Proposal for a Council Regulation (EC) establishing an Instrument for Structural Policies for Pre-Accession
Date: 1998-03-18
Institutions: European Commission
Subjects: Central and Eastern Europe, Central and Eastern European countries, EU policy, accession to the European Union, cooperation policy

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 18.03.1998 
COM(1998) 138 final 

98/0091 (CNS) 

Proposal for a 
COUNCIL REGULATION (EC) 
establishing an Instrument for Structural Policies for Pre-Accession 

(presented by the Commission) 

EXPLANATORY  MEMORANDUM 

Introduction 

The reinforced pre-accession strategy 

In Agenda 2000, the Commission  has made a series of proposals  for the reinforcement  of 
the  pre-accession  strategy  for  all  Central  and  Eastern  European  applicant  Countries 
(CEECs).  The  general  objective  of  the  strategy  is  to  offer  a  coherent  programme  to 
prepare theses countries for accession to the EU and, 

(i) 

(ii) 

to  bring  together  the  different  forms  of  support  provided  by  the  Union  within  a 
single Framework, the Accession  Partnerships1; 

to  familiarize  the  applicants  with  Union  policies  and  procedures  through  the 
possibility of their participation  in Community programmes. 

Pre-accession aid 

Together  with  Phare  and  aid  for  agricultural  development,  Agenda  2000  proposed 
Structural  aid for the applicant countries amounting to some EUR  1  billion per year. This 
aid  would  be  directed  mainly  towards  aligning  the  applicant  countries  on  Community 
infrastructure  standards,  particularly  -  and  by  analogy  with  the  Cohesion  Fund  -  in  the 
transport  and  environmental  spheres.  The  Luxembourg  European  Council  of 
December  1997 endorsed  the principle of the creation of such a structural  instrument. 

. 

Following  on  from  the  European  Council's  conclusions,  the  Commission  is  now 
proposing  a regulation  on  an  instrument  for  structural  policies  for  pre-accession  (ISPA). 
This  would  be  based  on  Article  235  of  the  Treaty.  Given  its  similar  objectives,  it  was 
considered  appropriate  for  ISPA  to  broadly  follow  the  approach  of  the  revised 
Cohesion  Fund. 

Accession  Partnerships will involve: 

precise  commitments  on  the  part  of  the  applicant  country  relating  in  particular  to 
democracy,  macoeconomic  stabilisation  and  nuclear  safety,  as  well  as  a  national 
programme  for  the  adoption  of  the  Community  acquis  within  a  precise  timetable, 
focusing  on the priority areas identified  in each opinion; 
mobilisation  of  all  resources  available  to  the  Community  for  preparing  the  applicant 
countries  for  accession. 

2 

The eligible countries 

In  accordance  with  the  orientations  of  Agenda  20002  and  with  the  conclusions  of  the 
European  Council  in  Luxembourg3,  financial  aid  provided  for  by  the  structural  and 
agricultural  pre-acccssion  instruments  will  be  granted  to  Central  and  Eastern  European 
applicant  countries.  This  is reflected  in  Article  1 of the present  Regulation,  which  lists 
the ten countries concerned. 

Cyprus,  as  set  out  in  the  Luxembourg  conclusions  (§  22),  benefits  from  a  specific 
pre-accession  strategy which corresponds with its present economic situation. 

In  the  light  of  future  progress  towards  the  political  solution  to  the  Cyprus  problem 
currently  being  pursued  under  the  aegis  of  the  United  Nations  and  in  order  to  take 
account  of  the  economic  situation  then  prevailing  on  the  island,  it  may  become 
appropriate,  as  accession  negotiations  proceed  on  the  basis  of  the  Luxembourg 
conclusions (§ 28), to also include Cyprus in the list of beneficiary  countries. 

PART ONE: OBJECTIVES 

A. 

The priorities 

Based on the provisions of Agenda 2000 and the amount of financial  envelope proposed, 
there  is  a  need  to  be  especially  selective  as  to  the  sectors  to  be  covered  by  the 
new  instrument.  Given  previous  experience  with  the  infrastructure  requirements  of  the 
new  German  Lander  in  this  regard,  as  well  as  its  Opinions  on  the  applicant  countries 
(see also below),  the  Commission  is proposing  that  the  new  instrument  should  limit  its 
funding  to environment  and  transport  projects.  This  will  include  measures  to ensure  the 
effective  operation of the projects such as training and maintenance. 

Environment -  meeting the environmental acquis 

As  outlined  in  Agenda  2000,  applicant  countries  arc,  on  the  whole,  facing  more  acute 
environmental  problems  than  the  existing  EU  Member  States,  particularly  in  water  and 
air pollution  and in waste management. 

Quantification  of the effort  required  is complex  and difficult,  particularly  given the need 
to  make  a  number  of  assumptions  regarding,  for  example,  economic  growth, 
consumption  patterns  and  future  behaviour.  Best  available  estimates  suggest,  however, 
that  total  investment  needs  for  environmental  acquis  compliance  in  the  ten  applicant 
countries could be of the order of EUR  100 000 million (or EUR  1  000 per capita). 

As indicated, this figure  concerns solely investments related  to meeting the  requirements 
of the acquis  in  respect  of  Directives  for  drinking  water  supply,  waste  water  treatment, 
air  pollution  and  solid  waste  management.  The  estimate  docs  not  cover  environmental 
improvements  which, although  they  might be a pre-condition  for economic  development 

See  part  II  (The  Challenge  of  Enlargement),  section  III  (a  strategy  for  enlargement)  part  2 
(reinforcing  the pre-accession  strategy) and section  IV (Cyprus). 
See paras.  17-22. 

3 

(such  as  cleaning  up  contaminated  land),  are  not  subject  to  Community  legislation  and 
for which no investment  is therefore  required  in order to meet the acquis. 

A major  effort,  including considerable  EU technical  and financial assistance, will thus be 
indispensable  for  enabling  acceding  countries  to  progress  rapidly  towards  alignment  to 
the  EU  environmental  acquis.  Assistance  under  ISPA  will  therefore  focus  primarily  on 
the areas of water, air quality and waste management. 

In the environmental field, assistance under ISPA will accordingly provide  for: 

environmental  measures,  enabling  the  beneficiary  countries  to  comply  with 
the  requirements  of  environmental  legislation  and  with  the  objectives 
contained in the Accession  Partnerships. 

Transport - extending the Trans-European transport network and  meeting the objectives 
of the Accession Partnerships 

Agenda  2000 highlights  the  urgent  need  for the development  and  upgrading  of  transport 
infrastructure  in candidate  countries  as well  as the need  to  tackle  missing  links between 
the latter and the EU. Without such  investment, severe problems of traffic  congestion  arc 
likely  to  arise  affecting  the  Union's  overall  traffic  and  policies.  For  the  countries 
concerned,  improvements  in  transport  infrastructure  are  an  essential  part  of  their 
economic  development  strategies,  and  thus  of  their  capacity  to  cope  with  competitive 
pressure  and  market  forces  in  the  EU.  Development  of  efficient  transport  systems  is 
therefore  an essential  part of the pre-accession  strategy. 

As  indicated  in  the  Commission's  Communication4  on  this  issue,  in  an  enlarged  Union 
the future  trans-European  transport network  must be for the benefit  of citizens throughout 
the  present  and  the  new  Member  States  -  it  will  eventually  serve  the  transport  needs  of 
the  Union's  regions  to  ensure  the  free  movement  of  people,  goods  and  services,  giving 
countries  and  regions  appropriate  access  to  European  centres,  while  ensuring respect  for 
the  environment.  Such  a  strategy  should  pursue  a  balanced  multimodal  transport 
infrastructure  development.  This  future  network  will  comprise  the  trans-European 
transport  network  of the present  Union, the appropriate  parts of the national  networks in 
the  applicant  countries  and  the  necessary  connections  between  them.  This  would 
encompass access to the latter, including by means of public transport where appropriate. 

