Opinion on:

- the Annual Report - Cohesion Financial Instrument 1993/1994, and

- the 1994 Annual Report - Cohesion Fund - Complement

(96/C 82/03)

On 20 January and 20 June 1995 the Commission decided to consult the Economic and Social Committee, under Article 198 of the Treaty establishing the European Community, on the above-mentioned Annual Reports.

The Section for Regional Development and Town and Country Planning, which was responsible for preparing the Committee's work on the subject, adopted its Opinion on 8 December 1995. The Rapporteur was Mr Mercé Juste.

At its 331st Plenary Session (meeting of 20 December 1995), the Economic and Social Committee adopted the following Opinion unanimously.

1. Introduction

1.1. This Opinion jointly examines two Commission reports relating respectively to the Cohesion Financial Instrument and the Cohesion Fund. The former covers the decisions taken by the Commission in agreement with the Member States concerned between 1 April 1993 and 26 May 1994, the date of the entry into force of the Regulation establishing the Cohesion Fund, which is the subject of the second report covering the period from 26 May to 31 December 1994.

1.2. Article 130d of the Maastricht Treaty stipulated that the Cohesion Fund should be set up to provide a financial contribution to projects in the fields of environment and trans-European networks in the area of transport infrastructure, with a view to strengthening economic and social cohesion. This financial support to the tune of ECU 15 150 million at 1992 prices for the 1993-1999 period, is intended for Ireland, Greece, Spain and Portugal.

1.3. The Economic and Social Committee recalls its support for the proposals to set up the financial instrument and the Cohesion Fund ().

2. General comments

2.1. The ESC is pleased to have the opportunity of commenting on the Reports, and wishes once again to make a positive contribution to more effective future application of the provisions governing the Fund. It would, however, stress the need to have comparable data on the projects funded in the various Member States.

2.2. The Committee welcomes the Commission's Reports, which present detailed comments and highly valuable data on the operations of the financial instrument and the Fund during the period covered and show that they have got off to a good start.

2.3. The Committee recognizes that the Commission has had to work under difficult conditions arising from (i) the legal uncertainty generated by the non-ratification of the Maastricht Treaty when the financial instrument came into force, and (ii) the fact that the instrument's administrative and legal management and monitoring machinery had to be put in place in its entirety in a very short period of time. The Committee emphasizes the effort made in this connection by both the Commission and the Member States.

2.4. The next review of the regulation, however, is to take place before the end of 1999, despite the Committee Opinion which argued for a 1996 review date. Until then, the Commission must submit a number of annual follow-up reports on the Fund. In order to facilitate analysis of follow-up results and evaluation of Fund activities, the Committee recommends that the reports henceforth be drawn up using the calendar year as the reference period. Similarly, it would recall that the deadline for submission of the reports is six months from the end of the period in question: the Report on the instrument has failed to comply with this. The ESC regrets that the complement to the Report for 1994 does not offer an overall analysis of interventions since the entry into force of the financial instrument.

2.5. In the first Report, the Commission refers to the ESC's positive contribution to the adoption and implementation of the financial instrument and to the Regulation on the Cohesion Fund and its implementing provisions. However, the Committee regrets that while the amendments by the European Parliament are mentioned, there is no corresponding reference to the main points made in the ESC's earlier Opinions. It would be desirable for future analyses of this kind to acknowledge the main concerns voiced by the Committee.

2.6. The Economic and Social Committee has taken note of the Court of Auditors' report on the application of the financial instrument. The Committee considers that the generally constructive criticisms it contains, which aim at more efficient and more transparent use of the fund, should as far as possible be taken on board by the Commission for future activities.

2.7. Subject to the points made above and in section 3 below, the Committee commends the Commission and the Member States for the progress made in launching the Cohesion Fund procedures and, in particular, for ensuring that the commitment appropriations for 1993 and 1994 utilized the total financial assistance available under the Community budget.

3. Specific comments

3.1. The Reports illustrate how the funds have been distributed according to type and in line with the 'appropriate balance' referred to in the regulations governing the financial instrument and the Cohesion Fund:

3.1.1. Distribution by sector

>TABLE>

3.1.2. Distribution by sector and country

>TABLE POSITION>

The Economic and Social Committee considers that although the balance varies from country to country, it may be deemed satisfactory, taking into account the administrative and planning difficulties encountered by the Member States, principally in connection with the environment.

