Source: EURLEX
Language: en
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# 52013SC0326

**COMMISSION STAFF WORKING DOCUMENT Background document Accompanying the document Report from the Commission to the European Parliament, the Council and the European Economic and Social Committee 2012 Annual Report on Financial Assistance for Enlargement (IPA, PHARE, CARDS, Turkey Pre-Accession Instrument, Transition Facility) /\* SWD/2013/0326 final \*/**

  

Table of Contents

A.    FINANCIAL
ASSISTANCE TO THE WESTERN BALKANS, ICELAND AND TURKEY   4

CROATIA.. 4

1. SUMMARY.. 4

2. STRATEGIC
PLANNING AND PROGRAMMING.. 4

3. IMPLEMENTATION OF
EU FINANCIAL ASSISTANCE IN 2012. 8

4. IMPLEMENTATION AND MONITORING MODALITIES AND STRUCTURES. 13

TURKEY.. 16

1. SUMMARY.. 16

2. STRATEGIC
PLANNING AND PROGRAMMING.. 16

3. IMPLEMENTATION OF
EU FINANCIAL ASSISTANCE IN 2012. 20

4. IMPLEMENTATION
AND MONITORING MODALITIES AND STRUCTURES. 29

ICELAND.. 32

1. SUMMARY.. 32

2. STRATEGIC
PLANNING AND PROGRAMMING.. 32

3. IMPLEMENTATION OF
EU FINANCIAL ASSISTANCE IN 2012. 35

THE FORMER YUGOSLAV
REPUBLIC OF MACEDONIA.. 37

1. SUMMARY.. 37

2. STRATEGIC
PLANNING AND PROGRAMMING.. 37

3. IMPLEMENTATION OF
EU FINANCIAL ASSISTANCE IN 2012. 41

4. IMPLEMENTATION
AND MONITORING MODALITIES AND STRUCTURES. 45

MONTENEGRO.. 49

1. SUMMARY.. 49

2. STRATEGIC PLANNING
AND PROGRAMMING.. 49

3. IMPLEMENTATION OF
ASSISTANCE. 54

4. IMPLEMENTATION
MODALITIES AND STRUCTURES. 58

ALBANIA.. 61

1. SUMMARY.. 61

2. STRATEGIC
PLANNING AND PROGRAMMING.. 61

3. IMPLEMENTATION OF
EU FINANCIAL ASSISTANCE IN 2012. 65

4. IMPLEMENTATION
AND MONITORING MODALITIES AND STRUCTURES. 74

SERBIA.. 77

1. SUMMARY.. 77

2. STRATEGIC
PLANNING AND PROGRAMMING.. 77

3. IMPLEMENTATION OF
EU FINANCIAL ASSISTANCE IN 2012. 80

4. IMPLEMENTATION
AND MONITORING MOSALITIES AND STRUCTURES. 88

BOSNIA AND
HERZEGOVINA.. 91

1. SUMMARY.. 91

2. STRATEGIC
PLANNING AND PROGRAMMING.. 91

3. IMPLEMENTATION OF
ASSISTANCE. 96

4. IMPLEMENTATION
MODALITIES AND STRUCTURES. 98

KOSOVO[1] 102

1. SUMMARY.. 102

2. STRATEGIC
PLANNING AND PROGRAMMING.. 102

3. IMPLEMENTATION OF
EU FINANCIAL ASSISTANCE IN 2012. 105

4. IMPLEMENTATIONAND
MONITORING MODALITIES AND STRUCTURES. 110

B.    MULTI -
BENEFICIARY.. 114

1. SUMMARY.. 114

2. STRATEGIC
PLANNING AND PROGRAMMING.. 114

3. IMPLEMENTATION OF
ASSISTANCE. 119

C.    Towards a
more efficient and effective delivery of assistance: linking assistance more
closely to the enlargement policy priorities and the sector approach. 122

1. Towards a new
Instrument for Pre-accession for 2014-2020. 122

2. Cooperation with
the donor community on aid effectiveness. 122

3. Sector approach. 123

4. Lessons learned
from Evaluation. 124

5. TAIEX, a demand
driven instrument aligned with EU policy priorities. 126

D.    PHARE,
CARDS, TURKEY PRE-ACCESSION AND TRANSITION FACILITYFINANCIAL DATA AT 31ST
DECEMBER 2012 : 129

1. EU 12 – PHARE and Transition Facility - Decentralised Management 129

2. Candidates and
Potential Candidates - CARDS (and PHARE for HR) or Turkey Pre-accession
Assistance - FINANCIAL DATA.. 129

Acronyms and
Abbreviations: 132

              A.      FINANCIAL
ASSISTANCE TO THE WESTERN BALKANS, ICELAND AND TURKEY

              CROATIA

1.
SUMMARY

Following the signature of
the Accession Treaty on 9 December 2011, Croatia continued throughout
2012 the implementation of measures to further strengthen its capacity to meet
the obligations of membership to the EU. Since 1 July 2013, Croatia is an EU
Member State.

The National Programme[2]
for component I adopted in 2012 covers two budgetary years, namely the IPA 2012
Transition Assistance and Institution Building allocation, as well as the
6-month allocation for 2013 (in accordance with the envisaged EU accession of
Croatia on 1 July 2013). The total amount of the 2012 and 2013 National
Programmes was EUR 46.80 million. The implementation of EU financial assistance
in 2012 accompanied these developments by providing further support for
completing reforms and building up capacity in the key areas necessary for
assuming the obligations of membership, namely in the areas of judiciary and
fundamental rights and justice, freedom and security, as well as continuing the
efforts of preparing Croatia for the management and implementation of
post-accession funds.

Furthermore, during 2012
Croatia completed its preparations for the waiver of the ex-ante
controls on procurement in order to achieve full decentralisation of the
management and implementation of EU financial assistance prior to accession.

2.
STRATEGIC PLANNING AND PROGRAMMING
2.1 Multi-annual Indicative Planning Document

The Instrument
of Pre-accession Assistance (IPA) support for the period 2012-2013 reflects, in
accordance with the 2011-2013 MIPD[3], the shift to a stronger sector  approach to EU financial assistance
under the IPA Instrument. A positive effect of this new approach was the more
targeted assistance allowing easier identification of the remaining gaps as
well as improved donor coordination.

The sectors identified as
key for EU assistance in Croatia are 1. justice and home affairs and
fundamental rights; 2. public administration reform; 3. environment and climate
change; 4. transport; 5. private sector development; 6. social development; 7. agriculture
and rural development.

In line with the
Enlargement Strategy and Main Challenges 2011-2012 and the accompanying 2011
Progress Report for Croatia, which identified the need to further consolidate
reforms in the fields of rule of law, fight against corruption and reform of
the public sector had been identified as key accession priorities, the IPA
2012-2013 National Programmes under Component I mainly focused on the first two
sectors of the MIPD.

In addition, the priorities
identified under the sectors 3 to 7 continued to contribute to the "Europe
2020" objectives of the EU by improving regional competitiveness, as well
as human capital and natural resources management. The implementation of the
assistance in these sectors took place under IPA Components III, IV and V,
allowing Croatia to continue its preparation managing decentralised funds.

Table 1: MIFF[4]
allocations per component, in million EUR

Component || 2011 || 2012 || 2013 || 2011-2013

I – Transition Assistance and Institution Building ||    39.96 ||    39.97 ||  17.44 ||          97.37

II – Cross-border cooperation ||    15.87 ||    16.44 ||    9.75 ||          42.06

III – Regional Development ||    58.20 ||    57.45 ||  30.09 ||        145.74

IV – Human Resources Development ||    16.00 ||    15.90 ||    8.55 ||          40.59

V – Rural Development ||    26.50 ||    25.82 ||  27.70 ||          80.02

TOTAL ||  156.53 ||  155.59 ||  93.52 ||        405.78

2.2. Programming
2.2.1 Component I

The National
Programme for component I adopted in 2012 covers two budgetary years, namely
the IPA 2012 Transition Assistance and Institution Building allocation, as well
as the 6-month allocation for 2013 (in accordance with the envisaged EU
accession of Croatia on 1 July 2013). The total amount of the 2012 and 2013
National Programmes was EUR 46,804,559 (2012: EUR 35,219,859; 2013: EUR
11,584,700). The latter focuses on the priorities identified by the Enlargement
Strategy 2011-2012 and the 2011 Progress Report and in the MIPD 2011-2013,
namely public administration reform as well as justice, home affairs, and
fundamental rights.

In addition to the
National Programme 2012/2013, two separate Decisions were adopted to support
Croatia's participation as active observer in the committees and expert groups
of the European Commission (2012: EUR 800,000; 2013: EUR 500,000), and an
amount of EUR 9,302,571 was transferred to the Regional Housing Programme under
the Sarajevo Process.

The Commission, with the
support of the EU Delegation in Croatia organised consultations on the 2012/2013
National Programme, with EU Member States' Embassies and local branches of
International Financial Institutions (IFIs) in Zagreb, and the comments
received were duly incorporated in the final programme.

As regards the evaluation
of IPA assistance, Croatia has taken over full responsibility of interim
evaluations under IPA Component I. The final report of the 2011 Country
Programme interim Evaluation (CPiE) was presented in March 2012. The report
gave a positive conclusion regarding the implementation of IPA projects in
Croatia and also provided useful analyses and recommendations, able to lead to
further improvements in the medium-term for the management of the
implementation of financial assistance by the national authorities.

Table 2: Indicative
financial allocations for the year under the National Programme, per priority
axis and per project, in million EUR:

Priority Sector || Projects || Budget

2012 Allocation || 35,219

Public Administration Reform || 6,400

Project 1 || Support to the enhanced functioning of the public administration || 1,021

Project 2 || Supply of IT equipment for the customs administration || 1,700

Project 3 || Flexible facility for reinforcement of administrative capacity || 3,679

Justice, Home Affairs, Fundamental Right || 22,352

Project 4 || Strengthening the capacity and efficiency of SAO/USKOK || 2,900

Project 5 || Further improvement of the case management system || 5,710

Project 6 || Support to the prison system of the Republic of Croatia || 4,399

Project 7 || Construction and equipping of police station Tovarnik and border police station Maljevac || 2,560

Project 8 || Civil society organisations || 4,950

Project 9 || Support to national minorities at local level || 1,832

Social Development and Supporting Programmes || 6,467

Project 10 || Strengthening policy and capacities to reduce undeclared work || 1,375

Project 11 || Participation in Union Programmes and Agencies || 5,092

2013 Allocation || 11,584

Public Administration Reform || 2,893

Project 1 || Strengthening Croatian tax administration's G2B capacities through consolidation of IT systems || 1,393

Project 2 || Flexible facility for reinforcement of administrative capacity || 1,500

Justice, Home Affairs, Fundamental Right || 5,164

Project 3 || Development of geographic information system with geographic profiling of serial criminal offenders || 925

Project 4 || Strengthening capacities of the Ministry of Interior to implement the automated exchange of DNA and dactyloscopic data || 1,080

Project 5 || De-mining of social/economic infrastructure in Lika-Senj, Sisak-Moslavina and Zadar county || 3,159

Social Development and Supporting Programmes || 3,527

Project 6 || Reconstruction of Moise Palace on the Island of Cres || 3,527

TOTAL || 46,805

2.2.2 Component II

The IPA
Cross-border Programmes Croatia – Bosnia and Herzegovina, Croatia - Montenegro
and Croatia - Serbia, adopted in 2007 and revised in 2010, included only a
financing plan covering the period 2007-2011.

In agreement
with the participating countries, these programmes have been revised in 2012,
in accordance with Art. 93(1)(a) of the IPA Implementing Regulation No. 718/2007,
in order to update the financing plan according to the revision of the
Multi-annual Indicative Financial Framework 2011–2013 and in line with the
Multi–annual Indicative Planning Document 2011–2013 for the IPA Cross–border
cooperation component.

The revision of
the programmes essentially entailed the update of the financing plan to include
the 2012–2013 appropriations. In accordance with the foreseen date of Croatia's
accession (1 July 2013), the 2013 allocations for these programmes cover until
30 June 2013. IPA funds for the second half of 2013 would be committed through
further Commission Decisions. At that stage, about two years before the end of
the programming period, it was considered as untimely to change the content of
the programmes, which would have entailed operational difficulties, especially
for the use of possible leftovers 2010–2011 into the 2012–2013 calls for
proposals.

These programmes
have been jointly revised by the Operating Structures of the participating
countries and approved by the Joint Monitoring Committee, before the submission
to DG Enlargement and the adoption by the Commission.

2.2.3 Component III

Under IPA
Component III, "Regional Development", the programming exercise
continued to follow a multi-annual approach, mirroring the Cohesion and
Structural Funds programmes. Three Operational Programmes related to the
Environment, Transport and Regional Competitiveness sectors were originally
agreed for the period 2007-2009. They underwent a first revision in 2010
following the allocation of 2010-2011 funds, and were revised again in 2012 in
order to cover the full period until the accession to the EU expected in July
2013.

Despite these
two revisions, the strategic priorities of these programmes remain the same:
the development of waste management infrastructure, the improvement of the
water supply and the waste water management systems, the upgrading of the rail
and inland waterway systems, the support of business-related infrastructure, to
technology transfer and support for Small and Medium-Size Enterprises (SMEs).

2.2.4 Component IV

The Operational
Programme for Human Resources Development was modified on 1 August 2012
(Commission Implementing Decision C (2012) 5580). The modifications consisted of
an allocation of additional resources (for 2012 and 2013), adaptation of
indicators and addition of one new priority (Priority 5 - Strengthening the
role of civil society for better governance). Two new bodies were also included
in the Operating structure: the National Foundation for Civil Society
Development and the government's office for NGOs.

2.2.5 Component V

During 2012 two calls were launched for the first two
conferred measures, namely measure 101 'Investments in agriculture holdings to
restructure and to upgrade to EU standards' and measure 103 'Investments in the
processing and marketing of agricultural and fishery products to restructure
these activities and to upgrade them to EU standards'.

So far, the implementing body – the IPARD Agency - has
received 305 applications out of which 167 projects were contracted, with an
IPA contribution of over EUR 56 Million by the end of 2012.

Further to the two measures conferred in March 2010,
namely measure 301 'Improvement and development of rural infrastructure'
and measure 302 'Diversification and development of rural economic
activities' three additional calls were launched throughout 2012.

As a result, 383 applications were received for both
measures from the beginning of implementation, conversely only 84 were contracted.
The low contracting rate is explained by the important rejection rate
concerning the first call for the Measure 301. Most difficulties encountered by
beneficiaries - Croatian small municipalities - were related to the implementation
of public procurement rules. However, it is worth mentioning that compared to
the first call, all following calls observed an increased number of contracted
projects. Moreover, the last call for the Measure 302 'Diversification' was
launched at the end of 2012.

The measure 'Rural infrastructure' continued to play an
important role in the IPA Component V programme, mainly due to its social
impact on the population within the rural areas.

Last but not least, in July 2012, the Croatian
authorities submitted to the Commission an application for conferral of
management for the two remaining programme measures, namely measure 501
"Technical Assistance" and the measure 202 " Preparation and
implementation of local development strategies". The conferral decision was
expected in early 2013; follow by the first call for selection of Local Action
Groups (LAGs). Implementation of the "LEADER approach"[5] still in the pre accession
period is crucial to guarantee readiness of Croatian LAGs for implementation of
long term local rural strategies as a Member State.

3.
IMPLEMENTATION OF EU FINANCIAL ASSISTANCE IN 2012
3.1 Success stories

IPA 2009 'Capacity Building in the Field
of Fight against Sexual Exploitation and Sexual Abuse of Children, and on
Police Assistance to Vulnerable Crime Victims' (EUR 1.6 million)

This project contributed to enhance law enforcement in the fight against sexual exploitation and
sexual abuse of children, as well as police assistance to vulnerable crime
victims, especially children and their families, according to EU standards and
best practices. It strengthened institutional capacities by providing
recommendations to the Ministry of Interior and the Ministry of Justice,
including the Public Prosecutor’s Office, and preparing a protocol and Standard
Operating Procedures for handling investigations among the relevant
institutional actors, internet service providers and NGOs. This project raised
the skills of police officers, public attorneys and judges, including in the
area of Internet and computer related crime, by designing a training needs analysis and a "train the
trainers" programme and providing guidelines for police officers in order
to prevent secondary victimization and reduce the risk of repeated
victimization. In terms of awareness-raising activities, this project improved
communication with the concerned groups (victims and those who are in risk of
becoming victims of sexual exploitation and sexual abuse involving their parents
and teachers), focusing on the use of Internet as a tool for dissemination of
information and prevention, and for reporting criminal offences. EU funds also
provided equipment to implement the "witness and victim support
system" in all police districts, conduct interviews with children, equip
official police premises with digital units for audio-visual recording of
interviews, and purchase forensic computers and forensic software for
investigating computers, mobile phones and similar storage devices.

IPA 2008 'Strengthening of the
Tax Administration in the Fight against Corruption' (EUR 230 000)

This project contributed to
strengthen the accountability and transparency of work in the Croatian Tax
Administration and to raise efficiency with regard to the detection and
prosecution of corruptive offences. The project first reviewed the existing
system for combating corruption and for improving ethics, integrity and the
transparency of the Croatian Tax Administration towards the public. Secondly,
an Internal Anticorruption Strategy and related Action Plan were prepared,
including guidelines for the treatment of citizen's complaints against the work
of employees. Extensive trainings were conducted in order to transfer knowledge
and skills to middle management and officers who are connected with the fight
against corruption. A training plan was developed for continuous training of
the employees in the central office and in the regional offices together with
'train the trainers' training after which the participants are capable of
training other employees. Procedures for reporting, detection and investigation
of criminal acts were improved and relevant guidelines were created.

IPA 2008
'Support to the Management, Monitoring and Evaluation of the Structural
Instruments (SI) in Croatia' (EUR 1.9 million)

This project
implemented by Lithuanian and Hungarian Member States counterparts contributed
significantly to the preparations of Croatia for the management of Structural
Instruments (SI) in the post-accession period. The twining partners assisted in
providing guidance for the preparation of, as well as critical review of, draft
key documents relevant for the programming of SI in Croatia for the period
2007-2013, such as the National Strategic Reference Framework and Operational
Programmes. The key contribution of the twinners was guidance in the preparation
of the Common National Rules which will regulate the management and control
system for SI. Since Croatia is preparing in parallel for the 2014-2020
perspective, the twining partners assisted in the programming process for this
new period, especially in facilitating the work of seven thematic working
groups on the national level which are to produce conclusions on funding
priorities for 2014-2010. The twinning partners also organized a series of
trainings for the staff of the Croatian state administration on SI including
topics such as establishment of management and control systems, project
selection criteria, management of grants, financial management and monitoring
of operational programmes. The final phase of the implementation of the project
confirms the high level of ownership of the project by the Croatian
authorities, which demonstrates the high level of sustainability of the project

3.2 Overview of the implementation status of the different
instruments and components

Regarding
IPA Component I and II, good progress was accomplished concerning the
decentralised implementation of the assistance by the Croatian authorities.

As regards the contracting performance of the national authorities
in Croatia, in 2012 a total of EUR 35.2 million were contracted, which is 57%
of the forecast established in January 2012 (EUR 61.74 million). The National
Programme TAIB 2008 achieved a contracting rate of 94.67% around its deadline
expiration, namely 5 June 2012.

In 2012, EUR 40 million were disbursed to contractors/grant
beneficiaries representing 63% of the aforementioned forecast.

Regarding transfers for Components I and II by the Commission to the
National Fund following requests for funds (RfF), EUR 39.2 million were funded
in 2012, which is 94% of the forecast established in January 2012 (EUR 41,68
million).

Under IPA Component III, the contracted rate amounts to 49% and the
certified rate at 24% of the funds allocated in 2007-2013. In line with
progress in the physical implementation of the programmes, the decommitment
rate decrease at EUR 2,607,118 (Regional competitiveness programme), as against
EUR 16.5 Mio in 2011 (three programmes).

The implementation of the Environment Operational Programme
registered progress during 2012. The pending contracts for the implementation
of the two major waste management centres in Marišćina and Kaštijun have been
signed. The works for the Water supply and sewerage treatment projects in
Slavonski Brod have progressed.

Tangible
progress was also registered regarding the Transport Operational Programme. The
project aiming at the development of the signalling and telecommunications
infrastructure at Zagreb Main Railway station pursued its physical
implementation. Works started for the Okučani to Novska Railway Rehabilitation
and Upgrade project. As a consequence, no IPA funds were de-committed in the
end of 2012.

Under
the Regional Competitiveness Operational Programme six tourism and
business-related infrastructure projects have been completed whereas nineteen
new projects have been selected. Newly established Business Support Centres
delivered training and services to SMEs in the e-commerce and e-business
activities sector. Business centres were coached and trained to deliver
high-level consultancy & training services to the SMEs throughout Croatia.
A certification programme was developed to attract investors that will assist
investors in eight lagging-behind counties. New infrastructure and
entrepreneurial training curricula were developed in universities and research
centres in order to boost the technology transfer and commercialisation of
public sector R&D. Despite progress in the implementation of the programme,
EUR 2,607,118 IPA funds were de-committed in the end of the year.

As regards IPA
Component IV, under the Human Resource Development Operational Programme,
tenders in the total amount of EUR 67.50 million or 71% of total 2007-2013
allocation were launched. Contracts in the total amount of 43.18 million or 46
% of total 2007-2013 allocation were signed. The National Authorising Officer
(NAO) submitted statements of expenditure to the European Commission (last
statement dated 27 December 2012) in the total amount of EUR 24, 13 million.
The amount represents 56% of the total amount contracted so far or 26% of the
total amount available under HRD OP 2007-2013. The "n+3" requirement
for 2012 is EUR 26, 79 million – therefore, de-commitment could not be avoided.

As regards Component V, although Croatia made important
progress in 2012 in the implementation of the IPA Rural Development Programme,
certain delays in implementation and more particularly in payments to final
beneficiaries accumulated so far persisted in 2012. This is due to the fact
that completion of rural development projects can be quite lengthy, and
therefore only a part of contracted projects could be paid in 2012. Due to this
situation, according to the N+3 budgetary rule, a part of the funds allocated
in 2009, about EUR13 million, was de-committed at the end of 2012.

Such a situation should be avoided in the next years as
currently the contracting is increasing. However Croatia should carefully
monitor the progress of implementation taking into account proportional
distribution of funds between the IPARD measures.

The implementation of the IPARD has made an important
contribution to building up Croatia's capacity for managing post-accession
funding, including by "learning-by-doing".

3.3 Sector I: Justice and Home Affairs and Fundamental
Rights

IPA
2007 Component I 'Strengthening Capacities of the Ministry of the Interior to
Combat Narcotic Drugs Trafficking and Drug Abuse', EUR 2.20 million.

This
project supported the strengthening of the ability of the Ministry of Interior
in the fight against organised crime, especially in the field of combating
drugs trafficking and drugs abuse. It contributed to enhance the ability of
criminal police officers, to strengthen the institutional capacities of the
Forensic Science Centre ”Ivan Vučetić” in the area of drugs analysis, and to
establish a National Contact Point for the transmission of synthetic drugs
samples and data exchange with other Forensic Science Centres. Some of the main
achieved results were, for example, increased capacity for narcotic drugs
analysis and profiling, development of a protocol for cooperation,
communication and strengthening of the institutional control model for
precursors, establishment of contact points in governmental institutions, and
training of police officers on advanced methods of investigations related to
drug crimes.

IPA
2007 Component I 'Development of modern information system for strengthening
Anti-Corruption Inter Agency cooperation', EUR 460 000.

This
project supported Croatia in its efforts to implement the National
Anti-Corruption Strategy (adopted in 2008). The success of the Strategy relies
very much on the good cooperation among all stakeholders (Croatian Ministries,
specific administrations, control bodies, other agencies, etc.). Therefore, the
project focussed on the development of an IT tool (including Internet portal)
to support the Ministry of Justice in coordinating the Croatian anti-corruption
efforts of all stakeholders; improving its capacity in managing the flow of
information from and towards other involved bodies, facilitating its monitoring
and analytical tasks, and improving its communication towards the public. The
project contributed to increase the public awareness on corruption. Its effects
should allow a better prevention of corruption, allowing Croatia to become also
more attractive to international business and foreign investments.

3.4 Sector II: Public Administration Reform

As regards TAIEX, the EU Delegation to Croatia
received 183 TAIEX applications for review in 2012, of which the majority, 51
applications, concerned Chapter 12, Food Safety, Veterinary and Phytosanitary
Policy and Chapter 11, Agriculture and Rural Development with 40 applications.
Chapters 24 (Justice, Freedom and Security), 27 (Environment), 23  (Judiciary
and Fundamental Rights) and 28 (Consumer and Health Protection) followed with
27, 21, 11 and 7 applications respectively. Chapter 1 (Free movement of goods)
and Chapter 22 (Regional policy and coordination of structural instruments) had
6 applications each. The Delegation also participated in the coordination and
recruitment for 13 Local Administration Facility events and 7 events funded by
the People to People Programme.

Twinning enjoyed a major success in 2012, contracting 13
twinning lights and a total of 19 twinning contracts for a total of EUR 21,2
million The sectors targeted by twinning and partner countries were as follows:
under IPA 2008: judiciary reform (one with Germany and France and another one
with the UK and Czech Republic), road safety (Germany with Poland), effective
management of EU cohesion funds (one with Lithuania and Hungary, another with
Italy and Poland), environment (Austria); under IPA 2009: training of judicial
advisors, future judges and state attorneys (Spain), fighting sexual
exploitation and sexual abuse of children and police assistance to vulnerable
victims (UK), anti-discrimination protection (Austria), co-ordination of social
security schemes (Sweden), Croatian Civil Aviation Agency and Aircraft Accident
and Incident Investigation Agency (Austria with Germany), tax audit (German
with the UK), environment (France with Austria and another one Austria), audit
function for the structural, cohesion and agricultural funds (Netherlands),
energy (Austria); under IPA 2010: taxation/VAT EU common system (Netherlands),
Integrated Border Management (Austria).

During 2012, SIGMA provided assistance to the Ministry of
Public Administration analysing the draft legislative framework linked to the prevention
of corruption and workshops were organised in the field of performance
appraisal of civil servants and integrity. In the area of policy-making,
SIGMA provided support to the Government Legislation Office in the field of
regulatory impact assessment and legislative drafting.

Concerning public finance, SIGMA supported the Ministry of
Finance in the preparation of the new Action Plan for the implementation of
financial management and control for the period
2012 – 2013; draft Public Finance Management Strategy for the period
2013 – 2016; Guidelines on managerial accountability and Guidelines on cost and
management accounting. In addition, the new Financial Management and Control
Manual and Rulebook on Internal Audit criteria (including at the local level)
were elaborated with the support of SIGMA. Workshops and on-the-job trainings
were consequently organised in the areas of risk management at central and
local levels; quality assurance process of the internal audit function of
budget users; use of Structural Funds and Cohesion Fund. In addition, a
conference on the supervision and external quality assessment of internal audit
was organised. SIGMA also conducted a peer review of the Agency for the Audit
of European Union Programmes' Implementation System (ARPA).

In the area of public procurement, SIGMA made a
review of the structure and organisation of the State Commission for
Supervision of Public Procurement Procedures and provided assistance in
developing its Action Plan. SIGMA worked with the Central Procurement Office on
preparing a draft Strategy and Action Plan. In addition, assistance was
provided in drafting the new Public-Private Partnership (PPP) Act and the
Concessions Act as well as in the elaboration of the relevant secondary
legislation. Workshops were organised in the following areas: review
procedures; blending of PPP schemes and EU Structural and Cohesion Funds;
defence procurement; centralised procurement; e-procurement and utilities for
various stakeholders.

As regards participation
in EU Programmes and Agencies, in 2012 Croatia participated in the
following programmes for which it will continue to participate in the first
half of 2013 on the basis of signed Memoranda of Understanding: Fiscalis 2013,
CUSTOMS 2013, Culture 2007-2013, Criminal Justice Programme, Civil Justice
Programme, Media 2007, Seventh Framework Programme for Research, Technological Development and Demonstration Activities, Europe for
Citizens, PROGRESS, Competitiveness and Innovation  Framework Programme (CIP), EU
Civil Protection Mechanism, Second Programme of Community Action in the Field
of Health 2008-2013, Marco Polo II, ISA Programme (Interoperability Solutions
for European Public Administrations), Life-Long Learning Programme (LLP), Youth
in Action Programme. Croatia also participates as an observer in the European
Agency for Fundamental Rights. As regards the participation of Croatia in Union
Programmes and Agencies as a Member State, there will be no horizontal
arrangements or specific terms or conditions applicable to all such programmes,
and each responsible Commission's Directorate General will make the necessary
arrangements to include Croatia as a Member State in the programmes under their
responsibility.

4. IMPLEMENTATION AND MONITORING MODALITIES AND STRUCTURES

One of the main objectives of the IPA instrument is that,
in addition to supporting the efforts of the country in the negotiating process, it will also prepare the
country for managing the structural and cohesion and rural development funds,
which become available after accession. In order to achieve this, the full
potential of IPA is reached when the beneficiary country becomes fully
responsible for managing the assistance it receives from the EU. Furthermore, Article 29 of the Croatian Act of Accession stipulates that the ex-ante
control by the Commission over procurement and grant awards shall be waived by
a Commission Decision to that effect, once the Commission is satisfied with the
effective functioning of the management and control system concerned in
accordance with the criteria and conditions laid down in Article 56(2) of the
Financial Regulation and in Article 18 of Commission Regulation (EC) No
718/2007.

Following the Commission Decisions to confer the management
of the IPA funds to the Croatian national authorities in 2008 and 2009, Croatia
continued to implement IPA programmes in 2012 on a decentralised basis, with
ex-ante controls by the European Union Delegation in Zagreb.

Furthermore, Croatia moved closer in 2012 to the
ultimate objective of the conferral of management process, the decentralised
implementation without ex ante controls by the Commission for IPA
Components I to IV. Component V has operated directly without ex ante
controls since the conferral of management decision in 2009.

In June 2012, the National Authorising Officer (NAO) submitted to
the Commission the requests to waive ex-ante controls under IPA Components
I and II. On the basis of the regular review of the implementation of the
roadmap for the waiver of ex-ante controls, and of the supporting
evidence submitted by the NAO as part of the application for the waiver of ex-ante
controls, the Commission examined the readiness of the Croatian national
authorities and Implementing Bodies for the waiver of ex-ante controls
and the compliance with the requirements of Article 18 of Regulation (EC) No
718/2007. Following a review by the Commission of the procurement systems of
Croatia, it was concluded that the capacity of the Croatian authorities has
sufficiently developed to take over the full responsibility of the system
without ex-ante controls.

As regards rejection rates in the context of the ex-ante
controls, under IPA Component I in 2012 they averaged at 2.4%, i.e. 8 rejected
files out of a total of 337.

On the basis of these assessments and of the steady low rate of
rejections, the amendments of the conferral of management decisions for
Component I and II with the view of waiving the ex-ante controls on
procurement currently exercised by the EU Delegation were launched in the third
quarter of 2012.

PART II - FINANCIAL DATA (EUR million and %)

On implementation of
assistance by DG ELARG at 31 December 2012

IPA I
+ II Croatia

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

IPA 2007 || 44.96 || 44.93 || 99.94% || 42.58 || 94.72%

IPA 2008 || 45.03 || 45.03 || 100.00% || 40.12 || 89.10%

IPA 2009 || 47.36 || 47.36 || 100.00% || 32.42 || 68.46%

IPA 2010 || 40.82 || 40.82 || 100.00% || 17.18 || 42.08%

IPA 2011 || 42.17 || 39.86 || 94.52% || 12.39 || 29.39%

IPA 2012 || 38.52 || 0.00 || 0.00% || 0.00 || 0.00%

Total || 258.86 || 218.01 || 84.22% || 144.70 || 55.90%

IPA – Component I National Programme Croatia

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

IPA 2007 || 42.30 || 42.28 || 99.94% || 40.12 || 94.85%

IPA 2008 || 41.37 || 41.37 || 100.00% || 37.46 || 90.54%

IPA 2009 || 44.60 || 44.60 || 100.00% || 31.12 || 69.77%

IPA 2010 || 38.62 || 38.62 || 100.00% || 16.76 || 43.38%

IPA 2011 || 39.16 || 39.05 || 99.72% || 12.39 || 31.65%

IPA 2012 || 36.02 || 0.00 || 0.00% || 0.00 || 0.00%

Total || 242.08 || 205.93 || 85.07% || 137.85 || 56.94%

IPA – Component II (CBC) Programme Croatia

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

IPA 2007 || 2.65 || 2.65 || 100.00% || 2.46 || 92.63%

IPA 2008 || 2.71 || 2.71 || 100.00% || 2.57 || 94.98%

IPA 2009 || 2.76 || 2.76 || 100.00% || 1.30 || 47.25%

IPA 2010 || 2.20 || 2.20 || 100.00% || 0.42 || 19.09%

IPA 2011 || 2.20 || 0.00 || 0.00% || 0.00 || 0.00%

IPA 2012 || 2.50 || 0.00 || 0.00% || 0.00 || 0.00%

Total || 15.02 || 10.32 || 68.71% || 6.75 || 44.95%

              TURKEY

1. SUMMARY

In 2012, the Positive Agenda for EU - Turkey
relations brought fresh dynamism putting in several areas the accession process
back on track after a period of stagnation. This agenda focused on efforts
related to common interests, including:

·
the alignment with the acquis;

·
enhancing the energy cooperation;

·
visas, mobility and migration;

·
trade agreements as well as the Customs Union,
on which a specific study to assess its overall impact was launched with the
World Bank;

·
foreign policy, including political reforms and
counter terrorism actions;

·
substantial increase in the participation in
Union programmes.

The IPA financial assistance in 2012 continued to
support the political priorities of the accession process with a focus on the
rule of law and tackling key reforms linked to the judiciary and fundamental
rights, under Component I, for a total value of EUR 225.74 million in 2012.

Positive developments were also observed in the
management of the financial assistance by the Turkish national authorities
under decentralised management mode. The accreditation process in view of
transferring tendering, contracting and financial management functions from the
Central Finance and Contracts Unit (CFCU) to the line ministries has been
successfully finalised for all Operating Structures under IPA Components III
and IV. The conferral of management for the IPA Component V has also been granted
for almost twenty provinces.

Throughout 2012, the dialogue with the Turkish
institutions was enhanced on migration and asylum as well as on integrated
border management. Further opportunities were explored, to support
institutional reform with EU financial assistance. A pipeline of project
proposals was developed and reviewed by all the relevant programming
stakeholders for financing under IPA, including specialised UN agencies.
Efforts to improve the management and control system by the Turkish authorities,
responsible for the implementation of IPA programmes continued, although
further improvements are still required in the area of IPA programming and
monitoring.

2. STRATEGIC PLANNING AND PROGRAMMING
2.1 Multi-annual Indicative Planning Document 2011-2013

The selection of a relatively limited number of sectors
in the MIPD 2011-2013 allowed for a more targeted approach towards EU
assistance that aims to deliver the expected results and meet the envisaged
objectives in a sustainable manner. The MIPD identifies priorities based on the
needs documented in the Accession Partnership of the country as well as the
latest progress report and the Turkish authorities' own strategies. It takes
into account the lessons learned as outlined in the Commission’s own assessment
of past performance and on recent audits and evaluations.

EU assistance provides added value and often initiates
important reform processes that will continue in a sustainable manner beyond
the duration of the EU programmes.

In line with the MIPD 2011-2013 sectors and priorities identified
for the 2012 IPA funds under IPA component I have been programmed, mainly
supporting projects in the sectors of justice, home affairs and fundamental
rights, energy, transport, social development and agriculture and rural
development,  as well as horizontal support activities.

Table 1: MIFF[6]
allocations per component, in EUR million

Component || 2011 || 2012 || 2013 || 2011-2013

I – Transition Assistance and Institution Building ||   231.27 ||   227.50 ||   238.50 ||       697.27

II – Cross-border cooperation ||       5.13 ||       2.17 ||       2.22 ||           9.52

III – Regional Development ||   293.40 ||   356.07 ||   366.88 ||    1,016.35

IV – Human Resources Development ||     77.60 ||     83.19 ||     91.17 ||       251.96

V – Rural Development ||   172.50 ||   187.39 ||   204.18 ||       564.07

TOTAL ||   779.90 ||   856.32 ||   902.95 ||    2,539.17

2.2 Programming 
2.2.1 Component I

The National
Programme 2012 which has been adopted by the Commission on 21 June 2012 is
split between 5 sectors in line with the MIPD 2011-2013: (1) justice, home affairs
and fundamental rights; (2) transport; (3) energy; (4) social development and (5)
agriculture and rural development and supports 14 projects in the
above-mentioned sectors. Projects under these sectors were
selected as they were mature for implementation and are of high priority for
Turkey. As part of the programming process, only those relevant and eligible
projects proposed by the Turkish authorities that have achieved sufficient
readiness for implementation have been accepted.

While programming 2012 IPA funds, efforts were made to better focus
projects on the political priorities of the accession process as well as on
aligning them with sector priorities. The largest part of the budget has been
programmed to support projects in the justice, home affairs and fundamental
rights sector, aiming to strengthen effective law enforcement, successful fight
against organised crime and corruption as well as improved integrated border
management and prevention of illegal migration. For example, project TR2012/0329.06 ''Modernisation of Turkish Customs Administration
VIII'' (EUR 10.49 million) aims to modernize the Turkish Customs Administration
(TCA) and to ensure a harmonized implementation of Customs Code and effective
functioning of the Customs in their law enforcement and border management
tasks, border protection of intellectual and industrial property rights (IPRs)
and Customs Laboratories in line with obligations of an EU Member State Customs
Administration.

While programming 2012 IPA Component I programme,  a project TR2012/0315.10 "Energy sector programme – phase 1" has been developed together with the World Bank, which will manage it.
The project aims at enhancing Turkey's energy sector in
line with the EU energy strategies and priorities in energy efficiency,
renewable energy, and the natural gas and electricity markets. This project is
in line with the MIPD 2011-2013 objective of promoted energy efficiency and
renewable energies.

When it comes to donor coordination, the Commission took several
initatives in Brussels and Ankara in order to coordinate with IFIs, notably
EIB, EBRD as well as theWorld Bank. In particular a
second EU-WB Turkey Country Day was organised in Brussels on 2 May 2012 in
order to explore further areas where synergy and value added can be found
through a joint approach. In addition, the Ministry of EU Affairs has also organised
on May 23rd a meeting with the participation of several IFIs (EBRD,
AFD, KFW, WB) and other donors (UNDP, UNICEF, UNIDO, ILO, IMO, CoE, WHO) in
order to facilitate donor coordination activities within the scope of the
accession agenda.