According  to  figures  in  the  Commission  Communication,  potential  investment  costs  for 
establishing  the  Union's  trans-European  transport  network  have  been  estimated  at 
ECU 50  to  90  billion  over  15  years,  merely  for  upgrading  roads  and  railways  to 
Western European  standards  to meet the expected  growth  in  traffic,  without  considering 
any new links. 

"Connecting  the  Union's  transport  infrastructure  network  to  its  neighbours  -  towards 
cooperative pan-European  transport network policy." COM(97)  172 final of 23 April 1997. 

4 

The  contribution  under  ISPA  to  future  transport  networks  will  thus  be  in  providing 
support  for: 

transport  infrastructure  measures  which  promote  sustainable  mobility,  and 
in  particular  those  that constitute  projects  of common  interest  based  on  the 
criteria  of  Council  Decision  1692/96  and  which  enable  the  beneficiary 
countries  to  comply  with  the  objectives  of  the  Accession  Partnerships.  This 
will  include  inter-connection  and  interoperability  of  national  networks  as 
well  as  with  the  trans-European  networks  (TENS)  together  with  access  to 
such networks. 

The results of the Transport  Infrastructure  Needs Assessment (TINA) process will also be 
taken into account in identifying  suitable projects. 

Technical Assistance - directly linked to the projects concerned 

A small part  of the ISPA budget may also be used to finance preparatory  studies as well 
as technical  assistance  expenditure.  A clear  link  will  need  to be established  between  the 
measures supported  and the projects being financed under ISPA. A key role for  technical 
assistance  in this regard  will be to ensure the high quality of projects,  including  in terms 
of  their  effective  management  and  implementation.  This  includes  the  preparation  of 
measure by feasibility  studies and arrangements for the appraisal, monitoring, control and 
evaluation  of measure as well as making best use of existing research results in the fields 
concerned. Total expenditure in this regard carried out at the Commission's  initiative will 
be  no  more  than  2% of  total  financing  under  ISPA.  Phare's  Large  Scale  Infrastructure 
Facility (LSIF), which will primarily  focus on the extension  of TENs beyond  EU borders 
and  on accession-related  environmental  problems  with  a transboundary  impact,  will  also 
be  used  to  help  prepare  projects  which  may  be  subsequently  financed  from  assistance 
under ISPA. 

B. 

Coordination with  Phare and the pre-accession  aid for agriculture 

It  will  be  necessary  to  ensure  close  cooperation  between  ISPA,  Phare  and  the 
pre-accession  agricultural  assistance,  in  particular  to  avoid  any  overlap  in  the  type  of 
operation  to be financed.  The committee foreseen  under the proposal  for a Regulation on 
the  Coordination  of  Assistance  to  Applicant  Countries  within  the  Framework  of  the 
Pre-Accession  Strategy (COM(1998) 150) will have a key role in this respect. 

As with all pre-accession  assistance, ISPA will be subject  to the conditionality  rules laid 
down in the Accession Partnership Regulation. 

PART TWO: THE  REGULATION 

An  approach by project  - based on national accession programmes for  the environment 
and transport 

By analogy with the Cohesion  Fund, the approach  for  ISPA will be by project  or  groups 
of  projects  (called  measures)  which  should  also  be  of  a  sufficient  scale  to  have  a 
significant  impact  in  the  field  of  environmental  protection  or  in  the  improvement  of 

transport  infrastructure  networks. Experience with the Cohesion  Fund, especially to avoid 
disproportionate  administrative  burdens  and  with  regard  to  the  amount  accepted  in  the 
new  guidelines  for  Phare  (EUR  2-3  million),  suggests  that  projects  should  be  of  a 
minimum  size  of  EUR  5  million.  The  minimum  size  should  also  take  account  of  the 
small size of some of the applicant countries. 

Project  selection  and  approval  will  be  based  on  national  programmes  for  transport  and 
environment  included  within  the  National  Programme  for  the  Adoption  of  the  Acquis 
which  is one of the main elements of the Accession  Partnership. These programmes  shall 
contain  specific  strategies  for  environment  and  transport  and  address  the  transnational 
dimension  necessary  for  the  development  of  future  trans-European  networks.  The 
Regulation  also  specifies  a  number  of  criteria  to, ensure  the  high  quality  of  projects 
including their leverage potential and degree of readiness. 

Financing  arrangements 

Indicative allocations by country - three key criteria 

The  indicative  allocation  of  resources  under  1SPA  to  the  beneficiary  countries  will  be 
made  by  the  Commission  based  on  the  criteria  of  population,  per  capita  GDP  in 
purchasing  power  parities  (which  most  realistically  reflects  the  wealth  of  the  countries 
concerned)  and  surface  area.  Allocations  will  be  on  the  basis  of  an  upper  and  lower 
range  in  order  to  provide  a  degree  of  financial  flexibility  -  they  will  also  need  to  be 
revised  as countries  accede  to the  Union  leaving  the  remainder  of  their  allocation  to the 
remaining  beneficiary  countries.  Due  account  will  also  be  taken  of  the  countries' 
respective deficiencies  in environment  and transport  infrastructure. 

Rates of assistance - to  encourage leverage 

As  outlined  earlier,  the  needs  of  the  applicant  countries  as  regards  environmental  and 
transport  infrastructure  are  considerable,  especially  compared  to  the  public  sector 
resources,  including  ISPA,  likely  to  be  available  for  cofinancing  projects.  On  the  other 
hand,  it  is  important  that,  wherever  possible,  ISPA  should  have  a  strategic  catalytic 
impact  relating  to  the  overall 
investment  needs  rather  than  subsidizing  ad-hoc 
investments.  Agenda  2000  also  calls  for  an  increased  multiplier  effect  from  structural 
resources by greater use of forms of assistance other than direct grants. In particular: 

scarce  public  sector  resources  should  have  a  leverage  effect,  especially  by 
mobilizing private sector  co-financing; 

assistance  from  ISPA should  not "crowd  out" other potential  financing,  including 
local sources and project generated  revenues. 

The Commission  will be seeking to maximise the multiplier effect  of ISPA by promoting 
increased  recourse to sources of loan  and equity financing and  in particular  from  private 
sources.  In  this regard  project  applications  at the  level  of the financial plan  will  need  to 
contain  information  on  financing  the  beneficiary  is  seeking  from  other  sources  such  as 
the  European  Investment  Bank  (EIB), 
its  pre-accession  facility,  The 
European Bank  for  Reconstruction  and  Development  (EBRD)  and  the  World  Bank. 

including 

Individual  projects  will be examined  with the EIB before  the financing package  is agreed 
by the Commission. 

An emphasis  on  seeking  alternative  sources  of  funding  will  help  dispel  any  tendency  to 
always  expect  a  high  rate  of  subsidy  and  might  also  be  considered  as  important  in 
supporting  the  efforts  being  made  by  the  applicant  countries  to  move  towards 
market economies. 

The  aim  is  therefore  to  differentiate  the  rate  of  Community  assistance  under  ISP A 
according  to the type of project  and  financial  package involved.  This will be up to 85% 
of public or similar expenditure, the precise level of support also taking account  of: 

the overall Community interest in seeing a particular project  implemented; 

a project's capacity to generate revenues; 

the application of the "polluter pays" principle. 

Such an approach  therefore  gives the flexibility  to use a lower rate of assistance for those 
projects  where  loan  finance  is  a  possibility,  with  the  upper  limit  allowing  the 
Commission to modulate the rate on a case-by-case basis. 

