Proposal for a COUNCIL REGULATION (EC) relating to aid for reconstruction and rehabilitation in Bosnia- Herzegovina, Croatia, the Federal Republic of Yugoslavia and the Former Yugoslav Republic of Macedonia
Date: 1996-04-29
Institutions: European Commission
Subjects: EU aid, Yugoslavia, aid to refugees, development aid, economic reconstruction

COMMISSION  OF THE EUROPEAN  COMMUNITIES 

Brussels,  29.04.1996 
COM(96)  123 final 

96/  0 0%  (CNS) 

Proposal  for  a 

COUNCIL  REGULATION  (EC) 

relating  to aid for reconstruction and  rehabilitation 

in Bosnia-Herzegovina, Croatia, the Federal Republic of  Yugoslavia 
and the Former Yugoslav'Republic of Macedonia 

(presented  by  the  Commission) 

Explanatory  Memorandum 

'Ihe economic development,  the restoration  of civil  society  and  cooperation 
between  the republics  of  Tonner Yugoslavia  are a prerequisite  for  peace and  stability  in the 
Balkans; 

As  stated  by  the Commission  in  its paper on  the  financial  aspects of reconstruction 
in  former  Yugoslavia  (C()M(95)58I,  p.6), the present  drall  Regulation  will  provide a  legal 
basis (Article 235 of the  VJC Treaty)  for  the use of  funds  from  the  following  budget 
headings: 

B7-541: 

B7-545N: 
B7-542N: 

Measures  for  the reconstruction  of the  Republics  formerly  part  of 
Yugoslavia (I «XXI 27 million,  including 20  from  budget  chapter  B0-
40); 
Kurope for  Sarajevo  (f>CU  35 million); 
Special  aid to refugees  in the  Republics  formerly  part  of  Yugoslavia 
(ECU  30 million). 

Ihe  European  Community  has decided  to contribute to these operations  under the 

conditions  indicated  by the Council  on  30 October  1995. It  intends  to  make  its support 
contingent  on  adherence  to the political  and  economic  terms oflhe  peace  agreements 
signed  in  Paris  on  14 December  1995, notably  respect  for  human  rights; 

In order  to  foster  reconciliation  between  the various  parlies  and  prevent  any 
resurgence  of  fighting,  special  attention  should  be accorded  to operations  aimed  at 
achieving economic  and social  objectives,  in particular employment,  and  the return  and 
reintegration  of refugees  and displaced  persons; 

As the draft  covers three budget  headings,  it  is very  wide  in scope 

/^ 

CQtMOI,  REGULATION  Œ€\ 

relating  to aid for reconsonction and  rehabtfila&on 

m Bosnia-Herzegovina, Croatia, me Federal Republic of Yugoslavia 
and the  Fonner Yugoslav  Republic of [Vfecedonia 

nmœtJMOLor  \m  EUROPEAN UNION, 

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

Having regard to the proposal from the  Commission, 

Having regard to the opinion  of the European  Parliament, 

Whereas economic development, the restoration of civil society and cooperation  between 
the  republics  of  former  Yugoslavia  are  a  prerequisite  for  peace  and  stability  in  the 
Balkans; 

Whereas  it is appropriate to start  repair work  and  renovate  infrastructure  whilst  pressing 
ahead with  political and  economic  reforms; 

Whereas the  European  Community  has decided  to contribute  to  these  operations  under 
the conditions  indicated  by the Council  on  30 October  1995; 

Whereas  it  intends  to  make  its  support  contingent  on  adherence  to  the  political  and 
economic terms of the peace agreements  signed  in Paris on  14 December  1995, notably 
respect  for  human rights; 

Whereas to foster  reconciliation  between  the various parties  and prevent  any  resurgence 
of  fighting,  special  attention  should  be  accorded  to  operations  aimed  at  achieving 
economic and social objectives,  in particular employment, the restoration  of civil  society 
and the return and reintegration  of refugees  and  displaced  persons; 