Table 2: Indicative
financial allocations  under IPA 2012 (component I)  National Programme, per
MIPD sector and per project, in EUR million:

Priority Sector || Projects || Budget

Justice, Home Affairs and Fundamental Rights ||

TR2012/0123.01 || Prevention of corruption and promotion of ethics || 2.25  MEUR

TR2012/0123.02 || Strengthening Judicial Ethics in Turkey || 3 MEUR

TR2012/0324.03 || Efficiency in anti-money laundering and counter terrorist financing || 3.75 MEUR

TR2012/0124.04 || Socioeconomic development through demining and increasing the Border Surveillance Capacity at the Easter Borders of Turkey - Phase II (EUR 40 million) || 40 MEUR

TR2012/0323.05 || The Strengthening of Probation Services’ Institutional Capacity in Transition to Electronic Monitoring System || 1.8 MEUR

TR2012/0329.06 || Modernization of Turkish Customs Administration VIII || 10.49MEUR

TR2012/0136.07 || Common Cultural Heritage: Preservation and dialogue between Turkey and the EU (Phase II) || 5.42 MEUR

TR2012/0136.08 || Jean Monnet Scholarship Programme || 8.84MEUR

Transport ||

TR2012/0314.09 || Capacity Building on Safety and Security Training Requirements of the Turkish Civil Aviation || 13.55 MEUR

Social Development ||

TR2012/0465.11 || Turkey's Participation in Union Programmes and Agencies || 67.93 MEUR

TR2012/0465.11 || Preventing and combating selected Risk Factors for Health in school || 3 MEUR

Energy ||

TR2012/0315.10 || Energy sector programme (phase I) || 11.8 MEUR

Agriculture and rural development ||

TR2012/0312.13 || Electronic identification and registration system for sheep and goats || 28.9 MEUR

Other activities ||

TR2012/0740.14 || Enhanced Support Activities to Strengthen the European Integration Process (ESEI) (EUR 25 million) || 25 MEUR

TOTAL || 225.74\*

\* The figure only concern National Programme 2012 and not include
the amount allocated to the CSF

2.2.2 Component II

On 17 July 2011 the Commission adopted an annual programme on
financing the participation of Turkey in the European Neighborhood &
Partnership Instrument (ENPI) Black Sea Basin programme[7], worth EUR 3 million.
To streamline implementation, for the last three years (2011–2013) of the
programme, it has been decided to front load the remaining IPA contribution
within a single financing decision of EUR 3 million to be adopted in 2011. The
multi-annual Black Sea basin programme (2007-2013) aims at supporting stronger
and sustainable economic and social development of the regions of the Black Sea
basin and enhanced mutual understanding through cross-border partnerships.
Consequently, there was no dedicated programming activity to be reported.

2.2.3 Components III-V

Component III and Component IV programmes were adopted
in 2007 and 2008 covering a seven-year programming period.

As regards the revision of
Environment, Regional Competitiveness and Transport operational programmes
(OPs) under IPA component III in 2011, preparations were
done regarding the distribution of the total allocation and the project
pipeline.

In 2012, the Environment, Regional Competitiveness and
Transport operational programmes were
again subject to an amending decision in order to revise the financial tables,
monitoring indicators as well as the project pipeline. The programme modification
also addressed the restructuring of the public institutions in Turkey in 2011.
The amending programme decisions were adopted in October 2012 and the
transposing amending financing agreements were signed in November 2012.

Following the entry into force of
the amending financial agreements, an additional pre-financing of approximately
EUR 36 million was paid for the Transport OP and EUR 38 million for the
Environment OP.

The Human
Resources Development OP (HRD OP) under IPA component IV was also revised in
2012 and the related Financing Agreement was updated accordingly. In the
framework of this revision, the scope of eligible actions was increased and
funding opportunities were opened up to a wider range of final beneficiaries.
Finally, provisions were included to allow for funding
to be provided to all Turkish regions while maintaining the principle to
concentrate on the Turkish regions with a GDP per capita below 75% of
the Turkish national average. The Commission Decision concerning the revised operational
programme was adopted on 12 October 2012.

As regards IPA Component V, the fourth and fifth modifications of
the IPA rural development programme (IPARD) were adopted by the Commission
respectively on 7 September and 5 December 2012. The main thrust of the fourth
modification was the improvement of absorption capacity, via an extended
geographical scope, more flexible eligibility conditions and broader eligible
expenditure. The fifth modification consisted in updating the financial table
to add the allocation for 2012 as in the agreed EU budget.

3. IMPLEMENTATION OF EU FINANCIAL
ASSISTANCE IN 2012
3.1 - Success stories

IPA Component
I, '2007 project Introduction of quality management in the revenue
administration'(EUR 1.18 million)

The project, implemented
in 2012, aimed to improve the administrative capacities and efficiency of the
tax administration in line with the Fiscal Blueprints, and to align the Turkish
tax system with the EU directives. The training was provided to the Turkish
Revenue Administration (TRA) in particular in relation to the implementation of
the European Foundation for Quality Management (EFQM) excellence model and establishing the infrastructure for its
implementation. During the course of project implementation the infrastructure
for the implementation of EFQM model was established through its basic tools
and frameworks such as self-assessment, RADAR benchmarking[8] and other new tools. The
following results have been achieved: establishment of a Complaint Management
System, creation of a Suggestion Improvement System for suggestions of
employees, enhanced level of administrative capacity of the TRA for the
National Quality Movement.

IPA Component
I, '2008 project Improving Occupational Health and Safety Conditions at Workplaces',
(EUR 3.50 million)

The project has
been implemented between 2010 and 2012 aiming to provide Turkish workers with
safer workplaces and healthier working conditions. National Occupational Health
and Safety Management Systems have been established for risky sectors to be
implemented at company level. Occupational health and safety conditions in 128
SMEs operating in the top risk sectors (mining, construction, and metal) have
been improved, significantly reducing accident risks. The outputs were disseminated
to SMEs and related partners all around the country. A national web-based
recording system has been established, aiming to gather reliable data
concerning occupational accidents and occupational diseases. This enables
Turkey to produce data comparable with the EU, allowing for better informed
policy making processes.

IPA Component IV – 'Increasing Enrolment Rates
Especially For Girls', EUR 13.61 million)

Particularly focusing on girls and women, this operation
aims at increasing enrolment rates in secondary education and vocational
education and training, decreasing drop-out rates in both primary and secondary
education and increasing vocational skills and competences of the labour force.
Early drop outs from school are a problem especially for girls often caused by
cultural obstacles, early and forced marriages, and economic insufficiencies,
among others.

This project, directly related to the EU 2020 targets of
increasing the educational attainment and preventing early school leaving and
drop outs, will help Turkey, as a potential future Member State, to pursue the
EU 2020 targets. The implementation started in May 2011 and is expected to run
until July 2013. It has supported the Turkish Ministry of National Education
(MoNE) in its efforts to tackle the drop out problem, especially for girls.

So far, the technical assistance team in cooperation
with the MoNE has prepared local actions plans covering 16 cities where school
enrolment rates are low, aiming at increasing enrolment rates through
persuasive activities with families, teacher training and monitoring of drop
outs and absenteeism. These actions are currently implemented by the local
authorities and monitored by the technical assistance team. Thanks to the
project support, the MoNE has improved guidance services within schools in
Turkey's less developed regions, targeting the existing students with focused
training for teachers and students of Guidance and Psychological Counselling
Departments within universities.

In addition to these bigger-scale activities, the
project also supported 89 small-scale interventions implemented by primary
schools, universities, local authorities and non-governmental organisations, to
help their activities to increase school enrolment rates, including direct
persuasive engagements with families to send their children to school, which is
the most significant factor influencing girls' education. These small-scale
projects are targeting specifically the problems in the Eastern and South-Eastern
provinces of Turkey, where the school enrolment rates are low compared to the
other provinces. As a result of the 89 grant projects, project workers
visited 16,600 households. So far, 2800 girls have been enrolled to catch up
education. 1500 girls and women received skills development training. 1000
girls and women learned how to read and write. 3300 girls went back to formal
education. 2800 drop-out cases have been prevented. 3300 girls received
psychological and counselling support to keep them in school.

The project also supported a very effective awareness
campaign, by broadcasting on national channels short movies targeting girls
outside the education system. As a result, 800 children who had dropped out or
who had never attended school have so far been enrolled. This has happened only
within two months following the broadcasting of the short movies, which can be
seen at this link: http://www.eba.gov.tr/video/izle/025876bd3ffe9d02a4ff4b0f88760d33b614081ed6001

3.2 Overview of the implementation status of the different
instruments and components
3.2.1 Component I

EU assistance
implementation under IPA component I has advanced compared to the previous
years. The financial performance has been positive overall in 2012 thanks to a
substantial effort and the good cooperation among different institutions that
resulted in contracting almost 94% of the NP 2008 and 97%
for NP 2009 (programme part for which the contracting deadline has not been extended).  Nonetheless, despite good contracting rate of 2008 and 2009
funds, the contracting of 2010 and 2011 programmes encounters substantial
delays. The lengthy preparation of the tender dossiers and then of the
evaluation process, explains the long time required to get to the contract
signature. Payments still remain low due to the fact that they are lagging
behind contracting and that final payments are only made on average several
months after contracts are fully implemented.

3.2.1.1. Sector I: Public Administration Reform

In the MIPD 2011-2013,
Public Administration Reform (PAR) is addressed under the sector of
"Justice, Home Affairs and Fundamental Rights" where one of the
sector objectives is "Effective implementation of the legislation
regarding the reform and restructuring of the central public administration and
transferring authority to the local and provincial administrations; reduced
bureaucracy, strengthened policy making systems and sustainable development of
a professional, accountable, transparent and merit-based civil service;
parliamentary and civilian oversight mechanism over security sector secured;
oversight, control and participatory mechanisms supported including
strengthened external and internal audit functions and establishing an
independent data protection system".

Within this framework, the
project ''Participatory Decision Making at the Local Level'' (EUR 3,305,000)
has been implemented by the Ministry of Interior as the main beneficiary and
the Ministry of Development as a co-beneficiary. 26 province municipalities are
involved as pilots. The overall objective of the project is to increase the
scope of local government reform in Turkey by improving the capacity of local
governments for enhancing participatory strategic governance at the local
level. In line with the overall objective, the project’s purpose is three-fold:

1. Improving strategic
planning and programming capacity and capability of local governments;

2. Enhancing citizens'
role within assemblies in local decision making mechanisms;

3. Supporting further
implementation of the recent legislation to ensure transparency and
accountability in 26 local governments in Turkey.

In Turkey, one of the main challenges is the need to strengthen the 
administrative and judicial capacity to implement and enforce the acquis.
Under IPA, the Commission continued to mobilise significant human and financial
resources to help Turkish public administrations with this process, using the
mechanism of T-twinning administrations and agencies. In
2012, 7 twinning contracts were signed with Member States in the area of judiciary,
transport, justice, freedom, security and health. In total, 114 out of the 132
projects initiated over the period 2002-2012, 91 projects were completed. Twinning
continues to be an important element for further implementation. Through the
so-called twinning Review Mission tool, in a form of a TAIEX mission, the
sustainability of twinning projects continued to be reviewed once a year.

During 2012,
around 100 workshops and expert missions took place in Turkey in addition
to many Turkish officials who took part in numerous study visits and
multicounty seminars in various European countries.

An EU funded
TAIEX seminar "Cycle on Human Rights Institutions - Turkish Independent
Human Rights Institutions in line with the Paris principles" was held in
Ankara on 19-20 December in Ankara together with high representatives of the
Ministry for EU Affairs, NGOs members and international experts. The seminar
covered legislative developments in the area of national human rights
institutions falling under chapter 23. The (then) Draft Law on
Independent Human Rights Institutions, as well as other relevant draft laws
(Ombudsman, Equality Board), including accountability and appointment of
membership, eligibility and plurality of membership, budget and staffing,
jurisdiction and functions were the main topics discussed.

3.2.1.2. Sector II: Justice, Home Affairs and Fundamental
Rights

Key objectives set in the
MIPD 2011-20213 are to implement the necessary reforms
to build an independent, impartial and efficient judiciary, to foster effective
law enforcement, successful fight against crime and corruption and improved
integrated border management and prevention of illegal migration. This is in
view of achieving tangible and measurable progress towards the full enjoyment
of all fundamental rights and freedoms by all individuals without
discrimination and building strong democratic institutions promoting pluralism
and the values of European integration.

Therefore, the twinning
Project “Improved Capacity of Civil Enforcement Offices” (IPA 2009 - EUR 1.7
million) was designed to address the deficiencies observed in this area.
The transactions carried out by the enforcement offices are directly related
with the fundamental rights and freedoms. In this sense, the project's purpose
is to strengthen the institutional capacity of civil enforcement offices to
ensure effectiveness and efficiency in executing their services thus enhancing
the trust in the judiciary.

Another twinning
project, Towards an Effective and Professional Justice
Academy (IPA 2010 - EUR 1.13 million), started in December 2012 and is designed
to support the Justice Academy to become a strong and independent training
provider for the entire Turkish judiciary. The project will address both
institutional and academic capacity of the Justice Academy through activities
including the establishment of a Human Rights Unit in charge of providing
adequate training on human rights to legal professionals.

A workshop on
"International judicial cooperation in fighting transnational and Terror
Crimes" took place in Ankara on 28 - 29 November 2012. It involved a large
and diverse group of officials from various institutions including the Ministry
of Justice, the Financial Crimes Investigation Board of Turkey, the IT and
Financial Investigation Units of the Turkish National Police as well as
Prosecutors from the Court of Cassation. Experts from the Department of
financial information of Poland brought an international perspective to this
event. The seminar was an excellent opportunity for the various institutions to
share knowledge and to get acquainted with innovative international practice
notably with regard to the investigation of terrorist financing
cases.

The project
"Improvement of Civilian Oversight of the Internal Security Sector Project
– Phase II" (IPA 2011 - EUR 3.5 million) started in July 2012 and is
implemented in joint management with the United Nations Development Programme
(UNDP). The project is expected to make a significant contribution to
increasing accountability of the internal security forces to the public and
establishing the necessary checks and balances to prevent any potential abuse
of power. Main targets include the revision and development of the regulatory
framework to enable the Ministry of Interior and local public administrators to
exercise effective civilian oversight over law enforcement bodies.

Similarly, in
2012, “Action Plan on IBM, Phase 2” developed recommendations for a structured
risk analysis system on border management and also modernised the database
system of the police used for border checks, supplied further border
surveillance equipment for the Gendarmerie, Coast Guard and the Land Forces.
Another project that was in force in 2012 on training of border police
developed curriculum and training programme for the in-service training of the
police. Assistance has been delivered also to the Customs Enforcement, with a
project by which Turkey’s first train scanner device was installed at the
border with Iran and also a number of boats were purchased to increase the
maritime capacity to fight against smuggling together with training delivered
via a twinning project.

In the field of
asylum and migration, a major and complex programme worth more than EUR 85 million
was under implementation aiming to deliver six response centres for asylum
seekers and the elimination of a dedicated detention centre destined for
irregular migrants.

3.2.1.3. Sector III: Private Sector Development

The MIPD 2011-2013 for
Turkey under Private sector development envisages support to increase
employment, productivity and export of goods and services, particulary in the
regions where employment and business stocks are low. In 2012, the
implementation of the projects under the Private Sector Development has
continued.

Significant progress was registered regarding the facilitation of
access to finance opportunities for SMEs. The Greater Anatolia Guarantee
Facility (GAGF), a financial instrument designed and implemented by the
European Investment Bank Group for the benefit of SMEs operating in Turkey, has
become fully operational in 2011 and almost all loans were disbursed to SMEs
during 2012. The second phase of the project has become operational in 2012,
increasing the IPA budget to EUR 51 million, which is complemented with an EIB
loan programme of EUR 450 million and an equivalent loan volume provided by
participating local banks. The project provides loans to SMEs through Akbank,
Yapı Kredi, Vakıfbank and Halkbank and micro-credits through Kredi Garanti
Fonu.

Lending activities continued under the Crisis Response Package,
where the Commission mobilized some EUR 470 million through the European
Investment Bank (EIB) and the European Bank for Reconstruction and Development
(EBRD) in late-2010. The programme enabled small businesses to receive loans
from local banks to meet their working capital and investment needs. The
programme also supports investments for energy efficiency.

3.2.1.4. Sector IV: Environment and climate change

Environment and
climate change continued to be one of the highest priorities underlining the
increasing EU support over the years in line with the MIPD horizontal
priorities on environment, nature protection and climate change.

The projects'
portfolio and investments reached up to project applications of EUR 855
million EU contribution, including all available pre-accession instruments.
Under Component I and III, 85 contracts were signed so far. 22 water, wastewater
or solid waste infrastructure projects were approved and are at different
stages of implementation.

A technical
assistance project on Increasing Implementation Capacity of the Seveso II
Directive which is worth EUR 2.73 million was started in 2012. This
project aims to strengthen the administrative and institutional capacity of
central and local bodies responsible for future implementation of the Seveso II
Directive in Turkey.

Further on, a 
twinning light project on Emergency Case Management and Risk Analysis in
Drinking Water for the Protection of Public Health started in 2012 with a budget
of EUR 250,000. The project aims to strengthen the Ministry of Health via
building the institutional capacity both at the Public Health Institution of
Turkey and the Public Health Directorates of the 81 provinces in the field of
drinking water for risk assessment, early warning and management of emergency
cases in line with the EU Drinking Water Legislation (98/83/EC).

A framework
contract (FWC) for Strengthening the Institutional and Administrative Capacity
on Implementation of Habitat and Birds Directives in Turkey has started in 2012
with a budget of EUR 115,877. The project aims to build the institutional
capacity and strengthen the Ministry of Forest and Water Affairs through a
series of training for the trainer on the implementation of Birds and Habitats
Directives and assessing the potential Natura 2000 sites.

3.2.1.5. Sector V: Transport

There is an almost complete convergence between national
strategies and EU pre-accession strategies with an outlook towards 2015. The
priority areas are carefully selected and project pipelines are prepared to
achieve the strategic priorities.

3.2.1.6. Sector VI: Energy

Defined as a
major priority sector under MIPD document (2011-2013), the energy sector
englobes three main objectives; the increase of  capacity and better alignment
in the energy efficiency field; further alignment by implementation of the acquis
on the internal gas and electricity market; bringing the nuclear safety in line
with EU standards.

Within this
framework, the project "Structure and Capacity Improvement of Turkish
Electricity Transmission Corporation (TEIAS)" (IPA 2009 - EUR 1,8 million)
was contracted in December 2012, aiming to improve the institutional structure
and capacity of TEIAS, by expanding its technical capacity to perform live
working (LW) and to develop work safety and training activities and
restructuring its organization by improving human resources policies and its IT
structure. Furthermore, the LW system will not only increase the reliability
and availability of the transmission system, but also reduce the operation and
maintenance costs of the operators on the strategic lines and interconnections.
The project is fully in line with the second objective of the MIPD related
priorities particularly on the implementation of the acquis on the
internal gas and electricity market.

In addition, the
tendering phase was finalised for the implementation of another project related
to electricity sector: "Harmonization of Transmission Code in line with
ENTSO-E, (2010 - EUR 1.35 million). The project is designed to harmonize the
Turkish Power System Transmission Code in line with the European Network of
Transmission System Operators for Electricity (ENTSO-E). By establishing the
same rules on electricity networks, they would provide better interoperability
in both the EU and Turkish systems and will bring the Turkish electricity
network code fully in line with EU energy acquis.

3.2.1.7. Sector VII: Social development

The first objective of this sector under MIPD document is to prepare
Turkish authorities for an effective implementation of the European Social Fund
(ESF) and bringing Turkey closer to the EU policies and parameters of the
Europe 2020 strategy, both in terms of strengthening employment and human
resources development as well as building institutional and administrative
capacity.

Within this framework, one of the projects implemented is “Promoting
Gender Equality in Working Life". The twinning project has helped
Turkish authorities transpose the equal opportunities acquis. Turkish
authorities have acquired extensive knowledge, better understanding, and more
resources to make gender equality, a fundamental EU principle, a reality in
their legislative and policy work. A gender equality award for Turkish
companies was established, and will be granted by the Turkish authorities
annually. The project is also intended to intensify discussion of harmonisation
of work and private life in the private sector.

The Human Resources Development programme Operation “Improving the
Quality of the Public Employment Services” – (EUR 8,600,000 EU contribution) is
still on-going.

The overall objective is to attract and retain more people in
employment by improving the quality of the public employment services. This is
being done by assisting the Turkish Public Employment Service (ISKUR), the
Ministry of Labour and Social Security, the Provincial Employment and
Vocational Training Boards and the social partners to strengthen their
administrative capacities. The three-year project will last until the end of
2013.

Thanks to the operation, the professional skills and behaviour of
ISKUR staff at the provincial level, where they meet up with their clients,
jobseekers and those seeking job changes and/or training advice, is changing
and improving with intensive and extensive training on management techniques
like local action planning and introducing the concept of the "Model
Public Employment Office" to deliver more quality and targeted services.

One major initiative aimed at improving the access of jobseekers and
employers to ISKUR's services has been a bus campaign in 2012 that reached
25,000 people in 21 provinces targeted directly at households, students, people
in rural communities informing them through interviews, presentations and
promotion materials about ISKUR and its full range of services. The campaign
has significantly increased ISKUR's visibility in the media as well. The second
bus campaign will be rolled out in 2013 visiting 22 provinces.

3.2.1.8. Sector VIII: Agriculture and rural development

MIPD 2011-2013 sets out
three main objectives for agriculture and rural development sector. The first
objective is to facilitate the preparation of Turkey for the future
implementation of the Common Agricultural Policy (CAP) and related policies
respecting the relevant EU standards and thereby ensuring a smooth integration
into the Single Market, which will be achieved by assisting Turkey with getting
ready to effectively implement EU rural development programmes as well as other
CAP related expenditures upon accession, including the setting-up of systems
for management and control of financial expenditures and agricultural
information systems. The second objective is the alignment with the acquis in
the area of food safety, veterinary and phytosanitary policy. The third
objective is the restructuring of the administrative system for fisheries
required for the adoption of the acquis for fisheries resource
management, including the strengthening of resource and fleet management as
well as the fisheries inspection and control services, producer organisations
and an integrated approach to sea-related activities.” 
In this framework the following projects were particularly successful in 2012.

The
project "Extending the Pilot Farm Accountancy Data Network Project and
Ensure Sustainability" (IPA 2009, EUR 1.45 million) was completed in 2012
and helped improving the capacity of the Ministry of Food Agriculture and
Livestock in the farm level accounts.

The current project "Tagging and Vaccination of Sheep and
Goats" (IPA 2008, EUR 29.6 million) has assisted Turkey to
establish the small ruminant database and identifying sheep and goats as well
as contributing  to improvement of the current PPR (peste des petits ruminants)
situation in Turkey by strengthening the existing control measures.

3.2.2 Cross-border cooperation (ENPI Black Sea basin
programme and Turkey-Bulgaria programme)

In 2012, regarding
the implementation of the Turkey-Bulgaria CBC
programme, the 2nd call for proposals was
finalized and grant contracts were signed. These projects aim at boosting
sustainable economic and social development. They build on comparative
advantages to improve social development, promote social cohesion among people
and communities, and to improve quality of life through the efficient use of
shared natural resources, as well as the protection of natural, cultural and
historical heritage sites.

3.2.3 Component III

Under Component III a high number of
relevant projects was approved in 2012. Their approval, and the start of
implementation of some, can be considered as a success as a good project
pipeline is an important premise for a full absorption of funds and a positive
step to preparing Turkey for the management of the Structural and Cohesion
Funds.

The Operational Structure (Ministry
of Environment and Forestry) under the Environment OP put in place a very
substantial project pipeline. Out of this pipeline, the Commission adopted 7
major projects and respective Bilateral Project Agreements were signed for 3 in
2012. Cumulatively,  the major projects approved under this programme amount to
19; they ensured payment requests exceeding EUR 30.7 million in 2012. In
parallel, work continued on the preparation of new IPA projects to further
strengthen the pipeline.

On the one hand, the Regional
Competitiveness OP faced significant problems in absorbing the available
funding largely due to insufficient capacities at the level of the Operating
Structure (Ministry of Science, Industry and Technology) and end recipients. On
the other hand a major problem, related to the extension of the financial
instrument "Greater Anatolia Guarantee Facility (GAGF)", was
resolved committing an additional EUR 20 million.

The Ministry of Transport,
responsible for the Transport OP and the Ministry of Science, Industry and
Technology, in charge of the Regional Competitiveness OP, obtained their
accreditation in 2012.

With the changes made in 2012 in the
operational programmes' financial tables , the final IPA contribution for the
period 2007-2013 will amount to approximately EUR 682 million for the
Environment OP, EUR 585 million for the Transport OP and EUR 468 for the
Regional Competitiveness OP, provided no further changes are adopted in the
2013 annual budget.

The efforts made in 2012 led to
important progress in terms of fund absorption eliminating the risk of
de-commitment related to the 2009 funds for Transport OP and Environment OP.
However, a narrow project pipeline in the Transport OP raises the risk of
future decommitment, as do delays in tendering, contracting and approval of
major projects in the Environment OP. Due to slow implementation and a weak
pipeline of projects in 2012, the Regional Competitiveness OP suffered from a
ca. EUR 12 million loss of 2009 committed funds.

3.2.4 Component IV

Progress has been made concerning the Human Resources
Development Operational Programme - IPA Component IV. The Operating Structure (the Ministry of Labour and Social
Security) has taken a series of actions to increase the design and
implementation capacity of the operation and grant beneficiaries. Numerous
trainings and other types of capacity building activities were conducted. This
is an important achievement which led to the design and approval of a number of
new operations in 2012, for instance for the promotion
of youth employment and registered employment, for the increase of school
enrolment rates, especially for girls, for the promotion of lifelong learning,
for the promotion of adaptability of tradesmen and craftsmen, for facilitating
access of disadvantaged higher education students to the labour market and for
the promotion of active inclusion. Three
calls for proposals for a total amount of EUR 50 million as well as several
service and supply tenders were published. However, the
progress in contracting did not reach the expected level. Although the amount
that has been contracted in 2012 is higher than in 2011 (EUR 26.6 million in
2012, compared to EUR 17.8 million in 2011), the number of contracts that were
signed remains at a low level. The total contracted
amount since the beginning of the programme reached EUR 145 million (IPA share:
EUR 123 million). This represents a 32% contracting rate for the IPA funds
allocated to the HRD OP for the 2007-2012 period (EUR 383 million). The level
of expenditure declared to the Commission remains low (22 % by the end of
2012).

3.2.5 Component V

Major progress was achieved for IPA Component V, since
2012 marked the first year of IPARD. Three conferred
measures (on farm investments, investments in processing and marketing of
agricultural holdings and diversification of economic activities) were
implemented in 20 provinces. Five calls for applications were organised by the IPARD
Agency in 2012 (following two calls in 2011). 630 project proposals were
submitted in these calls (a total of 878 from 2011), of which 201 were
contracted in 2012 (263 from 2011), whilst the project assessment for the sixth
and seventh call for proposals continues in 2013.  EUR 13 million were
disbursed to the beneficiaries during 2012. A great majority of projects
concern investments in agricultural holdings.

4. IMPLEMENTATION AND MONITORING
MODALITIES AND STRUCTURES

Efforts were made by the NAO office in implementing the
Comprehensive action plan which is now the main tool (for IPA Component I)
to follow up the outstanding shortcomings in the management and control system.
In 2012, in line with the Comprehensive action plan,
Turkish authorities have addressed shortcomings related to the reinforcement of the NAO supervision, workload analysis and training
of staff. Nonetheless, further measures are necessary
to address some system's persistent problems mostly
related to high staff turnover in the Central Finance and Contracts Unit (CFCU),
still high rejection rates on some transactions (tender dossiers and requests
for services) delays in preparation of procurement plans and payments made by
the CFCU. Improvements in those areas are crucial to increase the absorption
capacity and to reduce the current backlog in contracting and payments.

For the accreditation of the operating structures under
components III and IV, all necessary procedures for granting the transfer of
tendering, contracting and financial management functions to the responsible
line ministries were completed in 2012.

Regarding Component
III, the Commission has adopted three amending Decisions conferring the
tendering, contracting and financial management functions from the CFCU to the
Ministry of Environment and Urbanisation (on 31 January 2011), to the Ministry
of Science, Industry and Technology (on 15 February 2012) and to the Ministry
of Transport, Maritime Affairs and Communication (on 12 November 2012).

Under IPA Component IV, the tendering, contracting and
financial management functions were transferred from the CFCU to the Ministry
of Labour and Social Security in the beginning of 2012 following the adoption
of a Commission Decision. The necessary staff has been recruited and received
extensive training in line with the new needs. It is also planned to recruit
additional staff in order to enhance the monitoring and on the spot check
functions of the Ministry of Labour and Social Security.

For IPA Component V, the process of conferral was extended to
cover three additional provincial offices of IPARD Agency, thus totalling 20 by
the end of 2012. Turkey continued the implementation of its action plan to
improve absorption, but despite these efforts the project pipeline was still insufficient.
Also not many projects were actually completed on time. As a result a major
de-commitment of 2009 could not be avoided at the end of 2012 (EUR 64.9
million). Intensive work is needed to avoid a large de-commitment in 2013. A
request for a conferral of additional 22 provincial offices, technical
assistance and some outstanding sub-measures in the existing provinces was
submitted to the Commission on 28 September 2012.

Monitoring:

A monitoring reform, set up in 2011, aimed at enhancing the DIS monitoring
system in Turkey. Although there have been some major actions taken by the
Turkish authorities as regards the follow up of the operational conclusions of
the monitoring reform, it is still considered that the monitoring reform has
not reached full speed and some further actions are needed as regards
functioning of the Sectoral Monitoring Sub-Committees (SMCS) and Steering
Committees.

The capacities of the
NIPAC office (Ministry of EU Affairs - MEUA) have been further strengthened
through trainings and assistance delivered in the context of the ROM (result
oriented monitoring) contract. Much remains to be done
in terms of development of own monitoring capacities of the MEUA  alongside the
intensification of monitoring activities.

The cooperation
among the key actors needs to be strengthened further. Although
there was only a very limited number of joint missions executed in 2012, the
respective parties started sharing more information about their monitoring
plans. In line with the recommendation of the
evaluation on the Stakeholder Involvement, the MEUA has taken an active role to
invite relevant stakeholders and civil society organisations to the meetings
related to IPA assistance.

The IPA
Monitoring Committee for all five components took place on 26 June 2012 in
Ankara discussing progress and challenges in implementation. The main concern
raised was related to the high risk of loss of a significant amount of funds
allocated for the Components III, IV and V due to the insufficient capacities
of the national authorities to absorb IPA funds. The IPA Monitoring Committee
drew the attention to the fact that besides the
improvement of cooperation between the different actors and the strengthening
of capacities of the relevant national authorities, an effort has to be
deployed to improve the pipeline of projects, especially under the Transport
and Regional Competitiveness Operational Programmes.

Two
transition assistance and institutional building (TAIB) sector related
monitoring committees were held on 14 February and on 26 July 2012 combined
with the meetings concerning the programme financing Turkey’s participation in
the ENPI Black Sea basin programme under Component II.

Regarding
the ENPI Black Sea Basin programme, Turkey participated in two Joint Monitoring
Committees organised by the Joint Managing Authority (Romania).

In 2012, two
rounds of sector monitoring committees took place including all three
operational programmes under IPA component III and one annual technical
meeting. The issues discussed concerned the project pipelines and the
implementation progress for each of the programmes, including assessments of
progress with tendering. Special attention was paid to the Regional Competitiveness
Operational Programme, as the project pipeline needs to be reinforced.

The Human Resource Development sector monitoring committees for
Turkey were held on 20 and 21 June 2012 in Sanliurfa and on 30 November 2012 in
Ankara. During these meetings, the Committee examined the results of
implementation of the operational programme on the basis of the 2011
sector-oriented annual report on the implementation. The Committee was also
informed about the state of implementation of on-going operations, the
identification of new operations and other implementation issues such as audit
issues and the revision of the operational programme.

Last but not least, rural development sectorial
committees were held on 6 June and 12 December 2012. The
main topics for discussion were focused on broad issues related to the absorption
of funds, publicity efforts, links with national policies, advisory services,
and especially a major programme modification.

PART II -
FINANCIAL DATA (EUR million and %)

On implementation of assistance at 31 December 2012

IPA
Turkey – IPA I + II

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

IPA 2007 || 257.20 || 257.20 || 100.00% || 182.11 || 70.80%

IPA 2008 || 257.13 || 257.13 || 100.00% || 201.29 || 78.29%

IPA 2009 || 205.55 || 205.55 || 100.00% || 122.11 || 59.41%

IPA 2010 || 218.81 || 217.09 || 99.21% || 112.38 || 51.36%

IPA 2011 || 232.97 || 232.69 || 99.88% || 88.45 || 37.96%

IPA 2012 || 225.75 || 213.95 || 94.77% || 67.73 || 30.00%

Total || 1397.41 || 1383.61 || 99.01% || 774.07 || 55.39%

IPA – Component I National Programme Turkey

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

IPA 2007 || 256.20 || 256.20 || 100.00% || 181.34 || 70.78%

IPA 2008 || 256.13 || 256.13 || 100.00% || 200.99 || 78.47%

IPA 2009 || 204.55 || 204.55 || 100.00% || 122.01 || 59.65%

IPA 2010 || 217.81 || 216.09 || 99.21% || 112.28 || 51.55%

IPA 2011 || 229.97 || 229.69 || 99.88% || 88.15 || 38.33%

IPA 2012 || 225.75 || 213.95 || 94.77% || 67.73 || 30.00%

Total || 1390.41 || 1376.61 || 99.01% || 772.50 || 55.56%

IPA – Component II (CBC) Programme Turkey

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

IPA 2007 || 0.93 || 0.93 || 100.00% || 0.89 || 95.00%

IPA 2008 || 1.00 || 1.00 || 100.00% || 0.30 || 30.00%

IPA 2009 || 1.00 || 1.00 || 100.00% || 0.10 || 10.00%

IPA 2010 || 1.00 || 1.00 || 100.00% || 0.10 || 10.00%

IPA 2011 || 3.00 || 3.00 || 100.00% || 0.30 || 10.00%

IPA 2012 || 0.00 || 0.00 || || 0.00 ||

Total || 6.93 || 6.93 || 100.00% || 1.69 || 24.32%

              ICELAND

1. SUMMARY

The ratification of the IPA Framework Agreement was finalised in
2012, following the parliamentary resolution mandating the government of
Iceland to approve the Framework Agreement. The parliamentary resolution was
adopted on 18 June 2012, paving the way for the implementation of projects
planned under IPA National Programmes for Iceland.

Following the entry into force of the IPA Framework Agreement, the
implementation of projects under IPA National Programme 2011 started in the
second half of 2012. The 2011 Programme supports seven projects. The budget is
€ 12 million and balance between the two priority axes set in the MIPD was
taken into consideration (see attached). The 2012 National Programme was
adopted on 16 July 2012 and supports three projects for a budget of € 12
million. The projects implementation has partially started. Programming for the
National Programme 2013 was completed with a unanimous approval by the IPA
Committee in November 2012 and adopted on 2 December 2012. Three projects were
envisaged in a total value of € 10,8 million.

2. STRATEGIC PLANNING AND
PROGRAMMING
2.1 Multi-annual Indicative Planning Document

The global objective of EU financial assistance to Iceland is to
support its efforts towards compliance with the EU acquis, in order to
become fully prepared to take on the obligations of membership of the European
Union.

The MIPD 2011-2013 sets out two strategic objectives, to be financed
under IPA assistance:

- to further enhance Iceland's ability to assume the obligations of
membership by supporting institutional capacity building for acquis
transposition and implementation.

- to reinforce Iceland's institutional capacity in its preparations
for participation in and implementation of Structural Funds  and other EU
funds.

As mentioned, the Commission's Opinion on Iceland's application for
membership of the European Union of 24 February 2010 constitutes the key
reference for identification of IPA programming priorities. On 10 October 2012,
the Commission adopted its 2012 enlargement package. The 2012 Progress Report
for Iceland reconfirmed and further supported the priorities for pre-accession
financial assistance that were identified in the Commission Opinion.

However, further to the parliamentary elections of 27 April 2013,
the newly formed government has put the accession negotiations on hold until
Parliament assesses the state of the negotiations and the developments in the
EU. The consequences for IPA are being examined. The Commission does not
envisage proceeding with any further projects under IPA until such time as the
Icelandic government has decided whether or not to continue the accession
process.

2.2 Programming
2.2.1 Component I

The Programming of the 2012 National Programme was finalised in
August 2012 by signing the respective Financing Agreement.

The 2013 National Programme was presented to the IPA management
committee in November 2012. The 2013 programme in a total value of € 10.8
million was adopted on 2 December 2012. The additional national contribution is
€ 7.7 million. The 2013 Programme covers exclusively the first strategic
priority of the MIPD (To further enhance Iceland's ability to assume the
obligations of membership by supporting institutional capacity building for
acquis transposition and implementation).

The programming of National Programmes 2011-2013 was thus completed
in 2012 with all three annual programmes adopted. The national programmes
2011-2013 is envisioning in total 13 projects including environment, food
safety, increasing employability of low skilled workers, regional development,
financial supervision, customs upgrading, statistics and translation of the
acquis. Co-financing from the Icelandic side is sizable and stands at 33%
overall for the 2011-2013 National Programmes.

Iceland National Programme 2011 under IPA component I (EUR
million):

Axis 1 - Building administrative capacity for acquis transposition and implementation || EU IPA contribution || National contribution || Total amount (EU+National contribution)

Project 1: Institutional and laboratory capacity building to ensure food safety || 1.90 || 0.00 || 1.90

Project 2: Preparation for Implementing the Habitats and Birds Directives || 3.68 || 0.75. || 4.43

Project 3: Strengthening National Accounts || 0.83 || 0.24 || 1.07

Project 4: Translation of the acquis and setting up the conference interpretation programme at the University of Iceland || 1.50 || 1.92 || 3.42

Total Axis 1 || 7.91 || 2.92 || 10.83

Axis 2 - Preparation for effective use of Structural Funds and other EU funds || EU IPA contribution || National contribution || Total amount (EU  + National contribution)

Project 5: Katla Geopark: Regional development for the Eyjafjallajokull area || 0.56 || 0.18 || 0.74

Project 6: Increasing employability of low qualified workers with  skills recognition system in adult education || 1.88 || 0.62 || 2,50

Project 7. Technical Assistance and Structural Funds Preparation Facility || 1.65 || - || 1,65

Total Axis 2 || 4.09 || 0.81 || 4.90

Total Axis 1 + Axis 2 || 12.00 || 3.74 || 15.74

Iceland National
Programme 2012 under IPA (Transition Assistance and Institution Building
Component)

Axis 1 - Building administrative capacity for acquis transposition and implementation || EU IPA contribution || National contribution || Total amount (EU + National contribution)

Project 1: Preparation for implementing the Water Framework and Floods Directives in Iceland || 1.72 || 0.59 || 2.31

Project 2: Translation of the acquis || 1.00 || 2.28 || 3.38

Total Axis 1 || 2.72 || 2.97 || 5.69

Axis 2 - Preparation for effective use of Structural Funds and other EU funds || EU IPA contribution || National contribution || Total amount (EU + National contribution)

Project 3: Preparations for implementation of Structural Funds in Iceland || 9.28 || 2.59 || 11.87

Total Axis 2 || 9.28 || 2.59 || 11.87

Total Axis 1 + Axis 2 || 12.00 || 5.56 || 17.56

Iceland National
Programme 2013 under IPA (Transition Assistance and Institution Building
Component)

Axis 1 - Building administrative capacity for acquis transposition and implementation || EU IPA contribution || National contribution || Total amount (EU + National contribution)

Project 1: Implementation of a Risk Based Approach in Financial Supervision in Iceland || 3.16 || 0.57 || 3.73

Project 2: Reforming Icelandic business statistics || 1.67 || 0.30 || 1.97

Project 3: Implementation of transit and tariff customs systems in Iceland || 6.0 || 6.80 || 12.80

Total Axis 1 || 10.84 || 7.66 || 18.50

3. IMPLEMENTATION OF EU FINANCIAL
ASSISTANCE IN 2012

Financial
support to Iceland is exclusively implemented under IPA Component I
"Transition Assistance and Institution Building", through centralized
management by the Commission headquarters. Grants constitute a substantial part
of the pre-accession assistance in Iceland.

