B Explanatory Memorandum
1 Introduction
1. The Standing Committee of the Consultative Assembly, by Order No. 105 of 11th January 1957, which cancels and replaces its Order No. 77 of 9th July 1955, instructed a group of independent European and African experts to " submit proposals designed to encourage and accelerate the economic and social development of Africa and to raise the standard of living of the African peoples, in the interests of the prosperity both of Africa and of Europe, through co-operation on an equal footing between the African countries and the member countries of the Council of Europe ". The Group of Experts, composed of six personalities from European and six from African countries, held two meetings. Its report, prepared under the above-quoted terms of reference, was submitted to the Assembly at the second part of its Ninth Session in October 1957. It was then referred to the Economic Committee, which, on 26th October 1957, passed it to a Sub-Committee for study.
2. The Sub-Committee, of which M. Serres was appointed Chairman and which was composed further of MM. Heckscher, le Hodey, Rapporteur, and Marquand, with the participation of M. Devinat, a member of the Political Committee and Chairman of its Sub-Committee on Aid to Under-developed Areas, held several meetings, including a joint meeting with the Sub-Committee of the Political Committee just mentioned. Both the Sub-Committee and the plenary Committee have examined with the greatest interest the remarkable report of the Group of Experts, to the quality of whose work they desire to pay tribute.
2 Fundamental Principles
3. In making the practical proposals requested of them the Experts took as a basis two essential principles embodied in Order No. 105, which may be expressed as follows:
a all the member countries of the Council of Europe and all the African countries interested should, in their mutual interest, take part in a joint effort to accelerate the economic and social development of Africa;
b lco-operation between all participating countries, both European and African, should take place on a footing of equality.
2.1 First Principle (Joint effort by all European and African countries interested)
4. By enunciating this principle within the general framework of assistance to the less-developed regions of the world, the Standing Committee of the Consultative Assembly has in fact laid down a guiding line for a joint policy of member countries which appears best adapted to present circumstances and to the political trends of recent years.
5. The more highly-developed nations are with every year showing greater awareness of their responsibility for the development of other regions. Their first preoccupation has, naturally, been with any backward parts of their own territory, and their next, where the occasion arises, with those overseas territories with which they have constitutional links; after which most States have, it is true, been showing an interest in the development of other countries.
6. This also applies to the countries members of the Council of Europe each and severally and, mutatis mutandis, to a united Western Europe. A united Europe would first seek to promote and accelerate the economic development of less advanced European regions, then that of the overseas countries with which the European States have constitutional links and finally, that of the remaining under-developed parts of the world. Thus, as soon as the first European institutions had been established, and, once purely European requirements had been as far as possible satisfied, attention was given to co-operation for purposes of developing dependent territories (e. g. through the creation of the Overseas Territories Committee of O.E.E.C.) and, more generally, all the overseas countries having constitutional links with the European countries (e. g. Council of Europe Recommendation 26 (1952) of the Consultative Assembly, known as the Strasbourg Plan, and Recommendation 61 (1954), as a sequel thereto).
7. These early efforts, despite favourable declarations of principle, did not lead to the expected results. We had to wait for the Rome Treaty establishing a European Economic Community among the six Powers already Members of E. C. S. C. before a concrete European co-operative effort of any importance was initiated towards developing the overseas countries linked with Members of the Community.
8. These facts seem to show that while " the policy of European integration entails, as a corollary, co-operation between metropolitan Powers, the overseas countries which have constitutional links with them and the other member countries of the Council of Europe " 1, a minimum of integration — which evidently neither the Fifteen (Council of Europe) nor the Seventeen (0. E. E. C.) have yet attained — must be achieved before such co-operation can really take place. In effect, from the standpoint of the political interests involved, there are still too pronounced differences separating the member countries of the Council of Europe, some of which have overseas responsibilities while others have none.
9. Co-operation between member countries as regards assistance to less-developed countries would be easier if the assistance were applied to an overseas geographical area which is not defined by the criterion of constitutional links. There are two possibilities:
a definition and execution of a common general policy (policy co-ordination) ;
b definition and execution of a programme of action designed to afford the countries concerned a maximum of benefits in the most efficient manner. This is the basis of the first principle set forth in Order No. 105, that there should be a common effort, by all member countries and all African countries interested, to encourage Africa's economic and social development.
