Opinion of the Economic and Social Committee on the "Annual report of the Cohesion Fund (1997)"

(1999/C 116/03)

On 5 November 1998 the Commission decided to consult the Economic and Social Committee, under Article 198 of the Treaty establishing the European Community, on the "Annual report of the Cohesion Fund (1997)".

The Section for Economic and Monetary Union and Economic and Social Cohesion, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 8 February 1999. The rapporteur was Mr Barros Vale.

At its 361st plenary session (meeting of 24 February 1999), the Economic and Social Committee adopted the following opinion by 74 votes to two, with seven abstentions.

1. Introduction

1.1. As in previous years, the Committee has been consulted on the Commission's report on the decisions taken during 1997 regarding the Cohesion Fund. The Fund, which was established by the Treaty of Maastricht with the aim of boosting economic and social cohesion, provides financial assistance for environmental and transport infrastructure projects in the four beneficiary countries (Greece, Ireland, Portugal and Spain). The Fund's budget for the period 1993-1999 is ECU 15,150 million(1).

1.2. This total includes not only the Cohesion Fund proper (1994-1999) but also its predecessor, the Cohesion Financial Instrument, which was in force from 1 April 1993 to 26 May 1994.

2. General comments

2.1. The Committee is pleased to have again been consulted on the Cohesion Fund report. However it would once again draw the Commission's attention to the considerable delay in the publication of the report, which makes it impossible to address any problems promptly.

2.2. There are some points where greater detail is needed, for instance as regards the changes made to individual projects. No information is given about these changes, making it impossible to analyse the reasons for them and the resultant solutions.

2.3. The Committee is pleased to see that some of the recommendations which it made in earlier opinions have been adopted. On the whole, the report is a substantial improvement on its predecessors.

2.4. The legal and administrative procedures governing the management, operation, evaluation and monitoring of projects have been further stabilized, and the report shows that this has benefited the application of the Fund.

2.5. Subject to the analysis below, the Committee is pleased that once again the objectives set in implementing the budget have been achieved. This applies to both commitments and payments.

2.6. It is worth noting that from the beginning of activity in 1993 up to the end of 1997, the Fund committed around two thirds of its overall budget allocation for the period 1993-1999.

2.7. On the evaluation front - and without prejudice to subsequent considerations - the Committee welcomes the findings of the London School of Economics (LSE) study which were made pubic in June. The study estimates that the Fund should have a favourable medium and long term impact on the beneficiary regions and countries, especially as regards employment, the relationship between public and private investment, and relations between the cohesion countries and their neighbours.

2.8. Despite the high calibre of the LSE study, its extremely technical nature makes it difficult to identify its findings and to glean an overall picture of the progress made in the cohesion countries. The Committee therefore suggests that future initiatives of this type be accompanied by a summary clarifying the main findings; this would make the report more accessible and turn it into a real work-tool.

2.9. The Committee also welcomes the ex postproject evaluation programmes, which bear witness to the Commission's concern for project evaluation. The Committee is pleased that the programmes have been entrusted to outside assessors, as an independent view can prove much more beneficial than an in-house evaluation.

2.10. The Committee is pleased to see that project monitoring and inspections have been stepped up. The number of inspection visits has increased, and there have been checks on all projects.

3. Specific comments

3.1. Article 10(2) of the Cohesion Fund regulation states that "a suitable balance shall be struck between projects in the field of the environment and projects relating to transport infrastructure". Compliance with this requirement must be assessed over a period of more than one calendar year, as the Committee recommended and the Commission decided in 1995.

3.1.1.

>TABLE>

For the period 1993-1997 overall, the breakdown was 49,1 % for the environment and 50,8 % for transport.

3.1.2. Distribution by sector and Member State in 1997

Commitments

>TABLE>

Appropriations

>TABLE>

3.1.3. Analysis of these tables reveals that, in the environment sector, payments significantly lagged behind commitments in all countries (38,2 % and 54,6 % respectively), while the reverse was the case in the transport sector (61,7 % and 45,4 %). Both the Commission and the Member States must devote more attention to this point in future.

3.1.4. The Committee notes with pleasure the increase in investment in the environment sector, which considerably outstripped the figure for the transport sector in 1997 in all countries except Greece. This does much to restore the desired balance, although the trend must continue.

3.1.5. The Committee is also pleased to see that the allocation of funding has remained consistent with the indicative breakdown among the eligible Member States.

3.2. Breakdown for the transport sector

>TABLE>

3.2.1. Once again, the Committee calls for a better balance between the different transport modes. Road schemes again predominated in 1997, as they have since the beginning of the Cohesion Fund, although the Committee welcomes the increase for the rail sector, which accounted for 32 % of the total in 1997.

