Proposal for a COUNCIL REGULATION (EC) amending Council Regulation (EEC) No 3906/89 in order to extend economic aid to include Bosnia-Herzegovina
Date: 1995-12-20
Institutions: European Commission
Subjects: Bosnia and Herzegovina, Hungary, Poland, economic aid, economic reform, social change

COMMISSION  OF THE  EUROPEAN  COMMUNITIES 

it 

* 

Brussels,  20.12.1995 
COM(95)  728  final 

95/0361  (CNS) 

Proposal  for a 

COUNCIL  REGULATION (EC) 

amending Council Regulation (EEC) No 3906/89 
in order to extend economic aid 
to include  Bosnia-Herzegovina 

(presented  by the Commission) 

EXPLANATORY  MEMORANDUM 

The  negotiations  on  the  future  of  Bosnia-Herzegovina  culminated  in  the  initialling  of  a 
peace  agreement  on  21  November,  opening  the  way  for  normalization  of  the  situation  in 
the former  Yugoslavia  and the provision  of international  assistance  for  reconstruction  and 
economic  recovery there. 

The Council  discussed  the EU's contribution to this process  at some  length  at the  meeting 
of foreign  ministers  on  30  October  and  agreed  that  reconstruction  work  should  focus  on 
the territory  of Bosnia-Herzegovina  itself and certain  parts of  Croatia,  in other  words  the 
areas worst affected  by the war. The aid will be linked to  implementation  of the peace plan 
and a number of conditions formulated  by the Council. 

The  Community's  contribution  will  be  entirely  funded  under  beading  4  of  the  existing 
financial  perspectives,  with the money coming inter alia  from Phare. 

Yugoslavia was made eligible for  assistance  under Phare on  24  September  1990 but  since 
the  outbreak  of  hostilities  Phare  operations  have  been  confined  to  Slovenia,  except  for 
certain  emergency  operations  in  FYROM  and  Bosnia.  Now  that  the  hostilities  are  at  an 
end  the  Commission  proposes  that  the  Republic  of  Bosnia-Herzegovina  should  be  added 
to the list of countries eligible for Phare. 

This  will  make  it  possible  to  mobilize  resources  for  reconstruction  and  reform  in  Bosnia. 
In addition, the Commission  believes Phare operations  will  help cement  the  peace  process 
and the normalization  of relations, as far as possible,  between  the countries of this region. 

The Commission  therefore invites the Council to adopt the attached regulation. 

^ 

COUNCIL REGULATION (EC) No 
of 
amending Council Regulation (EEC) No 3906/89 in order to extend economic aid 
to include Bosnia-Herzegovina 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  establishing  the  European  Community,  and  in  particular 
Article 235 thereof, 

Having regard to the proposal from the Commission,1 

Having regard to the Opinion of the European Parliament,2 

Whereas Regulation (EEC) No 3906/893 provides for economic aid to support the process 
of economic and social reform in a number of Central and Eastern European countries; 

Whereas  the  countries  qualifying  for  such  aid  are  listed  in  the  Annex  to  the  said 
Regulation; 

Whereas  following  the  initialling  of  a  peace  agreement  by  Bosnia-Herzegovina  on  21 
November  1995 that country should be included in the list of eligible  countries  so that it 
can receive aid under Regulation (EEC) No 3906/89; 

Whereas the conditions for inclusion of Bosnia-Herzegovina among eligible countries can 
now be regarded as fulfilled, 

HAS ADOPTED THIS REGULATION: 

Article 1 

The following  country shall be included in the Annex to Regulation  (EEC)  No  3906/89: 
Bosnia-Herzegovina. 

Article 2 

'OJNo 
2OJNo 
3 OJ No L 375, 23.12.1989, p.  11. Last amended by Regulation (EC) No  1366/95 (OJ No 
L133,  17.6.  1995, p. 1). 

1 

This  Regulation  shall  enter  into  force  on  the  third  day  following  its  publication  in  the 
OfficialJournal of the European Communities. 

This  Regulation  shall  be  binding  in  its  entirety  and  directly  applicable  in  all  Member 
States. 

