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# 52011SC1198

**COMMISSION STAFF WORKING PAPER Background document /\* SEC/2011/1198 final \*/**

  

TABLE OF CONTENT

PART I: FINANCIAL
ASSISTANCE TO ICELAND, THE WESTERN BALKANS AND TURKEY   6

1........... ALBANIA.. 6

1.1........ Summary. 6

1.2........ Strategic
planning and programming. 6

1.2.1..... Multi-annual
Indicative Planning Document 6

1.2.2..... Programming. 8

1.3........ Implementation
of assistance. 13

1.3.1..... IPA.. 13

1.3.2..... CARDS. 18

2........... BOSNIA
AND HERZEGOVINA.. 22

2.1........ Summary. 22

2.2........ Strategic
planning and programming. 22

2.2.1..... Multi-annual Indicative
Programming Document 22

2.2.2..... Programming
exercise. 24

2.3........ Implementation
of assistance. 28

2.3.1..... IPA.. 28

2.3.2..... CARDS. 35

3........... CROATIA.. 37

3.1........ Summary. 37

3.2........ Strategic
planning and programming. 38

3.2.1..... Multi-annual
Indicative Planning Document 38

3.2.2..... Programming
exercise. 39

3.3........ Implementation
of assistance. 42

3.3.1..... IPA.. 42

3.3.2..... CARDS
and PHARE. 55

4........... THE
FORMER YUGOSLAV REPUBLIC OF MACEDONIA.. 60

4.1........ Summary. 60

4.2........ Strategic
planning and programming. 60

4.2.1..... Multi-annual
Indicative Planning Document 60

4.2.2..... Programming
exercise. 62

4.2.3..... Component
II 65

4.3........ Implementation
of assistance. 66

4.3.1..... IPA.. 66

4.3.2..... CARDS. 76

5........... ICELAND.. 78

5.1........ Summary. 78

5.2........ Strategic
planning and programming. 78

5.2.1..... Multi-annual
Indicative Planning Document 78

5.2.2..... Programming
exercise. 79

5.3........ Implementation
of assistance. 79

5.3.1..... IPA.. 79

6........... KOSOVO.. 82

6.1........ Summary. 82

6.2........ Strategic
planning and programming. 82

6.2.1..... Multi-annual
Indicative Planning Document 82

6.2.2..... Programming
exercise. 83

6.3........ Implementation
of assistance. 86

6.3.1..... IPA.. 86

6.3.2..... CARDS. 92

7........... MONTENEGRO.. 94

7.1........ Summary. 94

7.2........ Strategic
planning and programming. 94

7.2.1..... Multi-annual
Indicative Planning Document 94

7.2.2..... Programming
exercise. 96

7.3........ Implementation
of assistance. 101

7.3.1..... IPA.. 101

7.3.2..... CARDS. 106

8........... SERBIA.. 108

8.1........ Summary. 108

8.2........ Strategic
planning and programming. 108

8.2.1..... Multi-annual
Indicative Planning Document 108

8.2.2..... Programming
exercise. 109

8.3........ Implementation
of assistance. 112

8.3.1..... IPA.. 112

8.3.2..... CARDS. 119

9........... TURKEY.. 122

9.1........ Summary. 122

9.2........ Strategic
planning and programming. 122

9.2.1..... Multi-annual
Indicative Planning Document 122

9.2.2..... Programming
exercise. 125

9.3........ Implementation
of assistance. 131

9.3.1..... IPA.. 131

9.3.2..... Turkish
Pre-Accession Instrument (TPA) 141

10......... MULTI-BENEFICIARY.. 146

10.1...... Summary. 146

10.2...... Strategic
planning and programming. 146

10.2.1... Multi-annual Indicative Planning Document 146

10.2.2... Programming exercise. 148

10.3...... Implementation
of assistance. 150

10.3.1... IPA.. 150

10.3.2... CARDS (and PHARE for HR) or TPA.. 154

PART II: FINANCIAL ASSISTANCE TO FORMER CANDIDATE
COUNTRIES. 157

1........... Summary. 157

2........... Implementation of PHARE and
Transition Facility assistance in 2010. 157

2.1........ Taking
stock of pre-accession and post-accession assistance. 157

2.2........ Implementation
of PHARE and the Transition Facility. 161

PART III - FINANCIAL DATA.. 165

1........... 2010 allocations by beneficiary and by component (in million EUR) 165

2........... Breakdown of IPA commitments in 2010
in million EUR.. 165

2.1........ Component I – Transition Assistance
and Institution Building Programmes. 165

2.2........ Component II – Cross
Border Cooperation Programmes. 166

2.3........ Component III – Regional
Development Programmes. 167

2.4........ Component IV – Human
Resources Development Programmes. 167

2.5........ Component V – Rural
Development Programmes. 167

3........... Global overview of IPA 2007-2010
amounts committed, contracted and paid as at 31 December 2010 per beneficiary,
in million EUR.. 168

4........... PHARE, CARDS, Turkey
Pre-Accession and Transition Facility - Financial data at 31st December 2010  169

4.1........ PHARE, Turkey
Pre-Accession and Transition Facility funds
implementation by country at the end of 2010  169

4.2........ CARDS funds implementation
by country at the end of 2010. 170

PART I: FINANCIAL ASSISTANCE TO ICELAND, THE WESTERN BALKANS AND TURKEY

1.
ALBANIA
1.1.
Summary

EU financial assistance
to Albania has played an important role during 2010 to further support the
country on its way towards European integration. Ongoing CARDS and IPA projects
in the areas of justice and home affairs, public administration reform and
fight against corruption have been further advanced and have shown concrete
results. Furthermore, there has been progress in infrastructure projects in the
water and transport sectors. There have also been many technical assistance
projects ongoing in different line Ministries or state institutions, and the
support to the Ministry of European Integration has had a positive horizontal
impact on programming of EU financial assistance. Compared to the previous
year, further improvements in the programming exercise have been encountered as
the Ministry was in a better position to play its coordination role. This has
to be seen in the context of a more streamlined approach with the relevant line
Ministries as the previously installed Senior Programming Officers became more
and more operational.

The amount
contracted during the reporting period under the IPA programmes 2007, 2008 and
2009 is EUR 92.31 million, exceeding the new commitments (nearly EUR 87 million)
under the 2010 IPA Programmes. This continued a positive trend which began in
2009. With a view to the preparation for the decentralised management of IPA
funds further progress has been made with the help of an IPA 2007 technical
assistance. Under IPA Component I, key structures have now been established and
relevant staff hired and trained. Work has also started on IPA Components II-V.

2010 also saw the
preparation of the MIPD 2011-2013, which follows a sectoral approach. The
beneficiary, Member States and other donors have been actively involved and
welcomed the identified choice of sectors. Overall,
there has been good progress in the programming of EU funds, while there are still
remaining challenges concerning the implementation and sustainability of
projects, also after they have finished.

1.2.
Strategic planning and programming
1.2.1.
Multi-annual Indicative Planning Document

The following
priorities for IPA support have been identified in the Multi-Annual Indicative
Planning Document (MIPD) 2011-2013 in close cooperation with the beneficiary,
Member States and other donors:

·
Strengthen rule of law, ensuring the
independence, efficiency and accountability of judicial institutions and
enhance the fight against organised crime.

·
Support the public administration reform, with a
view to enhancing professionalism and de-politicisation of public
administration and to strengthening a transparent, merit-based approach to
appointments and promotions and strengthen the fight against corruption at all
levels.

·
Reinforce the protection of human rights,
notably for women, children and Roma, and to effectively implement
anti-discrimination policies.

·
To support acquis related issues, in
particular, administrative capacity, adoption and enforcement of legislation
and related investments in the transport sector, social sector, as well as in
the environment, climate change and agriculture sectors.

To achieve the
priorities selected for support in the programming period 2011-2013, in 2010 the
Commission identified primarily the following sectors: i) Justice and Home
Affairs, ii) Public Administration Reform, iii) Transport, iv) Environment and
Climate Change, v) Social Development, vi) Agriculture and Rural Development.

To increase the
impact of IPA assistance, to give greater focus to achievable results and to
strengthen ownership by the beneficiary countries, the Commission has decided
to concentrate its efforts on targeted sectors. A sector approach should
facilitate cooperation and coordination among donors and beneficiaries. To
date, the number of fully-fledged sector programmes developed by Albania is limited. Overall ownership on the side of the government to move towards a more
sector approach is improving, in particular with a view to coordination and
monitoring mechanisms at the central level. At the same time, there are obvious
differences between sectors and linked line Ministries, e.g. there has been no
sector strategy adopted in the justice sector. On the other hand, the
agriculture and rural development sector has been identified with the
beneficiary, Member States and the Commission as one where a possible sector-wide
or programme-based approach could be tested. The sector comprises the main
features for such an approach, namely the existence of a sector strategy, an
action plan, multi-annual budgeting, donor coordination and a relatively strong
capacity (including the political will) of the main beneficiary Ministry.

The
chosen sectors are in line with the Enlargement Strategy published in November
2010 and are designed to help the EU to attain its own objectives that include
dealing with the economic crisis and governance, restoring growth for jobs
through the Europe 2020 reform agenda and making the EU a safer place. The
strategic priorities of four of the above mentioned sectors have been
identified in close cooperation with the various Commission services responsible
for the different IPA components. This is a good basis for the implementation
of the IPA programmes during the coming years as well as the strategic
definition of a future accession instrument.

Overall, the
three-year planning period of the MIPD limits achieving the identified
objectives according to the many needs in the different sectors. A longer
period would probably make it more feasible to achieve the intended results and
sector objectives, as many of them have to be seen in a medium to long-term
perspective. This is particularly true as regards reforms in the rule of law as
well as public administration sectors.

In May and June
2010, the EU Delegation undertook a review and consultation process in certain
sectors in order to assess the existence as well as the quality of various
strategies and action plans/budget plans. On the basis of this assessment and
the needs and priorities in EU and Albanian Government strategy papers a first
draft text for the MIPD 2011-2013 was prepared. During a consultation mission
in July, the first MIPD draft document, which has been shared beforehand, was
discussed with the beneficiary, Member States and other donors. This first
round of consultations confirmed the suggested choice of sectors, on which the
European Commission will focus over the next three years. In particular, the
sectors regarding the political criteria were seen as very relevant. Further
refinements of the draft have been made, and subsequently, the draft MIPD was
consulted with Member States in Tirana, with IFIs, bilateral and international organisations
and the Beneficiary at the beginning of December 2010. The outcome of these
consultations led to further adjustments of the MIPD, notably in emphasizing
that a programme-based approach is also encouraged in other sectors under the
leadership of other donors, which could eventually be supported by the EU.
Furthermore, the division of tasks has been updated and clarified. Finally, it
was suggested to bring the indicators more in line with the indicators of the
NSDI, which are currently being revised.

The findings from an IPA mid-term
evaluation, conducted during 2010, partly confirmed this and also showed that
some of the prerequisites for a sector-based approach exist in Albania. However, at present the administrative capacity to adopt a sector-based approach
is relatively low. Therefore, with sufficiently well-targeted assistance and
continued effort to complete ongoing reforms (functional strategies and
monitoring system) the Albanian administration has the potential to develop
these necessary capacities in the immediate to short-term. The evaluation also assessed
different sectors and stated that the sector of agriculture/rural development
is one of the most advanced. Furthermore, it stated that synergy between donor
assistance, national strategy and IPA programming is important if a sector-wide
approach is to be applied in future programming. The evaluation concluded that
programming takes adequate and relevant account of the beneficiary's policies,
strategies and reform process.

These findings have been taken into account
in drafting the MIPD 2011-2013 as the document was fully based on the national
strategic framework and put future IPA intervention into perspective with
ongoing donor involvement.

Table 1: MIFF[1]
allocations per component, in million EUR

Component || 2010 || 2011 || 2012 || 2010-2012

I – Transition Assistance and Institution Building || 82.71 || 84.30 || 85.99 || 253.00

II – Cross-border cooperation || 9.97 || 10.13 || 10.28 || 30.38

TOTAL || 92.68 || 94.43 || 96.27 || 283.38

1.2.2.
Programming
1.2.2.1.
Component I

The IPA 2010 national programme was adopted
on 8 December 2010. It focused on the objectives identified in the Multi-Annual
Planning Document (MIPD) 2009-2011. The 10 projects of the programme were
grouped under 3 strategic priority axes, addressing key issues such as police
training and rule of law enforcement, in particular as regards support to the
penitentiary infrastructure and improvement of training capacities of the
Police Education Centre as well as the modernisation of the prosecution system.
At the same time, the national programme was also designed to continue
supporting the capacity-building efforts of Albania's administration, in
particular the Ministry of European Integration, the Ministry of Labour and the
Ministry of the Environment. Furthermore, support was planned to be given to
the Albanian Parliament and to important acquis-related issues such as
food safety. Two large infrastructure projects were included, one in the
environment sector (water supply and sewerage) and one in the transport sector
(local roads). It has been agreed with the Albanian Government that the local
road project and parts of the water project shall be implemented in cooperation
with international financial institutions (IFIs). This has to be seen also in
the context of the Commission's continuous efforts to help Albania soften the effects of the financial crisis.

The rural road project was included as part
of a continuous effort in the frame of a World Bank-coordinated and beneficiary-led
multi-donor programme, to which the European Commission has already allocated
funds under IPA 2008 and 2009. The water project is an example of continuous EU
support over the last years, which has not only an environmental aspect, but
which improves also the socio-economic development of the coastal areas with
view to tourism development. Finally, the food safety project has been designed
to follow-up on an IPA 2009 project.

Overall, donor coordination in Albania has improved during 2010. The Department of Strategy and Donor Coordination (DSDC)
created in 2005 under the Deputy Prime Minister's Office in the Council of
Ministers of the Albanian Government is responsible for national, sectoral and
cross-cutting development strategy coordination as well as for donor
coordination. The donors are organised via a Donor Technical Secretariat,
including representatives of the European Commission, World Bank, Organisation
for Security and Cooperation in Europe (OSCE), UNDP as well as other bilateral
donors.

Furthermore, the Fast Track Initiative of
Division of Labour in line with the Paris Declaration and the Accra Agenda for
Action became more and more developed. In Albania, this is led by the
Government, through the DSDC. Fast Track Initiative arrangements are open to
any European donor willing to join and other development and integration partners
that could contribute to the coordination process in the context of division of
labour and complementarity. The Fast Track Initiative of Division of Labour
should be seen as added value to the existing coordination mechanisms
established by the Government; as such it is embedded in the national
Harmonisation Action Plan. The allocation of Lead Donors to specific sectors
has been agreed based on expressions of interest from donors and as a result of
sectoral analysis of donor commitments by DSDC. The Fast Track Initiative is intended
to support Albania in the process of implementing in-country division of
labour. The final goal is to achieve better development results through more
effective aid and to increase the coherence of EU assistance, and ensure less
overlap, less transaction cost, etc. European donors participate in the Fast
Track Initiative on a voluntary basis. A Memorandum of Understanding has been
signed so far between the Albanian Government and some European donors
(European Commission, Italy, Austria, Switzerland and Sweden) on 31 May 2010. As regards donor presence, it should be noted that some bilateral donors
have announced a reduction of their foreseen resources and presence.

Coordination meetings with international
financial institutions as well as with EU and non–EU donors have been organised
on a regular basis. They focus primarily on strategic orientations and the
regional dimension of IPA planning and programming. Additionally, coordination
between the Commission and EU Member States took place on a regular basis in
the context of the IPA Committee. Meetings with the Embassies of EU Member
States and the local branches of international financial institutions on MIPD
or national programme preparations were organised regularly during programming
missions.

As mentioned above, the rural roads project
is the best example of a donor and beneficiary coordinated programme, where the
EU was able in cooperation with the EIB and EBRD to trigger a substantive amount
of funds due to grants/loan blending with the IPA 2010 project. The same was
also true for the water project, where through indirect centralised management
in cooperation with Germany (KfW) and Austria (ADA) significant funds have been
allocated. Finally, it was decided that a project on human resource development
is best implemented in joint management with the International Labour
Organisation due to its experience on the ground. This can be seen as a
continuation of using different management modes for an efficient and effective
programme implementation as done during previous IPA programmes.

Overall, the IPA 2010 programme has been
developed in close cooperation and consultation with national authorities. The
exercise has shown, compared to previous years, improvement with a view to
ownership by the beneficiary. The Member States, other donors as well as civil
society have been associated in the process as much as possible.

Significant efforts have been undertaken to
involve Albania's institutions in the planning and programming process for EU
assistance. The Ministry for European Integration benefited from substantial
institution and capacity-building support of the last years. The increased
involvement of the Senior Programme Officers (SPO) within the European
Integration units in line ministries and the leading role of the Ministry for
European Integration in the programming process improved overall the
identification and programming of financial assistance. Lessons learned, in
particular regarding the maturity, timely planning, better links between EU
assistance and sectoral strategies as well as sustainability have been taken
into account during the programming of IPA 2010.

Under the current institutional and legal
circumstances, the different methods of delivering EU financial assistance were
adequate. An intelligent mix out of centralised, indirect centralised and joint
management, as in recent years, is currently the best way to deliver IPA funds
for Albania. There is for the foreseeable future no possibility to use other
aid delivery modes, such as budget support, because the overall conditions, as
laid down in the IPA Regulation, are not yet in place in Albania.

The programming exercise for IPA 2011
started already early during the reporting year and took the six sectors of the
foreseen MIPD 2011-2013 fully into account. A first programming mission took
place in May 2010 and a final one in October, after which the beneficiary
started to draft the project fiches for the programme for an overall amount of
EUR 82 million. In the pilot sector "agriculture and rural
development", a project of EUR 10 million is foreseen to start investment in
farms through rural development component (IPARD)-like measures and to further
develop the national payment and management system in preparation for IPA
Component V.

Table 2: Indicative financial
allocations for the year 2010 per component, in million EUR

ALBANIA || 2010

I. Transition Assistance and Institution Building || 84.20[2]

Of which: ||

                                                                                  National Programme  || 83.20

Tempus Programme\* || 1.00

II. Cross-Border Cooperation || 10.48[3]

Of which:                    ||

                                                              CBC Montenegro-Albania || 0.85

                                                                                   CBC the former Yugoslav republic of Macedonia-Albania || 0.85

                                                                                   CBC Kosovo-Albania || 0.60

CBC Greece-Albania || 1.66

CBC IPA Adriatic\*\* || 6.01

Albania's participation in ERDF transnational programmes "South East Europe" and "Mediterranean"\*\* || 0.51

TOTAL || 94.68

\* The Tempus Programme is coordinated and implemented
under the relevant IPA Multi-beneficiary programme

\*\*Management of the allocations for these programmes
was cross-delegated to the DG Regional Policy (REGIO)

Table 3:
Indicative financial allocations for the year 2010 under the National
Programme, per priority axis and per project, in million EUR

Priority Axis/Projects || Budget

Political Criteria || 26.20

|| Support to the Penitentiary Infrastructure and the Police Education Centre || 18.20

|| Modernisation of the Albanian Justice system || 3.00

|| Support to the EU integration process || 2.00

|| Strengthening the Assembly of Albania || 1.50

|| Project Preparation Facility || 1.50

Economic Criteria || 23.00

|| Improvement of rural roads in Albania || 20.00

|| Human Resources Development || 3.00

Ability to assume the obligations of membership || 34.00

|| Improvement of Drinking Water Supply and Sewerage Systems || 26.00

|| Support to the Food Safety Infrastructure || 4.00

|| Capacity strengthening of the Ministry of Environment || 4.00

TOTAL || 83.20

1.2.2.2.
Components II

During 2010,
the cross-border programmes between the former Yugoslav Republic of Macedonia and Albania and between Albania and Montenegro were both
revised by the national authorities for the period 2007-2011. The revision
added mainly the 2010 and 2011 yearly financial allocations for each partner
countries and clerical changes following the entry into force of the Lisbon
Treaty, but did not touch the substance of the programme.

The revised cross-border cooperation
programme between the former Yugoslav Republic of Macedonia and Albania
2007-2011 and the multi-annual Financing Proposal for the years 2010 and 2011
were adopted by the Commission in October 2010. The overall objective of the
programme is to promote sustainable development in the cross-border area.

The revised
cross-border cooperation programme between Albania and Montenegro 2007-2011 and
the multi-annual Financing Proposal for the years 2010 and 2011 were adopted by
the Commission in July 2010. The overall objective of the programme is
promotion of regional cohesion and competitiveness though an approach
integrating economic, environmental and social development.

Following the October 2009 Commission
Communication on Kosovo, which recommended "progressively activate the IPA
cross border cooperation component (component II) for Kosovo"[4], the first Albania-Kosovo
cross-border cooperation programme 2010-2013 was jointly developed by the
Albanian and Kosovan authorities. The programme and the multi-annual Financing
Proposal for the years 2010 and 2011 were adopted by the Commission in December
2010. The overall objective of the programme is to promote sustainable
economic, social, cultural and environmental development in the border area.

The cross-border programme between Greece and Albania 2007-2011 was revised in order to include the 2010 and 2011 ERDF and IPA
financial allocations. The programme builds on the 2000-2006 INTERREG programme
between the two countries. The multi-annual Financing Proposal for the years
2010 and 2011 (IPA funds part) was adopted by the Commission in December 2010.
The overall objective of the programme is to increase living standards by
promoting sustainable local development in the border area.

Since 2007, Albania is taking part in the
IPA Adriatic cross-border cooperation programme together with Italy, Slovenia, Greece, Croatia, Bosnia and Herzegovina, Montenegro and, in phasing-out, Serbia. This programme is a continuation of the 2004-2006 Italy-Adriatic INTERREG and
Italy-Albania Neighbourhood programmes. The global objective of the programme
is to strengthen sustainable development of the Adriatic region.

Albania is also
participating in the ERDF transnational programme "South-East Europe"
(SEE) since 2007 and "Mediterranean" (MED) since 2009 under the
European Territorial Co-operation objective of the Structural Funds 2007-2013.
2010 IPA funds were integrated in the SEE and MED programmes. They are managed
by the Commission's Directorate-General for Regional Policy, which is now
entirely in charge of the programming and implementation of both ERDF and IPA
funds within these programmes. The programme supports Albania’s participation in joint transnational co-operation activities with partners from EU Member
States and familiarises the country with territorial co-operation programmes
under EU Structural Funds.

1.2.2.3.
Components III, IV and V

With a view to preparing for decentralised management of IPA funds,
a joint mission was organised by the Commission's Directorate Generals for
Enlargement, Regional Policy, Employment and Social Affairs, and Agriculture
and Rural Development, in January 2010. The aim of this mission was to launch
the programming exercise for Components III, IV and V with the Albanian
authorities. In spring 2010, the Albanian authorities started drafting their
Strategic Coherence Framework for IPA Component III and IV areas, i.e. regional
development, competitiveness and transport, as well as education, employment
and social inclusion. Their first draft was submitted for comments to the
Commission in autumn 2010, initiating a dialogue on the document. The first
draft Operational Programme for IPA Component IV was submitted to the European
Commission in autumn 2010 and the drafting process of the Operational programme
for Component III started. With regards to IPA Component V programming, there
was a dialogue between the Commission services and the relevant Albanian authorities
on the draft agricultural and rural development programme.

Establishment of the Albanian financial management and control
structures for Component III and IV, based on Component I structures, began. In
May 2010, DG Enlargement audited the basic structures, while in November DG
Agriculture and Rural Development audited the IPA Component V structures
including the Paying and Managing Agency. Both concluded that while progress had
been achieved, the Albanian authorities are still far from being able to apply
for Conferral of Management for IPA funds under Components III, IV and V.
Notably, the implementation of an accounting system by the Albanian authorities
is still needed,  as well as the completion of the Audit Authority structure.
For Component V, the establishment of a rural cadastre and farm register is a
crucial and challenging element for defining the scope of future rural
beneficiaries.

While the aim is for these programmes to be ready for implementation
when Albania becomes a candidate country, they do not however have a clear
timeframe and remain flexible documents to be adjusted according to the
progress of Albania on its European integration agenda.

1.3.
Implementation of assistance
1.3.1.
IPA
1.3.1.1.
Success stories

Support for
civil service reform (IPA 2008, EUR 1 million)

This project -
supporting civil service reform aiming at strengthening the public sector
governance by reinforcing the management capacity of the Department of Public
Administration - produced an important result during 2010. Thanks to the
project, an Order on "Measures for improving the management of the civil
servants in the line ministries and Council of Ministers apparatus" was
issued by the Albanian Prime Minister in October 2010.
This act set the basis for clear rules and limitations with regards to
temporary contracts, restructuring procedures and job descriptions, as well as
specific requirements for working positions. Overall, the project also supported the modernisation of the legal framework for the Albanian
civil service. New laws were drafted regarding the status of civil servants, general
administrative procedures and the organisation and functioning of the State public
administration. A more effective and efficient public administration is the
basis for progress in all areas of society and the socio-economic development
of Albania.

Preparation
for EU decentralised implementation system of IPA funds (IPA 2007, EUR 1.13
million)

The project
helped the Albanian authorities to progress towards preparation for the
decentralised management of IPA funds for Component I. It supported the establishment
of proper operating structures and of a management control system with strong
involvement and leadership by the Albanian authorities, notably the Ministry of
Finance. Based on the results, the Albanian authorities now intend to apply for
conferral of management for IPA Component I. In addition, as the main
structures for IPA components II, III and IV are similar to Component I
structures, the success of this IPA 2007 project laid the foundation for
setting up the structures for components II, III and IV programmed under an IPA
2009 national programme. Overall, progress in the preparation for decentralised
management process adds also to the improvement in the country's public
financial management system in general, which is the basis for the transparent,
efficient and legal spending of public funds.

Support for
police reform (IPA 2007, EUR 5.5 million)

Finally, the
project "Support to the Police Reform - PAMECA III" has proven extremely
valuable in improving the functioning of the Albanian State Police, in
particular regarding its structures fighting organised crime and terrorism, the
functioning of the Police Academy, the functioning of IT systems, the
implementation of the Integrated Border Management Strategy and the Community
Policing model. The project was also instrumental in identifying ways forward.
It encourages continued progress within the Albanian State Police with regard
to the respect of human rights, notably as regards the treatment of detainees.
It has been a successful method to use a pool of police experts from different
Member States, who addressed, with their different backgrounds and specific
experience, the complex needs of the Albanian police system.

1.3.1.2.
Overview of IPA implementation in 2010

2010 has been the best year to date
regarding IPA implementation, as regards commitments and disbursements. A total
amount of EUR 92.34 million was contracted: a considerable increase compared
with the contracting performance of EUR 65.25 million in 2009. The disbursement
of EUR 56.38 million also exceeded the performance in 2009 when EUR 53.54
million were paid.

Component I: Transition Assistance and Institution Building

Table 4: Status of implementation of IPA financial assistance
(Component I) as at 31st December 2010 (in
million EUR) per annual programme

|| Committed || Contracted || % Contracted || Paid || % Paid

IPA 2007 || 49.27 || 28.86 || 58.58% || 12.35 || 25.07%

IPA 2008[5] || 64.04 || 40.01 || 66.79% || 22.62 || 35.32%

IPA 2009 || 69.86 || 33.34 || 47.72% || 17.10 || 24.48%

IPA 2010 || 83.20 || 0.00 || 0.00% || 0.00 || 0.00%

TOTAL || 266.37 || 104.97 || 39.41% || 52.07 || 19.55%

Table 5: Distribution of total committed funds (2007-2010
allocations) by priority axes

Priority Axes || % of 2007-2010 allocations

Political criteria || 31.61%

(of which civil society) || 0.57%

Economic criteria || 21.72%

Ability to assume membership obligations || 45.41%

Support programmes || 1.25%

TOTAL || 100%

TAIEX, Twinning,
SIGMA and EU Programmes

Altogether, 55 TAIEX
events assisted Albania's administration in 2010. There were several positive
outcomes, where Albanian institutions addressed problems in regard to
legislation approximation, regulating internal inspection procedures,
implementation of legislation and strengthening of administrative capacities.
The focus of these events was on several areas of the acquis, such as
environment, fishery, agriculture and food, consumer protection, transport, and
competition. They contributed to the preparation of legislation in line with EU
standards as well as overall improved the administrative capacity of different
line Ministries.

Three Twinning
projects were launched during 2010, funded by IPA 2009, in the sector of justice
and home affairs. The projects dealt with penitentiary reform, witness protection
as well as anti-Money Laundering and Financial Crime Investigations. The participating
Member States were the United Kingdom, a consortium between Hungary and Lithuania and another consortium between Spain and Bulgaria. The total budget allocated
for these Twinning projects is EUR 3.14 million.

SIGMA activities in 2010 have revolved
around the following topics: public service and administrative framework with a
focus on the Law on administrative procedures and civil service reform, public expenditure
management and assistance to develop the public procurement system. The input
of SIGMA for the preparation of the Commission Opinion in November 2010 was
very useful.

In 2010, Albania participated in the
following EU programmes: 7th Research Framework Programme, Competition and
Innovation Framework Programme (CIP) and Europe for Citizens. Furthermore,
exploratory contacts were held with a view to participation in the “Culture”
Programme.

Component II: Cross-border Cooperation

Implementation of the 2007–2009
Cross-border Cooperation Programmes with Albanian participation continued in
2010.

For the programme Albania-Montenegro, 6
cross-borders projects were contracted and began at the end of 2010, from the
first call for proposals of 2007 IPA funds. Two projects were selected for each
measure of the programme: economic development; environmental protection and
social cohesion. The second call for proposal including joint 2008 and 2009 IPA
funds for this programme was launched and closed during 2010 and at the end of 2010
the proposals were to be evaluated by a set-up Joint Steering Committee with
Albanian and Montenegrin nationals. During the second semester 2010, the
Shkodra-based Joint Technical Secretariat of the programme established in 2008
experienced staffing and building issues due to internal Albanian financial
reasons. During the December 2010 IPA Monitoring meeting, the Commission raised
the matter since EU technical assistance funds had been paid under this
programme for those purposes, and asked the Albanian authorities to solve the
internal financial issue as soon as possible and respect their commitment by
ensuring an operational Joint Technical Secretariat.

For the programme Albania-the former Yugoslav Republic of Macedonia, 17 cross-border projects were selected by the
Joint steering Committee composed of Albanian and Macedonian nationals during
the autumn 2010, from the first call for proposals on IPA 2007 funds. The
second call for proposals encompassing the remaining 2007 and 2008 funds was
launched and closed during the first semester 2010 and the evaluation was
pending at the end of 2010. In 2010, the El-Basan/Albania antenna of the
programme established in 2008 experienced staffing and buildings issues due to
internal Albanian financial reasons. Since EU technical assistance funds had
been paid under this programme for those purposes, the Commission strongly
encouraged the Albanian authorities to solve the internal financial issue as
soon as possible and respect their commitment by ensuring an operational
antenna.

For the programme Albania-Greece, one
single joint call for proposals encompassing ERDF and IPA 2007, 2008 and 2009
funds was prepared during 2010 and launched in November. The call for
expressions of interest for the recruitment process of the 6 members of the Thessaloniki based Joint-Technical Secretariat started in November 2010, to be composed of
both Albanian and Greek nationals.

As regards
Albanian participation in the ERDF South East Europe Transnational Programme,
calls were opened for project proposals in the four following areas:
facilitation of innovation and entrepreneurship, protection and improvement of
the environment, improvement of the accessibility.

CBC Programmes can make a valuable
contribution to reconciliation and good neighbourly relations, and the
beneficiaries have shown high expectations with regards to the results of the
programmes of this component, also in light of the fact that CBC's
'learning-by-doing' approach will significantly contribute to local capacity-building.
These expectations were reflected in the large number of applications received
under these calls for proposals, despite the almost symbolic amount of
available funds.

Tables 6: Status of implementation of IPA financial assistance (Component
II) as at 31st December 2010 (in million EUR)
per annual programme[6]

|| Committed || Paid || % Paid

IPA 2007-2010 || 35.57 || 1.82 || 5.12%

Out
of which, the breakdown for the intra-Western Balkans CBC Programmes and the
ERDF Transnational Programmes (South-East Europe and Mediterranean) is[7]:

|| Committed || Contracted || % Contracted || Paid || % Paid

IPA 2007 || 3.52 || 1.33 || 37.78% || 1.80 || 51.14%

IPA 2008 || 3.19 || 0.02 || 0.63% || 0.02 || 0.63%

IPA 2009 || 3.93 || 0.00 || 0% || 0.00 || 0%

IPA 2010 || 4.47 || 0.00 || 0% || 0.00 || 0%

TOTAL || 15.11 || 1.35 || 8.93% || 1.82 || 12.05%

Table 7: Distribution of total committed funds (2007-2010
allocations) by priority axes

Priority Axes || % of 2007-2010 allocations

CBC with Member States || 41.01%

CBC within Western Balkans || 51.71%

Participation to ERDF Transnational Programmes || 7.28%

TOTAL || 100%

1.3.1.3.
Implementation Modalities and Structures

As a potential candidate country, Albania receives pre-accession financial assistance from the Instrument for
Pre-Accession Assistance (IPA) under its first two components, currently
managed by the EU Delegation in Tirana (EUD).

The introduction of a decentralized
implementation system for management of IPA funds remains an important
objective for Albania. A decentralised management process will enable Albania to take responsibility for, and hence increased ownership over, the implementation
of IPA components and the future management of EU Structural and Cohesion
Funds. Albania has taken a number of steps towards achieving decentralised
management accreditation and continued working towards this objective during 2010.
While progress was solid on IPA components I and V during the year 2010, the
process is at an early stage for IPA components II, III, IV.

On Component I (Transition
assistance and Institution Building), Albania followed and revised its Roadmap
for decentralized management. It set-up the main structure in 2009 (stage 0),
finalised its gap assessment report (stage 1) in May 2010, started the gap
plugging phase (stage 2) in August 2010 and started undertaking the compliance
assessment (stage 3).

On Component II (Cross Border
Cooperation), the process of decentralised management started in January 2010
and was at stage 1 (gap assessment) at year end.

On Components III and IV
(Regional development and human resources development), Albania started to prepare necessary decentralised management structures, strategic coherence
framework and operational programmes since January 2010. The Strategic
Coordinator is the Deputy Minister of European Integration, while the Operating
Structure for Component III is the Ministry of Transport, Public Works and
Telecommunications, and for Component IV, it is the Ministry of Labour, Social
Affairs and Equal Opportunities. The key challenges for these components are
the strengthening of the structure and the coordination mechanism as well as
the drafting of the Strategic Coherence Framework and the Operational
Programmes for components III and IV.

On Component V (Rural development),
Albania is trying to use already existing structures in order to set up the
Managing Agency and the Paying Agency for the Instrument for Pre-Accession
Assistance for Rural Development. A first draft programme for the rural
development component was prepared by the Albanian during 2010 on the basis of
sectoral analyses of priority sectors in agriculture, aiming at identifying the
current situation in the milk and dairy products sector, the meat sectors, the
fruit and vegetables sector.

1.3.1.4.
Monitoring

IPA
projects are amongst others monitored by a formalized Result Oriented
Monitoring (ROM) mechanism, outsourced to a specialized company. For 2010, the EU
Delegation adopted a monitoring plan and regularly updated it with the ROM
team.
In 2010, 32 projects were monitored in this way.

In addition to ROM, regular internal monitoring was conducted by the EU Delegation
during 2010. Regular meetings with project teams and beneficiaries were organised
throughout the year. The EU Delegation in Tirana carried out 114 site visits on
42 IPA and CARDS projects representing an amount of EUR 95.3 million.

Finally, the annual
joint IPA monitoring meeting undertaken by the European Commission with the
Albanian authorities took place in December 2010.

1.3.2.
CARDS
1.3.2.1.
Sectors with positive results/ Success
stories

Modernisation
of the civil registry and address systems (CARDS 2004, EUR 2.5 million)

This project
supported the strengthening of good governance and good public services, as
well as the protection of fundamental rights in Albania. A functioning address
system brings important benefits to inhabitants and local governments alike for
quality and efficiency of health, tax, social security, education, postal,
court services, as well as emergency response.

The Albanian
authorities were assisted in the establishment of the national register for civil
status and the national register of addresses. The national register for civil status
data is used for the production of biometric identity documents as well as for
the compilation of voters' lists. The national register of addresses aims at
being uploaded with almost 260 digital maps and enables providing about 3.8
million registered citizens with an official address. Also with the support of
the project, street names were chosen and plates installed in all streets of the
city of Saranda, in the south of Albania, benefiting both local residents and
tourists. Furthermore, a data protection law has been drafted with the help of
the project and approved. The project also supported the establishment of the Data
Protection Commission.

Strengthening public internal financial control
system (CARDS 2005, EUR 1 million)

This project to strengthen the control of
Albanian public internal finances lasted two years and ended in July 2010. The project provided assistance for the further development of the public
internal financial control system in Albania, in order to bring it in line
with EU standards and best practices. This project focused notably on
strengthening the administrative capacity for financial management control and
internal audit.

The twinning partnership was established between
the Albanian Ministry of Finance, the National Audit Office of the United Kingdom and the Polish Ministry of Finance, with the support of the Bulgarian
Ministry of Finance. The twinning team assisted central
harmonisation units within the Ministry of Finance of Albania to develop new a financial management control law, instructions related to the new law and an
internal audit law, in accordance with the international standards for internal
control and internal audit. In addition, two manuals on financial management control
and internal audit were developed, as well as a number of trainings events that
were organised for the high-level managers, the financial managers and internal
auditors of the public sector.

The newly developed manual on financial management
control was approved by the Albanian Minister of Finance in July 2010, while
the law on inspection was adopted by parliament in July 2010 and the law on internal
audit in September 2010.

These significant developments will help
the Albanian Government to manage the national State Budget in a more
transparent way. They will also serve as a basis for the future management of
EU funds when the conferral of management of IPA funds is granted to Albania.

"EURALIUS II"
(CARDS 2006, EUR 4.5 million)

Support for the
judicial system continued despite a national strategy not being ready in 2010.
Through the EURALIUS II project, support was provided to the Ministry of Justice,
institutions of the judiciary, penitentiary institutions and to the general
prosecutor Office. The assistance focused on the improvement of law drafting
and legal approximation skills and methods (development of a law drafting
manual on best practices and assessment of approximation of laws in the
sector), on the introduction of a new enforcement of rulings system, on justice
organisation and reform (new judicial power law, territorial reorganisation of
the courts, establishment of a new evaluation system for judges),
inter-institutional dialogue, improvement of the management capacities of the judicial
and penitentiary budget administration and planning, more efficient and
transparent court administration and case management systems, improvement of
legislation in civil matters (civil code and civil procedure code review) and
criminal justice (new "anti-mafia law", new law on mediation, new
judicial police law, new law on international legal mutual assistance, new
probation law), and support to immovable property rights matters. Overall, the
result has been an improvement in the quality of fundamental pieces of draft
legislation such as administrative procedures and judicial review. Finally, the
project helped to some extent to increase the professionalism or, as well as
accountability within, the judiciary in Albania.

1.3.2.2.
Lessons learned

In 2010 four
ex-post evaluations of CARDS projects were carried out:

- Assistance to
the Justice System of Albania: EURALIUS II (CARDS 2006) - rated satisfactory;

-  Assistance to the
Ministry of Public Works, Transport and Telecommunications in the field of
Transport (CARDS 2004) - rated moderately satisfactory;

- Accreditation, Standards
and Certification (CARDS 2006) - rated moderately unsatisfactory;

- Assistance to the Ministry
of Environment and Institutions involved in Environmental Monitoring aimed at
Strengthening of the Environmental Monitoring System in Albania (CARDS 2006) - rated moderately unsatisfactory.

This exercise
concluded that EU funds have significantly contributed to specific sector
objectives in Albania, in particular with regard to the reform of the judiciary
system and transport sector. Results in the ‘environment’ and ‘internal market’
sectors are less satisfactory, for an array of reasons. Assistance has been
less successful in terms of helping Albania meet obligations deriving from the
Stabilisation and Association Agreement, as projects are often not really
implemented from an EU accession perspective. Common constraints to full
project success were limited ownership and commitment from the beneficiary Albanian
authorities, persistence of inadequate institutional structures, programme
management constraints in the EU Delegation (due to limited human resources
available for project monitoring) and a management style that focuses more on
outputs than on process management. On the basis of this evaluation, the Commission
is insisting on a closer involvement of the Albanian administration in the programming,
planning, implementation as well as post-completion phase.

1.3.2.3.
 Management performance

Table 8: Status of financial assistance as at the end of December
2010 (in million EUR) – CARDS programmes[8]

|| Allocated || Contracted || % Contracted || Paid || % Paid

CARDS 2001 || 33.50 || 32.68 || 97.55% || 31.69 || 94.60%

CARDS 2002 || 42.90 || 41.39 || 96.48% || 40.90 || 95.34%

CARDS 2003 || 38.50 || 37.83 || 98.26% || 37.40 || 97.14%

CARDS 2004 || 62.00 || 56.47 || 91.08% || 52.19 || 84.18%

CARDS 2005 || 40.20 || 37.98 || 94.48% || 32.21 || 80.12%

CARDS 2006 || 42.50 || 40.73 || 95.84% || 27.25 || 64.12%

Total || 259.60 || 247.08 || 95.18% || 221.65 || 85.38%

During the reporting period, the Delegation did not undertake any
contracting activity under the above-mentioned Annual Programmes, as the
contracting periods set forth therein had already expired (the last one in
August 2009 for the CARDS 2006 Annual Programme). However, in addition to
regular disbursement activities, the Delegation closed a significant number of
projects implementing the above-mentioned Annual Programmes. Overall, 80 such
projects were closed during 2010.

1.3.2.4.
Institution Building highlights

CARDS 2006 - Implementation
of the National Plan for Approximation of Environmental Legislation (INPAEL)

The main
objective of the project is the transposition and implementation of the
priority legislation as foreseen in the Stabilisation and Association Agreement
(SAA), the National Plan for the Implementation of the SAA and the National
Environmental Strategy. The main beneficiary is the Ministry of Environment.
The approximation of EU legislation on the environment in Albania is advancing well, with broad public consultation done for each new piece of legislation and
horizontal line ministries consultation.

Important results from this project included
the cost estimation of the future implementation of EU Directives in
environmental sector, both in terms of investments and administrative costs, the
Strategy and Action Plan in the waste sector, the Pilot Water Basin Management Plan
in Mati River District, a National Compliance Plan for the Urban Waste Water
Treatment Directive, Monitoring Plan for the Gerdec area (affected by explosion
of ammunition deposit in 2008), as well as public awareness campaigns on environmental
protection regarding air, water and waste.

At the end of its implementation, together
with past pre-accession assistance (Environment Legislation Project in Albania project under CARDS 2004), the most visible impact is that a large share of EU
legislation in the environment sector was approved by the Albanian Council of
Ministers and sent to parliament. This brings Albania closer to a proper acquis
transposition in that particular field.

Overall, the improvement of the
environmental situation in the Western Balkan, and in particular in Albania, has
an added value also for EU citizens, as possible environmental disasters with
implications on neighbouring EU countries will be better contained and the risk
minimized.

1.3.2.5.
Joint Monitoring

The 2010 joint monitoring meeting undertaken by the
European Commission with the Albanian authorities in December reviewed the
implementation of the currently ongoing CARDS and IPA projects. Many
shortcomings in the implementation of projects were raised, in particular
retaining trained staff and providing maintenance as well as budgeting plans
for finished infrastructure projects in order to ensure a stronger impact and
sustainability. The outcome of the meeting was a list of agreed action points,
where the beneficiary committed itself to address the identified problems.

2.
BOSNIA AND HERZEGOVINA
2.1.
Summary

EU financial assistance to Bosnia and Herzegovina has played an important role during 2010 to further support the
country on its way towards European integration. Whereas the implementation of
CARDS was almost completed, IPA continued to offer support for Bosnia and Herzegovina to comply with the requirements of the EU accession process and to
fulfil its obligations under the Stabilisation and Association Agreement and the
Interim Agreement. The priorities of the assistance in 2010 were support for
the public administration reform, the strengthening of the rule of law,
including the fight against corruption and organised crime, and support for Bosnia and Herzegovina to overcome the consequences of the financial and economic crisis.
Compared to the previous year, further improvements in the programming exercise
occurred as the Directorate for European Integration and the Ministry of
Finance organised sector support workshops in 2010, to which the European
Commission, other donors and the International Financial Institutions
contributed to identify IPA priorities for the years 2011 – 2013. This was an important
step to improve Bosnian ownership in the IPA programming process.

The amount contracted during the reporting
period under the IPA 2007 - 2009 programmes was EUR 70.91 million, an increase
of 100 % compared to the preceding period and a continuation of the positive
trend which began in 2009. With a view to the preparation for the decentralised
management of IPA funds, some progress has been made by the nomination of the Competent Accrediting Officer (CAO), the National Authorising
Officer (NAO), and the National IPA Coordinator
(NIPAC). However, State and entity representatives could not agree on the
structures to be built to support the decentralised implementation of EU
assistance, further blocking progress towards decentralisation.

The year 2010 has also seen the preparation
of the MIPD 2011 – 2013, which follows a sectoral approach. The beneficiary,
Member States and other donors have been actively involved and welcomed the
identified sectors.

2.2.
Strategic planning and programming
2.2.1.
Multi-annual Indicative Programming Document

The strategic priorities identified in the
2011-2013 Multi-annual Indicative Programming Document (MIPD) are strengthening
the rule of law, improving the capacity and efficiency of the public
administration, and supporting social and economic development.

To achieve the strategic priorities, in
2010 the Commission identified the following sectors of intervention and
specific objectives:

- Justice and Home Affairs, with the
objectives of supporting the justice sector reform and to intensify the fight
against corruption and organised crime.

- Public Administration Reform, with the
objective of setting up a professional civil service, improving the functioning
of the institutions at all levels and adopting the legal framework for public
financial management, compliant with EU standards.

- Private sector, and Transport and
Environment sectors, with the objectives of developing the SME sector and supporting
investments in transport and environment infrastructure.

- Social Development, with the objective of
alleviating unemployment and reforming the education system.

The priorities and objectives have been
selected because of their remarkable significance for the country's progress in
the pre-accession process. Overcoming the economic crisis, social inclusion and
strengthening the rule of law and public administration reform were identified
as key challenges in the Enlargement Strategy 2010–2011. The 2010 Progress
Report concluded that Bosnia and Herzegovina has to step-up its efforts in the
areas of justice and public administration reform and that despite a moderate
economic recovery, unemployment remains high and fiscal adjustment measures, as
well as economic reforms, have to be pursued with determination to enable the
country to recover. In the long-term, these measures will allow the country to
cope with the competitive pressure and market forces of the EU.

The
Commission decided to concentrate its efforts on a limited number of sectors to
increase the impact of IPA assistance and to give greater focus to achievable
results. A sector approach will facilitate cooperation among donors and
beneficiaries, will eliminate duplication of efforts and will lead to greater
efficiency and effectiveness. Following the philosophy of the sector support
approach, the priorities identified above support Bosnia and Herzegovina's own
reform strategies, in particular the Country Development Strategy, the Justice
Sector Reform Strategy, the Public Administration Reform Strategy and the
Social Inclusion Strategy.

The Europe 2020 agenda offers enlargement
countries an important inspiration for reform. IPA supports Bosnia and Herzegovina in following the priorities of the 2020 agenda, particularly by supporting
the environmental protection, the promotion of social inclusion and the fight
against poverty.

The Commission, the Bosnia and Herzegovina Directorate for European Integration and the Ministry of Finance and Treasury
held a series of consultation workshops in June 2010 to facilitate the
identification of relevant sectors and to assess how to best move towards a
sector approach in the different areas concerned. Representatives from line
ministries, other relevant institutions, selected donors and civil society
organisations were invited to participate. Workshops were held in the areas of
social inclusion, small and medium-sized enterprises, education and employment,
civil society, judiciary, law enforcement, public administration reform,
environment, transport and energy. The aim of the workshops was to identify
strategic objectives, expected results, benchmarks and indicators for financial
assistance in the period 2011-2013. The workshops helped to identify areas
where the support provided by IPA or other donors can be better aligned with
the existing strategies so as to gradually move towards a sector approach. This
new approach considerably strengthened Bosnia and Herzegovina's ownership in
the programming process.

The relevance of the consultation process
and donor coordination was confirmed by the conclusion of the Mid-term Meta
Evaluation of IPA Assistance.  The evaluation, which took place in 2010,
recommended that MIPDs should concentrate on fewer specific priorities in line
with the beneficiaries' strategic reform framework.

Table 1: MIFF[9] allocations per
component, in million EUR

Component || 2010 || 2011 || 2012 || 2010-2012

I – Transition Assistance and Institution Building || 100.69 || 102.68 || 104.67 || 308.04

II – Cross-border cooperation || 4.70 || 4.75 || 4.80 || 14.24

TOTAL || 105.39 || 107.43 || 109.47 || 322.28

2.2.2.
Programming exercise
2.2.2.1.
Component I

The IPA 2010 national programme has been
prepared during the reporting year and was adopted on 28 July 2010. It focused
on the objectives identified in the MIPD 2009 – 2011.