2.1.1 Co-ordination of member countries' policies
10. Ministers of 0. E. E. C. adopted a Resolution containing directives for the work of the Organisation, among which was the following: " The Organisation should explore through an exchange of information the extent to which, and the methods by which, member and associated countries are contributing to the object of constructive economic development in the less-developed areas of the world. The appropriate bodies of the Organisation should, in the light of this study, consider and report to the Council whether there is action that the member countries might usefully take to coordinate their efforts. " The first phase of the work consisted in assembling all the requisite information in a document which has still not been published, and nothing has so far been done to co-ordinate the action of member countries.
11. On 25th October 1956, M. Devinat and a number of his colleagues presented to the Consultative Assembly of the Council of Europe a motion for a Resolution concerning assistance to under-developed areas, the object being "to attempt to draw up a plan of work which would incorporate the political, economic and social principles on the basis of which, substantial technical and financial aid could be most satisfactorily given and accepted by all the States in question". The motion was referred to the Political Committee, which instructed a Subcommittee under M. Devinat's chairmanship to report thereon.
12. This is not the place to analyse that report [
Doc. AS/Pol (9) 59]. Suffice it to say that, after emphasising the need for member countries to increase their aid to under-developed countries and to co-ordinate their policies, it proposes machinery whereby a common policy could be formulated and suggests, as it were, a form of strategy that would give the African regions some priority. In this regard the Report's conclusions coincide with the first fundamental principle in Order No. 105, which constitutes the terms of reference of the Study Group for the development of Africa.
2.1.2 Why Africa?
13. Helping the under-developed regions is a tradition among European countries, but the importance of their contribution varies: clearly, it is greater in the case of countries with overseas responsibilities. While Europe as a whole has sufficient resources of all kinds to increase its total foreign aid, such aid will always be less than the needs to be met. A concerted policy would doubtless enable additional resources to be set free for this purpose; in any event, it would ensure that the common effort is conducted with the maximum efficiency.
14. Through public and private bilateral channels and through the multilateral world or regional organisations all member countries are rendering assistance to under-developed countries as a whole. But the latter's needs are immense and out of all proportion to any additional resources which member countries might be able to release. The question therefore arises whether — without belittling or prejudicing existing endeavours — there are not backward regions whose development is clearly of sufficient special interest to all European countries to justify an additional effort, and the requirements of which are not wholly disproportionate to the extent of that effort.
15. If, for the reasons mentioned above, it is agreed for this purpose not to employ the criterion of any overseas countries having constitutional links with Europe, several considerations have led the Council of Europe to the belief that Africa is the region which best fulfils these conditions, (c/. Orders No. 77 and 105.)
16. A number of African countries have recently achieved their independence or autonomy. This development may be expected to continue at an even more rapid pace in the future. At present, the breaking of the links with the metropolitan country is apt to go hand in hand with a substantial reduction in the financial and technical assistance received therefrom, and such countries then find it necessary to seek new sources of aid. Without appropriate action by Europe, which the existing organisations cannot take, the capacity of such countries for expansion might well be weakened, with consequent detriment to their development and political stability and, in the last analysis, also the expansion of the European economy. On the other hand, in these circumstances, it might become possible in the new States to continue collaboration with the West European countries from the very beginning of indépendance.
17. This basic motive is reinforced by a number of other considerations which apply not only to relations between Europe and Africa, but to a greater or lesser extent, also to the relations between Europe and under-developed countries, notably in Asia, as a whole. The economies of Europe and Africa are largely complementary and inter-dependent; thus, two-thirds of Africa's foreign trade today is with Europe, which benefits by it in the shape of large quantities of essential basic products. Africa's economic and social development has been largely determined by its special relations with Europe, and these, if suitably adapted to present circumstances, will have an effective part to play both in the future development of the African continent and in the expansion of Europe's economy.
18. All the regions of Africa have been linked (and many still are) with European countries, and Europe has left a profound imprint on language, culture, administration and legislation. Certain appearances notwithstanding, there are many affinities which, given the right conditions, cannot but facilitate co-operation between the two continents.