Implementation
of the national IPA assistance started in 2012. The implementation of the 2011
Programme is well under way with contracting rate of 75%. The contracting rate
of the 2012 Programme is 8%. In the reporting period, the implementation of the
2013 Programme had not yet started.

Projects under
implementation in the reporting period cover key areas of Iceland's accession
process, such as environment, food safety, increasing social development,
regional development, statistics and translation of the acquis.

Good progress
can be reported as also verified by independent monitoring. Generally,
beneficiaries have a good administrative capacity to implement the projects and
there is a high projects ownership. The first IPA Monitoring Committee met in
November 2012 and concluded that notwithstanding the early stage of the IPA
implementation in Iceland, the programme was implemented effectively and there
was a sufficient quality and coherence towards meeting the objectives set out
in the multi-annual indicative planning document.

As regards
technical assistance, support has been provided by means of several consultancy
contracts, mainly in the area of regional development. The administrative
capacity of the National IPA Coordinator's office has been also reinforced
through a technical assistance contract. TAIEX continued to play a key role in
providing technical assistance to Iceland in 2012 and constituted a significant
component of the overall EU support in relative terms given the size of the
country and the national programmes.

PART II -
FINANCIAL DATA (EUR million and %)

On
implementation of assistance at 31 December 2012

IPA Iceland

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

IPA 2010 || || || || ||

IPA 2011 || 12.00 || 9.04 || 75.32% || 3.03 || 25.27%

IPA 2012 || 12.00 || 1.00 || 8.34% || 0.37 || 3.11%

Total || 24.00 || 10.04 || 41.83% || 3.41 || 14.19%

IPA –
Component I National Programme Iceland

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

IPA 2010 || || || || ||

IPA 2011 || 12.00 || 9.04 || 75.32% || 3.03 || 25.27%

IPA 2012 || 12.00 || 1.00 || 8.34% || 0.37 || 3.11%

Total || 24.00 || 10.04 || 41.83% || 3.41 || 14.19%

              THE
FORMER YUGOSLAV REPUBLIC OF MACEDONIA

1. SUMMARY

The former Yugoslav Republic of Macedonia continued accession-related reforms with the support of IPA but
faced serious challenges during 2012 as regards programming and implementation
of EU assistance. In general, the capacities of the national institutions
managing IPA remained uneven, contributing to recurrent delays in procurement
and low contracting and disbursement rates.

The IPA 2012-2013 National Programme represents a total EU
contribution to Component I of approximately EUR 28 million per year. It was
prepared and adopted by the Commission in November 2012 and consists of five
sector fiches and seven linked project fiches supporting the sectors of public
administration, justice, home affairs and fundamental rights, private sector
development, agriculture, and environment and climate change. The new
allocations for the Operational Programmes under Components III, IV and V were
also adopted on the same occasion.

Absorption of available funds from all IPA components was an issue
to which the Commission paid attention, supporting the authorities' efforts.
Temporary interruption of payments took place in March and again at the end of
2012 by the Commission (Regional Policy DG, Employment, Social Affairs and
Inclusion DG and Agriculture and Rural Development DG), due to understaffing
and insufficient managerial capacities in key institutions, especially in those
exercising control functions, such as the Audit Authority and the National
Authorising Officer's (NAO) office. Thanks to resolute action taken by the
government, the capacities of all these institutions almost reached their full
staff targets foreseen in their respective Workload Assessments (WLA) for 2012,
although important residual gaps remain in the Ministry of Environment.

Capacity building needs and the accumulated backlog continue to pose
serious problems and constant efforts and commitment should be secured at the
highest possible political level to accelerate implementation.

2. STRATEGIC PLANNING AND
PROGRAMMING  
2.1 Multi-annual Indicative Planning Document

The overall
objective of EU financial assistance to the former Yugoslav Republic of
Macedonia is to support its efforts regarding reforms and towards compliance
with EU acquis in order for the country to become fully prepared to take
on the obligations of membership to the European Union. The last MIPD 2011-2013
has been a good ground to start introducing Europe 2020 into the national
context, by stronger sector focus and implementation according to a
sector-based approach, as far as possible, aiming for greater impact on the
ground.

The Commission
took a number of steps to strengthen ownership by the beneficiary country and
to enhance the strategic nature of this process, reinforcing the link between
the priorities established in the Progress Reports and the programming of
assistance, starting from the IPA 2012-2013 National Programme, preparing the
ground for the new IPA II instrument.

Taking into
account all previous evaluations, the Commission followed up on all findings
and tried to systematically address the lessons learned by improving project
design, providing training and capacity building and ensuring a stronger link
between existing nationally-owned strategies and EU assistance programming
documents.

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

IPA Component || 2011 || 2012 || 2013 || Total

I (Transition Assistance and Institution Building) ||      29.40 ||       28.66 ||       27.06 ||          85.12

II (Cross Border Cooperation) ||        4.52 ||         3.58 ||         5.09 ||          13.20

III (Regional Development) ||      39.30 ||       40.95 ||       50.28 ||        130.53

IV (Human Resources Development) ||        8.80 ||       10.29 ||       10.64 ||          29.72

V (Rural Development) ||      16.00 ||       17.99 ||       20.16 ||          54.15

Total ||      98.03 ||     101.47 ||     113.22 ||        312.72

2.2 Programming 
2.2.1 Component I

The switch to a sector-based approach and IPA programming proved to
be a big challenge for the preparation of the Transition Assistance and
Institution-Building (TAIB) 2012-2013 National programme (NP). The programming
exercise was done for two years at once, allowing time for the preparations of
IPA II documents, the Country Strategy Paper 2014-2020 and the Sector
Programmes that would follow in 2013.

The NP 2012-2013 represents a total EU contribution of roughly EUR
28 million per year and consists of five sector fiches and seven linked project
fiches supporting the sectors of public administration, justice, home affairs
and fundamental rights, private sector development, agriculture, and
environment and climate change. The selection of the sectors was agreed with
the national authorities, who are fully responsible for the implementation of the
assistance, on the basis of the priorities of the Multi-Indicative Planning
Document (MIPD) 2011-2013, while coinciding to a large extent with the core
priorities of the High Level Accession Dialogue.

The programming started in August 2011 and was finalised in June
2012. The bi-annual NP was approved by the IPA Committee in November 2012. The
two Financing Agreements are expected to be signed by end of 2013.

During the 2012-2013 programming exercise for IPA Component I, the
Commission insisted on a very participative process, involving all major
stakeholders, such as development partners, IFIs and non-state actors. Dialogue
was also sought via the organisation of regular discussion meetings between the
EU Delegation and civil society representatives as well as 3 rounds of
programming consultations held in January and June 2012 in Skopje.

Table 2: Indicative
financial allocations for the year under the National Programme, per priority
axis and per project, in EUR million

Sector || Sector and Project Fiches || Budget (EUR Total IPA +National Contribution)

Public administration || 10.00

Sector fiche || Public administration reform (coordination of horizontal policies, reform of procedures, cooperation with civil society organisations) || 7.24

Project fiche || Support to the consolidation of the local self-government system (direct grant to UNDP) || 2.34

Justice and Home Affairs || 17.00

Sector fiche || Justice and Home Affairs and fundamental rights (fight against financial crime and fraudulent use of EU funds, establishment of home affairs data storage and backup system as basis for future Schengen Information System, protection of personal data, supply of technical equipment and vehicles for law enforcement) || 11.46

Project fiche || Strengthening the operational and institutional capacities of the customs administration || 2.00

Project Fiche || Upgrading the custom clearance facilities of the road border crossing Tabanovce (with Serbia) || 1.88

Project Fiche || Upgrade of the customs clearance and inspection facilities at the road Border Crossing Kafasan (with Albania) || 1.49

Private sector development || 9.37

Sector fiche || Private sector development (improvements in business environment, IT equipment for the Ministry of Economy, supply of laboratory equipment for the Bureau of Metrology) || 9.37

Environment and climate change || 6.33

Sector fiche || Environment and climate change || 6.33

Agriculture and rural development || 11

Sector fiche || :Agriculture and rural development  (land consolidation, farm accountancy data network) || 6.60

Project fiche || Further alignment of food safety, veterinary and phytosanitary policies with EU requirements (vaccination against rabies) || 3.61

Supporting programmes || 14.24

Project fiche || Enhanced capacity for effective management and audit of EU funds || 4.0

Project fiche || Participation in Union Programmes and Agencies || 10.24

Total || 67.94

2.2.2 Component II

No programming
took place since the cross-border programmes between the former Yugoslav
Republic of Macedonia and its neighbours were jointly drafted by the
participating countries in early 2007, except for the programme with Kosovo
which was prepared in 2009 and approved in 2010. Those multi-annual bilateral
programmes are implemented in centralised management (i.e. the Commission
acting as contracting authority). Implementation is on-going and new 2011
Financing Agreements on the programmes with Kosovo, Greece and Albania were
signed, respectively, in October, November and December 2012.

The IPA CBC Component II also finances the participation of the
country in transnational cooperation programmes under the Structural Funds'
European Territorial Cooperation objective i.e. Transnational Cooperation
Programme - South East Europe (SEE) 2007-2013.

The allocation
for 2009 (EUR 560,202) was not contracted and consequently de-committed by the
deadline of 28 May 2012. From 2010 onwards, the SEE programme began to be
implemented by 'integrated' management, meaning that the Management Authority
in Budapest also became financially responsible for the IPA allocations.

2.2.3 Component III

Through
Commission Decision C(2012)9308, which modified the Operational Programme (OP)
for Regional Development by adding the 2012 and 2013 allocations to its budget
and by expanding accordingly the programming, two more major projects
(waste-water treatment plants for Bitola and Tetovo) were added to the
pre-existing two (Completion of Corridor X motorway and waste-water treatment
plant in Prilep).

As for the two
new wastewater treatment projects included in the OP through this modification,
their realization as well as that of the rest of the proposed pipeline in the
environment sector are contingent upon the ability to bring about a manifold
acceleration especially of the tendering stage. This will continue to require
political commitment and substantial additional resources.

Due to the
lopsided progress in favour of the transport sector, at the last Sectorial
Monitoring Committee Meeting in Skopje (6 December 2012), the Commission
expressed its very strong concern about the national authorities' capacity to
implement the OP successfully in the environment sector, i.e. without
de-commitments and/or possibly recovery of funds due to non-completion of
certain environmental (major or other) projects by the required deadlines.

2.2.4 - Component IV

In 2012, the
revision of the Operational Programme for Human Resources Development (OPHRD)
took place to add the 2012-2013 financial allocations. This followed a very
inclusive consultation process led by the office of the Strategic Coordinator
and DG EMPL, with a substantive participation of Line Ministries and the active
support of the EU Delegation. The outcome was Commission Decision C(2012)7456
of 18 October 2012 which updated the financial plan of the OPHRD. The new
financial plan covers a total of EUR 64 million for the period 2007-2013, out
of which the IPA contribution (85%) is EUR 54.4 million.

Following the
endorsement by the NIPAC in December 2012 of the updated Financing Agreement,
and after assessment of the cash-flow needs submitted by the NAO, it was
decided to activate an additional pre-financing (according to article 160.3 of
the IPA IR), and this has allowed to avoid de-commitment of funds in 2012.

2.2.5 - Component V

In September 2012 the former Yugoslav Republic of Macedonia
submitted a proposal for a fourth modification of the IPARD Programme. The
proposal included adaptation of the financial tables in order to take into
account the new financial allocation for 2012, as well as a number of technical
modifications aiming to increase absorption, clarify various issues and
facilitate the implementation of the Programme. The amendments included
broadening the scope of eligible expenditure for measure 101 "Investments
in agricultural holdings" to encompass farm mechanisation in line with the
identified structural needs, as well as extending eligible sectors under
measure 302 "Diversification of rural development activities", in
order to include provision of rural services and establishment of
non-agriculture production activities in rural areas. The amendments were
approved with Commission Decision C (2012)9649 of 13 December 2012.

3. IMPLEMENTATION OF EU FINANCIAL
ASSISTANCE IN 2012
3.1 Success stories

TETRA 2 IPA 2008 - Digital Radio Communication System for the
Ministry of Interior (EUR 5 million)

EUR 5 million were
used for the supply of a digital radio communication system for the Ministry of
Interior and related technical assistance. This system, known as TETRA, offers
secure and reliable communication between police services and is similar to the
communication systems already in use in EU Member States. The new equipment is
an upgrade of the already existing system which was provided in the period of
2008-2010, in the framework of the CARDS project TETRA phase 1. TETRA phase 2 started in July 2010 and the provisional acceptance
was completed successfully by 15 December 2012.

Through this project, the
Ministry of Interior acquired a very sophisticated radio digital communication
system which offers possibilities for further extension, as well as the
possibility for including additional emergency services, such as ambulances,
fire brigades, etc.

IPA 2008 - Support for the Ombudsman twinning
project ( EUR 0.6 million)

The objective of this 18-month EU-funded twinning project was to
enhance the institutional capacity of the Ombudsman as well as to improve
citizens' knowledge of the Ombudsman's competences. Activities included
assisting the Ombudsman's Office in its task of effectively protecting and
promoting human rights, an event on the rights of children and of persons with
special needs, along with different activities on fundamental rights,
prevention of torture and equitable representation of the minorities. These are
all amongst the core values of the European Union.

The project had a budget of EUR
600,000 and lasted from March 2011 to September 2012.

IPA 2008 Capacity building of the veterinary services for
implementation of EU acquis (EUR 2 million)

The EU provided support to the Food and Veterinary Agency to improve
its overall ability and capacity for the implementation of the acquis.
The project, worth EUR 2 million, ended in December 2012, and it focused on the
Veterinary Agency's inspection services, control of animal diseases, animal
waste disposal and an animal identification and registration system, including
pigs. Some of the key results are: improvement in the rabies diagnostic
capacity of the national laboratory at the Veterinary Faculty; preparation of
an animal by-products strategy, and decision on the most suitable system and solution
for safe disposal of animal origin waste; work on a system for identification
and registration of pigs as well as an electronic system for micro-chipping of
pets. Last but not least, an adequate monitoring and reporting system that will
provide reliable data about the situation of animal diseases in the country was
established.

 IPA 2012 - Oral vaccination of foxes against rabies (EUR
1.1million)

This is a multi-annual programme that will
continue to be implemented twice a year in the coming years. The European Union
is financing the vaccines for the oral vaccination.

The
first phases of oral vaccination of foxes, part of the initiative for
eliminating rabies, was implemented in the course of 2011. The EU provided
EUR 1.1 million covering the 2012 autumn vaccination as well as for the three
consecutive vaccination campaigns in the next two years.

The vaccination was performed in the countryside, with 500,000
vaccine baits for aerial distribution per campaign. To improve public
information and awareness of the risk of rabies, the vaccination campaign
included TV and radio spots, posters, leaflets, trainings and seminars for
veterinary practitioners, hunters and medical doctors, with training of over
1000 people.

As a result of the activities for improvement of the rabies
surveillance system in the country, the number of rabies suspect animals
submitted to the laboratory has increased, with 9 positive cases confirmed (1
cat, 4 foxes and 4 wolves)

The collaboration among institutions involved in rabies control and
eradication was crucial, as well as the activities that increased public
awareness on rabies and its prevention.

3.2 Overview of IPA implementation in 2012

2012 was a critical year: when DGs REGIO, EMPL and AGRI
decided to interrupt payments in March due to serious deficiencies in the
management and control systems under DIS, a meeting of all DGs with the
Minister of Finance, chaired by DG ELARG, was decisive in resolving some of the
problems. It showed that only with the support at the highest possible
political level are appropriate measures taken. In concrete terms, a new
qualified senior General IPA Auditor was appointed and the budget of the
institution increased by 18%, and around 60 new recruitments were completed
during the year, mainly for the National Fund, the IPARD Agency and the Central Financing and Contracting Department (CFCD) in the Ministry
of Finance.

National institutions responsible for the management and
control of IPA funds are under increasing pressure due to delayed procurement
under three Operational Programmes, three consecutive NPs (2009, 2010 and
2011), as well as from the ambitious IPA II planning for 2013.

The twinning instrument
gained more success in the country and actively helped beneficiaries align
their standards with the EU and ensure closer cooperation with Member States'
administrations. The NP 2012-2013 contained 17 new twinning projects, bringing
the total of projects which have been either already implemented or are
currently in the process of implementation to 27: 7 projects in the area of
Justice and Home Affairs, 6 projects in the area of social affairs and
employment, 4 in the area of public finance, 2 in the area of statistics, 2 in
the area of competition policy, 2 in environment, 2 in agriculture, 1 on the
internal market.

The former
Yugoslav Republic of Macedonia is also the main TAIEX beneficiary in the
IPA region since 2010. TAIEX has become a very appreciated and successful tool
for institution building. In the course of 2012, 256 applications were
officially submitted by different beneficiaries and processed by the EU
Delegation, of which 228 were accepted by DG ELARG.

This was mainly the result of the close cooperation with
the EU Delegation and the active involvement and support of the Delegation's
Task Managers in all phases (identification of needs, preparation of
applications; assessment of the final application; identification of potential
participants on TAIEX events; drafting of the agenda of the event and providing
suggestions for possible improvement of the entire process; attending TAIEX
events in the country).

3.3 Component I: Transition Assistance and Institution
Building

In 2012, the EU Delegation contracted EUR 4.7 million and disbursed
EUR 11 million, spread over EU programmes, information-communication &
evaluation and CBC programmes.

The main part of IPA funds under Component I are currently managed
by the national authorities. Implementation figures remained far behind
forecasts throughout 2012, and continued to be a matter of concern. Under NP
TAIB 2009, the first programme managed by the authorities, even if the
contracting rate went up in the second half of 2012, by 31 December only 19
contracts had been contracted for an amount of EUR 11 million and payments
amounted to EUR 4.6 million. The types of contracts were 10 framework
contracts, 1 direct grant, 4 service contracts and 4 twinning programmes.

Under NP TAIB 2010, only one supply contract was signed for an
amount of EUR 885,000 (IPA funds) and pre-financing of EUR 531,000 was paid.
Due to the very low level of contracting, the Commission requested a revised
Procurement Plan and agreed with the NIPAC on the need to extend the
contracting deadline for one year (until December 2014).

The 2011 Financing Agreement was signed in November 2012 but no
procurement was initiated by end of the reporting period.

3.4 Component II: Cross-Border Cooperation

Implementation improved in the second half of 2012 and
progressed particularly well for the bilateral programme with Greece, whereas
the poor track record of the bilateral CBC programme with Albania led to a
transfer of the 2012 and 2013 allocations to Component I, where they will serve
to support the upgrade of two customs clearance facilities at road
border-crossings with Serbia and Albania.

The programme with Kosovo advanced very slowly. With the
exception of the concept design study for a joint border crossing, contracted
by the EU Office in Pristina in April 2012, very little progress has been made
in two years. The Commission did not receive the necessary assurances that the
two sides share the same political and economic interests regarding the use of
a new international border crossing that was jointly chosen in 2010 to be part
of the IPA CBC programme. Therefore, in order to avoid a de-commitment of funds
in 2013, the Commission proposed that the programme be implemented through a
single joint call for proposals to be launched before summer 2013.

3.5 Component III

Thanks to the major Corridor X project and its disproportionately
high weighting in the overall Operational Programme, some progress started to
show in financial terms. Despite some last-minute setbacks, this major project
has by now clearly moved ahead more than any other under Component III.
Following the submission of a valid bank guarantee letter, the contractor
received the advance payment of over EUR 20 million, paid out by the National
Fund in early December 2012.

The Prilep waste-water treatment plant faced additional delays in
the tendering phase in 2012 and the EU Delegation finally had to cancel the
evaluation, following serious concerns about breach of the confidentiality of
the process.

The accumulation of delays on several fronts means that physical
implementation (of infrastructure projects as opposed to studies and services)
is still very modest, which makes it difficult to draw lessons with a view to
planning the next programming period.

The issue
is being followed up and DG REGIO, in consultation with the EU Delegation and
the JASPERS experts have proposed: a) technical solutions for speeding up the
pipeline; b) drawing the attention of the highest possible political level
(Prime Minister) to the bottlenecks experienced by IPA so that appropriate
additional national input in supervisory (and possibly financial) efforts can
be secured. However, national authorities have not reacted with the necessary
sense of urgency.
3.6 Component IV : Social
development

In 2012 the implementation of IPA component IV advanced at a slow
pace and a huge backlog in terms of procurement was accumulated, which risks
having negative consequences in terms of de-commitment risks in the coming
years. The amount contracted by end 2012 is only EUR 12.6 million, i.e. 19% of
the financial plan 2007-2013. Up to the end of the current programming period,
the authorities still need to contract –and pay/declare to DG EMPL- 80% of the
funds allocated to IPA component IV, which constitutes a major challenge for
their capacities.

Due to deficiencies in the financial management by the ESA (Employment
Service Agency), DG EMPL decided to interrupt IPAIV payments again in relation
to the last two interim payment applications (November/December 2012) submitted
by the NAO. The IPA funds blocked amount to EUR 4.845 million. The decision to
interrupt payments once more under this component is a cause of great concern
for the Commission.

3.7 Component V Agriculture and rural development

IPARD is the only Component managed in a decentralised way from the
very beginning without ex ante controls. This means that a robust and
demanding system had to be put in place in the beneficiary country. The
programme is implemented through numerous small projects selected under six
different calls, projects which have to be pre-financed by small beneficiaries.
Availability of credits, among other obstacles, also had an impact on the slow
absorption of funds.

Most of the efforts of the national authorities in 2012 were
targeted at setting up and implementing a very demanding Action Plan to remedy
the deficiencies in the management and control system identified by DG AGRI
auditors, deficiencies that justified the temporary interruption of payments in
March 2012. The audits revealed serious deficiencies in several accreditation
criteria, notably in the internal control standards, and in the control
procedure on the attribution of investment aid, as well as lack of sufficient
administrative capacity with regard to the National Fund, IPARD Agency and the
Audit Authority.

In that context, the NAO was requested to perform additional checks
and the IPARD Agency had to examine all approved projects under Component V
(more than 500) and found irregularities (or suspected irregularities) in 47
projects – related for example to irregular selection processes and authorization
of payments.

Programme implementation consequently slowed down during the 4 month
interruption of payments and only two of the planned three calls for IPARD
applications were organised during the year. Furthermore, it also influenced
negatively the amount spent in 2012 under IPARD (only EUR 2 million out of a
total envelope of EUR 85 million) and resulted in the de-commitment of a large
part of the IPARD funds for 2009 (EUR 7.3 million out of EUR 10.2 million),
which according to the n+3 rule have to be returned to the EU budget if not
contracted and paid within three years following the year of the budget
commitment.

The Commission, together with the national authorities, started
working on the accreditation of two additional measures (Rural infrastructure
and Technical assistance) which are expected to contribute to better absorption
of IPARD funds.

4. IMPLEMENTATION AND MONITORING
MODALITIES AND STRUCTURES

With the exception of IPA Component II CBC, all other Components are
implemented under decentralised mode (DIS) with ex ante controls, while
IPA Component V is managed only with ex post control.  On a general
note, the implementation of all programmes whether centralised or decentralised
implementation, as detailed above, was often faced with problems of weak
political commitment and insufficient human and material resources.

Specific
problems of projects under DIS are the persistent delays and risks of
de-commitment due to several reasons:

·
weak inter-institutional cooperation;

·
poor and lengthy programming which results in
late and less relevant project activities;

·
late start in preparing the tender documents by
the relevant beneficiary;

·
poor quality of procurement documents (thereby
being rejected by the EU Delegation in the ex-ante approval process);

·
very long evaluation processes;

·
cases of possible conflict of interest or unfair
advantage;

·
during implementation, cases of lack of support
by the beneficiaries for unclear of unjustified reasons.

In 2012, de-commitment under IPA Component I was avoided through the
extension of the contracting deadline of the NP 2009 by 12 months. Regrettably,
de-commitments under Components IV and V could not be completely avoided, with
the funds finally de-committed under the latter amounting to EUR 7.3 million.

In 2013 the situation may be worse due to the increasing backlog and
continuing weak absorption capacity for IPA funds under decentralised
implementation. The Commission recognises the efforts of the Operating
Structure at administrative level, however, most of the systemic weaknesses
still remain – see above.

To improve the
situation, the EU Delegation already took some  measures:

·
Holding monthly procurement review meetings with
the Central Financing and Contracting Department (CFCD) of the Ministry of Finance
on Components I, III and IV with the aim to unbundle procurement jams and thus
accelerate tendering and adopt corrective
actions in particular for the contracts identified as "high risk" for
contracting.

·
Monthly meetings between the Head of Operations
and the National IPA Coordinator.

·
An IPA retreat was also organised internally in
the EU Delegation, focusing on issues related to programming, procurement and
monitoring under DIS. It was followed by a joint workshop with CFCD in December
2012 to address some of the problems.

·
Several recommendations have been jointly agreed
on by CFCD and the EU Delegation to improve effectiveness and efficiency of the
ex-ante control procedures, the sharing of information and communication as
well as the simplification of certain procedures.

There have been
delays in implementing IPA Component II and obligations by the line ministries
to the Joint Technical Secretariat staff were continuously breached last year
in respect to regular payment of salaries and follow-up activities. This
contributed to a transfer to IPA Component I of EUR 2.9 million from IPA
2012-2013 CBC allocations with Serbia and Albania for the two respective years.

All Sectoral
Monitoring Committees (MCS), for all five IPA components, including the IPA
Joint Monitoring Committee took place. For the first time, the IPA Joint
Monitoring Committee was held in the summer, as per NIPAC's request, and the
Annual Implementation Report was submitted on 30 August 2012.

In addition,
some progress in the area of monitoring of the IPA Operational Programmes was
reached by a greater involvement of the national structures and finalisation of
the National Monitoring and Evaluation Manual by the NIPAC and the CFCD
Monitoring Strategy; however, due to the very delayed implementation of DIS
projects, no desk monitoring or on the spot checks could be performed in 2012.

Monitoring is
also performed by the Delegation:

Monitoring
strategy for projects under centralised management - Operational
monitoring allows the checking of aspects of the implementation of
projects such as delivery of outputs, according to the contract.
In case of DIS
projects, the EU Delegation is supposed to monitor (i) Operating
Structures' implementation of programmes and contracts and (ii) the functioning
of the DIS system.

Results
Oriented Monitoring (ROM)

In 2012, four
missions by the ROM Western Balkan team monitored 21 projects (18 on-going and
3 ex post) with a value of EUR 28.4 million. The projects were proposed
according to their risk profile and their size – contracts with a higher risk
profile (grants, services and supplies), and preferably with a value bigger
than EUR 600,000-700,000. In addition, ex post monitoring was
introduced, focussing specifically on impact and sustainability.

Some lessons can be learnt
from 2012 monitored projects:  the grades awarded for the projects indicate
that overall performance of the projects was satisfactory with some room for
improvements in particular, on efficiency and effectiveness; some of the effectiveness
issues identified are attributed to the ambitious designs relative to the
beneficiary’s capacities in the given projects’ time frames; it was also noted
that a large number of beneficiaries and their unequal level of the commitment
to the project objectives may reduce both efficiency and effectiveness. The
presence of more relevant and SMART Objectively Verifiable Indicators (OVIs) at
the results, project purpose and the overall objective level would ensure more
robust effectiveness and impact assessments.

Another 21
projects have already been identified for ROM in 2013. It has also been agreed
with the government to include some projects under DIS in the ROM exercise,
since the government has not yet established its own ROM system.

PART II - FINANCIAL DATA (EUR million
and %)

On implementation of assistance at 31 December 2012

IPA
former Yugoslav Republic of Macedonia[10]
- IPA I + II

former Republic of Macedonia || Allocated || Contracted || % Contracted || Paid || % Paid

IPA 2007 || 36.67 || 33.30 || 90.79% || 29.34 || 79.99%

IPA 2008 || 40.75 || 37.06 || 90.92% || 29.01 || 71.19%

IPA 2009 || 40.09 || 36.06 || 89.95% || 17.73 || 44.23%

IPA 2010 || 40.01 || 30.19 || 75.44% || 3.05 || 7.63%

IPA 2011 || 32.03 || 0.00 || 0.00% || 0.00 || 0.00%

IPA 2012 || 30.31 || 0.00 || 0.00% || 0.00 || 0.00%

Total || 219.87 || 136.59 || 62.12% || 79.13 || 35.99%

IPA – Component I National Programme former Yugoslav
Republic of Macedonia

former Republic of Macedonia || Allocated || Contracted || % Contracted || Paid || % Paid

IPA 2007 || 34.02 || 31.80 || 93.48% || 31.09 || 91.39%

IPA 2008 || 37.12 || 34.00 || 91.58% || 26.86 || 72.35%

IPA 2009 || 37.06 || 35.32 || 95.30% || 17.73 || 47.84%

IPA 2010 || 36.92 || 30.13 || 81.63% || 3.01 || 8.16%

IPA 2011 || 28.90 || 0.00 || 0.00% || 0.00 || 0.00%

IPA 2012 || 28.16 || 0.00 || 0.00% || 0.00 || 0.00%

Total || 202.18 || 131.25 || 64.92% || 78.69 || 38.92%

IPA – Component II (CBC) Programme former Yugoslav
Republic of Macedonia

former Republic of Macedonia || Allocated || Contracted || % Contracted || Paid || % Paid

IPA 2007 || 2.65 || 1.03 || 38.65% || 0.90 || 34.03%

IPA 2008 || 3.63 || 3.06 || 84.20% || 2.15 || 59.30%

IPA 2009 || 1.56 || 0.00 || 0.00% || 0.00 || 0.00%

IPA 2010 || 3.10 || 0.05 || 1.65% || 0.04 || 1.32%

IPA 2011 || 3.13 || 0.00 || 0.00% || 0.00 || 0.00%

IPA 2012 || 2.16 || 0.00 || 0.00% || 0.00 || 0.00%

Total || 16.22 || 4.13 || 25.49% || 3.10 || 19.09%

              MONTENEGRO

1. SUMMARY

In the course of 2012, Montenegro successfully finalised the
programming of the remaining pre-accession assistance allocated under the last
two years of the current Financial Framework. The 2012-2013 National Programmes
under Component I – Transition Assistance and Institution Building – continued
to remain an important part of the IPA funding (EUR 21.28 million) and
continued to support key reform areas in line with previous programmes. The
opening of the accession negotiations, decided by the European Council in June
2012, reflected and confirmed the relevance and efficiency of the
implementation of the IPA projects by the EU Delegation in Montenegro under Component
I.

In comparison with funds under IPA Components I and II, most of the
IPA funds in 2012 and 2013 were earmarked for the preparations of the
implementation of EU cohesion and agricultural policies in the sectors of
environment, transport, social development and agriculture and rural
development, i.e. under Components III, IV and V. Indeed, with the granting of
the candidate country status since 2010, key investments have been programmed
through the adoption of the respective Operational Programmes for 2012-2013
under Component III (EUR 22.24 million) and Component IV (EUR 5.58 million),
with the exception of Component V for which the adoption of the Instrument for
Pre-Accession in Rural Development (IPARD) programme has been postponed to
2013.

Finally, the Montenegrin authorities have shown good progress all
over the year in preparing for conferral of management, especially with the
submission of the application package for Components I and II in July 2012.

2. STRATEGIC PLANNING AND
PROGRAMMING
2.1 Multi-annual Indicative Planning Document

The current
Multi-Annual Indicative Planning Document (MIPD) for the years 2011-2013
identified the main country priorities: 1) justice and home affairs; 2) public
administration, 3) environment and climate change, 4) transport, 5) social development
and 6) agriculture and rural development. It entered into force on 1 March 2012[11].

The review of the MIPD carried out by the Commission in 2012
reflected the effectiveness of  the strategy and priorities outlined and
recommended the continuity of this approach. The Council Decision to open
accession negotiations with Montenegro followed by the screening process indeed
reinforced the need to address the priorities selected in the MIPD 2011-2013.
The priorities in the area of rule of law and public
administration reform are especially relevant to be tackled given the new
approach developed under Chapters 23 and 24, in addition to the need to prepare
for the management of funds related to EU cohesion and agricultural policies – Montenegro having access to IPA Components III, IV and V since
the granting of the candidate country status. Finally, the support to the
country in its ability to assume EU membership as well as effectively implement
the acquis is all the more a critical priority area, given the opening of accession negotiations.

Finally, while the MIPD illustrates Enlargement specific priorities,
it also draws from the “Europe 2020” Agenda, by improving regional
competitiveness, as well as the management of both human capital and natural
resources.

Table 1: MIFF[12]
allocations per component, in million EUR

Component || 2011 || 2012 || 2013 || 2011-2013

I – Transition Assistance and Institution Building ||  29.84 ||      16.35 ||    5.07 ||          51.26

II – Cross-border cooperation ||    4.31 ||        4.59 ||    4.67 ||          13.57

III – Regional Development ||   ||        7.98 ||  14.75 ||          22.74

IV – Human Resources Development ||   ||        2.78 ||    2.81 ||            5.58

V – Rural Development ||   ||        3.26 ||    7.29 ||          10.54

TOTAL ||  34.15 ||      34.95 ||  34.59 ||        103.69

2.2 Programming exercise
2.2.1 Component I

The 2012-2013 National
Programme for Montenegro under the IPA Transition Assistance and Institution
Building Component was adopted by the Commission on 11 December 2012[13].
It amounts to EUR 18.02 million (2012: EUR 14.55 million; 2013: EUR 3.47
million). Contrary to previous years, this programme combined the programming
of two budget years, given the limited allocation earmarked to Montenegro under
this Component in 2013. This can be explained by the fact that Montenegro is
entitled to access allocations under further IPA components with no increase of
the overall IPA envelope (cf. table 1).

Like the 2011 programme, the 2012-2013 National Programme is focused
on the priority sectors identified in the MIPD, in particular the first three
sectors: justice and home affairs, public administration reform and environment
and climate change. The remaining three sectors of the
MIPD: transport, social development and agriculture and rural development are
not addressed per se in this Programme because the needs in these
sectors will be financed respectively under the operational programmes for
components III, IV and V adopted in 2012 and to be adopted in 2013 for the
programme under Component V. The 2012-2013 National
Programme also takes into account the opening of the accession negotiations and
the increasing obligations and needs that this decision implies for Montenegro.
Therefore it supports the approximation of EU legislation in various fields
such as free movement of services, competition, food safety, veterinary and
phytosanitary standards. Lastly, it is also worth
mentioning that this programme is the last under the current financial
perspective and under the above mentioned MIPD, which is translated in practice
by the fact that special attention has been paid to the needed follow up on
certain IPA projects, such as project 02 on Internally Displaced Persons and
residents of Konik camp which is the social component of another 2011 project
currently under implementation.

A second part to the above mentioned National Programme amounting to
EUR 3.26 million had been adopted on 13 December 2012[14]. The overall
objective of the programme is for the Montenegrin authorities to gain
experience in the implementation of rural development measures in accordance
with the basic rules of IPA Component V. This Part 2 of
the programme directly addresses the last sector of the MIPD: Agriculture and
Rural Development. This sector is significantly underdeveloped in Montenegro and needs to be
restructured to allow the agricultural
producers and processors to become competitive on the EU market.

Table 2: Indicative
financial allocations for the year 2012 under the National Programme (part 2 included),
per priority axis and per project, in million EUR:

Priority Sector || Project || EU contribution

Sector 1: Justice and Home Affairs || 3

|| 01 – EU Support to the Rule of Law || 3

Sector 2: Public Administration Reform || 1.3

|| 03-  Strengthening the management of EU funds and general administrative procedures || 1.3

Sector 3: Environment and Climate Change || 5.6

|| 05- Strengthening the environmental protection system in Montenegro || 2.85

|| 06 - Optimal use of energy and natural resources and mitigating natural disaster effects || 2.75

Sector 6: Agriculture and Rural Development (part 2 of the National Programme) || 4.76

|| Sole project of part 2 of the programme - Support to Montenegrin agriculture to achieve IPARD requirements || 3.26

|| 07 - Development of the Food Safety, Veterinary and Phytosanitary Services in Montenegro || 1.5

Ability to assume the obligations of membership (outside the priority sectors) || 1.2

|| 08 - Approximation of the legislation with EU Acquis || 1.2

Supporting programmes || 1.94

|| 09 - Support for participation in Union programmes || 0.63

|| 11 - Technical Assistance and Project Preparation Facility (TA/PPF) || 0.82

|| 13 - Support Measures Facility || 0.5

TOTAL || 17.81

Table 3: Indicative
financial allocations for the year 2013 under the National Programme, per priority
axis and per project, in million EUR:

Priority Sector || Project || EU contribution

Sector 1: Justice and Home Affairs || 1

|| 02 – Identifying durable solutions for (I)DPs and residetns of Konik camp – II phase || 1

Sector 2: Public Administration Reform || 0.7

|| 04 - Enhanced statistical capacity and provision of economic and social statistics || 0.7

Supporting programmes || 1.77

|| 10 - Support for participation in Union programmes || 0.62

|| 12 - Technical Assistance and Project Preparation Facility (TA/PPF) || 0.65

|| 14 - Support Measures Facility || 0.5

TOTAL || 3.47

2.3 Component II:

Four Commission Implementing Decisions covering 2012-2013
Cross–border programmes were adopted in 2012. These relate to CBC Programmes
between Montenegro and Bosnia and Herzegovina, Croatia, Serbia and Albania. The
programmes are the revised versions of the previous 2010-2011 CBC programmes.
This revision was made in consultation with the Montenegrin Authorities
concluding on a confirmation of their contents. However, the main change lies
in the inclusion of the financial provisions for the years 2012 and 2013. The
supported actions continue to promote cohesion and competitiveness in the
border areas through economic, environmental, cultural and social development.
The programmes remain an opportunity to improve the co-operation in the jointly
selected sectors and good neighbourly relations in the region. Joint actions to
improve physical, business, social and institutional infrastructure and
capacity will be promoted. No further Decision was adopted concerning the fifth
CBC programme with Kosovo[15].
Worth mentioning is that the financial allocations destined to CBC programme
2012-2013 "Croatia – Montenegro", will cover the period until 30 June
2013, in accordance with the date of accession of Croatia to the European Union
(1 July 2013). Lastly, Montenegro also participated in 2012, as in previous
years, in Structural Funds’ transnational programmes under the Territorial
Cooperation Objective (i.e. ERDF-SEE & ERDF-MED) and in the sole IPA CBC
multilateral programme (i.e. Adriatic) between IPA countries and EU Member
States.