The 14 projects of the programmes were
grouped under 3 strategic priority axes with a focus on supporting the justice
sector reform. Strengthening the rule of law was an EU enlargement strategy
priority, in particular to support the fight against organised crime and
corruption. The projects on "support to the area of law enforcement",
(EUR 8.0 million), "implementation of the anti-corruption strategy and
action plan" (EUR 2.0 million), "construction of a high security
state prison, phase II", (EUR 5.15 million), and strengthening the
judiciary", (EUR 4.0 million) continued activities in previous IPA
programmes and will be followed-up by further assistance to the justice sector
in the years 2011 and the following ones. The expected results of the projects
were improved cooperation and coordination of key institutions in the security
sector, reduction of organised crime, improved capacities of the State
Investigation and Protection Agency, police restructuring and better
cooperation between police and the judiciary, improved border management, the
improvement and implementation of the anticorruption strategy, improved
capacity building for judicial reform, and the building of the high-security
state prison.

The reform of the justice sector is a key
component of the EU integration process of Bosnia and Herzegovina. The
Commission mandated a team of Member State judicial experts to identify
priority areas for future EU support. A fact-finding mission was conducted in
May 2010. The objectives of the team were to identify and analyse specific
areas in the justice sector where the lack of progress is particularly relevant
to the European integration process and that could therefore be considered for
future IPA support. The findings and recommendations of the fact finding
mission served as a basis for the sectoral strategy planning for the time frame
2011 to 2013.

Further assistance was directed at developing
and implementing a sustainable strategy for integrated social protection and
the inclusion of children and families, to preserve Bosnia and Herzegovina's
cultural heritage, to support the Public Administration Reform Strategy through
the development of coordination and policy making capacities, and to provide
support on public financial management and the improvement of information
systems in public institutions.

As Bosnia and Herzegovina was severely hit
by the global economic crisis, the EU continued to provide support for
infrastructure investments through the 2010 national programme. The EU
cooperated with the World Bank on the rehabilitation and transport and
navigation development of the Sava River to link national with regional core
transport networks. It also supported the rehabilitation and construction of
water, waste water and solid waste infrastructure together with the European
Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB)
and the Kreditanstalt für Wiederaufbau (KfW). Grants to the international
financial institutions (IFIs) and the KfW leveraged significant loans for major
infrastructure investments and helped Bosnia and Herzegovina to conclude those loan
agreements.

The infrastructure projects in this programme
were selected because they were well-advanced in the preparatory phase, but
their timely implementation would have been unlikely without EU support. They
were a continuation of infrastructure support in 2009. Support for transport
and environment infrastructure will be continued in future IPA national
programmes. Support for infrastructure created a number of catalytic effects,
such as providing employment and income for citizens, protecting public health,
fostering industrial and agricultural production,
trade, and improving environmental conditions. Support for infrastructure was
in line with the EU 2020 Agenda, in particular where it promotes sustainable
development and social inclusion, and supported the European Neighbourhood
Transport Action Plan.

In the area of European standards, the
programme supported the customs sector through the Indirect Taxation
Authority.  It also prepared rural development structures through piloting IPA
rural development type measures to support the preparation of farmers towards
the implementation of a rural development policy in a way which is compatible
with the main principles of the EU rural development policy. Further assistance
was provided to the regional animal vaccination programme.

Donor coordination was ensured throughout
the entire project management cycle from project design to implementation. As the
main donor, the EU, in cooperation with DFID, was involved in setting up an Aid
Coordination Committee together with the Ministry of Finance, the Directorate
for European Integration and the Directorate for Economic Planning.

Regular coordination meetings on
programming and assistance implementation were held with EU Member States. The
Commission also participated in and provided regular updates on the IPA programming
process to a Donor Coordination Forum which comprised the European Union
Delegation, the EBRD, the International Monetary Fund (IMF), United Nations
Development Programme (UNDP/United Nations Resident Coordinator (UNRC), the
KfW, the World Bank and key bilateral donors.

Improved donor co-ordination resulted in the
division of labour in certain areas, in particular in infrastructure
investments, where member states or other donors are carrying out projects
which would otherwise not have been considered for financing.

The Commission used different management
approaches to implement assistance under the IPA 2010 programme to ensure
adjusted, efficient and effective programme implementation. The predominant
part of the assistance, which was devoted to infrastructure projects, was
implemented by joint and indirect central management, while other assistance
was implemented as twinning with European member states or technical
assistance.

A lesson confirmed (this is not a new
lesson, in BiH or elsewhere) from the implementation of assistance in Bosnia and Herzegovina was that lack of ownership and political commitment is detrimental
to the success of the assistance. In particular, despite the efforts of EU
assistance to support key reforms, progress has been rather limited in terms of
state building, governance and rule of law implementation, as well as in the
approximation to European Standards. The complex constitutional set-up,
insufficient political support and an overall weak administrative capacity have
not been conducive to reform implementation. The workshops mentioned in section
2.1 aimed to include final beneficiaries as early as possible in the
programming and project identification process to encourage ownership and
commitment. This approach has been confirmed by the recommendation of the
Interim/Strategic Evaluation of IPA Pre-accession Assistance to Bosnia and Herzegovina in the year 2010, which recommended the securing of an adequate time
frame for consultation and sufficient participation of all relevant
stakeholders.

In addition, the programme aimed at
promoting ownership by ensuring that projects were in line with Bosnia and
Herzegovina's own reform strategies and development plans, especially the
public administration reform and the judicial reform strategies.

The programming exercise for IPA 2011
started officially in November 2010 with a kick-off meeting in Sarajevo where the beneficiaries were asked to propose their priorities for the timeframe
2011 – 2013 and to propose projects based on these priorities for the IPA 2011.

Table
2: Indicative financial allocations for the year 2010 per component, in million
EUR

BOSNIA AND HERZEGOVINA || 2010

I. Transition Assistance and Institution Building || 100.69

Of which: ||

National Programme ||  98.29

Tempus Programme\* || 2.40

II. Cross-Border Cooperation || 4.70

Of which: ||

CBC Bosnia and Herzegovina – Croatia || 1.00

CBC Bosnia and Herzegovina - Montenegro || 0.50

CBC Bosnia and Herzegovina - Serbia || 0.70

CBC IPA Adriatic || 2.50

TOTAL || 105.39

\* The
Tempus Programme is coordinated and implemented in the Multi-beneficiary IPA
2010

Table 3: Indicative financial
allocations for the year 2010 under the National Programme, per priority axis
and per project, in million EUR

Priority Axis/Projects || Budget

Political Criteria || 31.90

|| Enhancing the Social Protection and Inclusion System for vulnerable groups – Phase III || 1.40

|| Construction of a High Security State Prison in Bosnia and Herzegovina - Phase II || 5.15

|| Strengthening the Judiciary || 4.00

|| Support to the Area of Law Enforcement || 8.00

|| Implementation of the Anti-Corruption Strategy and Action Plan || 2.00

|| Preservation of Bosnia and Herzegovina’s Cultural Heritage – Phase II || 5.00

|| Coordination of policy making capacities and public financial management || 3.00

|| Information Systems in Public Institutions || 1.35

|| Support to the Forensic Science Department of the International Commission on Missing Persons || 2.00

Economic Criteria || 51.60

|| Rehabilitation and Development of Transport and Navigation on the Sava River Waterway || 5.60

|| Rehabilitation and construction of water, waste water and solid waste infrastructure || 40.00

|| Rehabilitation and construction of water and waste water infrastructure || 6.00

Ability to assume the obligations of membership || 8.31

|| Pilot support to IPA Rural Development measures || 3.00

|| Improvement of animal health control through the vaccination against rabies || 3.06

|| Strengthening the customs sector within the Indirect Taxation Authority || 2.25

Supporting programmes || 6.48

|| Participation of Bosnia and Herzegovina in Community Programmes || 1.50

|| Project Preparation Facility || 4.98

TOTAL || 98.29

2.2.2.2.
Component II

The overall objective of the cross-border
cooperation (CBC) programmes is to promote cooperation between people,
communities and institutions, aiming at sustainable development and stability
and prosperity of bordering areas. The CBC programmes should have catalytic
effects as they should build the capacities of local stakeholders, municipal,
regional institutions and civil society, continuously strengthening their
ability to participate in cross-border initiatives.

The revised cross-border cooperation
programmes between Croatia and Bosnia and Herzegovina 2007-2011, between Bosnia and Herzegovina and Montenegro 2007-2011, and the multi-annual Financing Proposals
for the years 2010 and 2011 for these programmes were adopted by the Commission
in August 2010. The revised cross-border cooperation programme between Serbia and Bosnia and Herzegovina 2007-2011 and the multi-annual Financing Proposal for the
years 2010 and 2011 were adopted by the Commission in October 2010. The
revisions mainly added the 2010 and 2011 yearly financial allocations for both
countries and minor adjustments revising outdated references, but did not
affect the substance of the programme.

Since 2007, Bosnia and Herzegovina is
taking part in the IPA Adriatic cross-border cooperation programme together
with Italy, Slovenia, Greece, Albania, Croatia, and Montenegro and, in
phasing-out, Serbia. The global objective of the programme is to strengthen the
sustainable development of the Adriatic region.

Bosnia and Herzegovina is also participating in the ERDF transnational programme
"South-East Europe" (SEE) and "Mediterranean" (MED) under
the European Territorial Co-operation objective of the Structural Funds
2007-2013. 2010 IPA funds were integrated in the SEE and MED programmes. They
are managed by the Commission's Directorate-General for Regional Policies, which
is now entirely in charge of the programming and implementation of both ERDF
and IPA funds within these programmes. The programme supports Bosnia and Herzegovina’s participation in joint transnational co-operation activities with partners
from EU Member States and familiarises the country with territorial
co-operation programmes under EU Structural Funds.

2.3.
Implementation of assistance
2.3.1.
IPA
2.3.1.1.
Success stories

Reinforcement of Local Democracy
Project, IPA 2007, direct grant to UNDP (EUR 1.5 million)

The Reinforcement of Local Democracy
Project worked with 14 local governments focusing on strengthening relations
between local governance and the civil society sector, raising awareness on the
significance of the institutionalisation of these relations and the transparent
disbursement of funds.

There are 142 municipalities in Bosnia and Herzegovina, disbursing millions of euro per year to civil society organisations
(CSO), most of them in a non-transparent manner. The main objective of this
project was therefore two-fold: firstly, to introduce transparent mechanisms
for disbursement of municipal funds, and secondly, to improve the communication
and partnership between CSOs and municipalities. For many municipalities, the
project represented a first opportunity to learn how to work with CSOs in a
transparent corruption-free environment, thus helping them to learn how to
spend their financial resources effectively, efficiently, and by applying good
financial management. The EU will continue with a second phase of this project
in an effort to establish this culture in a critical amount of municipalities
across BiH which would in turn put pressure on the rest to act in a similarly
transparent manner.

The objectives to introduce transparent
mechanisms for disbursement of municipal funds to CSOs projects, to improve
communication and partnership among CSOs and to strengthen local grassroots
organisations were met.

Monitoring mechanisms were developed and
monitoring teams were established in 14 partner municipalities. These
activities improved trust, transparency and mutual understanding between the
civil society and local governance. In total, 67 sub-projects were implemented
with a focus on poverty reduction, social inclusion, gender equality, human
rights, environment, and improving the situation of minorities and vulnerable
groups.

A project of this nature needs to be
implemented by the EU to send a clear message to local governments and civil
society in Bosnia and Herzegovina that transparency is a value embedded in the
European culture.

Technical Assistance for the Central
Bank of Bosnia and Herzegovina, IPA 2008, direct agreement with the European
Central Bank (ECB), EUR 1.0 million.

The overall objective of this project was
to assist the Central Bank of Bosnia and Herzegovina (CBBH) to continue working
towards compliance with the EU central banking standards and rules to be ready
to join the European System of Central Banks (ESCB) when Bosnia and Herzegovina joins the European Union.

The success of
this project is highlighted by the proactive ownership of the beneficiary
institution, whose staff has been capable of adopting more advanced project implementing
methodologies, such as tailor-made transfer of know-how through well-planned
study missions, expert visits or preparation of very particular training
documents, manuals, guidelines, bridging models, etc.

This project
needed to be implemented by the EU (and not any other donor) as it concerned
partnership with relevant EU institutions such as the European Central Bank and
National Banks from the Euro area.

The project
yielded important deliverables in the fields of portfolio and interest rates
statistics, including proposal for adequate IT communication solutions, which enabled
the CBBH to improve its preparation of statistical data and information to
decision makers, and to provide recommendations and economic analysis on policy
and fiscal stability.

Efficient Prison Management, IPA
2007, Contribution Agreement with Council of Europe (CoE)- known as the 'joint
programme',  EUR 600,000.

As a transition country with 15 prisons or
detention centres spread throughout the country, Bosnia and Herzegovina faces
various policy, institutional and operational challenges in meeting European
standards in this area. The joint programme therefore was designed to address
some of those issues, and by doing so not only improved aspects of the
day-to-day operations of the prisons and the treatment of inmates, but also
supported the responsible Ministries of Justice and related ministries such as
health, in revising parts of their policy and legal framework.

More specifically the objective of the
joint programme was to address six key areas:  amending the strategic framework
in the use of alternative sanctions and independent inspections, enhancing
staff knowledge of European human rights, improving the treatment of vulnerable
groups, amending the legal framework on mental health and proposing
improvements to the prison databases.

With a strong track record in prison
reform, the CoE was selected as the EU's implementing partner. As a member
state of the CoE, Bosnia is already obliged to adhere to European standards in
this field, particularly the European Convention of Human Rights, and European
Convention for the Prevention of Torture. However, as a potential candidate
country to the EU, whose requirements under Chapter 23 of the accession
negotiations include the same conventions, the EU added value was clear and
founded on clear legal requirements for accession when compared to an EU Member
State financing the same support. Equally, in the framework of EU requirements
for justice, freedom and security, the EU has a clear framework for this area.

The joint programme adopted an innovative
and inclusive methodology in implementing the assistance; namely to establish
working groups comprising officials from the Bosnian authorities for the 6
areas mentioned above.  It also included 'cascade' trainings whereby a group of
12 Bosnian prison related officials were initially trained as trainers on
relevant topics and thereafter provided the trainings to their compatriots.
Such approaches were highly appreciated by all the beneficiaries who mentioned
throughout project implementation that they considered the approach not only
relevant to the reality in Bosnia and Herzegovina in terms of substance, but
also sustainable in terms of impact. The calibre of expertise was highly valued
by all stakeholders.

In the course of the activities, over 420
prison related staff were trained, legal frameworks were amended and adopted,
and collaboration between the prison related staff including ministry officials
were reinforced, an important benefit in an administratively and politically
fragmented set up as that of BiH.

The CoE considered the project to be such a
positive example of CoE/EU impact that they undertook an evaluation of the
joint programme.  The possibility of future benefits of the CoE and EU working
together in areas of mutual interest should not be underestimated.

2.3.1.2.
Overview of IPA implementation in 2010

Component I: Transition Assistance and Institution Building

The figures in table 5 below confirm that
after the slow start of IPA 2007 the implementation of IPA gained momentum and
contracting and payment rates improved considerably in 2010. At the end of the
year, EUR 142.88 were contracted, an increase of more than 100 % in comparison
to the year 2009, when EUR 70.91 million were contracted. Also the disbursement
of EUR 83.31 million at the end of the year 2010 triplicated the 2009 figures,
when EUR 25.16 million was were disbursed.

Table 4: Status of implementation of IPA
financial assistance (Component I) as of 31st December 2010 (in
million EUR) per annual programme[10]

|| Committed || Contracted || % Contracted || Paid || % Paid

IPA 2007 || 49.74 || 48.15 || 96.80% || 28.74 || 57.78%

IPA 2008 || 66.75 || 36.22 || 54.26% || 15.94 || 23.88%

IPA 2009 || 80.50 || 41.58 || 51.65% || 22.01 || 27.34%

IPA 2010 || 98.29 || 0 || 0% || 0 || 0%

TOTAL || 295.95 || 125.95 || 42.65% || 66.69 || 22.59%

Table 5: Distribution of total committed funds
(2007-2010 allocations) by priority axes

Priority Axes || % of 2007-2010 allocations

Political criteria || 29%

(of which civil society) || (4%)

Economic criteria || 42%

Ability to assume membership obligations || 25%

Support programmes || 4%

TOTAL || 100%

SIGMA activities were implemented in the
frame of 6 active project definition sheets (PDS). Most of the work was done in
the area of public procurement, with comments on a draft law on public
procurement and a peer review that started at the end of 2010. A workshop was
done jointly with a technical assistance project in the area of Public Internal
Financial Control (PIFC). Advisory assistance to the decentralisation of
assistance (DIS) on the set up of the Audit Authority was suspended, together
with other assistance to DIS due to the lack of progress in nominations and a legal
basis for DIS.

One continued
activity was the support to the Public Administration Reform (PAR) and
especially further work on the Blueprint of the Centres of Government. Another
activity was in the area of administrative decision-making, procedures and
disputes but without follow up on the side of authorities. SIGMA assistance has
in general been timely, professional and efficient.

Twinning: 5 twinning projects were launched and a further 5 were under
implementation. No twinning light projects were implemented in Bosnia and Herzegovina. The general problem with twinning projects was the exceptionally
long procedure for work-plan preparation and contract signature that created
uncertainty on both Member State and beneficiary sides and postponed the European
Commission's contracting targets and led to the ineligibility of many costs for
the beneficiary participants. With budget constraints on the side of the
beneficiary country and the non-adoption of the state budget, the beneficiaries
were unable to take part in some of the twinning activities which reduced the impact
of twinning projects in BiH.

The
TAIEX instrument was largely used by institutions from State and entities
(e.g. study tour, expert mission to beneficiary country, participation in
regional workshops, organisation of a single-country seminars, etc). TAIEX
assistance predominantly was requested and provided for the areas of justice
and home affairs and internal market. Out of 119 applications, 91 were approved
and realised in 2010.

In
addition to classical TAIEX assistance, it’s the non-governmental sector (civil
society organisations) in particular benefited from the European Union's People-to-People
Programme (P2P), in the form of study tours to Brussels, to learn about EU
policies, legislation, and programmes.  22 P2P study tours were organised in
2010.

154
TAIEX and P2P events involving Bosnia and Herzegovina were organised in 2010,
out of which 79 were single country events and 75 were multi-country events.

EU Programmes

In 2010 Bosnia and Herzegovina participated in the Seventh Framework Programme for Research and
Technological Development (FP7). The costs for the entry ticket were EUR 1.5
million, of which 85% were co-financed by IPA. The Ministry of Civil Affairs,
in cooperation with a network of National Contact Points (NCP), which are based
at Universities throughout Bosnia and Herzegovina, organised a series of
workshops and training session for applicants to increase the rate of
participation in the programme as well as to improve their capacities in
submitting good quality project proposals. Bosnia and Herzegovina had 25
approved projects with a total amount of EUR 2 million. BiH research
institutions also participated in 16 European Cooperation in Science and
Technology (COSTS) actions and 2 EUREKA projects.

During 2010 BiH
negotiated the Memorandum of Understanding (MoU) for entering into the Culture
Programme. The MoU was signed in November 2010, enabling it to take part in the
programme as of January 2011.

In the second
half of 2010, Bosnia and Herzegovina initiated a series of consultations with
the different European Commission services on the participation in the Entrepreneurship
and Innovation programme (EIP), the, Media programme, and the programme Europe for Citizens.

Component II: Cross-border Cooperation
(CBC)

The contracting peak for the 2007 and 2008
bilateral CBC programmes was reached towards the end of 2010, when the
evaluations of the received proposals were completed. The first call for
proposal for bilateral programmes demonstrated that that the interest for
participation in the programme exceeded by far the available resources. As an
example, the Commission received more than 100 applications
for participation in the CBC Croatia – Bosnia and Herzegovina programme,
requesting more than Euro 25 million. Finally, thirteen projects worth EUR 1.6 million were accepted.

Tables 6: Status of implementation of IPA
financial assistance (Component II) as at 31st December 2010 (in million EUR)
per annual programme[11]

|| Committed || Paid || % Paid

IPA 2007-2010 || 18.82 || 1.59 || 8.45%

Out
of which, the breakdown for the intra-Western Balkans CBC Programmes and the
ERDF Transnational Programmes (South-East Europe and Mediterranean) is:

|| Committed || Contracted || % Contracted || Paid || % Paid

IPA 2007 || 2.65 || 1.74 || 65.66% || 1.19 || 47%

IPA 2008 || 2.71 || 0.65 || 23.99% || 0.40 || 14%

IPA 2009 || 2.76 || 0.00 || 0% || 0.00 || 0%

IPA 2010 || 2.20 || 0.00 || 0% || 0.00 || 0%

TOTAL || 10.32 || 2.39 || 23.16% || 1.59 || 15.41%

Table 7: Distribution of total committed funds
(2007-2010 allocations) by priority axes

Priority Axes || % of 2007-2010 allocations

CBC with Member States || 44%

CBC within Western Balkans || 45%

Participation to ERDF Transnational Programmes || 11%

TOTAL || 100%

2.3.1.3.
Implementation Modalities and Structures

Implementation of Component I and II programmes: As in the previous reporting year, also in 2010 the majority of
projects under IPA 2007, 2008 and 2009 Components I and II were implemented on
a centralised (devolved) basis by the EU Delegation to Bosnia and Herzegovina,
in accordance with Article 53(a) of the Financial Regulation (FR) and the
corresponding provisions of the Implementing Rules (IR). Exceptions are the
infrastructure support projects in the 2009 and 2010 IPA programmes, which were
implemented by joint management with the European Bank for Reconstruction and
Development (EBRD), the European Investment Bank (EIB), and the World Bank (WB)
in accordance with FR Article 53(d) and corresponding IR provisions, and by
indirect centralised management through a delegation agreement with the Kreditanstalt für Wiederaufbau (KfW), in accordance with FR Article
54(2)(c) and corresponding IR provisions.

Multi-Beneficiary programmes: As was the case in the previous reporting year, Bosnia and Herzegovina's participation in horizontal nuclear safety and education (Tempus)
programmes was funded by allocations under Component I of IPA, but was
implemented on a centralised basis by the European Commission in Brussels in the framework of the Multi-Beneficiary Programme.

Preparation for decentralised management of IPA: In April 2010, the Council of Ministers of Bosnia and Herzegovina adopted decisions to nominate the Competent Accrediting Officer (CAO), the
National Authorising Officer (NAO), and the National
IPA Coordinator (NIPAC). The CFCU (Central Finance and Contracts Unit) and
National Fund (NF) are established within the Ministry of Finance and Treasury
and are functional although not fully staffed at the end of 2010. However, State and entity representatives could
not agree on the structures to be built to support the decentralised
implementation of EU assistance, further blocking progress towards decentralisation.

2.3.1.4.
Monitoring

During 2010, regular project monitoring was
undertaken by EU Delegation programme managers on all ongoing contracts through
participation in project Steering Committees, in specific project activities
and visibility events (conferences, seminars, training sessions, open days) and
by field visits, including verification of progress of construction works and
delivery of supplies. The general picture of implementation coming from the
monitoring activities was rather good; programme managers were in general able
to see if the projects are on the track and slightly steer them if needed.
Visibility events in general received good media coverage.

71 Result-oriented Monitoring (ROM)
missions were undertaken for 63 projects with a total value of approximately EUR
78 million. This was an increase of more than 100 % compared to the previous
year, both in value and in number of monitoring missions. The average score of
the projects performance was 2.17 on the scale from 1 - very good to 4 -
serious deficiencies. Except for individual projects related to social
protection, regional development, support to rural development and support to
the Ministries of Justice, for which corrective measures were taken, most of the
projects received scores ranging from 1 to 3. In general, the problematic
issues included mainly impact prospects, potential sustainability, and
effectiveness to date. Relevance and quality of design as well efficiency of
implementation to date were in general better scored. For each project, key
recommendations were proposed separately for the contractor and for the EU
Delegation in order to move forward. The implementation of these
recommendations generally proved to be successful and the projects were able to
get back on track.

The projects "Bosnian Kingdom
Trial", "VRBAS, Joint tourism development of the Vrbas valley"
"Building in the Capacity for Exports and Promote Export Base in
BiH", "Mine Clearance and Technical Assistance", and
"Reinforcement of Local Democracy I" as well as "Support to the
Registry for Section I for War Crime and Section II for Organised Crime"
were considered as success stories.

The findings of ROM reports in 2010
indicated that the best performance of projects was demonstrated in relation to
relevance /project design quality and impact as well as sustainability
prospects.

In
terms of involvement of the beneficiary institutions in the monitoring
activity, their representatives participated in project Steering Committees and
the above mentioned specific project activities and visibility events as it was
the practice in past years. The step forward was undertaken in summer 2010,
when the Monitoring and Evaluation (M&E) unit was established within the EU
assistance coordination sector of the Directorate for European Integration
(DEI). Capacity building to the staff of the M&E Unit was s provided by the
Commission.

2.3.2.
CARDS
2.3.2.1.
Sectors with positive results/ Success stories

As the implementation of CARDS programme was very
successful in Bosnia and Herzegovina and done within a relevant timeline, it is
almost completed and therefore no noteworthy activities took place in 2010. All
the relevant CARDS success stories as well as lessons learned were therefore
reported in previous Reports. All evaluations were also done in the previous
period.

2.3.2.2.
Management performance

With regards to
the closure of CARDS contracts, 111 contracts were closed in 2010 compared to
97 closed CARDS contracts in 2009.

In 2010, 17 recovery orders were issued in a total value of EUR
525,716 of which EUR 478,031 was recovered by the end of the year. This is an
increase compared with 2009. Sound financial management and the effectiveness
and efficiency of the activities were ensured inter alia through the recovery
orders. The most common reasons for the recovery orders were ineligible
expenses (identified either by the EU Delegation or by external auditors in
their expenditure verification report), unspent advance payments, and recovery
of interest.

Table 8: Status of financial assistance at the
end of December 2010 (in million EUR) – CARDS annual programmes[12]

|| Allocated || Contracted || % Contracted || Paid || % Paid

CARDS 2001 || 105.23 || 98.12 || 93.24% || 98.12 || 93.24%

CARDS 2002 || 60.50 || 56.53 || 93.44% || 56.53 || 93.44%

CARDS 2003 || 50.60 || 46.09 || 91.09% || 46.07 || 91.05%

CARDS 2004 || 62.10 || 60.15 || 96.86% || 59.96 || 96.55%

CARDS 2005 || 44.00 || 42.79 || 97.25% || 41.95 || 95.34%

CARDS 2006 || 43.80 || 42.30 || 96.58% || 40.72 || 92.97%

Total || 366.23 || 345.98 || 94.47% || 343.35 || 93.75%

2.3.2.3. Institution Building
highlights

CARDS 2006 "Capacity building and
Institutional Strengthening of Science and Research in BiH" (Service
Contract EUR 477,900)

The project was completed successfully. It
supported the re-establishment of a vibrant national research, technological
development and innovation system, and further integration of Bosnia and Herzegovina into the European Research Area. It also contributed to the development and
strengthening of the national contact point network for FP7 and provided
support for the Ministry of Civil Affairs in promoting activities in the
science and research sector. The project received great support from the Federation
of Bosnia and Herzegovina Ministry of Education and Science and the Republika
Srpska Ministry of Science and Technology.

3.
CROATIA
3.1.
Summary

In 2010 the European Union continued
providing IPA support for the accession process of Croatia. Croatia made good progress in using IPA funds towards completing the preparations for accession to
the EU and assuming the responsibilities of full membership.

The implementation of IPA, as in the
previous reporting period, took place under the provisions for decentralised
management, through which the management of programs is undertaken by the
relevant Croatian authorities, subject to the ex ante controls by the
European Commission. Furthermore, progress was made by Croatia towards meeting the conditions for the waiver of ex ante controls.

Programming and implementation of IPA was
differentiated into five components that focused on particular strategic
priorities, as defined in the Multi-annual Indicative Programming Document
(MIPD) for Croatia.

IPA Component I, Transition Assistance and
Institution Building (TAIB), focused on the remaining
assistance needs of Croatia relevant for assuming membership obligations. The
TAIB National Programme provided support in particular for efforts to reform
the judicial system, as well as improve Croatia's capacity of assuming its
obligations under the EU acquis.   Component II, Cross-Border Cooperation
(CBC), continued promoting the development of good neighbourly relations
between Croatia and the EU Member States, as well as the other Western Balkan
countries. Components III, IV and V served the dual role of, on one hand
improving the regional competitiveness and development of Croatia, and on the other hand, preparing the national authorities for the implementation of
structural and cohesion funds available after the date of accession.

As regards the
performance during the reporting period, Component I was
characterised by a relatively stable performance in 2010, with 13 twinning and
8 twinning light projects under implementation in this period, as well as
considerable support provided to Croatia under the TAIEX and SIGMA programs.
TAIB 2007 National Programme reached its contracting deadline, achieving a
contracting rate of 92.22%, but the 2008 National Programme faced delays in
contracting. This lead to a situation where Croatia will have to implement
various programmes under this component simultaneously.

Component IV, Human Resources Development,
showed good performance, with tenders launched covering 87% of the 2007-2009
allocation and contracts signed representing 70% of the same allocation. The
programmes under Components II, III and V showed a slower pace of activity
compared with Component I and IV. This was due to a number of factors such as the
addition of new bodies to the implementation system in the case of the Cross-Border
Co-operation Component, the underlying complexity of big infrastructure
contracts in the case of Component III, or due to delays in the conferral of
management for Component V, Rural Development. Nevertheless, addressing these
delays in the implementation process led to important lessons for improving the
structures managing pre-accession assistance and preparing for managing EU
Structural and Cohesion funds.

3.2.
Strategic planning and programming
3.2.1.
Multi-annual Indicative Planning Document

The purpose of the MIPD, prepared during
2010, is to set out the EU's priorities for assistance to Croatia for the programming period 2011-2013. Croatia will receive an indicative allocation of EUR
479 million, according to the Multi-annual Indicative Financial Framework
(MIFF) for IPA for the years 2011-2013. The "Enlargement Strategy and Main
Challenges 2010—2011" and the 2010 Progress Report[13], identifies Croatia's
needs to consolidate reforms in the field of judiciary and fundamental rights
and to make further efforts to finalise and implement the legal framework for
public administration reform.  Further, Croatia needs to sustain efforts to
fully establish the administrative structures required for the management and
control of EU funds.

In order to achieve these priorities, the
Commission decided to focus assistance on the following 7 sectors, as detailed
in the MIPD:

- Justice and home affairs and fundamental rights,

- Public administration reform,

- Environment and climate change,

- Transport,

- Private sector development,

- Social development,

- Agriculture / rural development.

Croatia has shown a
high degree of ownership during discussions on the draft MIPD and raised a
number of questions related to the presentation of assistance per
"sectors" (rather than, as in the past, by IPA Components) and its
suitability for Croatia. The Commission explained, as agreed in the wider
context of the IPA donor coordination conferences, the need to enhance the
strategic links between membership preparations, the Annual Enlargement
Strategy and the Progress Report with financial assistance. Evaluations made
by  external parties, such as the Court of Auditors and the European
Parliament, on the effectiveness of financial assistance in Croatia have been
carefully taken into consideration.

Table 1: MIFF[14]
allocations per component, in million EUR

Component || 2010 || 2011 || 2012 || 2010-2012

I – Transition Assistance and Institution Building || 39.48 || 39.96 || 40.87 || 120.31

II – Cross-border cooperation || 15.60 || 15.87 || 16.14 || 47.61

III – Regional Development || 56.80 || 58.20 || 59.35 || 174.35

IV – Human Resources Development || 15.70 || 16.00 || 16.04 || 47.74

V – Rural Development || 26.00 || 26.50 || 27.27 || 79.77

TOTAL || 153.58 || 156.53 || 159.67 || 469.78

3.2.2.
Programming exercise

Table 2: Indicative financial
allocations for the year 2010 per component, in million EUR

CROATIA || 2010

I. Transition Assistance and Institution Building || 39.48

Of which: ||

                                                                                  National Programme  || 38.62

                                                                             Nuclear Safety Programme\* || 0.86

II. Cross-Border Cooperation || 15.60

Of which:                    ||

                                                        CBC Croatia– Bosnia and Herzegovina || 1.00

                                                                          CBC Croatia - Montenegro || 0.40

                                                                                   CBC Croatia - Serbia || 0.80

CBC Croatia – Slovenia || 3.27

CBC Croatia – Hungary || 2.67

CBC IPA Adriatic || 7.46

III. Regional Development || 56.80

Of which: ||

Transport || 21.30

Environment || 21.30

Regional Competitiveness || 14.20

IV. Human Resources Development || 15.70

V. Rural Development || 26.00

TOTAL || 153.58

\*The
Nuclear Safety Programme is coordinated and implemented under the relevant
Multi-beneficiary IPA 2010 programme.

3.2.2.1.
Component I: Transition Assistance and Institution Building

The IPA
2010 Component I programme for Croatia was adopted by the Commission on 7
December 2010, on the basis of project proposals made by the National IPA
Coordinator (NIPAC) in Croatia and subsequent discussions with the Commission.

Given the advanced state of membership
preparations, the IPA Component I programme for Croatia focused on the
remaining assistance needs relevant for assuming membership obligations.  The 13 projects of the IPA 2010
programme were grouped under the four strategic priority axes defined in the
Multi-annual Indicative Planning Document (MIPD) 2009-2011 for Croatia: political criteria, economic
criteria, ability to assume the obligations of membership, and supporting
programmes.

They were selected by taking into account
their compliance with the Accession Partnership adopted on 12 February 2008, as
well as the Enlargement Strategy Paper and the Croatia Progress Report. They
have also been assessed against the background of the 2009 National Plan for
the integration of the Republic of Croatia into the EU, the Croatian strategic
development framework 2006-2013, as well as sectoral strategies wherever
appropriate.

About two thirds of the IPA funding was
delivered through institution-building activities. The remaining third focused
on investment. Under the Institution Building Component, the twinning
instrument continued to be the preferred implementation modality for
transposition or legal approximation-related projects, benefiting from
expertise from within the Member States. Investment projects related to
the growing importance of strengthening administrative capacity, complementing acquis
related projects with an increased emphasis on post-accession objectives.

Lessons learned from previous years were taken into consideration
when programming IPA 2010, as described in the thematic
Public Administration Reform[15]
evaluation and in the Country Programme Interim Evaluation carried
out by the Commission in 2009 (final report of March 2010), as well as the
Country Programme Interim Evaluation 2010 carried out by the Croatian
authorities.

During the programming exercise, attention was paid especially to
conditionality and sequencing by assessing the complementarity with past and
ongoing projects so as to avoid overlaps. Most IPA projects were to a various
degree follow-ups of previous projects under CARDS and PHARE or precursors for
new projects. Measures were deployed to improve the administrative implementability
of projects and compress the length of the preparatory phase.

Table 3:
Indicative financial allocations for the year 2010 under the National Programme
for Component I, per priority axis and per project, in million EUR

Priority Axis/Projects || Budget

Political Criteria || 9.2

|| Improvement of the Enforcement system || 1.5

|| Strengthening the efficiency of the judiciary || 2.3

|| Civil Society Facility || 2.4

|| De-mining Programme in War Affected Areas || 3.0

Economic Criteria || 5.5

|| Integrated Land Administration System Implementation || 5.5

Ability to assume the obligations of membership || 12.9

|| Continued Support to animal disease control/ eradication || 3.1

|| Enhancement of the CTA administrative and institutional capacity || 0.8

|| Integrated Border Management || 5.8

|| Support to the National Visa System || 1.2

|| Development of flood hazard maps and flood risk maps || 1.0

|| Strengthening capacities for Strategic environmental assessment at regional and local level || 1.0

Supporting programmes || 11.0

|| Flexible Facility for Reinforcement of Administrative Capacity || 3.6

|| Participation in Union Programmes and Agencies || 7.4

TOTAL || 38.6

3.2.2.2.
 Component II: Cross-Border Cooperation

Croatia participates in cross-border
cooperation (CBC) programmes with neighbouring IPA countries: Bosnia and Herzegovina, Montenegro and Serbia as well as with EU Member States, namely Slovenia, Hungary, as well as Italy and Greece. These programmes aim at encouraging the creation of
cross-border networks and partnerships and developing joint cross-border actions
with a view to revitalising the economy, protecting the environment and increasing social cohesion
in the programme areas. They also include
technical assistance.

The Financing Decisions allowing for the
deployment of IPA 2010 funds regarding CBC with Western Balkan countries were
adopted in August and September 2010, worth respectively EUR 2 million for CBC
with Bosnia and Herzegovina, EUR 0.9 million for the programme with Montenegro
and EUR 1.8 million for cooperation with Serbia (the amounts covering both
sides of the borders).

Croatia participates also in the following
cross-border programmes with Member States: CBC Adriatic, CBC Hungary-Croatia
and CBC Slovenia-Croatia, which had been adopted over February-March 2008.
Multi-annual Financing Decisions were adopted already in 2008 and modified in
2010 to include the allocations for the years 2010-2011.

The "IPA Adriatic Cross-Border Programme" between Greece,
Italy, Slovenia, Albania, Bosnia and Herzegovina, Croatia, Montenegro and
Serbia contain priority axes on "Economic, social and institutional
cooperation", "Natural and Cultural Resources and Risk Prevention",
"Accessibility and Networks" and "Technical assistance" for
a total amount of EUR 37.64 million  under 2010 funding, with a IPA contribution
for Croatia of EUR 7.46 million.

The Hungary – Croatia IPA cross-border programme contains priority
axes on "Sustainable Environment and Tourism", "Co-operative
Economy and Intercommunity Human Resources Development" and
"Technical assistance", for a total amount (again including the ERDF contribution)
of EUR 8.04 million under 2010 funding, with the IPA contribution amounting to
EUR 2.67 million.

The Slovenia –
Croatia IPA cross-border programme contains priority axes on "Economic and
social development", "Sustainable management of natural
resources" and "Technical assistance", for a total amount of EUR
6.54 million under 2010 funding and an IPA contribution of EUR 3.67
million.

3.2.2.3.
Components III-V

As regards IPA Components III and IV, Regional Development and
respectively Human Resources Development, the relevant Operational Programmes
were modified in 2010. The priorities and objectives of the programmes remained
unchanged; additional resources were allocated to the existing priority axes
and the indicators have been revised due to this increased financial
allocation. The new commitment of IPA funds for component III amounts to EUR
56.8 million for 2010 and EUR 58.2 million for 2011.

Furthermore, for the Operational Programme for Human Resources
Development two modifications were made regarding the measures. In Priority 2 a
new measure was introduced: 2.3 Development of social services to improve
employment opportunities. In Priority 3 measure 3.3 Supporting the quality and
effectiveness of institutions responsible for policy design and provision of
education and training was extended by including higher education.

As regards Component V, the programme for Agriculture and Rural
Development, adopted in February 2008, was subsequently modified in October 2008,
September 2009, and a third time in November 2010. The last modification included some technical modifications for reasons of clarity and
easier administration and implementation of the programme. As lessons were
learnt from results of the first and the second call for applications, the new
proposals aimed also at broadening the access of potential beneficiaries that
previously had not been eligible due to the size of their establishments or the
exclusion of their sector. Due to this modification, an increased number of
applications have been noted.

3.3.
Implementation of assistance
3.3.1.
IPA
3.3.1.1.
Success stories

Support to the Parliament of Croatia for the Preparation for EU Accession; IPA 2007 Component I; EUR 240,045

The project was implemented by the Croatian Parliament in
co-operation with the Hungarian National Assembly with inputs from various
parliaments of the EU Member States. The project implementation started in
February 2010 and included nineteen activities over six months.

The overall objective of the project was to prepare the Parliament
of Croatia for EU accession. The project resulted in the elaboration of the
efficient legal framework required to meet the specific membership obligations
of the Croatian Parliament after EU accession, it enhanced the knowledge of the
parliamentary staff on EU matters and elaborated proposals on the means to
raise public awareness on the parliamentary activities related to the EU.

Throughout this project, the Sabor, as the representative body of
the Croatian citizens, became more intensively involved in raising the interest
of the Croatian society in EU-related issues. By improving the internal
co-ordination and the external relationships with Governmental bodies, the
Sabor was able to launch debates and discussions on the EU.

Capacity Building of the Croatian Administration in the Wine Sector; IPA 2007 Component I, Twinning Light project; EUR 248,000

This project supported the development of Croatian geographical
indications for wine and it was implemented from January 2010 to July 2010.

With the assistance of Austria, this "twinning light"
project improved the expertise of the Croatian administration staff working in
the wine sector. It also developed an EU-compliant system of protected denomination of origin (PDO), based on the
existing Croatian wine law. Furthermore, professionals in the wine sector were
informed about the consequences of the new legislation.

After the 2008 reform of the EU Common Wine Market Organisation,
Member States have to decide for their wines between protected designation of
origin (PDO) and protected geographical indication (PGI). Given the importance of the wine sector in Croatia, the establishment of this system constituted a challenge during the pre-accession
period. During the implementation of the project, the Wine Department of the
Ministry of Agriculture, Fisheries and Rural Development was trained through
workshops and study visits in the technical aspects of preparation of the new
act and its implementation.

The new harmonised legislation was drafted and a plan for its
implementation was prepared. Workshops were held with 120 professionals (producers, institutions working in the wine
sector and agricultural advisory services) to inform them about obligations and
rights arising from the new harmonised legislation. The legislation created
through this project entered into force in December 2010.

Transnational Integrated Management of Water Resources in
Agriculture for the European Water Emergency Control; IPA 2007 Component II, Trans-national
Programme South East Europe, EUR 65,000.

The project has dealt with the development of shared methodologies
and the application of demonstrative and innovative interventions towards the
integrated management of water resources in rural areas, to move towards
sustainable development models framed by EU legislation. The main purpose was
to give concrete answers to the problem of water consumptions and water
contamination caused by the intensive exploitation operated by agriculture in
selected rural communities across South East Europe (SEE), where agriculture
represents the major user of natural resources and supplier of environmental
services.

In particular Eastern and Southern Europe is affected by a chronic
lack of water supply, which has reached alarming levels in the recent years.
This situation arises from several causes, e.g. low efficiency, pollution and
lack of an integrated cycle in agricultural, civil and industrial use of water.
Furthermore, the scenario of water availability has deteriorated due to climate
change and rainfall seasonality variation.

The project, commonly referred to as EU WATER, was carried out in
eight rural study areas belonging to eight SEE countries (Greece, Hungary,
Italy, the Republic of Moldova[16],
Romania, Serbia, Ukraine and Croatia) tackles the emergency related to water
consumption and contamination in Europe, and aims at spreading, at
transnational level, best practices in integrated water resource management in
agriculture based on the optimization of water consumption and cutback of
groundwater pollution.

The main objectives of the project were reorganization
of existing knowledge about water-sensitive areas, application of joint
strategy by downscaled local intervention plans toward better water -
agricultural regimes, development of practical actions and grants mechanisms
for introducing new technologies and new productive systems in agriculture and
improved environmental / rural / land use policy planning thanks to broad local
partnerships. The main result upon completion will be the establishment of a
bottom-up integrated water management in agriculture, involving directly at
least 100 pilot farms, 60 local authorities and 80 technicians, with wide
impact on most stakeholders in each concerned region.

Project Zagreb Main Railway Station Signalling and Interlocking
System; IPA Component III, Operational Programme Transport 2007-2009; EUR 12.6 million.

The signalling and interlocking system at the Zagreb Main Railway
Station dated back to the 1930s and it was technically and technologically
outdated and unreliable, with train speeds  being reduced to 30 km/h in the
interest of safety.

The project was aimed at upgrading railway station technical
parameters to Trans-European Network requirements. The basic benefit was the
removal of a traffic bottleneck and speed restrictions due to antiquated
signalling equipment. The project included all necessary reconstruction,
installation and adjustment of the devices. The design phase began in 2010, and
the works will be finalised in 2012. Upon completion, both passenger and cargo rail
traffic will travel faster through Zagreb.

Time for Women project; IPA Component IV, Operational Programme
Human Resources Development 2007 – 2009, Priority Axis 2 Reinforcing Social
Inclusion of People at Disadvantage;  EUR 108,213

The region of Eastern Croatia, largely rural, was heavily affected
by war in the 1990s. Fifteen years after the war, its effects on the economy
are still felt. The labour market has been strongly affected by the reduction in
employment opportunities, especially for women.

In order to facilitate the entry into labour market of unemployed
women, the project established a network of contacts among them, labour market
agents and potential employers. However, since most of the project
beneficiaries were older than 40 and out of the labour market for a long time,
this measure alone would not have significant impact, so the project trained
about 50 women in pepper and vegetable growing. The practical training was done
at experimental farms established for that purpose. In addition, the project
procured ten greenhouses, 100 square meters each, which were distributed to the
selected trainees in order to allow them to continue growing vegetables. Other
trainees either had their own facilities or joined efforts with those ten
receiving the greenhouses. 25 more women were trained in nursing, which they
could continue practising on a non-professional basis. The training was
reinforced by workshops in entrepreneurship and psychological assistance.

IPA Component V, Agriculture and Rural Development programme
2007-2013.

In 2010 three calls for applications were launched for two conferred
measures under Axis I "Improving market efficiency and implementation of
Community standards". As a result, 28 projects were contracted supporting
the improvement of market efficiency and implementation of EU standards in the
field of environmental protection, public health, animal welfare and
occupational safety.

Successful examples can be found for instance in the poultry sector,
where many farms still do not comply with animal welfare and EU environmental
standards. Thanks to the rural development component, Croatian poultry and egg
producers have received support for investment in equipment for laying hens'
housing, and equipment for manure management, usage and transport. In that way,
producers introduced new production processes and technologies, as well as
improving the quality of their products with the primary emphasis on reaching
EU standards. In many cases, thanks to new modernised production
facilities/technique, companies reduced their production costs and became more
competitive in local and European markets.

Other notable examples can be found in the meat sector. Investment
in slaughterhouses is particularly important due to the large number of
establishments still not compliant with EU standards. Many old existing
slaughterhouses use IPARD programme funds to enter into the 1st
category of facilities, according to the Commission classification – EU compliant.
Through the modernisation of their production facilities and practices, they
not only assured the safety of the meat production according to EU standards,
but may also be able to expand their markets by increased capacity.

The IPARD-added value is expressed mainly in compliance of Croatian
food production with EU standards, guaranteeing safe food for local and export
markets together with improving their competitiveness.

3.3.1.2.
Overview of IPA implementation in 2010

Component I: Transition Assistance and Institution Building

On 17 November 2010, the TAIB 2007 National Programme reached its
contracting deadline, achieving a contracting level of EUR 36.84 or 92.22%
(excluding the nuclear project). At the end of 2010, five months before the
contracting deadline of 05 June 2011, excluding the Community Programme part,
the contracting rate for IPA 2008 stood at 12.1% or EUR 4.3 million in absolute
terms. An extension of the contracting deadline by one year for IPA 2008 was
requested by the Croatian Government. .

In 2010, a total of 13 twinning contracts were under
implementation. The sectors targeted by the  twinnings and partner countries
were as follows: customs (Austria), VAT (Austria), maritime safety (Finland
with Italy and Sweden), intellectual property (Denmark) and air quality
monitoring (Finland), funded from the Phare 2006 National Programme, Twinnings
in the sectors anti-corruption (one with Germany and another one with France
and Italy), competition and state aid (Italy with UK), personal data protection
(Spain), combating drug trafficking (Austria), capacity building of the
Croatian Paying Agency (Austria), energy administrative data management
(Denmark with Latvia and Slovenia) and chemical safety (Sweden with Italy) were
funded from the TAIB 2007 National Programme.

8 twinning light contracts, all funded from the TAIB 2007 National Programme, were under
implementation in 2010 in the fields of public-private partnership (2
contracts, both with Greece), plant protection products and pesticide residues
(UK), protection of EU financial interests (Romania), own resources (Poland),
wine sector (Austria), public internal financial control (UK) and parliament
(Hungary).

The total amount of twinning and twinning light contracts under
implementation in 2010 was EUR 15.5 million. The funding was secured through the Phare 2006 and the TAIB 2007
national programmes. For IPA 2007, several Member States applied to the various
twinnings in Croatia, resulting in a wider spread of Member States selected by
Croatian ministries to implement these contracts.

Since January 2010, and upon request of the EUD, the CFCA has set up
a quality control department for twinnings. This important change resulted in
considerable improvement of the quality of the twinning documentation submitted
to the EUD for ex ante approval as well as for the monitoring by the
Croatian Contracting Authority of the implementation of twinnings in Croatia.

In 2010, the Delegation was consulted on 198 requests for TAIEX
assistance. The majority of them were related to: Chapter 12 Food safety
(74 requests), Chapter 24 Freedom, Security and Justice (23 requests), Chapter
27 Environment (20 requests), Chapter 28 Health and Consumer Protection (20
requests) and Chapter 23 Judiciary (13 requests). The other requests related to
all remaining chapters. Interventions funded by TAIEX can be extremely well
targeted to the needs of the institutions, and were financially not demanding,
which justified the high number of requests by the Croatian institutions (in average one each working day).

