EUROPEAN COMMISSION Brussels, 30.10.2015 SWD(2015) 201 final COMMISSION STAFF WORKING DOCUMENT Background document Accompanying the document Report from the Commission to the European Parliament, the Council and the European Economic and Social Committee Annual Report on Financial Assistance for Enlargement in 2014 {COM(2015) 548 final}



Table of Contents 1 - INTRODUCTION 2 - POLICY DEVELOPMENTS3 - THE STRATEGIC FRAMEWORK FOR PRE-ACCESSION ASSISTANCE 4 - ACTIVITIES FINANCED, RESULTS AND IMPACTS ALBANIA 1. SUMMARY 2. STRATEGIC PLANNING AND PROGRAMMING 3. IMPLEMENTATION OF ASSISTANCE 4. IMPLEMENTATION MODALITIES AND STRUCTURES 5. SUCCESS STORIES BOSNIA AND HERZEGOVINA 1. SUMMARY 2. STRATEGIC PLANNING AND PROGRAMMING 3 IMPLEMENTATION OF ASSISTANCE 4. IMPLEMENTATION MODALITIES AND STRUCTURES 5. SUCCESS SORIES CROATIA 1. SUMMARY 2. STRATEGIC PLANNING AND PROGRAMMING

3. IMPLEMENTATION OF ASSISTANCE 4. SUCCESS STORIES THE FORMER YUGOSLAV REPUBLIC OF MACEDONIA 2015 1. SUMMARY 2. STRATEGIC PLANNING AND PROGRAMMING 4. IMPLEMENTATION MODALITIES AND STRUCTURES 5.- SUCCESS STORIES KOSOVO 1. SUMMARY 2. STRATEGIC PLANNING AND PROGRAMMING 3. IMPLEMENTATION OF ASSISTANCE 4. IMPLEMENTATION MODALITIES AND STRUCTURES 5.- SUCCESS STORIES MONTENEGRO 1. SUMMARY 2. STRATEGIC PLANNING AND PROGRAMMING 3. IMPLEMENTATION OF ASSISTANCE 4. IMPLEMENTATION MODALITIES AND STRUCTURES 5. SUCCESS STORIES SERBIA

1. SUMMARY 2. STRATEGIC PLANNING AND PROGRAMMING 3 IMPLEMENTATION OF ASSISTANCE 4 IMPLEMENTATION MODALITIES AND STRUCTURES 5 - SUCCESS STORIES 1. SUMMARY 2. STRATEGIC PLANNING AND PROGRAMMING 3. IMPLEMENTATION OF ASSISTANCE 4. IMPLEMENTATION MODALITIES AND STRUCTURES 5. SUCCESS SORIES MULTI - COUNTRY 1. SUMMARY 2. STRATEGIC PLANNING AND PROGRAMMING 3. IMPLEMENTATION OF ASSISTANCE 4. SUCCESS STORIES 5 – EVALUATION FINDINGS 6 – FINANCIAL DATA 1 - INTRODUCTION The policy objectives of the Commission in the field of enlargement are supported by the Instrument for Pre-Accession Assistance (IPA). IPA is the means by which the EU supports reforms in the 'enlargement countries' with financial and technical help. It accompanies the accession policy, as set out by the European Union, with a view to implementing Article 49 of the Treaty on European Union which offers the prospect of EU membership to all European countries that respect the fundamental values of the EU and are committed to promoting them. The IPA funds build up the capacities of the countries throughout the accession process, resulting in progressive, positive developments in the region. For the period 2007-2013 IPA had a budget of some EUR 11.5 billion. In 2014 its successor, IPA II, was introduced. It builds on the results already achieved by dedicating EUR 11.7 billion for the period 2014-2020. Beneficiaries of assistance in 2014 were: Albania, Bosnia and Herzegovina, Croatia, the former Yugoslav Republic of Macedonia, Iceland, Kosovo, Montenegro, Serbia, and Turkey. Since its entry into the EU, in July 2013, Croatia is no longer an IPA beneficiary, but still benefits from the Transition Facility.

EU pre-accession funds are a sound investment into the future of both the enlargement countries and the EU itself. They help the beneficiaries make political and economic reforms, preparing them for the rights and obligations that come with EU membership. Those reforms should provide their citizens with better opportunities and allow for development of standards equal to the ones enjoyed by the citizens of the EU. The pre-accession funds also help the EU reach its own objectives regarding a sustainable economic recovery, energy supply, transport, the environment and climate change, etc. Since IPA II was only recently introduced, implementation of programmes in 2014 still fell under its predecessor IPA. The present Staff Working Document accompanies the Communication presenting an overview of the achievements of IPA in 2014. 2 - POLICY DEVELOPMENTS The EU’s enlargement policy contributes to mutual benefits of peace, security and prosperity in Europe. It reinforces the EU’s political and economic strength and has a powerful transformative effect on the countries concerned. For the countries of the Western Balkans, the clear perspective of EU membership granted by the EU’s Member States is a key stabilising factor. It supports progress towards fulfilment of the necessary conditions, including those of the Stabilisation and Association Process. The accession process is rigorous, built on strict but fair conditionality, established criteria and the principle of own merit. This is crucial for the credibility of enlargement policy, for providing incentives to enlargement countries to pursue far-reaching reforms and for ensuring the support of EU citizens. The Commission is increasing the focus in the enlargement process on addressing "fundamentals first". This approach prioritises reforms related to rule of law and fundamental rights, economic governance and improving economic competitiveness, and strengthening democratic institutions including public administration. The rule of law and fundamental rights: The rule of law is a fundamental value on which the EU is founded and is at the heart of the accession process. Countries aspiring to join the Union need to establish and promote from an early stage the proper functioning of the core institutions necessary for securing the rule of law. This work is extensive and in addition to the necessary national support requires considerable technical and financial support from the European Union The rule of law is crucial for a stable business environment, providing legal certainty for economic operators, supporting consumers and stimulating investment, jobs and growth. Three aspects of the rule of law are the subject of particular attention: Judicial reform, the fight against corruption and the fight against organised crime. In all three areas work is progressing across the board. Concerning fundamental rights, the Commission carefully monitors the situation in the enlargement countries as regards civil, political, social and economic rights, as well as the rights of persons belonging to minorities. Fundamental rights are largely enshrined in law. However, more needs to be done to ensure they are fully respected in practice. Economic governance and competitiveness: The Commission has been strengthening its support to improving economic governance and competitiveness in enlargement countries. This is key to addressing concerns of citizens in a persistently difficult economic environment, with high unemployment and low investment. It is also particularly important for the Western Balkan countries since none of them is yet considered to be a functioning market economy. Commission support will build on the experience of EU Member States in the European Semester with an increased emphasis on structural reforms which are sectoral in nature. Public administration reform: Together with rule of law and economic governance, public administration reform (PAR) is a pillar of the enlargement process. All three ‘pillars’ are closely linked, cross-cutting issues of fundamental importance for success in political and economic reforms and building a basis for implementing EU rules and standards. A well-functioning public administration is necessary for democratic governance. It also directly impacts governments’ ability to provide public services and to foster competitiveness and growth. The current enlargement agenda covers the countries of the Western Balkans and Turkey . 2014 was a significant year for a number of the countries of the Western Balkans: Montenegro: took further steps in accession negotiations. Twelve chapters were opened. Implementation of rule of law reforms had started. Serbia: The opening of accession negotiations in January was a turning point in the country's relations with the EU, with the focus turning to the need to deliver on reform priorities in a sustained manner, notably on rule of law and the normalisation process with Kosovo Albania: was granted candidate status in June as recognition for its reform efforts and progress made in meeting the required conditionality. Kosovo: The initialling of a Stabilisation and Association Agreement in July was a major milestone in EU-Kosovo relations and sharpened the focus on delivering on key reforms, in particular the rule of law. As regards the former Yugoslav Republic of Macedonia, the EU accession process is at an impasse. 2014 saw instances of backsliding, notably as regards freedom of expression and of the media and the independence of the judiciary. Bosnia and Herzegovina remained at a standstill on its European integration path. Elections late in the year offered the prospect of a fresh impetus to tackle urgent socio-economic reforms and to progress on its European agenda. Implementation of certain reform commitments by Turkey continued. However, there have also been grounds for serious concerns regarding the independence of the judiciary and the protection of fundamental freedoms.

