20 Pre-accession assistance
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5318/09
+ ADD 1
COM(08) 880
| Commission Report: 2007 Annual report on PHARE, Turkey pre-accession, CARDS and transition facility
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| Legal base | Article 5 of IPA Regulation (EC) No 1085/2006
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| Document originated | 22 December 2008
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| Deposited in Parliament | 16 January 2009
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| Department | International Development
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| Basis of consideration | EM of 6 February 2009
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| Previous Committee Report | None; but see (30162)15620/08 and (30303) 17210/07: HC 19-vii (2008-09), chapter 1 (11 February 2009); (30090) 14904/08: HC 19-iii (2008-09), chapter 4 (14 January 2009); and (29126) 15126/07: HC 16-v (2007-08), chapter 10 (5 December 2007)
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| To be discussed in Council | To be determined
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| Committee's assessment | Politically important
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| Committee's decision | Cleared; relevant to European Committee B debate on the Instrument for Pre-Accession.
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Background
20.1 Originally created in 1989 to assist Poland and Hungary,
the PHARE (Poland/Hungary Assistance for Reconstruction of Economy)
programme provided assistance to the former EU candidate countries
in adopting the acquis communautaire (the entire body of
European laws, including treaties, regulations and directives)
through improving administrative capacity and supporting related
investment. ISPA (Instrument for Structural Policies for Pre-Accession)
finances major infrastructure projects in the transport and environment
sectors. SAPARD (Special Accession Programme for Agriculture and
Rural Development) finances agricultural and rural development.
20.2 Pre-accession assistance is also provided by
the Community Assistance for Reconstruction, Development and Stabilisation
(CARDS)[67] programme
and the Turkey pre-accession instrument.
20.3 The Instrument for Pre-accession Assistance
(IPA) is the new instrument for candidate and potential candidate
countries which, from January 2007, replaced all pre-accession
instruments: not only PHARE, Turkey and CARDS, but also SAPARD
and ISPA.[68] 2007 programming
for actual and potential candidates thus took place under the
IPA and is reported on through the 2007 IPA annual report.
20.4 Decentralisation is the process for devolving
management of EU funds to candidate countries. SAPARD is implemented
in a fully decentralised manner under the Extended Decentralised
Implementation System (EDIS) which involves administrations in
candidate countries fully managing EU pre-accession funds. PHARE
and ISPA are currently implemented by the Decentralised Implementation
System under which EC Delegations must endorse procurement documents
before tenders are launched or contracts signed. The Commission
decided in February 2006 to grant PHARE and ISPA on a partially
decentralized basis to the designated Croatian body in the Ministry
of Finance (the CFCU); Bulgaria and Romania finally completed
accreditation in July 2007. The ten new Member States that joined
the EU in 2004 have all operated under EDIS since 2005.
20.5 All three programmes are subject to monitoring
and evaluation (in the case of ISPA, only once projects have been
completed). General cooperation between the three instruments
and between them and the IFIs, is managed by DG Enlargement, supported
by the PHARE Management Committee. ISPA is under the responsibility
of DG Regional Policy, and SAPARD under the responsibility of
DG Agriculture.
The Commission Report
20.6 This is the eighth annual report by the Commission
on the implementation (in this case, in 2007) of three of the
pre-accession aid instruments: PHARE, the Turkey pre-accession
instrument and CARDS. The report also covers implementation of
the Transition Facility during 2007 for new Member States which
provides funds for strengthening institutional capacity to implement
the acquis communautaire. [69]
20.7 The Commission recalls that its objective is
to enable the recipient countries of pre-accession assistance
to manage Community funds under EDIS in order to acquire, before
accession, sufficient practical experience in the management of
a fully decentralised system, and thus prepare them to effectively
manage Structural Funds upon accession. The decision to allow
the relevant implementing agencies to operate under EDIS is given
upon demonstration of their having appropriate resources, structures
and systems in place for the effective and timely management of
Community assistance.