19. Clearly, then, without on that account neglecting or reducing assistance to other underdeveloped regions, notably in Asia, Europe has a definite interest in making a special effort on behalf of Africa, where it is certain that its help, limited though it may be, will be put to good use in its own interest, as well as in that of the African countries.
2.2 Second Principle (Co-operation between African and European countries on a footing of equality)
20. Aid or assistance to under-developed countries is frequently spoken of as though the idea was one of charity-creating relations between a benefactor and a beneficiary. But private investment, which is one of the types of assistance, has none of the features of a charitable undertaking. Even gifts from public funds usually pre-suppose some material or political counterpart, if only in the long term. Thus, in spite of current terminology, the matter should be considered essentially as a "deal", comprising advantages for both sides, even though the advantages may become apparent at different times. To begin with, the contributing countries may alone bear the cost of the operation, but in the long run they are likely to reap substantial direct or indirect material benefits.
21. The setting up of the Common Market and the negotiations for the Free Trade Area are causing lively concern in the non-European countries, which are wondering whether Europe — already so much richer than they — is not in process of becoming a closed economy, with the object of increasing its own prosperity to the detriment of theirs. It is all the more imperative, then, that Europe should define its position towards them.
22. In the European countries one of the principal aims is to divide the national income more fairly; in the underdeveloped countries there is a similar concern for a better division of world income. What we look upon as a free gift, benevolent aid, appears to them as the fulfilment of a natural duty. In addition, colonial relationships and racial differences have given rise to "complexes" of mistrust, not to say hostility, towards Europe. Susceptibilités tend to be easily aroused ; there is a fear that under the pretext of assistance links of dependence will be re-forged. To ignore these psychological factors would lead to certain failure.
23. Therefore, any special effort which member countries agree to make towards Africa's economic and social development should be negotiated with the African countries concerned; that is to say, the latter must at all times be treated on a footing of equality, as partners, even as regards the simple allocation of gifts and subsidies. Moreover, it is most desirable that within territories which are not independent the maximum possible consultation with the African peoples should take place before plans are agreed, as also that every possible effort be made to explain to them the purpose which underlies the action planned and the considerable advantages which can result for their economic development from collaboration with Europe. The Report by the Group of Experts rightly stresses the partnership aspect, which must apply not only to the machinery of cooperation but also to the functioning of the executive organs that will eventually have to be set up.
3 The necessity of a regional basis for the common effort
24. Once it is admitted that a special European effort on behalf of Africa is justified, the question arises whether this effort, which takes the form of bilateral agreements and multilateral action through existing world organisations, should be intensified by an ad hoc regional organisation.
3.1 The bilateral method
25. The greater part of foreign financial aid to the African countries (about seven-tenths) has hitherto been on a bilateral basis. But this aid has been almost exclusively provided by the countries having responsibilities in Africa (see the Report by the Group of Experts, Appendix II). While such countries might find difficulty in increasing their contribution, other European countries could undoubtedly do so. To this end, the Experts considered that the conclusion of direct agreements by negotiations between the two parties concerned would be facilitated by common study, at periodic conferences of the European and African countries, of the national development plans submitted by the latter.
26. Interesting as are the prospects of bilateral action resulting from regional consultations between the participating Governments, they are nonetheless inadequate. Public bilateral assistance has often been linked with political motives; the recipient countries regard it as a means of domination akin to " colonialism " and hesitate to accept it.
3.2 The world-wide multilateral method
27. Multilateral efforts of world-wide scope (International Bank and United Nations Agencies), which appear to enjoy general favour, particularly with the under-developed countries, are proving manifestly insufficient. Resources distributed by this means are in fact relatively small: it is estimated that total investment, public and private, in under-developed countries amounts to some 3000 million dollars annually; of this amount only about 200 million dollars come from the I. B. R. D. and other international agencies. Yet the experts of the United Nations estimated in 1951 that the foreign aid requirements of the world's under-developed regions are at present about 10,000 million dollars per year.
28. An important step has been taken by the establishment of a United Nations Special Fund, intended to begin on 1st January 1959, but the resources of the Fund, estimated at 100 million dollars per year, are far from supplying what is required. It appears that the time has not yet come when the 'rich' countries can give up the distribution of their foreign aid through bilateral or regional agreements.
