Source: EURLEX
Language: en
Format: md

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# 52012SC0385

**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 2011 Annual Report on Financial Assistance for Enlargement (IPA, PHARE, CARDS, Turkey Pre-Accession Instrument, Transition Facility) /\* SWD/2012/0385 final \*/**

  

Table
of Contents

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

CROATIA.. 4

1. SUMMARY.. 4

2. STRATEGIC PLANNING AND PROGRAMMING.. 4

3. IMPLEMENTATION OF EU FINANCIAL ASSISTANCE IN 2011. 9

4. IMPLEMENTATION AND MONITORING MODALITIES AND
STRUCTURES. 21

TURKEY.. 25

1. SUMMARY.. 25

2. STRATEGIC PLANNING AND PROGRAMMING.. 25

3. IMPLEMENTATION OF EU FINANCIAL ASSISTANCE IN 2011. 31

4. IMPLEMENTATION AND MONITORING MODALITIES AND
STRUCTURES. 46

ICELAND.. 51

1. SUMMARY.. 51

2. STRATEGIC PLANNING AND PROGRAMMING.. 51

3. IMPLEMENTATION OF EU FINANCIAL ASSISTANCE IN 2011. 55

THE FORMER YUGOSLAV REPUBLIC of MACEDONIA.. 57

1. SUMMARY.. 57

2. STRATEGIC PLANNING AND PROGRAMMING.. 57

3. IMPLEMENTATION OF EU FINANCIAL ASSISTANCE IN 2011. 60

4. IMPLEMENTATION AND MONITORING MODALITIES AND
STRUCTURES. 67

MONTENEGRO.. 71

1. SUMMARY.. 71

2. STRATEGIC PLANNING AND PROGRAMMING.. 71

3. IMPLEMENTATION OF EU FINANCIAL ASSISTANCE IN 2011. 76

4. IMPLEMENTATION AND MONITORING MODALITIES AND
STRUCTURES. 86

ALBANIA.. 90

1. SUMMARY.. 90

2. STRATEGIC PLANNING AND PROGRAMMING.. 90

3. IMPLEMENTATION OF EU FINANCIAL ASSISTANCE IN 2011. 95

4. IMPLEMENTATION AND MONITORING MODALITIES AND STRUCTURES. 103

SERBIA.. .. 106

1. SUMMARY.. 106

2. STRATEGIC PLANNING AND PROGRAMMING.. 106

3. IMPLEMENTATION OF EU FINANCIAL ASSISTANCE IN 2011. 110

4. IMPLEMENTATION AND MONITORING MODALITIES AND STRUCTURES. 119

BOSNIA AND HERZEGOVINA.. 123

1. SUMMARY.. 123

2. STRATEGIC PLANNING AND PROGRAMMING.. 123

3. IMPLEMENTATION OF EU FINANCIAL ASSISTANCE IN 2011. 127

4. IMPLEMENTATION AND MONITORING MODALITIES AND
STRUCTURES. 134

KOSOVO\* 137

1. SUMMARY.. 137

2. STRATEGIC PLANNING AND PROGRAMMING.. 137

3. IMPLEMENTATION OF EU FINANCIAL ASSISTANCE IN 2011. 140

4. IMPLEMENTATION AND MONITORING MODALITIES AND
STRUCTURES. 144

B.           MULTI-BENEFICIARY.. 150

1.       SUMMARY.. 150

2.       STRATEGIC PLANNING AND PROGRAMMING.. 150

3.       IMPLEMENTATION OF EU FINANCIAL ASSISTANCE IN
2011. 154

C.        TOWARDS A MORE EFFICIENT AND EFFECTIVE DELIVERY OF
ASSISTANCE MORE CLOSELY TO THE ENLARGEMENT POLICY PRIORITIES AND THE SECTOR
APPROACH.. 166

1.        TOWARD A NEW IPA
REGULATION FOR 2014 - 2020. Error!
Bookmark not defined.

2.        TOWARDS A MORE EFFICIENT DELIVERY OF ASSISTANCE: GRADUALLY
IMPLEMENTING THE SECTOR APPROACH TO THE ENLARGEMENT POLICY PRIORITIES. 166

D.        PHARE, CARDS, TURKEY PRE-ACCESSION AND TRANSITION FACILITY
–FINANCIAL DATA AT 31ST DECEMBER.. 171

1.        PHARE, TURKEY PRE-ACCESSION AND TRANSITION FACILITY FUNDS
IMPLEMENTATION BY CPOUNTRY AT THE END OF 2011: 171

2.        CARDS FUNDS IMPLEMENTATION
BY COUNTRY AT THE END OF 2011.... .... 173

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

              CROATIA

1.
SUMMARY

For Croatia, 2011 marked the culmination of its accession negotiations with the European
Union, with the closure of the accession negotiations on 30 June 2011, followed
by the signature of the Accession Treaty on 9 December 2011.

