COMMISSION OF THE EUROPEAN COMMUNITIES
Brussels, 29.11.2002
COM(2002) 660 final
PROGRESS REPORT
ON THE COMMUNICATION FROM THE COMMISSION
ON THE IMPACT OF ENLARGEMENT ON REGIONS BORDERING CANDIDATE
COUNTRIES
COMMUNITY ACTION FOR BORDER REGIONS
2TABLE OF CONTENTS
1. Introduction ................................................................................................................. ....... 3
2. State of implementation: new measures............................................................................. 52.1. Trans-European networks .............................................................................................. 52.2. Pilot Project on the Impact of Enlargement for the Border Regions ............................. 62.3. Networking measures in the framework of INTERREG ............................................. 102.4. Special support of 30 MEUR to border regions under INTERREG in 2002............... 112.5. Special Programme with the European In vestment Bank (EIB) to support municipal
infrastructure projects in the border regions  of candidate countries with the EU...... 12
3. State of implementation: better co -ordination of existing policies .................................. 14
3.1. Improved co-ordination between Phare CBC and INTERREG................................... 143.2. Policy initiatives in the agricultural sector................................................................... 164. Conclusion................................................................................................................... ..... 17
31. INTRODUCTION
The European Commission adopted on 25 July 2001 an action plan for regions bordering on
applicant countries [COM(2001) 437]. Twenty-thr ee regions in Austria, Finland, Germany,
Greece and Italy were involved.1 The analysis undertaken in th is framework demonstrated that
most border regions receive substantial support from the Structural Funds under Objective 1 and
2 and through the Community Initiatives INTERREG, EQUAL, LEADER+ and URBAN. In theperiod 2000-2006, a total of € 16 billion are availa ble to Objective 1 and 2 areas adjacent to
candidate countries. However, it also became evid ent that some specific problems, in particular
in the area of infrastructure and economic restructuring, persist.
Consequently, the Communication of the Co mmission of 25 July 2001 proposed a series of
additional actions to strengthen economic competitiveness of border regions. These actionsinclude new measures  as well as a better co-ordination of existing policies .
The new measures  proposed by the Commission aimed at providing specific  additional funding
to border regions in the area of transport and environmental infrastruct ure, small and medium-
sized enterprises (SME), networking activities as well as youth exchanges. In detail, the actionplan foresaw the following measures:
– EUR 150 million were earmarked to support TEN-T projects at the borders with
candidate countries in the period 2003-06, EUR 50 million of which shall come from
existing funds, not already committed. At th e same time, the Commission proposed that
the maximum level of Community support for specific TEN-T cross-border projects
(including the above mentioned ones ) should be raised from 10% to 20%;
– Development of a municipal infrastructure facility in co-operation with the EIB to
support small-scale municipal infrastructure  projects in candidate countries’ border
regions with the EU based on an extr a allocation of EUR 35 million in 2002 and 15
million in 2003 under the Phare Programme;
– Additional support of EUR 15 million for actions  that strengthen the competitiveness of
regions and economic sectors particularly affected by enlargement, in particular of smalland medium sized enterprises. These speci al actions are funded by budget line B5-3003
entitled “Pilot Project on the Impact of Enlargement for the Regions Bordering theCandidate Countries” and in itiated by the European Parliament for the period 2001-
2002 (i.e. EUR 10 million in 2001 and EUR 5 million in 2002);
                                                
1 Two of them are located in Finland: Uusimaa, Et elä-Suomi; eight in Germany: Niederbayern, Oberpfalz,
Oberfranken, Brandenburg, Berlin, Mecklenburg-Vorpommern, Chemnitz, Dresden; six in Austria:
Burgenland, Niederösterreich, Wien, Kärnten, Steiermark, Oberösterreich; two in Italy: Veneto, Friuli-Venezia Giulia; and five in Greece: Anatoliki Makedonia – Thraki, Kentriki Makedonia, Voreio Aigaio,Notio Aigaio, and Kriti.
4– Community support of € 20 million for acti ons encouraging and facilitating co-
operation in border regions in the fram ework of the INTERREG programme for
networks, information activities, s upport to project development etc.;
– Allocation of an additional € 10 million of  Community support in the period 2003-2006
to targeted « people-to-people » youth exch anges, voluntary service and training and
information activities in border regions , within the framework of the YOUTH
programme.
Overall financing under the action plan for the development of border regions proposed by the
Commission amounted to EUR 245 million , EUR 50 million of which were specifically reserved
for border regions in the applicant countries.