Good neighbourly relations and regional cooperation are essential elements of the Stabilisation and Association Process and of enlargement policy. In 2014 these were strengthened through intensified cooperation and contacts at bilateral level, including in sensitive areas such as war crimes, refugee return, including through implementation of the regional housing programme under the Sarajevo process , with housing construction now underway, and on organised crime and police cooperation. Further steps have also been taken to increase connectivity and boost infrastructure investments across the region, including through the Western Balkans Investments Framework. In all the areas outlined above the EU is supporting progress in the enlargement countries through the provision of EU technical and financial assistance. This contributes to a well prepared accession process, which not only helps the countries concerned to meet the necessary conditions, but also ensures that enlargement is not at the expense of the effectiveness of the Union. 3 - THE STRATEGIC FRAMEWORK FOR PRE-ACCESSION ASSISTANCE The EU closely assists candidate countries and potential candidates with dedicated financial programmes. This assistance helps create stable, prosperous and wellfunctioning democratic societies and put them on a steady path towards EU integration. The Instrument for Pre-accession Assistance (IPA) EU financial assistance is channelled mainly through the Instrument for Pre-accession Assistance ( IPA ). IPA was launched in 2007, replacing a range of EU Programmes and instruments including PHARE, ISPA, SAPARD, and CARDS. IPA became the sole instrument fully dedicated to assistance to pre-accession countries, simplifying the assistance process. Between 2007 and 2013, IPA included five different components: Assistance for transition and institution building; Cross-border cooperation (with EU Member States and other countries eligible for IPA); Regional development (transport, environment, regional and economic development); Human resources development (strengthening human capital and combating discrimination); Rural development. Components I and II were under the responsibility of the Directorate-General for Enlargement (DG ELARG), now DG NEAR, and open to all beneficiary countries. The other components, aimed at preparing the beneficiaries for the implementation of structural funds after joining the EU, and were only accessible to candidate countries and are managed under the responsibility, respectively, of the Directorate-General for Regional Policy (DG REGIO), the Directorate-General for Employment, Social Affairs and Inclusion (DG EMPL) and the Directorate-General for Agriculture and Rural Development (DG AGRI). The IPA beneficiaries were divided into two categories. EU candidate countries at the time - Croatia, Turkey and the former Yugoslav Republic of Macedonia - were eligible for all five components. Potential candidates - Albania (which became a candidate country in 2014), Bosnia-Herzegovina, Montenegro (which became a candidate country in 2010), Serbia (which became a candidate country in 2012) and Kosovo - were only eligible for the first two components. IPA intervened both at country level and at a regional level, via national programmes, multi-beneficiary programmes, and cross-border cooperation. From 2011 to 2013, IPA also supported Iceland, addressing mainly institutional capacity building issues. After the Icelandic government’s decision to suspend accession negotiations in May 2013, the Commission decided to end its support for Iceland. Policy goals and priorities Respect of the rule of law emerged as the top priority early in the implementation period of IPA. In most enlargement countries, the Commission found combating organised crime, corruption and dysfunctional justice systems were essential goals. Public administration reform also remained a constant area of need in all EU enlargement processes. As the initial IPA term came to a close, economic governance emerged as an area that needed improvement - not least because of the economic and financial crisis in the EU itself, whose impact was heavily felt in the Western Balkans.

All throughout the 2007-2013 period, a special effort was made to link political priorities with assistance programmes and funding, with the aim of concentrating assistance where it was most critical for the EU integration process. Programming documents IPA assistance was based on the broad political guidelines set out in the Commission's enlargement package. Planning and programming was based on “multi-annual indicative planning documents”, or MIPDs, which covered a three-year period and were updated annually. Annual or multi-annual programmes were then adopted by the Commission and implemented in three ways: directly by the Commission, mainly via the EU Delegation on the ground; by the beneficiary countries, applying the so-called “decentralised management system”; via EU Member States, known as “shared management.” Decentralisation of financial management Decentralised management, now referred to as “indirect management,” was the preferred method of implementation under IPA. It implied that authorities in the beneficiary countries were responsible for managing IPA funds. Beneficiary countries were the contracting authorities, and they were also responsible for managing the tenders and paying contractors. This was a way to prepare the candidate countries and potential candidates to handle EU Structural and Cohesion Funds in the future. Before transferring management responsibilities to beneficiary countries, the Commission thoroughly assessed the countries' capacities through a number of system audits. Croatia, the former Yugoslav Republic of Macedonia, and Turkey were the countries that managed funds under the decentralised implementation system. IPA II In 2014 IPA II was launched. It covers the period 2014-2020 and represents the renewed commitment to enlargement. IPA II focuses on democracy and rule of law, as well as competitiveness and growth. IPA II also introduces a sector approach, incentives for delivery on results, budget support and prioritisation of actions. Coordinated investments along the main infrastructure corridors and cooperation with international financial institutions (IFIs) are also important parts of IPA II. Assistance under IPA II is implemented by DG NEAR in all sectors apart from Agriculture and rural development in candidate countries, which are covered by DG AGRI. Indicative Strategy Papers all countries were adopted in 2014. They cover the entire period 2014-2020 although a midterm review is foreseen. The programming process has been rendered more sector focused and sector planning documents form the basis of the process. Other forms of EU support While IPA unified many of the instruments for pre-accession assistance, enlargement countries continued to benefit from other forms of EU support. Particularly noteworthy are instruments with worldwide coverage, such as the European Instrument for Democracy and Human Rights, the Instrument for Stability, and the Common Foreign Security Policy missions and operations. The EU also extended the coverage of certain internal instruments to the enlargement area: enlargement countries had access to research programmes and selected educational programmes, such as Erasmus Mundus. The EU also provided assistance to the enlargement countries through bilateral aid from EU Member States and investment loans delivered by the European Investment Bank (EIB). EU Delegations worked to ensure coherence between IPA support and other sources of EU support.

4 - ACTIVITIES FINANCED, RESULTS AND IMPACTS ALBANIA 1. SUMMARY The granting of candidate status to Albania by the European Council in June 2014 was a recognition of the fundamental reforms undertaken by the country to improve governance, enhance rule of law and expand the protection of human rights. IPA assistance has widely contributed to this EU integration mile-stone achievement with a number of successful projects to advice on key reforms (e.g. judiciary) and facilitate their implementation, as well as capacity building projects to strengthen public administration and service delivery. 2014 has been a transitional year for EU assistance. The Commission has undertaken an intensive dialogue with the Government to present the new strategic framework of IPA II and the emphasis on sector support to facilitate the implementation of national strategies, maintaining at the same time a strong focus on the country priorities for EU accession. As a result, a new IPA II country strategy paper for 2014-20 has been devised and the IPA 2014 programme includes a first sector budget support operation, which aims at supporting the Albanian public finance management reform strategy. EU financial assistance continues to play a strategic role for the development process of the country, deploying a portfolio of projects amounting to approximately EUR 216 million and covering a number of sectors (e.g. transport, agriculture, SMEs, vocational education) with direct links to competitiveness and economic growth. Cooperation with IFIs continues to be productive with IPA operations able to leverage considerable amounts in loans, particularly for infrastructure development. Consequently, the EU remains by far the first donor in Albania. 2. STRATEGIC PLANNING AND PROGRAMMING Indicative Strategy paper: A country strategy paper (CSP) has been established for the duration of the multiannual financial framework, defining the priorities towards meeting the strategic objective of EU accession. The design of the CSP is the result of extensive consultation with the Albanian Government, development partners and civil society organisations in order to identify the main priorities EU assistance should tackle over the period 2014-20. The rounds of consultation have taken place during the first semester of 2014 at different levels, both political and technical, and have focused on the analysis of the most advanced national sector strategies. The CSP is designed on a sector by sector basis since IPA II assistance will be predominantly channelled via sector support programmes, possibly budget support. Therefore, the CSP spells out a range of priorities for each of the following sectors: Democracy and governance: creation of a professional and de-politicised public civil service; sound public finance management; empowerment of civil society. Rule of law and fundamental rights: creation of an independent and efficient justice system; fight against organised crime; eradication of corruption; protection of human rights in line with international conventions. Environment and climate action: alignment of polices and legislation with EU standards; functioning infrastructures for waste and water treatment; air pollution control; mechanisms to respond to natural disasters. Transport: functioning infrastructures; connectivity with regional networks; road safety; interoperability across transport modes. Competitiveness and innovation: access to finance for SMEs; enabling business environment; trade integration with neighbouring countries; tourism development. Education, employment and social policies: effectiveness of vocational education and training; labour market policy and functioning employment services; inclusion of vulnerable groups; efficiency of social and health services. Agriculture and rural development: competitiveness of agro-food producers; application of food safety standards; quality of life in rural areas. Indicative allocation per year/sector:

Albania (EUR million) 2014 2015 2016 2017 2018-2020 Total 2014-2020 Democracy and governance 157.2 66.3 223.5 Rule of law and fundamental rights 69.0 28.0 97.0 Environment and climate action 34.0 34.0 68.0 Transport 18.0 38.0 56.0 Competitiveness and innovation 16.0 28.0 44.0 Education, employment and social policies 19.0 50.0 69.0 Agriculture and rural development 40.0 52.0 92.0 TOTAL 83.7 86.9 89.7 92.9 296.3 649.4 Programming exercise: The IPA 2014 action programme mainly focuses on reforms in the broad sector of democracy and governance, more specifically public finance management (PFM) and public administration reform (PAR). In coordination with the World Bank and the International Monetary Fund, the Commission has decided to assist the country in the reform process of its PFM institutions. The Albanian Government has acknowledged that the current system requires a substantial review, considering the high stock of budget arrears, the underperformance of the tax administration, the weak internal controls for the execution of the budget and the limited supervision of the budgetary process by the external audit institution and the Parliament. The Commission is already providing assistance in key PFM sub-policy areas, such as the functioning of the treasury management, strategic budget planning and financial management control systems, and has envisaged capacity building support for the external audit institution. One of the limits of the on-going support is the absence of an overarching comprehensive framework for PFM reforms, which can provide long-term and systemic solutions for the current array of weaknesses. Therefore, the Ministry of Finance has devised a PFM strategy for 2014-20, the implementation of which will ensure an efficient process of budget planning, execution and oversight in view to enhance quality of public spending and achieve more savings and revenues for the national budget. Under the IPA 2014 programme, the Commission plans to support the implementation of the PFM strategy with a sector reform contract of budget support, which will link the disbursement of tranches against a performance assessment framework of general criteria and indicators related to key PFM measures and reforms. In the area of PAR, the Commission has devised two major interventions to further improve the efficiency of the overall public sector. (i) The EU Integration Facility will provide sector advice to prepare credible strategies and action plans. This support will facilitate the move towards a more systematic use of sector budget support, as envisaged under the IPA II CSP. The Facility will also prepare the Albanian administration for future accession negotiations and will support the effective translation and implementation of the EU acquis. (ii) The action 'Support to Public Administration Reform' will facilitate the application of transparent procedures for selection of officials based on open competitions and will establish an impartial human resource management system for merit-based careers of civil servants. The support will also include information and communication technology (ICT) development for e-governance and public services delivery. With regard to fundamental rights, the IPA 2014 programme includes an action for the integration of minority groups in the labour marker, notably Roma and Egyptian communities. In view of the sector-based programming exercise related to IPA 2015-16, the Commission is facilitating the restructuring of the sector working groups to be led by the Albanian Government for policy planning and donor coordination. The review is covering four pilot sectors: (i) integrated water management, (ii) competitiveness and innovation, (iii) employment and social policies and (iv) public administration reform. Under the new approach, sector working groups will actively contribute to the policy making process by drafting sector strategies and actions plans and monitoring EU acquis-related reforms for the different sectors. Allocation by sectors and management modes for the IPA 2014 Programme Sector 1 - Democracy and Governance: Direct Management

