[pic] | COMMISSION OF THE EUROPEAN COMMUNITIES |

Brussels, 1.3.2005

SEC(2005) 273

COMMISSION STAFF WORKING DOCUMENT

Annex to the 2003 REPORT ON PHARE AND THE PRE-ACCESSION INSTRUMENTS FOR CYPRUS, MALTA AND TURKEY COUNTRY SECTIONS & ADDITIONAL INFORMATION {COM(2005) 64 final}

TABLE OF CONTENTS

Part I: Country section 3

I.1. Bulgaria 4

I.2. Cyprus 14

I.3. Czech Republic 25

I.4. Estonia 32

I.5. Hungary 38

I.6. Latvia 48

I.7. Lithuania 57

I.8. Malta 65

I.9. Poland 73

I.10. Romania 82

I.11 Slovakia 93

I.12. Slovenia 103

I.13. Turkey 115

Part 2: Additional information on implementation and programme management issues 123

II.1 Bridging pre-accession support with structural funds 124

II.2 Technical and Financial assistance 125

II.2.1 Information on Twinning and Taiex activities in 2003 125

II.2.2 Information on multi country and horizontal programmes 126

II.2.2.1 Participation in Community Programmes, Agencies and Committees 126

II.2.2.2 Information on horizontal programmes: 128

II.2.2.3 Information on multi country programmes in cooperation with IFIs 134

II.3 Programme Management Issues – Monitoring and Evaluation 136

II.3.1 Monitoring and Interim Evaluation 136

II.3.2 Ex post evaluation 137

II.3.3 Other activities of the monitoring and evaluation function 138

Part III: Financial data 140

III.1 Phare funds by year 1990-2003 141

III.2 Phare funds by country 1990-2003 142

PART I: COUNTRY SECTION

I.1. BULGARIA

1.1. The year in review

As noted in the Commission’s latest Regular Report (November 2003), Bulgaria continued to make progress in meeting the accession criteria in 2003.

Political developments

Bulgaria continued to fulfil the political criteria. Progress was made with the adoption of a programme and an action plan for the implementation of the Strategy for Modernisation of the State Administration, which aims at consolidating the legal framework in this area. Sustained efforts will be necessary to further implement the public administration reform and to fulfil Bulgaria’s aim to have a qualified and efficient civil service in place in the medium term, to ensure the effective application and enforcement of the acquis when Bulgaria joins the Union.

The overall reform process for the judiciary continued in line with the 2002 Action Plan. In particular, the amendments to the Constitution regarding the status of magistrates represent an important step forward. Other legislative measures aim at reducing the duration of court proceedings and strengthening judicial control of executive decisions. However, further efforts are necessary to re-organise the investigation service as part of the executive, in line with best practice in Member States. Bulgaria also needs to ensure that the judicial budget is adequate for the smooth functioning of the judicial system.

Corruption remains a problem, and Bulgaria should maintain concerted efforts to implement measures in this respect. The fight against corruption remained high on the political agenda and further measures in this context were adopted.

Bulgaria continues to respect human rights and fundamental freedoms. The legal framework for asylum and child protection improved considerably. However, the living conditions of children placed in institutions changed little during the past year. As regards the mentally disabled, the required legal framework is still missing, notably to ban arbitrary detention. Despite some efforts to address the situation, the living conditions in institutions for mentally disabled are difficult and opportunities for rehabilitation and therapy are scarce. Further efforts are necessary to address the situation as regards degrading treatment by the police and trafficking in human beings. In the area of social and economic rights, progress can be reported notably as regards equal opportunities and anti-discrimination.

The new Action Plan for the implementation of the “Framework Programme for Equal Integration of Roma into Bulgarian Society” represents a positive step, as specific budgetary support is provided for measures in the areas of anti-discrimination, education, culture, housing, employment and social protection. Determined and sustained efforts are needed to fight discriminatory attitudes and behaviour and to address the widespread social disadvantage affecting the Roma community.

Macroeconomic developments and structural reforms

Bulgaria is a functioning market economy. It should be able to cope with competitive pressure and market forces within the Union in the near term, provided that it continues implementing its reform programme to remove remaining difficulties.

The Bulgarian economy has achieved a high degree of macroeconomic stability due to a good policy-mix brought about by the currency board arrangement, a tight fiscal stance and wage moderation. Economic stability and good progress in structural reforms allow market mechanisms to provide a more efficient allocation of resources which, in the absence of the nominal exchange rate as an instrument for adjustment, is setting the basis for a process of sustained growth. This holds in particular for the increasing role of the private sector through privatisation and the reduction of state aid, the positive development of the banking sector and some improvements in the regulatory environment.

However, the flexibility of product and labour markets needs to be further enhanced. In particular, the efficiency of the administrative and judicial system has to be improved, providing economic agents with a more stable and predictable framework and allowing them to enforce their property rights. The privatisation programme needs to be completed. Regulations and administrative procedures affecting enterprises must be further streamlined, also to provide more viable conditions for small and medium-sized enterprises. The restructuring and liberalisation of the network industries needs to further advance in order to reduce subsidies, to enhance quality and allow for a reduction of the prices of their services. The ongoing reduction in unemployment should be further supported by addressing rigidities in the labour market and improving the education system. Implementing these reform measures should contribute to higher levels of private and public investment, thereby contributing to sustained growth and competitiveness within the Union.

Progress in meeting the acquis communautaire

Over the past year, Bulgaria has continued to make good progress in most areas of the acquis and is on track to complete the required legislative transposition before the planned date of accession if the current pace of progress is maintained. Bulgaria needs to continue to make sustained efforts to develop sufficient administrative and judicial capacity to implement and enforce the acquis . As well as continuing horizontal reform of the public administration, it needs to focus in particular on developing the capacity to be part of the internal market and to apply the acquis in areas such as agriculture, environment and regional policy[1].

1.2. Phare in 2003

Programmes launched

For 2003, Phare allocations for Bulgaria totalled € 188.92 million - National Programme (€ 94.9 million), Cross-border Co-operation Bulgaria-Greece (€20 million), Cross-border Co-operation Bulgaria-Romania (€ 8 million), External Border Initiative (€ 4.12 million) and Nuclear Decommissioning (€ 61.9 million). This figure excludes the benefits to Bulgaria from horizontal and multi-country Phare programmes, including those on nuclear safety.

The overall aim of the National Programme (€ 94.9 million) was to assist Bulgaria’s preparations for EU membership, on the basis of the priorities identified in Bulgaria’s latest Accession Partnership, approved in May 2003. National Programmes together with the External Border initiative amounted € 99 million. The National Programme reflected the findings of the Commission’s 2002 Regular Report and the priorities identified in the Government of Bulgaria’s updated National Programme for the Adoption of the Acquis and preliminary National Development Plan.

The National Programme was designed to meet six main broad objectives, which represented the areas in which the Commission believed that Phare support could most assist Bulgaria to meet the accession criteria.

- Strengthen public administration and the judiciary at all levels ; the programme included projects on Public Administration Reform: Improved Service Delivery, Unallocated Institution Building Envelope, Reform of Civil and Penal procedures and Information Technology for Judicial Reform.

- Improve transparency, financial control and the fight against corruption and fraud : The programme included projects on Institution Building for Public Internal Financial Control and Strengthening the Administrative Capacity of the National Audit Office.

- Promote economic growth, competitiveness and social cohesion ; the programme included projects on Alternative Employment, Water Supply for Tourism areas, Regional Development Scheme, Social Sphere Commitments and a Database for Structural Funds Instruments.

- Integrate minority and vulnerable groups into mainstream society and create a more dynamic and pluralist civil society ; the programme included projects on Institution Building for the Council of Electronic Media, Civil Society Development, Roma Health and Education and Child Welfare and Mental Health.

- Enhance the administrative and judicial capacity to implement and enforce legislative measures and assume the obligations of EU membership ; the programme included projects on Strengthening the administrative capacity of the State Agency for Metrology and Technical Surveillance, Institution Building for the Tourism Agency, Introduction of a Cluster Approach and the establishment of a Cluster Model, Food Safety, Veterinary Border Control, Rendering Plants, Integrated Administrative and Control System (IACS) Phase 2, Vessel Traffic Management and Information System (VTMIS) Phase 2, Control System for Roadside Inspections and Checks, Strengthening the administrative capacity of the Executive Agency for Maritime Administration, Vocational Qualifications, Oil Stocks, Electricity Market, Institution Building for the State Energy Regulatory Commission, Chemical Substances, Water Basin Management, Air Monitoring, Police Academy, Mobile Border Units, Refugees Agency Accommodation, Customs Laboratory, Customs Computerisation and Participation in EC Programmes and Agencies.

- Improve the strategic planning and effective utilisation of EU funds and prepare for Structural Funds (including implementation of EDIS) ; the programme included projects on Project Preparation Facility and Preparation of the Ministries of Regional Development and Public Works, the Economy and Finance for Structural Funds.

The overall aim of the Cross-border co-operation programme (€ 28 million) was to promote economic and trade co-operation between border regions of Bulgaria and counterpart regions in Greece and Romania, and help these regions overcome their specific development problems. The following projects were supported:

- Cross-border co-operation projects with Greece : Railway, road, employment, border safety and water quality projects (€ 20 million);

- Cross-border co-operation projects with Romania : Road, river, economic development and environmental protection projects (€ 8 million);

- External Border Initiative Programme : infrastructure and economic development (‘people to people’) projects situated in the border regions of Bulgaria with Serbia & Montenegro, Former Republic of Macedonia and Turkey (€ 4.12 million).

Overview of programmes implemented

The Phare programme allocated some € 1,410 million between 1992 and 2003. In addition to the National Programmes, Bulgaria has benefited from special assistance for the decommissioning of the Kozloduy nuclear power station, from Cross Border Cooperation programmes and from multi-beneficiary programmes.

