Source: EURLEX
Language: en
Format: md

**COMMISSION OF THE EUROPEAN COMMUNITIES**

**COM(95)** **13 final**
Brussels, 20.02.1995

**THIRD AND FOURTH ANNUAL REPORTS FROM THE COMMISSION**

**TO THE COUNCIL AND THE EUROPEAN PARLIAMENT**

**on the implementation of Community assistance to the** **countries**
**of East and Central Europe (PHARE) in** **1992** **and** **1993**

**THIRD ANNUAL REPORT FROM THE COMMISSION**

**TO** **THE COUNCIL** **AND** **THE EUROPEAN PARLIAMENT**

**ON**

**THE** **IMPLEMENTATION** **OF COMMUNITY ASSISTANCE**

**TO THE COUNTRIES OF EAST AND CENTRAL EUROPE (PHARE)**

**IN** **1992**

**Contents**

_PREAMBLE_

I - _GENERAL CONTEXT FOR EC ASSISTANCE_ _IN J_ _992_

1.1 Legal basis
1.2 Financial framework

1.3 Policy orientations
1.4 Programming

II- _1992 MEASURES_

2.1 Preparation and decision making
2.2 National Programmes and Sectors
2.3 Multidisciplinary measures
2.4 Regional Cooperation

III - _HUMANITARIAN AID 1992_

_\W_ _- IMPLEMENTATION_ _OF 1990_ - _1992_ _MEASURES_

4.1 Tenders and contracts

4.2 Payments
4.3 Monitoring and Evaluation
4.4 Counterpart funds

V.- _SPECIFIC_ _ISSUES_

5.1 Assessment of the reform efforts in PHARE countries in 1992

5.2 Impact of PHARE : achievements and problems

VI - _COMMISSION ORGANISA_ _TION_

VII - _PHARE Guidelines_ _1993-199?_

Tables

1. Synthesis of National Indicative Programme 1992
2. Breakdown by sector of major Programmes 1992
3. Scheduling of Financing Proposals on 1992 budget
4. Sector breakdown of 1992 commitments

5. Regional Programmes 1992
6. Humanitarian aid 1992

7. International Tenders 1992

8. Disbursements as of 31.12.92

9. Macroeconomic Indicators of Phare Countries 1990-1992

PREAMBLE

This is the third report on Community assistance under the PHARE Programme to the
Central and Eastern European Countries, which was extended in 1992 to Albania, Estonia,
Latvia, Lithuania and Slovenia. It deals with the general context of the assistance in 1992. It
covers economic aid measures including regional co-operation aid and describes
humanitarian aid. It reviews the 1990-1992 measures in addition to two specific issues of
particular interest : the progress of reform in PHARE countries in 1992 and the impact of
PHARE. Finally It describes the new guidelines which were adopted in 1992 and which
constitute the framework for future PHARE support.

**I** **- GENERAL CONTEXT FOR EC ASSISTANCE IN 1992**

**1.1 Legal basis**

Council Regulations n" 3906/89 of 18 September 1989 ( [1] ) as amended in 1990 and in
1991(2) represent **the** legal basis for PHARE assistance. Following the recognition by the
Community and **the Member** States of Slovenia and Croatia as independent republics, the
Commission presented **a** proposition to the Council in order to formally include these
republics amongst **the** beneficiary countries of the "PHARE Regulation". The European
Parliament having given a negative opinion in respect of Croatia, the Council finally adopted
a Regulation including only Slovenia ( [3] ).

1.2 Financial framework

The initial allocation foresaw a budget of 1.000 MECU for 1992 (budget line B7-600-Aid for
economic restructuring of the countries of Central and Eastern Europe -CEEC's -).

During the year the Commission asked for the transfer of 25 MECU in order to finance the
incorporation of Estonia, Latvia and Lithuania in the PHARE programme, in addition to the
reconstitution of the appropriations used for the balance of payments grant to Albania.
Following the Budgetary Authority's approval of a transfer of 15.5 MECU, the final budget
amounted to 1.015.5 MECU, of which 1.015,3 MECU was committed.

The breakdown of the commitments was :

National Programmes( [4] )
Regional Programmes
Multidisciplinary measures
Humanitarian Aid

733.0 MECU

116.0 MECU

44.8 MECU

121.5 MECU

TOTAL 1.015.3 MECU

Under budget line B8-760 "mini-budget" appropriations of 15 MECU appeared. This was used
to cover administrative expenditure in support of the PHARE operations.

L 375 of 23.12.89. p. 11
Second Annual Report on the implementation of Community assistance to the countries of East and Central
Europe, p.4
L 277 of 11.8.92. p. 1
Including balance of payments (MECU 35) to Albania

1.3 Policy Orientations

The Commission's approach to programming for the period 1991-1992 was defined at the
beginning of 1991 and was applied for the first time during that year's programming exercise.
A synthesis of the developing ideas on programming in the form of draft guidelines
1991/1992 was discussed and given a favourable opinion by the PHARE management
Committee on 21.02.1991, and formally adopted by the Commission on 15.05.1991.

In addition to the extension of the aid programme to Albania. Estonia. Latvia, Lithuania and
Slovenia the Commission therefore intended in 1992. as in 1991. to focus PHARE assistance

on its fundamental objective which is to support the transformation of a market economy to
one based on market forces. In order to increase the efficiency of the assistance, the
emphasis was on concentrating on key sectors of the reform process. The "core areas"
identified in this transformation process were notably the restructuring of public enterprises,
the modernisation of financial services, the promotion of the private sector and the
development of the labour market and the social sector. Assistance in the core areas would
be complemented by support in related priority areas such as energy, environment,
telecommunications, transport, health, housing, training and agriculture. In addition
programming would also make due allowance for ongoing schemes of co-operation in the
domain of human resources development such as TEMPUS and ACE, as well as supporting
institution building efforts.

Assistance which would focus on technical assistance, training and studies as well as
financial assistance within the framework of sectoral programmes aimed at supporting the
development of a market economy.

While the bulk of the PHARE resources (75 -80 %) would be used for national programmes
in accordance with the above mentioned orientations. 10-15% would be used to encourage
programmes of a regional significance which can only be implemented on a regional basis or
enable economies of scale if implemented on a regional basis. In addition, 5-10% would be
reserved for humanitarian aid in response to the increasing economic difficulties and critical
hardships experienced in some central and eastern European countries.

1.4 Programming

The core areas were identified in the context of programming dialogues with the beneficiary
states on the basis of country priorities related to the objective of transformation and
sustainable development as well as the emerging economic strategies. Attention was paid to
the evolving or often transitional nature of many of the beneficiary governments and the
need for flexibility to be supported under the PHARE assistance for 1992.

Following from this phase, Indicative Programmes were signed with the relevant authorities
of the beneficiary countries during the first half of 1992 : CSFR 14.02.1992. Estonia
31.03.1992, Hungary 31.01.1992, Latvia 02.04.1992. Lithuania 03.04.1992. Poland
28..05.1992, Romania 31.01.1992. Slovenia 26.03.1992. The Indicative Programme for.
Albania was approved in the form of an exchange of letters on the 26.03.1992. Bulgaria had
already signed a multiannual Indicative Programme on the 08.02.1991 covering the period
1991/1992. In that context the allocation of the indicative amount for 1992 to projects and
other operations was therefore agreed upon on 29.01.92

The Indicative Programmes while not being formal binding agreements with the Commission
are working documents indicating priorities and providing a tramework lor the identification,
formulation and appraisal of projects to be financed. They are summarised in tables 1 and 2

The priority area identified as requiring most assistance in the majority of beneficiary
countries was economic restructuring covering notably enterprise restructuring and
privatisation, private sector development, and modernisation of the financial system. In
addition human resources, particularly the social and health sectors, as well as agriculture
and infrastructure were figuring as areas requiring assistance. Education, notably in the form
of support for the TEMPUS programme figured also prominently among the key areas.

In several countries a general technical assistance facility was identified as being a flexible
multidisciplinary instrument which would allow the beneficiary countries to respond relatively
quickly to urgent need for TA with a view to develop reform policies and provide institutional
support across a wide range of areas. In three countries, Estonia, Latvia and Lithuania, the
bulk of the assistance was provided in the form of this facility, thus reflecting the early phase
of the transformation of these countries. A fundamental characteristic of this is that basic
technical assistance is required for a multitude of core areas.

**Il-1992** **MEASURES**

**2.1 Preparation and decision making**

The total number of PHARE financing decisions on the 1992 budget was 96. These included
11 decisions under the heading of humanitarian aid in addition to 64 national sector
programmes and 15 regional cooperation programmes, and also four global authorisations for
small scale multidisciplinary actions.

The PHARE Management Committee met on ten occasions and gave a favourable opinion
on all financing proposals except for an import support guarantee programme for Albania of
4 0 MECU which was discussed at an extraordinary meeting of the Committee. The
proposal was then converted to an humanitarian aid programme of smaller size and
approved by the Committee.

The draft general guidelines for PHARE 1993/97 were discussed in detail at various meetings
of the Committee.

**2.2 National** Programmes

During 1992 the number of PHARE programmes grew to ten with the addition of Slovenia and
Albania and the transfer to PHARE of Estonia, Latvia and Lithuania which had previously
received Community assistance under the CIS programme. Total assistance on national
programmes - that is, excluding humanitarian assistance and regional programmes amounted to nearly 698 MECU (see Table). The largest PHARE recipient was Poland with
200 MECU. equivalent to 28.6% of total national allocations, followed by Romania (130
MECU, 18.6%). Hungary (101.5 MECU, 14.5%) and Czechoslovakia (100 MECU, 14.3%).

Table 4 shows the broad sectoral pattern of assistance by country. The figures should be
treated with a little caution mainly because for some general technical assistance
programmes not all the assistance is allocable by sector. Subject to this, roughly a quarter of
total national allocations (167 MECU. 23,5%); was committed to enterprise development
covering privatisation, enterprise restructuring, assistance to small and medium enterprises
(SMEs), investment promotion and export development; this may understate somewhat the
true extent of support since regional development programmes also include components
designed to stimulate local enterprise. The ratio compares with approximately 28% in 1991
and underscores the continuing primacy of this area of activity for PHARE assistance.

Agriculture continued to receive substantial support (85 MECU or 12% of national allocations)
reflecting the importance of this sector in the economies of Eastern Europe; this compares
with approx. 15% in 1991. Although agricultural supplies continued to make up a proportion of
such assistance, there was more emphasis during 1992 on assistance for agricultural strategy
development and transformation including farm privatisation, agro-industrial restructuring,
advisory services and the development of credit channels for the new private farmers.

Allocations to the social sectors and education (including the TEMPUS programme) which
absorbed about 27% of national programmes, represent a relative increase as compared to
1991. The growing importance of the social dimension in the reform programmes of CEECs,
including the need to restructure social security and health budgets, has been evident in the
growing number of PHARE programmes addressing social policy and social sector
reorganisational issues. These include support for labour market development to cope with
the inevitable rise in unemployment resulting from restructuring measures. There was
somewhat less emphasis on the environment in 1992 national programmes although
significant commitments continued to be made to this area in Poland and Hungary.

Although technical assistance remained a central plank of PHARE support, particularly for
countries at a relatively early stage of the reform process, other forms of assistance during
1992 continued to draw on the range of instruments available. These include: training,
manpower development, equipment supply, the provision of essential inputs in exceptional
cases (mainly in agriculture and health), and - increasingly - support for investment. The latter
has included PHARE contributions, typically on a cost-sharing basis with the Government or
local institutions, to developing financing mechanisms for newly emerging private agents
including loans and credit guarantee schemes for SMEs and private farmers, as well as
concessional financing schemes to promote environmental and/or regional development
goals.

Finally the PHARE Programme contributed 35 MECU for balance of payments support to
Albania.

**2.3 Multidisciplinary measures**

In addition to the sectoral programmes several operations were financed under the heading
**Miiltirii^rinlinarv** Multidisciplinary Measures. **Mpa<;iirp<;**

First of all a commitment of 18.8 MECU for "multidisciplinary technical assistance" was
agreed in several successive tranches as in 1990 and 1991. This is the enabling device
giving a global authorisation to finance, within given parameters, small-scale operations such
as feasibility studies and technical assistance without requiring a specific Management
Committee opinion and Commission decision on each operation.

As in previous years, in 1992 the multidisiplinary facility was used to finance much of the
identification, appraisal and auditing work for sector programmes. Planning studies were also
financed for instance for telecommunications and infrastructure.

After the so-called "Bangkok Agreement" between the EBRD and the EC in 1992, a new
cooperation was established between both institutions. This enabled the implementation of
measures in the beneficiary countries, which are approved and financed by the Commission
and are technically managed by the EBRD. This collaboration is considered to be successful
and spent up to 18.5 MECU, in actions mainly related to the financial sector.

Two complementary activities started in 1992 under the multidisciplinary heading. The first
one is PHARE Information Action, the objective of which is to inform the business and
political milieux of the EC Member States about the Community's relations with, and
assistance for the countries of Central and Eastern Europe The amount committed for this
programme was 2.5 MECU.

iClO

The other activity concerns the PHARE Democracy Programme, to which 5 MECU was
allocated for the first time in 1992. The Commission followed in accordance with the budget
line B7-600 comment of the European Parliament, which states that "An appropriation of
ECU 5 million must be earmarked for the continuation of the démocratisation process in
Central and Eastern Europe. It must enable financial and technical aid to be provided on a
non-party basis, through parliamentary institutions, for general civic education and
democratic principles to be stabilised and reinforced in countries with close or developing
links with the European Community".

The multidisciplinary measures amount to 44.8 MECU, for which the breakdown is as follows:

Multidisciplinary technical assistance 18.8 MECU
EBRD 18.5 MECU

Information Action 2.5 MECU

Democracy Programme 5.0 MECU

TOTAL 44.8 MECU

2.4 - Regional Cooperation

During the course of 1992, increasing emphasis was placed on developing regional
cooperation amongst the five PHARE beneficiary countries (Bulgaria, Czechoslovakia,
Hungary, Poland and Romania) on issues of common concern and interest. Thus 116 MECU
was allocated for regional programmes.

In 1992, considerable progress was made in strengthening the demand driven approach to
programme/project formulation with much greater participation by the beneficiary countries.
In December 1991, following a meeting of the 6 National Aid Coordinators in Brussels, a
Regional Coordination Group was established with a rotating annual Presidency commencing
with Bulgaria. This group was provided with technical assistance by the Commission and
became responsible for defining the core areas for assistance, for evaluating proposals
submitted by the beneficiary countries and by PHOS. and for achieving a consensus on the
sectoral allocation of the budget which was then agreed with the Commission. In this respect
detailed discussions were held in each of the countries with the National Aid Coordinators

and sectoral ministries.

Furthermore, to ensure participation in the implementation of programmes, Sectoral
Coordinators were nominated by the Group with the role of ensuring coordination and
programme monitoring amongst the sectoral ministries and between PHOS and the Regional
Coordination Group. The sectoral Coordinators are: Bulgaria (Telecommunications),
Czechoslovakia (Transport), Hungary (Environment). Poland (Nuclear Safety/Ace) and
Romania (Energy and industrial Property)

For the 1992 Regional programme, there were effectively 3 principal areas of assistance.
Infrastructure (35 MECU), Environment/Nuclear Safety (46 MECU), and Education/Training
(24 MECU) together with a number of Miscellaneous Programmes amounting to 11 MECU.

Within the Infrastructure Sector, by far the largest component was allocated to Transport
(21 MECU) of which the major proportion (15 MECU) was directed to the alleviation of acute
bottlenecks at border crossings on key transit routes between the Community and the
CEECs. This was in response to requests from the CEECs to reduce extensive delays which
were hampering trade. A crucial element in the assistance provided was the allocation of
funds for direct investment for the improvement of border crossings using local contractors.

**11**

Other components in the Infrastructure Sector included Telecommunications (7 MECU) with
the emphasis on training and Energy (7 MECU). The latter involved a wide range of
initiatives to study the potential for improving electricity and natural gas interconnections
between the Community and the CEECs, to rationalise oil refining and transportation
facilities as well as to develop management twinning and improve the regulatory
environment in accordance with the European Energy Charter.

For the Environment/Nuclear Safety component, 26 MECU was allocated to the Regional
Environmental Programme reflecting the CEECs' increasing concern with issues of a truly
regional nature which could only be addressed by concerted action. Whilst some elements
involved extensions to existing 1991 programmes (Danube River Basin, Black Triangle,
CORINE/Remote Sensing), others addressed environmental issues in the Baltic Sea and the
Black Sea, for which the latter involved coordination with the TACIS Programme and with the
Global Environment Facility being organised by the UNDP, UNEP and the World Bank. A
crucial element in this programme is the Post-Dobris Environmental Action Programme for
which 10 MECU has been allocated to form part of an overall fund supported by other donors
to target specific projects for investment support.

The allocation of 20 MECU for Nuclear Safety was in response to the increasing pressure to
provide assistance to improve safety standards for the Soviet designed nuclear reactors and
to develop alternative waste management facilities and explore decommissioning
possibilities.

For Education/Training, 24 MECU was allocated for ACE and TEMPUS. For ACE. substantial
improvements have been made in developing much more transparent selection and
evaluation procedures with participation by representatives from all PHARE beneficiary
countries as well as in the management of the programme with a consultancy firm appointed
to support DG II. For TEMPUS, a major proportion of the funding was allocated to a
continuation of support for JEPs (Joint European Projects) and for the operational costs for
managing the programme.

Finally, a number of miscellaneous programmes have been supported including the
extension of the 1991 Statistics, Customs and Standards programmes to Estonia, Latvia,
Lithuania, Albania and Slovenia as well as the Statistics programme to Poland. Additionally,
a pilot programme for the Fight Against Drugs was launched in response to the growing
concern at illicit drug trafficking in the CEECs ; and a Regional Industrial Property
Programme jointly funded by the European Patent Office designed to harmonise legislation
and upgrade facilities to protect industrial property rights.

In general terms, 1992 saw a strengthening of the coordination of regional programmes with
much greater participation by the beneficiary countries

^ 12

III. - PHARE HUMANITARIAN AID

PHARE Humanitarian aid in 1992 was dominated by the situation in Albania as well as by the
conflict in the former Yugoslavia. Preparations for a follow-up programme to complement the
1990-1991 operation for children in Romania were made.in addition to the implementation of
the food aid programme. The total PHARE budget of 121.5 MECU necessitated an increase
of the budget reserved for humanitarian aid. This increase was approved by the Council on
October 30, 1992.

10 MECU was reimbursed to FEOGA for the food aid provided to Albania. The Commission
also decided exceptionally to finance a critical industrial import programme to help the
Albanian industries to re-start production and so contribute to reduce the very high rate of
unemployment. This programme totalling 30 MECU was decided in two stages : the first one
in March for 10 MECU and the second one in June for 20 MECU. Counterpart funds deriving
from the sale of the imported spare parts and raw materials were generated in accordance
with the general protocol agreed with the Commission. A further allocation of 10 MECU was
decided in July mainly for the rehabilitation of hospitals and dispensaries throughout Albania,
the supply of basic medical equipment and for the building of houses for ex-political
prisoners. The humanitarian aid provided to Albania has to be set in the context of support
for the reform programme as the supplies provided were a necessary condition for starting up
the transformation process.

PHARE contributed 39 MECU to emergency aid for refugees in the Former Yugoslavia. This
operation was complemented by an additional 35 MECU mobilised from the 1990 PHARE
Yugoslavia financial sector programme which had never started. PHARE also contributed 0.5
MECU for the financing of the Peace Monitoring missions. At the end of the year, the
European Council in Edinburgh decided on a 100 MECU support programme for the Former
Yugoslav Republic of Macedonia to assist in coping with the consequences of the blockade
against Serbia. Thus, the Former Yugoslav Republic of Macedonia received an initial grant
of 10 MECU from PHARE for an import programme of medicines, raw material and basic
medial equipment which was complemented by a 15 MECU emergency grant provided by
the European Office for Humanitarian Aid (ECHO.)

Concerning ROMANIA, a medium term humanitarian aid programme of 12 MECU was
decided in December to complement 1990-91 actions for the rehabilitation of the orphanage
and the training of the personnel in charge of the orphanages. The 1992 programme consists
of the establishment and implementation of a global policy for the protection of children in
liaison with the Romanian Government. In addition PHARE also financed food aid to

Romania for an amount of 10 MECU.

**13**

**IV.-IMPLEMENTATION** **OF 1990-1992 MEASURES**

Once the financing decision has been taken, the normal procedure as explained in the 1990
Annual Report is for a financing memorandum to be signed by both the Commission and the
Implementing Authority, usually the line ministry in the country concerned, specifying the
respective responsibilities for management of both parties. As a general rule the use of
decentralised implementation systems continued in 1992 with line ministries being required
to set up Programme Management Units, designate an authorising officer, open a bank
account and draw up a detailed work plan and cost estimates for the first six months.

4.1 Tenders **and** contracts

In accordance with Commission Regulations Technical Assistance contracts are normally
awarded after restricted invitation to tender, i.e. on the basis of a selection of a limited
number of firms (shortlis) which are asked to submit a proposal. The criteria for the final
choice rely strongly on quality and to a lesser extent on price. For smaller TA contracts and
for non profit organisations the contract can be negotiated by direct agreement. For supply
contracts an open invitation to tender is published in the Official Journal of the EC.

All contracts can be awarded under either of two implementation systems used by PHARE :

- the direct implementation where contracts are awarded and managed from Brussels on
behalf of the recipient countries

- the decentralised implementation system where contracts are approved and managed
under a "work programme/advance payment " system by the recipient country.

Under both systems the same procedures have to be used, and under the decentralised
implementation system the Commission monitors the respect of these procedures by the
recipient institutions.

In late 1992 the Commission started the creation of procedural manuals, giving a complete
new set of standard texts and guidelines for contracts (supply as well as services contract)
and tenders (international as well as restricted).

Since data on contracts awarded under decentralised implementation reach the Commission
only with some delay, the information given in the table below is still essentially based on
contracts awarded under the direct implementation system. They show that 672 contracts
have been awarded in 1992 of which 155 were awarded after tendering (total tendered
amount of circa 70 MECU, i.e. 60% of the overall contracted total of circa 117 MECU)

The table below attempts to give a breakdown by nationality for contracts awarded from
Brussels. This breakdown does not include those awarded under the decentralised

implementation system. Information on these contracts will be available later

14

**CONTRACTS SIGNED DURING** **1992**

1. No. of cases

2. Total volume of contracts

3. National % in terms of volume

672 contracts

117 MECU

COUNTRY x1000 ECU i n %

Belgium 16.117
Germany 10.528
Denmark 7.501

Spain 2.114
France 16.527

Greece 734

Ireland 7.395

Italy 2.227
Luxembourg 27
Netherlands 5.350

Portugal 50
United Kingdom 15.878
PHARE countries 8.449

International Organisations & Others 24.430
Unclassified 53

TOTAL 117.380

4.2 Payments

13.7

9.0

6.4

1.8

14.1

0.6

6.3

1.9

4.6

13.5

7.2

20.9

In 1992 a total amount of 434 MECU was disbursed under the budget line B7-600. This is
almost the same amount that was paid during the two previous years (454.9 MÈCU). The
breakdown by programme is the following :

Programmes of 1990
Programmes of 1991
Programmes of 1992

48.9 MECU

169.4 MECU

215.7 MECU

TOTAL 434.0 MECU

Together with the disbursements made in 1990 and 1991, the total amount effectively
disbursed by the PHARE programme at the end of 1992 was 888.9 MECU, or 38.81% of the
total commitments taken with the beneficiary countries. An overall view of disbursements is
given in Table 8.