Financial Management - simplification with rigour 

The  ISPA  articles  on  financial  management  reflect  the  provisions  of  Title  IX  of  the 
Financial  Regulation  applicable  to  the  general  budget  of  the  European  Communities 
which contains detailed financial rules relating to external  aid. In essence, this means that 
projects  adopted  by the Commission  will  be covered  by a financing memorandum  to be 
drawn  up  between  the  Commission  and  the  beneficiary  country.  The  details  of  the 
payments  mechanisms  for  projects,  as  well  as  the  management,  evaluation  and  control 
systems, would  also  be  contained  in  the financing memoranda.  Where  permitted  by  the 
Financial  Regulation,  these  mechanisms  and  systems  will  be  similar  to  those  of  the 
Cohesion  Fund. 

However,  with  respect  to  budgetary  commitments  a  simpler  and  more  efficient  system 
will  apply  under  ISPA  which  will  operate  under  on  the  basis  of  multiannual  projects. 
Drawing  on  the  experience  of  the  Structural  Funds  and  Cohesion  Fund,  the  initial 
commitment  will  be made  when  the decision  to grant  Community  assistance  is  adopted 
by  the  Commission.  Commitments  in  respect  of  subsequent  annual  instalments  will  be 
made  at  the  start  of  each  budgetary  exercise  and  at  the  latest  by  1 April  of  the  year 
in question. 

Whilst  improving  the  management  of multiannual  measures,  the  above  exception  to  the 
Financial  Regulation,  whereby  budget  appropriations  are  authorized  for  the  duration  of 
one financial  year, will have to be included  in the Interinstitutional  Agreement. 

In order to avoid  too large a difference  between  the level of commitments and payments, 
and as an incentive to the efficient  use of resources, assistance granted  to a project  where 
in  the  financing 
work  has  not  begun  within 
memorandum will be automatically  decommited. 

the  contractual  period  scheduled 

efficient  management, 

Such  an approach  will  make  it possible  to take a coherent  overall  view of the operations 
to  be  undertaken  for  each  project  as  well  as  facilitating  a  degree  of  decentralization 
safeguarding 
the 
Phare programme,  this  means  that,  to  the  extent  permitted  by  the  Financial  Regulation 
and  agreed  in  the  respective  Financial  Memoranda,  the  implementation  of  projects  will 
be the responsibility  of the applicant  countries  under the supervision  of the  Commission. 
As of  1  January 2000 and in any event not later than  1  January 2002 beneficiary  countries 
should  have  established  the  required  management  and  control  systems.  Recourse  as 
necessary to outside assistance would be possible until  1  January 2002. 

evaluation.  As  with 

control 

and 

Monitoring and Evaluation  - according to quantified indicators 

Evaluation  and  monitoring  mechanisms  for  ISPA  will  be  carried  out  jointly  by  the 
applicant  country  in question  and the Commission  through  procedures  established  in the 
individual  financing  memoranda.  In  particular,  monitoring  will  be  carried  out  by 
reference  to quantified  physical  and  financial  indicators  relating  to the specific  character 
of  the  project  concerned  and  its  objectives.  During  the  implementation  of  projects  and 
after  their completion, evaluation  will similarly assess whether the original objectives can 
be,  or  have  been,  achieved.  The  evaluation  capacity  of  the  implementing  and 
monitoring bodies  will  also  be  strengthened  as  appropriate  in  these  countries  through 
technical assistance. 

Committee - assisting implementation 

In  implementing  the  ISPA  regulation,  the  Commission  will  be  assisted  by  an 
Advisory Committee  composed  of  representatives  of  the  Member  States  and  chaired  by 
the  Commission  representative.  The  Committee  will  deliver  opinions  on  matters 
referred  to 
taking  a  vote.  The 
European Investment  Bank will also participate in a non-voting capacity. 

the  Commission,  where  appropriate  by 

it  by 

Proposal  for a 
COUNCIL REGULATION  (EC) 
establishing an Instrument for Structural Policies for  Pre-Accession 

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 Commission5, 

Having regard to the opinion of the European Parliament6, 

Having regard to the opinion of the Economic and Social Committee7, 

Having regard to the opinion of the Committee of the Regions8, 

the  conclusions  of 

the  Luxembourg  European  Council  of  12  and 
Whereas 
13 December  1997  provide  for  an  enhanced  pre-accession  strategy  for  the  applicant 
countries of central and eastern  Europe, and a specific  pre-accession  strategy  for Cyprus; 

Whereas,  in  the  light  of  future  progress  towards  a  political  solution  to  the  problem  of 
Cyprus currently being pursued  under the aegis of the United Nations and  in order to take 
account  of  the economic  situation  which  will  then  prevail  on  the  island,  it  may  become 
appropriate,  as  accession  negotiations  proceed  on  the  basis  of  the  conclusions  of  the 
Luxembourg  European  Council, to include Cyprus in the list of beneficiary  countries and 
to envisage to this effect  specific  modalities for the application of this Regulation; 

Whereas, however,  the conclusions  of the  European  Council  provide  that  the  assistance 
provided  for  in  this  Regulation  is  to  be  granted  for  the  time  being  to  the  ten  applicant 
countries of central  and eastern  Europe; 

Whereas  Council  Regulation  (EC)  No  622/98  of  16  March  1998  on  assistance  to  the 
applicant  States  in  the  framework  of the pre-accession  strategy,  and  in  particular  on  the 
establishment  of  Accession  Partnerships9,  provides  that  those  partnerships  are  to 
comprise  a  single  framework  for  the  priority  areas  and  all  available  resources  for 
pre-accession  assistance; 

5 
() 
7 
8 
9 

OJC... 
Opinion delivered on  ... 
OJC  ... 
Opinion delivered on  ... 
OJL85,  20.3.1998, p. 1. 

Whereas  the pre-accession  strategy  includes  provision  for an Instrument  for Structural 
Policies  for Pre-Accession,  hereinafter  called  "ISPA",  which  will  be directed  towards 
aligning  applicant  countries  on  Community  infrastructure  standards  and  provide  a 
financial contribution  for environmental measures, and transport  infrastructure  measures; 

Whereas  assistance  from  the Community  under  ISPA, together  with  assistance  from the 
Community  under  Council  Regulation  (EEC)  No 3906/89  of  18 December  1989 on 
economic  aid to the Republic  of Hungary  and the Polish  People's  Republic10,  as last 
amended  by Regulation  (EC)  No 753/96",  and assistance  from  the Community  under 
Regulation  [.../...  on Community  Support  for Pre-accession  measures  for Agricultural 
and  Rural  Development  in the  applicant  countries of Central  and  Eastern  Europe  in the 
Pre-Accession  period]12  is to be coordinated  within  the framework  of the  Regulation 
[.../... on the Coordination of Assistance to the Applicant countries within the Framework 
of  the  Pre-Accession  Strategy]13  and to be subject  to the conditionality  provisions of 
Regulation (EC) No 622/98 and of the individual decisions on Accession Partnerships; 

Whereas  an  appropriate  balance  must  be  struck  between  financing  for  transport 
infrastructure  measures and financing for environmental  measures; 

Whereas  the  Community  assistance  under  ISPA  should  facilitate  the  implementation by 
the  applicant  countries of the acquis communautaire in the field of the environment  and 
contribute to sustainable development in these countries; 

Whereas  Decision  No 1692/96/EC  of the  European  Parliament  and of the  Council of 
23 July  1996 on  Community  guidelines  for the development  of  the trans-European 
transport  network14  describes  the principles  for the development  of a  trans-European 
Transport  Network  which  after  accession  should  also cover the requirements of the new 
Member  States  while  the ongoing  Transport  Infrastructure  Needs  Assessment  (TINA) 
initiated  by the Council  and following  these  principles  should  facilitate  the selection 
process for measures eligible for assistance during the pre-accession  period; 

Whereas provision  should  be made  for the Commission to make an indicative  allocation 
of  the  total  resources  from  the Community  under  ISPA  available  for  commitment 
between the applicant countries in order to facilitate the preparation  of measures; 

Whereas  the rates  of assistance  provided  from  the Community  under  ISPA  should be 
adjusted  to strengthen  the  leverage effect  of resources, promote  use of private sources of 
finance  and  to  take  account  of  the  capacity  of  measures  to  generate  substantial 
net revenue; 

Whereas, as regards  Community  assistance,  maximum  transparency  must be ensured in 
the  implementation  of financial  assistance, and  stringent  controls  must be  applied to the 
use of appropriations; 

10 
n 
12 
13 
14 

OJL375,  23.12.1989, p.  11 
OJL  103, 26.4.1996, p. 5. 
OJL... 
OJL... 
OJL  228, 9.9.1996, p. 1. 