The end of 2003 saw the successful closure of most of the projects financed from the 2000 programme, covering a range of sectors. The 2001 programmes have been contracted and their implementation is under way. Contracting of 2002 programmes has started; the contracting rate, however, remained relatively low as Bulgarian authorities have focused efforts mainly on the 2001 programmes.

Phare management performance

At the end of November 2003 the contracting period for all the projects under the 2001 programmes expired with the exception of one CBC project worth a total of € 7 million whose contracting deadline was extended by a year (BG0106.01 Rehabilitation and partial reconstruction of Road II-19 Section Simitli – Razlog). The final contracting rate for Phare 2001 reached well over 90 %. This positive result was obtained as a result of intensive efforts by the Bulgarian authorities and the EC Delegation.

Four Phare 2000 projects had their contracting deadline extended by one year; the deadline expired on 31 December 2003. One project, Institution Building and development of the National Statistics System (budget: € 1.30 million), was successfully contracted. However, the Phare funds under the other three projects failed to be contracted in full. The projects concerned are the following:

- BG 0004.01 SME Quality Management Systems – grant scheme, technical assistance (budget: € 5 million);

- BG 0004.02 Business Incubators – works, supplies, management services (budget: € 2.45 million);

- BG 0004.04 Renovating Vocational Training Institutes – supplies (budget: € 1.14 million).

The partial contracting of these projects indicates the need for improvements in procurement planning and project management, especially with a view to the forthcoming transition to EDIS.

NDPs – State of Play

In June 2003, the Bulgarian authorities published a revised and strengthened National Economic Development Plan, incorporating Commission comments. The revised NDP, which includes draft Sectoral and Regional Operational Programmes, will facilitate coherent planning of Phare ESC and other investment support in the 2004-06 period. Furthermore, a methodological framework and guidelines for the preparation of the NDP for the period 2007-2013 have been elaborated by the relevant authorities.

Institution Building highlights

Most new Phare Institution Building projects are now delivered through Twinning. For Bulgaria, fourteen 1999 projects, fourteen 2000 projects, ten 2001 projects and ten out of sixteen 2002 projects were running in 2003. In addition, in the course of 2003 three twinning projects were chosen for financing from the 2002 Unallocated Envelope for Institution Building. Twinning will contribute to the results of seventeen projects under the 2003 programme. From 2001 a Twinning Light facility started spanning a broad range of acquis -related activities and ten twinning light projects were under implementation in 2003. Additionally, an Unallocated Envelope is available for covering IB need between programming exercises to allow the EC to respond more rapidly and flexibly to Bulgaria’s IB needs.

The selection of Member State partners for the Twinning projects under the Phare 2003 programme took place in October 2003 and the preparation of the covenants started immediately thereafter. Endorsement of most Phare 2003 Twinning projects is expected during the second and third quarters of 2004.

1.3 . Results and impact

State of play for JMC/SMSC development

During 2003, Bulgarian authorities displayed considerable efforts in improving their self-monitoring capacities. An updated format for Monitoring reports has been adopted and the nine Sectoral Monitoring Sub-committees, operative since 2001, continued to hold regular sessions twice a year.

The fourth annual meeting of the Joint Monitoring Committee was held on 11 December 2003 in Sofia. It reviewed the findings of the Phare Sectoral Monitoring Sub-committees, the ISPA Monitoring Committee and the SAPARD Monitoring Committee meetings held in 2003. The Bulgarian National Aid Coordinator services also presented reports on the following issues of overall concern to pre-accession assistance management:

- Administrative Capacity within the Bulgarian administration to manage EU programmes;

- Preparation for extended decentralisation (EDIS);

- Lessons learned from previous Phare contracting cycles;

- Development of self-monitoring capacity.

Corrective measures were agreed on a number of sector specific issues of project management. The conclusions and recommendations from Phare 2001 contracting, completed in November, were highlighted with a view to ensure further improvements in implementation of all ongoing programmes and smoother contracting of Phare 2002 funds. Further efforts need to be devoted to the implementation of the recommendations of the SMSCs.

M&IE Reports in 2003 - Lessons Learned

In 2003 the Interim Evaluator, EMS consortium, carried out evaluations of all sectors producing two reports per sector. Further acceptance by the Bulgarian authorities of the utility of the Interim Evaluation Reports was noted. However, although in most of the cases problems and corrective actions are identified and accepted by all involved parties, more attention should be paid to their implementation.

Overall, the impact of Phare programmes in Bulgaria continues to be positive. In view of the target date for accession, further sustained efforts need be taken to ensure the capacity of the Bulgarian administration to absorb EC funds.

Sectors with positive results

In the agriculture sector work continued on improvement of veterinary control, and the strengthening of the fisheries and aquaculture sector through two Institution Building projects involving twinning and supply of equipment: laboratory equipment for the veterinary medical pharmaceuticals control, for the animal tuberculosis control and for the fish health control; IT equipment for the fishing vessel monitoring system and for the fisheries information statistics system, as well as cars and patrol boats for the fishing control activities. Other projects that were implemented are technical assistance and supply of servers for the Sapard Agency. Projects launched include a comprehensive study on border veterinary inspection posts and five classical twinning projects: for veterinary control, for transmissible spongiform control, for strengthening of the Ministry of Agriculture in the field of agri-environment and rural development, for the restructuring of the forestry sector and for the establishment of a paying agency and setting up of IACS. Additionally three twinning light projects were also launched for the definition of less favoured areas in Bulgaria, for the strengthening of the phytosanitary control and for the control of the plant protection products and the organic farming.

In the Public Finance sector two twinning projects were successfully completed – BG 0006.02 “Strengthening the Public External Audit Institution” and BG 00.06.01 “Strengthening Public Internal Financial control”. Both projects supported the relevant Bulgarian institutions – National Audit Office (NAO) and Public Internal Financial Control Agency (PIFCA) in improving the overall public financial control and audit system on the basis of further development of the legal framework, strengthening the administrative capacity of NAO and PIFCA, human resources development and implementation of audit standards as per EU requirements. In addition, major restructuring of Ministry of Finance was successfully carried out through BG9909-02-01 “Support for the Implementation of the Medium Term strategy of the Ministry of Finance”. The assistance provided under the project helped the management of the Ministry of Finance to implement its budgetary and expenditure reform, to improve its functional organization and human resources management, to strengthen its key role as National Aid Coordinator and National ISPA Coordinator as well as to start the implementation of the FMIS.

The Phare projects in the environment sector assisted in terms of the transposition and implementation of the EU environmental acquis and for the preparation of the implementation of EU directives. There are 5 successfully completed Twinning projects in the areas of water, chemicals, Integrated Pollution Prevention Control (IPPC), trade in species of wild flora and fauna and radiation protection and safety at medical use. The projects have complementary awareness campaigns and supply of equipment components. They contributed to the establishment of the new authorities, adoption of the legislation, administrative capacity, enforcement and training of staff.

In the social sector , a major project on Vocational Training (BG 0004.03) came to an end in August 2003. This Grant Scheme provided 103 training organisations and vocational training schools with grants for vocational training in two regions of Bulgaria. In the North West, 40 grants were awarded, amounting to € 2 567 914.39; in the South Central region, 62 grants were awarded, amounting to € 3 323 771.77. A total of 9848 unemployed people received training and 3255 employed people received re-training. By 1 November 2003, some 1883 people who had received training started work; monitoring of the number of people who are no longer unemployed as a result of their participation in the project will continue during 2004. Two major Grant Schemes were also launched in 2003 - Labour Market Initiatives (BG 0102.05) and Social Inclusion (BG 0102.06). Both projects aim to provide employment, education and training opportunities for disadvantaged groups throughout Bulgaria, including numeracy and literacy training for the Roma community and employment opportunities for people with disabilities. A total of 170 grants were awarded to a wide variety of local organisations which will implement their projects during 2004.

In the home affairs sector substantial aid was provided to enhance the institutional capacity of the Ministry of Interior through the development of the relevant structures in compliance with EU standards. The structures of the MoI services were further reformed. Substantial investment to strengthen control over Bulgaria's borders was provided to the services of the National Border Police. Under a twinning project the State Agency for Refugees further strengthened its administrative and training capacity in line with the Asylum Law of 2002 and prepared terms of references for two transit centres to be built. Two other twinning projects have started, namely the implementation of the National Anti-Corruption Strategy and the Implementation of a Human Resources system for the MoI. Furthermore, the implementation of the Schengen Action Plan project is leading to positive changes in Bulgaria's policy towards the establishment of high level control of the external borders. Finally, with the completion of a project to create a national anti-drug strategy, a national drug coordination unit was set up.

In the area of nuclear safety , six Phare projects worth € 9.71 million are under implementation. Two more worth € 3.25 million have been approved by the Phare Management Committee. The KIDSF (Kozloduy International Decommissioning Fund managed by EBRD) is also available for implementation of decommissioning and energy efficiency projects with a budget, so far, of € 155 million. The Bulgarian Nuclear Regulatory Authority (NRA) is benefiting from five projects (€ 7.7 million) related to the decommissioning of Units 1 and 2, the assessment of modernisation of Kozloduy NPP Units 3 to 6 and the management of sealed radioactive sources. Kozloduy NPP is the beneficiary of a project (€ 2.5 million) for preparation of a manual aimed at assisting KNPP operators in handling severe accident conditions. Two projects (€ 2.76 million), under procurement, will supply equipment, respectively, for characterisation and control of institutional radioactive waste at the national repository of Novi Han and for innovation of the radiation monitoring system at the research reactor IRT of the Institute of Nuclear Research (INRNE) in Sofia.

