Report from the Commission to the European Parliament and the Council - General Report on pre-accession assistance (PHARE – ISPA – SAPARD) in 2003 {SEC(2005)558}
Date: 2005-05-02
Institutions: European Commission
Subjects: EU financial instrument, EU programme, accession to the European Union, pre-accession aid, report

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 02.05.2005 
COM(2005) 178 final 

REPORT FROM THE COMMISSION TO 
THE EUROPEAN PARLIAMENT AND THE COUNCIL 

GENERAL REPORT ON PRE-ACCESSION ASSISTANCE 
(PHARE – ISPA – SAPARD) IN 2003 

{SEC(2005)558} 

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1. 

SUMMARY 

This  is  the  fourth  report  to  the  European  Parliament  and  the  Council  on  the  three  pre-
accession  instruments  and  their  co-ordination  in  accordance  with  Article  13  of  the  ‘Council 
Regulation  on  the  co-ordination  of  pre-accession  assistance’(EC)  No  1266/991  (in  the 
following  "Coordination  Regulation").  In  line  with  the  positive  accession  negotiations  in 
Copenhagen  2002,  an  increased  emphasis  was  in  2003  put  on  creating  the  administrative 
capacity required for a successful implementation of the acquis and participation in present or 
future European Community programmes as of membership. 

Phare  addresses  priority  measures  concerning  the  adoption  of  the  acquis  communautaire, 
whether  through  improving  administrative  capacity  or  supporting  related  investment.  It  also 
has an element for Economic and Social Cohesion. 

ISPA  (Instrument  for  Structural  Policies  for  Pre-Accession)  finances  major  environmental 
and transport infrastructure projects. 

SAPARD  (Special  Accession  Programme  for  Agriculture  and  Rural  Development)  finances 
agricultural and rural development. 

Detailed  information  on  the  activities  in  2003  under  each  pre-accession  instrument  can  be 
found in the relevant annual PHARE2, ISPA3 and SAPARD4 reports. 

For financial figures on the pre-accession instruments, see section 5 “Financial Overview”.  

The  co-ordination  of  the  three  instruments  is  ensured  by  a  division  of  responsibilities 
between the instruments. A committee at Directorate level ensures co-ordination between the 
Commission services concerned. A ‘General Assistance Document’ covering all instruments 
was  presented  in  April  2003  to  the  Phare  Management  Committee,  the  body  assisting  the 
Commission in co-ordinating the instruments. At country level, the Commission encouraged 
the applicant countries to enhance inter-ministerial co-ordination, which is seen as a key pre-
condition for the successful future management of the Structural Funds.  

2. 

OVERALL DESCRIPTION OF MECHANISMS OF THE PRE-ACCESSION INSTRUMENTS 

2.1 

Commitments and transfer of funds 

Before EU funds can be transferred, they require: (1) a Commission Decision, in order to be 
committed  into  the  Budget;  (2)  a  Framework  Agreement;  and  (3)  an  annual  bilateral 
Financing  Agreement  or  Memorandum  determining  the  financial  commitment  of  the 
Community  for  the  measure  concerned  towards  the  recipient  country,  i.e.  fixing  rights  and 
obligations  for  both  parties.  However,  the  procedures  leading  to  decision  making  and 
commitment  of  funds  are  different  for  each  instrument.  Detailed  information  on  the 
procedures leading to funding under each instrument can be found in the annex 1.1.  

1 
2 
3 
4 

Published in the OJ L 161, 21.06.1999, p.68  
COM(2005) 64 final 
COM(2004) 735 final 
COM(2004) 851 final 

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2.2 

Implementation structures in Candidate countries 

Funds  from  the  pre-accession  instruments  are  channelled  through  the  National  Fund, 
established in the Ministry of Finance in each country, under the responsibility of the National 
Authorising  Officer.  The  concrete  implementation  of  Phare  and  ISPA  is  carried  out  in 
Implementing Agencies (such as the Central Finance and Contracts Unit, CFCU) that receive 
the  funds  from  the  National  Fund5.  For  SAPARD,  the  implementation  is  carried  out  by  the 
dedicated SAPARD Agency that receives the funds from the National Fund. 

2.3 

Decentralisation  of  implementation  under  Article  12  of  the  Co-ordination 
Regulation6 

Decentralisation is the process by which management of EU funds is devolved to candidate 
country administrations.  

For Phare and ISPA, this process was governed in 2003 by the Decentralised Implementation 
System (DIS). DIS means that the procedures for managing measures or projects financed by 
ISPA and Phare require ex ante control, i.e. decisions concerning procurement and award of 
contracts  are  taken  by  the  contracting  authority  and  referred  to  the  EC  Delegation  in  the 
beneficiary country for endorsement. Thus the EC Delegations are responsible for endorsing 
procurement documents before tenders are launched or contracts signed. 