During 2010 SIGMA support to Croatia covered the following main
areas:

1. Support in public administration reform and the judiciary
sector. A comparative study was elaborated on the
modality, scope and procedure of verification of assets of officials in the EU
Member States', Austria, France, Italy and Slovenia. Sigma provided comments on
the draft legislative package elaborated by the Croatian authorities in view of
meeting the closing benchmarks on prevention of corruption under Chapter 23 of
the accession negotiations. These included in particular: the Law on the
Financing of Political Activities and Electoral Campaigns, the Law on
Prevention of Conflict of Interest and the Law on Access to Information. Sigma
further supported the Ministry of Public Administration in the finalisation of
the draft Operational Programme for Administrative Capacity Development.
Several workshops were organised by Sigma in order to strengthen the
administrative capacities of the Ministry of Public Administration.

2. Support to the financial sector, included support in
drafting and implementation of the National Anti-Fraud Strategy. Workshops and
consultations were held for strengthening the AFCOS network. Workshops and
consultations were organised on compliance assessment; capital budgeting and
budget supervision, internal control and audit as well as building up
capacities of the ARPA (Audit Authority).

3. Assistance to the public procurement system. A comparative study was elaborated on the alternatives in the new EU
Member States on public procurement systems and rules for procurement of EU
funds after accession. Discussions were held with the institutions involved for
setting-up a national legislative framework for EU funding. Workshops and consultations
were organised to improve the remedy systems in Croatia; a workshop on
‘Centralised Purchasing in Practice’ was held. Assistance was also provided to the
Agency for Public Private Partnerships (APPP)  and the Ministry of Finance in
the field of concessions and Private Public Partnerships. Several workshops
were organised in order to improve the capacities of MELE I, contracting
authorities and economic operators in applying efficiently PP procedures.

4. Support for the Development of
Regulatory Impact Assessment (RIA) including
assistance in the elaboration of the draft RIA Strategy and RIA Law.  A
Conference was held on ‘Impact Assessment and the Development of Policy-Making
Capacities in Croatia’. Several consultations and workshops were held for improving
the capacities of the Government Legislation Office (GLO) on RIA.

In 2010, Croatia participated Croatia
participated in the following EU Programmes: 'Seventh Research Framework
Programme'; 'Competitiveness and Innovation Framework Programme' (including
'Entrepreneurship and Innovation Programme', 'Information Communication
Technologies Policy Support Programme' and 'Intelligent Energy Europe
Programme'); 'Progress'; 'Culture'; 'Europe for Citizens'; 'Fiscalis 2013';
'Customs 2013'; 'Interoperable Delivery of European eGovernment Services to
public Administrations Business and Citizens' (IDABC); 'Civil Protection
Financial Instrument'; 'MEDIA 2007'; 'Community action in the field of health';
'Marco Polo II'; and 'Civil Protection Mechanism'.

During 2010 Croatia signed a Memorandum of Understanding (MoU) establishing
its participation in the Life-Long Learning Programme (LLP) and Youth in Action
Programme as of the budget year 2011.

Depending on the EU Programme, the relevant Croatian authorities continued
to undertake activities related to the promotion of the opportunities under
specific Programmes for institutions from Croatia. The Office of the National
IPA Co-ordinator organized on 29 November 2010 a conference "Participation
of the Republic of Croatia in Union Programmes: Possibilities and
Results". The opportunities under all EU Programmes open to Croatian
institutions were presented, as well as the results achieved so far. The
successful applicants from Croatian institutions in the following programmes
were underlined: Europe for Citizens, Culture 2007-2013 and Seventh Framework
Programme for Research, Technological Development and Demonstration Activities.

Table 4: Status of implementation of IPA financial assistance
(Component I) as at 31st December 2010 (in
million EUR) per annual programme

|| Committed || Contracted || % Contracted || Paid || % Paid

IPA 2007 || 45.41 || 41.12 || 90.55% || 21.41 || 47.15%

IPA 2008 || 41.37 || 9.59 || 23.18% || 7.18 || 17.36%

IPA 2009\* || 42.10 || 4.68 || 11.12% || 4.57 || 10.86%

IPA 2010 || 38.62 || 0.00 || 0% || 0 || 0%

TOTAL || 167.50 || 55.39 || 33.07% || 33.16 || 19.80%

\*Excluding a EUR 2.5 million programme cross-delegated to DG Education
and Culture

Table 5: Distribution of total committed funds (2007-2010
allocations) by priority axes

Priority Axes || % of 2007-2010 allocations

Political criteria || 20.06 %

(of which civil society) || 4.85 %

Economic criteria || 6.68 %

Ability to assume membership obligations || 48.87 %

Support programmes || 24.35 %

TOTAL || 100 %

Component II: Cross-border Cooperation

Whereas in 2010 the contracting of the 2007 and 2008 allocations of
the transnational programmes South East Europe and Mediterranean was completed,
the contracting of the same allocations of the bilateral programmes among IPA
countries merely started at the end of the year. The delay is significant,
bearing in mind that the calls for proposals were published in Q3 2008. This is
due mostly to the complexity of the evaluation procedure and of the management
structures.

The evaluation procedure for calls for proposals consists of four
stages. The Joint Technical Secretariat prepares the proposals and the Joint
Monitoring Committee is regularly consulted. Next, the evaluation reports
arising from each of the stages are controlled either by the implementing body
and EU Delegation (Croatia) or just by the EU Delegation (Bosnia and Herzegovina, Montenegro, and Serbia).

The decisions on both sides of the border covered by a programme
must always be harmonised in order to allow the awarding of the matching
grants, which requires additional time. These operating procedures take a lot
of time, to the extent that it makes sense to launch calls for proposals for
the bilateral programmes only every two years. Still, it is a challenge for the
grant applicants to stick to the original project proposals for a very long
time, often despite changing circumstances.

Tables 6: Status of implementation of IPA financial assistance
(Component II) as at 31st December 2010 (in
million EUR) per annual programme[17]

|| Committed || Paid || % Paid

IPA 2007-2010 || 55.92 || 9.72 || 17.38%

Out
of which, the breakdown for the intra-Western Balkans CBC Programmes and the
ERDF Transnational Programmes (South-East Europe and Mediterranean) is:

|| Committed || Contracted || % Contracted || Paid || % Paid

IPA 2007 || 2.65 || 2.65 || 100% || 0.92 || 34.72%

IPA 2008 || 2.71 || 2.71 || 100% || 1.06 || 39.11%

IPA 2009 || 2.76 || 0.00 || 0% || 0.00 || 0%

IPA 2010 || 2.20 || 0.00 || 0% || 0.00 || 0%

TOTAL || 10.32 || 5.36 || 51.94% || 1.98 || 19.19%

Table 7: Distribution of total committed
funds (2007-2010 allocations) by priority axes

Priority Axes || of 2007-2010 allocations

CBC with Member States || 81.54%

CBC within Western Balkans || 15.74%

Participation to ERDF Transnational Programmes || 2.72%

TOTAL || 100%

Component III: Regional Development

Progress on the ground has been rather slow as regards the Operational Programme "Environment". Two projects (solid waste) initially approved in the beginning of
2009 were modified (change in the physical object as more works were added and
the project costs increased). The contracting rate for both projects stood at zero at the end of 2010. A third major project
application (waste water) initially rejected in 2009 was resubmitted to the
Commission services during 2010 for re-evaluation. At the end of 2010, the relevant
funding decisions had been adopted for the 2007-2011 allocation to the
Operational Programme, five contracts were signed and EUR 13 million
contracted.

Under the "Regional competitiveness" Component, the
implementation of eight capacity-building projects and two grant schemes
covering the 2007-2009 allocation of funds (EUR 35.4 million) began. The
programming covering the new 2011-2011 allocation was completed and the tender
process launched.

Under the "Transportation Operational Programme, five contracts
were signed with an IPA contribution of EUR 9.3 million, including 3 contracts
for the major project "Zagreb Main Station Signalling and Interlocking
System". A further 5 tenders were running at the end of 2010 with an IPA
contribution of EUR 10 million. Programming for the 2010-11 allocations was
completed.

For all three
Operational Programmes, Croatia has submitted
expenditure claims to comply with
the n+3 rule which has been met for the year 2010.

A follow-up audit on IPA conferral of management confirmed
that internal control procedures are broadly satisfactory. The audit indicates
that the internal control procedures for IPA Component III
are designed in a manner ensuring that bodies operate satisfactorily in
practice and that the conditions included in the Commission Decisions on
conferring management powers are properly addressed. Recommendations made have been
or are being properly addressed.

Table 8: Status of implementation of IPA financial assistance
(Component III) as at 31st December 2010 (in
million EUR)

|| Committed || Paid || % Paid

IPA 2007-2010 || 199.4 || 47.1 || 23.62%

Table 9: Distribution of total committed funds (2007-2010
allocations) by priority axes

Priority Axes || % of 2007-2010 allocations

Transport || 37.56 %

Environment || 37.56 %

Regional Competitiveness || 24,88 %

TOTAL || 100%

Component IV

As regards the Human Resources
Development Operational Programme, tenders of EUR 39.28 million were launched
(87% of the total 2007-2009 allocation). Contracts were signed worth EUR 31.34
million, representing 70% of the total 2007-2009 allocation. The National Fund received an advance payment of EUR 11.48 million
and it has submitted expenditure claims to the Commission for EUR 3.52 million.
The amount to be consumed by advance or interim payments by the end of 2010 was
EUR 11.37 million in respect of the n+3 automatic de-commitment rule. An automatic
de-commitment by the end of 2010 was thus avoided.

A follow-up audit on IPA conferral of management
confirmed that internal control procedures are broadly satisfactory.

Table 10: Status of implementation of IPA financial assistance
(Component IV) as at 31st December 2010 (in
million EUR)

|| Committed || Paid || % Paid

IPA 2007-2010 || 53.9 || 15.00 || 27.9 %

Table 11: Distribution of total committed funds (2007-2010
allocations) by priority axes

Priority Axes || % of 2007-2010 allocations

Employment || 24.9%

Social inclusion || 25.6%

Human capital and employability || 39.75%

Technical assistance || 9.8%

TOTAL || 100%

Up to 31 December 2010
the tenders for all 8 grant schemes were launched and contracts for 7 grant
schemes were signed, which was an important step in terms of preparation for
the European Social Fund.

Component V: Agriculture and Rural Development

Since Croatia received the conferral of
management powers for the first two measures under IPA Rural Development only
in November 2009, the effective implementation only started in 2010.  Three
calls for proposals were launched in 2010 for the two accredited measures,
namely measure 101 'Investments in agriculture
holdings to restructure and to upgrade to EU standards' and measure 103 'Investments
in the processing and marketing of agricultural and fishery products to
restructure these activities and to upgrade them to EU standards'. From those 3 calls, the implementing body received 76
applications out of which 28 projects were contracted. The value of contracted
projects in 2010 involved an EU contribution exceeding EUR 6 million.

In 2010 the Croatian rural development programme provided support to
agricultural holdings, family farms and food processing companies for
relatively small projects aimed at contributing towards achieving of the
improvement of market efficiency and implementation of EU standards in the
field of environmental protection, public health, animal welfare and
occupational safety.

During 2010, the Croatian authorities were
focused on the preparation of procedures for conferral of management powers for
the remaining programme measures. National accreditation for measure 301
"Improvement and development of rural infrastructure" and for measure
302 "Diversification and development of rural economic activities"
was expected to be received in the beginning of 2011.

Although important progress in implementation
could be observed, the delays in implementation as well
as the small value of the contracted projects under the IPA Rural Development
Programme still persisted by the end of 2010 which put at risk the funds
allocated for 2007 and 2008. According to the "n+3"[18] budgetary rule, these funds
will have to be de-committed if not spent by the end of 2011. Therefore, in the
future all efforts would be oriented towards further conferral of management
and calls for applications.

Table 12: Status of implementation of IPA financial assistance
(Component V) as at 31st December 2010 (in
million EUR)

|| Committed || Paid || % Paid

IPA 2007-2010 || 102.90 || 11.53 || 11%

Table 13: Distribution of total committed funds (2007-2010
allocations) by priority axes

|| Priority Axes || % of 2007-2010 allocations

|| Market efficiency and EU standards || 65.7%

Agri-environmental measures and Leader approach || 1.3%

|| Development of rural economy || 29.8%

|| Technical assistance || 3.2%

|| TOTAL || 100%

3.3.1.3. Implementation Modalities and Structures

IPA develops its full potential when a candidate country decides to
entrust management of its components, from the outset, to the institutions
which will continue to manage post-accession instruments. With the Commission
decision to confer management, a candidate country better manages the
transition between the IPA instruments and the structural funds by the time of
accession. All IPA components
in Croatia continue to be implemented on a decentralised basis, by the system
to which management was conferred in 2008 (except for the rural development
component for which the conferral took place in November 2009).

The only major change in the administrative capacity of the
structure managing IPA Component II during 2010 happened in August when the
Commission conferred management of the programmes with non-Member States to the
Agency for Regional Development, which was envisaged to continue to manage
related programmes under the ERDF – Priority Territorial Co-operation. This
ensured respect of the most important principle of IPA assistance, which was
institutional continuity for post-accession assistance.

Due to a small number of calls for proposals managed by the Agency,
the question how to formulate the roadmap for the waiver of ex ante controls with meaningful
performance benchmarks remained open. That is one of the reasons why the
roadmap for IPA Component II was still not agreed at end 2010. Other reasons
are weaknesses in the draft, which range from general reference to training
courses to the role of the procurement plan and dilution of responsibility for
certain measures.

The Croatian authorities have taken adequate measures to follow up
on the recommendations of the 2009 Country Programme Interim Evaluation.
Additional personnel has been employed in the institutions which lacked staff,
in order to raise performance to optimum, meet the criteria from the roadmap
for ex ante controls and prepare for implementation of financial instruments
post-accession.

The screening of project proposals by the NIPAC in Component I became
stricter during 2010, and the margin of reserve project proposals decreased
from 300% of the available budget in case of TAIB 2008 National Programme to
less than 100%. NIPAC has intensified the training and advice to the PIUs in
the programming phase, which increases implementability of the most recent
programmes. At the same time, better knowledge of the project cycle management
and intensified controls has had an impact on the quality of monitoring and
evaluation at all levels.

Croatia has taken over full responsibility of
interim evaluations under IPA Component I. The first Country Programme interim
Evaluation (CPiE) contracted by CODEF was presented in December 2010. Overall,
the report indicates that performance is good, and in most cases Phare/ IPA
TAIB are effectively used to support Croatia’s technical preparation for
accession. However, the report was also clear that further progress was needed to
increase the absorption rate.

3.3.1.4.
Monitoring

The European Union Delegation in Croatia (EUD) continues to carry out monitoring activities as
follows:

(1) Formal  monitoring at programme level:

Active participation in meetings:

• Bi-annual Sectoral Monitoring Committees  for  IPA  I, IIIa, IIIb , IIIc and IV, as well as  bi-annual sectoral
monitoring sub-committees under  IPA Component I (six sub-committees);

• Joint Monitoring Committees (twice a year) and Joint Steering
Committees (meetings at each step of evaluation process of calls for proposals)
for each of IPA IIb (CBC between IPA countries) Programmes;

• Bi-annual ISPA Monitoring Committees;

• Bi-annual SAPARD Monitoring Committees;

• Annual IPA Monitoring Committee, as well as the Joint Monitoring
Committee for Phare and CARDS.

Review of Reports:

• Review of all sectoral implementation reports produced in the framework
of these Monitoring Committees

(2) Specific monitoring at priority/measure/project level:

Active participation in following meetings:

• Participation in tender evaluations;

• Monthly meeting with the  Ministry responsible for the priority/ measure/
 project;

• Kick-off meeting at project level;

• Ad hoc meetings (at the request of explain OS, or at the
Delegation's request) related to  implementation issues;

• Project opening and closing visibility events;

• Project Steering Committee at project level.

Review of following Reports:

• Inception report;

• Six-monthly progress reports/interim and final reports.

(3) Follow-up on procurement and financial management at programme
level:

• Monthly or bi-monthly procurement plan meetings for Phare / IPA I,
IIIa, IIIb, IIIc and IV  (including as regards IPA III and IV the monitoring of
the absorption capacity via an update on LOTHAR and assessment of n+3 risk)

• bi-monthly or ad hoc consultations on procedural issues (led by the
Delegation's Finance & Contracts section)

(4) In addition to the monitoring
instruments mentioned above, the Delegation  performs on the spot
checks/monitoring visits, typically on grants,
supply and works contracts.

Measures to make monitoring of programming and implementation more
effective include a revision of the Sectoral Monitoring sub-Committees
following the recommendations of the Country Programme interim Evaluation. The
number of sub-Committees was expanded from five to six, and their coverage has
been modified in order to harmonise the workload under each of them. The sub-Committees
now cover the following sectors: (1) public administration, public finance and
public procurement, (2) energy, transport and environment, (3) justice, freedom
and security, (4) internal market and economy, (5) regional development and
cohesion policy and (6) agriculture, fisheries, phytosanitary and veterinary
policies.

In-depth monitoring by the Delegation of Croatia's implementation of
IPA assistance has been complemented by the Croatia Unit's supervision through,
in particular, the
TAIB Sectoral Monitoring Committee meetings on 9 June and 14 December 2010 (combined with Phare Joint Monitoring Committee). The IPA Monitoring Committee
(comprising all five IPA Components) took place on 8 July 2010. These meetings confirmed that Croatia has further strengthened
management and control systems in the IPA operating structures and that the
quality of files submitted for ex ante controls has further increased.

By carrying out monitoring activities, the Delegation adhered to its
Annual Assurance Strategy 2010. This included a full coverage of ex ante
controls, eight procurement plan meetings with the national authorities, participation
in monthly PIU meetings involving the beneficiaries, CFCA and CODEF as well as
the Delegation's on-the-spot checks on 45 contracts worth EUR 19 Million.

There has been no monitoring of individual grant contracts under the
IPA Component II, since they were not signed until the end of 2010. JMC
meetings happened as foreseen in the regulatory framework (2 meetings per
programme - there are 5 CBC/transnational programmes) which were mainly
involved in proposing the list of proposals to which the grants should be
awarded. Monitoring at the programme level has not been performed by the JMC.

In terms of achieving results and objectives of the ELARG assistance
(IPA component I), the final report of the Country Programme Interim
Evaluation 2010 noted that performance and
results-oriented management, promoting good practice, encouraging motivation
and facilitating institutional learning, should receive further attention. It
noted promising signs from the beneficiary institutions that a broader
consensus is emerging, aiming at a stronger focus on the performance of IPA
TAIB programmes. Currently the management of programmes is still driven more by
the need to spend resources and
financial compliance, than by a focus on results achieved. It recommended that
the remaining time for IPA in Croatia should also be used to bring
results-oriented management principles closer to the Croatian stakeholders. In
this respect, a broader supportive programme environment promoting good
practice, encouraging motivation and facilitating institutional learning has
still not sufficiently materialised.

Phare / IPA TAIB impacts are positive and significant, especially in
the area of institution building. There are good immediate legislative and administrative impacts,
particularly setting up of new institutions, alignment of legislation, and
strengthening of administrative capacities. The renewed assistance was influential in promoting and
supporting institutional change. The intermediate impact of institutional
building projects was observed in efficiently working institutions.
Socio-economic impact was identifiable with regard to infrastructure
investments.

There has been increased attention by the
European Parliament's committees on Budgets (BUDG) and on Budgetary Control
(CONT), as well as the Court of Auditors, to Croatia's performance under IPA
and its preparation for future EU funds. Following a visit to Croatia by European Parliament committees in June 2010,
a feedback report was established and discussed in relevant Parliamentary committees
in November 2010. The findings of the report in connection to the use of IPA
funds were largely positive but referred also to the need to strengthen
administrative and absorption capacities.

The
Court of Auditors embarked in 2010 on a performance audit on Croatia covering most IPA Components and pre-IPA programmes. The audit is
focused on assessing to what degree EU pre-accession assistance has been effective in preparing Croatia for managing EU funds after accession.

The objectives of the audit were to determine whether: a) the Commission
planning of EU assistance sufficiently addressed the issue of Croatia’s preparedness to manage the increased EU
funding after accession; b) the EU-funded projects targeted the development of Croatia’s capacity to ensure proper management of EU funds.

The sample of projects audited includes ten pre-IPA (PHARE, CARDS,
ISPA and SAPARD) and six IPA projects (financed by IPA components I, III and IV). The publication of the
report is foreseen for early 2012.

3.3.2.
CARDS and PHARE
3.3.2.1.
Sectors with positive results/ Success
stories

Phare 2006 National Programme, project Support for Increasing the
Competitiveness and Exports of Croatian SMEs, EUR 2 million. A stronger presence in the EU single market and the global market is
both a challenge and a huge opportunity for Croatian companies, especially
SMEs. The purpose of the project was to increase the
competitiveness, productivity and volume of exports of Croatian SMEs and to
pilot test programmes and procedures under IPA, thus strengthening the
capacities for the structural instruments that would became available upon
accession.

24 grants to export-oriented SMEs were awarded in this grant scheme.
The SMEs strengthened their export capacities in such a
way that they opened new markets (50% of SMEs), found new customers (22% of
SMEs) and established links with potential customers (28 %). Also, many of
grant beneficiaries managed to create innovative and more competitive products
or to improve the overall quality of their products.

The analysis of delivered results of 21 grant beneficiaries which implemented their projects indicates that they
successfully implemented 96% of planned activities and utilised 82% of the
total original contracted amount.

Regarding the impacts of this project, it is important to point out
that the majority of companies successfully managed to annul the recession
trends and even raised the number of employees. Among other impacts, it is
necessary to highlight that the
productivity level and competiveness of the SMEs on the EU single market has
improved (through certification, introduction of new technologies etc.).
Moreover, export potentials of competitive products have been extended and
co-operation with partners from the EU on new projects has been established. It
is realistic to expect that in the future these companies could contribute to
raising the volume of exports of Croatian SMEs. Also, the grant beneficiaries’
staff gained priceless knowledge on export initiation, export expansion and
dealing with foreign markets.

As added value to this project, it is also necessary to emphasize
that many grant beneficiaries participated in several conferences and workshops with the objective of transferring
the acquired knowledge and experiences to potential beneficiaries of IPA and
structural instruments.

The lessons learnt from this pilot grant scheme mostly indicate that
private companies encountered difficulties in the preparation of their
applications because they were inexperienced in the area of project preparation
and partly due to the lack of support from the regional development agencies
and relevant advisory services.
Also, as a recommendation for the implementation of future grant schemes for
the SME sector, there is a need to assist the grant beneficiaries in the
implementation steps and secondary procurement procedures.

Project Maritime Safety - Enforcement of Administrative Capacity -
Monitoring and Management of Vessels, implemented in two phases in Phare 2005
and 2006 National programmes, together EUR 7,475,000. The purpose of the project was enhancement of administrative and
technical efficiency of Maritime Administration in monitoring and management of
vessels, implementation of the flag state and evaluation of the port waste
reception facilities.

As a result of these two projects, vessel traffic monitoring and
management system covering the East Adriatic area is now fully operational and
available to the Croatian maritime administration. Its infrastructure backbone
is represented the three operational centres and the ten radars, which were all
supplied and put in operation by this project. That will ensure the required
level of the safety of navigation and pollution prevention in the East Adriatic area.

The level of safety of navigation and pollution prevention will be
increased through shortened response time in case of an emergency (accidents,
pollutions) as well as through real-time traffic data processing (particularly
in respect of identification of rogue vessels and tracking of non-SOLAS ships,
recreational boats and yachts). Data exchange system was interconnected with
similar systems in neighbouring countries. Data distribution system was capable
to communicate with information systems of relevant data users and providers
(governmental bodies and agencies, port authorities, etc).

Cadastre and Land Registry Reform, implemented through CARDS 2002,
2003 and 2004 National programmes, together EUR 11,500,000. The main purpose of these projects was development of a
Multi-purpose Spatial Information System aiming to achieve public functionality
by becoming available via internet and also enabling distribution of data for
final users.

As a result of this project, hand kept cadastre and land register
records were digitalised and saved in a simple and user-friendly data base for
the whole territory of Croatia. A complex application of the Joint Cadastre and
Land Registry IT System was developed and the data integrated, which enables
staff of cadastre offices and municipal court land registry departments to implement
more efficient and consistent record keeping of both registers.

An internet one-stop-shop for citizens, public authority bodies and
businessmen was put in operation[19]
(, enabling an easy and quick insight into the registers' data as well as the
submission of requests for parcelling out, sales and purchase of land. In
consequence, the Croatian real estate market has become much more efficient and
organised, which serves the citizens and the economy alike. In the first four
years of operation the system has had over 52 million inquiries.

3.3.2.2.
Lessons learned

Key success factors in Phare / IPA TAIB interventions were
thoroughly conducted needs’ analyses and reviews of existing good practice. In
the case of legal harmonisation and institution building it proved to be very
helpful to study the Member State experience and to get acquainted with their
systems. Consequently, CODEF should consider encouraging beneficiary
institutions to explore good practice more systematically at the design stage of interventions. Lessons learnt from previous
interventions and programming campaigns could be widely reported. Good practice
should be actively gathered from beneficiaries and disseminated during CODEF
training seminars.

Setting realistic preconditions can improve implementation and
performance. Putting preconditions
in place makes sense where they are directly related to implementation
requirements, in particular staffing and capacity issues. However,
conditionality involving overall political decisions or actions represent a
risk factor, as they can introduce significant delays in the implementation
process.

Twinning contracts should be prepared and twinning counterparts
mobilised more rapidly. There is still potential to
prepare twinning contracts more quickly and to receive feedback from the
twinning country more rapidly. There was still too often the impression that
some beneficiaries tend to leave the actual preparation to  the Member State partner. Equally, it sometimes happens that the selected Member State is not so reactive to the initiatives by the CFCA or beneficiary institutions, extending
the period of contract preparations.

Training on horizontal programme is
essential, and it needs to continue to be provided and the CFCA and CODEF must
ensure that training systems become sustainable. CODEF should also consider carrying out a training needs analysis in
order to assess the demonstrated need and interest for conducting advanced
training on programming for those who already have experience and may want to
develop a higher level of attainment. The central project implementation units
can give additional support to sustainable training systems by organizing short
internal training courses to transfer knowledge gained at various CODEF/CFCA
courses.

Other lessons learnt and recommendations for the future are laid
down in the Croatia Country Programme Interim Evaluation 2010.

3.3.2.3.
Management performance

In 2010 the Delegation received four final declarations, i.e. for the CARDS 2003 National Programme, PHARE
2005 Nuclear Safety, PHARE 2005 CBC Croatia – Italy, and PHARE 2005 Croatia – Slovenia – Hungary.

Other controls, including implementation of the Delegation's annual
assurance strategy 2010, were reported in its Annual Management Report of 14
January 2011.

Table 14: Status of financial assistance at the end of December 2010
(in million EUR) – CARDS (PHARE)/TPA annual programmes

|| Allocated || Contracted || % Contracted || Paid || % Paid

CARDS 2001 || 54.00 || 52.62 || 97.44% || 52.62 || 97.44%

CARDS 2002 || 56.00 || 51.98 || 92.82% || 51.93 || 92.73%

CARDS 2003 || 59.00 || 56.68 || 96.07% || 56.68 || 96.07%

CARDS 2004 || 77.00 || 73.12 || 94.96% || 73.12 || 94.96%

PHARE 2005 || 69.52 || 66.40 || 95.51% || 66.40 || 95.51%

PHARE 2006 || 60.47 || 57.29 || 94.74% || 56.18 || 92.91%

Total || 375.99 || 358.09 || 95.24% || 356.93 || 94.93%

3.3.2.4.
Institution Building highlights

PHARE 2006 National Programme twinning
contract Strengthening and Enhancement of the Croatian Tax Administration IT
Function to Achieve the EU Standards in the VAT Field, EUR 1 Million,
implemented in partnership with Austria.

In the EU two information systems are used in the field of taxation
– VIES[20]
and VES[21].
.

This project provided technical support to the Croatian Tax
Administration (CTA) with regard to IT procedures for enhanced VIES and VES and
the preparation of operational manuals and guidelines in the field of VAT. The
project provided also comprehensive staff training and support to public
awareness actions towards Croatian businesses operators.

The overall objective of the project was to meet the obligations of
the EU acquis concerning Chapter 16 (Taxation) in order to successfully
implement the transposed legislation. The project followed a previous one where
the CTA had been supported in the preparation of its internal management
structure. The project was linked with a service contract where a private consultant
supported the CTA in developing the software needed to run VIES and VES in
Croatia in order to be, in future, interconnected with all other IT systems
from EU Member States.

The project enhanced the institutional capacity of CTA to manage VIES and VES systems and increased its capacity to combat
tax fraud. It also prepared operational manuals and
guidelines in the field of VAT (in legal, administrative and procedural
spheres), supported the harmonization of the Croatian VAT law with the EU
legislation and contributed to the implementation of public awareness actions
towards Croatian business operators.

Phare 2006 National Programme twinning
contract Strengthening the Enforcement of Intellectual Property Rights, € 1
Million implemented with Denmark.

The objective of the project was to strengthen the administrative
capacity of the State Intellectual Property Office, Ministry of Justice,
Ministry of Interior, Customs Administration and the State Inspectorate to
enhance the enforcement of intellectual and industrial property rights.
Enforcement of intellectual property rights (IPR) is a relatively new field of
criminal and civil offence that might involve significant health and safety
risks for consumers and society and is very profitable for organised
crime.

Among various training activities and tools for the individual
enforcement bodies, the project also developed a formalised platform for
co-operation. This co-operation, on strategic and operational levels,
started under the project and has continued ever since. The co-operation now
also involves various other state bodies and the private sector, and it forms
an integral part of the national IPR strategy.

3.3.2.5.
Joint Monitoring Committees / Sector
Monitoring Sub-Committees

In 2010 the Commission, under the initiative of the national
authorities, carried out 12 meetings of the sectoral monitoring sub-committees
(twice per sub-Committee, in April and October) and one Joint Monitoring Committee (JMC) in December. All the issues
requiring follow up related to the control environment.

The first conclusion was related to the quality of follow up of
findings arising from the on-the-spot checks, which in 2010 was not fully
satisfactory, and which was the reason for two Senior Programme Officers to
have been invited to the Joint Monitoring Committee to report on the follow up
in person. It was also concluded that joint on-the-spot checks between the CFCA
and EUD could be organised in 2011 whenever possible. That will give to the EU Delegation
the opportunity to monitor on-the-spot not only project implementation, but
monitoring by the implementing body as well.

There are still some shortcomings in the supervision operated by
State Audit Office, acting as the external audit body for the DIS system. The
Commission highlighted the importance of this problem to the Croatian
authorities in the December 2010 JMC and have asked Croatia to address the
issue. Moreover, the Delegation carried out ex post audits before the
closure of programmes.

4.
THE FORMER YUGOSLAV
REPUBLIC OF MACEDONIA
4.1.
Summary

EU financial assistance
to the country has played an important role during 2010 to further support the
country on its way towards European integration. Compared to the previous year,
further improvements in the programming exercise have been noticed as the Secretariat
for European Affairs was in a better position to play its coordination role and
the Senior Programming Officers became more and more operational. This has to
be seen in the context of the accreditation for conferral of management powers
for Component I, which was granted in December 2010.

At the end of
2010 the EU Delegation was responsible for a total budget of EUR 113.31
million, out of which EUR 35 million were committed during the year;
furthermore, more than 114 contracts were ongoing for a
total value of EUR 55 million, and 88 contracts were closed in 2010 for a total
value of EUR10 million.

A number of
completed CARDS and some on-going IPA projects in the areas of justice and home
affairs, public administration reform and supporting
improvement of inter-ethnic relations showed concrete results during 2010. Several
laws have been adopted by the Parliament as well as new strategies and capacity
building activities produced some good impact. To mention some, the drafting of
a new law amending the Customs Code (further aligning
it with the acquis, amongst others, in the areas of electronic customs
declarations, transit procedure, and customs debt and guarantees) was entirely
supported by the IPA 2007. A
CARDS 2005 Twinning project "Fight against Organized Crime and Corruption
Unit - Public Prosecutor's Office" completed in June 2009 contributed
substantially to the drafting of the new Law on Criminal Procedure which was
adopted in November 2010. Also, support under IPA 2007
for strengthening the capacity of the General Secretariat of the Government -
Sector for Policy Analysis and Coordination was crucial for the revision of the
1999 Public Administration Reform Strategy, updated in 2010 covering the period
2010-2015. Last but not least, more
than 3000 people have been trained in different subjects, from agriculture to
internal market, through workshops and study visits under the TAIEX instrument.

2010 also saw the
preparation of the new Multiannual Indicative Planning Document (MIPD-
2011-2013). The beneficiary, Member States and other donors were actively
involved and welcomed the identified choice of sectors. Overall, there was good progress in the programming of EU funds,
while there are still remaining challenges concerning the implementation,
monitoring and sustainability of projects, particularly under decentralised
management

4.2.
Strategic planning and programming
4.2.1.
Multi-annual Indicative Planning Document

The process of
drafting a new MIPD started in summer 2010, shifting from centralised planning
towards more inclusive and decentralised planning  where the beneficiary was
asked to provide the first choice of priorities and sectors for the new
2011-2013 MIPD. Guidance on the content and structure of the new document, as
well as the timeline, was provided by the Commission services.  The draft followed
the broad policy objective of moving towards a sector-based approach engaging
the existing national Programme Based Approach (PBA) working groups.

Donor coordination and consultation on the
part of DG ELARG and the Delegation took place not only at the level of annual
and multi-annual programming of IPA but also as regards the new MIPD 2011-2013.
The skeleton of the draft document was presented to the donor community and
civil society in coordination meetings held in Skopje and in Brussels in the
course of 2010. Furthermore, IFIs, Member States and civil society organisations
were given the opportunity to send written comments on the draft MIPD to the
Commission. Comments were incorporated into the draft MIPD in the most
appropriate manner.

The following priorities for EU support over the
period 2011-2013 were identified: support for
the economic and social development of the country, improvement in good governance
and reduction in corruption; and ensuring non-discrimination and respect of
human rights. In order to achieve these objectives, EU financial assistance
would be focused on seven sectors: public administration, justice, home affairs
and fundamental rights, private sector development, agriculture and rural
development, transport, environment and climate change, and social development.

When the 2010 programming exercise started,
the MIPD 2009-2011 was still being applied. The strategic choices were
concentrated on three areas of activity, namely supporting institution
building, improving cross-border cooperation and preparing the beneficiary for
participation in the Union's cohesion policy and rural development instruments.
An assessment of the validity of the document and the outlined priorities was
conducted in the beginning of 2010. On the basis of this needs assessment, the
Commission concluded that no significant changes neither in national policies
nor in EU-former Yugoslav Republic of Macedonia relations would require a
different approach to IPA support and that the strategy in the MIPD 2009-2011
was valid and matched the gaps identified in the 2009 Progress Report. Therefore
it was recommended that the MIPD 2009-2011 should not be revised.

A more in-depth assessment of the strategic
approach as regards IPA assistance was undertaken in the context of the
preparation for the new MIPD 2011-2013. In agreement with the national
authorities, a stronger linkage to some strategies were
to be pursued in the next programming period: Public Administration
reform Strategy (2010-15), Strategy of the Reform of the Criminal Legislation
(2007-11); National Action Plan for implementation of the Penitentiary system
reforms (2009-14); the revised National Employment Strategy, National Transport
Strategy (2007-17), National Strategy for Agriculture and Rural Development
2007-2013 and National Strategy for Sustainable Development (2008-30).

A Country Programme Interim
Evaluation, published in December 2010 covering the 2006 CARDS and the 2007
IPA national programmes, outlined a few key recommendations. With regards to
programming and intervention logic, it suggested the programming authorities
should introduce independent ex ante assessment of the Multi-Annual Indicative
Programmes and Annual National Programmes to improve the quality of
programming, including the improvement in definition of indicators and
determination of baseline data. It also recommended focusing external
assistance on only a few key areas, identified in the sector based approach to
programming. Furthermore, it
recommended a clear but
cautious approach to multi-annual financing to facilitate planning and ensure
results before more funds are allocated. The national authorities should also
aim to replace long term local administrative support with permanent civil
servants in those institutions that have long term European Union fund
management responsibilities. The Commission noted that some of them were
already being implemented.

The evaluation
recommended that funding should be directed so as to support existing
ministerial strategic planning efforts, that the SEA should review the
administrative capacity in each PBA sector and address any weaknesses detected,
while the development of sector programmes should be based on existing national
strategic plans in order to increase local ownership of the programmes.

Another
conclusion was that IPA should allow for greater flexibility in the allocation
of resources within the multi-annual envelope according to needs, between
priorities and components, to better reflect the requirements and capacity of
the recipient country and adapt better to political circumstances as election
years.

Table 1: MIFF[22]
allocations per component, in million EUR

Component || 2010 || 2011 || 2012 || 2010-2012

I – Transition Assistance and Institution Building || 36.32 || 28.80 || 28.21 || 93.33

II – Cross-border cooperation || 5.07 || 5.12 || 5.18 || 15.37

III – Regional Development || 29.40 || 39.30 || 42.30 || 111.00

IV – Human Resources Development || 8.40 || 8.80 || 10.38 || 27.58

V – Rural Development || 12.50 || 16.00 || 19.00 || 47.50

TOTAL || 91.68 || 98.03 || 105.07 || 294.78

4.2.2.
Programming exercise
4.2.2.1.
Component I

The National
Programme 2010 was the second one to be programmed following DIS-rules (i.e.
implementation by the beneficiary under decentralised management, with ex ante
controls by the EU Delegation); In order to increase the ownership of the
programming process and to reach better efficiency once the priorities were
defined, the process of drafting the National Programme 2010 project fiches was
the sole responsibility of the final beneficiaries. Still, it was proven that a
number of institutions have limited capacities in providing priorities,
objectives and results, thus the EU Delegation doubled its efforts and
supported the preparations of the 2010 programme, by creating working groups on
project fiche basis. This facilitated the drafting process and allowed for
timely submission of the programmed to the IPA Committee for approval.

The Government submitted the official
documents to the EU services on 15 January 2010. The National Programme IPA
2010 - Component I was adopted by the Commission on 25 August 2010.

The programme covered the following
areas/sectors:

- Priority Axis 1 - Political
criteria: the programme envisaged strengthening the organizational and
institutional capacity of the public administration and the judicial system,
with a strong focus on prevention and fight against corruption. It further aimed
at providing technical and material assistance to prioritised institutions,
including the Ministries of Justice, Interior, Local Self Government, and the
Civil Servants Agency, as well as to foster civil society development and
better integration of minorities. The total IPA allocation was EUR 14,884,025.

- Priority Axis 2 - Socio-economic
criteria: support to further harmonize the legislation and improved capacity
building in the field of consumer protection. The total IPA allocation was EUR
3,780,000.

- Priority Axis 3 - Ability to
assume the obligations of EU membership:  building institutional capacity for
transposing, implementing and enforcing the acquis. with a focus on employment
and social affairs, Agriculture, environment, internal market, Customs, and food
safety. The IPA allocation was EUR 11,470,600.

- Priority Axis 4 supported the
participation of the country in a series of EU Programmes and Agencies which
are deemed essential for the country’s further cohesion process.  The IPA
allocation was EUR 6,782,430.

The IPA 2010
Component I programme included 18 project fiches, which were selected based on
the following criteria: firstly, priorities identified in the MIPD; secondly,
interventions in most cases build on clearly identified and well developed
national strategies. However, in some cases these strategies will be updated
and improved through IPA assistance; thirdly, possible follow-up on previous
and ongoing projects. Finally, projects were screened with regard to the
preparedness of intended beneficiaries to receive and manage the support.

The Programme
included 9 full twinning arrangements in areas such as public administration
reforms, anticorruption, freedom of movement of workers, veterinary, public
revenue, customs and environment. Furthermore, 8 service contracts, 7 supply
contracts, 3 work contracts, 1 framework contract and 2 calls for proposals
(grant schemes) were foreseen.

Sequencing was
a very important element. A good example is the support given to the Customs
Administration where, with the consecutive support provided with 2007-2008
programmes, and the upcoming 2009/2010 projects, there was a clear recognition
that harmonised customs procedures and their implementation exert a great
impact on trade with the EU and the international movement of goods across
borders.

Coordination of activities among donors was
reinforced with the introduction of the Programme Based Approach (PBA) by the
national authorities in 2009, and major donors are part of the High Level
working group; however, the process lost some of its previous drive in 2010 and
its input and relevance is yet to be seen, given the fact that many of the
bilateral assistance is phasing out (e.g.: Austria, Sweden).

The programming exercise 2011 was conducted
during 2010 in close consultation with the national authorities, civil society
and other stakeholders under the coordination of the EU Delegation and DG Enlargement.
Two sets of consultations were organised with Member States, IFIs, other donors
and civil society organisations (CSOs) in July 2010 when the projects were on
the level of ideas, and in December 2010 when the project fiches were
finalised. In both cases, input was received from the UK and Dutch Embassies in Skopje. Extensive comments were received also from CSOs in July when the
project ideas were discussed and most all of them were taken into account when
preparing the first versions of the fiches.

Particular attention was given to
complementarity with projects financed under the Multi-Beneficiary IPA programmes
and managed by the European Commission, which are linked to sectors such as
justice, social issues, statistics, environment and refugees.

Achieving better results through better
design and implementation of financial assistance is a key target for the Commission,
even more since conferral of management powers for decentralised implementation
of IPA Component I was granted on 13 December 2010.

Table 2: Indicative financial
allocations for the year 2010 per component, in million EUR

THE FORMER YUGOSLAV REPUBLIC OF MACEDONIA || 2010

I. Transition Assistance and Institution Building\* || 36.91

Of which: ||

                                                                                  National Programme || 36.91

II. Cross-Border Cooperation\* || 4.47

Of which:                     ||

                                                              CBC  with Albania || 1.00

                                                                                   CBC with Bulgaria || 1.37

                                                                                   CBC with Greece || 1.50

CBC with Kosovo || 0.60

III. Regional Development || 29.40

Of which: ||

Transport || 19.61

Environment || 8.51

TA || 1.26

IV. Human Resources Development || 8.40

V. Rural Development || 12.50

TOTAL || 91.68

\*
The difference with Table 1 is explained by a transfer of EUR 0,6 million. from
Component II (cross-border programme with Serbia, not programmed yet) to the
National Programme

Table 3:
Indicative financial allocations for the year 2010 under the National
Programme, per priority axis and per project, in million EUR

Priority Axis/Projects || Budget

Political Criteria || 14.80

|| Support to institutions in implementation of policies relevant to non-majority communities || 1.62

|| Further support to judiciary and promotion of probation service and alternative sanctioning || 3.01

|| Further Institution and Capacity Building of the Police Service in the area of border management, Union policing and fight against organised crime || 2.51

|| Revitalisation and Adaptation of Shengjul (Gjulshen) Hamam into a Cultural-Info Centre || 0.81

|| Further strengthening of the organisational and institutional capacities for the accession negotiation process || 1.99

|| Sustainable civil society || 1.42

|| Support to efficient prevention and fight against corruption || 1.35

|| Technical assistance to institutions in charge of implementation of the civil service and public administration reform || 2.09

Economic Criteria || 3.87

|| Capacity building to institutions involved in implementation of the Industrial Policy || 2.67

|| Legal harmonisation and capacity building in the field of consumer protection || 1.20

Ability to assume the obligations of membership || 11.46

|| Strengthening the capacities for effective implementation of the acquis in the field of freedom of movement for workers || 0.90

|| Further Harmonisation with EU acquis in field of Movement of Capital and Payments and Financial Services || 1.17

|| Strengthening of administrative and institutional capacity of the competent authorities regarding food safety, veterinary and phytosanitary policy || 3.64

|| Improving of the Public Revenue Office (PRO) Tax Payers Services || 1.33

|| Strengthening the administrative capacities at central and local level for implementation and enforcement of the environmental acquis || 2.62

|| Strengthening the capacity of the Customs Administration || 1.80

Supporting programmes || 6.78

|| Participation in Union Programmes and Agencies || 4.78

|| Preparatory Measures for Participation in Lifelong Learning (LLP) and Youth in Action (YiA) Programmes\* || 2.00

TOTAL || 36 91

\* Management of
this project was cross-delegated to DG Education and Culture (EAC)

4.2.3.
Component II

Currently, the former Yugoslav Republic of Macedonia participates in four
IPA cross-border programmes with the neighboring countries Albania, Bulgaria, Greece as well as in the transnational South-East Europe programme.

Besides, a new
multiannual Cross–border programme between the former Yugoslav Republic of
Macedonia and Kosovo was prepared and submitted by the authorities to the
European Commission in May 2010. It was formally adopted by the Commission in December
2010. Economic and social development and
promotion of natural and cultural resources were identified as
priorities for the period 2010-2013. As regards the 2010 funds in particular, a
strategic project (border-crossing infrastructure) was jointly chosen by both parties and tender(s) should be launched
during the third quarter of 2011.

The
cross–border cooperation programme 2007–2013 with Albania, was originally
adopted by the Commission in December 2007 with financial tables covering the
2007–2009 period only; at the initiative of the Commission, this was revised to
add the 2010–2011 appropriations in line with the IPA Multi–annual Indicative
Financial Framework (MIFF) 2010–2012. The revised Commission Decision was
adopted in October 2010.

Finally, the Financing
agreements for the year 2009 corresponding to the CBC programmes with Albania and with Greece, both adopted in August 2009, were signed in December 2010.

4.2.3.1.
Components III,
IV and V

Component III
and IV Operational Programmes, which were adopted in 2007 covering a seven year
period, were revised in 2010, and discussions  for the revision of. Component V
Operational Programme started.

As regards the Regional
Development Operational Programme under Component III, the modification approved
in November 2010 concerned mainly the financial tables, indicators and
increased IPA contribution rate[23],
thus the revisions did not imply changes in the strategy and priorities.

Concerning the revision of Human Resources
Development Operational Programme under Component IV, financial allocations for
the years 2010 and 2011 were included, increasing the overall total of IPA
component IV contribution to more than EUR 24 million for four years.

4.3.
Implementation of assistance
4.3.1.
IPA
4.3.1.1.
Success stories

In the framework of the professionalization
of the public administration it is worth mentioning a project that ran from October
2009 to February 2011  to support the implementation of the National System for
Training Coordination. Among the results already achieved: training needs analysis carried out for the Civil Service Agency
(CSA), course material developed for the training council on the National
System for Training Civil Servants, and new curricula developed for different
modules developed for CSA general staff, Training Unit and HR Management Unit.

Some good
results were achieved in further aligning the legislation with the Acquis in
the customs sector, through a Technical Assistance project (EUR 999,900).
 With IPA support, a thorough assessment of the situation in the field of
customs legislation was done in 2010, resulting in an accurate gap analysis, by
comparing in detail the current status with the requirements of the Community
Customs Code and its implementing regulations. A study visit to Finland was organised in June 2010 and to the Czech Republic in December 2010. The project was
highly relevant as it addressed the most urgent priorities in the area of
customs as stated in the National Programme for the Adoption of the Acquis
(NPAA) and the Accession Partnership, as well as in the Customs
Administration’s (MCA) Strategic Plan. The impact prospects of this project were
significant. Legal and procedural basis were created for electronic transit,
export and import, including newly established security measures, allowing for
electronic communications between customs and traders.

In the reporting period, the Ministry of
Environment and Physical Planning (MEPP) successfully continued using TAIEX
technical assistance regarding the legal and implementation aspects of relevant
EU directives in the area of environment. Several seminars and workshops were
organized and all of them were considered useful. In particular, the following
two workshops were considered as very successful:

1) A TAIEX workshop on the
legal requirements and implementation of the Directive on batteries,
accumulators and waste batteries took place in Skopje (May 2010) and
representatives of MEPP, other ministries and institutions, NGOs, Economic
Chamber, public enterprises and private companies participated. It was a great
opportunity for sharing experiences regarding the legal requirements and the
implementation of the EU Directive 2006/66/EC with EU Member State
representatives. This workshop contributed in such a way that the gained
knowledge was reflected in the national Law on Management of Batteries and
Accumulators, Waste Batteries and Accumulators adopted in October 2010 which
also transposed provision from the EU Directive 2006/66/EC.

2) A workshop on the EU Directive on Noise
was held in Skopje in June 2010. This workshop was attended by representatives
of several ministries, scientific and educational institutions and NGOs and it
was a good opportunity for sharing experiences regarding the legal requirements
and the implementation of the basic EU Directive 2002/49/EC on noise protection
in environment. The knowledge gained from this seminar contributed in the
preparation on several sub laws regarding strategic noise maps and plans, as
well as action plans. By these sub-laws, adopted in 2010, Directive 2002/49/EC
became fully transposed into national legislation.

