Special Report No 5/99 concerning Phare cross-border cooperation (1994 to 1998), accompanied by the replies of the Commission
Date: 1999-11-11
Institutions: European Court of Auditors
Subjects: Central and Eastern European countries, EU aid, EU programme, cross-border cooperation, report

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I

(Information)

COURT OF AUDITORS

concerning Phare cross-border cooperation (1994 to 1998), accompanied by the replies of the
Commission

SPECIAL REPORT No 5/99

(pursuant to Article 248(4), second subparagraph, EC)

(2000/C 48/01)

TABLE OF CONTENTS

Paragraph
references

Page

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SUMMARY OF AUDIT OBSERVATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

THE IMPACT OF THE PHARE CROSS-BORDER COOPERATION PROGRAMME. . . . . . . . . . . .

Impact by sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Transport and communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Economic and human resource development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Small project funds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Policy impacts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Impact on local and regional development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cross-border impact of the cross-border cooperation programme . . . . . . . . . . . . . . . . . .

Impact of the cross-border cooperation programme in attracting other co-financing . . .

FACTORS AFFECTING IMPACT OF THE CROSS-BORDER COOPERATION PROGRAMME . . .

Setting up of the cross-border cooperation programme. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Commission(cid:146)s management set-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Implementing conditions in the beneficiary countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Management of the project cycle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Monitoring and evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

New Phare procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CONCLUSIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1-7

8-15

16-65

16-54

16-36

37-47

48-51

52-54

55-65

55-59

60-63

64-65

66-93

67-75

76-78

79-83

84-90

84-87

88-90

91-93

94-97

Replies of the Commission. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2

3

4

4

4

7

9

9

10

10

10

10

11

11

12

12

13

13

13

13

14

19

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INTRODUCTION

1. The purpose of this report is to assess the impact of the Phare
cross-border cooperation (CBC) programme over the first five
years of its implementation (1994 to 1998) and to evaluate the
effectiveness of CBC management, including the coordination
with the Interreg programme and national co-financing.

2. The objectives of the CBC programme as stated in the Regula-
tion (1) are:

(a) to assist Phare countries(cid:146) regions which are adjacent to the
European Union (EU) in overcoming their specific develop-
ment problems. Such assistance is to be in the interest of the
local population and compatible with the protection of the
environment;

(b) to promote the creation and development of cooperation net-

works on either side of the border.

3. According to these objectives, the main intention underlying
the CBC programme which distinguishes it from the general Phare
programme is the wish to improve economic and social condi-

tions and links specifically in the border regions. This is in con-
trast to the Phare programme which is designed to address priori-
ties at national level including the development of major national
and international infrastructure links.

4. The CBC programme was designed to help develop the kind
of cross-border cooperation on the EU(cid:146)s external borders which
the Interreg programme, funded from the EU Structural Funds,
was already promoting across the internal frontiers of the Euro-
pean Union (2). It was thus intended that CBC funds would be
allocated to border regions in the Phare countries to co-finance
joint projects with adjacent border regions in the EU which were
eligible for Interreg funding.

5. A total of ECU 820 million was committed within the five
first years of the programme. This represents approximately 18 %
of total Phare funds committed over the period 1994 to 1998.
CBC funds have been allocated to the areas of intervention shown
in Table 1. A more detailed analysis by country and sector is shown
in Annex I. A map of the regions eligible for CBC is given in
Annex II.

Phare CBC implementation by area of intervention as at 31 December 1998

Table 1

Commitments

Contracts

Payments

Sector

Transport and communications

Environment

Amount
(million
ECU)

400,8

194,1

% of total CBC
commitments

48,9

23,7

Economic and human resource develop-
ment

119,9

14,6

Small project funds

Other sectors

Programme and project management

35,2

23,2

47,2

4,3

2,8

5,8

Amount
(million
ECU)

192,9

80,5

39

28,6

10,5

33,1

Total

820,4

100

384,6

% of com-
mitments

48,1

41,5

32,5

81,3

45,3

70,1

47

Amount
(million
ECU)

109,9

56,6

19,1

10,5

3,5

21,2

220,8

% of com-
mitments

27,4

29,2

15,9

29,8

15,1

44,9

27

Source: European Court of Auditors.

(1) See Article 3 of Commission Regulation (EC) No 1628/94 of 4 July
1994 concerning the implementation of a programme for cross-
border cooperation between countries in central and eastern Europe
and Member States of the Community in the framework of the Phare
Programme (OJ L 171, 6.7.1994, p. 14).

(2) The Interreg programme was created in 1990 with funding for the
period 1990 to 1994 of ECU 1 000 million. This amount was increased
to ECU 2 400 million for 1995 to 1999.

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6. The audit was carried out in 1998. It included missions to the
Czech Republic, Estonia, Latvia, Lithuania, Poland, and Slovenia.
File reviews were completed for the other eligible Phare coun-
tries (1). Projects subject to on-the-spot audits represented approxi-
mately 56 % of total CBC disbursements at 31 December 1998
(see Annex III). The primary criterion for selecting projects for
on-the-spot audits was operations over ECU 0,5 million where
implementation had begun.

7. The Commission issued in November 1998 an evaluation of
the Phare CBC programme based on its Polish, Czech and Bulgar-
ian components. The main focus of the evaluation was to assess
the reasons for the delay in the implementation of the programme.
While the Court shares many of the evaluation report(cid:146)s conclu-
sions, it considers that more attention should have been given
both to the impact of the programme and to its management by
the Commission.

SUMMARY OF AUDIT OBSERVATIONS

8. Although ECU 820 million was committed under the pro-
gramme it had had only a limited impact at project level by the
end of 1998. This was due both to the lack of projects with a
cross-border impact which were ready for implementation at the
time of funds being committed and delays in the implementation
of approved projects (see paragraphs 16-55). The CBC programme
is nevertheless already having a positive impact at institutional
level in developing cross-border cooperation networks (see para-
graph 63), and contributing, in most countries, to preparing local
authorities in border regions for the management of EU Struc-
tural Funds (see paragraph 57). In the majority of countries the
CBC programme has also mobilised national co-financing (see
paragraph 64).

Implementation is most advanced in the Poland-Germany
9.
programme but one of the main problems the programme was
designed to tackle, the long waiting times at border crossings, per-
sists (see paragraphs 17-22). The Albania-Greece, Albania-Italy
(see paragraph 33), Bulgaria-Greece (see paragraphs 29-31 and
47) and Slovak Republic-Austria programmes (see paragraph 26)
have all experienced significant difficulties.

10. Problems in implementing the CBC programme partly stem
from the excessively large budget of ECU 150 million allocated to
the programme by the European Parliament at its inception (see
paragraph 67). The Commission(cid:146)s allocation of this budget between
individual Phare countries did not adequately take account of

their relative absorption capacities for cross-border projects (see
paragraphs 71-72). The Commission followed a policy of fully
committing the budget, even if projects are not yet adequately
prepared or have only a limited impact at cross-border and regional
level (see paragraph 73).

11. The impact of the CBC programme has been reduced by the
very limited harmonisation with the Interreg programme. Only in
very few cases were joint projects established. This is mainly the
result of the lack of compatibility between Interreg and Phare pro-
cedures (see paragraphs 68-70).

12. The scope of CBC projects has been very wide and, particu-
larly in those countries with insufficient regional administrative
capacities, has often overlapped with the content of projects
financed from Phare national programmes. Insufficient priority
has been given to projects which are primarily for the benefit of
the population of the border regions. To ensure the interests of
the border regions are properly addressed, a larger share of the
CBC programme should focus on relatively small projects with a
strong local/regional and cross-border impact. Notwithstanding
the fact that the new guidelines of the Commission for the Phare
programme require a minimum project size of ECU 2 million,
greater use should be made of small project fund (SPF) facilities,
including the establishment of a common SPF managed jointly by
local authorities in adjacent EU and Phare country border regions
(see paragraphs 54 and 91).

13. Within Phare countries further steps should be taken to
decentralise implementation. CBC funds should be allocated to
regions and on a multiannual basis. More responsibility should be
given to Euroregions (2) for project coordination (see paragraphs
54 and 81).

14. As the procedures for implementing the CBC programme
are more decentralised than for Phare national programmes, the
Commission should consider a corresponding deconcentration of
its management of the programme whilst ensuring that its Del-
egations are adequately staffed for the purpose notably in regard
to engineers (see paragraphs 76-78).

15. Given the results achieved at institutional level, if the Com-
mission can overcome the shortcomings which have reduced the
impact of the programme mainly at project level, a good basis
exists for the further financing of the CBC programme (see para-
graphs 94-97).

(1) Albania, Bulgaria, the Former Yugoslav Republic of Macedonia

(FYROM), Hungary and the Slovak Republic.

(2) Organisations, independent of the Commission, in the border regions
of Austria, the Czech Republic, Germany and Poland responsible for
coordinating project planning and made up of representatives of
municipalities, districts, chambers of commerce and similar bodies.

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THE IMPACT OF THE PHARE CROSS-BORDER COOPERATION
PROGRAMME

Impact by sector

Transport and communications

16. As shown in Table 1, almost half of the Phare CBC funds
have been devoted to transport and communication projects.

Poland-Germany CBC transport projects

In the Poland-Germany CBC programme, ECU 115 million
17.
were committed in the transport sector, mainly to improve infra-
structure and related access roads at several of the main border
crossings with Germany. The objective of these projects was to
tackle the long waiting times to cross the border, particularly for
freight traffic but also local traffic, which had developed as a
result of the increase in trade since 1990 (1). Thus in 1994 wait-
ing times on the German-Polish border for lorries were of the
order of 30 hours.

20. The implementation of two other major border crossing
projects at Gubin (ECU 20,8 million) and Olszyna (ECU 15 mil-
lion), also funded from the 1994 Poland-Germany CBC pro-
gramme, took much longer to complete although the financing
memorandum foresaw completion of the projects by December
1996. Olszyna was only completed in October 1998 while Gubin
was rescheduled for completion in May 1999. The delays are prin-
cipally due to the excessive time required by the Polish authori-
ties and the Commission to prepare the tender documentation
and award the contracts. Border waiting times at these two cross-
ings were also of the order of 10 hours. Swiecko, Gubin and
Olszyna were among the six border crossings with the longest
crossing times in Europe in November 1998 (2).

21. Two further completed projects at Kolbaskowo (ECU 10 mil-
lion) and Osinow Dolny (ECU 1,2 million) have improved the
access roads to these border crossings. However, the usefulness of
the Osinow Dolny project has been reduced because, contrary to
what was foreseen in the financing memorandum, the German
authorities have not opened up the border crossing to lorries for
environmental reasons. The same restriction on lorries is also
threatening to lessen the impact of large scale improvements being
financed to the road from the border at Kostrzyn to Gorzow
Wielkopolski (ECU 9,4 million). It would have been expected that
the selection of the projects by a Polish-German Joint Program-
ming and Monitoring Committee (JPMC) would have drawn atten-
tion to such restrictions (3) at an early stage.