In the sector of Regional Development , support continued on the preparation of Bulgaria for the management of Structural Funds (SF) and on the promotion of cross border co-operation (CBC). Support for preparation for SF is provided by IB projects for the line ministries which will be involved in the implementation of SF as future managing authorities of the Sectoral and Regional operational Programmes and by investment projects, mainly grant schemes, which are considered as SF-type projects. In the area of Cross-Border Cooperation , projects in Transport, Environment, Energy and Joint Small Project Funds are under implementation for both CBC Programmes between Bulgaria – Greece (€ 20 million) and Bulgaria- Romania (€ 8 million). A new CBC Programme entitled External Border Initiative Programme was initiated during 2003, providing funds for infrastructure and economic development (‘people to people’) projects which are situated in the border regions of Bulgaria with Serbia & Montenegro, Former Republic of Macedonia and Turkey (€ 4.12 million).

Two projects in the Public Administration Reform sector have started in 2003. They were evaluated as highly relevant to the reform process in the area of public administration. The project on implementation of Civil Service Reform is developing very well. It has contributed substantially to the drafting and implementation of the latest changes to the Law on Civil Service ion force since October 2003. Although the project on Strategic Policy Making and Coordination started with some delay, it is expected to have substantial influence for establishment of a comprehensive system for policy design and coordination in the Government. Good level of donor coordination is reached in the sector. Nevertheless more efforts particularly from the side of the beneficiaries are needed for reaching the optimal results with the resources available from different development agencies.

There are several Twinning projects under implementation in the area of Judicial Reform . The twinning type of project proves to be the suitable form for transfer of experience and good practices in this highly sensitive area. All of the projects are aimed at implementation of specific priority measures identified in the Government’s Strategy for the Reform of the Judiciary. A project on Streamlining Bankruptcy Procedures is developing very well. However, it is not yet completely clear what part of the MS experts’ recommendations shall be completely translated into organisational and legislative changes. The support to the Public Prosecutors Office continues at good pace. The two subsequent twinning projects are good examples of how the good practices of MS can be introduced in the traditionally very closed and conservative system of the public Prosecution. During the year 2003 several specific projects were started: on Strategy for Training and Recruitment of Magistrates, on Administrative Justice, and on implementation of the particular priorities of the Reform Strategy such as improvement of the System for Free Legal Aid, Execution of Judgements, and full automatisation of the judiciary.

Success story

Cross Border Cooperation between Bulgaria and Romania BG 0007.04.01 Joint Small Project Fund In the Regional development sector and within the Cross Border Co-operation Programme between Bulgaria and Romania, the first Joint Small Project Fund (BG 0007.04.01 JSPF) came to an end in November 2003. This Grant Scheme provided 17 projects with a total budget of EUR 530 999 (449 207 EU Grant and EUR 81 792 own contribution from the implemented organizations) with a clear cross border impact. The projects were implemented in 7 Bulgarian municipalities: Vidin, Montana, Shvistov, Pleven, Rousse, Sitovo and Silistra. The Programme provided financial support to NGOs and local and regional authorities in the following areas: Economic development; Environment; Tourism Development; Cultural Exchange; Local democracy; Planning and development studies. The supported projects were focused at the following target groups: Children and young people (7 projects); Musicians and actors (2 projects); General public within the region (2 projects); SMEs (4 projects); NGOs (1 project); Local authorities (1 project). During the implementation of the projects numerous events (total 197) have been organized which can be classified in three groups: Working meetings: 41 seminars with 1110 participants, 3 conferences with 108 participants, 80 workshops with 730 participants and 1 round table; Cultural events: 2 festivals, 8 exhibitions, 9 concerts, 3 plain airs, 21 puppet theatre performances; Public Events: 11 competitions, 3 fairs and 15 excursions. A total of 45 from these events were organized in the border area on the territory of Romania and the rest on the Bulgarian territory. Similar JSPF are under implementation for the same border financed under 2001 and 2002 programmes and for the CBC programme between Bulgaria and Greece. |

- Tasks ahead

The challenges for 2004 and subsequent years are to further improve the programming and implementation of Phare, and to implement a system of multi-annual programming and EDIS for the 2004-2006-period. These are in turn preparations for Bulgaria’s eventual participation in Structural Funds after accession. The immediate priorities are threefold:

- First, there is a need further to strengthen the capacity of the Bulgarian authorities, especially the EU funds Directorate in the Ministry of Finance and Implementing Agencies, to identify strategic programming priorities in a pro-active way, and translate these priorities into mature project proposals that can be supported by Phare. Public institutions need to collaborate across ministerial boundaries, work in partnership with business and civil society groups, and co-ordinate donor assistance more effectively.

- Secondly, there is a need to strengthen both financial management systems and project implementation capacity in some areas. This is particularly the case for projects involving investment in ESC and grant schemes, which will account for an increasing proportion of the Phare programme. Efforts are needed to reduce staff turnover and provide adequate resources for the contracting, technical and financial aspects of project implementation. Horizontal public administration reform, which is now a major priority for Phare, should help in this respect.

- Thirdly, the JMC arrangements and evaluation systems must be further strengthened, with lessons of monitoring and evaluation fed back into the design of new programmes. In the longer term, the Bulgarian Ministries must develop their own monitoring and evaluation systems so that they can work effectively under more decentralised arrangements.

I.2. CYPRUS

2.1. The year in review

Political developments

Overview

During the year 2003 remarkable developments occurred in Cyprus, even though the talks for the Cyprus problem did not reach an agreement.

Important developments included the signing of the Treaty of Accession by the Government; the massive demonstrations by thousands of Turkish Cypriots in the north for a political solution that would lead to EU accession, as well as the partial lifting of restrictions in movement across the green line. By the end of the year hundreds of Turkish and Greek Cypriots had crossed the green line.

Other major developments were the election of a new President and the establishment of a new government in Cyprus as well as the “parliamentary” elections in the northern part of the island.

Internal situation

The year 2003 started with an intensive Presidential election period for the Republic of Cyprus and ended with an 'election' period in the Turkish Cypriot community. During both electoral procedures the main debate issue among the candidates was the solution to the Cyprus problem and EU accession.

The Presidential elections took place on 16 February 2003 and Mr Papadopoulos was elected President of the Republic of Cyprus in the first round.

In the north the opposition against the leadership's negotiation position in the UN talks resulted in the demonstrations of thousands of Turkish Cypriots calling for a political solution that would lead to EU accession. The opposition of the Turkish Cypriots against the leadership's stance was expressed politically with the opposition parties of Mr. Talat, Mr. Akinci and Mr. Erel.

Although these three parties did not agree to enter the "parliamentary” elections in the north in December 2003 under a single list, they declared their will for a solution and EU accession by May 2004. The outcome of the 'parliamentary elections' in the north was as follows: Mr. Talat's party (main opposition) gained 19 seats, Mr Eroglu's party (status quo) 18 seats, and Mr. Denktash's Jr. party 7 seats and Mr. Akinci's party (opposition) 6 seats. This meant that there was a stalemate between the status quo and opposition parties. By the end of the year frantic efforts were being made to form a new administration in the north that would reflect the changes in political sentiment expressed in the elections.

EU accession process

A detailed overview of the progress made by Cyprus in the preparations for EU accession is given in the Commission's Comprehensive Monitoring Report for Cyprus and the monthly pre accession reports. In the period October – December 2003 no substantial progress was recorded and only six legislative acts of minor importance concerning harmonisation, passed through the Parliament. At the end of the year around 200 legislative measures needed enactment.

The UN process

On 15 January direct talks between President Clerides and Mr Denktash in the presence of UN Secretary General’s Special Adviser Mr de Soto resumed in Cyprus. After the Presidential elections of 16 February Mr. Papadopoulos was elected to succeed Mr. Clerides.

On 26 February 2003 the UN Secretary-General presented a third version of his plan. On 10 March both leaders met with UN Secretary-General Annan in Hague in order to inform him whether or not they were prepared to sign a commitment to put the UN plan to separate simultaneous referenda on 30 March, but the talks resulted in failure.

On 1 April, the UN Secretary-General reported to the Security Council on his mission of good offices in Cyprus, underlining inter alia that a solution on the basis of his plan could be found only if there is an 'unequivocally stated preparedness on the part of the leaders of both leaders to commit themselves to finalising the plan without reopening its basic principles or exceptional trade-offs by a specific date and to put it to separate simultaneous referenda on a date certain.

However, the Turkish Cypriot regime subsequently eased restrictions on crossings of the UN buffer zone on 23 April. Since then, the crossing has become routine for thousands of Greek and Turkish Cypriots.

The north

The political developments in the north have focused almost exclusively on attempts to solve the Cyprus problem. Various actions were taken by several political parties and civil society groups in the north. The Platforms “This Country is Ours” and “Common Vision”, supported by the main opposition parties, staged three demonstrations: on 26 December 2002 with 30,000-40,000 participants; on 14 January 2003 attended by an estimated 45,000 people and on 27 February 2003 with some 60,000. In addition there have been a large number of small-scale events.

On 3 June the Commission adopted a package aiming at promoting economic development of the northern part of Cyprus and bringing it closer to the EU. It responds to the request of the European Council of Copenhagen in December 2002, and consists of financial assistance worth €12 million as well as measures promoting trade and bringing the north closer to the Union. The implementation of the measures of the package is underway.

Macroeconomic developments and structural reform

Cyprus is a functioning market economy and it should be able to cope with competitive pressure and market forces within the Union. The European Commission has already acknowledged on several occasions the economic reform efforts undertaken by the Cypriot authorities to prepare for EU accession. The Cypriot authorities' commitment to the economic requirements of EU accession has always been sustained.

However, further improvements can be made. Liberalisation of the telecom, energy, air transport and postal services by 2003 has been implemented in some sectors, but remains to be put into practice in others. Fiscal consolidation went markedly off target and the current account deficit widened. Progress has also been achieved in financial supervision but further improvements remain necessary.