In autumn 2001, the budgetary authority subsequent ly agreed to allocate an additional 60 MEUR
to border regions in the 2002 and 2003 budgets raising the total funding for border regions onboth sides of the frontier to EUR 305 million . The additional amount of € 60 million made
available by the budgetary authority is split up as follows:
– special support of € 30 million to border regions under INTERREG in 2002 (deriving
from the flexibility instrument);
– additional allocation of € 15 million to the a bove mentioned pilot project on the “Impact
of Enlargement for the Regions Bordering the Candidate Countries” in 2002;
– additional allocation of € 15 million to preparatory measures on the “Impact of
Enlargement for the Regions Bordering the Candidate Countries” (budget line B5-3003)
in the 2003 budget.
In addition to these measures providing add itional funding, the action plan of the Commission
proposed a better co-ordination of existing policies  aimed at harmonising  different European
policies more efficiently in order to take acc ount of the particular needs of border regions.
In particular, the Commission envisaged an impr oved co-ordination between Phare CBC and the
INTERREG initiative. To this end, the Commission proposed
– to modify the Phare-CBC Regulation by the end of 2002;
– to examine the possibilities of making the so-called “principle of territoriality”, which
only allows funding by INTERREG for those projects which are physically located inEU territory, less rigid in application.
Furthermore, the Commission encouraged Member States to undertake certain policy initiatives
in the agricultural sector. In this context, the Commission proposed:
– to re-focus existing rural development programmes to improve the competitiveness and
diversification of activities in border areas;
5– to use the LEADER+ programme to devel op cross-border co-operation between rural
communities on both sides of the border.
Implementation of the action plan is monito red by a special Commission working group for
border regions set up for this purpose. The worki ng paper contains the first progress report of
this working group. It describes the state of implementation of the me asures outlined above.
2. STATE OF IMPLEMENTATION : NEW MEASURES
2.1. Trans-European networks
On 2 October 2001, the Commission adopted a pr oposal for a regulation of the European
Parliament and of the Counc il amending Council Regulation (EC) No 2236/95 laying down
general rules for the granting of Community financial aid in the field of trans-European networks[COM(2001)545final].
In line with its action plan for border regions, the Commission argued that cross-border projects
with candidate countries may prove  difficult to be implemented due to financial constraints. The
Commission therefore considered that the ma ximum support for trans-European transport
network projects which fall into the category of cross-border rail projects crossing natural
barriers or aiming at eliminating clearly identified bottlenecks at borders with candidatecountries should be increased from 10% to 20%, in or der to have a leverage effect and to attract
private investors in particular.
In order to complement ISPA support for candi date countries, the Co mmission also concluded
that an additional financia l assistance of EUR 100 million in the period 2003-2006 assigned to
the TEN budget line should be allocated to the Member States to be used towards the mosturgently needed improvements related to cross-border transport infrastructure with candidatecountries. Therefore the financial framework should be increased accordingly within the 2000-
2006 financial perspectives. To this aim, 50 mio € of the current TEN-T budget will be
specifically devoted to these projects. This could be done in the framework of the revision of the
Indicative Multi-annual Programme established between Member States and the Commission for
the funding of TEN projects.
The Council as well as the European Parliame nt have started to examine the Commission
proposal. The first reading of  the EP took place on the 2
nd July 2002, and the vote of the EP
confirmed its support to the Commission’s proposal. The draft regulation has not yet been
adopted and it is unlikely that the process of its adoption will be completed before the end of
2002.
62.2. Pilot Project on the Impact of Enlargement for the Border Regions
Co-operation with ARGE launched in 2001
In 2001, the Commission awarded a grant of EUR 10 million to ARGE2 to support a wide scale
pilot project in favour of SMEs of EU border regions (“Growing together with Europe”). ARGE
is a network of 28 chambers of commerce from va rious Member States located in the EU regions
bordering the candidate countries and therefore represents SMEs in most of the border regions
specified in the action plan of the Commi ssion. SME from a border region not represented
through a chamber of commerce of the ARGE network (e.g. Finland) may also benefit from theactivities of this pilot proj ect and will be actively informed and involved by ARGE.
The pilot project aims at strengthening the competitiveness of SMEs in particular through 3 main
components : 1) information, 2) strategy deve lopment and implementati on, and 3) cross-border
co-operation. The project started on Ja nuary 3, 2002. Until May 2002 a complete work
programme was established for each region and publication material for SMEs had been
finalised. A dedicated web-site has been developed and is available to SMEs since July 1, 2002.
Activities under all three component s have started and will be implemented over a period of 40
months.