18. Although these projects address a high priority need in the
Polish-German border region, their impact has been reduced both
by delays on the part of the Polish authorities and the Commis-
sion in contracting the works to be carried out and by other fac-
tors such as the inadequate management of border crossings, the
poor state of the Polish road network and environmental restric-
tions. Thus considerable waiting times, particularly for lorries,
continued to exist in 1998.

22. The impact of improvements to border crossings is further
weakened by other factors:

(a) approximately half of the lorries crossing the German-Polish
border are in transit to countries east of Poland (4) and face
serious delays on Poland(cid:146)s eastern border (5);

19. The 1994 programme provided co-financing (ECU 5,5 mil-
lion) for a new freight terminal at the major Swiecko-Frankfurt an
der Oder border crossing. The CBC financing (15 %) served as a
stop-gap after the Polish authorities ran out of their own funds to
complete the project. The project was completed in mid-1995
using accelerated procedures. As a result of the project, border
waiting times for lorries have dropped from 36 hours to 10-12
hours but this is still significant and considerably more than the
project objective of 30 minutes. While the continuing waiting
times are partly due to further increases in the volume of traffic
using this crossing, understaffing of the terminal by Polish cus-
toms officials and the failure of the Polish authorities to build a
special access road from the border to the terminal are also rea-
sons for the clearing procedure still being so long.

(1) From 1990 to 1994 the number of border crossings by lorries between
Germany and Poland increased from 606 508 to 1 625 617 (Polish
Ministry of Transport).

(b) the underdeveloped nature and deteriorating physical condi-
tion of the Polish road network. In 1997, only 24 % of the
main roads in Poland were in a satisfactory state (4);

(c)

improvements in the physical infrastructure at border cross-
ings have not been accompanied by corresponding improve-
ments in the management of border crossings (6).

(2)

(cid:145)Border Waiting Times(cid:146) report of International Road Transport Union,
November 1998.

(3) Projects are selected by JPMCs, in which the Commission has observer
status, before being submitted to the Commission for final approval.

(4) Source: Polish Ministry of Transport.
(5) Notably Kuznicka and Terespol on the Belarus border (see Interna-
reports on IRU website

tional Road Transport Union (IRU)
www.iru.org).

(6) Evaluation of Phare customs programme, PricewaterhouseCoopers,

1998.

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23. Significant CBC funding is also being used to finance bypasses
round several Polish towns (Zielona Gora (ECU 3,3 million), Jele-
nia Gora (ECU 3,8 million), Gorzow (ECU 10 million), Pniewy
(ECU 3,1 million)). While these projects are useful in themselves
for relieving congestion, the distance of 50 km to 150 km from
these towns to the border means that the projects have only a lim-
ited direct cross-border impact, for which reason their financing
under the Phare national programme would have been more
appropriate.

Dresden line has led to less traffic than expected passing through
Cheb (see Map No 1). As a result there is a considerable overca-
pacity following the Phare investment: train capacity was increased
by 32 % while the number of trains has remained the same. Mar-
shalling capacity has increased by 42 % but the number of goods
wagons handled actually fell by 12 % from 1995 to 1997.

Czech Republic-Germany CBC transport projects

Czech-Austrian, Slovenian-Austrian and Slovak-Austrian CBC Trans-
port Projects

24.
In the Czech Republic-Germany CBC programme ECU 28,3
million has been committed in the transport sector. The main
CBC transport project implemented to date has been the mod-
ernisation of Cheb railway station (ECU 12,9 million), the second
biggest rail border crossing between the Czech Republic and Ger-
many. This project was originally based on an agreement between
the German and Czech railways to prioritise improvements to the
N(cid:252)rnberg-Prague line. A decision by the German railways (Deut-
sche Bahn) in April 1996 to focus instead on the N(cid:252)rnberg-

25. The CBC programme has had little impact on the transport
sector in the framework of programmes between Phare countries
and Austria despite the priority assigned to this sector in the
Phare countries(cid:146) 1995 to 1999 multiannual indicative programmes
(MIP). Thus in the Czech Republic-Austria MIP, which is for ECU
30 million, the main transport project being financed by CBC is a
ECU 1,7 million 52 km bicycle path in the Lipno region to link
up with the Austrian cycle path network. While this project is

Map No 1

Railway lines in the German-Czech border region

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likely to enhance tourism in the region, the CBC programme has
no impact on the problems of the transport sector referred to in
the Czech Republic-Austria CBC MIP which stated that (cid:145)for the
revival of the rural border area, it is important to reconstruct,
modernise and extend the road ... and ... railway system ... and to
update the connection between the Czech and Austrian transport
systems in the border region(cid:146) (1).

26. Transport projects in the Slovenia-Austria programme were
similarly largely limited to cycle paths despite the MIP prioritising
the modernisation of border crossings and the related road net-
work. In Slovakia the impact of two projects completed in 1998
to establish new local border crossings with Austria (ECU 0,4 mil-
lion) was uncertain because the two countries had still to reach
an agreement to open the border at these locations. As for the
project, referred in paragraph 21 above, it would have been
expected that such issues would have been cleared at the level of
the JPMC before the financing decision was made.

Bulgaria-Greece, Former Yugoslav Republic of Macedonia (FYROM)-
Greece, Albania-Greece and Albania-Italy CBC transport programmes

27.
In the case of the CBC programmes which Albania, Bulgaria
and FYROM had with Greece, as well as the Albania-Italy CBC
programme, approximately three quarters of the funds have been
allocated to the improvement of road/rail infrastructure, chiefly
along the (cid:145)Crete corridors(cid:146) (2) running through these countries
(see Table 2). These CBC projects are designed to link up with new
investments in Greece and Italy partially financed from Interreg.

28. Very little had been implemented by the end of 1998, above
all because of the limited amount of preparatory work that had
been completed at the time projects were selected by the Com-
mission for CBC funding and because of the weak management
capacities of national and regional authorities. The projects selected
have generally been infrastructure projects of national impor-
tance but with only limited benefits for the population of the bor-
der regions themselves. In several cases the estimated rate of return
of the projects is either below the minimum rate of return nor-
mally eligible for funding by the Commission or very uncertain (3).

29.
In Bulgaria, a major reorientation of the CBC programme
with Greece, agreed between the Commission, Greece and Bul-
garia in mid-1997, led to funds being concentrated on the improve-
ment of the main road and railway line in the transport corridor
leading from the Greek border in the south-west corner of Bul-
garia to Dupnica, 130 km to the north. Dupnica is approximately
30 km outside the border area eligible for CBC funding. Construc-
tion was only expected to begin on these projects in 1999, five
years after the start of the CBC programme.

30. The internal rate of return (IRR) for the railway project was
calculated in 1994 at only 3,71 %, based on cost estimates by the
Bulgarian authorities of ECU 16 million. The project budget has
been subsequently raised to ECU 32,2 million which has lowered
the IRR even more. The Commission is the sole donor although
it would have been expected that a project of this size would have

CBC funds allocated to road and rail projects in the Balkan region (1994-98)

Table 2

Programme

Total commitments
(million ECU)

Commitments in
road and rail sectors
(million ECU)

% of programme
allocated to
road/rail sectors

Albania-Greece

Albania-Italy

Bulgaria-Greece

FYROM-Greece

45

45

99,6

30

31,2

29,4

82,5

19,7

Total

219,6

162,8

Source: European Court of Auditors.

69

65

83

66

74

Crete corridors financed

VIII (Duerres-Burgas)

VIII (Duerres-Burgas)

IV (Berlin-Thessaloniki)

X (Salzburg-Thessaloniki)

(1) Page 19 of Czech Republic-Austria CBC MIP.
(2) Ten such corridors through central and eastern Europe were identi-
fied at the second Pan-European Transport Conference in Crete in
1994.

(3) The communication from the Commission to the Council and the
European Parliament of 23 April 1997 (COM(97) 172 final) entitled
(cid:145)Connecting the Union(cid:146)s transport infrastructure network to its neigh-
bours(cid:146) states that (cid:145)as a general rule, the rate of return should be at least
of the order of 10 %(cid:146) for Commission-financed infrastructure projects
in Eastern Europe.

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been co-financed with an international finance institution. The
benefit of the rail project to the population of the border region
itself is limited (1).

31. Similarly the road project (ECU 25 million) along the same
corridor is of only limited benefit to the border region itself,
despite the inadequate nature of the road network in that region (2).
Indeed, the rehabilitation measures do not cover the first 20 km
of the road from the border because of the low traffic volumes.

32.
In FYROM, the CBC programme has also been reoriented so
that approximately 80 % of the funds from the 1996 to 1999 MIP
are devoted to improving the road from Skopje to Thessaloniki.
The economic justification for the improvements is weak. In 1998
the European Investment Bank estimated the IRR at between 5 %
and 9 % depending on political developments in the Federal
Republic of Yugoslavia. The main section is situated at between
48 km and 66 km from the frontier which lessens the cross-
border impact.

33. For the Albania CBC programmes with Italy and Greece,
approximately 70 % (ECU 64,6 million) of the 1994 to 1998 CBC
funds have been allocated to the rehabilitation of the main national
roads including roads leading to the ports. Both CBC financing
and funds from the Phare national programme (ECU 18 million)
form part of an overall effort by donors, of which Phare is the
largest, to assemble funds to rescue the country(cid:146)s crumbling road
infrastructure. However, the first construction only began in 1998
and has run into serious delays in its implementation. The use of
CBC and Phare national programme funds for the same projects
indicates that these are not specifically cross-border projects.

CBC transport projects in the Baltic States

In the Baltic States most of the funds allocated to the trans-
34.
port sector were designated for improving port infrastructure
(ECU 11,4 million). In Latvia the construction of a vessel traffic
system (VTS) control tower (ECU 1,5 million) was due to be com-
pleted in early 1999. The need to improve shipping safety is
underlined in the Commission(cid:146)s opinion on Latvia(cid:146)s application
for EU membership (3). The project has been seriously delayed
because of a change in the project objectives, the limited experi-
ence of the Latvian authorities in preparing the detailed design
and tender documentation and the late payment of the advance
to the contractor by the Commission.

(1) Approximately half of the municipalities in the CBC eligible areas
have no links with the national rail network. (LACE-Phare project,
Issues paper: Bulgaria-Greece, 1997).

(2) 37 % of the municipalities in the border region eligible for CBC fund-
ing have no national roads. (LACE-Phare project, Issues paper: Bulgaria-
Greece, 1997).

(3) Supplement No 10/97 to the Bulletin of the European Union.

In Lithuania the CBC programme is financing improvements
35.
to the ferry terminal at Lithuania(cid:146)s only port, Klaipeda (ECU 5
million). After significant delays, caused mainly by the inadequate
performance of the contractor and late payments by the Commis-
sion, this project was also scheduled for completion in early 1999.
The project is economically justified because of the significant
growth expected in freight traffic. However, it is noted that similar
projects were being undertaken in Estonia and Latvia financed
from loans by international finance institutions. This raises the
question of whether CBC grants should be used to support projects
which are of a directly commercial nature (see paragraph 65).