4.3.1.2.
Overview of IPA implementation in 2010

The year 2010 has seen several major
achievements under operational aspects:

·
The contracting of all outstanding projects
under IPA 2007- Component I;

·
The conferral of management for decentralised
management (DIS) of Component I to the national authorities granted in December
2010; followed by the signature of IPA Component I 2009 Financing agreement;

·
Payment of a first pre-financing request under
DIS for Component I (EUR 16,30 million) processed by EU services on 27 December
2010;

·
Payment of the first direct grant to the
Employment State Agency in the frame of measure 1.3 of the Operational
programme for Component IV, the flagship measure to address unemployment issues;

·
New CBC programme between the former Yugoslav Republic of Macedonia and Kosovo was adopted in December 2010;

·
Two calls for proposals under the IPARD
Programme were opened in 2010, and in total more than 200 applications
received, which demonstrated high interest in IPARD assistance

The Delegation managed to contract the last
outstanding Component I 2007 project (Municipal Infrastructure) within the
extended deadline (November 2010). By this, all projects foreseen in the 2007
Financing Agreement/Project Fiches were contracted as planned, before end of
contracting deadline 19 May 2010.  Due to savings in the procurement process,
more than 90% of funds were committed. Furthermore, IPA 2008, Component I
contracting rate by 31 December 2010 reached 64%.

Since the IPA Component I Financing
Agreement 2009 was only signed in December 2010 there was virtually no
contracting in 2010. Given the fact that this programme will be implemented
under DIS by the Central Financing and Contracting Department in the Ministry
of Finance, efforts were made to assist the national authorities in preparation
of project documents and proper procurement plan, and close follow up of the
medium term risks identified with the Conferral decision.

Component I: Transition Assistance and Institution Building

Overall, the relevance of EU assistance was largely satisfactory and
implementation under IPA Component I particularly satisfactory in 2010.
However, building on the experience gained from programming and implementing EU
funds in the country, project implementation was still regularly hampered by
either insufficient staff or financial resources.

Stronger conditionalities were defined in the 2010 project fiches,
especially as regards the tasks of the beneficiary. Very often the beneficiary
institutions had difficulties in fulfilling the following:

1) Endorsement by all key stakeholders of the terms of reference, where
there was more then one beneficiary;

2) Allocation of working space and facilities by the beneficiary for
technical assistance before the launch of tenders;

3) Arrangement of all legal procedures to allow construction,
refurbishment activities before the launch of tenders;

4) Appointing and permitting the relevant staff by the beneficiaries to
participate in training activities as per work plans;

Furthermore, in 2010 the preparatory measures for the Lifelong
Learning and Youth in Action Programmes (for which funds have been allocated
under IPA 2007, IPA 2009 and IPA 2010) were suspended due to irregularities and
serious deficiencies in the financial management and control system in the
country

Strong commitment from senior management and various final
beneficiaries remained crucial for the overall implementation of the project
activities.

Table 4: Status of implementation of IPA financial assistance
(Component I) as at 31st December 2010 (in
million EUR) per annual programme

|| Committed || Contracted || % Contracted || Paid || % Paid

IPA 2007 || 34.02 || 30.71 || 90.27% || 18.76 || 55.14%

IPA 2008 || 37.12 || 19.13 || 51.54% || 6.23 || 16.78%

IPA 2009 || 37.06 || 0 || 0% || 0 || 0%

IPA 2010 || 36.91 || 0 || 0% || 0 || 0%

TOTAL || 145.11 || 49.84 || 34.35% || 24.99 || 17.22%

Table 5: Distribution of total committed
funds (2007-2010 allocations) by priority axes

Priority Axes || % of 2007-2010 allocations

Political criteria || 31%

(of which civil society) || 3%

Economic criteria || 15%

Ability to assume membership obligations || 40%

Support programmes || 14%

TOTAL || 100%

During the reporting period, the Delegation
conducted 50 evaluations/short-listings, 3 Call for Proposals, plus 15 smaller
evaluations for Framework Contracts and 4 Direct Grants. This was an average of
1.4 evaluations/short-listings per week or 6 evaluations/short-listings per
month, so 22% above the average figures in 2009.  101 contracts were signed including
15 Framework contracts. This contracting is higher than the figure of 2009
(64). The value of contracts follow the same trend, as all contracted in 2010 represents
more than twice the amount of 2009 (EUR 35.5 million versus EUR 16.9 million).

The Twinning instrument was used successfully in many priority areas and helped the country
to further prepare for the implementation of EU policies. Up to now a total of
15 fully-fledged twinning projects for a total amount of around EUR 17 million
and 3 twinning light projects amounting to around EUR 600,000 have been
programmed under IPA.

Of these, there were five projects under
implementation in 2010, financed under IPA 2007 and 2008, with a total budget
amounting to EUR 10,699,534: Institutional Strengthening of the Energy
Regulatory Commission; Support on the preparation of the country to manage the
European Social Fund; Support to the National Employment Policy; Modernisation
the educational and training system; Strengthening the central and local level
capacities for environmental management in the area of air quality; and Support
for capacity building of the Centre for Adult Education and Development of
programme  for Adult Education and programme for literacy and fulfilment of
elementary education for exclude persons.

Institution/capacity building activity
under the TAIEX instrument was intense, particularly in the fields of
agriculture, internal market and justice and home affairs, as can be seen from
the tables bellow.  There were 184 single country events organised and 3600
participants from the former Yugoslav Republic of Macedonia attended TAIEX
events in 2010.

As for participation in Union Programmes,
in the course of 2010 the following entry tickets were committed: Culture 2009,
2010 and 2011; PROGRESS 2010; Europe for Citizens 2010 and 2011; CIP[24] – EIP 2010 and 2011, FP7 2010
and 2011, Fiscalis 2013, and Customs 2013. The interest is very high as it is
another way for the country to get closer to EU activities and work in
different specific fields related to EU policies (research for small and medium
sized enterprises; Taxation and Customs Training Interactive Campus; e pilot and market replication projects; fight against social exclusion; Information 
Society, etc) already together with Member States.

As an example, two
projects supported in the former Yugoslav Republic of Macedonia under the
PROGRESS programme in 2010: the first one named “Open Dialogue on social
inclusion through youth employment and youth labour rights" implemented by
the Balkan Children Youth Foundation in partnership with Federation of the
Trade Unions. And the second one "Introducing indicators for measuring
discrimination at local level (through information, education and measuring
indicators) by the Helsinki
Committee for Human Rights.

Component
II: Cross-border Cooperation

Overall,
implementation of the four on-going cross-border programmes in which the
country participates was not easy in 2010. Long delays in setting the joint
management structures and lengthy evaluation of applications led to increased
risk of losing some funds in 2011.

The second call of the programme former Yugoslav
Republic of Macedonia-Albania, including part of 2007
and all 2008 appropriations (EUR 3.5 million), was launched in April 2010; more
than 80 applications were received and the evaluation was just starting at the
end of the year. In November 2010 the EU Delegation warned the national
authorities about the high risk of losing more than one million Euro of IPA
funds 2007 unless a revised proposal for the composition of the Joint Steering (evaluation)
Committee was immediately sent for endorsement, allowing in that way the immediate
start of the evaluation and a timely signature
of grant contracts next year.

The first Call
for proposals under the programme the former Yugoslav Republic of
Macedonia-Greece was finally launched in July and closed in November 2010; the high expectations
were confirmed by the 133 project proposals received.

As the regional South East Europe
Transnational Programme is concerned, the selection of the projects for the 2nd
call for proposal (2008 and 2009 IPA funds up to EUR 1,015 million) was
completed in December 2010.

Tables 6: Status of implementation of IPA financial assistance
(Component II) as at 31st December 2010 (in
million EUR) per annual programme[25]

|| Committed || Paid || % Paid

IPA 2007-2010 || 17.09 || 1.87 || 10.94

Out
of which, the breakdown for the intra-Western Balkans CBC Programmes and the ERDF
Transnational Programmes (South-East Europe and Mediterranean) is[26]:

|| Committed || Contracted || % Contracted || Paid || % Paid

IPA 2007 || 3.44 || 0.27 || 7.85%% || 0.22 || 6.40%

IPA 2008 || 2.85 || 0 || 0% || 0 || 0%

IPA 2009 || 3.03 || 0 || 0% || 0 || 0%

IPA 2010 || 3.10 || 0 || 0% || 0 || 0%

TOTAL || 12.42 || 0.27 || 2.17% || 0.22 || 1.77%

Table 7: Distribution of total committed funds (2007-2010 allocations)
by priority axes

Priority Axes || % of 2007-2010 allocations

CBC with Member States || 64%

CBC within Western Balkans || 26%

Participation to ERDF Transnational Programmes || 10%

TOTAL || 100%

Component III

Programming
under IPA Component III is multi-annual (2007-2013) and sector-based. Due to
this approach and the long lifecycle of mostly infrastructure projects,
operational programmes under Component III typically do not register financial
implementation in the first years. Additionally, eligibility of expenditure
starts only after the completion of a rigorous accreditation procedure designed
to establish efficient and reliable managing and control systems in the
beneficiary countries. Due to this accreditation procedure, the start of
eligibility period for expenditure in the country was July 2009.

Since the
conferral of management powers, implementation has unfortunately been very slow
and the risk of losing funds through de-commitment (at the end of 2011) was
very high at the end of 2010, due to the fact that the greatest share of the
allocations is earmarked for the completion of the Corridor X motorway, which
the Commission has, in principle, agreed to co-finance and allocate EUR 45
million.

The preparation
of the two major projects in the operational programme
(completion of Corridor X motorway and Prilep wastewater treatment plant) was considerably delayed in 2010. Finally, another reason for the high risk of losing funds was the insufficiently mature
project pipeline in the environment sector.

Table 8: Status of implementation of IPA financial assistance
(Component III) as at 31st December 2010 (in
million EUR)

|| Committed || Paid || % Paid

IPA 2007-2010[27] || 69.90 || 12.15 || 17.4 %

Table 9: Distribution of total committed funds (2007-2010
allocations) by priority axes

Priority Axes[28] || % of 2007-2009 allocations

Transport || 61.0%

Environment || 34.2%

Technical assistance || 4.8%

TOTAL || 100%

Component IV

The country received conferral of management powers for
this IPA Component in October 2009. The signature in
November 2010 of the direct grant to Employment State Agency (ESA) was the
first concrete achievement and an important milestone for the implementation of
the multi-annual Operational Programme for Human resources Development (OPHRD)
under IPA IV component. This direct grant to ESA (for an amount of EUR 1.3
million) was made in the frame of measure 1.3 in the OPHRD, the flagship
measure to address unemployment issues. This meant also the starting point for
a series of direct grants to ESA which would allow for a close link in between
IPA funding and Active Labour Market Policies' schemes, as the main policy tool
to tackle unemployment in the country.

To speed-up
procurement the administrative capacity of IPA units in the Line Ministries
(Ministry of Labour & Social Policy and Ministry of Education and Science)
would be reinforced with the contribution of the expertise to be provided by
several twinning projects. The first twinning contract for "Support to the capacity building of the Centre for Adult Education
and development of programmes for adult education and programmes for literacy
and fulfilment of elementary education for excluded persons" was signed in December 2010 with the
Finnish administration.

Table 10: Status of implementation of IPA financial assistance
(Component IV) as at 31st December 2010 (in
million EUR)

|| Committed || Paid || % Paid

IPA 2007-2010 || 24.70 || 4.89 || 20%

Table 11: Distribution of total committed funds (2007-2010 allocations)
by priority axes

Priority Axes || % of 2007-2009 allocations

Employment || 42%

Social inclusion || 30%

Human capital and employability || 20%

Technical assistance || 8%

TOTAL || 100%

Component V

The former Yugoslav
Republic of Macedonia received conferral of management powers under IPA Component
V for three measures (101 "Investments in
agriculture holdings to restructure and to upgrade to EU standards", 103 "Investments
in the processing and marketing of agricultural and fishery products to
restructure these activities and to upgrade them to EU standards" and 302 " Diversification and development of rural
economic activities") in December 2009. Therefore, effective programme implementation
could only start in 2010.

The Financial
Agreement (FA) for this Component was signed on 19 February 2010 for an amount
of EUR 31.5 million, covering the period 2007-2010. The first call for applications under IPARD was
announced in December 2009, immediately after the conferral of management was
granted. During the call 133 applications were received, demonstrating high
interest in the IPARD Programme. However, the analysis of the applications done
afterwards revealed that only 27 of those were eligible.
One of the problems was that the bodies/services responsible for issuing compliance certificates could not issue them in time or did not issue the proper documents, making some applications
ineligible. Another was that many
buildings were built illegally in the past and could
not now be
certified. Measures to overcome both problems were
taken, for example through changes in the legal framework and through signing
memorandums with the technical services responsible for issuing certificates.

The majority of the 27 projects finally contracted were
under measures "Investment in agricultural holdings" and
"Investments in processing and marketing".

In the period September
– November 2010 a second call for applications under IPARD was organised. A
total of 112 applications were received. As realisation of IPARD projects
requires some time, no direct payments to beneficiaries were made in 2010.
Nevertheless the Commission disbursed in 2010 the first part of an advance payment
of EUR 2.85 million.

Although important
progress in the implementation of the IPARD Programme could be observed, the late start of activities as well as the high rejection rate and
small value of contracted projects under the Programme in 2010 put at risk the
funds allocated for 2007 and 2008. According to the "n+3[29]" budgetary rule, these
funds will have to be de-committed if not spent by the end of 2011. An Action Plan, describing the corrective measures to be taken, is
due to be prepared in 2011 by the NAO at the request of the Commission.

Table 12: Status of implementation of IPA financial assistance
(Component V) as at 31st December 2010 (in
million EUR)

|| Committed || Paid || % Paid

IPA 2007-2010 || 31.50 || 2.85 || 9.05 %

Table 13: Distribution of total committed funds (2007-2010 allocations)
by priority axes

Priority Axes || % of 2007-2010 allocations

Market efficiency and EU standards || 75%

Agri-environmental measures and Leader approach || 3%

Development of rural economy || 18%

Technical assistance || 4%

TOTAL || 100%

4.3.1.3. Implementation Modalities and Structures

Significant efforts were done during the
reporting period to ensure the readiness of all national structures to manage
IPA funds under decentralised management.

Indeed, the country took legislative
measures to strengthen the accredited structures under Component I and prepared
an Action plan to address the remaining medium risk weaknesses identified by
the Commission's auditors in the management and control systems. Considerable
progress was evident in all Line Ministries and beneficiary institutions
regarding staffing, organisational set up of IPA Units, continuous training and
awareness rising regarding IPA.

A
full re-assessment by NAO of
the readiness of bodies
constituting the Operating Structures for IPA Component I took place, based on the recommendations
received from the Commission.  Furthermore, separate laws on State Audit Office and on IPA Audit Authority were prepared,
incorporating all relevant comments from the European Commission. This Law, that provides for the independence of the Audit Authority from all
actors in the management and control system, was approved in May 2010. Also,
all necessary additional employments for key positions were realized as planned
in the Recruitment Plans for 2010.

In December 2010, management powers were
finally granted to the former Yugoslav Republic of Macedonia for IPA Component
I, followed by the signing of the financing agreement concerning the National
Programme 2009.

However, implementation of Components III,
IV and V for 2007 and 2008 funds, under decentralised management, was still
slow one year after the respective conferral of managament decisions, and progress
under Component II, only one left under centralised management, was also
limited.

4.3.1.4.
Monitoring

Regarding monitoring activities under
centralised management, in addition to the ‘shadow’[30] Sectoral Monitoring Committee
for Component I held in October in Skopje, and consequently a ‘shadow’ Joint
Monitoring Committee which took place, as the year before, in December in Skopje, the Commission undertook many actions to monitor the programmes concerned during
2010.

The EU Delegation conducted monitoring of
the ongoing projects on regular quarterly basis in the form of Project Review
meetings where different operational and financial issues were discussed.
Besides the monitoring done by the competent Sectoral committees and the Joint
IPA Monitoring Committee, a number of projects under IPA 2007-Component I were
included in the Result Oriented Monitoring (ROM) which operated on a
multi-country basis. This tool complemented the internal monitoring activities
carried out by the Delegation under various forms (regular reporting, steering
committee meetings, project implementation reviews).

The Delegation, as contracting authority,
developed a draft monitoring strategy for IPA Component II under centralised
management, a particularly challenging element given the very high number of
small projects, with a significant geographical dispersion and a great
thematical variety. Annual monitoring plans will be elaborated in consultation
with the national authorities and implemented as of 2011.

In addition, following Articles 60, 83 and 84
of the IPA Implementing Regulation, progress in the area of monitoring of the
IPA Operational Programmes was attained by larger involvement of the national
structures. All Sectoral Monitoring Committees for IPA components III, IV and V
were organised regularly, including the last 'shadow' Joint Monitoring
Committee (JMC) held on 3 December 2010. The general conclusions from that
meeting were the following:

Design of the
programmes and choice of activities to achieve the stated objectives:

The project design under all
Operational/National Programmes is relevant to the priorities of the
country as set in the MIPDs. 
Once the implementation is
launched under all components, it will be followed with interim
evaluations under each of them, thus offering solid base for drawing
conclusions and recommendations vis-à-vis the design of the programmes not
undermining the specific features of the programmes.

Management and
control systems:

NAO is committed in
maintaining and even more in increasing the quality of the management and
control systems installed within each OS by providing regular follow up
and reporting on mitigating the remaining medium risks deriving from the Commission's
Audit Reports to the Government.
The accreditation of the DIS
and the conferral of management (in particular for component I) have the
highest priority as it is a precondition for the implementation of the
programmes under the IPA instrument.
To reinforce and sustain the
cooperation between the Operating structures for efficient use of the IPA
assistance and to follow and implement the principles of “partnership and
ownership”.

Sustainability
or likely sustainability of the changes initiated with the assistance of the
programmes:

The JMC calls upon sharing
good practices identified in the frame of sectoral and future sub-sectoral
monitoring committees.
To avoid overlapping with
other bilateral and multilateral assistance.
Where necessary, additional
staff should be recruited quickly and available training possibilities
used.

The status of all recommendations and
conclusions would be reviewed during the next JMC, to be scheduled in 2011.

The monitoring capacities within NIPAC Office
and CFCD in producing Annual Implementation Reports were weak, requiring preparations
for all those committees to be supported by the Delegation. [31] In order to help the
structures in performing this task, a technical support was foreseen to give
assistance to the national structures involved in implementation of Operational
Programmes, monitoring and evaluation.

4.3.2.
CARDS
4.3.2.1.
Sectors with positive results/ Success
stories

The EU has provided substantial support
under CARDS to the police reform, with constant attention and effort to sustain
the momentum in the country during the last years. In order to achieve
high-level guarantees of basic rights, the common minimum standards on physical
condition of police stations, both the structure of the actual buildings and
the facilities, had to be fully in line with international human rights
standards.

Namely, under CARDS 2005 programme a short
term project prepared the full design and technical specifications with the
objective of full renovation of the police station Kisela Voda in Skopje and the police station in Tetovo. The scope of the activities and the selection of
the stations were carefully and thoroughly done in continuous cooperation with
the Beneficiary.

Furthermore, under
CARDS 2006 Programme, a project for a value of EUR 536,311 upgraded
the working conditions at the police station Kisela Voda in Skopje in
accordance to the EU standards and the national law on police. The construction
phase ended in March 2010 and provisional Acceptance Certificate was issued in
April 2010.

The upgrade of the police stations not only
contributed to raising human rights standards in the field of detention to European
levels but also will significantly help increasing the citizens' confidence in
the law enforcement agencies.

4.3.2.2.
Lessons learned

A Country
Programme Interim Evaluation, published in December 2010 covering the 2006
CARDS and the 2007 IPA national programmes, outlined a few key recommendations
and conclusions. CARDS 2006 projects were implemented directly by the European Agency
for Reconstruction (EAR), with internal project monitoring maintained by task
managers to ensure that output targets were achieved. National authorities had
no formal involvement in this process but were included to various degrees as
observers in the project preparation, evaluation and implementation process
including membership of steering committees. An internal evaluation unit was
established within the EAR that produced more than 50 sector or thematic
evaluations.  Knowledge management of these important learning exercises has
been poor, with the only source of information being a selection of executive
summaries on the webpage of the EAR.

As regards the impact and
sustainability of CARDS projects, greater emphasis should have been placed on
the identification and development of ownership of both the programme as a
whole by the central authorities and the individual projects by line ministry
stakeholders; staff turnover has undermined the sustainability of EU-funded
assistance, as well as the frequent use of external contractors by the beneficiary
institutions to complete their tasks, rather than completing the work under the
supervision of the experts.  Nevertheless, it should also be noted that in some
key sectors where substantial EU assistance has been provided, such as customs
and police, real institutional change has been achieved

4.3.2.3.
Management performance

All contracts have been completed from the operational
point of view already in 2009 with the exception of the construction works of
the Veterinary and Phytosanitary Border Inspection facilities at the Border
Crossing Point of Tabanovce (CARDS 2006- Contract amount: EUR 1.22
million) - Provisional acceptance certificate expected to be issued in January
2011 (with 3 months delay); the contract was in defects liability period and
the supervisor will still have to inspect the works periodically, and when
necessary.

Only a few final invoices and final acceptance
certificates are being processed corresponding to the CARDS Programmes 2004 and 2005.

Table 14: Status of financial assistance at the end of December 2010
(in million EUR) – CARDS annual programmes[32]

|| Allocated || Contracted || % contracted || Paid || % paid

CARDS 2001 || 56.64 || 55.48 || 97.95% || 55.48 || 97.95%

CARDS 2002 || 34.50 || 34.00 || 98.55% || 34.00 || 98.55%

CARDS 2003 || 33.50 || 32.22 || 96.18% || 32.22 || 96.18%

CARDS 2004 || 51.00 || 48.67 || 95.43% || 48.62 || 95.33%

CARDS 2005 || 37.50 || 35.52 || 94.72% || 35.46 || 94.56%

CARDS 2006 || 32.50 || 30.07 || 92.52% || 29.15 || 89.69%

Total || 245.64 || 235.96 || 96.06% || 234.93 || 95.64%

5.
ICELAND
5.1.
Summary

Following Iceland's application for EU membership on 17 July 2009 and the opening of the accession
negotiations on 17 June 2010, Council Regulation 1085/2006 establishing an
Instrument for Pre-Accession Assistance (IPA) was amended to include Iceland as a beneficiary country for EU pre-accession assistance. The amended Regulation[33] entered into force on 14 July 2010.
Due to the country's level of economic and social development and its substantial
degree of alignment with the EU legislation, through the EEA Agreement, IPA
financial support will be exclusively implemented under IPA Component I "Transition Assistance and Institution Building"
and via direct centralised management. IPA financial assistance to Iceland will be channelled through three main tools: the Technical Assistance and
Information Exchange (TAIEX) instrument, multi-beneficiary programmes and a
National Programme.

In 2010, the
preparations for the programming of the first ever National Programme for Iceland started. Until the finalisation of the programme, envisaged in late 2011, TAIEX
instrument and multi-beneficiary programmes are the sole means of pre-accession
assistance to Iceland.

The Framework Agreement that sets out the
rules for cooperation concerning EU financial assistance to Iceland remains to be agreed between the Commission and the Icelandic government.

5.2.
Strategic planning and programming
5.2.1.
Multi-annual Indicative Planning Document

In 2010 there was no financial framework
for Iceland who became a candidate country for the accession of European Union
in the reporting period.

The first Multi-annual Indicative Planning
Document (MIPD), that is the key strategic planning document for financial
assistance under IPA in Iceland, was prepared during 2010 and covers the period
2011‑2013.

The overall objective of pre-accession
assistance to Iceland is to support the country's efforts to fully comply with
the accession criteria by the date of accession. More concretely due to Iceland's existing level of alignment with EU law, IPA assistance specifically targets
identified institution-related gaps in all chapters of the acquis, with
a strong focus on chapters not or only partially covered by the European Economic
Area Agreement. Particular emphasis is also paid to the preparations for Iceland's participation in common EU policies and implementation of Structural Funds and
other EU funds following accession. EU assistance should therefore also support
preparations for the implementation of the EU’s cohesion policy by introducing
strategic planning and management principles which guide the implementation of
EU structural instruments.

On this basis, two strategic objectives
corresponding to the above mentioned areas of intervention are identified in
the MIPD: i) to further enhance Iceland's ability to assume the obligations of
membership by supporting the institutional capacity building of the Icelandic
central and local administration for acquis transposition and
implementation; and ii) to reinforce Iceland's institutional capacity while
preparing for participation in and implementation of Structural Funds[34] and other EU funds[35].

The identification of the objectives was
done in close contact between Commission services and the Government of
Iceland. Close contact is maintained throughout the programming exercise to
identify the assistance needs the most relevant to the Iceland's accession process. The Commission Opinion on Iceland's
application for membership of the European Union, EU Enlargement
Strategy, Progress Reports as well as observations of the screening exercise
will serve as important pillar in these discussions.

Table 1: MIFF[36] allocations
per component, in million EUR

Component || 2010 || 2011 || 2012 || 2010-2012

I-Transition Assistance and Institution Building || N/A || 10 || 12 || 22

TOTAL || N/A || 10 || 12 || 22

5.2.2.
Programming exercise
5.2.2.1.
Component I

IPA financial assistance to Iceland will be implemented under IPA Component I and channelled through the TAIEX
instrument, multi-beneficiary programmes and National Programme. Whilst TAIEX
and multi-beneficiary programmes became open to Iceland in 2010, programming
and implementation of the National Programme could not happen during the reporting
period.

Preparations
for the first, 2011, National Programme for Iceland started in autumn 2010. In
December 2010 Icelandic authorities submitted 50 project outlines for an estimated
EU contribution ca EUR 96 million. The challenge in 2011 is to prioritise the
needs to fit to the envelope of EUR 10 million..

5.3.
Implementation of assistance
5.3.1.
IPA
5.3.1.1.
 Success stories

Until the start of the implementation of the 1st National
Programme for Iceland the assistance will be mainly provided through TAIEX
instrument. In 2010 TAIEX executed 25 events for Iceland beneficiaries. Namely
expert missions but also study visits and workshops. As an outcome of the 7
assessment missions conducted in autumn 2010, Iceland's
needs for technical assistance were identified in sectors considered as priority
in the Commission Opinion on Iceland's
application for membership of the European Union: regional policy
and preparation for the implementation of structural funds; agriculture and
rural development; customs; taxation; financial services; food safety,
veterinary and phytosanitary policy; environment. Mapping of needs and required
timeline has facilitated the provision of TAIEX assistance as well as
programming of the National Programme 2011.

In addition to the elaborated needs assessment TAIEX activities
raised awareness among the Icelandic administration on the acquis
requirement concerning short term business statistics, financial accounts, NUTS
classification and requirements to the institutional set up of Structural
Funds.

5.3.1.2.
Overview of IPA implementation in 2010

Component I: Transition Assistance and Institution Building

The first National Programme for Iceland will be the National
Programme 2011 that will be implemented as of 2012, but activities under TAIEX
started in 2010.

TAIEX assistance for
the Icelandic administration is performed through a wide range of short term institution
building activities as well as through medium term assistance based on action
plans for particular sectors drafted together with Icelandic administration.

The needs for
technical assistance are identified in cooperation with the National IPA
Coordinator in Iceland (NIPAC) who ensures that the applications correspond to
the actual needs of the central administration and that the offered assistance
effectively supports the process of Iceland's preparations for the accession in
the European Union.

In 2010, TAIEX
organised, together with Icelandic authorities, 7 scoping missions to assess
the needs for technical assistance in the sectors identified as priorities in
the Commission Opinion on Iceland's
application for membership of the European Union: Fisheries, Regional
policy and coordination of structural funds. Agriculture and Rural Development,
Environment, Food safety, veterinary and phytosanitary, Customs and Taxation,
and Financial services supervision. The assessments resulted in action plans
for TAIEX assistance over a medium-term perspective.

The first TAIEX applications from Iceland were received in spring
2010 and the short–term technical assistance activities have since then been
organised in various fields including: regional policy, judiciary and fundamental
rights, statistics, agriculture and rural development.

5.3.1.3.
Implementation Modalities and Structures

In August 2010 Iceland appointed a National IPA Coordinator (NIPAC) to ensure the overall coordination and
implementation of assistance under IPA including TAIEX. The NIPAC is placed in
the Ministry for Foreign Affairs and is assisted by a staff of two people and a
Coordination team formed of representatives of Ministry for Foreign Affairs,
Prime Minister's Office and Icelandic Mission to the EU.

Iceland faces difficulties in terms of administrative capacity to programme
and implement IPA. Icelandic institutions have already gained some experience
in participation in European programmes through the EEA agreement however
setting up and managing EU pre-accession assistance is a new undertaking
requiring knowledge on strategy development and project cycle management.
Secondly, Iceland faces a problem of capacity, particularly in terms of staff
numbers. As a country of 318 000 habitants, the size of the public
administration is small. The size of the ministries ranges from 26 (Ministry of
Economic Affairs) to 214 staff (Ministry for Foreign Affairs), with an average
size of 58 staff members. Hence the absorption capacity of the country is
limited and will provide a challenge during programming as well as
implementation of national programmes. Thorough thought needs to be put to the
choice of instruments used for providing the assistance. TAIEX, facilitating
institution building with a relatively short notice and less demands on the
beneficiary, is the most suitable in Icelandic circumstances.

The structures
of NIPAC need to be further strengthened to provide support and guidance to the
Iceland administrations throughout the cycle of IPA support.

5.3.1.4.
Monitoring

No monitoring activities took place in
2010.

6.
KOSOVO
6.1.
Summary

The European Commission
Liaison Office to Kosovo (ECLO) continued managing the implementation of EU
assistance to Kosovo. The ECLO managed to exceed its financial targets, both in
terms of contracts and payments.

The preparations
of the 2010 IPA Annual Programme (AP) for Kosovo have been completed. Programming
of the AP 2011 has started. Kosovo has started participating in IPA
Cross-Border Cooperation (CBC) programmes. Preparations of the CBC-programmes
with the former Yugoslav Republic of Macedonia and with Albania have completed and both programmes are ready for implementation. Programming for the CBC
programme with Montenegro has started.

In terms of
projects, important successes include the "Vetting and the Re-Appointment
of Judges and Prosecutors" and the closing of the Roma Camp in Cesmin Lug.
The inclusion of the new minority communities in the EURED-project was
significant as well, since it provides a platform for regional economic development
and reconciliation. The pilot projects on energy
efficiency have demonstrated a significant impact on energy use and the
potential for reducing energy demand, which is very relevant in the context of
Kosovo. In addition, an attractive legal and regulatory framework has been
created for investment in the energy sector. Finally, important groundwork has
been done for the preparation of the 2011 census, the first census in Kosovo
for more than 30 years.

6.2.
Strategic planning and programming
6.2.1.
Multi-annual Indicative Planning Document

The purpose of the Multi-annual Indicative
Planning Document (MIPD), prepared during 2010,  is to set out the EU's
priorities for assistance to Kosovo for the programming period 2011-2013.

The MIPD is based on the needs identified in
the European Partnership of Kosovo as well as the latest progress report
(adopted on 9 November 2010 as part of the Enlargement Package) and with
Kosovo's own strategies. The Government of Kosovo, local stakeholders, EU
Member States and other donors have all been consulted in the design of this
MIPD.

In its Communication 'Kosovo – Fulfilling
its European Perspective' of October 2009, the Commission identified the key
priorities for Kosovo to focus on in its EU reform agenda. The Communication
confirmed that IPA resources will be targeted to support the rule of law,
public administration reform and efforts to improve Kosovo's business
environment. It confirmed that support for infrastructure will also be
considered. It specified that the Commission will support the initiatives
included in the communication's recommendations through financial and technical
assistance. These initiatives envisaged the Commission moving forward in the
areas of visas, trade, economic and fiscal surveillance, EU programmes, the
Stabilisation and Association process (SAP) Dialogue and cross-border
co-operation. These areas coincide with Kosovo's own European Agenda.

To achieve the priorities selected for
support in the programming period 2011-2013, the Commission will focus its assistance
primarily on the following sectors:

·
Justice and Home Affairs (focus on visa
liberalisation and the judiciary)

·
Private Sector Development (focus on trade and
business environment)

·
Public Administration Reform (focus on the
functional review)

The overall objective of EU financial
assistance to Kosovo is to support its efforts for reform and towards
compliance with EU standards and progress in the implementation of its European
reform agenda.

The Europe 2020 agenda offers the
enlargement countries an anchor for reforms. Kosovo is invited to follow the
priorities of the strategy and adapt main challenges in the Kosovo context.
Enlargement policy also supports the Europe 2020 strategy by extending the
internal market and enhancing cooperation in areas where cross border
cooperation is key.

Table 1: MIFF[37] allocations
per component, in million EUR

Component || 2010 || 2011 || 2012 || 2010-2012

I – Transition Assistance and Institution Building || 64.5 || 65.8 || 67.1 || 197.4

II – Cross-border cooperation || 2.8 || 2.9 || 2.9 || 8.6

TOTAL || 67.3 || 68.7 || 70.0 || 206.0

6.2.2.
Programming exercise
6.2.2.1.
Component I

The 2010 IPA Annual Programme was presented
to the IPA Committee on 8 December 2010.   The Commission Decision was adopted on
17 December 2010. This annual programme was prepared by the ECLO in close
coordination with all beneficiaries and the Ministry of European Integration
(MEI). Close involvement of beneficiaries is to facilitate project
implementation. The IPA committee also approved the two CBC programmes with Albania and the former Yugoslav Republic of Macedonia on 8 December.

IPA 2010 is to support the strengthening the rule of law, governance, public administration reform,
communities and education. It also addresses socio-economic issues, such as
public finance, regional economic development, including infrastructure,
agriculture and rural development. The programme also focuses on the
approximation of the legislation and European standards, including on
veterinary and food safety, energy sector reform, and the environment.

The government
has increased its effort in terms of donor coordination and EU Integration in
general. The Ministry of European Integration was
confirmed as the main IPA coordination body in April 2010.

At the second High
Level Forum held on 16 April 2010, the government reported to the donor
community on progress in the area of donor coordination. The government
presented the new donor coordination mechanism, the establishment of sector and
sub-sector working groups and the implementation of the Aid Management Platform
(AMP).

The platform is an initiative by all donors
in a joint effort to support the government to improve
Aid Management and Coordination. The platform aims to:

-
facilitate the link between donor assistance and
the European Partnership Action Plan (EPAP);

-
improve the alignment of EPAP with the Medium
Term Expenditure Framework (MTEF);

-
reduce transaction costs in gathering and
reporting on donor assistance;

-
improve the alignment of donor assistance with
the government’s sector wide strategies; and

-
provide up-to-date and publicly available
information on ongoing and planned aid activities.

The Aid Management Platform was
successfully launched by the Minister of European Integration at the end of
June 2010.

During 2010 the ECLO continued involving
beneficiary institutions in implementing projects. The IPA assistance is
currently providing support for the development of monitoring systems.

Strong emphasis is made on coordination
with all other parties (bilateral and multilateral donors) through the regular
monthly coordination meetings chaired by the ECLO. These meetings were
originally for Member States only but now also include representatives from the
US, Switzerland, Norway, Japan, the WB, IMF and the UN. EULEX and the International
Civilian Office also participate.

The programming of the IPA 2011 programme started
in August 2010. It was agreed that the MEI take a more active role in the
programming process. MEI therefore organised meetings with the different
beneficiaries without much involvement of ECLO. The MEI submitted a draft list
of concept notes for projects proposed for inclusion in the 2011 programme
before end-2010. The ECLO is currently working with the line ministries and MEI
in developing the project fiches. The intention is to discuss the IPA 2011
programme in the IPA Committee in September 2011.

Table 2: Indicative financial
allocations[38]
for the year per component, in million EUR

KOSOVO || 2010

I. Transition Assistance and Institution Building || 66.10

Of which: ||

                                                                                  Annual Programme  || 63.90

Tempus Programme\* || 2.20

II. Cross-Border Cooperation || 1.20

Of which:                    ||

                                                              CBC Albania – Kosovo || 0.60

                     CBC the former Yugoslav Republic of Macedonia - Kosovo || 0.60

TOTAL || 67.30

\*              The Tempus Programme is coordinated and
implemented under the relevant Multi-beneficiary IPA 2010 programme.

Table 3:
Indicative financial allocations for the year 2010 under the Annual Programme,
per priority axis and per project, in million EUR

Transition
Assistance and Institution Building

Priority Axis/Projects || Budget

Political Criteria || 24.80

|| Strengthening the rule of law || 12.30

|| Governance || 2.00

|| Public administration reform || 5.50

|| Communities and education || 5.00

Economic Criteria || 21.00

|| Public finance || 1.50

|| Regional economic development || 17.50

|| Agriculture and rural development || 2.00

Ability to assume the obligations of membership || 12.00

|| Veterinary and food safety || 1.50

|| Energy sector reform || 2.00

|| Environment || 8.50

Supporting programmes || 6.10

|| General technical assistance and ‘Kosovo Communication’ follow-up facility || 6.10

TOTAL || 63.90

6.2.2.2.
Components II

In 2010, the
Commission programmed Cross-Border Cooperation programmes for Kosovo for the
first time. There is a CBC-programme with Albania, and with the former Yugoslav Republic of Macedonia.

Project
Title: Cross-Border Cooperation Programme –
Kosovo-Albania

Value: EUR 1.2
million (programme 2010-2011)

Description: The overall objective of this Cross-border Programme is promoting
cooperation between people, communities and institutions in the bordering
areas, fostering the sustainable development, stability and prosperity of the
cross-border region in the interest of the citizens of Kosovo and Albania.

The programme (2010-2011) will be
implemented through call for proposals.

Status: The
Financial Agreements are in the process for signature. The Operating Structure
is working on TA grant proposal, staff recruitment for Joint Technical
Secretariat, and has appointed members of Joint Monitoring Committee.

Project Title:
Cross-Border Cooperation Programme – Kosovo-former Yugoslav Republic of
Macedonia

Value: EUR 1.2
million (programme 2010-2011)

Description: The overall objective of this cross-border programme is promoting
cooperation between people, communities and institutions in the bordering
areas, fostering the sustainable development, stability and prosperity of the
cross-border region in the interest of the citizens of Kosovo and the former Yugoslav Republic of Macedonia.

The programmes allocation for first year
(2010) foresees strategic project: border crossing point while second year
(2011) will be implemented through call for proposals.

Status: The
Financial Agreements are in the process for signature. The Operating Structure
is working on TA grant proposal, staff recruitment for Joint Technical
Secretariat, and has appointed members of Joint Monitoring Committee.

Remarks: From
the former Yugoslav Republic of Macedonia side, the road (in length around 15 km)
which leads to the border crossing needs the reconstruction. To date no action
has been taken by the authorities in this regard. Therefore the first year implementation
of this strategic project (border crossing point) could fail.

6.3.
Implementation of assistance
6.3.1.
IPA
6.3.1.1.
Success stories

Vetting and Re-appointment of Judges and
Prosecutors

Value: EUR 5
million – Instrument for Stability 2007

The Independent Judicial and Prosecutorial
Commission (IJPC), established for the purpose of conducting a one-time,
comprehensive, Kosovo-wide review of the suitability of all applicants for
permanent appointments as judges and prosecutors, managed the complex process
of developing standards for examination of judicial candidates, conducting the
exams, the vetting, the interviews of the candidates and their final selection.
After the completion of the first appointments of judges and prosecutors, some
of them were appointed to join the IJPC as Kosovo members participating in the
further process. Working side by side with international members, the joining
of the Kosovo colleagues has ensured the progressive taking over of the entire
vetting process.

Some
noteworthy aspects of the appointments made during of the appointment process
should be mentioned:

·
Seven completely new members were appointed to the Supreme
Court and five of them were women.

·
All ten positions in the Office of the Special Prosecutor
were filled, including one person from a non-majority community. The new Deputy
Head of the Special Prosecutor’s Office is a woman.

60% of the appointees are new to their positions
which marks a major rejuvenation of Kosovo’s judiciary and prosecution
service.

·
28% of all appointees were women.

·
15 positions were filled by candidates with minority
background.

While 72% of all
advertised positions were filled, 28% or 127 positions need yet to be filled.
This shortfall resulted mainly from the lack of well-qualified candidates,
especially at the municipal level. Due to the limited number of minority
applicants, the IJPC appointment process only resulted in the appointment of 15
minority candidates, out of approximately 45 minority positions in total.

However, it is expected
that many of these positions will be filled by individuals who are currently
enrolled in the 15 months long Initial Legal Education Program conducted by the
Kosovo Judicial Institute. Entry into this program is highly competitive and it
is specifically designed to prepare successful applicants to serve as judges
and prosecutors.

Promoting energy efficiency

Value: EUR 3
million – IPA 2008

The main objective was to provide support
on energy efficiency which was initially focused on establishing the legal
framework and the national plan on energy efficiency. In the subsequent phase,
the implementation of this plan was supported through specific and targeted
measures, namely: implementing demonstration projects in schools and hospitals;
raising the public awareness; establishing the energy audit process, and
promoting energy efficiency in Small and Medium Enterprises (SMEs) through a
loan scheme with the European Bank for Reconstruction and Development (EBRD).

Energy audits have been very useful for the
efficient management of resources and the protection of environment in general.
Specifically the public buildings, business facilities and homes are managed in
more efficient way and also remarkable financial resources have been released
which could be reprogrammed to further develop the economy and individuals. A
strong impact will also have the very short pay-back period of the most
cost-effective investment measure used.

Furthermore the assistance has had an
impact at a local government level by improving their capacities to forecast
expenditures for energy services in their respective public buildings (public
health houses, schools, kindergartens, etc).

Another important result is that an
attractive legal and regulatory environment has been created. This has proven
to be conducive for interesting International Financial Institutions (namely
EBRD and KfW) to provide funds for both the private and the public sector to
invest in energy efficiency. EBRD is planning a loan of € 12 million for
SMEs, whereas KfW has earmarked a loan of EUR 5 million for energy
efficiency measures in municipal buildings.

Return & Reintegration in Kosovo
(phase I)

Value: EUR 3.3
million – IPA 2007

(For the actual return of Internally
Displaced Persons (IDPs) to Kosovo fostering a sustainable multi-ethnic
society)

The IPA 2007 project which was completed in
November 2010 aimed at fostering and consolidating sustainable return of
minority communities to Kosovo and is implemented through a grant contract
entailing the various aspects of the comprehensive package delivered to
returnee families.

Despite the important shortcomings
experienced with UNDP (direct grant agreement) throughout the implementation of
this first phase, the success of the approach has been demonstrated and will be
continued through a phase II (ongoing) under IPA 2008 and an upcoming phase III
under IPA 2010 – both of these phases being implemented following an open Call
for Proposals.

Under this project, 130 refugee families
(or approximately 520 IDPs) from minority communities have been able to return
to their places of origin in Kosovo: these persons have been offered a
comprehensive package of assistance to allow their sustainable reintegration. Through
this EU-funded project, 130 dwellings (including related infrastructure) were
reconstructed. Socio-economic support measures were also taken - among other
things - to prepare them for their own income generation (e.g. by providing
gardening tools based on a family's agricultural skills). Lastly, community
development projects were implemented (mostly relating to basic infrastructure
such as improving of the water supply). Consequently, this project is directly
contributing to create a climate of reconciliation, inter-ethnic tolerance and
sustainable multi-ethnicity.

Food
Safety Twinning

Value: EUR 2
million – IPA 2007

The overall objective of the twinning project “Meeting EU Standards
Food Safety & Veterinary Services” is to develop and implement sectoral
policies and strategies that are compatible with European Standards (including
gender, minorities and environmental standards) for Kosovo’s institutions. The project's
purpose is to enhance the commercial and export potential of the agro-business
food chain in Kosovo through improving controls on animal health, food safety
and quality, in line with EU standards and technical requirements.

An immediate impact of this twinning
project is that the fragmented food control institutions (competences divided between
the Ministry of Health, Ministry of Agriculture and Local Government
administration) were brought together under one umbrella, i.e. one single
institution – Kosovo Food and Veterinary Agency (KVFA); at the same time since
they all operated under different legal provisions, as a single institution
they reorganised under a single legal act being EU acquis compliant.

Because of the previously fragmented
system, each institution had applied different standards and operating
procedures for food safety control, causing overlap of competences, internal
market distortion and double standards. With the support of the twinning
project, single operating procedures for the entire food chain are developed
and the KVFA staff is trained to apply one food safety control standard at food
establishments' level.

The KVFA staff is trained in applying risk
assessment methods in food control system; coherent methodology and
transparency for food control/inspection according to EU standards and acquis.

Work with Member States' twinning partners
enabled the KVFA staff to adopt EU compliant norms and educated the local food
business operators in the implementation of the upcoming strict food safety
legal requirements and obligations.

Support to Border and Boundary Police

Value: EUR 2
million – IPA 2007

The overall objective of this project was
to strengthen the rule of law in Kosovo, further reform of the Kosovo Police
Service including the border/boundary police; fighting corruption; and
furthering alignment with and implementation of the acquis in the area
of justice and home affairs.

In particular, this project has focused on
ensuring that the concept of Integrated Border Management is applied in an
effective manner throughout Kosovo's borders. In this sense, the coordination
with the other state bodies involved on Integrated Border Management has been
increased. The application of the Law on Integrated Border Management was
facilitated by the development of secondary legislation (Administrative
Instructions), which are an essential means for border police officers to
perform more efficiently and effectively. Efficient implementation of an
Integrated Border Management will also improve the coordination with other
neighbouring countries.

The ability of Kosovo Border Police to
intercept and seize contraband and prevent illegal border crossings has also
been improved. Moreover, more than 750 police officers received tailored
trainings that included a wide range of policing subjects such as basic investigation,
intelligence management, and trafficking in human beings as well as courses
that centred on EU Standards for Border Control and Visa Regimes. The project
contributed also to the re-design of an effective institutional structure for
Kosovo Border Police, improving the management and workflow among all the
divisions of the Border Police, in particular of those responsible for policing
the entry/exit points to Kosovo.  Also, a key performance indicator framework
have been developed by the project and adopted by the Kosovo Border Police as a
tool to improve the effectiveness.

Regional Development Agencies

Value: EUR
6.6 million – IPA 2008

The general aim
of this ongoing project is to enhance activities which foster regional
development in Kosovo. Specifically, this programme aims to support:

·
The development of a regional development
framework that is line with EU practices;

·
The introduction of a Regional Economic
Development (RED) approach in at least three regions in Kosovo to facilitate
local and regional economic development and consequently employment generation;
and

·
The development of institutional capacity in
these selected areas to manage the process of economic development

So far, five
Regional Development Agencies have been established across Kosovo in the
respective economic regions of: Centre (Pristina), North (Mitrovica), West
(Peja), South (Prizren) and East (Gjilan). The agencies are fully staffed and
functional. They serve as a platform which increases the ownership of the
municipalities of their own development, as these municipalities are able to
determine their own needs by themselves. Additionally, the
agencies help to increase mutual understanding and to bridge the cultural
divide, as all municipalities (including those considered minority
municipalities) are encouraged to interact and cooperate with each other.
Lastly, the foundation of a regional institutional framework has been created
to incorporate European acquis by absorbing EU structural funds which may
become available in the future.

6.3.1.2.
Overview of IPA implementation in 2010

Component I: Transition Assistance and Institution Building

Overall, the implementation under IPA Component I was highly
satisfactory in 2010. The remainder of IPA 2007 was contracted, as well as the
bulk of IPA 2008.

The Strategic Interim Evaluation of IPA
assistance aimed to carry out an interim evaluation of assistance provided to
Kosovo under the EU Instrument for Pre-Accession (IPA). Specifically, it
aimed to: (1) assess the intervention logic used, to date, in the planning,
programming and management of IPA assistance, and (2) to make an overall
judgement on the performance of programming and implementation of IPA
assistance.

The scope of the evaluation was confined to
IPA Component I (IPA-TAIB) over the period 2007-2009. It started with a mission
in June 2010, during which several meetings took place with representatives
from MEI, line-ministries (SPOs), Member States and main donors.

The evaluation confirmed that "the
procurement stage of implementation is well managed in Kosovo" (on the
basis of contracting and disbursement rates) and that "contract management
and pay systems are functional and well managed." Of course, several
recommendations were also formulated, including:

·
the quality of the IPA intervention logic could
be improved by reducing the number of (MIPD)-priorities and improving their
focus;

·
multi-annual programming would allow the
identification  and preparation of  mature and well-sequenced projects; and

·
quality and ownership can be improved by greater
involvement of beneficiaries in implementation and monitoring;

Table 4: Status of implementation of IPA financial assistance
(Component I) as at 31st December 2010 (in
million EUR) per annual programme

|| Committed || Contracted || %Contracted || Paid || % Paid

IPA 2007 || 62.00 || 61.39 || 99.02% || 39.86 || 64.29%

IPA 2008 || 182.70 || 146.05 || 79.94% || 76.03 || 41.61%

IPA 2009 || 103.60 || 43.82 || 42.30% || 12.88 || 12.43%

IPA 2010 || 63.90 || 0.00 || 0% || 0.00 || 0%

TOTAL || 412.20 || 251.26 || 60.96% || 128.77 || 31.24%

Table 5: Distribution of total committed funds (2007-2010 allocations)
by priority axes

Priority Axes || % of 2007 - 2010 allocations

Political Criteria || 35.52%

Economic Criteria || 47.79%

Ability to assume membership obligations || 11.67%

Support Programmes || 5.02%

TOTAL || 100.00%

Component II: Cross-border Cooperation

As the programmes were only approved by the
end of 2010, no project activities have taken place.