The
implementation of EU financial assistance in 2011 in Croatia, also in line with
the priorities selected for the MIPD 2011-2013, accompanied these developments
by providing support for completing reforms and building up capacity in the key
areas necessary for assuming the obligations of membership, such as justice and
home affairs or public administration reform, as well continuing the efforts of
preparing Croatia for the use of post-accession funds.  The 2011 IPA programme
of EUR 39.159 million is consistent with these priorities.

A
Special Report by the Court of Auditors, finalised after a meeting between the
Commission and the Court in October 2011, concludes that EU pre-accession
assistance is making a significant contribution to supporting Croatia's preparations to manage structural and cohesion funds. It also stressed that
further progress in capacity-building to manage EU funds is needed.

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

In
contrast to the 2009-2011 MIPD, which structured the priorities for EU
assistance according to the Copenhagen criteria for enlargement (the political
criteria, economic criteria, and the ability to assume the obligations of
membership), the 2011-2013 MIPD reflects the shift to a more sectorial 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 improving donor coordination.

The key
sectors identified for EU assistance and detailed in the MIPD are as follows:
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.

The
choice to focus on these particular sectors came as a result of the conclusions
highlighted in the Enlargement Strategy and Main Challenges 2010—2011 and the
accompanying 2010 Progress Report for Croatia[1], where the need to
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.

Moreover,
addressing the priorities identified under the sectors 3 to 7 continues 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. A special report published by the
Court of Auditors[2]
has confirmed the good management of these funds.

Table 1: MIFF[3] allocations per
component, in EUR million

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

I – Transition Assistance and Institution Building || 39,959,128 || 39,969,161 || 19,256,943 || 99,185,232

II – Cross-border cooperation || 15,869,158 || 16,442,542 || 8,499,192 || 40,810,892

III – Regional Development || 58,200,000 || 57,578,127 || 31,000,000 || 146,778,127

IV – Human Resources Development || 16,000,000 || 16,040,000 || 9,000,000 || 41,040,000

V – Rural Development || 26,500,000 || 26,151,182 || 27,700,000 || 80,351,182

TOTAL || 156,528,286 || 156,181,012 || 95,456,135 || 408,165,433

2.2 Programming
2.2.1 Component I

The 2011 National Programme for Croatia under the IPA Transition
Assistance and Institution Building component was adopted by the European
Commission on 11 November 2011, on the basis of a proposal from the Croatian
National IPA Coordinator (NIPAC) and following extended consultations with the
European Commission. In addition to this programme,
EUR 0.33 million have been allocated to support activities on
"Connecting the Croatian Customs Administration (CCA) to the Common
Communication Network and Common System Interface" and EUR 5 million to
support the preparation of a project pipeline for Structural and Cohesion Funds
in Croatia under the JASPERS facility (Joint Assistance to Support Projects in
European Regions). These two projects were adopted
separately from the main National Programme in order to allow a quicker
implementation.

The
main 2011 programme contains 10 projects, with the total EU contribution
amounting to EUR 33.8 million. Given Croatia's advanced stage of
membership preparations, and in line with the 2011-2013 MIPD, the EU assistance under this IPA programme increasingly moved
from sheer adoption and concrete implementation of the acquis to more
general administrative strengthening of post–accession priorities, with a
particular focus on justice, home affairs and fundamental rights, as well as
public administration reforms. These priorities had also been highlighted in the Enlargement Strategy and Main Challenges
2010—2011 and 2010 Croatia Progress Report[4].

The Commission, with the support of the EU Delegation in Croatia, organised consultations, both on the MIPD
2011-2013 and on the 2011 National Programme, with EU Member States' embassies
and local branches of International Financial Institutions (IFIs) in Zagreb. The assistance provided by IFIs and
bilateral donors further reinforced the prospects for sustainability of EU
assistance, with a good example provided by the Justice Sector Support
Programme financed by the World Bank, which started in 2010 (EUR 27.9
million) and thus complementing the actions to be financed by the IPA 2011
national programme.

Lessons
highlighted by a number of IPA related evaluations, such as the thematic Public
Administration Reform[5]
evaluation, the Country Programme Interim Evaluation 2009 (performed by the European Commission), as well as
the Country Programme Interim Evaluation 2010 (carried out by the Croatian
authorities), were taken into account in the course of the programming process.
In particular, more attention was paid to conditionality and sequencing, where
measures have been deployed to improve the administrative ability to implement
projects and to enhance the involvement of decision-makers in the execution of
projects, and to facilitate inter-institutional coordination.

Furthermore,
following the mid-term evaluation of IPA assistance, the NIPAC has taken on a
more proactive role throughout the project preparation and selection process.
In particular, efforts were made to enhance their role in the prioritisation,
sequencing and quality assessment of project proposals before their submission
to the Commission.

