of EUR 7.6 million (then USD 9.4 million) in a single Tibetan county was somewhat disproportionate.

A 1995 re-appraisal mission largely vindicated the original project design, if not the concentration of resources, finding that Panam farmers treated the suggestion that Han would want to occupy the newly irrigated land with derision . . . [saying] no mainland farmer would wish to move [there] due to the poverty and hardship of the area. But by this time the issue had become highly politicised. Involving international NGOs in the implementation of the project was seen as a way of winning over critics, and the European Commission duly set about looking for likely NGO partners. In the end, Save the Children (UK) were contracted to implement an education component, and the Italian NGO, ASIA, agreed to manage a health component.

But it was not until July of this year that the consultants contracted by the EU finally arrived in Panam to start implementing the project, long after Chinese counterpart activities had been completed.

Environmental relief

Environment sector projects became a new area of focus in the 1990s, and have proceeded more smoothly from design to implementation. Following some policy dialogue, joint research projects and fellowship programmes, the Commission in 1995 identified as priorities for future cooperation 'brown' environmental issues (with particular emphasis on air and water quality, waste management and urban pollution), and energy efficiency (including energy savings, renewable resources, and cleaner production methods).

An integrated environmental management programme in Liaoning was started with relative alacrity. With an EU contribution of EUR 48.5 million (USD 34 million at current exchange rates), this is much the largest project in the current EU portfolio. It is intended to help the provincial government to develop comprehensive management strategies that link economic restructuring and investment with pollution control and urban planning.

September of this year saw the start of a national environmental management project that seeks to bring much the same cross-sectoral planning approach to central government institutions and policy making. The project will also emphasise EU-China technology and information transfer.

A large energy efficiency project is now in preparation, and expected to start next year.

A forestry project is also planned for Hainan, Hunan and Sichuan. This is being developed in collaboration with the World Bank which, now that China has passed the threshold for receiving soft loans from the Bank, is looking for other donors to provide technical assistance programmes to complement loans that it makes on commercial terms. Similar arrangements may follow in future. The EU has also provided funding for an integrated pest management programme implemented by the UN Food and Agriculture Organisation.

Governance and reform

Governance and the rule of law have been other key areas of EU programme development over the last few years. From 1995, the Commission began to develop two projects that were quite adventurous by the standards of the time, when these were considered sensitive and difficult areas in which to work: an exchange and training programme for Chinese legal professionals, and a project to strengthen village committee election processes by training Civil Affairs officials and village committee members. These, however, did not start up until 2000 and 2001 respectively.

The field of governance is often broadly construed to include almost all aspects of public administration. According to Ms. Francoise Collet, Development Cooperation Counsellor with the Beijing EU Delegation, future activities in this field are likely to include support for civil society capacity building and assistance to Chinese authorities in preventing illegal migration from areas such as Fujian. A new project is also being developed to improve economic and social rights in poor, ethnic minority areas of Yunnan.

The 'economic and social reform' programme area is perhaps even broader, and in some ways overlaps with governance. EU delegation head, Ambassador Klaus Ebermann described it in a speech this summer as encompassing 'institutional strengthening and capacity building, human resource development and the promotion of a sound business regulatory framework and the transfer of know-how and technology in the private sector.'

This suggests extremely wide parameters for future engagement from a social security reform project, currently under preparation, to assist the Ministry of Labour and Social Security in developing and extending social safety nets, to potential further 'human resource development' assistance in previously supported areas such as STD/HIV/AIDS prevention and management.

'Human resource development' also provides fertile ground for cultivating commercial, educational, cultural, and political links between China and Europe. This is an explicit goal of many EU projects. A blend of diplomatic and commercial interests is evident in many bilateral donor programmes, but the EU in China appears particularly ardent in its desire to promote the visibility and influence of Europe; propelled, perhaps, by concern at the evident influence of the United States.

Improving the cash flow

As the new programme areas unfold, Ms. Collet is confident that projects will come on-stream quicker following a decentralisation process that is expected to be completed by next year.

As the whole European Commission is responsible for approving projects, significant delays are inevitable at the approval stage, if only to allow for translation of documents into the member state languages.

But, according to Ms. Collet, a more significant cause of past delays was a bottleneck in the contracting, through competitive tenders, of European consultants to implement the projects. Only after a final financing agreement had been signed can tendering begin and in the past this has generally taken at least one year, with the process managed from Europe.

In the financial year 1997/98, a total of EUR 65 million was committed in new project funding, but only EUR 10 million was actually disbursed. Backlogs of committed funds 'waiting to be contracted' had by then built up to EUR 220 million; but, since then, Ms. Collet says, 'we have improved our performance,' and the uncontracted funds now stand at around EUR 75 million.

As of next year, responsibility for contracting will transfer to the Beijing delegation, and it is expected to proceed more rapidly as a result. The delegation will also have a greater role in project design, and this too is expected to accelerate the process from conception to implementation. A three-year programming cycle that the Commission is now introducing may also make for smoother planning.

However, past delays have not all been the result of internal EU bureaucracy. Chinese bureaucratic processes also involve complex negotiations between aid gatekeepers at the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) and other line ministries and provinces. Project agreements need to reconcile multiple, institutional interests on both sides.

It is therefore perhaps not surprising that misunderstandings have sometimes arisen even after a project has been agreed in principle as in the case of the ill-fated follow-up to the CECAT project.

Ms. Collet nonetheless affirms that relations with MOFTEC are generally cordial. 'We can understand the need for China to have a single coordinator for incoming aid,' she says.

NGO match funding

In addition to its own technical assistance projects, the EU has over the last decade provided at least EUR 5 million in co-funding for a wide range of projects implemented by international NGOs in China. This has come from several distinct, funding streams: one budget line specifically for NGO community projects, another for environmental projects, and the EC Humanitarian Affairs Office, which has supported a number of emergency relief and rehabilitation initiatives. As all of these are global programmes, application procedures are not expected to be affected by the decentralisation process. Applicants can continue to expect decisions to take at least twelve months for development project, and three months in emergencies.