Done at 

For the Council 
The President 

h 

FINANCIAL STATEMENT 

1. TITLE OF OPERATION 

Extension of Council Regulation (EEC) No 3906/89 to cover Bosnia-Herzegovina 

2. BUDGET HEADINGINVOLVED 

H 7-60 -  Cooperation with the countries of Central and Eastern Europe 

3.  LEGAL BASIS 

Treaty establishing the European Economic Community, and in particular Article 
235 thereof 

Council Regulation (EEC) No 3906/89 of  18 December  1989 on economic aid to 
the Republic of Hungary and the Polish People's Republic (OJ L 375, 23.12.1989, 
p.  M) 

Council  Regulation  (EEC)  No  2698/90  of  17  September  1990  amending 
Regulation (EEC) No 3906/89 in order to extend economic aid to other countries 
of  Centrai  and  Eastern  Europe  (OJ  L  257,  21.9.1990.  p.  1)  -  Bulgaria, 
Czechoslovakia, Romania, Yugoslavia, German Democratic Republic 

Council  Regulation  (EEC)  No  3800/91  of  23  December  1991  amending 
Regulation  (EEC)  No  3906/89  in order to  extend  economic  aid to  include other 
countries in central and eastern  Europe (OJ L 357,  28.12.1991,  p.  10) - Albania, 
Estonia, Latvia and Lithuania, minus the GDR 

Council  Regulation  (EEC)  No  2334/92  of  7  August  1992  amending  Regulation 
(EEC)  No  3906/89  to  extend  economic  aid  to  include  Slovenia  (OJ  L  227, 
11.8.1992, p. 1) 

Council  Regulation  (EEC)  No  1764/93  of  30  June  1993  amending  Regulation 
(EEC)  No  3906/89  on economic  aid for  certain countries  of  central  and eastern 
Europe (OJ L 162, 3.7.1993, p.  1) - Czech Republic and Slovakia 

Council  Regulation  (EC)  No  1366/95  of  12  June  1995  amending  Regulation 
(EEC)  No  3906/89  in  order  to  extend  economic  aid  to  Croatia  (OJ  L  133, 
17 6.1995, p.  I) 

4.  DESCRIPTION  OF OPERATION 

4.1 General objective 

<" 

t j* 

The  negotiations  on  the  future  of  Bosnia-Herzegovina  culminated  in  the  initialling  of  a 
peace  agreement  on  21  November,  opening  the  way  for  normalization  of  the  situation  in 
the  former  Yugoslavia  and  the  provision  of  international  assistance  for  reconstruction  and 
economic  recovery  there. 

Yugoslavia  has  been  eligible  since  September  1990,  but  since  the  outbreak  of  hostilities 
Phare  operations  have  been  confined  to  Slovenia,  with  only  certain  emergency  operations 
in  FY ROM  and  Bosnia  Now  that  the  hostilities  are  at  an  end  Phare  can  be  extended  in 
lull  to  cover  Bosnia-Herzegovina. 

This  will  make  it  possible  to  mobilize  resources  for  a  programme  of  reconstruction  and 
reform  in  Bosnia.  In addition,  Phare operations  will  help cement  the  peace  process  and  the 
normalization  of relations,  as far  as possible,  between  the countries  of this  region. 

4.2  Period  covered  and  arrangements  for  renewal  or  extension 

This  is  a  contingent  measure.  Given  the  present  situation  of  the  countries  of  Central  and 
Eastern  Europe,  the  EU  plans to  continue  backing  the  process  of reform  and  restructuring 
until  1999  at  least,  in  line  with  the  financial  perspectives  approved  at  the  Edinburgh 
European  Council  (11-12  December  1992). 

5. CLASSIFICATION  OF  EXPENDITURE  OR  REVENUE 

5. /  Non-compulsory 

expenditure 

5.2  Differentiated 

appropriations 

5.3  Type  of  revenue  involved:  nil 

6. TYPE OF EXPENDITURE OR REVENUE 

-  100%  subsidy 

Generally  these  operations  involve  100%  grant  financing  of  operational  programme 
spending,  with  the  recipient  body  responsible  for  administrative  (staff  and  infrastructure) 
costs. 

However,  the basic  regulation  (Regulation  (EEC)  No  3906/89)  allows  running  costs to  be 
covered  in  the  start-up  phase  of  a  programme  if  the  economic  situation  of  the  recipient 
country  so dictates,  as is the case with  Bosnia-Herzegovina. 