Out of disbursements made in 1992, 311.7 MECU were paid directly to the contractors by the
Commission in Brussels, and 122.3 MECU were advanced to the PIU's (Programme
Implementation Units) in the beneficiary countries. The total amount advanced to the PIU
since 1990 until the end of 1992 was 259.9 MECU representing 29.3% of the total 888.9
MECU disbursed.

**15**

The advances to the PIU reflect the particular aspect of the PHARE implementation system.
They refer to the decentralised implementation procedure, under which the recipient
countries are given a share of responsibility for execution. The recipient institution in charge
(PIU) receives an advance payment based on an estimated work plan and budget allocation
for the six month period ahead. This advance enables the PIU to conclude contracts and to
make payments provided certain Commission approvals are given.

While this implementation system is very desirable because it shifts responsibility
increasingly to the PHARE recipients, it also takes more time to set up the local units.
However, it allows the acceleration of disbursements once the local institutional capacity has
been established, which is usually in the second year of the programme cycle.

4.3 Monitoring and Evaluation

The major part of the programme is implemented under the decentralised management
system. There are now more than 60 PMUs in place in PHARE recipient countries. Given
this situation monitoring and evaluation have become an essential management tool.

While financial monitoring is being done through a standardised financial accounting and
reporting system (PHACSY) technical and operational monitoring is done through an
established planning and reporting system. Regular six monthly work programmes setting out
targets, activities, contacts, payments, etc. provide the basis for a regularly comparing the
plan with the achievements in the progress reports. This internal monitoring is being
supplemented by audits and missions if necessary.

Technical monitoring will further be improved by integrating the logical framework into all
planning and reporting documents (i.e. financial proposal, plan of operations, work
programme, progress report, end of programme report). The logical framework method will
allow the monitoring of achievements based on objectively verifiable indicators. Furthermore
it will provide a sound basis for evaluation of programme objectives and assessment of
impact.

While the monitoring is primarily geared towards an improvement of programme operations,
evaluation is meant to provide information which allows improving the programme through
better selection and design.

At the end of 1992 a first evaluation was prepared for the environmental sector in Poland and
Hungary. More sector and programme evaluations will follow. Evaluations will be either
undertaken during programme implementation or at the end of a programme. The
evaluations will be undertaken by outside experts based on clear terms of reference and
evaluation criteria in order to limit the bias.

In 1991 agreements on the use and generation of counterparts funds were drawn up with
Albania, Bulgaria and Romania. In 1992 agreements were drawn up with the governments of
F^tnnia I atvia and I ithuania

**16**

The legal basis for the utilisation and the management of the PHARE Counterpart Funds
(CPF) is the Memorandum of Understanding which was signed between the Romanian
Government and the Commission of the European Communities in September 1991 and the
Government Decision 470/1992. This decision transfers the financial administration of the

Counterpart Funds in Romania from the Romanian Development Agency to the Ministry of
Finance and the Department for European Integration of the Council for Co-ordination,
Strategy and Economic Reform. On October 29 1992 a Protocol was signed between the
Ministry of Finance and the R.D.A. to this effect. A programme for the use of Counterpart
Funds was approved by the Romanian Government and was presented for agreement by the
Commission of the European Communities in February 1992. The breakdown of the use of
Counterpart Funds was agreed through an exchange of letters between the Commission and
the Government of Romania. Counterpart Funds were generated by the sale of food-aid and
commodity supplies provided in the context of the PHARE Programmes for transport,
agriculture and humanitarian aid (médecines). Following agreement, part of the funds have,
however, been used inter alia for humanitarian aid programmes, directed specifically to
orphanages and children in care.

In Albania Counterpart Funds were generated by the sale of food-aid, industrial supplies and
agricultural equipment. As a result of the large budget deficit and in accordance with the
recommendations of the IMF, the Commission decided -in concertation with the major
donors- to use the Counterpart Funds for budgetary support.

Poland's Counterpart Funds have mainly come from the sale of animal feed and
agrichemicals. The funds were generated within the context of 1990 PHARE National
Programme, and their use was set on an annual basis according to the Indicative
Programme. The task of management of the counterpart funds has been assigned to the Cooperation Fund, an institution separated from the government. Part of the funds have been
used for the pre-financing of PHARE programmes and the promotion of the opening of the
new branch of the College of Europe in Natolin. Funds have also been allocated to training
programmes and in support of economic/legal research in the context of the Europe
Agreement.

Bulgarian Counterpart Funds were generated by the sale of agriculture, medical and energy
supplies delivered as from the end of 1990. The funds are managed on behalf of the
Government by a state Fund for Reconstruction and Development. Awaiting the agreement
on an Indicative programme some of the funds have been used for health care programmes.

Estonia, Latvia and Lithuania agreed on Counterpart Funds in December 1991. Prior to the
first deliveries, memoranda of understanding, setting out general principles for receipt and
distribution of EC supply programme assistance, and aides mémoires, setting out details
specific to the cereals supply programmes, were negotiated and signed with each republic.
All funds generated from the first tranche of sales have been allocated to income supplement
schemes targeted at the most needy socially deprived groups. An exception was made in
Latvia where the funds were allocated to agricultural reform and development measures.

**17**

V - SPECIFIC ISSUES

5.1 Assessment of the reform efforts in PHARE countries in 1992

In the transition to a market economy, whereas liberalisation and stabilisation can be
accomplished quite quickly, structural reform takes much longer to achieve. This draws a
clear line between those PHARE countries that have already dealt with liberalisation and its
repercussions before 1992, and those that were still struggling with the price and exchange
rate shocks and were launching structural reform in an unstable macroeconomic
environment. The group of early starters included Poland, Hungary, GSFR, Bulgaria, and
Slovenia.

5.1.1 Economic performance in 1992

In 1991, the collapse of the CMEA generated large losses of external markets for PHARE
countries, which aggravated the recession throughout the region. 1992 was still a depressed
year, except for Poland, which achieved slight GDP growth. However, there was a sharp
contrast between the two groups of PHARE countries. In the advanced countries, GDP
growth, though still negative, indicated a bottoming out of the recession: growth rates lay
between 1 % for Poland and -8% for Bulgaria, against a range of -8% and -17% in 1991.
Except in Albania, the less advanced countries experienced a sharpening of the recession in
1992 with GDP declines of between -6% (Albania) and -35% (Lithuania) against a range of 3.5% and -27% in 1991. The macroeconomic dynamics and imbalances underlying this
growth performance reflect the different stages in reform reached by the various countries.

For the early starters, the relatively better performance in 1992 over 1991 was mainly driven
by the successful reorientation of exports towards western markets which had started in
1991, and the correlated export growth. All countries ended the year with a trade surplus.
Investment, however, still has shown no sign of recovery. One of the positive features of the
advanced countries is the slowdown in inflation after the completion of price liberalisation.
Except Slovenia, all countries in the group had two-digit inflation in 1992. However, the
combined effects of the prolonged recession and the impact of the restructuring reform are
generating new macroeconomic imbalances, which risk becoming medium-term features for
these economies and which present major challenges for governments. Unemployment was
increasing very rapidly, exceeding 10% of the work force at the end of 1992. This increased
the burden of social protection in public expenditures Simultaneously the tax base was
shrinking. In some countries, such as Hungary. Bulgaria and Poland, this has already
resulted in an open fiscal crisis with public deficits repeatedly exceeding 5% of GDP

In the less advanced countries, the macroeconomic environment did not stabilise or began to
do so only late in the year. Inflation was still a three or four digit figure in 1992, and during
the year anti-inflationary policies relying on instruments such as excess wage tax were
implemented. The current account was in deficit, or if there was a constraint on the
availability of foreign exchange, the external balance was achieved through drastic import
restrictions. The current account imbalances were particularly acute for Estonia, Latvia and
Lithuania which only became independent in late 1991 and suffered acutely from the
disintegration of the Soviet Union and subsequent collapse of the Soviet internal market. In
these countries, unemployment and public deficits have not yet become an issue, except in
Albania and in Romania which experienced serious fiscal imbalances in 1992.

The progress in structural reform in 1992 was highly dependent on the initial macroeconomic
conditions described above. There are. however, two areas where the implementation of
reform encountered difficulties throughout the region: launching large scale privatisation and
the financial sector reform.

**18**

**5.1.2 Stabilisation, liberalisation and legislative framework**

The wide liberalisation and deregulation of the PHARE economies encompassed
liberalisation of prices, a new legal and regulatory framework, an opening up of the
economies to international markets and a switch to convertible currencies.

For all PHARE countries, the liberalisation of prices, the removal of administrative allocation
mechanisms and subsidies were largely completed within two to three years. The early
starters had already achieved this by the end of 1991, and in 1992 most of the less
advanced countries caught up, although Romania kept price controls on a number of goods.
Most of the remaining price controls and consumer subsidies in PHARE countries are on
household energy, utilities or transport services, and can be considered as compatible with
market economy standards.

Simultaneously, PHARE countries undertook the major task of adjusting their legislation to
the standards and requirements of a market economy. New company, accountancy and
auditing laws, together with competition legislation, were in place at a very early stage of the
reform process. Estonia, Latvia and Lithuania adjusted their legislation during 1992, and
Albania is lagging behind. The legislative and regulatory framework being put in place is
broadly adequate. The main deficiencies and challenges for the future lie in the enforcement
of the laws and the capacity of administration in charge of implementation and supervision.
The dispute resolution mechanisms are also often very weak. This may be a source of
confusion in practice, which becomes a serious deterrent to investment.

One of the priorities in setting up the legal framework was to lay down a clear basis for the
acquisition and protection of property rights. Although this was achieved relatively quickly, in
some cases rights are still unclear or restricted. The restitution issue is a source of confusion
in some countries, even two years after the enactment of the law. Everywhere restrictions on
the purchase of property by foreigners were introduced and are, in some cases, disincentives
to business. In several countries the legislation on land ownership needs to be amended or
modernised. In addition, in all PHARE countries the systems for the recognition of property
rights are underdeveloped, which restrains the development of real estate, housing or
mortgage markets.

On the external front, the opening up and liberalisation were also far-reaching, with a rapid
dismantling of tariffs, quotas and licences. Restrictions were still in place in 1992 in
Lithuania and Albania. In countries, which are more advanced, governments are having
some second thoughts on the merits of rapid and comprehensive trade liberalisation. In
1992, revisions in tariffs or the introduction of an import surcharge were implemented in the
Central European countries. But trade policy is, anyhow, bound by various trade agreements
that PHARE countries are concluding.

Trade liberalisation was supported by a rapid switch to current account convertibility of
PHARE countries' currencies, which gave domestic operators free access to foreign
exchange and allowed exchange rates to be adjusted to sustainable levels. 'Only minor
restrictions were still in force, such as ceilings on travel allowances in the Central European
countries. The advanced countries implemented these changes before 1992 together with
trade reform. In Estonia, Latvia and Lithuania, the currency reform began in 1992. In
Romania, because of a sustained gap between the official and parallel exchange rates, there
is insufficient foreign exchange to meet import demand and some sort of rationing is applied.
The exchange rate regimes remain extremely diversified across the region.

Finally, most countries have opened their economies to foreign investment through very
liberal legislation, allowing full foreign ownership, transfer of profits and repatriation of
capital. Bulgaria established the legal basis for foreign investment only in 1992, and Albania
has still a very poor and restrictive legislation.

19

5.1.3 Privatisation and restructuring

PHARE countries have generally given priority to privatisation to enhance the development
of a competitive productive sector. Restructuring has been less actively pursued, although
there is a growing awareness of the urgent need for restructuring plans. This is partly related
to the fact that privatisation has often resulted in a kind of appropriation of firms by the
workers and the management without generating any improvement in efficiency. Moreover,
it is now clear that privatisation will be a slow process and that a large state-owned sector will
dominate the economy for some years. More urgently, the accumulation of inter-enterprise
arrears and bad loans is now raising acute problems for the sustainability of ongoing reform

programmes.

Privatisation has not progressed uniformly throughout the region. Although by the end of
1992 the legal basis was in place in all countries, there were some impediments to
implementation, such as the issue of restitution or compensation, which has slowed down
the small-scale privatisation in Poland and the privatisation of agricultural units in Hungary,
Romania and Latvia. In most countries, small-scale privatisation, together with privatisation
of housing and agriculture, is underway. Large-scale privatisation had hardly begun, except
in Hungary, Lithuania, Estonia and more recently in 1992, in the CSFR. and. to a very limited
extent, Romania. Of the other countries. Poland. Bulgaria and Slovenia, finalised legislation
only late in 1992 or early 1993. In Albania the privatisation agency was set up recently, but
legislation is still lacking. Apart from drawing up a~list of eligible companies for privatisation,
Latvia did not initiate anything in this field in 1992. In most countries, however, the first
major step in large-scale privatisation was the transformation of state-owned enterprises into
companies. In some countries, this process entailed some restructuring through dismantling
of large companies into smaller units, as in Bulgaria, but it generally did not improve
enterprise behaviour. Nowhere is privatisation a smooth process, all countries encountering
obstacles, from the inadequacy of legislation in Albania, to the lack of political consensus in
Bulgaria, or the levelling-off of demand for state-owned firms in Hungary.

Once state subsidies have been withdrawn, access to preferential sources of credits has
been stopped, and a credible bankruptcy law is being enforced, restructuring of the nonprivatised part of the economy is expected to occur through market forces. However, in
most PHARE countries thèse three conditions have not yet been met, although the
dismantling of direct production subsidies is fairly complete in all countries by now.

Bankruptcy legislation was still very weak, except in Slovenia and Hungary, which
experienced massive bankruptcy waves in 1992. In Poland a comprehensive Enterprise and
Financial Sector Law was being finalised in 1992 which would establish the necessary
regulatory framework for bankruptcy procedures as well as for solving enterprise bank debts.
However, nô proper bankruptcy legislation existed yet in Bulgaria or Romania. It is not
enforced in the CSFR, lacks the institutional framework for implementation in Estonia, Latvia
and Lithuania, and had begun to be applied only recently in Albania

Financial discipline has been lax everywhere, and inter-enterprise arrears and bad loans in
the banks' portfolios are becoming an acute problem, amounting in all countries to several
percentage points of GDP. The chain reaction of liquidity problems makes the screening of
profitable and non-profitable companies difficult. At the same time, banks are prevented from
making resources available for new investments. Some countries began to address the issue
of bad debts in 1992. Most countries opted for a strategy of substituting bad loans with State
bonds, as in Hungary, Slovenia, Estonia, Bulgaria, and soon in Albania and Romania. In the
CSFR, a consolidation bank to which bad loans were transferred was set up. In Poland, part
of the stabilisation fund was converted for recapitalization purposes at the end of 1992.
Lithuania did not initiate any action, and Latvia intends to address the issue of interenterprise arrears through the confiscation of inventories

2 0

The difficulty of enforcing any financial discipline without generating massive closures of
companies has prompted some governments to adopt a cautious restructuring policy. This
often leads to a kind of wide screening of state-owned companies to select companies which
need temporary support or companies which can be reorganised or those which will be
liquidated. Such a screening has been initiated in Hungary, leading to some temporary
sectoral support programmes and to the selection of companies to remain permanently stateowned. Similar actions will start in Poland, with the forthcoming Pact on State Enterprises,
and for 100 companies in Romania.

In spite of the slow progress in restructuring and privatisation, the private sector is expanding
fast in all PHARE countries, as a result of the sustained creation of small and medium-sized
enterprises. This indicates the ability of these economies to generate a supply response and
suggests that the prospects for investment may improve.

5.1.4 Financial sector reform

The financial sector has a key role to play, in the transition, as it is expected to be an
important channel for allocation of resources according to market rules and the main support
for an upturn in investment.

All PHARE countries have overcome the first step of the reform, i.e. setting up a two-tier
banking system where the financial intermediation functions are separated from the central
bank functions of monetary control. It seems to have been easier to adapt monetary policy
than to develop an efficient banking sector. All countries except Albania have deregulated
interest rates and all except Estonia, Latvia and Lithuania have removed administrative
allocations of credits. Some countries have kept, however, credit ceilings or preferential
credits for some specific purposes.

However, the efficiency of the banking sector is very low. Although small banks have
mushroomed, the banking sector is still dominated by the large state owned banks which are
highly specialised and not familiar with commercial practices. Except in CSFR where the
voucher scheme implemented in 1992 covered banks, bank privatisation did not start except
for small banks in Romania, Poland, Slovenia and Hungary. Overall the sector is still highly
non-competitive. Starting from very low capital/asset ratios, all banks are now suffering from
the high share of bad loans in their portfolios. The recapitalization of the banks will remain
the priority of the reform programmes for at least the next two years. Thus, it is unlikely that
the banks will be able to participate more actively in the restructuring and privatisation
process and to enhance the development of financial markets in the near future.

5.1.5 Fiscal reform and social sector issues

For the government sector, the transition to a market economy implies major shifts away
from the legacy of central planning: an overall reduction of the size of the government, an
extension of the tax base to other sources than companies, a streamlining of social benefits
to target them to the vulnerable groups and a regrouping of social activities, which were in
the previous system split between companies and other public institutions. Most of the
countries are at the very beginning of this reorganisation process

**21**

AH PHARE countries have made significant progress in the modernisation of their tax
systems, except Bulgaria, Albania and Romania which is expected to start in 1993. Apart
from Hungary, which introduced personal income tax, VAT and corporate tax at a very early
stage of the reform and Estonia, Latvia, Lithuania and Slovenia which initiated the reform
already in 1990 and 1991, most of the changes in the tax area occurred in 1992. But
independently of the progress in tax reform, all countries experienced recently a collapse of
their tax base and the accumulation of large tax arrears as a result of the sharp recession in
the region. In addition, tax administrations are so weak that they do not succeed in enforcing
new laws and tax evasion is particularly acute in the new expanding private sector. Under
these conditions, a fiscal crisis as experienced in Hungary, Bulgaria and Poland seems
unavoidable at one stage or another of the transition.

On the expenditure side, even less progress was made. All countries have now a social
safety net in place, including a system of unemployment benefits, although this is very recent
in Albania. However, this social safety net is still strongly biased towards a system of
benefits awarded across the board without redistribution or targetting considerations. PHARE
countries have so far made very little progress, if at all, with the streamlining of the generous
social security systems, although countries facing a fiscal crisis such as Hungary, Poland,
Bulgaria, Romania or Albania cannot avoid painful measures any longer. These are
prerequisites for the social sector reform, which will probably necessitate an increase in
public expenditures if the education and health sectors are to be upgraded Other areas of
traditional state interventions will also very soon absorb more public resources. The next
priorities will be an active labour market policy and the rehabilitation ot infrastructures so
much needed for the improvement of the business environment

**5.2** - **IMPACT OF PHARE - ACHIEVEMENTS AND** PROBLEMS

The PHARE programme was initiated with Poland and Hungary. It has since grown to cover
eleven states of Central and Eastern Europe. Between 1990-92 some 2.3 billion ECU have
been committed to Community actions in support of the economic, social and political
transformation of these countries. Of this amount some 1.6 billion ECU (approximately 70%
of the total) have been allocated to national programmes; the remainder has financed a
variety of regional programmes as well as humanitarian and emergency aid The national
programmes thus constitute the main focus of PHARE involvement in the transformation
process and of related Community grant assistance

Since its inception PHARE had two broad aims: (a) to ensure that in each country Community
assistance helps to promote the key restructuring priorities; and (b) to respond flexibly to the
variety of needs at many levels (both in and outside the Government/state sector) which
systemic transformation generates. The latter include the requirements deriving from the goal
of progressive integration of CEECs in the European economy including specific assistance
for legal approximation and the harmonisation of standards for those countries having
Association Agreements with the Community. The grant nature of PHARE assistance and its
ability to draw on the wealth of Community expertise and resources have made it a
particularly desirable form of assistance for these purposes. This has resulted in a pattern of
assistance characterised by enormous diversity within a broadly sector-oriented framework.

Progress may be gauged from the sectoral analysis of national programmes. It is not possible
to provide other than a selective indication of the kind of activities supported and results
achieved. Within and across programmes assistance covers the spectrum from TA for policy
definition, strategy development and establishment of the legal and institutional structures to
help in actual policy implementation (e.g. for active privatisation transactions, agricultural and
business advisory services, financing schemes).

**22**

Up to 1992 over 400 MECU or nearly a quarter of total national allocations have been for
enterprise development covering privatisation, enterprise restructuring, support for small and
medium enterprises (SMEs), investment promotion and other related activities (e.g. export
development). In Romania PHARE has been the major actor in the privatisation process,
helping to prepare and implement the country's voucher privatisation scheme including
setting up the Private and State Ownership Funds and preparing share sales guidelines and
asset valuation seminars for companies; PHARE assistance has been instrumental in the
active privatisation of some companies and the preparation for privatisation of others. In
Poland, PHARE assistance helped to set up the Ministry of Privatisation and to develop the
legal framework for its operations; it has contributed to a number of major privatisations,
some involving foreign investment, as well to promoting the privatisation of thousands of
small firms.

Similarly, in Hungary the PHARE programme has helped with the establishment of the State
Privatisation Agency as well as the State Holding Company (charged with managing
enterprises in which the state intends to retain an interest) and related training alongside
assistance for active privatisation transactions. In Bulgaria the programme has involved
assistance with setting up the Privatisation Agency and legal framework, leading to the
adoption of the law on privatisation as well as the screening of all major enterprises and
completion of major sectoral restructuring studies.

Alongside assistance for privatisation/restructuring several programmes have initiated
schemes for channelling financial assistance to the newly emerging private economic agents,
notably SMEs and small-medium sized farmers. Such schemes, ranging from the provision of
advisory/supportNservices to concessional loans and credit guarantees have been established
in Romania, Hungary, Poland, Bulgaria, the Czech and Slovak Republics and Albania. In
Poland business support centres have been set up in several regions with almost 1900
entrepreneurs receiving training. In Hungary Local Enterprise Agencies have been
established in twelve of the nineteen counties providing advice and support to SMEs; the
LEAs work alongside appointed bank branches offering specialised credit facilities and
services and through which PHARE financial assistance is channelled.

In the area of agriculture PHARE assistance has helped with implementation of the land
reform/restitution programmes in Romania and Bulgaria (essential to promote a market in
land as a necessary but not sufficient condition for raising agricultural productivity) as well as
in the formulation of an agricultural policy for these countries. In both Hungary and Romania
PHARE is supporting the development of advisory services for the new private farmers
alongside the provision of credit (para 6 above), as well as helping with restructuring of the
agro-industrial sectors. Poland, Romania, Bulgaria and Albania have been recipients of
significant amounts of assistance for agricultural inputs and supplies.

PHARE support to the social sectors is helping with policy definition and institutional reforms
in the areas of: health care (Romania. Poland. Bulgaria. Lithuania); education and vocational
training (Hungary, Czech and Slovak Republics, Poland); labour market and employment
development (Romania, Poland. Hungary, Bulgaria, Czech and Slovak Republics); social
policy and social security/social safety net (Poland, Hungary, Romania, Latvia); community
development and self-help initiatives (Hungary).