10 

Whereas,  in  the  interest  of  the  proper  management  of  Community  assistance  granted 
under  ISPA, provision  should  be  made  for  effective  methods  of  appraising,  monitoring, 
evaluating  and  controlling  operations,  specifying  the principle  governing  the  evaluation, 
defining  the nature of and the rules governing the monitoring, and laying down the action 
to be taken  in response  to  irregularities  or  failures  to comply  with  one of the  conditions 
laid down when assistance under ISPA was granted; 

Whereas, during  the transitional  period  (from  1 January  1999 until  31 December 2001), 
each reference made to the euro should as a general rule also be read as a reference to the 
euro  as  a  monetary  unit  as  in  Article  2,  second  sentence,  of  Council  Regulation  (EC) 
No .. 798 [on the introduction of the euro15]; 

Whereas  for  the  purpose  of  the  implementation  of  this  Regulation  the  Commission 
should be assisted by a committee of an advisory nature; 

Whereas the implementation  of the measures provided  for by this Regulation  will  help to 
achieve the Community's  aims; whereas the Treaty docs not provide,  for the adoption  of 
this Regulation, powers other than those of Article 235, 

HAS ADOPTED THIS REGULATION: 

Article 1 
Definition  and objective 

1. 

The Instrument  for Structural  Policies for Pre-Accession, hereinafter  referred  to as 
ISPA, is hereby established. 

ISPA  shall  provide assistance to contribute to the preparation  for accession  to the 
European  Union  of  the  following  applicant  countries:  Bulgaria,  Czech  Republic, 
Estonia,  Hungary,  Latvia,  Lithuania,  Poland,  Romania,  Slovakia  and  Slovenia, 
hereinafter  referred  to as the "beneficiary  countries",  in the area of economic and 
social  cohesion,  in  particular  concerning  environment  and  transport  policies  in 
accordance with the provisions of this Regulation. 

2. 

The Community  assistance  granted  under ISPA  shall  contribute  to the  objectives 
laid  down  in  the  Accession  Partnership  for  each  beneficiary  country  and  to 
corresponding  national  programmes  for the improvement  of the environment  and 
of transport infrastructure  networks. 

OJ  L... 

11 

Article 2 
Eligible measures 

1. 

The Community assistance financed  under ISPA shall include projects, stages of a 
project  which  are  technically  and  financially  independent,  groups  of  projects  or 
project  schemes  in  the  field  of  environment  or  transport,  hereinafter  referred  to 
collectively  as  measures.  A  stage  of  a  project  may  also  cover  preliminary, 
feasibility  and technical  studies needed  for carrying out a project. 

2. 

The Community  shall provide assistance under ISPA in the light of the  objectives 
mentioned  in Article  1 for the  following: 

(a) 

(b) 

environmental measures enabling the beneficiary  countries to comply with 
the  requirements  of  Community  environmental 
the 
objectives of the Accession Partnerships; 

law  and  with 

transport  infrastructure  measures which promote sustainable mobility, and 
in particular those that constitute projects of common interest based on the 
criteria  of  Decision  No  1692/96/EC  and  those  which  enable  the 
the 
beneficiary 
Accession Partnerships; this includes inter-connection  and  interoperability 
of national  networks as well  as with the trans-European  networks  together 
with access to such networks. 

the  objectives  of 

to  comply  with 

countries 

Measures  shall  be of a sufficient  scale to have a significant  impact  in the  field  of 
environmental  protection  or  in  the  improvement  of  transport 
infrastructure 
networks.  The  total  cost  of  each  measure  shall  in  principle  not  be  less  than 
EUR 5 million. 

3. 

An  appropriate  balance  shall  be  struck  between  measures  in  the  field  of  the 
environment  and measures relating to transport  infrastructure. 

4. 

Assistance may also be granted  for: 

(a) 

(b) 

preliminary  studies related to eligible measures, including those necessary 
for their implementation; and 

technical  support  measures,  including  information  and  publicity  actions, 
particularly: 

(i) 

(ii) 

horizontal  measures  such  as  comparative  studies  to  assess  the 
impact of Community assistance; 

measures  and  studies  which  contribute 
the  appraisal, 
monitoring,  evaluation  or  control  of  projects  and  to  strengthening 
and ensuring the coordination  and consistency  of projects  with the 
Accession Partnerships; and 

to 

12 

(iii)  measures  and  studies  to  ensure  effective  project  management  and 

implementation and to make any necessary  adjustments. 

Article 3 
Financial  resources 

Community assistance under ISPA shall be granted during the period from 2000 to 2006. 

The  annual  appropriations  shall  be  authorized  by  the  budgetary  authority  within  the 
limits of the financial  perspectives. 

Article 4 
Indicative allocation 

An indicative allocation  between  beneficiary  countries of the total  Community  assistance 
under  ISPA  shall  be made by the Commission  on the basis of the criteria  of  population, 
GDP  per  capita  in  purchasing  power  parities  and  surface  area.  This  allocation  may  be 
adjusted  to  take account  of the performance  in previous years of each  of the  beneficiary 
countries  in  implementing  ISPA  measures.  Due  account  shall  also  be  taken  of  the 
countries' respective deficiencies  in environment and transport  infrastructure. 

1. 

2. 

3. 

Article 5 
Compatibility with Community  policies 

Measures  financed  by  the  Community  under  ISPA  shall  comply  with  the 
provisions  set  out  in  the  Europe  Agreements,  including  the  implementing  rules 
for  the  application  of  the  provisions  on  State  aids,  and  shall  contribute  to  the 
achievement  of Community policies, particularly those concerning  environmental 
protection and improvement, transport and trans-European  networks. 

The  Commission  shall  ensure  coordination  and  consistency  between  measures 
this  Regulation  and  measures  undertaken  with 
undertaken  pursuant 
contributions 
the 
from 
European  Investment  Bank  (EIB),  including  through  its  pre-accession  facility  as 
well as the other financial instruments of the Community. 

to 
the  Community  budget, 

the  operations  of 

The  Commission  shall  seek  coordination  and  consistency  between  measures 
undertaken  in  the  beneficiary  countries  pursuant  to  this  Regulation  and  the 
operations  of  the  European  Bank  for  Reconstruction  and  Development  (EBRD), 
the World Bank and other such financial institutions. 

Article 6 
Forms and rate of assistance 

1. 

Community  assistance  under  ISPA  may  take  one  of  the  following  forms: 
non-repayable  direct  assistance,  repayable  assistance,  an  interest-rate  subsidy,  a 
guarantee fee subsidy, the risk-capital participation or another form of finance. 

13 

Assistance  repaid  to the managing authority or to another public authority  shall be 
reapplied  for the same purpose. 

2. 

The  rate  of  Community  assistance  granted  under  ISPA  may  be  up  to  85%  of 
public or equivalent  expenditure, including expenditure by bodies whose activities 
are  undertaken  within  an  administrative  or  legal  framework  by  virtue  of  which 
they are regarded as equivalent to public bodies. 