-  Subsidy  for  joint  financing  with  other  sources  in  the public  and/or  private  sector 

c 

Within the G24 framework,  operations are also co-financed  sometimes with the E1B, the 
EBRD or the World Bank, and jointly-financed  operations may also be carried out at the 
initiative of non-governmental organizations. 

As  a  rule  the  Phare  programme  follows  a  demand-driven  approach,  in  other  words 
funding priorities are identified by the beneficiary countries themselves. 

-  Interest subsidy 

In  some  cases  interest  subsidies  may  be  appropriate,  particularly  for  small-business 
development and support programmes. 

Other 

Should the operation prove  and economic success, is there provision for  all or 
part of the Community contribution to he reimbursed?  No 

Will the proposed  operation cause any change in  the  level  of  revenue? If  so, 
what sort of change and what sort of revenue is involved?  NA 

Re-use No 

7. FINANCIAL  IMPACT 

7.1  Method of calculating total cost of operation 

Bosnia-Herzegovina's  inclusion  in the  Phare programme will  be  paid  for  out  of  existing 
budgetary  appropriations,  specifically  under  the  multiannual  allocation  for  1995-1999 
approved at the Cannes European  Council  in June (see financial statements  appended  to 
Commission  Communications  to  the  Council  COM(94)320  final  of  13  July  1994  and 
COM (94)361 final of 27 July 1994 on the strategy to prepare the countries of Central and 
Eastern  Europe for accession,  as updated  by the Commission's  letter  of 7 April  1995  to 
the President  of the Council  and the President  of Parliament, and the financial statements 
for the preliminary draft  1996 budget, Chapter B7-60). 

No additional appropriations are therefore required for this specific measure. 

7.2  Itemised breakdown of cost 

See financial  statements, as above. 

7.3  Indicative schedule of appropriations 

See financial  statements, as above. 

8. FRAUD PREVENTION MEASURES; RESULTS OF MEASURES TAKEN 

> 

Before  payment  is  authorized,  the  Commission  verifies  grants  and  acceptance  of  services 
(e.g.  studies  carried  out  under  contract),  having  regard  to  the  relevant  contract  terms  and 
the  rules  of good  housekeeping  and  sound  financial  or  general  management.  All  contracts 
or  agreements  between  the  Commission  and  parties  to  whom  payments  may  be  made 
contain  stipulations  regarding  checks  or  reporting  requirements  which  are  designed  to 
prevent  fraud. 

As a rule  ongoing  operations  are  subject  to  regular  monitoring  and  systematic  audits  both 
by  the  Commission  or  its  authorized  agents  and  by  the  Court  of  Auditors.  Statistical  and 
other  information  is used  to  check  the  progress  of  Community-funded  measures  and  thus 
also  contributes  to  the prevention  of  fraud. 

9.  ELEMENTS  OF COST-EFFECTIVENESS  ANALYSIS 

9.1.  Specific  and  quantified  objectives;  target  population 

Specific  objectives:  links  with  general  objective 

In the  context  of the general  objectives  set  out  in  Section  4.1, this  heading  can  be  used  to 
finance or  part-finance  programmes  in the following  fields: 

approximation  of  laws,  to  enable  the  countries  of  Central  and  Eastern  Europe  to 
absorb  the acquis  communautaire, 

reforms  linked  to  the  rehabilitation  of basic  infrastructure  essential  for  the  move  to 
a  modern 
and 
communications  sectors; 

environment, 

economy, 

transport 

energy, 

e.g. 

the 

in 

protection  of the environment  and  improvement  of nuclear  safety; 

restructuring  and  privatization  of  state-run  industrial  or  agricultural  undertakings 
and  modernization  of the  financial  sector; 

assistance  to  private-sector  firms,  particularly  SME,  and  promotion  of  private-
sector  investment  and  tourism; 

modernization  of  public-sector  administration,  particularly  departments  dealing 
with  economic,  financial  and  tax  policy; 

development  of welfare  systems  comprising  positive  policies  on  human  resources, 
employment,  health and  relief of poverty. 