**23**

Most PHARE programmes are still in process of implementation. For a number of reasons the
lead time involved in programming and implementation has in many cases been longer than
expected. Since PHARE's inception decisions on how the PHARE national allocation should
be used has relied on a demand-led approach in which Governments largely determine
priorities in the framework of a continuing policy dialogue with the Commission. In each
country the National Coordinator (usually the senior official or Minister in the Department
responsible for coordinating external grant assistance) plays a leading role in coordinating
internal demands from line ministries and other institutions for PHARE assistance. This

approach has ensured internal consensus on allocations to high priority areas. However, in
certain CEECs the allocations have not always reflected an optimal use of resources. This is
particularly due to: (a) a lack at central policy-making levels of well-defined medium term
strategies and related decision-making authority on relative sectoral priorities; (b) limited
capacities for, or resources devoted to, economic analysis and public expenditure/investment
planning; (c) changes of government which have caused priorities to change and/or
difficulties in clarifying strategy objectives, sometimes necessitating reallocation of
commitments; and (d). separate arrangements for coordinating grant and loan assistance. In
addition, systematic transformation can mean that while there is agreement on broad
objectives, detailed implementation policies or the precise application of them may still be
being worked out, perhaps in the teeth of political opposition.

These issues should be addressed in general through the.putting into practice of the principles
contained in the new PHARE Guidelines 1993-1997 (see paragraph VII) and more specifically
through future PHARE financed activities. This in turn is expected to lead to a further
strengthening of the demand led approach.

At the level of programme implementation it has taken time to establish the structures,
relationships and familiarity with Community procedures required for efficient programme
management and implementation. Institutional weaknesses and problems in attracting
qualified local staff for project management units have affected some programmes. To an
extent these problems reflect the 'growing pains' of institutions adapting to a new framework
of economic cooperation. At the same time the Commission's own procedures may have
been time-consuming. The problem is how to ensure the most rapid access to Community
expertise and resources consistent with preserving aid quality and accountability, recognising
that the procedures have themselves helped the transfer of know-how in important areas. A
review of PHARE procedures is currently under way with the aim of reducing lead times in the
cycle from programme approval through implementation.

**24**

VI - COMMISSION ORGANISATION

During 1992 the workload of PHARE almost doubled its tasks, including the execution of the
1990 and 1991 budgetary commitments in the order of MECU 127.5, together with the
programming and implementation of the 1992 programme amounting to MECU 1015. A
"mini-budget" allocation was used for a variety of staffing, equipment and operational
requirements related with PHARE assistance and aid co-ordination in accordance with the
Commission regulation governing its use.

Staffing of PHARE staff increased during 1992 as follows :

END 1991 END 1992

Officials 36 48

(all grades including
secretarial staff)

Non-statutory staff 72 85
(all grades including
secretarial staff)

Staff is organised into four units essentially on sectoral or functional lines :

1. Agriculture, environment, infrastructure, nuclear safety.
2. Enterprise restructuring and privatisation, SMEs, investment promotion, banking and
financial sector development
3. Employment, social policies and health, public administration and infrastructure,
humanitarian aid and NGOs country co-ordination and programming.
4. Administration and finance ; secretariat of the PHARE Management Committee
5. Legal and public affairs

In the latter part of 1992. following the reorganisation of some of the DGI's services, the
PHARE operational service became Directorate L of DGI and was granted a number of
permanent and temporary statutory staff post in response to the abolition of the mini-budget
and the accompanying reduction of non-statutory staff. However, as indicated in the two
previous year's reports, the constraint on staffing level has been a major preoccupation. Thus
the total number of staff during 1992. excluding the staff responsible for the implementation
of the Europe agreements only increased by 5% whereas the workload in financial terms
increased by 80%.

25

VII - PHARE Guidelines 1993-97

During 1992 new guidelines for PHARE covering the period 1993-97 were agreed by the
Commission with member states. Related 'Conclusions' were adopted by the Foreign Affairs
Council in November 1992. The two documents, which are complementary, are referred to
together below as the Guidelines' and will constitute the framework for further support under
the PHARE programme for Central and Eastern Europe countries (CEECs)

The Guidelines reaffirm PHARE's general mandate to promote the political, economic and
social transformation of the countries. They contain a number of elements or principles
designed to govern PHARE's operations over the next phase. Among the chief of these are:

a. a continuing flexible response to the differing needs of
countries reflecting their different levels of development,
stage of transformation reached and progress with reforms;

b. the assessment of progress with reform efforts as a factor in
determining both the annual national allocation to a country as
well as commitments to particular sectors within the national
allocation;

c. the incorporation of explicit policy objectives and related
performance measures in sectoral programmes while ensuring
that PHARE actions properly support priority restructuring needs;

d. greater concentration of effort in a limited number of areas at a
time coupled with a forward-looking multiannual approach to the
programming of PHARE assistance;

e. increasing support for investment alongside a continuing
emphasis on TA and training for policy definition and institutional
development;

f strengthened donor coordination including seeking out
opportunities for co-financing where appropriate and practicable;

g streamlining implementation procedures with a view to increasing
decentralising of programme management to implementing
agencies consistent with maintaining aid quality and
accountability.

The thrust of the Guidelines is thus towards a more 'performance oriented' approach in the
determination of assistance levels and the design of sectoral programmes, combined with
greater flexibility in the range of aid instruments and greater involvement of beneficiary
institutions in the management of programmes.

The point of aspect (d) is that by planning activities ahead over a two-three year period this
can help to avoid excessive 'dispersal' of PHARE effort in any one year Such planning would
be of a provisional/conditional nature (dependent inter alia on the review of priorities at the
time and on performance with existing programmes) and without commitment, but would
introduce an important element of predictability in PHARE operations; alongside (c) it would
help to enhance impacts at sectoral level.

**26**

The Guidelines will have implications for PHARE's methods of operation. The Indicative
Programme will become an increasingly important instrument of policy dialogue with recipient
governments. In addition to adopting a multi-year programming perspective it will review
reform efforts and make explicit the linkages between PHARE levels of support and progress
with reforms. In some countries the machinery for determining priorities for the use of PHARE
resources will need to be reviewed. A stronger emphasis on performance criteria in PHARE
sectoral programmes will necessitate more explicit conditionality in certain programmes,
requiring appropriate coordination with other donors.

It is recognised that the pace at which Guidelines principles can be applied will vary among
countries and will need to be progressive. For the larger recipients faster progress should be
expected. Even where 'full' implementation is the goal the scope will partly depend on
circumstances outside PHARE's control. The crisis nature of the reform process in some
CEECs and complex political and institutional circumstances (including the significant powers
of some legislatures vis-a-vis their Governments) can make forward planning an uncertain
venture. The required 'medium term' perspective and well defined conception of priorities
may be lacking or extend to barely more than a year or two in effective budgetary and public
expenditure planning terms, possibly limiting the scope for effective multi-annual
programming or increasing the risks associated with it. In general, the multiannual
programming approach will need careful handling to take account of the limitations and/or
risks in Governments' own planning horizons and, most importantly, to avoid locking PHARE
into inappropriate programmes over several years

_**tt**_

TABLE 1

SYNTHESIS OF NATIONAL INDICATIVE PROGRAMMES 1992

ALBANIA

Agriculture

Animal feed

Agricultural Chemicals
Veterinary Drugs

Seeds

Small Equipment

Mechanisation

Aid Coordination Unit

T.A. for the Economic Reform

SMEs Programme
Privat/Restructuring
Tourism

Financial sector

TEMPUS

Transport

Various sectors

**BULGARIA**

Enterprise restructuring and promotion of the private sector
Integral regional conversion projects and trade unions

Environment

Energy
Health (Part 1)
Health (Part 2)

Telecommunications

Agriculture
Human Resources (TEMPUS, ACE)
Nuclear Safety
Transport
Coordination Unit/Reserve

MECU

3

3

1

1

1

3.5

2.5

1.3

0.8

0.2

0.5

1.2

4.4

1.6

20

2.5

7.5

8

15

10.5

3

10

8

3.5

1

1

_**1%**_

TABLE 1 continued

MECU

CZECHOSLOVAKIA

Privatisation, Restructuring and Private Sector Development 31
Civic Society Development 2
Energy 4
Telecommunications 6

Education 10

TEMPUS 13

General Technical Assistance Facility (GTAF) 30
General Reserve 4

ESTONIA

Privatisation, enterprise restructuring,
private sector and SME development 3.5
Banking and financial sector reform 2.5
TEMPUS 1

Reserve for other technical cooperation actions
(including aid coordination - 0.5 MECU) 3

HUNGARY

Restructuring of the Economy

Strengthening the private sector, support for SMEs 11

Rural credit and land registration 5
Upgrading of statistical system 10
Research and Development 5

Reform of the Public Administration 5

Local and regional Development 10

Development of Human Resources

Social policy, labour market and social dialogue 26

TEMPUS 16

Environment. Energy and Infrastructure

Environment protection fund 10

Reserve 2

_**l°\**_

TABLE 1 continued

LATVIA

Privatisation, enterprise restructuring, private sector
or SME development

Banking and financial sector reform

TEMPUS

Other technical cooperation actions of which :

complement to 1991 PHARE Sectors

social sector

other

**LITHUANIA**

MECU

4.5

3.0

1.5

2

1.3

2.7

Financial and Banking sector 3.5
Privatisation and private sector development 9.5
Labour Market Development 2
TEMPUS 1.5

Technical Cooperation in other priority sectors and aid coordination 3.5

**POLAND**

Economic Restructuring

Structural development in selected regions - STRUDER

Export promotion - EXPROM
Development of tourism industry - TOURIN
Agriculture - privatisation and cooperatives - APRICOT

Land information system - LIS
Support to economic strategy and the creation
of the Ministry of Economy - SUPEC

Support to implementation of the Europe Agreement - SIERRA

Human Resources Development

Modernisation of vocational education - MOVE

Teaching and education in strategically significant areas - TESSA
TEMPUS

Local administration management building and
development - LAMBDA
Support for the science and technology sector reform - SCI-TECH

Environment

General Technical Assistance Facility - GFTA

Reserve

60

10

4.5

18

5

3

10

5

4

26

5.5

7

18

10

14

**} o**

TABLE 1 continued

MECU

ROMANIA

Industrial Restructuring and Privatisation 30
Small and Medium Size Enterprises 10
Social Sector 1 5

Agricultural Sector 32

Environment 5

Financial Sector 5

Human Resources (TEMPUS & Economic research) 14

GTAP 19

SLOVENIA

Enterprise privatisation & restructuration, small business

development, and training in Management & Marketing 2.5

Science and technology. Research and Development 1.6

Financial and Banking Sector Reform 1.6

Public Infrastructure restructuring 1

TEMPUS 2.3

_**2>[**_

TABLE 2

PROVISIONAL BREAKDOWN BY SECTOR OF NATIONAL PROGRAMMES (1992)
FORESEEN ACCORDING TO INDICATIVE PROGRAMMES

COUNTRY AMOUNT

(M.ECU)

ECONOMIC RESTRUCTURING

Privatisation/Restructuring/Pr vate sector development
Privatisation/Restructuring/Pr vate sector development
Privatisation/Restructuring/Pr vate sector development
Privatisation/Restructuring/Pr vate sector development
Privatisation/Restructuring/Pr vate sector development
Privatisation/Restructuring/Pr vate sector development
Privatisation/Restructuring/Pr vate sector development
Privatisation/Restructuring/Pr vate sector development
Privatisation/Restructuring/Pr vate sector development
SME

SME

Banking/Finance
Banking/Finance
Banking/Finance
Banking/Finance
Banking/Finance
Banking/Finance
Banking/Finance
Export promotion
Trade promotion
Support to Economic strategy &
creation of the Ministry of Economy SUPEC
Structural development in selected regions
Local and regional development
Integral regional conversion projects and trade unions

Tourism

Tourism

Tourism

Standards

AGRICULTURE

Import/sector programmes
Privatisation & development of agriculture
Privatisation of agriculture & agro-industries
Agriculture - Privatisation & cooperatives
Agriculture and food production
Land Information system
Rural credit and land registration

A

B

CS

ES

H

LV

LI

R

SL

A

R

A

CS

ES

LV

LI

R

SL

P

CS

P

P

H

B

A

P

R

CS

A

B

R

P

CS

P

H

0.80

20.0

31.0

3.5

11.0

4.5

9.5

30.0

2.5

1.3

10.0

0.5

5.0

2.5

3.0

3.5

5.0

1.6

10.0

4.0

3.0

60.0

10.0

2.5

0.2

4.5

4.5

2.0

15.0

10.0

32.0

18.0

3.0

5.0

5.0

**3>Z-**

TABLE 2 continued

INFRASTRUCTURE

Energy
Energy

Telecommunications

Telecommunications

Transport
Transport
Transport

Energy, Telecommunications, Transport
Public Infrastructure Restructuring
Nuclear safety

ENVIRONMENT

Environment

Environment

Environment

Environment protection fund

HUMAN RESOURCES

TEMPUS

Education

Education

Social Sector

Social Sector

Social Sector

Social sector

Social sector

Science & Technology/Research & Development
Science & Technology/Research & Development
Science & Technology/Research & Development
Science & Technology/Research & Development

Health

Health

Statistics

Statistics

Public administration/Local government
Public administration/Local government
Public administration/Local government
Public administration/Local government
Civic Society Development

VARIOUS TECHNICAL ASSISTANCE / RESERVE

COUNTRY

B

CS

B

CS

A

B

CS

R

SL

B

ALL

CS

P

CS

LV

R

H

Ll

H

P

SL

R

B

CS

H

CS

H

P

CS

R

CS

A

B

CS

ES

H

LV

Ll

P

R

AMOUNT

(M.ECU)

8.0

4.0

3.0

6.0

4.4

1.0

2.0

6.5.

1.0

3.5

7.5

5.0

18.0

10.0

84.5

10.0

9.0

2.0

1.3

15.0

26.0

2.0

5.0

7.0

1.6

1.0

25.5

4.0

10.0

2.0

5.0

5.5

2.0

1.5

2.0

1.6

1.0

8.0

3.0

2.0

4.7

3.5

34.0

**^jjMLi'SSlQN .OP** **THE** **llUKOI'llAN** **C O M M U N i r i l - ^**

**IJlKCCTORATC-GCNeRAL FOR** **E X T E R N A L RELATIONS**

**OPERATIONAL SERVICE PHARE**

TABLE 3

**PLANNING COMMITMENTS OP PHARE PROGRAMMES O N 1992 BUDGET**

**17**

**OS/07**

**••$SL9**

***97;0** **îïîSiS**

**IS**

**28/07**

**Kf43:ll**

**16**

**20/05**

**S14SÏ5**

**19**

**16710**

**20**

**02/12**

**21**

**14/12**

**M A N A G E M E N T COMMITTEE OR DECISION** **Pro-**

**-1992**

**15**

**17/03**

**T O T A L**

**>:74;00** _**M^I-0<>**_

**NATiONAferROGriRA>>irft:irâj**

**:ALBANtA-:**

**549:0** **8*S*>**

**15.0**

**4 . 4**

**1.2**

**4.4**

**0 . 0**

**60.00**
**AI.970I** **Import guarantee** **(caoccllod** **[1]** **.** **replaced** **by** **A9203)** IfPJL **0 0 0**

**AL9702** **Dcv.** **agriculture** **.&** **transport** **infrastructure.** **15.0** **15.00**
**AL9205 Geocral** **Technical Assistance Facility** **4.40**

**AL9702** **Dcv.** **agriculture** **.&** **transport** **infrastructure.** **15.0** **15.00**
**AL9205 Geocral** **Technical Assistance Facility** **4.40**
**AL9206** **Transport** **4.40**
**Al.9207 Tcnipui** **1.20**

**AL92IO** **Balance of payments grant** **35.0** **35.00**

**DU1X7ARLA** **30.5** **0 . 0** **8.0** **3.5** **2S.5** **87.50**

**HG9I01 Environment** **2** **7.5** **7.50**

**HG9107 Energy** **8 . 0** **8.00**

**1IG9201 Restructuring of health** **system** **15.0** **15.00**

**HG9202 Nuclear safety** **3.5** **3.50**

**IIG9203** **Telecom** **3 . 0** **3.00**

**HG9204 S M E** _**Si**_ **regional reconversion** **22.5** **2 2 . 5 0**

**HG9205** **Tcmpus** **8 . 0** **8.00**

**HÇ92XXTransport (transfcrod** **to multidisciplinary)** **0.00**

**HG9206** **Agriculture** **10.0** **10.00**

**MO9207** **Energy,** **complementary** **[-]** **for winter** **92(nuclcar&.lhcrm** **10.0** **10.00**

**HG9301** **Restructuring** **of** **health system** **- > ' 9 S**

**HUNGARY** **14.5** **ICO** **0.0** **35.0** **5.0** **20.00** **101.5.0**

**HU9I12** **Science** **<fc.** **tech** **noiogv** **5.0** **5.00**

**IU/9201** **Statistical** **information** **system** **9 . 5** **9.50**

**HU9202** **Agriculture (rural credit** **&** **land** **registration)** **5.0** **5.00**

**HI.** **79203** **Environment protection** **Fund** **10.0**
**HU9204** **Employment** **<v.** **social dialog** **20.0** **20.00**

**HU9205** **Tcmpus** **16.0** **16.00**

**HU92I0 lyocal** _**Si**_ **regional development** **10.00** **10.00**

**HU9206** **SME:** **rcstruct.** _**St.**_ **privatisation** **11.0** **11.00**

**HU9209** **Social Policy Development** **6.00**

**HU9208** **Tech.** **Assist,** **for** **the** **implement,** **of** **Eur.Agreement** **4.00** **4.00**

**IUJ9207** **Public administration reform** _**Si**_ **training** **5.0** **5.00**

**r O L A N D** **0.0** **25.0** **15.5** **36.0** **89.5** **200.00**

**r** **1.9201** **Tourism** **4.5** **4.50**

**1*1.9202** **Export** **promotion** **10.0** **10.00**

**1-L9203** **Tcmpus** **25.0** **1.0** **2 6 . 0 0**

**l*L92XX** **Supp.** **to** **ccon.** **strategy** _**&.**_ **Min.** **or** **Econ.** **- >** **PL920S** **0.00**

**1*1.9205** **Agricultural and Rural Development** **18.0** **18.00**

**l'1.9206** **I j n d information srvstcm** **T . A .**

**1*1.9209** **Science** _**St**_ **technology sector reform**

**5.0** **5.00**

**7 . 0** **7.00**

**1'1.9208** **Public** **sector** **niana*.** **coord.** **&dccc«tr.-OMEGA** **1]** **8.5** **8.50**

**l*L9210** **Education Reform** **9 . 0** **9.00**

**1*1.9204** **Environment** **18.0** **18.00**

**l*L9207** **Structural** **dcvcl.** **io sclcctod** **localities -** **S T R U D E R** **60.0** **6 0 . 0 0**

***1.92xx** **Support to** **implctn.** **of** **Eur.Agfccm.-SlERRA** **PL9211** **0.00**

**'1.921 1** **Technical Assistance for the** **implement,** **of** **Eur.Agreement** **34.00** **34.00**

**R O M A N I A** **4 . 0** **30.0** **46.0** **0.0** **15.0** **15.0 1** **0.01** **20.00** **130.00**

**RO9105** **Technical Assistance Fund** **G T A F** **4 . 0** **4.00**

**RO920I** **Privatization** _**Si**_ **restructuring** **30.0** **30.00**

**KO9203 Privati7Jtion** **agro-industry** **12.0** **20.00** **32.00**

**UO9204** **Financial sector** **5.0** **5.00**

**KO9205** **G T A F** **16.0** **16.00**

**KO9206** **Environment** **5.0** **5.00**

**KO9207** **SMF.** **10.0** **10.00**

**KO9208** **Tcmpus** **13.0** **13.001**

**UO9209** **Employment** **^.Social** **Development** **15.0** **15.00**

**CHECHOSLOVAKIA** **0.0** **0.0** **43.0** **41.0** **12.0** **0.00**

**OS920I** **GTAF** **30.0** **30.001**

**OS9202** **Encigy** **-:.0** **4.00**

**O 9 2 0 3** **Pnv.iiulion** **31.0** **i** **3** **1.00**

**OS9204** **P/'ucat.on** **10.0 1**

**<'S9205** **T,** **13.0** **I** **2 0**

**10.00**

o.ool

_*****_ **.00**

**</S9206** **Telecom**

**S9^()7** **C.v.r**

**<l)** **[: ]**

**I** **6.0**
Jl. iil

_**rx.i**_ **Iwl-^nJiicc)** **:** _**(2 ) =**_ **a p p r o v e** **(vis.:) : (3)** **=** **not approve)** **i.-M** **vti** **lomiilr.** **confirm»!**

**34-**

**COMMISSION** **OP** **THE EUROPEAN COMMUNITIES**

**DIRECTORATE-GENERAL** **FOR EXTERNAL RELATIONS**

**OPERATIONAL SERVICE** **PHARE**

M Bec ^ P^v. _~2-_

**PLANNING COMMITMENTS OF PHARE PROGRAMMES ON 1992 BUDGET**

**MANAGEMENT COMMITTEE OR DECISION** **Pro**

-1992

**15**

17/03

**16**

**20/05**

**20**

**02/12**

**21**

**14/12**

**17**

**08/07**

**18**

**28/07**

**19**

**16/10**

.;.;.:•:; • . * & E X - Y U C O S L ^ I A W
SL9201 SLOVENIA: Gen. Technical Assistance Facility
SL9202 SLOVENIA: Tcmpus
CR92XX Croatia (p.nU
BH92XX Bosnia-Hcrzgovina
MN92X Montenegro
MA92X FYR0M

Tl IE BALTIC STATES

ZZ9302 Baltic Slates: Improvement of Animal Production
ZZ92xx Baltic States: Energy Supply

LI920I LITHUANIA: GTAF

LI9202 LITHUANIA: Privatisation

LI9203 LITHUANIA: Tcmpus
LE920I LATVIA: GTAF

LE9202 LATVIA: Tempus
ES920I ESTONIA: GTAF

ES9202 ESTONIA: Tcmpus

0.0 0.0 2-3

**2.3**

**0.0** **0.0** **4.0**

**1.5**

**1.5**

**1.0**

0.0 _6.1_

6.7

0.0 0.0 0.00

0.00

0.00

0.00

0.00

41.0

9.0

9.5

13.5

9.0

0.0 0.0 0.0 0.00

:;-•::><-•:> 93,

              - >93

**TOTAL** rAL [

9.00

6.70

2.30

0.00

0.00

0.00

0.00

45.00

0.00

0.00

9.00

9.50

1.50

13.50

1.50

9.00

1.00

**(1) =** **authorized** **(ocxlonnancc)** **; (2)** **=** **approved (vise) ; (3)** **=** **not approved** **|X|** **programming hot** **yet formally confirmed**

Table 4

SECTORAL BREAKDOWN OF 1992 COMMITMENTS

1992 National Programmes : Commitments by Sector (MECU)
Pol. Rom. Cz-SI. Slov. Alba. Esto. Latv. Lith. Total %

Hung

Esto.

Lith.

Bulg.

Alba.

Rom.

Cz-SI.

Slov.

Latv.

Total

Enterprise Development (1)
Financial Sector Reform

Agriculture

Infrastructure (2)
Regional Development
Environment

Education (3)
TEMPUS
Social sectors (4)
Public Administration

Miscellaneous (5)

TOTAL
% Country Allocs

40

5

32

6.5

5

1

13

15

12.5

130

18.6

31

5

3

12

10

15

10

2

12

100

14.3

22.5

10

24.5

7.5

8

15

87.5

12.5

40(*)

18

5

30(*)

18

16

26

8.5

38.5

200

28.6

11

5

10

10

5

16

26

5

13.5

101.5

14.5

2.5

1.6

1

1.6

2.3

9

1.3

2.1

0.5

15

4.4

1.2

0.7

0.9

0.2

25

3.6

3.7

2.3

0.35

1

2.65

10

1.4

4.5

3.0

0.7

1.3

0.55

1.5

1.3

2.15

15

2.2

9.5

3.5

0.6

0.9

1.5

3

1

20

2.9

166.8

20.9

84.65

55.6

40.0

41.05

33.6

85.5

71.0

16.4

82.5

698.