3.3 The regional framework
29. There is, then, a definited need for cooperation on a regional basis, in the first place for fostering and co-ordinating the negotiation of direct bilateral agreements (paragraph 25 above) but perhaps eventually also for distributing joint aid from the European countries. There are two ways of envisaging such a regional basis:
a either the world organisation must be " regionalised " by setting up regional branches with their own funds;
b or the necessary regional institutions must be created.
30. Solution (a) would appear to be impracticable in present circumstances. The advantage of solution (b) is that it needs the agreement only of the European and African countries involved. It should therefore be adopted without hesitation, provided that the European and African countries really wish to make a special effort and to see it quickly initiated.
31. A regional scheme would already find initial support in such organisations as the Council of Europe and O. E. E. C, and in the policy for a united Europe. Politically speaking, too, European integration should open up new prospects for the under-developed countries, untainted by outworn notions of colonialism and paternalism. These new prospects would notably result:
a from the co-ordination of the policies of European countries for assisting the less-developed areas, both on.a bilateral basis and through the multilateral efforts of the world organisations;
b from co-operation with the other countries of the world towards solving the general problem of under-development; and
c from co-operation, on a footing of equality, with the African countries within a regional organisation associating Europe and Africa.
4 Practical methods
32. The action proposed in the Report by the Group of Experts has four aspects:
financial assistance;
technical assistance;
trade relations;
co-operation machinery.
4.1 Financial assistance
33. A basic aspect to which attention is too seldom paid deserves to be emphasised here. While the under-developed countries fear that public and private contributions of foreign capital may lead to external interference with their domestic affairs, the countries furnishing such capital are concerned about the political and financial instability of the African countries. The Experts have therefore stressed the need to create or maintain a favourable climate for investments — and to this end have suggested that an investment statute be drafted.
34. The question of drafting an investment statute is not new, but it is again becoming topical; furthermore, it is of world interest and is under consideration by ECOSOC. It is easier to reach an agreement in a regional rather than in a world framework, and such regional agreement cannot but facilitate a wider arrangement. But, even if it appeared impossible to reach the final goal at once, substantial progress could Ibe made if the African countries, alive to their responsibilities and their interests, each in its in own sphere, took active steps to set at rest the anxieties of foreign capital suppliers. To this end, a confrontation of all the interests concerned (public and private, internal and external) is a first essential.
35. The Experts point out that investment necessary for development falls into three categories. First, there is the establishment of directly productive enterprises: for example, in agriculture, mining or manufacture. External capital for this purpose can normally be raised on the basis of acquisition of share and debenture capital. The second is the provision of essential utilities — e.g. water for irrigation and power; roads or railways—without which the directly productive enterprises cannot function. The third is the provision of social capital — e.g. the provision of schools, hospitals and houses— without which a healthy, competent and stable labour force cannot be ensured. The two latter groups, together, constitute the infrastructure of development; and the Experts place heavy emphasis upon the need for a sound infrastructure as a basis for effective development. Indeed, in many parts of Africa capital for the infrastructure is at present more urgently needed than capital for the ultimate tier of development. External capital help is needed for both types of development. For the infrastructure it is frequently provided by the raising of loans by Governments or by Government-assisted public utility corporations. These loans, as well as private investment, should qualify for help from Europe.
36. The Experts propose that, under the auspices of the European and African countries, a Development Bank and an Investment Fund for Africa should be set up. They are aware, however, that these proposals will be received with some reserve, on account of the present shortage of capital and the considerable requirements arising in connection with the establishment of the new European economic structures. Desirous of proposing solutions capable of immediate application, the Experts have suggested, as a minimum alternative, the establishment of a guarantee and financial assistance fund. It would appear easier to reach agreement on this simple formula, especially as it may well be a necessary stage towards the achievement of more ambitious aims.
37. The object of the Fund, according to the Report, would be two-fold: first, to provide guarantees, and, secondly, to render financial assistance. It may be asked, however, whether one and the same body should, in fact, deal, on the one hand, with guaranteeing non-commercial risks in connection with public loan issues and private investments, and, on the other hand, with subsidies designed to reduce charges on loans contracted under commercial conditions (bonifications d'intérêts). But this is a matter of practical organisation, to be solved by the technical bodies which, it is to be hoped, will have the task of launching the necessary institutions for implementing the common effort.