Progress in meeting the "acquis communautaire"

The main conclusions of the Comprehensive Monitoring Report show that the most problematic issue for Cyprus besides the 2 on agriculture similar to other countries (Paying Agency, Trade Mechanism) is maritime safety in the Transport chapter. Regarding the agricultural issues very hectic last minute efforts are under way, particularly as concerns the setting up of the Paying Agency before 1 May. However, the so far ‘amber’ issue of upgrading agri-food establishments is gradually turning ‘red’ so far as the government has not, as promised, closed down by 31 December 2003 143 establishments not complying with the acquis. The resistance of the companies seems higher than the government expected.

Other serious concerns remain, including concerns over Flag State policy and resources, as well as Port state control. With Cyprus having the 6th biggest fleet in the world this is an issue that has high political profile for the Member States. Cyprus is still on the black list of the Paris MOU. The main problem is the lack of administrative capacity to carry out a sufficient number of controls.

While in general JHA-issues are managed well by the Cypriots, there are many problems concerning asylum which used to be handled by UNHCR. The Cypriots have not yet a stable asylum service in place and are overwhelmed by a large influx of asylum seekers of more than 3000 persons in November and December which is much for a small island. Cyprus has a strong record in the internal market field (with some exceptions) whereas in the environmental field implementation is slow. Little progress can also be noted in the field of energy leaving doubts if the requirements will be fully met by accession.

Tangible progress has been achieved mainly as concerns “external relations”, with Cyprus presenting an overdue list of bilateral agreements to be cancelled and concerning visa policy (JHA) by eliminating (as the last accession country) visa-free entry for Russian citizens as of 1 January 2004. Progress can be noted also in the field of telecommunications.

2.2. Pre-accession assistance in 2003

Programmes launched

In the framework of its pre-accession strategy for Cyprus and following the expiry of the financial protocols at the end of 1999, the Council adopted Regulation 555/2000 of 13 March 2000, whereby an amount of EUR 57 million was allocated to Cyprus in the form of pre-accession assistance over the period 2000-2004. These funds were intended to support priority operations identified in the accession partnership as well as bi-communal activities that would contribute to the reconciliation of the two Cypriot communities.

The Financing Memorandum concerning the 2003 Pre-accession Programme for Cyprus (EUR 11,8 million) was signed in June 2003 and its activities are in line with the Regular Report 2002 of the Commission on Cyprus progress towards accession.

This programme covers in particular the areas of environment, SME's, administrative co-operation, statistics and bi-communal activities.

Moreover, a separate Financing Memorandum concerning a special aid package for the northern part of Cyprus (EUR 12 million) was signed in January 2004. The purpose of this additional assistance to Cyprus, decided by the Commission in 2003, is to finance activities aiming at the economic development of the northern part of Cyprus and at bringing it closer to the European Union.

Overview of programmes implemented

2000 Financing Memorandum

Justice and Home Affairs – Schengen Information System (SIS) : The contract (Europeaid/113785/D/S/CY) of the project "Police Computerisation System and National Schengen Information System" was awarded in May 2003 and project implementation is ongoing.

Development of the operational capacity of the Department of Customs and Excise: completed

Reform and modernisation of the VAT Service : completed

Administrative Co-operation and TAIEX activities: completed

Participation in Phase II of Leonardo, Socrates, Youth Programmes : completed

2001 Financing Memorandum

The contracting deadline for the projects "Management of the Akamas Forest", "Customs", "VAT", "Upgrading of State Laboratories", "Trade Union Links" (bi-communal), was extended by six months until 31.3.2004.

The disbursement deadline in respect of "Urban Wastewater Development", "Management of the Akamas Forest", "Customs", "VAT", "Capacity building for Accreditation and the New Approach Directives", "Upgrading of State Laboratories", "Reinforcement of the capacity of Social Partners" and "Trade Union Links (bi-communal), was extended by twelve months until 30.9.2005 and for the "Monitoring and Assessment" until 31.12.2005.

Urban Wastewater Development:

The service contract (EuropeAid/113561/D/SV/CY) was awarded in February 2003 and the project is being implemented. According to the contract, the consultant will carry out technical studies for sewerage networks and treatment plants for twenty eight (28) communities with population equivalent to or greater than 2000 and will submit detailed studies including detailed design and tender documents.

Management of the Akamas Forest:

The pertinent tender (EuropeAid/114326/D/S/CY) was re-launched in October 2003 and the evaluation report is being examined. This project will cover the design, delivery, installation, commissioning, training and maintenance during the warranty period of an automatic fire detection system in Akamas forest, a protected area.

Customs: The service contract (EuropeAid/113346/D/SV/CY) has been endorsed by the Commission. The project is a follow-up from the Customs project funded under 2000 and aims at strengthening the administrative and operational capacity of the Department of Customs & Excise in the areas of excise control, control of customs duty suspensions and reliefs, and the application of simplified customs procedures in line with the acquis and EU good practice.

VAT :

The service contract (EuropeAid/113347/D/SV/CY) has been endorsed by the Commission. The overall objective of this Project, which is a follow-up from the 2000 VAT Project, is to strengthen the administrative and operational capacity of the VAT Service in the areas of risk management policy, training for VAT control and investigation staff, intra-community trade and EU "own resources", and promoting voluntary compliance in line with the acquis and EU good practice.

Capacity building for New Approach Directives:

A contract was signed in September 2003. The aim of the technical assistance is to advise on the establishment of the appropriate administrative structure and on the legislative framework for the implementation of the new approach directives and to provide the necessary training.

Capacity building for Accreditation:

A contract was signed in September 2003. The aim is the provision of support through advice, joint assessment, training and a quality manual for the establishment and operation of a National Accreditation System in Cyprus.

Upgrading of State Laboratories:

One framework contract and two supply contracts were signed and implemented. A third supply tender was launched on 9.1.2004.

Participation in Community Programmes and Agencies: completed

Reinforcement of the capacity of Social Partners: The relevant contract was awarded in September 2003 and the project is being implemented. The project focuses on reinforcing the links between trade unions in Cyprus and the development of an in-depth understanding of the acquis in the area of employment and social affairs.

Monitoring and Assessment: An amount of EUR 50.000 was transferred to this Project from the Urban Wastewater Project. The pertinent contract was signed in September 2003 and will expire in July 2005. The main objective is to provide an independent view of the management of Community pre-accession support to Cyprus by means of an external interim evaluation service. The results of the independent interim evaluations together with the information provided through the monitoring reports shall enable the Cypriot administration and the European Commission (through the Joint Monitoring Committee in particular) to judge progress of the pre-accession assistance to Cyprus and take corrective actions. To this end, an Inception Report was submitted by the contractor in January 2004. From its part, the Planning Bureau has prepared its Action Plan for Monitoring and Evaluation.

2002 Financing Memorandum

Further Upgrading of the State Laboratories: The pertinent Supply Procurement Notice (EuropeAid/114584/D/S/CY) will be published in the OJEC S 26 on 6.2.2004.

Telecommunications and I.T: An amount of EUR 610.000 has been transferred from this Project to Administrative Co-operation.

(a) The Contract Award Notice (EuropeAid/114937/D/SV/CY) was published in OJEC S 12 on 27.1.2004. This project component provides inter alia for the enhancement of the administrative capacity of the Office of the Commissioner for Telecommunications and Postal Regulation, the drafting of a human resources development plan and for an analysis and redrafting of current laws and regulations on the new acquis in the telecoms area.

(b) A framework contract has already been signed aiming at the reinforcement of the administrative capacity of the Department of Electronic Communications of the Ministry of Communications & Works in various spectrum management matters.

(c) The Request for Services in respect of number portability has been launched.

(d) The Request for Services in respect of Costing Models has been launched.

Extension of DG TAXUD CCN/CSI systems to Cyprus: Completed for the most part. ATOS's Service Quality Plan accepted by the Customs Authorities of Cyprus whilst EQUANT's SQP is about to be submitted for endorsement.

Establishment of IACS

The supply contract (EuropeAid/115209/D/S/CY) for the first component was awarded in November 2003 whilst the framework contract in respect of the second component has not been awarded yet. The aim of this project is to provide hardware and software to the Department of Agriculture in order to improve the administration capability of managing CAP mechanisms including direct payments and other CAP support measures in accordance with the provisions of the Integrated Administration and Control System (IACS). The computerized information management system, IACS, to be supplied, is required to support the registration, verification, authorization and payments of the individual claims from applicants.

Enhancement of the programming capacity and implementation structures for Rural Development and Agri-environment:

The evaluation report in respect of this tender (EuropeAid/115238/D/SV/CY) has been endorsed but a clarification as to whether some components of the project objectives are outdated is still required. The objectives of the project are: a) to assist in the finalization of a coherent and comprehensive rural development programme with emphasis on agri-environmental components and b) to improve the administrative capacity to implement relevant measures and schemes in line with the EU relevant Regulation 1257/99, including the preparation and implementation of a training programme for the enhancement of the administrative capacity of the relevant services of government institutions and especially of the Department of Agriculture

Strengthening the programming and implementation capacity for Structural Funds:

A negotiation report has been prepared for the installation of a Management Information System (MIS) for structural funds in Cyprus. In addition, a framework contract has been signed for the preparation of a pilot regional development programme that would "test" the institutional structures of Cyprus and advise the Authorities on the implementation of structural funds.

Strengthening the capacity of the Department of Merchant Shipping (DMS):

The supply tender dossier for the Effective Monitoring of Classification Societies has been prepared. The tender dossier for the Inspectors Training Programme has been approved. The framework contract for Flag Register has been endorsed. The contract for a Twinning Light for the implementation of ILO Convention No.147 is underway. The tender dossier for the purchase of Mobile Earth Stations and GMDSS has been revised.

Participation in EUROSTAT's Multi-beneficiary Programme 2000: completed

Participation in Community Programmes and Agencies : completed

Administrative Co-operation: An additional amount of EUR 610.000 was transferred from the Telecoms Project.