6.3.1.3.
Implementation Modalities and Structures

IPA programmes in Kosovo are implemented
under centralised management by the European Commission. The programmes can also
be implemented under joint management with international organisations. As any
other IPA beneficiary, Kosovo has to establish a roadmap
for the decentralisation of management of EU funds. Kosovo
is at very early stage. The Commission
is supporting the Kosovo authorities in efforts to take ownership of the annual
programming process, inter alia with a Twinning project supporting the Ministry
of European Integration.

6.3.1.4.
Monitoring

In 2010, Kosovo participated in the Results
Oriented Monitoring (ROM) project managed by DG Enlargement. Accordingly, all
contracts with a value exceeding € 1 million were subject to ROM, providing the
ECLO with an independent opinion on the efficiency of project implementation
and its impact. Accordingly, most ongoing IPA projects were monitored by an
independent team of experts. The contractor has been working closely with ECLO
to make sure that planned monitoring missions are implemented as per the
monitoring plan.

By end -2010, 48 monitoring missions had been
conducted. The overall average score of IPA projects in Kosovo improved by 6%,
while the share of projects performing 'very well' and 'well' increased by
9.5%. In general, IPA projects in Kosovo improved, notably in terms of effectiveness.
A meta-analysis ROM report produced in October 2010 suggests this is due to
improved results and better use made by the beneficiaries of these results. The
discussions with the new contractor on the monitoring plan for 2011 have started
and the first mission is planned for April.

6.3.2.
CARDS
6.3.2.1.
Sectors with positive results/ Success
stories

During the reporting period all CARDS-funded
projects were completed. A few projects continued under defect liability periods.
Projects which are considered a success include:

Justice and youth: Support to the
juvenile justice system

Value: EUR 1
million - CARDS 2006

This project, implemented by UNICEF, aimed
to support the reform of the juvenile justice system based on the rights of
children and adolescents and evidence-based research will offer alternatives to
detention and promote a juvenile crime prevention programme and social
rehabilitation of juveniles. A main result of this project was the mobilisation
of a network of child protection service providers and community stakeholders,
which laid the foundation for future work in establishing a coordinated
response in preventing juvenile delinquency, despite the challenging political
context.

Economic development and employment:
Promoting local enterprise development and employment creation in the
Mitrovice/a/Zvechan municipalities (FAIR Grant programme)

Value: EUR 3.2 million - CARDS 2004

The main objective of this project was to
support the establishment and expansion of growth oriented enterprises in the
agro-processing, industry manufacturing and service sectors through employment
creation and export potential in the north region of Kosovo. Some of the
project activities were to assess current market needs and priorities, identify
points of synergy and prevent duplication, evaluate business profiles and award
grants to the best ones, conduct monitoring and inspection visits, promote
dialogue between government and the business community, conduct final
evaluation and audit of supported enterprises, analyse monitoring and
inspection visit results, and conduct SME development workshops. The project
was completed on 15 September 2009.  In total, over EUR 2.3 million have been
awarded to the 17 beneficiaries of the three calls for proposals. The total
combined investment mobilised through the FAIR project was over EUR 5.3
million. The new business ventures are expected to create a total of 295 new
jobs.  Supported businesses are in industry sectors ranging from food
processing (meat and sausage production, industrial production of bread),
textiles, wood industry (furniture production, and production of semi processed
wood for the furniture and construction industry), recycling (processing of
scrap metal and production of egg cartons from recycled paper, production of
plastic granulate from waste plastic and production of water pipes),
construction related (production of doors and windows, production of decorative
features for buildings) and other (printing, production of prescription lenses
for optical glasses, production of motor oil for vehicles).

6.3.2.2.
Lessons learned

Some of the main lessons learned in the
implementation of CARDS projects in Kosovo are:

Overall, CARDS has
performed better in concrete and specific technical projects rather than
in strategic and planning type of projects.
Donor coordination
during the implementation of CARDS was generally a weak point; it did not
function effectively in a majority of the areas subject to the evaluation.
Delays had been
registered in the implementation because institutions were being set up
when the project started and lacked administrative capacity and staff.
It has been
difficult to assess CARDS in relation to national sector strategies as
they did not exist in most sectors at the time.
Lack of developed
sector strategies and prior needed assessments may have contributed to
inadequate project design, which has impacted CARDS performance.
Impact can be
noticed in particular at the institutional level in many projects in most
of sectors subject to the evaluation; however, a general concern is that
the lack of institutional capacity did limit the wider impact.
CARDS assistance
has focused on direct training in a majority of the projects more than on
training-of-trainers and developing training capacity, and was vulnerable
to staff turnover and movement.
Many projects have
been implemented in a continuously changing environment with new staff at all
levels.
6.3.2.3.
Management performance

Table 6: Status of financial assistance at the end of December 2010
(in million EUR) – CARDS annual programmes[39]

|| Allocated || Contracted || % Contracted || Paid || % Paid

CARDS 2001 || 155.50 || 154.95 || 99.65% || 154.95 || 99.65%

CARDS 2002 || 162.54 || 131.30 || 80.78% || 131.30 || 80.78%

CARDS 2003 || 62.28 || 58.16 || 93.38% || 57.80 || 92.81%

CARDS 2004 || 72.60 || 69.29 || 95.44% || 69.25 || 95.39%

CARDS 2005 || 76.50 || 72.79 || 95.15% || 72.36 || 94.59%

CARDS 2006 || 46.50 || 44.79 || 96.32% || 44.31 || 95.29%

TOTAL || 575.92 || 531.28 || 92.25% || 529.97 || 92.02%

6.3.2.4.
Institution Building highlights

CARDS projects were completed during the
reporting period. No activities took place, except for some under the defect
liability periods for some works / supply contracts.

6.3.2.5.
Joint Monitoring Committees / Sector
Monitoring Sub-Committees

 A Joint Monitoring Committee to review IPA implementation in Kosovo
took place in early July 2010.

7.
 MONTENEGRO
7.1.
Summary

2010 has been a
successful year in terms of contracting and implementation and the IPA projects
started to deliver results and early impacts. Several laws have been adopted by
the Parliament as well as new strategies and capacity building activities
produced good impact. To mention some, new laws on Financial Stability Council,
on National Qualification Framework in education, Energy and Energy Efficiency
have been supported by IPA assistance and adopted during the year. The 2.4 km
road by-pass of Podgorica was finally concluded, more than 780 people have been
trained in public procurement, and the national Television has been provided
with digital computerised newsroom which improved the quality of news
broadcasted. Moreover, IPA assisted 2100 refugees and IDPs with appropriate
houses, income generation packages, special training, and 50 families returned
to Kosovo.

At the end of 2010
projects were ongoing for a total value of EUR 73.6 million, and projects were
finalised for a total value of EUR 9 million.

7.2.
Strategic planning and programming
7.2.1.
Multi-annual Indicative Planning Document

On 17 December 2010, the European Council
endorsed the Council's conclusions of 14 December 2010 on enlargement and
agreed to give Montenegro the status of candidate country.

In its Opinion on the Montenegrin
application for membership, the Commission identified key priorities that need
to be closely monitored before opening negotiations: improving the legislative
framework; completing public administration reform; strengthening rule of law;
improving the anti-corruption legal framework and implementing the government's
anti-corruption strategy and action plan; strengthening the fight against
organized crime; enhancing media freedom and strengthening cooperation with
civil society; implementing the legal and policy framework on
anti-discrimination; adopting and implementing a sustainable strategy for the closure
of the Konik camp.

One of the practical implications for Montenegro of receiving candidate status is the access to the other three components of
IPA, namely regional development; human resources development; and agriculture
and rural development.

Taking into account that other donors are
also actively involved in assisting Montenegro, areas where IPA can make a
contribution in the future (2011-2013) to further approaching EU membership,
have the following priorities:

· Strengthen the Parliament’s legislative and oversight role; complete
essential steps in public administration reform; enhance media freedom and
strengthen cooperation with civil society;

· Strengthen rule of law; improve the anti-corruption legal framework
and strengthen the fight against organised crime;

· Implement effectively the acquis throughout the programme,
and specifically through strengthening the administration capacity;

· Prepare Montenegro for the management of Structural Funds for the
future EU cohesion policy, namely the European Regional Fund and Cohesion Fund
regarding the environmental and transport sectors (in the areas of railways and
maritime) and the European Social Fund (in the areas of human resources
development, ie. employment, education and social inclusion);

· Strengthen the environmental administration including for EIAs, for
the management of protected areas, for climate change and to identify
sustainable funding for implementation;

· Strengthen the administrative capacity in the sector of agriculture
and rural development, including food safety, veterinary and phytosanitary
issues, and focus preparations on setting up basic instruments and institutions
for managing the CAP.

To achieve these priorities in the
programming period 2011-2013, the Commission will focus its assistance on the
following sectors: (1) Justice and home affairs; (2) Public administration
reform; (3) Environment and Climate Change; (4) Transport; (5) Social
Development; (6) Agriculture and rural development.

Preparations for IPA Component III will
fall under the sectors environment and climate change, as well as transport,
while for Component IV preparations for the Human Resources Development
component are under the sector Social development. For Component V, agriculture
and rural development, the preparation is carried out with the close
involvement of AGRI. The joint work of Commission services has been very
fruitful and will be a good basis for the implementation of the IPA programmes
during the next years as well as with view to the future strategic definitions
in the frame of the next IPA 2014-2020 preparations.

Other main line
DGs which have a link with the national programming are ECFIN, MOVE, ENV,
CLIMA, INFSO, EAC, HOME and JUST.

The progress
report, the Commission Europe 2020 strategy on enlargement, the European
Partnership, the national plan for integration to the EU, and other national
strategies, have been the basis for the programming exercise. Ownership is
progressively improving, alongside the understanding of the EU accession process.
In addition, a needs assessment was carried out, based on the existing
strategies, on the needs expressed by Government, on the conclusions of the
sub-committees, on the shortcomings mentioned in the progress report and in the
Opinion, on the SWOT analysis done for the draft Strategic Coherence
Framework (SCF), and on the lessons learnt from past and on-going assistance.
The EU Delegation also carried out a survey to identify
the existing strategies or action plans in view of identifying priority sectors,
as well as of programming IPA assistance for the next three years period.

Participants at the various donor
coordination meetings outlined the sectors which they found to be priority areas for future financial
assistance, such as environment, good governance or assistance to EU accession.
Italy is supporting sustainable
development and environment. Germany, through GTZ is assisting the employment
sector through vocational education and economic development as well as in the
tourism sector, energy efficiency, communal land management. Austria is involved in the education and tourism sector. IPA support will closely work with those
donors. KfW is the biggest donor in the energy sector, financing investments in
energy production, transmission and energy efficient measures both on the
supply and on the demand sides. Moreover KfW is financing water and waste water
projects at the coast. With the World Bank, areas for potential close
cooperation with IPA have been identified in the sectors of Agriculture and food
safety; in energy efficiency and in education. EIB is investing in environment
Northern region and in the railways sector, in close collaboration with IPA
also. Donor coordination is crucial for the efficient use of scarce funds. The US and other bilateral donors are also closely supporting the CSOs.

Experience with the implementation of the
first two components of IPA assistance and the evaluation carried out for CARDS
projects in the fields of public administration, justice, liberty and security,
and civil society led to strategic and operational recommendations which
included: the need to better target project objectives; to improve the planning
of operations; to increase the awareness on sustainability; to conduct
functional needs assessments; to improve donor coordination; to improve project
design and project preparation; to involve civil society in the programming
steps, not only for social matters; to increase the monitoring of project
implementation; to ensure that cross-cutting aspects lead to concrete impact;
to ensure ownership by the beneficiaries and sufficient absorption capacity.
Experience also showed that in the sectors of environment and transport, an
adequate project pipeline and quality project preparation is essential to
success; that competent and strong managerial capacities should be in place, at
local and national levels.

In October
2009, the MIFF has been adopted, and these amounts are presented in Table 1. In
November 2010 the revised MIFF for 2011-2013 was adopted without prejudging
whether or not the Council would decide to grant candidate status to Montenegro.

Table 1: MIFF[40]
allocations per component, in million EUR

Component || 2010 || 2011 || 2012 || 2010-2012

I – Transition Assistance and Institution Building || 29.24 || 29.84 || 30.45 || 89.53

II – Cross-border cooperation || 4.28 || 4.31 || 4.34 || 12.93

TOTAL || 33.52 || 34.15 || 34.79 || 102.46

In December
2010, Montenegro became a candidate country, and thus, the MIFF will have to be
amended to take into account components III to V, however, only after the
revision of the IPA Regulation allowing Montenegro to be moved from Annex II
(pre-candidate countries) to Annex I (candidate countries). The amounts
presented in Table 1.2 (here below contain slight changes.

7.2.2.
Programming exercise
7.2.2.1.
Component I

During the year, IPA 2010 national
programme was finalised and adopted on 28 July 2010. It focuses on
infrastructures (with a leverage effect on EIB loans) (35%), as this helps
mitigating the impacts of the financial crisis and provides employment, in
addition to developing the necessary infrastructure needs, through two large
projects on railways rehabilitation and waste water treatment as well as grants
for municipal small infrastructures. It also includes two new projects in the
social sector, on gender equality and a large social inclusion one dealing with
inclusive education, social welfare reform and child care. There are also
several well needed projects in the main acquis-related areas.

No project was foreseen for civil society
in 2010, as in 2009, a large programme of support for civil society project was
launched as well as an ongoing one from 2007 going. The regional multi-country
"civil society facility" was in place.

Per priority axis, the IPA 2010 national
programme is clustered as follows:

-
Political criteria. This includes support for
local self government, as a continuation of the IPA 2008 project including
grants for infrastructure; for strengthening the police; and pursues the fight
against corruption through developing integrity framework in the public administration;
in addition to creating the path towards gender equality.

-
Economic criteria. This axis includes support
for infrastructure (railways and environment); for reforms in the social area
for an inclusive society; for environment through forestry projects and
awareness campaigns; as well as for assisting the ministry of Information
society.

-
Ability to assume obligations of membership.
This axis supports the implementation of acquis related activities in the areas
of statistics, phytosanitary, construction norms, blood transfusion, market
surveillance, as well as tax administration

-
Participation in Community programmes, IPA
facilitates the "entry ticket" for the 7th Framework
programme in Research; Entrepreneurship & Innovation; Culture and Customs 2013.

Montenegro being a small country, coordination
among donors is permanent. As presented in this report, to the extent possible,
projects are designed to be implemented by an EU bilateral donor, or a UN
agency, or as co-financing with an IFI, mainly EIB for 2010.

Some sectors are well covered by specific donors such as energy by
KfW, private sector and education by the World Bank. In addition, most donors
are assisting the country in fighting corruption and organised crime, and in
good governance. Caution was taken during programming to ensure absorption
capacity, as technical assistance is excess is counterproductive.

In addition, IPA national programmes take into account IPA
multi-beneficiary programmes, which are also involved in infrastructures,
energy efficiency, SMEs (through EFSE), and several networking projects in the
sectors of JLS, statistics, environment, refugees, etc.

In Montenegro, the bulk of assistance goes to infrastructures in the environment sector such
as solid waste management and waste water management. In the sector of
transport, the assistance focuses on railway infrastructure. Both these sectors
contribute directly to achieving EU policies in terms of environment and
climate change. In addition, they are complementing EIB loans.

At the start of
the programming process, all projects were, as usual, presented to the
Commission by the beneficiaries themselves. During this year, it was clear that
the needs were well-owned and stemmed from the sub-committees, the progress
reports and other specific acquis needs. The Delegation continued to
enjoy a very close relationship with civil society and NGOs participated in the
needs identification for the IPA civil society project.

As a result of
donor coordination and efficiency of the implementation, in 2010, one project (project 10: Capacity building in the forestry
sector) is set-up to be implemented under
Indirect Centralised Management, in accordance with Article 56.1 of the
Financial Regulation through a delegation agreement with Lux Development. In
addition, direct grants (for projects 4: Gender Equality, 8: Social welfare and
child care system reform: enhancing social inclusion and 14: Implementation of
the European Blood Transfusion System) are to be negotiated with UNDP, UNICEF
and WHO (under Article 168.1.c Implementing Rules).

The programming of IPA 2010 funds took into account whenever
possible the lessons learned programmes such as an improved use of
conditionalities and of functional needs assessments of the institutions
involved in the projects. However, the implementation of IPA projects was
sometimes hindered by lack of ownership by the beneficiaries, the limited size
and weakness of the public administration dealing with IPA related which are
recurrent issues.

Programming for IPA 2011 has started early 2010, and was
fairly advanced by the end of 2010. However, due to the late progress in the
MIPDs 2011-2013, the programming was put on-hold. In addition, joint
programming missions with line DGs to prepare for components III and IV were
planned for early 2011.

The total amount allocated to Montenegro in the MIFF is EUR 29.24 million. An additional amount of EUR 600,000
has been added in order to start socio-economic activities at the border with
Kosovo (CBC-type activities) instead of a CBC component II programme.

Table 2: Indicative financial
allocations for the year 2010 per component, in million EUR

MONTENEGRO || 2010

I. Transition Assistance and Institution Building[41] || 29.84

Of which: ||

National Programme || 28.64

Tempus Programme\* || 1.20

II. Cross-Border Cooperation[42] || 4.84

Of which:   ||

CBC Albania Montenegro || 0.60

CBC Croatia Montenegro || 0.50

CBC Bosnia and Herzegovina Montenegro || 0.60

CBC Serbia Montenegro || 0.60

CBC with Adriatic Programme || 1.38

Participation in ERDF transnational programmes (SEE and MED) || 1.16

TOTAL || 34.68

\* The Tempus Programme is coordinated and implemented
under the relevant Multi-beneficiary IPA 2009 programme.

Table 3:
Indicative financial allocations for the year 2010 under the National
Programme, per priority axis and per project, in million EUR

Priority axes/projects || Budget

Political criteria || 6.70

|| Strengthening the police directorate in integrated border management, criminal intelligence and the fight against drugs || 1.80

|| Support the implementation of the anti corruption strategy and action plan || 0.70

|| Support to Local Self-Government for implementing the National Training Strategy (NTS) and provision of grants to municipalities) || 3.50

|| Gender Equality || 0.70

Economic Criteria || 13.25

|| Major rehabilitation of the main Railway line Bar–Vrbnica  (Miatovo Kolo-Mojkovac) section || 5.00

|| Upgrading the Pljevlja waste water treatment system  ) || 3.50

|| Raising environmental awareness || 0.50

|| Social welfare and child care system reform: enhancing social inclusion || 3.00

|| Strengthening administrative capacities in information society || 0.50

|| Support for capacity building in the forestry sector || 0.75

Ability to assume obligations of membership || 5.60

|| Improving Statistical information system || 1.20

|| Strengthening of the Phytosanitary Directorate || 0.70

|| Achieving highest safety and technical quality of construction || 0.70

|| Implementation of the European Blood Transfusion System || 1.80

|| Consumer protection and market surveillance || 0.70

|| Upgrading IT capacity of the Tax Administration || 0.50

Supporting programmes || 0.32

|| Community programmes || 0.32

Support activities || 2.77

|| TA&PPF || 2.02

|| Support Measures Facility (SMF) || 0.75

Total || 28.64

7.2.2.2.
Component II

For programmes
at borders with candidate countries/potential candidates, the Montenegrin
Operating Structures focused on reinforcing the capacity of their staff and
that of the Joint Technical Secretariats working for the programmes where Montenegro is a participating country. For this capacity building effort, the assistance of
the regional project “CBIB II” was instrumental, as well as the signature of
four grant contracts (March 2010), directly awarded to the Ministry of European
Integration as technical assistance for the programmes with its four neighbours
(Albania, Bosnia and Herzegovina, Croatia and Serbia.

The evaluation
of the four calls for proposals launched in 2009 under the CBC programmes with
these neighbours was successfully concluded and most of the contracts were
signed by the end of 2010. The last two contracts in relation to the
participation of Montenegrin operators in the ERDF-SEE transnational programme
were concluded by May 2010.

The second call
under the CBC programme with Albania was published in June 2010 including the
allocations 2008-2009. By the deadline, the number of applications received was
a 50% greater than in the first call published just one year before, which
indicates a growing interest in the scheme thanks to the measures taken to
promote the visibility of the programme and the capacity of the potential
applicants under the aforementioned TA contract supporting the implementation
of this programme.

Finally, during
the fall of 2010, the CBC programme document for the new CBC programme Kosovo –
Montenegro was drafted and approved by the Operating Structures.

The programme Albania – Montenegro seeks to promote cooperation between people, communities and institutions on
the bordering areas, aiming at sustainable development, stability and
prosperity in the mutual interest of citizens of the two countries. They
specifically target the promotion of economic development through the
improvement of tourism and cultural potentials; the advancement in the
protection, promotion and management of sensitive ecosystems and sustainable
environmental development; and the furtherance of citizens cooperation and
partnership building across the border.

The main
priority of the programme Bosnia & Herzegovina – Montenegro consists of
fostering the sustainable development of the cross-border area, its economic,
cultural, natural and human resources and potentials by strengthening the local
capacities and common institutional networks among local communities and other
relevant actors.

The overall
objective of the Croatia - Montenegro programme is to improve the quality of
life in the cross-border area by (a) establishing cooperation between
institutions in charge of environment protection, as well as cultural heritage
protection; by (b) creating recognizable tourist products based on the natural
and cultural assets of the programme area and re-establish social and cultural
connections; and by (c) enhancing cooperation between institutions, citizens
and civic organizations in order to boost community development and improve
neighbourhood relations.

The Serbia –
Montenegro programme revolves around five main priorities, to wit: (a)
strengthening the incentives for SME development in the border areas; (b)
development of tourism as a key sector of the border economy; (c) promotion of
cross-border business cooperation and accessibility to markets; (d)
preservation of the high quality of the border area environment as an economic
resource; and (e) strengthening cross-border ‘people-to-people’ interaction to
reinforce ethnic, educational, cultural and sporting links.

The regional
Adriatic IPA Cross-border programme includes maritime areas in three Member
States (Greece, Italy and Slovenia) and several IPA countries Croatia (HR),
Bosnia & Herzegovina (BiH), Montenegro (MNE) & Albania (AL) and seeks
to strengthen sustainable development capabilities of the Adriatic region
through a concerted strategy of action between the partners of the eligible
territories emphasising research and innovation, promotion and protection of
natural and cultural resources, and the integration and extension of the existing
infrastructure network.

The two
ERDF-South East Europe and Mediterranean trans-national programmes enable the
participation of Montenegrin partners with partners from many EU Member States
in joint transnational cooperation activities and make possible the
familiarisation of Montenegrin partners with territorial cooperation programmes
under the EU structural funds. The main areas of cooperation are innovation,
environment, accessibility and sustainable urban/rural development.

7.3.
Implementation of assistance
7.3.1.
IPA
7.3.1.1.
Success stories

Construction of Podgorica Eastern
by-pass, Section 4 (IPA 2007 EUR 4 million)

This project has contributed to the
economic growth of Montenegro by improving the efficiency, effectiveness and
safety of its transport network. Rehabilitation of roads is key not only to
integrating Montenegro into regional trade and tourism networks but also to
improve traffic flows and safety measures in line with EU standards. The
completion in 2010 of the construction of Section 4 of the Podgorica by-pass
has had a significant impact on passengers and goods transport in Montenegro by considerably reducing the time taken to transit the capital city. In addition
the new by-pass has led to a significant reduction of circulation and pollution
in Podgorica itself.  The total construction comprised a length of highway of 2.4
km, comprising dual carriageways, central median, pedestrian footpaths, and
ancillary works and the provision of two railway under-passes. The main
beneficiary was the Ministry of Transport.

Juvenile Justice System Reform (IPA 2008
Direct grant to UNICEF EUR 500,000)

The main achievement of this project has
been to harmonise Juvenile Justice Policy and the Legislative Framework with
internationally recognized standards of protection of the rights of children in
conflict with law. The Draft Law on Juvenile Justice has now been prepared and
is in the process of adoption. Under this law, the focus is on education rather
than punishment for juveniles in conflict with the law with imprisonment used
only as a last resort.  Additional achievements included improvements to the
Juvenile Justice database and capacity building for over 200 professionals,
judges, prosecutors, police officers, social workers, psychologists and staff
within responsible departments to deal with juvenile justice. The main beneficiaries
were the judiciary and Ministry of Justice.

National Qualification Framework (NQF)
and Quality Assurance in Education (IPA 2007 EUR 1.5 million)

This project has helped to further policy
and institutional reforms in education and training as part of Montenegro’s effort to engage with the wider European Union education developments. The
main achievement included the adoption by the Parliament of Montenegro in
December 2010 of the Law on a National Qualification Framework. In September
2010, Pilot Sector Commissions for Qualifications were established for the
sectors of Tourism, Trade and Hospitality, Construction and Architecture;
Agriculture, Forestry, Food processing and Veterinary. In addition a
Communication and Public Relations strategy was adopted to guide the work on
awareness rising on the Montenegrin Qualification Framework over a five year
period. The main beneficiary was the Ministry of
Education and Science.

Fight against organised crime and
corruption (IPA 2008 Twinning EUR 1.2 million)

The main achievements of this project
included strengthened inter-agency cooperation in the fight against organised
crime, corruption and money laundering including the establishment and implementation
of both a surveillance system to obtain evidence on organised crime and an
anti-money laundering database. Public campaigns on anti-corruption were
organised and an integrity plan and website was established for the Directorate
for Anti-corruption Initiative (DACI) Main beneficiaries of the project were
the Police Directorate, Ministry of Interior, Police Academy, Administration
for the Prevention of Money Laundering and DACI.

Support to Transformation of Radio and
Television of Montenegro into a Public Service Broadcaster – supply of digital
equipment (IPA 2008 EUR 1.2million)

This project has contributed to
establishing an independent and effective Montenegrin public broadcasting
service as befits an open and democratic society. The beneficiary is Radio
Television of Montenegro (RTCG). The main achievements have been the
provision of a modern computerised newsroom in order to strengthen the
independence and effectiveness of the Montenegrin public broadcaster RTCG to
provide better quality news and other public service programming. The project
also aimed at enhancing the knowledge and skills of RTCG staff to effectively
use the new digital workflow technology in television programme production. The
actual benefit to citizens will materialize after the digital switchover.

Comprehensive support to refugees and
displaced persons (IPA 2008 Grant EUR 1.5 million)

The overall objective of the project was to
contribute to resolving the issues of refugees and displaced persons as
outlined in the Montenegro's National Strategy. Finding durable solutions for
refugees and displaced people in Montenegro is also a priority identified by
the Commission for action before Montenegro can begin accession talks.  The
main achievements of this project, which was implemented by the German NGO
"HELP", included providing over 400 people with secure and
appropriate housing, supporting over 230 income generation schemes, providing
230 people with specialised training, conducting cross border information
activities with 1159 participants and facilitating return of 50 displaced
families to Kosovo. In addition to these 2100 direct beneficiaries assisted by
the project the institutional beneficiaries were Bureau
for Care of Refugees, Ministry of Social Welfare, Local Governments and
communities in Montenegro and Kosovo.

Institution building highlights

Strengthening the regulatory and
supervisory capacity of the financial regulators (IPA 2008 Twinning EUR 1.2
million)

This project has helped to create the
conditions for long-term economic stability and growth in Montenegro by strengthening the regulatory and supervisory framework of the capital and financial
markets in line with EU acquis. In this respect,
one of the key successes has been the adoption by the
Parliament of Montenegro in July 2010 of the Law for
the Financial Stability Council and the approval by the Government of the Law of Prevention of Money Laundering and Financing of Terrorism. A
draft of the Montenegrin Law on Financial Collateral Arrangements has also been
prepared and a Plan of Action for the implementation of Basel II in the banking
sector has been adopted by CBM Governing Board. In
addition a Consumers’ Awareness and Financial Education Strategy was prepared
and adopted by SEC Management Board and the capacity of financial institutions
has been strengthened through training in EU financial stability issues. Three
inspection programmes for anti-money laundering and
against financing of terrorism have also been established. The main beneficiaries were the Central Bank of Montenegro (CBM), Securities
and Exchange Commission (SEC) and Insurance Supervision Agency (ISA).

Further development and strengthening of
the public procurement system (IPA2007 EUR 1.3 million)

One of the main achievements of this
project has been the drafting of a New Public Procurement law which is now in
the process of adoption and will help to ensure full harmonisation with the EU acquis
and international best practice. The project has also strengthened the capacity
of the Public Procurement Directorate to implement its functions through
training of 786 procurement officers and through establishing an IT system for
publication of public procurement notices. A public awareness campaign on the
benefits and principles of public procurement has also been implemented. The
main beneficiary is the Directorate for Public Procurement

Technical Assistance for implementation
of Energy Community Treaty (IPA 2007 EUR 1.5million)

This project has helped to develop and
implement energy sector policies that will ensure the implementation of Montenegro's commitments under the Energy Community Treaty, including the implementation of
the Regional Energy Market. The key achievement has been the adoption by the
Parliament of Montenegro in April 2010 of the Law on Energy and the Law on
Energy Efficiency.  A further achievement in December 2010 was the adoption by
the Government of Montenegro of their first Energy Efficiency Action Plan.  The
main beneficiaries were the Ministry of Economic
Development and the Energy Regulatory Agency.

7.3.1.2.
Overview of IPA implementation in 2010

2010 was successful so far in terms of implementation of IPA
projects in Montenegro.

Year || Commitments (million EUR) || Disbursements  (million EUR)

2008 || 11.5 || 3.5

2009 || 15.6 || 12.0

2010 || 39.3 || 28.4

In 2010 the EU Delegation committed 2.5 times the amount committed
in 2009 and 3.4 times the committed amount of 2008. During the same year EU
Delegation disbursed 2.4 times the amount paid in 2009 and 8.1 times the amount
disbursed in 2008. Overall the Delegation committed a total of
EUR 39.3 million. Indeed, in 2008, commitments amounted to
EUR 11.5 million, and disbursed EUR 3.5 million; while in
2009, respectively EUR 15.6 million and EUR 12 million, and
in 2010, respectively EUR 39.3 million and EUR 28.4 million.

Component I: Transition Assistance and Institution Building

Table 4: Status of implementation of IPA financial assistance
(Component I) as at 31st December 2010 (in
million EUR) per annual programme

|| Committed || Contracted || % Contracted || Paid || % Paid

IPA 2007 || 23.87 || 23.65 || 99.08% || 16.91 || 70.84%

IPA 2008 || 26.80 || 23.37 || 87.20% || 11.18 || 41.72%

IPA 2009\* || 28.43 || 12.56 || 44.18% || 4.67 || 16.43%

IPA 2010 || 28.64 || 4.25 || 14.84% || 1.94 || 6.77%

TOTAL || 107.74 || 63.83 || 59.24% || 34.7 || 32.21%

\*Including EUR 1.2
million for a separate Rural Roads project

Table 5: Distribution of total committed
funds (2007-2010 allocations) by priority axes

Priority Axes || % of 2007-2010 allocations

Political criteria || 24.49%

(of which civil society) || 3%

Economic criteria || 38.25%

Ability to assume membership obligations || 29.55%

Support programmes || 7.71%

TOTAL || 100%

Several
contracts have been closed in 2010: 12 out of the IPA 2007 programme, 3 out of
IPA 2008 and 2 out of IPA 2009, for amounts of respectively
EUR 2.18 million, 0 EUR .12 million, and EUR
0.13 million.

Component II: Cross-border Cooperation

The complex
architecture (dual managing structures; dual operational structures, Joint
Monitoring Committees (JMC) and Joint Technical Secretariats) has led to
considerable delays in contracting CBC funds.

Only in the
last three months of 2010 was progress made. By the end of 2010 the EUD had
signed all contracts stemming from the evaluation of the first calls for
proposal under priority 1 (regional cohesion) under the Albania-Montenegro,
Bosnia and Herzegovina-Montenegro, Croatia-Montenegro and Serbia-Montenegro CBC
programmes respectively. [This represents 24 contracts under the CBC 2007
allocation, 7 under CBC 2008 allocation, 7 under both CBC 2007 and 2008
allocation and 4 under the transnational programmes allocation 2007.] The 2007
allocations for Bosnia and Herzegovina-Montenegro, Croatia-Montenegro and
Serbia-Montenegro programmes have been fully committed. The Joint Monitoring
Committee (JMC) of the Albania-Montenegro programme submitted in late December
a strategic project for the use of residual funds of the 2007
Albania-Montenegro allocation. The uncommitted funds from the 2008 allocations
for the Bosnia and Herzegovina-Montenegro, Croatia-Montenegro and
Serbia-Montenegro programmes will be used in the second calls for proposals to
be published in Q1 2011.

Tables 6: Status of implementation of IPA financial assistance
(Component II) as at 31st December 2010 (in
million EUR) per annual programme[43]

|| Committed || Paid || % Paid

IPA 2007-2010 || 17.91 || 2.13 || 11.89%

Out
of which, the breakdown for the intra-Western Balkans CBC Programmes and the
ERDF Transnational Programmes (South-East Europe and Mediterranean) is:

  || Committed || Contracted || % Contracted || Paid || % Paid

IPA 2007 || 3.18 || 2.50 || 78.62% || 1.63 || 51.26%

IPA 2008 || 3.25 || 0.93 || 28.62% || 0.50 || 15.38%

IPA 2009 || 3.31 || 0 || 0% || 0 || 0%

IPA 2010 || 3.40 || 0 || 0% || 0 || 0%

TOTAL || 13.20 || 3.43 || 25.98% || 2.13 || 16.14%

Table 7: and distribution of total committed funds (2007-2010 allocations)

Priority Axes || % of 2007-2010 allocations

CBC with Member States || -

CBC within Western Balkans || 80.00%

Participation to ERDF Transnational Programmes || 20.00%

TOTAL || 100%

7.3.1.3.
Implementation Modalities and Structures

With view to decentralisation in the
management of EU funds, in 2010 Montenegro completed Stage 1 and progressed to
Stage 2 (gap plugging) as regards Component I and II while for the other
Components Montenegro remained in Stage 0. Five IPA projects were dedicated to
preparing the systems for decentralised management – 1 project for components I
and II, upon the results of which a bigger project for Components I-IV was
launched in Q4 of 2010, 1 service contract for the preparation of the
Operational Programmes and the Strategic Coherence Framework for Components III
and IV, 1 twinning contract for Component V and 1 project for the establishment
of the Audit Authority. As a consequence, 2010 has shown a progress in
strengthening the capacity of the National Authorising Officer (NAO) and the
National Fund: a head of the National Fund was appointed and the staff was
increased; the NAO has taken over the role of a general manager of the
decentralisation process for all five components; the practice of regular
three-monthly reports by the NAO to the EC was established. The capacity of the
Central Financing and Contracting Unit and the Programme Authorising Officer
were strengthened significantly as well. An Audit Authority was formally
established within the State Audit Institution as a temporary host until the
end of 2011. It employs 5 persons, has its own premises and relative budget
independence. Following the changes in the Government at the end of 2010, a new
National IPA Coordinator and Competent Accrediting Officer were appointed.

7.3.2.
CARDS
7.3.2.1.
Sectors with positive results/ Success stories

All CARDS projects ended in 2010.

7.3.2.2.
Management performance

Table 8: Status of financial assistance at the end of December 2010
(in million EUR) – CARDS annual programmes[44]

|| Allocated || Contracted || % Contracted || Paid || % Paid

CARDS 2001 || 16.30 || 16.30 || 100% || 16.30 || 100%

CARDS 2002 || 12.00 || 11.50 || 95.83% || 11.50 || 95.83%

CARDS 2003 || 12.00 || 11.89 || 99.08% || 11.89 || 99.08%

CARDS 2004 || 16.76 || 16.34 || 97.49% || 16.34 || 97.49%

CARDS 2005 || 23.12 || 20.22 || 87.46% || 20.18 || 87.28%

CARDS 2006 || 20.71 || 19.40 || 93.67% || 19.40 || 93.67%

Total || 100.89 || 95.65 || 94.81% || 95.61 || 94.77%

7.3.2.3.
Joint Monitoring

The IPA Monitoring Committee took place on
4 June afternoon in Budva.

The main findings of the meeting can be
summarised as follows:

•
It was agreed by all participants that the
administration lacks absorption capacity; one of the immediate solutions could
be the reduction of the number of projects and contracts i.e. the financing of
large infrastructure projects for IPA 2011 and 2012

•
Co-financing is sometimes an issue, therefore close
monitoring by NIPAC will be established from June 2010 onwards.

•
Office space is a main issue; thus each
beneficiary with such a problem should find a solution, and any potential
beneficiary without sufficient office space should refrain to request an IPA
project. NIPAC shall monitor this closely.

•
Coordination and communication is an issue when
a project has several beneficiaries. NIPAC shall improve monitoring of projects,
and efforts in inter ministerial coordination should be done.

•
EU accession requires high numbers of staff, in
such a small country; this is a real issue in the public administration not
only in terms of number but also in terms of qualification and English
speaking. Stakeholders (donors and beneficiaries) shall ensure reasonable
requirements / recruitment, in terms of staff for project management and wise selection.
Donor coordination could also contribute to improve this.

•
The role of twinning is sometimes not fully
understood and should not be under-estimated. Indeed, technical assistance is
not always the best option for institution building in the fields of the Acquis;
in addition, twinning partners should be carefully selected. In the future IPA
programmes will consider "twinning-lights" as much as possible.

•
Official donor coordination should imperatively
improve and NIPAC or Office of the deputy PM will ensure this.

•
Motivation is sometimes lacking, due to low
wages. This is a widespread issue which unfortunately this IPA monitoring
committee cannot address.

In the course of 2010, mitigation measures
were established for several of the issues mentioned; for example, the set-up
of a donor coordination office within the Prime minister's office.

8.
SERBIA
8.1.
Summary

Programming of EU assistance during 2010
included finalisation and
approval of the IPA 2010 programme and the start of programming of the IPA 2011
programme. The elaboration of the IPA 2010 programme was shorter compared to
the previous ones. One key reason was the fact that
there was a substantial increase in both ownership and capacities of national
bodies responsible for the IPA programming process, following the technical
assistance support provided by the EU during the previous year. As a
consequence the Financing Decision for the IPA 2010 programme was adopted on 12
April 2010 and the Financing Agreement between the European Commission and the Republic of Serbia was signed on 25 May 2010. The gradual move to sector based approach
started during 2010 and had an impact on programming of IPA 2011. Especially
the setting up of sectoral working groups by Serbian authorities further
improved ownership and coordination both internally and with donors. The
sectoral working groups will also help to further improve inter-institutional
coordination.

The targets for contracting and
disbursement for 2010 were established in December 2009 and foresaw EUR 200
million for contracting and EUR 184 million for disbursement in 2010. These
targets for 2010 were exceeded by EUR 2.9 million (1.45%) for contracting and EUR
4.5 million (2.44%) for disbursement. On average, this performance represents an
increase of 43% in contracting compared with 2009 (excluding budget support).

In terms of implementation, the EU
Delegation in Belgrade was managing a portfolio of ongoing projects amounting
to EUR 606 million by the end of 2010, encompassing 7 annual programmes. In order to reach these high
contracting and disbursement rates increased cooperation with National
Authorities at Central and Municipal level was essential, as was the prominent
role played by the Delegation in the coordination of all donors and
International Financial Institutions (IFIs). Project implementation was
assessed through a formal, external monitoring mechanism, which complemented
the Delegation's internal monitoring of projects. During 2010 the external
monitoring mechanism covered 108 projects for an amount of approximately EUR
243.6 million and noting that the average performance of projects was
"good" (a rating of 3.04 out of 5).

8.2.
Strategic planning and programming
8.2.1.
Multi-annual Indicative Planning Document

The Government of Serbia, local
stakeholders, the EU Member States, and other donors have all been consulted in
the design for the Multi-annual Indicative Planning Document (MIPD) for the
period 2011-13. The following priorities, which are in line with the EU
strategic framework and the EU Enlargement strategy, have been identified for
IPA support: (1) Strengthening the rule of law and
public administration; (2) Overcoming the economic crisis and improving
competitiveness; and, (3) Social inclusion and reconciliation.

To achieve the priorities selected for
support in the programming period 2011-2013, the European Commission will
primarily focus EU assistance on the following sectors:

(1) Justice and home affairs;

(2) Public administration reform;

(3) Social development;

(4) Private sector development;

(5) Transport;

(6) Environment, climate change and energy; and,

(7) Agriculture and rural development.

The consultation and coordination
mechanisms that were established at the beginning of 2009 functioned well in
2010 and were instrumental in planning the priority sectors for MIPD 2011-13.
These mechanisms consisted of monthly EU donor meetings and two-monthly
Informal Donor Group (IDG) meetings. In the monthly EU-27 assistance meetings
chaired by the Delegation, information was also shared about the ongoing and
planned activities of each Member State. In each meeting, a presentation of a
specific sector was made, followed by an exchange of views and information on
the sector. IDG meetings were co-chaired by the Delegation and the World Bank
and gathered all the main donors in Serbia in order to share information about respective
activities and to discuss related issues.

Table 1: MIFF[45]
allocations per component, in million EUR

Component || 2010 || 2011 || 2012 || 2010-2012

I – Transition Assistance and Institution Building || 186.20 || 189.96 || 193.80 || 569.96

II – Cross-border cooperation || 11.75 || 11.92 || 12.10 || 35.77

TOTAL || 197.95 || 201.88 || 205.90 || 605.73

8.2.2.
Programming exercise
8.2.2.1.
Component I

The programming activity during 2010
included finalisation and approval of the IPA 2010 programme and start of
programming of IPA 2011 programme. The Financing Decision for IPA 2010
programme was adopted on 12 April 2010 and the Financing Agreement signed on 25
May 2010 by the European Commission and the Republic of Serbia. The 2010 IPA programme
under Component I included 27 projects which were selected in line with the
priorities identified in the MIPD for 2009-2011. The distribution under
Component I by priority axis was the following: 31% Political criteria (7
projects), 43% Socio-economic criteria (9 projects), 25% Ability to assume
obligations of membership (10 projects), and 1% Supporting activities (1
project).

The programming of IPA 2010 took into
account the various lessons learned from previous CARDS and IPA programming
exercises. Assistance had to complement and be consistent with development and
action plans of implementing institutions. Particular attention was paid for
the preparedness and maturity of the selected projects, absorption capacity and
past achievement records of implementing institutions. A very important aspect
that contributed to efficient programming of IPA 2010 programme was a clear
increase in ownership of national bodies responsible for the IPA programming
process, following the technical assistance support provided by the EU during
the past year.

The programming of IPA 2011 started at the beginning
of 2010 with a first meeting organised by Serbia's National IPA Coordinator
(NIPAC), where the objectives for the new programme were identified. As the
national programme for IPA 2011 was prepared simultaneously with preparation of
the MIPD for 2011-2013, the programme fully reflects the sectoral priorities of
the new MIPD and takes into account the EU Strategy for
the Danube Region and the
Europe 2020 Strategy. Several rounds of consultations were organised between
the Commission and the Serbian authorities, as well as with the EU Member
States, other donors and local stakeholders.

IPA 2011 programming was positively
affected by the gradual move to sector approach during
2010. Under the leadership of the NIPAC office the inter-institutional sectoral
working groups were established. The working groups started to meet on a
regular basis to discuss programming and implementation of financial
assistance. The preparation of the needs assessment document for international
financial assistance for 2011-13 and regular meetings of the sectoral working
groups enhanced ownership over IPA programming. The sectoral working groups
were also a positive step towards better inter-institutional coordination, and
is expected to positively effect implementation of IPA programmes in the
future. Furthermore, consultation of civil society organisations and donors are
organised for each sectoral working group, thus improving the overall strategic
and coordinated approach.

Table 2: Indicative financial
allocations for the year 2010 per component, in million EUR

SERBIA || 2010

I. Transition Assistance and Institution Building || 186.8[46]

Of which: ||

National Programme || 174.8

Tempus Programme\* || 7.0

Nuclear Safety Programme\* || 5.0

II. Cross-Border Cooperation || 12.2[47]

Of which: ||

CBC Serbia – Croatia || 1.0

CBC Serbia - BiH || 1.0

CBC Serbia - Montenegro || 0.6

CBC Serbia - Hungary || 2.5

CBC Serbia - Romania || 3.0

CBC Serbia - Bulgaria || 2.4

CBC IPA Adriatic || 0.6

Serbia's participation in ERDF transnational Programmes "South East Europe" and "Mediterranean"\*\* || 1.1

TOTAL || 199.00

\* The Nuclear Safety and Tempus Programmes are
coordinated and implemented under the relevant Multi-beneficiary IPA 2010
programme.

\*\* Management of the allocations for these programmes
was cross-delegated to the Commission's DG Regional Policy (REGIO).

Priority Axis || Projects || Budget

Political Criteria || 54.1

|| Support for the implementation of Public Administration reform process || 6.5

|| Support to the preparation for IPA component III || 5.0

|| Municipal Infrastructure  Support programme MISP 2010 || 31.1

|| Support for the Ministry of Finance- treasury administration capacity building || 2.0

|| Project Against money laundering and terrorism financing in Serbia || 2.0

|| Further alignment of the penal system with EU standards and strengthening alternative sanction system || 5.5

|| Support to Civil society || 2.0

Economic Criteria || 75.9

|| Higher Education teaching infrastructure programme || 25.0

|| European South and South west Serbian Support Programme || 14.1

|| Development of palliative care services in the Republic in Serbia || 3.5

|| Implementation of strategy for fight against drugs – supply reduction component || 4.0

|| Integrated innovation support programme || 3.0

|| Removal of UXO from Danube river || 3.8

|| Preparation of the necessary documentation for river training and dredging works on selected locations along the Danube river || 2.0

|| Supervision of road construction works on the corridor X || 10.0

|| Assistance to the digital broadcasting switchover in Serbia || 10.5

Ability to assume the obligations of membership || 42.8

|| Capacity building of institutions involve in migration management and reintegration of returnees in the Republic in Serbia || 1.8

|| Establishment of efficient system for prevention and suppression of illegal migrations on the territory of the Republic of Serbia || 5.0

|| PF code nr and project Title Strengthening of the Serbian market surveillance system for non-food and food products || 2.5

|| Institutional and capacity building and support to agriculture and rural development in Serbia || 2.8

|| Establishment of the Serbian farm accountancy data network || 2.2

|| Equipment and courier service supply and capacity building of Serbian National Referent Laboratories in food chain || 6.5

|| Strengthening the Serbian environmental inspectorate and relevant stakeholders || 2.5

|| Follow up technical Assistance to Srbijagas || 1.5

|| Construction of substations 400/110Kv Vranje4 and Leskovac2 || 15.5

|| Implementation of Energy component of the National strategy for sustainable development || 2.5

Supporting programmes || 2.0

|| Project Preparation facility || 2.0

TOTAL || 174.8

Table 3: Indicative financial
allocations for the year 2010 under the National Programme, per priority axis
and per project, in million EUR

8.2.2.2.
Component II

Serbia is
actively participating in three Cross-Border Cooperation Programmes (CBCs) with
the EU Member States Bulgaria, Hungary and Romania, as well as in three CBCs with
neighbouring countries Croatia, Bosnia and Herzegovina, and Montenegro.

The main objectives
of  this component were: i) to support cross-border economic, social and
environmental cooperation; ii) to foster socio-economic development of border
regions; iii) to address common challenges in fields such as environment,
natural and cultural heritage; iv) public health; v) to prevent of and the
fight against organised crime; iv) to promote joint small scale local
actions ("people-to-people") with a view to encourage contacts; vi)
communication and cooperation between local communities and institutions across
the borders; vii) to support accessibility, networks as well as emergency
preparedness, particularly in relation to flood prevention and control; and,
viii) to address cross-border pollution, food safety and health issues.

All mentioned
programmes were in an advanced stage of implementation over the reporting
period. Following the establishment of the appropriate institutional and legal
frameworks, all authorities and bodies foreseen by the applicable rules were
created and appropriate implementation capacities were developed.

During 2010,
the institutional setup for the management of Component II was reorganised with
the aim of streamlining it in preparation for a Decentralised Implementation
System (DIS). The body in charge of programming and monitoring; the "CBC
Unit", was functionally and logistically separated from the
"implementation body" (whose functions were attributed to the
Ministry of Finance's Central Finance and Contracting Unit).

IPA Component
II also supported the participation of Serbia in two Transnational Cross-Border
Programmes: the South East Europe Programme (SEE) and the Adriatic Programme,
although participation in the latter was on a phasing-out basis, and was
limited to the participation of Serbian research, cultural and university
institutions.

With a view to
integrate IPA and the ERDF funds under the direct responsibility of the
Managing Authority, the SEE programme underwent important revisions during 2010.
Technical details on the institutional reshaping of the programme were
discussed with the management structure of the Programme. The modified draft
Operational Programme was submitted to the European Commission in November
2010. The overall management of the programme should, as a result, be greatly
simplified with a corresponding reduction in timings and administrative costs.