Target  population:  distinguish  as  applicable  for  each  objective; 
end-beneficiaries 
the  Community's 
in termediaries  in volved 

financial 

contribution 

of 

indicate 
and 

the 
the 

% 

Obviously,  the  ultimate  intended  beneficiaries  of  Phare  assistance  are  the  citizens  of the 
recipient  countries.  In practical terms the target  population  for  each programme  depends 
on the type of programme and form of action envisaged.  As programmes vary widely, it is 
difficult 
to  catalogue  the  end-beneficiaries  and  intermediaries  exhaustively,  but  the 
following  broad categories can be distinguished: 

In the case of technical  assistance-based  programmes  or  programme  components, 
the  intermediaries  are  essentially  public-  or  private-sector  Community  firms  or 
bodies.  Since  the  point  of  these  operations  is  to  transfer  know-how  relating  to 
various  sectors  of  the  economy,  especially  in  the  initial  stages  of  a  particular 
sector's  or  country's  transition,  the  end-beneficiaries  will  be  both  public-sector 
institutions  and  the  two  sides  of  industry  in  the  Central  and  Eastern  European 
countries 

In the case of the small number of measures designed  to  foster  democracy  and the 
development  of  civil  society,  the  end-beneficiaries  are  NGOs  in  the  recipient 
countries, generally assisted by Community NGOs. 

In  the  case  of  energy,  transport,  telecommunications,  nuclear  safety  or  other 
infrastructure  programmes,  the  end-beneficiary  is the  population  as  a  whole,  and 
the  intermediaries  the undertakings  responsible  for  those  sectors  in the  countries 
concerned, generally assisted by their Western counterparts: 

In  the  case  of  privatization,  industrial  development  and  SME  programmes,  the 
beneficiaries  are  private-sector  entrepreneurs  who  receive  loans  and  interest 
subsidies  via the  local  banking  system,  which  in turn  receives technical  assistance 
from  Phare. 

When  programmes  are  designed  to  introduce  new  systems  of  taxation  or  public 
finance,  the ultimate recipients are public-sector administrations. 

Some  programmes  target  quite  specific  recipients,  e.g.  farmers  or,  in the  case  of 
TEIVfPUS and training schemes, students, universities and the young. 

9.2 Grounds for  the operation 

See conclusions of the Essen European Council (December  1994). 

9.3 Monitoring and evaluation of the operation 

In accordance with the prescribed arrangements. 

10. ADMINISTRATIVE EXPENDITURE (PART A OF THE BUDGET) 

7 

£^«r3£$ 

This section of the financial statement must he sent to DGs IX and XIX;  DG IX will 
then forward  it to DG XIX with its opinion. 

The  necessary  administrative  resources will be mobilized  under the  Commission's annual 
decision on resource allocation, taking into account in particular any additional money and 
stalf made available by the budgetary authority. 

As  the  1996 budget  procedure  is already  so  far  advanced,  this  operation  will  be  put in 
hand using the existing  resources  of the units concerned.  In the  light  of  further  study it 
may  prove  necessary  to  request  specific  additional  resources  under  the  1997  budget 
procedure. 

/U> 

Impact on the number of posts 

Staff to be assigned to the 
project 
permanent 
posts 

temporary 
posts 

of which 

duration 

by using existing 
staff in the DG or 
department 
concerned 

by  recourse  to 
additional  staff 

1995-99 

Type of post 

Officials  or 
temporary 
officials 

Other  staff 

B 
C 

Total 
Additional  staff: indicate periods when required. 

10.2  Overall  financial  impact of the additional  staff 

Total 

Method  of calculation 

(ECU) 

Officials 
Temporary  officials 
Ot her  st a If (indicate  budget 
heading) 

I olal 

| 

1 

fhe figures give  the total  cost  of the additional  posts for the entire duration  of the  project 
if it is of a fixed duration or for  12 months if it is of unlimited duration. 

0  3 

Increase in other operational  expenditure resulting from the operation 

Budget  heading (No  and title) 

Amount 

Method  of calculation 

(ECU) 

Total 
The figures represent  the total expenditure  on the project  if it is of a fixed duration or the 
expenditure for  12 months if it is of unlimited duration. 

/i/i 

ISSN 0254-1475 

COM(95) 728  final 

DOCUMENTS 

EN 

11 

Catalogue number  :  CB-CO-95-778-EN-C 

ISBN 92-77-99253-0 

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