2003 Financing Memorandum

Air Pollution Monitoring System:

The Authorities requested that the amount initially allocated to this project be increased by EUR 379.610 through the transfer of funds from the "Participation in Community Programmes and Agencies" Project. The technical specifications for this project (EuropeAid/116452/D/S/CY) are awaiting endorsement before the relevant procurement notice can be published. The objective of this project is the supply of three complete air-quality monitoring stations that should operate in a common network connected via online telecommunication system with a Central Data Control System (CDCS). In addition, online communication of the CDCS should be established with all continuous analyzers operating on-site at different industrial plants for self-monitoring of stack emissions.

Solid Waste Management System (Landfill):

The Terms of Reference in respect of this service contract (EuropeAid/116312/D/SV/CY) are being prepared. The contract purpose is to carry out studies and designs for landfills in Cyprus: technical studies including feasibility and techno-economical studies (ii) environmental impact assessment studies (iii) tender documents.

SME Facility: This project is being managed centrally by DG ELARG and ECFIN.

Administrative Co-operation: General : on-going

Administrative Co-operation: TAIEX: on-going

Statistics : The participation of Cyprus in the 2002 Multi-beneficiary Programme can become possible when EUROSTAT finalises its contracts for the participation of the Phare countries in the Programme.

Community Programmes and Agencies: The Authorities requested that out of the total amount (EUR 2.300.000) of the project, the funds initially allocated to "Leonardo", "Socrates" and "Youth" Programmes (EUR 700.000), together with the amount initially allocated to the European Monitoring Centre for Drugs and Drugs Addiction" (EUR 75.000), be transferred to the "Air Pollution" Project (EUR 379.610) and to the participation of Cyprus to the 6th Framework Programme for Research and Technological Development" (EUR 395.390).

Pre-accession aid management performance

Cyprus has made slow progress in the implementation of pre-accession assistance, especially with regard to the pre-accession programmes of 2001. The implementation of the 2002 programme however shows more positive developments in the tendering and contracting, especially for telecommunications, Structural Funds and Upgrading of State Laboratories projects.

The Government is in the course of providing the additional information requested by the Audit Unit of DG ELARG during its recent follow-up mission to Cyprus, so that an EDIS decision can taken by the Commission as soon as possible.

National Development Plan (2004-2006 )

The primary objective of the National Development Plan which was adopted in April 2003 is to achieve a satisfactory rate of sustainable growth and the utilisation of the opportunities offered through the accession of Cyprus to the EU, thus contributing to a greater real convergence with Member States and enhancing Cyprus' role as a regional centre for the provision of high quality services and as a bridge for economic co-operation between the EU and the countries of the Middle East and North Africa.

Other objectives of the Plan are:

- Enhancing the competitiveness and macro-economic stability of the economy;

- Achieving balanced regional development;

- Embedding social cohesion and full employment conditions;

- Protection of the environment and improvement of the quality of life

The main development priorities for the achievement of the above strategic objectives are:

Expansion and upgrading of basic infrastructure : Particular emphasis is attached to expanding the infrastructure in the sectors of transport, energy and telecommunications in order to link Cyprus effectively to Trans-European networks. It is proposed that this expansion is achieved through investment expenditures of the broader public sector and co-financing from the EU Cohesion Fund and other EU sources as well as through the construction and management of infrastructural projects by the private sector.

Enhancing competitiveness: Strengthening of SMEs, encouragement of research and development, promotion of innovation, utilisation of modern technology and improvement of productivity, as well as the specialisation of enterprises in the production of high quality and high value added goods and services.

Development of human capital – promotion of equal opportunities and strengthening social cohesion : The adaptation of the educational and training systems to the current needs of the labour market, measures to increase the participation of women in the labour market and reduce the pay gap differential between sexes, the reconciliation of family and working life, the promotion of measures designed to eliminate the possibility of social exclusion of vulnerable social groups.

Balanced regional and rural development : The reduction of regional disparities with the urban centres and the coastal areas, and the development of disadvantaged rural areas through the restructuring of the agricultural sector and the encouragement of new economic activities as well as the revitalisation of the degraded urban areas.

Protection of the environment and upgrading the quality of life : The effective protection of the environment, which has suffered as a result of rapid tourist development in the coastal areas, and the improvement of the quality of life are increasingly important not only to the prosperity of the population but also to the export activity of the services sector .

The Single Programming Documents (SPDs) in respect of Objectives 2, 3 and Fisheries have been finalised, whilst the Monitoring Committees held in January 2004 approved the programming complements for the three documents.

Institution building highlights

Twinning

Cyprus has primarily taken advantage of the instrument of Twinning Light, since the Twinning Light has proven a flexible tool for ad-hoc interventions to fill gaps with regard to the implementation of the acquis. Twinning Light projects in Cyprus have an average duration of 6 months and rely on short-term experts of Member States. The following Twinning Light projects have been and are being implemented to address targeted institution-building aspects in the pre-accession assistance:

- Enhancement of EU Asylum Policy and Practice (MS Greece)

- Development of the Operational Capacity of Cyprus to apply the Personal Data Protection Principles (MS UK)

- Maritime Transport: Strengthening the capacity of the Dept of Merchant Shipping (Classification Societies/ILO) - to be launched shortly with MS UK

- Social Insurance - Enhancement of admin. capacity - to be launched shortly with MS UK

- Public Procurement - to be launched shortly with MS Italy

- Ministry of Health: Implementation of EU Co-ordination Rules - currently selection procedure ongoing: MS UK and Spain submitted project proposals.

As regards regular Twinning projects (requiring the preparation of a Twinning Covenant and the secondment of a Pre-Accession Adviser), one Twinning project is currently ongoing, addressing the establishment of a National Drugs Monitoring Centre and the development of a National Drugs Strategy (MS Spain, junior partner Greece). The Twinning Covenant was signed in October 2003, project duration is 12 months.

Communication strategy

For 2002, 91% of funds have been planned and 63% committed. All funds must be committed by 31 July 2004. The tender dossier is being prepared for the production of a booklet and its distribution to all residential households for approval by headquarters, under Financing Memorandum 2003.

2.3. Results and Impact

State of play for JMC, M&A reports

An informal JMC meeting took place in November 2003 in Nicosia, during which the procurement and implementation of pre-accession programmes were reviewed. The final version of the Inception Report on the Interim Evaluation of pre-accession programmes for Cyprus was submitted in January 2004. The first official JMC meeting is scheduled to take place in the second half of March 2004.

EDIS

The Audit Unit of DG ELARG carried out in December a follow-up mission to the one that took place in September 2002. The mission covered three main areas: (a) a review of the system that has been established for EDIS, (b) a follow-up on the recommendations of the last report and (c) a follow up on the application of EDIS for Twinning projects.

Following the follow-up audit mission, the Cypriot authorities submitted to the Audit Unit of DG ELARG their training plan for registry officers, the minutes of the informal JMC meeting, a memo on the checks carried out by the Public Procurement Directorate, their Action Plan for Monitoring and Evaluation, and their application for the EDIS Twinning. In addition to the above, the Cypriot authorities will submit an update of job descriptions for people involved in EDIS as soon as the overall changes within the National Aid Co-ordinator’s office are finalised, and will embark on a training needs analysis for Pre-accession aid, the Transition Facility and Twinning Projects.

Success story

Restoration of the Omeriye area in Nicosia, including the Omeriye Bath

Since the de-facto division of Cyprus in 1974, the two main communities of the island, the Greek Cypriots and the Turkish Cypriots, have been largely separated, residing south and north of the buffer zone respectively. With a view to this complex situation, the strategy of the European Union as regards the Cyprus issue has been to allocate one-third of the yearly pre-accession funds for Cyprus to so-called bi-communal projects. The objective of these projects is to establish and reinforce the links between the Greek Cypriot and Turkish Cypriot communities and to foster common experiences so as to lend support to reconciliation efforts. Since the political situation calls for a neutral stance towards the two communities, the majority of the EU-funded bi-communal projects are being implemented by UNDP via grants provided through its executing agency UNOPS.

In this context, substantial amounts have been given to UNDP/UNOPS to implement projects with regard to the rehabilitation of the Walled City of Nicosia, the last divided city in Europe. The restoration of the Walled City comprises both sides of the so-called Green Line that divides the city, and includes historically important monuments, infrastructure, the renovation of facades as well as the sensitising of the citizens of Nicosia via information campaigns.

An outstanding renovation sub-project of the 2000 pre-accession funds has been finalised in October 2003, illustrating vividly the dramatic metamorphosis and beautification of one prominent neighbourhood of Nicosia, namely the Omeriye area. Traditionally, this area has held high cultural and civic importance but is at present located close to the buffer zone. The focal points of this area are the Omeriye Turkish Baths and the Omeriye Mosque, formerly St. Marie Church of the medieval Augustinian monastery. The northern wall of the Omeriye Mosque and its gardens have been renovated, the complete overhaul and refurbishment of the Omeriye Bath complex has been achieved and the open spaces surrounding the historical landmarks have been renewed. The comprehensive rehabilitation has had a great impact on the neighbourhood, demonstrating a new vision of this area and attracting locals and tourists alike.

I.3. CZECH REPUBLIC

3.1. The year in review

Political developments

The coalition government of PM Spidla - composed of Social Democrats (CSSD), Christian Democrats (KDU-CSL) and Freedom Union (US-DEU) – continued to be supported by a very narrow parliamentary majority (101 seats out of 200). There continues to be a basic consensus though amongst political parties in favour of European Union membership.

President Havel retired in February 2003 after more than a decade in office. Vaclav Klaus, former Prime Minister and leader of the Civic Democrats (ODS), was elected as his successor by the Parliament.

The referendum on EU accession held in June showed a strong support for EU accession. A 77.33% majority voted in favour of EU membership, with a considerable voter turnout of 55.21%.

In 2003, the government pursued its programme of public finance reform and agreed on a first reform package aimed at reducing the growing deficit of public finances. The reform package was approved by Parliament in December.

