Opinion of the Economic and Social Committee on the "Annual Report of the Cohesion Fund (1998)"

(2000/C 140/06)

On 18 October 1999, the Commission decided to consult the Economic and Social Committee, under Article 262 of the Treaty establishing the European Community, on the "Annual Report of the Cohesion Fund (1998)".

The Section for Economic and Monetary Union and Economic and Social Cohesion, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 7 March 2000. The rapporteur was Mr Victor Hugo Sequeira.

At its 371st plenary session of 29 and 30 March 2000, (meeting of 29 March), the Economic and Social Committee adopted the following opinion by 83 votes to one.

1. Introduction

1.1. In accordance with the Cohesion Fund Regulation, the Economic and Social Committee was again asked to issue its opinion on the 1998 Annual Report of the Cohesion Fund. This instrument was set up with the aim of boosting economic and social cohesion within the European Union and providing financial support for environmental and transport sector projects in Greece, Ireland, Portugal and Spain for the 1993-1999 period.

1.2. This fund has an initial budgetary allocation of ECU 15510 million(1) for a period which runs beyond the period of the current Community Support Framework (CSF II), since it fully incorporates the cohesion financial instrument in force between 1 April 1993 and 26 May 1994.

2. General comments

2.1. The Committee welcomes the opportunity to express its views on the 1998 Cohesion Fund report, but it would nevertheless reiterate a concern already voiced in its opinions of previous years regarding the late presentation of this report by the Commission.

2.2. The present report has been issued even later than the 1997 report. This makes it impracticable for the Commission to take suitable action to correct any errors or follow-up concerns or proposals expressed by the Committee or any other body. This point is particularly important in the year currently under consideration, since 1999 is the last year of the Cohesion Fund under the 1994/99 Community Support Framework.

2.3. The Committee welcomes some of the improvements made to the presentation of the report, especially those relating to its structure and the summaries of some chapters and points, which make the document more concise and easier to understand.

2.4. The Committee is pleased to note the results of the conditionality study carried out by the Commission, which revealed that the four Member States benefiting from the Cohesion Fund were complying with the established macro-economic standards.

2.5. The delays and slowness in national governments' submission of requests for payments, as discovered by the Commission in the course of its monitoring missions, merit comment by the Committee; it wishes to register its concern about this.

2.5.1. These delays - in addition to creating financial inefficiencies (possible temporary lack of resources) - can have a detrimental effect on how projects are actually implemented, compromising the ultimate objective of the fund which is to boost economic and social cohesion.

2.6. The Committee again welcomes the fact that no case of fraud was discovered or reported regarding the use of resources in the Cohesion Fund framework.

2.7. In the Committee's view, the Commission's monitoring activities for the projects financed by the current Cohesion Fund, whether carried out by the monitoring committees or inspection missions, play a key role since they can raise the "alarm" for sponsor bodies, identify errors or delays in programmes in good time and devise solutions jointly with other bodies to improve project implementation.

2.8. The Committee feels that it would have been appropriate to include a point on the main political proposals for the future, as in the previous annual report, particularly regarding developments and priorities under the next Community support framework. It believes that documents such as the Commission's communication on "The Structural Fund and its coordination with the Cohesion Fund" issued in July 1999 should have been referred to in the report under discussion.

3. Specific comments

3.1. Principles governing eligibility

3.1.1. The Committee is pleased to note that work has been completed on establishing the principles governing the eligibility of expenditure for project support and that this has been appended to all Commission decisions on allocating grants from the Cohesion Fund; this will certainly have a most positive impact on the transparency of financial relations between all parties involved in the process.

3.1.2. The Committee nevertheless regrets the fact that this work was only completed and applied in the course of 1998, i.e. less than two years before the end of the period of application of the current fund.

3.2. Financial implementation

3.2.1. The Committee is again pleased to note that the outstanding implementation rate for the Cohesion Fund was maintained at 100 % in 1998.

3.3. Good financial implementation in the period finishing in 1998 led to ECU 13632,5 million being used, i.e. 81,4 % of the Cohesion Fund's total financial allocation for 1993-1999.

3.3.1. For 1999, ECU 3118 million have been budgeted for, which is equivalent to 18,6 % of the whole of the Cohesion Fund and represents an increase in 8,6 % over the budget allocated and implemented in 1998.