Save  in the case of repayable assistance or when there is a substantial  Community 
interest, the rate of assistance shall be reduced  to take into account: 

(a) 

the availability of  co-financing; 

(b) 

the measure's capacity to generate revenues; and 

(c) 

an appropriate application of the polluter-pays principle. 

3. 

Measures which generate revenues in accordance with paragraph 2(b) shall be: 

(a) 

infrastructures  the use of which  involves fees borne by users; 

(b) 

productive investments in the environment  sector. 

4. 

Preliminary  studies and technical  support  measure, may be financed exceptionally 
at  100% of the total  cost. 

Total  expenditure  carried  out  at  the  Commission's  initiative  or  on  behalf  of  the 
Commission  pursuant  to this paragraph  may not exceed  2% of the total  allocation 
to ISPA. 

Article 7 
Appraisal  and approval of measures 

1. 

2. 

The  Commission  shall  adopt  decisions  on  the  measures  to  be  financed 
under ISPA. 

The  beneficiary  countries  shall  submit  applications  for  assistance 
to  the 
Commission.  However,  the  Commission  may  grant  assistance  pursuant  to 
Article 2(4) on its own  initiative. 

3. 

Applications shall  contain: 

(a) 

the information  set out in Annex  I; 

(b) 

all  relevant  information  proving  that  the  measures  comply  with  this 
Regulation  and with  the criteria set out  in  Annex  II, and  in particular  that 
there  are  medium-term  economic  and  social  benefits  commensurate  with 
the resources deployed. 

14 

4. 

5. 

1. 

2. 

3. 

On  receipt  of  an  application  for  assistance  and  before  approving  a  mca^im.  -h ; 
Commission  shall  carry  out  a thorough  appraisal  in order  to assess  the measure's 
compliance with the criteria set out in  Annex II. 

Commission  decisions  approving  measures  shall  determine  the  amount  of 
financial assistance  and  lay down  a financing plan together  with  all  the provisions 
and conditions necessary  for the implementation  of the measures 

Article 8 
Commitments  and  payments 

The Commission  shall  implement  expenditure  under  [SPA in accordance with the 
the  European 
Financial  Regulation  applicable 
Communities  on the basis of the  financing  memorandum  to be drawn  up between 
the Commission  and the beneficiary  country. 

the  general  budget  of 

to 

However,  annual  budgetary  commitments  in  respect  of  assistance  granted  to 
measures shall be carried out in one of the following  two ways-

(a) 

commitments  in  respect  of  the  measures  referred  to  in  Article  2(2)  to  be 
carried  out over a period  of two or more years shall, as a general  rule and 
subject  to point (b), be effected  in annual instalments. 

The  commitments  in  respect  of  the  first  annual  instalment  shall  be  made 
when the financing  memorandum  is drawn up. Commitments  in respect of 
subsequent  annual  instalments  shall  be  based  on  the  initial  or  revised 
financing  plan  for  the  measure  and  in  principle  be  granted  at  the  start  of 
each  financial  year  and  at  the  latest  by  1 April  of  the  year  in  question 
according to forecast  expenditure for this year. 

(b) 

For  measures  with  a  duration  of  less  than  two  years  or  for  which 
the  Community  assistance  does  not  exceed  EUR  20  million  a  first 
commitment  of  up to  80% of the assistance  granted  may take place when 
the financing memorandum  is drawn  up. The remainder will be committed 
subject  to the state of the implementation  of the measure. 

Except  in duly justified  cases,  assistance  granted  to  a measure  where  substantial 
work has not begun within the specified  contractual  period shall be cancelled. 

Payments  of  financial  assistance  for  measures  may  take  the  form  either  of 
advances  or  of  intermediate  payments  or  payments  of  balances  in  respect  of 
expenditure certified  and actually paid. 

The  Commission  shall  adopt  detailed  rules  on  payments  in  accordance  with  the 
procedure laid down  in Article  14. 

4. 

The  details  of  the  payments  mechanism  for  measures  shall  be  laid  down  in  the 
financing  memorandum  with each beneficiary  country. 

15 

Article 9 
Management and control 

1. 

The Commission  shall require the beneficiary  countries: 

(a) 

to  establish  as  from  1  January  2000  and  in  any  event  not  later  than 
1 January 2002, management and control systems which ensure: 

(i) 

the  proper  implementation  of  the  assistance  granted  under  this 
Regulation  in  accordance  with  the  principles  of  sound  financial 
management, 

(ii) 

the separation of the functions  of management and control, 

(iii) 

that  expenditure  declarations  presented  to  the  Commission  are 
from  accounting  systems  based  on 
accurate  and  emanate 
supporting documents which are open to  verification; 

(b) 

to verify  on  a regular basis that the measures  financed  by the  Community 
have been properly carried out; 

(c) 

to prevent irregularities and take action against them; 

(d) 

to recover any amounts lost as a result of irregularity or negligence. 

Without prejudice  to checks carried out by beneficiary  countries, the Commission 
and  the  Court  of  Auditors  may,  through  their  own  staff  or  duly  authorized 
representatives,  carry  out  on-the-spot  technical  or  financial  audits,  including 
sample checks and final audits. 

implementing  provisions  of 

The  detailed 
in 
paragraphs  1 and  2  shall  be  contained  in  the  financing  memorandum,  together 
with  arrangements  for  cooperation  and  for  coordination  of  programming  and 
methodology of control between the Commission and the beneficiary  country. 

the  principles  established 

The  financing  memorandum  shall  also  contain  provisions  concerning  the 
reduction,  suspension  and cancellation  of assistance where the implementation  of 
a measure does not justify  either a part or the whole of the assistance allocated. 

Article 10 
Use of the euro 

The  amounts  in  the  applications  for  assistance,  together  with  the  relevant 
financing plan, shall be expressed  in euros. 

The  amounts  of assistance  and  the  financing  plans  approved  by the  Commission 
shall be expressed  in euros. 

16 

2. 

3. 

4. 

1. 

2. 

3. 

4. 

Declarations of expenditure in support of the corresponding payment  applications 
shall be expressed in euros. 

Payments of financial  assistance by the Commission  shall be made in euros to the 
authority designated by the beneficiary  country to receive such payments. 

Article 11 
Monitoring and ex-post evaluation 

The  beneficiary  countries  and  the  Commission  shall  ensure  that  the  implementation  of 
measures  under  this  Regulation  is  monitored  and  evaluated  in  accordance  with  the 
provisions in Annex III. 

Article 12 
Annual report 

The Commission  shall present an annual  report on Community  assistance granted  under 
ISPA to the European  Parliament, the Council, the  Economic  and  Social  Committee  and 
the Committee of the Regions. The annual  report  shall  contain  the information  set out in 
Annex IV. 

The  European  Parliament  shall  deliver an opinion  on  the report  as soon  as possible. The 
Commission  shall  report  on  the  manner  in  which  that  opinion  has  been  taken 
into account. 

The  Commission  shall  ensure  that  the  Member  States  and  the  beneficiary  countries  are 
informed  of the activities of ISPA. 

Article 13 
Information  and publicity 

1. 

The  beneficiary  countries  responsible  for  implementing  measures  for  which  the 
Community  has  granted  financial  assistance  under  ISPA  shall  ensure  that 
adequate publicity is given to the measure with a view to: 

(a) 

(b) 

making the general  public  aware of the role played  by the Community  in 
relation to the measures; 

making potential beneficiaries  and professional  organizations aware of the 
possibilities afforded  by the measures. 

Beneficiary  countries  shall  ensure,  in  particular,  that  directly  visible  display 
panels  are  erected  showing  that  the  measures  are  being  co-financed  by  the 
Community,  together  with  the  Community  logo,  and  that  representatives  of  the 
Community  institutions  are duly  involved  in the most  important  public  activities 
connected with Community assistance granted under ISPA. 