100%

%

23.8%

3.0%

12.2%

8.0%

5.7%

5.9%

4.8%

12.3%

10.2%

2.3%

11.8%

100%

(1) Includes: Privatisation, Enterprise Restructuring, SMEs, Investment Promotion, Export Development.

(2) Includes: Energy/Nuclear Safety, Transport, Telecommunications.

(3) Includes: Science & Technology, Scientific Research.

(4) Includes: Health, Employment, Social Policy, Labour Market Development.

(5) Includes: Customs, Statistics, Tourism Development, Land Information Systems, Aid Coordination, Programme Management and Other
Multi-Sectoral/Non Sector-Allocated GTA.

(6) STRUDER programme allocated 30 MECU to Enterprise Development and 30 MECU to Regional Development.

(7) Excluding balance of payments assistance to Albania of MECU 35.

**(A**

_**y»**_

**Table 5**

**REGIONAL COOPERATION PROGRAMME 1992**

Sector Budget
(MECU)

A) INFRASTRUCTURE

Transport programme
Key components :

             - Transit Infrastructure

             - Trans-European North/South Motorway and
Trans-European North/South Railway

             - Integrated Training-cum-Technical
Assistance Programme

             - Sectoral Studies

ii) Telecommunications programme
Key components :

             - Special case studies/training needs

             - Management/coordination

             - Evaluation/management

             - Contingency

iii) Energy Programme
Key components :

Electricity Interconnections
Natural Gas Interconnections

Oil Refining/Transportation
Management Twinning Training
Legislation/Regulation

B) ENVIRONMENT

Environment Programme II
Key components :

             - Integrated Environmental Programme for
Danube River Basin

Black Triangle
Black Sea Programme
Baltic Sea

Remote Sensing
Support for Regional Environmental Centre
Post-Dobris Environmental

Action Programme

15.0

2

2

2

21

**5.6**

**0.7**

**0.1**

**0.6**

**4**

**3**

**1**

**2**

**5**

**1**

10

26

_**11**_

ii) Nuclear Safety Programme
Key components :

Safety Authorities, Emergency preparedness 6
Fuel Cycle, Waste Management, Decommissioning 2
W E R 230 Operational Safety 7
W E R 213/1000 Operational Safety 5

20

C) EDUCATION/TRAINING

ACE for all PHARE countries 6

TEMPUS (JEPS) 12.5
TEMPUS (Technical Assistance) 5.5

24

D MISCELLANEOUS

Extension of 1991 statistics programme to
Baltics. Albania/Slovenia and Poland       - 2.5

Extension of 1991 customs programme
to Baltics and Albania 1.5

Extension of 1991 standards programme
to Baltics. Albania and Slovenia 2

Fight against Drugs . 2
Regional Industrial Property Programme (RIPP) 3

**ÏT~**

TOTAL 116

_**Ix**_

Country

ALBANIA

ALBANIA TOTAL

BOSNIA-HERZEGOVINA

TABLE 6

**PHARE** **-** **HUMANITARIAN** **AID 1992**

Nature & Operation **Amount** (MECU)

Import support I
Import support II
FEOGA

Hospitals/ex-political prisoners/NGO's

Emergency help

ECHO

10

20

10

10

50

1.5

37.5

39

BOSNIA-HERZEGOVINA TOTAL

FYR0M

FYR0M TOTAL

ROMANIA

**ROMANIA TOTAL**

YUGOSLAVIA

**YUGOSLAVIA TOTAL**

Import supply drugs 10

10

Food aid

Children

10

12

**22**

Monitor mission 0.5

**0.5**

**TOTAL HUMANITARIAN** **AID 1992** **121.5**

**OPEN SUPPLY TENDERS IN THE OFFICIAL JOURNAL**

**OF THE** **EUROPEAN COMMUNITIES**

Information System

Computer Equipment

Survey Equipment

Computer Equipment and Software

Equipment for Blood Collection and Production.

Monitoring system for water quality

Computerised Operations Support System

Upgrading of the information system

Mobile Air Quality Monitoring Station

Computer System

Information Centre for Hazardous Waste

Equipment for a Toxicologic^! Centre

Laboratory Equipment

Computer System

Emission Monitoring System

Stack Emission Monitoring Vansv

Bending Roller

Computer Equipment

Equipment for Water Quality Measurement

Equipment for the Ecotoxicological Center Bratislava

Upgrading of the Information System

Various Supplies

Computer Equipment

Various Supplies

Medical Equipment

Various Supplies

Certificates or ownership

Air Pollution Monitoring Network

Impmvmg the numitoniii; til drinking water quality

_**2**_ _**[C]**_ _**\**_

**Date of Number of** **Country**
**Official Journal**

_**\*V>U=**_ **" ^**

CS

**HU**

**BG**

**CS**

**RO**

**CS**

**HU**

**RO**

**RO**

**BG**

**CS**

**CS**

**RO**

**BG**

**HU**

**PL**

**PL**

**BG**

**HU**

**CS**

**HU**

**RO**

**RO**

**RO**

**BG**

**RO**

**RO**

**HU**

**CS**

17/12/92

**08/12/92**

**25/11/92**

**10/11/92**

**19/09/92**

**16/07/92**

**09/07/92**

**27/06/92**

**19/06792**

**18/06/92**

**13/06/92**

**13/06/92**

**03/06/92**

**21/05/92**

**20/05/92**

**16/05/92**

**16/05/92**

**06/05/92**

**05/05/92**

**05/05/92**

**28/03/92**

**26/03/92**

**24/03/92**

**21/03/92**

**19/03/92**

**18/03/92**

**29/01/92**

**04/01/92**

**04** **AM/\>2**

S 245 p.07

**S** **238 p.06**

**S 229 p.07**

**S218p.07**

**S** **183** **p.09**

**S 136** **p.05**

**S 131** **p.07**

**S** **123** **p.05**

**S 118** **p.07**

**Sll7p.06**

**S114p.l2**

**S** **114** **p.ll**

**S** **107** **p.07**

**S 099 p.08**

**S 098 p.07**

**S 096 p.06**

**S 096 p.06**

**S** **088** **p.05**

**S 087 p.05**

**S 087** **p.** **05**

**S 063 p.07**

**S 061** **p.05**

**S 059 p.07**

**S** **058** **p.07**

**S** **056** **p.06**

**S** **055** **p.07**

**S 020 p.07**

**S** **003** **p.07**

**S** **(10."'** **p.06**

GENERAL OVERVIEW OF THE PHARE PROGRAMMES as at 31/12/92

PAYMENTS .

95.2

_.Wf&ti_

53.7

53 ;7

19.3

19.3

1.9

1.9 1

0.9

PAID ON BUDGET YEAR (in million ECU)
1990 1991 1992 Total

Balance

to be paid
_mmmmsfr_
_wmm&9mi_
_mm®$$6w_
_^%mmm-_

 - \:";-.*:\-=?0.2;

_•'••:,U-^S[m_

..73.3

86.5

. [J] -0.6.-5

63.3

99.7

: 163.5

   - ..-••..•. 1.7

      - •^•••;-2."8
26.4

30.9

0.6

0.1

7.4

8.1

_>_

148.7 V

   - 477.6

     - 775.1

1 401:4

1991

1992

National programmes

Programm

year
m 1990

(2) 1991

1992
**'** **[;]** ***:Totaï'**

113.1

97.6

_•••<_ 21017

11.3

30.4

41.7

1.4

22.1

23.5

4.3

1.8

6.1

1.8

0.1

Total

..•.••••••••.•••¥i;253/4

- ••••.•••;•••,: [ :] -:-N217.6

_mwmwz_

-••' _-mm-_

^ 66.3

   - :i59.7

.48.2

174.2

21.0

36.6

16.3

73.9

8:3

    - .-•7.2

.10.9

26.4

2.8

   - ••' ' 0.3

: V [:] 0 . 1

-'•3.2

  - -351.8

   - ::321 [:] .'4'

.,215.7

!-:888.9

45. r

120.0

140.2

::.:305.3'

1.3

29.3

48.2

78.8

0.3

14.5

16.3

31.1

2.1

5.4

10.9

18.4

0.1

0.2

0.1

:':•• •.• 0.4

Total %

63.49%

35.32%

19.79%

35.46%

99.70%

82.12%

39.67%

66.82%

97.67%

36.64%

14.05%

31.13%

83.00%

72.00%

29.22%

46.07%

82.35%

75.00%

1.33%

28.32%

70.29%

40.23%

21.77%

38.81%

Humanitarian aid (3) 1990

1991

1992

"Total

Regional programmes 1990
1991

1992

Total

Multidisciplinary 1990
1991

1992

Total

Others 1990

1991

1992

Total

Committed

399.1

616.0

708.5
*:: [!] ltt723'#

66.5

72.7

121.5

- •. v->i260;7

21.5

99.9

116.0

- : [:] 237;4

10.0

10.0

37.3

57;2

3.4

0.4

7.5

**•^V&gflStf**

: : :;-. [:] .'.x.-i:9.

131.9

152.0

0.0

$»283;9,;

**.** **•'•.** **[:]** **.::':0i9-**

171.0

0.0

0.0
_skm/im_

1990

1991

1992

.• :- [:] ïi=Totâl:

48.9

169.4

215.7

*.S::::,::'434;0

Total (1)

(2)

500.5

799.0

990.8

&ii2&90B;

Budgets: Alloc, payments 1 350.01 470.9 1 (*) 437.01

(1) includes 515.980Ecus committed in 1991 for H9011 Infrastructure commerce extérieur
(2) includes 24.5 MioEcus balanceof'91 programmes committed in 1992 (BG9101.BG9107.HU9112.RO9105)
(3) includes 51 MioEcus FEOGA-garantie
(*) 537 Mccu, reduced to 437 after Notenboom transfer

**m**

**00**

_**I**_

Macroeconomic Indicators of PHARE Countries - 1990 • 1992

Lithuania

   - 5.0

  - 1 2 . 8

   - 3 5 . 0

   - 1 1 . 5

   - 8.0

   - 3 0 . 0

0.3

   - 1.3

  - 56.9

8.4

2 7 5 . 0

1 0 2 0 . 5

0.0

0.0

1.0

   - 2.9

2.8

2.2

2.1

3 5 . 3

9 2 . 7

n.a.

0.1

n.a.

n.a.

n.a.

Stmd by

|Jul92-Jun93)

on uieV

Hungary

   - 3.5

  - 11.9

   - 5.0

   - 8.4

   - 5.0

  - 23.0

   - 9.2

  - 19.1

   - 9.8

28.9

3 5 . 0

2 3 . 0

1.7

8.6

12.2

   - 0.1

   - 4.6

   - 7.4

   - 1.6

7.0

8.3

0.1

0.3

0.3

3 3 5

245

214

|P«b9I.Peb9*l

oil IncV

Poland

  - 11.6

   - 7.6

1.0

   - 2.2

   - 0.9

   - 1 1 . 0

  - 21.3

   - 1 4 . 0

4.2

2 4 9 . 3

6 0 . 4

4 3 . 0

6.3

11.8

13.6

3.1

   - 5.6

   - 6.0

4 3 . 4

17.5

9.7

0.7

   - 2.2

    - 0.3

251

346

357

_iff_

|Apr9!.Ap/94|

off trie*

Romania

   - 7.4

  - 13.0

  - 15.0

-3.0

   - 5.0

    - 9.2

  - 17.4

  - 18,7

  - 21.8

4 7 3, 7 (f)

1 9 9, 0

0.0

2.9

8.4

   - 1.1

   - 2.0

   - 5.0

  - 44.8

  - 29.3

4,9

   - 1.7

   - 1.4

   - 1,3

8

54

80

Stmd by

M.y92-Apr93)

all triek.

Slovenia

  - 3.4

  - 9.3

  - 6,5

2.8

  - 1.0

 - 17,0

 - 10.5

 - 12.4

 - 13.2

5 5 0 . 0

118.0

2 0 1 . 0

6.9

10.1

13.3

n.a.

2.6

0.6

25.0

   - 5.0

4.9

0.7

0.2

0.9

n.a,

46

43

no

programme

Baltic itates

Latvia

**•0.2**

**•** **3.5**

**•32.9**

**• 1 7 . 2**

**•3.6**

**• 13.0**

**7.4**

**0.0**

**•35.1**

**10.5**

**124.5**

**9 0 9 . 6**

**0.0**

**0.0**

**2.3**

**2.2**

**6.3**

**• 1.4**

**n.a.**

**n.a.**

**•85.4**

**0.1**

**0.1**

**0.0**

**n.a.**

**n.a.**

**n.a.**

**Stmd** **by**

**|Jul92-Jun93)**

**en** **triek**

Bulgaria

   - 9.1

  - 16.7

   - 7.7

   - 6.7

  - 13.2

  - 12.9

  - 16.3

  - 27.5

   - 2 2 . 0

21.6

3 3 3 . 5

91.1

"il.7

10.2

15.6

   - 9.1

   - 14.9

   - 1 4 . 0

n.a.

   - 3 6 . 7

12.9

   - 1.2

   - 0.9

   - 0.4

299

2 7 1

255

Stmd by

|Api92-Mir93l

oil tfieV

CSFR

0

   - 16

     - 8

     - 2

   - 14

   - 12

     - 4

   - 21

   - 12

10

58

12

1

7

5

0

     - 2

     - 2

11.7

10.6

11.4

   - 1.1

1.0

0.2

135

91

84

Stmd by

|Api92.0ee9}|

on trieV

GOP,».t constant prices (a) 1 9 9 0

(a) 1991

(o) 1 9 9 2
Apricul'.urnl production (a) 1 9 9 0

(a) 1991

(a) 1 9 9 2
K-!u.i:ri/il production (a) 1 9 9 0

(a) 1991

(a) 1 9 9 2

Consumer price index (a) 1 9 9 0

(a) 1991

(a) 1 9 9 2

lJ".»:^oloymftnt r Ate, in % (b) 1 9 9 0

(b) 1991

(b) 1 9 9 2

IV.iflpei bftUnce, % OOP (c) 1 9 9 0

(c) 1 9 9 1

(c) 1 9 9 2

LxpoMs in S (a) 1 9 9 0

(a) 1991

(n) 1992

Current Account S bn 1 9 9 0

1991

1 9 9 2

Dsht-export ratio. % (e) 1 9 9 0

(o) 1991

(o) 1992
IV.I [:] rrofliammo

**•.:«-,!»,•)*** _**incit.ni:**_ **o v v** **previous** **ye«'**

**r!** **c'** **3«'.«d**

_**r'-ti**_ **oov*ir>r-.erM** **budget** **detieit.** **«crtuti b»»u**

**• »** **hn'">CA** **o'** **ftiyment** **b o i t,** **erceot l e A l h m n on** **t** **euttom b i n »**

**n«> h<i(j.eu''eney** **debt** **»i** **<** **pereentige ol h i r d - e u " * n e y export»**

**•.f.»nh»r 1990** **to December** **1991**

_**ri**_ _**e>'**_ **M»reS** **1993**

Albania

**•13.1**

**•27.1**

**• 6 . 0**

**•7.4**

**n.a.**

**13**

**•7.5**

**• 4 0 . 0**

**n.a.**

**n.a.**

**3 6 . 0**

**2 2 6, 0**

**8.6**

_**n.B,**_

**3 2 . 0** **1a)**

**•** **2 0 . 0**

**• 4 4 . 0**

**• 2 2 . 0**

**•7.5**

**•** **4 0 . 7**

**•4.1**

**•0.1**

**•0.3**

**•0.4**

**2 8 4**

**5 9 3**

**9 5 3**

**Stmd by**

**(Aug92-Juld3l**

**en** **trtet**

Estonia

**•3.6**

**• 1 1 . 8**

**•32**

**• 1 8 . 0**

**•20.8**

**•21.3**

**•5.6**

**•9.5**

**•38.7**

**23.1**

**2 1 0 . 0**

**1 0 7 5 . 9**

**0.0**

**0.0**

**1.5**

**'•** **3.1**

**4.7**

**1.7**

**n.a,**

**n.a.**

**• 8 8 . 0**

**0.5**

**0.0**

**n.a.**

**n.a.**

**n.a.**

**Stmd** **by**

**|Jul92-Jun93l**

**on** **trick.**

**>**
**CD**

**<4-2_**

**FOURTH ANNUAL REPORT FROM THE COMMISSION**

**TO THE COUNCIL AND THE EUROPEAN PARLIAMENT**

**ON**

**THE IMPLEMENTATION OF COMMUNITY ASSISTANCE**

**TO THE COUNTRIES OF EAST AND CENTRAL EUROPE (PHARE)**

**IN 1993**

**4-3**

Contents

_PREAMBLE_

I - _GENERA_ _L CONTEXT_ _FOR EC ASSISTANCE_ _IN 1993_

1 I Legal basis

1.2 Financial framework

1.3 Policy orientations
1.4 Programming

I I - _1993_ _MEASURES_

_2._ 1 Preparation and decision making
2.2 National Programmes and Sectors

2.3 Other measures

2.4 Regional Cooperation

2.5 Humanitarian Aid

2.6 Europe Agreement Activities

2.7 Information Activities

III _-IMPLEMENTATIONOF_ _1990 -_ _1993MEASURES_

3.1 Commitments

3.2 Tenders and contracts

3.3 Payments
3.4 Monitoring and Evaluation
3.5 Counterpart funds

IV- _COMMISSION_ _ORGANISA_ _TION_

_V. - SPECIFIC_ _ISSUES_

5.1 Assessment of the reform efforts in PHARE countries in 1993

5.2 The Copenhagen Initiative

5.3 Health

5.4 Public Administration Reform

5.5 Cross Border Cooperation

5.6 Coordination with other donors

5.7 Direction of Phare

**4-4**

Tables

1. Synthesis of National Indicative Programmes 1993
2. Breakdown of 1993 commitments by sector and country
3. Regional Programmes 1993
4. General Overview of Budgets 1990-93
5. General Overview of Contracts 1990-93

6. General Overview of Payments 1990-93
7. Amount of Operations.concludecJ by Year (1990-93)
8. Breakdown of Commitments, Contracts and Payments by Country 1990-93
9. Breakdown of Commitments, Contracts and Payments by Sector 1990-93
10. Breakdown of Commitments by Country and Sector 1990-93
11. Breakdown of Contracts by Country and Sector 1990-93
12. Breakdown of Pavmentsbv Country and Sector 1990-93

Annexes

_H._ Professional Associations and Non-Profit Making OrganisationsA warded Phare Contracts

4 b

PREAMBLE

This is the fourth report on Community assistance under the PHARE Programme to the
Central and Eastern European Countries (CEECs) which was extended in 1993 to eleyen
countries - Albania, Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania,
Poland, Romania, Slovakia and Slovenia.

1993 saw a number of key developments of considerable impact on the Phare
programme. The 1993-97 Guidelines were adopted by the Commission in July 1993 and
the implementation of Phare programmes reflected their adoption. Considerable progress
was made in introducing the multi-annual approach into programming in order to integrate
Phare assistance more effectively into the process of medium term restructuring of the
beneficiary country. Steps have been taken to streamline implementation procedures,
including more decentralisation.

The Copenhagen Council in June 1993 came to two decisions having considerable impact
on the Phare programme. The Council confirmed the prospect of future EU membership
for the associated countries. This meant that Phare, as one of the principal financial
instruments in the implementation of the Europe Agreements, would henceforth be
directed and focused on measures aimed at transforming the economies of the associated
countries within the perspective of their preparation for future membership of the
European Union. Secondly, a decision was made at the Copenhagen Council to allow up
to 15% of the Phare budget to be used in support of infrastructure programmes. This
increased emphasis in the Phare programme on investment recognises that the demand
for the- type of assistance required by the Countries of Central and Eastern Europe
(CEECs) changes as the restructuring of the economies progresses from classic technical
assistance to investment support programmes.

The report looks at the policy and programming aspects of assistance in 1993. It reviews
the national assistance programmes, regional programmes, humanitarian assistance,
activities in the area of the Europe agreements and Phare information activities. The
implementation of the Phare programme over the period 1990-93 is examined as are
issues of specific concern - the assessment of the reform efforts in the CEECs, the
Copenhagen initiative on infrastructure investment, health, public administration reform,
cross-border cooperation, donor coordination and the direction of the Phare programme.

4 ^

GENERAL CONTEXT FOR EC ASSISTANCE IN 1993

1.1 Legal basis

Council Regulation n° 3906/89 of 18 September 1989 [1] as last amended in 1993 [2 ]

represents the legal basis for Phare assistance. In 1993, the Commission transmitted a
proposal to the Council in order to formally include [3] "The Former Yugoslav Republic of
Macedonia" (FYROM) in the regulation. The proposal has not yet been adopted.

1.2 Financial framework

The Phare programme is the largest source of grant financing mobilised in support of the
economic transformation of the CEECs. In 1993, the initial appropriations under the
budget line B-7600 - Aid for the Economic Restructuring of Central and Eastern Countries
reached 1040 MECU for commitments and 447.7 MECU for payments.

During the course of 1993 a number of modifications to the Phare budget were approved.
30 MECU were transferred to the "Erhergency Humanitarian Aid" budget line B-7514, 5
MECU to the Nuclear Safety Multilateral Fund for the CEECs and the CIS which is
managed by the EBRD, and 0.3 MECU for the purposes of the Common Foreign Policy
and Security Pillar of the European Union. The Phare budget was increased in December
1993 by 1 MECU from the budget line B 3-1025 for actions in the field of training.

The final amount available for commitments was, therefore, 1,005.7 MECU, out of which
1,003.9 MECU were committed, 1 MECU was carried over to 1994, and 0.8 MECU were

not committed.

The breakdown of the commitments was:

National Programmes 801.0
Regional Programmes 112.2
Multidisciplinary and other measures 70.8
Humanitarian Aid 19.9

1,003.9 MECU

Appropriations for payments were reinforced by the end of the year by a transfer of 108
MECU. Taking into account the modifications in the budget mentioned above, the net
reinforcement for payments in the PHARE Programmé during 1993 was 73.4 MECU.
This meant that the final amount available for payments in 1993 was 521.1 MECU, an
amount completely used by the end of the year.

**1.3** **Policy Orientations**

Two key developments, the adoption of the 1993-97 Guidelines by the Commission and
the decisions of the Copenhagen Council in regard to membership for the associated
countries and support for infrastructure investment, shaped Phare policy orientations in
1993. The Copenhagen Council in June 1993 came to two decisions having considerable

1 OJ L375 of 23 December 89, pt 11
2 OJL162of 3 July 93, p. 1
3 OJ C231 of 27 August 93, p. 15

**v>**

impact on the Phare programme. The Council confirmed the prospect of future EU
membership of the associated countries. This meant that Phare, as one of the principal
financial instruments in the implementation of the Europe Agreements, would henceforth
also be directed and focused on measures aimed at transforming the economies of the
associated countries within the perspective of their preparation for future membership of
the European Union. Secondly, a decision was made at the Copenhagen Council to allow
up to 15% of the Phare budget to be used in support of infrastructure programmes.

1993 marked the first year of the implementation of the Phare guidelines. The Guidelines,
adopted by the Commission in July 1993, reaffirmed Phare's mandate to contribute to the
process of economic reform, structural adjustment and sustainable development in. the
recipient countries and'to show a"flexible -response to the differing/ needs of the recipient
countries, reflecting their different levels of development, stage of transformation and
progress with reforms.