(à 

Whereas  it  is  necessary  to  provide  a selection  procedure  lor  projects,  programmes and 
actions which  is both  flexible  and rigorous and consequently  a "Consultative Committee 
on  Reconstruction/Rehabilitation  in  former  Yugoslavia",  made  up  of  representatives  of 
the Member States and the Commission,  with responsibility  for giving an opinion  on the 
choices  made by the Commission  is  established; 

Whereas  a  multiannual  approach  should  be adopted  to enable  elfectivc  management  of 
the  measures provided  for  in this  Regulation  and  undertake  medium-term  operations; 

Whereas  implementation  of  these  operations  will  help  achieve  the  Community's 
objectives;  whereas  the Treaty  docs  not  provide,  for  the operations  in question,  powers 
other than  those  set out  in Article 235, 

HAS ADOPTED Tl US REGULATION: 

Article 1 

The  Community  shall  implement  aid  measures  comprising  projects,  programmes  and 
cooperation  schemes  for reconstruction,  return of refugees  and displaced persons and  for 
economic and regional cooperation  in Bosnia-I ler/egovina Croatia, the federal  Republic 
of  Yugoslavia  and  the  Former  Yugoslav  Republic  of  Macedonian  accordance  with  the 
criteria  set  out  in this  Regulation. 

These  operations  shall  be  funded  as  part  of  the  indicative  multiannual  programming 
(1996-99)  for  cooperation  with  the  republics  of  former  Yugoslavia.  The  annual 
appropriations  shall  be  authorized  by  the  budgetary  authority  within  the  limits  of  the 
financial  perspectives. 

Community  funding  under  this  Regulation  shall  take the  form  of grants. 

Article 2 

Regional  and  international  organizations,  public  and  semi-public  bodies,  organizations 
providing  support  to  businesses,  private  operators,  cooperatives,  mutual  societies, 
associations,  foundations  and  non-governmental  organizations,  shall  be  eligible  for 
Community  aid  for projects,  programmes and  cooperation  schemes. 

Article 3 

The  aim  of  the  projects,  programmes  and  cooperation  schemes  shall  be  to 
underpin  the  reconstruction  process,  to  encourage  the  return  of  refugees, 
reconciliation  and regional economic cooperation, and to create the economic and 
social conditions that will  lay the foundations  for the development of the recipient 
countries. 

2. 

They  shall  cover the following  fields: 

-  The consolidation  of civil society and the reinlbrcement of  non-governmental 
organizations  as well  as cultural  institutions  and  teaching establishments. 

- 

rebuilding  of  infrastructure  and  other  individual  or  collective  facilities 
damaged  in the  lighting; 

- 

return  of  refugees; 

integration  or reintegration of refugees,  displaced  persons and  former  soldiers 
into working  life; 

-  preparation  of the production  apparatus  for  economic  recovery; 

-  development of the private sector, notably small  businesses, and promotion  of 

investment; 

- 

regional  cooperation  projects. 

Article 4 

The  granting  or  continuation  of  community  aid  shall  be  subject  to  certain 
conditions, notably: 

- 

- 

- 

application  of the clauses of the peace agreement; 

respect  for human rights, the rights of minorities and the right of all  refugees 
and displaced  persons to return home; 

in  relation  to  the  Federal  Republic  of  Yugoslavia  (Serbia-Montenegro)  the 
granting within  that  state of a wide measure of autonomy  to Kosovo; 

-  observance of the principles of a market  economy; 

- 

cooperation  with the International  War Crimes Tribunal. 

Article 5 

The measures to be financed shall be subject  to a selection  process that takes account of 
the potential  recipients' requests, their urgency, the actual  aid  take-up capacity  and their 
impact on the return of refugees  and displaced persons and on reconciliation  between the 
parties through  participation  in common  projects. 

A r i d e* 

1. 

In  order  to  ensure  the  consistency  of  cooperation  projects  and  improve  their 
complementarity  and  effectiveness,  Member  States  and  the  Commission  shall 
exchange  all  useful  information  on the  financing  they  intend  to  make  available. 
Scope  for  cofinancing  shall  be  sought  as  part  of  this  exchange  of  information, 
which  shall  also  be  used  to  explore  the  scope  for  complementarity,  notably  by 
means  of cofinancing  or  parallel  financing. 