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

Priority Sector || Projects || Budget

Sector 1: Justice and Home Affairs and Fundamental Rights || 19.153

NP 2011  part 3 - 1) || 01-23 - Support to the rationalization of court network || 9.376

NP 2011  part 3 - 2) || 01-35 - Civil Society Facility – Active Civil Society for ensuring durability of policy reforms in post-accession Croatia || 2.859

NP 2011  part 3 - 3) || 01-23 - Restoration and Equipping of the premises for PNUSKOK Osijek and  Rijeka || 1.793

NP 2011  part 3 - 4) || 03-24 - Strengthening capacities of the Ministry of the Interior to combat computer crime || 0.665

NP 2011  part 3 - 5) || 03-24 - Construction and Equipping of the Centre for Training Dog Handlers and Police Dogs || 2.312

NP 2011  part 3 - 6) || 03-24 - Upgrading the capacities of the Reception Centre for Foreigners || 2.148

Sector 2: Public Administration Reform || 3.762

NP 2011  part 3 - 7) || 03-18 – Technical assistance in development of business statistics and upgrading of data collection system || 0.693

NP 2011  part 3 - 8) || 04-40 - Flexible Facility for Reinforcement of Administrative Capacity || 2.739

NP 2011  part 1 || "Connecting the Croatian Customs Administration (CCA) to the Common Communication Network and Common System Interface (CCN/CSI)" || 0.330

Sector 3 + Sector 4: Environment and Climate Change" and "Transports" || 5.000

NP 2011  part 2 || JASPERS - Support to the preparation of a project pipeline for Structural and Cohesion Funds in Croatia || 5.000

Sector 7: Agriculture and Rural Development || 4.180

NP 2011  part 3 - 9) || 03-11 - Strengthening the PAAFRD capacities for meeting the challenges arising from the CAP and the CFP reforms and the post-2013 period || 4.180

Supporting programmes || 7.062

NP 2011  part 3 - 10) || 04-65 - Participation in Union Programmes and Agencies ||

TOTAL || 39.159

2.2.2 Component II

The
Financing Decisions allowing for the deployment of IPA 2010 and 2011 funds
regarding CBC with Western Balkan countries had been adopted in August and
September 2010. In 2011, the CBC envelopes available for actions on borders
with Croatia amount to EUR 2 million, for the border with Bosnia and
Herzegovina EUR 0.9 million, for the one with Montenegro, EUR1.8 million and
the same amount is allocated  for cooperation with Serbia, these amounts
representing the contributions from both sides of the border for each
programme.

In the course of 2011,
all 2008 CBC programmes between Croatia and its IPA neighbouring countries (3
programmes) were granted an extension of the contracting deadline to allow for
the full implementation.

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 approach. 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 will be revised again in 2012
in order to cover the full programming period (2007-2013).

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 the technology transfer and the Small and Medium Enterprises
(SMEs).

2.2.4 Component V

With 
regard to the multi-annual programme 2007-2013 for IPA Component V, adopted in
February 2008, a fourth proposal for modification was submitted to the
Commission in July 2011, following consultations and approval by the national
stakeholders.

Croatia
proposed a number of technical modifications meant to improve clarity and
simplify the administration and implementation of the programme by taking into
account experience gained so far. The main modification concerned the technical
adaptation of measure 202 "Preparation and implementation of local rural
development strategies". These updates were also intended to harmonize the
programme with the accreditation process. This measure is particularly crucial
in the involvement of local rural actors as well as the implementation of IPARD[6] through
public-private partnerships and Local Development Strategies.

Moreover,
due to lessons learnt from earlier practice, this amendment is expected to increase
absorption thanks to the eligibility of projects from Axis I measures for
realisation under Local Development Strategies.

Additionally,
Croatia has proposed to broaden the scope of potential beneficiaries under
the Measure 101 "Investment in agricultural holdings" adjusting and
updating the programme indicators.

3.
IMPLEMENTATION OF EU FINANCIAL ASSISTANCE IN 2011
3.1 Success stories

IPA
2008 Component I 'Support to the establishment of a State School for Judicial
Officials', EUR 230 000.

Starting
2013 Croatia will appoint new judges and prosecutors exclusively from
candidates who having successfully completed the two-year cycle. This project
supported the Croatian Judicial Academy, in charge for the School and other
involved institutions (State Judicial Council, State Prosecutorial Council,
etc.) in preparing a training strategy, developing training programmes, and
strengthening selection procedures through structured interviews based on
objective criteria. The project contributed to the general need, based on EU
standards, of increasing the independence, professionalism and accountability
of the judicial system. Specific recommendations were provided in order to
guarantee the success of the School in recruiting the most suitable candidates
becoming the future Croatian judges and prosecutors responsible for managing
the Croatian judicial system within the EU internal market and called to verify
on the correct implementation of the EU law in Croatia.

IPA
2008 Component I 'Developing the National Information System for Nature
Protection Supervision', EUR 250 000.

The
purpose of the project was to ensure the sustainable management and
strengthening of supervision in proposed Natura 2000 sites through improved
administration of biodiversity data for efficient implementation (pursuant to
the Birds and Habitats Directives). The project contributed to the development
of an information system that will be used by inspectors and supervisors
engaged in nature protection supervision. New additional functionality and new
software modules, specially designed for nature protection inspection and
supervisors, were established.