For countries at relatively early stages of reform where the key priorities are
macroeconomic stabilisation involving rigorous monetary and fiscal policies, progressive
liberalisation of prices and foreign trade and establishment of the legal, regulatory and
institutional framework necessary for a market economy, Phare assistance is used to
complement balance of payments financing through for example import supply
programmes and "classic" technical assistance (studies, training, provision of expertise)
for institution building and initiating reforms. Exceptionally a balance of payments grant
was extended to Albania in 1993.

As a country proceeds through its reform process, needs shift from that for classic
technical assistance to that involving more direct support for the process of long term
"restructuring of the economy. Long term restructuring involves consolidation of private
ownership and an increase of the share in the economy of the private sector,
reorganisation of remaining state enterprises, modernising banking and financial systems,
restructuring of the educational and vocational training systems, reform of public
administration and the mobilisation of infrastructure investment. In this phase of
development, countries increasingly need investment/structural assistance as opposed to
classical technical assistance.

In 1993 the conclusions of the European Summit of Copenhagen permitted Phare
assistance to adapt to the needs of this long-term restructuring phase with an increasing
focus on investment and related operations. It was decided that a significant portion, up to
15% of total Phare commitments spread over Phare countries, can be used for capital
expenditure for infrastructure projects which are jointly financed by the EIB and/or
International Financial Institutions and beneficiary countries. Phare assistance is as well
being used to. facilitate investment in the private sector for projects which have a positive
economic return but face transitional problems of market failure. This type of support is
usually directed toward SME development, regional development, environmental
improvement and agricultural restructuring. Phare supports financial intermediaries in the
provision of certain types of financing such as small loans, seed capital and guarantee
schemes.

In addition to investment support, the Copenhagen summit provided impetus to Phare
support for the implementation of the Europe agreements. Programmes were introduced
in a number of beneficiary countries to assist signatories to the Europe agreements to
support a full range of measures including the facilitation of the approximation of laws
and their implementation, the identification of barriers to the integration with the EU, the
improvement of technical understanding and know-how of the public sector in relation to
the above issues; the enhancement of the quality and effectiveness of public education
and information activities about the EC, and; the effective monitoring of the process of the
implementation of the Europe Agreements.

**4 g**

1.4 Programming

The 1993-97 guidelines defined some new principles on which PHARE support should be
provided. The most important are:

The need to ensure greater coherence and integration of PHARE into the national
strategy and the general reform programme of the beneficiary country. To that end a
multiannual approach in the context of an ongoing dialogue on priorities and policies
would be adopted.

Continuing flexible response to the differing needs of countries reflecting their
different levels'of development, stage of transformation and progress with reform. '

The importance of an assessment of progress with reform efforts and the performance
of the PHARE programme by maintaining its focus on support for the development
and implementation of policy reforms and structural change, notably in areas directly
linked with economic reform.

A concentration on a limited number of areas so as to achieve the critical mass

necessary to achieve impact. This combined with a more thorough assessment of
needs and absorptive capacity should lead to an acceleration of the rate of
disbursement.

In order to put these principles into practice the Commission started in 1993 to strengthen
the programming process. Thus the multiannual approach was introduced in a number of
countries and where its implementation was not possible, preparatory work for such an
approach from 1994 onward was initiated. Moreover, efforts were made in the 1993
programming exercise to concentrate assistance in a limited number of areas linked with
policy reform and structural change and to better assess needs and absorptive capacities.
Finally, to put more emphasis on a discussion with member states on country
programmes, Orientations Papers describing the assistance orientations were drawn up
and discussed with member states. These papers serve as a basis for member state input
into the programming process.

Indicative Programmes were signed with all beneficiaries and while not being formal
binding agreements with the Commission they are working documents indicating priorities
and providing a framework for the identification, formulation and appraisal of projects to
be financed. They are summarised in Table 1.

The indicative programmes established the sectoral priorities which were eventually
reflected in the sector programmes presented in the form of financing proposals to the
management committee. Priority continued to be granted to economic restructuring and
private sector development programmes. However, infrastructure, human resources
development (particularly through the TEMPUS programme on higher education reform)
and social sector programmes gained in importance in 1993 relative to the private sector

programmes.

In several countries a general technical assistance facility was identified as being a
flexible multidisciplinary instrument which would allow the beneficiary countries to respond
relatively quickly to urgent needs for technical assistance with a view to develop reform
policies and provide institutional support across a wide range of areas. In three countries,
Estonia, Latvia and Lithuania, the bulk of the assistance was provided in the form of this
facility, reflecting the early phase of the transformation of these countries and the need to
conduct a range of preparatory work prior to launching sectoral programmes.

_**A-**_ **/N**

_**¥\**_

**PROGRAMMING AND APPRAISAL CYCLE**

Economic and Social Assessment

Review of On-Going
Phare Programmes

_\_ Orientations Paper

Indicative Programme

**i**

**i**

4/
-| Preliminary Sector Appraisal

_\L._
Detailed Programme Design
(to preparation **of** FP)

— | **Programme Monitoring**

^ o

I I - 1993 MEASURES

2.1 Preparation and decision making

The total number of PHARE financing decisions on the 1993 budget was 87. These
included 66 national sector programmes and 10 regional cooperation programmes. The
remaining financing decisions concerned mainly EBRD projects, humanitarian aid and
authorisations for small scale multidisciplinary actions. The General Guidelines for 199397 were adopted by the Commission in July 1993. The PHARE Management Committee
met on six occasions concentrated in the latter part of the year and gave a favourable
opinion on all financing proposals.

2.2 National Programmes

During 1993 the number of PHARE beneficiary countries grew to eleven given the
dissolution of the Czechoslovak Federation and the creation of two republics. Total
assistance on national programmes - that is, excluding humanitarian assistance and
regional programmes - amounted to nearly 801 MECU. The largest PHARE recipient was
Poland with 225 MECU, equivalent to 28.% of total national allocations, followed by
Romania (130 MECU, 16.2%). Hungary (100 MECU, 12.5%) and Bulgaria (90 MECU,
11.2%).

Table 2 shows the broad sectoral pattern of assistance by country. Thé figures should be
treated with caution mainly because the general technical assistance programmes include
significant sectoral components such as banking and finance, social protection, public
administration, Europe agreement implementation and so on, meaning that the shares of
these specific sectors in the total is actually higher than the table suggests. Bearing this in
mind, the 1993 programmes reflected a continued focus on support for the development
of the private sector and economic restructuring. Roughly 25% of total national allocations
(190 MECU). was committed to enterprise development covering privatisation, enterprise
restructuring, assistance to small and medium enterprises (SMEs), investment promotion
and export development.

In recognising that a modem banking system is crucial to à properly functioning market
economy, there was an increased emphasis on support for the financial sector and
banking institutions in 1993. Funds have been provided for strengthening the newly
created central banks, for legislation, training, portfolio audits, banking associations,
information systems, payment systems and bank restructuring. Phare support has been
provided as well in schemes dealing with the problem of bad debts and re-capitalisation of
banks, both key issues in the reform.

Agriculture continued to receive substantial support (78.5 MECU or 10% of national
allocations) reflecting the importance of agrarian reform in the economies of Eastern
Europe. There was increased emphasis in 1993 on assistance for agricultural strategy
development and transformation including farm privatisation, development of land reform
and registration systems, agro-industrial restructuring, advisory services and the
development of credit channels for the new private farmers.

An increasingly important task of the CEEC governments in 1993 was to maintain the
momentum of economic reform while preserving a social consensus. Phare assistance
played an increasingly important role in helping these governments deal with the social
implications of the transformation process; Assistance was provided for institutional and
organisational change in the labour market and social protection sectors. This included
support to pro-active labour market programmes addressing the problem of high
unemployment resulting from the restructuring process and assistance for the reform of

**51**

the social benefits system involving the development of unemployment insurance,
pension and health care schemes as well as social assistance programmes.

Support for human resources development and the reform of public administration was an
increasingly important part of the 1993 programmes. In regard to the first, a significant
commitment continued to be made in 1993 to the reform of higher education through the
TEMPUS programme. Vocational education training schemes and education system
reform programmes were important components of some of the 1993 national
programmes. In the public administration field there was a continued focus on institutional
development and training at both the national and local government levels.

In regard, to the infrastructure sector, there'was somewhat less emphasis on the
environment in 1993 national programmes although significant commitments were made
in Bulgaria and Albania. This reflects in part the substantial allocations made in previous
years to most Phare beneficiary countries. Environmental support has evolved towards
support for policy formulation and the preparation and implementation of environmental
strategies for specific sectors. There has been an increased focus on the promotion of
investment related to the environment either through the support for investment funds or
through co-financing operations with International Financial Institutions (IFIs).

Support of infrastructure (energy, telecommunications and transport) focused in 1993 on
restructuring and adaptation to the circumstances of the market economy. Allocations
were made to Bulgaria, the Czech Republic, Poland and Slovakia and included support
for the restructuring of the railway companies, the preparation of the regulatory framework
for the telecommunications and transport sectors and the establishment of energy saving
funds. The shift towards investment in infrastructure development, is reflected by the 30
MECU Phare contribution for a railway development project in Poland.

Additional measures covered under the 1993 Phare programme were a 35 MECU balance
of payments support grant to Albania and assistance to the Former Yugoslav Republic of
Macedonia (FYROM). At the end of 1992, the Edinburgh Council decided on a 100 MECU
support programme for FYROM to assist in coping with the consequences of the blockade
against Serbia and non-recognition by the international community. The assistance given
to FYROM in 1992 was complemented in May 1993 by a 25 MECU programme in support
of the import of industrial raw materials and equipment as well as technical assistance in
the field of customs, statistics, health and agriculture.

2.3 Multidisciplinary and other measures

In addition to the sectoral programmes several operations were financed under the
heading Multidisciplinary Measures.

First of all a commitment of 26.4 MECU for "multidisciplinary technical assistance" was
agreed in three tranches in 1993. This is an enabjing device giving a global authorisation
to finance, within given parameters, small-scale operations such as feasibility studies and
technical assistance without requiring a specific Management Committee opinion and
Commission decision on each operation.

After the so-called "Bangkok Agreement" between the EBRD and the EC in 1992, a new
cooperation scheme was established between both institutions. This enabled the
implementation of measures in the beneficiary countries, which are approved and
financed by the Commission and are technically managed by the EBRD. This
collaboration received an allocation of 11.7 MECU, in actions mainly related to the
financial sector.

_**SX-**_

PHARE Information Action which has the objective of informing the business and political
milieu in the EC Member States about the Community's relations with, and assistance for
the countries of Central and Eastern Europe received 2.7 MECU.

The PHARE Democracy Programme received an allocation of 10 MECU in 1993. This
amount supports the continuation of the démocratisation process in Central and Eastern
Europe. It enables financial and technical aid to be provided on a non-party basis, through
parliamentary institutions, for the reinforcement of general civic education and democratic
principles.

A new initiative was approved in 1993 entitled the Phare Partnership and Institution
Building Prôgrërnrhe which aims at supporting the . development ' of sustainable
partnerships between EU and CEEC non-profit organisations. This programme is a cost
sharing scheme and is operating as a pilot programme focusing on a number of sectors
notably economic development, business promotion, local/regional government,
community development and worker/consumer interests. It will support some 90 projects
in the CEECs with each project requiring the participation of at least one organisation
based in the EU and one in a Phare beneficiary country. The European Union will provide
matching funding to equal contributions secured by the partner organisations themselves.
The EU Member States are responsible for preselecting projects and can decide to which
extent they will participate themselves in the projects. The initiative was allocated 10
MECU in 1993.

These multidisciplinary and other measures amount to 70.7 MECU, for which the
breakdown is as follows:

Multidisciplinary technical assistance 26.4 MECU
EBRD 11.7 MECU
Information Action    - 2.7 MECU
Democracy Programme 10.0 MECU
Tempus "Overhang" [4] 9.9 MECU
Partnership/Institution Building 10.0 MECU

TOTAL 70.7 MECU

2.4- Regional Cooperation

Regional cooperation is seen as playing an important role in developing an economic and
political dialogue among the countries of Central and Eastern Europe (CEEC) and
between the CEECs and the Member States of the European Union. It is seen as
promoting political stability in Europe and closer economic integration among the CEECs.
The Europe Agreements, the conclusions of the Edinburgh and Copenhagen summits and
the proposed Pact on Stability all stress the importance of enhanced regional cooperation
building on existing relationships such as Visegrad. In this context, the Phare regional
programmes initiated in 1991 have played a major role in stimulating such a dialogue and
promoting cooperation on a wide range of issues of common concern and interest in the
CEECs.

This amount covered the remaining financial commitments from TEMPUS projects seleced
over the period 1990-93, prior to the commencement of the second phase of TEMPUS
(TEMPUS II)

**s2>**

1993 saw a continued emphasis on the development of regional cooperation amongst the
now enlarged group of eleven beneficiary countries with an overall allocation of 112.3
MECU for regional programmes. This approach has been further reinforced with the
adoption by the Regional Coordination Group of orientations for future programming
which endorse the principles of a multi-annual programming approach, and on
concentration on a limited number of core areas, for programmes which are inherently
regional in nature and which focus on enhancing regional co-operation between
beneficiary countries.

For 1993, the focus was on three key areas:

An extension/consolidation programme to enable the new beneficiary countries to benefit
from existing programmes and to build on established programmes in the original
countries of the Regional Coordination Group. Some 29 MECU of additional support was
provided in this way for the Drugs, Transport, Customs and Energy programmes.

Support for a limited number of core area programmes. A substantial allocation (20
MECU) was made to the Transport sector, principally to continue the programme of
support for the elimination of a limited number of high priority border crossing bottlenecks.
This element is complemented by activities under the 1993 Regional Customs
programme to ensure a well-balanced approach in resolving infrastructure, administrative
and customs problems in a coherent way. A further allocation of 20 MECU for Nuclear
safety was made in 1993 in recognition of the urgent need to continue and reinforce the
activities begun in 1992, in particular with respect'to the improvement of safety standards
for the Soviet designed nuclear reactors. The TEMPUS programme was allocated 15.8
MECU in 1993 to complete the Joint European Projects launched in earlier years, and to
support the operational costs of managing the programme. The Joint Venture PHARE
Programme (JOPP) which was initiated in 1991 and assists the creation of new, or
expansion of existing, joint ventures between companies from EU Member States and
PHARE beneficiary countries received an additional allocation of 27.5 MECU.

As well, a number of preparatory studies were launched for the medium term
programming period in particular in the areas of human resources (concentration on
distance learning and higher education) and to explore the potential for developing crossborder co-operation between PHARE beneficiary countries and trade development
initiatives.

The Regional Coordination Group has continued to play a key role in the programming
and coordination of the regional programmes. Participation by the beneficiary countries in
the implementation and monitoring of regional programmes has been assured in 1993
through Sector Coordination meetings to plan implementation of programmes and identify
future needs. This process.has been further extended with the appointment of Sector
Coordinators for Customs (Slovenia) and Trade development (Slovakià)J

The process of decentralisation of the day to day management of regional programmes
also began in 1993 with the creation in Prague of a Regional Transport Coordination Unit,
responsible for implementation of the Transport programmes, and the establishment in
Bulgaria, within the existing national PMU. of a Secretariat for the coordination of the
Telecommunications programme. Similar Coordination Units, established wherever
possible alongside existing PHARE management units and staffed by local staff assisted
by technical advisors, are also planned for the Energy, Customs and Drugs programmes.

^

2.5. - Humanitarian Aid

Phare humanitarian assistance in 1993 was dominated by the difficult situation in Albania,
the problems entailed by the drought in Romania as well as by the conflict in the former
Yugoslavia.

For Albania, a decision was taken in December 1993 to extend an extraordinary allocation
of 10 MECU for the rehabilitation of schools and prisons throughout Albania and for the
continuation of programmes for building houses for ex-political prisoners. For Romania,
because of the continuation of the crisis in agricultural production related to the drought in
1992, Phare financed food' aid- in the arhûirnt. of 9.9MECU: 

The war in ex-Yugoslavia and the dramatic situation of the refugees was the focus of
activities and funding allocations of the European Office of Humanitarian Aid (ECHO) in

1993. A total of some 300 MECU was spent in 1993 for emergency aid for refugees. This
was organised and implemented through UNHCR, ICRC and other NGOs. Phare
contributed to this operation through the transfer of 90 MECU from the Phare budget to
the new "Emergency Humanitarian Aid" budget line mentioned in Section 1.2.

2.6 - Europe Agreement Activities

The Europe Agreements provide a legal, political, and economic framework for the
relationship of the signatory CEECs (Poland, Hungary, Bulgaria, Romania, Slovakia and
the Czech Republic) with the European Union. Phare is one of the principal vehicles for
providing financial assistance to the signatory countries. The decision taken at the
Copenhagen Council in June 1993 which confirmed the prospect of future EU
membership for associated countries had implications of considerable importance for the
Phare programme. It means that Phare must also give priority to the transformation of the
economies of the associated countries within the context of their preparation for
membership.

The implementation of the Europe Agreements is supported through the provision of
technical assistance covering specific provisions of the agreements aimed at facilitating
integration. There are a number of both national and regional programmes which provide
support in implementation of the Europe agreements. In regard to the former, building on
the Euro-GTAF (92) in Hungary and the Sierra (92) programme in Poland, Euro-GTAF's
were agreed upon in 1993 for Bulgaria, the Czech Republic, Romania and Slovakia.
These multi-sector financial instruments support a wide range of activities, insofar as
assistance is not otherwise available under Phare funded sectoral reform programmes,
including:

(i) the preparation and implementation of strategies designed to lead to laws which are
compatible with EC laws, .

(ii) funding the technical assistance required for each key area of policy concerned by the
Europe Agreements,

(iii) training, targeted study visits (for instance to appreciate legislative and institutional
methods of implementation in the Community) and public information initiatives including
the establishment of documentation centres.

_<_

Additionally there are a number of Phare regional economic legislation programmes
having components supportive of the implementation of the Europe Agreements. In the
area of approximation of economic legislation, framework programmes in Latvia, Estonia,
Lithuania and Slovenia were started in 1993 with the aim of approximation of financial
service law, commercial law, labour law and trade law. In regard to competition and state
aids, general programmes of assistance are being provided to Bulgaria, Estonia, Hungary,
Lithuania, Romania, Poland, Slovenia and Slovakia for the provision of experts to assist
in the process of reform of the relevant laws, regulations and implementing procedures, to
prepare inventories of the existing state aids and monopolies of a commercial character
and to provide training. A further regional programme in the area of consumer protection
provides for-institutional and legislative-assistance for the.approximation of laws, training
and the setting up information systems. A regional intellectual property programme,
cofinanced with the European Patent Office addresses the development of trade mark,
patent and industrial design protection in all Phare beneficiary countries. Finally, the
European Committee for Standardisation (CEN) is implementing a regional Phare
programme on quality assurance which provides for the provision, translation and
transpositions of European norms, standards and technical EC directives and regulations.
It also provides for the auditing of quality assurance systems and training.

2.7. Information Activities

In an effort to increase the transparency of the Phare programme and to provide timely
information to interested parties on Phare activities, an increased focus was placed on
information activities in 1993. This involved the broadening of the constituency for Phare
information activities beyond the business community, an initial target group, to a wide
variety of opinion leaders in the Member States and in the beneficiary countries. The
information strategy aimed not only at explaining the Phare programme and providing
information on tenders and contract procedures but as well at addressing certain public
misconceptions and misunderstandings about the programme. The funding for the
expanded information programme was increased to 2.7 MECU.

The Phare information office produced a series of documents over the course of the year,
including continued publication of an operational programme compendium, the indicative
programme summaries and the operational programme updates as well as new
publications such as country profiles, sector profiles, a "success story" compendium,
newsletters, a mission statement and information on contracts. A database of some 5000
interested parties was used for three mailings.

In addition to these publication activities, the Phare information office undertook some
150 speaking engagements over the course of 1993 and met with an average of 50
visitors per week. In the audio-visual field, meetings were organised with CIRCOM, the
umbrella organisation for East and Western European TV stations to investigate the
potential of broadcast sponsoring for Phare related documentaries. Finally, Phare
participated for the first time in 1993 at a number of trade fairs - the Hannover Fair, the
Brno Fair and "S'implanter" in Paris.

5fc>

III.- IMPLEMENTATION OF 1990-1993 MEASURES

The reforms in the CEECs have involved fundamental economic and political changes.
While there has been a consensus on the principle of establishing a market system, there
are wide divergences within and between the CEECs on the content and timing of the
actual measures needed to achieve this. Phare has thus faced the challenge of dealing
with frequent changes in government and basic policies as well as in the institutions and
the counterparts responsible for implementing the programmes. Despite this the
programme responded rapidly to the needs of the reform process and^ has made a
substantial contribution to the transformation of the CEECs.

3.1. Commitments

Once the financing decision has been taken, a financing memorandum is signed by both
the Commission and the Implementing Authority, usually the line ministry in the country
concerned, specifying the respective responsibilities for management of both parties. The
amount specified in the financing memorandum is the commitment. In 1993 all funds
available, 1004 MECU, were successfully committed. This brings the total amount of
Phare commitments since 1990 to 3294 MECU.

The commitment of funds is only a first step. Progress in implementation is reflected in
contracts signed and by the subsequent expenditure.

3.2 Tenders and Contracts

Tendering and contracting are undertaken in accordance with the Phare Council
Regulation 3906/89, the Financial Regulation (Title IX/External Aid) and the General
Regulations for tenders and award of contracts financed from Phare/Tacis funds.

In accordance with these regulations, service contracts are normally awarded after a
restricted invitation to tender. The criteria on which the final choice of a project is made
are weighted towards quality rather than simply price. For supply contracts, an invitation
to tender is normally published in the Official Journal of the EC. For smaller service and
supply contracts with a value of below 50,000 ECU, a contract can be awarded by direct
agreement.

Individual Phare programmes are increasingly implemented through a Decentralised
Implementation System where the execution of the programme including the launching of
tenders and the signing of contracts has been transferred to an Implementing Agency in
the beneficiary country. Based on approved work programmes, funds are regularly
transferred to these agencies to finance the activities. For other programmes, however,
the tendering and contracting is done by the Commission on behalf of one or several
beneficiary governments.

In a number of different sectors - banking, taxation, training, customs, regional
development - Phare programme implementation in certain beneficiary countries has
been contracted to associations, professional organisations and other non-profit making
organisations. In certain cases contracts have been won by these organizations through
the tendering process; in other cases, and specifically in regard to the European
professional associations, contracts have been extended directly. An overview of the
non-profit organisations and the programmes in which they are involved is provided in
Annex 1.

**s>**

The overall amount of contracts concluded in 1993 was MECU 572.1. Of this amount

MECU 450.7 correspond to contracts awarded by the Commission on behalf of the
beneficiary governments and 121.4 MECU are contracts concluded directly by the
recipient institutions.

In the period 1990-93. of the 3294 MECU committed under the Phare programme, 1566
MECU or 48% has been contracted. The breakdown for each programme year (Table 5)
shows that 77% of 1990 commitments, 64% of 1991 commitments, and 23% of 1993
commitments have been contracted,. These contracting figures together with the
payment/disbursement figures mentioned below reflect the. nature of PHARE programmes,
which are normally implemented over a three to five year period. Funds committed for
programmes in any given year will normally be contracted and disbursed in subsequent
years. Contracting starts in the first year of programme implementation and is followed by
disbursement which builds up significantly in the third to fifth year of programme
implementation.

3.3 Payments

As has been the case in previous years, 1993 saw an important increase in payments.
The total amount disbursed was 521.1 MECU, representing 20% more than the
disbursements in 1992.