2.  Member  States and the Commission  shall  also communicate,  in particular  within 
the Committee referred  to  in Article  12, any  information  they  may  have on other 
bilateral  and multilateral  aid schemes  for the states concerned  by this  Regulation. 
To  that  end,  Member  States  and  the  Commission  shall  maintain  a  mutual 
information  system. 

Article 7 

Financing decisions and agreements and contracts stemming therefrom  shall among other 
things provide  for monitoring and financial  control  by the Commission  and audits by the 
Court  of Auditors,  where necessary  on the spot. 

Article 8 

1. 

I he operations referred  to in this Regulation may cover expenditure relating to the 
importation of goods and services and the local expenditure necessary to complete 
the projects and programmes,  faxes, duties and charges and the acquisition of real 
estate shall  be excluded  from  Community  financing. 

Agreements  and  contracts  for  the  implementation  of  the  operations  financed  by 
the Community pursuant to this Regulation shall benefit  in the recipient state  from 
tax and customs arrangements which are not less favourable than those which that 
state applies  to the  most  favoured  state or  international  organization  responsible 
for promoting economic  development. 

2. 

3. 

Project  running  and  maintenance  costs  on  the  ground  may  be  covered  by 
Community  financing  within  a  limit  set  in  advance  for  each  measure  on  the 
understanding that those costs may be covered only during the start-up phase and 
that they  shall  decrease  progressively. 

With regard to investment projects, Community  financing shall  be combined  with 
the  recipient's  own  resources  or  with  other  sources  of  funding.  Community 
cofinancing  shall  not exceed  80% of the total  cost  of  the  investment. 

Article 9 

Invitations to tender and contracts shall  be open without  discrimination  to all  natural and 
legal  persons  in  the  Member  States  and  the  recipient  stales.  The  following  shall  be 
considered  to  be  legal  persons  of  a  Member  State  or  recipient  state:  legal  persons 
established  in  accordance  with  the  legislation  of  a  Member  State  or  recipient  stale  and 
having  their  central  administration  or  principal  establishment  in  the territories  in  which 
the  Treaty  establishing  the  European  Community  applies  or  in  Ihe  recipient  stales,  or 
which have their registered office  there, where their activity has an actual  and continuous 
link  with  the economy  of the said  territories  or slates. 

In  the  event  of  cofinancing,  participation  in  invitations  to  tender  and  contracts  by 
nationals  of  other  countries  may  be  authorized  by  the  Commission  on  a  case-by-case 
basis.  In  the  latter  case,  the  participation  of  companies  of  third  countries  shall  not  be 
taken  into  account  unless  reciprocity  is  applied  by  those  countries  towards  the 
Community. 

Service contracts  shall  be awarded  by restricted  invitations  to tender  with  the  exception 
of operations  not  exceeding  200.000  ECU which  may  be awarded  by  private  treaty. 

Article  10 

financing  decisions  exceeding  ECU  2  million  shall  be adopted  in  accordance  with 
the  procedure  provided  for  in  Article  12(2).  Ihe  Committee  provided  for  in 
Article  12  shall  be  informed  of  operations  involving  financing  of  less  than 
ECU 2  million. 

Decisions amending decisions adopted in accordance with the procedure provided  for 
in Article  12 shall  be adopted by the Commission  without consulting the Committee 
where they do not comprise substantial  changes to the nature of the original  projects 
and  operations  or,  as regards the financial element,  where they  do  not  exceed  20% 
of the total  amount  of the  initial  commitment. 

Article  II 

Operations  covered  by  this  Regulation  which  are  financed  from  the  Community 
budget  shall  be  managed  by  the  Commission  in  accordance  with  the  financial 
Regulation  of  21  December  1977 applying  to  the  general  budget  of  the  European 
Communities,  as  last  amended  by  Regulation  No 2335/95  of  18 September  1995. 

In  presenting  the  financing  proposals  submitted  to  the  Committee  referred  to  in 
Article  12 and  the  evaluation  referred  to  in  Article  13,  the  Commission  shall  take 
account  of the principles of sound financial management,  in particular the principles 
of economy and cost/effectiveness  referred  to in Article 2 of the financial  Regulation. 