The project addresses the concer ns of SMEs in labour intensive sectors likely to face increased
competition from enterprises in the candidate  countries. It also supports medium-sized
businesses in capital intensive, innovative sector s likely to benefit from the opening of new
growth markets. The available funds will be di stributed according to the needs and priorities of
each region without fixed proportions. The conc ept foresees to address 144.000 SMEs, 25% of
which are located in each Austria, the new German Länder and Bavaria; 15% in Italy, and 5% ineach Greek and Finnish border regions. The figu res per country are indicative and based on
number of population and SMEs.
The project stands out due to a combination of  central project management and decentralised
project implementation. On the one hand, select ed regional co-ordinators from among the ARGE
members provide knowledge on par ticular concerns of “their” border region. They can also
provide their know-how concerning activities that  have been organised by the chamber(s) they
represent and which have proven to be particularly successful. Regional co-ordinators are also be
responsible for the planning and the implement ation of measures in the regions, which they
represent. On the other hand, the central proj ect management perfor med by ARGE ensures
coherent and balanced imp lementation of measures.
The planning and implementation of activities is co-ordinated with the Euro Info Centres (EIC),
e.g. for information activities on the enlargement process or the set-up of co-operation networksin the candidate countries.
                                                
2Arbeitsgemeinschaft der Wirtschaftskammern entlang der Grenzen zu den mittel- und osteuropäischen
Beitrittsstaaten
7Continuation of ARGE support in 2002
Throughout the budgetary procedure 2002, the initial proposal of the Commission of EUR 5
million for 2002 was increased at the request of the European Parliament to EUR 20 million. For
the Programming of actions in 2002 the Commission took into account the request of the EP to
continue to put an emphasis on SME support.
In this context the Commission has decided to award an additional grant of EUR 3 million to
ARGE. The additional funds will be used to incr ease the level of inform ation and qualification
measures for entrepreneurs and to equip a dedi cated web-site develope d under the current pilot
project with more products and services for SMEs of border regions than originally foreseen. In
particular, the additiona l funds will allow the creation of ne w web-based products for SMEs such
as company, traineeship and vocational training exchanges as well as an expert and informationdatabase providing SMEs with online access to local experts and country/regional profiles. In
terms of training, funds will be used for the development of a coaching programme for SMEs to
help them implement strategi es and business plans, which have been developed under the
project.
The Commission has decided to award this grant beca use of the Project’s direct reach to SMEs in
the border regions and its partic ularly innovative approach char acterised by various factors
including synergies through networking between  28 partner chambers, balanced service of
border regions and result orientation of activities due to a centralised project management,advantages of know-how of sectors and problems of SMEs through decentralised
implementation.
…and start of co-operation with EICs
In addition to the support granted to ARGE, the Commission published three calls for proposals
on July 20, 2002
3 for a total amount of EUR 15 million of  which one call for proposals aims at
improving the competitiveness of SMEs in EU border regions by developing their trade relationsand industry links with SMEs in border regions of candidate countries or in non-border regions
of the current EU. The Commission will support th e organisation and imple mentation of regional
partnership events for SMEs
– to foster co-operation between SMEs to he lp them establish contacts, networks and
collaborative links with a view to establishing future business relations;
– to stimulate transnational and cross-border activities of SMEs with a view to identifying
common business interests and market oppo rtunities arising from the enlargement
process;
– to give SME owners and managers the possibility to meet providers of technical,
financial services and marketing assistance.
                                                
3 OJ C 174 pp.13-17 of July 20, 2002
8The overall amount available for this call for propos als, which is restricted to EICs, is EUR 7.5
million.
….with local and regional trade union organisations
The objective of the second call for proposals is to  strengthen the competitiveness of regions and
economic sectors particularly affected by enlargement by addressing the needs of employees andworkers in the border region. Activities will focus on:
– information and knowledge on social economic  effects of enlargement to especially
affected groups and organisations;
– qualification and skills enhancement for workers and employees of regions and
economic sectors particularly affected by enlargement;
– cross-border activities affecting the social lives of workers and employees with a view
to increase the cross cultural understanding.
The overall amount available for this call for proposal s, which is restricted to local or regional
trade union organisations, is EUR 6 million.
…and with regional/local authorities and municipalities
The third call for proposals aims at strengthenin g the capacity of local and regional authorities in
the EU border regions to adopt strategies and action plans to prepare for the administrative
effects of enlargement.. To achieve this objectiv e, the grants to be awarded will support cross
border initiatives which
– improve the collaboration and pooling of experience between local and regional
authorities;
– intensify and consolidate cross border dialogue, and establish institutional relationships,
between administrations to facilitate the integration of regions, communities andcitizens;
– focus on institutional and administrative capacity building including developing
frameworks for operations and management , needs assessment, human resources, and
service delivery;
– equip local and regional authority actors with the skills and know-how to develop,
implement and manage the administrative and technical aspects of enlargement..