There were insufficient appropriations for payments in 1993 From an initial 447.7 MECU
allocation, the budget was increased to a final amount of 521.1 MECU. Despite this, ± 50
MECU could not be paid because of a lack of appropriations, and was deferred for
payment to 1994.

The breakdown of payments in 1993, per programme year is as follows :

Programmes of 1990 68.6
Programmes of 1991 148.0
Programmes of 1992 161.5
Programmes of 1993 143.0

Total 521.1 MECU

In 1993, of the 521.1 MECU in payments, 328.7 MECU was paid on contracts by the
Commission and 192.4 MECU was advanced to the Programme Management Units
(PMU's) in the beneficiary countries.

At the end of 1993 total payments by the PHARE Programme were 1,412.2 MECU, or
42.9% of the total commitments to the beneficiary countries. The total amount advanced
to the PMUs in the 1990-93 period was 451.1 MECU, 32% of total payments. An overall
view of disbursements is provided in the tables in annex. It is important to note that the
tables show payments made on contracts awarded by the Commission and the advance
payments made to the beneficiary countries (rather than payments actually made on
contracts locally).

**S£**

3.4 Monitoring and Evaluation

Monitoring and evaluation received considerable attention in 1993. Three major sector
assessments were conducted for Phare support to SME development, to banking sector
reform and to privatisation and restructuring [5] . The recommendations of those
assessments provided key input into further programme design.

Additionally, in the context of a major initiative in 1993 to streamline and consolidate
Phare procedures, very careful attention was paid to the subject of monitoring and
evaluation..The result of this initiative was the preparation of two manuals: (1).the manual
for decentralised'implementation, and (2)-the manual for'contracts and procurement
rules.

In the first manual, a monitoring and evaluation system has been defined. The main
innovation in this system is the creation of a general document, the strategic plan, which
is the basic instrument covering the entire duration of the programme. It is based on the
content of both the Financing Memorandum and the Monitoring and Evaluation Matrix
attached to the Financing Proposal and translates the two documents into operational
terms. One of the elements of this document is the Plan of Operations which summarises
the implementation arrangements and the major milestones of the programme. An annual
monitoring and assessment report reviews the extent to which targets have been met,
analyses main constraints and identifies corrective action. The monitoring report provides
a review of the overall achievement of the programme, lessons learnec and
recommendations for the future. In addition, external independent mid term and end of
project evaluation will continue to be carried out to supplement the internal monitoring
system.

The preparation of the manuals is an important step towards the strengthening of the
management and control functions of the beneficiary institutions and an increased
decentralisation of the Phare programme. In addition, the planning and monitoring tools
contained therein contribute towards better project design and improved programming.

**3.5** **Counterpart funds**

In 1991 agreements on the use and generation of counterparts funds were drawn up with
Albania, Bulgaria and Romania. In 1992 agreements were drawn up with the governments
of Estonia, Latvia and Lithuania.

The Counterpart Funds in Romania are managed by the Ministry of Finance and the
Department for European Integration. Counterpart Funds in Romania were generated by
the sale of food-aid, and commodity supplies provided in the context of the PHARE
Programmes for transport, agriculture and humanitarian aid (medicines). An Indicative
Programme for the use of Counterpart Funds has been agreed by the Romanian
Government and the Commission of the European Communities.

In Albania Counterpart Funds were generated by the sale of food-aid, industrial supplies,
agricultural equipment and transport equipment. As a result of the large budget deficit and
in accordance with the recommendations of the IMF, the Commission decided -in
cooperation with the major donors- to use the Counterpart Funds for budgetary support.

These assessments are reviewed in a recent Phare publication "Phare - A Performance Review
1990-93", March 1994, Annex 2

**S** **'** _**\**_

Poland's Counterpart Funds have mainly come from the sale of animal feed and
agrichemicals. The funds were generated within the context of 1990 PHARE National
Programme and their use was set on an annual basis according to the Indicative
Programme. The task of management of the counterpart funds has been assigned to the
Co-operation Fund, a State Treasury Foundation. Part of the funds have been used for
the pre-financing of PHARE programmes and the promotion of the opening of the new
branch of the College of Europe in Natolin. Funds have also been allocated to training
programmes and in support of economic/legal research in the context of the Europe
Agreement and for emergency actions such as saving national heritage in the context of
the Wileczka flooding and providing equipment for animal transport notification (Foot and
Mouth outbreak): - - . •.. . • : - •• - •: • - • . . • . • • : . . •

Bulgarian Counterpart Funds were generated by the sale of agriculture, medical and
energy supplies delivered as from the end of 1990. The funds are managed on behalf of
the Government by a state Fund for Reconstruction and Development. Awaiting the
agreement on an Indicative programme some of the funds have been used for health care
programmes as well as energy equipment.

Estonia, Latvia and Lithuania agreed on Counterpart Funds in December 1991. Prior to
the first deliveries, memoranda of understanding, setting out general principles for receipt
and distribution of EC supply programme assistance, and aides mémoires, setting out
details specific to the cereals supply programmes, were negotiated and signed with each
republic. All funds generated from the first tranche of sales have been allocated to income
supplement schemes targeted at the most needy socially deprived groups. An exception
was made in Latvia where the funds were allocated to agricultural reform and
development measures. A higher proportion of allocations from second tranche receipts
has been used to support PHARE and national reform programmes, particularly the
development of private agricultural business.

**ko**

**IV -** **COMMISSION ORGANISATION**

Following a reorganisation of DG l's services at the end of 1992, Directorate L was
created comprising 6 units (L1 to L6). Two separate units (Public Relations and G24 coordination) also report to the Chief Advisor in charge of Directorate L. The original
PHARE Operational Service Units (formerly PHOS 1,2,3 and 4) are therefore now to be
known as units L3, L4, L5 and L6. The newly created units L1 and L2 are involved in
general relations with-the beneficiary countries, in particular, the development, of the
European agreements and trade matters. ' '

In spite of a considerable increase in the funds managed by the Phare programme,
staffing remained essentially constant in 1993 as compared to 1992. The replacement in
1993 of non-statutory staff by Commission officials as shown in the table below, while a
positive step in a long term perspective, caused various problems and dislocations
inherent in a period of large staff turnover.

A. DG l/L, only ex-"PHARE OPERATIONAL SERVICE" UNITS (Principal Counsellor
and Staff, Units L3, L4, L5 & L6)

**END** **1992** **END** **1993** **DIFFERENCE**

Officials 39 66 +27
(permanent and
temporary, all grades,
including secretarial
staff)

Non-statutory staff 84 59 - 25
(seconded national
experts, service,
contracts, all grades
including secretarial)

**TOTAL** **123** **125** **+ 2**

_**u**_

_M -_ SPECIFIC ISSUES

5.1 Assessment of the reform efforts in PHARE countries in 1993

Stabilisation and liberalisation have been largely completed in all the PHARE countries.
Nevertheless macroeconomic policy continues to be dominated by the need to control
inflation and, in those countries faced with fiscal crisis, by the need to reduce budget
deficits. The Visegrad countries (the ÇSER, Hungary and Poland).had accomplished,
stabilisation and liberalisation by the end of 1991 and began to focus more attention on
structural reform. Slovenia has since caught up with them, and Bulgaria, Estonia and
Latvia are following with somewhat of a lag. Slovakia since it became independent at the
start of 1993 has tended towards a more interventionist and gradualist approach. Albania,
Lithuania and Romania have been more hesitant about adopting and pursuing a coherent
reform strategy.

5.1.1. Economic performance in 1993 .

Only two countries experienced growth in 1993: Poland, where GDP rose by 4.5%, and
Albania, with growth of 11%, which resulted from the continued recovery of agriculture
after its collapse in 1990 and 1991. In the other countries output again declined, though in
all of them by less than in 1992: the fall in GDP ranged from about - 1 % in the Czech
Republic, Hungary and Romania to -17% in Lithuania. Fixed investment continued to fall
in most countries, and in some the decline even accelerated.

Inflation slowed everywhere except in Romania. It was relatively low (between 20% and
35% year-on-year)-in Hungary, the Czech and Slovak republics, Poland and Slovenia, but
remained very high in Lithuania (410%).

Unemployment has stabilised, at least temporarily, at 14-16% in Bulgaria, Poland, the
Slovak Republic and Slovenia and 10-12% in Hungary and Romania. In Latvia it is lower
but rising, while it is still very low in the Czech Republic, Estonia and Lithuania. In all of
these three countries this reflects significant hidden unemployment, although in the Czech
Republic it is also explained by a particularly tight labour market. Within most countries
there are sizeable differences among regional unemployment levels: Productivity
improved significantly in Poland and Slovenia in 1993, and to a lesser extent in Hungary.

Serious fiscal imbalances face Albania, Bulgaria, Hungary, Poland and Slovakia, though
the situation improved in Poland in 1993, as the strong performance of the economy
helped generate increased revenue. The trade balance deteriorated acutely in 1993 in
Hungary and Poland, and less sharply in Bulgaria and Slovenia. In Hungary's case the
positive aspect of this development is an increase in imports of investment goods. Most
other countries have seen a slight improvement in their external accounts.

<-2_

5.1.2 Liberalisation and deregulation

The far-reaching liberalisation and deregulation of the PHARE countries' economies
encompassed liberalisation of prices, a new legal and regulatory framework, an opening
up of the economies to international markets and a switch to convertible currencies.

For almost all countries, the liberalisation of prices and the removal of administrative
allocation mechanisms and subsidies were largely completed by the end of 1992. In
Romania this liberalisation process was completed^ by the end of 1993. Most of the
remaining price, controls'and consumer subsidies in the PHARE countries are on rents,
household energy, utilities or transport services, and can be considered largely compatible
with market economy standards.

Simultaneously, the PHARE countries undertook the major task of adjusting their
legislation to the standards and requirements of a market economy. New company,
accountancy and auditing laws, together with competition legislation were in place at a
very early stage of the reform process. In Bulgaria and Romania some legislation still has
to be passed by Parliament. Albania is lagging further behind. The legislative and
regulatory framework being put in place is generally adequate. The main deficiencies
and challenges for the future lie in the enforcement of the laws and the inadequate
administrative capacity for implementing and supervising them. The dispute resolution
mechanisms are also often very weak. This can cause confusion and may be a deterrent
to investment.

A priority in the reform process was to lay down a clear basis for the acquisition and
protection of property rights. Although this was achieved relatively quickly, in some cases
rights are still unclear or restricted. The restitution issue is a source of confusion in some
countries, such as Poland, where the main law has yet to be enacted. Almost everywhere
restrictions on the purchase of land by foreigners were introduced and are, in some cases,
disincentives to business. In several countries there is room for further amendment and

modernisation of legislation on land ownership. In addition, in all countries there is room
for improvement of the systems for the recognition of property rights so as to promote and
sustain the development of real estate, housing or mortgage markets.

External liberalisation has also been far-reaching: tariffs, quotas and licences have been
rapidly dismantled, except in Albania, where restrictions are still in place.

Trade liberalisation was'supported by a rapid introduction of current accountconvertibility,
which gave domestic operators access to foreign exchange and allowed exchange rates
to be adjusted to sustainable levels. Only minor restrictions such as ceilings on travel
allowances remain in force. In Romania, because of a sustained gap between the official
and parallel exchange rates, there is insufficient foreign exchange to meet import demand
and rationing is applied. The exchange rate regimes are extremely diversified across the
region.

Finally, most countries have opened their economies to foreign investment through very
liberal legislation, allowing full foreign ownership, transfer of profits and repatriation of
capital. In Albania, although a suitable legislation exists, the treatment to which some
foreign investors are subjected acts as a disincentive.

fc.3

5.1.3 Privatisation and restructuring

The PHARE countries have generally focused on privatisation as one of the means to
enhance the development of a competitive productive sector. Restructuring has been
less actively pursued, although there is a growing awareness of the urgent need for
enterprise restructuring. Privatisation of itself does not generate improvement in efficiency
and the newly privatised firms must often be restructured to operate effectively in a
market system. Moreover, it is now clear that with the exception of the Czech Republic,
privatisation will be a. slow process and that a large stat.e-dwned sector wijj dominate the
economy for some years. More urgently, the accumulation of inter-enterprise arrears and
bad loans is now raising problems for the sustainability of reform programmes.

Privatisation has not progressed uniformly throughout the region. Although by the end of
1992 the legal basis was in place in all countries, there were some impediments to
implementation, such as the issue of restitution or compensation, which has slowed down
small-scale privatisation in Poland and the privatisation of agricultural units in Hungary
and Latvia. In. most countries, small-scale privatisation, together with privatisation of
housing and agriculture, is under way; in the Czech and Slovak republics it is almost
complete.

Large-scale privatisation has advanced in the Czech Republic under the voucher scheme,
where it has been most rapid, and in the Slovak Republic, Hungary, the Baltic states and,
to a more limited extent, Romania. In most countries, however, the first major step in
large-scale privatisation was the transformation of state-owned enterprises into joint stock
limited liability companies. In some countries, this process entailed some restructuring
through dismantling of large companies into smaller units, as in Bulgaria, but this
generally did not improve enterprise behaviour. Nowhere is privatisation a smooth
process; all countries have encountered obstacles, from the inadequacy of legislation in
Albania, to the lack of political consensus in Bulgaria, or the Ievelling-off of demand for
state-owned firms in Hungary.

Only following the withdrawal of state subsidies, the removal of preferential access to
credit and the enforcement of credible bankruptcy laws can the restructuring of
enterprises take place through market forces. In most PHARE countries these three
conditions, have not yet been met, though in all of them the dismantling of direct
production subsidies is fairly complete.

Bankruptcy legislation in most CEECs is still weak. It is non-existent or inadequate in
Bulgaria and Romania; is not enforced in Albania and the Czech and Slovak republics and
Slovenia; and lacks the institutional framework for implementation in the Baltic states. In
Poland, legislation T h e Enterprise and Financial Sector Law", was passed in 1993 to
facilitate out of court settlement of enterprise debt cases. This law is designed to avoid the
situation which arose in Hungary in 1992 when rigorous bankruptcy legislation was
introduced but the commercial courts did not have the capacity to process the massive
wave of bankruptcy proceedings triggered by this legislation.

Financial discipline has not been rigorous and inter-enterprise arrears and bad loans in the
banks' portfolios are becoming an acute problem, amounting in all countries to several
percentage points of GDP. The chain reaction of liquidity problems makes it difficult to
distinguish profitable and unprofitable companies. At the same time, banks are prevented

**Ê»4-**

from making resources available for new investments. Some countries have begun to
address the problem of bad debts. Hungary and Slovenia opted for a strategy of
substituting state bonds for bad loans. In the CSFR. a consolidation bank to which bad
loans were transferred was set up. In Poland, the major banks have established units to
manage the bad loan portfolios as a part of a comprehensive national scheme to deal with
the bank-enterprise dept problem. In the Baltic states, some progress has been made
with restructuring and consolidation of banks.

The difficulty of enforcing financial discipline without generating massive closures of
companies has.prompted some governments to adppt a cautious restructuring policy. This,
often leads to-a. kind of wide screening of state-owned companies to select companies
which need temporary support or companies which can be reorganised or those which will
be liquidated. Such a screening has been initiated in Hungary, leading to some temporary
sectoral support programmes and to the selection of companies which will remain
permanently state-owned. Similar actions are to be initiated in Romania.

In contrast to the slow progress in restructuring and privatisation, the expansion of the
private sector has been rapid in all PHARE countries as a result of the sustained creation
of small and medium-sized enterprises. This indicates the ability of these economies to
generate a supply response and suggests that the prospects for investment may improve.
The share of the private sector in GDP ranges from about 20% in Bulgaria to 50% in the
Czech Republic and Poland. The private sector dominates construction and retail trade,
with shares ranging from 50% to over 80%, but is much less present in industry, with
shares of 13% to 33%.

5.1.4 Financial sector

The financial sector has a key role to play in the transition, _as_ it is expected to be an
important channel for allocation of resources according to market rules and the main
support for an upturn in investment.

All PHARE countries have taken the first step of the reform, i.e. setting up a two-tier
banking system in which the financial inter mediation functions are separated from the
central bank functions of monetary control. All countries have ended administrative
allocation of domestic credits and many have deregulated interest rates. Some countries,
however, have kept credit ceilings or preferential credits for some specific purposes.

However, there is still considerable room for improving efficiency in the banking sector in
most countries. Although small» banks have mushroomed many of these banks focus on
short term trade and foreign currency operations. The banking sector is still dominated by
the large staterowned banks, which tend to dominate certain regions or sectors of the
market (e.g. agriculture).,They are highly specialised and not familiar with commercial
practices. Except in the Czech and Slovak republics, Estonia and Poland, where at least
some large state banks have been privatised, bank privatisation is only beginning in other
countries. Overall the sector is still uncompetitive. Most banks began with very lov/
capital/asset ratios and continue to suffer from the high share of bad loans in their
portfolios. Until the banks have been recapitalized they will be unable to participate more
actively in the enterprise restructuring and the privatisation process and to enhance the
development of financial markets. A comprehensive recapitalisation scheme is underway
in Poland and is being launched in Hungary.

_**<0>**_

5.1.5 Fiscal reform

For the government sector, the transition to a market economy implies major shifts away
from the legacy of central planning: an overall reduction in the size of the public sector, an
extension of the tax base to sources other than enterprises, a streamlining of social
benefits to target them on vulnerable groups, and the transfer to the state of those aspects
of social protection that previously were the responsibility of enterprises.

All the PHARE countries have made significant progress in modernising their tax systems,
except Albania which has begun only recently. Apart from Hungary, which introduced
personal income tax, VAT and corporate tax at a very early stage of the reform and the
Baltic states and Slovenia, which initiated the reform in 1990 and 1991, most of the
changes in tax systems occurred in 1992 and 1993.

Most countries have experienced a collapse of their tax base and the accumulation of
large tax arrears. This reflects the steep fall in output, particularly in the state-owned
sector, which until recently was the main source of revenue. Furthermore, because of
weak tax administration, the new systems are not being effectively implemented; in
particular, the expanding private sector generates less revenue than it should, because of
widespread tax evasion. This heightens the risk of fiscal crisis.

On the expenditure side, all countries have difficulties in restructuring the social protection
system. Although basic social insurance legislation is in place, social benefits still have to
be targeted more narrowly on needy groups. The Phare countries have, at best, made
limited progress in streamlining their generous social security systems. Reforms in the
areas of social assistance/social work and the development of occupational/private
insurance schemes are still outstanding. Other aspects of social sector reform, notably
improving education and health services, will probably necessitate an increase in public
expenditures. The next priorities will be an active labour market policy and the
rehabilitation of infrastructure that is so necessary to improve the business environment.

5.2 The Copenhagen Initiative - Phare Support for Infrastructure Development

The Phare 1993-97 Guidelines, while maintaining the emphasis on the role of Phare in
supplying technical assistance for the transformation process, defined the possibility for
an increased use of Phare funds for investment purposes. The Guidelines identified the
following sectors as the most relevant: environmental improvements, energy savings,
regional, reconversion, job creation, SME development, research, education, health,
housing and infrastructure.

The most important initiative in 1993 in this respect was that the European Council at it
meeting in Copenhagen in June 1993 decided that as from 1993 up to 15% of the total
Phare budget could be made available in support of the implementation of infrastructure
investments, notably in the areas of energy, telecommunications and transport.

Through the Copenhagen Co-financing scheme financial support will be provided for a
limited number of major infrastructure investments. The main criteria for eligibility are
that (i) the intervention is" linked with progress in restructuring or reorganising the sector in
question; (ii) the project is bankable according to normal criteria applied by international
financing institutions (IFIs); (iii) the project is cofinanced with one or several of the IFIs

_**Lie**_

and the Government; (iv) that the Phare contribution is a necessary part of the
Government contribution and advance the date of project finalisation or make the project
feasible at all; (v) Phare will not replace private financing and (vi) the project is of
Community interest.

The Copenhagen Co-financing scheme was used in 1993 in support of the upgrading and
integration into the European network of the E-20 railway line in Poland between the
German border and Warsaw. Phare through the 1993 National Programme for Poland
financed 30 MECU out of total investment costs of approximately 450 MECU. It is
envisaged that approximately 100 MECU will be used for co-financing of transport and
energy infrastructure investments in CEECs in 1994.

In addition to the Copenhagen Co-financing scheme. Phare provided approximately 35
MECU in 1993 for the elimination of border crossing bottlenecks in the region. These
projects, concentrating on high impact, urgent interventions, supported the upgrading of
basic infrastructure in the border crossing area, the establishment of and equipment for
customs clearance and control facilities. By focusing on the main international corridors,
coherence and complementarity with larger ongoing or planned infrastructure investments
have been ensured The projects have generally been cofinanced with recipient countries
and with Phare providing 50% of financing.

5.3 Health

Health care systems have been placed in a precarious position due to the difficult socioeconomic situation faced by the countries of Central and Eastern Europe. Reform of these
systems is essential if they are to become viable and affordable in the context of a market
economy while at the same time being socially acceptable. Health care restructuring is a
key priority of Central and Eastern European governments.

This need for restructuring has come at a time at which the countries in question find
health standards in decline and the gap between East and West growing. Health care
systems are deteriorating with unsuitable infrastructure, shortages of medicines and
inadequate staff. The financial situation in the health care sector is critical with seriously
shrinking resources and badly targeted and uncontrolled spending.

Priority areas are: (i) reform of planning and management, (ii) decentralisation of health
care, (iii) the development of community health care (family practitioners, etc.), (iv) the
introduction of ways of keeping access to health care as open as possible, (v)
improvement of the qualifications of hearth care staff and (vi) the development of
preventive medicine and action to tackle the causes of disease.

Phare's first activities in the health sector sought to ensure that various basic health
services continued to be available, while at the same time supporting the first steps in
institutional reform and the definition of new health care policies. The health care systems
at greatest risk were therefore supplied with consumables. However, this type of
assistance, similar to humanitarian aid, was limited to the early phases of reform.

By encouraging CEECs to adopt a strategic approach to health care, Phare is now aiming
to support reforms which will provide the foundations of systems which can develop in a
new social and economic setting and take on board the concepts of cost/benefit and
comparative advantage. Such strategies are becoming a part these countries' mediumterm health care policies.

***?**

Priority areas for Phare support are (i) financing of health care expenditure (budgetary
practices, cost control, personnel salaries, contribution systems), (ii) the reorganisation of
health services (particularly the movement from a centralised hospital system to one
focused on family medicine, ambulant care and privatisation); (iii) pharmaceutical
policies (legislative framework, price policies, reorganisation of supply and distribution,
including privatisation), (iv) training of personnel, (v) activities related to the promotion of
preventative medicine.

Phare is now operating in all of Central and Eastern Europe apart from Slovenia, either
through sectoral programmes (Romania, Bulgaria, Poland, Albania and Hungary) or
through a GTAF. (Lithuania, Latvia. Estonia, Czech Republics and Slovakia). Phare
commitments by the end of 1993 were ECU 100 million (excluding humanitarian aid); for
programmes lasting an average of three years.

With a view to concentrating assistance resources in the health care sector, Phare has
recently put together programming guidelines intended for aid coordinators, health
ministries. Commission delegations, multilateral partners. Community Member States and
technical assistance staff involved in drawing up Phare health care programmes.

5.4 Public Administration Reform

Whilst the pivotal objective of PHARE has been to contribute to the process of economic
reform, structural adjustment and sustainable development through the provision of
support focused on the four core areas defined in the 1993-97 guidelines, it has been
necessary to broaden the range of sectors and issues implicated in the process of
economic reform. Assistance for reform in the area of public administration has during
1993 taken on a greater urgency and a higher profile than was previously the case in the
first years of PHARE.