Article 12 

Ihe Commission  shall be assisted by a committee of an advisory  nature composed of the 
representatives  of  the  Member  States  and  chaired  by  the  representative  of  the 
Commission. 

Ihe  representative  of  the  Commission  shall  submit  to  the  committee  a  draft  of  the 
measures to be taken.  Ihe committee shall deliver  its opinion on the draft,  within a time 
limit  which  the  chairman  may  lay  down  according  to  the  urgency  of  the  matter,  if 
necessary  by taking a vote. 

The opinion  shall be recorded  in the minutes; in addition, each  Member  State shall have 
the right  to ask  to have  its position  recorded  in the minutes. 

The Commission shall take the utmost account of the opinion delivered by the committee. 
It  shall  inform  the  committee  of  the  manner  in  which  its  opinion  has  been  taken  into 
account. 

Article  13 

1.  The  Commission  shall  supervise  implementation  of  the  aid  and  the  conditions  in 
which  ongoing  projects  and  operations financed by  that  aid  are  being  implemented 
by the recipients. 

2. 

In the course of the supervision  provided  for  in paragraph  1  above, the Commission 
shall  carry  out  an  evaluation  of  the  main  projects  completed  so  as  to  ascertain 
whether the objectives  defined  at the project  appraisal  stage have been  achieved and 
to draw up guidelines  for enhancing the elTectivcness and profile  of  future  activities. 

3. 

Ihe Commission  shall  submit  to Parliament  and to the Council,  by 30 April  of each 
year  at  the  latest,  a  report  on  the  implementation  of  the  aid,  in  particular  on  the 
evaluation  referred  to  in paragraph  2 above. 

This Regulation  shall  enter  into force  ... 

Article  14 

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

Done at  ...,  ... 

1. TITLE OF 'II IE ACTION 

Financial form 

Council regulation on help in the reconstruction/rehabilitation  in Bosnia and I Ierzegovina, 
Croatia, the  federal  Republic of  Yugoslavia  and  in the  fomier  Yugoslavian  Republic of 
Macedonia. 

2.  BUDGET  LINI^S) CONCERNED (o 

(1) ITie  line  B7-.v1() (linaneial  protocols) iilrcady  has a legal  base. 

*  B7-541  :  Reconstruction  actions  for 

the 
Yugoslavia (27  Mecus of which  20  in chapter  BO-40); 

the  Republics  of 

former 

*  B7-542N  :  Special  help to refugees  in the  former  Yugoslavia  (30  Mecus); 
*  B7-545N  :  Europe  for  Sarajevo  (35  Mecus). 

3.  LEGAL  BASIS 

Article 235 establishing the European Community  and the Council  Regulation on 
help  in the rehabilitation/reconstruction  in  Bosnia and  I Ierzegovinia, Croatia, the 
federal  Republic  of  Yugoslavia  and  in  the  former  Yugoslavian  Republic  of 
Macedonia  of" 

4.  DESCRIPTION  Of' THE  ACTION  : 

4.1  Objective  of  the action 

In its communication  on maximum amounts and  legal  bases (SEC (94)1106), the 
Commission  committed  itself to propose a  legal  base as quickly  as possible,  for 
actions  considered  significant. 

themselves  with  democratic  political 

Hie Community  supports the efforts  of Bosnia-I Ierzegovina, Croatia, the  federal 
Republic  of  Yugoslavia  and  the  former  Yugoslav  Republic  of  Macedonia  to 
institutions  and  a  modem 
provide 
competitive production  mechanism  in the framework  of an open market economy. 
It specially  supports the reconstruction  and  modernization  of the. infrastructure  of 
Sarajevo  and  provides  a  special  humanitarian  aid  to  refugees  and  displaced 
persons  in consequence  of the tragic  conflict  in the  former  Yugoslavia. 