Macroeconomic Developments and Structural Reform

The Czech Republic enjoyed a stable macroeconomic environment during 2003. The GDP growth is expected to have reached 3% according to preliminary figures (2% in 2002), boosted by household consumption and fiscal expansion. The general government deficit rose to 5.6% of GDP in 2003 according to preliminary figures, showing a significant deterioration in relation to 2002.

The Czech Republic recorded rather positive results in the area of monetary stability. The Czech National Bank (CNB) broadly succeeded in its goal of ensuring price stability. The year on year inflation rate temporarily slipped into disinflation during 2003. The Czech crown’s fluctuations against the euro, the most important currency for Czech external trade, have also been moderate during 2003 compared to 2002.

However, in comparison with some other acceding countries, the Czech Republic was not able to fully exploit growth opportunities offered by the perspective of the EU accession. In addition, Czech GDP growth continued to be accompanied by significant imbalances not only internally (rapidly rising public debt and rising unemployment) but also externally (substantial Current Account deficit). The government proposed steps towards the consolidation of public finances aiming to bring the deficit down to 4% by 2006. A first reform package was approved by Parliament in December, and is expected to be followed by reform proposals in areas such as social benefits, pensions and healthcare.

Progress in meeting the acquis communautaire

During 2003, progress in legislative harmonisation has been noted in chapters such as the free movement of goods (public procurement), the free movement of services (insurance), company law (trademarks) and taxation (VAT). Delays in completing legislative alignment with the acquis have, however, occurred in some areas.

Specific legislative alignment efforts remain to be made in a number of chapters, including the free movement of capital (measures against money laundering), social policy and employment (measures concerning health and safety at work and anti-discrimination) telecommunications, culture and audio-visual policy (adoption of legislative amendments to the Broadcasting Act) or environment (delays in completing the legal alignment in the area of nature protection).

As regards administrative capacity, even though there have been some further improvements, additional efforts in this direction need to be made, particularly as regards agriculture, road transport, regional policy and financial control[2].

3.2. Pre-accession financial assistance in 2003

Programmes launched

A total allocation of over € 116 million was made available to the Czech Republic under the Phare programme in 2003 . 2 Financing Memoranda for the 2003 Phare National Programme were concluded in May and October. The first, for € 38.5 million, mostly concerned Institution Building measures, and was based on the gaps highlighted in the 2002 Regular Report, Accession Partnership and Action Plan. The second, for € 56.7 million, involved investments in the area of Economic and Social Cohesion and comprised of Structural Fund-like measures based on the preliminary National Development Plan. It should therefore enable the Czech Republic to have significant hands-on experience to prepare for EU funds which will be available after accession.

The whole National Programme therefore amounted to € 95.2 million and focused on the following:

- Improving the opportunities for the Roma in the areas of education, employment and housing (€1 million);

- Strengthening the competitiveness of the Czech Republic’s market economy (€ 8.2 million) with a view to its full integration in the internal market, including improving trade inspection, energy efficiency, capital markets, banking, statistics and public procurement;

- Reinforcing the Czech Republic’s institutional and administrative capacity to implement the acquis (€ 19.6 million), including the spheres of agriculture (e.g. improving food safety), the environment (e.g. implementation of EU environmental standards), justice and home affairs (e.g. training the judiciary, addressing trafficking in human beings), employment and social affairs (e.g. information systems for social protection), and public administration (e.g. improving financial control at the regional level);

- Preparing for the management of Structural Funds (€ 66.4 million), mainly through grant schemes to be managed by future Managing Authorities (e.g. schemes at the Ministry of Labour and Social affairs to help the unemployed or disadvantaged groups find work, at the Ministry of Industry and Trade to develop Small and Medium Sized Enterprises, and at the Ministry for Regional Development to fund measures to increase tourism).

In October 2003, three Financing Memoranda were signed for the 2003 Cross-Border Co-operation (CBC) programmes; € 10 million was allocated for co-operation with Germany, € 4 million for co-operation with Austria and € 5 million for co-operation with Poland. A further Financing Memorandum on nuclear safety, for € 1.8 million was signed in December.

In 2003, the Czech Republic continued to participate in and benefit from Phare financed multi-beneficiary programmes, such as SIGMA, the Small Projects Programme and the Small and Medium Sized Enterprise Facilities.

Overview of programmes implemented

2003 saw the expiry of € 69.3 million under the following budgets: the 4 1999 Cross-Border Cooperation Programmes (with Austria, € 10.6 million, Germany, € 29.4 million, Poland, € 3 million, and Slovakia, € 2 million), the 1999 Large Scale Infrastructure Facility part 5, € 14.2 million (Brno Municipal Water Project), the 1999 Consensus 3 programme, € 2 million (4 twinning projects in the area of social affairs), and the 2000 Supplementary Investment Facility, € 8.1 million (the development of 4 industrial zones). All the programmes, except for Consensus 3, involved mainly infrastructure projects which were all completed on time. Contracting and disbursement rates for these programmes were very satisfactory (nearly 100% for the former, around 90% for the latter). It should be noted that problems were experienced during the implementation of some of these programmes, so that extensions had to be granted.

Projects are now being implemented under many programmes, including the National Programmes 2000 through 2003, the Cross-Border Cooperation programmes 2000 through 2002, Access 2000, and Nuclear Safety 2001. Overall implementation is satisfactory. Further projects are yet to be contracted and commence under the Cross-Border Cooperation programme for 2003, and the Nuclear Safety programmes for 1999, 2002, and 2003.

Phare management performance

All final payments were made in time under programmes which closed during 2003, while 6 programmes with an allocation of almost € 87 million were successfully contracted during the year, including the 2001 National Programme (€ 65.4 million) and the 2001 Cross-Border Cooperation programmes (€ 19 million). Over 96% of these funds were contracted, which continues previous high standards. As during 2002, the high contracting rate is mostly attributable to the speeding up of the procurement process, which allowed spare funds to be re-allocated to new projects.

Progress in future is looking bright since approximately 70% of the total allocation for the 2002 programme has been tendered, and close to 45% already contracted. Under the 2003 programmes, projects have already been launched, and, in some cases, contracts signed and implementation commenced. Progress with regard to twinning covenants has improved even on 2002.

Altogether, approximately € 75 million were contracted and € 85 million disbursed in 2003 as compared to € 120 million and € 78 million respectively in 2002. The percentage of total Phare funds contracted and disbursed remained almost as for 2002 (contracted: 80% as compared to 81%; disbursed:70% as compared to 69%).

National Development Plan (NDP)

The 3rd draft of the NDP 2004-06 was approved by the Government on 16 December 2002 and submitted on 3 March 2003. It was finally accepted by the Commission as the basis for negotiating the Community Support Framework (CSF) for 2004-06 on 7 May after a few conditions had been met in April. The Commission subsequently drew up its negotiating mandate, and negotiations themselves commenced on 3 July in Prague. Following 2 further rounds of formal discussion and a number of technical meetings, negotiations were concluded on 12 September. Agreement on the draft text of the CSF itself was reached at the end of October and the final version was informally approved from the side of the Commission on 18 December. The individual Operational Programmes (OPs) and Single Programming Documents (SPDs) were adopted by the Government in late January 2003, and submitted to the Commission in late February through to April. These were also informally agreed on 18 December. Though formal approval of these documents can only take place as of the date of accession (i.e. 1 May 2004), projects are eligible for reimbursement under the CSF as of 1 January 2004 provided that all relevant EU rules are respected. With regard to implementation of the CSF, the OPs, and SPDs, relevant capacity was increased, in line with the Government’s Human Resource Development strategy, approved in mid-2003.

Institution Building Highlights

As in previous years, the main mechanism for strengthening the institutions of the Czech Republic was delivered via twinning. During 2003, 24 projects under the 2001, 2002 and 2003 National Programmes were endorsed and commenced implementation. In the same period 21 projects were completed which were financed from the 2000 and 2001 National Programmes. A total of 33 twinning projects are now under implementation. Projects are active, for example, in the areas of corruption and economic crime, tax and customs, the administration of public health, financial control at the regional level, and preparing for the management of the Common Agricultural Policy and Structural Funds.

The 12 projects under the 2003 National Programme were circulated to the Member States in the 1st quarter of 2003; 10 partners were selected in the 2nd quarter of 2003, and the remaining 2 in the 3rd quarter. Preparation of the covenants started immediately after selection in all cases bar 1, where a new PAA had to be selected. The EC Delegation organised a training seminar for the drafting of covenants in June. Endorsement of most Phare 2003 twinning covenants is expected during the first quarter of 2004.

2003 also saw the first twinning light projects completed successfully in the sectors of the environment, tax administration, and agriculture. A further 5 commenced in the sectors of business environment, data protection, home affairs, public administration and statistics.

One example of successful institution building took place at the Czech Supreme Audit Office. Under this 14 month project, which was completed in July 2003, a German civil servant provided expert advice on external financial control. Results included the creation of the necessary preconditions for the proper control of EU funds, a more effective use of information technology in auditing operations, and a swift application of the relevant international INTOSAI standards and European auditing directives .

3.3. Results and impact

State of play for JMC/SMSC development

2003 saw the most significant changes in the Phare monitoring and evaluation system since the year 2000. In the earlier year, the responsibility for formal monitoring was transferred from the Commission to the national authorities; in 2003 the responsibility for production of interim evaluation reports and ensuring follow-up and action was also handed over. The Commission hired an external evaluator, EMS, and therefore ceased to operate its own monitoring in the Czech Republic in July 2003. While this was fully in line with preparations for Phare to be fully managed by the national authorities after accession, due to the comparatively late dissemination of this information and some tardiness on the part of the national authorities, there emerged a significant gap in interim evaluation capacity of some 8 months (a new contractor to perform these evaluations should be in place by April 2004).