The overall amount available for the call for proposal s, which is restricted to local or regional
authorities, municipalities or associa tion of municipalities, is EUR 1.5 million.
All three calls for proposals have been restri cted to well defined organisations whose main
mission is the support of the target groups in the intervention areas concerned and which are
9widely represented in the border regions and non- border regions of EU Member States. , A wide
range of organisations have been invited to  form partnerships with the applicants.
All project proposals submitted to the Commission must also demonstrate complementarity with
local or regional activities promoting bor der regions and co-fi nanced under European
Community Programmes or Initiatives (such as INTERREG). Provisional notification date ofresults of the award process is lik ely to take place in December 2002.
Additional measures in favour of young people
…in the framework of the pilot project in 2002
Finally, € 2 million will be used to finance measures in favour of young people in border regions
according to the sets of rules, criteria and procedures currently applied in the YOUTHprogramme. The funds will, however , be executed in the framework of the pilot project (budget
line B5-3003). Consequently, the budget of the YOUTH programme (B3-1010) in 2002 will not
be affected by the activities foreseen for border regions.
The breakdown of funds decided by the Pr ogramme Committee for the YOUTH programme in
June 2002 is based on the population of the regi ons concerned. Each c ountry is allocated a
proportion of the total funds dedica ted to cross-border co-operation according to the ratio of the
population of its regions concerned to the overall total population in all th e regions concerned in
all 13 countries. These funds will be awarded in accordance with the existing YOUTHprogramme rules for decentralis ed activities at the 5 selecti on rounds scheduled in 2002, which
will strongly increase the cost efficiency and visibility of cross-border people-to-people co-operation. In the context of their regular re porting exercise scheduled for April 2003, YOUTH
National Agencies are required to present a separate financial and statistical reporting which willclearly identify their 2002 cross-border activities.
The Commission has invited the National Agencies of all countries involved to present cross-
border co-operation plans with a view to devel op and implement projects and partnerships which
will encourage mobility, initiative, intercultura l learning and solidarity between young people
and other citizens in border regions.
On the basis of these work plans, National Ag encies shall grant a number of cross-border co-
operation projects which a ll bear features of intercultural learning, active participation of young
people, trans-national mobility and co-operation similar to the ones of the following exemplaryyouth exchange:
The Finnish YOUTH National Agency has gran ted a multilateral youth exchange entitled
“COSMO” which involve young people from cro ss-border regions in Finland, Estonia and
Germany. The project aims at preventing so cial exclusion and increasing the knowledge of
Europe amongst young people. The youngsters w ill learn things about the culture and customs in
other countries as well as get information on how  to study and work abroad. During the youth
exchange, young people will arrange workshops on themes of European interest and organise
intercultural evenings where they will presen t their country through music, food and games.
“olympic games” and a “city adventure” w ill complement the intercultural and non-formal
10learning components. Young participants ha ve been actively involved in preparing and
organising the exchange as well as implementing the activity programme.
YOUTH National Agencies shall also undertake si gnificant information activities to promote
cross-border co-operation to young people and all ac tors in the youth field (youth workers, youth
organisations, etc.) through contact-making semin ars, study visits, training seminars, etc.
The final number of granted youth exchange s, voluntary services, support measures (co-
operation, training and informa tion activities) as well as in formation activities will not be
available before 30 April 2003 when YOUTH Nati onal Agencies deliver their 2002 financial and
statistical interim reports.
…in the framework of the YOUT H programme in the period 2003-2006
The additional allocation of € 10 million of Community support to the YOUTH programme in
the period 2003-2006 will be managed according to  the same decentralised procedures. The
Programme Committee for the YOUTH programme  will decide in November 2002 on the
distribution of the 3 Mio Euro allocated to  the budget line of the YOUTH programme (B3-1010)
for 2003.
2.3. Networking measures in the framework of INTERREG
In its action plan for border regions, the Commission proposed to allocate € 20 million of
resources from paragraph 53 of the INTERREG III Guidelines for actions intended to encourage
and facilitate co-operation in border regions. The Commission subsequently decided to allocatethese funds to the strand C programmes of INTERREG III and to the INTERACT programme
(i.e. INTERREG support programme) since both prog rammes are designed to provide financing
in favour of the type of actions i ndicated in the Commission communication.
This approach also benefits from the partnershi ps and management structures already established
for the implementation of INTERREG III C a nd INTERACT programmes and thus allows a
more rapid use of the funds for the regions c oncerned. By contrast, the preparation of a new
specific programme would have involved a slow  and burdensome imple mentation process and
would have been less effective.