7 

In  the context  of  the  1996 budgetary  exercise,  the  Budgetary  Authority  inserted 
considerable  amounts  for this end  in the (ieneral  Budget  of the  European  Union 
and,  in  accordance  with  what  the  Commission  declared  to  the  Council  in  its 
in  the  former 
communication  on  the  financial  aspects  on  reconstruction 
Yugoslavia  ((X)M(95)5K1  p.6), the Commission  presents  this draft  regulation. 

4.2  Period  covered  by the action 

An  unlimited  period. 

5.  CLASSIFICATION  Of  THE  EXPENDI TURPyREŒIPPS 

5.1  NIX) 
5.2 DA 

5.3  Type  of  receipts envisaged  : none 

6. TYPE of  fin-  f;xpi;Ni)iTURfyRf:cf;iPis 

Non  reimbursable aid 
*  a  large part  of the envisaged  actions  take the  form  of  a grant  of  up to  100% 
of  the  operational  expenses  of  a  project,  programme  or  cooperative actions. 
'Ihose  actions  can  equally  lake  the  form  of  interest  rate  subsidies  on  loans 
from  the  EIB. 

*  grants  for  co-financing  with  other  sources  from  the public  or private sector ; 
co-financing  with other sponsors, the member states of the Union, NGOs are 
equally  foreseen,  particularly 
in  the  context  of  cooperation  actions  ; 
concerning investment projects the Community financing may not exceed 80% 
due to  the risks  in this  region ; 

*  does the proposed action involve a modification  of the level of receipts: none; 
* 

reuse  : none. 

7.  FINANCIAI. CONSEQl IENCES 

7.1  Method  of calculation  of the total  cost  of the action  : 

Ihe  Community  aid  will  particularly  locus  on  the  areas  of  reconstruction  of 
infrastructure, the reinsertion in professional  life of refugees and displaced persons 
and  the conversion  of armaments  industries  to civil  activities. 
Ihe new  actions  require the engagement  of specialized  experts with  competence 
other  than  those of Community  oflicials. 
Subject  to the annual  budgetary  procedure,  it  is  foreseen  to reserve an  indicative 
financial  envelope  of 400  Mecus  for  this  action  for  the  period  1996-1999  from 
this  programme.  PI IARE will  complete  the  Community  aid  on  the  basis  of  its 
regulation. 

'Ihe  activities  covered  by  this  regulation  will  he  Imanccd  as  a matter  of  priority 
by the chapter  B7-54 'reconstruction1.  Regional cooperation, help to SMI'Is, to the 
private  sector  and  to the  promotion  of  investment  will  be considered  principally 
as the  responsibility  of  PI IARE  in so  far  as  this  is possible. 

x 

e 

7.2  Breakdown  by the element  of the action  : 

The principle areas of intervention  will  be amongst  others  : the reconstruction  of 
infrastructure,  the  preparation  of  the  mechanism  of  production  necessary  to 
relaunch  the  economy,  the  different  forms  of  economic  cooperation,  including 
interest  rate subsidies  on  loans  from  the LIB. 

7.3  Indicative  schedule of appropriations 

Indicative  financial  envelope  for  the  period  1996-1997  :  400  Mecus.  These 
rehabilitation/reconstruction actions are inserted in the framework  of the indicative 
financial  programming of chapter  B7-54 : 

Rehabilitation/reconstruction  in the  fomier  Yugoslavia 

Indicative  multiannual  financial  programming  (subject  to the annual  budgetary 
procedure) 
Commitment  appropriations  in millions of  Ixu,  current  prices. 
-  Chapter  B7-54 -

(in  Meats 
current) 

lilMlgl-t 
19% 

1997 

1998 

1999 

98 

100 

100 

102 

5.264 

5.622 

6.181 

6.849 

Financial 
perspectives 
ceilings  (rubric 
IV) 

Total 
1996/1999 

400 

23.916 

8. ANTI  FRAUD  MI'ASURKS  fORKSIT-N 

The  projects  and  programmes  financed  will  be  the  object  of  regular  follow  up  and 
systematic  audits  by the Commission  services  including the  service  created  specially  to 
combat  fraud  (UCLAF), or  by  mandated  agents  as  well  as  the  Court  of  Auditors.  The 
coordination of the Commission services shall be ensured by the 'Yugoslavia'  Interservice 
Group  created  for this. 