IPA
Component IV 2007-2011, 'Vocational Education and Training (VET) Quality
Assurance Development', EUR 1.74 million.

The
project assisted with the implementation of pilot self-assessment process in 20
VET secondary schools throughout Croatia, in line with the recommendation of
European Quality Assurance Reference Framework for VET (EQARF-VET). The
Self-Assessment Manual produced with the assistance of the project will serve
as the main guiding instrument for the remaining approximately 300 VET
schools in Croatia to undertake the same self-assessment process. The
experience of 20 piloted schools' staff will be available through peer
learning activities organized among VET schools, and is already available
through a web-based tool which was created with the assistance of this project.
In future all VET schools will upload the relevant documents into this newly
created tool. This will ultimately result in creation of a comprehensive
database which will allow overview at national level and will allow the
responsible national authorities to adopt informed decision for modernisation
of formal VET in Croatia.

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

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

Under
Component I, this development was expressed by a reduction of the
"rejection rate" – in the context of the EU Delegation's ex ante
control on tendering and contracting files submitted by the Croatian
authorities - in the second half of 2011 to below 5%. This positive trend needs
to be sustained in 2012. However, while gradually expanding, absorption
capacity remained a challenge for the Croatian authorities in order to catch up
past delays (see Part II on financial data). The Commission continued to help
the authorities to select mature project proposals for funding in order to ease
future implementation.

In
regard to Component II, for CBC programmes with other IPA countries, all grants
from the first call for proposals were successfully contracted in the first
quarter of 2011. The second calls for proposals for all programmes were
launched in the second half of 2011. Regarding programmes on the border with
current Member States, Croatia continued to participate very actively in the
bilateral actions with Hungary and Slovenia, as well as in the regional
programmes IPA Adriatic, "Mediterranean" (MED) and "South-East Europe" (SEE). 60 projects were awarded more than EUR 14 million
EU funding within the Hungary-Croatia IPA Cross-border Cooperation Programme.
Under this last programme, the third Call for Proposals was launched on 22
November 2011.

In the
framework of the Slovenia-Croatia cross-border programme, whose main purpose is
to make the cross-border area between Croatia and Slovenia highly competitive
and also to create sustainable living conditions and prosperity for its
inhabitants by exploiting development opportunities arising out of joint
cross-border actions, the third Call is expected to be launched in 2012. This
is one of the best performing IPA cross-border programmes under shared
management, which is also due to the commitment of Croatia to this programme.

As
regards Component III, under the Environment
Operational Programme all available funds were committed, and contracting was
strong in 2011, reaching more than 50% of the available funds. Nevertheless,
due to previously accumulated delays, at the end of 2011 EUR 5.2 million
were withheld, expecting more improvement in the implementation of operations.

For the Transport Operational Programme, the complexity of the
projects specifically in this sector caused important delays in the
implementation of the programme, with a contracting rate being at 17%.
Nevertheless, tendering accelerated during 2011 and much of the accumulated
backlog was reduced. However, this could not prevent the automatic withhold of
EUR 9.3 million at the end of 2011. Another similar situation can be found for
the third Operational Programme, namely Regional Development, where delays in
the design and tendering of projects led to a contracting rate of 30%.

Under
Component V, Croatia
received the conferral of management powers for the first two measures under
IPA Rural Development only in November 2009 and for two additional measures in
March 2010. Since then, Croatia continued the implementation of IPARD. Three
additional calls for applications were launched in 2011 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 – IPARD Agency has received 209
applications out of which 90 projects were contracted, with an IPA contribution
of over EUR 19 million by the end of 2011. As regards 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' two
calls were launched in 2011. As a result, 156 applications were received for
both measures, however only 18 were contracted. This result was a consequence
of an important rejection rate under the first call for measure 301 'Rural
infrastructure'. Difficulties encountered by beneficiaries – Croatian small
municipalities, were related to implementation of public procurement rules. It
must be however noted that the second call for the same measure was much more
successful with 45 Memoranda of Understanding signed.

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. Lessons learnt from the first call bore
fruit under the second call: higher interest from municipalities as well as
their better readiness as regards quality of applications. Based on submitted projects it could be
analysed that Croatian rural small towns and villages want mainly to improve
and invest in sewerage system, wastewater treatment or local roads.

While the contracting performance in Croatia improved in 2011,
payment levels to final beneficiaries remained low. This is due to the fact
completion of rural development project can be quite lengthy, and therefore
only a small part of
contracted projects could be paid in 2011. Pre-financing included, the
Commission disbursed about EUR 26 million by the end of 2011.

Moreover during 2011, the Croatian authorities focused strongly
also on the preparation of procedures for conferral of management powers for the two remaining programme
measures. The national accreditation was granted for measure 501
"Technical Assistance" and the measure 202 "Preparation and
implementation of local development strategies" was accredited at the
beginning of 2012. It is hoped that the conferral of management for these
measures should be obtained in mid-2012, followed by calls for applications.