2.4 Components III and IV:

In April 2012,
the Montenegrin authorities submitted to the Commission's services the
Strategic Coherence Framework which establishes the basis for the programming
of both components under the instrument for pre-accession assistance, i.e.
regional development component and human resources development component. After
several rounds of formal and informal exchanges, the Commission considered the
final version of this document as meeting the requirements of Article 154 of
the Commission Regulation (EC) No 718/2007 implementing Council Regulation (EC)
No 1085/2006 establishing an instrument for pre-accession assistance and
consequently deemed acceptable in December 2012.

In parallel,
under component III, the national IPA co-ordinator also submitted in April 2012
the corresponding programming document for the regional development component,
i.e. the operational programme "Regional Development 2012-2013". The
programme was revised several times by the Montenegrin authorities following
the comments of the Commission's services and finally approved by a Commission Decision
in December 2012. The overall objective of the programme is to improve the living standards and the state of environment in Montenegro, in accordance with national
policies and strategies as well as with EU policies and standards. The programme includes three priority axes: i) the upgrade of the
environmental management systems, ii) the improvement of the transport system,
promoting environmentally friendly transport modes with special emphasis on
improving the rail infrastructure and iii) technical assistance to cover the
preparatory, management, monitoring, evaluation, information and control activities
related to the implementation of the programme together with activities to
reinforce the administrative capacity for its implementation. The total EU
contribution to the programme is EUR 22.24 million (EUR 7.98 in 2012 and
EUR 14.25 million in 2013) and the national co-financing amounts to EUR
3.92 million. The EU contribution in the programme does not correspond to the
overall amount available for Montenegro under component III, since EUR
500 000 are committed for JASPERS technical assistance to the
beneficiary country, whose objective is to accelerate the preparations of
Montenegro for the absorption of the EU funds by supporting the development of
a sound pipeline of infrastructure projects.

Under component
IV, The "Human Resources Development" Operational Programme was
adopted by the Commission Implementing Decision C(2012)7202 on 18 October 2012.
The overall strategic objective of the Programme is to contribute to the
creation of more and better jobs through priority goals designed to attract and
retain more people in employment, reinforce social inclusion and promote
adaptability of enterprises and workers. The programme includes four priority
axes: i) Efficient and Inclusive Active Employment Policy Measures; ii)
Enhancing skills, knowledge and competences for employability and
competitiveness; iii) Enhancing social inclusion and iv) Technical Assistance.
This multiannual Operational Programme includes financial allocations for 2012
(EUR 2.77 million) and for 2013 (EUR 2.81 million) with a total
amount of EUR 5.58 million.

The
implementation of the Operational Programmes under components III and IV will
start only following the conferral of management powers for component III and
IV and signature of the corresponding financing agreements. The submission of
the accreditation package by the Montenegrin authorities is expected during
spring 2013.

2.5 Component V

The Montenegrin
authorities submitted during the year 2012 a draft IPA Rural Development
(IPARD) Programme covering the years 2012-2013 and the document was originally
expected to be adopted by the end of 2012. The IPARD programme focuses on supporting the beneficiaries in the
milk, meat, fruit, vegetable and fish sectors in order to upgrade them to the
EU standards and to improve performance of the enterprises. However, the
allocation for Montenegro under component V can only be spent under full
decentralised management which requires the prior establishment of the
necessary administrative and control structures. In June 2012, it was agreed by
the Montenegrin authorities and the Commission services that the progress made
to prepare for decentralised management under component V was not sufficient,
thus endangering the 2012 allocation under component V to be spent in a timely
manner. For this reason a transfer of appropriations from Component V to I was
approved in November 2012 by the budgetary authority, leading to the adoption
of Part 2 of the National Programme for Montenegro under Component I, as
mentioned in section 2.2.1 Component I. As a consequence, the IPARD Programme
now covers the year 2013 and is expected to be adopted in the course of 2013.

Concerning the preparation for conferral of management under Component
V, Montenegro developed structures for the implementation of the IPARD
Programme with a view to obtain the national accreditation at the end of 2013
and to submit a request for the conferral of management to DG AGRI early 2014.

3. IMPLEMENTATION OF ASSISTANCE
3.1 Success stories

IPA 2008 -
Food Safety Services (EUR 2 million)

Through the project Food Safety Services Montenegro
has moved closer to adopting the rules essential for assuring effective control
systems and evaluating compliance with EU standards in the food safety sector.
The government objective being to implement and enforce an effective food
control system in line with the EU regulations. The latter being able to ensure
that food business operators take primary responsibility for food safety by
enforcing adequate food safety systems in their establishments Almost 600
stakeholders in the food industry have been trained by international experts on
different food safety thematic areas, study visits were carried out to
competent authorities in Italy and Lithuania and official laboratories in
Croatia and Italy. The project also supported target laboratories in
preparation of procedures to be accredited and in support of inter-laboratory
comparison schemes.

CBC Montenegro-Croatia Traditional olive
industry as a part of cross border tourism offer (EUR 0.48 million)

This CBC-project was implemented by six local partners
including associations of olive producers in Montenegro and Croatia and has
been highly successful in developing the agro tourism sector in this cross
border region. In both regions Bar and Boka-Bay in Montenegro and Dubrovnik-Neretva
County in Croatia, olive related facilities were improved and made more
competitive leading to more economic opportunities and local employment
possibilities. Promotion and marketing focused on niche markets for nature and authentic
local products (www.olive-tourism.com ).

IPA 2010 Gender
Equality Programme (EUR 0.7 million)

The latter is a
three-year project which mainly targets the promotion of personal integrity, the
economic status as well as political representation of women. The latter was
designed to support development of gender responsive policies in Montenegro and
to boost implementation of national legislation and international standards
related to gender equality. The main outcome of this programme successfully led
to advocating for the introduction of a 30% quota for women in the Election Law
and significantly contributed to political empowerment of women through
tailor-made education programs for 167 female politicians. in addition to
supporting the development of a new Action Plan for Gender Equality covering
2013-2017, Further on, the project supported implementation of anti-violence
legislation through a Code of Conduct for institutions dealing with violence
and training for police officers and social workers in this area. Support was
also provided to the development of a centralized database on victims and
perpetrators with indicators which will enable institutions to monitor trends
related to violence. Economic empowerment of women included development of a study
related to barriers, motivation factors and challenges to women
entrepreneurship. Results and recommendations of the study will be used for
development of the national strategy for women entrepreneurship, boosting the
latter at the local level, in 4 pilot municipalities. Awareness raising
campaigns also contributed to the national battle against gender stereotypes
allowing a better public understanding of gender issues.

Child Care
System Reform project (EUR 2.9 million)

Progress
continues in the social inclusion sector through 3 related IPA projects in this
sector. Thanks to the Child Care System Reform project amounting
to EUR 2.9 million and implemented with UNICEF, the number
of children with disabilities benefitting from the social, educational and
therapeutic services provided in day care specialised centres had increased
four times in 2012 compared to 2010. The reform initiative is also benefitting
children in residential child care institutions where personnel have been
provided with knowledge and new skills to support children for independent
living as the child care system is shifting from institutional care to family-
and community-based care. Foster care services are being improved to ensure
that children can be cared for in a family environment, rather than an
institution. All field level activities will be reflected in the new
legislation on social and child protection which is currently being developed
within the project. Finally, progress in the reform process will be closely
monitored and measured through the recently established electronic child
protection database.

3.2 Overview of IPA implementation in 2012

Implementation of IPA projects advanced well in 2012. IPA projects
included under the 2007-2010 programmes are close to being fully implemented
and preparation for the procurement of IPA 2011 national programme is well on
track. Both IPA Components I and II show high rates of implementation (both
commitments and disbursements). At the end of 2012, there were 312 on-going
contracts for around EUR 100 million. The size of the country, its limited
absorption capacity of individual beneficiary institutions and the high number
of CBC projects are among others the reasons for a high number of contracts.

The implementation of these funds directly contributed to the
readiness of the country to open accession negotiations in June 2012, as most
institutions involved in the screening process benefitted to some extent from
pre-accession assistance.

TAIEX was among
the main players in Montenegro implementing 73 events
throughout 2012. The EU Delegation contracted 4 twinning contracts with a total
value of EUR 2.6 million and 1 twinning light (EUR 250 000) with Member States.
Despite the appreciation of the added value of twinning, their number remain
limited, reflecting the limited capacity in the administration which still must
resort largely on technical assistance. Also the EU Delegation partially
reimbursed the entry ticket to the 5 Union Programmes in which Montenegro
participated: Culture 2007-2013; ICT Policy Support Programme under the
Competitiveness and Innovation Framework Programme; Entrepreneurship and
Innovation specific Programme under the Competitiveness and Innovation
Framework Programme;  7th Framework Programme for Research; Customs 2007-2013.

3.3 Sector I: Justice and Home
Affairs and Fundamental Rights

In relation to the fight against corruption and
organised crime, IPA projects in 2012 supported the establishment of a
track record for investigations, prosecutions and convictions cases in this
area. The administrative and institutional capacity of the law enforcement,
judicial and prosecutorial authorities was strengthened through capacity
building and training. IPA support contributed to the preparation of key
strategic documents such as the Organised Crime Threat Assessment (OCTA), the
anti-corruption strategy and action plan. Public awareness campaigns
on anti-corruption were undertaken.

3.4 Sector II: Public Administration Reform

In the internal market area, IPA projects supported
progress on a new Law on Protection of Competition, amendments to the Law on Consumer
Protection and Law on Consumer Credits and the National Programme on Consumer
Protection. Capacity building and training
continued in competition protection, state aid, market inspection and
accreditation. Manuals/guidelines/instructions were prepared in the area of
market surveillance and consumer protection and IT support was provided for the
market inspectorate. A public awareness campaign on consumer protection has
been particularly successful.

3.5 Sector III: Environment and climate change

Environmental protection is still in its early stages in
Montenegro, and the project "Raising Environmental Awareness in
Montenegro" (IPA 2010 EUR 485,000) has contributed to an increasing public
awareness of the importance of Montenegro's environment in the country’s
economic development and the need to cooperate among different sectors. The
project has also elevated government's capacity in planning sustainable
environmental development and environmental protection. The nationwide
environmental campaign demonstrated the huge upsurge of interest and concern
for the environment across all sectors including the public.

3.6 Sector IV: Transport

In the transport sector, IPA activities mainly focused
on railway and maritime transport where a dual approach was implemented.
Investments took place in parallel to the relatively successful harmonisation
of laws and regulations. With well-coordinated technical assistance through IPA
funding, the relatively new Railway Directorate will be transformed into the
Regulatory Body and hopefully take over responsibility for essential tasks. The
Rolling Business Plan for the next 5 years was developed and is under
discussion with the relevant Ministries. Further investments in the
rehabilitation of the main railway line successfully continued including the
rehabilitation of the station of Trebesica. Following intensive technical
assistance provided by IPA 2009, the Civil Aviation Sector advanced
considerably and is an example of sustainable institutional development. Meanwhile,
Montenegro became full member of all relevant European bodies and agreements in
civil aviation area.

3.7 Sector V: Social development

The MIPD
2011-2013 states “The objective of IPA interventions is to improve social
inclusion in general, to improve social services as well as education and high
quality vocational education and training (VET) system, and to improve access
of unemployed people to the labour market.” Several IPA projects have
contributed to these objectives during 2012.

The Operational
Programme Human Resources Development 2012-2013 was adopted by the Commission
in October 2012. However, as conferral of management for IPA component IV has
not been requested, no actions were implemented under Component IV in 2012 yet.

In support to
promoting economic development, the twinning project "Development Strategy
of Montenegro (2010-2015) and National Development Plan" (IPA 2009 EUR1
million) has provided expert support to the national administration in its
first attempt to prepare a solid National Development Plan. The Plan includes
the establishment of financial and political basis, methodology and
institutional framework for national and local development strategic planning.
Under this project, working groups of civil servants, experts in their
respective fields, have been established aiming to contribute to the
development of a new culture of political planning and decision making
necessary to support social development and economic growth.

3.8 Sector VI: Agriculture and rural development

According to the
MIPD 2011-2013, the objective is to support the on-going development of a
sustainable agriculture sector and to assist alignment to the common
agricultural policy and EU standards.

In the veterinary, food safety and fisheries area, the
project "Sustainable management of marine fishery" (IPA 2009 EUR
1 million) successfully contributed to the sustainable development and
management of the fisheries sector in Montenegro including aligning fisheries
legislation with the acquis. The project improved fleet and resource
management, by providing equipment for establishing the Vessel Monitoring
Centre and a research vessel for the Institute of Marine Biology. Finally, the
second oral rabies vaccination campaign under the project "Control and
eradication of rabies and classical swine fever" (IPA 2008 / EUR 1.36 million)
successfully continued the achievements from the 2011 campaign. This is
part of an EU wide campaign in the Western Balkans which aims to have the whole
region free from these diseases.

3.9. Cross-border Cooperation

2012 was a period of extension and consolidation of the Cross-Border
Cooperation programmes with Montenegro. In addition to the transnational
programme, Montenegro now manages five bilateral CBC programmes with its
neighbours. Following the closure of the second round of calls for proposals
launched in 2012 for the CBC programmes, around 40 projects were contracted
giving at the end of 2012 a total number of 100 CBC actions in place in
Montenegro. In addition, joint preparatory work with Kosovo took place for
establishing the management structures and to launch the first call for
proposal in 2013.

Cross-Border Cooperation is by now a well-known and appreciated
cooperation instrument in Montenegro, providing tangible and visible results at
national and local level. CBC has proven to be instrumental for the bottom-up
development of the border regions, to bring people together and thus to pave
the way for sustainable, integral local development in the frame of peaceful,
tolerant and likeminded relations.

The CBC management structures are well established in Montenegro and
have gained substantial experience during the first years of the CBC
programmes. IPA assistance supported the national implementing structures in
the management, technical advice, monitoring and follow-up of the programmes
and the projects. During 2012, the government managed smoothly all Structural Funds’
transnational programmes under the Territorial Cooperation Objective.

Many successful CBC projects are to be reported in 2012, including
the MARIBU project, the  promotion of the joint heritage of two bordering
countries, implemented by the Municipality of Ulcinj in Montenegro and Municipality
of Shkodra in Albania; the project “Be Ready”, implemented by FORS
Montenegro in cooperation with Fire Brigade Nikšić and Territorial Fire Brigade
from Trebinje, which raised awareness of local population regarding fire
prevention activities in the cross border region and the promotion of the olive
oil industry.

4. IMPLEMENTATION MODALITIES AND
STRUCTURES

The National
authorities continued the preparations for conferral of management powers. In
July 2012 the accreditation package for IPA Components I and II was submitted
to the Commission. A first audit mission took place in December 2012.
Preparations for IPA components III and IV were progressing with the compliance
assessment carried out at the end of 2012. The submission of the accreditation
package for Components III and IV is expected to take place in spring 2013. The
preparation for conferral of management for Component V is progressing more
slowly and as a result, funds earmarked of IPA Component V in 2012 were
transferred back to Component I to help further capacity building and learning
by doing. The Management Authority was established but the establishment of the
Paying Agency as an independent body has not been achieved yet. Montenegro
originally envisaged a submission of the application package under Component V
in the first half of 2013 but there had been delays in the implementation of
the Action Plan. An updated timeline indicates that the application package is
expected at the beginning of 2014. Overall, staffing, management information
system and capacity of the Audit Authority remain key issues to be addressed.

84% of projects monitored under the Result Oriented Monitoring
Programme in 2012 were awarded A or B grade for relevance and 89% received an A
or B for impact. Nonetheless, efficiency was considered weak, with 50% of
projects receiving a C or D grade. Lessons learned included: further support is
needed for good governance; sustainability remains a key concern given the high
staff turnover and weak administrative capacity; projects should last at least
2 years to increase impact.

The EU Delegation marked a major increase in monitoring of small
grants compared to 2011. Of 173 on-going grants on 31 December 2012 (CBC,
support to civil society, municipal grants, EIDHR), all CBC and local
municipality grants were monitored at least once by the Joint Technical
Secretariats for CBC and the Technical Assistance contract for municipalities.
In addition, there were 35 monitoring visits to projects by Task Managers
and/or external monitoring consultants during 2012. Where projects were
considered as high risk, visits were carried out jointly by both financial and
operations sections of the EU Delegation.

In addition to this in-depth monitoring of the financial assistance,
supervision by the Commission services was done through the participation in
two IPA Monitoring Committee meetings on 12 June and 11 December 2012. These
meetings were used to monitor the implementation of IPA funds and to identify jointly
with the national authorities mitigating strategies/solutions were problems
arose. The meetings were also an opportunity to take stock of the progress in
preparing for Conferral of Management for all IPA Components.

PART II -
FINANCIAL DATA (EUR million and %)

On implementation of assistance at 31 December 2012

IPA I
+ II - Montenegro

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

IPA 2007 || 27.05 || 26.69 || 98.65% || 23.96 || 88.56%

IPA 2008 || 30.05 || 29.44 || 97.96% || 26.76 || 89.05%

IPA 2009 || 31.74 || 30.44 || 95.88% || 25.68 || 80.89%

IPA 2010 || 30.94 || 25.39 || 82.06% || 18.15 || 58.67%

IPA 2011 || 29.69 || 4.13 || 13.91% || 0.99 || 3.35%

IPA 2012 || 20.95 || 0.00 || 0.00% || 0.00 || 0.00%

Total || 170.43 || 116.08 || 68.11% || 95.54 || 56.06%

IPA – Component I National Programme Montenegro

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

IPA 2007 || 23.87 || 23.55 || 98.65% || 23.15 || 96.96%

IPA 2007 || 26.80 || 26.46 || 98.74% || 24.54 || 91.55%

IPA 2008 || 28.43 || 28.24 || 99.34% || 24.50 || 86.16%

IPA 2009 || 28.64 || 24.24 || 84.65% || 17.52 || 61.19%

IPA 2010 || 26.49 || 3.64 || 13.75% || 0.72 || 2.73%

IPA 2011 || 17.80 || 0.00 || 0.00% || 0.00 || 0.00%

IPA 2012 || 152.04 || 106.14 || 69.81% || 90.43 || 59.48%

Total || 23.87 || 23.55 || 98.65% || 23.15 || 96.96%

IPA – Component II (CBC) Programme Montenegro

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

IPA 2007 || 3.18 || 3.03 || 95.11% || 2.81 || 88.41%

IPA 2008 || 3.25 || 2.97 || 91.57% || 2.22 || 68.41%

IPA 2009 || 3.31 || 2.19 || 66.20% || 1.18 || 35.62%

IPA 2010 || 2.30 || 1.15 || 49.81% || 0.63 || 27.27%

IPA 2011 || 2.90 || 0.49 || 16.81% || 0.27 || 9.34%

IPA 2012 || 3.15 || 0.00 || 0.00% || 0.00 || 0.00%

Total || 18.09 || 9.83 || 54.32% || 7.11 || 39.32%

              ALBANIA

1. SUMMARY

During
2012, EU financial assistance played a strategic role in Albania,
deploying approximately EUR 95 million on Components I and II, with a view to
enhancing administrative capacities of a number of institutions and fostering
social, environmental and economic development.

On-going
projects in the areas of justice, public administration reform and fight
against corruption were further advanced. Law-enforcement agencies acquired
increased capacities, as a result of EU strategic support, and are showing
concrete results in the fight against organized crime. Technical assistance
projects continued supporting different line ministries and state institutions
with the effect that many relevant pieces of legislation for the acquis
alignment have been adopted.

Infrastructure
projects, however, encounter implementation problems, mainly due to a lack of
coordination among line-ministries and between national and local institutions,
with implications for the projects' long-term sustainability. This situation
has led the Commission to request an IPA inter-institutional coordination
mechanism in order to ensure project sustainability.

Albania has
accomplished substantial efforts in relation to the preparation for the
decentralised management of IPA funds. Further focused actions are still
required to ensure that the decentralised management system in place reflects
all the requirements set out in the IPA regulatory framework. However, if
conditions are met, conferral of management can be achieved soon. In view of
this accreditation, the Albanian authorities are supposed to take all necessary
measures to ensure stability as regards the positions of civil servants trained
for the management of IPA funds.

2. STRATEGIC PLANNING AND
PROGRAMMING
2.1 Multi-annual Indicative Planning Document

The current Multi-annual Indicative Planning Document
(MIPD) for Albania was adopted by the Commission on 8 July 2011. The strategic
priorities identified in the 2011-2013 MIPD are:

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

·
Supporting public administration reform, with a
view to enhancing professionalism and de-politicisation of civil servants and
to strengthening a transparent and merit-based approach to appointments and
promotions, as well as to fighting corruption at all levels.

·
Reinforcing the protection of human rights,
notably for women, children and Roma minority, and effectively implementing
anti-discrimination policies.

·
Supporting EU acquis-related issues, in
particular administrative capacity, adoption and enforcement of legislation and
related investments in the transport and social development sectors, as well as
in the environment and agriculture sectors.

The 2011-2013 MIPD has identified six priority sectors:

1.         Justice and Home Affairs;

2.         Public Administration Reform;

3.         Transport;

4.         Environment and Climate Change;

5.         Employment and Social Inclusion;

6.         Agriculture and Rural Development.

The
planning of EU financial assistance in 2012 was also strictly driven by the
priorities identified in the Enlargement strategy documents, i.e. the 2010
Commission Opinion on Albania's application for EU membership and the 2011
Progress Report, both listing 12 key priorities, where Albania needs to deliver
before any decision on opening accession negotiations may be considered.
Extremely relevant for IPA planning are the key priorities on public
administration reform, rule of law, anti-corruption, fight against organized
crime, property rights, protection of human rights and
improvement of detainees.

IPA
planning is overall aligned with national and sector strategies. In Albania,
the National Strategy for Development and Integration is the strategic
programming framework for the country, which is accompanied by a number of
sector strategies and action plans. The Commission is working to introduce the sector
approach in IPA programming with the purpose to link EU assistance to national
sector policies. However, there are still shortcomings regarding the
administrative capacity in some line Ministries to fully implement sector
strategies, for which proportional financial resources have not been foreseen
in the national budget.

2.2 Programming
2.2.1 Component I

The programming
exercise for IPA 2012 started already early in 2011, taking into account the EU
recommendations in relation to maturity of project proposals, better links
between EU assistance and sectorial strategies, as well as long-term project
sustainability. Compared to the IPA programmes 2010 and
2011, which saw a high number of infrastructure projects, the 2012 programme
pursues a more balanced approach between capacity building and investment.

The Programme foresees different methods of delivering EU financial
assistance. A combination of centralized management, indirect centralized
management in cooperation with Member States agencies and joint management with
International Organizations, as in recent years, currently appears the best way
to deliver IPA funds for Albania. The Programme also includes a number of
twinnings, which is resulting to be a successful implementation modality for EU
acquis-related projects.

The IPA 2012 programme has
been developed in close cooperation and consultation with national authorities.
The Member States, other donors as well as civil society have been associated
in the process as much as possible. Coordination
meetings with international financial institutions have been organised on a
regular basis. These meetings primarily focused on strategic orientations,
regional dimension and coordination with other donor initiatives.

The 2012
programme, amounting to of EUR 81.64 million, is expected to fund 16 projects,
which have been designed to sustain the current efforts of the Albanian government
to further advance in the EU integration process.

In the area of
justice and home affairs, the Commission has foreseen capacity building actions
to back the implementation of the government's justice reform strategy and to
improve the performance of the Albanian State Police, as well as investments
such as the construction of the Justice Palace in Tirana and the restructuring
of two border crossing points.

In the area of
public administration reform the focus is on public financial management in
order to contribute to the effective and transparent use of public funds by the
Albanian government. This also refers to the future management of EU funds
since actions are envisaged to strengthen the capacities of the Central Finance
and Contracting Unit (CFCU) within the Albanian Ministry of Finance, which is
supposed to be the entity in charge for procurement, contracting and payments
in the frame of decentralized management of EU funds.

Two major
infrastructure investments are envisaged in the transport and environment
sectors, i.e. the construction of the Rrogozhina bypass and the rehabilitation
of the sewerage system in Vlora, which have been conceived as coherent
follow-up projects of previous assistance in the two sectors. Indeed, the
Commission intends to further develop the road network along the North-South
and East-West transport corridors (Rrogozhina is a crossing point for both
axes).  The Commission has also funded a number of initiatives in the field of
water to improve the sanitary conditions of the population living along the
Albanian coast and to protect the sea from waste water. The investment in Vlora
is going to complement this long-lasting endeavour.

Table 1: Indicative financial allocations for the year 2012 per
component (EUR in million)

ALBANIA || 2012

I. Transition Assistance and Institution Building || 85.14

Of which: ||

National Programme || 81.64

Tempus Programme\* || 2.00

Civil Society Facility\* || 1.50

II. Cross-Border Cooperation || 10.48[16]

Of which: ||

CBC Montenegro-Albania || 0.85

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

CBC Kosovo-Albania || 0.60

CBC Greece-Albania || 1.66

CBC IPA Adriatic\*\* || 6.01

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

TOTAL || 95.62

\* The Tempus
Programme and the Civil Society Facility are coordinated and implemented under
the relevant IPA Multi-beneficiary programme

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

Table 2: Indicative financial allocations for the year 2012 under
the National Programme, per priority axis and per project (EUR in million):

Sectors/Projects || Budget

Justice and home affairs || 23.00

|| Support to the implementation of the Justice Reform Strategy || 2.50

|| Construction of the Justice Palace in Tirana || 12.00

|| Support to the Albanian State Police || 5.50

|| Reconstruction of Hani  I Hotit Border Crossing Point and completion of works at Morine Border Crossing Point || 3.00

Public Administation Reform || 9.00

|| Support to Civil Service reform || 1.80

|| Implementation of Modern Financial Management and Control System and Public Financial Inspection in Albania || 2.50

|| Strengthening the capacity of the Central Finance and Contracting Unit (CFCU) for efficient implementation of EU funds || 1.20

|| Modernisation of the Albanian Customs Administration || 3.50

Transport || 9.30

|| Technical Assistance to the Albanian Transport Sector || 2.30

|| Construction of the Rrogozhina bypass || 7.00

Environment || 18.5

|| Construction of Sewerage System in Vlora, Phase II || 18.5

Employment and Social Inclusion || 6.20

|| Improving local public social services and infrastructures  for vulnerable groups in the peri-urban areas of Tirana and Durrës || 6.20

Agriculture and Rural Development || 9.50

|| Improve Consumer Protection Against Zoonotic Diseases || 4.50

|| Establishment of the Rural Credit Guarantee Fund || 5.00

Other horizontal activities || 6.140

|| Project Preparation and Strengthen European Integration Process Facility || 3.706

|| Union Programmes || 2.434

TOTAL || 81.64

2.2.2 Component II

Albania is participating in three bilateral Cross-border
Co-operation (CBC) Programmes with other candidates and potential candidates
(Montenegro and the former Yugoslavian Republic of Macedonia since 2007 and
Kosovo since 2010) and in one bilateral CBC Programme with one EU Member State
(Greece since 2007).

The three CBC Programmes with other EU candidates or
potential candidates are mostly focused on specific measures to promote
economic development with an emphasis on tourism, to protect environment and to
enhance social cohesion through "people-to-people" actions. The CBC
Programme with Greece provides measures to promote entrepreneurship, to foster
sustainable tourism, to facilitate border accessibility through small scale
infrastructure, as well as to protect the environmental and cultural heritage
along the border area.

The four CBC programmes have so far been implemented via
calls for proposals, which helped funding a number of small-scale projects
across the bordering regions of Albania. The projects have been generally
successful, thanks to an increase of contacts and cooperation among local
stakeholders coming from neighbouring countries. However, the impact vis-à-vis
the objectives of economic development and environment protection and tourism
promotion was lower than expected. Therefore, for the last two years of the programmes'
life, i.e. 2012-13, the Commission and the beneficiary countries have decided
to switch the implementation modalities from call for proposals to joint bigger
scale/strategic projects.

In the frame of the CBC programme between
Albania-Montenegro and Albania-Kosovo, the two partner countries are supposed
to identify concrete ideas of strategic projects, which will later be
implemented via service or supply or works contracts, centrally managed by the
two EU Delegations.

In the frame of the CBC programme between Albania-fYRoM,
the 2012 and 2013 allocations have been moved from IPA component II
(cross-border co-operation) to IPA component I (transition assistance and
institution building) for each beneficiary country. Therefore, Albania and
fYRoM will autonomously decide with the Commission the type and size of the
project/s to be implemented in the bordering areas.

In the frame of the CBC programme between
Albania-Greece, the partner countries have decided to launch a call for
strategic projects, which will set EUR 2 million as minimum ceiling. With this
higher ceiling, the call will fund bigger scale projects.

2.2.3 Component III, IV and V

Not having yet the candidate status, and components III,
IV and V not being available in the country yet, during 2012 the Albanian authorities
have focused on the definition of the functions, responsibilities and relations
among the national IPA structures, which are supposed to manage funds under IPA
components III (regional development) and IV (human resources development) in
future decentralized implementation. National IPA structures have received
support from the IPA 2009 technical assistance project
and will continue to receiving support from a follow-up project under IPA 2012.

The IPA 2008 project Capacity Building for Implementing the Rural
Development Strategy assisted the Ministry of Agriculture in the setting up
of the Operating Structure (i.e. Paying Agency and Managing Authority) for future
management of EU funds under IPA Component V (agriculture and rural
development). Overall, the preparation for IPA V decentralized management is
relatively advanced. The IPA 2011 project Support to Agriculture and Rural
Development is assisting the Operating Structure to implement in practice
IPA V-like measures, i.e. grant schemes to fund small and medium investments in
the agro food sector. The related call for proposals was launched in December
2012.

3. IMPLEMENTATION OF EU FINANCIAL
ASSISTANCE IN 2012
3.1 Success stories

Restoration
of Via Egnatia in Elbasan, an ancient Roman road
crossing Albania and part of the programmes
related to the preservation and promotion of sites of
historical importance (EUR 9 million)

The respect for
cultural heritage is vital for developing Albania's European identity and
cultural heritage. The European Union is therefore dedicated to the importance
of cultural heritage and has committed EUR 9 million to restore priceless
treasuries in Elbasan, Himara, Kruja, Tirana, Shkodra, Berat and Korça.

In Elbasan, the Commission has
financed the restoration works of the urban centre, namely Via Egnatia,
one of the most ancient roads in Albania. It was constructed by the Romans in
the 2nd century BC to cross the Roman provinces of Illyricum, Macedonia, and
Thrace, connecting the Adriatic Sea with the Bosphorus. It now runs through a
territory that is part of modern Albania, the former Yugoslavian Republic of
Macedonia, Greece and the European part of Turkey.

Via Egnatia's segment inside the Elbasan castle was restored with a very
prestigious pavement, which reflects the Albanian tradition of paving stone
manufacturing. A green area was created, by planting new trees to create a
green atmosphere. A special decorative lighting was placed along the road,
making it more attractive and visible. Decorative sitting places (park-like
benches) were placed along the road. An overall intervention was carried out
for utility cables, such as water supply pipelines, power connection, sewerage systems,
phone lines etc, in order to protect the site from future interventions.

The rehabilitation of Via Egnatia adds value to
Elbasan's urban centre, which is now expected to attract more tourists. As a
result, it is likely that new local businesses will soon start-up. Tourism flow
to cultural sites and increased business are expected to bring economic
benefits to the local communities, hence ensuring the economic sustainability
of the project. Via Egnatia was inaugurated on 16 November 2012 in the
presence of the Minister of Tourism and local authorities and national media
covered the event. However, the EU support to the rehabilitation of historical
sites in Elbasan is continuing with the revitalization of the area around the
Basilica.

 Different IPA envelopes since 2007 - Border Control
and Customs modernization- (EUR 70 million)

EU supports effective border control and customs
modernization to fight illegal smuggling and organized crime; Albania is considered to be a transit and storage zone for illicit
commodities destined to the EU and a logistical centre for organized crime
groups. Therefore, national law enforcement agencies need state-of-the-art
technology and equipment to be successful in the fight against crime. The EU
considers assistance to police forces as the top priority in its endeavour to
support the country's pre-accession agenda in the area of justice, freedom and
security. As a result, from 2007 onwards, more than EUR 70 million were
channelled into the home affairs sector (police, penitentiary, customs) to
increase capacity and upgrade facilities.

Effective
surveillance of the Adriatic Sea is strategic in fighting trafficking of human
beings and illicit commodities destined to the EU markets. Therefore, the
Commission has equipped the Albanian police and customs with eight modern
vessels to impose real control of the maritime border. The boats are high speed
patrol vessels, provided with all the state-of-the-art technological devices to
capture smugglers. This assistance has definitely led to increased patrolling
of the Adriatic Sea, thus securing neighbouring countries from criminal
activities originating from Albania.

Customs
modernization is another essential element of the overall strategy put in place
by the Albanian Authorities to fight crime. Indeed, customs are at the
forefront in intercepting and disrupting illicit trade. The Commission has
helped Albania move to full compliance with EU customs standards and procedures
through multiple interventions, including supply of new technological devices.
A video monitoring system has been installed in the main border crossing points
and inland customs offices, which is centrally supervised by the General
Directorate of Customs in Tirana. The new monitoring technology for detection
and surveillance across ports of entry has enabled the customs service to
maximize its effectiveness.

Different IPA
envelopes - Albanian Institute of Statistics – INSTAT
(EUR 10 million)

Reliable statistics are crucial for Albania's
socio-economic development. Statistics
help identify needs and potentials of the society and represent an essential
instrument for sound and informed policy-making across sectors. Reliable
statistical data are also crucial for business
decisions, as well as for the mission of other stakeholders such as NGOs,
Universities and Academia.

With the support of the EU (more than EUR 10
million via different IPA envelopes), the Albanian
Institute of Statistics - INSTAT - has increased
its capacities in the preparation and implementation of censuses and data
processing, analysis and dissemination. As a result, INSTAT has recently carried out three key censuses in the area of economics,
population and housing, and agriculture.

The economic census provided complete and
reliable statistical data on micro, small and medium enterprises, which will
contribute to the set-up of a modern statistical business register, which will
fulfil the expectations of both the EU and Albanian users.

Through the results of the population and
housing census, INSTAT has improved statistical reporting on demography,
poverty, labour, education, health, vulnerable groups and ethnic minorities.
The increased scope and quality of statistics will, inter alia, help the
country and the EU in the identification of tailored interventions to improve
the living conditions of the population.

EU support for reliable and comparable
statistics has continued with the agriculture census. Since agriculture is the
dominant sector of the Albanian economy, contributing to 25-30% of

the GDP, the government needed updated
information on the structure of agricultural holdings 
and on the production and distribution of agricultural and livestock products
in order to formulate a new sector policy. With this census, INSTAT has also
shown excellent ability in terms of logistics, supervising the work of many
enumerators and controllers sent in every corner of the country.

TAIEX event "Promoting Environment and Sustainable Development through
Participatory Processes"

A very successful TAIEX event which was organized in
December 2012; the two days event gathered experts from Albania and from the EU
to discuss the place of civil society in the decision making process in general
and in the field of environment in particular. The event focused on possible
ways to enhance collaboration between civil society and local government
structures to raise public awareness for environment protection and to identify
and promote grassroots initiatives for sustainable development and sustainable
use of natural resources. More than 100 persons attended the event and a report
was prepared to keep memory of the high quality presentations delivered by the
speakers.

3.2 Overview of the implementation status of the different
instruments and components

In Albania 449 EU-funded projects are on-going for an overall amount of EUR 348
million.

During 2012 and
considering IPA annual envelopes from 2007 onwards, the EU Delegation has
contracted a total amount of EUR 85,125,000. The disbursements amount to EUR
71,097,000, exceeding the performance of 2011 by more than EUR 6 million.

The EU Delegation started
to sign contracts under IPA 2012 in the same year as the Commission Financing
Decision of the Programme, as happened in 2011.

3.3 Sector I: Public Administration Reform

IPA support over the period covered by the 2011-13 MIPD is driven by
the following priorities: (i) enhancing professionalism and de-politicisation
of public administration and strengthening a transparent, merit-based approach
to appointments and promotions; (ii) improving coordination of the economic and
fiscal policies to assist in the stabilisation of the macroeconomic
environment; (iii) ensuring the sustainability of public expenditure, while
strengthening the capacity of institutions providing statistical data.

During 2012 the government designed a new Law on Civil Service,
which needs the final approval from the Parliament. This comprehensive reform
aims at aligning Albania to the best practices of EU Member States in the areas
of civil servants recruitment and employment regime and mobility and career
development within the public administration. The adoption of this law has been
identified in the December 2012 Council conclusions as one of the pre-conditions
to grant candidate status to the country as the strengthening of the public
administration will lead to positive outcomes across a number of sectors. The
new reform has not yet been adopted by the Parliament since it requires 3/5
majority and, therefore, cross-party agreement, which has not been achieved in
2012. The project Support to Civil Service Reform (IPA 2012 - EUR 1,8
million) is going to provide technical expertise for the full implementation of
the law to the Department of Public Administration (DOPA) within the Ministry
of Interiors. The project will start as soon as the law is agreed in the
Parliament.

Two new interlinked initiatives started in 2012. On the
one hand, with the IPA 2010 project Support to the EU Integration process
(EUR 2 million) the Commission has provided technical assistance to the
Ministry of European Integration to enhance capacity in legal drafting and
transposition techniques of EU law into domestic legislation. On the other
hand, the IPA 2010 twinning project Strengthening the Assembly of Albania
(EUR 1.5 million) aims at enhancing the capacities of the Parliament to make
the government and the Public Administration more accountable in general terms
and in EU-related issues. In practice, the project is revising the
parliamentary procedure in order to increase the oversight function over the
executive power of all standing Committees, particularly the Committee for
European Integration, and to strengthen the legislative process for a more
effective transposition and approximation of EU laws. Overall, this combined
package of assistance will further enhance Albania's institutional capacities
to fulfil the obligations on EU acquis compliance arising from the
Stabilisation and Association Agreement.

SIGMA continued its
support to Albania in the area of public administration reform. In particular the
programme provided general support to the Department of Public Administration
in developing a new civil service system. SIGMA also provided support to the
Ministry of Justice in drafting regulations on administration simplification
tools. In the area of financial control and external audit, it also helped the
Ministry of Finance on several levels.  Finally, it provided assistance in the
area of public procurement and concessions, e.g. with the establishment of a
new review body (Public Procurement Commission).

In 2012, Albania participated in the following EU programmes:
7th Research Framework Programme, Competition and Innovation Framework
Programme, Customs and Europe for Citizens.

3.4 Sector II: Justice, Home Affairs and Fundamental
Rights

The objectives identified in the 2011-13 MIPD for the sector are:
(i) strengthening the professionalism of judges and prosecutors, (ii)
increasing the level of execution of court decisions, (iii) reinforcing the
capacity of the law-enforcement bodies and coordination between prosecutors and
state police and (iv) improving the infrastructure in the judicial sector, i.e.
the courts, prison and pre-detention systems. In addition, several on-going
projects include the fight against corruption as a cross cutting area of
intervention, since the 2010 EC Opinion considers corruption as a key shortfall
for the rule of law in Albania.