9. COST/RFFKTI-NCY  ANALYSIS  ITTM-NTS 

The economics  of the  four  countries concerned  have been  profoundly  disrupted  by  four 
years  of  conflict.  Their  economic  development,  the  restoration  of  civil  society  and 
cooperation  between  them  is undissociablc  from  peace and  stability  in this  region. 

Consequently  it  is necessary  to  give  priority  to actions  directed  to economic  and  social 
objectives,  particularly  employment,  the restoration  of civil  society  as well  as the return 
and  reinsertion  of  refugees  and  displaced  persons.  The  cost  efficiency  management 
methods will  be developed  on an ongoing basis and  in view of the nature of the  projects 
and  programmes  which  will  be selected. 

sr 

1 

10. ADMINISTRATIVE  EXPENDITURE  (part  A of the budget) 

the  operational  appropriation, 

It  is necessary  to underline that the present  communication  concerns the management  of 
around  100 Mecus per year in commitment  appropriations  and  to ensure sound  financial 
management  of 
the  availability  of"  administrative 
appropriations  should  equally  be  foreseen.  The  increase  in  the  work  flowing  from  the 
growth  in activities  foreseen  for  the period  concerned  will  be more than  proportional  to 
the increase in commitment  appropriations.  By means of redeployment, the Commission 
has  allocated  7 oflicials  and  6 temporaries  /  auxiliaries  to the  management  of this  tasks 
at headquarters  (management  of projects and  finances).  ( )n the ground, by means of own 
resources, 4 officials  and  17 local  agents  as well  as one temporary  agent  are  foreseen. 

However,  it should  be underlined  that  the effective  mobilization  of human resources and 
the  necessary  related  budgetary  appropriations  will  result  from  the  annual  Commission 
decision  concerning the allocation  of resources,  in particular taking account  of staff  and 
supplementary  amounts  which  will  have  been  granted  by the  Budgetary  Authority. 

0.1  1 leadquarters 

Effects  on  the number of  posts (for  4  years) 

Ty|x.* of  post 

Staff  lor  inaiui^cnrnt  of  (lie 
notion 

of  which 

duration 

permanent 
posts 

lenyxMary 

JTOStS 

•1  • 
I 
i 

Officials  or 
temporary 
agents 

Other 
resources 

M 
( 

A 
11 
0 

Total 

7 

4 
1 
1 

6 

by  use of" 
existing 
resources 
within  the 
I Xi  or  service 
concerned 

4 
1 
2 

4 
1 
1 

13 

96-99 

10.2 

111crease in <>lhcr administrative  expenditure  flowing  form  the action 
(for  4 years) 

In order  to deal  with the increasing number of actions  in  favour  of reconstruction 
in  former  Yugoslavia  and  to guarantee  adequate  follow  up of the projects  on the 
ground  it  is necessary  to  increase  the budget  lor  missions. 

^ 

Id 

I 

Budget line 
(n & title) 

I 

I 

1 

Amounts 

Method of  calculation 

A - HO  M i n i o ns  l i om 
headquartci s 

3 6 0 . 0 00 

A-6006  Missions  from 
delegations  and  offices 

184.000 

Total 

544.000 

6  ollicials  lor  20  days  x  250  I xu  x 
4/years 
30  returns  x  2.000  I xu  x  4 / y-  240.000 
Ixu 

120.000 

20 returns  x 2.000  Ixu/tickets  R = 
40.000 
3 ollicials  x 200  Ixu/day  x 60 days = 
144.000 

The  amounts  expivss  the  cosl  of  Ihe  lolal  supplementary  post  lor  the  duration  of  the  action  if  this  is 
determined,  for  12  months  if  Ihe  duration  is  indeterminate. 

jS 

II 

ISSN 0254-1475 

COM(96) 123 final 

DOCUMENTS 

EN 

11 

Catalogue number  : CB-CO-96-153-EN-C 

ISBN 92-78-02469-4 

Office  for Official  Publications of the European Communities 

L-2985 Luxembourg