Although Croatia made important progress in 2011 in the
implementation of the IPA Rural Development Programme, the
delays in implementation and more particularly in payments to final
beneficiaries accumulated so far persisted in 2011. Due to this situation,
according to the N+3 budgetary rule, a part of the funds allocated in 2008
had to be suspended at the end of the 2011, and more funds are at risk of
suspension in 2012. Therefore, in the future all efforts shall be oriented
towards further calls for applications together with shortening the period
between these calls and completing the payments to beneficiaries.

Nevertheless,
the Court of Auditors' Special Report on Croatia[7], prepared during
2011, indicates that EU assistance 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 2.2 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 enhancing 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 advances 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

In
2011, the EU Delegation was consulted on 156 requests for TAIEX assistance. The
majority of them were related to: Chapter 11 Agriculture and Rural Development
(68 requests), Chapter 27 Environment (21 requests), Chapter 24 Freedom,
Security and Justice (19 requests), Chapter 23 Judiciary and Fundamental
Rights (15 requests), and Chapter 28 Health and Consumer Protection (10
requests). Interventions funded by TAIEX can be extremely well targeted to the
needs of the institutions, and were financially not demanding, which justified
the high number of requests by the Croatian
institutions (on average one each working day).

In
2011, a total of 20 Twinning contracts were
under implementation. The sectors targeted by Twinning and partner countries
were as follows: under  IPA 2007: customs (Spain), regulatory impact assessment
(UK), competition and state aid (Italy with UK), anti-corruption (one with
Germany and another one with France and Italy), personal data protection
(Spain), combating drugs trafficking (Austria), paying agency for agricultural
funds (Austria with France and Slovakia), energy (Demark with Latvia and
Slovenia), chemical safety (Sweden with Italy), health and safety at work
(Austria with Slovakia), plant protection products and pesticide residues (UK);
under IPA 2008: judiciary reform (one with Germany and France and another one with
the UK and Czech Republic), road safety (Germany with Poland), preparation for
Cohesion Funds (one with Lithuania and Hungary and another one with Italy and
Poland); under IPA 2009: fight against sexual exploitation and sexual abuse of
children (UK), anti-discrimination (Austria), coordination of social security
(Sweden).

17 Twinning light contracts
were under implementation in 2011 in the fields of: under IPA 2007: protection
of EU financial interests (Romania), public procurement (Greece), medicinal products
and medical devices (Spain), environment (Austria), preparation for Structural
Funds (Poland); under IPA 2008: fight against counterfeiting of banknotes
and coins (Germany), fight against corruption in customs (Spain), fight against
corruption in taxation (Austria), public procurement (Austria), judiciary
(Germany), taxation (France), education (Finland), employment (Germany); under
IPA 2009: postal services (Spain), environment (Spain), customs (Italy),
judiciary (Lithuania). The total amount of Twinning and Twinning light
contracts under implementation in 2011 was EUR 24.6 million.
Several Member States applied to the various Twinning projects in Croatia, resulting in a wide spread of Member States selected by Croatian ministries to
implement these contracts.

The
SIGMA Programme, a joint initiative of the Organisation for Economic
Co-operation and Development (OECD) and the European Union aims to strengthen
public governance institutions in Croatia, in order to facilitate the accession
process by assisting the reform of the public sector. During
2011 SIGMA support to Croatia covered  in the area of judiciary and public
administration reform , where SIGMA provided assistance to the authorities in
finalising the relevant legal framework , as well as participating in round
tables organised by NGOs on the following issues: prevention of conflict of
interest, financing of political parties, local and regional self-government,
etc. Furthermore, SIGMA provided. SIGMA also assisted the national authorities
in the areas of public procurement and financial management (Anti-Fraud
Strategy, Public Internal Financial Control and Financial Management and
Control).

In
2011, Croatia participated in the following EU Programmes: 'Seventh Research
Framework Programme'; 'Life-Long Learning Programme' (LLP); 'Youth in Action
Programme'; 'Competitiveness and Innovation Framework Programme' (including
'Entrepreneurship and Innovation Programme', 'Information Communication
Technologies Policy Support Programme' and 'Intelligent Energy Europe
Programme'); 'Progress'; 'Culture'; 'Europe for Citizens'; 'Fiscalis 2013';
'Customs 2013'; 'Interoperable Delivery of European eGovernment Services to
public Administrations Business and Citizens' (IDABC); 'Civil Protection
Financial Instrument'; 'MEDIA 2007'; 'Community action in the field of health';
'Marco Polo II'; Civil Protection Mechanism'; and 'ISA Programme'
(Interoperability Solutions for European Public Administrations).

In
2011, Memoranda of Understanding for the following two Programmes were also
concluded: 'Criminal Justice Programme' and 'Civil Justice Programme' (both
memoranda were concluded on 15 December 2011).

IPA
2008 Component I 'Development of an effective system for fight against
counterfeiting of banknotes and coins in Croatia', EUR 230 000.