On the basis of the population living in the bor der regions in question, the Commission decided
to allocate € 12.3 million to the INTERREG III C East programme, € 2.2 million to INTERREGIII C North programme, and € 0.5 million to INTE RREG III C South programme. In addition,
the Commission will allocate € 5 million to the INTERACT programme.
The additional funding has been added in the fo rm of an additional priority in each programme
concerned. In the case of the INTERREG III C programmes, the operations foreseen under thisspecial priority include networks and individual co-operation projects aiming to encourage andfacilitate co-operation in border re gions in order to strengthen their economic competitiveness. In
the case of INTERACT, the operations foreseen cover information actions, seminars, studies and
exchange of experience on horizontal issu es for INTERREG programmes and on their
complementarity with external policy instruments.
11Lead partners have to be located in border re gions with candidate countries. Co-operation with
partners located in candidate countries is enc ouraged. In the framework of the INTERREG III C
programmes concerned, an individual co-operation pr oject must have at least three partners from
at least two countries, whereas a network must have  at least five partners from at least three
countries.
Concerning the additional funds  made available to the INTE RREG III C programmes, the same
rates of contribution from the ERDF will be a pplied as envisaged under Article 29(3) of the
general Regulation on the Structural F unds (1260/1999). As for INTERACT, the same
contribution rate will be applied as for equivalent  measures under INTERACT.
The process of adopting the affected INTERREG III C programmes has been completed in May
2002. The adoption of the INTERACT programme is  envisaged for the beginning of autumn
2002.
2.4. Special support of 30 MEUR to bo rder regions under INTERREG in 2002
On 21 November 2001, the Europe an Parliament, the Commission and the Council agreed at a
Conciliation Committee meeting on the budget pro cedure 2002 that an additional amount of € 30
million should to be entered under heading 2 (Structural Funds) of the budget for regions
bordering candidate countries in order to fina nce specific actions to support these regions. The
European Parliament adopted the 2002 bud get on 13 December 2001 and confirmed the
commitment of € 30 million for border regions with  a special budget line (B2-1411) relating to
the INTERREG III initiative.
In line with the approach taken for spending the € 20 million for networking activities in the
framework of INTERREG III C and INTERACT, the Commission decided to allocate thesefunds to already existing programmes providing  the scope for enhanced cross-border co-
operation. Given the tight timeframe for committin g the additional allocation of € 30 million,
such a solution once again appeared as the simplest and most pragmatic approach.
The Commission decided to allocate the additional funding to:– the 13 Strand A INTERREG programmes covering  the borders with candidate countries
and thus directly concerned by enlargement as well as
– to the Strand B INTERREG programme for the Baltic Sea Region.
The borders with the candidate countries ar e covered by the 13 Strand A programmes from
Greece/Cyprus in the South to Finland/Estonia in the North with the exception of the maritimeborder with Latvia and Lithuania. Although these two countries have no land border with a
Member State, their accession will also have an impact on the competitive situation of someregions of the Union similar to the accession of ot her candidate countries. Inclusion of the Strand
B Baltic Sea programme also responds to the Eu ropean Parliament's co ncern about the maritime
border regions.
12The funds have been distributed to the 14 pr ogrammes concerned following an objective key,
which was the existing distribution of ER DF funds to the programmes (see annex).
Given the relatively small allocation per programme, the € 30 million have been allocated to one
common priority “ Special Support for Regions bor dering the Candidate Countries” to be added
to the 14 programmes. Priority shall be given to projects in the following fields: strengthening oftransport systems, supporting SME particularly affected by enlargement as well as supporting
training and inter-cultural co-operation actions  including those favouring the integration of
different language and cultural groups. Special attention shall be  given to projects in the
transport and SME sectors directly linke d to the improvement of environment.
Normal rules concerning the INTERREG IIIA a nd B programmes apply. In view of sound and
efficient management, one single Commi ssion decision on 26 July 2002 amended the 14
INTERREG programmes concer ned. All commitments were va lidated in September 2002.
Member States were invited to submit beforehand the amended financial tables for the 14programmes. It will be the task of the respective steering committees to commit these financialmeans to concrete projects according to criteria of the programme complements still to beadjusted.
2.5. Special Programme with the European Investment Bank (EIB) to support
municipal infrastructure projects in the border regions of candidate countries withthe EU
The Special EIB Programme has been developed in response to the lack of adequate small scale
infrastructure identified in the border regions of the candidate countries with the EU. Its overall
objective is to contribute to the social and econo mic development of these border regions and to
their integration with their neighbouring re gions in the current EU Member States.