As to the monitoring system, this also underwent changes in 2003. As of September 2003 a new schedule and new templates were introduced by the coordinating Czech body, with 3 Sectoral Monitoring Sub-Committees (SMSCs) to be held annually for each sector (instead of 1 as in 2002). However, this turned out to be extremely time consuming, and the number is likely to be reduced, while the template may be simplified again. Furthermore, it is now apparent that this formal system is too slow and cumbersome to function as an early warning system. It is therefore hoped that the national authorities continue the Delegation’s practice of holding monthly meetings with each beneficiary which allows for “real time” monitoring, and has been shown to be much more effective.

The Joint Monitoring Committee (JMC) was held on 20 June. As in 2002 a total of 16 SMCS were held covering all sectors. These also acted as debriefing meetings for the interim evaluation reports produced by EMS (see below).

In general, the Czech Republic is moving in the right direction with regard to monitoring and evaluation of Phare. However, ideally there needs to be more coordination between these bodies and those to be responsible for monitoring and evaluating post-accession funds, particularly the Structural Funds. 2003 did see some positive moves, with the initiative of creating an institution at the Ministry of Finance overseeing evaluation of all national funds (both from Czech and EU sources).

M&A Reports in 2003 (lessons learnt)

EMS only produced 6 sectoral reports, out of a maximum of 12, due to the fact that it ceased operations in July 2003. All reports were rated satisfactory. It also produced a country summary report presented at the JMC (no rating was given). Reports were of a high quality.

Recommendations proved useful and most were taken up and implemented. However, the horizontal recommendations presented at the JMC were even more relevant, including comments on the Phare monitoring system (limited effectiveness), the usefulness of interim evaluation if action is not taken (overall 45% of accepted recommendations agreed in 2002 were actually implemented), and the enforcement of conditionalities. These points have been registered, and should be taken into account in the monitoring and evaluation system once finalised by the national authorities.

A Phare funded contract produced 3 ex-post evaluations for the National Aid Coordinator’s office during 2003, with 3 more to follow. The conclusions, as with the ex-post evaluations performed in 2002, were positive compared with normal interim evaluations, since the impacts of projects are easier to discern, and since day-to-day implementation issues, such as late payment, are seen from a more distant perspective. The recommendations from the reports have been taken up by the direct beneficiary and are being used in the programming of the Transition Facility. Where recommendations were for other bodies, they were communicated; however, the beneficiary has no method of enforcing them.

Sectors with positive results

With regard to the political criterion in 2003, 71 grants were made to Non-Governmental Organisations in 2003 for a total of over € 2.5 million, while more than 200 projects were implemented under grant schemes for approximately € 10 million. These mostly concerned improving the situation of social disadvantaged groups, such as the Roma or the elderly, and strengthening organisations active in the area of civil society. Technical assistance was also provided to the Ministry of Education (see success story box below).

2003 saw a very innovative and effective project in the Justice sector which supported the relatively new Probation and Mediation Service (PMS). This twinning supported the development of mediation proceeding as an alternative to criminal trials, the development of penalties other than imprisonment; such as community service orders and probation, and the strengthening of the system for the release and supervision of offenders on parole. The € 1.1 million twinning project commenced in January 2003 and aims at accelerating criminal proceedings via strengthening the PMS. Results of the project so far include 5 permanent trainers in the field, a set of national training materials, and the introduction of all 244 PMS staff to a range of probation methodologies. 100 staff also had the opportunity to witness at first hand how equivalent systems worked in 3 Member States. In terms of implementation, there has been excellent co-operation between both the Czech and UK partners, with a very solid commitment from the former and a high level expertise provided by the latter. So efficient has been the use of time and money that the project has been extended by 6 months until July 2004 with an expanded and deepened agenda. The project serves as a model for how the twinning mechanism should work.

In the area of the environment , the sewerage of the Czech Republic’s 2nd city, Brno, was upgraded. The Phare financed project of almost € 14 million was completed on time in July 2003, and involved the improvement or laying of over 2 kilometres of sewers. The quality of the work is rated as excellent. The project is complemented by the parallel upgrading of the municipality’s waste water treatment plant (approximately € 50 million) funded by a loan from the EBRD. The city contributed over 390,000 EUR in co-financing. Apart from improving the environment for the city’s almost 400,000 inhabitants, the experience gained by the authorities involved has proven very valuable for ISPA and the Cohesion Fund, particularly with regard to coordinating a number of funding sources.

A twinning project completed in 2003 has tested whether the Czech administration is prepared to implement the EU social security legislation (Regulations 1408/71 and 574/72) dealing with cross-border payments of social security benefits and medical treatment costs, a huge agenda necessary for free movement of people. Hundreds of people from a number of "first contact" institutions were trained and tested, and necessary data processing systems have been implemented and tested. The practical knowledge of 377 executive officers was tested in processing model requests and applications on pensions, sickness and maternity benefits, work accidents and occupational diseases, health care payments, family benefits and unemployment benefits. About 500 officials from all concerned institutions on both central and regional level received further training focused on gaps identified during the testing. The project also reviewed relevant administrative capacity of involved institutions and issued 66 detailed recommendations. Testing of the implementation capacity verified that the Czech administration should be ready to implement the EU social security coordination rules from the date of accession.

Success story

Support to Roma education/Multi-cultural education reform

€ 1 million (€ 0.6 million Czech co-financing)

2003 saw the implementation of 2 very significant projects at the Ministry of Education whose overall goal was to reduce discrimination of minorities, particularly the Roma, and to further their integration into society.

Since prejudicial attitudes are acquired early in life, and since the public intervention is easier in school rather than the home, the projects addressed primary education. The first targeted improving the environment for the education of Roma pupils, while the second looked at giving non-minority pupils positive images of different cultures and people. Both involved the development and testing of curricula and a system of monitoring and evaluation, extensive training of teachers as well as training of trainers, and the conduct of pupil surveys.

Though the projects started with a significant delay, the contractors made up for it with high quality and dedicated work, while cooperation between them was excellent. Their recommendations to the Ministry for the longer term are well considered and valuable, and there is evidence that their work directly led to a positive change of teacher attitudes towards the Roma.

Much now depends on the use of the project results by the Ministry of Education, and so far the signs are very positive. The outputs should be officially disseminated in the first half of 2004 at a large conference for concerned professionals and press, which should also be used as an opportunity for the beneficiary Ministry to announce a clear vision of the goal in this area and how to get there. Furthermore, a follow-up initiative is planned, which should receive funding from the European Social Fund or EQUAL.

I.4. ESTONIA

4.1. The Year in review

Political developments

The Government coalition entered office on 10 April 2003. The coalition is made up of centre-right newcomer Res Publica (the PM’s party), the liberal-right Reform Party and rural-conservative People’s Union. It declared increasing the birth rate and economic growth generated by knowledge-based R&D activities as its two main priorities. On 15 September, 67 % of Estonians voted in favour of joining the EU.

The Comprehensive Monitoring Report (CMR) published on 5 November confirmed that overall the functioning of the Estonian administration and judiciary continues to be satisfactory. There have been no major developments in public administration reform and the planned new Civil Service Act remains to be adopted. Further progress has been made in the area of judicial reform. However, a number of further reforms remain to be made. Corruption remains at a relatively low level. Nevertheless, Estonia needs to develop and implement a comprehensive national strategy for fighting corruption in the public sector.

Macroeconomic developments and structural reform

Estonia has continued to perform well with, in particular, strong GDP growth (6% in 2002), decreasing unemployment (9.1%) and decreasing inflation (3.6%). The implementation of Estonia’s oil shale restructuring programme is continuing. However, there has been no progress as regards liberalisation of the electricity market (for which Estonia secured a transition period in the accession negotiations). Finally, in the light of the widening current account deficit (12.3% of GDP in 2002), it is noted that the expansionary fiscal policy, notably during 2002 and 2003, could pose a risk to macroeconomic stability.

The country’s high rate of structural unemployment is a concern, given the limited size of the labour force. Sharp regional disparities remain an obstacle to regional cohesion and to the sustainability of rural Estonia. Phare is assisting Estonia to meet these needs through Economic and Social Cohesion projects, which also are a precursor to post-accession assistance from Cohesion and Structural Funds. In addition, rural areas are being assisted through SAPARD funds.

Structural reforms and the privatisation of public enterprises have been largely completed and there are no significant barriers to entry into markets for either domestic or foreign enterprises. The reform of the pension system has been successfully implemented. Land reform has advanced steadily. An overhaul of the hospital system is ongoing.

Progress in meeting the “acquis communautaire”

Overall, Estonia has now achieved a high degree of alignment with the acquis in the large majority of areas and the fulfilment of the accession negotiation commitments is, overall, well on track. However, the CMR highlighted certain areas as requiring urgent efforts if Estonia is to be ready by the date of accession: labour law, equal treatment of men and women, and mutual recognition of professional qualifications in the healthcare sector. In these areas outstanding legislation must be adopted and effectively implemented.

A wide range of other areas were highlighted as requiring enhanced efforts, including adoption of legislation in fields such as fisheries, environment, free movement of goods, freedom to provide services and veterinary issues. Administrative capacity also needs to be reinforced in a number of key agencies and bodies, such as the Public Procurement Office and Financial Intelligence Unit.

4.2. Phare in 2003

Programmes launched (including National Programme objectives, CBC, multi- country & Community programmes)

A total of € 42.525.800 was allocated to Estonia under the 2003 Phare budget to support Estonia’s accession to the EU, in line with the priorities highlighted in the Accession Partnership. This amount includes the annual allocation for the Phare National Programme 2003 presented in three parts (2003/004-582, 2003/005-026 and 2003/005-850), and the Cross-Border Co-operation programme (Co-operation in the Baltic Sea Region 2003 – EE 2003/005-875).

In addition to this amount, assistance was also provided through Multi-country/Horizontal programmes, Sigma, TAIEX, the Administrative and Technical Assistance programme and the Small Projects Programme.