They  shall  inform  the  Commission  annually  of  the  initiatives  taken  under 
this paragraph. 

17 

2. 

The Commission  shall adopt detailed  rules on information  and publicity  acting in 
accordance with the procedure laid down in Article  i 4. 

It  shall  inform  the  European  Parliament  thereof  and  shall  publish  them  in  the 
Official Journal of the European Communities. 

Article 14 
Committee 

In implementing  this Regulation,  the Commission  shall be assisted  by a committee of an 
advisory  nature  composed  of  representatives  of  the  Member  States  and  chaired  by  the 
representative  of  the  Commission.  The  European  Investment  Bank  shall  appoint  a 
non-voting representative. 

The  representative  of  the  Commission  shall  submit  to  the  committee  a  draft  of  the 
decision  to be taken. The 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 opinion 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 15 
Final and transitional  provisions 

1. 

2. 

3. 

The  Council,  acting  on  a  proposal  from  the  Commission,  shall  re-examine  this 
Regulation  by 31 December 2006. It shall  act on the proposal  in accordance  with 
the procedure laid down in Article 235 of the Treaty. 

On  accession  to  the  European  Union,  a  country  shall  lose  its  entitlement  to 
assistance under ISPA. 

The  remainder  of  its  allocation  shall  be  reallocated  among  the  remaining 
beneficiary  countries in accordance with Article 4. 

18 

Article  16 
Entry into force 

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

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

in  all 

Done at Brussels, 

For the Council 
The President 

19 

Content of applications (Article 7(3)(a)) 

ANNEX I 

Applications shall contain the following  information: 

1. 

2. 

3. 

4. 

5. 

6. 

7. 

the  name  of  the  body  responsible  for  implementation,  the  nature  of  the  measure 
and a description  thereof; 

the cost and location  of the measure, including, where applicable, an indication of 
the  inter-connection  and  interoperability  of  measures  situated  on  the  same 
transport axis; 

the timetable  for implementation  of  the work; 

a cost-benefit  analysis, including the direct and indirect effects  on employment; 

assessment  of the environmental  impact  similar to the assessment  provided  for in 
Council Directive 85/337/EEClf»; 

information  on  the  place  and  priority  of  the  measure  within  the  national 
environmental  strategy  as  laid  down  in the national  programme  for  the  adoption 
of the acquis communautaire; 

information  on  the  national  transport  development  strategy  and  the  place  and 
priority of the measures within that strategy; 

8. 

information  on compliance with competition  law and public contract rules; 

9. 

' 

the  financing  plan  including,  where  possible,  information  on  the  economic 
viability of the measure, and the total financing the beneficiary  country  is seeking 
from  ISPA,  the  European  Investment  Bank  (EIB)  including  its  pre-accession 
facility  and  any  other  Community  or  Member  State  source,  the  European  Bank 
for Reconstruction  and Development (EBRD), and the World  Bank; 

10. 

the compatibility of  measures with Community policies; 

11. 

information  on  the  arrangements  for  ensuring  the  efficient  use  and  maintenance 
of  facilities. 

16 

OJ  L  175,5.7.1985,  p. 40. 

20 

Appraisal of measures (Article 7(3)(b) and (4)) 

ANNEX II 

A. 

In appraising  the measures, the  following  criteria  shall  be applied  to ensure  their 
high quality: 

1. 

2. 

3. 

4. 

5. 

6. 

their economic and social benefits, including their potential for leverage of 
private  financing,  which  shall  be  commensurate  with  the  resources 
deployed;  an  assessment  shall  be  made  in  the  light  of  a  cost-benefit 
analysis; 

the arrangements  for ensuring effective  management of the measures; 

the  priorities  established  by  the  Accession  Partnerships  for  the  areas 
of intervention; 

the  contribution  which  measures  make 
Community policy on the environment; 

to 

the 

implementation  of 

the  contribution  of  measures  to  trans-European  networks  and  common 
transport policies; 

the  establishment  of  an  appropriate  balance  between  the  fields  of  the 
environment and transport  infrastructure. 

B. 

C. 

The Commission  may  invite the  EIB,  EBRD or  World  Bank  to contribute  to  the 
appraisal  of  measures  as  necessary.  The  Commission  shall  examine  applications 
in  particular  that  the  administrative  and  financial 
for  assistance  to  verify 
mechanisms are adequate  for the effective  implementation  of the measure. 

The Commission  shall appraise measures to determine their anticipated  impact in 
terms of the objectives of this Regulation, using appropriate quantified  indicators. 
The  beneficiary  countries  shall  provide  all  necessary  information,  as  set  out  in 
Annex  I,  including  the  results  of  their  feasibility  studies  and  appraisals,  an 
indication  of  alternatives  not  pursued  and  the  coordination  of  measures  of 
common  interest  situated  on  the  same  transport  route,  to  make  this  appraisal  as 
effective  as possible. 

21 

Monitoring and ex-post evaluation (Article 11) 

ANNEX III 

A. 

B. 

C. 

D. 

Monitoring  shall  be carried  out by  means of jointly  agreed  reporting  procedures, 
sample checks and the establishment of ad hoc committees. It shall  be carried out 
by reference  to physical  and financial indicators. The indicators shall  relate to the 
specific  character of the project  and  its objectives. They shall  be arranged  in such 
a  way  as  to  show  the  stage  reached  in  the  measure  in  relation  to  the  plan  and 
objectives  originally  laid  down  and  the  progress  achieved  on  the  management 
side and any related problems. 

These committees shall be set up by arrangement  between  the beneficiary  country 
concerned  and  the  Commission.  The  authorities  or  bodies  designated  by  the 
beneficiary  country,  the  Commission  and  where  appropriate,  the  EIB  shall  be 
represented  on  the  committees.  Where  regional  and  local  authorities  and  private 
enterprises  are  competent  for  the  execution  of  a  project  and  where  they  are 
directly concerned by a project they shall also be represented on such committees. 

For each  measure, the authority  or body responsible  for the measure shall  submit 
progress  reports  to the  Commission  within  three  months  of  the  end  of  each  full 
year of implementation. 

The  authority  or  body  responsible  for  the  measure  shall  submit  a final report  to 
the  Commission  within  six  months  of  completion  of  the  measure  or  stage  of 
project. The  final  report shall contain the  following: 

1. 

2. 

3. 

4. 

a description  of the work  undertaken, accompanied  by physical  indicators, 
quantification  of expenditure by category of work  and  the measures taken 
with  regard  to  the  specific  clauses  contained  in  the  decision  to  grant 
assistance; 

information  relating to publicity actions; 

certification  of  the  conformity  of  the  work  with  the  decision  granting 
assistance; 

a  first  assessment  of  the  extent  to  which  the  expected  results  have  been 
achieved, including notably: 

(a) 

the effective  date of implementation  of the measure; 

(b) 

(c) 

an  indication  of  the  way  in  which  the  measure  will  be  managed 
once completed; 

confirmation,  if  appropriate,  of  financial  forecasts,  especially  as 
regards operating costs and expected  revenues; 

22 

(d) 

(c) 

confirmation  of 
expected costs and benefits; 

the  socio-economic 

forecast,  especially 

the 

an  indication  of  the  actions  taken  to  ensure  protection  of  the 
environment and their cost. 

E. 

F. 

G. 

H. 

On  the basis of the results of monitoring  and  taking  account  of the comments  of 
the  monitoring  committee,  the  Commission  shall  adjust  the  amounts  and 
conditions  for  granting  assistance  as  initially  approved,  as  well  as  the  financing 
plan envisaged, if necessary on a proposal by the beneficiary  countries. 

The Commission  shall  define  the appropriate  arrangements  for  these  adjustments 
differentiating  them according to their nature and importance. 