CBC telecommunications projects

In Lithuania and Albania, CBC funds have been used to
36.
finance telecommunications projects. In Lithuania, an optical-
fibre cable network in the Klaipeda region was funded (ECU 2,7
million) as part of a wider national project mainly financed by an
EBRD loan (ECU 35 million). 60 % of the project funded by Phare
lies outside CBC eligible areas. The cross-border impact of the
project is in fact of secondary importance. In Albania ECU 1,7
million has been used to co-finance a 500 km submarine optical
cable telecommunications link south to Greece and north to
Croatia. The link with Croatia was not eligible for CBC funding as
Albania has no CBC programme with Croatia and, moreover,
Croatia itself is suspended from the Phare programme.

Environment

CBC environment projects in the Baltic region

37. The environment has been the main sector to which CBC
funds have been allocated in Estonia and Latvia and is also an
important part of the Polish and Lithuanian CBC programmes.
The projects are principally aimed at cleaning up the Baltic Sea of
which the Baltic States and Poland, together with Russia, are the
principal polluters.

38. Although the CBC allocations to this area address a high
cross-border priority, the limited funds available compared with
the size of the needs means that the CBC programme can only be
expected to have a modest impact (4). Moreover, delays in imple-
mentation, particularly in the Baltic States, have further reduced
the impact of
the period 1994 to
1998. These delays can principally be attributed to the lack of

the programme over

(4) The Helsinki Commission(cid:146)s (cid:145)Baltic Sea joint comprehensive environ-
mental action programme(cid:146) which covers the period 1993 to 2012,
estimates the total cost of cleaning up the Baltic at ECU 18 billion.

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experience of the local administrations and the inadequate moni-
toring of the programmes by the Commission until it established
programme implementation units in the Baltic States at the end
of 1996. Up to this point, project monitoring was the direct
responsibility of the Commission headquarters but there is no
evidence that environment projects had been visited by Commis-
sion officials.

In Poland, from 1995 onwards, approximately 40 environ-
43.
mental projects have been funded from the CBC programme,
although few projects had been completed at the end of 1998.
The majority of these projects concern the building or upgrading
of WWTPs. While 75 % of Poland(cid:146)s 860 towns are equipped with
a WWTP, 50 % of the WWTPs do not have sufficient capacity (1).
The estimated total cost of bringing waste water treatment to
European Union standards is ECU 10 300 million, which again
indicates the limited impact the CBC programme can have (2).

39.
In Latvia, the CBC programme (ECU 1,9 million) financed
the completion of a pipeline to send waste water from Jurmala to
Riga for processing to EU standards, instead of being discharged
into the Baltic. Jurmala, a town of 60 000 on the Baltic Coast, is
the source of approximately 3 % of Latvia(cid:146)s waste water. Approxi-
mately 80 % of the project had been carried out over the period
1989 to 1993, using national funding until the Latvian budget
was exhausted. The CBC part of the project was completed two
years behind schedule in 1998 mainly because of the poor per-
formance of the consultant responsible for drawing up the tender
documentation and the lack of proper guidelines from the Com-
mission on the evaluation of tenders for works contracts, which
led to the first tender being cancelled.

40. The CBC programme has also financed a project (ECU 1,8
million) to collect Latvia(cid:146)s hazardous waste. This project was com-
pleted towards the end of 1998, also two years later than pro-
grammed. In this case the delays principally arose from the poor
quality of the feasibility study carried out by the consultant and
delays in contracting the funds resulting from a lack of guidelines
from the Commission. The project only covered the collection of
800 tonnes of waste because this was the total amount of national
waste estimated in the Phare-financed feasibility study. In 1998
total waste was re-estimated at 2 000 tonnes. Moreover, no
arrangements had been made at the time of the Court(cid:146)s audit
(June 1998) for the incineration of the waste once it had been col-
lected.

41. A similar project for hazardous waste management is being
financed in Estonia (ECU 2,4 million), no such system having
existed previously. The first phase, the building of two collection
stations, was expected to be completed in early 1999, two years
behind schedule, largely as a result of local political interventions
as well as the lack of experience of the local authorities and the
absence of adequate guidelines from the Commission for imple-
menting the CBC programme. As in Latvia, the problem of incin-
erating the materials collected had still to be resolved.

42.
In Lithuania, a project is being funded to improve the waste
water treatment plant (WWTP) at the coastal resort of Palanga
(ECU 1,2 million) where pollution at levels five to seven times
higher than the European Union norms flows into the Baltic Sea.
The project has suffered a three-year delay due to a major reori-
entation of the Commission(cid:146)s contribution to the project after it
only belatedly became aware that the works and equipment to be
funded under the CBC project had already been financed in part
by the Lithuanian authorities.

44. Among the largest environmental projects in Poland were
WWTPs in Gubin (ECU 3,3 million) and Szczecin (ECU 3,5 mil-
lion). The project in Gubin represents an excellent example of
cross-border cooperation The new WWTP serves not only Gubin
but its twin German town of Guben on the other side of the
Neisse river (3), thereby significantly reducing both the project
investment and operating costs. Although the CBC project as a
whole had not yet been completed, the WWTP itself was opened
in May 1998 and has enabled a significant reduction in pollution
in line with EU norms. In contrast, in Szczecin the project,
although approved by the Commission in 1995, (total cost: ECU
29,2 million) had still to commence because of delays on the part
of Szczecin City Council in finalising the project design.

CBC environment projects in the Czech Republic

45.
In the Czech Republic, financing needs in the environmental
sector are also huge, an estimated ECU 1 400 million (4) being
required in the waste water sector alone. CBC funds are in par-
ticular being used in the heavily polluted northern Bohemia region
on the German border through which the river Elbe flows. As in
other countries, impact has been reduced because of implementa-
tion delays and only five projects, all funded from the 1994 bud-
get, had been completed at the end of 1998. A major cause of
delay in the Czech Republic was the adoption of a new national
procurement law which led to the blocking of all Phare tenders
for a 12-month period until September 1997.

46. The CBC programme financed a sewer (ECU 5,8 million) to
transfer waste water from the town of Usti nad Labem (180 000
inhabitants) to a newly built Czech-financed WWTP in the nearby
town of Nestemice. This has led to a substantial reduction in the
pollution of the Elbe from Usti in 1998. On the other hand, the
overall pollution levels of the Elbe in the region are broadly the
same as previously because of the amount of pollution upstream,

(1) Approximation of Environmental Legislation Directive related report

(2)

by DG XI dated June 1997.
(cid:145)Compliance costing for approximation of EU environmental legisla-
tion in the CEEC(cid:146), Final Report, Table 4.14, May 1997 (EDC, Ireland).
(3) The two towns were originally one town until being divided at the

end of the Second World War.

(4) Supplement No 10/97 to the Bulletin of the European Union.

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C 48/9

notably from Prague. A similar project for the town of Rumburk
(population of 14 000) which also includes the German town of
Seifhennersdorf was completed at the end of 1997. In Nejdek the
completion in December 1997 of a steam pipeline (ECU 6,6 mil-
lion), fuelled by heat from a local industrial plant, enabled the clo-
sure of brown coal heating plants. This greatly reduced local air
pollution, although no information was available on the extent of
the cross-border impact.

In Hungary significant resources were being used to pro-
50.
mote tourism through developing a cycle path network to link
into the extensive Austrian system. A cross-border industrial park
was also being developed at Szentgotthard-Heiligenkreuz (ECU
4,3 million). However, these projects, decided in 1995, had not
yet been completed.

CBC environment projects in Albania, Bulgaria and FYROM

51.
In the Slovak Republic, the impact of a project to plan the
Jarovce-Kittsee Industrial park (ECU 0,5 million) has been signifi-
cantly reduced. The feasibility study and project design, originally
intended for the creation of an industrial park on both sides of the
Slovak-Austrian border, could only be performed on the Slovak
side because of a lack of cooperation between the two countries.

47.
In Albania, Bulgaria and FYROM, despite the ecological prob-
lems faced, very little funding has been allocated to the environ-
ment because of the priority given to transport projects. The larg-
est environment project is a radioactive waste reprocessing and
storage facility at the Kozloduy nuclear plant in Bulgaria (ECU 3,7
million). This project is not situated in the Bulgaria-Greece border
region but on Bulgaria(cid:146)s northern border with Romania, an area
which was not eligible for CBC funding from 1994 to 1998.

Small project funds

Economic and human resource development

52.
In most CBC beneficiary countries, small project fund (SPF)
facilities have been established with the aim of supporting small
scale (cid:145)people-to-people(cid:146) and (cid:145)soft(cid:146) local development activities.

48.
In most countries, economic and human resource develop-
ment projects have received a relatively small allocation of funds
compared to transport and environment projects, the main excep-
tions being Hungary, the Slovak Republic and Slovenia. Moreover,
most projects were funded from 1996 onwards and have there-
fore not yet been completed. The low allocations partly reflect the
difficulty in identifying projects of this kind which will have a
positive impact on both sides of the border. In some cases, the
regions on either side of the borders are in economic competi-
tion with each other, which makes the financing of such projects
more sensitive.

53. Since 1996, this type of project is becoming the main
approach to implementing the CBC programme in the Baltic
region. Thus ECU 12 million has been allocated to local develop-
ment projects of up to ECU 100 000 involving at least one local
authority from the Phare Baltic States and at least one local
authority from the EU. A contractor (2) was engaged to administer
the programme. However, because of delays on the part of the
Commission in setting up the programme, the first projects were
only starting in mid-1998.

49. The largest project in this field is the establishment of the
(cid:145)Collegium Polonicum(cid:146) in Slubice on the Polish border, which is
being developed by the universities of Frankfurt an der Oder and
Poznan using CBC funds (ECU 16 million) and Interreg funds
(ECU 3,2 million) as well as approximately ECU 8,9 million from
Polish co-financing. The aim of the (cid:145)Collegium(cid:146) is to promote joint
teaching and research in the field of German, Polish and European
studies (1). By the end of 1998, the Phare-financed construction
of hostels for 267 students had been completed (ECU 4 million
from the1994 CBC programme).

54. With the exception of Albania, Bulgaria and FYROM, SPFs
were also established in the other CBC countries, although for
smaller amounts than in the Baltic region (3). These projects gen-
erally had a different emphasis to the Baltic SPF, focusing on
people-to-people and cultural activities. They were highly appre-
ciated in the border regions as a means of cross-border integra-
tion at grass roots level. Implementation has also been relatively
fast, since project selection and approval is more decentralised
than for the rest of the CBC programme. In Poland and the Czech
Republic, management of the SPFs has been successfully delegated
to Euroregions, organisations in the border regions made up of
representatives of municipalities, districts, chambers of commerce
and similar bodies.

(1) The main subjects covered are law, economics, history, philosophy

and linguistics.

(2) A de facto (cid:145)bureau d(cid:146)assistance technique(cid:146) (BAT).
(3) Between 2 and 3 % of each country(cid:146)s CBC allocation.

