4 ENVIRONMENTAL PROJECTS IN THE CANDIDATE
COUNTRIES
(24623)
Special Report No. 5/2003
| European Court of Auditors' Special Report No.5/2003 (pursuant to Article
248(4), second subparagraph, EC) concerning PHARE and ISPA Funding of
Environmental Projects in the Candidate Countries together with the
Commission's replies.
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| Legal base | —
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| Deposited in Parliament |
16 June 2003 |
| Department | International Development
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| Basis of consideration |
EM of 26 June 2003 |
| Previous Committee Report |
None |
| To be discussed in Council
| No date set |
| Committee's assessment | Politically important
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| Committee's decision | Not cleared; further information requested
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The Commission Communication
4.1 The objective of the audit which is the subject of
this Special Report from the European Court of Auditors (ECA)
was to assess the effectiveness of assistance given under the
PHARE[8] and ISPA[9]
programmes to the environment sector in the ten candidate countries
of Central and Eastern Europe[10]
between 1995 and 2000.
4.2 Introducing the Report, the ECA says
that the environment sector represents one of the most challenging
areas to be tackled in preparing for the enlargement of the European
Union as:
a) It requires the transposition of a large
body of environmental acquis consisting of approximately
140 directives which relate amongst other things to air quality,
water quality, waste management, nature protection and control
of industrial pollution, as well as to sector-wide legislation,
such as environmental impact assessments and access to environmental
information;
b) A huge investment in infrastructure is needed
to implement certain key directives. Recent estimates place the
total costs of compliance at between €79 and €110 billion
making the environment sector the single most investment-intensive
sector;
c) It requires the development of monitoring
bodies, including the requisite human resources, budgets and equipment,
to enforce the legislation that has been transposed; and
d) Institutions have to be established at central,
regional and local level, with the administrative capacity to
manage the transposition, implementation and enforcement of the
environmental acquis.
4.3 The ECA comments that although the candidate
countries were required to have transposed and enacted all the
environmental acquis prior to accession, it has always
been clear that they needed long transitional periods to build
the necessary infrastructure. Therefore, no specific minimum
level of implementation of these directives was set for the provisional
closure of the environment chapter, although the Commission did
require candidate countries to submit implementation plans. On
the other hand, as far as enforcement bodies and general administrative
capacity are concerned, the candidate countries are required to
demonstrate that the relevant institutions will be operating satisfactorily
by the time of accession.
4.4 During the period 1995-97, the PHARE
programme continued to be demand-driven, as it had been since
its inception in 1989. Each beneficiary was free to allocate
its PHARE funds according to its own national priorities. Following
the Luxembourg European Council in 1997, the focus of PHARE was
re-directed towards the pre-accession priorities set out in each
country's Accession Partnership, including assistance to prepare
for Structural Funds. Funding for environmental infrastructure
projects was greatly increased in 2000 with the introduction of
ISPA, which made available over €1 billion per year over
the period 2000-06 for the environment and transport sectors.
The ISPA Regulation requires a "balance to be struck"
between the funding of these two sectors.
4.5 The report covers three main issues:
- institution-building projects
in the environment sector,
where the audit found that the Commission's assistance to support
institution-building in the environment sector in the candidate
countries has been only partially successful. This is a reflection
of the limited scale of funding committed to institution-building,
and the modest impact of the twinning and technical assistance
projects funded. The Commission's institution-building strategy
has placed too much reliance on the twinning instrument, which
cannot be expected to overcome many of the underlying structural
problems faced by the administrations of the candidate countries.
- the financing of environmental infrastructure
projects, where the audit found that candidate
countries should have developed environmental and financing strategies
at an earlier stage to identify project priorities and to co-finance
them efficiently. PHARE and ISPA funding has largely been allocated
to the water sector, despite the huge need for investment in the
air sector and the fact that this is identified as a priority
in all the national ISPA strategies. According to the report,
this is because most of the investment for the air sector is needed
for large, privately-owned, combustion plants and the Commission
has not yet worked out how to fund such projects whilst respecting
the need to comply with the competition rules, as required by
the ISPA Regulation.