The IPA 2009
twinning project: Support to Anti-Money Laundering and Financial Crimes
Investigations Structures (EUR 1.5 million), provided advice and mentoring
to the government agencies and Judiciary institutions in charge of prevention,
detection, investigation and prosecution of money laundering. The twinning team
has organised several trainings and provided technical assistance in practical
cases, focusing particularly on seizure, confiscation and subsequent
administration and destination of criminal proceeds and illegal assets. The team has also emphasised the importance of cooperation
between law-enforcement agencies and prosecutors. Cooperation with
neighbouring countries and international and European agencies (Interpol,
Europol and Eurojust) has also been strengthened. As
a matter of fact, the number of indictments and investigated cases has
increased.

In the area of integrated border management, in the course
of 2012 two infrastructures have been completed, i.e. the new migration police
commissariat in Saranda at the border with Greece and the rehabilitation and
extension of the Morine-Vernice crossing point at the border with Kosovo. The
police staff in Saranda have benefited from the improved working conditions in
their daily tasks of surveillance, patrolling and border control. The
commissariat has also better facilities for detainees. The new infrastructure
at the Morine-Vernice border crossing point will have positive effects on the
performance of the border police and the customs services. Starting from 2013,
the Commission will also fund a 2nd investment stage in order to
increase impact.

During 2012 the
Albanian State Police has also received assistance from the IPA 2009 twinning
project:  Enhancement of the operational and logistical capacities of the
Directorate of Witness and Special Persons Protection (EUR 1.5 million).  A
new law on witness protection has been adopted and the police, as well as other
institutions involved, such as the General Prosecutor Office, have received ad
hoc training. Finally, the Commission has also planned an upgraded facility for
the Albanian State Police Education Centre, whose works started in early 2012
and are expected to finish by 2013.

3.5 Sector III: Transport

A further priority sector is transport, since it has multiplier
effects on the overall economy of the country. In this area, the Commission has
aligned its interventions to the strategic direction of the Albanian government,
which intends to boost mobility via road networks.

With an overall amount of approximately EUR 51.5 million, the EU has
financed the rehabilitation of about 250 km of local roads, part of a larger
programme developed in coordination with EBRD, EIB and other IFIs for the
rehabilitation of more than 1,500 km across the secondary road network. These
investments have brought considerable advantages to rural communities, which
now benefit from facilitated access to essential services and city markets.

The strategic objective is to establish a unified road network
connecting rural communities to the main national and regional transport lines,
notably the SEETO (South East European Transport Observatory) Corridor VIII
(from Durres to Pogradec) and the north-south axis (from Shkoder to
Tepelene-Gjirokastra). In this respect, the Commission has also focused on
large-scale strategic investments. Under previous IPA envelopes, the Commission
has funded the feasibility studies and designs of the Vlora and Rrogozhina
bypasses and, with subsequent envelopes, is now going to fund the works, i.e.
EUR 19,365,000 under IPA 2011 for the Vlora bypass and EUR 7,000,000 under IPA
2012 for the Rrogozhina bypass. Both investments will strengthen mobility along
the north-south axis.

Under IPA 2012 a general technical assistance (EUR 2.3
million) is foreseen with the Ministry of Transport and Public Works to
strengthen administrative, regulatory and technical competences across the air,
road, rail and maritime transport modes.

3.6 Sector IV: Environment and Climate Change

Albania is
confronted with several and increasing environmental problems, such as
deforestation, sea, coast and land degradation, biodiversity loss and
unsustainable exploitation of natural resources. The side-effects of the recent
rapid economic growth, such as uncontrolled urbanization and limited
environment protection, are having an increased impact on public health, which
is challenged by unresolved problems in the area of solid waste management,
sanitation and waste water treatment, as well as water and air quality.
Environment problems affect also rural areas, where illegal landfills are
proliferating and protected areas are subject to illegal exploitation. For all
these reasons, the MIDP considers environment as a key sector for channelling
IPA financial assistance.

During the last
years the EU has funded various projects to clean-up environmental hot-spots
and to build up waste water treatment plants and sewerage systems in selected
municipalities/prefectures, mainly along the Albanian coastal regions (Golem,
Durres, Lezha/Shengjin, Velipoje, Shkodra, Kavaja, Lushnje, Berat/Kuçove, Fier,
Saranda). The strategic purpose was to improve sanitary and environmental
conditions in the coastal cities to protect the seawater quality with a view to
increase the tourism industry. This approach has continued under IPA 2012,
which foresees the rehabilitation of the entire sewerage system of the Vlora municipality.

The EU
environment and climate legislation together are one of the largest parts of
the acquis. Its transposition and implementation is an enormous
challenge for every pre-accession country. In this respect, throughout 2012
Albania has received continuous technical support to improve law enforcement
and fight against environment crime. Indeed, the permit and inspection systems,
as well as public awareness and participation of public to environmental
decisions, must be considerably strengthened. The IPA technical assistance is
also aiming at integrating environmental aspects in all relevant national and
sector policies and at expanding the use of environmental impact assessment
methodology in the planning of national infrastructures.

3.7 Sector V: Social Development

The 2011-13 MIDP has identified a number of priorities to be tackled
in the area of social development: (i) increasing school enrolment rates at
secondary level; (ii) improving the education system in order to increase the
offer of required skills; (iii) establishing a modern vocational training
system in line with the market expectations.

The IPA 2010 project Human Resources Development (EUR 3
million) has provided a comprehensive package of technical and financial
assistance to the Ministry of Labour, Social Affairs and Equal Opportunities in
order to improve its administrative capacity in implementing labour active
market measures, designed to improve the vocational training system and to
promote employment. In conjunction with the relevant stakeholders, the project
is also working, on the definition of two national sector strategies, i.e. for
Vocational Education Training and Lifelong Learning (2013-2020) and for
Employment (2013-20).

The Commission has invested a considerable amount of funds to
upgrade the Vocational Education and Training (VET) system (EUR 7 million from
IPA 2008 and EUR 2,8 million from IPA 2011). During 2012 the works for the
construction of four VET schools have been completed. The new schools in
Bushat, Shkodra, Kamez and Elbasan have been provided with modern equipment for
workshops. The Commission has also supported the adaption of VET curricula to
labour market demand and the related training of teachers. The Commission has in
the pipeline the upgrading of other three schools in Lezha, Fier and Durres,
whose rehabilitation works will start in 2013.

Strongly concerned about vulnerable groups, the Commission has
envisaged an intervention to improve local social services and infrastructures
for vulnerable groups in the peri-urban areas of Tirana and Durrës (EUR 6.2
million). As a result of rapid urbanization and high flow of internal
migration, the two cities have been affected by a considerable change in the
density of population. The local services are unable to cope with this
situation, which is particularly undermining the social conditions of
vulnerable communities. The assistance package under IPA 2012 is going to
provide an integrated response, which will upgrade public service delivery,
including social, health and education services.

3.8 Sector VI: Agriculture and Rural Development

Agriculture maintains a considerable share of the national GDP, employing
almost half of Albania's population. That's why the financial assistance
channelled so far into the sector has produced multiplier effects for the
living conditions of the population and for the macroeconomic situation of the
country, helping Albania to fulfil the enlargement obligations as regards the
economic criteria.

The Commission is preparing Albania to manage the funds available
under IPA component V (agricultural and rural development), currently
administrated by the EU Delegation. Consequently, IPA technical assistance has
been provided to the Albanian Ministry of Agriculture in order to set up the
administrative agencies responsible for IPA component V. Capacities are also
being consolidated in a learning-by-doing exercise, where national agencies in
conjunction with external expertise are launching calls to co-finance small and
medium scale investments in the agro-food sector (IPA 2011 - project Support
to Agriculture and Rural Development – EUR 10 million).

Substantial funding has been allocated to improve consumer
protection by adopting the required EU legislation on food safety, setting-up
the risk assessment capacity, undertaking official controls to food
establishments and upgrading physical infrastructure of the food safety system,
including regional laboratories (IPA 2009 – project Support to the Food
Safety Infrastructure – EUR 4 million and IPA 2011 – project Improve
Consumer Protection Against Zoonotic Diseases – EUR 4.5 million).

3.9 Cross cutting sector: support to civil society

IPA funds from different yearly envelopes have been focusing on
expanding civic initiatives and building civil society organizations'
capacities. The annual national civil society facility for Albania has been
designed and implemented in coordination with other IPA initiatives in this
area, i.e. regional civil society facility and cross-border co-operation programmes,
and with the assistance channelled under the European Instrument for Democracy
and Human Rights.

During 2012, the projects funded with the 2009 appropriations
(approx. EUR 1.2 million) came to a positive conclusion. The projects addressed
three main areas: (i) fight against corruption, organised crime and human
trafficking; (ii) environment protection and environmental education; (iii)
assistance to vulnerable groups (e.g. women, children, minorities and poor
people). Three projects specifically targeted Roma communities in Tirana, Fier
and Pogradec, providing ad hoc support on the occasion of the
displacement of a group of Roma families from their location in Tirana.

During the second half of 2012, the Commission launched a new call
for proposals, funded with the 2012 appropriations amounting to EUR 1.5
million. This call will finance small scale interventions in the area of a)
access to justice, fight against corruption and improvement of detention
conditions; b) promotion of social and economic inclusion of the Roma minority
and Egyptian community; and c) freedom of expression and media freedom.

3.10 Cross-border Cooperation

Albania is taking part in four bilateral cross-border
cooperation (CBC) programmes with (i) Montenegro, (ii) Kosovo, (iii) former
Yugoslavian Republic of Macedonia (fYRoM) and (iv) Greece. During 2012 the
implementation of the four CBC programmes has overall improved: a number of
projects came to a satisfactory conclusion; a number of new grant contracts
have been signed; the Joint Technical Secretariats of the various Programmes
are more involved in monitoring activities.

(i)
Albania-Montenegro CBC Programme

During 2012, 5 out of the 6 projects funded from the 1st
call for proposals (EUR 768,000 in Albania, 2007 appropriations) came to their
conclusion and submitted the final report: four of them were satisfactory
implemented, while one is still under review with the possibility of recovery
order.

Some shortcomings have been identified in the
implementation of the projects funded under the 2nd call for proposals (EUR
1.44 million in Albania, 2008-09 appropriations), particularly those
implemented by local authorities, which suffer from limited capacities.

The 3rd call for proposals (EUR 1.53 million in Albania,
2010-11 appropriations) was launched in September 2012. The evaluation is
expected to be finalised within 2013 and project implementation will start in
early 2014.

Small scale interventions funded from call for
proposals, albeit generally successful, may have relative impact and may not
substantially contribute to the achievement of the overall objective set-out in
the Programme for entire bordering region, i.e. promotion of regional cohesion
and competitiveness through an approach integrating economic, environmental and
social development. Therefore, the Commission and the two partner countries
have decided to use the Programme appropriations for 2012-13 (EUR 1.53 million
for each country) to fund joint bigger scale/strategic projects.  The
identification and formulation exercise of concrete project ideas has started
and is expected to be finalized in the first semester of 2013 while projects
implementation will start in the second semester.

The Programme Joint Technical Secretariat is involved in
monitoring activities, in close cooperation with the EU Delegations. During
2012, it has carried out a number of monitoring visits of the projects signed
under the 1st and 2nd call.

(ii)
Albania-Kosovo CBC Programme

During 2012 the 1st call for proposals (EUR 1.08 million
in Albania, 2010-11 appropriations) was launched. 78 proposals are under
evaluation, with an active role of the Joint Technical Secretariat.

Following the same approach adopted for the Programme
with Montenegro, the Commission and the two partner countries have decided to
use the Programme appropriations for 2012-13 (EUR 1.08 million for each
country) to shift from small-scale projects funded under call for proposals to
joint bigger scale/strategic projects. The two countries are expected to
identify concrete project ideas after consultation with local stakeholders and
potential beneficiaries. Projects implementation will start in the second
semester of 2013.

(iii)
Albania – fYRoM CBC Programme

During 2012, the first set of 15 projects from the 1st
call for proposals (EUR 527,000 in Albania, 2007 appropriations) came to their
conclusion. All of them, but one, were satisfactory implemented. The last one
is still under review with the possibility of a recovery order.

The 8 projects, contracted in early 2012 from the 2nd
call for proposals (EUR 675,000 in Albania, 2008 appropriations), are currently
under implementation, monitored by the Joint Technical Secretariat in close
coordination with the EU Delegations.

The 3rd call for proposals (EUR 2.30 million in Albania,
2009-10-11 appropriations) was closed in February 2012, having received 123
applications. The final evaluation report was submitted to the EU Delegations
in December 2012. 18 applications are pre-selected for contracting, which are
expected to start activities in the first quarter of 2013.

The funds for the years
2012/13 (EUR 1.7 million for each country), moved from IPA Component II
(cross-border cooperation) to Component I (transition assistance and
institution building), are going to be used for strategic projects in the
bordering areas. As far as Albania is concerned, the IPA 2013 National
Programme is going to fund a project for the protection of the cultural and
natural assets of the Lake Ohrid cross-border region, to be implemented by the
UNESCO World Heritage Centre. Currently, the side of the Lake in the fYRoM's
territory is already in the UNESCO World Heritage list. The project will inter
alia facilitate the extension of this prestigious recognition to the entire
area.

During 2012, the performance of the Joint Technical
Secretariat grew stronger, having eventually its entire staff positions filled.
Project monitoring know-how is also improving through on the job learning
process.

(iv)Albania
– Greece CBC Programme

During 2012, 25 projects selected in the framework of
the 1st call for proposals (approx. EUR 3.5 million in Albania, 2007-2008-2009
and part of 2010 appropriations) have been contracted and started activities.

In 2012 the Greek Managing Authority launched the 2nd
call for proposals (approx. EUR 2.9 million in Albania, 2010-11
appropriations), as well as a targeted call with funds exclusively allocated to
Greece (EUR 3 million, including EU contribution and national co-financing).

A Joint Monitoring Committee (JMC) was organised for the
first time in Albania. The JMC has decided to launch a call for strategic
projects with the remaining Programme's funds (overall EUR 6 million - approx. EUR
3 million for Albania and EUR 3 million for Greece) and has identified the
strategic thematic axes:

Axis 1: Infrastructure for Cross-border accessibility
(EUR 2 million)

Axis 2: Fostering of tourism, preferably with the
synergy of energy efficiency (EUR 4 million).

Since the minimum budget per project is EUR 2 million,
two/three joint strategic projects will be funded. Ministries and Regional
Authorities from both sides of the border will present proposals to the
Managing Authority.

The selection procedure for the staff of the Joint Technical
Secretariat (JTS) has only been partly completed. The lack of a fully staffed
JTS may create delays in the monitoring of the on-going projects funded under
the 1st call for proposals.

4. IMPLEMENTATION AND MONITORING
MODALITIES AND STRUCTURES

The
Commission and the Albanian Authorities have regular meetings to review the
implementation of IPA assistance and, if needed, to take corrective actions for
problematic projects. From a general perspective, projects implementation has
suffered from problems such as missing or delayed
construction permits; missing or delayed utility connections for big
infrastructure projects; delays for the national co-financing; limited national
funds for operating and maintaining EU-funded investments; lack of coordination
among institutions, particularly between central and local governments; missing
or delayed re-imbursement of VAT to contractors and civil society
organisations. These findings are taken into account before tendering or
contracting a new IPA project.

The
monitoring of the assistance is done through risk analysis, visits on site,
results-oriented monitoring (ROM), audit and evaluations.

During
2012, the EU Delegation has monitored through 227 on-site visits 96 on-going
projects out of 449 in total. The projects monitored represent in financial
terms EUR 141.2 million out of a total of EUR 348 million for all the on-going
interventions. Furthermore, through the ROM tool, 28 projects (26 on-going and
2 closed) were monitored, divided in four missions. The total financial amount
of the projects monitored in 2012 reaches EUR 64 million, which represents a
slight increase in comparison to EUR 57.8 million in 2011.

With regard to external monitoring, the EU Delegation has hired
three external experts under the 2012 ATA (Administrative Technical
Appropriations) funds to assist in the monitoring of grants funded under
cross-border cooperation (CBC) programmes and civil society facilities.
Throughout 2012 they have been monitoring 161 contracts. Indeed, the implementation of CBC programmes and Civil Society
activities through grant contracts required close monitoring, as the grant
beneficiaries are mostly local government bodies or small civil society
organisations, often with a limited administrative capacity. Additional
information and communication efforts have been undertaken by the EU Delegation
in order to better prepare these organisations for participation in calls for
proposals and future project implementation.

The Delegation launched an
external evaluation on 32 closed projects in the field of (i) technical
assistance, (ii) supplies and (iii) infrastructures.  The evaluation,
undertaken by the AETS (Application Européenne de Technologies et de Services)
consortium under a framework contract, took into account 32 contracts for an
overall amount of EUR 26.4 million, namely 8 grants or service contracts for
technical assistance, 20 supply contracts and 4 works contracts. The evaluation
assessed each project against five main criteria, i.e. relevance,
effectiveness, efficiency, impact and sustainability, coming to the conclusion that
the results of 27 projects are satisfactory, or higher than satisfactory, with
only 5 projects marked as unsatisfactory.

PART II - FINANCIAL DATA (EUR million and %)

On implementation of assistance at 31 December 2012

IPA I
+ II - Albania

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

IPA 2007 || 51.92 || 50.67 || 97.59% || 24.70 || 47.56%

IPA 2008 || 68.10 || 63.89 || 93.83% || 55.71 || 81.82%

IPA 2009 || 73.79 || 70.26 || 95.22% || 42.25 || 57.26%

IPA 2010 || 87.16 || 76.32 || 87.56% || 23.02 || 26.41%

IPA 2011 || 85.99 || 46.39 || 53.94% || 16.87 || 19.62%

IPA 2012 || 84.82 || 0.00 || 0.00% || 0.00 || 0.00%

Total || 451.77 || 307.54 || 68.07% || 162.55 || 35.98%

IPA – Component I National Programme Albania

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

IPA 2007 || 49.27 || 48.62 || 98.68% || 35.91 || 72.88%

IPA 2008 || 64.04 || 60.02 || 93.72% || 53.14 || 82.98%

IPA 2009 || 69.86 || 68.09 || 97.47% || 40.93 || 58.58%

IPA 2010 || 83.20 || 76.12 || 91.50% || 22.88 || 27.50%

IPA 2011 || 82.00 || 46.39 || 56.57% || 16.87 || 20.57%

IPA 2012 || 81.64 || 0.00 || 0.00% || 0.00 || 0.00%

Total || 430.01 || 299.24 || 69.59% || 169.72 || 39.47%

IPA – Component II (CBC) Programme Albania

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

IPA 2007 || 2.65 || 1.92 || 72.40% || 1.72 || 64.82%

IPA 2008 || 4.06 || 3.88 || 95.48% || 2.58 || 63.47%

IPA 2009 || 3.93 || 2.17 || 55.24% || 1.32 || 33.69%

IPA 2010 || 3.96 || 0.20 || 4.97% || 0.14 || 3.52%

IPA 2011 || 3.99 || 0.00 || 0.00% || 0.00 || 0.00%

IPA 2012 || 3.18 || 0.00 || 0.00% || 0.00 || 0.00%

Total || 21.77 || 8.16 || 37.50% || 5.76 || 26.46%

              SERBIA

1. SUMMARY

Serbia received the status of a candidate country in 2012 and continued
its intense preparations for the introduction of a decentralised implementation
system (DIS) for the management of IPA funds. The EU contribution regarding IPA
Component I, allocated in 2012, was EUR 170.60 million.

After a positive
compliance assessment done by an independent auditor, the national
accreditation was completed and the accreditation packages for all four IPA
Components (I, II, III and IV) were sent to the European Commission in 2012.

In the meantime,
it was decided not to proceed with opening of components III and IV under the
current financial perspective 2007-2013. A first audit mission for Components I
and II was conducted by the auditors of the Directorate General for Enlargement
in November 2012. The conferral of management for these Components is expected
to be granted to Serbia in the course of 2013.

2. STRATEGIC PLANNING AND PROGRAMMING
2.1 Multi-annual Indicative Planning Document

The government of Serbia, local stakeholders, the EU Member States,
and other donors have all been consulted in the design of the Multi-annual
Indicative Planning Document (MIPD) for 2012-13. To achieve the priorities
selected for EU support in this programming period, IPA support will primarily
focus its assistance on the following sectors: Justice and Home affairs and
public administration reform as well as social development and private sector
development in addtition to transport, environment and agriculture.

During 2012, the Delegation continued to play a leading role in
donor coordination. The coordination mechanisms that were established at the
beginning of 2009 (monthly EU donor meetings and bi-monthly informal donor
group meetings with donors and IFIs) continued functioning well, bringing added
value to the overall international assistance in Serbia. Sector coordination
meetings were held at the initiative of line ministries and/or donors. In most
cases they were organised by the EU Delegation. In almost all sectors lead
donors are identified. In 2011 a reform of donor coordination has started, led
by the Serbian authorities and supported by the donor community, in order to
align better donor coordination with Serbia's Needs Assessment for
International Assistance. All sector coordination groups are to be gradually
taken over by the relevant national authorities under the overall coordination
of SEIO. A lead donor will be associated to each group.

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

Component || 2010 || 2011 || 2012 || 2013 || 2010-2013

I – Transition Assistance and Institution Building || 190.56 || 190.60 || 196.68 || 577.84 ||    190.56

II – Cross-border cooperation || 11.32 || 11.50 || 11.63 || 34.45 ||      11.32

TOTAL || 201.88 || 202.10 || 208.31 || 612.29 ||    201.88

2.2 Programming exercise
2.2.1 Component I

The programming
of IPA 2012 took into account the various lessons learned from previous CARDS
and IPA programming exercises: preparedness and maturity of the selected
projects, beneficiary absorption capacity and past achievement records of
implementing institutions. Project maturity was assessed against the quality of
existing project documentation especially in terms of investment projects
involving works and supplies. The ownership of national bodies responsible for
the IPA programming process continued to rise, which was particularly evident
in the donor coordination aspect.

One example of
the progress towards donor coordination is the EU participation to a
Multi-donor trust fund on justice sector reform lead by the World Bank with the
participation of 8 countries.

The starting of
this programming exercise has proven, however, to be more challenging than
other IPA national programmes due to the implementation of a new methodology of
programming for the introduction of a sectorial approach.

Table 2: Indicative financial allocations for the year 2012 under
the National Programme, per sector and per project, in EUR million:

Sectors || IPA support (in EUR million)

Justice and Home Affairs || 32.51

1. Support to the Rule of Law System || 13.40

2. Police reform and migration management || 3.91

3. Support for improvement of the living conditions of forced migrants and closure of Collective Centres || 15.2

Public Administration Reform || 16.05

4. Support to Public Administration Reform || 11.25

5. Strengthening the Serbian Statistical System || 4.80

Social Development || 24.1

6. Support to Social Development || 24.1

Private Sector Development || 6.18

7. Support to SME development || 6.18

Environment, Climate Change and Energy || 57.15

8. Support to Environmental Protection and Climate Change || 55.15

9. Support to improvement of energy efficiency || 2.0

Agriculture and rural development || 15.6

10. Support to agriculture and rural development || 15.6

Other EU acquis and horizontal activities || 20.01

11. Strengthening the European Integration Process and management of post 2013 IPA || 11.84

12. Strengthening Media Freedom || 3.0

13. Support for participation in EU programmes || 4.17

14. Participation to JASPERS || 1.0

 2.2.2 Component II

Institutional bodies involved in the programming and implementation
of Cross-Border and Transnational Programmes are performing increasingly
challenging roles, with a setup which is prefiguring the DIS. Preparation for
the full accreditation process is on-going

The EU Delegation to
Serbia manages (or Serbia participates in) 3 intra-Western Balkans Cross Border
Cooperation (CBC) Programmes (between Serbia and Croatia, Montenegro and Bosnia
and Herzegovina respectively) and one transnational interregional programme
(South East Europe). The impact of CBC in terms of fostering dialogue and
reconciliation is large. The bottom-up approach and joint dialogue at
grass-root level which is the essence of the CBC produced direct positive
effects on the diplomatic relations between the countries.

A further increase of interest was registered in the field of
environmental protection, energy efficiency and rural tourism development. Such
trends reflect the early attempt to improve the efficiency and effectiveness of
management of CBC Programme in the view of the next Financial Perspective

2.2.3 Component III, IV and V

The country having just been awarded candidate status, these
components are not operational yet. Furthermore, the government has decided not
to go ahead with the preparation for the management of components III and IV
under the present Financial Framework.

Concerning component V, the required structures, i.e. the future
paying agency and the future managing authorities, were continued to be
established during 2012 with the support of both a twinning project and a
technical assistance project.

3. IMPLEMENTATION OF EU FINANCIAL
ASSISTANCE IN 2012
3.1 Success stories

Different IPA
envelopes – the Innovation Fund in Serbia (EUR 8.4
million)

On the Internal
Market, the Innovation Fund continued promoting programs directly supporting
enterprise Research and Development (R&D), encouraging knowledge-based
entrepreneurship. With EU financial assistance through IPA, an envelope of EUR 8.4
million was allocated in 2011 to the "Innovation Serbia Project" and
administered by the World Bank. The Innovation Fund established an independent
review and decision-making process in line with international models of best
practice. In 2012, an amount of EUR 2.7 million was awarded financing 25
projects in more than 200 companies, both form hi-tech and traditional
industries. Projects selected for financing support over 100 engineers
including 24 PhD researchers, and engage 15 academic and public R&D
institutions in their effort to bring new products and services to market.

IPA 2008 -
"Construction of Elementary School in Ribare, Jagodina Municipality"
(EUR 0.4 million)

On September 4, 2012, the first day of the school year,
the EU Delegation together with the city of Jagodina marked the opening
of the newly rebuilt school "Ljubiša Urošević" in
Ribare village near Jagodina. The EU donated EUR 0.4 million for the
construction of a new wing of the school, thus helping increase the
capacities of the village school and stop the trend of depopulation from the
rural regions towards the cities in Serbia. 370 children from Ribare on that
day entered a brand new school, with proper facilities such as central heating,
which they did not have before.

3 2 Overview of IPA implementation in 2012

In 2012, the EU Delegation committed EUR 157.6 million in new
contracts and made payments for EUR 173.1 million, which is above the
contracting and payment targets for 2012. The Delegation is confident that the
remaining resources to contract for the IPA programme will be committed before
the end date for contracting. Indeed, by end of the reporting period, EUR 240
million remain, including the just adopted IPA 2012 programme. The tendering
procedures for the remaining contracts to be committed under IPA 2009, 2010 and
2011 have been initiated to ensure that the remaining resources will be
committed before the end date for contracting. Savings under IPA 2010 are in
the process of reallocation following a change to Commission Decision initiated
by the EU Delegation in December 2012.

Serbian institutions
submitted 154 TAIEX applications, 125 of which were accepted. The largest
number of applications was submitted by the Ministry of Agriculture, Trade,
Forestry and Water Management. In 2012, a total of 2,580 representatives of the
Republic of Serbia participated in 67 events organised by TAIEX including study
visits, seminars and regional seminars.

It should be noted that
this particular ministry prepares a training map twice a year illustrating the
priority areas for TAIEX events. In the course of the year applications are
submitted according to this training map. From the total number of 22 on-going
twinning  projects, in 2012, the following five were completed: 1) strengthening
administrative capacities to implement Air Quality Management System in the
Ministry of Environment; 2) strengthening administrative capacities to protect
Natural areas; 3) police reform: internal affairs; 4) public procurement office;
5) harmonisation of the Serbian Customs Enforcement Division with the
standards, organisation and operational methodology of EU enforcement agencies:
Component 3 – Risk Analysis and Risk Management and Post Clearance Audit.

The
new version of the twinning Manual was adopted in 2012. Several events were
organised with attendance of the EU Delegation to get acquainted with the
changes introduced by the new Manual.

Two SIGMA missions took
place at the end of 2012 for the new experts' team to explore possibilities of
assistance, in particular on Public Administration Reform (implementation of
the new Strategy, coordination and monitoring), Public Finance - assistance to
the Parliament's Finance Committee.

3.3 Sector I: Public Administration Reform

In 2012, some
key projects under implementation in the area of public administration reform should
be highlighted .

In 2012, the EUR 6.5 million
IPA 2010 project (EUR 9.5 million with co-financing) "Support to Public
Administration reform process" continued supporting public administration
reform: the general legal and institutional framework for public administration
reform, enhancement of the recruitment system and introduction of career
development in civil service, and e-government development, both in terms of
policy and of technological capacities. The project aims at rationalising
administrative resources and making public administration more transparent,
effective and accountable; at improving civil service in the sense of a
merit-based system; and at making services to the citizens more effective and
accessible.

The implementation of
the IPA 2008 project "EU integration scholarships" ended in
February 2012. It delivered a number of specialised training on
EU acquis requirements and internships for Serbian civil servants in EU
Member States twinning counterparts.  These activities showed to be
particularly effective in enhancing human capacities in charge of preparation,
adoption, implementation and enforcement of EU-related legislation.

3.4 Sector II: Justice, Home Affairs and Fundamental
Rights

Important activities have
been carried out in 2012 in this sector especially improving capacities of the
judiciary system as well as improving implementation of penal sanctions.

In terms of supporting the
judiciary system in Serbia, some key projects have been implemented with the
aim of enhancing capacities of staff and improving transparency and efficiency
of judiciary system. In this field, three projects can be highlighted:

“Improvement of efficiency
and transparency of judiciary system” (IPA 2007, EUR 3 million): the key
objective of the project is to provide assistance to the Ministry of Justice to
improve the efficiency and transparency of the Serbian Courts through the
development of a case management system, including document handling and data
collection. The procurement of substantive data handling IT equipment was
undertaken successfully.

“Improvement of the
penalty system” (IPA 2007, EUR 5 million): the improvement of prison conditions
for the inmates successfully progressed through the construction works of a new
security fence at the prison of Nis and the construction of housing units in
the Juvenile detention facility in Krusevac according to EU standards.

“Further Alignment of
Penal system of Republic of Serbia with EU standards and strengthening
alternative sanction system,” (IPA 2010, EUR 5 million) comprises of two
components: 1 - Strengthening capacities of Ministry of Justice for
introduction of efficient practical professional training program for convicts
to enable them to be employed once their sentence is finished; and 2 -
Establishment of necessary preconditions for an efficient and effective
alternative sanctions system in the Republic of Serbia. Both components are
currently being successfully implemented.

 “Development of strategic
planning at the Ministry of Interior” (IPA 2011, EUR 1.5 million) aims at
institutionalizing strategic planning, strategic management and evaluation and
monitoring in the Ministry of the Interior of the Republic of Serbia. For this purpose
to be achieved, the twining partner shall assist in applying all modern
analytical technique for a strategic planning process, establishing a
functional strategic planning system and ensuring continuous improvement of
strategic management and accountability of the institution.

The IPA 2011 project
“Strengthening the Capacities of Law Enforcement and judiciary in the Fight
against Corruption in Serbia” (EUR 1.0 million) will be technically implemented
through a Contribution agreement with the Council of Europe. The Contribution
agreement has been signed, and the inception period initiated in December 2012.
The project aims to contribute to democracy and the rule of law through the
implementation of institutional reforms aimed at preventing and combating
corruption. The purpose of the project is to strengthen the capacities of law
enforcement agencies and judiciary to detect, investigate, prosecute and
adjudicate corruption cases.

The purpose of
the IPA 2011 Project “Implementation of Anti-Discrimination Policies in Serbia"
including technical assistance (EUR 1.2 million) and
supply contract (EUR 0.3 million), is the strengthening
of institutional capacity of the Office for Human and Minority Rights and the
Office of the Commissioner for the Protection of Equality for more effective
and efficient implementation of anti-discrimination policies in line with EU
standards and best practice. The project is a continuation of interventions
which have been successfully financed from CARDS and IPA funding in the past,
most notably the IPA 2007 project: "Implementation of Priorities in the
Areas of Human Rights and Protection of National Minority Groups". It
initiated in November 2012.

3.5 Sector III: Social Development

In
2012 IPA support helped improving social inclusion of vulnerable groups as well
as supporting education. Important support for social inclusion of refugees and
IDPs has been provided in 2011 through projects financed under IPA 2007 (EUR 10
million), 2008 (EUR 6 million) and 2009 (EUR 12.65 million). These
projects aimed at providing refugees and IDPs with a comprehensive set of
measures to facilitate and encourage their social inclusion into Serbian
society. Measures included mainly housing solutions but also legal assistance
as well as self-employment and income generation support

"Education
for All - Increasing the Availability and Quality of Education for Children
from Marginalised Groups" (IPA 2008, EUR 3 million):
the project contributed to the social inclusion and poverty reduction by enabling
greater access to the regular public education system in Serbia for children
from marginalised and special needs groups. The project ended in April 2012.

"Support
to Human Capital Development and Research" (IPA 2011, EUR 8 million): the overall objective of the project is to contribute to human
capital development through strengthening  the “knowledge triangle”: education
– research – innovation, as well as to enhance the effectiveness of the
educational system in Serbia, thus contributing to a better overall level of
knowledge, skills and competences in the society, through the following
results: National Curriculum Framework development, teachers’ training,
research in education and development of practice schools. The project started
in July 2012.

Employment

“Preparation of Serbian
Labour market Institutions for European Employment Strategy” (IPA 2011, EUR 2
million): implementation started in May 2012, with the aim to improve the
impact of Serbian employment policy and contribute to the labour market reforms
in line with EU standards. The expected results are: 1) Strengthened
capacity of National Employment Service and The Ministry of Economy, Labour and
Social Policy (MoELSP) Department for Employment officials and staff in
European Employment Strategy; 2) Recommendation provided on the harmonisation
of the employment regulations in line with EU laws; 3) MoELSP staff capacity
built for drafting of the Serbian Joint Assessment Paper; 4) Local Employment
Councils capable of interpreting data on labour market needs and developing
coordinated responses to unemployment; and 5) Local Employment Councils capable
of developing and steering the implementation of Local Employment Action Plans
in line with local LM situation.

“Further integration of
forecasting, monitoring and evaluation in the design and implementation of
active labour market policies and adjustment of National Classification of
Occupations to The International Standard Classification of Occupations (ISCO)
08 standards”(IPA 2011, EUR 1.5 million): project started in September 2012.
The overall objective of the project is to improve the impact of Serbian
employment policy. The project purpose is to embed forecasting, monitoring and
evaluation in the design and implementation of active labour market policies.
The expected project results include: 1) Methodologies for monitoring and
evaluation of active labour market policies and forecasting labour market
trends disseminated throughout the National Employment Service; 2) Evidence
based employment policy creation concept introduced in practice; 3) Annual
NEAPs designed, implemented and evaluated; and 4) National Classification of
Occupations adjusted to ISCO standards.

3.6 Sector IV: Private Sector Development

Worth mentioning is the
following project which started in August 2011; “Strengthening consumer
protection in Serbia” (IPA 2009, EUR 2.5 million). The contract aims to
contribute to the protection of consumer rights and interests in Serbia in
accordance with the EU acquis. In the course of 2012, the project
provided valuable support for the establishment of the National Council for
Consumer Protection, drafting of the Consumer protection Strategy 2013-2018 and
proposing amendments to the Law on Consumer Protection. The project also
worked on mapping all the actors on the consumer protection scene and finding
the ways to improve the cooperation among them as well as to increase the
competencies of the different institutions. It provided a software platform for
registering and administering of Consumer Complaints and organized various
events that raise the overall public awareness on consumer issues (e.g. open
days for consumer organizations, media breakfasts).

“Delivery and installation
of forensic software for the Commission for Protection of Competition” (IPA
2011, EUR 0.2 million): the contract comprises supply, delivery, installation
and commissioning of software/hardware and trainings. Provisional acceptance
was signed in October 2012.

“Strengthening the
institutional capacity of the Commission for Protection of Competition (CPC) in
Republic of Serbia” (IPA 2011, EUR 2.8 million): project implementation started
in September 2012. The overall objective of the contract is to increase the
ability of Serbia to assume the obligations stemming from the SAA in the field
of competition. Its project purpose is to strengthen the institutional
capacity of the Commission for Protection of Competition (CPC) for more
effective enforcement of competition policy with expected economic benefits for
consumers and market participants. The contract has to contribute to the
achievement of enhanced CPC enforcement capacities, improved capacities of
market regulators on protection of competition and enhanced competition
culture.

"Improved SME Competitiveness and Innovation Project –
ICIP" (IPA 2008, EUR 3 million) contributed to the development of the
Serbian SME sector by providing a new model of business support services with
assurance of a high standard and to improving capacities of business and
innovation support organisations. The contribution of the Project to the
development of the Serbian SME sector is positively evaluated. The following
main results are achieved:

·
Mapping and assessment of needs and capabilities
of Business Service Providers was undertaken as well as an evaluation of
business service needs of SMEs. Based on the results of the surveys, a
comprehensive manual of business support services was produced and
capacity-building modules for SME support institutions (Regional
Agencies/Centres) were developed. In total 17 capacity-building workshops were
held (557 trainee-days) and 11 Business Service Manuals were developed.

·
Quality standards and certification systems were
established – for the first time in Serbia – both for organisations and
individuals involved in support to SMEs. A system for evaluating quality
standards of service provision by RDAs was developed and tested. A
certification for the first 50 individual business service providers (BSP) was
developed and implemented on a pilot basis. In addition, a mechanism for
registration of consulting companies and an accreditation of training providers
were developed. A nationwide network of business support organisations and
consultants has been established (RDA Net). ICIP has developed a database of
about 500 business service providers who will be invited to register at the
NARD portal.

·
In line with the government’s innovation policy
and strategy, all existing competitiveness and innovation programmes were
evaluated and capacities of key Business Innovation Support Organisations (BISOs)
are assessed. Innovation scan is organised with involvement of 3,000
enterprises, including 50 qualitative interviews to identify gaps in provision
of support. Also, qualification needs of civil servants managing competitiveness
and innovation measures are assessed.  ICIP contributed to the improvement of
two grant-scheme programmes in line with EU requirements; strengthening of
innovation-based Business Incubators is performed; key BISOs are trained on 10
newly-developed subjects on innovation management (414 trainee-days); an
Innovation Management Diagnostic tool for Serbian enterprises is developed and
Business Plan guidelines for innovation-based business are produced.
Furthermore, 12 additional BISOs / research institutions have joined the
European cooperation networks and 13 organisations / companies have
successfully applied to EU or international innovation funding. All of the
implemented activities will further enhance local competitiveness and
preparation of the private sector in Serbia for the European single market.

3.7 Sector V: Transport

In
2012, important achievements in this sector have been achieved, namely through
"Harmonization with the "acquis communautaire" in the
transport sector – phase II" (IPA 2008, EUR 1.5
million) which aims to harmonize Serbian transport legislation with the EU
acquis.

Moreover,
"River Information Services" (IPA 2007, EUR 11
million) are under implementation to improve the inland waterway transport
system on Euro Corridor VII (Danube) in Serbia, enhancing the traffic safety by
monitoring and managing the traffic on the Danube waterway. The project has
been extended to the Sava River. The implementation is on-going until April
2013. Attention has to be paid to allocation of national funds after the end of
the project in order to secure its sustainability.

"Facilitating
Intermodal Transport in Serbia" (IPA 2008, EUR 2
million) helps increasing Serbian economic competitiveness and reduces
environmental burdens due to transport, by establishing the institutional
framework for development of intermodal transport and logistics centres in the
Republic of Serbia. The project finalized the project documentation for the
construction of the first modern intermodal logistic centre in Serbia. Financing
for the construction is requested by Serbian Authorities through IPA 2013.