3.3.2. Consequently the Committee hopes that Member States will have sufficient capacity to absorb the resources still available under the legal framework of this Cohesion Fund and thus guarantee a final implementation rate of 100 %.

3.4. Distribution of funds

3.4.1. The Committee is also pleased to note that in 1998 the Cohesion Fund's resources were allocated amongst its beneficiaries in accordance with the distribution previously established on an indicative basis.

3.4.2.

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3.5. As regards the allocation of resources between the two areas of fund intervention, the Committee welcomes the efforts over the last few years in general, and in 1998 in particular, to strike a better balance between environmental projects and transport infrastructure projects.

3.5.1. These developments meant that at the end of 1998, appropriations were shared out equally between the environmental sector (50,1 %) and the transport sector (49,9 %); this balanced distribution was reflected in each of the beneficiary Member States, albeit with slightly different relative percentages.

3.5.2.

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3.6. Without prejudice to the general comments made in point 2.3 above, the Committee feels that some aspects of the analysis per beneficiary Member State in Chapter 3 of the present report, entitled "Managing Projects and Measures Adopted", are not as good as in previous years; this is due not only to an excessive summarisation of some of the points broached but also the fact that harmonised framework summaries were not presented for some Member States.

3.7. On the basis of the indicator entitled "Payments as % of Total Commitments" the Committee deemed the level of project implementation to be satisfactory and notes a slight improvement over the 1993-97 period, particularly in environmental action.

3.8. The Committee nevertheless feels it must highlight a number of disparities, both between the two spheres of intervention - in that the indicator referred to above amounts to 87,8 % for transport and only 57,9 % for the environment - and between beneficiary Member States - where the indicator varies from 67,8 % for Spain to 90,8 % for Portugal.

3.8.1. This warrants greater attention and far greater effort on the part of the Commission, since the current financial framework of the Cohesion Fund is nearing its end, so as to ensure that all the projects currently being implemented can be completed and paid for in good time.

3.8.2.

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3.9. As regards the financial allocation between projects in the environment sector, the Committee notes an increase in assistance for the waste water sector in compliance with the requirements laid down by Directive 91/271/EC.

3.9.1. Nevertheless, the Committee reiterates its concern about the amount of support being allocated to nature protection, particularly erosion control and afforestation, whose share of total assistance fell in the 1993-1998 relative to the 1993-1997 period, falling to 8,6 % from 9,2 %.

3.9.2. Because of the importance of this issue, particularly for the Member States bordering the Mediterranean, the Committee wishes to highlight a) the impact of the fight against desertification, b) water-protection and c) the fight against water-erosion so that Member States can step up their afforestation policies through the Cohesion Fund.

3.9.3. Consequently, it is hoped that in 1999 more attention will be paid to environmental protection; this is essential for improving the living conditions of the local population and for sustainable development at regional, national and even world level.

3.9.4.

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3.10. As for the distribution of resources in the transport sector, the Committee is pleased to note that in 1998, contrary to the earlier trend, support for rail projects has been predominant, absorbing 45,9 % of the transport sector allocation for 1998.

3.11. In view of the fact that 1998 was the penultimate year of the Cohesion Fund under the 94/99 financial framework, the Committee continues to express its concern that the road transport sector continues to account for most of the resources budgeted for the transport sector - around 64,1 % - over the 1993-1998 period, and it recommends that actions and measures be implemented to reduce this imbalance.

3.11.1. In its Opinion on the 1997 Cohesion Fund Report, the Committee expressed its concern about the fact that less investment was being allocated to maritime, port and river projects and called for a special effort to correct this. Therefore, although aware of the explanations put forward by the Commission, namely that these activities generate income and are therefore not given the same support by the Cohesion Fund, the Committee feels it must express its concern about the new reduction in the share of financial support allocated to ports as a proportion of all resources allocated to the transport sector in 1998.

3.11.2. The Committee feels that the transport priorities recently announced by the Commission in its Communication on "The Structural Fund and its coordination with the Cohesion Fund", particularly as regards boosting the efficiency of transport networks and securing a better inter-modal balance (between the different transport types), should not be overlooked by the Cohesion Fund.

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3.12. Assessment of the impact of the Cohesion Fund

3.12.1. The report reaffirms the positive impact of the Cohesion Fund on economic activity, particularly on job creation in the beneficiary countries. The various quantitative assessment studies on the impact of the fund provide some information as to the extent of these effects.