- the management of environmental infrastructure
projects, where the audit found that problems
with project cycle management were not always effectively addressed
by the Commission. Candidate countries experienced difficulties
in preparing projects to an adequate standard and in dealing with
ISPA contracts. They did not always receive appropriate assistance.
Also, the Commission did not employ sufficient resources at the
project appraisal stage. Most infrastructure projects, once up
and running, were satisfactorily implemented.
4.6 The Court's recommendations focus on
- the continuing need for
significant institution-building, given the partial success
of the PHARE programme, and the key role national, regional and
local authorities and operators in the candidate countries have
in meeting the environmental acquis.
- the need to target grant financing more effectively
and increase funding from other sources. The
Commission should increase support for the development of financing
strategies, establishing clearer criteria for setting ISPA grant
levels, and further explore the possibilities for public-private
partnerships, in close co-operation with international financial
institutions.
- the need to improve absorption capacity in
the candidate countries by strengthening project preparation and
tendering capabilities. In particular, the Commission should
allocate sufficient staff and technical assistance for the appraisal
of investment projects, and support candidate countries in drawing
up a pipeline of projects for ISPA financing, and in arranging
competitive tendering for contracts.
The Government's view
4.7 The Secretary of State for International
Development (Baroness Amos) has commented on the Report as follows:
- "DFID agrees with the
recommendations of the report, which validates current UK policy
on Twinning. There has been an over-reliance on Twinning in these
programmes, and a need for institution-building remains. Twinning
is one of a number of instruments which can be used to support
institution-building, as part of an overall strategy. However,
it is not always appropriate, and cannot alone address underlying
structural problems within administrations. It is important that
the Commission takes account of this report, and the Court of
Auditor's report on Twinning, when making decisions about the
expansion of Twinning in CARDS,[11]
TACIS[12] and MEDA[13]
countries.
- "Furthermore, DFID agrees with the report
that environmental and financing strategies should have been established
as early as possible. A strategic approach to these programmes
is essential to identify priorities and manage resources most
effectively. This is why DFID has supported, and continues to
support, the move to multi-annual programming in PHARE for Bulgaria
and Romania".
Conclusion
4.8 This document includes the Commission's
replies, attached at the back of the European Court of Auditors
(ECA) Special Report. We ask the Minister to provide a short
summary of these and to comment on them.
4.9 We also
ask the Minister to comment on whether any of the lessons to which
the ECA draws attention have already been learnt by the Commission,
given that a number must have been obvious for some time, even
before the end of the period audited. Although most of the States
covered by the audit are expected to accede next year, some lessons
are likely to continue to be well worth learning and disseminating.
We ask the Minister whether the ECA's recommendations are being
acted upon and whether the lessons learnt have wider relevance.
Is she content that steps have been taken to improve any structural
deficiencies within the Commission or to review any constraints
within which it operates?
4.10 Meanwhile,
we shall not clear this document.
8 Named, initially, the Poland and Hungary Assistance
for Reconstruction programme, PHARE was later extended to all
the countries of Central and Eastern Europe. Back
9
Instrument for Structural Policies for Pre-Accession. Back
10
Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania,
Poland, Romania, Slovakia and Slovenia. Of these, eight are now
usually referred to as the Accession States. Back
11
CARDS is the EU programme of assistance for Albania, Bosnia and
Herzegovina, Croatia, the Federal Republic of Yugoslavia and the
former Yugoslav Republic of Macedonia. Back
12
TACIS is the EC's programme of technical assistance to the Commonwealth
of independent States and Mongolia. Back
13
MEDA is the main EU programme of assistance to Algeria, Cyprus,
Egypt, Israel, Jordan, Lebanon, Malta, Morocco, Syria, Tunisia,
Turkey and the Palestinian Authority. Back
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