"Technical Assistance
to Serbian Railways in restructuring of selected fields "(IPA 2008, EUR 0.5 million) assists in the implementation of the organisational
reform of Serbian Railways in line with European Directives. Implementation of separation of
accounts with implications regarding full knowledge of costs, Public
Service Obligation (PSO) contracts, Serbian asset evaluation and other specific
technical issues. The implementation of the project was suspended due to
delayed adoption of establishing acts for new subsidiaries (infrastructure
manager, freight operator, passenger operator, asset management) in JSC Serbian
Railways[17]
and may be cancelled.

"Preparation
of Documentation for River Training and Dredging Works on selected locations
along the river Danube" (IPA 2010, EUR 2.2 million)
will contribute to the restoration and creation of safe and swift navigation on
the Danube River (Corridor VII) in full accordance with the Danube Commission
requirements, EU standards and legislation of the Republic of Serbia. The
service contract is preparing the project documentation for dredging and river
training works on selected critical navigational sections of the Danube River identified
in Inland Water Transport (IWT) Master Plan. The implementation is on-going
until April 2013.

"Modernization
of Railways" (IPA 2011, EUR 8.3 million) will
prepare the project documentation for the upgrade and modernization of the
railway line between Novi Sad–Subotica-Hungarian Border and preparation of
project documentation for the construction of a railway bypass around the City
of Niš. One service contract is in final stage of evaluation, and the other
service contract Invitation to Tender is launched with submission deadline on
19 April 2013. Both contracts are to be signed before contracting deadline in
June 2013.

 3.8 Sector VI: Environment, Climate change and Energy

"Law
Enforcement in the Field of Control of Industrial Pollution, Prevention of
Chemical Accident and EMAS in Serbia Service Contract" (IPA 2011; EUR 2.5
million): the project commenced in September 2012 with a planned duration of 24
months. It is to complete the alignment of Serbian legislation with the EU acquis
in the thematic areas concerned. It is moreover to deliver hand on assistance
with the development of a structure and system that will allow the competent
authority to treat applications for integrated permits for Serbia's estimated
160 installations falling under the IPPC (Integrated Pollution Prevention
Control) legislation. The project shall provide similar assistance with regard
to the evaluation of safety reports and internal emergency plans submitted by
Serbia's upper tier Seveso installations in compliance with EU legislation on
the prevention of chemical accidents. It will finally evaluate interest and
scope in Global EMAS (the European Eco-Management and
Audit Scheme) in Serbia and
prepare three pilot companies to be certified under this voluntary
environmental management scheme.

"Strengthening
the Serbian Environmental Inspectorate and Relevant Stakeholders" (IPA
2010 EUR 2.5 million): this project helps create an enabling legislative
framework with appropriate provisions for effective environmental inspection and
strengthen the necessary inter-institutional cooperation with a view to enhance
environmental law enforcement in Serbia. The project commenced in February 2011
and is scheduled to end in November 2013.

"Strengthening
Administrative Capacities for Protected Areas in Serbia" (IPA 2007, EUR 1 million):
supports the beneficiary (Ministry of Environment & Spatial Planning) in
development of a system for Nature Protection in Serbia in line with the EU
environmental acquis. The project was extended in time by 6 months and
closed in June 2012. As a result (i) Serbian legislation has been substantially
harmonized with the EU nature conservation directives; the (ii) designation of
Natura 2000 sites has been prepared. Proposals for specially protected areas
under the EU Birds Directive are already available.

"Study
of flood prone areas in Serbia, Phase 1" (IPA 2007; EUR 2 million):  the
project supported the development of an integrated flood management framework
and introduction of land use planning, zoning and risk assessment including
development of early warning systems and upgrading of contingency planning and
emergency measures, as well as the preparation and integration of pollution
prevention measures. It also worked to prepare flood hazard and flood risk maps,
which will be the basis for the future preparation of the Flood Risk management
Plan. It covered significant parts of the flood prone areas on the Danube
between Belgrade and Zemun (1,175 km) and the upstream end of the Iron Gate
Gorge (1,040 km) as well as the flood prone areas on the larger rivers in the
Velika Morava river basin. The project was successfully concluded in November
2012.

In 2012, the IPA 2008 project (EUR 7.8 million) titled
“Emission Reduction from Nikola Tesla Thermal Power Plant in Obrenovac, Unit
B1” was completed. Reduction of the emissions from the thermal power plant was
achieved as a result of this project. It provides the fulfilment of legal
obligations related to dust emission into the atmosphere in accordance with the
legal regulations and EU directives (Directive 2001/80/EC for large combustion
plants).

The
finalisation of IPA 2010 project (EUR 1.5 million) “Promotion
of renewable energy sources and energy efficiency” assisted the line ministry to
build the capacity in the energy sector which will lead to the increased use of
renewable energy sources in Serbia and the more efficient use of energy from combined
heat and power (CHP) production.

As a
continuation of the CARDS 2006 project “Construction of a high voltage
electricity transmission line between Niš and FYROM border (toward Skopje)” a
follow up IPA 2010 project (EUR 13.6 million) on the procurement and construction of the Substations 400/110 kV Vranje 4 & Leskovac 2 started. The project will increase security of the supply in south
Serbia and will together with a new transmission line provide development of
the regional electricity market.

“Follow-up
technical assistance to Srbijagas” (IPA 2010, EUR 1.5 million) provides
critical assistance to the Serbian gas transmission company which needs to
fulfil the requirements of the Energy Community Treaty regarding unbundling of
different activities and establishment of liberalised gas market.

3.9 Sector VII: Agriculture and rural development

The
first five campaigns of oral vaccination of foxes (which are the main reservoir
and vector for spreading of rabies virus to other animals) against rabies in
autumn 2010, spring and autumn of 2011 and 2012 yielded further results: the
number of registered cases of rabies identified annually continued to
substantially reduce.

Support was also
provided through“Strengthening the capacities of the
Republic of Serbia for the absorption of EU Rural Development funds in
pre-accession period” (IPA 2007, EUR 2 million) provides critical assistance to
the Serbian Agrarian Payments Directorate which needs to fulfil the conditions
for accreditation by the Commission for utilisation of the IPARD funds.  The
project also includes delivery of IT equipment whose value is EUR 0.7 million.

“Capacity
Building and Technical Support for the Renewal of Viticulture Zoning and for
the System of Designation for Wine with Geographical Indications” (IPA
2008, EUR 1.2 million) is a project that supports a sector with significant
rural development potential. This measure includes a twinning and two supply
contracts, which support the small and medium wine producers in different areas
of Serbia mainly through the harmonization of the Serbian legal context towards
the EU standards. The twinning component strengthens the capacities of the
ministry and decentralised governmental bodies through specialist trainings,
study tours to the north Italian wine producing region and specific technical
assistance from member states. The obligatory vineyard register has been established
successfully to follow up adequately European harmonised PDO (Protected
Denomination of Origin).

3.10 Sector VIII: EU acquis - other horizontal
activities

The
newest Project Preparation Facility (PPF 5) (IPA 2012, EUR 5.2 million)
started in November 2012. The most important purpose of this project is to
support the Serbian administration in programming of the new IPA financial
perspective starting in 2014. The importance lies in the fact that the sector
approach that was introduced with IPA 2011, more comprehensively applied in IPA
2012 and IPA 2013, needs to be fully implemented as of 2014. Moreover, the PPF
5 will continue the work of its precursors on development of the project
pipeline. A comprehensive set of criteria will be agreed for project selection
using as a starting point the policy relevance, institutional set up and a
range of factors of maturity.

The
Project;"Preparation and Technical Assistance Facility to Reinforce
Administrative Capacity in Serbia I "(IPA 2007, EUR 6.9 million) aimed
to enhance and reinforce the Serbian capacities in the context of the EU
pre-accession process and IPA management. The purpose of the project was to
assist the relevant Serbian authorities in preparing strategic and programming
documents for IPA III and IPA IV  in accordance with the EU requirements and
procedures, to assist the NIPAC Secretariat and the relevant Serbian
authorities in ensuring that selected projects proposed for funding under IPA -
including a pipeline of mature infrastructure projects for funding under IPA
III Environment and Transport - are developed and documented under the highest
standards of quality in order to be submitted to the ultimate approval of the Commission
and implemented to assist the development of the capacities of the Serbian
administration in order to fulfil its responsibilities over the whole project
cycle in relation to the management of the IPA

The
project entitled Project Preparation Facility (IPA
2008, EUR 4.6 million) ended in May 2012. It supported the Serbian
Administration in the preparation and delivery of effective EU projects in accordance with EC procedures for IPA
programming and contracting, in order to enhance and reinforce the
Serbian capacities in the context of the EU pre-accession process and the IPA
management. The purpose of the project was
to increase the quality of project implementation under the IPA programmes
through the provision of support to
respective line ministries and other agencies in the identification, screening and preparation of project
documentation and tendering documentation.

3.11: Cross-border Cooperation

As
mentioned before, the implementation of Component II
(Cross-Border Cooperation, or 'CBC') is done mainly through a bottom-up
approach, favoured by grant schemes based on joint calls for proposals fully
involving local communities

“Strengthening
of Economic Development through Sustainable Management of Water
Resources", Serbia-Montenegro Programme: this project is the result of the
cooperation between the Public Utility Companies of Bijelo Polje, Montenegro,
and Novi Pazar, Serbia, one of the poorest areas of the country. It started in
September 2012 and will last for 24 months. After a few months, it could be
already presented as a positive example of cooperation between the two
countries. The project is tackling the weaknesses of the water infrastructure
in Novi Pazar, using transfer of knowledge and experience provided by the team
from Bijelo Polje. Water leakages are being identified and water pumps
installed to facilitate the transfer of water to more remote locations. On the
long run, the project is expected to improve the quality of water management in
line with EU standards, both for private consumptions and as a precondition for
sustainable development of agriculture and economy in cross border area.

4. IMPLEMENTATION AND MONITORING
MOSALITIES AND STRUCTURES

Monitoring of EU-funded
projects is a core element of the assurance strategy of the EU Delegation. The
monitoring of on-going contracts is carried out through 3 essential channels:
regular monitoring, external (ROM) monitoring and internal monitoring through
specific on the spot visits. To further prepare the national authorities for
their role under DIS, findings from the external ROM monitor are communicated
to the Serbia European Integration Office (SEIO) as central counterpart, which
can then follow up with beneficiaries and report on corrective actions taken
where necessary.

Regular
monitoring:

·
Monthly project meetings of the task managers
are held with the team leaders of their projects, beneficiary organisations and
other stakeholders. Moreover, quarterly Steering Committees are held for all
institution building projects. In the case of small grants, meetings are held
on an ad-hoc basis depending on possible problems or complexity in the
implementation of the projects. The EU Delegation’s Heads of Sections have
regular meetings with their task managers to discuss problematic issues.

·
Ad hoc sector
meetings between task managers, beneficiary institutions and other stakeholders
(such as other donors, contractors, project implementation units or NAO) are
organized to discuss relevant developments concerning both tendering and
implementation from the sector point of view. In the context of moving to
sector approach and DIS, SMSC (Sector Monitoring Sub Committees) are now being
introduced.

·
Bi-monthly bottleneck meetings are organised
between the EU Delegation and SEIO to discuss problematic issues that cannot be
resolved at the level of monthly meetings and Steering Committees.

·
IPA/Joint Monitoring Committees: twice a year,
programme level monitoring committees are held with the participation of
headquarters at high level to discuss key issues related to programme
implementation. Corrective actions are agreed at these meetings where problems
are identified at lower level monitoring activities.

Results
Oriented Monitoring

In the course of 2012,
five ROM missions were carried out to Serbia and 56 projects with a value of EUR
120.7 million were monitored by the ROM service contract. The higher number of
ex-post ROM assessments compared to the previous year aimed at feeding lessons
learned back into future programming. 22% of the projects monitored had a
budget below EUR 1 million, hence the lower value of total projects monitored
compared to the previous year.

Internal Monitoring

For
2012, the selection of monitoring visits to be performed is linked more firmly
to contract risk analysis. Apart from the risk-based selection of projects, to
ensure sound implementation task managers visit on-going projects at least once
during contract lifetime (this excludes small contracts, e.g. framework
contracts). In the case of grant schemes involving a large number of grant
contracts, visits are conducted on a sample basis. Monitoring visits are
performed for on-going and completed contracts. The checklists used for
monitoring visits were updated in 2012 based on lessons learnt from monitoring
carried out in 2011.

SEIO organised Sector
Monitoring Sub Committees meetings (SMSCs) in November 2012 where SMSC reports
per sectors were examined as well as national co-financing of IPA projects in
the sector, bottleneck projects in the sector, status of development of NAD
indicators (link with the development of indicators within IPA 2013 programming)
and status of the Donor Coordination Groups per sector. This exercise should
play a key role in sector based monitoring, agreeing on corrective actions and
also linking monitoring to programming, donor coordination and evaluation.

PART II -
FINANCIAL DATA (EUR million and %)

On
implementation of assistance at 31 December 2012

IPA I + II - Serbia

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

IPA 2007 || 174.01 || 172.44 || 99.10% || 137.66 || 79.11%

IPA 2008 || 172.23 || 166.84 || 96.87% || 123.37 || 71.63%

IPA 2009 || 174.42 || 169.93 || 97.43% || 142.05 || 81.44%

IPA 2010 || 177.41 || 152.40 || 85.90% || 79.67 || 44.91%

IPA 2011 || 181.16 || 112.82 || 62.28% || 45.01 || 24.85%

IPA 2012 || 174.20 || 4.17 || 2.39% || 4.17 || 2.39%

Total || 1053.42 || 778.59 || 73.91% || 531.92 || 50.49%

IPA –
Component I National Programme Serbia

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

IPA 2007 || 164.84 || 162.38 || 98.51% || 152.71 || 92.65%

IPA 2008 || 168.64 || 163.47 || 96.93% || 120.81 || 71.63%

IPA 2009 || 170.55 || 166.29 || 97.50% || 139.92 || 82.04%

IPA 2010 || 174.81 || 151.44 || 86.63% || 79.03 || 45.21%

IPA 2011 || 178.56 || 112.31 || 62.90% || 44.68 || 25.02%

IPA 2012 || 171.60 || 4.17 || 2.43% || 4.17 || 2.43%

Total || 1028.99 || 760.06 || 73.86% || 541.33 || 52.61%

IPA –
Component II (CBC) Programme Serbia

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

IPA 2007 || 3.71 || 3.64 || 97.88% || 3.35 || 90.22%

IPA 2008 || 3.59 || 3.37 || 93.84% || 2.56 || 71.33%

IPA 2009 || 3.86 || 3.63 || 94.04% || 2.12 || 54.89%

IPA 2010 || 2.60 || 0.95 || 36.69% || 0.63 || 24.41%

IPA 2011 || 2.60 || 0.52 || 19.99% || 0.33 || 12.75%

IPA 2012 || 2.60 || 0.00 || 0.00% || 0.00 || 0.00%

Total || 18.97 || 12.11 || 63.85% || 9.00 || 47.44%

              BOSNIA
AND HERZEGOVINA

1. SUMMARY

In 2012, the
Commission programmed for Bosnia and Herzegovina the IPA 2012 and IPA
2013 allocations under Component I together in a single exercise allocating EUR
84.77 million within the National Programme of 2012. This was different than in
previous years when the Commission programmed one programme per year. The
advantage of the new approach was that the planned interventions followed a
longer-term plan, thus ensuring continuity and economies of scale.

Despite the
thorough preparation of the programming process, which started with meetings at
the political level, the programming, as in previous years, witnessed
significant delays due to Bosnia and Herzegovina's internal difficulties to
reach agreement on the identification and formulation of projects. The
Commission has urged the authorities to adopt an efficient coordination
mechanism between the state and the two entities to overcome these persistent
difficulties.

Notwithstanding
the problems in the programming and implementation of IPA assistance, a number
of projects delivered good results and a perceptible impact, in particular in
the home affairs sector and in the support for the economic development. The
Integrated Border Management System improved considerably, and the support for
the development of the tourism sector and the support for small and medium
sized enterprises created and secured employment.

2. STRATEGIC PLANNING AND
PROGRAMMING
2.1 Multi-annual Indicative Planning Document

The 2011 – 2013
MIPD identified three strategic priorities with the corresponding specific
objectives:

I.
Strengthening of the rule of law by supporting
the country to reform its justice sector and to fight against organised crime
and corruption;

II.
Improving the capacity and efficiency of the
public administration and setting a professional civil service, so as to
support the country's efforts to improve the functioning of the institutions at
all levels of governance.

III.
Supporting social and economic development, in
particular assisting the country in its efforts to develop the SME sector, to
alleviate unemployment and to reform the education system to help adapting the
qualification framework with the requirements of the labour market, and to
invest in transport and environment infrastructure.

To achieve the
priorities, the MIPD focused primarily on the sectors Justice and Home Affairs,
Public Administration Reform, Private Sector Development, Transport,
Environment and Climate Change, and Social Development.

Overcoming the
economic crisis, social inclusion and strengthening the rule of law and public
administration were identified as key challenges in the Enlargement Strategy.
Bosnia and Herzegovina had to step-up its efforts in the areas of justice and
public administration reform. Despite a moderate economic recovery, unemployment
remains at very high levels and fiscal adjustment measures, as well as economic
reforms have to be pursued with determination to enable the country to recover,
and, over the long term, to cope with the competitive pressure and market
forces of the Union.

In most sectors,
no country-wide strategies existed, with the exception of a public
administration reform strategy, a justice sector reform strategy, and a war
crimes strategy. Where strategies existed, they were not underpinned by long
term budgets. The assistance to Bosnia and Herzegovina, in particular the
support for social sector reform, and the environment and transport sectors,
addressed the principles of the Europe 2020 strategy of smart, sustainable and
inclusive growth.

During the preparatory
phase of the MIPD, a constant dialogue between DG Enlargement and the other
line DGs ensured a joint selection of priority sectors and formulation of
sector objectives.

Considering the
delays in programming and implementation, the current three-year planning
period proved to be unsuitable for achieving the expected results. The absence
of sustainable reform strategies at State and entity level calls for IPA
support to prepare the strategic framework before investments in the respective
sectors can start, thus extending the lead times for interventions. The longer
time span for planning, as provided by the new multi-annual financial
framework, should facilitate planning and increase the likelihood that expected
results could effectively be achieved within that time span.

For the
preparation of the 2011 - 2013 MIPD the Commission applied an innovative
approach to increase beneficiary ownership and to plan in a more strategic way.
The Commission, the Directorate for European Integration and the Donor
Coordination Unit in the BiH Ministry of Finance and Treasury held a series of
consultation workshops in June 2011, to which representatives from the line
ministries, other relevant institutions, selected donors and civil society
organisations were invited to participate. Workshops were held in the areas of
social inclusion, small and medium-sized enterprises (SME), education and
employment, civil society, judiciary, law enforcement, public administration
reform, environment, transport and energy. The objective of these workshops was
to identify strategic objectives, expected results, benchmarks and indicators
for financial assistance in the period 2011-2013. The workshops helped to
identify areas where IPA or other donors support can be better aligned with the
existing strategies and action plans to gradually move towards a sector
approach.

A number of
assistance projects in Bosnia and Herzegovina did not achieve the expected
results because of an insufficient sense of ownership on the part of the
beneficiaries. The lesson learned was that EU assistance must not only reflect
European Partnership priorities but, in the broader sense of the Paris
Declaration, must also be interlocked with Bosnia and Herzegovina's own
development and action plans. Future EU assistance will therefore gradually
shift to sector support; will promote ownership by ensuring that projects are
in line with Bosnia and Herzegovina's own reform strategies and by enhanced
participation of beneficiaries in the programming process.

Table 1: Indicative
financial allocations for the year per component, in million EUR

Bosnia and Herzegovina || 2012

I. Transition Assistance and Institution Building || 102,67

Of which: ||

National Programme  || 84,77

Tempus Programme\* || 2,40

Sarajevo Process on Refugee Return\* || 12,00

Civil Society Facility\* || 3,50

||

II. Cross-Border Cooperation || 5,20

Of which:                    ||

CBC BiH - MNE || 0,60

CBC BiH - HRV || 1,00

CBC BiH - SRB || 1,00

CBC IPA Adriatic ||

BiH's participation in ERDF transnational programmes "South East Europe" and "Mediterranean" ||

TOTAL || 107,87

\*The support for Bosnia
and Herzegovina in the Sarajevo Process on Refugee Return, the Civil Society
Facility and the Tempus programme are coordinated and implemented under the
relevant Multi-beneficiary programme.

2.2 Programming exercise

Bosnia and
Herzegovina signed the financing agreement for IPA 2011 in July 2012. The first
contracts under the 2011 programme were signed in December 2012.

2.2.1 Component I

The Commission
programmed IPA 2012 and 2013 together in a single exercise in 2012. This was to
round off the programming of the current IPA instrument and to concentrate in
2013 on the preparation of the strategy for the new financial instrument, IPA
II and the programming of the first programme under the new financial
instrument, IPA 2014.

The 2012 and the
2013 programmes pursued almost identical objectives, in particular reforming
the public administration, setting up a professional civil service,
strengthening the rule of law and fighting against organised crime and
corruption, supporting the socio-economic development, in particular through
assisting SMEs, alleviating unemployment, reforming the education system and
investing in transport and environment infrastructure.

The programmes
followed the priorities of precedent programmes and considered the existing
project pipeline. By this approach it was ensured that the interventions
followed a longer-term plan, thus ensuring a continuity and economy of scale. A
good example is the support for law enforcement which follows a sequenced
support for law enforcement institutions, starting with a law enforcement
project under IPA 2010. The aim was to ensure the continuous EU support for the
law enforcement institutions after the expiration of the European Union Police
Mission (EUPM) mandate in June 2012.

Regular meetings
with the Member States, and also Croatia, Norway and Switzerland, the Civil
Society, as well with the International Finance Institutions throughout the
programming process ensured coordination, coherence and complementarity.

Some examples of
coordination, coherence and complementarity:  Judicial Efficiency support – IPA
supported with its 2009 and 2010 programmes the High Judicial and Prosecutorial
Council of BiH to reduce the backlog of first instance court cases, and to
further advance the new electronic case management system. These activities
were co-financed by Sweden and Norway, where the United Kingdom provided
complementary support in drafting court rulebooks.

The support for
the International Registry for the Court and Prosecutors Office of BiH is a
joint effort, co-financed by the EU, Sweden, the United Kingdom, Italy, the
Netherlands, Germany, Norway, Switzerland, USA and Turkey. The total donor
support for a six year period amounts to EUR 56 million.

For the
construction of a High Security Prison, the EU and Sweden pooled the
funds for the construction works of the prison building
(EU contribution EUR 10.8 million, Sweden EUR 2 million,
while the USA provided EUR 0.8 million for the training of the prison personnel).

IPA supported
the work of the forensic and science department of the International
Commission for Missing Persons (ICMP) with EUR 1.2 million, while Sweden, the
United Kingdom and Switzerland contributed to the operational costs (EUR 2.3
million) of the organisation and the Netherlands provided
assistance (EUR 1.3 million) for the exhumation of victims in
Srebrenica.

To support BiH
institutions in the EU integration coordination process, IPA provided
capacity building assistance mainly to the Directorate of European
Integration (EUR 0.8 million), while the United
Kingdom provided capacity building support to entity government
structures, reaching out the cantonal level of administration as
well ( EUR 150,000).

In the High
Level Meeting, the Commission formulated recommendations for Bosnia and
Herzegovina on how to improve the EU coordination process, and in particular
the IPA coordination process. On IPA, the Commission proposed to examine the
legal feasibility to accelerate the adoption procedure for Financing Agreements
with the Commission, the creation of working groups for the drafting of sector
and project fiches, and an improved coordination with the Bosnia and
Herzegovina IPA Coordination Board.

In the kick-off
meeting of 17 November 2011, the Commission defined the priorities for the IPA
programming for the years 2012 and 2013 and asked Bosnia and Herzegovina to
prepare corresponding sector and project fiches.

Despite the
thorough preparation of the programming exercise, the programming process for
IPA 2012 and 2013, as in the precedent year, has witnessed significant delays
due to political difficulties to reach agreement between different levels of
government on the identification and formulation of projects.

The
implementation of assistance became more difficult in 2012. The Republika
Srpska took a systematic approach to using programming and implementation of EU
financial assistance as a forum in which to "defend" the perceived
constitutional rights of the Republika Srpska. It challenged previously agreed
projects; some of them were already on-going. In consequence, the Commission
had to halt projects and started to negotiate possible ways out.

It became
obvious that the weak internal coordination capacity on EU matters, including
IPA, was the main hurdle for a successful and smooth cooperation between the
Commission and the BiH authorities. In consequence, the Commission defined the
existence of a functional coordination mechanism as a condition for IPA II
assistance for BiH to avoid the problems encountered during the programming and
implementation of IPA assistance in the last years and to ensure that
programming is not based on ad-hoc, last minute compromises but strategic and
leading to the desired impact.

In the 2012 and
2013 programmes, the Commission used for the first time targeted sector budget
support as a tool to support the proceeding of war crimes in BiH. There is a
huge backlog on the proceeding of war crimes because of a lack of judges, prosecutors
and judicial support staff. With a contribution of EUR 7.4 million in the two
respective years, IPA will support the employment of additional staff to
accelerate the proceeding.

Table 2: Indicative
financial allocations for the year under the National Programme, per priority
axis and per project, in million EUR

Priority Axis || Projects || Budget

Political Criteria || 40.038

|| 01.23.04 Justice Sub sector  || 21.253

|| 01.24.05 Support to the Area of Law Enforcement  || 7.095

|| 01.36.01 Enhancing capacity of parliaments in Bosnia and Herzegovina in the context of EU accession   || 4.69

|| 01.63.09 Support to durable solutions of Revised Annex VII DPA Implementation Strategy  || 7.0

Economic Criteria || 21.0

|| 02.21.07 Support to Bosnia and Herzegovina in implementation of the commitments in Transport Sector under the SAA   || 21.0

Ability to assume the obligations of membership || 23.733

|| 03.05.02 Strengthening Public Procurement system in Bosnia and Herzegovina  || 1.5

|| 03.08.06 Establishment of the State Aid System   || 2.5

|| 03.12.10 Improvement of animal health and animal by-products control in BiH   || 6.578

|| 03.12.11 Further strengthening of capacities of phytosanitary sector in the fields of plant protection products, plant health and seeds and seedlings, including phytosanitary laboratories and phytosanitary || 1.5

|| 03.18.03 Support to the State and Entity Statistical Institutions, phase VI  || 2.0

|| 03.26.08 Development of Qualification Framework in all forms of Education  || 3.5

|| 03.40.12 European Integration Facility  || 6.156

TOTAL || 84.77

3. IMPLEMENTATION OF ASSISTANCE
3.1 Success stories

IPA 2008 -
Integrated Border Management (IBM) (EUR 1.4 million)

Through twinning
assistance to the BiH encouraging progress was made towards the implementation
of an efficient border management system in Bosnia and Herzegovina. In 2012 the
relevant BiH IBM legislation was harmonised with EU standards, the monitoring
structure for the implementation of the IBM Strategy was enhanced, the work of
the border agencies harmonised, the common risk analysis and the support of
data and information exchange between the border management agencies was
developed. An improved border management system supports Bosnia and Herzegovina
tackling effectively customs fraud, trafficking and illegal migration. EU
citizens benefit from improved security at non-EU borders, in particular along
the Trans-European Transport network..

IPA 2008 -
Indirect Taxation Authority (ITA) (, EUR 2.4 million)

With twinning
support for the BiH the indirect taxation system in Bosnia and Herzegovina was
reformed. In particular, the customs, tax and information systems were brought
in line with EU standards and ensured a more effective, efficient and
transparent collection of revenue. ITA is one of the most important revenue generating
agencies in BiH and the well-functioning of the ITA shall contribute to the
economic recovery of the country.

IPA 2008 -
Support to the development of ecotourism in the National Park Sutjeska"
(EUR 0.4 million)

Thanks to its
unique and diverse natural and cultural beauty, Bosnia and Herzegovina has huge
potential for tourism growth, particularly in niche sectors. This project which
was concluded in September 2012 helped to advance this potential. It
strengthened the competitiveness of tourism in BiH through developing new
eco-tourist products, developing tourist infrastructure, strengthening the
human capacities and introducing a new marketing approach for eco-tourism in
the Sutjeska National Park. The park has a huge potential to attract tourism. It
is the oldest and the biggest national park in BiH, established in 1962, mainly
involved in tourist development and bio-diversity protection. It covers one of
two oldest and the biggest wildlife forests still remaining in Europe named
"Perucica" (1434 acres) as a protected area, parts of Maglic Mountain
with the highest peak in BiH – 2,386 meters of height and represents the most
various complex of eco-systems is BiH and South East Europe. There are also
national monuments of historic importance within the Park, especially those
from the World War II. In 2000, it was included into category II of IUNC (UN
unit for natural heritage protection).

IPA 2009 - "Development
of New Accreditation Schemes in Bosnia and Herzegovina"(EUR 0.7 million)

The latter supported
the Institute for Accreditation of Bosnia and Herzegovina (BATA) to develop new
credible and international recognised accreditation schemes for medical
laboratories, product certification, quality and environment management systems
certification, personnel certification, and lift inspection bodies. In addition
the project provided training for BATA staff and improved BATA´s information
systems. With the help of the project, BATA was recognised by the European
Co-operation for Accreditation as an official accrediting body. The project
contributed to the strengthening of the BiH quality infrastructure. Credible
accreditation schemes are the basis for export oriented international trade and
contribute to the competitiveness of BiH industries and manufacturers.

To support the
economic development, the EU provided international advisory services (IPA
2007, EUR 2.5 million) to 250 small and medium size enterprises in the
metal, textile, dairy and wood processing sectors to improve energy efficiency,
to implement quality management standards, and to improve marketing and
financial management. With the help of the assistance, 50 municipal economic
development projects were implemented, which provided an extensive training
programme for about 900 employees in all 144 BiH municipalities. With these
measures, the EU assistance improved the sustainability of small and medium
enterprises, and secured and created jobs.

3.2 Overview of IPA implementation on 2012

In 2012, EUR
100.5 million were committed, and EUR 61.3 million were disbursed. This was a
substantial increase compared with the previous reporting year, where EUR 68
million were committed and EUR 44.6 million were disbursed. The increase of the
commitments is mainly caused by among other reasons the ratification of large
scale contracts with IFIs on infrastructure projects and grants for the
preservation of the cultural heritage and grants to support the demining of
contaminated areas.

In 2012, BiH was
an active user of the Commission's TAIEX programme. 125 TAIEX applications were
submitted, whereof 100 applications were approved. BiH participated with more
than 2200 participants in 102 single-country TAIEX events (expert missions,
study visits and workshops) and with almost 1000 participants in TAIEX multi-country
events.

The number of
twinning activities registered a slower pace throughout 2012, with five
projects amounting to EUR 5.8 million implemented and three projects with a
total budget of EUR 3.2 million prepared. Current support to statistics includes,
for instance, a twinning for supporting the State and Entities statistical
institution, with focus on developing business statistics. Further support to
statistics is planned on business statistics and national accounts.

SIGMA carried
out a number of activities in BiH. A study on civil service professionalization
in the Western Balkans served as a baseline for the further assessment of the
reform progress. Assessment and comments on the draft civil service law of the
Federation of BiH and the District of Brcko were provided. An assessment was
made of proposed amendments to the state level civil service law. Work with
focus groups (70 participants from all levels) on Human Resource Management
(HRM) was conducted in order to evaluate HRM policies and practices and led to practical
recommendations. A cost of government scoping mission produced terms of
reference for a project that produced a study on governmental spending.

SIGMA worked
with the public procurement institutions on reviewing the draft law on public
procurement, prepared a rationale and reviewed the comments raised during the
public consultation process. The draft law was submitted to the BiH Council of
Ministers in October 2012. SIGMA conducted a peer review of the Supreme Audit
Institutions in BiH, which resulted in a very good rating of the institutions
legislation and practice.

IPA supported in
2012 the participation of BiH in EU programmes. The 2012 entry tickets for the
Seventh Framework Programme (FP7), and the Culture and the Europe for Citizens
programme were co-financed with nearly EUR 2.5 million, allowing the citizens
of BiH to benefit from the activities and opportunities offered by these
programmes, including increased involvement in international cooperation in the
different sectors covered by these.

3.3 Component II: Cross-border Cooperation

The
implementation of the Cross-border co-operation programmes between Bosnia and
Herzegovina and its neighbours Montenegro, Croatia and Serbia continued. The
evaluations for the three bilateral programmes implemented under shared
management (Transnational Programmes South East Europe and Mediterranean and
IPA Adriatic CBC Programme) where finalised in 2012.

Information,
co-ordination and sharing proved to be valuable for enhancing the capacities of
the national Operating Structure. In 2012, in the absence of the EU Delegation
Technical Working Group meetings the coordination mechanism was limited to
bilateral co-ordination. The contract for the technical assistance project
CBIB+ was signed in December 2012 and it is expected that with its assistance
the coordination will boost in 2013.

Regarding DIS,
some progress could be reported. The Head of the Operating Structure was
appointed in early 2012. The decision on the establishment of the Audit
Authority was not yet taken. The Central, Finance and Contracting Unit of the
BiH Ministry of Finance of Bosnia and Herzegovina (CFCU), assumed the role of
the First Level Controller in the three IPA Component II programmes implemented
under shared management (Transnational Programmes South East Europe and
Mediterranean and IPA Adriatic CBC Programme). In 2012, the assistance focused
on enhancing the capacities and developing methodology of the CFCU to perform
the functions of the First Level Controller.

The Operating
Structure developed the action plan to adopt a BiH system for recovery
procedures for grants to public bodies which is expected to be in place as of
2013.

4. IMPLEMENTATION MODALITIES AND
STRUCTURES

Bosnia and
Herzegovina has made no progress towards the establishment of a decentralised
implementation system.

In mid-May 2012,
the BiH Parliament's House of People adopted a conclusion to set up the
functions and structures for DIS. However, by December 2012 there has been no
follow up to this decision. The only new appointment to a DIS function in 2012
has been the nomination of the Minister of Finance, Mr Nikola Spiric, as the
Competent Accrediting Officer (CAO). The National IPA Coordinator (NIPAC) and
the National Authorising Officer (NAO) are nominated. The Programme Authorising
Officer (PAO) has not been appointed and the Audit Authority is as of yet
unidentified.

The CFCU
(Central Finance and Contracting Unit) and the National Fund (NF) have
maintained their staff levels but – in the absence of progress towards DIS -
without being able to play a role in the implementation of IPA programmes.

Politically it
does not appear realistic to achieve progress towards DIS prior to the
establishment of a functioning EU coordination mechanism.

Regular
project monitoring and implementation reviews

During 2012,
regular project monitoring of on-going contracts was undertaken by EU
Delegation Programme Managers in the form of participation to Steering
Committees, specific project activities and visibility events (conferences,
seminars, training sessions, open days), field visits, including on the spot
checks and verification of progress of construction works and delivery of
supplies.

In 2012 the
monitoring visits by Joint Technical Secretariats (JTS) of the CBC Programmes
continued for on-going projects from the 1st Call, with a total of 23 projects
monitored (5 in Serbia-BiH, 12 in Croatia-BiH and 6 in BiH-Montenegro
programme). EU Delegation Programme Managers accompanied JTS in 2 monitoring
visits. In addition, EU Delegation Programme Managers accompanied the assigned
Financial Officers in on-the-spot check visits to 3 projects.

As the
evaluation processes of the 2nd Call in all three bilateral CBC programmes were
completed in the summer and autumn 2012 and the implementation of 45 selected
projects has started in Q4 2012 or is expected to start in Q1 and Q2 of 2013,
external monitoring expertise was contracted through the technical and
administrative assistance facility (ATA) 2012 funds, to be implemented in the
second half of 2013 for the 2nd Call projects.

Implementation
reviews

Four
Implementation Review rounds (per each Operations section) took place with EU
Delegation management in 2012 on a quarterly basis on which occasions both
projects in implementation and in pipeline were discussed with the focus on
those with problematic issues.

IPA
Monitoring Committee

The bi-annual
regular monitoring of IPA projects' implementation together with NIPAC - IPA
Monitoring Committee - took place in July and its follow-up meeting in
December. The projects that had faced problems in implementation as well as
those where the project start is conditional upon the fulfilment of project
preconditions were discussed in both meetings (twenty four projects in July, nineteen
projects in December). Conclusions were drawn on further actions to be
undertaken.

Reinforced
monitoring

Reinforced
monitoring measures were applied to the following projects that were identified
in the Early Warning System (EWS) at level W1a and W3b respectively: "
Strengthening institutional capacities to combat corruption",
"Support to Reform of Higher Education in BiH", "Support to the
BiH government for the European Integration process and Co-ordination of
Community Assistance, Phase III - extension of services", "Support to
IPA Component I Programming 2012-2013 for BiH";  “Preparation of twinning
fiche, assessment  needs of ICT equipment for all Parliament in BiH and
preparation of detailed TS and ToR for required equipment - IPA 2012”.

Reinforced
monitoring consisted of additional visits and meetings with project team and
beneficiaries through which both project implementation and financial documents
were examined and which resulted in specific monitoring reports.

Fourteen
projects (12 supplies and 2 works contracts) were proposed by EU Delegation
management mid-2012 to be subject of ex-post control. The objective of the
ex-post control was to verify if the purchased equipment had been properly
installed, was in function and maintained and also if the related
infrastructure had been properly maintained. The EU Delegation Programme
Managers undertook the ex-post control missions for all 14 projects by the end
of November 2012, and no particular issues were reported.

Result
Oriented Monitoring of BiH Projects

Thirty seven
Result-oriented Monitoring (RoM) missions were undertaken for thirty seven
national projects for a total value of approximately EUR 91 million. Out of 37
projects, 33 were under on-going implementation, while 4 projects had been
finished and were monitored ex-post. The average score of the on-going
projects' performance was 2.72 on a scale from 1 (serious deficiencies) to 4
(very good), while the average score of the ex-post monitored projects'
performance was 2.75.

CARDS and
PHARE

The
implementation of CARDS in Bosnia and Herzegovina was completed in the year
2011. In 2012, a final payment in the amount of EUR 151,391 was made.

The interim
evaluation (PHARE 1999-2002) and the ex-post evaluation (PHARE 1999-2001) of EU
pre-accession assistance also highlighted a number of lessons for future
assistance. Especially the latter's recommendations on better balancing the
three Copenhagen criteria and support for a broader, multi-pronged approach to
address political criteria, have led to a strong focus in the MIPD on the
political criteria, in particular to the reform of the justice sector and the
public administration reform. The 2008 ad hoc evaluation of the CARDS programme
confirmed that political consent is a pre-requisite to establish or reform
institutions or to re-balance State and Entity responsibilities.

An audit by the
European Court of Auditors in 2007 on EU support for the judicial sector noted
shortcomings on the side of the beneficiaries in ensuring the maintenance of buildings,
infrastructure and equipment financed by the Commission. Future EU investments
will be conditional on strategic planning and capacity by Bosnia and
Herzegovina to ensure follow-up maintenance.

