Select Committee on European Scrutiny Twenty-Ninth Report


4 European Agency for Reconstruction

(27439)

8493/06

COM(06) 162

Commission Report: The future of the European Agency for Reconstruction

Legal baseArticle 181a EC; QMV; consultation with the European Parliament
Document originated6 April 2006
Deposited in Parliament24 April 2006
DepartmentInternational Development
Basis of considerationEM of 5 May 2006
Previous Committee ReportNone; but see HC 34-xviii (2005-06), para 15 (8 February 2006)
To be discussed in Council12 June 2006 General Affairs and External Relations Council
Committee's assessmentPolitically important
Committee's decisionCleared, but further information requested

Background

4.1 The European Agency for Reconstruction (EAR) was set up in February 2000 in response to the urgent need for reconstruction in Kosovo following the 1999 conflict and was initially responsible for managing the EU's aid programmes there.

4.2 Following extensions to its mandate in 2001, 2002 and 2004, the EAR became responsible for implementing the regional Community Assistance for Reconstruction, Development and Stabilisation programme (CARDS) in Serbia and Montenegro and the Former Yugoslav Republic of Macedonia, as well as in Kosovo. CARDS aims to foster institution-building and good governance, to promote the development of a market economy and essential infrastructure and to consolidate civil society. The Agency's head office is in Thessaloniki and it has operational centres in Belgrade, Podgorica, Pristina and Skopje. During this time, it has managed €2.6 billion of EU taxpayers' money.

4.3 On 8 February 2006, we cleared the Commission Communication that outlined the Commission's proposals on the future of the EAR after its current mandate runs out on 31 December 2006.[8] They were based on the fact that from 2007 to 2013, assistance to all countries in the region will come under the Instrument for Pre-Accession Assistance (IPA), the regulatory framework for which is currently being negotiated between the Commission, Presidency and the European Parliament.[9] Under this instrument, the shift from reconstruction to capacity-building in the Western Balkans will be completed, with a continuing emphasis on preparing countries for candidate status and eventual accession. The latest enlargement had demonstrated that devolution of the existing pre-accession instruments — PHARE, ISPA and SAPARD[10] — towards Commission delegations and national administrations of the beneficiary countries had worked well, progressively integrating the beneficiary countries into EU policies by teaching them to manage EU financial aid autonomously as an integral part of preparations for their post-accession participation in the structural and rural development funds.

4.4 But the EAR (a form of "indirect centralised management") is not able to provide the necessary gradual decentralisation, as it may not delegate further the powers given to it by the Commission. Further, the current system creates a differentiation between assistance to some Balkan aspirants being managed via EC Delegations and to others by EAR. Instead, EC Delegations should become the single Commission interlocutor for all these countries, providing daily proximity, continuity and support and helping to ensure coherence between assistance programmes and other elements of the EU's relationship with the region.

4.5 But the EAR's work has to be completed, and administrative, budgetary and personnel issues properly dealt with. So the Commission proposed an extension for the EAR until 31 December 2008 with its current status, in order to enable it to complete its activities under the CARDS programme. From 2009, all EC assistance to the region would then be programmed and implemented by the Commission's Delegations in the region, under the proposed IPA Regulation.

The draft Council Regulation

4.6 This draft Regulation seeks to amend Regulation (EC) No 2667/2000 accordingly. It provides for a two-year transitional period (2007-08) during which both the Commission and the EAR will be responsible for the implementation of EC assistance. The EAR will focus its efforts on the finalisation of CARDS programmes, the gradual transfer to Commission Delegations of programmes that cannot be closed by the EAR, and on the administrative closure of its activities; while the Commission (Headquarters and Delegations) will manage programming and implementation of the new IPA, with assistance from the EAR where necessary. In his 5 May 2006 Explanatory Memorandum, the Parliamentary Under-Secretary of State at the Department for International Development (Mr Gareth Thomas) says that the Commission Delegations should be ready to handle any outstanding business of the EAR at the end of the transitional period, as part of a responsibility transfer plan that will be finalised in 2006 and organised on the basis of priority sectors.

The Government's view

4.7 The Minister recalls his endorsement (in his earlier Explanatory Memorandum of 1 February 2006 on the Commission proposal) that it represents the best way forward for implementing EU assistance to the Western Balkans, and support for the creation of a single coherent Commission point of contact — through reinforced Commission Delegations — that can address aid alongside other issues for the EU and the region. He says that, considering the stated intention of the Commission to manage IPA programming and implementation from 2007 (though with EAR assistance), it is important to ensure that the Commission has sufficient capacity to carry out these tasks, and that he will closely monitor progress made in scaling up the capacity of the Delegations.

Financial Implications

  1. The Minister says that there are no financial implications for the UK. He explains that the number of officials in Delegations and Offices will be gradually raised over 2007 with the aim of reaching full capacity in 2008, as the EAR phases out, leading to a period of overlap with increased administration costs, and sets out the forecast administrative expenditure from 2006-09 in the table below:
  2. EUR millions
Institutions 2007 2008 2009
EAR24.8 23.9620
EC Delegation 7.9425.56 23.33

4.9 He explains that the EAR's administrative costs will be paid from the operating budget for 2006, with the forecast provision based on the need to manage project funds of €580 million that have already been committed and a further €870 million that have yet to be committed. "Though some staff will probably leave the EAR before the end of 2008, it is essential to set aside enough resources to enable the EAR to offer contracts until the end of 2008 where necessary. This will prevent staff leaving early as a result of uncertainty. The full allocation may therefore not be spent, and any unused funds will be repaid to the general budget."

4.10 He also explains that this estimate of resources only concerns activities linked to the implementation of European Community assistance as part of the pre-accession strategy and that the upgrading of Delegations and Offices in line with other priorities in the light of political developments on the ground (especially in Kosovo and Montenegro) will be dealt with separately.

4.11 He says that he considers that the overlap of administrative costs is necessary for this defined period, in order to ensure the successful transition of responsibility from the EAR to the Commission and the he "will monitor expenditure closely, to ensure that it is as efficient as possible".

Conclusion

4.12 We have no questions on the proposed extension regulation, which we are reporting to the House because of the interest it has taken, and continues to take, in the existing pre-accession programmes, the proposed new external action instruments and enlargement.

4.13 We also ask that the Minister reports in due course on the two points that he promises to monitor, on the assumption that there will be a final Report by the Commission at the end of 2008 on how the transition process has fared.

4.14 In the meantime, we clear the document.



8   See head note. Back

9   One of four new Instruments for EU External Assistance - an Instrument for Pre-Accession Assistance; a European Neighbourhood and Partnership Instrument; a Development Co-operation and Economic Co-operation Instrument; and an Instrument for Stability - which along with two existing instruments will replace a plethora of instruments and budget lines; which we considered on several occasions and which were debated in the European Standing Committee on 10 November 2005.  Back

10   PHARE focuses on implementing the acquis communautaire, economic restructuring and political capacity-building; ISPA on environmental and transport projects; and SAPARD on agriculture and rural development. Back


 
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