Amount EUR 1 Sector Reform Contract for Public Finance Management 42,000,000.00 2 Project preparation component of the EU integration facility (see action 3) 3,446,389.00 Sub-total 45,446,389.00 Indirect Management with the Albanian Government Amount EUR 3 EU integration facility 10,300,000.00 4 Support to public administration reform 6,000,000.00 5 Support to participation in Union Programmes 1,000,000.00 Sub-total 17,300,000.00 Total per sector (direct + indirect management) 62,746,389.00 Sector 2 - Rule of law and fundamental rights: Indirect Management with the United Nations Development Programme (UNDP) Amount EUR 6 Economic and Social Empowerment of Roma and Egyptian Communities 4,000,000.00 Total per sector 4,000,000.00 3. IMPLEMENTATION OF ASSISTANCE Transition Assistance and Institution Building (IPA component I):

The implementation of on-going IPA assistance is in first instance driven by the priorities identified in the Enlargement Strategy and in the annual Progress Report, notably the five key priorities in view of opening accession negotiations, i.e. (i) establishing a professional and depoliticised administration; (ii) enhancing the efficiency and impartiality of the judiciary; (iii) strengthening the fight against corruption; (iv) increasing the fight against organised crime; (v) reinforcing the protection of human rights. The on-going assistance has been designed on the basis of the strategic orientations of the Multi-annual Indicative Planning Document (MIPD) 2011-2013, which has identified six priority sectors: 1. Justice and Home Affairs; 2. Public Administration Reform; 3. Transport; 4. Environment and Climate Change; 5. Employment and Social Inclusion; 6. Agriculture and Rural Development. Projects under each priority sector are in turn aligned with the objectives spelled out under sector strategies and action plans defined by the Albanian Government. Justice and Home Affairs Main areas of actions are the structural reforms, including the Constitution, regarding the independence and efficiency of the Judiciary, the Criminal Code and the Criminal Procedure Code to be achieved in line with the recommendations of the Council of Europe Venice Commission and EU peer assessments. The Commission is accompanying these reforms with the EURALIUS IV technical assistance mission to the Ministry of Justice, a pool of experienced international and national judges and experts on judiciary matters. The EURALIUS team is also advising on changes to improve the case management capabilities of the Albanian courts. In parallel, the Commission has completed the design, testing and deployment of a computerised case management system for the General Prosecutor Office. Increased capacity and modern IT infrastructure will lead to an acceleration of the average duration of trials, for which the Albanian business community, as well as common citizens, have advocated since long time. Other important developments in the sector driven by EU assistance relate to penitentiary infrastructure. The new pre-trial detention centre in Berat and the new penal institution in Fier have been inaugurated. These facilities will ensure better living conditions for detainees, thus contributing to the respect of their rights. The Commission has also financed the upgrading of the Police Education Centre in Tirana. Public Administration Reform Public Finance Management (PFM) is one of the core areas of cooperation. A number of operations are on-going to tackle the weaknesses of key elements of the system, starting from the accumulation of budget arrears. In the framework of macroeconomic stability programmes with the World Bank and International Monetary Fund, the Government is clearing the stock of unpaid bills to contractors of the administration. For its part, the Commission is financing an external audit to ensure that all bills paid by the Government reflect effective delivery of procurement service, supply and works. The external audit has also identified modalities to improve the arrears clearance process, as well as numerous systemic weaknesses for mid-term follow up, which will be addressed by the upcoming IPA 2014 PFM sector reform contract of budget support. Another important operation covers the area of public internal financial controls, including financial management and internal audit function in line ministries, as well as financial centralized inspections. Training and coaching activities are regularly taking place to increase capacities and ensure effective financial controls. The Commission is also contributing to the World Bank-managed multi-donor trust fund to roll out the integrated planning system, which aims at linking sector policy interventions with the medium-term budget plan of the Government. Transport The Commission is providing technical assistance to the Ministry of Transport and Infrastructure to align the regulatory framework with the EU acquis, as for example the implementation of the European agreement concerning the international carriage of dangerous goods by road and the agreement on the international carriage of perishable foodstuffs. Practices, procedures and standards related to maritime safety, security and environmental protection are also addressed. In addition, the staff of the Albanian Civil Aviation Authority is benefiting from training and coaching to enforce air traffic standards. The Commission is also financing the construction of key segments of the road network. The works for the Rogozhina bypass have started while those for the Vlora bypass are in pipeline. These segments have been identified by the South East Europe Transport Observatory (SEETO) as strategic investments to increase regional connectivity. Environment and Climate Change

As a result of EU support, the Ministry of Environment has been re-organized both at headquarter and field levels and is now better placed to enforce national environmental legislation. The National Environment Agency has been relocated in more suitable premises, thus increasing its visibility and facilitating the accreditation of its laboratory. In addition, the staffs of both the State Environmental Inspectorate and the Agency have increased. The Commission is also financing key infrastructures to develop the sewage system and treat waste water. The water plants in the area of Durrës and Velipoja are now completed and in operation, thus protecting the sea and the coast from untreated waste water and increasing the quality of life for citizens and season tourists. The Government is now expected to build a proper secondary and tertiary sewerage network in both Durrës and Velipoja in order to increase the connection rates. Additional sewerage projects are ongoing in Vlora, Ksamil, Kavaja and Shëngjin. Employment and Social Inclusion Important institutional, legal and governance achievements have achieved through an EU project for the Ministry of Social Welfare: (i) finalisation of the employment and skills strategy 2014-2020, which is likely to receive EU budget support for its implementation under the IPA 2015 programme; (ii) better alignment of the legal framework to the EU Regulations and Directives on occupational health and safety; (iii) improvement of services offered by the administration through training of labour inspectors and dissemination of EU good practices for active labour market policies. The Commission has accompanied the design process of relevant planning documents for social inclusion, i.e. the strategy on social protection and the action plan for Roma and Egyptian (R/E) communities. The design process was done in a very participatory manner with continuous involvement of civil society, international organisations and other development partners. The Commission has also contributed to a number of practical results to improve living conditions of the Roman and Egyptian communities: new infrastructures for social services, preparation of local community development plans and small grants for fifteen Roman and Egyptian NGOs. Agriculture and Rural Development The Commission has provided advice on the design of the inter-sectorial strategy for agriculture and rural development, whose implementation will enhance the productivity of the agro-processing industry, increase the compliance of products with sanitary standards and improve living standards and income opportunities in rural areas. The Commission has worked together with the National Food Authority to improve consumer protection, enhance the inspection function and expand the database for food establishments' registration. Besides technical assistance, significant support was provided to upgrade the laboratory infrastructure of the Authority. Nine regional offices and laboratories, as well as the central veterinary laboratory in Tirana, have been restructured. The veterinary laboratory has also been nominated for the European Union Prize for Contemporary Architecture – Mies van der Rohe Award 2015. The Commission is also providing assistance to the veterinary sector with the aim of establishing an improved animal disease surveillance system and eradicating zoonotic diseases. Two massive aerial vaccination campaigns against rabies in foxes have been launched, as well as a vaccination campaign against brucellosis (a bacterial infection spreading from animals to people). Cross-border Co-operation (IPA component II) Albania is participating in three bilateral CBC programmes with other candidate countries or potential candidates (Montenegro and fYRoM since 2007, Kosovo since 2010) and in one bilateral CBC programme with one EU Member State (Greece since 2007). The three CBC programmes with candidate countries and potential candidates are mostly focused on specific measures to promote economic development with an emphasis on tourism, protect environment, and enhance social cohesion through "people-to-people" actions. The CBC programme with Greece provides measures to promote entrepreneurship, foster sustainable tourism, facilitate border accessibility through small scale infrastructure, as well as to protect environmental and cultural heritage along the border area. The four current CBC programmes have so far been implemented via calls for proposals, which led to funding a number of small-scale projects across the border regions of Albania. The projects have been generally successful, thanks to an increase of contacts and cooperation among local stakeholders coming from neighbouring countries. However, the impact related to the objectives of economic development, environment protection and tourism promotion has been lower than expected. Therefore, during the last two years of the programmes' lifespan, i.e. 2012-13, the Commission and the beneficiary countries have decided to switch from call for proposals to joint bigger scale/strategic projects. 4. IMPLEMENTATION MODALITIES AND STRUCTURES Coordination meetings with the Ministry of European Integration are taking place on a regular (i.e. monthly) basis in order to monitor progress in the implementation of assistance and solve outstanding problems. The most important issues are also discussed in detail during the yearly IPA Monitoring Committee, which was held on 19 March 2014 and co-chaired by the Minister of European Integration and the relevant Director of the Commission. Overall, the Ministry is taking a more pro-active and proficient approach in monitoring implementation and addressing outstanding issues, which often refer to complex infrastructures projects. On its part, the Commission is devising monitoring maps, which will serve to establish a detailed operational plan based on the risk assessment carried out for each project/contract. With respect to indirect management, in March 2014 the Commission conferred powers to the Albanian Government to manage funds under IPA Component I. The total amount of projects programmed under the decentralised implementation system (DIS) stands at EUR 30 million. Decentralized projects are part of the IPA 2012 and 2013 programmes and cover different types of implementation modalities (twinning, service, supply and works contracts, etc.) and a number of sectors (justice, agriculture, transport etc.). The capacity of the Central Finance and Contracting Unit (CFCU) within the Ministry of Finance to procure EU funds has been strengthened via a technical assistance project. The CFCU has developed a procurement planning system, including detailed rules and procedures to be followed by all actors involved in the implementation of projects (inputs from line ministries to define terms of reference and technical specifications; monitoring of projects; closure of contracts etc.). Procurement procedures are in the pipeline and are going to take place in the course of 2015. 5. SUCCESS STORIES