To this end, the Programme will increase the ava ilability of small scale m unicipal infrastructure,
by increasing the financial means available to  municipalities and their public service providers
through a combination of loans from EIB re sources with non-reimbursable Phare support.
Investments will take due acc ount of available regional and otherwise, national or local
programming documents.
In 2002, € 35 million will be allocated from the Phare budget 2002 to the Facility according to
the Financing Proposal adopted by the Ph are Management Committee on 27 September 2002.
The EIB intends to start the roll out of the F acility 2002 in Poland, which shares a large border
with the European Union. Additional border re gions of other Candidate Countries shall be
covered at a later stage under this Programme (i.e. border re gions of Bulgaria, the Czech
Republic, Estonia, Hungary, Poland, Slovenia, and Slovakia). In line with the Commission’s
Action Plan for border regions, it is planned to continue funding of the Special EIB Programme
with an additional amount of up to €15 million from the 2003 Phare budget.
The implementation of this Programme is base d on the concept of a Municipal Infrastructure
Facility. The EIB will dedicate funds from its  own resources and thus provide a global loan
combined with a Phare grant to selected local participating banks. The overall ratio between the
13EIB resources and the Phare allocation shall be equal or higher than 5/1. The EIB will provide at
least €175 million in the form of loans and the Commission will provide a maximum of €35
million in 2002.
The Commission entrusts the EIB with the implementation of this Programme and will conclude
a Contribution Arrangement with the EIB for th is purpose in early 2003 providing for project
activities until 2009.
As regards the practical implementation of the programme, the EIB, in first step, will identify
and select local financial institutions in the border regions as partners, which have the capacity,strength and interest to expand their operations to financing small infrastructure investments of
municipalities in a specific border region. The EIB will provide loans to these institutions, which
in return will engage in lending operations  to municipalities or utilities providing a public
service. The Phare Contribution will be used to pay for a performance and service fee toparticipating local banks to motivate them to participate in the Programme and to coveradditional costs involved i.e. in the promoti on of the Facility among municipalities, services
rendered to municipalities to prepare loan applications, or the analysis and structuring ofmunicipal loans. A second part of the Phare C ontribution will be used to partly compensate
municipalities or municipal service providers for the costs of their investments and thoseincurred in the selection and ev aluation of these investments.
Before the EIB may sign an agreement on a financial package including the EIB loan and the
Phare grant (“the Project”) with a selected loca l financial institution, the EIB has to propose this
Project to the Commission for approval. In th e Project proposal, the EIB will inform the
Commission about the total loan amount allocated to this local financial institution under the
Facility and the corresponding Phare Contri bution. Upon approval, the EIB will sign an
agreement with the local financial institution, which then becomes the Participating Bank under
this Programme.
The Participating Bank will engage in the promotion of the Facility among municipalities and
aim at receiving loan applications for infrastructure investments that meet the eligibility criteria..On the basis of a thorough analysis of the applications, the Participating Bank will sign a loanagreement with a municipality or utility company providing a municipal service (“Sub-Project”).This loan agreement will include the allocation of a proportion of the Phare Contribution to the
municipality or municipal service provider. Gene rally, those investments are eligible, whose
costs do not exceed € 5 million.
All investment projects shall be carried out in compliance with the relevant Community
environmental legislation. The sum of the total value of the “Sub-Pr oject”, the total value of the
Phare Contribution (Direct Investment Support)  in favour of the Promoter and any other
European Community funds used by the Promoter  for the financing of the Investment shall not
exceed 90% of the Investment costs. At operational level, the implementation of this Programmewill be monitored through progress reports to be submitted by the EIB and through a SteeringCommittee composed of representatives of the Commission and the EIB.
143. STATE OF IMPLEMENTATION : BETTER CO -ORDINATION OF EXISTING POLICIES
With regard to the particular problems of bor der regions, the Commission expressed in the action
plan its intention to further harmonise co-o rdination between Phare CBC and INTERREG. To
this end, the Commission announced the following measures:
3.1. Improved co-ordination between Phare CBC and INTERREG
Amendment of the PHARE CBC Regulation
On the assumption that enlargement will take place on 1st January 2004, the 2003 Phare
programming exercise will be th e last one for the acceding countries. Given the short timeframe
of this scenario, the Commission envisages to only slightly adjust the Phare-CBC Regulation.
The experience gained since 1999 with the setting up of the Joint Programming Documents and
of Joint Committees proves there is still scope to further align Phare-CBC with INTERREG,namely the eligibility of actions. Taking stock of  the innovations already introduced by the Phare
2000 Review, it seems worthwhile to proceed with this alignment.
The only modification required for this purpos e concerns Article 5 of the Phare-CBC
Commission Regulation where, by deleting the final sentence of paragraph 1, the current
differences between actions (a) to (i) and (j) to (n) will disappear. As a result, each and everyaction will be eligible for Phar e CBC mainstream or Phare CBC Small Project Fund (Article 5.2)
financing. This alignment of eligible actions under Phare CBC will bring more consistency with
the INTERREG approach.