20.8 With the introduction of IPA, there were no
new commitments in 2007 under PHARE, Turkey pre-accession instrument
or CARDS. The focus in 2007 was accordingly on implementation
of previous years' programmes and reduction of backlogs.
20.9 Funds committed to PHARE, Turkey Pre-accession
and the Transition Facility between 1990 and 2007 totalled €21.35
billion (£20.33 billion); for 2007 the amount was €78.2
million (£74.5 million) of which €78 million (£74.2
million) was for Transition Facility commitments to Bulgaria and
Romania. Total commitments for CARDS between 2000 and 2007 totalled
€4.24 billion (£4 billion).
20.10 The Report refers to the approximately €700
million managed by four accredited Implementing Agencies in Bulgaria,
which was suspended during 2007 as a result of continued shortcomings.
In Romania, where the accredited Implementing Agencies
are now managing over €1.3 billion under
PHARE and the Transition Facility, the Commission says that the
system also showed some deficiencies during its first operating
year, with mandatory conditions for its proper operation not being
fully met; in response to its concerns, the Commission says "substantial
action has been taken by the authorities in addressing the remaining
key issues" and that "efforts are being made for the
proper management of pre-accession and post-accession funds that
still remain to be contracted." The Commission is "closely
monitoring the operation of the system, as the capacity of the
agencies managing the funds still needs to be strengthened and
procedures in place need to be effectively applied in order to
ensure that implementation of projects is timely and efficient
and that results are effectively achieved."
20.11 Concerning Croatia, a follow-up audit
on the Decentralised Implementation System (DIS) introduced in
February 2006 (which maintains the ex-ante control requirement
for tendering and contracting) "highlighted several management
deficiencies resulting in weak absorption and administrative capacities
that need to be remedied", in the light of which DG Enlargement
decided in December 2007 to "temporarily suspend the endorsement
of contracts under the Phare national programme 2006 until the
Commission is satisfied with improvements judged against a set
of benchmarks."
20.12 The Report also notes that "a highly critical
follow-up audit report on the functioning of DIS in Turkey"
was finalised at the beginning of June 2007, whereby reinforcement
of the staffing of the Central Finance and Contracts Unit (CFCU)
and the adoption of legislation strengthening the CFCU enabled
the suspension of DIS to be averted. Other critical shortcomings
identified for urgent attention through an Action Plan by Turkey
concerned "the insufficient supervision of line ministries
through the Programme Authorising officer (PAO), a flawed practice
of dealing with irregularities, a sub-standard quality control
of procurement files through the PAO, as well as late procurement
and contracting." Significant progress was achieved in strengthening
DIS in the second half of 2007, including "an acceleration
of contracting, the reinforcement of the CFCU and the assertion
of the authority of the PAO over the Senior Programming Officers
(SPO) structures in the line ministries."
20.13 The Report also outlines the Commission's cooperation
with the European Investment Bank and other International Financial
Institutions (IFIs), which is organised under the amended Memorandum
of Understanding of 26 April 2006 between the European and participating
IFIs for the enlargement countries. The Report gives details of
the four horizontal programmes that have been developed:
— The
SME Finance Facility, which aims at strengthening the capacities
of financial intermediaries (banks and leasing companies) in beneficiary
countries to expand and sustain their financing operations to
SMEs. At the end of December 2007, the total earmarked for projects
was €300 million;
— The Municipal Finance Facility,
to encourage local financial intermediaries to extend loans to
the municipalities. At the end of December 2007, the total amount
committed was €60 million;
— The Municipal Infrastructure Facility,
which combines loans from EIB resources with non-reimbursable
PHARE support to accelerate the completion of small local infrastructure
investments. By the end of 2007, the PHARE allocation had been
fully earmarked for 24 municipal projects; and
— The Energy Efficiency Finance Facility
aims at stimulating energy efficiency investments in all types
of building and in the industry sector by making appropriate financing
available to the end-borrowers. Implementation started in April
2007 and by December the first projects were approved for a total
amount of €13.65 million.