Consolidation of law enforcement capacities in Albania - PAMECA IV assistance mission The mission has deployed a team of fifteen senior international and national police officials and prosecutors, who are working with the Albanian State Police (ASP) to improve its organisational, administrative, technical and resource management capacities and increase the coordination with the General Prosecutor's Office and other relevant law enforcement agencies. With regard to prosecutions, the mission has identified the main critical areas of concerns and has provided important inputs to shift attention from low/medium to high profile cases, including pro-active high level anti-corruption investigations. As a result of training and coaching activates on road traffic management, the ASP is now strongly and consistently enforcing traffic laws. The PAMECA team has also advised the ASP border and migration department on the application of the Schengen Code, with particular regard to green and blue border surveillance. In operational terms, the mission was directly involved in the preparatory works leading to successful anti-drug operations, such as the intervention in June 2014 to dismantle the marijuana-producing centre in the village of Lazarat near the Greek border. The operation gave a clear signal to drugs smugglers that the time of impunity and passivity in countering drugs production has ended. The team has also worked on the re-definition of the container handling procedures in the port of Durrës, which is a junction point for smuggling activities and where increased controls are required to check containers. PAMECA was also involved in the preparation of the agreement on operational and strategic cooperation with Europol (ratified in May 2014), as well as in the formulation of the new ASP Law. The day-to-day high level advice provided by the team leader to the Minister of Interior and the Director General of the State Police is likely to generate additional pro-active measures to fight organized crime and its links with cross-border criminal networks and to increase strategic cooperation with police and intelligence forces of neighbouring countries. The Commission improves access to rural areas in Albania With EU funds 250 km of secondary road connections have been rehabilitated. The Commission has allocated an overall amount of EUR 51.5 million to this endeavour, being able at the same time to leverage additional EUR 200 million in loans from the European Bank for Reconstruction and Development (EBRD), the Council of Europe Development Bank (CEB) and the German Development Bank (KfW). Considering the country’s mountainous landscape, almost half of the population lives in remote areas, where agriculture remains the prime source of employment and over a third of residents live in poverty. By upgrading the local road network, the Commission has opened up new employment opportunities and access to a wider range of public and social services to some of the poorest regions in the country. Better roads are already making it easier – and cheaper – for farmers to reach urban markets. Patients can get to regional hospitals faster and emergency services can reach outlying villages. With upgraded infrastructures, traffic accidents, a major concern in Albania, are likely to decrease. Finally, improved access to urban area gives the chance to young generations to more easily attend schools and universities. Remote places have been connected to national traffic arteries, rehabilitating roads where entire sections were often unpaved. Indeed, the programme for secondary road connections seeks the objective to establish a unified network, linking rural communities to the main national and regional transport lines, notably the east-west axis from Durres to Pogradec (Corridor VIII) and the north-south axis from Shkoder to Tepelene-Gjirokastra (Blue Corridor). Access to historic cities – notably Lezhe, Shkoder and the UNESCO World Heritage sites of Gjirokaster and Berat – has also been facilitated and ad hoc road-signs have been set up to attract foreign travellers. As a result of this programme, according to statistics, 600,000 Albanians have now access to all-season roads; traffic volumes are up by 21 % and public transport costs are down by 8.5%. These are all encouraging signs of the improvements that road infrastructure is bringing to living conditions in rural Albania. BOSNIA AND HERZEGOVINA 1. SUMMARY Programming and implementation of IPA assistance in Bosnia and Herzegovina continued in 2014 in a challenging political environment and were heavily influenced by the disastrous floods that hit the country in May 2014. The preparations for IPA II restarted after they had been interrupted in 2013 and led to the adoption of the IPA II Indicative Strategy Paper for Bosnia and Herzegovina in December 2014. However, the Paper covers only 2014-2017 and in the absence of a comprehensive EU Coordination mechanism, funds will only be allocated in four sectors where agreed strategies and sufficient coordinating structures exist. Widespread, citizen-led protests in early 2014 underlined the fragility of the socio-economic situation. The Commission launched three initiatives to shift the focus towards reforms and issues of direct concern to citizens, among them a joint EU- Bosnia and Herzegovina Working Group to accelerate the implementation of EU funded projects. The group made only limited progress, despite involvement at Prime Ministers’ level. Following the floods of May 2014 the paramount challenge became to assist Bosnia and Herzegovina fast and effectively in addressing the impact of the flooding. The EU reallocated immediately EUR 42 million of IPA funds to assist recovery and reconstruction. Further EUR 41 million was allocated before the end of the year.

2. STRATEGIC PLANNING AND PROGRAMMING Indicative Strategy paper The Indicative Strategy Paper (2014-2017) was prepared in partnership with the authorities of Bosnia and Herzegovina. The State level and Entity Prime Ministers, the National IPA Coordinator (NIPAC), line Ministers at State and Entity level and representatives of the civil society as well as other donors contributed to the preparation of this strategy. A lesson learned from the programming and implementation of previous and on-going EU assistance is that political commitment and ownership of the reform process is an indispensable precondition for success. In view of this lesson, and in accordance with the Paris declaration on aid effectiveness, support will be based on Bosnia and Herzegovina's own sector reform strategies. Where such strategies do not exist (e.g. energy, transport, environment), IPA II will support the development, the adoption and the implementation of the strategies. The Indicative Strategy Paper foresees support to Bosnia and Herzegovina in the following four sectors: Democracy and governance, Rule of law and fundamental rights, Competitiveness and innovation: local development strategies, Education, employment and social policies. In order to benefit from support through a sector approach, strategies should be based on a budget, a medium term expenditure and performance management framework, should address sector and donor coordination and should facilitate a countrywide harmonised implementation of the EU acquis. None of the sectors envisaged for support appears at present suitable for support through a sector approach. However, the EU will continue to support the preparation and gradual implementation of suitable strategies. In particular, EU assistance aims to create the capacities for strategic planning and the preparation for sector support. Indicative allocation per year/sector Bosnia and Herzegovina 2014 2015 2016 2017 Total 2014-2017 a. Reforms in preparation for Union membership 11 17 18 18 64 Democracy and governance 31 31 Rule of law and fundamental rights 33 33 b. Socio-economic and Regional development 24.7 11.7 13.7 13.7 63.8 Competitiveness and innovation: local development strategies 63.8 63.8 c. Employment, social policies, education, research and innovation, promotion of gender equality, and human resources development 4 11 111 121 38 Education, employment and social policies 38 38 TOTAL 39.7 39.7 42.7 43.7 165.8 Programming exercise The IPA 2014 programming was launched on 7 May with a kick-off meeting with the BiH authorities and representatives of civil society. Following the floods of May 2014, EUR 15 million from the BiH IPA 2014 envelope (total: EUR 39.7 million) were reserved for flood recovery and flood risk management. EUR 2.1 million were allocated to the Civil Society Facility under the Multi-Country IPA programme 2014. The remaining EUR 22.6 million were programmed focusing on local integrated development. In addition, the programme includes support in the following areas: indirect taxation system, anti-corruption, identification of missing persons, transformation of care institutions and support to participation in EU programmes. Country Action Programme Bosnia and Herzegovina 2014 Sectors EUR Democracy and Governance 5 831 834 Rule of Law and Fundamental Rights 1 750 000 Competitiveness and innovation: local development strategies 14 000 000 Education, employment and social policies 1 000 000 PROGRAMME TOTAL 22 581 834 In addition to the Country Action Programme for Bosnia and Herzegovina 2014 the Commission adopted a special measure for flood recovery and flood risk management. This special measure includes support to all IPA beneficiaries to develop flood prevention, preparedness and response but the majority of the funds are allocated to Bosnia and Herzegovina (EUR 26 million in addition to the EUR 15 million mentioned above) and Serbia for flood recovery, re/construction of embankments of different sections of the Sava and Drina rivers and improvements to the hydrological forecasting systems.