The
beneficiary of this project was the Croatian National Bank in co-operation with
the Ministry of Interior's Police National Office for the Suppression of
Corruption and Organised Crime. The project contributed to ensure the efficient
functioning of the system for the fight against internationally organised crime
in the area of counterfeiting of banknotes and coins in line with EU standards.
The achieved results were further alignment of the legal framework and further
enhancement of the implementing procedures. In addition, methodological tools
were developed while the administrative capacity of the key stakeholders in the
system was strengthened through training, workshops and study visits to Member States and the European Central Bank (ECB).

IPA 2007 Component I 'Equipment for anti-smuggling units', EUR
3.45 million.

This project supported the fight against national and
international organised crime, thus enhancing safety and security of Croatian
and future EU external borders, internal market and collection of national and
EU revenue. It provided equipment to the mobile customs units of the customs
administration, such as vans, personal vehicles, all-terrain vehicles, vehicles
for transport of official dogs, mobile x-ray vehicle, patrol sea boats, patrol
river boats, trace detectors, and contraband detectors.

IPA 2007 Component I 'Customs Laboratory Development',
EUR 500 000.

This project contributed to
maximise the collection of customs duties and taxes by establishing nature,
tariff classification, origin and value of goods, and provided support for the
prevention of illegal traffic of goods. It contributed to further develop the
operational capacity of the Croatian Customs Laboratory, in compliance with EU
requirements, resulting in an improved legal basis, management policies,
analytical equipment, analytical methods, training programmes and working
methods. In terms of results, a Quality Management System in Customs
laboratories was introduced and Quality Handbook elaborated; laboratory methods
were updated in compliance with EU best practice; written guidelines, regarding
laboratory safety, security and hygiene procedures, correct sampling,
labelling, packing and despatching of the samples, were developed and disseminated;
training policies were delivered; and a plan for co-operation with EU customs
laboratories and/or with other analytical institution inside and outside the
country were developed.

IPA
2008 Component I 'Strengthening of the tax Administration in the fight against
corruption', EUR 207 000.

This
Twinning light contributed to improving the legal and
institutional framework for efficient and systematic combating of
corruption, and the public awareness on the harmfulness of corruption, and to
create conditions for preventing corruption in the Croatian Tax Administration.
It therefore contributed to the protection of the interests of Croatian and EU
citizens, taxpayers and businesses.

3.5 Sector III: Environment and
climate change

In Croatia this sector is supported under the Environmental
Operational Programme (EPOP) under Component III and it addresses priorities
such as municipal solid waste (waste management and cultivation of
non-compliant landfills), water and wastewater (treatment plants and networks).

IPA
2007 Component I 'Identification and Setting-up of the Marine Part of Natura
2000 Network in Croatia ', EUR 527 500.

This
project contributed to the existing draft proposal of marine NATURA 2000 by
identifying potential NATURA 2000 sites. This list of sites was prepared
through consultation with relevant stakeholders and the scientific community,
with the purpose to further develop the national biodiversity monitoring and
reporting system through capacity building, according to the provisions of the
Habitats Directive.

IPA
2007 Component I 'Energy Administrative Data Management', EUR 1 095 000.

This
project focused on institutional capacity building by developing a methodology
for energy administrative data management related to EU Regulations, supplying
related hardware equipment to enable the stakeholders to report data, and
developing new tailor-made software for web-based energy data collection and
management. This project has facilitated the transfer of experiences on energy
statistics and international reporting.

3.6 Sector IV: Transport

The "Transportation" Operational
Programme under IPA Component III continued to provide support for developing
transport infrastructure in the area of railways and inland waterways in Croatia. Besides a series of technical assistance and project pipeline development
operations in the rail and inland waterways sectors, there was one investment
project under implementation during 2011. This project aims the development of
the signalling and telecommunications infrastructure at the Zagreb main railway
station.

A new major project was approved by the Commission during 2011:
Okučani to Novska Railway Rehabilitation and Upgrade. The total investment
value is EUR 40 million, with IPA co-financing amounting to EUR 34 million.

ISPA
'Vinkovci to State Border Railways Rehabilitation', EUR 60.2 million, 48% of
which was co-financed by the EU.

This
project contributed to the achievement of interoperability and safety
requirements in line with EU acquis through civil works,
electrification, signalling and telecommunication. It allowed the
rehabilitation of 38 km of the double track railway line on the European
Corridor X (Project of European Interest), Section Vinkovci to Tovarnik
(interface with Serbian railway line at Šid).

PHARE
2006 'Supply and implementation of Vessel Traffic Monitoring and Information
System (VTMIS)', EUR 5 million

This
project delivered supply and support to the implementation of the Vessel
Traffic Monitoring and Information System (VTMIS), particularly radar and
surveillance and tracking systems, which will significantly contribute to the
safety and pollution prevention in the area along the east Adriatic coast,
particularly in respect of ships manoeuvring in congested areas, ports and
adjacent waters as well as non-SOLAS (International Convention for the Safety
of Life at Sea) ships and yachts. Through this project, the VTMIS equipment has
been installed at the national VTMIS control centre in Rijeka, and regional
control centres in Split and Dubrovnik, and also 10 radar stations have been
installed along the Adriatic coast and islands.