20.14 Details by country and by funding instrument
are reported in the Commission Staff Working Document annexed
to the Commission Report.
The Government's view
20.15 In his Explanatory Memorandum of 6 February
2009, the Parliamentary Secretary at the Department for International
Development (Mr Michael Foster) accepts the findings of the 2007
Report and welcomes "proper closure of the individual pre-accession
instruments as part of a smooth transition to the IPA instrument."
The UK, he says, "encourages lessons learned to be factored
into the implementation of programmes under IPA." He describes
the IPA as having brought about a number of improvements over
previous assistance programmes, "including the provision
of a broader range of assistance; the strengthening of democratic
institutions and the rule of law; focus on respect for human rights
and minority rights; regional cooperation, reconciliation and
reconstruction; focus on state-building and good governance; improved
donor coordination and better financial management." He also:
— shares
the Commission's concerns and welcomes the action taken over the
inadequate management of EC funds by certain countries, irrespective
of the fact that these funding instruments are coming to an end;
— supports and encourages the Commission
to take action as necessary, including assistance for capacity-building,
in order to address weaknesses in the management of all EC funds
where relevant;
— regards the IPA as a key tool for the
UK and other Member States to provide institution building assistance
to, and influence on, candidate or potential candidate countries;
and
— sees effective monitoring and evaluating
of projects, and further developing donor coordination, as increasingly
important issues for IPA efficiency.
20.16 The Minister also notes that the Foreign and
Commonwealth Office has been consulted in the preparation of his
Explanatory Memorandum; that there are no direct financial implications
arising from this Report; and that no date has been set for it
to go a Council.
Conclusion
20.17 As we have noted on several other occasions,
the IPA will provide a total of €11.468 billion (£10.92
billion) over the 2007-13 Financial Perspective, and in much more
challenging circumstances than earlier enlargements; this and
the shift from date-based accession to Conditionality makes it
all the more important to monitor the efficiency and effectiveness
of the IPA, and to be able to react and respond accordingly.
20.18 As we also note in our consideration of
Commission Communications on the IPA Multi-Annual Indicative Financial
Framework and the IPA 2007 Report, the importance of ensuring
that the mechanisms for monitoring and evaluation work as intended
is highlighted by the experience in Romania and, particularly,
Bulgaria. We should accordingly be grateful if the Minister would
let us know what the present position is with regard to the action
taken against Bulgaria, and when she expects the judiciary and
human rights chapter in the negotiations with Croatia to be opened.
20.19 We also said that, in view of the experience
hitherto, the degree of interest in the next stage of the enlargement
process, the sums involved and the present economic challenges
and budgetary pressures facing the Union, a debate in European
Committee B would be appropriate.[70]
Given what this Report has to say about the enlargement process
thus far, we consider it relevant to that debate.
20.20 We now clear the document.
67 The Community Assistance for Reconstruction, Development
and Stabilisation (CARDS) programme supported Western Balkans
countries (Albania, Bosnia and Herzegovina, Croatia, Macedonia,
and the then Federal Republic of Yugoslavia) to make progress
on post-conflict stabilisation and accession to EU membership,
as part of the Stabilisation and Association Process. Back
68
See (30090) 14904/08: HC 19-iii (2008-09), chapter 4 (14 January
2009) for our consideration of the Commission's 2007 Report on
implementation of the ISPA, of which the only beneficiary is now
Croatia. Back
69
Article 31 of the Bulgaria and Romania Accession Treaty. Back
70
See (30162)15620/08 and (30303) 17210/07: HC 19-vii (2008-09),
chapter 1 (11 February 2009), where we consider the 2007 Report
and the related Multi Annual Indicative Financial Framework for
IPA expenditure in 2010-12. Back
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