Special Measure for flood protection and flood risk management Action No + Title EUR Support to flood protection and water management 15 000 000 Housing interventions 12 500 000 Strengthening SMEs' competitiveness 9 000 000 Support to civil protection 2 500 000 Support to civil society in awareness raising, advocacy and recovery assistance to flood affected areas 2 000 000 TOTAL 41 000 000 Multi-country Regional reconstruction and improvement of flood protection infrastructure in the Sava River Basin in Bosnia and Herzegovina and Serbia 20 000 000 Prevention, preparedness and response to floods in the Western Balkans and Turkey, Lot 2 4 000 000 TOTAL 24 000 000 3 IMPLEMENTATION OF ASSISTANCE BiH and its political leadership continued to lack a common vision regarding the overall direction of the country. Disagreements about the division of responsibilities between different levels of governments remained the main obstacle to an effective implementation of EU financial assistance. The failure of the authorities to address long standing social and economic concerns led in February 2014 to violent street demonstrations. The fragile economic situation was aggravated by massive floods that hit the country in May 2014. IPA supported in 2014 especially the recovery following the floods (see section "success stories"). In addition, the following were among the results achieved in 2014: The main achievements of the EU Support to law enforcement over 2014 were the agreement on a road map for improvement of data protection; a practical solution for covert identity developed and tested; the Europol Serious and Organised Crime Threat Assessment (SOCTA) Methodology adapted for BiH and used for the first BiH SOCTA; changes to the Law on Prevention of Money Laundering and Financing of Terrorist Activities (adopted in June 2014) elaborated and implementation capacities further developed through a holistic financial investigations training programme; institutional appraisals in view of preventing corruption were carried out in selected law enforcement agencies in cooperation with the Agency for Prevention of Corruption and Coordination in the Fight against Corruption as well as capacity building on detection/investigation of corruption cases; a review of the Criminal Procedure Code was carried out and further analysed aiming to identify future improvements of the police-prosecutor cooperation. In light of the significant backlog of war crimes cases throughout BiH, extraordinary IPA budget support is provided from 2014 to 2018. As a result of the 142 additional prosecutors, judges and relevant legal support staff recruited to work alongside the domestically-financed staff, significant progress was noted. By the end of 2014, nationwide war crimes cases with known suspects were reduced by 23% in the prosecutors' offices. Such progress is unprecedented in BiH, and indicates that IPA support not only produced results but created also a positive case processing momentum. In the SME and tourism sectors, the project “Support to introduction of Quality Management Systems (QMS) in Bosnia and Herzegovina” enabled 100 pilot SMEs to participate in the free preparation process for the certification of quality management system in accordance with ISO 9001 standards. Overall, the QMS certification performed with EU assistance is expected to create a long term positive impact on the business sector in Bosnia and Herzegovina, by reducing operational costs, better trained and educated employees, increased efficiency, better customer satisfaction and improved product quality. “EU technical assistance to Support Tourism industry in BiH” (EU Tourism Project) delivered important recommendations on how to improve strategic and legislative framework, prepare investment projects and promote tourism development country-wide. The project also provided marketing support to the cities of Sarajevo and Eastern Sarajevo in their preparation for the European Youth Olympic Festival in 2017. In the field of education, the project “Strategic Development of Higher Education and Qualification Standards” developed for the first time in Bosnia and Herzegovina a set of qualification standards and occupational standards for higher education. The project “Promoting Competiveness through Higher Employment Capacity of Human Resources”, implemented in Gorazde Canton can be used as a model for good cooperation between education, labour and employers parties. 197 unemployed persons were trained and certified (61 of them found a job already during the project implementation) and 131 workers already employed without adequate education were trained and certified. As regards social inclusion and social protection, several ongoing projects are showing very good results so far. For example, the project “Socio-economic empowerment of mine victims and their families through provision of business trainings and employment opportunities in BiH” addresses the socioeconomic exclusion of 240 mine victims and improvement of living conditions of their families through provision of preparatory business training and business grants for job creation. In the environment sector, the project "Strengthening of BiH's environmental institutions and preparation for pre-accession funds" (ENVIS) developed strategic documents which can ensure the harmonised implementation of the EU environment acquis throughout the country. There is still a risk that the outputs delivered will not be adopted or maintained if there is no political endorsement. In the area of food safety, veterinary and phyto-sanitary, the twinning light project “Strengthening of the capacities of the phyto-sanitary services in BiH” increased the capacities of the phyto-sanitary service in BiH to control plant health and food safety by introducing internationally recognised methods and procedures for the phyto-sanitary sector in laboratories and by developing a Monitoring Programme for BiH priorities relating to crops and harmful organisms. Campaigns of oral vaccination against rabies continued to be efficiently implemented in BiH. Since autumn 2011, the declining trend of reported cases of rabies has been pertained. In comparison to 47 cases reported in 2011 or 27 in 2012, in 2014, there was not a single case of rabies reported. In the sector of culture, the works on the building Vijecnica in Sarajevo were completed in June 2014. The renovated building was intensively visited by BiH citizens and tourists. A similar example is the completion of the interventions on the Stolac cultural heritage.

The Cross-border co-operation (CBC) project between Croatia and BiH "It started with the sport…" allowed the construction and equipment of a sport field, and rehabilitation and equipment of school facilities in Dobretici. The project “Mobile Library Services for Life Long Learning (LLL) in Rural Communities” established the first mobile library in the Una-Sana Canton which serves as a platform to support the LLL in remote country-side communities. The CBC Serbia-BiH project "Beekeeping - Activity for the Future" supported the beekeeping and horticulture development in Gorazde area. The project "Development and Promotion of Health Tourism Spas in Cross-border Area of BiH-Serbia - CROSS SPA" resulted in the development and placement of a new joint health tourism product. The "Agriculture Forecast-Reporting System (AFRS) in the Cross Border Region" established an innovative concept of integrated agriculture production based on IT weather forecasting and reporting. 4. IMPLEMENTATION MODALITIES AND STRUCTURES IPA funds continue to be implemented by the EU Delegation to Bosnia and Herzegovina. Bosnia and Herzegovina's institutions have made no progress towards the establishment of a decentralised implementation system. The CFCU (Central Finance and Contracting Unit) and the National Fund (NF) have maintained their staff levels but - in the absence of progress towards indirect management - without being able to play a role in the implementation of IPA programmes. The CFCU has continued however to perform the function of the First Level Control for the Cross-Border and Transnational Programmes implemented in shared management for the projects under IPA Adriatic CBC Programme, South-East Europe Programme and Mediterranean Programme. Politically it does not appear realistic to achieve progress towards indirect management of IPA funds prior to the establishment of a functioning EU coordination mechanism. 5. SUCCESS SORIES Floods recovery The implementation of the Floods Recovery Programme (EUR 43.52 million, out of which EUR 42.24 million provided by the EU) launched in July 2014 has produced a whole range of tangible results in gradually restoring normal living conditions in local communities and ensure the provision of aid to the most vulnerable people affected by the May floods. The Programme, implemented by UNDP, in cooperation with UNICEF and IOM focused on the rehabilitation of public services and infrastructure, housing units for the most vulnerable people and for social and economic recovery of local communities. In the first six months of the implementation the following results were achieved: 671 dwellings rehabilitated, 337 in progress; 66 public buildings rehabilitated, with additional 31 in progress and 19 in different stages of procurement or project design; 32 communal infrastructure projects completed and 26 ongoing; surveying of additional municipalities completed, with new infrastructure projects to be selected to continue implementation. As concerns the economic recovery component, 48 bank guarantees were received and accompanying payments amounting to total of EUR 1.27 million were made. Waste water treatement The project “Construction of the waste water treatment plant in Zivinice Municipality" (Tuzla Canton) was successfully completed in September with IPA assistance of EUR 3 million out of an overall investment of EUR 7.2 million. The plant will contribute to approximate local environmental standards to EU standards to the benefit of the 42000 citizens, allowing the implementation of the Drinking Water and Urban Waste Water Treatment Directives and the improvement of environmental protection through wastewater collection systems. In addition, it will promote a significant improvement in the water quality by reducing pollution, in particular through the treatment of wastewater from the settlements. CROATIA 1. SUMMARY During 2014 Croatia continued actively to implement the measures to further strengthen its capacity in order to meet the obligations of membership to the EU. Since 1 July 2013, Croatia is an EU Member State. Under IPA component I and II, an adequate institutional set up for decentralised management of IPA funds already established in 2013 was consolidated over 2014 with the further development internal rules of procedure, and with functioning implementing and operational agreements between the NAO and the Head of the Operating Structure and among bodies and responsible persons within the Operating Structure. Manuals of procedures were developed for each body within the system, with a clear description of all processes and procedures and with audit trails developed. The IPA management and control systems continued to be fully functional.

2. STRATEGIC PLANNING AND PROGRAMMING As all programmes have been adopted in the previous years and no strategic programming was done over 2014. DG NEAR however involved in the approval of the requests for modifications of Project Fiches and in the approval of the projects financed from the Flexible Facility under IPA and Transition Facility programmes. 3. IMPLEMENTATION OF ASSISTANCE Croatia continued throughout 2014 to implement the measures to further strengthen its capacity to meet the obligations of EU membership and to go well beyond the sheer transposition of the acquis. All national programmes have been adopted in the previous years, therefore the country focused on implementing the IPA component I 2008, 2009, 2010 and 2011 programmes in support of Croatia's preparation for the management and implementation of post-accession funds and for completing the reforms and building up capacity in the following areas: Justice, Freedom and Security, Environment, Transport and Energy, Internal Market and Economy, Public Administration Reform, Public Finance and Public Procurement, Cohesion Policy and Labour and finally Agriculture, Fisheries and Food, Veterinary and Phytosanitary A particular attention has been given over 2014 to ensuring the sustainability of outcomes once the EU funded projects are completed. With regard to impact of the IPA national programmes, the programmed EU pre-accession support has provided the necessary assistance to Croatia in meeting the requirements for accession. The IPA assistance was better designed in later years, generally better structured, and often built on outputs and recommendations of previous assistance. As a result, key improvements in legislative and administrative structures, systems, infrastructure and resources as a result of the provided IPA support have been noted. With regard to administrative capacities, measures continue to be delivered in order to enhance administrative capacities of the bodies dealing with EU funds. During 2014 administrative capacities have been strengthened in a number of institutions and recruiting of new staff has been under way. Justice, Freedom and Security The Implementation of Judicial Development Strategy (2013-2018) is in progress. The Ministry of Justice together with the judicial authorities and national and international experts is continuously and intensively working on the achievement of its strategic goals, in particular to develop actions aimed at further reducing the total number of pending cases, to reduce the duration of court proceedings and to increase the overall efficiency of judicial bodies. The efforts for the courts rationalization and reorganization processes will continue, in line with the Judicial Development Strategy. In parallel to supporting the judiciary, IPA also strengthened the capacity of the prosecutor's office and co-operation among various related agencies, particularly the Office for Combating Corruption and Organised Crime. As a result, the sector fight against corruption and organised crime has been strengthened, including the adequate legal and institutional framework. As regards the Schengen Facility, of which the Ministry of Interior is one of the beneficiaries since July 2013 when Croatia became a Member State, after having received the total allocation of EUR 120 million, significant progress was reached in contracting.