These amendments were adopted by the Co mmission on 6 September 2002, which allows the
amended Phare CBC Regulation to be applicable for the Phare 2003 programming exercise.
Review of the PHARE Guidelines
The Commission has also worked on a revision of the Phare Guidelines 2000-2006. In this
context, aspects of transnational and inter-reg ional co-operation have also been addressed.
Concerning the participation of  candidate countries in INTERREG III B (transnational), such as
CADSES, or III C (inter-regional) programmes, the Phare Guidelines reiterate that candidatecountries can continue to use, and even expand if they so wish, their Phare national programme
funds for this purpose.
In the Baltic Sea area, where a transnational approach is followed, PHARE-CBC will continue to
provide co-funding for INTERREG III B-type programmes.
The revised guidelines were adopted together  with the PHARE CBC Regulation on 6 September
2002.
15Application of the territorial principle
In its action plan for border regions the Commi ssion also announced to examine the possibilities
of making the “principle of terr itoriality” less rigid in application. This means that currently only
projects or those parts of projects which are phys ically located in EU territory may be funded by
INTERREG.
After carefully examining this matter, the Commission has drawn the conclusion that the current
legislative framework clearly rules out the use of Structural Funds assistance outside the territoryof the European Union. The territorial principle must therefore continue to apply to investment
projects (e.g. sewage plants, bridges, technology centres, etc.). A less rigid interpretation of the
territorial principle approach is however feasible in the following cases:
Exceptions for technical assistanceCommission Regulation (EC) No 1685/2000 of 28 July  2000 (Point 2.1, second indent of rule No
11 in the Annex) laying down detailed rules fo r the implementation of  Council Regulation (EC)
No 1260/1999 provides that expenses for par ticipants from non-Community countries at
meetings of the monitoring committees and subcommittees can be financed from the relevanttechnical assistance budget wh ere the chair of the committee involved deems their presence
necessary for the effective implementation of the programme.
In the case of INTERREG programmes, their steering committees can be regarded as
subcommittees. Where INTERREG programmes invol ve non-Community countries, in particular
applicant countries, the presence of these countries' representatives can generally be considered
to be necessary for the effective implementation of the programme, given the rules of procedureof the monitoring and steering committees (which in most cases have already been decided),which establish the membership of these representatives from outside the Union and therequirement for decisions to be passed unanimously. This does not th erefore need to be re-stated
in each and every invitation.
Exceptions for projects not eligible for technical assistanceAs regards the reimbursement of project-relate d travel and subsistence expenses incurred by
representatives from non-Community countries, the Commission considers strand A projects –
other than investment projects – run by promoters eligible for a ssistance on the EU side of the
border, certain expenses incurred by participants  from applicant countries (travel and subsistence
costs, attendance fees for meetings, seminars and language courses, etc.) are eligible forreimbursement from the ERDF. For projects of st rand A and B, with a view to ease the co-
operation as much as possible, trav el and subsistence expenses of partners or participants
from  third countries outside the EU can be eligible costs for an operation when the meeting or
seminar takes place in the EU and is part of an approved operation.
The travel and subsistence expenses by partners and participants from EU Member States  on
parts of operations that take place in a third c ountry and are vital for the success of the project as
a whole is also eligible for ERDF assistance.
16Further possibilities of a more flexible interpretation of the territorial principle
In accordance with EC public procurement law, se rvices or equipment used for implementing an
INTERREG project in the EU can also come from the "partner country" or other third countries
in question, according to general national, EU or  international legisla tion on public procurement.
In line with the approach described above c oncerning the eligibility for ERDF assistance of
certain expenditure incurred by participants from applicant countries on projects – other than
investment projects – some of th e expenditure by participants from EU Member States on parts
of projects that take place in an applicant country and are vital for the success of the project as a
whole is also eligible for ERDF assistance (travel and subsistence costs, fees for attendingmeetings, seminars, work placements or language courses, etc.)
Eligibility of areas adjacent to border areas
In view of its unique geographical position in close proximity to the border areas of Slovakia,
Hungary and the Czech Republic, the Commission agreed to the inclusion of Vienna in theINTERREG III A programmes with Hungary and the Czech Republic. The particular role of
Vienna in economic relations and administrativ e co-ordination with border areas of candidate
countries militated in favour of th is inclusion. The details were discussed with the Austrian
authorities and set out in a modification to the INTERREG guidelines
4, after consulting the
neighbouring countries and taking into account the specific needs of the bordering Länder.