3.12.2. The most advanced economic model used for measuring the impact of the Cohesion Fund is the one developed by the London School of Economics. The Commission should divulge more information about the data produced by this model. The Commission has briefly outlined some of the results from that study; unfortunately it has not presented any quantitative data, even in a non-technical form.

3.12.3. The Commission has nevertheless referred to some interesting data regarding the partial impact of the fund on road investment in Spain and Portugal (but not in Ireland or Greece).

3.12.4. The Commission has maintained the estimate previously presented in the 1997 Report on the impact of the Cohesion Fund, namely that for every million ecu of financial assistance granted, 20 jobs are directly created in the transport sector and 25 in the environmental sector. These estimates essentially reflect the direct impact of investment, but do not allow an assessment of the supply side effect of improvements in the competitive situation of the region concerned. Consequently these estimates should be viewed and interpreted with some caution, in terms of both medium-term job sustainability and difficulties in determining whether or not a project would have been implemented without financial support.

3.12.5. The Committee welcomes the announcement that the Cohesion Fund generated 398600 new jobs between 1993 and 1998 although for the same reason as set out above, it feels that these estimates should be presented by the Commission with a certain amount of caution, highlighting the main problems associated with them.

3.13. As regards the ex-post evaluation studies, the Committee welcomes its main results both in the environment sector - noting positive benefits for local populations, economic development and the environment - and in the transport sector where, although the impact on direct employment is not long-term, a (fairly) positive impact has been noted on economic activities and local populations, particularly in terms of a) a reduction in travelling times and costs and b) improved economic and social systems.

3.14. Anti-fraud allocations

3.14.1. The Committee is pleased to note that applications for assistance under the budgetary heading for appropriations to combat fraud are generally earmarked for the vocational training of staff in specialised investigations and the risk of fraud in projects financed by the Cohesion Funds (five out of six applications for assistance), enabling more effective and efficient monitoring and inspection of the use of resources in the future.

4. Conclusions

4.1. The Committee hopes that the next annual reports will include more detailed and comprehensive information on the qualitative and quantitative impact of the Cohesion Fund. Indeed the Committee believes that it is a matter of key importance for the main results of the assessment of the fund to be published and disseminated and for these results to be discussed by the Commission and other bodies involved.

4.2. The Committee feels that the Commission should make a greater effort to step up the monitoring and inspection of any delays; Member States and their governments should also make a greater effort to submit payment requests to the Commission in good time, thus improving the financial management of the fund.

4.3. The Committee also hopes that the Commission will strive to reduce the delays in submitting the annual reports to the ESC which were noted in the previous time period.

4.4. The Committee believes that the Commission should encourage the establishment of interactive transport and environment projects in future Cohesion Fund action.

4.5. The future of the Cohesion Fund

4.5.1. While the Economic and Social Committee is issuing its opinion on the Report on the 1998 Cohesion Fund, the European Union is on the point of establishing a new Community Support Framework for the period from 2000-2006; the Committee therefore feels this is a good time to express a number of concerns and suggestions about the future of the Cohesion Fund.

4.5.2. Although it acknowledges that much progress has been achieved by the four Member States benefiting from the Cohesion Fund, the Committee would like to reiterate the importance it attaches to its continuity as an instrument for promoting and consolidating economic and social cohesion in the European Union.

4.5.3. The forthcoming enlargement of the European Union is without doubt one of the greatest challenges facing the EU. The Committee believes that this matter must continue to receive special attention from the Commission, particularly as regards economic and social cohesion policy and the Cohesion Fund. It points out that it is fully available to take part in the discussions on this subject, and welcomes the decisions taken at the Berlin Council in this connection.

4.5.4. The Committee believes that the Cohesion Fund should back up the overall policies defined by the European Union. It therefore reiterates the importance of linking this fund up with the other structural funds, particularly as regards the objectives and guidelines for the period 2000-2006 contained in the Commission's Communication on the "The Structural Funds and their Coordination with the Cohesion Fund".

Brussels, 29 March 2000.

The President

of the Economic and Social Committee

Beatrice Rangoni Machiavelli

(1) At 1992 prices. After adjustment this sum amounts to Euro 16750,8 million.