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Policy impacts

Cross-border impact of the cross-border cooperation pro-
gramme

Impact on local and regional development

55. Although the CBC Regulation stipulates that the aim of CBC
projects is to (cid:145)promote cooperation ... in the interest of the local
population(cid:146), the degree to which this has occurred in practice has
varied. In Hungary and Slovenia projects have had a strong local
focus from the beginning and in Poland, the Czech Republic and
Estonia there has been an increasing trend in this direction. On
the other hand, the lack of adequate regional development plans
in these countries for the border regions concerned has meant
that projects in many cases have been selected in an ad hoc fash-
ion without being integrated into an overall regional development
strategy.

56.
In Bulgaria, FYROM and Albania the emphasis on large
national infrastructure projects has significantly reduced the poten-
tial regional development impact of the programmes.

In countries (1) that have involved their local administrations
57.
in planning and implementing the CBC projects, one of the major
impacts of the CBC programme so far has been to initiate these
administrations in the practices and procedures of the European
Union. This can be considered valuable preparation for future
management of the EU Structural Funds.

58. The CBC financing of the so-called (cid:145)ECOS-Ouverture(cid:146) pro-
gramme (1994 to 1996: ECU 10 million), a programme set up in
1991 by the Commission to promote interregional cooperation
between local and regional authorities from central and eastern
Europe and the Member States, has also contributed to the
strengthening of the capacity of these authorities in Phare coun-
tries.

60. For the great majority of CBC projects it was possible to
identify some kind of cross-border impact even if it was not always
easy to measure. Thus, for example, all environment projects,
almost by definition, have some cross-border impact. However,
the (cid:145)intensity(cid:146) of this impact has varied considerably and the Com-
mission could have better specified priority forms and levels of
cross-border impact required.

61. For the Baltic States, CBC programmes and those of Poland-
Baltic and Albania-Italy, the intensity of the cross-border impact
was reduced by the fact that the sea border made cooperation
between the local authorities and inhabitants on either side of the
border more difficult.

62. The potential cross-border impact of CBC has been reduced
by the lack of integrated development plans which cover the two
sides of the border. Moreover, in most cases the imbalances
between economic development levels on either side of the exter-
nal borders of the EU hinders the establishment of common strat-
egies.

63. A significant impact of the programme has been the enhanced
institutional cooperation between Phare countries and EU Mem-
ber States. In the first place, this has arisen from the setting-up of
Joint Programming and Monitoring Committees (JPMC) in accor-
dance with the CBC Regulation. The JPMCs, which have the task
of selecting CBC projects and monitoring their implementation,
consist of representatives of the EU Member State and the border-
ing Phare country. More intense contact at a lower level has gener-
ally developed through JPMC working groups and cross-border
bodies set up to identify and implement CBC projects. At project
level, most beneficiaries confirmed that the projects had led to
new contacts and/or the strengthening of existing contacts with
counterparts on the other side of the border.

59.
In several countries the part of the country bordering on the
European Union, far from being underdeveloped in a national
context, is one of the most prosperous regions in the country.
Moreover, in most cases, the border regions funded by CBC were
significantly richer than border regions in other parts of the Phare
countries. This is particularly the case in Hungary, where two of
the three eligible counties are the wealthiest in the country, and,
to a lesser extent, in Poland and the Slovak Republic. This is in
marked contrast to the situation in the Member States where the
border regions with the Phare countries are generally among the
poorest regions in the country. While the CBC programme has a
positive impact on the eligible border regions, it is not designed
to contribute to solve regional disparities within the Phare coun-
tries. This problem should be addressed by specific regional policy
instruments.

(1) Estonia, Latvia, Czech Republic, Hungary, Poland and Slovenia.

Impact of the cross-border cooperation programme in
attracting other co-financing

64. A further positive feature of the CBC programme in most
Phare countries has been the co-financing of CBC projects by
national budgets, the first time systematic national co-financing
has taken place in the context of the Phare programme. This rep-
resents an important step towards the co-financing arrangements
required by the EU Structural Funds. The CBC regulation encour-
ages such co-financing in Article 4(3) and the Commission has
sought to insist on a minimum co-financing of 25 % of the project
value. Only Albania, Bulgaria and FYROM failed to meet this
requirement. In Albania, the implementation of the road pro-
gramme was threatened by the lack of a sufficient Albanian bud-
get to finance the compulsory purchase of land.

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65. Article 6(1) of the CBC Regulation stipulates that (cid:145)whenever
the Community grant contributes to the financing of revenue-
generating activities, the Commission shall determine, in consul-
tation with the authorities involved, the rules for financing which
may include co-financing by the project(cid:146)s revenues or reimburse-
ment of the initial grants(cid:146). Despite the fact that numerous CBC
projects are indeed generating revenue, no measures have been
taken by the Commission to implement this Article, which has
simply been ignored.

70. Moreover, the territoriality principle has prevented Interreg
funds being used to co-finance CBC projects in Phare countries
and the CBC programme co-financing Interreg programmes in
the Member States, although such co-financing was one of the
main reasons for establishing the CBC programme.

FACTORS AFFECTING IMPACT OF THE CROSS-BORDER
COOPERATION PROGRAMME

66. The overall impact of the CBC programme five years after its
launch and following the commitment of ECU 820 million is
modest, particularly at project level. This section of the report
seeks to identify the main reasons for this.

71.
In the first two years of the programme, when allocating the
overall CBC budget between individual Phare countries, the Com-
mission did not sufficiently take into account the varying absorp-
tion capacities of the different countries, both in relation to the
management capacity of their local authorities and the existing
cooperation structures between Phare countries and neighbour-
ing EU Member States. Several countries have excessively high
Phare CBC allocations compared with their Phare national alloca-
tions, notably in the Czech Republic where CBC allocations rep-
resent 43 % of the total Phare allocation to the country for 1995
to 1999.

Setting-up of the cross-border cooperation programme

67. The establishment of the CBC programme was agreed at a
meeting of the European Parliament, the European Council and
the European Commission in June 1993. At the Parliament(cid:146)s insis-
tence, the 1994 CBC budget was set at ECU 150 million although
the Commission sought to limit the budget to ECU 20 million (1).
This increase was made without adequate consideration being
given to the actual absorption capacity of the Phare countries.

68. The European Parliament took the view that it would be pos-
sible to implement the CBC programme according to the same
rules as for the Interreg programme. Although the CBC Regula-
tion sought to mirror the Interreg Regulation as closely as pos-
sible, the Financial Regulation prevented the harmonisation of
procedures because the Phare countries are subject to the provi-
sions of Title IX of the Financial Regulation which stipulates dif-
ferent programme selection and implementation arrangements
for Community expenditure outside the European Union. This
has severely hindered the establishment of joint projects between
CBC and Interreg.

In particular, whereas the Interreg programme is approved
69.
for a five-year period (1995 to 1999) by the Commission, the
selection of projects and the supervision of their implementation
is the responsibility of the Member States. On the other hand, the
CBC programme can only be implemented through annual com-
mitments with the Commission responsible for project selection
and the supervision of implementation.

(1) See Letter of amendment No 1 to the preliminary draft budget for

1994, SEC(93) 1588 final, Brussels, 8 October 1993.

72.
In Bulgaria, where the absorption capacity for projects which
have a genuine impact on the border regions has proved particu-
larly limited, the Commission has nevertheless sought to maintain
the allocation provided for in the MIP. Thus after no commit-
ments were made in 1996 and 1997, ECU 51 million was com-
mitted in 1998 for the Bulgaria-Greece CBC programme for
actions without an obvious cross-border impact on eligible regions.

73. Although the Commission fully committed the CBC budget
each year with the exception of 1997, the utilisation of payment
appropriations has been consistently low as Table 3 demonstrates.
The low rate of implementation to a considerable degree is the
result of the large budget made available compared to the rela-
tively limited number of genuine cross-border projects ready to be
implemented. This is a direct consequence of the Commission(cid:146)s
policy of seeking to fully commit the available appropriations
under whatever conditions.

74. The Commission made extensive use of a consultancy firm
to draw up the MIPs for the implementation of the CBC pro-
gramme, although the programming exercise would have nor-
mally been expected to be undertaken directly by the Commis-
sion services in conjunction with the authorities in the Phare
countries. The regional and local authorities were not adequately
consulted in preparing the programmes.

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Table 3

Utilisation of CBC appropriations (1994 to 1998)

Year

Commitment
appropriations
(million ECU)

Actual commit-
ments
(million ECU)

Percentage
utilised
(%)

Payment
appropriations
(million ECU)

Actual pay-
ments
(million ECU)

Percentage
utilised
(%)

1994

1995

1996

1997

1998

150,0

169,0

180,0

279,9

180,0

Total

958,9

Source: European Court of Auditors.

150,0

169,0

180,0

141,0

180,0

820,0

100

100

100

50

100

86

100,0

95,2

161,0

179,9

185,0

721,1

26,5

35,2

71,3

109,7

168,5

411,2

27

37

44

61

91

57

In several areas the procedures for implementing the CBC

75.
programme were not sufficiently defined by the Commission:

the CBC programme should have been matched by a correspond-
ingly greater input from the Commission Delegations.

(a) the main CBC guidelines document issued by the Commission
is mainly limited to programming the aid and exists only in
draft form so that it is uncertain how far the document is
applicable (1);

(b) while at the time the CBC programme was launched, most of
the mainstream Phare programme was implemented through
service contracts, the CBC programme is chiefly implemented
through works contracts. However, guidelines for works con-
tracts were only established in January 1998 (2);

c) although the SPFs have had an important role to play in the
CBC programme as from 1995, when the first funding was
allocated to these instruments, guidelines in this area were not
issued until April 1997.

Commission(cid:146)s management set-up

77.
In the Baltic States and Slovenia the CBC programme was
implemented according to the Commission(cid:146)s centralised proce-
dures, all contracts having to be approved and signed by Com-
mission headquarters. In other countries where the so-called
(cid:145)Phare decentralised implementation system(cid:146) (DIS) was in place, all
contracts signed by beneficiaries for over ECU 500 000 had to be
endorsed by the Commission headquarters. In addition, all work
programmes, which form the basis for transfers of funds from the
Commission to the beneficiary countries, had to be approved not
only by the Delegations but also by two different services within
DG I/A. Thus for the Polish CBC programmes the average time
required by the Commission for endorsing contracts was 80 days
and for work programmes 73 days.

78. Despite the importance of infrastructure investment projects,
the Commission had not adequately staffed its Delegations with
professional engineers. Thus, for example, the Delegations in
Poland and Albania did not have qualified expatriate engineers
among their officials.

76. While the Financial Regulation gives the Commission overall
responsiblity for external relations aid (see paragraphs 68 and 69
above), the procedures used for implementing the CBC pro-
gramme have been unnecessarily cumbersome and the process of
devolution to the Commission Delegations within the Phare coun-
tries only began in 1998. This lack of devolution is despite the fact
that, in accordance with the objectives of the programme, CBC
has been implemented in a more decentralised way by most ben-
eficiary countries than is the case for Phare national programmes.
Thus the greater involvement of local and regional authorities in

Implementing conditions in the beneficiary countries

79. The impact to date of the CBC programme has also been
adversely affected by difficulties in the implementing environ-
ment in the beneficiary countries. In the first place, the CBC pro-
gramme, because of its multisectorial and decentralised nature,
has presented considerably more coordination difficulties to ben-
eficiary countries than other Phare programmes.