PART II - FINANCIAL DATA (EUR million
and %)

On implementation of assistance
at the end of December 2012

IPA I +
II - Bosnia and Herzegovina

Bosnia & Herzegovina || Allocated || Contracted || % Contracted || Paid || % Paid

IPA 2007 || 57.80 || 55.90 || 96.72% || 48.02 || 83.07%

IPA 2008 || 75.46 || 71.21 || 94.37% || 51.39 || 68.10%

IPA 2009 || 89.19 || 76.10 || 85.33% || 49.00 || 54.94%

IPA 2010 || 107.46 || 69.43 || 64.61% || 29.70 || 27.64%

IPA 2011 || 99.98 || 11.00 || 11.00% || 7.74 || 7.74%

IPA 2012 || 91.63 || 4.26 || 4.65% || 2.13 || 2.33%

Total || 521.51 || 287.91 || 55.21% || 187.97 || 36.04%

IPA – Component I National Programme Bosnia and
Herzegovina

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

IPA 2007 || 49.74 || 47.45 || 95.41% || 45.93 || 92.35%

IPA 2008 || 66.75 || 62.92 || 94.26% || 43.52 || 65.19%

IPA 2009 || 80.50 || 68.50 || 85.09% || 42.06 || 52.25%

IPA 2010 || 99.95 || 64.01 || 64.04% || 24.51 || 24.52%

IPA 2011 || 92.89 || 6.11 || 6.58% || 3.34 || 3.59%

IPA 2012 || 84.77 || 0.00 || 0.00% || 0.00 || 0.00%

Total || 474.60 || 248.99 || 52.46% || 159.35 || 33.58%

IPA – Component II (CBC) Programme Bosnia and
Herzegovina

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

IPA 2007 || 2.65 || 2.54 || 95.91% || 2.24 || 84.43%

IPA 2008 || 2.71 || 2.59 || 95.88% || 2.17 || 80.34%

IPA 2009 || 2.76 || 1.97 || 71.40% || 1.31 || 47.47%

IPA 2010 || 2.20 || 0.39 || 17.70% || 0.15 || 6.93%

IPA 2011 || 2.20 || 0.00 || 0.00% || 0.00 || 0.00%

IPA 2012 || 2.60 || 0.00 || 0.00% || 0.00 || 0.00%

Total || 15.12 || 7.50 || 49.60% || 5.88 || 38.87%

              KOSOVO

1. SUMMARY

The
implementation of EU assistance to Kosovo exceeded its financial
targets, both in terms of contracts and payments. The preparation of the IPA
2012 Annual Programme for Kosovo has been completed, allocating EUR 63.2
million. The 2013 Annual Programme was prepared and approved by the IPA
Committee in November 2012, aiming for adoption in early 2013.

Kosovo's
participation in the IPA Cross-Border Cooperation (CBC) programme proceeded
well in 2012 and the Financing Agreements for 2011 were signed for all three
CBC programmes (with Albania, the former Yugoslav Republic of Macedonia, and
Montenegro respectively). The first call for proposals in the CBC
Kosovo-Albania was launched in June 2012.

In March 2012, a
consultation meeting was organised with civil society during which the government
presented the proposed projects to civil society organizations and allowed for
a discussion. It was the first time in Kosovo that such a consultation took
place in an early stage of the IPA programming process.

2. STRATEGIC PLANNING AND PROGRAMMING
2.1 Multi-annual Indicative Planning Document

The overall objective of EU financial assistance to Kosovo is to
support its efforts for reform and towards compliance with EU standards and
progress in the implementation of its European reform agenda. The purpose of
the Multi-annual Indicative Planning Document (MIPD) is to set out the EU's
priorities for assistance to Kosovo for the programming period 2011-2013.

The MIPD is shaped around the needs identified in the European
Partnership of Kosovo as well as the annual progress reports and Kosovo's own
strategies. The government  of Kosovo, local stakeholders, EU Member States and
other donors have all been consulted in the design of the MIPD.

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

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

•           justice and home affairs (focus on visa liberalisation
and the judiciary)

•           private sector development (focus on trade and business
environment)

•           Public Administration Reform (focus on the functional
review)

Table 1: MIFF[18] allocations per component, in EUR million

IPA Component || 2011 || 2012 || 2013 || Total

I (Transition Assistance and Institution Building) ||      66.90 ||       67.00 ||       68.48 ||        202.38

II (Cross Border Cooperation) ||        1.80 ||         1.80 ||         2.99 ||            6.59

Total ||      68.70 ||       68.80 ||       71.47 ||        208.97

2.2 Programming
2.2.1 Component I

The 2012 IPA Annual Programme (AP) was presented to the IPA
Committee in October 2012 and the Financing Agreement was signed in November
2012. This Annual Programme had been prepared by the EU Office in close
coordination with the Ministry for European Integration and all beneficiaries.

IPA 2012 continues to support the rule of law, good governance,
public administration reform, communities and education. It also addresses
socio-economic issues, such as employment creation, labour market reforms and
regional economic development (including infrastructure, agriculture and rural
development). Lastly, the programme addresses the approximation of the
legislation to European standards, including on veterinary and food safety and
free movement of goods.

The Annual Programme includes a flexible allocation that will help
the Commission to respond to urgent political priorities that need financial
support for their implementation, such as the Belgrade-Pristina dialogue, the
strategic review of EULEX (European Union Rule of Law Mission)  and the visa
dialogue.

The government has increased its overall efforts in terms of donor
coordination. A detailed donor coordination structure with sector working
groups and sub-sector working groups started functioning in 2012. In June 2012,
the Ministry of European Integration organised the third High-Level Forum for
donor coordination. The Aid Management Platform continued to support the
government in improving aid management and donor coordination.

In June 2012, a joint seminar with the World Bank was organised as a
follow-up to the Commission-World Bank Western Balkans Country Days 2012
Conference held in Brussels in January 2012. The meeting brought together the
EU Office, the World Bank and the government and helped mapping ongoing and
planned activities.

A concrete
example of functioning donor coordination are the contributions of the Swedish
government (around EUR 2 million) and of the Grand
Duchy of Luxembourg (EUR1.5 million) to the EU-funded "Improvement of
District Heating in Pristina" project.

In March 2012, a
consultation meeting was organised with civil society during which the
government presented the proposed projects to civil society organizations and
allowed for a discussion. It was the first time that such a consultation took
place in an early stage of the IPA programming process.

Table 2: Indicative
financial allocations for the year 2012 under the Annual Programme, per
priority measure identified in the MIPD 2011-2013, in EUR million

Priority Measures || Projects || Budget

Public Administration Reform ||

|| 01-2012/1: Support to Public Administration Reform (Public Finance and Statistics) || 3.5

|| 02-2012/1: Improvement of social services, labour conditions and social dialogue || 3.6

Justice and Home Affairs ||

|| 03-2012/2: Return and Reintegration in Kosovo || 4.0

|| 04-2012/2: Strengthening the rule of law in accordance with EU standards || 6.6

|| 05-2012/2: Strengthening criminal investigation capacities against organised crime and corruption || 2.0

|| 06-2012/2: Support to Dialogue and EU approximation || 8.3

Private Sector Development ||

|| 07-2012/3: Support to the free movement of goods || 2.5

|| 08-2012/3: Support to Education and Employment || 5.8

|| 09-2012/3: Upgrade of Kosovo’s Transmission System Infrastructure || 3.5

|| 10-2012/3: Support to Agriculture and Rural Development || 7.4

|| 11-2012/3: Construction of a processing plant for the disposal of animal by-products || 2.0

|| 12-2012/3: Balanced Regional Development || 12.0

Support and Other Activities ||

|| 13-2012/4: Support measures and technical assistance facility || 2.0

TOTAL || 63.2

The 2013 Annual
Programme was prepared in parallel with the 2012 AP. It was approved by the IPA
Committee in November 2012 to be adopted in early 2013. The preparation of the
Country Strategy Paper for 2014-2020 started in December 2012.

2.2.2 Component II

During 2012, the
Financing Agreements for 2011 were signed for all three Cross-Border
Cooperation Programmes with Albania, the former Yugoslav Republic of Macedonia
and Montenegro. The programme with Albania will be implemented through a call
for proposals. The first call for proposals in the CBC Kosovo-Albania was launched in June 2012.

3. IMPLEMENTATION OF EU FINANCIAL
ASSISTANCE IN 2012
3.1 Success stories
IPA
2009 – "Reform of juvenile justice system" ( EUR 1.65 million)

The EU support
for this sector in Kosovo aims to ensure that children in contact and conflict
with the law are treated in line with European standards and the Child Rights
Convention. The second phase of the project has helped to increase the
awareness of the available mechanisms for the treatment and service provision
for juveniles in conflict with the law. As a result, the use of alternative
measures and educational measures has increased by around 50% in comparison
with 2010 and 2011. On the law enforcement side, seven child-friendly interview
rooms have been established in regional police centres and guidelines on the
usage of these rooms and on child- friendly interviewing techniques have been
delivered to Kosovo Police.

IPA 2007 -
Enterprise Growth Project and Business Advisory Support (EUR 2.5 million)

SME support
through Enterprise Growth Project (EGP) and Business Advisory Support (BAS); the objective of the project was to promote enterprise growth,
modernisation and employment through support to selected small- and
medium-sized enterprises (SMEs), including enterprises in the agri-business
sector and enterprises in economically underdeveloped areas. Target groups
included women in business, minorities, young entrepreneurs and people with
disabilities. The project brought industry-specific management expertise
directly to individual companies with more than 25 employees (EGP projects) and
assisted enterprises with less than 25 employees to operate successfully and
develop new business skills at the senior management level (BAS projects). Some
of the results achieved by this project are:

·
29 EGP projects implemented;

·
86 BAS projects implemented;

·
10 sector and market development activities
(SDAs/MDAs) implemented;

·
49 local professional consultants of which 12
are youth-owned and 12 are women-owned consulting companies were engaged for
completion of BAS Projects.

·
47 female entrepreneurs were supported (target
was 20);

·
30 rural projects were supported (target was
15);

·
6 projects supporting minorities were
implemented.

·
3 companies were certified with ISO Standards.

·
At least 8 of the companies have received
further financial investments from banks or other donors.

IPA 2009 - Rural
Grant Scheme (EUR 5 million)

The multi-annual
Rural Grant Scheme supports the development and modernisation of three
sub-sectors of agriculture namely dairy, meat, fruits and vegetables
processing. The programme supports the improvement of by-products'
utilization, the introduction of products with higher value added, the creation
of cold storage facilities, the introduction of appropriate food safety
management systems (HACCP), improved marketing and labelling of processed food
products, upgrading production lines and facilities to meet EU standards,
including quality control equipment modernization. The first round of the
Rural Grant Scheme has supported 13 agro-food processing companies and created
approximately 240 seasonal and 64 long-term jobs. About 400 farmers concluded
contracts with processors to supply them with raw material (milk, meat, fruits,
and vegetables).

IPA 2008 - EU
Support to establish the Qualifications Authority of Kosovo (EUR 2 million)

The EU has
supported the establishment of the Qualifications Authority and the creation of
the qualifications system of Kosovo in respect of vocational education and
training qualifications. The Qualifications Authority is tasked to develop and
maintain the National Qualifications Framework (NQF) in Kosovo and to regulate
the awarding of VET qualifications in the Qualifications Framework of Kosovo.
So far, it has approved and registered 6 qualifications in the NQF and
accredited 12 providers. In 2013, the Qualifications Authority will build on
qualification validation and providers' accreditation and implementation of
processes of validation of occupational standards, the drafting of secondary
legislation for the validation of informal and non-formal learning and work
with the University of Pristina to build a connection between vocational
education and university level education in technical subjects.

IPA 2007 EU –
Mitrovicë/a RAE Support Initiative (EUR 5 million)

In December
2012, the lead-contaminated Osterode camp in north Mitrovica, which had housed
many Roma, Ashkali and Egyptian families for the last 13 years, was finally
closed. Fourteen remaining families moved to newly constructed houses and one
social apartment block, bringing the total number of families resettled from
the lead-contaminated camps in north Mitrovica to 148. The other camp, Cesmin Lug,
was closed in October 2010.

The EU-funded
project provided housing and infrastructure construction and repairs, medical
screening and treatment for elevated blood lead levels, income generation,
community development initiatives, interethnic dialogue, education, civil
registration, legal assistance, and capacity building support for municipal
authorities.

IPA 2009 –
"Culture for All" (EUR 0.5 million),

Through the "Culture
for All" programme the EU supported around 30 small-scale cultural
projects across Kosovo, including the international documentary and short film
festival Dokufest, Jazz Festival, PrifilmFest, Skena up Festival and Remusica.
The project initiated two new cultural activities in public squares such as an
event marking the 'World Book and Copyright Day' held on 23 April 2012, and the
first Open Air Pristina Culture Festival. It also helped to finalise an
assessment report on creative industries and provided advice and financial
support to a number of small-scale events to promote intercultural exchange in
all regions in Kosovo.

Young Cell
Scheme

An external
evaluation of the EU scholarships for future civil servants (Young Cell Scheme)
carried out in 2012 confirmed that the YCS is highly relevant as it clearly
responds to the need for higher professional capacity of Kosovo public
administration and support to EU integration process for Kosovo. The YCS
grantees have brought a positive impact and improved professional capacity of
Kosovo institutions to deal particularly with processes related to European
Integration and strategic planning, which represent the areas of specialisation
where around 70% of YCS grantees have been employed.

After two years
of stagnation and difficulties in ensuring appropriate employment for the YCS
participants after their graduation, the government decided in 2012, thanks to
great efforts of the Ministry of European Integration, that no governmental
institution should employ staff without considering the list of YCS students.
Also as a result, 24 out of 27 students that returned after completing their
studies were instantly employed.

3.2 Overview of the implementation status of the different
instruments and components

Component 1
advanced substantially compared to the previous reporting year in terms of
contracting (see e.g. data for IPA 2009, 2010, 2011). The allocations for 2008
and 2009 - both closed for contracting during 2012 – have been fully contracted
(99.8 % for 2008, both envelopes; 99.7% for 2009). During 2012, the main
challenges were experienced in relation to infrastructure projects. The key
risk relates to essential preconditions not being in place at the start of the
project (example: permits and licenses in works contracts). This is mitigated
by: (1) being diligent in selecting projects (to avoid problems), and
(2) maintaining close cooperation with project beneficiaries (MEI, line
ministries, etc.) (to solve remaining problems during implementation).

For Component II
the contracting has not started yet (apart from technical assistance contracts).
Implementation has started and is progressing well for the programme with
Albania (an open Call for Proposals which combined the financial allocations
for 2010 and 2011 was launched in June 2012), whereas the programmes with FYRoM
and Montenegro have been progressing slowly.

Components 3, 4
and 5 are not applicable in Kosovo, which has no candidate status.

3.3 Sector I: Justice and Home Affairs (focus on visa
liberalisation and the judiciary)

Project implementation in the area of
judiciary and home affairs continued to strengthen the rule of law institutions
in Kosovo, with the aim of contributing to a transparent, independent judiciary
system which respects human rights.

During 2012, a three-year twinning project
was completed which focused on improving the professional capacities of the
Ministry of Justice, enhancing alternative dispute resolution and
supporting the reduction of backlogs in civil court cases. The project has
increased the organisational and administrative performance of the Ministry of
Justice. It has been heavily involved in the training of future and already
certified mediators. To support the correctional and probation services of
Kosovo, workshops have been conducted and materials for day-to-day performance
of duties have been drafted. Finally, judges have been trained with a view to
reducing the number of backlog cases at the civil courts.

The main results of the project include:

·
more than 280 participants from the Ministry of
Justice, the probation and correction services, the prosecution service and the
judiciary took part in trainings ranging from organisational and human
resources issues, the application of existing instruments in mutual legal
assistance, law approximation, risk assessment of sentenced persons and the
treatment of high risk and of drug addicted prisoners and the reduction of
backlogs;

·
more than (future) 60 mediators have been
trained,

·
assistance to more than 10 pieces of legislation
has been provided (amongst them the laws on mutual legal assistance and on confiscation
of assets as well as the criminal procedure code),

·
a roadmap for the reduction of backlogs has been
elaborated.

The EU will continue its support to the
Ministry of Justice with a new twinning project to be launched in 2013
focussing on international legal co-operation.

In November 2012, the EU Office in Kosovo
together with the Ministry of Health and Ministry of Justice, marked the end of
the first part of training for forensic psychiatry professionals. On this
occasion, the EU also presented the designs of the Kosovo Forensic Psychiatry
Institute that will be constructed within the University Centre Clinic in
Pristina.

In the area of legal education a twinning
project was concluded resulting in the development of three new master
programmes developed at the Law Faculty, University of Pristina,  in Criminal
Law,  in Constitutional and Administrative Law and in Financial Law. Another
positive output of the project was the support to a series of legal
publications, for example on applicable laws and court decisions. Finally, the
project established a publishing company to ensure the sustainability of
further publication of relevant legal materials.

In the field of document
security and proper functioning of civil status procedures as one of the key criteria
in the visa liberalisation process, the EU supported Kosovo in implemeting an
agreement reached in the EU-mediated Pristina-Belgrade dialogue which provides
for the certification of copies of civil registry books by EULEX and their
handover to the Civil Registration Agency. The project, which started in June
2012, will help Kosovo to establish a reliable and efficient record keeping of
personal data of citizens and protection of their rights and freedoms. It
concerns those civil registry books which had been transferred to Serbia during
the 1990s.

Other areas
supported by IPA are the fight against organised crime and corruption,
fundamental rights; legal education reform; support to juvenile justice reform.

Worth mentioning
is that IPA supported part of the population census via a trust fund and the
remaining funds from the Population and housing census have been transferred to
support the agriculture census for Kosovo.

3.4 Sector II: Private Sector Development (focus on trade
and business environment)

Private sector development continued to be
supported through IPA at the central and local level.

During 2012, 9 municipalities benefited
from the Beautiful Kosovo Programme, which helped them to realise a total of 12
small and medium-scale infrastructure projects, such as the creation or
renovation of parks, river banks and school yards and protection of cultural
heritage. The total value of the initiated projects was around EUR 1 million,
whereas municipalities contributed around EUR 140,000. Through these 12
projects, over 450 short-term jobs and  some 30 long-term employments were
created. Special attention was given to vulnerable groups such as people with
disabilities and women.

In the area of support to trade, a
technical assistance project has assisted the Ministry of Trade and Industry in
developing its institutional capacity to prepare negotiating positions for a
free trade agreement and to implement agreed policy initiatives in line with
international trade requirements and EU practices.

3.5 Sector III: Public Administration Reform

In 2012, the assistance in this priority
area mainly focused on the development of administrative capacity of Kosovo’s
civil service, local government and the wider decentralisation process, public
finance management, public procurement, statistics and design of a trade
policy.

In the field of public finance management,
the EU supported the Office of the Auditor General, the financial control
framework and internal audit systems, and the improvement of the quality of public
investment allocation decisions, through further development of the Public
Investment Programme.

The EU Office continued to use the twinning
instrument as implementing modality for capacity building projects. An example
is the twinning which helped to improve the capacity of the Office of the
Auditor General to provide quality information on the use of public funds and
to further develop good governance across the public sector in Kosovo. In
addition, SIGMA provided continued support in the area of public administration
reform.

Another project implemented through the twinning
instrument has supported the Kosovo Assembly in strengthening its position
within the constitutional framework of Kosovo and its role in the process of
approximation to EU legislation, norms and standards.

3.6 Cross-border cooperation

Kosovo's Operating Structure for cross-border cooperation, the
Ministry of Local government Administration, continued to receive technical
assistance to implement the three cross-border programmes with Albania, the
former Yugoslav Republic of Macedonia, and Montenegro.

Out of the three CBC programmes, the
cooperation between Kosovo and Albania has progressed furthest. An open Call
for Proposals combing the allocations of 2010 and 2011 was launched in June
2012 and the first steps of the evaluation procedure were finalised in December
2012. The two Operating Structures have initiated the procedures for the
identification of strategic project ideas for the 2012-13 allocations which
should result in a joint application containing all the supporting
documentation including Project Fiches, feasibility study, environmental impact
assessment, etc.

In the CBC programme Kosovo-Montenegro, the
preparation for establishing Joint structures have started. The first Call for
Proposals wich will include three years allocations, is expected to be launched
in mid-2013.

Progress under the CBC programme Kosovo and
the former Yugoslav Republic of Macedonia has been slow. During 2012, a study and technical design for a joint border
crossing point was carried out, but a decision on the character of the border
crossing is pending. Alternatively, the programme may be implemented through a
Call for Proposals.  As of the second semester 2012, Joint structures have been
established.

4. IMPLEMENTATIONAND MONITORING
MODALITIES AND STRUCTURES

In 2012 Kosovo
was included in the target area of the Result-Oriented Monitoring (ROM) project
managed by DG Enlargement's Regional and Horizontal Programmes unit.
Accordingly, most of the on-going IPA projects were monitored by an independent
team of experts.

44 national
projects with a total value of approximately EUR 128 million were covered by
ROM assessments carried out through four missions. The 44 ROM assessments
included three ex-post ROM reports. The average score of the 41 ongoing
projects’ performance is 2.91 on the scale from 4 - very good to 1 - serious
deficiencies, which is a slight improvement compared to 2011 (average score
2.89). The average score of the three projects monitored ex-post is 3.3. The
consolidated ROM report for projects monitored in 2012 highlights that the vast
majority of on-going projects are relevant, with roughly 85 % having A and B
ratings. Positive impact is reflected through A and B grades awarded to 80% of
the projects.

Internal monitoring is systematically carried out by the EUO through
different mechanisms:

·
approx. 2,437 project monitoring meetings
between task manager, contractor and/or beneficiaries aiming at coordinating
particular contracts related issues have been held in 2012. Such meetings have
as main purpose to ensure proper follow up and to discuss particular issues to
be solved.

·
222 Project Steering Committee Meetings
involving the task managers, the team leader, contractors, beneficiaries and
stakeholders to analyse the implementation of the project and find common
solutions to difficulties encountered.

·
on the spot checks are carried out by the task
manager. By the end of December 2012, more than 738 on the spot checks were
carried out.

PART II - FINANCIAL DATA (EUR million and %)

On implementation of assistance at 31 December 2012

IPA I + II - Kosovo

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

IPA 2007 || 82.70 || 82.58 || 99.86% || 73.24 || 88.56%

IPA 2008 || 183.32 || 182.66 || 99.64% || 139.22 || 75.94%

IPA 2009 || 103.60 || 103.32 || 99.73% || 57.73 || 55.73%

IPA 2010 || 72.10 || 63.19 || 87.64% || 30.02 || 41.63%

IPA 2011 || 68.90 || 30.69 || 44.54% || 12.91 || 18.74%

IPA 2012 || 67.50 || 2.50 || 3.70% || 2.38 || 3.52%

Total || 578.12 || 464.94 || 80.42% || 315.50 || 54.57%

IPA –
Component I National Programme Kosovo

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

IPA 2007 || 62.00 || 61.75 || 99.60% || 56.62 || 91.32%

IPA 2008 || 182.70 || 182.34 || 99.80% || 138.90 || 76.03%

IPA 2009 || 103.60 || 103.32 || 99.73% || 57.73 || 55.73%

IPA 2010 || 63.90 || 56.02 || 87.67% || 22.92 || 35.87%

IPA 2011 || 62.90 || 26.49 || 42.11% || 8.92 || 14.19%

IPA 2012 || 63.20 || 0.00 || 0.00% || 0.00 || 0.00%

Total || 538.30 || 429.91 || 79.87% || 285.09 || 52.96%

IPA –
Component II (CBC) Programme Kosovo

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

IPA 2007 || || || || ||

IPA 2008 || || || || ||

IPA 2009 || || || || ||

IPA 2010 || 1.20 || 0.17 || 13.89% || 0.09 || 7.85%

IPA 2011 || 1.80 || 0.00 || 0.00% || 0.00 || 0.00%

IPA 2012 || 1.80 || 0.00 || 0.00% || 0.00 || 0.00%

Total || 4.80 || 0.17 || 3.47% || 0.09 || 1.96%

Status of
Implementation of IPA financial assistance per country at 31st
December 2012 of total committed funds (2007 – 2012):

The following
tables provide the amount of all IPA allocations between 2007 and 2012 in EUR
million by beneficiary and by component for Candidate Countries and Potential
Candidates. The figures take into account transfers made between components I
and II during the course of 2012.

At 31 December 2012 IPA Component I managed by Enlargement DG[19]:

EUR Million || Committed || Contracted || Percentage || Paid || Percentage

Croatia || 242.08 || 205.93 || 85.07% || 137.85 || 56.94%

the former Yugoslav Republic of Macedonia || 202.18 || 131.25 || 64.92% || 78.69 || 38.92%

Iceland || 24.00 || 10.04 || 41.83% || 3.41 || 14.19%

Montenegro || 152.04 || 106.14 || 69.81% || 90.43 || 59.48%

Turkey || 1,390.41 || 1,376.61 || 99.01% || 772.50 || 55.56%

Albania || 430.01 || 299.24 || 69.59% || 169.72 || 39.47%

Bosnia  and Herzegovina || 474.60 || 248.99 || 52.46% || 159.35 || 33.58%

Kosovo || 538.30 || 429.91 || 79.87% || 285.09 || 52.96%

Serbia || 1028.99 || 760.06 || 73.86% || 541.33 || 52.61%

Total || 4482.61 || 3568.17 || 79.60% || 2238.37 || 49.93%

 At 31 December 2012 IPA Component II managed by Enlargement DG:

EUR Million || Committed || Contracted || Percentage || Paid || Percentage

Croatia || 15.02 || 10.32 || 68.71% || 6.75 || 44.94%

the former Yugoslav Republic of Macedonia || 16.22 || 4.13 || 25.46% || 3.10 || 19.11%

Montenegro || 18.10 || 9.83 || 54.31% || 7.11 || 39.28%

Turkey || 6.93 || 6.93 || 100% || 1.69 || 24.39%

Albania || 21.77 || 8.16 || 37.48% || 5.76 || 26.46%

Bosnia and Herzegovina || 15.12 || 7.50 || 49.60% || 5.88 || 38.87%

Kosovo || 4.80 || 0.17 || 3.47% || 0.09 || 1.96%

Serbia || 18.97 || 12.11 || 63.85% || 9.00 || 47.44%

Total || 116.93 || 59.15 || 50.59% || 39.38 || 33.68%

At 31
December 2012 IPA Component II, implemented by Regional Policy DG:

EUR Million || Committed || Paid || Percentage

Adriatic || 205.66 || 59.45 || 28.9%

Slovenia-Croatia || 35.75 || 16.24 || 45.4%

Hungary-Croatia || 43.90 || 19.85 || 45.2%

Hungary-Serbia || 41.96 || 22.96 || 54.7%

Romania-Serbia || 44.47 || 18.43 || 41.4%

Bulgaria-Serbia || 26.26 || 9.15 || 34.8%

Bulgaria-the former Yugoslav Republic of Macedonia || 14.99 || 5.64 || 37.6%

Bulgaria-Turkey || 22.83 || 7.85 || 34.4%

Greece-the former Yugoslav Republic of Macedonia || 12.60 || 6.08 || 48.3%

Greece-Albania || 9.47 || 4.62 || 48.8%

Total || 457.89 || 170.27 || 37.19%

At 31
December 2012, IPA Component III,
implemented by Regional Policy DG:

EUR Million || Committed || Paid || Percentage

Croatia || 329,68 || 88,64 || 26,9%

the former Yugoslav Republic of Macedonia || 199,93 || 48,15 || 24,1%

Turkey || 1747,58 || 519,29 || 29,7%

Montenegro || 22,24 || 0 || 0%

Total || 2299,43 || 656,08 || 28,5%

At 31
December 2012 IPA Component IV, implemented by Employment, Social Affairs and
Inclusion DG:

EUR Million || Committed || Paid || Percentage

Croatia || 85.88 || 35.02 || 41%

the former Yugoslav Republic of Macedonia || 33.50 || 10.33 || 31%

Turkey || 473.66 || 109.48 || 23%

Montenegro || 2.77 || 0 || 0%

Total || 403.18 || 96.32 || 23.9%

At 31
December 2011 IPA Component V, implemented by Agriculture and Rural Development
DG:

EUR Million || Committed || Paid || Percentage

Croatia || 129.90 || 30.08 || 23.16%

the former Yugoslav Republic of Macedonia || 63.49 || 11.33 || 17.8%

Turkey || 650.38 || 81.25 || 12.5%

Total || 843.77 || 122.66 || 14.5%

              B.      MULTI
- BENEFICIARY

1. SUMMARY

Regional
cooperation in South East Europe has made important progress in recent years,
in particular in the areas of trade, statistics, energy and transport,
cooperation in public administration reform and civil protection. The bulk of
IPA support to the beneficiaries is delivered through the national programmes.
However, around 9% of available funds are allocated through the
Multi-Beneficiary programmes (MB). They complement national programmes and
strengthen multi-lateral relations in the Western Balkans and Turkey in areas
identified as crucial for European integration and stability in the region.

Areas of
intervention are only addressed through MB assistance where there is a clear
need for regional cooperation or horizontal action, for instance through
tackling cross-border problems or in increasing efficiency through establishing
harmonised approaches, leveraging existing instruments or facilitating networks
of experts. In the period 2012, the indicative allocation available for this
totalled around EUR 222. 06 million for Component I.

A regional
project promoting inclusive education has been selected as one of the
priorities in the sector Justice and Home Affairs, including fundamental rights
and vulnerable groups while a regional project to strengthen witness protection
enhances the fight against organised crime and corruption. Refugee return and
provision of durable housing solutions is addressed through the Regional Housing
Programme under the umbrella of the Sarajevo Process, for which the EU is the
biggest donor.

Particular
attention has been given to projects that help the beneficiaries to overcome
the economic and financial crisis and to sustain the emerging economic recovery
by continuing financial support for priority investments in infrastructure, in
close coordination with International Financial Institutions (IFIs).
Investments in energy efficiency are geared towards achieving sustainable
economic growth and embracing the Europe 2020 strategy.

In the sector of
Environment and Climate Change, a regional project has been selected to enhance
civil protection cooperation in the Western Balkans and Turkey. With a view to
foster reforms and regional cooperation in education, the IPA 2012 Multi
Beneficiary programme will continue previous practice and support the Erasmus
Mundus Action 1 and 2 as well as the Youth in Action programme in the sector
Social Development. Regarding the support to civil society, 18 framework partnership
agreements were signed in 2012 with more than 170 organisations from the region
and Europe in various priority sectors like anti-corruption, energy, human
rights and security, environment and natural resources.

2. STRATEGIC PLANNING AND
PROGRAMMING
2.1 Multi-annual Indicative Planning Document

The purpose of
the Multi-Annual Indicative Planning Document (MIPD) is to set out the EU's
priorities for Multi-Beneficiary assistance for the programming period
2011-2013. MB programme assistance is provided
through component I of IPA. Subject to annual reviews, the areas of
intervention set out in the MB MIPD served as a basis for the annual
programming of IPA assistance in 2011, 2012 and 2013.

The bulk of IPA
support to the beneficiaries is delivered through the national programmes.
However, around 9 % of available funds are allocated through the MB programmes
to complement national programmes and strengthen multi-lateral relations in the
Western Balkans and Turkey in areas identified as crucial for European
integration and stability in the region. Areas of intervention are only
addressed through MB assistance where there is a clear need for regional
cooperation or horizontal action, for instance through tackling cross-border
problems or in obtaining efficiencies through establishing harmonised
approaches, leveraging established instruments or facilitating networks of
experts. In the period 2011-2013, the indicative allocation available for this
totalled around EUR 526 million for component I.

The MB MIPD
2011-2013 was adopted by Commission Decision C(2011)4179 of 20 June 2011. The
overall objective of the MB MIPD 2011-2013 is to support the candidate
countries and potential candidates in the accession process by creating
favourable conditions for political and economic reforms and promoting regional
cooperation that support reconciliation and political dialogue in order to
achieve political stability, security and economic prosperity in the region.

As foreseen in
the IPA regulation, the MIPD 2011-2013 was subject to a review carried out in
the second half of 2012. The review concluded that the strategy outlined in the
MB MIPD 2011-2013 is still in line with the Strategy Paper and Progress
Reports, so there is no need for the revision of the current MIPD. The scope,
overall objectives and strategic choices of the MIPD remain valid as they have
been based on the agreed principles of assistance under IPA, guidance provided
in the EU strategic documents, lessons learned from the programming and
implementation of previous EU assistance and findings from consultations with
amongst others, the IPA beneficiaries, International Financial Institutions,
the Regional Cooperation Council, and other regional initiatives, Civil Society
organisations, EU Member States and Commission services. It was therefore
recommended that the MIPD 2011-2013 is not undergoing a revision.

Table 1: MIFF[20] allocations per component, in million EUR

Component || 2011 || 2012 || 2013 || 2011-2013

I – Transition Assistance and Institution Building || 173.46 || 168.86 || 183.84 || 526.16

II – Cross-border cooperation || 5.29 || 5.67 || 6.06 || 17.02

TOTAL || 178.75 || 174.53 || 189.90 || 543.18

2.2 Programming exercise
2.2.1 Component I

For the 2012 programmes:

The MB 2012
programmes address all priorities of the MIPD either directly or indirectly,
while particular attention is paid to public administration reform, the fight
against organised crime and corruption and to support recovery from the recent
economic crisis.

Energy
efficiency and higher education as well as support to Civil Society and refugee
return also figure high on the agenda. With a view to facilitate programming,
the projects have been consolidated into separate Programmes:

–
Multi-Beneficiary Programme 2012, adopted on
31/05/2012;

–
Tempus Programme 2012, adopted on30/05/2012;

–
Civil Society Facility 2011-2012, adopted on 5/12/2011,
amended to include an allocation for 2013 on 9/08/2012;

–
Monitoring Programme 2012, adopted on
20/07/2012;

–
Regional Housing Programme (Sarajevo process)
phase 2: 2012-2013, adopted on 17/12/2012.

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

COUNTRY/MULTI-BENEFICIARY || 2012

I. Transition Assistance and Institution Building || 250.24

Of which: ||

Multi-Beneficiary programme  2012                                                                                    || 108.65

Amendment to MBP 2010 allocation SIGMA 2012 || 3.00

Tempus Programme\* || 14.90

Civil Society Facility allocation 2012                                                                                     || 8.50

Regional Housing Programme (Sarajevo process) allocation 2012 || 74.70

Support to the operation budget of the office of the High Representative (OHR) in Bosnia and Herzegovina || 4.58

Support to the Interim Civilian Office Kosovo || 2.50

Contribution to the Energy Community secretariat || 3.00

TAIEX || 12.00

Information and Communication || 10.00

ERDF || 1.34

Monitoring Programme || 3.48

Evaluation and audit || 3.59

TOTAL || 250.24

\*Management of the allocations for this programme was cross-delegated
to DG Education and Culture (EAC)

The
selection process of projects that form part of these annual programmes has
been based on sector plans and discussions in sector working groups that were
set up for the purpose to define the priorities for the MIPD 2011–2013 and hence
in full coordination with the IPA beneficiaries, other donors, the RCC, civil
society and other stakeholders, taking also into account lessons learnt of past
and on-going programmes.

Only
projects that have achieved sufficient readiness for implementation have been
accepted.

With
a view to maintain the momentum of public administration reform and
improve public governance, projects include continuous support to the Regional
School of Public Administration (ReSPA) and Support for Improvement in Governance
and Management (SIGMA).

Horizontal
support to statistics will also continue, as it is not only an essential basis
for the development of democratic and market-oriented societies, but also a
precondition for successful accession negotiations. Parliamentary Cooperation
in the Western Balkans has been singled out as being a powerful tool to enhance
public governance and hold governments accountable.

A
regional project promoting inclusive education has been selected as one of the
priorities in the sector Justice and Home Affairs, including fundamental
rights and vulnerable groups while a regional project to strengthen witness
protection enhances the fight against organised crime and corruption. Refugee
return and provision of durable housing solutions is addressed by a separate
programme.

Particular
attention has been given to projects that support the beneficiaries to overcome
the economic and financial crisis and support the nascent economic recovery by
continuing financial support for priority investments in infrastructure,
in close coordination with IFIs. Investments in energy efficiency are deemed to
hold the key for achieving sustainable economic growth and embracing the Europe
2020 strategy. Technical assistance for project preparation will also be provided.

In
the sector of Environment and climate change, a regional project has
been selected to enhance civil protection cooperation in the Western Balkans
and Turkey.

With
a view to foster reforms and regional cooperation in education, the IPA 2012 MB
programme will continue previous practice and support the Erasmus Mundus Action
1 and 2 as well as the Youth in Action programme in the sector Social
Development.

Support
to Civil Society is provided by a separate multi-annual programme.

Coordination
and coherence of assistance and activities is particularly important, given the
large number of players involved in multi-beneficiary IPA assistance
programming. The need for improved coordination and coherence has been
highlighted to the Commission during consultations as a continuing concern by
the authorities of the region.

Efforts
are being made by the Commission to ensure good coordination in the programming
as well as the implementation process by organising regular meetings throughout
the year with beneficiaries, EU Delegations, EU Member States, IFIs, the RCC
and other stakeholders. This process is aimed at ensuring complementarities,
avoiding overlaps and enhancing, as far as possible, local ownership of the
choices, content and design of the programmes.

The
Commission organises on a regular basis donor coordination meetings where the
Commission and Member States, together with the IFIs and non-EU donors, discuss
those projects that were selected to form the MB programmes. The discussions
proved to be a key tool to determine areas of common interest and possibilities
for sector coordination and division of labour.

Throughout
the programming process the Commission has also worked very closely with
international organisations, public sector bodies and IFIs to prepare smooth
implementation in particular where this is foreseen to be carried in joint
management or by delegating implementation tasks.

Prominent
examples are the Western Balkans Investment Framework (WBIF) as well as the
Refugee Housing Programme.

Table 3: Indicative
financial allocations for the year 2012 under the Multi-beneficiary Programme,
per sector and per project, in million EUR

MIPD sector || Projects || Budget

Public Administration Reform || 20.00

|| Support to the Regional School of Public Administration || 6.00

|| Parliamentary Cooperation || 1.00

|| SIGMA || 3.00

|| Statistics || 10.00

Justice and Home Affairs || 86.35

|| Regional support for inclusive education || 4.65

|| Witness protection II || 7.00

|| Refugee Housing Programme allocation 2012 || 74.70

Private Sector Development || 2.00

|| WBIF || 2.00

Transport and energy infrastructure || 50.00

|| WBIF || 50.00

Environment and Climate Change || 2.00

|| Civil protection || 2.00

Social Development || 37.90

|| Erasmus Mundus Action 1 || 8.00

|| Erasmus Mundus Action 2 || 12.00

|| Youth in Action || 3.00

|| Tempus || 14.90

Other || 3.00

|| Strengthening European Integration || 3.00

Civil Society Support || 8.50

|| Civil Society Facility allocation 2012 || 8.50

Supporting programmes || 40.49

|| Support to the operation budget of the office of the High Representative (OHR) in Bosnia and Herzegovina || 4.58

|| Support to the Interim Civilian Office Kosovo || 2.50

|| Contribution to the Energy Community secretariat || 3.00

|| TAIEX || 12.00

|| Information and Communication || 10.00

|| ERDF || 1.34

|| Monitoring Programme || 3.48

|| Evaluation and audit || 3.59

TOTAL || 250.24

For the 2013 programme:

At the end of 2012, the preparations for the 2013 Multi-beneficiary
programme and Tempus have been concluded. The MB programme 2013 was presented
at the IPA Committee meeting of 5 December and received a unanimous positive
opinion.