The process of decentralisation, déconcentration and transformation of the state involves
a complex range of interventions, and the reform of public administration has already
been a feature of some sectoral programmes. Subsequently, the need has arisen to
develop fully-fledged stand-alone assistance programmes in order to introduce reforms
into the structures of central and local governments in a more concentrated form. Thus,
PHARE support in the area of Public Administration has been directed at two levels: i)
local and regional government ii) central government. In addition to the programmes
already underway in the Czech Republic, Hungary, Poland and Slovakia support
amounting to 7.2 MECU is being, provided through the respective GTAFs within the
framework of the National Programmes in Bulgaria, Estonia, Latvia and Lithuania. A first
phase of assistance has also been approved for Albania in the form of a package which
combines support to both central and local government. As a necessary part of coordinated support, all the above National Programmes work in conjunction with the
Regional Programme SIGMA.

A horizontal approach to public sector management and public administration reform is at
the forefront of assistance towards institutional development and change, but it is a
Sensitive sector susceptible to political whim, sometimes requiring unpopular decisions
and with an impact on civil servants who are traditionally conservative by nature.
Therefore in some instances, implementation has been delayed or slowed down by lack of
political will and change of circumstance. Reform of the public administration should be
viewed as a slow process requiring sustained support over the years as it tackles the core

te

issues of central government reform, public finance and budget, decentralisation of public
services, reform of management systems, civil service reform and training. In addition,
with the recently acquired powers and responsibilities of local authorities, a massive effort
in terms of human resource development is required as new legislative frameworks
emerge and local governments assume greater autonomy.

In 1993, further to the EURO-GTAF of Hungary and SIERRA (Poland) four new
programmes in support of the implementation of the Europe Agreements were initiated in
Bulgaria, the Czech Republic, Romania and Slovakia. The underlying importance of
support to public administration reform is further evidenced by the emergence of the
Europe Agreements as the new legal and political framework for Community assistance.
The ability of the central administrations to draw up policies, administer, approximate and
implement legislation effectively and efficiently within agreed time frames will be
essential. Therefore the strengthening of administrative capacities of the CEECs and the
creation of satisfactory conditions of employment for the civil service during the
forthcoming years will be crucial.

During 1993 important initiatives were taken with the Council.of Europe in the realisation
of two joint programmes totalling some 2 MECU: a programme in Albania covering legal
system reform and assistance to local government reform and legal reform in Estonia,
Latvia and Lithuania within the framework of the Council of Europe's LODE and THEMIS
programmes. Both of these programmes financed from multi-disciplinary funds are
viewed as experimental models of co-operation with the Council of Europe incorporating
the cost-effective pooling of resources to satisfy a common need in the CEECs in the area
of local democracy.

5.5 Cross Border Cooperation

In recognition of the specific development problems normally faced by border regions and
of the key role that cross border cooperation initiatives can play in the creation and
development of networks between the CEECs and the member states of the EU, the
European Parliament (EP) requested in the commentary to the 1993 budget that up to 15
MECU of the Phare programme budget (B 7600) be set aside for CEEC/EU cross border
cooperation and that at least 5 MECU be used for similar CEE/CEEC measures. The EP
request was based on the positive results generated by the Community's structural funds
initiative INTERREG which is aimed at cooperative development across national borders
with the EU.

Early in 1993, the Commission services (DG I in close cooperation with DG XVI) started a
process of project identification, involving the receipt of initial project proposals from the
Member States which were subsequently discussed with the CEECs in the Phare
programming process. A number of these projects were selected in addition to those
proposed by the CEECs, with the result that by the end of 1993 some 14 MECU was
committed for projects of cross border cooperation between Albania, Bulgaria, the Czech
Republic and Poland and their respective bordering EU member state and over 40 MECU
committed for cross border initiatives between the CEECs. Both groups of projects
involved primarily infrastructure (border crossing) and environmental projects. Most of the
CEEC/EU initiatives linked up directly with projects included in INTERREG. An overview
of the CEEC/EU projects is provided below.

_**l*\**_

PROJECTS OF CROSSBORDER COOPERATION
WITH MEMBER STATES FINANCED BY PHARE IN 1993

COUNTRY I PROJECTS I AMOUNT

(MECU)

ALBANIA Border Crossing at Kakavia/Ktismata 0.5

BULGARIA Environmental Study, Mesta (Nestos) River 0.7
CZECH Border Crossing in Folmava and Bavaria 1.5
REPUBLIC

Northern Bohemia - Saxony Regional 1.722
Programme. Includes the following cross border
impact activities:

           - Cargo Railway Crossing at Vejprty

           - Border Crossing at Mnisek

           - Border Crossing at Moldava

          - Ferry Connection Reiharsdorf/Schona-Hrensko

           - Border Crossing at C. Potok-Johstadt

           - New tourist track Loucna-Oberwiesenthal

           - Joint sewage system for village Cesky Jiretin

           - Waste water purification plant Moldava

           - Disposal of waste water Petrovice-Bahratal

           - Waste water purification Véjprty-Barenstein

           - Border tourist path Brandov-Olbernhan

           - Landscape protection tn area Cinovec
Petrovice
POLAND Border crossing (bridge) in Qlzyne/Forst 6.8
Border crossing at Kalboskowo, Route E28 Z8
TOTAL 14.022 [6 ]

PHARE
Funding |

In the process of identifying and launching the cross border initiatives, a number of policy
and implementation issues were raised.' The CEECs were initially reluctant to take up
proposals for projects in border regions with Member States, as these regions were
already in a better economic and social position relative to other border areas of their
countries, which in their view, needed more support.

Although in several instances and within the context of INTERREG I, there were contacts
at local and regional level between a Member State and a CEEC, there was little evidence
of such contacts being reflected within the plans and objectives of central government
departments dealing with Phare. The cross border exercise should assist in improving the
communication channels between regions and the centre within the CEECs in regard- to
Phare programming.

This amount is only what PHARE programme contributes to investment that may be of larger
value. It does not include contributions from the side of the Community member states.

**3o**

Although the implementation procedures of Phare and Interreg are different, the
experience gained in 1993 showed that with close coordination and cooperation cross
border initiatives can be successfully programmed and implemented both between the
CEECs and the EU Member States and between the CEECs. The "demand driven"
approach of Phare was maintained and the overall exercise will be useful in developing
experience for the programming and implementation of similar exercises involving twc
community assistance programmes.

5.6 Co-ordination with other donors

Aid co-ordination has been a major preoccupation of the Commission since the beginning
of the PHARE programme. It has over time strengthened its efforts to achieve
complementarity of aid through closer co-operation with the IFI's and bilateral donors at
the various stages of the programming and project cycle. In addition, co-ordination
contributes towards the sharing of experience among donors. The Commission's
commitment to aid co-ordination was reconfirmed in the PHARE guidelines 1993-1997 in
which it is underlined that "aid-co-ordination including co-financing with the G-24 countries
and the multilateral agencies will continue to be a major consideration for the
Commission". In addition, the guidelines stress the importance of the "synergies with
major sources of finance such as EIB, EBRD and the World Bank". Although there is a
great variety in the nature of co-ordination, it is evident in all sectors, and indeed, for most
programmes. Though the key partners are the World Bank, EBRD the EIB and Member
States, a number of other bilateral bodies have been involved.

*' Co-ordination takes place in a variety of ways as indicated below:

The Commission continues to liaise closely through a regular exchange of information,
working meetings and joint in-country.missions with the IFI's such as the IMF, World
Bank, EBRD and of course directly with the EIB. This is aimed at ensuring consistency of

 - views and objectives on macroeconomic policy and sector strategies, as well as a better
division of labour in providing assistance. For example the IMF is the main source of the
initial advice to central banks on policy and the regulatory and supervisory framework.
**PHARE** support is then provided in close co-ordination with the Fund for the subsequent
technical assistance, training and infrastructure, such as computer systems, needed to
**develop** **the** institution. Such operations have been undertaken in all CEECs. Similar cooperation with the IMF is ongoing in the area of fiscal reform.

Where reform strategies do not exist, the Commission has been instrumental in assisting
' ;the national authorities in developing appropriate sectoral policies and strategies which
are often followed by financial operations. For instance, in Romania a medium term
agricultural strategy has been developed with the assistance from the PHARE
programme, World Bank and the EBRD in addition to several bilateral donors. It will form
the basis for future financial support. Similar support has been provided for strategy
formulation in the agricultural sector in Bulgaria and Poland. In the Romanian banking
sector a co-ordinated approach involving a 60 MECU EBRD loan through a local bank
combined with PHARE technical assistance was developed. In Albania an operation of
this type was carried out for the health sector. In Poland a major programme to
recapitalise banks with substantial bad loan portfolios is being cofinanced with the World
Bank, EBRD and UK, French and US AID, involving a total donor contribution in excess of
500 MECU. A similar programme is under discussion in Hungary.

**>l**

PHARE technical assistance for feasibility studies and technical assistance provides
opportunities for subsequent loans and investment operations by the EIB and EBRD. The
33 MECU made available in 1992-93 under the Bangkok facility led to an estimated 434
MECU EBRD participation in investment projects ranging from transport, water and waste
treatment and energy to capital participation in enterprises. Similarly, studies financed for
the EIB resulted in several major loans to a total of some 635 MECU being signed and
others being considered in various fields including air transport, telecom and energy.

Under the G-24 mechanisms regular meetings are held at the level of senior officials and
sectoral working groups to ensure coherence of policy and objectives, as well as to
discuss possibilities of common action in specific sectors. Phare technical assistance has
been provided to set up aid co-ordination units in all CEE countries to co-ordinate G-24
assistance at the national level. At the sector level, the management and financing
mechanisms put in place for PHARE sector programmes also provide a framework for G24 aid initiatives. Examples are the four major environment programmes in Poland,
Hungary and the Czech and Slovak Republics that co-ordinate bilateral assistance
ranging from policy development to specific projects. Similarly, in Hungary the SME
programme management provides support to bilateral operations, and thus twelve G-24
donors, including Austria, Finland, USA and Turkey, have cofinanced projects under this
scheme. Under the auspices of the privatisation programme in Slovakia, UNIDO,
PHARE, French and German bilateral aid are co-operating in creating a subcontracting
advisory service for local enterprises.

Other aid co-ordination initiatives include the co-ordination of sector policies and
assistance strategies in the context of the discussion on the Orientations Papers. Finally,
PHARE is contributing to improved donor co-ordination through its support for public
investment planning in Lithuania. Similar assistance is foreseen for Latvia and Estonia.

5.7 Direction of PHARE

The process of economic transformation falls into two stages. The first includes short-term
stabilisation through macroeconomic measures (interest rates, credit control, reduction of
budget deficit...) combined with liberalisation of trade, prices and current account
convertibility. In addition the legal, regulatory and institutional framework required for a
market economy needs to be established, together with the formulation and starting up of
reforms in key sectors (privatisation, banking, labour market, private sector
development...). These are essential prerequisites for economic restructuring.

The focus on PHARE assistance up to 1992 has reflected the requirements of this first
stage of the reforms. The concentration was on traditional technical assistance, such as
the studies, training and expertise needed for policy formulation, legislation,, institution
building and for initiating reform programmes. Other forms of support were provided, but
up to 1992 these were largely limited to investment schemes for specific purposes, such
as credit for SME's or small farmers, or the supply of essential goods to countries facing
particular difficulties.

The second stage of reforms is more complex. It concerns the fundamental long term
restructuring of the national economy and increasing the share of the private sector. This
involves, inter alia, a substantial shift to private ownership, reorganisation of remaining
state enterprises, modernising banking and financial systems or measures to mobilise
investment and upgrading infrastructure. The dismantling of barriers to setting up and
developing private firms is equally important. A major restructuring of the education and
training system is required, including large scale programmes for professional and
vocational training. Finally, a thorough reform of public administration and the
establishment of the basic institutions of a civic society are necessary.

**r-2.**

The first phase of transformation is well under way and certain PHARE beneficiary
countries are now beyond the initial stages of reform. They are entering the second stage
of reform characterised by a diminishing need for classical technical assistance and an
increasing requirement for large scale private and public investments with an important
multiplier effect. Public investment will, however, due to limited mobilisation of domestic
saving and the budgetary restrictions necessary to maintain internal macroeconomic
equilibrium, have to be financed by a combination of loans provided by IFI's, budgetary
means and external grants.

The Europe Agreement provides the framework for preparing the associated countries for
future membership of the EU. This was confirmed by the European Summit of
Copenhagen. There will therefore be a need for structural assistance to help to adapt the
economic, social and physical structures of the CEEC to the requirements of integration.
Examples are the improvement of physical links between the EU and the CEEC (as well
as between the CEEC themselves) in fields such as transport, telecommunications or
energy and support for regional development in areas facing difficulties due to the
reforms. Finally, greater attention could be paid to 'sensitive' sectors such as steel, with
the aim of removing potential conflicts through better mutual cooperation. A number of
operations along the above lines are underway, but these will need to be developed
further within a medium term programming framework.

**PHARE** has already» or, is in the process of, providing investment support within the limits
**of** the existing guidelines. This support is extended to the private sector in situations of
**market** failure where neither local financial institutions nor external sources can provide
**the** necessary resources. The lending efforts of the EIB and EBRD are supported as are
**those** **of** appropriate domestic financial intermediaries. In the public, sector, PHARE

**•support** has been effective **in** developing and improving the efficiency of national financial
**instruments.** **In** addition, **PHARE** has financed urgent infrastructure on a limited scale and
**infrastructure** programmes with a demonstration effect. Finally, PHARE is co-financing
**infrastructure with IFI's in** accordance with the eligibility criteria and within the financial
**ceilings** decided by the European Summit of Copenhagen (see 5.2).

**These** various avenues **of** investment support are not sufficient if PHARE is to respond to
**the needs of the CEECs in a** significant **way** and is **to** continue to have the impact sought
**by member states. There is, therefore,** a need to increase the existing possibilities for
**investment** support in addition **to** further developing the investment operations already
**underway.**

**A multiannual** assistance programme with the twin aims of helping to accelerate the
**transformation process** **through** **support for** strategic investment (together with the major
**lenders of capital, the EIB, EBRD and IBRD** and the private sector) and **to** continue
**support for structural reform** carried **out** within the context of the implementation of the
**Europe Agreements would** be **an** effective means to support and sustain the process,
**leading to** accession. Such a programme could serve to reduce the costs of membership
**of** the CEECs in the European Union.

**12)**

PHARE PROGRAMME

SYNTHESIS OF NATIONAL PROGRAMMES 1993

_NATIONAL_ _PROGRAMMES_ _801.0_

l ALBANIA | €5.0
AL9301 Balance payments grant 35.0

AL9302 Tcmpus 2JS

AL9303 - " Health . 6 . 0

AL9305 Private sector development ; 7.0

AL9306 Environment 3.3

AL9307 Public administration reform 1.2
AL9308 {Agriculture (ARISE) | 1Q~Ô~

[BULGARIA I 90.0
BG9202 Nudear safety reconst. BG9107 4.8

BG9301 Health 10.5
BG9302 Tempus . 15.0
BG9303 Private sector 6.0

BG930S Transform, of customs 8.0

BG9306 Financial sector 5.0

BG9307 Energy 8.4
BG9308 Transport . 3.5
BG9309 Telecommunications 2.0

BG9310 Environment 7.0

BG9311 Nuclear safety 3.8

BG9312 GTAF Social & labour market 2.0

BG9313 GTAF Social dialogue, 2.0

BG9314 GTAF Education 1.0

BG931S GTAF Manag. training ' 1.5
BG9316 GTAFImptenxEuropeagr 2.0

BG9317 GTAF Public admn. reform ; .3.0

BG9318 GTAF Statistics 3.0

BG9319 JGTAFAkl co-ordination, _\_ 1.5

(CZECH REPUBLIC j 60.0

CZ9301 Tempos 8.0
CZ9302 Private sector develop. 27.0
CZ9303 Infrastructure 9.0

CZ9304 - GTAF 1» 8J)
CZ9305 } Human resources _\_ 8.0

[ESTONIA | 12.0
ES9301 Tempus 1.5

ES9302 JGTAF _\_ 10.5

[HUNGARY I 100.0

HU9208 T e d w . assist ; 1.0

HU9301 Tempus ' 16.0

HU9302, . . Health _'__ 10.0
H09303 Private se^rdévAétop^' ' ' [r] " w ^ ^ - "•••-yix)
HU9304 Agriculture 30.5
HU930S .{Technological develop. 1 0 0
HU9306 (Assistance co-ordination J 1.5

lLATVIA I 18.CJ

LE9301 Tempus 2.0
LE9302 JGTAF | 160

~~ LITHUANIA I 2G.QJ

LI9301 Tcmpuc ? f)|
LI9302 IGTAF j ~"22"î>1

_%_ _•_

JPOLANO j 22S.0
PL9301 Tempus 35.0
PL9302 Upgrading statistical inf. 12.0
PL9303 Quality control 5.0

PL9304 Financial sector 10.0

PL930S Customs 15.0

PL9307 Safe society ; 10.0
PL9308 - Transport ; 18.0
PL9309 Transport infrastructure 30.0

PL9310 Tourism 8.0

PL9311 Foreign investment 10.0
PL9312 Rural and agricultural 30.0

PL9313 Posts & Telecom. 7.0

PL9314 Training & education rcf. 10.0
PL931S - - ' Enterprise restructuring ; 7.0

PL9316 Flexible reserve T A . 16.0

PL9317 Fiesta ll Commerce 1.0

PL9318 (Fiesta 11 Securities | 1.0

[ROMANIA I 13(TÔ~
RO9302 Tempus 18.0
RO9303 Private sector develop. 70.0
RO9304 Computer, customs 1 0 0

RO930S GTAF 27.0

RO9306 | Agriculture _\_ 5.0

[SLOVAKIA | 40.0

SR9301 Tempos 5.0
SR9302 Private sector develop. 19.0

SR9303 Infrastructure 5.0

SR9304 Agriculture 3.0

SR9305 GTAF 111 5.0

SR9306 . JHuyman resources | 3.0

~ ~ [SLOVENIA [ 11.0
SL9301 Tempos 3.5
SL9302 IGTAF | 7"!s

jex-YUGOSLAVIA [ 2S.0
MA9301 iFYROM-knportation | 25.0

**5r^**

PHARE **BREAKDOWN** **OF** 1993 **COMMITMÉNTS** **[;]** **.BY** **SECTOR AND COUNTRY** (silualion at 31.12.1993)

**19S**

7S

OS

OS'

4S

**5s;**

**16S'**

I S ;

15S, - '

**OHJ**

**4H** **;**

**IS'-**

21SJ

**100*"?.**

SECTORS -C

Private sector, fteiiructurtng, Prtvatlaatlon, SME'» "*.

financial sector v

Administration and Publie Institutions :'.

Agricultural reslruclurtng V

Environment and Nucl»er Safety - '
.•i

Social develeomerl _ind_ Employment
Education, Training and Aeseareh

Publie health i*

Infraalruelur» l£n«'9y, Transport, Telecom.)

Integrated ftaolonM Measures

Humanitarian and [ c] ood Aid <•

Oemoerallsailon

Other (MultldlselpiMAry, OTAP, tie...) _"j,_

Total v

**10**

**14.0**

**5.0**

**15.8**

**14.5**

**17.5**

**13.9**

**3.0**

**6.5**

**10.0**

ts

1.5

10.6

12.0

C2

27.0

6.0

6.0

9.0

6.0

(0.6

18.01 226.0

ftO

70.0

5.0

16.0

10.0

9.9

27.0

13».»

(')

W 

31.0

30.5

10.0

26.0

2.6

100.0

YU

25.0

M | OJ

10.0

200

to.o

20 6

_u.o_

2?.5

11Î.3

PL

22.0

20.0

30.0

45.0

75.0

33.0

Ll

2.5

22.5

25.0

SA

19.0

3.0

3.0

S.O

5.0

6.0

**PR**

**n**

**AO**

**AO**

**EN**

**SO**

**ED**

**SP**

**IN**

**Rt**

**HA**

**Ot**

**AA**

**AL**

**7.0**

**35.0**

**1.2**

**10.0**

**3.3**

**2.6**

**6.0**

**10.0**

**76.0**

I t

.2.0

16.0

(Mécus)

TOTAL

190.0

70.0

1.2

78.5

36.9

45.5

162.2

6,0

146.9

3.0

44.9

10.0

206.8

1,603, t

9.9

10.0

40.6

70.?

JL

35

;.5

11.6

40.01 25.0

**•A** **t** **7«A|** **»«A|** **1'A** 10* 2'A

2 2 ' A I 2 ' A I 1<*A

8 ' A | 4M | 2'A| l'A | It'AJ ?*A| 100*A j

**AL « ALBANIA** _**\**_

**uG** **»** **BULOAPIA** **.** **[v ]**

**ES » ESTONIA**

**HU» HUN GARY**

**LE «LATVIA**

**Ll** **»** **LITHUANIA** _**I**_

**HL** **•** **POLANC** **.•••**

**no «** **rtOMANA** **:'.**

**CS** **'OX-CZECMOS'-CVAKIA**

_**CI**_ _*****_ **CZECH** **PSPi.'DL'C**

**SA** **•** **SLOVAKS** **;** **:** **.**

**YU** **«** **ex-YUGC.)U'** **•"'• 'ffjeeot** **S ' Ô V ^ I )** **j**

**SL** **t SLOVEN'V**

GOft » «i.eor

HP « Region*! P r e ; [-] a - ^ e s

CP » Oiher _Prcr»--**_

' •, Th.i /imou" -.11 _•**_ _•_ f'.ni^ccc **6ui** _('_ i>« eack«o« c( **N.vona^proflrimme».**

1Ô93: BY **SECTOR** 1993: BY COUNTRY

**OP** AL

_*****_

Table 3

_**It,**_

**PHARE PROGRAMME**

**SYNTHESIS OF REGIONAL PROGRAMMES 1993**

_REGIONAL_ _PROGRAMMES_ } _112.3\_

ZZ930S Tempus technical assist. 5.5
ZZ9306 Tempus regional projects ; 10.3
77Q3f)fl Regional energy sector 5.0

ZZ9311 Joint venture JOPP 27.5

ZZ9312 Customs 10.0

ZZ9313 Transport extension 92 4.0
ZZ9314 Transport 20.0
ZZ9316 Drug extension 10.0
ZZ9317 | Nuclear safety } 20.0

###### PHARE PRâfî8A;Miyi£ • iliîi^lfrtîffrrifnTtfiiii [:] /-. .? i&V&^f**

**GENERAL OVERVIEW OF BUDGETS SINCE** **1990**

(budget line B7-6000 - situation at 31.12.1993 - in Mecu)

Table 4

Payments

171.0

283.9

436.2

521.1

1,412.2

Budget

Year

1990

1991

1992

1993

Total

_{_ **Initial**

**r**
**.** **Budget**

_**••**_ **300.0**

**759.9**

**•** **1**,000.0

**1,040.0**

_**i**_ **3,099.9**

Appro priations for commitments

300.0

291.9

537.0

447.7

1,576.6

**Commitments**

**(1)**

**500.0**

**775.0**

**1,014.3**

**1,003.9**

**3,293.2**

Appropriations for payments

Final

Budget

**Final**

**Budget**

500.0

775.0

1,015.5

1,005.7

**3,296.2**

Initial

Budget

350.0

307.0

437.0

521.1

1,615.1

_(1) After decommitment of unused amounts._

**GENERAL OVERVIEW** **OF;CONTRACTS** **•** **1990-1993**

silualion at 31.12.1993 - inlMecu)

_;Contrsct$ concluded by the_ _**Commission headquarters and by the recipient countries)**_

Year

1

1990

1991

1992

1993

Total

Corrimltmentâ

2

_k_ _-_ 600.0

775.0

1,014.3

1,003.9

3,293.2

Total

7 = 3 to 6

385.6

492.7

444.8

243.0

1,566.1

1990

3

1991

4

1992

5

Table 5

 - %

8 = 7/2

77.1%

63.6%

43.9%

24.2%

47.6% **d?**

Contracts concluded in

1993

6

103.6

179.8

258.8

0.0

542.2

27.8

115.3

186.0

243.0

572.1

154.7

0.0

0,0

0.0

154.7

99.6

197.6

0.0

0.0

297.1

_%_

8 = 7/2

84.5%

60.6%

37.2%

14.2%
### 42.9% 2

GENERAL/OVERVIEW OF **PAYMENTS** .1990-1993

(situation at 31.12.1993 • in Mecu)

_(Payments on Commission headquarters contracts_ + _advance payments to recipients)_

Year

1

1990

1991

1992

1993

Total

1 Commitments

: 2

_\_ 500.0

**775.0**

**1,014.3**

**.** **i** **1,003.0**

_**I**_ **3,203.2**

1.71.0

0.0

0.0

0.0

171,0

1990

3

1991

4

1992

5

Paid on budget year

1993

6

51.1

169.4

215.7

0.0

436.2

68.6

148.0

161.5

143.0

521.1

'able 6

Total

7 «• 3 to 6

422.6

469.4

377.2

143.0

1,412.2

131.9

152.0

0.0

**0.0**

**283.9**

PHARE Programme,

**AMOUNT OF OPERATIONS CONCLUDED BY YEAR** **-1990-1993**

**(situation** **at** **31.12.1993** **•** **in Mecu)**

Operations

_Commlttdd_

_Contracted_ _(1)_

_Paid_ ; _(2)_

'able 7

Total

3,293.2

1,566.1

1,412.2

1990

1991

1993

1.003.9

572.1

521.1

1992

1,014.3

542.2

436.2

500.0

154.7

171.0

**775.0**

**297.1**

283.9

(1) Contracts concluded by the Commission headquarters and by the recipient countries.
(2) Paymenis on Commission headquarters contracts and advance payments to recipients.