8.3.
Implementation of assistance
8.3.1.
IPA
8.3.1.1.
Success stories

Environment and Spatial Planning

Air quality is a problem in Serbia as in many transition economies, having a negative impact on public health, flora
and fauna, and even the neighboring countries. A twinning project "Strengthening
Administrative Capacities for Implementation of Air Quality Management System"
twinning project (IPA 2007, EUR 1
million) with the Czech Republic and Germany was under implementation in 2010.
The project was based on the results of the CARDS project, which included an
investment of nearly EUR 3 million for establishment of a
national automatic air quality monitoring network. The project helped Serbia to substantially complete the legislative alignment with the EU air protection
legislation. Based on the data generated amongst others by the new EU-funded
air quality monitoring network, it also  supported with Serbia's first
preliminary air quality assessment by helping to distinguish between areas
where air quality is good, where air quality is poor and where measures for air
quality improvement are required.

The twinning project has had an impact on
the definition of concrete measures for the improvement of air quality. The
Serbian municipal administrations are now developing on pilot basis Cleaner Air
Plans with short-, medium- and long-term measures for Serbia's most problematic agglomerations, i.e. Belgrade, Niš and Bor, where a mix between an
overegged vehicle fleet, poor fuel standards and location specific
industries are the principle sources of air pollution. The identified measures
are various, including for example legislative changes and restricted accesses
of old vehicles to city centres.
Furthermore there is more transparency about air quality problems due to the
air quality database, which is accessible to general public.

Health sector

In 2010 the
"Support to the Health Care Accreditation Agency" technical
assistance project (IPA 2007, EUR 1.5 million) provided support both with
development of the Public Agency for Accreditation of Health Care Institutions
and with the design and testing of the Agency's  accreditation process for
Serbian health care institutions. The project has had an impact on Serbia's health care reform programme by improving the role and the functioning of the
Agency. The Agency is now in a position to develop certification mechanisms,
which will improve the overall healthcare sector in Serbia. This project also
assisted in further developing and defining the culture of health care quality
and the role of patients and medical professionals in quality assurance. A
wider, long-term impact relates to the increased trust of health care service
users in quality and patient safety.

Local government

In 2010, the 3-year project 'Strengthening
Local Self Government in Serbia' (IPA 2007, EUR 2 million) entered its
second phase. The project was implemented by the Council of Europe. It supports
Serbia to develop a legal framework for decentralisation and local government capacity building. The second phase built on
the achievements of the first phase (completed in 2008) and supported a further
elaboration of the decentralisation strategy and the implementation of institutional and legal reforms
in Serbian local government.

The 'EXCHANGE 3 programme' (IPA
2007, EUR 11,9 million) supports local self-governments in implementing
projects identified in their strategic plans and local economic development
plans.  Exchanges between EU and Serbian municipalities
were financed on a project basis through two calls for proposals. More than 30
projects were financed in a variety of sectors such as inclusive governance,
education, employment, rural development, economic development, tourism
development and environmental protection. The programme
strengthened core financial management capacity in local self governments,
improved HR management for local governments and contributed to the
finalisation and implementation of the national local self-government training
strategy. It also supported the integrated process of programming in the area
of local government and community development.

The Municipal Infrastructure Support
Programme (MISP) (EUR 2.4 million) provided technical assistance in
three areas: the Public Utilities Companies (PUC) transformation strategy;
programming and project preparation; and, to construction implementation
through supervision services and institutional building of relevant local
services. In addition to the technical assistance, EUR 35 million has been
allocated for capital investment in municipal infrastructure projects, of which
three started in 2010, focusing on regional water supply (EUR 7.2 million),
regional wastewater treatment (EUR 9 million) and solid waste management (EUR 4.5
million).

Transport and Infrastructure

In 2010 a number of important projects were
implemented in the transport sector. The main project " Žeželj Bridge – Rebuilding Serbian infrastructure" (IPA 2009, EUR 30 million)
started. This is an important project with the purpose to build the new Žeželj Bridge and the
associated connecting infrastructure. The project aims
to restore full road and rail traffic across the Danube in Novi Sad and has a
wide impact both in Serbia, neighbouring countries and Europe, as Novi Sad is located on the international
'Corridor X', the transport artery connecting Central and South East Europe. A project
"Implementation of the European Common Aviation Area" "
(IPA 2007, EUR 2 million) with both technical assistance and supply components,
was under implementation in 2010. Technical assistance provided support in safety,
security, air traffic management and airport management, resulting in adoption
of a new Aviation Law. The project results include, among others full opening
of Serbian skies for foreign carriers, adoption of a State Safety Programme
(SSP), large-scale training programme of expert staff (1,275 student days) and
delivery of critical security equipment for training and for usage on airports.
The project has improved both quality of work of air traffic authorities and
safety of air travelers.

8.3.1.2.
Overview of IPA implementation in 2010

Component I: Transition Assistance and Institution Building

Table 4: Status of implementation of IPA
financial assistance (Component I) as of 31 December 2010 (in million EUR) per annual programme

|| Committed || Contracted || % Contracted || Paid || % Paid

IPA 2007 || 164.84 || 133.53 || 81.01% || 80.86 || 49.05%

IPA 2008 || 168.64 || 90.02 || 53.38% || 37.15 || 22.03%

IPA 2009 || 170.55 || 106.67 || 62.54% || 102.83 || 60.29%

IPA 2010 || 174.81 || 20.21 || 11.56% || 4.92 || 2.81%

TOTAL || 678.84 || 350.43 || 51.62% || 225.76 || 33.26%

Table 5: Distribution of total committed
funds (2007-2010 allocations) by priority axes

Priority Axes || % of 2007-2010 allocations

Political criteria || 38%

(of which civil society) || 1%

Economic criteria || 35%

Ability to assume membership obligations || 24%

Support programmes || 3%

TOTAL || 100%

For the IPA 2008, 2009 and 2010 programmes, the
deadline for contracting is in the first half of 2012. The early signature of
the Financing Agreements for the IPA 2009 and IPA 2010 programmes, on 10 February and 25 May 2010 respectively, allowed a timely
implementation of both programmes. As a consequence, out of IPA 2009 and 2010 programmes, contracts worth EUR 97.7 million
were signed by the end of 2010. This is an important improvement and reduced
considerably time between project design and project implementation.

According to the
external monitoring of projects covering 108 projects
in 2010 for an amount of approximately EUR 243.6 million, the average
performance was "good"; a rating 3.04 out of 5. This is a weighted
average of each project, comparing: relevance and quality of design,
efficiency, effectiveness, impact and sustainability. This close
follow-up and assessment through a formal, external monitoring mechanism has
complemented the internal monitoring carried out by task managers.

Over the course of 2010, SIGMA (Support for Improvement in Governance and Management) completed its assistance for the development of a new administrative
legal framework, aligned with democratic principles and standards, as practiced
by EU Member States. Furthermore, the assistance to the Ministry of Finance in
promoting and establishing a Coordination and Harmonisation Unit (CHU) was completed in April 2010. Between March and June, the
authorities responsible for EU integration and for public
finance explored together the possibilities of implementing cutbacks while
preserving priorities (“rational decremental budgeting”). Mid-2010, SIGMA
started a mission on assistance in concession and the introduction of Public
Private Partnerships in Serbia.

With regard to TAIEX, there was a further
increase in the use of the TAIEX instrument. In 2010 the Serbian authorities
submitted 159 requests for TAIEX support in comparison to 143 requests in 2009.
During 2010, 96 events (either in Serbia or abroad) were organised with Serbia as a single beneficiary, representing 7.2% of all classic TAIEX events. Further 60
events (either in Serbia or abroad) were organised with Serbia as one of the beneficiaries. Participation of Serbians in the TAIEX events increased from 3,241 participants in 2009 to 3,550
participants in 2010, representing 10.7% of all participants in the TAIEX
events during 2010.

Twinning has become recognised by the Serbian administration
as an important instrument supporting approximation with EU legislation. Twinning
coordination continues to be enhanced between the EU Delegation and the Serbian
administration, with strong support from the Twinning team in DG Enlargement.
The Serbian national contact point for Twinning is based in Serbia's European Integration Office and plays an active coordinating role between the EU Delegation
and beneficiaries in the ministries. Following selection procedures, nine
Twinning projects started in 2010:

·
Strengthening Administrative Capacities to
protect Natural Areas;

·
Strengthening the capacities of the Republic of Serbia for the absorption of EU Rural Development funds in pre-accession
period;

·
Police Reform: Internal Affairs;

·
Support to the Public Procurement Office;

·
Harmonization of the Serbian Customs Enforcement
Division with the standards, organization and operational methodology of EU
enforcement agencies: Component 3 – Risk Analysis and Risk Management and Post
Clearance Audit;

·
Harmonization with EU acquis in
the Field of Transport – Phase II;

·
Strengthening institutional capacity in
Hazardous Waste Management;

·
Harmonisation of national legislation with EU
legislation for placing on the market and control of Plant Protection Products
and implementation of new legal provisions;

·
Capacity building within the National Referent
Laboratories Directorate.

During 2010 Serbia has participated in a
number of EU programmes under the financial perspective 2007-13, including the 7th
Framework Programme for research and technological development, PROGRESS, the
Entrepreneurship and Innovation Programme (EIP), the ICT Policy Support
Programme, the Culture Programme, as well as the Customs and Fiscalis
programmes.

Component II: Cross-border Cooperation

The
implementation of Component II (Cross-Border Cooperation, or 'CBC') is done
mainly through a bottom-up approach, favoured by Grant schemes based on joint
calls for proposals fully involving local communities. During 2010
implementation started for grants financed by the Programmes between Serbia and Montenegro, Serbia and Bosnia and Herzegovina as well as Croatia and Serbia.

Although not
being territorially eligible for the Programme (lack of costal area), but
taking into account its previous eligibility in the Italy–Adriatic Programme
covering 2004-2006, Serbia has been granted a phasing out participation in the
IPA Adriatic CBC Programme until 2012 inclusive. This transitional and specific
support allows the participation of Serbian partners in institutional
cooperation activities between universities, cultural institutions, and
research institutes.

The first calls for proposals for all
programmes, both the programmes with Member States and between candidate and
potential candidate countries, were launched and completed in 2010. The
contracts awarded first were signed at the end of 2010.

One important success was an event in
November held in Zlatibor that celebrated the signature of the first round of
grants awarded under the Programmes between Serbia and Bosnia Herzegovina and
between Serbia and Montenegro. A total of 25 contracts have been signed for a
total amount of EUR 4.12 million to fund the activities of 50 applicants
from the three countries involved, half of which are from Serbia. The event saw the participation of high level government representatives from all three
countries involved, including the deputy Prime Minister of Serbia, achieving
high resonance in regional and national media and drawing the public's
attention to the impact of EU funds on economic development in peripheral
regions.

A few of the
more advanced programmes launched the second round of calls for proposals (e.g.
the SEE programme, the CBC Hungary-Serbia and the CBC Romania-Serbia), while
preparations are at an advanced stage for the second round of calls for proposals
in all other programmes. The actual launch is expected to take place during the
first semester of 2011.

Component II is
also financing the participation of Serbia in the European Regional Development
Fund's (ERDF) European territorial cooperation transnational programme
"South East Europe". Under the first call for proposals, 17 projects
(for a total value of EUR 1.8 million) with Serbian partners were
selected for financing and by the end of 2010 were in the process of
implementation. The selection process within the second call for proposals was
undertaken in 2010. By the end of the year, a total of 21 applications were
provisionally selected, 9 of which included partners from Serbia. Preparation of the third strategic call for proposals also took place in 2010. Selection
priorities were defined and relevant stakeholders in all participating
countries were identified.

Tables 6: Status of implementation of IPA financial assistance
(Component II) as of 31 December 2010 (in
million EUR) per annual programme[48]

|| Committed || Paid || % Paid

IPA 2007-2010 || 43.96 || 6.24 || 14.19%

Out
of which, the breakdown for the intra-Western Balkans CBC Programmes and the
ERDF Transnational Programmes (South-East Europe) is:

|| Committed || Contracted || % Contracted || Paid || % Paid

IPA 2007 || 3.71 || 2.67 || 71.97% || 1.68 || 45.28%

IPA 2008 || 3.59 || 1.81 || 50.42% || 0.95 || 26.46%

IPA 2009 || 3.86 || 0 || 0% || 0 || 0%

IPA 2010 || 3.70 || 0 || 0% || 0 || 0%

TOTAL || 14.86 || 4.48 || 30.15% || 2.63 || 17.70%

Table 7: Distribution of total committed
funds (2007-2010 allocations) by programmes

Programmes || % of 2007-2010 allocations

CBC with Member States || 65%

CBC within Western Balkans || 25%

Participation to ERDF Transnational Programmes || 10%

TOTAL || 100%

8.3.1.3.
Implementation Modalities and Structures

As a potential candidate country, Serbia receives pre-accession financial assistance from the Instrument for Pre-Accession
Assistance (IPA) under the first two IPA components (Transition Assistance & Institution Building and Cross-border Cooperation). The EU Delegation in
Belgrade (EUD) is currently responsible for managing these two components.

Serbia has started
preparations for the introduction of a decentralised implementation system (DIS) for management of IPA funds. DIS will
enable Serbia to take responsibility for, and hence increased ownership over,
the implementation of IPA components and for the future management of EU
Structural and Cohesion Funds.

Serbia has taken a
number of steps towards achieving DIS accreditation in line with the Commission's
" Roadmap to decentralised
system for IPA", which foresees five different stages prior introduction
of DIS. During 2010 Serbia continued working towards this objective:

Components I, II, III and IV: During 2010 Serbia moved from Stage 1 (gap
assessment) to Stage 2 (gap-plugging). After the first gap assessment in 2009
to determine to what extent the conditions for a DIS are in place for
Components I and II, a subsequent gap assessment was performed for Components
III and IV and the gap assessment report published in March 2010. EU-funded technical
assistance supporting relevant national authorities started for Components I
and II in December 2009 and for Components III and IV in September 2010.  Implementation
of these two projects was ongoing during 2010. During this gap plugging phase, training
is provided to staff of the relevant structures and manuals and procedures are
drafted.

Component V:
The required structures, i.e. the future paying agency and the future managing
authority, were being established during 2010 (and have continued to be
established during 2011) with support of both a twinning project, which started
in July 2010 and a technical assistance project, which started in November
2010.

8.3.1.4.
Monitoring

A
formalised, Result Oriented Monitoring (ROM)
mechanism, outsourced to a specialised contractor,
has been in place since 2009. For 2010, the Delegation adopted a monitoring
plan and regularly updated it with the ROM team. In 2010, 108 project
monitoring reports were produced covering approximately EUR 250 million of ongoing assistance. According to the ROM mechanism,
monitored projects are classified as A (very good), B (good), C (problems) and
D (serious deficiencies). The table below shows the frequency of A and B
occurrences in relation to EU funded projects in Serbia, along with the average
score in 2010.

Criterion || Good or Very Good (A or B) || Average Score (out of 5)

Relevance/Quality of design || 97 % || 3.15

Efficiency || 84 % || 2.98

Effectiveness || 85 % || 3.01

Impact || 95 % || 3.04

Sustainability || 95 % || 3.01

Average || 91% || 3.04

None
of the projects monitored was classified as "D" (having "Serious
deficiencies"). Factors that contributed to the above results included:

1) Involvement
of all relevant project stakeholders;

2) Ownership and
commitment of the beneficiary stakeholders;

3) Professional
and “Final Beneficiary-Oriented” project management, based on a bottom-up
approach;

4) Good
adaptation capacity towards changing needs by project teams; and

5) Interaction,
supervision and coordination with the project partners at project design stage
by the EU Delegation;

In addition to ROM, regular internal monitoring has been conducted by the EU
Delegation. This has included monthly (minimum) project meetings between the EU
Delegation, project team leaders and beneficiary organizations and other
stakeholders. Also, regular internal meetings within the EU Delegation have
been organized to follow up on project implementation and to highlight any
potential bottlenecks for project implementation. Furthermore, ad hoc sectoral
meetings between the EU Delegation, beneficiary institutions and other
stakeholders (e.g. donors, consultants/contractors, the Serbian EU Integration
Office, National Audit Coordinators have been organized on a regular basis. The
EU Delegation has also organized regular on-the-spot monitoring visits to
projects. All these various monitoring mechanisms aim to identify any potential
problems as early as possible so that appropriate corrective measures can be
taken to allow proper implementation of projects.

8.3.2.
CARDS
8.3.2.1.
Sectors with positive results/ Success stories

Orthophoto Maps project (CARDS 2005, EUR 2.6 million, technical assistance)

Implementation
of the project activities with the Geodetic Authority of Serbia were completed
in December 2010. The project took several years and entailed taking areal
photos all over Serbia. These photos were then digitised into orthophoto maps. The project helped to improve a database,
which is necessary for the access to community funding as an EU member state.
Following the project, the Geodetic Authority now disposes the necessary means
to assist the transition from landbooks to a modern, reliable and unified real-estate cadastre in Serbia and to allow for more efficient spatial management. The good results of this project
have also had a positive impact on the increase of legal certainty in land and
property issues.

The Geodetic
Authority is able to use the digital data for improved cadastre verifications
and will contribute to a sound tax reviewing facility in this area. The project
facilitated the online access to the digital data production, which created a
wider understanding of mapping exercises within the civil society and enabled
better institutional coordination.

Project Preparation facility (PPF)
(CARDS 2006, EUR 1.9
million, technical assistance)

The Project Preparation facility (PPF)
project started in 2008 and was finished in July 2010. It achieved particularly
good results, as it helped substantially to strengthen Serbian ownership of the
programming process and improve absorption capacity. Improvement of the
beneficiaries’ ownership over the programming process, i.e. in identification,
selection and development of projects would later on ensure higher rates of
absorption of funds and enhanced quality of implementation. These results are
particularly important considering that Serbia is preparing for the
decentralised management of EU funds. More concretely, the project supported national
authorities with:

Programming of the IPA 2009 and 2010 programmes,
including preparation of Project Fiches under IPA component I, and
preparation of IPA 2009 Budget support for Serbia;
Preparation of a first draft for the IPA
2011 programme;
Drafting of supporting
documents for the ongoing IPA programmes (ToRs, Twinning Fiches, Technical
specifications);
Provision of training on programming and
project preparation; and,
Development of an interactive training
system for distance learning (also known as a 'MOODLE'.)

The project was monitored by ROM and the
final monitoring report stated as follows: “Results
have been achieved as foreseen and expanded due to the dedication, knowledge
and commitment of the personnel involved. The accomplished synergy between the
beneficiary and project partners is indicating how mutual coordination can
serve its purpose, even in the most difficult implementing environment. This
layout is making the projects' added value even higher, due to the gained
skills, experience and knowledge by the personnel involved.”

Support to
National Investment Planning and Implementation (CARDS 2006, EUR 1.4 million,
technical assistance)

This project focused
on improving capital expenditure, the macro-fiscal framework, macroeconomic
policy coordination and budgetary processes. The project contributed to the
improvement of national strategic investment expenditure priorities by
developing and detailing categorisation and prioritization methods for investment projects and the
necessary information gathering tools for the tracking and monitoring of
line-ministry expenditure against plans and budgets. The project also improved
the capacity of staff of the Ministry of Finance and related line-ministries
through training, study tours and expert working groups. It generally improved the
overall policy making system.

The Project also supported the Treasury
with a number of econometric models and tools that have been directly embedded
into the Treasury system such as the ability to calculate macro-economic stabilization,
the long-term projections of Serbian indicators to 2050, and the ability to
estimate budget revenues and to forecast these revenues on a daily basis so
that spending needs and revenues collected can be matched. This last process
has been incorporated into the Treasury’s newly established dealing room and is
used on a daily basis. As a consequence of these
improvements to the Serbia’s public investment and budgetary planning, a strong
impact on the socio-economic development of Serbia, in line with EU standards,
has been achieved.

Ministry of the Interior - Border Police
Directorate (CARDS 2006, EUR 1.5 million, twinning)

The Serbian Government adopted
the Integrated Border Management (IBM) strategy and the associated action plan
in 2006. Although the Serbian administrations were making steady progress in
some important areas of IBM, a structured approach in the implementation
process was missing. The overall objective of this project was to contribute to the “open
borders” for citizens and goods and at the same time ensure that Serbia’s borders are better controlled and secure. The project undertook a review of the legal
framework, and provided substantial recommendations for updating existing laws
and implementing regulations. Furthermore, the IBM strategy and Action plan for
all four types of border crossing were updated. Guidelines describing the
workflow at all four types of border crossings were developed as well.

The main result
of the twinning project was the establishment of coordinating structures at all
levels that allow permanent communication and information exchange, especially
on the operational level of the integrated management of the borders. The
project contributed to efficient and effective border
management, which enhances citizens' security and at the same time facilitates travel
conditions. The project had an impact in alleviating threats related to
malfunctioning border management systems, such as smuggling of goods and
trafficking in human beings, drugs and arms, because these threats can be now
more effectively addressed due to improved communication, exchange of
information and overall cooperation among the authorities responsible for the
management of state borders. The project also contributed for facilitation of cross–border
trade, which further contributes for economic growth and poverty reduction in
long-term. Enhanced cross-border flows will also have impact on improvement of relations
between the neighbouring countries in long-term.

8.3.2.2.
Lessons learned

The final CARDS Evaluation was performed in 2009 and is incorporated
in the annual 2009 report for Serbia.

8.3.2.3.
Management performance

In 2010 the Delegation continued to
implement the remaining CARDS programmes (33 projects financed under CARDS are
still active from the administrative and implementation point of view). As
described in the table below, the overall contracting rate for CARDS projects
is over 99%. The disbursement percentage is also extremely high.

Table 8: Status of financial assistance at the end of December 2010
(in million EUR) – CARDS annual programmes[49]

|| Allocated || Contracted || Contracted (%) || Paid || Paid (%)

CARDS 2001 || 143.50 || 143.50 || 100% || 143.50 || 100%

CARDS 2002 || 170.70 || 164.99 || 96.65% || 164.99 || 96.65%

CARDS 2003 || 220.00 || 213.76 || 97.16% || 213.65 || 97.11%

CARDS 2004 || 207.13 || 205.42 || 99.17% || 203.26 || 98.13%

CARDS 2005 || 147.17 || 144.07 || 97.89% || 140.19 || 95.26%

CARDS 2006 || 157.46 || 144.08 || 91.50% || 129.27 || 82.10%

Total || 1045.96 || 1015.82 || 97.12% || 994.86 || 95.11%

8.3.2.4.
Institution Building highlights

The programming exercise of CARDS
concentrated on institution building and the introduction of IPA assistance. The
priorities were strengthening capacities of the Government, economic
development and reform in line with the European Partnership recommendations,
including promoting good governance and the strengthening of rule of law.

Among the remaining CARDS project that will
be completed in 2011 in the Infrastructure sector a programme implementation unit
has been established in the Serbian Railway Company (ZTP) with the objective to
assist the Railway Company in the implementation of infrastructure projects and
rehabilitation of rolling stock, as well as to provide capacity building to the
management of the Railway Company.

In the field of consumer protection, a CARDS project is providing technical assistance to the Ministry of
Trade and Services, line ministries, law enforcement bodies involved in
consumer protection and independent consumer organizations. The project contributed
to the drafting of a new Law on Consumer Protection, which was adopted in
October 2010.

9.
TURKEY
9.1.
Summary

The year in
review has registered positive developments in the management of the financial
assistance and Turkey is continuously improving the expertise in key
institutions in charge of programming, implementation and monitoring of EU
funds. Numerous projects financed under the Turkish pre-Accession Instrument
(TPA) have been completed and the implementation of IPA projects is now well
underway and is starting to show a substantial impact. Positive results have
been achieved in several domains such as social inclusion, education and
entrepreneurship.

Important
reforms have been brought under way to improve the programming and monitoring
of funds. Efforts were made to better focus projects on
the political criteria of the accession process as well as on aligning them
with sector priorities and putting them in a longer term perspective.
Particular emphasis has been given to
law enforcements services and human rights as well as civil society dialogue
development, being fundamental for Turkey's political reform process.

The extension
of the coordination groups run by the EU Delegation to other donors beside the
International Monetary Funds represented an important step to avoid
duplications of financial assistance and generate added value trough the
support of complementary actions when appropriate.

The year 2010
has also seen the preparation of the MIPD 2011-2013, which follows a sectoral
approach. The beneficiary, Member States and other donors have been actively
involved and welcomed a more consultative process in drafting the MIPD, which
ensures a higher ownership. The programming of IPA
funds now follows a more sector based approach, which includes better link of
assistance to sector strategies and political priorities, development of more
measurable results and indicators, enhanced donor coordination and improved
monitoring systems to measure performance.

9.2.
Strategic planning and programming 
9.2.1.
Multi-annual Indicative Planning Document

The
Multi-annual indicative planning document 2009-2010 was still being applied in
2010. An assessment of the validity of the MIPD 2009-2011 has been conducted
together with the Turkish authorities, and on this basis the strategic approach
was considered to be still valid for programming in 2010.

The new Multi-Annual Indicative Planning Document for Turkey covering the years
2011-2013 was drafted during 2010 based on the needs
identified in the Accession Partnership of the country as well as the latest
progress report and the country's own strategies. It takes into account the
lessons learned outlined in the Commission’s own assessment of past performance
and on recent audits and evaluations. The MIPD 2011-2013 was adopted on 28 June 2011 through Commission
Decision C(2011)4490.

The MIPD
2011-2013 puts the stress on ownership and a more sector based approach and on
ownership towards setting priorities for assistance as it was drafted based on
the priorities established by Turkish authorities. To
support a more effective delivery of IPA and to move to a more sector based
approach with more focus and impact, the following strategic objectives for the
new MIPD have been chosen:

1. The first
priority for Turkey is to make progress in the critical areas of rule of law in
order to tackle key reforms of the judiciary and fundamental rights.

2. A second priority is to adopt the acquis
in areas where there is complex legislation or costly requirements to adopt EU
standards in areas such as transport, agriculture, food safety, environment,
climate change and energy.

3. A third priority is to support Turkey in its economic and social development and to enhance competitiveness.

4. Horizontal
priorities that will be supported as cross-cutting themes are participation of
civil society, participation in EU programmes, a high degree of protection of
the environment, mainstreaming of climate change considerations, equal
opportunities for men and women, support to disadvantaged and vulnerable groups
as well as the development of good neighbourly relations. These horizontal
priorities may be supported in their own right or as part of programmes and
projects in other priority areas.

In line with
these priorities, the choice of sectors in the MIPD has therefore been carried
out bearing in mind the remaining challenges for Turkey to fully meet the Copenhagen criteria for membership with particular focus on the political criteria. The new MIPD for Turkey for 2011-2013 focuses EUR 2.56 billion of assistance on 7 sectors:

- Justice, home affairs
and fundamental rights

- Private sector development

- Environment and climate
change

- Transport

- Energy

- Social development

- Agriculture and
rural development

The selection
of a limited number of sectors allows for a targeted approach towards EU
assistance that aims to deliver the expected results and meet the envisaged
objectives in a sustainable manner. The sectors and priorities chosen have
potential to support the catalytic effect and additional EU support. Where
linkages between sectors exist, these will be explored in order to ensure that
assistance provided is mutually reinforcing. This is especially the case where
there is strong ownership and political commitments for the reforms on the
Turkish side and comprehensive sector strategies either exist or are under way.
EU assistance will provide value added and often kick start important reform
processes that will continue in a sustainable manner beyond the duration of the
EU programmes.

The MIPD was drafted by the Commission based on input from sectoral working
groups in Turkey. National consultation meetings took place in Ankara on 24 and 25 November 2010 involving around 70 participants
from the public administration,
30 participants from the Embassies of Member States, IFIs, bilateral and
international organisations and civil society organisations. These constructive
discussions were much appreciated by all stakeholders and increased ownership
of Turkish authorities in the programming of EU funds.

 Based on the Commission’s own assessment
of past performance and recent audits and evaluations[50] the following lessons learnt
have been taken on board while drafting in order improve the financial
assistance:

Ø
Given the often insufficient
strategic underpinning of assistance provided, the new MIPD for 2011-2013 aims
to be a step in the direction of establishing a more strategic and focussed
programming framework for IPA in particular through the introduction of
sectors. A review of the sectoral definitions under IPA Component I aim to
ensure a higher degree of consistency and clearer links between the MIPD,
annual programmes and monitoring committees.

Ø
Although projects in the past have generally
achieved their intended outputs and results were likely to be sustainable, the
results and impact of assistance has not always been measurable. Further
efforts are therefore made in the programme and project design to have
measurable objectives and results and adequate indicators.

Ø
Extended use of the twinning instrument is also
envisaged to improve the relationship between Turkish ministries and their
counterparts in EU Member States and to make full use of the potential gains
from exchange of know-how between the Member States and Turkey on the implementation of the acquis.

Ø
Within the field of civil society efforts are
focused on bringing together key organisations in order to develop a clear
strategy for the development of civil society and to maximize the contribution
which civil society can make to Turkey’s preparations for EU membership.

Ø
Considering the need for enhanced donor
coordination, under the lead of the EU Delegation in Turkey, EU member states,
IFIs and other international and bilateral donors have accepted a
systematically enlarged coordination at the level of all relevant actors
engaged in Turkey in financial and technical cooperation. These efforts reflect
the principles of aid effectiveness laid down in the Paris and Accra summits.

Ø
The evaluation report on Gender Equality in Turkey,
which was financed by the Commission, emphasised the need to systematically
carry out gender mainstreaming within the IPA structures, while the thematic
report focusing political criteria highlighted the need for priority indicators
- particularly in the field of gender equality - to ensure sufficient
prioritisation between projects

The
recommendations of the evaluations which have been finalised during 2010
concerning strategic planning have been taken into account in the new 2011-2013
MIPD i.e.  the Country Programme Interim Evaluation of EU pre-accession
assistance to Turkey, concluded that MIPD should be a real multi-annual
strategic document used by all stakeholders as the main reference of EU
pre-accession assistance. The evaluation on Stakeholder Participation in
Programming and Implementation of Pre-Accession Assistance to Turkey
concluded that the strategic approach of stakeholder involvement should be
reinforced and linkages with the new sectoral strategies being put in place.

As concerns a
three-year planning period, considering the dynamic nature of accession
negotiations and EU Turkey relations, although a longer term planning period is
desirable a three year review is adequate for the planning of assistance.
Planning needs to continue to be based on the pace of negotiations, Accession
Partnership and NPAA (National Programme for the Adoption of the acquis)
and updates are required in line with the changes of these basic documents and
in accordance with the development of the acquis. It is also strongly
encouraged to increase freedom to frontload or backload spending within this
multi annual envelop in order to better adapt to political circumstances such
as political elections, slow negotiation and absorption of funds.

Table 1: MIFF[51]
allocations per component, in million EUR

Component || 2010 || 2011 || 2012 || 2010-2012

I – Transition Assistance and Institution Building || 211.31 || 228.62 || 233.90 || 673.83

II – Cross-border cooperation || 9.59 || 9.78 || 9.97 || 29.45

III – Regional Development || 238.10 || 293.40 || 367.81 || 899.31

IV – Human Resources Development || 63.40 || 77.60 || 89.93 || 230.93

V – Rural Development || 131.30 || 172.50 || 197.89 || 501.69

TOTAL || 653.70 || 781.90 || 899.50 || 2335.10

9.2.2.
Programming exercise
9.2.2.1.
Component I

The 2010 programming exercise under
Component I started in 2009 and was completed in May 2010 when the selection of
the projects to be supported was finalised. The programme was presented on 27
September 2010 by the Commission to the IPA Management Committee who gave its
approval. After its adoption on 23 November, the first Financing Agreement was
signed on 17 December 2010.

The 2010 National Programme for Turkey under component I included 33 projects selected in line with the priorities
identified in the 2009-2011 MIPD. The projects have been selected after
analysis of the Turkish authorities and consultation with the Commission,
according to the priorities identified in the Accession Partnership, the
screening process and ongoing negotiations in the different chapters of the acquis.

The distribution within IPA 2010 Component
I by priority axis was the following: 14.92 % Political criteria, 46.54 % acquis
harmonisation, 35.46 % Civil Society Dialogue, and 3.08 % Supporting
Activities.

As part of the programming process, only
projects that have achieved sufficient readiness for implementation have been
accepted. Efforts were made to better focus projects on the political
priorities of the accession process as well as on aligning them with sector
priorities and putting them in a longer term perspective.

Under the 2010 programme
there were 13 projects which focus on judicial reform, support to law
enforcements services and human rights, being fundamental for Turkey's political reform process. Strong emphasis was given on promoting women's and children's
rights: for example the projects 'Support to the Local Human Rights Boards and Women’s Rights
Awareness' (EU contribution EUR 2.3 million and 
'Prevention of Domestic Violence against Women' (EU contribution EUR
2.8 million) aims at improving human rights violation complaints and
investigation mechanisms and to raise awareness among the society on human
rights, with a special focus on women’s participation in social, economic and
cultural life as well as to prevent domestic violence and enhance human rights
for women. The project 'Improved Relations between
Mass Media and Judiciary' aims at supporting the setting up of a
spokesperson system for the judiciary, which should increase transparency and
communication on judicial cases. Moreover, the project should result in
improved relations between the independent media and judiciary in terms of
protecting fundamental rights and freedom of expression (EU contribution EUR
1.6 million).  Implementation of these projects is expected to start in 2012.

The 2010 National Programme also addressed the
need for continuation of the EU-Turkey civil society dialogue (CSD), i.e. the 2010 project
Civil Society Dialogue between
the EU and Turkey-III was built
on two previous projects: the 2006 project Promotion of Civil Society Dialogue between the European Union and
Turkey and the 2007 project “Promotion of the Civil Society
Dialogue between European Union and Turkey-II”. The 2006 project encompassed
four grant schemes amounting to EUR 19,3 million. The aim was to establish a
framework for cooperation, support the establishment of partnerships, and
promote dialogue between the following categories of Turkish and EU
counterparts. The follow up, project in 2007 covers three grant schemes
amounting to EUR 4.2 million and aims, like its precursor at establishing a
framework for cooperation, supporting the establishment of partnerships and
promoting dialogue between the civil societies of Turkish and EU counterparts.

The EUR 9.6 million
project included in the 2010 programme will build on the 2006 and 2007 projects
under CSD. It aims to establish strong
links and a high level of cooperation between civil society in Turkey and the
EU Member States through a concrete civil society dialogue on the themes of
“political criteria" (40 grants), “media" (20 grants) and “EU
policy" (40 grants).

All three civil society
dialogue projects have contributed to the exchange of opinions, to sharing
experiences and best practice from the EU and candidate countries and to
discussing perceptions of culture and values. The overarching goal of the
projects was to encourage an effective civil society and its participation in
the political, cultural and economic development of Turkey.

There is continuous information exchange between
the EU Delegation in Ankara and donor organizations working in Turkey with a view to avoid duplication of financial assistance and support complementary
actions where appropriate. During 2010 the Commission and the EU Delegation in Ankara conducted several coordination meetings on the coordination of financial
cooperation in Turkey with other donors.

The EU Delegation's
proposal for a systematically enlarged coordination at the level of all
relevant actors engaged in Turkey in financial and technical cooperation was
accepted by EU member states and the coordination group was extended to include
different IFIs (World Bank, AFD, EIB, KFW, JICA, IDB), UN agencies and other
bilateral actors such as USA and Canada, beside the IMF. So as to exchange
information on sectoral issues and financial cooperation the following thematic
working groups were established : 1) Governance, Democracy and Human
Rights; 2) Migration; 3) Economic governance; 4) Regional development
(including private sector and rural development); 5) Employment and social
policies; 6) Environment, energy and sustainable development; 7) Transport.
Alongside working group meeting the EU Delegation continued to hold ad hoc
bilateral meetings with representatives of the Member States, IFIs and
international organisations on the coordination of assistance in specific
areas.

A
joint European Commission and World Bank coordination meeting was also
organised in Brussels on 7 December, following the 2010 IPA conference, to
discuss opportunities to strengthen operational coordination between the two
institutions.
The meeting intended to strengthen the impact and sustainability of respective
financial and technical programs with Turkey by exchanging views on economic,
social and administrative challenges and opportunities for Turkey in relation to its EU accession process; sharing information on existing programs and
exploring concrete opportunities for collaboration. The Commission and the
World Bank agreed that the dialogue and exchange of information on ongoing and
planned assistance for Turkey will be enhanced. Energy, Environment, Skills,
Competitiveness, Public Administration Reform and Food Safety have been
identified by both partners as potential priorities for increasing
collaboration and impact. The Commission and the World Bank are determined to coordinate
their future strategies and their implementation (CPS and MIPD) in order to
explore further areas where synergy and value added can be found through a
joint approach. Where possible, in such areas the Turkish authorities will be
approached in a coordinated manner by the two institutions.

The 2011 Programming under IPA
component I has been already well advanced and a first part of the programme
(consisting of the deferred 2010 projects) was finalised by the end of 2010. As
concerns the second package for the 2011 programme the project proposals have
been assessed by the Commission by the end of 2010. The second part of 2011
programme should be presented at the IPA Committee meeting in September

The National
Programme 2011 part I was drafted in the end of 2010 taking into account the
new MIPD 2011-2013 sectoral approach and consists of three sectors: Justice,
Home Affairs and Fundamental Rights, Social Development and Transport.

Table 2:
Indicative financial allocations for the year 2010 per component, in million
EUR

TURKEY || 2010

I. Transition Assistance and Institution Building || 217.81[52]

Of which: ||

                                                                                  National Programme  || 217.81

II. Cross-Border Cooperation || 3.09[53]

Of which:                    ||

                                                              CBC Turkey– Bulgaria || 2.09

Turkey's participation in the ENPI Black Sea basin programme 2010 || 1.00

III. Regional Development || 238.10

Of which: ||

Environment || 95.24

Transport || 71.43

Regional Competitiveness || 71.43

IV. Human Resources Development || 63.40

HRD OP Turkey || 63.40

V. Rural Development || 131.30

TOTAL || 653.70

Table 3: Indicative financial
allocations for the year 2010 under the National Programme, per priority axis
and per project, in million EUR

Priority Axis/Projects || Budget

Priority 1 Political Criteria || 32.50

Public Administration Reform || 2.33

|| Improved Strategic Management Capacity || 2.33

Human Rights/Women, rights || 8.28

|| Support to the Local Human Rights Boards and Women’s Rights Awareness || 2.25

|| Prevention of Domestic Violence against Women || 2.79

|| Promoting Gender Equality in Education || 3.24

Children's rights and social inclusion || 11.00

|| Increasing Primary School Attendance Rate of Children || 2.88

|| Supporting Social Inclusion through Sports Education || 2.07

|| Fight Against Violence Towards Children || 2.70

|| Justice for Children || 3.35

Judiciary || 10.91

|| Towards an effective and professional Justice Academy || 1.94

|| Improvement of Enforcement Services in Prisons || 4.97

|| Strengthening witness protection capacities || 0.95

|| Improved Relations Between Mass Media and Judiciary || 1.62

|| Improved Court Expert System || 1.43

Priority 2: Adoption and implementation of the acquis communautaire || 46.54

Free movement of goods || 4.10

|| Strengthened Market Surveillance System For ICT sector || 2.50

|| Improving chemical and ionising radiation metrology II || 1.60

Information Society/Competition || 0.90

|| Prevention of anti-competitive behaviors in the electronic communications sector || 0.90

Agriculture and Food Safety || 73.76

|| Digitisation of Land Parcel Identification System || 39.27

|| Oral Vaccination Against Rabies || 1.87

|| Control of Foot and Mouth Disease- Phase 2 || 32.62

Transport and energy || 4.11

|| Improved Maritime Education and Training || 1.24

|| Control of Ship-Sourced Emissions || 1.52

|| Harmonization of Transmission System for Electricity || 1.35

Justice Freedom Security – Migration/Asylum || 9.78

|| Establishment of Reception and Removal Centers – phase II || 9.78

Environment || 5.98

|| Alignment in Bathing Water Monitoring || 1.43

|| Implementation of by-law on Strategic Environmental Assessment || 1.04

|| Implementation of Persistent Organic Pollutants Regulation || 0.90

|| Better Air Quality By Transposing The Large Combustion Plant Directive || 0/90

|| Capacity Building to implement the Flood Directive || 1/71

Public health || 2/25

|| Recruitment of Future Blood Donors || 2.25

Customs || 0/51

|| Modernisation of the Turkish Customs Administration VII || 0/51

Priority 3: Promotion of an EU-Turkey Civil Society Dialogue || 35.46

|| Civil Society Dialogue III || 9.63

|| Turkey's Participation in Union Programmes and Agencies || 67.61

Priority 4: Support Activities || 6.71

|| Support Activities to Strengthen the European Integration Process || 6.71

TOTAL || 217.81

9.2.2.2.
Component II

On 4 November
2010 the Commission adopted a fourth annual programme on financing the
participation of Turkey in the ENPI Black Sea Basin programme[54], worth EUR 1 million. The multi-annual
Black Sea basin programme (2007-2013) aims at supporting stronger and
sustainable economic and social development of the regions of the Black Sea basin and enhanced mutual understanding through cross-border partnerships.

9.2.2.3.
Components III-V

Component III
and Component IV programmes were adopted in 2007 and 2008 covering 7 years programming
period.

As concern revision of environment,
regional competitiveness and transport operational programmes (OPs) under IPA component
III, the modifications concerned mainly the financial tables, indicators and
increased IPA contribution rate[55],
thus the revisions did not imply changes in the strategy and priorities. In
June 2010 all 3 programmes were extended and modified in order to adjust the
strategy where necessary and to cover additional budget years within the
current financial perspective.[56]
For all 3 programmes the respective modified Financing Agreements were signed
on 11 November 2010 and on 14 December 2010.

As concern revision of Human Resources Development (HRD) OP under IPA component IV
it was revised in order to include financial allocations for the years 2010 and
2011, increasing the overall total of IPA component IV contribution to EUR 299.7
million for the period 2007 - 2011. The related result and output indicators
were adapted accordingly. In addition,
the geographic concentration principle is softened to allow for some financial
support (up to 20-25% of total HRD OP funding) to be provided to the Turkish
regions with a GDP above 75% of the national average. The approach will allow
the spread of best practices and the use of Community rules beyond the 12 NUTS
II regions in the East of Turkey. The priorities and measures remain the same.
A specific donor coordination meeting was organised in June 2010 with the participation of the World Bank,
International Labour Organisation and several EU member states.

As regards Component V, the IPA rural development (IPARD) programme
for 2007-2013 was modified a third time in 2010. Modifications were required to
take account of changes required by the conferral exercise which the Commission
is expected to adopt in the first half of 2011, and the modifications were approved
by the Sectoral Monitoring Committee. The programme amendments mainly concerned
the fine-tuning of the definition of eligibility conditions, beneficiaries, the
requirements for the implementation of EU standards as well as the geographic
scope. In order to avoid overlap and develop synergies regarding support for
rural development related activities under IPA component V, a donor
coordination working group has been set up in 2008 with AGRI, the EUD, World
Bank, FAO and UNDP as main participants. As a result of this, World Bank has intensified
its support for rural development capacity building before conferral of
management. Moreover, during 2010 it was agreed that the World Bank would
support an assessment of food processing enterprises with regard to upgrading
to EU standards to prepare for the related investments under the component V of
IPA.

9.3.
Implementation of assistance
9.3.1.
IPA
9.3.1.1.
 Success stories

Several twinning projects under IPA fund
have been successfully completed and showed to have significant impact, as was
described in the IPA Report 2009. The following three projects are currently
being under implementation:

EU support for the
empowerment of women’s NGOs (IPA Component
I 2007, EUR 2 million)

The EU has financed
several projects related to the protection of women’s rights and the
empowerment of women’s NGOs in Turkey. One of these EU-funded projects was the Empowerment
of Women and Women’s NGOs in the Least Developed Regions of Turkey.

The project is still
under implementation phase and aims to upgrade women’s social, political and
economic status in the least developed regions of Turkey, taking into account
the need for reducing regional disparities. The target groups of the project
include the GAP Regional Development Administration, women and youth NGOs.

Local Support Centres for Women are focal
points of the project. The executive centre of the project is located in
Şanlıurfa, but there are also local support centres in Trabzon and Van. ‘Social
project experts’ are employed in local centres in Van and Trabzon as
representatives of the GAP Regional Administration.

Women’s NGOs that are organised on a local
basis meet each other a these centres to discuss problem areas and solutions
supported by experts.

EU-Turkey Civil Society Dialogue – Cultural Bridges (IPA Component I
2007, EUR 6.6 million)

The project is currently under implementation
and aims to combat prejudices in Turkish and European societies through
cultural exchanges and by building lasting dialogue between cultural actors and
civil society through partnerships. The programme brings Turkey and the EU closer together through the themes of contemporary arts and culture.

Consisting of four ongoing projects ("On
the road", "kaladeiscoeurope", "My city",
"Digital Bridges") undertaken by the cultural institutes of the EU
Member States in Turkey, the programme brings societies together through
hundreds of arts and culture events. 18 countries, including Turkey, participate in the programme’s highly visible multi-national and multi-cultural events
across various cultural themes. Hundreds of activities are bringing thousands
of artists together take place both in Turkey and EU countries. The programme
also contributed to the European Capital of Culture 2010 events, which took
place over the same period. Cultural Bridges covers all the fields of the contemporary arts (music, performing arts, visual arts)
and literature.

Participant testimonials' well underline the positive impact of the
projects implemented under the "Cultural Bridges" project, describing
it as “a courageous and passionate project that goes
beyond previous projects, showing its difference through innovation and
creativity” and “Culture is a significant dimension in Turkey’s EU accession process. The perceptions of both sides need to be altered by demonstrating the
similarities in their cultures. For this reason, the project aims to establish
bridges between Europe and Turkey and try to persuade those who don’t believe
that Turkey is a part of the European family. Against this background, the
artists from the many EU countries participating in this project are building
intercultural bridges. I believe that future generations will communicate more
easily with each other thanks to the project and that we can overcome all
barriers through culture.”

Continuation of the Jean Monnet
Scholarship Programme for post-graduates in Turkey (IPA 2007 Component I, EUR 6.980
millions)

The Jean Monnet Scholarship Programme was
introduced in 1989 to generate solid support for Turkey in its efforts towards
accession to the European Union. Since then, the JMSP has been running
successfully as one of Turkey’s most long established and prestigious
scholarships.

Since its inception, roughly EUR 27 million
have been spent for the programme enabling approximately 1,112 civil servants,
new graduates, as well as private sector employees to acquire new knowledge and
skills related to EU accession.  It has included two phases through which 931
young people completed their postgraduate studies. The programme is currently
running in its third phase having supported 281 scholarship holders between
2007 and 2010.

By offering bright young people an
opportunity to carry out post-graduate studies in EU member countries, the
programme spearheaded a very significant human resources development in the
disciplines related to the EU acquis. It has done so by contributing to the
professional and personal development of the scholarship holders in general,
and by broadening their perspective and perception of the European integration
process in particular. It has also provided opportunities for cultural exchange
and networking between promising young Turkish professionals and young
professionals in their programs of study from other EU member states. As a
result, the first generation of scholars are in decision-making positions.
These scholars are leading EU relations in the public sector, conducting
research, teaching EU-related subjects in the universities and playing a key
role in expanding economic growth in the Turkish private sector. Studies show
that even after their return, scholars maintain a network with their friends
and colleagues in the EU. In other words, the Jean Monnet Scholarship Programme
also contributes to the development of a people-to-people dialogue between Turkey and the European Union. This dialogue is essential to generate mutual knowledge and
understanding between civil societies in Turkey and EU Member States, to dispel
ignorance, mutual prejudices and fears.

In addition to the effectiveness of the
programme in achieving objectives and purpose and its impact on administrative
capacity in Turkey, the overall assessment of the scholarship holders of the
Programme is very positive.

Under IPA component III
and IV a high number of relevant projects have been approved in 2010. Even if
their implementation did not start yet, their approval can be considered as a success
as a good project pipeline is an important premise for a full absorption of
funds and a positive step to reach the purpose to
prepare Turkey for the management of the Structural Funds.

An important achievement under the environment
operational programme (IPA component III) is an impressive IPA Major Project
pipeline put in place by the operational structure (Ministry of Environment and
Forestry). At the end of 2010 the Commission in total had received 29
applications for this programme with an estimated total
eligible public expenditure value of over EUR 700 million. In parallel, work continued on the preparation
of new IPA projects to further strengthen the pipeline. The existence of a long list of available projects ready to be
implemented is the first precondition for the successful implementation of a
programme, however real absorption
will largely depend on the progress with the tendering and contracting.

Under the regional competitiveness operational programme the Greater Anatolia Guarantee Facility (EUR 500 millions) was
approved by the Commission in 2010, less than a year after its submission showing
the operation's high contribution to the global purpose of this IPA programme.
This financial engineering project is an important step for the efficient
implementation of IPA funds under component III and has been prepared by
Ministry of Trade and Industry with the participation of the European
Investment Fund and the Commission. The cooperative spirit of all stakeholders during
the preparation phase was an important factor behind the success. The facility
will support Turkish Small and Medium size enterprises (SMEs) with micro-loans
and loan counter-guarantees in regions where this type of support was never
available before. This required the participation of selected banks that
currently are finalising their contributions. The initial performance of the
project is promising but the impact is yet to be proven.