On the other hand, SAPARD is implemented on a fully decentralised basis (EDIS = Extended 
Decentralisation  Implementation  System).  EDIS  stands  for  full  decentralisation  of  EU 
support, meaning the process by which management of EU pre-accession funds is devolved to 
candidate  country  administrations,  where  the  Commission  exercises  no  systematic  ex-ante 
control over individual transactions, but is limited to an ex-post control, whilst it retains the 
final responsibility for general budget execution. 

Such  delegation  of  management  responsibility  requires  each  country  to  set  up  adequate 
management and control systems to be approved at national level by the National Authorising 
Officer.  Once  these  conditions  are  met,  the  Commission  carries  out  the  compliance 
verification prior to the Decision by the Commission conferring financial management.  

Whilst  Phare  and  ISPA  continued  to  be  implemented  through  the  DIS  in  2003,  significant 
progress  to  move  to  EDIS  on  the  basis  of  the  Co-ordination  Regulation  was  noted  in  the 
acceding  and  Candidate  countries.  Preparations  for  EDIS  were  accelerated  in  all  Candidate 
countries. For Phare and ISPA, the move to EDIS is done through 4 stages described in the 
Commission Working document “Preparing for Extended Decentralisation” and the document 
“Roadmap to EDIS for ISPA and Phare”. The Roadmap sets out the procedural stages leading 
to  an  EDIS  decision.  Stages  1  to  3  are  the  responsibility  of  the  Candidate  countries  and 
contain a Gap assessment, a Gap Plugging and a Compliance assessment of the management 
and  control  systems.  Stage  4  is  the  preparation  for  Commission  decision  and  is  the 
responsibility  of  the  Commission.  This  decision  is  taken  following  an  in  depth  review, 
including  a  verification  audit  on-the-spot,  of  the  management  and  control  systems  as 
described in the EDIS application submitted to the Commission by the National Authorising 
Officer.  

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6 

Unless the National Fund acts as a paying agent on behalf of the Implementing Agency 
Article 12 of the Co-ordination Regulation provides the legal basis to “waive the Commission’s ex ante 
approval for project selection, tendering and contracting by applicant countries” 

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The obligation for the acceding countries to have EDIS in place by accession was announced 
in  2002  and  subsequently  inserted  in  the  Act  of  Accession  signed  in  2003  as  a  legal 
requirement. As regards Bulgaria and Romania the Commission encourages moving to EDIS 
by the end of 2005/beginning of 2006. For more information on EDIS, see Annex 1.2. 

3. 

MONITORING AND EVALUATION 

3.1 

PHARE 

Execution  of  the  Phare  programmes  is  subject  to  a  structured  monitoring  and  evaluation 
process. A Joint Monitoring Committee in each country is supported by Sectoral Monitoring 
sub-Committees which meet twice a year.  

Concerning evaluation, an ex-ante evaluation report was conducted in 2003, which revealed 
needs  for  more  strategic  programming,  increase  of  resources  for  project  design  and  the 
introduction of a more systematic quality control.  

In  2003,  the  123  interim  evaluation  reports  issued  together  with  the  comprehensive  ex-post 
evaluation indicated that Phare programming, in general, generated projects whose priorities 
were in line with those of the Accession Partnerships.  

Overall,  evaluation  results  concluded  satisfactory  Phare  performance.  Good  progress  was 
made  in  meeting  objectives  in  cross  border  co-operation,  environment,  justice  and  home 
affairs, public administration/finance, transport and the social domain. Outcomes were more 
mixed in agriculture, economic and social cohesion/regional policy. Results in the SME and 
in the internal market sectors have been uneven but improving.  

3.2 

ISPA 

All ISPA projects are subject to the ISPA Regulation and the Financing Agreement provisions 
of both monitoring and evaluation. Implementation progress is reviewed systematically twice 
a  year  and  periodically  by  Commission  services,  in  particular  through  the  Monitoring 
Committees.  

Requirements  for  ex-post  evaluation  are  stipulated  in  Section  XIII  of  the  annex  to  the 
Financing Memorandum, which is concluded for  each  project between  the Commission and 
the  ISPA  beneficiary  state.  This  section  states  that  after  the  completion  of  a  project,  the 
Commission and the beneficiary countries will evaluate the project’s impact and the manner 
in which the project has been carried out. Given the early stage of ISPA implementation, no 
ex-post evaluation was launched in 2003. 

3.3 

SAPARD 

Implementation  of  SAPARD  programmes  is  subject  to  the  provisions  of  the  ‘Multi  Annual 
Financing  Agreements’  in  respect  of  both  monitoring  and  evaluation.  In  2003  each  of  the 
Monitoring Committees met at least once. Annex 1.5 provides a list of subjects dealt with in 
Committee meetings. 