According to the accelerated procedure initiated in 2002, the Phare 2003 National Programme for Estonia was presented in three parts, allowing for an early implementation of the most urgent institution building projects. The Phare Management Committee approved the first part of the Phare 2003 National Programme in March 2003 and the Financing Memorandum was signed by the Estonian government and the European Commission on 9 June 2003, for an amount of € 12.5 million.

The second part of the 2003 National programme was submitted to the Phare Management Committee in July 2003, and the Financing Memorandum was signed by the Estonian government and the European Commission on 9 September 2003, accounting for € 23.5 million.

The third part of the 2003 National programme was submitted to the Phare Management Committee in October 2003 together with the 2003 CBC programme. Both Financing Memoranda were signed by the Estonian government and the European Commission on 16 December 2003, accounting respectively for € 3.5 million and € 3 million.

Phare funds are used to support institution building through twinning, twinning light, technical assistance and investment in the acquis, aimed at supporting the institution activities by providing equipment to assist Estonia in complying with EU norms and standards. Phare funds are also used to invest in economic and social cohesion.

The Phare 2003 National Programme provides € 39.52 million for:

- Administrative capacity : € 7.57 million

- Establishment of a customs laboratory - € 0.42 million (First Part)

- Accession Facility - € 2.56 million (First Part)

- Development of Structural Funds electronic information system - € 1.11 million (Second Part)

- Project preparation facility for EU assistance - € 2.33 million (Second Part)

- Twinning Light Facility - € 1.15 million (Third Part)

- Public sector - Financial management: € 1.84 million

- Assistance to the Ministry of Finances in preparing the administration of the European Communities’ Own Resources and participation in the EU budgetary process - € 0.54 million (First Part)

- Strengthening Financial Management and Control System – Phase II - € 0.57 million (First Part)

- Assistance to the Public Service Academy to develop taxation training curriculum - € 0.73 million (Second Part)

- Trade - Internal Market: € 0.65 million

- Development of testing facilities for implementation of market surveillance - € 0.65 million (Second Part)

- Transport : € 1.1 million

- Further alignment with the railways acquis and strengthening administrative capacity to manage its implementation - € 1.1 million (Second Part)

- Justice and Home Affairs : € 7.29 million

- Enhancing border control and development of border surveillance at Estonian eastern Border - € 3.32 million (Second Part)

- Extension of the Estonian Automated Fingerprint Identification System - € 2.18 million (Second Part)

- Reducing corruption in Estonia - € 0.47 million (Third Part)

- Support to the creation of a witness protection system - € 0.3 million (Third Part)

- Improving investigation involving digital evidence - € 0.37 million (Third Part)

- Building competence in European law in the Estonian judiciary - € 0.65 million (Third Part)

- Agriculture and Fisheries : € 3.28 million

- Development of an IT system for the administration of EAGGF Guarantee section of the Rural development measures - € 0.4 million (Second Part)

- Development of an IT system for the administration of market regulation measures - € 0.92 million (Second Part)

- Development of plant protection products analyses in the Estonian Control Centre of Plant Protection - € 0.69 million € (Second Part)

- Upgrade of clinical veterinary medicine in Estonia - € 1.27 million (Second Part)

- Forestry: € 0.76 million

- Strengthening of forest management in Estonia - € 0.76 million (Second Part)

- Environment : € 3.66 million

- Development of the national hydrometric network according to EU standards - € 0.54 million (Second Part)

- Development of the Estonian fuel quality management system - € 2.6 million (Second Part)

- Programme for strengthening the civil society and preparing for Accession by supporting NGOs in implementing the environmental acquis - € 0.52 million (Second Part)

- Social Services : € 1.08 million

- Implementation and further development of the national drug strategy - € 0.53 million (Second Part)

- Development of administrative capacity of national authorities in the field of gender mainstreaming - € 0.55 million (Third Part)

- Economic and Social Cohesion : € 12.29 million

- Support for Tourism Development - € 2.7 million (First Part)

- Support for industrial infrastructure development - € 1.4 million (First Part)

- Testing and notification of oil shale chemicals produced from oil shale - € 1 million (First Part)

- Estonian Language Training and Teaching in Estonian for Non-Estonian Speakers - € 3.3 million (First Part)

- Development of the Tartu Science Park - € 1 million (Second Part)

- Development of the Tallinn Technology Park - € 0.24 million (Second Part)

- Support to energy efficiency investments in municipalities - € 1.5 million (Second Part)

- External Border Initiative for Estonia - € 1.15 million (Second Part)

- Community Programmes and Agencies : In 2002 sufficient funds were allotted to cover participation costs in 2003 (front-loading). Therefore, in 2003, Phare funds were not allotted within the national programmes to front-load participation in Community programmes and agencies for those countries, like Estonia, joining the Union in 2004.

In addition, € 3 million is allocated to the Co-operation in the Baltic Sea Region in 2003.

Short-term assistance was also provided by TAIEX on various issues, through visits of experts (on agriculture and veterinary legislation, VAT taxation of intra-community trade, etc.), conferences and seminars (on customs tariff classification for laboratory analysis, on adequate and sustainable pensions, presentation of the pre-notification database, etc.), study visits to Member States or the Commission (10). TAIEX also conducted 14 peer reviews in Estonia in order to monitor implementation of the Acquis.

As regards multi-country programmes, the benefits that Estonia derives from such programmes can be estimated at approximately € 2-3 million per year.

The EC Delegation also uses the ATA facility to assess tender dossiers and send experts as observers to tender evaluations.

Overview of programmes implemented

In total, the Community has made around € 500 million available to Estonia for the period 1992 – 2003. The national Phare programmes allocated around € 325 million to Estonia during this period. In addition to the National Programme, Estonia also benefits from Phare funded multi-beneficiary programmes, which are open to several Central and Eastern European countries. Estonia was allocated around € 48 million under SAPARD from 2000 – 2003 for agriculture and rural development as well as around of € 120 million from ISPA for environment and transport infrastructure projects in the same period. The currently active Phare national programmes 2001-2003 add up to around € 100 million and are managed by the EC Delegation in accordance with the Deconcentration Instructions.

Phare management performance

The Phare management performance in terms of contracting and payments reaches around 90 – 95 % for contracting annually and 85 – 90 % for disbursement at the end of their typically 2-year contracting and 3-year disbursement period. On 31 December 2003, 94.5% of the 2001 allocation were contracted and 94% of the 2000 envelope disbursed. Considerable delays are encountered in carrying out the procurement once funds have been allocated to Estonia in Financing Memoranda. In order to improve the situation, the EC Delegation has provided coaching to the Estonian authorities in this area and developed specific joint monitoring mechanisms such as procurement plans and reviews.

NDPs – state of play

Estonia submitted the draft Single Programming Document (SPD) for Structural Funds for informal Commission comments during 2002 based on the National Development Plan 2003 - 2006. A final draft SPD was submitted to the Commission on 18 March 2003. Following negotiations with Estonia a final version of the SPD was favourably assessed by the Commission services in December 2003, and will serve as support for expenses incurred as of the eligibility date of 1st January 2004.

The preparations for Structural Funds are supported by Phare Twinning projects: two on-going projects, special facilities (SPP+ and SPP++), programmed in 2001 and 2002 (total € 3 million), are specifically targeted to the preparations for Structural Funds, covering central administrative level, local municipalities and final beneficiaries, including preparation of a project pipeline for Structural Funds. Furthermore an additional € 1.96 million was made available to support the establishment of a project pipeline for structural funds, and € 1.11 million for finalisation of the Structural funds electronic information system.

Institution Building Highlights

Implementation of Phare in Estonia is judged as particularly successful in the areas of Environment, Public Finance and Education, where Phare funds and projects provide real value added to scarce public funds. With a view to the start of Structural and Cohesion Funds support for Estonia in 2004, Phare has provided support through a number of Phare grant schemes in areas such as tourism, industrial infrastructure, cross-border cooperation, NGO support and for building of project pipelines. These have contributed to support government institutions in streamlining their administration and in supporting regional development. Similarly, the Twinning instrument continues to be used successfully in many priority areas and helped Estonia to prepare for the implementation of EU policies and laws.

4.3. Results and Impact

State of play for JMC / SMSC development

The Joint Monitoring Committee (JMC) for the decentralised monitoring system in Estonia is fully operational and in combination with the eight Sectoral Monitoring Sub-Committees (SMSC) for Agriculture, Economic Affairs, Environment, Justice and Home Affairs, Cross-Border Cooperation, Social Affairs, Education and Finance is a well functioning tool to review the progress and bottlenecks in Phare implementation based on monitoring reports. The monitoring system was reformed on the occasion of the third JMC on 12 March 2003 with further responsibility, including the co-chairmanship of the JMC and chairmanship of SMSCs, being handed over to the Estonian authorities.

M&A Reports in 2003

During 2003, interim evaluations were finalised on Internal Market (unsatisfactory), Environment (satisfactory), Economic and Social Cohesion (unsatisfactory), CBC and Environment (satisfactory), Aid-Co-ordinator sector (satisfactory) and Agriculture (unsatisfactory). Furthermore a country review was submitted in view of the JMC in February 2003. The interim evaluation contractor was phased out in the second half of 2003 and will be replaced by a new contractor in 2004. The reports generally stressed the need for the Estonian side to increase administrative capacity for a proper management of Phare projects and to put more emphasis on the monitoring of projects as an effective management tool rather than as an ad-hoc exercise. Estonian authorities were partly criticised for excessive delays in launching procurements and a lack of horizontal co-ordination between Government agencies.

Sectors with positive results

Besides the Education and Finance sectors, which continue to show positive results, the Environment sector is one of the most successful ones in terms of the management and implementation of projects. Projects in this area are generally well managed and implemented. Investments in waste water treatment and fresh water provision for local municipalities, as well as a number of institution building projects, have made a good impact and contributed significantly to Estonia’s effort in implementing the EU’s acquis in the field of environment.

Success Story

Estonian Master