Moreover, the aim of achieving an 'appropriate balance' between projects in the fields of transport and those in the environment should, in the Committee's view, focus on a period of more than one calendar year, by introducing some room for manoeuvre in the definition of each Member State's priorities for succeeding years. With this in mind, the Economic and Social Committee urges that future reports refer to trends in the overall balance, based on the accumulated annual allocations for each area. This would eventually allow a comprehensive evaluation to be made of how far the aim of balance in the fund has been achieved. The Committee would repeat its hope that the environmental part will increase over successive years. From this point of view, the Committee welcomes the initial adjustment in the balance of project distribution for 1994, as shown in the Complement to the report presented by the Commission.

3.1.3. Distribution by country

>TABLE>

The Committee is pleased to note that the budget appropriations for both 1993 and 1994 are very close indeed to the mid-point of the indicative allocation bands and calls on the Commission to maintain that situation, rather than allow annual allocations to drift to the extremities of those wide bands.

3.2. During the period analyzed, the four Member States in question channelled more than 70 % of the funds earmarked for transport into road projects.

While acknowledging that these countries need to modernize and develop their road networks, the Committee considers that a better balance should be struck between the different modes of transport.

The Economic and Social Committee would alert the Commission to the need to give priority, in the transport sector, to projects taking greater account of environmental protection concerns.

In the environmental sector, the Committee notes that nature conservation attracts only a tiny fraction of the funds available although this aspect is under particular threat in the Cohesion Fund beneficiaries.

3.3. The Committee once again emphasizes the special position of extremely remote island regions, and calls upon the Member States to take account of the specific problems of these areas in pursuing the general aim of cohesion, with a view to ending their isolation, considering that they are among the Union's important natural resources.

3.4. It is left to the Member States to assess priorities among projects to be assisted, subject to the provisions of Article 2 of the Council Regulation, supplemented by the 1992 Edinburgh European Council. The two Reports provide a general description of the most important projects to have received funding - although not on the same basis for all countries - and of the objectives pursued at national level. Bearing in mind that according to Article 130d of the TEU funding from the Cohesion Fund is directed towards projects and not programmes, as in the case of the Structural Funds, the Committee recommends that future reports should assess the contributions made by the projects receiving assistance to achieving not only national, but also Community objectives.

3.5. The Committee endorses the Commission's initiative under the heading 'Assistance for studies and technical assistance' to set up a tender procedure, with the aim of strengthening systematic evaluation of projects, practical implementing rules, and the potential and real impact of their implementation. It notes, however, that the figures for take-up of assistance for studies and technical assistance are far lower than expected: serious thought needs to be given to the reasons for this.

The Committee believes that the experience of EIB participation constitutes an effective contribution in the area of assessment and follow-up of projects funded by the financial instrument. Insofar as is possible, the Committee would wish to obtain more detailed information on EIB contributions in this field.

3.6. The Committee once again stresses the need to consult the economic and social partners in the Member States: this should take place at all stages of establishment of priorities, implementation and follow-up of projects receiving funding. Here, the Committee would refer to the comments made on Article 4 of the Framework Regulation of the Structural Funds (). This would contribute to a broader base for project selection, greater transparency and efficiency in Community allocations and better national-level coordination between Community-funded projects and others, together with increased consistency in future funding.

The Economic and Social Committee feels that prior consultation of national economic and social councils, where they exist, would be appropriate when priorities are being fixed at Member State level.

3.7. The Committee believes that the Commission should provide an overview of developments in funded projects, in the form of graphs or charts, to help verify whether projects comply with the objectives set by the Cohesion Fund, particularly in the area of the trans-European networks. The aim would be to check how far investment under the fund takes account of networks already defined on a priority basis.

3.8. The Reports make clear that many projects or groups of projects considered small scale on account of the modest amounts involved have been approved under the financial instrument, particularly in the environmental sphere. The Committee, although in favour of flexibility in this area, recommends more amalgamation of support wherever possible, in line with the specific features of each beneficiary country.

3.9. Cohesion Fund assistance depends upon Member States submitting a programme which contributes to the achievement of the convergence criteria as set out in Article 104c of the Maastricht Treaty. These conditions were not applied to the financial instrument. As laid down in point 3 of Annex II of Regulation 792/93, the Commission's Report provides summary information on the convergence programmes in the beneficiary countries, indicating progress made, particularly concerning the objective of reducing government deficit.