3.7 Sector V: Private Sector
Development

The IPA Component III also provided support to private sector
development by providing investment in business-related infrastructure located
in less developed regions, as well as the improvement of business climate, the
technology transfer and services for start-ups and SMEs, and the first
achievements already became visible on the ground.

Six infrastructure projects were renovated or newly built to
support the tourism and business-related activities in lagging-behind regions.
10 newly-established Business Support Centres started delivering training and
services to SMEs in the e-commerce and e-business activities sector. 21
business centres are being coached and trained to deliver high-level
consultancy & training services to the SMEs throughout Croatia. A certification programme is being developed to attract investors at will assist
investors in eight lagging-behind counties. New infrastructure and
entrepreneurial training curricula are being developed in five universities and
research centres in order to boost the technology transfer and
commercialisation of public sector R&D.

IPA 2007 Component I 'Implementing Croatian Competition and State
Aid Policies', EUR 1 million.

This project contributed to ensure a more solid enforcement record
of competition and state aid rules in Croatia and to set up a regulatory
environment which is genuinely competition-oriented. The project achieved the
following results: the Croatian competition and state aid legislation was
further aligned with the relevant EU acquis; the Croatian Competition Agency (CCA) further strengthened its enforcement record
and its ability to prosecute the most serious infringements of antitrust law;
the CCA is ready to take up its responsibilities within the European
Competition Network and has been granted observer status therein; a series of
public events ensured the visibility of the CCA as a promoter of competition
culture and established its advocacy role in competition-relevant regulatory
impact assessment; a smoother interplay of competition enforcement and
regulatory intervention has been achieved by providing training to Croatian
sectorial regulators and strengthening their co-operation ties with the CCA;
the CCA successfully continued to enforce state aid legislation in light of EU
state aid policy, with a view to achieving less and better targeted aid.

3.8 Sector VI: Social
development

IPA
Component IV 2007-2011 'Regional Network of Local Learning Institutions',
EUR 5 million.

This
project contributed to the modernisation of adult education in Croatia. There were 56 adult education institutions which, as main grant beneficiaries and
their partners, provided free training of adult learners for approximately 2,850
people. Technical assistance focused on support to adult education
institutions. Reports on learning needs analysis were prepared for each of 21
counties (NUTS 3 level) in Croatia. They provided up-to-date information on the
needs of employers and on the state of affairs at the local labour markets in
terms of supply and demand. Those reports form a significant background
document for future Calls for Proposals to be published by the national
authorities in the field of adult education.

IPA
Component IV 2007-2011: 'Establishing Support in Social Integration and
Employment of Disadvantaged and Marginalized Groups', EUR 90 008.

This
grant scheme, as part of the 'People with Disabilities and Support System Model
for Improving their Labour Market Approach' project, targeted long-term
unemployed people with disabilities, as well as social welfare beneficiaries.
Activities supporting active participation on the labour market were delivered
through career counselling, monitoring and occupational rehabilitation.
Simultaneously, through motivational training and psychosocial aid, the project
encouraged the strengthening of social integration, whereas experimental
workshops and a round table encouraged partnership in the field of social
integration and employment.

IPA
Component IV 2007-2011 'Local Partnerships for Employment – Phase', EUR 91 677.

This
grant scheme, as part of the 'Education and
Networking – Opportunity for Employment' project, targeted unemployed and not
adequately employed highly educated people from Osijek-Baranja County. They have been provided with knowledge, skills and practical experience in the field of
entrepreneurial support and development and implementation of EU-funded
projects. A minimum of 30 persons attended education about business counselling,
business plan development and development and implementation of EU projects.
With the help of trainers from the Centre for Entrepreneurship Osijek and
Regional Development Agency of Slavonia and Baranja, each project team worked
on development of concrete project proposal for current call for proposals
under EU funds. As a result, the participants gained specific knowledge and
experience which will provide them better opportunity for adequate employment.
The project had a positive impact on strengthening the capacities of local
communities and organisations regarding the development and implementation of
EU-funded projects.

3.9 Sector VII: Agriculture and
rural development

IPA
2007 Component I 'Capacity Building of the Croatian Paying Agency' and 'Support
to establishment of fully operational Paying Agency in line with EU standards',
EUR 4.5 million.

In
order for Croatia to use EU agricultural funds, a sophisticated administrative
and control system meant to manage the EU-tax payers' money needed to be put in
place. These two coordinated projects achieved this goal in cooperation with
the Croatian Paying Agency. The first one, a Twinning project, involved 3
paying agencies from Austria, France and Slovakia and worked on the
specifications of the system. The second one, a technical assistance project,
was led by a consortium of Croatian, Czech and Slovene IT companies and
developed the software modules needed to build the system. Training was
provided to the staff of the Croatian paying-agency and an information campaign
on the Common Agriculture Policy (CAP) was carried out throughout Croatia. Thanks to that support, Croatia tested the system under its national budget in
2011 and 2012 and could thus familiarise its farmers and its administration with
EU requirements prior to accession.