(1) Phare-Interreg cross-border cooperation: Proposed guidelines for mul-

tiannual programming (August 1994).

(2) Phare Decentralised Implementation System Manual, Volume 1.

80. Under the DIS the CBC programme is overseen by pro-
gramme management units (PMUs). Although it might have been
expected that the CBC programme would be monitored by regional
development PMUs which had already been set up for Phare

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national funds, new PMUs specific to the CBC programme were
established. In Bulgaria and the Czech Republic the PMUs were
only starting to become operational in 1998, despite the fact that
ECU 1,1 million and ECU 1,5 million respectively had already
been spent on setting them up. All PMUs were based in the capi-
tals, disregarding the fact that projects were located in the border
regions. This has often lowered the efficiency and effectiveness of
programme management.

81. The central governments in the Phare countries have exerted
varying, but in all cases significant, degrees of influence over the
CBC programme, notably at the project selection stage. This ten-
dency is only starting to be modified as most Phare countries
embark on reforms aimed at decentralising their administrations.
This has meant that the programme has had less of an institu-
tional impact on local authorities than it could have had.

82. To the extent that local and regional authorities have been
actively involved in the CBC programme, this has inevitably con-
tributed to slowing down implementation, and thereby reducing
impact at project level, because of the limited management expe-
rience of most of these bodies. To help overcome this situation,
technical assistance which has been largely concentrated on the
PMUs in the capitals should have been more widely extended to
local and regional authorities to support implementation of the
programme at project level.

83.
Implementation of the CBC programme in Bulgaria and
Albania was seriously disrupted by the economic and political cri-
ses which these countries experienced in 1996 and 1997 respec-
tively.

Management of the project cycle

Planning

84.
Implementation of the CBC programme has been hindered
by the constraints of annual budget appropriations. Thus projects
frequently have had to be divided up into annual phases with no
guarantee concerning the funding of future phases and the need
to retender contracts. Moreover, unlike for Interreg, CBC funds are
only allocated at national level rather than regional level which
constitutes an obstacle to regional planning and coordination
with Interreg.

85. The annual commitment of funds by the Commission is
typically towards the end of the financial year. This is despite the
fact that for some programmes, notably Poland-Germany, projects
are generally approved by the JPMC at the start of the year.

infrastructure projects only began on average 20 and 26 months
respectively after the signature of the financing memorandum. In
certain cases, notably for the large road-building projects in Alba-
nia, feasibility studies had not even been completed at the time of
project approval.

87. Although the CBC programme has mainly financed infra-
structure projects, for the great majority of such projects the
Commission has not sought to obtain co-financing from IFIs as
envisaged under the Copenhagen Council(cid:146)s Decision in 1993
when Phare(cid:146)s involvement in infrastructure was authorised.

Monitoring and evaluation

88. The Joint Planning and Monitoring Committees have played
a major role in project selection but have generally played only a
minor role in monitoring project implementation, rarely taking
corrective action to ensure programmes were meeting their objec-
tives.

89. Although the Commission formally uses the logical frame-
work methodology (1) to enable projects to be monitored and
evaluated, the indicators used to measure project achievement are
rarely precise and responsibilities for obtaining monitoring data
are never defined.

90. The annual monitoring and assessment reports carried out
by consultants for the Commission for all Phare programmes
including CBC are useful but focus on outputs rather than impact.
No system has been established by the Commission for assessing
the impact of completed projects and the overall evaluation of the
CBC programme of November 1998 did not address this issue
adequately (see paragraph 7). The Commission has not estab-
lished an annual report on the implementation of the CBC pro-
gramme as foreseen by Article 11 of the Regulation.

New Phare procedures

91.
In 1998, the Commission introduced several initiatives which
affect the Phare CBC programme. The new policy guidelines cov-
ering the Phare programme as a whole (2) included the require-
ment that the minimum size for Phare projects should be ECU 2
million. While this approach may be valid for Phare national
projects, it does not accord well with the CBC objective of sup-
porting relatively small
local projects managed by local and
regional authorities.

86.
In most cases, project implementation only begins one to
two years after project approval because beneficiaries had not
prepared tender documentation at the time of the approval. For
example, in Poland and the Czech Republic implementation of

(1) A project management tool designed to integrate planning, monitor-

ing and evaluation.

(2) Decision of the Commission on the guidelines for Phare programme
implementation in candidate countries, 1998 to 1999. SEC(1998)
1012 final. Brussels, 15 June 1998.

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92. For the 1999 budget, for the first time, up to one third of the
total CBC budget is to be allocated to cross-border cooperation
between Phare countries. This step recognised the importance of
allocating resources to the relatively poorer border areas which do
not adjoin the European Union (see paragraph 59). Further stud-
ies are needed to address the issue of regional imbalances within
each of Phare countries and to determine whether other instru-
ments are necessary.

(d) the small project funds established have proved a succesful
innovation for fostering cross-border cooperation at grass
roots level.

However, in Albania, Bulgaria and FYROM the programme was
implemented without any significant involvement of local and
regional authorities, the national co-financing criterion was not
met and small project funds were scarcely implemented.

93. A new CBC Regulation was adopted at the end of 1998 (1).
It seeks to improve programming between CBC and Interreg but
cannot address the main problem of different implementing pro-
cedures. In the case of both the new Regulation and the alloca-
tion of funds to the Phare-Phare borders, given the existence of
the 1995 to 1999 CBC multiannual indicative programmes, it
would have been better to introduce such significant changes after
1999 to avoid disruption to the current programmes.

CONCLUSIONS

94. The Court considers that during the first five years of its
existence the Phare CBC programme has already had a positive
effect at institutional level as a result of the cooperation developed
in the framework of the Joint Programming and Monitoring
Committees and the wider cooperation between regional and local
authorities arising from the planning and implementation of CBC
projects. However, over the period 1994 to 1998, the impact of
the projects themselves has been less satisfactory.

95. The main positive aspects of the programme are that:

96. On the other hand, the programme has suffered from the
following difficulties:

(a)

implementation has been delayed so that the programme has
had only a modest impact so far at project level. The main
reasons for this are:

(i)

the excessively high budget originally granted to the pro-
gramme by the European Parliament and the Commis-
sion(cid:146)s policy of seeking to fully commit available appro-
priations;

(ii) the limited experience of the administrations in the ben-
eficiary countries which was not compensated for by suf-
ficient guidelines from the Commission on how to imple-
ment the programme, in particular in relation to works
contracts,

(b) some of the projects have only a limited cross-border impact;

(c) some of the projects focus on national priorities rather than
being specifically in the interests of the local population in the
border region;

(d) there have been few joint projects with Interreg, partly as a
result of the lack of compatibility in implementation proce-
dures between the two programmes;

(a) the programme has contributed to the strengthening of coop-
eration between Phare countries and bordering EU Member
States at national and, generally, regional and local level;

(e)

joint plans covering both sides of the borders were not estab-
lished by Member States and Phare countries at the start of
the programme;

(b) in most countries regional and local authorities have increas-
ingly participated in the planning and implementation of the
programme. This helps prepare them for subsequent manage-
ment of the EU Structural Funds;

(c) most countries have mobilised at least the minimum 25 %
co-financing contribution foreseen by the programme;

(1) Commission Regulation (EC) No 2760/98 of 18 December 1998 con-
cerning the implementation of a programme for cross-border coop-
eration in the framework of the Phare programme. (OJ L 345,
19.12.1998, p. 49).

(f)

the programme does not contribute to solving the problem of
regional disparities within Phare countries, the regions sup-
ported by the CBC programme being generally already the
most developed in the countries concerned. While the future
allocation of up to one third of the programme to other bor-
der areas should help to reduce such disparities, the need for
specific regional policy instruments will remain;

(g) programme management procedures of both the beneficiary
countries and the Commission have been too centralised;

(h) the new Phare guidelines do not take adequate account of the

specificities of the CBC programme.

21.2.2000

EN

Official Journal of the European Communities

C 48/15

97. Overall, the Court takes the view that the CBC programme
can play an effective part in the European Union(cid:146)s support to

Central and Eastern Europe if the Commission takes steps to rem-
edy these shortcomings.

This report was adopted by the Court of Auditors in Luxembourg at its meeting of 11 November 1999.

For the Court of Auditors

Jan O. KARLSSON

President

C 48/16

EN

Official Journal of the European Communities

21.2.2000

CBC IMPLEMENTATION BY COUNTRY AND AREA OF INTERVENTION (1994 to 1998)

ANNEX I

SECTOR

(million ECU)