The  Commission  continued  working  closely  with  the  beneficiary  countries  on  adapting  and 
running  the  monitoring  and  evaluation  systems.  Meetings  provided  a  useful  opportunity  to 
reinforce  Commission  Guidelines  on  the  mid-term  evaluation;  to  ensure  that  the  evaluation 

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exercise would be undertaken in a comprehensive and timely fashion; and to address specific 
queries which the evaluators wished to raise in the early stages of their work.  

The  Commission  also  organised  a  seminar  on  the  theme  ‘Developing  and  promoting  local 
initiatives  in  the  Candidate  Countries  (Pardubice,  Czech  Republic,  8-11  May)  aiming  to 
provide  a  forum  for  the  exchange  of  views  on  the  implementation  of  the  SAPARD 
programme.  

4. 

CO-ORDINATION 

4.1 

General 

As  required  by  the  Coordination  Regulation,  the  Commission  ensures  close  co-ordination 
between  the  three  pre-accession  instruments.  The  Regulation  carefully  specifies  the  field  to 
which each instrument provides assistance, thereby minimising potential overlaps between the 
different instruments.  

The  Accession  Partnerships  set  the  general  framework  for  assistance  under  the  three  pre-
accession  instruments.  They  are  complemented,  in  the  case  of  Phare,  by  the  National 
Development Plans, and in  the  case of ISPA, by the national strategies for the  environment 
and  transport.  SAPARD  projects  are  selected  on  the  basis  of  the  Rural  Development 
Programmes  for  2000-2006,  prepared  on  the  basis  of  the  Candidate  countries’  plans  and 
approved for each of the countries by the Commission in 2000. 

The  Phare  Management  Committee  plays  a  key  role  in  general  co-ordination.  According  to 
Article 9 of the Co-ordination Regulation, the Committee should assist the Commission in co-
ordinating  operations  under  the  3  instruments  and  the  Commission  should  inform  the 
Committee  about  the  indicative  financial  allocations  for  each  country  and  per  pre-accession 
instrument about action it has taken as regards co-ordination with the EIB, other Community 
instruments and IFIs.  

4.2 

Co-ordination inside the Commission 

The Phare programme and the co-ordination of the instruments come under the responsibility 
of  DG  Enlargement,  supported  by  the  Phare  Management  Committee.  ISPA  is  under  the 
responsibility  of  DG  Regional  Policy,  and  SAPARD  under  the  responsibility  of  DG 
Agriculture. 

Programming is co-ordinated through extended inter-service consultations. In addition, a Co-
ordination Committee at Directors level for the pre-accession instruments has been set up in 
the  various  Commission  services  involved.  It  pays  particular  attention  to  the  preparation  of 
EDIS of Phare and ISPA. 

To  avoid  duplication,  the  Commission  has  clarified  the  interface  between  Phare  and 
SAPARD,  taking  into  account  the  provisions  of  the  Co-ordination  Regulation.  As  regards 
project  monitoring,  co-ordination  takes  the  form  of  the  JMC.  The  JMC  is,  where  possible, 
supported by the ISPA Monitoring Committees and the relevant Phare sub-committees. 

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4.3 

Co-ordination in the Candidate countries 

In line with the objective of decentralisation, the Commission encourages Candidate countries 
to  enhance  inter-ministerial  co-ordination  as  a  key  condition  for  successful  future 
management  of  the  Structural  Funds,  and  in  the  short  term  for  programming  and 
implementing Phare Economic & Social Cohesion. In several countries, however, such inter-
ministerial coordination needs further improvement.  

As  full  decentralised  management  is  provided  for  from  the  outset  (for  SAPARD),  or  has 
gradually  been  increased  through  the  progress  towards  EDIS  (for  Phare  and  ISPA),  the 
Candidate  Countries’  responsibility  for  proper  co-ordination  of  operations  receiving  pre-
accession  support  and  avoiding  overlaps  is  to  be  developed  accordingly.  Only  the  countries 
themselves  will  be  able  to  ensure  full  implementation  at  project  level.  The  Commission 
therefore requested that they take the necessary steps for effective and efficient co-ordination.  

4.4 

Co-ordination with the EIB and International Financial Institutions (IFIs) 

Pre-accession  aid  can  play  its  full  role  when  it  mobilises  funds  from  the  IFIs.  Co-operation 
with  the  EIB  and  other  IFIs  in  2003  therefore  continued  under  the  framework  of  the 
“Memorandum of Understanding on co-operation in the pre-accession assistance”.7  

Figures available for the years 2000 to 2003 show that the yearly operations of the IFIs are in 
excess of 22.8 billion Euros in loans signed with the 10 enlargement countries. This amount 
also  demonstrates  the  leverage  effect  of  Community  pre-accession  assistance  having  been 
reinforced since 2000.  