As regards the general programme Solidarity and Management of Migration Flows (SOLID) out of four funds which are available under this programme, Croatia is using the European Return Fund and the European Refugee Fund. As for the European Return Fund, in 2014 the EC approved the multi-annual and the annual programme and co-financing for 2013. Public Administration Reform, Public Finance and Public Procurement Sector The implementation of projects proved a positive impact on the overall public administration reform and the assistance contributes to Croatia’s fulfilment of Political Criteria in the field of Democracy and the Rule of Law and, in particular, to fully implement public administration reform measures on administrative procedures. In respect of administrative procedures the goals were to simplify the General Administrative Procedures Act (GAPA), to reduce the number of special administrative procedures, to speed up and simplify procedures as well as increase the efficiency of public administration. The GAPA is now shorter, simpler, regulates administrative contract, actions of the providers of public services and any other actions taken by public authorities in the field of administrative law, guarantees legal protection against all forms of administrative action. Its better use was ensured with the support of an IPA 2008 contract meant to support Croatia in further enhancement of reliable, open, transparent and client-oriented public administration. The project IPA 2010 FF RAC Support to Strengthening the Administrative Capacity through Development of the Competency Framework in Civil Service finalised in 2014 developed civil servants competency framework in order to define which competencies (knowledge, skills, abilities, attitudes, behaviours) should civil servants have on specific posts as precondition for administrative capacity building in civil service. The assistance in the area of Public Finance contributed to the strengthening of competence of public internal auditors for auditing Structural Funds and Cohesion Fund, to provide support to Croatian Customs Administration (CCA) for the prevention of illegal traffic of goods, to ensure the adoption of EU standards and best practices in the field of customs laboratory analysis. Extensive support has been provided to the Croatian Tax Administration´s (CTA) for aligning its procedures with EU procedures in the field of VAT and to strengthen its institutional capacity. The IPA 2010 project Enhancement of the CTA Administrative and Institutional Capacity in the Field of Application of VAT EU Common System (completed in April 2014) increased effectiveness of VAT function on the whole and provided the tax officials and tax payers with a more organised and more efficient way of implementing VAT procedures. Also, the CTA´s project IPA 2010 FF RAC Supporting the Capacity of CTA for Further Development of EU Information Exchange Systems enabled further development of EU information exchange systems through improvement of relevant procedures, establishment of more efficient monitoring and managing system and strengthened capacity of relevant CTA employees. Other two project completed in 2014 supported the Central Harmonisation Unit (CHU) within the Ministry of Finance in upgrading methodology for internal auditors in order to ensure effective and efficient internal auditing of Structural Funds and Cohesion Fund, respectively to ensure the adoption of EU standards and best practices in the field of customs laboratory analysis. Transport For the Transport sector projects, the main goal was to complete the alignment with the EU acquis. Furthermore, the goal is to enhance administrative capacity in the area of road transport, aviation and maritime transport and in the area of inland waterway transport. In the Pre-Feasibility Study project the goal was to assess which are the best options for possible connection of two separated parts of Croatian (EU) territory in Dubrovnik-Neretva County. The Roadside Inspections project directly improved road safety by implementation of digital tachograph database, harmonised road safety legislation with the acquis and use of equipment. The capacities of the Ministry of the Maritime Affaires, Transport and Infrastructure and the Ministry of Interior were improved in order to conduct required checks and to use the established database in order to keep the register of checks and infringements. Also, a Croatian Maritime Strategy has been developed under the Maritime Strategy project. IPA 2009 equally contributed to the improvement of the air traffic safety. After having received the IPA assistance the data collection in transport sector has been improved as a crucial element for strategic planning, cost-benefit analysis and feasibility studies. Environment and Climate Change In the sector of Environment the projects continue to contribute to the transposition and implementation of the EU acquis with particular emphasis on waste management, water quality and flood protection, nature protection, integrated pollution prevention and control, strengthening of administrative capacity in order to implement the environment acquis and ensure integration of environmental concerns into horizontal issues (access to justice, strategic environmental assessment, ecological network impact assessment). Cohesion Policy and Labour The EU assistance has made an important contribution to building up Croatia’s capacity for managing post-accession funding in the cohesion sector, including through learning by doing. The projects assisted the Croatian administration and relevant state bodies to prepare for the implementation of the common EU cohesion policy post-accession.

The actions within the Cohesion Policy projects support the relevant Croatian institutions in the fields of programming, development and fine-tuning of the NSRF and specific sectorial OPs to be implemented within the framework of the EU structural funds, preparation for the waiving of ex-ante controls (EDIS), ex-ante evaluations of programming documents for both the EU financial perspective 2007-2013 post-accession and relating to the next period 2014-2020, strengthening of the overall institutional capacities in the area, relevant programme audit and setting up of the future SF audit system, adequate SF project pipeline and numerous other related activities. Internal Market and Economy The assistance covers a variety of sub-sectorial components such as Statistics, Consumer and Health Protection (Freedom to provide services) and Competition. A strong emphasis is put on institutional capacity building and enforcement of harmonised legislation. Agriculture, Fisheries and Food, Veterinary and Phytosanitary Policies Significant progress is met in connection to preparation Croatian administration for the use of EAFRD funds. The procedure related to the Strategic Environmental Assessment (SEA) of Croatian Rural Development Programme 2014-2020 (RDP) was finalised. SEA Report was finished in July 2014 providing the assessment of possible environmental impacts of implementation of the Rural Development Programme for Croatia. The system approach to control and eradicate the rabies in Croatia that was supported by IPA 2008 and IPA 2010 projects starting from 2011, continued with the implementation of oral vaccination of foxes in the multiannual programme (2014-2018) by which additional two years of oral vaccination are secured. The 2014 spring campaign of oral vaccination has been successfully conducted, and the results of testing show that until September 2014 only one sample out of 1772 was positive to rabies. Cross-border Co-operation (IPA Component II ) IPA Component II contributes to regional development activities, which aim to encourage the creation of cross-border networks, partnerships, development of joint cross-border operations, capacity building of local and regional units in implementing European Union programmes, as well as preparing them to manage operations within cross-border cooperation programmes over 2014-2020. IPA Component II provides funding for three types of cross-border co-operation programmes: 1. CBC with neighbouring non-EU Member States - Serbia, Bosnia and Herzegovina and Montenegro. All three programmes share the same overall objective of building the capacity of local, regional and national institutions to manage EU programmes and preparing them to manage future cross-border programmes under objective 2 of the EU Structural Funds. 2. CBC with Member States (MS) - Slovenia, Hungary and IPA Adriatic, designed to create a dynamic cross-border area, facilitation of culture and knowledge based development on the basis of successful management of natural and cultural heritage and intense socio-economic interactions between the two sides in the eligible area and the strengthening of the sustainable development capacity of the Adriatic Region. 3. CBC in the framework of transnational programmes – South-East Europe (SEE) and Mediterranean Programme (MED), focused on facilitation of innovation and entrepreneurship, Protection and improvement of the environment, Improvement of accessibility and Development of transnational synergies for sustainable growth areas. The Operating Structure is fully operational and well set up. The readiness of the Croatian structures do deal with the overall management of IPA II Component, is proven by successful management of the Programmes in the covered period. The absorption capacity and the interest to participate in CBC Programmes continue to be high on the local and regional level. 4. SUCCESS STORIES

Reorganisation and rationalization of the courts One of the most important reform measures relates to the implementation of reorganisation and rationalisation of court network, which is currently under way. As the part of the given process and to serve as a ground for reorganisation and rationalisation, in October 2014 the new Law on the areas and the seats of the courts was adopted in the Croatian Parliament, which is to be applied as of 1 April, 2015 on municipal and county courts, and as of 1 July 2015 on misdemeanour courts. According to the Law, Croatian area is divided into 15 judicial areas, in a way that establishes 15 district courts, 24 municipal courts and 22 misdemeanour courts, which is 43 municipal courts and 39 misdemeanour courts less. This new organisation opens up the possibility of specialisation, greater mobility and more balanced workload of judges and the harmonisation of the court practice. Also, this way the number of judicial managerial staff is reduced, which will enable cost savings as well as better functioning of the judiciary (i.e. more even workload, shortening the duration of the judicial proceeding, backlogs reduction, etc.). However, citizens will continue to be provided with access to municipal and misdemeanour courts identical to what they had before the new Law. The current municipal and misdemeanour courts that cease operating, as well as current services of the municipal and misdemeanour courts, will become a full-time offices of new municipal and misdemeanour courts. Support for children from institutional care Facilitation of transition of children from institutional care to independent living or reintegration in the family is an area where progress has been achieved and where IPA had an important contribution. The project “Improving experts’ capacities for the protection of rights and interests of children and youth placed in homes for children and youth with behavioural disorders” is an example. New procedures and processes, ensuring that all children receive support and follow up in transition from institutional care to independent living or reintegration, have been developed and implemented as part of the activities of the working groups during the project IPA 2009 FPP RAC Improving experts' capacities for the protection of rights and interests of children and youth placed in homes for children and youth with behavioural disorders. This is done through adopted Procedures Protocol made in order to enhance collaboration between relevant institutions responsible for protection of rights and interests of children and youth with behavioural disorders. Data on the number of children successfully integrated in the community by 2014, the number of recidivists by 2014 and the number of complaints to the Ombudsman for Children by 2014 is yet to be obtained as statistical data on the above mentioned issues is still being processed. De-mining The implementation of the IPA 2010 De-mining project was completed during 2014. The project purpose was to create a safe environment and security pre-conditions for sustainable return of refugees and displaced persons and also socio-economic development in war affected areas in Republic of Croatia, by the removal of mine threat from war affected areas. De-mining operations were performed under the project in Osijek-Baranja and Vukovar-Srijem County areas; in the Town of Osijek and Vukovar and Municipalities Draž, Stari Jankovci and Markušica. Under this project demining operations were be performed in Vukovar-Srijem County and Osijek-Baranja County on the area of 3 444 930 m2. As a result, an area of 3,4 km2 was declared safe. THE FORMER YUGOSLAV REPUBLIC OF MACEDONIA 2015 1. SUMMARY IPA assistance has continued to play an important role in meeting the general objectives set in the DG Enlargement Annual Management Plan as regards the former Yugoslav Republic of Macedonia. With regard to IPA II, the Indicative Strategy Paper for the country was adopted on 19 August 2014. The 2014 IPA II programme was adopted on 17 December 2014. The programme consists of one annual action programme and one multi-annual action programme. The annual programme covers three sectors: democracy and governance; rule of law and fundamental rights; competitiveness and innovation, for a total amount of EUR 52.7 million. The multi-annual programme covers the first three years of the implementation of Sector Operational Programmes for environment and climate action and transport for a total amount of EUR 81 million. The Rural Development Programme under IPA II for the years 2014-2020 was also approved in December 2014. The budget for the 7 years is EUR 60 Million with modest allocations for the first four years and increasing amounts towards the end of the period. As regards implementation of financial assistance under IPA I, de-commitments of funds and the future risks of loss of funds from programmes under the Decentralised Implementation System (DIS) have remained a source of concern. The contracting situation has worsened in comparison to 2013. In 2014, EUR 41.6 million were lost under all IPA Components. The Operating Structures in the country are facing numerous structural problems which negatively impact on their performance and ultimately on the timely absorption of IPA funds. The contracting of the remaining National Programmes for the years 2011, 2012 and 2013 did not start in 2014.