m
o
c
e
l
e
t

,
t
r
o
p
s
n
a
r
T

36,35
8,74
3,12

35,40
16,83
1,55

91,19
11,44
2,29

4,35
1,70
0,00

28,30
20,09
11,18

3,01
1,26
0,52

24,20
13,86
2,82

12,71
3,53
1,99

6,41
1,82
1,81

12,23
10,52
8,70

1,42
1,02
0,71

140,16
98,94
74,21

0,91
0,40
0,09

1,32
0,50
0,00

2,83
2,23
0,88

0,00
0,00
0,00

r
a
e
l
c
u
n

,

y
g
r
e
n
e

,
t
n
e
m
n
o
r
i
v
n
E

y
t
e
f
a
s

5,45
0,00
0,00

5,75
0,00
0,00

5,65
5,62
3,51

10,10
3,16
1,39

50,32
24,54
21,42

7,25
2,82
2,17

1,60
0,00
0,00

4,32
0,60
0,50

8,64
4,16
3,45

8,81
1,36
0,05

13,84
5,37
4,37

61,12
25,96
14,94

2,99
1,74
0,96

2,34
0,40
0,31

3,22
2,30
1,32

2,70
2,47
2,23

s
e
c
r
u
o
s
e
r

n
a
m
u
h

d
n
a

c
i
m
o
n
o
c
E

t
n
e
m
p
o
l
e
v
e
d

0,30
0,00
0,00

0,15
0,05
0,03

0,00
0,00
0,00

4,76
0,12
0,08

15,50
3,71
1,29

5,46
4,19
2,11

2,40
1,00
0,11

12,74
1,95
1,38

0,66
0,10
0,04

1,13
0,04
0,00

2,83
2,76
2,74

31,56
17,91
7,37

4,28
1,02
0,40

7,27
1,88
1,63

2,14
1,23
0,57

28,74
3,07
1,35

Committed
Contracted
Paid

Committed
Contracted
Paid

Committed
Contracted
Paid

Committed
Contracted
Paid

Committed
Contracted
Paid

Committed
Contracted
Paid

Committed
Contracted
Paid

Committed
Contracted
Paid

Committed
Contracted
Paid

Committed
Contracted
Paid

Committed
Contracted
Paid

Committed
Contracted
Paid

Committed
Contracted
Paid

Committed
Contracted
Paid

Committed
Contracted
Paid

Committed
Contracted
Paid

Total committed

400,79

194,09

119,91

Total contracted

192,88

Total paid

109,86

80,49

56,63

39,03

19,08

t
c
e
j
o
r
p

)
F
P
S
(

l
l
a
m
S

s
d
n
u
f

0,00
0,00
0,00

0,00
0,00
0,00

0,00
0,00
0,00

2,00
1,00
0,48

4,17
2,17
0,97

0,00
0,00
0,00

0,50
0,00
0,00

0,95
0,46
0,32

0,00
0,00
0,00

0,00
0,00
0,00

0,18
0,18
0,16

7,15
5,07
2,35

0,22
0,22
0,01

0,13
0,13
0,04

0,14
0,00
0,00

19,75
19,37
6,17

35,17

28,59

10,50

d
n
a

e
m
m
a
r
g
o
r
P

-
e
g
a
n
a
m

t
c
e
j
o
r
p

t
n
e
m

1,90
1,16
0,65

1,80
1,07
0,64

2,77
2,15
1,38

1,48
0,46
0,33

6,54
4,89
2,64

0,90
0,80
0,71

1,30
0,37
0,27

1,23
0,70
0,70

0,99
0,85
0,62

1,14
0,75
0,30

1,00
0,36
0,17

l
a
t
o
T

45,00
10,55
3,77

45,00
19,06
2,22

99,61
19,21
7,17

27,00
8,52
3,15

107,38
57,95
38,66

16,61
9,07
5,51

30,00
15,22
3,20

32,00
7,24
4,89

16,70
6,93
5,91

23,30
12,67
9,06

19,27
9,68
8,16

10,77
6,76
4,44

252,44
154,64
103,30

0,60
0,28
0,11

0,66
0,28
0,22

0,67
0,45
0,33

13,49
11,73
7,65

47,25

9,00
3,66
1,56

12,00
3,18
2,19

10,00
6,93
3,78

75,12
40,08
18,17

820,44

n
o
i
t
a
t
n
e
m
e
l
p
m

I

e
t
a
r

23,45 %
8,37 %

42,36 %
4,94 %

19,28 %
7,20 %

31,54 %
11,67 %

53,97 %
36,00 %

54,57 %
33,17 %

50,74 %
10,67 %

22,63 %
15,29 %

41,52 %
35,41 %

54,37 %
38,89 %

50,21 %
42,33 %

61,26 %
40,92 %

40,65 %
17,35 %

26,50 %
18,24 %

69,26 %
37,81 %

53,35 %
24,19 %

33,06

384,58

46,88 %

s
r
e
h
t
O

1,00
0,65
0,00

1,90
1,11
0,00

0,00
0,00
0,00

4,31
2,08
0,87

2,55
2,55
1,17

0,00
0,00
0,00

0,00
0,00
0,00

0,06
0,00
0,00

0,00
0,00
0,00

0,00
0,00
0,00

0,00
0,00
0,00

1,67
0,00
0,00

0,00
0,00
0,00

0,30
0,00
0,00

0,99
0,70
0,67

10,45
3,44
0,77

23,22

10,53

3,48

21,15

220,71

26,90 %

Programme

Albania - Greece

Albania - Italy

Bulgaria - Greece

Czech Republic - Austria

Czech Republic - Germany

Estonia - Baltic Sea

FYROM - Greece

Hungary - Austria

Latvia - Baltic Sea

Lithuania - Baltic Sea

Poland - Baltic Sea

Poland - Germany

Slovak Republic - Austria

Slovenia - Austria

Slovenia - Italy

International/Multi-country

Source: DesirØe at 31.12.1998.

21.2.2000

EN

Official Journal of the European Communities

C 48/17

ANNEX II

LIST OF PHARE CBC BILATERAL PROGRAMMES

1. Baltic Sea region
2. Poland/Baltic Sea region
3. Poland/Germany
4. Czech Republic/Germany
5. Czech Republic/Austria
6. Slovakia/Austria
7. Hungary/Austria

8. Slovenia/Austria
9. Slovenia/Italy
10. Bulgaria/Greece
11. FYROM/Greece
12. Albania/Greece
13. Albania/Italy

C 48/18

EN

Official Journal of the European Communities

21.2.2000

ANNEX III

LIST OF CBC PROJECTS SUBJECT TO ON-THE-SPOT AUDITS
(31December 1998)

Country

Project

Programme

Amount com-
mitted
(million ECU)

Amount disbursed
(million ECU)

Czech Republic

Estonia

Latvia

Lithuania

Poland

Bela nad Radbuzou road and bridge

1 Cheb railway station
2
3 Zelezna Ruda road
4
Lipno bike route
5 Reconstruction Kynzvart castle
6 Vresova Nejdek steam pipeline
7 Usti nad Labem sewer
8 Rumburk sewer
9
Small project fund
10 Znojmo sewage system

1 Hazardous waste management system
2

Economic development

1 Hazardous waste disposal
2
3 Reconstruction Riga port

Jurmala pipeline waste water treatment plant

1 Klaipeda optical fibre cable
2 Klaipeda Ro-Ro terminal
3
Palanga waste water treatment
4 Klaipeda hazardous waste storage

1 Gubinek by-pass and border crossing
2 Olszyna border crossing
Swiecko freight terminal
3
4 Kolbaskowo border crossing
5 Osinow Dolny border crossing access road
6 Rosow-Rosowko border crossing and access road
7 Kostrzyn-Gorzow Wielkopolski road modernisation
8 Gubin-Zielona Gora roads
9 Rzepin railway border crossing modernisation
10 Gdansk-Rebiechowo airport improvement
Poland-Germany environment projects
11
Baltic Sea environment projects
12
Leba Yacht port
13
14
Tourism projects
15 University of Viadrina
16 Development of Keszyca former Soviet base

Slovenia

1 Robic border crossing
Solarji-Volce road
2
Solarji-Livek road
3
Eco Adria
4
Timav
5

Multi-country

1
2

Baltic small project facility
Baltic project facility

Total

42

Source: European Court of Auditors.

CZ 9403, 9502, 9604
CZ 9403
CZ 9502
CZ 9508
CZ 9502
CZ 9403
CZ 9403
CZ 9403
CZ 9604, 9605
CZ 9508

ES 9407
ES 9619

LE 9404, 9506
LE 9404
LE 9506

LI 9507
LI 9407
LI 9507
LI 9617

PL 9402
PL 9402
PL 9402
PL 9402
PL 9402
PL 9502, 9604
PL 9502, 9701
PL 9502
PL 9502
PL 9503
PL 9502
PL 9409, 9503
PL 9409
PL 9502
PL 9402, 9604
PL 9502

SL 9403
SL 9403
SL 9506
SL 9506
SL 9403

ZZ 9524
ZZ 9631

14,8
1,0
0,5
1,7
0,9
6,8
5,8
1,0
1,1
1,2

2,4
1,2

1,3
1,9
1,5

2,7
5,0
1,2
2,0

20,8
10,4
5,5
10,0
1,2
3,2
6,4
9,7
6,0
0,6
5,6
1,2
1,9
0,9
16,0
1,4

0,2
0,8
0,4
0,7
1,2

2,0
14,0

174,0

7,9
0,9
0,4
0,0
0,2
6,8
5,8
1,0
0,9
1,1

2,0
0,4

0,9
1,9
1,5

2,4
4,0
0,1
0,0

20,8
10,4
5,5
10,0
1,2
1,5
4,7
7,2
2,0
0,5
3,5
1,1
1,7
0,5
5,1
1,2

0,2
0,4
0,0
0,0
1,1

1,5
5,2

123,5

21.2.2000

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Official Journal of the European Communities

C 48/19

COMMISSION REPLIES

The Commission welcomes the generally positive overall conclu-
sion of the Court concerning the Phare CBC programme between
1994 and 1998. Nevertheless, in the light of programme imple-
mentation during the said period, the Commission has already
taken steps to reform the programme, in particular by modifying
the Phare CBC Regulation.

The Commission(cid:146)s replies are in two parts:

(cid:151) the first comments on the Court(cid:146)s observations,

(cid:151) the second sets out the measures adopted in the new Regula-
tion and the new Phare guidelines which take into account
most of the Court(cid:146)s recommendations.

Comments on the Court(cid:146)s observations

(a) Delays in implementation (paragraphs 10, 67, 71, 72, 75,

and the conclusion paragraph 96(a))

The Commission can agree with the Court that the budgetary
authority, on the initiative of the European Parliament, allocated
an excessively large share of Phare funds to the new Phare CBC
budget line (1) (paragraphs 10 and 67).

However, we also believe that, due to the innovative character of
the CBC programme and the limited experience of the adminis-
trations in the beneficiary countries, it was unavoidable that time
was required for getting the programme on stream, with delays in
the implementation as a result:

(cid:151) the Commission needed to draft a new regulation in order to
define eligible borders, eligible actions, institutions and mecha-
nisms for programming and implementation etc.,

(cid:151) the Phare countries needed to create new structures which
would be responsible for the CBC programme at national, and
sometimes at the regional level,

(cid:151) bilateral structures between eligible Phare countries and their

EU neighbours needed to be set up,

(1) The Commission proposed only EUR 100 million for Phare CBC in
the preliminary budget proposal for 1999. In consultation with the
Parliament, the amount of EUR 180 million which was finally decided,
has been allocated for two thirds to borders between candidate coun-
tries and the EU, and for one third to other borders (including borders
between candidate countries).

(cid:151) the Phare countries needed to engage in project identification
and consultations on this with Member States and the Com-
mission, etc.

It should be noted that the Commission was able to adopt the
Phare CBC Regulation on 4 July 1994 and to issue informal guide-
lines for multiannual programming for the 1995 to 1999 period
in August 1994. Furthermore, the Commission only committed
the full amount of the country allocations where acceptable stan-
dard projects were proposed.

From the outset, allocations per country were decided on the
basis of objective criteria such as population and length of the
border. However, on several occasions, countries that were not
able to propose good projects in time, saw their allocations
reduced (e.g. the allocations for Bulgaria and the Slovak Republic
in 1996 and 1997). From the third year of the CBC programme
onwards the Commission has effectively taken absorption capaci-
ties into account. Regarding guidelines, as Commission Regula-
tion (EC) No 1628/94 of 4 July 1994 had Council Regulation
(EEC) No 3906/89 concerning Phare as its legal basis, the general
Phare guidelines based on this Council Regulation also applied to
Phare CBC, and there was no legal obligation for new guidelines.
The Phare CBC Regulation itself was sufficiently specific. Further-
more, for implementing CBC programmes, as is the case with all
other Phare programmes, the Phare DIS (decentralised implemen-
tation system) manual applies. Additional administrative guidance
as provided in August 1994 was sufficient as it provided detailed
information on how to prepare indicative multiannual pro-
grammes covering the 1995 to 1999 period, as well as framework
agreements including agreed objectives and priorities for coop-
eration between partners, and the set-up of Joint Programming
and Monitoring Committees. The Commission also provided
detailed guidelines for the establishment of small project funds by
the time that Phare countries had developed sufficient capacities
for assuming such decentralised responsibilities i.e. at the begin-
ning of 1997. However, the very nature of cross-border coopera-
tion makes these programmes more difficult and slower to imple-
ment. Despite consistent efforts to improve the pace of contracting,
the contracting rate is less favourable than for other Phare pro-
grammes (at the end of 1998, the contracting rate for CBC was
47 % against 67 % for national Phare programmes). This is firstly
the result of the difficult nature of cross-border cooperation. Many
programmes, on external borders as well as internal borders are
facing delays. Another problem is the involvement of parties with
little or no cooperation and management experience. On Phare-
Interreg borders, it is also the result of the legal requirement to
apply two different sets of procedures, as recognised in para-
graphs 68, 69 and 70 of the report.