A couple of examples of selected projects
under the IPA component IV call for proposals in the vocational
education and training (VET) field that were contracted
in 2010, and now are about to start off the ground:

The Promoting Registered Employment project
(EUR 109.962) aims at establishing an active employment strategy
by involving all parties concerned, which will contribute to human resource
development in Çorum through promoting integrated vocational training. It will
also provide training and other services to meet the local labour demand with a
view to increasing transition from unregistered to registered employment under
the leadership of social partners. The project is expected to lead to increased
awareness about the importance of the problem of unregistered employment in
public; to reinforce social dialogue, consolidating cooperation amongst social
partners and other relevant institutions; to raise social responsibility
awareness of employers regarding unregistered employment.

The Supply of Qualified Workforce in the
Knitting Sector project (EUR 66.456) aims to
provide qualified labour force for the enterprises registered with the Chamber
of Craftsmen and Artisans in Bingöl through training activities in line with
the current needs of the labour market as well as of the unemployed. Thirty
women who are registered to Turkish Employment Organisation in Bingöl are
targeted to be trained in textile overlocking, machine sewing, and computer design
draughtsmanship.

9.3.1.2.
Overview of IPA implementation in 2010

Component I: Transition Assistance and Institution Building

Table 4: Status of implementation of IPA financial assistance
(Component I) as at 31st December 2010 (in million EUR) per annual programme

|| Committed || Contracted || %Contracted || Paid || % Paid

IPA 2007 || 256.20 || 152.79 || 59.64% || 94.76 || 36.99%

IPA 2008 || 256.13 || 118.21 || 46.15% || 83.29 || 32.52%

IPA 2009 || 204.55 || 0 || 0% || 0 || 0%

IPA 2010 || 217.81 || 0 || 0% || 0 || 0%

TOTAL || 934.63 || 271.00 || 28.99% || 178.05 || 19.05%

Table 5: Distribution of total committed funds (2007-2010
allocations) by priority axes

Priority Axes || % of 2007-2010 allocations

Political criteria || 12,46%

Civil Society dialogue || 38,15%

Ability to assume membership obligations || 47,38%

Support programmes || 2,02%

TOTAL || 100%

EU assistance implementation under
component I has significantly improved during the year in review and Turkey is
positively making up for the  back-log created in the initial years of IPA, and
contracting of IPA 2007, 2008 and 2009 is ongoing under component I. However
the payments of the IPA programmes still remain low. This is due to the fact
that they are lagging behind contracting and the final payments are only made
on average several months after contracts are fully implemented. As concerns
the 2007 programme, more than 90% of National Programme 2007 has been
contracted by the end of 2010, excluding the projects for which the contracting
deadline has been extended by 6 to 12 months. The 2008 Financing Agreement has
been amended in 2010 in order to extend the final contracting deadline by 7
months (October 2011). The 2009 National Programme was split into two parts.
Both Financing Agreements have been concluded by the end of 2010.

A first Financing Agreement  for the
National Programme for Turkey under IPA Component I 2010, covering Turkey's
participation in Union Programmes and Agencies, has been signed in December
2010. A second Financing Agreement covers the remaining 30 projects to be
implemented through decentralised management.

The Twinning and Taiex instruments have
successfully been used to develop capacities of Turkish Institutions. Turkey was
encouraged to use twinning as standard tool for public sector cooperation,
rather than direct grants to international organisations. The 2010 programme
included 10 twinning projects for
justice sector training, prison
reform, witness protection, judiciary-media relations, capacity building for
court experts, ICT market surveillance, maritime safety, reducing ship
emissions, improving water quality and reducing by EUR
11.79 million the 2007-2009 National Programme.  For TAIEX, 234 study visits,
experts missions and workshops took place in Turkey in 2010, the biggest number
of events in the field of international market (90) and justice and home affairs
(54).

Ten twinning contracts for projects under
the national programmes 2007 and 2008 were signed in 2010 of a total amount of
EUR 11.79 million. These projects is expected to contribute to significant
impact in the related fields, such as establishing systems for management of
asylum seekers and irregular migration, integrated border management, training
of the Turkish police, gender equality and acquis alignment in the environment
field.

Component II: Cross-border Cooperation

Tables 6: Status of implementation of IPA financial assistance
(Component II) as at 31st December 2010 (in
million EUR)[57]

|| Committed || Paid || % Paid

IPA 2007-2010 || 11.11 || 2.55 || 22.95%

Out
of which, the breakdown for Turkey's participation in the ENPI Black Sea Basin programme is:

|| Committed || Contracted || % Contracted || Paid || % Paid

IPA 2007 || 1.00 || 0.06 || 6% || 0.04 || 4%

IPA 2008 || 1.00 || 0.00 || 0% || 0.00 || 0%

IPA 2009 || 1.00 || 0.00 || 0% || 0.00 || 0%

IPA 2010 || 1.00 || 0.00 || 0% || 0.00 || 0%

TOTAL || 4.00 || 0.06 || 1.5% || 0.04 || 1%

 Table 7: Distribution of total
committed funds (2007-2010 allocations) by priority axes

Priority Axes || % of 2007-2010 allocations

CBC with Bulgaria || 64%

Participation ENPI Black Sea basin programme || 36 %

TOTAL || 100%

In 2010 the implementation of the ENPI
programme for the Black Sea basin was on-going. The first call for proposals that
was launched in 2009 materialised in the first grant contracts with Turkish
partners being singed by the end of 2010. The second call for proposals is
planned to be launched in early 2011.

As concerns the implementation of the Turkey-Bulgaria CBC programme
the first call for proposals has been organised and by the end of 2010 the
evaluation process was still ongoing.

In 2010, the hand over process as concerns the National
Authority in charge of coordinating Turkey's participation in the IPA
cross-border programmes has been initiated, i.e. the Turkish Cooperation
and Development Agency (TIKA) has been replaced by
the Secretariat General for European Union Affairs (EUSG). In practice, this new
impetus has changed the face of the cross border programme in a very positive
manner and Turkey showed a pro-active attitude. As concerns the Turkey - Bulgaria programme, cooperated went smoothly in 2010 and the delay accumulated during
previous years was made up for and implementation is now well underway.

Component III

Table 8: Status of implementation of IPA financial assistance
(Component III) as at 31st December 2010 (in
million EUR)

|| Committed || Paid || % Paid

IPA 2007-2010 || 762.10 || 213.32 || 28.00

Table 9: Distribution of total committed funds (2007-2010
allocations) by priority axes

Priority Axes || % of 2007-2009 allocations

Transport || 34,29%

Environment || 38,95%

Regional Competitiveness || 26,76%

TOTAL || 100%

The implementation of the operational programmes (OPs)
under component III could start only following the conferral of management
powers and signature of the Financing Agreements (autumn 2009) therefore the
year 2010 was only the second year of implementation. Project preparations have
been ongoing since the adoption of the programmes but although significant
progress had been made in the preparation of project pipelines for the three
programmes nevertheless at the end of 2009 the preparation and publication of
tender documents was still limited, a most critical stage for the implementation
of projects and absorption of funds. Accordingly, 2010 was an important year to
catch up for the delays occurred in 2008 and 2009.

Under the environment OP Turkey submitted 9 new major
project (MP) applications and 10 revised MP applications in 2010. The
Commission approved one MP through a formal decision. This OP has a long list
of project applications awaiting approval amounting to more than EUR 600 million
while the available funds for 2007-2011 are only EUR 416 million. As regards
the transport OP one of the four major projects approved in 2009 was suspended
in 2010 and two appraised projects (one rail and one port project) were
withdrawn by Turkey. One MP was adopted in 2010. For the regional
competitiveness OP one MP was
appraised by the Commission, however, formal approval
was still outstanding at the end of 2010.

Component IV

Table 10: Status of implementation of IPA financial assistance
(Component IV) as at 31st December 2010 (in
million EUR)

|| Committed || Paid || % Paid

IPA 2007-2010 || 222.10 || 48.08 || 21.65

Table 11: Distribution of total committed funds (2007-2010
allocations) by priority axes

Priority Axes || % of 2007-2009 allocations

Employment || 46.75%

Social inclusion || 14.29%

Human capital and employability || 30.86%

Technical assistance || 8.10%

TOTAL || 100%

The Ministry of Labour
and Social Security, appointed as the operating structure for the HRD OP,
launched the first operations in 2009. The evaluation of the first five calls
for proposals published in 2009 was concluded in 2010. Around 450 project proposals were selected for IPA component
IV co-financing. The related contracts were concluded between May and December
2010, amounting to approximately EUR 80 million of IPA contribution. Although
progress was achieved in the signature of contracts, it was not possible to
avoid the application of the automatic de-commitment rule[58] by the end of 2010 for the first time. As a
consequence an amount of EUR 198,000 had to be de-committed.

Component V

Table 12: Status of implementation of IPA financial assistance
(Component V) as at 31st December 2010 (in
million EUR)

|| Committed ||  Paid || % Paid

IPA 2007-2010 || 290.50 || 0 || 0

Table 13: Distribution of total committed funds (2007-2010
allocations) by priority axes

Priority Axes || % of 2007-2010 allocations

Axis 1 - Market efficiency and EU standards || 71 %

Axis 2 – Preparation for agri-environmental measures and Leader || 3 %

Axis 3 - Development of the rural economy || 24 %

Technical assistance || 2 %

TOTAL || 100%

Programme implementation under component V
could not start in 2010 due to the delays regarding the finalisation of the
legal framework including the preparatory national legislation and the
signature and conclusion of the Sectoral Agreement (EU-Turkey agreement laying
down the EU rules for decentralised implementation of funds without ex-ante
controls) as well as the national accreditation of the Component V
implementation system by the Turkish authorities. Delays were mainly due to the
lengthy process of setting-up and staffing the IPA rural development (IPARD) entities,
drafting and setting-up the legal framework and in relation, the very complex
and extensive adoption process of the legislation and the IPARD related
regulations. Furthermore, Turkey opted for an ambitious and complex rural
development programme featuring not only many measures and sub-measures, but
also a wide geographical scope leading to a high degree of decentralisation of
the IPARD agency's controls to provincial level necessitating in turn a high
number of provincial co-ordination units.

However, it has to be
noted that during 2010 important progress has been achieved with the signature
and conclusion of the Sectoral Agreement which entered into force on 27 July
2010 and thus constitutes the specific legal basis for the implementation of
component V in Turkey.

9.3.1.3.
Implementation Modalities and Structures

Progress has
been made concerning the conditions attached to the conferral of management
decisions under IPA component I. However, a number of outstanding
weaknesses remain in the management and control systems that have been
identified via monitoring and audit activities. These concern the national authorising officer (NAO)
supervision, monitoring by the national IPA coordinator (NIPAC) and payment
related issues. Further critical weaknesses also remain with the current
staffing of key decentralized management institutions, such as the Central
Finance and Contracts Unit (CFCU), compared to the workload faced by them and
in relation to delays in the implementation of the transition strategy. The
issues have been discussed at the monitoring committees to identify corrective
actions and national authorities have started to work on an action plan to
address these weaknesses. In the same time, significant steps have been made to
improve the staffing levels and capacity improvement of the IPA institutions
(in 2008, 161 people; in 2010, 296 people). However, further efforts need to be
made in this respect to address the existing gaps and to create adequate
capacity to absorb funds in a speedy manner.

For Component
II the management and control system for the Black Sea Basin programme is now in place with few weaknesses remaining, mainly related to the set-up of
the monitoring system. Open issues also remain in the process of setting up the
management and control structures for the cross-border cooperation programme
with Bulgaria.

For the
accreditation of the operating structures under component III and IV,
the Commission requested Turkey to meet a number of specific criteria before
the assigned Operating Structures[59]
would be allowed to take over the responsibility as contracting authorities for
their respective programmes. These criteria concern the establishment of the
legal base; developing staff planning, recruitment, training and appraisal
management; define procedures for procurement and grant calls and setting up
internal audit functions.

During a transition
period, planned to run from 2007 to 2010, the operating structures for
implementing the operational programme under Component III and IV delegated
certain functions related to the tendering and contracting of projects to the
CFCU to give them time to prepare for these tasks. However, in 2010, some
delays occurred, mainly due to the Ministries' slow acquisition of know how. As
a consequence, the transition period had to be extended into 2011, which has stretched the capacity of the system in terms of staffing in
tendering and monitoring, which is an important reason behind the delays
experienced in implementation.

Regarding
Component III, on 11 October 2010
the NAO notified the Commission about the accreditation of the Ministry of
Environment and Forestry (MoEF) for the tendering, contracting and financial
management functions to the environment programme as established criteria were
met. Following a Commission audit in the end of 2010, a
new conferral of management Commission decision was adopted on 20 January 2011 transferring
the functions of the contracting authority for the environment OP from the CFCU
to the MoEF.

The same process is expected to be followed
for the transport, regional competitiveness and human resources development OPs
in the course of 2011.

Concerning IPA component V, the accreditation package with
the request for conferral of management was submitted to the Commission in July
2010, thus starting the formal conferral of
management preparation process. Following the submission, Turkey was asked to prepare an action plan to remedy the major organisational and procedural
deficiencies and gaps identified either by the pre-accession external auditors
or by the Commission auditors. During the first Commission conferral mission
carried out in December 2010, it was noted that the working arrangements were
still undergoing significant corrections for all IPARD entities. The de-commitment
risk remained very high under IPA component V due to the delays in the
conferral of management process.

Turkey
officially submitted the first version of the roadmaps for decentralised
management without the ex-ante controls for IPA component I-IV at the end of
2009/beginning of 2010. The Commission provided comments and updated roadmaps
are expected in 2011.

As a summary; in 2010 the NAO, the National Fund
and the CFCU all made limited progress in establishing adequate procedures and
organisational structures as part of an improved supervision under the
decentralised management system. However, some weaknesses in the management and
control systems remained in 2010, in particular the level of staffing at the
CFCU.

9.3.1.4.
Monitoring

Overall monitoring by the Turkish institutions remained
weak in 2010. The practical
exercise of the NAO's supervision functions and the use of the available tools
indicate that there was a scope for improvement. Apart from some signs of
increased leadership, efforts were required especially to strengthen of overall
monitoring functions of the Secretariat General for EU Affairs (EUSG), CFCU and
Senior Programme Officers (SPO). The institutional capacity of the EUSG were
strengthened with the recruitment of 91 junior staff with 22 persons being
allocated to the Financial Cooperation Directorate, including the Director, 11
of which were designated with monitoring and evaluation function. In addition,
a contract for results oriented monitoring
(ROM) was signed at the end of December 2010 after considerable delays in the
tendering process. With the activities focusing of on the job training
opportunities for the junior staff members, the ROM contract was considered to
provide important assistance to the EUSG’s monitoring functions.

Turkey's institutions rely mainly on CFCU’s functions
for ensuring the proper management of project implementation and project
monitoring. The CFCU considerably strengthened its capacity in monitoring of
grant schemes and this was reflected in the workload assessment provided to the
Commission auditors in January 2010 whereas their monitoring capacity
concerning other types of procurement was not considered sufficient.

The IPA Monitoring Committee for all five
components took place on 29 June 2010 in Ankara discussing progress and challenges
in implementation. The main concern raised was the insufficient capacity of the
Turkish authorities to efficiently and effectively manage the IPA funds
currently under implementation in the 5 components. Following delays and
remaining weaknesses in all stages of the project management cycle, a
significant backlog in implementation exists. The Commission proposed a
comprehensive set of measures in order to avoid loss of funds in 2011. These
measures specifically address the need to improve forecasting, procurement
planning and contracting performance; to enhance monitoring trough the increase
of staff capacity and the involvement of a higher level of participation of all
stakeholder; addressing the remaining weakness in the management and control
system. Other concerns were raised over frequent turn over of staff in the
operating structures, the need to provide an update transition strategy and
updated roadmaps on further decentralisation, to improve the irregularity
reporting and follow up audit findings in a systematic way.

Two transition assistance and institutional
building (TAIB) sectoral monitoring committees were held on 7 February and on
29 June 2010 combined with the meetings concerning the programme financing
Turkey’s participation in the ENPI Black Sea basin programme under Component
II. The June Committee agreed that measures (as concerns system weakness,
improve procurement planning, budget execution) to improve the management of
funds should be taken as soon as possible in order to avoid loss of funds. The Commission requested the Turkish authorities to review
the existing monitoring system and to make a clear definition of the roles and
responsibilities in monitoring of each institution. Weaknesses needed to be addressed
at system, programme and project level, including the harmonisation of
Management Information System (MIS) and reporting systems.

No IPA Joint Monitoring Committee on
Bulgaria-Turkey IPA CBC Programme under Component II was held in 2010.

Regarding the ENPI Black Sea Basin programme, Turkey participated in two Joint Monitoring
Committees organised by the Joint Managing Authority (Romania) on the 28 June and the 3-4 November 2010. On these occasions the guidance and the evaluation process of the
first call for proposals were discussed in detail.

In 2010 two rounds of
sectoral monitoring committees for all three operational programmes under IPA component
III and one annual technical meeting took place. The
issues discussed concerned the programme modification and increase of the
co-financing ratio to 85 %, accreditation of the
Ministry of Environment and Forestry for the tendering, contracting and
financial management functions for environment programme, cooperation with the
CFCU and preparation for accreditation of the operating structures for the
transport and regional competitiveness programmes, project pipelines and
implementation progress for each of the programmes, including assessments of
progress with tendering.

The human resource
development (component IV) sectoral monitoring committees for Turkey were held on 24 June 2010 in Van and on 29 November 2010 in Hatay. Among other things the Committee was informed about the revision of
the operational programme and implementation issues, and activities regarding
the mid-term evaluation. It was also informed about the state of implementation
of ongoing operations, the identification of new operations implementing
the programme and the future actions to take place in 2011. In addition, information was provided on the
accreditation preparations for the conferral of finance and contracting
responsibilities from the CFCU to the Ministry of Labour and Social Security.

Rural development sectoral
committees (component V) were held on 6 May and 9 December 2010. The May
Committee approved a number of important programme modifications relating to
eligible beneficiaries, general eligibility conditions as well as the
geographic scope of the programme. A
number of actions to improve access to rural credits and to better involve
banks to ensure availability of sufficient co-financing for IPA rural
development funds were also discussed and approved. In the December meeting
additional programme amendments were adopted and the communication and publicity
action plan for 2011 as well as the technical assistance action plan in 2011
were debated and approved.

9.3.2.
Turkish Pre-Accession Instrument (TPA)
9.3.2.1.
 Sectors with positive results/ Success
stories

When
considering the value of EU funding to Turkey under the TPA, the introduction
of the decentralised implementation system (DIS) in Turkey was an important
milestone in the EU accession preparations. This allowed Turkey to be well placed to prepare for the conferral of management under IPA. Starting in 2002, the
DIS was subject to close monitoring by the Commission and regular improvements
were agreed with the Turkish authorities inter alia based on audits and
discussions at the biannual Joint Monitoring Committees. Staffing levels and
expertise in newly established institutions which are key for management of EU
funds, such as the Central Finance and Contracting Unit and the Secretariat
General for EU Affairs, were increasing over time. This was only possible
through the adoption of a number of legal amendments and with the help of technical
assistance, guidance by the EU Delegation to Turkey and the practical
experience gained through implementing EU projects in a wide range of areas.
The professionalism that was built up during the learning period under the
Turkish Pre-Accession instrument was one of the key reasons why the more
rigorous accreditation of the decentralised management system under IPA
subsequently could be completed in 2008. The existence of the CFCU allowed also
to immediately manage IPA component III and IV under decentralised management
during a transition period. In summary, the management of the TPA provided a
crucial learning period for Turkey on the way to the setting up of adequate
management and control systems for IPA.

Some selected
examples of successful projects funded under the Turkish
Pre-Accession Instrument:

Employment support from the EU (TPA 2006
EUR 20 million)

The ‘Active Labour
Market Measures II Project’, implemented with the EU’s financial support,
promoted the participation of unemployed women and young people in the labour
market by providing them with vocational training opportunities. The main
purpose was to improve the existing capacity to design, develop and implement
policies and programmes in order to contribute to human resource development
aligned with the European Employment Strategy in Turkey. The project was
finalised in April 2010.

To this end the project
assisted İŞKUR in delivering more efficient employment services by improving
its institutional capacity, and increased employability of people through 101
grant-projects carried out in 25 different cities. These projects reached approximately
11 000 unemployed women and young people. The participants received vocational
training aimed at increased participation in employment, plus advisory services
helping them find quality jobs corresponding to their skills and professional
background.

Small Enterprise Loan Program II (SELP
II) (TPA 2005 EUR 62.8 million)

Small and Medium size enterprises
(SMEs) represent more than 99% of all enterprises in Turkey, and are the
backbone of the economy with their flexible and dynamic structure; the employment
they generate; and the contribution they make to competition and growth.
However, the most crucial obstacle to the development of SMEs is access to
financing. Small enterprises in particular, i.e. those with less than 50
employees, find it difficult to access long-term financing as commercial banks
consider the risks too high. Existing loan facilities for small enterprises
struggle to meet demand.

In order to contribute
to the solution of this problem and to improve the financial environment for SMEs
in Turkey, the European Union has been supporting numerous initiatives since
2002; one of them being the Small Enterprise Loan Programme (SELP). As the
first loan programme for small enterprises in Turkey, it fills an important gap
by providing enterprises’ access to financing in addition to improving the
lending services of banks to small enterprises. In the first phase of the
programme in 2002-2008 which covered an EU support of EUR 20 million, loans of
more than EUR 36 million were made available to small enterprises. Following
the successful completion of the first phase, SELP-II (funded under the TPA
programme in 2005) was launched in 2008 and will run until November 2012.

SELP II encompasses all of the 49 provinces
falling under the scope of Code No: 5084 on promotion of investments and
employment, and has created a funding opportunity of nearly 5-fold of the first
phase with a sum of EUR 90 million. The programme offers working capital of up
to EUR 30 000 and an investment loan of up to EUR 50 000 to small enterprises.
Applications can be made via Akbank, Garanti Bank, T.İş Bank and Şekerbank in
the 49 provinces. Since the start of lending activities
in January 2009, a total of 12,632 loans worth EUR 127,339,807 have been
provided to small enterprises in Turkey. According to the statistical data
gathered from the on-lending banks, 11,291 new jobs were created and 34,346
jobs were secured as result of the SELP loans by the end of 2010.

Thanks to SELP-II
loans, many small enterprises have developed innovative project ideas. One of
them is Tokgün Ticaret which operates in Kars. The company partners
noticed that the agricultural machines they imported and sold were not suitable
for the land conditions of the region, and those that were convenient were too
costly for small land owners. They made use of a SELP-II loan to conduct Research
and Development with the objective of developing machines suited to the terrain
in the region. The company partners report that sales and turnover have
increased significantly and are encouraging other enterprises to apply for
loans.

Expansion of the European Turkish
Business Centers Network (ABIGEM) Project (TPA 2006, EUR 50 million)

The pioneering of the Union of Chambers
& Commodity Exchanges of Turkey (TOBB) in cooperation with the related
Chambers of Commerce and/or industry has resulted in the establishment of EU
Turkish business centers (ABİGEM) in 15 provinces all around Turkey since the year 2002. During the four-year period between 2002 and 2006, the first ABİGEMs, which
were established thanks to EU’s financial support in an effort to provide
services to SMEs, started operating in Gaziantep, İzmir and Kocaeli.

ABİGEMs provide professional training,
consultancy and information services in the regions where they are established
in order to help SMEs improve their competitiveness within the national and
international markets and increase SMEs’ contribution to both local and
national economies. The business centers also provide their regions with
services and products resulting from their “windows project” equipments. These
lasts, determined according to the specific needs of the region with the
contribution of major local stakeholders, include food laboratories, 3D design centers,
CNC milling machinery, cheese and apricot packaging vehicles, environment and
hybrid seed laboratories and non-destructive testing equipment.

Following the success of the first project,
it was agreed to expand the ABİGEM network to 15 by establishing a further 12 business
centers throughout Turkey. “The Expansion of the European Turkish Business
Centers Network” project funded under the 2006 programme to develop Business
Centers in Adana, Denizli, Eskişehir, Kayseri, Konya, Trabzon, Afyonkarahisar,
Çorum, Erzurum, Malatya, Trakya and Uşak. An ABİGEM coordination unit within
TOBB was also established. Due to the outstanding success of the first two
phases of the project, it has been decided that four more Business Centers are
to be established in the near future in Antakya, Batman, Sivas and Van.

One of the main results of the project is
to develop an efficiently working local consultants and experts pool in Turkey in order to improve the match between demand and supply. Although similar
consultancy and business development structures exist in the world, this is the
first time that such business centers have succeeded in achieving
self-sustainability without receiving any state support. In order to prevent
the ABİGEM experts becoming public officers and let them preserve their
consultant and entrepreneur spirit, ABİGEMs are established as non-profit joint
stock companies that are only supported during the project duration and that
are expected to ensure their continuity. Nevertheless the support of TOBB and
the Chambers of Trade and/or industry together with other stakeholders of
importance in the region considerably facilitates the realization of the social
and economical tasks of the ABİGEMs

Support to the Solution of Economic and
Social Integration Problems in Diyarbakir, Sanliurfa, Gaziantep and Erzurum as Major In-Migrant Destinations (IGEP) (TPA 2006, EUR 12.9
million)

The project focused on the enhancement of
the institutional capacity of four metropolitan municipalities to mitigate
problems arising from migration, as well as to assist with the rehabilitation
and reintegration of street children. The project was implemented between
December 2008 and May 2010. The project aimed to minimise urban disparities by
improving social and cultural facilities, building on the experience from a
previously EY funded project: Economic and Social Integration Project in
Major In-Migrant Destinations, implemented in Diyarbakir, Sanliurfa,
Gaziantep and Erzurum Municipalities.

The IGEP project had two main components:
capacity building and social services. Under the capacity building component,
needs analysis reports were prepared based on replies to 2300 surveys at
district level and face-to-face interviews with more than 250 institutions in
four cities. Based on these reports and with the support of more than 20
working groups, the municipalities prepared social mappings for identifying the
needs of each region. Strategic action plans and relevant operational
programmes were developed on the basis of all these practices.

The project responded to an urgency to ensure
the participation of the migrated population into urban life, and to reveal its
links with serious challenges such as alienation and discrimination. In the
context of this multidimensional struggle, an unprecedented coordination and
cooperation model was developed with the participation of civil society
organizations, public institutions, governorships, local administrations which
ensured cooperation between the local authorities. Consequently the project
developed an efficient model in the field of social policy and provided the
municipalities with the capacity of managing their social responsibilities through
a systematic approach. Within a relatively short period of 18 months, various
activities were conducted in an exhaustive and sustainable manner. In this way,
not only the objectives of the project were attained, but also the positive
impacts of the centres on children’s and young people’s behaviour and
expectations were seen to improve greatly. This impact became the most
important element of motivation for the municipalities in continuing their
activities after the completion of the project.

9.3.2.2.
Lessons learned

Please refer to section
"2.1 Multi-annual Indicative Planning Document" above as the experience from the Turkish
Pre-Accession has been critical in the Commission’s own
assessment of past performance and in improving IPA based on lessons learned.

9.3.2.3.
Management performance

2010 was mainly about finalising the formal
procedures related to the 2005 and 2006 projects funded under TPA; 446
decentralised contracts were closed and the Commission completed 74 recoveries
of a total amount of EUR 2.38 million.

Table 14: Status of financial assistance at the end of December 2010
(in million EUR) –TPA annual programmes

|| Allocated || Contracted || % Contracted || Paid || % Paid

TPA 2002 || 126.0 || 112.2 || 89.05% || 105 || 83.33%

TPA 2003 || 144.0 || 122.0 || 84.72% || 117 || 81.25%

TPA 2004 || 235.6 || 194.4 || 82.51% || 186 || 78.95%

TPA 2005 || 277.7 || 232.6 || 83.76% || 223 || 80.30%

TPA 2006 || 450.0 || 388.9 || 86.42% || 348 || 77.33%

Total || 1233.3 || 1050.1 || 85.15% || 979 || 79.38%

9.3.2.4.
Institutional building highlights

Prepared
in order to assist Turkey with its efforts in preventing corruption, the
EU-financed project Ethics
for the Prevention of Corruption in Turkey (TPA 2006, EUR 1.5
million) promoted democracy and the rule of law by strengthening and improving
ethics in preventing corruption in Turkey, in accordance with European and
international standards. The project was implemented by the
Council of Europe and consisted of activities in order to support the
implementation of the Regulation on Principles of Ethical Behaviour across the
public administration in line with GRECO recommendations, develop principles of ethical behaviour for other categories
of officials or holders of public office, create systems to monitor the
effectiveness of anti-corruption measures, ensure coordination of
anti-corruption measures.

Under the project the staff of the Council for Ethics in Public
Service was trained on various areas such as investigation of complaints and
application of principles of ethical behaviour. Thanks to the preparation of a
training, 110 officers from public administration received training on ethics
and subsequently becoming trainers themselves. Moreover, 10 academic studies on
topics such as "public bidding and ethics", "the shadow economy
and ethics", "ethics and the customs services" were carried out.
For instance the studies determined corruption risks related to unethical behaviour
and contributed to the development of new strategies on combating corruption by
filling the gap on the issue. Subsequently the Council of Ethics presented he
results of the studies followed by public debates.

Effective measures have been carried out to encourage the adoption
of a code of conduct in line with EU standards, such us the legislative ethics
and judicial ethics workshops on the needs and possibilities of developing
codes of conduct for elected office holders and the judiciary. The
effectiveness of codes of conduct and anti-corruption legislation in Turkey (criminal law measures, Public Information Act, Regulation on the Principles of
Ethical Behaviour etc.) was evaluated, specific anti-corruption measures were
proposed, national conferences on the prevention of corruption were organised,
and recommendations for future anti-corruption measures to promote ethics were
provided.

The
Chair of the Council for Ethics In Public Service) commented on the outcome of
the project: "one
of the most important aspects of our council’s work covers developing and
extending ethical culture in the public sphere. The project, which serves this
objective, is unique in Turkey in terms of its objectives and activities. The
academic studies, ethics leadership seminars, conferences on ethics and
combating corruption, and other efficient activities of the project, beyond
reaching the objectives, form a strong basis for future projects”

9.3.2.5.
Joint Monitoring Committees/Sector
Monitoring Sub-Committees

During the year
two Joint Monitoring Committee (JMC) meetings were organised in combination
with IPA Transition Assistance and Institution Building Monitoring Committees
on 7th of February and on 29th June
2010. The implementation and
programming of the financial assistance has been discussed in detail, including
specific risky projects, and how to sustain the impact of projects in a more
general way. Problems of sustainability persisted and
need to be addressed during programming, implementation and ultimately also
after project completion. The National Aid Coordinator, the Ministry for EU
Affairs, undertook to organise meetings to discuss how sustainability can be
underpinned and checked through ex-post monitoring.

10.
MULTI-BENEFICIARY
10.1.
Summary

Regional cooperation in South East Europe
has made important progress in recent years, in particular in the areas of
trade, energy and transport and cooperation in public administration reform.
However, more efforts are needed to improve the efficiency of regional
structures and initiatives and to overcome bilateral disputes and disagreements
which hinder the effective functioning of regional organisations.

Multiple challenges still lie ahead for the
Western Balkans to achieve the overall goal of membership. In particular,
political instability, the lack of progress in the fight against organised
crime and corruption as well as continuing investment shortfalls, mainly in
transport and energy infrastructure, remain major challenges.

In this light, during programming IPA
assistance for 2011- 2013 particular attention has been given to projects that
support the beneficiaries to overcome the economic and financial crisis and
prepare for sound recovery by frontloading financial support for priority
investments in infrastructure, in close coordination with International
Financial Institutions (IFIs), also by supporting regional initiatives.  Furthermore,
the areas of public administration, human rights and minorities, the rule
of law and the fight against organised crime and corruption as well as
education and environment have been selected as priorities for the next years.

10.2.
Strategic planning and programming
10.2.1.
Multi-annual Indicative Planning Document

The purpose of the Multi-Annual Indicative
Planning Document (MIPD) 2011-2013, prepared during 2010,  is to set out the EU's
priorities for multi-beneficiary assistance in the candidate countries and potential
candidates. Multi-beneficiary assistance is provided through component I of IPA
and is delivered through regional and horizontal projects.

Areas of intervention will only be
addressed through multi-beneficiary assistance where there is a clear need for
regional cooperation or horizontal action, for instance through tackling
cross-border problems or in obtaining efficiencies through establishing
harmonised approaches, leveraging established instruments or facilitating
networks of experts. In the period 2011-2013, funds available for this will
total around EUR 521 million for component I.

The strategic priorities of the MIPD draw
from needs identified in the European/ Accession Partnerships, as well as the
latest progress reports, included in the Enlargement Package. The beneficiaries,
local stakeholders such as the Regional Cooperation Council (RCC), civil society
organisations, EU Member States, other donors and international financial
institutions, as well as other Commission Services responsible for specific
sector policies have been consulted in the design of the MIPD.

The priorities selected for support under the
2011- 2013 multi-beneficiary MIPD are addressed under the following sectors:

1. Justice and Home Affairs, including fundamental rights and
vulnerable groups: focuses on the rule of law and
the fight against organised crime and corruption, respect of human rights and
protection of minorities.

2. Public Administration Reform:  the
overall objective in this area is to contribute towards upgrading the
operational capacities and professionalism of public administrations at
central, regional and down to local level, in the Western Balkans and Turkey,
as well as to promote regional cooperation through knowledge transfer,
networking and exchange of experience, by using existing instruments, in
particular SIGMA and ReSPA. The sector also includes support to statistics with
the aim to upgrade and strengthen the statistical systems of the Beneficiaries.

3. Support to Civil Society: here assistance
mainly supports the Civil Society Facility. Media freedom and freedom of
expression are also mentioned in this context.

4. Private Sector Development: support aims
to raise regional competitiveness, increase competence of human capital,
attract investment and provide financing to SME as well as help to establish a
business climate conducive to the development of SMEs and to facilitate trade.

5. Transport and Energy Infrastructure, including Nuclear Safety:  assistance in this sector will increase the access to finance for
investments in priority infrastructure projects, including investments in energy
efficiency and renewable energy which has emerged as a potential key driver of
recovery from the economic crisis and sustainable growth.

6. Environment and Climate Change: assistance
in this sector will focus on strengthening regional cooperation, mainly through
the Regional Environmental Network for Accession (RENA), in strategic planning
for environmental policy and investments, aligning with the EU acquis
and developing capacities in the area of disaster risk reduction and adaptation
to climate change.

7. Social Development:  includes the
programmes of Erasmus Mundus and Youth in Action as well as Tempus. In
addition, support will be provided to regional cooperation in cultural heritage
and reappraisal of history as a means of dialogue and reconciliation in the
Western Balkans.

The MIPD builds upon experience from
previous and existing EU financial assistance. Regarding the programming
process, experience has shown that regular and
timely communication to facilitate the
involvement of beneficiaries and improve ownership of the programmes is of
paramount importance. Consequently, detailed programme plans, including
timelines and draft documents for comments, have been distributed to IPA beneficiaries.
Multi-beneficiary coordination meetings take place regularly throughout the
year and allow for discussion on the status of current and future programming
as well as project implementation.

Table 1: MIFF[60]
allocations per component, in million EUR

Component || 2010 || 2011 || 2012 || 2010-2012

I – Transition Assistance and Institution Building || 138.97 || 173.46 || 168.86 || 481.29

II – Cross-border co-operation || 4.92 || 5.29 || 5.67 || 15.88

TOTAL || 143.89 || 178.75 || 174.53 || 497.17

10.2.2.
Programming exercise
10.2.2.1. Component I

Table 2: Indicative financial
allocations for the year per component, in million EUR

MULTI-BENEFICIARY || 2010

I. Transition Assistance and Institution Building || 162.70[61]

Of which: ||

Multi-beneficiary Programme 1 || 81.02

Multi-beneficiary Programme 2 || 6.48

Amendments to MBP 1 and 2 2009 || 6.50

Support to the operational budget of the Office of the High Representative (OHR) in Bosnia and Herzegovina || 5.30

Support to the Interim Civilian Office Kosovo || 7.00

Tempus || 13.80

Nuclear safety and radiation protection || 7.07

Contribution to the Energy Community Secretariat || 3.19

TAIEX || 17.00

Information and Communication || 10.00

ERDF || 1.34

Evaluation, Monitoring and Audit || 4.00

TOTAL || 162.70

The objective of the pre-accession
assistance provided under the 2010 multi-beneficiary programmes was to address
the three priority areas identified in the MIPD 2009-2011, namely: political
and economic criteria as well as the ability to assume the obligations of
membership and approximation to European standards.

An assessment of the multi-beneficiary MIPD
2009-2011 was carried out at the beginning of 2010 with the objective to check
its validity in light of developments in the region and main challenges ahead.
It was concluded that the scope, overall objectives and strategic choices of
the 2009-2011 MIPD remained valid also for 2010. All stakeholders, including
the donors' community were informed about the process and conclusions of this
assessment and agreed that a revision of the MIPD was not required at this
stage.

The assessment of the 2009-2011 multi-beneficiary
MIPD constituted a stepping stone toward an in-depth and comprehensive revision
of the strategy in the 2011-2013 multi-beneficiary MIPD. A number of Working
Groups were set up to provide a framework for discussions with beneficiaries,
donors, civil society and other stakeholders, analysing in particular the needs
for regional cooperation.

Discussions in those Working Groups
provided valuable contributions to the development of specific sector plans
that in turn fed into the draft MIPD for 2011-2013. This process allowed better
tailoring of the new multi-beneficiary strategy according to the needs of the beneficiaries
in the region while at the same time enhancing ownership of the programme and
complementarity of regional and horizontal programmes with national strategies.

Two multi-beneficiary donor coordination
meetings have been organised in 2010 with EU Member States, International
Financial Institutions (IFI), the Regional Cooperation Council and other
stakeholders. IPA multi-beneficiary coordination meetings with beneficiaries are
held approximately three times a year and regular updates on the outcomes of
each step in the programming cycle are transmitted to stakeholders. Such
involvement affords beneficiaries the opportunity to judge their absorption
capacity for each project as well as to evaluate how each project would fit
into the national plans.

The 2011 programming exercise was initiated
by mid 2010 while drawing on the planning framework provided in the various sector
working groups and aligning with the priorities identified in the 2011 – 2013
MIPD.

Table 3:
Indicative financial allocations for the year 2010 under the multi-beneficiary
Programmes, per priority axis and per project, in million EUR

Priority Axis / Projects || Budget

Political Criteria || 56.78

|| Support to the operational budget of the Office of the High Representative (OHR) in Bosnia-Herzegovina || 5.30

|| Support to the Interim Civilian Office Kosovo || 7.00

|| Support for Improvement in Governance and Management (SIGMA) || 10.00

|| Improving Public Financial Management in the Western Balkans || 1.00

|| Cross-Border Institution Building Phase II || 1.50

|| Regional Initiative for Roma Integration || 3.00

|| Fight against organised crime and corruption: Strengthening the Prosecutors' Network || 5.00

|| Regional Co-operation in Criminal Justice: Strengthening capacities in the fight against cybercrime || 2.50

|| Civil Society Facility (CSF) || 12.00

|| INSPIRATION - Spatial Data Infrastructure in the Western Balkans || 1.50

|| Support to the operating expenditures of the RCC Secretariat and Strengthening the RCC Secretariat || 3.20

|| Support to the Ljubljana Process II – Rehabilitating our Common Heritage || 1.50

|| Support to the South East Europe Investment Committee – implementation by the RCC Secretariat || 0.80

|| Strengthening the Southeast European Joint History Project as a strong tool for reconciliation in Southeast Europe || 0.98

|| Amendment MBP 1 2009 – Refugee return || 1.50

Economic Criteria || 58.56

|| Implementation and follow-up of the Small Business Act in the Western Balkans || 0.30

|| Infrastructure Project Facility – Technical Assistance Window || 15.12

|| Erasmus Mundus Action 1: Western Balkans - Turkey Windows || 8.00

|| Erasmus Mundus – Action 2: Partnerships, Lot - Western Balkans || 12.00

|| Youth in Action Programme – Western Balkans Window || 1.50

|| Western Balkans Regional Strategy on Research and Development for Innovation || 1.50

|| EEF (Green for Growth Fund) || 5.00

|| Tempus || 13.80

|| ERDF || 1.34

Ability to assume the obligations of membership || 29.56

|| Systematic Electronic Exchange of Data (SEED) || 1.30

|| Statistical Cooperation || 1.00

|| Nuclear Safety || 7.07

|| Energy Community || 3.19

|| TAIEX || 17.00

Information and Communication || 10.00

|| Information and Communication || 10.00

Supporting programmes || 7.80

|| Strengthening European Integration || 3.80

|| Evaluation, Monitoring and Audit || 4.00

TOTAL || 162.70

The table above reflects consistency in the distribution of the multi-beneficiary
assistance by the different areas of intervention as indicated in the multi-beneficiary
MIPD 2009-2011, where strong emphasis was given to the area of “addressing
the economic criteria” in view of helping beneficiaries
to tackle the effects of the financial crisis. In accordance with the 2009
Enlargement paper's strategic orientations, regional co-operation, the fight
against organised crime and corruption, good governance as well as support to civil
society have been addressed under the political criteria in the 2010
multi-beneficiary programmes.

10.3.
Implementation of assistance
10.3.1.
IPA
10.3.1.1. Success stories

The Regional School of Public
Administration: The formal opening of the Regional School of Public Administration, ReSPA,
on 11 November in Danilovgrad, Montenegro by Commissioner Füle and Milo
Djukanovic, Prime Minister of Montenegro marked an important deliverable of the
Multi-beneficiary IPA assistance. The school's aim is to reinforce regional co-operation
and strengthen administrative capacity in the Western Balkans. It follows the
principles of the 'European Administrative Space' in which public servants in
European countries meet to exchange views and best practices on the
implementation of EU legislation. The EU has provided more than EUR 7 million
in technical assistance and equipment and is planning to finance another EUR 7
million adding to the foreseen contributions of national authorities.

Some of the main activities of the ReSPA project include
seminars, conferences and training for public administration professionals, as
well as publications, training material and the creation of an electronic
library.

European
Fund for Southeast Europe (EFSE): EFSE is a Public - Private Partnership with the aim of attracting
private sector capital and thereby leveraging the public donor funds for the
development of the private sector (SMEs and households) in the region. EFSE is
extending loans to partner lending institutions such as local commercial banks
and micro finance institutions. EFSE invests in one of the world's growing
emerging markets, namely fourteen countries of the region of Southeast Europe,
including the European Eastern Neighbourhood Region. Currently, EFSE has
provided approximately 270,000 sub-borrowers with a total amount of EUR 1.50
billion. It has thereby created 280,000 new jobs, a remarkable social impact.
The maximum loan size is EUR 100,000 but the average loan size is EUR 4 700.

EFSE was awarded first prize at the G-20 summit
in Seoul, receiving by far most votes in the competition
'SME Finance Challenge'. With this award, the
innovative, crisis-resistant fund model for financing SMEs has recei­ved one of
the highest credentials possible.  Since 2005, the European Commission has
contributed with a total amount of EUR 70 million to the Fund. The assets,
represented via European Investment Fund (EIF) were worth, at end 2010, approximately
EUR 100 million.

The Western Balkans Investment Framework
(WBIF): In its first year of existence the implementation
of the WBIF has made substantial progress, demonstrating that it is a useful
and efficient mechanism of financing important investment projects in the
Western Balkans. The Joint Grant Facility (JGF) has been very active in meeting
its main objective which is pooling stakeholders’ resources (grants and loans)
and expertise together to finance projects, as well as strengthening coordination
among donors and beneficiaries.

In 2010, a total of 81 projects were
approved and grants of a total value of EUR 139.20 million were handed out
under the framework. It was decided to provide technical assistance to 69
projects and 12 projects will receive investment co-financing under the Infrastructure
Project Facility Municipal Window, altogether corresponding to investments of
an estimated total value of EUR 6.80 billion. There is a relatively balanced
distribution of grants by sector, with environment accounting for 49%, followed
by transport with 26%, energy with 16% and the social sector with 9%.

The JGF Project
Financier's Group (PFG) met four times during the year in order to monitor the
implementation of the WBIF and discuss submitted projects. The third Steering
Committee (SC) of the WBIF took place in London on 16th December
2010. The meetings gathered more than 70 participants representing the donors
to the European Western Balkans Joint Fund (EWBJF), the beneficiaries (NIPACs),
the IFIs, the Commission and regional organisations.

During the meeting, the annual report 2010
of the WBIF was presented, the new website of the WBIF was formally launched (www.wbif.eu)
and the work underway to update and upgrade the database on investment flows
from the EU, IFIs and bilateral donors to the region was previewed. The
resources and proposed work programme for 2011 as well as the next call for
project submissions were presented. The SC meeting also provided an opportunity
to enhance further the coordination between donors, the Commission and beneficiaries
in the area of policy and strategy.

Bilateral donors have pledged new funding
of EUR 10.00 million for the WBIF and the European Commission announced that
EUR 70.00 million of the IPA multi-beneficiary assistance will be channelled into
the WBIF in 2011.

Erasmus Mundus (Action 1 and Action 2):

Apart from scholarships offered to students
from third countries, as from 2009 additional scholarships for students from
Western Balkans and Turkey have been made available under the so called
”Western Balkans and Turkey Window” of Erasmus Mundus Action 1. This
programme supports degree-seeking mobility in the form of joint courses.  In
2010 under this window a total of 188 students from the Western Balkans and Turkey were selected for the academic year 2010/2011.

Under Erasmus Mundus Action 2 (aiming at promoting institutional co-operation and mobility
activities) three projects were selected for the Western Balkans Lot in 2010. One is coordinated by the 
Karl-Franzens University of Graz (also managing the mobility of 202
individuals from the Western Balkans), one by the University of Ghent (also
managing the mobility of 230 individuals from the Western Balkans) and
one by the  City University London also managing the mobility of 184
individuals from the Western Balkans).

In 2010, EUR 8 million were allocated for
Action 1 and EUR 12 million for Action 2 respectively with activities starting
in the academic year 2011/2012. It is foreseen that under Action 1
approximately 141 scholarships will be financed altogether, out of which those
for participation in Joint Master Courses amount to 117 and respectively to 24
in Joint Doctorate Programmes.

10.3.1.2. Overview of IPA implementation in 2010

Component I: Transition Assistance and Institution Building

Table 4: Status of implementation of IPA financial assistance
(Component I) as at 31st December 2010 (in
million EUR) per annual programme[62]

|| Committed || Contracted || % Contracted || Paid || % Paid

IPA 2007 || 153.42 || 120.07 || 78.26% || 108.60 || 70.79%

IPA 2008 || 196.54 || 169.61 || 86.30% || 90.89 || 46.25%

IPA 2009 || 247.92 || 192.52 || 77.66% || 116.66 || 47.06%

IPA 2010 || 162.70 || 55.93 || 34.38% || 29.86 || 18.35%

TOTAL || 760.58 || 538.13 || 70.75% || 346.01 || 45.49%

Table 5: Distribution of total committed
funds (2007-2010 allocations) by priority axes

Priority Axes || % of 2007-2010 allocations

Political criteria || 6.61%

Civil Society || 5.26%

Support to interim civilian administration || 6.83%

Economic criteria || 31.79%

Ability to assume membership obligations || 7.00%

Regional support programmes || 2.89%

TAIEX / SIGMA || 9.03%

TEMPUS/Education/Youth || 18.09%

Communication || 4.38%

Nuclear safety || 4.03%

Technical Support, monitoring, audit and evaluation || 4.09%

TOTAL || 100%

All Beneficiaries can participate in
(formerly Community) EU Programmes, Agencies and Committees on a case-by-case
basis and the ticket to participate in those is
financed through the National Programmes. As was the
case with previous Enlargements however, the EU supports the Agencies to
prepare their counterparts in the Beneficiaries for participation in the
activities of the EU Agencies either, if permitted,
prior to accession or following accession to the EU.
Multi-Beneficiary assistance continued in 2010 to be provided to the following
Agencies:

·
CPVO (Community Plant Variety Office) – EUR 400
000

·
EASA (European Aviation Safety Agency) – EUR 700
000

·
ECDC (European Centre for Disease Prevention and
Control) – EUR 400 000

·
ECHA (European Chemicals Agency) – EUR 200 000

·
EEA (European Environment Agency) – EUR 1 200 000

·
EFSA (European Food Safety Authority) - EUR 1
000 000

·
EMCDDA (European Monitoring Centre for Drugs and
Drug Addiction) – EUR 900 000

·
EMSA (European Maritime Safety Agency) – EUR 300
000

·
ERA (European Railway Agency) – EUR 200 000

·
EU-OSHA (European Agency for Safety and Health
at Work) – EUR 900 000

·
EUROFOUND (European Foundation for the
Improvement of Living and Working   Conditions) – EUR 700 000

·
EMEA (European Medicines Agency) – EUR 900 000

A new programme is expected to be adopted in 2011 as to continue the
work with these Agencies and with the new agency: European Institute for Gender
Equality.