38. Your Committee has devoted particular attention to thes idea of a Guarantee Fund, since it felt that such an institution is capable of being easily set up and likely to be highly effective. A Guarantee Fund for non-commercial risks •— e.g. confiscation, nationalisation, obstacles to repatriation of profits and capital — can be established without difficulty, since it requires no large financial contribution from the participating countries, no call being made on the Fund's capital except in cases where the guarantee is to operate. Experience has shown that the guaranteeing of non-commercial risks entails only insignificant expenditure. A Guarantee Fund, despite the small resources it • demands, may prove extremely efficacious in facilitating capital mobilisation. The Guarantee Fund would be set up by those European and African countries desiring to participate in it, all assisting in its management on a footing of equality and contributing to the coverage of risks. It might be governed, for instance, by the representatives of the note-issuing banks in each member country or region, — and its object would be to guarantee non-commercial risks — i.e. political risks — both for private investments in Africa and for loans floated on the international market by the African authorities. The great advantage of such a guarantee is that it would facilitate the mobilisation of public and private capital and allow lower interest rates to be obtained and it would be given on request to any country floating a loan or benefiting by an investment; the Fund would not give its guarantee until it had verified that the general conditions laid down by common consent of the participating countries were fulfilled. If some such financial organisation, comprising representatives of European and African central banks, were set up, it would establish important contacts, capable of further development. The studies which the Fund would find it necessary to make would result in some co-ordination of investments and economic policies.
39. A Fund of this kind would hardly seem suitable, as such, for providing subsidies to cover interest charges (bonifications d'intérêts); if that were also its object, the participating countries would have to make an annual contribution to the Fund to cover any interest differences which it might be bearing. A better arrangement would perhaps be to set up a separate institution —• a Financial Assistance Fund — since some countries might agree to give their guarantee without wishing to be committed to annual contribution payments. Be that as it may, the foregoing functions, whether they are entrusted to one or two funds, supplement but do not duplicate the action of the multilateral Funds with world or regional responsibilities such as that established by the Rome Treaty. In addition, they would be the first step towards a co-operation which may be expanded as circumstances permit.
4.2 Technical assistance
40. Technical assistance raises fewer political problems than financial assistance, and the resources of the European countries from which Africa might benefit are much greater than would appear. Although there might be a shortage of European technicians able to go abroad to help the Africans, the countries of Europe have all the facilities for training large numbers of African technical staff. Direct bilateral agreements are just as fruitful as multilateral action; both would gain from more effective co-ordination. It should be noted that prospects have recently improved through the creation, at Accra in February 1958, of a Foundation for Mutual Assistance to Africa (F. A. M. A.) under the auspices of the Commission for Technical co-operation in Africa South of the Sahara.
Note
41. The purpose of this Foundation is:
a to collect and disseminate information on offers of technical assistance to Africa, and on the stated requirements of the African countries;
b to encourage mutual assistance betveen Governments and the supply of technical assistance to Africa by means of bilateral arrangements;
c to foster the development of working relations between the various organisations operating technical assistance programmes for Africa;
d to operate a special fund (the beginnings of a multilateral system) whose resources will make it possible to remove the material difficulties hampering the achievement of a technical assistance programme.
It is further contemplated that this Foundation may merge with the existing " African Foundation for the Exchange of Research Workers and Technicians ", itself managed by C. C. T. A.Note
42. The responsibility of C. C. T. A. however, extends only to the region south of the Sahara, although it was recently decided to include in that area the Sudan, Ethiopia and the Somali coast, which were originally excluded from it. The group of Experts therefore proposes the further expansion of this Commission's geographic competence so that it may, in the first place, cover the entire African continent, including those African countries which are still outside it, and may, in the second place, be open to the participation of all European countries and not only of those having political responsibilities in Africa. The group of Experts also proposes that the resources earmarked for technical assistance programmes of common interest to several African countries should be increased.
43. It must also be hoped that if the Foundation is enlarged in accordance with these suggestions it will maintain very close contacts with United Nations Agencies concerned with technical assistance, so that any overlapping, confusion or practical difficulty may be avoided.
4.3 Trade relations
44. The development of the already large trade between Africa and Europe is rightly considered to be closely linked with financial and technical assistance. Thus in the Rome Treaty the association of the overseas territories with the Common Market is to some extent the counterpart of financial assistance by the Six through the Development Fund.