Ex-post  evaluation  shall  cover  the  utilization  of  resources  and  the  effectiveness 
and  efficiency  of assistance and  its impact.  It shall  cover  the  factors  contributing 
to the success or failure of implementation  of measures and the achievements  and 
results.  After  the  completion  of  measures,  the  Commission  and  the  beneficiary 
countries shall therefore  evaluate the manner,  including the efficient  and  effective 
use  of  resources,  in  which  they  have  been  carried  out.  The  evaluation  shall  also 
cover  the  actual  impact  of  their  implementation  in  order  to  assess  whether  the 
original  objectives  have been  achieved.  This  evaluation  shall,  inter alia,  address 
the contribution  made by measures to the implementation  of Community  policies 
on  the  environment  or  to  the  contribution  of  trans-European  networks  and 
common transport policies, and they shall also assess the environmental  impact of 
the measures. 

For  the greater  effectiveness  of  Community  assistance  granted  under  ISPA,  the 
Commission  shall ensure that in administering  ISPA particular attention  is paid to 
transparency of management. 

The  detailed  rules  for  monitoring  and  evaluation  shall  be  laid  down  in  the 
Commission decisions approving the measures. 

23 

Annual report from the Commission (Article 12) 

ANNEX IV 

The annual report shall provide information  on the  following: 

1. 

2. 

3. 

4. 

5. 

6. 

7. 

8. 

9. 

financial  assistance  committed  and  paid  by  the  Community  under  ISPA  with  an 
annual  breakdown  by  beneficiary  country  by  type  of  project  (environment  or 
transport); 

the contribution  which the Community  assistance  under  ISPA  made to the  efforts 
of the beneficiary  countries  to  implement  Community  environment  policy  and to 
strengthen  trans-European  transport  infrastructure  networks; the balance  between 
measures  in  the  field  of  the  environment  and  measures  relating  to  transport 
infrastructure; 

assessment  of  the  compatibility  of  operations  of  Community  assistance  under 
ISPA  with  Community  policies,  including  those  concerning  environmental 
protection, transport, competition  and the award of public contracts; 

the  measures  taken  to  ensure  coordination  and  consistency  between  measures 
through  ISPA  and  measures  financed  with  contribution  from  the 
financed 
Community  budget,  the  European  Investment  Bank  (EIB) and the other financial 
instruments of the Community; 

the  investment  efforts  of the beneficiary  countries  in the fields of  environmental 
protection  and transport  infrastructure; 

the preparatory  studies and technical  support measures financed; 

the  results  of  appraisal,  monitoring  and  evaluation  of  measures,  including 
information  on any adjustment  of measures to accord with the results of appraisal, 
monitoring and evaluation; 

the contribution  of the EIB to the evaluation of measures; 

summary  of  information  on  the results of checks  carried  out,  irregularities  found 
and administrative and judicial proceedings in progress; 

10. 

information  on publicity actions. 

24 

FINANCIAL  STATEMENT 

1. 

TITLE OF OPERATION 

Proposal  for  a  Regulation  establishing  an  Instrument  for  Structural  Policies  for 
Pre-Accession (ISPA) 

2. 

BUDGET HEADING  INVOLVED 

B2 

3. 

LEGAL BASIS 

Article 235 of the Treaty 

4. 

DESCRIPTION OF THE OPERATION 

4.1 

General  Objective 

Financial  assistance  within the re-inforced  pre-accession  strategy  to contribute to 
bringing the applicant countries'  infrastructures  up to Community standards in the 
areas of transport and environment. 

V 

4.2 

Period covered  and arrangement  for renewal or extension 

2000-2006; the proposal should be re-examined  by the Council before 31.12.2006 

5. 

CLASSIFICATION  OF EXPENDITURE OR REVENUE 

5.1 

Non-compulsory  expenditure 

5.2 

Differentiated  appropriations 

5.3 

6.  TYPE OF EXPENDITURE OF REVENUE 

Subsidy  for joint financing with  other sources  in the public and/or  private  sector. 
The  subsidies  can  take  the  form  of  non-repayable  direct  assistance,  repayable 
assistance (repayable to the managing  authority  who must  re-apply  the  assistance 
for  the  same  purpose),  an  interest  rate  subsidy,  a  guarantee  fee  subsidy,  risk 
capital participation or another  form of finance. 

25 

7. 

FINANCIAL  IMPACT 

7.1  Method of calculating total cost of operation 

The proposal  for financial resources  for pre-accession  structural  assistance for the 
period  2000-2006  will  be  included  in  the  Commission  proposal  on  the  financial 
perspectives  for  2000-2006.  In  Agenda  2000  the  Commission  indicated  that  an 
amount  of ECU  1 billion per year would  be allocated  for  such  assistance  for  the 
period 2000-2006. 

7.2 

Itemized breakdown of costs 

The  annual  financial  resources  for  pre-accession  structural  assistance  for  the 
period  2000-2006  will  be authorized  by the budgetary  authority  within  the  limits 
of the financial  perspectives to be agreed  for 2000-2006. 

7.3 

Administrative  expenditure  relating  to  studies,  to  experts  and  alike  included  in 
part B of the budget 

A  small  part  of  the  resources  for  ISPA  will  be  set  aside  for  preliminary  studies 
related  to eligible measures and technical  assistance expenditure. A clear link will 
need  to  be  established  between  the  measures  supported  and  the  projects  being 
financed under  ISPA. A key  role  for  technical  assistance  in this regard  will  be to 
ensure  the  high  quality  of  projects,  including  in  terms  of  their  effective 
management  and  implementation.  This  includes  the  preparation  of  measure  by 
feasibility  studies  and  arrangements  for  the  appraisal,  monitoring,  control  and 
evaluation of measures. 

Depending  on  the  outcome  of  current  experiences  of  the  Phare programme  with 
the  'STAP'  {"Technical Support for  the Administration of Programmes")  facility 
a  proportion  of  the  expenditure  could  be  used  to finance contracts  concluded  by 
the  Commission  for  the  duration  of  programmes,  in  order  to  supply  technical 
support  and  cover  relevant  administrative  expenditure  for  the  mutual  benefit  of 
the Commission  and the recipient countries. 

Total  expenditure  for  studies  and  technical  assistance  carried  out  at  the 
Commission's  initiative will be no more than 2% of total financing under ISPA. 

8. 

FRAUD PREVENTION  MEASURES: RESULTS OF MEASURES TAKEN 

to 

applicable 

The  Commission  shall  implement  expenditure  under  ISPA  in  accordance  with 
the 
the  Financial  Regulation 
European  Communities  on the basis of a financing  memorandum  to be drawn  up 
between 
financing 
memorandum  shall contain provisions concerning the management  and control of 
expenditure  through  ISPA  as  well  as  reduction,  suspension  and  cancellation  of 
assistance where the implementation  of a measure does not justify  either a part or 
the whole of the assistance allocated. 

the  beneficiary  country.  The 

the  general  budget  of 

the  Commission  and 

26 

9. 

ELEMENTS OF COST-EFFECTIVENESS  ANALYSIS 

9.1 

Specific  and quantifiable objectives; target population 

Article  1  of the proposal for a Regulation sets out the objectives of ISPA: 

The Community  assistance  granted  under  ISPA  shall  contribute  to the  objectives 
laid  down  in  the  Accession  Partnership  for  each  applicant  country  and  to  a 
corresponding  national  programmes  for the improvement  of the environment  and 
of transport  infrastructure  networks. 