2. STRATEGIC PLANNING AND PROGRAMMING Indicative Strategy Paper The Indicative Strategy Paper covers the duration of the Multiannual Financial Framework, defining the priorities for accession-related actions for the benefit of the former Yugoslav Republic of Macedonia. The Indicative Strategy Paper was adopted on 19 August 2014, paving the way for programming assistance under IPA II. The elaboration of the Indicative Strategy Paper has been an intensive and inclusive process. Numerous consultations have been conducted with development partners, government stakeholders, non-state actors and Member States. The Strategy Paper focuses on seven sectors and addresses notably (i) democracy and governance, (ii) Rule of law and fundamental rights, (iii) competitiveness and innovation, (iv) transport, (v) environment, (vi) education, employment and social policies and (vii) agriculture and rural development. The consultation process identified key areas of intervention. As regards strategic priorities, reforms in the area of rule of law and fundamental rights are crucial for the overall development of the country and its democratic institutions, by providing quality justice to the citizens, accountability and a favourable environment for economic growth. Support for strengthening inter-community relations in line with the Ohrid Framework Agreement will also be important. Reforms in the field of democracy and governance, particularly public administration reform and public finance management, will be vital to the country's accession process. As regards competitiveness and growth, efforts will focus on achieving inclusive growth in line with the Europe 2020 priorities. In the field of transport, assistance will be provided to develop the main Trans-European Corridors. Assistance will further help to increase access to quality education and to the labour market for all citizens. Assistance in the environment and climate action sector will seek to support more sustainable growth, an energy-efficient economy, and to reduce the high levels of pollution in the country. Assistance will further address local governance, local economic development and private sector development with a view to supporting social cohesion and the country's democratic development. Lastly, assistance in agriculture, one of the country's most significant economic sectors, will support a more balanced territorial development of rural areas, better food safety and a more competitive agri-food sector. Indicative allocations (million EUR) per policy areas and sectors 2014 2015 2016 2017 2018-2010 Total 2014-2020 climate change relevant (%) a. Reforms in preparation for Union membership 39.7 17.9 35.6 26.9 85.8 205.9 Democracy and governance 66.1 56.8 122.9 Rule of law & fundamental rights 54.0 29.0 83.0 b. Socio-economic and Regional development 41.0 38.7 38.0 46.0 135.1 298.8 Environment and climate action 61.3 51.6 112.9 100% Transport 56.4 56.5 112.9 60% Competitiveness and innovation 46.0 27.0 73.0 c. Education, employment, and social policies 0.0 14.0 13.0 0.0 26.2 53.2 Education, employment and social policies 27.0 26.2 53.2 d. Agriculture and rural development 5.0 18.3 5.0 22.0 56.0 106.3 Agriculture and rural development 50.3 56.0 106.3 10% TOTAL 85.7 88.9 91.6 94.9 303.1 664.2 Programming exercise With the aim of concentrating IPA II financial assistance on a limited number of key priorities, the Annual Action Programme adopted in 2014 covers three sectors identified in the Indicative Strategy Paper: democracy and governance; rule of law and fundamental rights; competitiveness and innovation. The democracy and governance sector will be addressed through two actions – the EU Integration Facility and participation in Union Programmes. Sector selection has been agreed upon with the national authorities on the basis of the priorities set in the Indicative Strategy Paper. The key objective is building up capacity for further developing the sector approach in selected sectors, preparing project pipelines, supporting EU acquis alignment, and financing studies and other short-term assistance aiming at increasing the administrative capacity of the beneficiary.

The sector rule of law and fundamental rights will be addressed through three actions: "Support for justice sector", "Home affairs: implementation of business continuity and disaster recovery system" and "Home affairs: further development of the capacities for crime scene investigation". Financial assistance will contribute to improving the independence, efficiency, accountability, professionalism and competence of the judiciary and prosecution with a view to ensuring a more accessible justice system, more efficient and fair criminal investigation, prosecution and trial and more efficient and effective criminal system. These issues feature prominently in the Commission's 2014 Progress report and have been shown, by events during 2015, to be key. Assistance will further focus on the fight against organised crime, through improved capacities for forensic expertise. Furthermore, the establishment of Business Continuity and Disaster recovery centre will be supported as a follow-up of a project started under IPA I. Finally, the sector competitiveness and innovation will be addressed through one action in the area of local and regional competitiveness. The main objective of is to improve economic competitiveness of the country's regions and municipalities and to stimulate job creation. The action will focus on enhancing local competitiveness and integrated local development including through unlocking economic potential in the tourism sector. Indicative budget table in EUR - Country Action Programme 2014 Indirect Management with the IPA II beneficiary Other management modes EU Contribution Beneficiary Co-financing Total expenditure EU Contribution IPA II beneficiary Co-financing Total expenditure Management mode Total EU contribution Objective 1 Sector 1 Democracy and Governance 14,717,811 Action 1 EU Integration Facility 8,000,000 8,000,000 Direct Action 2 Participation in Union Programmes 6,717,811 2,604,603 9,322,414 Sector 2 Rule of Law and Fundamental Rights 20,000,000 Action 3 Justice Sector Programme 13,000,000 2,293,000 15,293,000 Indirect with beneficiary country Action 4 Home Affairs: Implementation of business continuity and disaster recovery system-phase 2 5,950,000 1,050,000 7,000,000 Indirect with beneficiary country Action 5 Further development of the capacities for crime scene investigation 1,050,000.00 0 1,050,000.00 Indirect with beneficiary country Objective 2 Sector 6 Competitiveness and Innovation 18,000,000 Action 6 Local and Regional Competitiveness 18,000,000 3,176,471 21,176,471 Indirect with International Organisations TOTAL 26,717,811 5,947,603 32,665,414 26,000,000 3,176,471 29,176,471 52,717,811 Multi-annual Action Programme This programme covers two sectors identified in the Indicative Strategy Paper for the former Yugoslav Republic of Macedonia, 2014-2020, namely environment and climate action and transport. Assistance to both sectors will be provided within the framework of multi-annual operational programmes with split commitments. The overall objective of assistance under the environment and climate action sector programme is to contribute to a cleaner environment and improved quality of life through sound management of natural resources and reduction of pollution. The IPA II contribution amounts to EUR 44.4 million for the period 2014-2016. Support will focus on three core areas: approximation of environmental and climate change legislation, investment in water and waste management and sustainable development. The overall objective of assistance under the transport sector programme is to support the conditions for sustainable development through improvement of the transport infrastructure.The Operational Programme has three core priorities: road, rail and horizontal measures. IPA II support in the period 2014-2016 will focus on two of them: road transport infrastructure (Action 4 in the Multi-annual programme), horizontal sector assistance (Action 5 in the Multi-annual programme). Sector: Environment and Climate Action Indirect Management

with the IPA II beneficiary Other implementation arrangements (Indirect Management Delegation Agreement) Action 1 Approximation of environmental and climate change legislation in priorities areas EUR 6,470,000.00 ./. ./. Action 2 Investments in water and waste management (except for Activity 2.1) EUR 33,895,000.00 ./. ./. Action 3 Support to sustainable development – energy efficiency (except for Activity 3.1) Action 3 / Activity 3.1: Implementation of pilot measures for sustainable use of natural resources EUR 4,000,000.00 TOTAL EUR 40,365,000.00 TOTAL EUR 4,000,000.00