C 48/20

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Official Journal of the European Communities

21.2.2000

In order to address the limited experience of the administrations
in the beneficiary countries, the Commission made available, at
the early stage of the programme, important amounts of techni-
cal assistance, inside the individual programmes and in horizontal
programmes, for helping the countries to prepare cross-border
programmes.

where in the region, as well as perhaps from Dresden. It is under-
stood that the electrification on the German side will still go
ahead, but at a later date.

(b) Limited cross-border impact of some projects (paragraphs 9,
11, 12, 13, 19, 21, 23, 24, 27, 28, 54, 60, 61, 62, 74, 91 and
the conclusions in paragraph 96(b))

The Commission appreciates the Court(cid:146)s view that (cid:145)For the great
majority of CBC projects is was possible to identify some kind of
cross-border impact even if it was not always easy to measure(cid:146)
(paragraph 60).

The Commission agrees that the intensity of the impact has varied
considerably. Prior to the submission of proposals for Phare CBC
support to the Commission, the Joint Programming and Monitor-
ing Committee and often their joint sectoral working groups dis-
cuss and appraise the cross-border impact of a particular project,
and jointly formulate their recommendation to the relevant
authorities of the Phare country. It will then be up to the Com-
mission to acknowledge and appraise the CBC impact, as reflected
in the project fiches and the logframe matrixes. The Commission
recognises that in some cases partner countries capacities in pre-
paring the required documentation is subject to improvement, as
is the case for the main Phare programme, and will provide fur-
ther technical assistance for this purpose, as appropriate.

The report mentions (paragraph 9) that (cid:145)Implementation is most
advanced in the Poland-Germany programme but one of the main
problems the programme was designed to tackle, the long wait-
ing time at border crossings, persists. The Albania-Greece, Albania-
Italy, Bulgaria-Greece and Slovak-Austria programmes have all
experienced significant difficulties(cid:146). The Commission agrees that
the Poland-Germany CBC programme has been the most success-
ful one, although starting up the programme in 1994 took place
in difficult circumstances, and delays occurred during the first
years. The long waiting times which still persist at border cross-
ings, should be appreciated against the background of a very
important increase of traffic on the borders with the EU. On the
border between Germany and Poland, actual border crossings
have multiplied by a factor of seven for cars and by a factor of
three for trucks. It can not be expected that the limited Phare CBC
funds would be able to solve this problem. Furthermore, as men-
tioned in paragraphs 21 (on the Osinow Dolny project) and 24
(on the Cheb railway station), in certain cases Member States were
responsible for the limited cross-border impact of Phare CBC
projects. As regards the Cheb project, following the change in
German electrification planning, the Czech railways are acting to
ensure full utilisation of the increased capacity at Cheb, by trans-
ferring a number of operations from less efficient facilities else-

As to the transport (rail/road) projects on the border between Bul-
garia and Greece, of which the implementation suffered from sub-
stantial delays (paragraphs 28 and 29), the contracts have now
been signed, and work is about to start. The Commission believes
that they will have an important impact at the transnational,
national, and local level. In particular the railway modernisation
project will play an important role to the benefit of the local
population. The road projects also will play an important strate-
gic role for the economic development of the region as a whole.

The Commission agrees with the Court(cid:146)s findings concerning the
lack of impact of bicycle paths on the transport sector in the pro-
grammes between Austria and its Phare neighbours (paragraph
23). In future, such projects, which are to be considered as enhanc-
ing tourism, will be supported through small project funds only.

Taking into account the good results of the Phare CBC programme
on the border between Poland and Germany, in comparison with
other borders where partners, up to 1998, were used to select a
large number of relatively small projects, the Commission can
only partly subscribe to the Court(cid:146)s view (paragraph 12) that (cid:145)The
CBC programme should focus on relatively small projects with a
strong local/regional and cross-border impact(cid:146). On the basis of
past experience, it became evident, even more so than for main
Phare programmes, that capacities for managing a large number
of small projects were lacking in these countries, especially at the
regional and local level, with increasing backlogs as a result. The
Commission therefore remains strongly committed to ensuring
focus, concentration and impact, notably through the EUR 2 mil-
lion minimum size per project, although this principle will be
applied in a flexible manner in certain cases.

On the other hand, the Commission also favours the set up of
small project funds, which allows local actors on the spot to decide
on small projects and to acquire management skills. As suggested
by the Court (paragraph 13), more scope is being created for such
funds: up to 20 % of country allocations can be used for this pur-
pose (the European Parliament(cid:146)s budgetary comment mentions
10 %), and the project ceiling is being increased from EUR 50 000
to EUR 300 000. In several cases, Euroregions provided valuable
support for managing these small project funds, and the Commis-
sion is sympathetic to extending their role to other borders (as
suggested in paragraph 13), where ever they exist.

21.2.2000

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Official Journal of the European Communities

C 48/21

The Commission also supported the extension of the LACE net-
work, aiming at improving, inter alia, management capacities at
the local level. The Commission recognises that maritime borders,
that are also eligible to Phare CBC, may have somewhat affected
the intensity of the cross-border impact (paragraph 61). In addi-
tion to that, the absence of a Swedish Interreg programme should
be taken into account. However, in the case of the Baltic States
CBC programme, a (cid:145)transnational(cid:146) approach has been followed
from 1995 onwards whereby the four Member States and the four
Phare countries bordering the Baltic Sea (and Russia, as an observer)
jointly discussed a multiannual strategy for the region and dis-
cussed and agreed on project proposals before they were submit-
ted to the Commission. This has allowed support to investment
projects, notably in the fields of transport and environment, to
the benefit of the Baltic region as a whole. Furthermore, through
the set up of a Phare Baltic project facility in 1996, it has been
possible to select an important number of (cid:145)soft(cid:146) small scale projects,
generated on the basis of a (cid:145)bottom-up(cid:146) approach.

A typical sector where only a (cid:145)transnational(cid:146) approach can be fol-
lowed on maritime borders concerns the telecommunications
sector (e.g. the optical fibre cable network in Lithuania mentioned
in paragraph 36). But also on land borders, a (cid:145)transnational(cid:146)
approach was followed in exceptional cases, e.g. for the subma-
rine optical cable in the context of the Adria I project set up by
an international consortium, and for which the Albanian share
was co-financed by the 1995 Phare CBC programme between
Albania and Greece; given the important impact of this project at
international, national and local level (through improved telecom-
munication links between the regions on both sides of the border)
of this project, which was strongly supported and jointly pro-
posed by Albania and Greece, the Commission agreed to support
this project. The ECU 1,7 million has been used to finance Alba-
nian Telecom(cid:146)s share of the total international contribution to the
500 km Adria 1 project. This 1995 CBC allocation has thereby
financed 8 % of segment 2 Dubrovnik-Dures and 14,2 % of seg-
ment 3. This share has therefore only financed that part of the
optical fibre cable in Albanian territorial waters. The Commission
agrees that in most cases it has been difficult to establish com-
mon strategies for the border region as a whole (paragraph 62).
Nevertheless, when Phare CBC multiannual indicative programmes
and Interreg operational programmes were prepared in view of
the 1995 to 1999 period, on most borders, intensive consulta-
tions between partners from Phare countries and neighbouring
Member States took place, which allowed for instance the identi-
fication of common priorities, be it that the different weighting
given to these priorities reflected the differences in economic
development.

The Report also mentions, as a (cid:145)factor affecting impact of the CBC
programme(cid:146), in paragraph 74, that (cid:145)The Commission made exten-
sively use of a consultancy firm to draw up MIPs for the imple-
mentation of the CBC programme(cid:146). In line with the terms of refer-
ence of the contract concerned (Contract No 940856 and
addendum 950726) with LRDP, this company assisted the then

eligible CEEC(cid:146)s in identifying core areas and sectoral priorities for
CBC in the period 1995 to 1999; it provided technical assistance
to the national and regional authorities concerned in view of pre-
paring the Phare CBC multiannual indicative programmes.

(c) Support for national priorities rather than for interests of

the local population (conclusion paragraph 96(c))

The report of the Court mentions that (cid:145)some of the projects focus
on the national priorities rather than being specifically in the
interests of the local population in the border region(cid:146) (paragraph
96(c)) and that (cid:145)insufficient priority was given to projects which
are primarily for the benefit of the population of the border
regions(cid:146) (paragraph 12).

The Commission recognises that, certainly in the initial stage of
the programme, and also in quite different degrees country by
country, national priorities were taken into account when formu-
lating project proposals. As such, this is not contrary to Commis-
sion Regulation (EC) No 1628/94, which provides under Article
4(1)(ii) that (cid:145)projects ... can take the form of ... projects agreed by
the countries concerned, that have a cross-border impact, con-
tribute to the development of structures in border regions and
facilitate cooperation between countries of central and eastern
Europe and the Community as a whole ...(cid:146). Furthermore, the fact
that large investment projects in the field of transport, comple-
menting the development of transEuropean networks (in line with
Article 5(1), seventh indent of Regulation (EC) No 1628/94) were
decided at the national level, is not in contradiction with a posi-
tive local impact of these projects; both aspects are indeed comple-
mentary, as these transport projects (e.g. on the borders between
Bulgaria and Greece, or Poland and Germany) contribute to the
economic development of the border regions concerned.

Although the involvement of regional and local authorities in
designing and implementing cross-border projects became increas-
ingly important in most countries, the Commission agrees that
the future development of integrated regional development strate-
gies will contribute to consolidating this trend.

(d) There have been few joint projects with Interreg (paragraph

11 and conclusion paragraph 96(d))

The Commission recognises that only in very few cases real joint
projects were established. The different priorities on either side of
the border, stemming from important differences in economic
development, were the main reason for this. Furthermore, where
joint projects could be identified, procedural differences stem-
ming from the different legal bases of Phare and Interreg as well
as from the Financial Regulation hampered the design of genuine
joint projects, which would be subject to a single tendering pro-
cedure, a single contract, and common implementation. These

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21.2.2000

differences concern for instance the need for ex ante project
approval from the Commission in the case of Phare (not for Inter-
reg), annual budgets for Phare versus multiannual budgets for
Interreg, and the application of specific rules concerning the
award of contracts under Title IX of the Financial Regulation in
the case of Phare. It was not possible for the Commission to
address these matters in the context of the new Phare CBC Regu-
lation of December 1998, which is a Commission Regulation.
This could only be done by modifying the Financial Regulation.