45. Speaking more generally, no effort to develop Africa could neglect the question of trade relations, since the economy of the African countries, whose domestic market is still very limited, essentially depends on the export of a small number of products.
46. Just as integration efforts in Europe will lead to the liberalisation of intra-European trade and perhaps to the establishment of a European Free Trade Area, so a joint effort by Europe and Africa should bring about a liberalisation of trade both between the two continents and within each of them.
47. Finding that the institution of the Common Market is likely to produce some distortion of trade flows, which may be detrimental to African countries not associated with the Common Market, the Group of Experts has proposed that in the current negotiations for a European Free Trade Area the African countries should be given the opportunity, if they so desire, of becoming associated with that Area. In April 1957, when it was presented with a proposal to this effect, formulated by the Group of Experts in its Second Interim Report, the Assembly did not adopt it in so many words, but suggested in Recommendation 134 that the possibility of association with the Free Trade Area should be open to all overseas countries. Actually, this did not imply any contradiction of the viewpoint expressed by the Experts, but simply that the Assembly had taken into consideration the fact that the territories for which European countries are responsible form zones some of which extend to all continents. It may therefore be difficult to restrict the possibility of association to the African countries alone.
48. B e that as it may, the Experts' proposal is recalled at this stage in order that it may be considered during the negotiations for a Free Trade Area now in progress at 0. E. E. C.
49. Finally, with regard to the difficult question of stabilising raw material prices on the world markets, the Group of Experts has not ventured to propose any concrete steps. It has doubtless shown greater realism in expressing the hope that the African and European countries will try to define a common policy and maintain a common attitude in the appropriate international bodies (in particular, G. A. T. T. and F.A.O.).
4.4 Co-operation machinery
50. Reduced to their minimum terms, the proposals of the Group of Experts visualise:
a the establishment of one or possibly two Funds to guarantee non-commercial risks and to subsidise interest charges; and
b in the case of technical assistance, recourse to an existing organisation, the G.C.T.A., whose geographic competence and means of action should be enlarged
Note
Such proposals may well seem unduly modest.
51. The Experts have tried to define cooperation machinery within which the aforementioned institutions would operate, namely periodic conferences of the participating countries for the joint study of national development programmes, previously examined and analysed by a permanent secretariat.
52. The Experts consider this point as a cornerstone of their proposals. They feel that if this machinery were set in motion it might well lead to new developments and accelerate the accomplishment of bolder projetcs. No joint effort by Europe and Africa is in any case conceivable without appropriate co-operation machinery, carefully adapted to the tasks allotted to the special institutions that will be set up, and capable of paving the way for fresh achievements.
5 Negotiation procedure
53. The Experts' Report is confined to making proposals for action. If the Assembly adopts them, a decision will be needed on how to carry them out. In this connection, the following questions are relevant:
a Do the Governments of member countries agree to make a special European effort on behalf of Africa, on the understanding that this will not affect adversely their efforts to help other parts of the world?
b Do the Governments of member countries agree that this special effort should operate within a regional framework where the participating European and African, countries would co-operate on a footing of equality?
54. If the answer to either of these questions is in the negative, there is no point in going any further and starting new technical studies, which would inevitably themselves arrive at the same two questions. The Governments of member countries must therefore express a clear opinion on these questions through the medium of the Committee of Ministers. It would not appear expedient at this stage to consult an existing organisation (e.g. O. E. E. C.) or one set up for this purpose.
55. Only if an affirmative answer is given can the study be continued, both on the technical and political aspects, preferably with the cooperation of 0. E. E. C. and C. C. T. A. Since there is no African organisation comparable to 0. E. E. C. or the Council of Europe, the participation of C. C. T. A. has the special advantage of securing the collaboration of some of the African countries from the outset.
56. The proposal is therefore that the Committee of Ministers be recommended, once an affirmative and formal reply has been given to the above two questions, to convene, under the joint auspices of the Council of Europe, 0. E. E. C. and C. C. T. A., a conference to be attended on a footing of equality by all the member countries of those organisations and all the African countries. The object of the conference would be to define the common action to be taken for the development of Africa, on the basis of the proposals set forth in the Report by the Group of Experts and recalled above.