The Tempus 2013 programme was submitted at the end of December in
written procedure to the IPA Committee.

3. IMPLEMENTATION OF ASSISTANCE
3.1Success stories

IPA 2010 "Fight against organised crime and corruption:
Strengthening the Prosecutors' Network (CN 271-284"), (EUR 5.0 million)

The project
strengthens the operational capacity and capabilities of the General/State
Prosecutors’ Offices in the Western Balkan countries to prosecute and
investigate cross-border organised crime and linked cases of economic and
financial crime and corruption. It institutionalises the Western Balkan
Prosecutor Network and increases cooperation with international and European
networks. The overall objective of the project is to
contribute to improved cross-border and international judicial cooperation in
the Balkan countries.

Through the
support of the project in 2012, Joint Investigation Teams (JITs) with various
EU Member States have been formally set up, focussing especially on human trafficking
and forgery of documents. Furthermore the project assisted in coordination
meetings of prosecutors and police officers, witness hearings in neighbouring
countries and asset recovery measures.

IPA 2011 - "Regional reporting on transitional justice issues"
(CN 275-110) (EUR 0.46 million)

Since its launch
with EU support in 2012, the "Regional reporting on transitional justice
issues project" of the Balkan Investigative Reporting Network (BIRN) has
already had a significant impact on the perception of transitional justice
across the Balkans. It has raised awareness of transitional justice issues
among local citizens - a first step in the process of reconciliation. It has
ensured that facts remain at the forefront of any debate on transitional justice
and provided a sense of assurance to victims that the process will not be
terminated, regardless of political changes in the Balkans.

The unique
multi-language, multimedia programme which involves daily updated news reports
and analysis for the Transitional Justice section on BIRN’s flagship
publication “Balkan Insight”, plus radio and television productions, fills a
crucial gap in a region where media is to a certain extent biased, ethnically
divided and subject to political and economic pressure.

The Balkan
Transitional Justice (BTJ) online publication is the only media outlet in the
region giving constant, impartial, in-depth coverage of war crimes trials,
political news related to transitional justice and its impact on ordinary
people. A recent UNDP Kosovo Report, ‘Perceptions on Transitional Justice’,
praised the programme for successfully researching and reporting on war crimes.

BTJ’s high
journalistic quality is based on solid, perceptive and sensitive reporting from
its pool of journalists in Bosnia and Herzegovina, Croatia, Kosovo, Macedonia,
Montenegro and Serbia, who were all specially trained by the Balkan
Investigative Reporting Network.

Since the
project started, more than 1,160 articles (news, analysis and interviews) were
published, providing a unique insight into the issue and creating a crucial
source of information for researchers, analysts, academics, judicial experts,
students and media. There were at least 4,000 republications of BTJ articles by
local media outlets across the region.

The project will
also have a long-term impact, through the creation of a dedicated trials' and
analysis archive for the public, allowing free access to the most comprehensive
archive material on these topics for people in the Balkans and elsewhere.

The programme
also includes the production of documentary series and a film that will be
distributed to media networks across the region for broadcast and also to film
festivals. The film follows young people from six Balkan countries as they
travel across the region witnessing the impact of the 1990s conflicts.

The Transitional
Justice team is regularly contacted by ordinary people from the region seeking
help, such as war veterans, families looking for missing persons and people
left without personal documents who have lost their property.

It has also become a trustworthy source of information for local,
regional and international media as well as for judiciary members, students and
numerous other stakeholders and opinion-formers. Some of the most prominent
international media outlets have conducted interviews with BTJ journalists,
including the BBC, Time, The Guardian and Al Jazeera.

IPA
2010 – "Strengthening the South East European Joint History Project as a
Tool for

Reconciliation
South East Europe"(CN 260-676) (EUR 0.98 million)

The Joint
History Project (JHP) is an on-going, social, political and educational
initiative that begun under the auspices of the CDRSEE in 1999, a
non-governmental organisation in Thessaloniki, aiming at an informed,
significant and realistic change in historical research and education in all
countries of South East Europe. The objectives are to encourage debate,
celebrate diversity and recognise common achievements through a participative
approach to history teaching, in order for students and teachers to develop the
understanding and skills needed for sustainable peace and a democratic future.
In the long term, the JHP aims to revise ethnocentric school history teaching.

The project
assists in the production of a set of alternative history-teaching education
materials. Four joint history books are currently available in ten languages on
four topics relevant in all South East European Curricula: The Ottoman Empire,
Nations and States, the Balkan Wars, and World War II.  These are designed and
written by prominent experts from all over the region – supplemented with
continuous teacher training, outreach and media work. The four joint history
books have been disseminated to teachers, distributed to schools, universities
and libraries in South East Europe. Over 1000 teachers have participated in
workshops and have been trained in using the workbooks. Some 4,250 copies of
the workbooks have already been disseminated to teachers and 2,600 more will be
distributed by 2014.

The JHP is funded
by around 20 donors – both public and private institutions.

In 2012 the
project was subject to a Result Oriented Monitoring (ROM) assessment which gave
a very positive assessment in terms of performance and expected impact.

Education Ministers
or their deputies have participated in the launches of all language editions so
far and have publicly praised the project. However, it should be recognised
that the material has not been included in the formal national curricula in any
of the countries. On the other hand, in some countries, the materials and
teacher training component has been certified and is on offer as part of the
national supplementary teacher training development programmes.

IPA 2011 - EASA
– IPA II Project (CN 279-348) (EUR 0.7 million)

The European
Aviation Safety Agency (EASA) - IPA II project is helping to improve air safety
by bringing together Civil Aviation Authorities in the Western Balkans to meet
and exchange views on safety procedures, to promote compatibility among safety
management systems and discuss ways to cooperate with each other. This will
contribute to the overall objective of the IPA project to support the Western
Balkan countries to become part of the EU Single Aviation Area.

PART II - FINANCIAL DATA

On implementation of assistance at 31 December 2012

IPA Multi-Beneficiary

Multi Beneficiary || Allocated || Contracted || % Contracted || Paid || % Paid

IPA 2007 || 98.56 || 97.60 || 99.02% || 88.42 || 89.71%

IPA 2008 || 147.25 || 144.75 || 98.30% || 126.77 || 86.09%

IPA 2009 || 204.51 || 197.79 || 96.71% || 186.52 || 91.20%

IPA 2010 || 110.51 || 103.36 || 93.53% || 78.17 || 70.74%

IPA 2011 || 168.21 || 148.51 || 88.29% || 68.92 || 40.97%

IPA 2012 || 222.06 || 56.76 || 25.56% || 6.68 || 3.01%

Total || 951.10 || 748.77 || 78.73% || 555.47 || 58.40%

              C.      Towards
a more efficient and effective delivery of assistance: linking assistance more
closely to the enlargement policy priorities and the sector approach

1. Towards a new Instrument for
Pre-accession for 2014-2020

After an
extensive stakeholder consultation and an ex-ante evaluation on the
future pre-accession assistance instrument which contributed significantly to
shape the future instrument, the Commission adopted a proposal for the IPA II
Regulation on 7 December 2011, as part of a package of external action
instruments. The Commission proposal aims at linking the pre-accession
assistance more closely to the enlargement policy priorities and to move
towards a sector approach.

In the course of
2012, the proposal for the IPA II Regulation was subject to discussion and
negotiation in Parliament and Council, and the negotiations were still ongoing
as this report was written.

In parallel, the Commission started to
prepare the draft IPA-specific Rules of Application and the strategic planning
documents, in view of completing the framework for programming and delivering
IPA II assistance. It launched a study on the implementation of the sector
approach and initiated duly dedicated working groups addressing different
dimensions of the implementation modalities of the new instrument.

2. Cooperation with the donor
community on aid effectiveness

In 2012, the
Commission continued to pursue the donor coordination agenda including efforts
to maximise aid effectiveness and transparency in line with the commitments
made at the 4th High Level Forum on Aid Effectiveness in Busan in
November 2011, where the Commission agreed on the importance of shared
principles such as ownership of priorities, importance of results, transparency
and accountability. In addition, the donor community, including the Commission,
committed to improving the quality and effectiveness of development
co-operation also through the transparency of its aid.

In the course of
2012, the Commission took further steps to ensure alignment of funding under
the Instrument for Pre-accession (IPA) with the international standards on aid
transparency. In accordance with the commitments made during the 2012 Busan Conference
on Partnership for Effective Development Co-operation, relevant information on
Official Development Assistance (ODA) will be made available to the public in
standard format at the latest by the end of 2015. Through the publication of
datasets with information at the organisation and activity levels as well as on
current and future expenditure, the Commission will provide Member State
authorities, their citizens and third countries with timely, comprehensive and
forward-looking information on resources provided through development
cooperation.

In line with the
recommendations of the Organization for Economic Co-operation and Development
(OECD) in the framework of its DAC[21]
Peer Review of the EU 2012, the Commission has reviewed its programme
design approach. The implementation of the sector approach envisaged under IPA
II is aiming at managing external aid in a more effective way and making
pre-accession assistance more effective, efficient and results-oriented.

Further
developments in line with a more results-oriented approach are expected from
IPA in the future. In this respect, a working group was established in 2012
with the purpose of developing a framework for indicators to be used at the
level of the country strategies for monitoring, evaluation and review of
progress and performance.

The Commission
is coordinating these processes to make sure that pre-accession assistance is
in line with the various initiatives within the Commission, as well as by EU
Member States, International Financial Institutions and the wider donor
community, to improve donor coordination and aid effectiveness and to ensure
achieving expected results.

3. Sector approach

Throughout 2012
the Commission continued the gradual implementation of the sector approach in
the programming of the next financial instrument for pre-accesion assistance
(IPA II) for the period 2014-2020.

The gradual move
towards a sector approach was decided as a follow-up of the IPA Conference of
October 2009, with the purpose to better achieve results, impact and added
value through the assistance. These principles have become key for all new
external action instruments for the period 2014-2020.

The shift
towards a sector approach is particularly relevant at a time when budget
constraints faced by Member States and International Financial Institutions
call for an even more efficient and sustainable pre-accession assistance: a
strategy-based approach to programming built upon the countries' needs and
strengths will contribute to a more effective and results oriented
pre-accession process. Moreover, while ensuring greater ownership of national
authorities over the programmes, since the sector approach is based on national
strategies, such an approach maximises the potential for complementarity. It
increases the leverage between different modes of support and helps to
rationalise the support through an appropriate division of labour. The
relevance of this new approach was confirmed in the IPA stakeholder conference
in Zagreb in April 2011 and the conclusions of the evaluation on the current
IPA implementation.

The IPA
Multi-annual Indicative Planning Documents (MIPDs) covering the years 2011-2013
were drafted to reflect this approach, resulting in more focused documents and
aiming at achieving an enhanced prioritization and more targeted assistance. A
new programming method including new programming templates and guidance, was
already introduced at the end of 2011 for the programming of the budget years
2012 and 2013. In the course of 2012, all national authorities made a sustained
effort to analyse the readiness of the sectors identified in their respective
MIPD to move towards a sector approach. As such, 2012 saw the first genuine
attempt to implement a sector approach in enlargement countries and served as a
pilot test for the more substantial changes that will take place under IPA II.

Meanwhile, draft
guidelines on the application of a sector approach to pre-accession assistance
were produced by the Commission in the course of 2012, to be finalised in 2013,
to serve the programming of IPA II. In 2013, the Commission has also held
workshops on the sector approach in all IPA beneficiary countries to allow for
a thorough understanding of the application of the sector approach for the
programming of IPA II funds.

4. Lessons learned from Evaluation

The role of evaluation
is attracting increasing attention from governments and development agencies,
and reflects a cornerstone related to the aid effectiveness agenda. Different
actors are presently engaged in enhancing the policy making role of evaluation,
disseminating a "performance culture" and actually strengthening the
departments dedicated to evaluation.

The interest in evaluation
originates from Member States, EU Parliament, Court of Auditors, the civil
society but also, increasingly, from within the Commission. In particular, the
March 2012 Directorate General for Enlargement Internal Audit Capability report
on IPA programming is also mentioning a "confusion of strategic and
operational objectives" and recommends to "develop comprehensive
methodology of setting and distinguishing three levels of objectives
(strategic, operational and intervention) in the intervention logic, ensuring
appropriate logical links between them and elaborating how to define SMART
indicators". As a follow-up to the DG seminar held on 25 January 2013, a
Working group on "performance culture" was set up.

Progress towards
the overall objective of enlargement policy is assessed against the policy’s
impact on enlargement countries meeting the political, economic and EU acquis
criteria for accession and coming closer to the standards of the EU, as well as
meeting the Stabilisation and Association conditions in the EU’s policy
framework for the Western Balkan countries.

The
implementation of the policy is supported by the Instrument for Pre-Accession
Assistance (IPA) financial instrument 2007-2013. The added value of the
IPA program lies in its characteristic to act as a main driver for the
preparation of the candidate countries and potential candidates for future EU
membership. IPA is designed to give countries a ‘test run’ of the obligations
of membership before accession (such as putting in place institutions for
managing post-accession EU funds, and/or adopting the acquis and EU standards).
It provides a comprehensive toolbox, linked to the EU global field presence,
wide-ranging expertise and economies of scale.

An emphasis on a
move towards policy evaluation, in order to better apprehend the link between
implementation of financial cooperation and achievement of the policy goals set
out, is presently pursued. Based on the recommendations of an IAC audit on
programming, an internal working group has been set up and is active elaborating
guidelines and more relevant performance indicators to be used in the 2014-2020
programming exercise. A joint project on capacity development on Monitoring and
Evaluation has been launched in 2012 with the World Bank and is under
implementation.

The move towards
result oriented sector approaches has been confirmed in the present draft IPA
Regulation, also taking on board results of past evaluations, the
recommendations of the IPA Conference of 2009 and the Special report on Turkey
issued by the Court of Auditors in 2010.

In the context of the main
challenges and objectives for the EU’s enlargement policy in 2012, a thematic
evaluation on the EU's support to strengthening Governance, Rule of Law,
Judiciary Reform and Fight against Corruption and Organised Crime in the
Western Balkans was finalized in 2012. The evaluation confirms the importance
of the issue, raised by the Council and European Parliament, which both
underlined that strengthening the rule of law and democratic governance in
candidate and potential candidate countries remains crucial. The evaluation on
the Rule of Law found out that in all seven Western Balkan countries, the
actions bring a clear added value to national authorities, as there have been
major improvements to the fundamental institutional and organisational
frameworks in the rule of law sector. Nevertheless, the challenges ahead are
stronger political will, increase in the ownership of the program and local
administrative capacity which remain crucial conditions for a sustainable
judicial reform.

In terms of efficiency and
effectiveness, the evaluation supports the simplification of IPA II programming
to fewer instruments, more sector programming with longer time-horizons. On the
beneficiary side, it was recommended that judicial reform programmes should
have clear priorities reflected in national policy and budget propositions,
ensuring stable planning parameters and financing. On the EU side, the
evaluator recommended that the EU shall elaborate overall and programme
objectives with regard to Governance and Rule of Law and shall
re-assess/increase the IPA funding following the evidence based programming.
Priority programmes could have a four-to-seven year horizon with clear
'stoppage points' for review and adjustment.

Taking into account the results
of the current evaluation, a notion for introduction of multi-annual planning
in IPA II assistance, covering the duration of the next multi-annual financial
framework, with a mid-term review, was proposed. Regarding the performance
measurement and management of financial assistance in the areas Governance,
Rule of Law, Judiciary Reform and Fight against Corruption and Organised Crime,
the evaluation pointed out the importance of coming up with the elaboration of
SMART (Smart, Measurable, Achievable, Realistic, Time-bounded) objectives and
indicators of measurement to support programming and monitoring of performance
of financial assistance and reforms. Some of the proposed indicators are
currently used to develop an indicator framework for the programming exercise
for IPA II assistance.

Another thematic evaluation on judiciary
and fundamental rights in Turkey recommended using a sectoral programming
approach in programming new IPA II. Moreover it concluded that a Judiciary and
Human Rights field is appropriate for a programme sector-based approach for IPA
II assistance, while considering agreed political priorities and a streamlined
programming process. Based on the evaluation, the EU assistance in judiciary
and fundamental rights in Turkey was considered as supportive, adding value in
enhancing human rights reforms to meet the political criteria for EU accession,
strengthening the effectiveness of the court system to take into account
European human rights standards and demonstrating an adequate level of delivery
of results in view of the available resources. However, the evaluation pointed
out weaknesses in the programming and implementation of assistance, which
deprive the assistance of some of its added value. Following the evaluation's
recommendations to streamline the programming process while strengthening the
ownership by relevant institutions and enhance its transparency to
beneficiaries, some amendments in programming IPA II are foreseen. Elements of flexibility,
improved governance and growing ownership by the beneficiary countries will be
introduced in new IPA II programming to cater for emerging needs and give
incentives to improve performance.

The thematic Evaluation of EU's
Support to Civil Society in the Western Balkans and Turkey recommended
greater involvement of civil society and stakeholders in the programming and
project selection mechanisms. In addition, it proposed better synergy between
EU and non-EU interventions, in the programming and implementation of IPA
assistance. The evaluation contributes to proposing some modifications in the
management of the new IPA program in terms of increasing cooperation with other
donors and International financial institutions at strategic level. In addition
it supports enhancing stakeholder's participation in programming through
working groups, Sectoral Monitoring Sub-Committee and Transition Assistance and
Institution Building meetings.

The strategic/interim evaluation
of the SIGMA (Support for Improvement in Governance and Management)
programme assessed the relevance, effectiveness and potential impact and
sustainability of SIGMA collaboration, support and advice. The evaluation
reported that SIGMA's input is considered indispensable and effective, but it
also acknowledged that the process is driven by mutual demand as institutional
and legislative developments. A structured and traceable hierarchy of general
and specific objectives and integrated (political) risks is currently lacking,
which hampers the positive impact of SIGMA’s input. To overcome the bottleneck,
the evaluation proposed establishing a SIGMA's intervention logic, representing
the programme as a whole. Both the Commission services and SIGMA were advised
to search for a new agreement, which could be useful to provide a real time
overview of SIGMA’s implementation context. Also in
line with the evaluation recommendations, the purpose of the SIGMA assessment
will be broadened. Starting in 2013, in three countries, the assessment
will become the basis for a more effective policy dialogue, a tool for
informing IPA national and regional funding, and a tool for SIGMA to develop
country reform plans.

Conclusions

Drawing on these findings,
lessons learnt and recommendations in evaluations, the Commission's proposal
for the new IPA II programme seeks to make the necessary adaptations to meet
the challenges currently faced. Hence, during 2012 a number of important
milestones were achieved related to the establishment of the regulatory and
strategic framework of pre-accession assistance post 2013 (IPA II) and the
development of the sector approach. IPA II was designed so as to ensure
continuity and transition from the current IPA, to operate under simplified and
harmonised rules across all Commission departments, and to facilitate access to
funding for beneficiaries. For better effectiveness and efficiency, the
assistance will be made more result-oriented, flexible and tailored to specific
needs.

5. TAIEX, a demand driven
instrument aligned with EU policy priorities

TAIEX (Technical
Assistance and Information Exchange) was set up in 1996 to share EU Member
State public administrations' technical expertise in all fields of EU
legislation with those countries that are about to join the European Union. In particular,
TAIEX facilitates the delivery of tailor-made expertise to address issues at
short notice. In 2006 the instrument was extended to neighbourhood countries,
both South and East. TAIEX is mainly driven by incoming demand. Nevertheless,
in 2012 requests submitted by beneficiary public administrations largely
matched the policy priorities set by the European Union.

In recent years
Enlargement Strategy and ENPI policy documents have attached increased
importance to strengthening the rule of law and countering corruption and
organised crime. Assistance requests submitted by TAIEX beneficiaries have
increasingly focused on this policy area – Freedom, Security and Justice. A
record level of operations, 475 out of a total 1,879 of TAIEX activities, took
place in 2012.

TAIEX assistance
also covered traditionally highly requested areas of the internal market (IM),
as well as agriculture and food safety (AGRI), and environment, transport and
telecommunications (ETT).

·
A flexible instrument

Outside classic TAIEX
events, the Local Administration Facility (LAF) aims to increase awareness
among Western Balkan local and regional authorities on how the EU works and
what accession means for their responsibilities. In total 14 LAF events were
organised, to the benefit of almost 400 representatives from local and regional
administrations.

In 2012, the
TAIEX instrument's flexibility was demonstrated by a broad set of other
activities. Increasing use is being made of medium-term technical assistance, a
sequence of agreed short-term interventions. This approach has been used in the
agriculture and food safety sectors as well as, generally, in assistance to the
Turkish Cypriot community, Iceland, and Kosovo.

TAIEX further
supported the assessment of Montenegro's compliance with the EU acquis, the
so-called screening, a key part of the EU accession process. Finally, TAIEX
organised several assessment missions chiefly aimed at providing feedback on
the legislative, institutional and administrative “state of play” in defined
sectors of a beneficiary country.

·
TAIEX outreach

In line with the
trend registered since 2005, in 2012 TAIEX reached around 30,000 public
officials from beneficiary countries. Turkey, the former Yugoslav Republic of
Macedonia, Croatia and Bosnia and Herzegovina benefited the most from TAIEX
assistance with almost five thousand Turkish participants (4,767) and more than
3,000 from the other three countries (3,431, 3,232 and 3,223).

·
TAIEX experts, the instrument's driving force

TAIEX operations
rely on the expertise provided by public administration officials from the EU
Member States. The knowledge and competence of the experts mobilised by TAIEX
has been rated as excellent by more than half of the participants and in
general the level of appreciation is noticeably high. In 2012 almost 5,000
experts were mobilised.

·
Tracking TAIEX performance and impact

The overall goal
of TAIEX operations is transferring expertise in EU legislation from experts to
events' participants. In 2012, this objective was met for the large majority of
events; 99% of participants who provided feedback reported that the attended
TAIEX event had enabled them to improve their knowledge.

The transfer of
knowledge and expertise can and should lead to more tangible and meaningful
effects for the beneficiary administration. With the aim of measuring both the
effectiveness and the final impact of TAIEX assistance, a new evaluation system
has been put in place. Six months after the implementation of an event,
applicants are asked to provide a synthetic, online feedback on the specific
assistance delivered.

·
Logistics

Organising
almost 2000 operations per year represents a considerable challenge not only in
matching assistance requests with tailored expertise, but also logistically.
For the practical implementation of events, TAIEX relies on the external
support of a service provider that in 2012 procured and provided highly
appreciated interpretation, accommodation, transportation, and conference venue
support services.

              D.      PHARE,
CARDS, TURKEY PRE-ACCESSION AND TRANSITION FACILITYFINANCIAL DATA AT 31ST
DECEMBER 2012 :

1. EU 12 – PHARE and Transition Facility - Decentralised Management

PHARE together with the Transition Facility proved to be
a complex and efficient instrument responding to most of the pre-accession
needs and acquis related post-accession issues.

The project implementation phase was successfully
completed in 2011 for PHARE and the Transition Facility. All payments were
therefore finalised before 2012. There was however, throughout 2012, some
remaining work to be done. Significant developments were made concerning the
clearing of the accounts and the closure of programmes including 56 programmes that
were closed, 40 programmes that were subject to the Clearance of Accounts 'Final
Decision' and 28 that were subject to the Clearance of Accounts 'Opening
Positions'. The total amount cleared in 2012 was approximately EUR 0.58 billion.

The last Joint
Monitoring Committees on EU-10 took place in 2010 and for Bulgaria and Romania
the last ones took place in 2011 for the supervision of the remaining few
programmes, via written procedure. No supervision of implementation was
necessary since 2011.

Total
commitments, contracts and payments:

CARDS Total ||  Allocated || Contracted || Percentage || Paid || % Paid

CARDS 2001 || 951,941,764 || 951,941,764 || 100.00% || 951,941,764 || 100.00%

CARDS 2002 || 526,714,315 || 526,129,157 || 99.89% || 525,615,185 || 99.79%

CARDS 2003 || 485,017,422 || 484,821,558 || 99.96% || 484,000,541 || 99.79%

CARDS 2004 || 545,815,353 || 541,386,249 || 99.19% || 537,831,820 || 98.54%

CARDS 2005 || 411,760,483 || 408,857,507 || 99.29% || 402,863,483 || 97.84%

CARDS 2006 || 376,224,823 || 372,270,702 || 98.95% || 354,431,683 || 94.21%

Total || 3,297.474,162 || 3,285.406,938 || 99.63% || 3,256,684,475 || 98.76%

2. Candidates and Potential
Candidates - CARDS (and PHARE for HR) or Turkey Pre-accession Assistance -
FINANCIAL DATA

The main
objectives of CARDS programmes were: (i) support to good governance,
institution building and the rule of law; (ii) continued support to the
development of a market economy while investing further in vital physical
infrastructure and environmental actions and (iii) support to democratic
stabilisation, social development and strengthening of civil society. These
objectives contributed to the all-encompassing goal of CARDS annual Action Programmes
which aimed at helping Candidates and Potential Candidates prepare for EU
accession. Therefore, the main lesson learned along the way concerned
increasing ownership of the EU programming process encouraged by the
beneficiary together with proper coordination and cooperation must be ensured
also from other donors when trying to deliver an important message to the government.

In order to ensure that EU funds implemented under
decentralised management are used in accordance with the applicable rules, and
in line with the Financial Regulation, the Commission applies
'clearance-of-accounts' procedures or financial correction mechanisms which
enable it to assume final responsibility for the implementation of the EU
budget.

This process is essential to, inter alia, assess
whether EU-funded projects achieved the foreseen results and met specific
objectives.

During 2012, the Commission performed on-the-spot checks
on the contents of the accounts and on the underlying transactions presented in
the aforementioned final declaration of expenditure, including checks made
jointly with the Croatian institutions.

The next steps will be for the Commission to establish
the amount of expenditure recognised as chargeable to the budget, recover the
balance and close the programmes. This process includes an "adversarial
procedure" during which the national authorities are expected to respond
to the Commission's observations on the final declarations.

 In this regard, an ex-post evaluation of CARDS has been
launched in 2012 and another ex-post evaluation of PHARE has been planned in
the evaluation work plan for 2013.

A Success story among others

In Serbia, the
"Rehabilitation and extension of the waste water treatment plant of
Subotica" (total budget: EUR 18 million; EU Contribution - CARDS 2004: EUR
4.92 million - (works EUR 4.72 million and TA EUR 0.2 million). Other project
partners were: PUC “Vodovod i kanalizacija” Subotica/EBRD Loan: EUR 9 million,
funds allocated by the Municipality of Subotica: EUR 3 million; Italian government
Grant: EUR 0.59 million; Public Water Management Company Vode Vojvodine: EUR 0.45
million; Kingdom of the Netherlands Grant: EUR 0.15 million.

In March 2012,
citizens of Subotica and the region saw the opening of a new waste water treatment
plant. Through the Medically Indigent Services Program (MISP), the EU financed
the construction of a EUR 5 million sludge line, thus solving the problem of
poorly treated waste water full of phosphate and nitrate which was heavily
polluting the lake and the region's soil. The sludge line will now help to
restore the ecological balance and natural habitat of Palić Lake by pumping
filtered, clean water into the lake. In addition, the new treatment plant saves
energy as the treatment of waste water produces biogas which in turn is used to
generate electricity.

Management
performance : Status of financial assistance at the end of December 2012
(in million EUR) – CARDS /PHARE annual programmes

CROATIA:

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

CARDS 2001 || 58.00 || 56.06 || 96.66% || 52.69 || 90.84%

CARDS 2002 || 59.00 || 56.78 || 96.24% || 54.43 || 92.25%

CARDS 2003 || 62.00 || 61.08 || 98.52% || 58.25 || 93.95%

CARDS 2004 || 81.00 || 77.92 || 96.20% || 74.13 || 91.52%

Phare 2005 || 78.14 || 67.79 || 86.75% || 62.35 || 79.79%

Phare 2006 || 68.71 || 59.16 || 86.10% || 56.12 || 81.68%

Total || 406.85 || 378.79 || 93.10% || 357.97 || 87.99%

THE FORMER
YUGOSLAV REPUBLIC OF MACEDONIA

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

CARDS 2001 || 56.64 || 56.64 || 100.00% || 56.64 || 100.00%

CARDS 2002 || 33.033 || 33.033 || 100.00% || 33.033 || 100.00%

CARDS 2003 || 36.005 || 36.005 || 100.00% || 36.005 || 100.00%

CARDS 2004 || 53.175 || 53.175 || 100.00% || 51.351 || 96.57%

CARDS 2005 || 34.044 || 33.498 || 98.40% || 32.364 || 95.07%

CARDS 2006 || 33.399 || 30.577 || 91.55% || 29.65 || 88.78%

TOTAL || 246.296 || 242.928 || 98.63% || 239.043 || 97.06%

SERBIA

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

CARDS 2001 || 193.61 || 193.61 || 100.00% || 193.61 || 100.00%

CARDS 2002 || 165.79 || 165.79 || 100.00% || 165.12 || 99.60%

CARDS 2003 || 211.76 || 211.76 || 100.00% || 209.14 || 98.76%

CARDS 2004 || 200.64 || 199.19 || 99.28% || 200.18 || 99.77%

CARDS 2005 || 147.17 || 146.99 || 99.87% || 146.22 || 99.35%

CARDS 2006 || 157.47 || 155.96 || 99.04% || 155.13 || 98.51%

Total || 1076.44 || 1073.29 || 99.71% || 1069.41 || 99.35%

BOSNIA AND
HERZEGOVINA

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

CARDS 2001 || 105.23 || 98.12 || 93% || 98.12 || 93%

CARDS 2002 || 60.50 || 56.53 || 93% || 56.53 || 93%

CARDS 2003 || 50.60 || 46.08 || 91% || 46.07 || 91%

CARDS 2004 || 62.10 || 60.09 || 97% || 60.8 || 97%

CARDS 2005 || 44.00 || 42.78 || 97% || 42.27 || 96%

CARDS 2006 || 43.80 || 42.23 || 96% || 41.70 || 95%

Total || 366.23 || 345.83 || 94% || 344.77 || 94%

ALBANIA

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

CARDS 2001 || 43.39 || 40.09 || 94,26% || 40.09 || 100%

CARDS 2002 || 31.69 || 31.69 || 100% || 31.69 || 100%

CARDS 2003 || 37.83 || 37.40 || 98,85% || 37.40 || 100%

CARDS 2004 || 58.03 || 56.15 || 96,76% || 53.34 || 95,00%

CARDS 2005 || 38.07 || 37.64 || 98,89% || 35.80 || 95,11%

CARDS 2006 || 40.85 || 40.36 || 98,79% || 35.70 || 88,47%

Total || 249.86 || 244.14 || 97,71% || 234.84 || 96,19%

TURKEY

|| Allocated by EU || Contracted by PAO Turkey || % Contracted || Paid by PAO Turkey || %Paid

TPA 2001 || 57.45 || 56.42 || 98.21% || 54.51 || 94.88%

TPA 2002 || 126.00 || 112.18 || 89.03% || 104.94 || 83.29%

TPA 2003 || 144.00 || 122.03 || 84.74% || 117.11 || 81.33%

TPA 2004 || 235.60 || 194.38 || 82.50% || 186.16 || 79.02%

TPA 2005 || 269.25 || 228.30 || 84.79% || 221.46 || 82.25%

TPA 2006 || 450.00 || 387.50 || 86.11% || 374.19 || 83.15%

Total || 1,282.30 || 1,100.81 || 85.85% || 1,058.38 || 82.54%

TPA = Transition Period Assistance. EU allocated funds to Turkey under
MEDA and PHARE programmes.

              Acronyms and
Abbreviations:

AFD                                                    Agence
Française de Dévéloppement

ARPA                                                  Agency
for the Audit of EU Programmes' Implementation System

BIRN                                                   Balkan
Investigative Reporting Network

BISO                                                   Business
Innovation Support Organisations

BSP                                                     Business
Service Providers

BTJ                                                      Balkan
Transitional Justice

CAP                                                    Common
Agricultural Policy

CBC                                                    Cross
Border Cooperation

CDRSEE                                             Center for Democracy and Reconciliation in Southeast Europe

CFCD                                                  Central
Financing and Contracting Department

CFCU                                                  Central
Finance and Contracts Unit

CIP                                                      Competitiveness
and Innovation Framework Programme

CoE                                                     Council
of Europe

CPC                                                    Commission
for Protection of Competition

CPiE                                                    Country
Programme interim Evaluation

DOPA                                                 Department
of Public Administration

EASA                                                  European
Aviation and Safety Agency

EBRD                                                  European
Bank for Reconstruction and Development

EFQM                                                 The European Foundation for Quality Management

EIB                                                      European
Investment Bank

EMAS                                                 European Eco-Management and Audit Scheme

ENTSO-E                                            European
Network of Transmission System Operators for Electricity

ESF                                                     European
Social Fund

EUPM                                                 European
Union Police Mission

FWC                                                   Framework
Contract

GAGF                                                  Greater
Anatolia Guarantee Facility

HACCP                                               Hazard analysis and critical control points

IAC                                                     Internal
Audit Capability

ICMP                                                  International
Commission for Missing Persons

IDPs                                                    Internally
Displaced Persons

IFIs                                                      International
Financial Institutions

ILO                                                      International
Labour Organisation

IMO                                                    International Maritime Organization

IPA                                                      The
Instrument of Pre-Accession

IPARD                                                 Instrument
for Pre-Accession in Rural Development

IPPC                                                    Integrated
Pollution Prevention Control

IPRs                                                     Industrial
Property Rights

ISA Programme                                   Interoperability
Solutions for European Public Administrations

ISCO                                                   International
Standards Classification of Occupations

ISKUR                                                Turkish
Public Employment Service

ISTAT                                                 Albanian
Institute of Statistics

JHP                                                      Joint
History Project

JIT                                                       Joint
Investigation Teams

JMC                                                    Joint
Monitoring Committee

JTS                                                      Joint
Technical Secretariat

KFW                                                   Kreditanstalt
für Wiederaufbau

LAGs                                                   Local
Action Groups

LLP                                                     Life
Learning Programme

MIFF                                                   Multi
Annual Indicative Financial Framework

MIPD                                                  Multi-Annual
Indicative Planning Document

MoELSP                                              Ministry
of Economy, Labour and Social Inclusion

NAO                                                   National
Authorising Officer

NIPAC                                                National
IPA Coordinator

NOF                                                    National
Qualifications Framework

OCTA                                                 Organised
Crime Threat Assessment

ODA                                                    Official
Development Assistance

OPHRD                                               Operational
Programme for Human Resources Development

OVIs                                                    Objectively
Verifiable Indicators

PAR                                                     Public
Administration Reform

PPP                                                     Public-Private
Partnership

PPR                                                     Peste
des petits ruminants

PSO                                                     Public
Service Obligation

RDA                                                    Research
and Data Analysis

ROM                                                   Result
Oriented Monitoring

SAA                                                    Stabilisation
and Association Agreement

SI                                                         Structural
Instruments

SIGMA                                                Support for Improvement in Governance and Management

SMCS                                                 Sectoral
Monitoring Sub-Committees

SMEs                                                   Small
and Medium-Size Enterprises

TAIB                                                   Transition Assistance and Institution Building

TCA                                                    Turkish
Customs Administration

TEIAS                                                 Turkish
Electricity Transmission Corporation

UNDP                                                 United
Nations Development Programme

UNICEF                                              United
Nations Children's Fund

UNIDO                                               United
Nations Industrial Development Organization

VET                                                     Vocational
Education and Training

WB                                                      World
Bank

WHO                                                   World
Health Organisation

WLA                                                   Workload
Assessment

YCS                                                    Young
Cell Scheme

[1] This designation is without prejudice to positions on status, and
is in line with UNSCR 1244 and the ICJ Opinion on the Kosovo Declaration of
Independence.

[2] For the purpose of this Report, figures quoted under National
Programmes refer to Components I

[3]Decision C(2011)4181 of 17.6.2011.

[4]As reflected by the Communication from the Commission to the
European Parliament and the Council Instrument FOR Pre Accession Assistance
(IPA) Revised Multi-Annual Indicative Financial Framework for 2013. COM(2012)
581 of  10 October 2012

[5] LEADER ("Liaison Entre Actions de Développement
de l'Économie Rurale", meaning 'Links between the rural economy and
development actions') is a local development method which allows local actors
to develop an area by using its endogenous development potential. The LEADER
approach forms one of the four axes of Rural Development Policy 2007–2013. In
this section you will find all you need to know about LEADER, just click on any
of the sections below.

[6]Communication from the Commission to the
Council and the European Parliament 'Instrument for Pre-Accession Assistance
(IPA) Multi-Annual Indicative Financial Framework for 2011-2013', new MIFF (10.10.2012
COM(2012) 584 final)

[7]C(2010)7470

[8]               The radar chart approach is one of a number of
special analytical tools that have been developed in connection with
benchmarking in the private and public sectors.

[9]               Communication from the Commission to the Council and
the European Parliament 'Instrument for Pre-Accession Assistance (IPA) Revised
MIFF for 2013, COM(2012)
581 final of 10.10.2012.

[10]Decentralised Management since 2009

[11] This Decision has entered into force on the day on
which the Regulation whereby Montenegro is inserted into Annex 1 of Regulation
(EC)1085/2006 enters into force.

[12]              Communication from the Commission to the Council and
the European Parliament 'Instrument for Pre-Accession Assistance (IPA)
Multi-Annual Indicative Financial Framework for 2011-2013', COM(2009) 543 of 14.10.2009

[13]              Commission Implementing Decision of 11 December 2012,
C(2012) 9382 final.

[14] Commission Implementing Decision, of 13 December 2012 C(2012), 9675
final.

[15] This designation is without prejudice to positions on
status, and is in line with UNSCR 1244/99 and the ICJ Opinion on the Kosovo
declaration of independence.

[16]             The difference with Table 1 is explained by the
allocation for participation in ERDF transnational programmes (EUR 0.51
million)

[1] Communication
from the Commission to the European Parliament and the Council 'Instrument for
Pre-Accession Assistance (IPA) Revised Multi-Annual Indicative Financial
Framework for 2011-2013', COM(2010)
640 of 10.11.2010.

[17] Joint Stock Company Serbian Railways

[18]Communication from the Commission to the Council and the European
Parliament 'Instrument for Pre-Accession Assistance (IPA) Revised MIFF for
2013, COM(2012) 581
final of 10.10.2012.

[19]             Croatia, the former Republic of Macedonia, Turkey
benefit from Decentralised Management, which  consists in transferring the
allocated EU-funds to the Ministry of Finance of the beneficiary country who
will be responsible for managing the effective contracts and payments.

[20]             Communication from the Commission to the Council and
the European Parliament 'Instrument for Pre-Accession Assistance (IPA)
Multi-Annual Indicative Financial Framework for 2011-2013', COM(2009) 543 of 14.10.2009.

[21] Development Assistance Committee, Development Co-operation
Directorate (DCD-DAC), OECD

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