3.2. Policy initiatives in the agricultural sector
With regard to re-orientating existing rural development programmes to improve the
competitiveness and diversification of activities in border areas, it is still premature to drawconclusions in the absence of the mid-term eval uation of these programmes (planned by the end
of 2003). It should, however, be recalled that a num ber of border regions benefit from substantial
Objective 1 assistance comprising rural development measures as well as higher co-financingrates than other regions.
Implementation of the “trans-national co-opera tion” strand of LEADER +, which enables local
action groups to launch projects w ith similar structures of anothe r country (including applicant
countries), has not started everywhere. The se lection of LEADER groups is not yet completed
and programmes are not yet in th eir implementing phase. In additi on, co-operation with applicant
countries is a new feature of LEADER and the LEADER groups, which give priority to local
projects, have to identify their potential partners and to measure the added value of these projects
for the development of their territory. However,  certain groups of local action have already
initiated contacts.
                                                
4 See OJ C 239 of 25 August 2001, page 4.
174. CONCLUSION
Enlargement is of particular importance to the border regions in the EU Member States. It will
provide these regions with opportunities for incr eased integration, economic  activity and growth.
Some specific problems in the area of infrastructure and economic restructuring still need to betackled, though.
In combination with the instruments of structural policy and the instruments of the intensified
pre-accession strategy the action plan of the Commission of July 2001 ensures that the border
regions will receive sufficient support through a broad range of measures.
The report demonstrates that the Commission has made considerable progress in implementing
the Community Action for border regions. Project implementation is, however, still in its earlystage and the Commission is relying in this context, to a large extent, on the efforts of regionaland local partners to make the projects, to which financial means have been committed, asuccess.
With a view to 2003, an additional allocation of € 15 million to preparatory measures on the
“Impact of Enlargement for the Regions Border ing the Candidate Countries” (budget line B5-
3003) is foreseen. The followi ng activities are envisaged:
– continue with support measures for SMEs, particularly in the most affected business sectors
including the promotion of business cooper ation and transfer of technical know-how;
– consolidation of actions for workers, such as advice and guidance to workers in social and
labour legislation on both sides of the border and other inform ation on the acquis in the area
of free movement of persons at the time of accession;
– continue with measures to prepare local and regional public administration bodies for
increased mobility and migration and help implement targeted social, cultural and educationalinitiatives for their citizens.
In addition, the Commission will continue to monitor the social and economic impact of
enlargement in border regions in order to  further improve this Community Action.
18Annex: Breakdown of 30 MEUR for border regions  under INTERREG in 2002 (n ew budget line B2-1411)
13 A-STRAND PROGRAMMES + BALTIC SEA REGION B-STRAND PROGRAMME
Participating countries Name of the programme
covering the regions inquestionTotal
expenditureERDF
allocation (
used
as weighting key )Share in
%Distribution of
the 30 million onprogrammesSum of ERDF
allocation aftertop-up of 30
Meuro
Finland/Estonia South Coastal Line  31,40  14,10 1,5% 0,451  14,55
Germany/Poland Mecklenburg-Poland  110,98  83,09 8,9% 2,657  85,74
Germany/Poland Brandenburg-Lubuskie  130,79  96,21 10,3% 3,077  99,29
Germany/Poland Saxony-Poland  61,11  42,68 4,5% 1,365  44,05
Germany/Czech Rep. Saxony-Czech Rep.  244,25  170,72 18,2% 5,459  176,18
Germany/Czech Rep. Bavaria-Czech Rep.  127,64  63,82 6,8% 2,041  65,86
Austria/Czech Rep. Austria-Czech Rep.  51,80  25,90 2,8% 0,828  26,73
Austria/Slovakia Austria-Slovakia  52,50  26,25 2,8% 0,839  27,09
19Austria/Hungary Austria-Hungary  61,65  30,82 3,3% 0,986  31,81
Austria/Slovenia Austria-Slovenia  54,52  27,26 2,9% 0,872  28,13
Italy/Slovenia Italy-Slovenia  93,29  43,20 4,6% 1,381  44,58
Greece/Bulgaria Greece-Bulgaria  259,28  170,00 18,1% 5,436  175,44
Greece/Cyprus Greece-Cyprus  80,21  47,00 5,0% 1,503  48,50
Finland/Sweden/
Denmark/Germany/
Estonia/Lithuania/
Latvia/PolandBaltic Sea Region  186,51  97,11 10,4% 3,105  100,22
Totals 1 545,93  938,17 100,0% 30,000  968,17
+3,2%
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