Given the fact that large infrastructure projects that commonly are subject to international co-
financing are financed under ISPA; co-financing under Phare was in practice very limited. 

The  Commission  organised  meetings  with  these  IFIs  to  co-ordinate  issues  related  to 
programming and implementation, as well as procedural issues. If possible, joint missions are 
envisaged, which is an important component for ensuring that co-operation on a project level 
is  to  the  benefit  of  the  Candidate  countries.  Together  with  the  EBRD,  the  Commission 
organised  regular  exchanges  of  information,  co-ordination  of  meetings  and  detailed 
discussions  of  methodological  issues  which  continued  harmonisation  of  approaches  to  the 
appraisal of projects.  

At the level of the individual pre-accession instruments, the co-operation can be summarised 
as follows: 

– 

7 

For Phare, the main co-financing instrument in 2003 was the SME Facility in which 
the EIB, the EBRD and the Council of Europe Development Bank / KfW participate. 
The objective is to continue the co-financing capacity building of the financial sector 
to  develop  financing  for  SMEs  and  municipalities.  In  December,  the  Commission 
approved two Phare programmes on SME Finance Facility 2003 which included for 

In  September  the  Commission  signed  a  revised  Memorandum  of  Understanding  with  the  EIB,  the 
European Bank for Reconstruction and Development, the Nordic Environment Finance Corporation, the 
Nordic Investment Bank, the Council of Europe Development Bank, the Black sea Trade Development 
Bank and the World Bank Group to reinforce their co-operation and to facilitate co-financing under the 
Phare, ISPA and SAPARD. 

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– 

– 

– 

– 

the  first  time  a  Rural  Sub-Window  allowing  for  a  specific  targeting  of  the 
development of the rural credit sector among local financial intermediaries. This will 
ensure a better access of SAPARD beneficiaries to the bank credit in the rural areas. 
The two IFIs involved are the EBRD and the CEB/KfW. 

ISPA  is  the  main  facility  for  co-financing  large  infrastructure  projects  that  are 
commonly  subject  to  international  co-financing  by  the  IFIs.  Thus,  DG  Regional 
Policy is the major partner for co-financing with IFIs.  

Results  of  the  co-operation  between  ISPA  and  participating  IFIs,  (mainly  EIB  and 
the EBRD) are very positive. At the project level, the exchange of information was 
carried  out  at  an  early  stage  in  the  procedure  of  project  identification  in  order  to 
identify possible proposals for co-financing. Collaboration with the EIB and EBRD 
resulted in the joint co-financing of several projects in 2003. 

Several  periodic  co-ordination  meetings  were  held  in  order  to  set  up  the  working 
framework  and  make  operational  improvements  to  the  Co-operation  Agreement 
between the Commission and the EIB on Community structural assistance, including 
ISPA,  for  the  period  2000-2006.  The  main  objective  was  to  maximise  the  leverage 
effect  of  the  EC  grants  and  to  especially  target  the  EC  budget  resources  towards 
those  projects  that  require  a  larger  grant  contribution.  Discussions  regarding  co-
operation after accession once Candidate countries become eligible for the Cohesion 
and  Structural  Funds  were  also  held.  The  EIB  and  the  EBRD  contributed  to  the 
preparation  of  ‘Guidelines  for  successful  public-private  partnerships’  which  were 
prepared by DG Regional Policy and published early in 2003. 

As  regards  the  implementation  of  SAPARD,  one  of  the  main  constraints  identified 
concerns the difficulties faced by the farmers and the rural businesses to gain access 
to  the  credit  facilities  for  co-financing  their  projects.  In  2003  the  Commission 
continued consultations and exchanges of information with IFIs in order to find ways 
for  co-operating  on  this  issue,  resulting  in  the  aforementioned  Phare  rural  sub-
window. 

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5. 

FINANCIAL OVERVIEW 

The allocations per country for PHARE, ISPA and SAPARD in 2003 (in € million) 

PHARE 

SAPARD 

ISPA 

TOTAL 

Bulgaria 

Czech Republic 

Estonia 

Hungary 

Latvia 

Lithuania 

Poland 

Romania 

Slovakia 

Slovenia 

Other8 

Total 

99 

95 

40 

107 

46 

67 

403 

272 

57 

38 

476 

1699.0 

56

24

13

41

24

32

182

162

20

7

- 

561

113 

76 

31 

96 

54 

53 

378 

261 

51 

15 

- 

268

195

84

244

124

152

963

695

128

60

476

1128 

3389

8 

Horizontal, regional and part of nuclear programmes 

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