Sector: Transport Indirect Management

with the IPA II beneficiary Other implementation arrangements Action 4 Road transport infrastructure EUR 35,400,000.00 Action 5 Horizontal sector assistance EUR 1,506,609.70 TOTAL EUR 36,906,609.70 3. IMPLEMENTATION OF ASSISTANCE The country continued to implement its commitments under the Stabilisation and Association Agreement (SAA). Regular political and economic dialogue between the EU and the country continued through the structures set up by the SAA. Meetings of the Stabilisation and Association Committee and the Stabilisation and Association Council took place in June and July 2014, respectively. The former Yugoslav Republic of Macedonia is engaging in the reinforced multilateral economic dialogue with the Commission and with EU Member States, in order to prepare for participation in multilateral surveillance and economic policy coordination under the EU’s Economic and Monetary Union. No meetings of the High Level Accession Dialogue took place in 2014. IPA assistance has continued to play an important role in meeting the general objectives of the DG's Management Plan as regards the former Yugoslav Republic of Macedonia. With regards to IPA I, while the contracting and disbursement of funds under centralised management is largely on track, there were substantial de-commitments of funds managed by the beneficiary country under the Decentralised Implementation System (DIS). For the IPA 2010 national programme, the contracting deadline fell within the reporting period and 12 out of 31 procurement procedures did not succeed, leading to overall financial de-commitments of EUR 11.3 million. The main reason for de-commitment is the late start of procurement preparations. To date, no significant contracting achievements can be reported on national programmes 2011, 2012 and 2013 and further losses of funds are likely. The implementation of EU financial assistance under (DIS) often faces problems of commitment, planning and sustainability. Many beneficiary institutions do not have the necessary human and material resources to successfully implement and follow up on the projects. This results in a situation where technical assistance often substitutes for the national administration instead of accompanying it. Several systemic challenges on the side of the national authorities, reported previously, persist. This also compromises the sustainability, impact, visibility and monitoring and evaluation of EU financial assistance. The contracting and implementation of EU assistance under direct management is smooth, except for cross-border cooperation programmes. The complex type of procedures for selection and contracting of projects, as well as the lack of management capacities and commitment by national counterparts, cause substantial delays. The on-going technical assistance contracts cannot compensate for the lack of staff in the national operating structure. Temporary assignments of external staff do not ensure sustainability of operations. Despite some improvements, it is important that the relevant Ministry further strengthens the coordination efforts and efficiency of the Joint Technical Secretariat. Public Administration Reform Technical Assistance to the Ministry of Information Society and Administration and Strengthening the Implementation of the National System for Training Coordination (contract amount EUR 1,095,000, of which IPA EUR 985,500) The Project assisted the Ministry of Information Society and Administration in developing nine pieces of implementing legislation related to the new laws on administrative servants and on public employees. It provided administrative training in various areas to 1,250 civil servants, of which about half were from the minorities - people being employed through the programme for equitable representation but not deployed to final institution of employment. It developed ten micro-learning and six e-learning modules. The project increased capacities through trainings for various administrative purposes, but also for functional analysis and legislative drafting. Enhancing the administrative capacities of telecom and media authorities for efficient regulation of new digital and multiple play services (contract amount EUR 854,900, of which IPA EUR 769,410) – service contract The project helped to develop implementing legislation, providing the regulators with tools for policy-making and enforcement of decisions. The staff of the beneficiary institutions were provided with valuable information and tools which will be used in their everyday work. The project also contributed to the development of a quality management system, for monitoring hate speech and effectively managing digital rights. Justice, Home affairs and Fundamental Rights Integrated Border Management (total contract amount EUR 4,598,595, of which IPA EUR 3,568,736.25): The project helped to complete the existing digital radio TETRA communication system. Within the frame of third phase implemented under IPA 2009 assistance programme, the full coverage of 90% was reached of the country and proper lines of communication were established between the police’s operational branches which are expected to provide support for the day-to-day operation of the Ministry of Interior’s services, optimising coverage in terms of population and territory, including main highways, green border lines and international border-crossing points. Agriculture and Rural Development Supply of rabies vaccines (contract amount EUR 1,700,000, of which IPA EUR 1,275,000): Three vaccination campaigns were successfully implemented between 2012 and 2014. The project was completed successfully, contributing to the eradication of an animal disease which might have an impact on human health.

Transport During the reporting period, the contracting rate increased with the signature of eight contracts: Rehabilitation of the Railway Station Skopje, Rehabilitation of road section Veles-Katlanovo, Reconstruction of the rail section Bitola Kremenica, Design study for rail section Kicevo-Lin and Road Safety. The IPA 2009 national programme contract for strengthening the administrative and operational capacity of the State Transport Inspectorate has been completed. Environment and climate change In the environment sector, progress has been achieved both in programming and in contracting. In 2014, ten contracts were signed including the contract for construction of a waste water treatment plant in Prilep. All contracts related to preparation of technical and tender documentation for the investment projects to be constructed within this OPRD are currently ongoing. Social development Social development sector has been addressed under the Operational Programme for human resource development (IPA Component IV). In the area of labour and social policy, a twinning project supported the Employment Service Agency in designing and implementing active labour market measures, in particular targeting youth as one of the most affected groups. 4. IMPLEMENTATION MODALITIES AND STRUCTURES Decentralised (indirect) management Under the decentralised implementation system (DIS), minor improvements were noted. The office of the National IPA Coordinator (NIPAC) continued its effort to monitor IPA implementation and secure higher commitment of involved ministries. The central finance and contracts department (CFCD) has, despite higher losses of funds, enhanced its autonomy and improved quality of procurement files, while relying less on the ex ante checks by the EU Delegation. Lessons learned included also the practice of earlier nomination of evaluation committees than in 2013, which should speed up tendering procedures. Some weaknesses have, however, persisted. The administrative capacity remains weak. Procurement plans were not realistic, leading to significant delays. Tender procedures take too long and the time before contracting is excessive. Despite some improvements, there is insufficient capacity in some line Ministries to ensure adequate quality of tender documents. Inter-institutional coordination needs to be improved to allow for the whole system to learn from common and very often repetitive mistakes in procurement documents. The Commission continues to address the challenges in a constructive manner with the national authorities, including training. The national authorities have prepared a DIS Action Plan in order to address key shortcomings leading to the reduced absorption of financial assistance. Several trainings on procurement were provided by the EU Delegation to national authorities. 5.- SUCCESS STORIES TETRA project In its three phases, the project helped to set up a secure digital police radio system ("terrestrial Trunked Radio – TETRA). Approximately 5,500 radio terminals of various types (fixed, vehicle installation, hand-held) have been supplied. The full coverage of 90% of the country was reached. Communication lines were established among the police's operational branches. It is envisaged that the Tetra system will be extended to all other emergency services, such as ambulances or fire brigades.

TETRA phase 1 (contract amount IPA EUR 5,145,143 under CARDS 2004) TETRA phase 2 (contract amount IPA EUR 3,999,959 under IPA 2008) TETRA phase 3 (contract amount IPA EUR 2,849,996.25 under IPA 2009) Public Administratio Reform The project Strengthening the capacity of the Customs Administration consists of three contracts (total EU contribution EUR 2,428,301.25). The project encompassed software development, support to the beneficiary institution in managing the software development project and establishing the required procedures and organisational set up in the area of integrated tariff environment, as well as a supply of the necessary hardware to support the use of the software application. The software design had to be readjusted and developed as a unique solution. The system which was developed will serve as a tool both to the Customs Administration and the economic operators in the process of customs clearance KOSOVO 1. SUMMARY In 2014 the Commission introduced IPA II and its programming process to the government of Kosovo and worked closely with all stakeholders to ensure that the new approach is well understood. Several meetings were organised to present and discuss the new framework for IPA II as well as the new financial regulation. The 2014 Annual Programme was prepared and approved by the IPA Committee in November 2014, and adopted in December 2014, with an allocation of EUR 66.05 million. In 2014 the implementation of IPA I programmes continued smoothly, including the roll out of the IPA 2013 programme in support to the 19 April 2013 dialogue agreement between Pristina and Belgrade. The Palace of Justice, a major infrastructure project in support to the improvement of the rule of law in Kosovo, was completed at the end of 2014. With regard to Cross-border Cooperation (CBC) programmes, a number of difficulties were encountered during 2014 which resulted in a failure to contract the 2011 allocations reserved to finance projects under the CBC programme Albania-Kosovo and the 2010 allocations reserved to finance projects under the former Yugoslav Republic of Macedonia – Kosovo programme. Measures have been introduced to prevent and to mitigate the risks related to management of CBC programmes. Nevertheless, the other allocations for the two programmes have been successfully contracted, and the awarded projects will start in 2015. The 2014-2020 CBC Programmes between Kosovo and the former Yugoslav Republic of Macedonia, Albania and Montenegro were adopted, as well as the respective allocations for the year 2014. 2. STRATEGIC PLANNING AND PROGRAMMING Indicative Strategy paper In 2014 the preparation of the Indicative Strategy Paper for Kosovo 2014-2020 was finalised. The Indicative Strategy Paper was developed with the view of the programming and implementation of the new IPA instrument for the period 2014-2020. The paper aims to reflect a strategic and result oriented approach in delivering IPA assistance. The Indicative Strategy Paper for Kosovo was adopted on 20 August 2014. A select number of sectors were identified in close cooperation with the Kosovo authorities and the donor community, and were consulted with stakeholders, including civil society organisations. The sectors selected are: democracy and governance, rule of law and fundamental rights; energy; competitiveness and innovation; education, employment and social policies; agriculture and rural development.

Objectives of the Democracy and Governance sector: to support Kosovo in creating a de-politicised, reliable, transparent and accountable public administration, able to provide an efficient service to the citizens and the business community, and in line with EU standards; to support the strengthening of the economic governance with a focus on strategic planning and preparation to the indirect management by Kosovo. This will include the strengthening of public finance management and the reinforcement of tax administration and tax collection. An additional objective is to reinforce civil society, in order to stimulate participatory democracy. Objectives of the Rule of Law and fundamental rights sector: to support creation of an accountable, independent, and efficient judicial system aligned to EU legislation and best practice; to enhance the capacity to prevent, investigate, prosecute and convict cases of organised crime and corruption; implementation of the legal framework for the protection of human rights and protection of minorities, including creating sus