10.3.1.3. Implementation Modalities and Structures

Multi-beneficiary programmes are
implemented by direct centralised management, by indirect centralised
management, by joint management with an International Organisation based on Article 53a and d of the Financial Regulation, or by decentralised management (for some projects under the
Nuclear Safety and Radiation Protection programmes). In some specific cases
crossed sub-delegation to other Commission services for the implementation of
projects under centralised management is also foreseen.

10.3.1.4. Monitoring

The successive introduction of monitoring
maps for each project has helped to better demonstrate progress in
implementation and, if necessary, decide on additional checks or corrective actions
whenever required. The monitoring of Multi-beneficiary projects comprises also on
the spot verifications by Project Managers, participation in Project Steering
Committees, implementation reports as well as the Results Oriented Monitoring
(ROM).

Through a consistent approach, with
standardised outputs, ROM highlights strengths and weaknesses in the
implementation of EU external assistance projects, by assessing each project’s
relevance, quality of design, efficiency, potential impact and sustainability. The general principle and aim is to monitor ongoing projects of at
least EUR 1.00 million EU contribution and a minimum duration of 12 months. The total number of regional/horizontal projects monitored during
2010 reached 26. No reports flagged serious problems in the project
implementation.

A total number of 68 regional/horizontal
projects were monitored during the whole three-year period from end November
2007 to end November 2010 by the ROM contractor ICCS-NTUA and a total of 440
sets of ROM outputs produced. The projects to be monitored are chosen on the
basis of the general principles but are still subject to discussion by the Unit
with the contractor. A new contract was signed with PARTICIP GMBH for a period
of two years as from December 2010.

10.3.2.
CARDS (and PHARE for HR) or TPA
10.3.2.1. Sectors with positive results/ Success stories

Under Phare,
the implementation of horizontal programmes has offered wide possibilities of
co-operation with the European Investment Bank (EIB) and International
Financial Institutions (IFIs) such as the European Bank for Reconstruction and
Development (EBRD) and the Council of Europe Development Bank (CEB) in
association with Kreditanstalt für Wiederaufbau (KfW) by allowing the blending
of IFI loans with EU grants. These horizontal programmes have complemented the
investment projects financed by national programmes.

Four types of
programmes have been developed as follows.

The SME
Finance Facility (SMEFF) has been set up to strengthen the capacities of
financial intermediaries (i.e. banks, leasing companies) in beneficiary
countries to expand and sustain their financing operations to SMEs. The SMEFF
projects include the provision of loans, loan guarantees, and leases for local financial
intermediaries in combination with non-reimbursable financial incentives. In
turn, financial intermediaries on-lend or lease to individual micro-enterprises
or SMEs. Since 2005, the only eligible countries have been Bulgaria, Croatia, Romania and Turkey. At the end of December 2010, the total amount of EU
incentives earmarked for projects increased, in particular in the newly
introduced energy efficiency area and reached about EUR 320 million.

Under the Municipal
Finance Facility (MFF) local financial intermediaries are supported to
extend loans to the municipalities. The mechanism of the programme is similar
to this one of the SMEFF. In 2010, the pace of development and signature of new
projects steadily accelerated, mainly due to the conclusion of amendments to
the Contribution Agreements extending the sub-programme deadlines. However, the
overall progress remained relatively slow due to high administrative costs,
delays in regulatory reforms in some countries, and the inexperience of the
municipalities to prepare credit files. At the end of December 2010, the total
amount of EU incentives committed into projects was over EUR 81 million.

 The objective
of the Municipal Infrastructure Facility (MIF) is to contribute towards
the social and economic development of border regions of the EU-15 Member
States. To this end, the MIF combines loans from EIB resources with
non-reimbursable Phare support to accelerate the completion of small local
infrastructure investments. By the end of 2010, about EUR 40 million was
disbursed.

The Energy
Efficiency Finance Facility (EEFF) was launched in 2006 to stimulate energy
efficiency investments in all types of building and in the industry sector by
making appropriate financing available to the end-borrowers. The overall
results of the programme will be savings in energy and a significant reduction
of CO2 emissions.

The EEFF
combines IFI credit lines extended to financial intermediaries with incentives
to improve the cost effectiveness of equipment and make the energy investment
more attractive, and fees to the benefit of local financial intermediaries to
encourage them to onward-lending. By the end of 2010, large amounts were
contracted (EUR 53 million in three Contribution Agreements) and an increased
number of new projects for a total amount of EUR 35 million approved.

At the end of
2010, four Commission decisions of 2005 and 2006 establishing a Phare Multi-beneficiary
programme on the SME Finance Facility, Municipal Finance Facility and Energy
Efficiency Finance Facility with the CEB in cooperation with KfW were amended
to extend the end date for the conclusion of the Project Agreements to allow
for proper implementation and full utilisation of Phare resources by making
them available to the Green for Growth Fund (GGF) and the European Fund for
South East Europe (EFSE). Five other amendments to Commission decisions
regarding the 2006 Facilities with the EIB and the EBRD allowing for energy
efficiency investments and extension of the end date for the conclusion of the
Project Agreements were under preparation. In addition, the Commission
continued the reshaping process of the Facilities, focusing in particular on
energy efficiency measures.

Under the CARDS
Regional Action Programme 2005, the project "International Law Enforcement
Co-ordination Units ILECUS" has contributes to officially open an
ILECU, i.e. national platforms for international police co-operation in all the
beneficiaries.

The project "Assessment of Corruption in the Western Balkans" under CARDS 2006 produced a survey on Corruption in the
Western Balkans: Bribery as experienced by the population. It captures the
actual experience of ordinary citizens and how bribery affects their dealings
with the public administration. The survey will help in the development of
effective anti-corruption policies. It also provides a benchmark to assess
future progress.

The project "Support
to the Prosecutors' Network" under the CARDS Regional Action Programme
2006 ended in July 2010. In all beneficiaries the project contributed directly
to establishing and developing co-operation between the Prosecutor’s Offices in
the Western Balkans. The most significant effect, both in terms of quality and
quantity, was produced at the level of strengthening the human capacities of
the prosecution services, ministries of justice and other authorities targeted
by the project activity. All the beneficiaries indicated that the work on the
preparation and conclusion of bilateral agreements regulating either specific
forms of mutual assistance or direct co-operation between the prosecutors
intensified in the recent years. Moreover, the revised Memorandum of
Understanding provides a solid basis to sustain the project impact over the
next years, provided that authorities are committed to undertake the necessary
steps to achieve the goals set out in this document. Contact points for the Prosecutors’
Network from all the beneficiaries recognised that the project was essential
for maintaining the Network.

10.3.2.2. Institution Building highlights

Under the CARDS regional Action Programme
2006, Technical Assistance has been provided to beneficiaries to support them
in the implementation of the European Common Civil Aviation Area Agreement. The
project has been successfully completed during 2010 and the national administrations
had received comprehensive training and capacity building through assignments
of long and short term experts, workshops, seminars and study visits in the
fields of aviation legislation, economic regulation, aviation safety, air
traffic management, aviation security and airport regulation.

Under the Phare 2006 Programme on
Statistical cooperation for Bulgaria, Croatia, Romania and Turkey, Eurostat
completed its training activities to upgrade and strengthen the statistical
systems in the beneficiaries by improving the availability, quality,
comparability and timeliness of statistical data in particular in
macro-economic, price, external trade, agricultural, demographic, social and
business statistics. A number of experts from the National Statistical
Institute of Bulgaria, the Central bureau of Statistics of Croatia, the
National Institute for Statistics of Romania and the Turkish Statistical
Institute attended workshops or seminars and participated in technical meetings
organised by Eurostat and other Commission services.

PART II: FINANCIAL ASSISTANCE TO FORMER
CANDIDATE COUNTRIES

1.
Summary

Following the
end of implementation of the Transition Facility 2006
programme at the end of 2009 in the 10 Member States that
joined the EU in 2004 (hereinafter, the EU 10), the
national authorities concentrated in 2010 mainly on monitoring and evaluation
of results, payments to the beneficiaries and tasks related to the proper
closing and phasing out of Phare and Transition Facility programmes, including some
institutional changes.

For Bulgaria and Romania the pre-accession assistance has been completed and closed down in terms of
operational implementation in 2010 with the expiry of the deadline for
execution of contracts under Phare 2006 and under the Transition Facility. The
project results and objectives have been successfully achieved and no major
problems in the project implementation have been reported.

2.
Implementation of PHARE and Transition Facility
assistance in 2010
2.1.
Taking stock of pre-accession and post-accession
assistance

Bulgaria

In 2010,
thirteen thematic evaluations have been carried out in Bulgaria concerning Phare and Transition Facility projects by external experts contracted under TF
2007. Together with the results of two national interim evaluations, the reports
reveal the main strengths and weaknesses in the management of EU assistance and
provide useful advice for the future assistance under Operational Programmes:

1)
The EU assistance has proven to be particularly effective
in certain sectors, such as civil society development and community-based services for vulnerable members of society. Thus,
the main achievements of the financial assistance consisted in strengthening
the capacity of the NGOs in Bulgaria to participate in
the accession process; development of partnerships with public bodies and
business; improving the access of vulnerable groups and minorities to social
services and labour marker; enhancing transparency and prevention of
corruption. The assistance also significantly contributed
to the upgrading of human capital and enhancing the administrative capacity and
competences of the implementing organisations.

On the other
side, road construction projects under Phare were assessed as less effective,
as they suffered from significant delays and exceeded the budget. According to
the evaluator's conclusions Phare interventions in this
sector have been affected by insufficient project design and planning,
difficult and time consuming procedures for land acquisition, insufficient performance
of some works contractors and insufficient capacity of the managing
authorities.

2)
As regards the grant
schemes the evaluators recommend to establish a clear link between objectives
and results and the indicators to measure their achievement and include target
values and baseline data. Moreover, the evaluation on the grant schemes has
drawn the conclusion that complex grant schemes with
several parallel objectives were difficult to manage and led to insufficient
results. The lessons learnt as regards the large grant
schemes concern the need for more careful planning of interventions by defining
clear and limited number of objectives and taking into account the capacity of
the beneficiaries, the risk of failure of more complex projects and the need of
partnerships.

3)
In the thematic report on twinning the main
conclusion is that twinning has been a preferred
instrument for institution building under Phare in Bulgaria and has been used two
times more often than Technical Assistance. The reason for the success of
twinning is the fact that it is much more flexible and hence its project
activities could be timely adjusted to the current needs of the beneficiary
organisation.

Success
Stories

Civil Society Development Phase 1 (BG 2004/016-711.01.01) and Phase 2 (BG 2005/017-353.01.01)
– Grant Schemes

The objective of
this multi-annual project was to support the civil society and its role in
strengthening the rule of law and democratisation; increase the capacity of the
NGO sector by enhancing its participation in the accession process; promote partnerships
with public bodies and ensure access of minority groups to the public services
and the labour market.

With a budget of EUR 1.48 million of Phare funds for phase 1 and EUR 2.65 million
for phase 2, more than 1,300 events were organized, including workshops,
conferences and seminars, round tables, cultural events and information
services delivered in areas such as equal opportunities, human rights and
protection of minorities, regional development, environmental protection and youth
to the benefit of a large number of citizens (about 20,000). Youth and
children, and representatives of vulnerable groups comprised the biggest share
of direct beneficiaries, thus the individual grant contracts contributed to
enhancing social integration and inclusion.

The assistance
contributed to enhancing the capacity and competences of the NGO sector in
three directions: project implementation; management, monitoring, evaluation of
EU funded projects; and work with target groups. Local
authorities also gained experience in both project implementation and resolving
issues of local/social importance. The partnerships developed, including public
private partnerships, and the networks created were also valuable. Another
important result was the increased awareness and tolerance of the community
about the specific problems of minorities and vulnerable groups.

Success
Story 2

Deinstitutionalisation
through provision of community based services for risk groups Phase 1 (BG 2004/016-711.01.02); phase 2 (BG 2005/017-353.01.02)
and 3 (BG 2006/018-343.01.01) – Grant Schemes

The objective
of this multi-annual project was to support the development and delivery of
community-based services for vulnerable members of society, including orphans and
handicapped children, elderly people and mentally and/or physically handicapped
adults. In addition to Phare funds, national co-financing was provided as
follows: budget of EUR 3.84
million Phare funds and EUR 1.28 million national co-financing under Phase 1; EUR
5.00 million Phare funds and EUR 1.67 million national co-financing under Phase
2; and EUR 6.4 million and EUR 2.14 million respectively under Phase 3.

The project was
successful in achieving its specific objectives for the creation and development
of a network of community-based social and mental health services. Assistance
developed and supported 208 social and mental health services. Individual grants supported nearly 6,000 children and 3,000 families at risk; 2,900 adults with
disabilities or elderly people and 1,500 people with psychiatric
disorders/mental health problems. They also contributed to the restructuring of
25 childcare institutions and 10 institutions for adults with disabilities or
elderly people.

The assistance
made a tangible contribution to the development of community-based services for
vulnerable people in Bulgaria. It created about two-thirds of all Community
Support Centres and the transitional homes for children; more than 40% of the
day care centres for elderly people; about 30% of the day care centres for
adults with disabilities and the family-type centres for accommodation of
children; one forth of sheltered homes and about one fifth of all day care
centres for children with disabilities in the country.

Access to community-based services, as an
alternative to institutionalisation, was improved in 97 out of 264 Bulgarian
municipalities, of which 83% did not have any similar services before the start
of the project.

The assistance also significantly
contributed to the upgrading of human capital and enhancing the capacity of the
implementing organisations in working with the target groups as most of the
grant contracts included training of staff and experts,
exchange of experience and transfer of knowledge on new approaches.

Romania

Altogether ten
sectoral evaluations and two thematic evaluations were carried out by external
experts contracted under TF 2007 in the period February 2010 to December 2010. The ratings for the 2010 sectoral interim
evaluation reports show an improvement compared to the 2007 and 2008 ratings with the overall rating per sector shown
as satisfactory with minor differences between sectors (i.e. productive
sector and environment sector show lower ratings for one or both of
these indicators: efficiency and sustainability)

The general
conclusions drawn following the aforementioned evaluations are fairly positive:

1.
The Phare and Transition Facility assistance is
a final round of interventions that built on many years of effort. The
management structures and the PIUs were more mature and experienced.
Implementation efficiency was generally good where many Phare 2006 projects
needed to be completed in a shortened implementation period. Progress is made
in disbursements despite the problems faced by contractors and twinning
partners in meeting the extensive documentation requirements.

2.
The effectiveness of the assistance continued to
be strong in terms of the delivery of outputs. Major supplies of equipment were
achieved in several sectors. The feedback on the quality of training provided
is generally satisfactory. The visible perception of wider impact is affected
by the slow progress in absorbing the structural and cohesion funds and the
continuation of the Co-operation and Verification Mechanism. Many of the institutional
results are already sustained and the remaining uncertainties opposing
sustainability have reduced in comparison with earlier years.

Overall
lessons learned:

1.
In terms of the management of a significant
development programme, the Phare and Transition Facility interventions
established the importance of a strategic approach and the use of a logical
framework for prioritising the implementation programmes. The need for a large
group of actors to oversee the proper management of the programme was appreciated
as a pre-requisite to achieving (and measuring) the results.  The substantial
investment in training people conveyed a fundamental principle held in the EU
of the value and necessity of training for achieving a modern and efficient
administration.

2.
A lesson specific to the Phare programme is the
appropriateness of the different implementation instruments (technical
assistance, twinning, supply and grant schemes) in different circumstances and
the need for a variety of instruments to secure impact in a large and
wide-ranging development programme. This was apparent from the significant
final use of twinning and twinning light interventions in the Transition
Facility. Also, the ability of the Phare programme to achieve results in Romania at the level of the individual citizen and in the smallest and most remote
communities will be one of its most enduring legacies.

3.
A final horizontal lesson that emerged from the
Phare programme is the recognition of the importance of training and
development of public officials to achieve development results. In all sectors,
the capacity for sustainable training was generously supported by the programme
resulting in a basic competence, often through the train-the-trainer approach,
and is extending the benefits of the Phare interventions. The national
co-ordination of this training resource is not well established and it would be
worthwhile to invest in further consolidation of this horizontal capacity.

Evaluation
of EU pre-accession assistance to CBC programmes in Bulgaria and Romania

A
retrospective evaluation of EU pre-accession assistance to CBC programmes in Bulgaria and Romania was also carried out at the end of 2010. The main conclusion was that the
relevance and intervention logic of CBC programmes have been satisfactory.
However, in terms of efficiency and effectiveness CBC has been rated as only
partially satisfactory, as the project implementation has been hampered by the
following problems: insufficient cooperation between National Aid Coordinators'
services; insufficient resources to manage large grants; uncertainties
regarding transition from EU procurement rules to national procurement rules,
problems with delegation of responsibilities; disproportionate burden in terms
of documents to be submitted, etc.

Programme and
project monitoring has only been partially adequate. Indicators defined at
programme level have not in all cases been adequate and consistent with those
defined at project level, and a formal monitoring has not been carried out at
programme level, but only at project level. The overall monitoring system and
its reports have focused on the implementation of the programme (input), with
limited focus on results/impacts.

The evaluators
recommend an increase of the level of publicity, improvement of evaluation
grids; differentiation of the grants' implementation period; increased
involvement of local authorities in the programming stage; submission of an
annual report of implementation and clear definition of territorial criteria.

Success Stories

Social
Sector - Grant scheme for Life Skills (RO2007/19343.03.03): Integration of
youth from minorities and disadvantaged groups into the Romanian society

The objective of the grant scheme was
to enable NGOs to provide appropriate services for children and youth,
especially minorities and disadvantaged groups, to increase their involvement in
the society; to reduce the vulnerability of children and youth and to promote
equal opportunities for education, professional orientation and social
inclusion. The overall budget was EUR 2.98 million, all funded through the
Transition Facility. The technical assistance budget for the administration of
the grants was EUR 0.43 million, managed by the Civil Society Development
Foundation. The scheme was launched on 27 July 2009. All grants had been
awarded by 15 December 2009 and implemented by 15 December 2010.

The use of grant schemes by the Phare
instrument was an efficient way to address multiple objectives and to make
Phare funds available to strengthen the capacity of the recipient organizations
such as NGOs as well as micro-enterprises and individual citizens. The scheme
has influenced and continues to influence government policy in an area of acute
social need. The most visible aspect of the success of the scheme is the strong
partnership relationships that emerged between the NGO implementers, the
schools and local community (commune) centres and the teachers, parents and
guardians of the children that were reached by the scheme. This partnership
owes much to the leadership and experience of the CSDF and the careful planning
and preparation that was made in advance of the implementation of the
individual projects.

National
Customs Authority - New Computerised Transit System (NCTS) (RO2007/19343.05.01):
Development and implementation of the NCTS security and safety aspects and of
the NCT5/TIR at the level of NCTS customs offices

The project objective was to support
the National Customs Authority for the implementation of the
"Electronic-Customs" strategy of DG TAXUD through implementation of
NCTS/TIR and NCTS systems. The project budget was EUR 0.69 million. The project
started in November 2008 and was completed in January 2010. The project's
results significantly affect the daily work of trade and commerce in Romania. The project has both EU-wide and national strategic importance.

The contributing factors to the project
success were the well established track record of the beneficiary in managing
information systems projects and the availability at the NCA of a competent IT
unit to manage the project.

2.2.
Implementation of PHARE and the Transition
Facility

i)  PHARE 2005 – finalisation of payments (EU 2 only)

By the end of
2010 (also the end of the disbursement period), the disbursement rate by the Bulgarian
authorities under PHARE 2005 reached 98.48%. For Romania the disbursement rate
was 90.28%.

ii)  PHARE 2006 – finalisation of payments (EU 2 only)

For PHARE 2006
the disbursement was 61.86% of the committed amounts as per Financing Agreement
in Bulgaria and 85.30% for Romania at the end of 2010. The low rate of
disbursement for Bulgaria is the consequence of the withdrawal of EDIS
accreditation for two Implementing Agencies, which affected the level of
contracting of 2006 Phare appropriations.

iii) Transition facility 2005 (EU
10 only)

The
disbursement rates for the 10 Member States under Transition Facility 2005 by
the end of 2010 are indicated in the table below:

In million
EUR

Member State || FM committed || Contracted || Paid || % of disbursed of FM committed

Cyprus || 6.29 || 6.17 || 6.17 || 98.06%

Czech Republic || 10.21 || 9.72 || 9.72 || 95.15%

Estonia || 4.48 || 4.21 || 4.21 || 94.03%

Hungary || 9.55 || 9.20 || 9.20 || 96.30%

Lithuania || 8.47 || 7.79 || 7.79 || 92.00%

Latvia || 8.07 || 7.27 || 7.27 || 90.06%

Malta || 5.15 || 4.98 || 4.98 || 96.62%

Poland || 35.15 || 32.07 || 32.07 || 91.23%

Slovenia || 4.08 || 3.81 || 3.81 || 93.48%

Slovakia || 8.86 || 8.24 || 8.24 || 92.94%

\*Information from Global Perseus

iv) Transition facility 2006 (EU
10 only)

The
disbursement rates for the 10 Member States under Transition Facility 2006 by
the end of 2010 are indicated in the table below:

In million
EUR

Member state || FM committed || Contracted || Paid || % of disbursed of FM committed

Cyprus || 2.81 || 2.81 || 2.81 || 99.78%

Czech Republic || 6.45 || 6.15 || 6.15 || 95.41%

Estonia || 3.49 || 3.21 || 3.21 || 91.97%

Hungary || 5.41 || 5.41 || 5.28 || 97.68%

Lithuania || 3.98 || 3.58 || 3.58 || 89.97%

Latvia || 4.00 || 3.75 || 3.75 || 93.82%

Malta || 3.11 || 2.97 || 2.97 || 95.54%

Poland || 16.93 || 15.57 || 15.57 || 91.93%

Slovenia || 2.61 || 2.34 || 2.34 || 89.43%

Slovakia || 4.65 || 4.57 || 4.57 || 98.17%

\*Information from Global Perseus

v)  Transition Facility 2007 (EU
2 only)

The
implementation of Transition Facility has been completed successfully by 15
December 2010 and the envisaged project results have been broadly achieved.

Bulgaria

The Transition
Facility in Bulgaria had a budget amounting to EUR 31.49 million, out of which
only 68.8% have been contracted by the contracting deadline 15 December 2009.
The low contracting rate is due to the withdrawn accreditation of the CFCU
resulting in failure to contract 13 technical assistance contracts, 9 supplies
and 2 Grant Schemes. Thus, only 22 twinning and 31 twinning light contracts
have been contracted and implemented under the Transition Facility programme in
the sectors justice and home affairs, environment, agriculture and public
finance.

The disbursed
funds under TF amounted to EUR 17.33 million by the end of 2010 representing 80
% of the EU contracted amount. The disbursement deadline of the programme
expires on 15 December 2011.

Romania

Out of a total
allocation of EUR 46.5 million only EUR 31.6 million or 67.92% have been
contracted by the deadline (15 December 2009). This is due mainly to late
contracting, difficulties in finding twinning partners (with no offers received
after fiches had been circulated up to three times in some cases) and/or poor
quality of project proposals (especially under the Unallocated Envelope
component). By the end of 2010, some EUR 26.25 million or 83.11% of the total
contracted have been disbursed. The disbursement period expires on 15 December
2011.

2.3 Institution Building highlights

In the
pre-accession and post-accession period the national administrations
successfully used the twinning instrument under Phare and Transition Facility
programmes to further strengthen their capacities to adopt and enforce EU
legislation. The twinning and
twinning light projects implemented under the Transition Facility covered a
significant number of priority areas such as justice and home affairs,
agriculture, environment, public finance and economic development. The
successful completion of the twinning and twinning light contracts under TF contributed
to the establishment of sustainable partnerships with counterparts from Member
States and supported the national institutions in fulfilling their
post-accession obligations. Twinning projects proved to be particularly
effective in staff trainings, development of procedures and documents,
establishment and/or development of administrative structures and legislative
harmonization.

2.4 Joint Monitoring Committees / Sector Monitoring Sub-Committees

EU 10

For the 10 new
Member States the final Joint Monitoring Committee meetings were conducted
under written procedure in January/February 2010 (except for Lithuania and Latvia, which had the final JMC meetings at the end of 2009). The correspondence
related to the JMC addressed the outstanding horizontal and project related
issues under Transition Facility programmes. The Implementation Status Reports
were of good quality, including sufficiently detailed information regarding
projects implementation and the achievement of their intended results.

In 2010 the
JMC continued to supervise progress of PHARE and TF assistance in Bulgaria and Romania and provided recommendations on the management of the programmes.

Bulgaria

Two JMC took
place, in March (meeting) and July (via written procedure), addressing issues such
as further improvement of project management and, mainly, monitoring and
follow-up of the irregularities as well as reporting to the Commission.

Romania

Following the
JMC meeting in February 2010, it was agreed to continue the JMC by written
procedure with the next exercise taking place in July. Main issues for
follow-up were: submission of final declarations, irregularities (reported by
national authorities[63]) and the findings of
an audit on twinning projects under the Extended Decentralized Implementation
System (EDIS) sub-system.

By the end of
2010, 493 suspected and reported irregularities[64] were open in Bulgaria (233) and Romania (260), of which most are
likely to be subject to recovery. These figures include all cases reported by
the national authorities as well as irregularities identified through the DG’s
internal and external on the spot monitoring, press news, audit findings, etc.

Out of the
total above, 124 new irregularities reported in the period (for a value of EUR
3.5 million) have been reported by the Bulgarian authorities. This can be
seen as an indication that the implementation of the action plans agreed with
the Bulgarian authorities as a condition for lifting the suspension of the
payments in 2009 has led to more accurate reporting of irregularities.
Nevertheless, the high value of new irregularities reported (roughly 5% of
financial agreements running in Bulgaria) confirms that the DG’s reservations
on the management of EU funds under EDIS raised in 2007 were justified.

Romania also shows a high number of new irregularities (35 by number, for a
value of EUR 4.9 million). However, this represents less than 1% of the
financing memoranda running in the period. No major frauds have been reported
to the Commission; most irregularities concern small contracts and incorrect
expenditure, especially regarding grants at the local level. The Romanian
authorities, in particular the Anti-Fraud Service (DNA), continue to be
proactive in tackling all irregularities regardless of the amount involved.

Concerning Bulgaria, there were 16 OLAF cases in various stages of investigation which compares to 30
cases in the previous year. In Romania there were 47 OLAF cases in various
stages of investigation as opposed to 64 cases in the previous year.

PART III - FINANCIAL DATA

1.
2010 allocations by beneficiary and
by component (in million EUR)

IPA beneficiaries/ || I || II || III || IV || V || TOTAL

Components

Albania || 84.20  || 10.48  || || || || 94.68

Bosnia and Herzegovina || 100.69  || 4.70  || || || || 105.39

Croatia || 39.48  || 15.60  || 56.80  || 15.70  || 26.00  || 153.58

former Yugoslav Republic of Macedonia || 36.91  || 4.47  || 29.40  || 8.40  || 12.50  || 91.68

Iceland || 0.00 || || || || || 0.00

Kosovo || 66.10  || 1.20  || || || || 67.30

Montenegro || 29.84  || 4.84  || || || || 34.68

Serbia || 186.80  || 12.20  || || || || 199.00

Turkey || 217.81  || 3.09  || 238.10  || 63.40  || 131.30  || 653.70

Multi-beneficiary || 143.04\*  || || || || || 143.04

TOTAL || 904.87 || 56.58 || 324.30 || 87.50 || 169.80 || 1543.08

\* This figure
excludes amounts for the Tempus and Nuclear Safety Programmes already included
under the separate national allocations

2.
Breakdown of IPA commitments in 2010 in million
EUR
2.1.
Component
I – Transition Assistance and Institution Building Programmes

Country
Allocations  (in million eur)

Country || Annual Programme || Nuclear Safety || Tempus || Total

Albania || 83.20 || - || 1.00 || 84.20

Bosnia and Herzegovina || 98.29 || - || 2.40 || 100.69

Croatia || 38.62 || 0.86 || - || 39.48

former Yugoslav Republic of Macedonia || 36.91 || - || - || 36.91

Iceland || 0.00 || - || 0.00 || 0.00

Kosovo || 63.90 || - || 2.20 || 66.10

Montenegro || 28.64 || - || 1.20 || 29.84

Serbia || 174.80 || 5.00 || 7.00 || 186.80

Turkey || 217.81 || - || - || 217.81

TOTAL || 742.17 || 5.86 || 13.80 || 761.83

Multi-Beneficiary Allocations  (in million eur)

Programme || Total\*

Multi-beneficiary Programme I || 81.02

Multi-beneficiary Programme II || 6.48

Amendments to Multi-beneficiary Programme I and II || 6.50

Support to the operational budget of the Office of the High Representative (OHR) in Bosnia and Herzegovina || 5.30

Support to the Interim Civilian Office in Kosovo || 7.00

Contribution to the Energy Community budget || 3.19

TAIEX || 17.00

Information and Communication || 10.00

Monitoring, Evaluation and Audit || 4.00

TOTAL || 140.49

\*Excluding Nuclear Safety, Tempus and ERDF,
which are presented under the country allocations table

2.2.
Component II – Cross Border Cooperation
Programmes

Cross Country Cooperation Programmes with Member States (in million
EUR)

Country || Bulgaria || Greece || Hungary || Romania || Slovenia || Adriatic Programme || Total

Albania || || 1.66 || || || || 6.01 || 7.67

Bosnia and Herzegovina || || || || || || 2.50 || 2.50

Croatia || || || 2.67 || || 3.27 || 7.46 || 13.40

former Yugoslav Republic of Macedonia || 1.37 || 1.50 || || || || || 2.87

Kosovo || || || || || || || 0

Montenegro || || || || || || 1.38 || 1.38

Serbia || 2.40 || || 2.50 || 3.0 || || 0.60 || 8.50

Turkey || 2.09 || || || || || || 2.09

TOTAL || 5.86 || 3.16 || 5.17 || 3.0 || 3.27 || 17.95 || 38.41

Cross Country Cooperation Programmes between IPA beneficiary countries
and participation in Transnational Programmes

Country || Albania || Bosnia and Herzegovina || Croatia || former Yugoslav Republic  of Macedonia || Montenegro || Kosovo || Serbia || ERDF SE Europe / Med || ENPI Black Sea || Total

Albania || || || || 0.85 || 0.85 || 0.60 || || 0.51 || || 2.81

Bosnia and Herzegovina || || || 1.00 || || 0.50 || || 0.70 || || || 2.20

Croatia || || 1.00 || || || 0.40 || || 0.80 || || || 2.20

former Yugoslav Republic of Macedonia || 1.00 || || || || || 0.6 || || || || 1.60

Kosovo || 0.60 || || || 0.60 || || || || || || 1.20

Montenegro || 0.60 || 0.60 || 0.50 || || || || 0.60 || 1.16 || || 3.46

Serbia || || 1.00 || 1.00 || || 0.60 || || || 1.10 || || 3.70

Turkey || || || || || || || || || 1.00 || 1.00

TOTAL || 2.30 || 2.60 || 2.50 || 1.45 || 2.95 || 1.20 || 1.50 || 2.28 || 1.00 || 17.78

2.3.
Component III – Regional Development Programmes

Country || Regional Competitiveness || Transport || Environment || Technical Assistance || Total

Croatia || 14.20 || 21.30 || 21.30 || - || 56.80

former Yugoslav Republic of Macedonia || - || 19.61 || 8.51 || 1.26 || 29.40

Turkey || 71.43 || 71.43 || 95.24 || - || 238.10

TOTAL || 86.63 || 112.34 || 125.05 || 1.26 || 324.3

2.4.
Component IV – Human Resources Development
Programmes

Country || Reducing Unemployment || Social Inclusion || Education and Training / Human Capital Investment || Technical Assistance / Administrative Capacity || Total

Croatia || 3.93 || 4.79 || 5.48 || 1.50 || 15.70

former Yugoslav Republic of Macedonia || 3.36 || 2.10 || 2.44 || 0.50 || 8.40

Turkey || 34.00 || 8.19 || 12.75 || 8.46 || 63.40

TOTAL || 41.29 || 15.08 || 20.67 || 10.46 || 87.50

2.5.
Component V – Rural Development Programmes

Country || Improving market efficiency and upgrading to EU Standards || Preparatory actions for Agri- Environmental measures and Leader || Development of Rural Economy || Technical Assistance || Total

Croatia || 16.38 || 1.30 || 7.80 || 0.52 || 26.00

former Yugoslav Republic of Macedonia || 9.05 || 0.90 || 2.10 || 0.45 || 12.50

Turkey || 91.25 || 8.53 || 28.89 || 2.63 || 131.30

TOTAL || 116.68 || 10.73 || 38.79 || 3. 60 || 169.80

3.
Global overview of IPA 2007-2010 amounts
committed, contracted and paid as at 31 December 2010 per beneficiary, in
million EUR

Component I (annual programmes)

IPA beneficiaries || Committed || Contracted || %Contracted || Paid || %Paid

Albania || 266.37 || 104.97 || 39.41% || 52.07 || 19.55%

Bosnia and Herzegovina || 295.95 || 125.95 || 42.65% || 66.69 || 22.59%

Croatia || 167.50 || 55.39 || 33.07% || 33.16 || 19.80%

former Yugoslav Republic of Macedonia || 145.11 || 49.84 || 34.35% || 24.99 || 17.22%

Kosovo || 412.20 || 251.26 || 60.96% || 128.77 || 31.24%

Montenegro || 107.74 || 63.83 || 59.24% || 34.70 || 32.21%

Serbia || 678.84 || 350.43 || 51.62% || 225.76 || 33.26%

Turkey || 934.63 || 271.00 || 28.99% || 178.05 || 19.05%

Multi-beneficiary || 760.58 || 538.13 || 70.75% || 346.01 || 45.49%

Component
II

IPA beneficiaries || Committed || Paid || %Paid

Albania || 14.60 || 1.82 || 5.19%

Bosnia and Herzegovina || 18.82 || 1.59 || 8.45%

Croatia || 55.92 || 9.72 || 17.38%

former Yugoslav Republic of Macedonia || 17.09 || 1.87 || 10.94%

Kosovo || - || - || -

Montenegro || 17.91 || 2.13 || 11.89%

Serbia || 43.96 || 6.24 || 14.19%

Turkey || 11.11 || 2.55 || 22.95%

Component
III

IPA beneficiaries || Committed || Paid || %Paid

Croatia || 199.40 || 47.10 || 23.62%

former Yugoslav Republic of Macedonia || 69.90 || 12.15 || 17.38%

Turkey || 762.10 || 213.32 || 27.99%

Component IV

IPA beneficiaries || Committed || Paid || %Paid

Croatia || 53.90 || 15.00 || 27.82%

former Yugoslav Republic of Macedonia || 24.70 || 4.89 || 19.80%

Turkey || 222.10 || 48.08 || 21.65%

Component V

IPA beneficiaries || Committed || Paid || %Paid

Croatia || 102.90 || 11.53 || 11.21%

former Yugoslav Republic of Macedonia || 31.50 || 2.85 || 9.05%

Turkey || 290.50 || 0.00 || 0.00%

4.
PHARE,
CARDS, Turkey Pre-Accession and Transition
Facility - Financial data at 31st December 2010
4.1.
PHARE, Turkey
Pre-Accession and Transition Facility funds implementation by country at the end of 2010

Total commitments,
contracts and payments, in million EUR[65]

Partner Country || Commitments || Contracts || Payments

Bulgaria || 2,359.63 || 1,862.27 ||  1,852.42

Czech republic || 917.24 ||  835.47 ||    835.44

Croatia || 144.60 ||  118.32 ||   111.70

Cyprus(\*) || 338.01 ||  297.38 ||    181.32

Czechoslovakia || 230.49 || 231.82 || 228.88

East Germany || 34.49 || 28.86 || 28.86

Estonia || 346.84 ||  311.62 ||  311.51

Hungary || 1,480.06 ||  1,363.33 ||  1,363.40

Latvia || 423.61 ||  382.31 ||  382.28

Lithuania || 810.27 ||  752.20 ||  751.88

Malta || 57.11 ||  48.61 ||  48.61

Multi-country programmes || 3,357.05 ||  2,853.73 ||  2,747.90

Poland || 3,995.99 ||  3,617.83 ||  3.617.50

Romania || 3,670.00 ||  3,200.00 ||  3,100.00

Slovakia || 717.59 ||  653.12 ||  652.88

Slovenia || 360.33 ||  333.26 ||  332.75

Turkey || 1,861.95 ||  1,457.76 ||  1,423.00

Total || 21,105.26 ||  18,347.21 ||  17,970.15

(\*)           Including assistance to the Turkish Cypriot community

4.2.
CARDS funds
implementation by country at the end of 2010

Total commitments,
contracts and payments, in million EUR[66]

Partner Country || Commitments || Contracts[67] || Payments

Albania || 310.03 ||  279.01 ||  253.53

Bosnia & Herzegovina || 467.14 ||  428.47 ||  425.77

Croatia || 276.84 ||  254.86 ||  254.80

Former Yugoslav Republic of Macedonia || 307.87 ||  295.40 ||  294.36

Kosovo || 727.18 ||  712.45 ||  711.14

Montenegro || 127.40 ||  125.21 ||  125.17

Serbia[68] || 1 396.63 ||  1,311.90 ||  1,290.94

Regional Programme[69] || 583.36 ||  558.46 ||  549.81

Total || 4 196.45 || 3 965.75 || 3905.52

[1]               Communication from the Commission to the Council and
the European Parliament 'Instrument for Pre-Accession Assistance (IPA)
Multi-Annual Indicative Financial Framework for 2011-2013', COM(2009) 543 of 14.10.2009.

[2]               The difference with Table 1 is explained by the fact
that an additional €1.5 million were used from left
over money (due to urgency measures following severe flooding)

[3]               The difference with Table 1 is explained by the
allocation for participation in ERDF transnational programmes (EUR 0.51
million)

[4]               Communication from the Commission to the European Parliament
and the Council, Kosovo\* - Fulfilling its European Perspective, COM(2009)534 final of 14 October 2009, p.14.

[5]               Figure includes the separate Financing Decision
"Rehabilitation of Gerdec" of EUR 3.12 million

[6]               Figures include IPA Adriatic

[7]               Figures include also the Border Development programme
in the Kukes region (2007) and the CBC Albania-Greece, which is not under
shared management

[8]               Figures include only Annual Action Programmes, while
not including other programmes managed centrally, such as Customs and Taxation.

[9]               Communication from the Commission to the Council and
the European Parliament 'Instrument for Pre-Accession Assistance (IPA)
Multi-Annual Indicative Financial Framework for 2011-2013', COM(2009) 543 of
14.10.2009.

[10] Figures do not include allocations to support the Office of the
High Representative in Bosnia and Herzegovina

[11]             Including IPA Adriatic

[12]             Figures include only Annual Action Programmes, while
not including other programmes managed centrally, such as Customs and Taxation,
or assistance to support the budget of the Office of the High Representative in
Bosnia and Herzegovina

[13]             Enlargement Strategy and Main Challenges 2010-2011, COM(2010) 660 of 9 November 2010,

http://ec.europa.eu/enlargement/press\_corner/key-documents/reports\_nov\_2010\_en.htm

[14]             Communication from the Commission to the Council and
the European Parliament 'Instrument for Pre-Accession Assistance (IPA)
Multi-Annual Indicative Financial Framework for 2011-2013', COM(2009) 543 of
14.10.2009.

[15]             Supporting Public Administration Reform in Croatia – Thematic Evaluation of EU and other support, MWH Consortium, June 2009.

[16]             Hereafter Moldova

[17]             Figures include IPA Adriatic and CBC Programmes with EU
Member States

[18]             As foreseen by Article 166 (3)(a) of Regulation (EC,
EURATOM) No 1605/2002 of 25 June 2002.

[19]             www.uredjenazemlja.hr

[20]             VAT Information Exchange System, which EU Member States
use to exchange information regarding VAT transactions between business operators and Tax Administrations

[21]             VAT on e-services - an electronic supplied support to
EU consumers regarding VAT issues related to non-EU businesses

[22]             Communication from the Commission to the Council and
the European Parliament 'Instrument for Pre-Accession Assistance (IPA)
Multi-Annual Indicative Financial Framework for 2011-2013', COM(2009) 543 of
14.10.2009.

[23]            Pursuant to the amendments introduced by Commission
Regulation (EU) No 80/2010 of 28 January 2010 amending Regulation (EC) No
718/2007 implementing Council Regulation (EC) No 1085/2006 2006 establishing an
instrument for pre-accession assistance (IPA) the co-financing rate in IPA
regional development programmes is increased to 85%

[24]             CIP has three sub-programmes: 1. Entrepreneurship and
Innovation Programme (EIP), 2. Information and Communication Technology
Programme (ICT) and 3. Intelligent Energy Europe Programme (IEE). Participation
in EIP in 2007 and 2008 was co-financed with CARDS funds, whereas participation
in the other two sub-programmes was co-financed with IPA funds.

[25]             Figures include the CBC Programmes with Bulgaria, under shared management

[26]             Figures include also the CBC Programme with Greece, which is not under shared management

[27]             According to Commission
decision C(2007)5721 Operational
Programme (OP) "Regional Development" comprised allocations 2007-2009
(EUR 40.5 million) whereas modifying decision C(2010)7569 extended allocations 2010-1011
to the same OP, bringing total commitments to EUR 109. 2 million

[28]             The Operational Programme
Regional Development," has 4 axes, of which two are dedicated to
transport, one to environment, and one to TA. So the entries above for
transport show the total of the two transport axes. The amounts shown are those
determined by modifying Decision C(2010)7569, which, however, includes the
2010 and 2011 allocations as well.

[29]             As foreseen by Art. 166 (3)(a) of Regulation (EC,
Euratom) No 1605/2002 of 25 June 2002.

[30]             "Shadow" Sectoral and Joint Monitoring
Committees were held for IPA Component I because the conferral of management
powers for this component was not granted to the national authorities until 13
December 2010.

[31]             Annex with dates of SMC for all
IPA Components, Findings and recommendations are also included.

[32]             Figures include only Annual Action Programmes, while
not including other programmes managed centrally, such as Customs, or the running
costs for the European Agency for Reconstruction

[33]             Regulation (EU) No 540/2010 of the European Parliament
and of the Council of 16 June 2010.

[34]             European Regional Development Fund (ERDF), European
Social Fund (ESF).

[35]             European Agricultural Fund for Rural Development
(EAFRD), European Fisheries Fund (EFF).

[36]             Communication from the Commission to the Council and
the European Parliament 'Instrument for Pre-Accession Assistance (IPA)
Multi-Annual Indicative Financial Framework for 2011-2013', COM(2010) 640 of 10.11.2010.

[37]             Communication from the Commission to the Council and
the European Parliament 'Instrument for Pre-Accession Assistance (IPA)
Multi-Annual Indicative Financial Framework for 2011-2013', COM(2009) 543 of
14.10.2009.

[38]             Allocations reflect MIFF 2011-2013 adopted by Decision
COM(2010)640 of 10.11.2010. The difference with Table 1 is explained by the
fact that in the course of 2010, allocations for Component II for 2010 were
reduced to EUR 1.2 million, the remaining funds having been transferred to
Component I.

[39]             Figures include only Annual Action Programmes, while
not including other programmes managed centrally, such as Customs and Taxation,
or the running costs for the European Agency for Reconstruction and for the EU
Pillar of UNMIK

[40]             Communication from the Commission to the Council and
the European Parliament 'Instrument for Pre-Accession Assistance (IPA)
Multi-Annual Indicative Financial Framework for 2011-2013', COM(2009) 543 of
14.10.2009.

[41]             The difference of EUR 0.6 million compared to Table 1 is
due to a transfer from Component II (originally allocated to a CBC with Kosovo)

[42]             The difference of EUR 0.56 million compared to Table
1 is due to additional transfers to reinforce CBC with Adriatic
Programme / Participation in ERDF transnational programmes (SEE and MED)

[43]             Figures include IPA Adriatic

[44]             Figures include only Annual Action Programmes, while
not including other programmes managed centrally, such as Customs and Taxation,
or the running costs for the European Agency for Reconstruction

[45]             Communication from the Commission to the European
Parliament and the Council 'Instrument for Pre-Accession Assistance (IPA)
Revised Multi-Annual Indicative Financial Framework for 2011-2013', COM(2009) 543 of 14.10.2009

[46]             The difference with Table 1 is explained by the fact
that EUR 600,000 were reallocated from Component II to Component I

[47]             As above. Moreover, additional EUR 1.1 million were
allocated to the ERDF transnational progreammes

[48]             Figures include the CBC Programmes with EU Member
States and IPA Adriatic

[49]             Figures include only Annual Action Programmes, while
not including other programmes managed centrally, such as Customs and Taxation,
or the running costs for the European Agency for Reconstruction

[50]             An
evaluation on the intervention logic for programming pre-accession assistance
to Turkey under IPA was completed in September 2009: "Ad Hoc Evaluation of
the European Commission’s intervention logic for Financial Assistance in
candidate countries and key lessons for MIPD 2010-2012 revision A case study – Turkey". A number of thematic evaluations were also carried out between 2008 and 2010.
A Country Programme Interim Evaluation of EU pre-accession assistance to Turkey was finalized in 2010)

[51]             Communication from the Commission to the Council and
the European Parliament 'Instrument for Pre-Accession Assistance (IPA) Multi-Annual
Indicative Financial Framework for 2011-2013', COM(2009) 543 of
14.10.2009.

[52]             The difference with Table 1 is explained by the fact
that EUR 6.5 million of unspent funds were transferred from IPA Component II

[53]             Idem

[54]             C(2010)7470

[55]            Pursuant to the amendments introduced by Commission
Regulation (EU) No 80/2010 of 28 January 2010[55] amending Regulation (EC) No
718/2007 implementing Council Regulation (EC) No 1085/2006 2006 establishing an
instrument for pre-accession assistance (IPA)[55] the co-financing rate in IPA
regional development programmes is increased to 85%

[56]             Regional
Competitiveness: Decision C(2010)3776 of 23 June 2010; Environment: Decision C(2010)3773 of 23 June 2010; Transport: Decision C(2010)3770 of 22 June 2010

[57]             Figures include the CBC Programmes with Bulgaria

[58]             The
Human Resources Development Operational Programme for Turkey under IPA Component IV is subject to the application of the n+3 automatic de-commitment rule.
This rule foresees that the part of the budget commitment of given year will be
automatically de-committed by the end of the third year following the year of
its commitment, if it has not been used for the purpose of pre-financing
payments or intermediate payments from the Commission to the National Fund

[59]             Ministry of Environment and Forestry for the
Environment Operational programme; Ministry of Industry and Trade for Regional
Competitiveness; Ministry of Transport for Transport Operational programme and
Ministry of Labour and Social Security for the Human Resources Development
Operational programme.

[60]             Communication from the Commission to the Council and
the European Parliament 'Instrument for Pre-Accession Assistance (IPA)
Multi-Annual Indicative Financial Framework for 2011-2013', COM(2009) 543 of
14.10.2009.

[61]             This amount includes national funds for Tempus and
Nuclear safety and radiation protection, amounts in other budget lines for
actions specified in the multi-beneficiary MIPD, as well as the use of carried
over assigned revenues.

[62] For contracted and
paid amounts, only programmes managed centrally by DG ELARG were taken into
account (i.e. no Erasmus Mundus, Youth, Tempus, contribution to the Energy
Community Secretariat and ERDF). Therefore the actual percentages of contracted
and paid amounts are higher.

[63]              Source:
AAR2010

[64]             Which may concern contracts from any programme year

[65]              Instances
of contracted amounts being slightly above allocations are due to interest
accruing assigned to the programmes. Instances of decreasing contracted and
paid amounts when compared to last year are explained by closures and
de-commitments by the local authorities and by the Commission. Payments can
also decrease due to some local contracts being excluded from the final
declarations.

[66]             The difference with the figures available in Part I
(Country Section) is explained by the fact that those figures include only
Annual Action Programmes from 2001, while not including other programmes
managed centrally, such as Customs and Taxation. Amounts allocated to support
the running costs of the European Agency for Reconstruction and of the Office
of the High Representative in Bosnia and Herzegovina may also be excluded from
tables in Part I, as well as amounts allocated to support the operating costs
of the EU pillar of UNMIK in Kosovo

[67]             Increased contracting for CARDS in 2009 is explained by
the use of N+3 as contracting deadline (“N” being the commitment year)

[68]             Includes Montenegro in 2000-2001; includes assistance
from the Regional Programme for Integrated Border Management destined for the
whole of FRY/Serbia and Montenegro for 2002-2003 (in 2004, this is included in
the regional programme); includes EUR 8 million commitments for the Serbia and Montenegro State Union (2005)

[69]             Includes EUR 215.8 million commitments for interim
civilian administrations

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