To this end, the Committee believes that future Reports should provide more detailed information on government deficit trends in each Member State and on the probable consequences of the conditionality rules approved at the Edinburgh Summit and due to come into force from November 1995. This information should not be provided at the expense of information on the progress of the convergence programmes.

3.10. The information contained in the Report on the criteria used by the Member States in evaluating projects for support reveals difficulties in the methodology used, and in some cases illustrates the need to improve the economic evaluation methods used, principally in the environmental sphere. The Committee shares this approach and believes that improvements must be made in coordination with the Commission, so as to make projects more effective.

3.11. The Committee emphasizes that the decision on project funding must only be taken once full, high-grade documentary data is available for a project submitted by a Member State to be assessed.

The Committee considers it necessary for the Commission to provide general data on the number of projects approved in relation to the total submitted, and on the main reasons for rejection. Project evaluation and selection by the Commission would be more transparent and efficient as a result.

3.12. The recent entry into force of the Cohesion Fund means that no final determination of the economic and social impact of the projects funded by it can realistically be made. The Committee recognizes the need to carry out such analyses: future Reports should describe in more detail the analytical methods used and, above all, the socio-economic effects of projects financed by the Cohesion Fund. Special attention should focus on competitiveness, economic growth and job creation, given the level of unemployment in some of the countries receiving Cohesion Fund aid.

3.13. Project follow-up is the key to ensuring more effective management of funds. The chapter on the Monitoring Committees seeks to convey an image of efficiency which given the delay in their establishment and the dearth of meetings and available information, cannot be verified. One of the general conclusions for the first year of operation was that project implementation had suffered modifications and delays, largely due to the fact that most projects had been submitted in the closing months of 1993.

In the Complement to the 1994 Report, the information given by the Commission on the Monitoring Committees is restricted to a single Member State. The Committee suggests that in future reports, the Commission refers to the monitoring arrangements set up, or to be set up, in each country, specifying the planned level of involvement of the economic and social partners.

The Committee trusts that the Commission will take a close interest in the work of the Monitoring Committees, set up independently by each beneficiary country, and will provide more information on the content of their meetings. It would restate the need for the economic and social partners, as well as regional representatives, to sit on these Committees, and is disappointed that their current membership still does not reflect this.

In the absence of any other basis for assessing country priorities, the role of the Monitoring Committees is crucial and it mostly reflects wider interests than just those of the operators.

3.14. Commission inspection missions for funded projects have been few and far between in relation to the total number of projects funded, and the information given in the Report on their results is not sufficient to allow conclusions to be drawn. There is no mention of the management and control systems set up in the Member States: as a result, it is difficult to check on the various stages of project implementation. The Committee calls upon the Commission to rectify these shortcomings, in particular by putting such inspections on a more systematic footing.

3.15. Detailed follow-up of the regulation on irregularities is essential, and sums wrongly paid by the Cohesion Fund must be recovered. The Economic and Social Committee notes that the Commission has not uncovered any fraud relating to project funding. However, it would urge the Commission, in future Reports, to publish the reports drawn up by the Member States under the provisions of the regulation on any irregularities or shortcomings they may come across in the management of the funds.

3.16. The Reports provide a detailed view of the various types of information and publicity measures taken by the Commission since the Cohesion Fund came into operation. Such measures, which reflect policy on transparency, are always welcome and never enough. The Committee recommends that they be continued and, where possible, multiplied at national, regional and Community level.

3.17. The Economic and Social Committee draws attention to the importance of coordination with the other structural-type instruments and Community programmes (Structural Funds, LIFE, TENs) and appreciates the Commission's efforts in this direction, in particular to avoid duplication of funding.

Lastly, the Committee would urge the Commission to provide more detailed information in future reports on contributions from other Community instruments to funding projects benefiting from the Cohesion Fund.

3.18. In the interests of greater transparency and, in particular, better information on the results of activities under the Cohesion Fund, the Committee recommends that the Commission concentrate on measures designed to ease dissemination of information. It should be disseminated as widely as possible: in this respect, the Committee considers that the consolidated report submitted by the Commission for 1993-1994 represents a positive step forward in this direction.

Done at Brussels, 20 December 1995.

The President

of the Economic and Social Committee

Carlos FERRER

() OJ No C 108, 19. 4. 1993; OJ No C 133, 19. 5. 1994.

() OJ No C 393, 31. 12. 1994.