1,200.0   - ^

1.000.0

800.0 4

0.0 4

**— •-** **•**

**•**

« Committed

**i**

i - • **•** Contracted

**i**

_'_ - Paid

1990 1991 1992 1993

BREAKDOWN **OF COMMITMENTS, CONTRACTS AND PAYMENTS BY COUNTRY** **- 1990-1993**

(situation at 31.12.1993 - in Mecu)

_1_

Country ';

Albania »\

Bulgaria

Estonia - '.

Hungary

Latvia .•

Lithuania

Poland

Romania

ex-Czechoslovakia :

C2ech Republic

Slovakia

ex-Yugoslavia (except Slovenia)

Slovenia

ex-GDR

(Rooional Programmes)

(Other Programmes)

Total

4 = 3/2

**%**

_•2_

**Commitments**

**195.0**

**308.5**

**22.0**

**405.8**

**33.0**

**45.0**

**802.8**

**441.7**

**233.0**

**60.0**

**40.0**

**123.9**

**20.0**

**35.0**

**389.1**

**138.3**

**3,293,2**

_3(1)_

**Contracts** **.**

**149.5**

**139.6**

**8.6**

**149.0**

**11.2**

**14.9**

**270.5**

**225.0**

**• 102.9**

**8.0**

**5.0**

**121.4**

**11.9**

**22.9**

**210.0**

**115.8**

**1,566.1**

**76.7%**

45.3%

38.7%

36.7%

34.1%

33.0%

33.7%

50.9%

44.2%

13.3%

12.5%

97.9%

59.7%

65.4%

**54.0%**

**83.7%**

**47.6%**

Fable

_5(2)_

Payments

136.3

124.2

5.3

196.3

7.3

8.0

277.6

198.8

111.0

6.4

3.5

83.0

8.4

25.9

163.8

56.4

1,412.2

_6_ e _5/2_

%

69.9%

40.3%

24.1%

48.4%

22.1%

17.7%

34.6%

45.0%

47.6%

10.6%

8.7%

67.0%

42.0%

74.0%

42.1%

40.8%

42.9%

**oQ**

.'»; _Corrects concluded_ _**by**_ _the_ _**Commission headquarters end by the recipient**_ _**Countries.**_
'?; _Payments on Commission_ _**headquarters contracts êndêdvance payments to**_ _**recipients.**_

BREAKDOWN OF COMMITMENTS, CONTRACTS AND PAYMENTS BY SECTOR -1990-1993
(situation at **31.12.1993** - in **Mecu)**

_1-_

Sectors

Private sector, Restructuring, Privatisation, SME's

Financial sector

Agricultural restructuring

Environment and Nuclear Safety

Sochi development and Employment

Education, Training _&r\d_ Research

Infrastructure (Energy, Transport, Telecom.)

Administration and Public Institutions

Integrated Regional Measures

Humanitarian and Food Aid

Public health

Démocratisation

Other (Multidisciplinary, GTAF, etc...)
_fmm^^ÊÊ^^^ÊKÊKÊSMKÊBKKtm_

_2_

**Commitments**

**594.5**

**161.7.**

**383.5**

**312.4**

**220.7**

**446.4**

**307.6**

**40.2**

**20.8**

**385.6**

**6.0**

**10.0**

**403.8**

_3(1)_

**Contracts**

**198.1**

**89.3**

**179.5**

**79.4**

**26.7**

**• 374.9**

**73.5**

**20.7**

**12.9**

**339.6**

**0**

**0**

171.6

4=3/2

**%**

**33.3%**

**55.2%**

**46.8%**

**25.4%**

**12.1%**

**• 84.0%**

**23.9%**

**51.5%**

**62.0%**

88.1%

**0.0%**

**0.0%**

**42.5%**

Table 9

_5(2)_

Payments

200.4

98.3

191.8

95.7

34.3

323.1

65.9

9.7

4.4

286.1

0

0

102.7

_:'B^W?/y.%y(rt'£®_

_6-5/2_

         - /•

33.7%

60.8%

50.0%

30.6%

15.5%

72.4%

21.4%

24.1%

21.2%

74.2%

- •. " - 0.0%

0.0%

25.4%

_I^M^MMWM_

**0Q**

_(Vi Contracts concluded by the Commission headquarters_ _**and**_ _by the recipient_ _countries._

_(2} Payments on Commission heedquarters contracts and advance payments to_ _recipients._

Table 10

PHARE COMMITMENTS FROM 1990 T0.1993 (situation at 31.12.1993).

_fj_

0

0

0

0

0

6.OC0

0

0

0

Mr.900

0

_0_

0

_HP_

23.000

0

0

66.500

13.000

94.X2

$9.000

9.*95

10.800

51.000

0

0

29.000

i n ( n «

0

10.292

0

i.000

0

0

0

10.000

103.64 S

ni.}))

220.700

44^.434

307.550

40.196

20.600

365.620

6.000

10.000

403.766

),2)),1ll.

**SO**

**56,500**

**15,000**

**51.000**

**37,600**

**17,000**

**30.500**

**51,400**

**3,000**

**0**

**40.000**

**0**

**•** **0**

**6.500**

**261,100**

**fl**

**0**

**0**

**0**

**0**

**0**

**2.500**

**0**

**0**

**0**

**0**

**0**

**0**

**10,600**

**22,000**

MU

113,500

16,000

68.500

47,000

26.500

66.500

11,300

13.000

10.000

0

0

0

6,600

401,100

u

0

0

0

0

0

3.500

0

0

0

0

Ô

0

26,500

12,000

11*| 71* j     - ' A | 11*| i'A| I M | 1 2 K | 4Vl| I O O H |

OP AL

SECTORS ;•.

PrMt» aeeior, ftejtruelurlng, Prlvaiiwiion, SMÊ'i 

Financial aictor j

Agricultural reairueiurlno.

Environment and Nuclear Safety " [; ]

Social development »nd Employment

Education, Training <nd fteie/ireh

infraalrueturt (Energy, T/iniport, Telecom.)

Admlnlatratlon and Public Inniiuilei»

inteejrated AaglonM Maaiure», 

Humanitarian and rood Aid ;'

Publie Malin

OemoeraUaailon

Omar (Multldiieio.'inaf/, OTA*, ate...) ';.

Total

**AL**

**7,000**

**70.000**

**25.000**

**3.300**

**0**

**3.700**

**'** **4,400**

uoo

**0**

**70.600**

**6.000**

**Ô**

**4,400**

**111,006**

Ll

6.500

0

0

0

0

4.000

0

' 0

0

0

ô

6

61,500

41,600

ftO

110.000

5:000

- 71,000

5,000

15.000

41.000

19.000

0

0

106.720

0

0

66,000

441,726

131*

06ft

0

0

0

10,000

0

1.000

0

0

0

0

0

0

14.000

31,606

tKècus)

_OP_ | 10ÎAL

J»

19.000

0

3.000

0

3C00

S.000

S.ÎCO

0

0

0

0

0

J.COO

40,0001 m . t o o

PL

136.000

42,700

165.000

75,000

117.200

104.300

117.450

6,500

0

0

0

0

33.660

102,100

es

60.000

0

0

35.000

19,000

38,000

21.000

0

0

0

0

0

30,000

2)2.000

K

0

0

0

0

0

S.600

0

0

0

0

0

0

U.20Ô

10,000

M

27.000

0

0

0

6,000

6.000

9.0CO

0

0

0

0

0

6.000

10.000

0

10.000

0

524.500

141.700

3S3 5ÔO

0| 312 400

**•A** **1** **11*1** **11*** **1** **t'A** 12U| 1'A| 24V* | 1H

**AL «ALBANIA**

**60 •BULGARIA**

**ES •** **ESTONIA**

**HU» HUNGARY**

**LE** **t** **LATVIA**

**11 t LITHUANIA**

**Pi** **•** **POlANO**

**r«0** **•** **ROMANIA**

**CS** **«** **«I.CZECWOJI.OV'.\KIA**

_**11**_ **««ECHAEPunuC**

**Sn** **• SLOVAKIA**

**ru «** **ea.YUGOSlAViA (except** **S'ovtNa)**

**Si » SLOVENIA**

**COR** ***** **Oa-GOR**

**ftp «** **rUgionaiProj.-ann*»**

**OP «** **Oin«( Prôçjrnr.ttjj**

Table 11

PHARE **CONTRACTS FROM 1990 TO 1993** **(1)** (situation at 31.12.1993)

.: _ .. _ t ...

SECTORS

Private aecior, P.esi-jeiu.'lng, PrfvMlsmlon, SVE [-] »

financial «ector

Agricultural resiruciurlno. ;

Environment ar.d Nuclear Safely

Social development and Employment

Education, Tralrlng »nd fteeeareh

Infraalruetura (£ner;y, Trinipon, Telecom.)

Admlnlalratlon *nd "ublle Injtliutioni

inlegratad Regional Meaiuraa,i

Humanliarl«n «rd Peod Aid

Public he*n>>

Oemocratlsmlor. ; [: ]

Other (MuiHiiacMi!-»rY, O T / [f], _>•(_ ..|

Tolal ;

**AL** **,**

**0**

**70.000**

**8.256**

**0**

**0**

**3,700**

**4.031**

**0**

**6**

**59.406**

**0**

**6**

**3.697**

**141,412**

HU

40,237.

7,516

17.548

1.740

9.867

65,654

7.212

6.962

2,092

0

0

0

0

141,021

**Î4**

**0**

**0**

**0.**

**0**

**0**

**2.500**

**0**

**0**

**0**

**0**

**0**

**0**

**6.011**

**1,111**

PL

61,649

6.523

67.374

21,625

7.661

76,666

6,712

0

0

0

0

0

0

270,131

1H | 71* 11*1 01*1 l'A| 1'A| 1)V.| 7'A| I O O H I

#### **1**

CS

36.604

0

0

21.605

4.147

29,066

7,619

0

0

0

0

0

3,619

162,111

AO

19.955

3.486

35.520

0

125

41.000

8.376

0

0

66.344

0

0

30.(85

224,661

14%

OOft

0

  - 0

0

11,300

0

6.700

0

0

0

0

0

0

4,690

12,166

_HP_

23.000

0

0

13.455

3.000

66.766

9.676

8.749

10.768

S 1.000

0

0

1.400

209,919

_OP_

0

c

0

0

0

16.245

C

5,000

0

0

0

0

100,552

111,137

(KÔCUS) 

tOtAL •

195.059

69.255

179.473

79 44*^

26.723

374,232

73.476

20,711

12 630

339 544

0

6

171.624

1,111,112

LC '

0

0

. 0

0

0

3,500

0

0

0

0

0

0

7,737

11,237

Ll

3,640

0

0

0

0

4.000

' 0

0

0

0

0

0

7.023

14,113

SL

0

0

0

0

.0

î.eoo

0

0

0

0

0

0

6.140

11,140

Ci

0

0

0

0

c

6,000

0

0

0

0

0

0

0

1,000

**80**

**12,774**

**1,741**

**30,775**

**9.415**

**1,609**

**26,000**

**27,647**

**0**

**0**

**27.363**

**0**

**.** **0**

**0**

**131,127**

JA

0

0

0

0

0

i.000

Û

0

0

0

0

0

0

1.000

rv

0

0

0

0

c

Î.000

0

0

0

I1S3S*

0

0

0

uuw

_'••_ _•_

_**'A**_ **•;** **I** **101*** **|** _**VA**_ **11*1** **101*1** **11*** **171*1** **11***

**AL » ALBANIA**

**00** **• BULGARIA**

**ES • ESTONIA**

**HU»** **HUN** **GARY**

**IE** **«LATVIA**

**ll** **«LITHUANIA**

**Pi** **• POLAND**

**RO «ROMANIA**

**CS «** **Of.-CZECHOSlCVAKIA**

**C2** **«C2ECHRE--UC..IC**

**Sfl.** **» SLOVAKIA**

**YU •** **e«.YUGOSlAV:.\ (ocepi** **S'ovesa)**

**SL «SLOVENIA**

**GOR •** **«a-GOR**

_**HP ***_ **Regional** _**Pitys-mei**_

**OP «** **Other Pr0Cf.':T.r»»**

_**li) CanuêC.i**_ **coc** _**:>c?.i**_ _**ù*i"t**_ **Co--** _**ss-f^tiCiu'-fi**_ _**i-i**_ **6y** _**\h6**_ _**r'ttipitnl**_ _**eounlrliS.**_

0

0

0

0

0

**PHARE** **PAYMENTS** **FROM** **1ÔÔ0 TO-1993** **(1)** **(situation** **at 31.12.1993)**

SECTORS

Private aecior, Rejirueturlng, Prlvatliatlon, SME'a

r                                             
Financial aecior

Agricultural restructuring _\_

Environment aid Nuclear Safety

Social developmeni and Employment

Education. Trailing and Aeieereh

Infraetrveture (Energy, Trenapori, Telecom.)

Administration and Public Initllutloni

Integraiad Regional Measures,<

Humanitarian »nd food Aid i.

Public health

Oomoerailsailri

Other (MuiiidU:io [i] :'Mry, OTA', ete...l

Total

**AL** **,**

**0**

**70.000**

**9.366**

**0**

**0**

**3,463**

**1.067**

**0**

**0**

**50,102**

**0**

**0**

**2,267**

**1)1,341**

**Table** **12**

ru | SL

0

0

3

0

0

13,001 | 1.40?

**60**

**12,062**

**2.701**

**31,404**

**6.109**

**466**

**21.547**

**20,359**

**0**

**0**

**27,563**

**0**

**0**

**0**

**124,221**

**ts**

**0**

**0**

**0**

**0**

**0**

**2.500**

**0**

**0**

**0**

**0**

**0**

**0**

**2.611**

**1,311**

I t

0

0

0

0

d

3.500

0

0

0

0

0

0

3.790

7,210

OP

0

0

0

0

0

962

0

2.504

0

0

0

0

32.925

11,311

a

0

0

0

0

0

6,368

0

0

0

0

0

0

0

!.)(!

SA

0

0

0

0

0

3/6?

0

0

0

0

0

0

0

:.4t)

OOft

0

0

0

- 14.600

0

927

0

0

0

0

0

0

10.366

21,195

21*| l'A| 0'A| O'A | IV. | l'A | . 1}'/. | 4'A| 1001*

##### **_A_**

es

46.414

0

0

14.654

7.054

28,792

6,612

0

0

0

0

0

3.652

110,119

(Kécus)

TOÎAL

200.35*

93.267

191.753

96.635

34.291

323.144

65.928

9.692

4.364

266.120

C

0

102,671

1,412,249

HU

48.595

11.465

27.892

32.970

9,196

54,449

6.876

2.751

1.607

0

0

0

600

191.232

ftO

' 14.337

2.463

35,566

0

 - 628

36,656

7,321

0

0

60.370

0

0

21,271

191,131

14'A

PL

65.235

11,566

67.523

20.697

15,646

65,043

10.795

640

0

0

0

0

0

277,117

Ll

3.052

0

0

0

0

3.755

0

0

0

0

0

o

1.175

7,912

M

8.639

0

0

4.625

900

60.103

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113.141

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**RO « ROMANIA**

**CS** **«** **CJ-CZECMOSIOVAKIA**

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**SA** **» SLOVAKIA**

**V** **U** **•** **e»<YUGOSLAVIA (eteeoi $iev<>.«../>)**

**Si** **« SLOVENIA**

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_**%G**_

**ANNEXE**

**Professional Associations and Non-Profit Making Organisations**
**Awarded** **PHARE Contracts**

PROJECT CONSULTANT

1. Banking and Financial Sector ' x

- Assistance to the Latvian Central Bank - European Association of Cooperative Banks

- Assistance to the Latvian Savings Bank - European Association of Savings Banks

- Capital Market Development - Czech Republic - Banque Nationale de Belgique

- Banking Supervision Reform - Slovakia - Banque de France

- Banking Trai nirtg - Chartered Institute of Bankers .

- Insurance Training - Insurance Training Association

- Development of EU linked compensation - ECU Banking Association

2. Taxation and Accounting

- Assistance for taxation reform in the CEECS - Danish, Irish, French, Belgian and Dutch

Ministries of Finance (Tax Administrations)

- Accounting training - Institute of Chartered Accountants

3. Institutional Infrastructure

- Customs Administration Reform - Eurodouanes (customs association of the 12 EU

Member States)

- Statistics Reform - - CESD, Unité Conseil d'Eurostat
"Developmentand Harmonisation of Industrial >-. r CEN-ÇIîi^ELJÇC;..Comité JEuropéen de ^ ^
Standards and Quality Control Normalisation

- Reorganisation of the Patent Offices - European Patent Office

4. SME Promotion and Regional Development

- Training and Reorganisation of Chambers of
Commerce in the CEECs

- Creation of BICs (Business and Innovation
Centres)

- Assistance to SME Associations in the CEECS

- Assistance to Regional Agencies in Poland

- Support to regional development in Slovakia

- SME Development in Romania

- Restructuring of the textile industry and SME
development Lodz, Poland

5. Financial Instruments for SMEs

- Creation of financial assistance schemes

- Creation of a guarantee fund for SMEs in

Poland

- Creation of a Regional Investment Fund,
Ostrava, Czech Republic

- Creation of a Regional Investment Fund,
Zilina, Slovakia

6. Public Administration and Training

 - Training of Public Enterprise Managers,
Bulgaria

 - Industrial training attachment programme

 Management training^ - "ChemicaTlridustry

 - SME Support

 - Public Administration Reform

 - Regional Cooperation in Higher Education

## **_l*\_**

Eurochambers, European Association of
Chambers of Commerce and Industry

EBN, European Business and Innovation Centre

Network

UAPME, (Union of SME Associations) [: ]

Centre de Rencontres et d'Initiatives pour le

Développement Local (CRIDEL-DATAR, France)
avec le Centre Européen de Recherche sur les
Reconversions et les Mutations (CERRM, Longwy)

- SPRI, Sociedad para la promotion y Reconversion
Industrial, Bilbao

- CNA Venelo, Confederazione Artiginale e délie
Piccola Imprcse di Veneto, Italie

Novacité et Chambre de Commerce de Lyon

- IAPME, Istituto de Apoio as Pequehas e medies
Empresas e as Investimento, Portugal

- CEPME, France, Crédit d'Equipment des PME

- NEHEM-ING, Netherlands

- 1BF Belgique (Institut Belge de Formation) with
FRIULIA (Société régionale d'Investissement du
Frioul)

- Université Bocconi, Milano with a consortium of 5

Business Schools

- Eurochambers (responsible for the selection of
placing interims)
- CËriC fëùropéarfConfédération ôfthé'CHeniicâr L

Industry Federation)

- European Senior Service (European Association of
Retired Managers established specifically for TACIS
and Phare)

 - OECD

- OECD

**7. Health. Social** **Sector;** **Employment.**
**Democracy**

**- Healthcare support and training**

**- Health and security in Romania**

**- Development of Social Services - Romania**
**^** **Worker protection - Poland** **.-••.«•**

**- Social and employment policy - Bulgaria**

**- Democracy Programme**

**- NGO Programme**

8. Food Aid

**- 250 MECU Food Aid operation to ex-**
**USSR** **in** **1991**

**- Pesticide Distribution in Poland**

**- Development and training of** **rural coopérative**
**bank staff in Poland**

**- Training of Cooperative field advisors in Poland**

**9. Environment. Energy.** **Infrastructure**

8S

**ECPC,** **European** **Consortium for Primary Healthcare**
**Danish Working Environment Service**
**King's Fund College (UK registered charity)**
**Health** **and Safety Executive** *****
**ILO** **(International Labor Organisation)**
**European Human Rights Foundation**
**European Volunteer Centre**

**- A number of non-profit organisations were**
**responsible for the distribution e.g. Red Cross,**
**Médecins Sans Frontières, Save the Children Fund**

**- Foundation for the Development of Poland**
**(Rockfeller Foundation)**

**- EC Association of Cooperative Banks**

**- The** **Plunkett** **Foundation, UK**

**Agence pour les** **Déchets,** **l'Environnement et** **la**

**- Technical assistance to the Romanian Energy**
**Conservation Agency**

**- Development of an Energy Conservation**
**strategy for Slovenia**
**-** **Research** **Programme on Air and Health in**
**Central and** **Eastern** **Europe**

**- Strengthening the Role of Environmental NGOs**
**and stimulating environmental** **awareness** **and**
**education**

**- Institutional Development of** **the** **Bulgarian**
**Ministry of Transport**

**- Institutional Development of Lithuanian**
**Natrona!** **Roads** **Ad** **ministration'"** **"** **' -'-** _**"•'•**_ _**'-•"• •""•**_

**- Training of Air Traffic Controllers in Central**
**and Eastern Europe**

**Maîtrise de l'Energie, France**
**Energy** **Technology Support** **Unit** **from the State**

**Department of Environment** **(UK)**
**The National Institute of Public Health (NL) and the**
**London School of Hygiene and Tropical Medicine**

**British Council**

**Deutsche** **Gesellschaft** **fur** **Tcchnische** **Zusammen-**

**arbeil** **(GTZ)**

**Danish National Roads Administration**

**Eurocontrol**

**ISSN 0254-1475**

###### **COM(95) 13 final**

# **DOCUMENTS**

###### **EN ll**

**Catalog number** **:** **CB-CO-95-019-EN-C**

**ISBN 92-77-85100-7**

**Office for Official Publications of the European Communities**

**L-2985** **Luxembourg**