(e) Lack of joint plans covering both sides of the border (para-
graphs 55, 62, 94 and the final part of paragraph 96(e))

The Commission agrees that real joint plans covering both sides
of the border were not established at the start of the programme.
However, as already mentioned, multiannual programming docu-
ments for the 1995 to 1999 period (multiannual indicative pro-
grammes for Phare CBC, operational programmes for Interreg),
were prepared in close consultation between partners from Phare
countries and neighbouring Member States. As a result, both
documents contained cross-references concerning characteristics
of the border region, strengths and weaknesses, existing CBC
activities, objectives, and common priorities (be it with different
weightings). The elaboration of genuine common regional devel-
opment plans covering both sides of the border is one of the main
innovations under the new Phare CBC Regulation.

(f) The programme does not contribute to solving the problem
of regional disparities within Phare countries (paragraph
59, and the final part of paragraph 96(f))

The report mentions that (cid:145)the programme does not contribute to
solving the problem of regional disparities within Phare coun-
tries, the regions supported by the CBC programme being gener-
ally already the most developed in the countries concerned(cid:146).

The Commission agrees that, during the 1994 to 1998 period, the
Phare CBC programme has not been seen as a part of a wider
regional development policy, and that the programme needed to
be better integrated in the overall pre-accession strategy. Further-
more, it became necessary to address imbalances between budget-
ary resources allocated for CBC within the overall context of Phare,
and the other pre-accession priorities, and between different
regions inside the candidate countries. The Commission has there-
fore widened the geographical scope of the programme. The Phare
CBC programme now covers not only the borders between the
Phare countries and the EU, but also the, often less prosperous,
borders between the candidate countries themselves. This allowed
these new borders to also prepare themselves for their future par-
ticipation in Interreg, and to include Romania in the programme.

The Commission also agrees with the Report (paragraph 96(f))
that, besides the Phare CBC programme, the need for specific
regional policy instruments will remain, and has invited candidate
countries to prepare National Development Programmes in the
context of which Phare will co-finance investment in economic
and social cohesion from the year 2000 onwards.

(g) Programme management procedures have been too centra-
lised, both in the Commission and in the beneficiary coun-
tries (paragraphs 14, 76, 77, 78, and the final part of para-
graph 96(g))

As a matter of fact, the Phare CBC programme has been part of
the process of deconcentration and decentralisation which was
substantially strengthened in 1999; moreover, the decentralised
implementation system became applicable simultaneously to Phare
CBC as to the main Phare programme, and responsibilities of Del-
egations e.g. for approving tender dossiers are similar as for the
main Phare programme. In reply to the suggestion of the Court
that Delegations (paragraphs 14, and 76 to 78)
(cid:145)should be
adequately staffed ... notably in regard to engineers(cid:146), it should be
noted that in the context of deconcentration, the re-enforcement
of Delegations through redeploying staff from headquarters has
reached its limits. Taking into account the reluctance of the bud-
getary authority to allow for additional Commission staff, it is not
likely that further re-enforcement of our Delegations with new
staff will be possible. As to the need for engineers, Delegations
dispose of certain possibilities in the context of the STAP facility
(support for technical assistance to programmes).

The process of further decentralising management responsibili-
ties from the Commission to the candidate countries has to take
account of the legal requirements of Title IX of the Financial
Regulation, in particular those which concern the responsibilities
of the Commission. In line with the provisions of Council Regula-
tion (EC) No 1266/1999 on coordinating pre-accession aid, man-
agement of aid on a decentralised basis will only be conferred to
the applicant countries themselves provided they fulfil certain
minimum criteria thereto (well defined internal management sys-
tem, effective internal controls, reliable national financial control
system, procurement rules compatible with Title IX of the Finan-
cial Regulation etc...).

As to the possibilities for further decentralisation of management
responsibilities inside candidate countries, these will notably
depend on evolutions of the legal basis for regional policy in each
country, and on actual organisation of regional and local admin-
istrations. Although progress is being made, in general, the pace
of reforms strongly varies country by country.

(h) The new Phare guidelines do not take adequate account of
the specificities of the CBC programme (paragraphs 91, 92,
93 and the final part of paragraph 96(h))

The text of paragraph 91 criticises the application of the EUR 2
million minimum project size provided in the Phare guidelines of

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C 48/23

1998 to Phare CBC; as already mentioned, under Section (b), the
Commission will maintain this minimum threshold. However, the
draft new guidelines for the period 2000 to 2006 provide for a
flexible application of the EUR 2 million minimum project size
for Phare, in the case of Phare CBC.

strategies and priorities for the region, seen as one single
socioeconomic and geographical entity; on the basis of this
joint programming document, they will also define a com-
mon set of projects once per year,

The report also states that (paragraph 93) (cid:145)In the case of both the
new Regulation and the allocation of funds to the Phare-Phare
borders, given the existence of the 1995-1999(cid:146) CBC multiannual
indicative programmes, (cid:145)it would have been better to introduce
such significant changes after 1999 to avoid disruption to the cur-
rent programme(cid:146).

The Commission was of the opinion that it was urgent to intro-
duce the modifications included in the new Regulation (see Sec-
tion III), in the light of the evaluation report on Phare CBC, pub-
lished in 1998, of long preparatory discussions with Phare
countries and Member States, and in the perspective of enlarge-
ment. The new Regulation has been prepared jointly by the DG(cid:146)s
responsible for external relations and the Structural Funds, in
view of maximum coherence with Interreg, and has been pro-
posed to the Commission jointly by the two responsible Commis-
sioners. The Commission also had to respect the European Par-
liament(cid:146)s budgetary comment for 1999. Furthermore, there has
been no disruption of the current programmes on the EU bor-
ders, be it that allocations for these borders were somewhat
reduced, taking into account that the global amount allocated by
the budgetary authority for Phare CBC remained unchanged, for
a larger number of eligible borders.

MEASURES FOR IMPROVEMENT

On the basis of the external evaluation of the Phare CBC pro-
gramme for the 1994 to 1998 period launched by the Commis-
sion and of in-depth discussions with the candidate countries and
the Member States in the context of the Phare Management Com-
mittee, the Commission adopted a new Phare CBC Regulation in
December 1998. The main improvements of the new Regulation
concern the following:

(cid:151) the Phare CBC programme will become part of a wider regional
development policy, in the context of the pre-accession strat-
egy,

(cid:151) the programme will also cover borders between candidate
countries, which will allow these to prepare themselves for
their future participation in Interreg, and also to include
Romania in the programme,

(cid:151) Joint Cooperation Committees (JCC) will be established on
each border, which will include representatives from both
neighbouring countries at the national and local level and
from the Commission,

(cid:151) these JCCs will elaborate a joint programming document in a
multiannual perspective containing common development

(cid:151) joint small project funds may be established in each border
region, for which a limited part of appropriations may be
used.

The improvements provided for in the new Phare CBC Regula-
tion, as well as the new approaches provided for in the new Phare
guidelines and a further decentralisation of programming imple-
mentation would allow the addressing of the difficulties men-
tioned in the Report:

(a) the pace of implementation of the programme is improving
in most cases. As is the case for the main Phare programme,
projects proposed for support from Phare CBC are only
accepted by the Commission if they are ready for implementa-
tion. Where problems persist in terms of absorption capaci-
ties, this will be taken into account when deciding on future
allocations; budgetary allocations per border became also
more balanced now that Phare-Phare borders became eligible
in 1999 and received (modest) allocations for the first time.
As the new Phare guidelines will also apply to CBC, the new
Phare CBC Regulation, complemented with guidance for elabo-
rating the joint programming documents and updated guide-
lines for small project funds which are currently being pre-
pared, will provide sufficient guidance from the Commission.
The experience of the administrations in the beneficiary coun-
tries is also improving, as the Phare CBC programmes evolve;
special attention is being given to the newly eligible borders
under the Credo and Lace programmes;

(b) the cross-border impact of projects should improve as they
will be derived from joint multiannual strategies developed
for the border region seen as one single entity, and as the Joint
Cooperation Committees will define a common set of projects
once per year. The Commission will continue to appraise the
cross-border impact of each project, identified by the JCC and
proposed for Phare CBC support by the Phare country. How-
ever, cross-border impact should be looked upon at pro-
gramme rather than at project level;

(c) as cross-border cooperation programmes will be based on
joint programming documents made in a multiannual per-
spective, which will include common development strategies
and priorities for the border region, and regional and local
representatives shall be represented in the Joint Cooperation
Committees, the national priorities would become less rel-
evant for cross-border cooperation. Regional and local authori-
ties are also becoming increasingly involved in developing
integrated regional development plans, as the set up of regional
structures and competences in candidate countries evolves;

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21.2.2000

(d) while genuine joint programming is foreseen under the new
Phare CBC Regulation, which would allow to increase the
number of real joint projects supported by Phare CBC and
Interreg, these may remain rather exceptional, bearing in mind
the differences between the two Regulations;

(e)

joint programming documents covering both sides of the bor-
der will be established by the year 2000. These will include a
detailed description of the current situation, a strategy for
long-term cross-border cooperation, the definition of main
priorities and measures for CBC, an indicative financial table
for the 2000 to 2002 period, within a seven-year perspective,
mechanisms for joint project selection, and provisions con-
cerning joint project funds, implementation, and institutional
aspects;

(f) as the Phare CBC programmes will also become part of wider
regional development policies (cid:151)while respecting the specific
requirements of CBC(cid:151) and the Phare CBC programme has
been extended to borders between candidate countries (con-
sideration will also be given to expanding the geographical
coverage to the future external borders of the EU), the pro-
gramme is also increasingly contributing to solving the prob-
lem of regional disparities inside the candidate countries;

(g) programme management procedures are becoming increas-
ingly decentralised now that the DIS has become operational

in all candidate countries. Further steps will depend on progress
made in these countries as concerns management capacities,
financial control procedures and structures regarding public
finance at the national and regional level. The Commission
has taken the initiative to provide for further decentralisation
in the context of Article 12 of the Regulation on coordinat-
ing pre-accession aid. The text finally adopted by the Council
spells out the required conditions thereto. The small project
funds which were set up on a number of borders and allowed
local actors to decide on small projects without ex ante project
approval from the Commission will be further extended and
consolidated, notably through raising the project ceiling from
EUR 50 000 to EUR 300 000;

(h) the new Phare guidelines which shall also apply to Phare CBC
contain a (cid:145)flexibility clause(cid:146) concerning project size which cre-
ates sufficient scope for better alignment with Interreg, nota-
bly as concerns project size. According to these Guidelines,
(cid:145)the application of the otherwise required minimum size of
projects (EUR 2 million) will allow derogations only on the
basis of a case by case assessment and under the circumstances
of genuine cross-border cooperation falling within the prior-
ity measures defined in the joint Phare-Interreg programming
documents(cid:146). However, the flexibility will only be used in
exceptional circumstances as it is necessary to strike a balance
between full alignment with Interreg, and the responsibilities
of the Commission for implementing the Phare CBC pro-
gramme, including the award of contracts.