3.2.2. The Committee is obliged to note that investment in ports has remained extremely low throughout the Fund's existence, accounting for a mere 2,9 % of the total. The bulk of this investment has been in Greece. The Commission and Member States must strive harder to increase investment in projects for sea and inland port infrastructure and help the sector develop. This would do much to further the development of the target regions, where it is difficult for such projects to be financially viable.

3.2.3. The Committee is pleased to see that, as in previous years, a significant portion of the transport budget was used for projects relating to the trans-European transport networks. This trend should become more pronounced in the future.

3.3. Turning to the breakdown for environmental projects, the Committee notes again that the sums invested in nature protection and improvement of the urban environment remain low despite the increasing importance of these areas, which are fundamental for safeguarding quality of life. However, investment in these areas has increased. The Committee is also sorry to see that the report - unlike its predecessors - does not contain a comparative table of expenditure in the environmental field.

3.4. More attention should focus on investment in the forestry sector to combat desertification and other environmental problems. In 1997 Spain was the only country to present projects in this field, which also involved its outermost regions.

3.5. Still on the subject of breakdown, the Committee again recommends that more attention be paid to the geographical location of projects, which continue to focus on the main areas of population. Investment in the outermost regions has been low, and the Member States and the Commission should give this matter more attention.

3.6. The Committee is pleased to note how many jobs are generated directly or indirectly by the infrastructure schemes financed by the Fund. Both direct and indirect jobs are generated in the short term, but in the longer term the most lasting jobs are those generated indirectly. The Commission estimates that 20 jobs are generated directly per million ecus of grant in transport projects and 25 in environmental projects.

3.7. The Committee welcomes the significant improvements in the presentation of the report, and in particular the clearer layout and the summary. This makes the report easier to read and analyse.

3.8. The Committee is also pleased at the improvements made in the monitoring process, and notes that in the course of the year the Commission held two meetings in Brussels with the social partners, including representatives from the cohesion countries.

3.9. The Committee notes that more public projects are being managed by the private sector; these mainly concern airports, bridges, ports and incinerators. The Committee trusts that this trend will make for more dynamic, efficient and high-quality services for the community.

3.10. The Committee notes that applications for Cohesion Fund assistance are mainly made by national governments, as stipulated in the regulation establishing the Cohesion Fund, although some initiatives originate with local or regional authorities. The Committee urges the Commission to show greater flexibility when applying this principle, by being more open to intermediary bodies and thereby encouraging dialogue and possibly helping to secure projects with considerable potential which otherwise would not have materialized.

3.11. The Committee feels that the publicity measures to be undertaken by the cohesion countries are modest and have virtually no impact, being limited to the actual site of the project and lacking any access to the mass media, such as television and the press. The general public is therefore unaware that the EU has contributed to the schemes. The case for allocating additional funding to this area should be considered so that the EU's commitment to the development and modernization of the cohesion countries is apparent both in those countries and in the contributing countries.

3.12. The Committee is pleased to see that once again the Cohesion Fund has been properly coordinated with other Community policies, and in particular with competition policy (which the Commission has striven to safeguard) and public procurement; in this latter area, the Commission notes that national authorities have cooperated more in applying Community procedures.

3.13. The report states that the Commission wishes the Cohesion Fund to continue in the seven-year period 2000-2006, and the Committee has taken a similar view in a number of earlier opinions. The current beneficiary countries should continue to receive support irrespective of whether they enter the third stage of EMU, provided that their per capita GNP remains less than 90 % of the Community average. The Committee suggests that different criteria be established for countries taking part in EMU on the one hand, and for Greece and future members on the other. After the applicant countries (some of whom will qualify for the Cohesion Fund) join the EU, the Fund's resources will have to be reinforced rather than redistributed. A reduction in budgetary capacity would undermine the primary objective of boosting economic and social cohesion, and would mean that fewer high-quality projects could be approved.

3.14. The Committee welcomes the Commission's proposals regarding the continuation of the Cohesion Fund, which envisage a budget allocation of ECU 3000 million per year for the four current beneficiary countries. The central and eastern European candidate countries are to have a separate budget of ECU 1000 million per year for the period 2000-2006, in the form of pre-accession aid under the ISPA (pre-accession structural instrument), which is being set up as a counterpart to the Cohesion Fund. The Commission also states that countries taking part in the third stage of EMU will have to comply with the growth and stability pact, and that the conditionally principle should continue to apply to all countries.

3.15. The Committee is pleased to see that once again no cases of fraud were detected. It stresses the need to provide information on any omissions or irregularities in the management of assistance.

3.16. The Committee welcomes the increase in the number of inspection and monitoring visits by the monitoring committees in the four countries, notably to the most complex projects.

Brussels, 24 February 1999.

The President

of the Economic and Social Committee

Beatrice RANGONI MACHIAVELLI

(1) At constant 1992 prices.