Article 2 lays down the eligible measures: 

(a) 

(b) 

environmental  measures enabling the beneficiary  countries to comply with 
the requirements  of the  body  of Community  environmental  law  and  with 
the objectives of the Accession  Partnerships; 

transport  infrastructure  measures which  promote sustainable mobility, and 
in  particular  those  that  constitute  projects  of  common  interest  based  on 
the  criteria  of  Council  Decision  1692/96  and  those  which  enable  the 
beneficiary  countries  to  comply  with  the  objectives  of  the  Accession 
Partnerships;  this  will  include  inter-connection  and  interoperability  of 
national  networks  as  well  as  with  the  trans-European  networks  together 
with access to such networks. 

instrastructure 

The target population  will be the authorities and bodies in the applicant  countries 
responsible  for  transport  and  environment 
investment.  The 
intermediaries  involved  will  vary  between  the  applicant  countries.  However  in 
line  with  the  decentralized  implementation  policy  the  Commission  is  pursuing 
with  Phare  assistance  for  applicant  countries  it  is  probable  that  ISPA  will  be 
administered  through  a National  Fund  in each  country,  preferably  located  within 
the Ministry of  Finance. To the extent  permitted  by the Financial  Regulation,  the 
implementation  of ISPA will be the responsibility of the applicant countries under 
supervision  of the Commission. 

9.2 

Grounds  for the operation - Need  for Community aid: Choice of ways and means 

The best available estimates of the cost of the applicant countries'  adoption og the 
whole  of  the  Community  acquis  show  that  it  will  be  very  considerable 
everywhere.  In Agenda 2000, the Commission  made a series of proposals  for  the 
reinforcement  of  the  pre-accession  strategy  for  all  applicant  countries.  The 
general objective of the strategy is: 

to offer  a coherent  programme  to prepare the applicant  countries  for  accession  to 
the EU and, 

(i) 

to  bring  together  the  different  forms  of  support  provided  by  the  Union 
within a single Framework, the Accession  Partnerships; 

27 

(ii) 

to  familiarize  the  applicants  with  Union  policies  and  procedures  through 
the possibility of their participation  in Community programmes. 

Together  with  Phare  and  aid  for  agricultural  development,  Agenda  2000 
announced  Structural  aid  for  the  CEECs  amounting  to  some  ECU  1  billion 
per year.  This  aid  would  be  directed  mainly  towards  aligning  the  applicant 
countries on Community  infrastructure  standards. 

Based  this financial envelope  proposed,  there  is a need  to be especially  selective 
as to the sectors to be covered  by the new  instrument.  Given  previous  experience 
with  the  infrastructure  requirements  of the new German  Lander in this regard,  as 
well  as its Opinions on the applicant  countries  the Commission  is proposing  that 
the new instrument should limit its funding  to environment and transport projects. 

Applicant countries are, on the whole, facing  more acute environmental  problems 
than the existing  EU Member States, particularly  in water and air pollution  and in 
waste  management.  The  investment  needed  to  comply  with  the  requirements  of 
the acquis could be more than  ECU  100 billion. 

Agenda  2000  also highlights  the  urgent  need  for  the development  and  upgrading 
of  transport  infrastructure  in  candidate  countries  as  well  as  the  need  to  tackle 
missing  links  between  the  latter  and  the  EU.  Without  such  investment,  severe 
problems  of  traffic  congestion  arc  likely  to  arise  affecting  the  Union's  overall 
traffic  and policies. 

Support  for  investment  in  these  two  areas  would  have  major  benefits  in  the 
applicant  countries  to  improve  the  quality  of  life  and  support  economic 
development  and  also in the  EU countries  in view of the transboundary  effects  of 
transport and environment problems. 

As  the  needs  of  the  applicant  countries  as  regards  environmental  and  transport 
the  public  sector  resources, 
infrastructure  arc  considerable  compared 
including  ISPA,  likely  to  be  available  for  cofinancing  measure,  it  is  important 
that,  wherever  possible,  ISPA  should  have  a  strategic  catalytic  impact  relating 
to  the  overall  investment  needs  rather  than  subsidizing  ad-hoc  investments. 
Agenda 2000 also calls for an increased multiplier effect  from  structural  resources 
by greater use of forms of assistance other than direct grants. In particular: 

to 

scarce public  sector resources should  have a leverage effect,  especially by 
mobilizing private sector  co-financing; 

assistance  from  ISPA  should  not  "crowd  out"  other  potential  financing, 
including local sources and project  generated revenues. 

The  Commission  will  be  seeking  to  maximise  the  multiplier  effect  of  ISPA  by 
promoting  increased  recourse  to  sources  of  loan  and  equity  financing  and  in 
particular  from  private  sources.  In this  regard  project  applications  at  the  level  of 
the financial plan  will need  to contain  information  on  financing  the beneficiary  is 
seeking  from  other  sources  such  as  the  European  Investment  Bank  (EIB), 

28 

including  its  pre-accession  facility,  The  European  Bank  for  Reconstruction  and 
Development  (EBRD) and the World  Bank.  Individual  projects  will  be examined 
with the EIB before the financing package is agreed  by the Commission. 

Main factors of uncertainty 

The  capacity  of  the  organizations  in  the  applicant  countries  responsible  for  the 
implementation  of  the  measures,  the  general  economic  situation  in  the  countries 
and  more  specifically  the  functioning  of  the  financial  system  as  well  as  the 
willingness  of  the  financial  markets  to  allocate  funds  to  the  projects  involved 
which could affect  their possibilities to co-finance operations. 

9.3  Monitoring and evaluation of the operation 

Performance  indicators  selected:  These  will  be  selected  by  the  Commission 
together  with  the  applicant  country,  when  applications  for  assistance  are 
appraised.  The  proposal  for  a  Regulation  states  that  on  receipt  of  a  request  for 
assistance  and  before  its  approval,  the  Commission  should  carry  out  a  thorough 
appraisal of the measure. The following criteria will be applied: 

economic  and  social  benefits,  including  the  potential  for  leverage  of 
private  financing,  which  shall  be  commensurate  with  the  resources 
deployed;  an  assessment  shall  be  made  in  the  light  of  a  cost-benefit 
analysis; 

the arrangements for ensuring effective  management of the measures; 

the  arrangements  for  ensuring  effective  financial  management  of  the 
measures; 

the  priorities  established  by  the  Accession  Partnerships  for  the  areas  of 
intervention; 

the  contribution  which  projects  can  make  to  the  implementation  of 
Community policy on the environment; 

the  contribution  of  projects  to  trans-European  networks  and  common 
transport policies; 

the  establishment  of  an  appropriate  balance  between  the  fields  of  the 
environment and transport  infrastructure. 

Details and frequency  of planned evaluations 

In  addition  to  the  ex-ante  appraisal  outlined  above,  the  Commission  and  the 
applicant  countries  will  undertake  ex-post evaluations  of  the  measures  supported 
through  ISPA. In addition annual progress reports on each measure will have to be 
submitted  to the Commission. 

29 

9.4 

Coherence with financial  programming 

The action proposed for assistance corresponds to the broad Community  objective 
of economic and social cohesion defined  in Articles  130a and  130d of the Treaty. 

10. 

ADMINISTRATIVE  EXPENDITURE 

10.1 

Increase in Commission  staff 

Any  increase  in  staff  if necessary,  cannot  be  quantified  at  this  stage.  In  some of 
the  applicant  countries  increases  in  staff  in  the  Commission  delegations  may  be 
necessary  to  assist  with  the  decentralised  implementation  of  the  assistance 
through ISPA. 

However,  actual  mobilisation  of  the  necessary  administrative  resources  will 
depend  on  the  Commission's  annual  decision  on  the  allocation  of  resources, 
taking  into account  the number of staff  and additional  amounts authorized  by the 
budgetary authority. 

30 

ISSN 0254-1475 

COM(98)  138 final 

DOCUMENTS 

EN 

06  01  11  14 

Catalogue  number  :  CB-CO-98-185-EN-C 

ISBN  92-78-32422-1 

Office  for  Official  Publications  of  the  European  Communities 

L-2985  Luxembourg 

31