IPA
2008 Component I 'Support to the Implementation of the Common Organization of
the Agricultural Market', EUR 230 000.

The
Common Agricultural Policy (CAP) includes support to agricultural markets
grouped under the so-called Common Market Organisation. Croatia has to develop the various schemes foreseen by the EU legislation prior to its
accession to the EU in order to be able to support its agricultural markets
when required. This Twinning Light project supported Croatia to set up the
systems needed to administer the following sectors: sugar, milk and milk
products outside milk quota, beef and veal, fruit and vegetables, wine, as well
as export refunds for processed agricultural products. Under the leadership of
the French Market and Intervention Agency, a unique team of experts from four
different Member States (France, Germany, Hungary and Poland) supported and trained the Croatian Paying Agency to successfully develop the
required procedures for each of the targeted sectors.

3.10 Cross-border cooperation

In 2011
Croatia continued to participate in cross-border co-operation projects with
its neighbours in the Western Balkan area (Bosnia and Herzegovina, Montenegro and Serbia), as well as with Member States (Hungary and Slovenia) and in wider regional
cooperation projects covering the Mediterranean or Adriatic basins.

Cross-border
cooperation projects remain an important aspect of IPA assistance in the
Western Balkans by aiming to improve the quality of life in the cross border
areas through joint projects in the areas of environment, tourism and cultural
space, and private sector development. Furthermore, these efforts are an
important contribution to achieving reconciliation following the 1990s
conflicts.

IPA Component
II, Cross-border programme between Croatia and Bosnia and Herzegovina 'VIOR -
Vinkovci and Orašje Heritage Tourism Project', EUR 62 355.

This
project contributed to enhance tourism products – notably heritage tourism – to
increase the sector’s GDP contribution and create income in the Vinkovci and
Orašje regions. It developed joint CBC heritage tourism products and joint
tourist itineraries (packages), built capacities in the fields of heritage
tourism organization, hosting and preservation of heritage resources through
education, training and know-how transfer, and promoted heritage sites and
awareness on heritage site protection with use of today's communication tools.
The beneficiaries of this grant were the City of Vinkovci in Croatia and the Municipality of Orašje in Bosnia and Herzegovina, in partnership with the Tourist
Board of City of Vinkovci and the Tourist Community of Posavina Canton.

IPA
Component II, Cross-Border Programme between Croatia and Montenegro, 'Traditional olive industry like a part of cross-border tourism offer', EUR 147
720.

This
project contributed to the development of socio-economic conditions through
diversification of the tourism offer in the cross-border region. It improved
the quality of tourist destination by creating cross-border olive tourism offer
based on authentic olive oil production, tradition and culture. On the Croatian
side, the beneficiaries of this grant were the Croatian Centre for Agriculture,
Food and Rural Affairs and SNV- Netherlands Development Organisation, in
partnership with Dubrovnik Neretva County’s association of olive oil producers
and Dubrovnik Neretva County’s Regional Development Agency. The Montenegrin
partners were the Municipality of Bar, the Association of olive producers Bar
and the Association of olive producers, Boka.

IPA
Component II, Cross-Border Programme between Croatia and Serbia, 'Toward Recycling Societies in Osijek – Baranja County and North Bačka District', EUR
151 696.

This
project contributed to protecting the cross - border environment (air,
groundwater and nature areas) of Eastern Croatia and North-Western Serbia. It
improved the waste management system in Osijek-Baranja County and North
Bačka District through mutual cooperation and exchange of experiences. The
beneficiaries of this grant were Green Action - Friends of the Earth Croatia in
Croatia, and Centre for Ecology and Sustainable Development (CEKOR)in Serbia, in partnership with the Croatian Zeleni Osijek - Ecological Association Green Osijek.

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 negotiation process, it also helps to 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.

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 2011 on a decentralised basis, with ex ante
controls by the European Union Delegation in Zagreb.

Furthermore, Croatia moved closer in 2011 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.

Under Component I, Croatia established in December 2009 a roadmap
with indicative benchmarks and time limits to achieve decentralisation without ex
ante controls. In 2011, the Commission continued to monitor its implementation through the
regular reports submitted by the Croatian authorities. The main indicators are
the quality of procurement – expressed in the "rejection rate"
of tendering and contracting files submitted by the authorities to the EU
Delegation in the context of its ex ante control -, and the pace of
implementation. The first indicator improved significantly in the course of
2011, especially in the second semester. The absorption capacity, however,
remains a challenge for the Croatian authorities, as they need to catch up with
past delays. Nevertheless, capacity under this component is gradually
increasing. The overall positive trend therefore needs to be sustained in 2012.

Under Component II, the Commission's assessment on whether
conditions for waiving ex ante controls are met, will focus on the
functioning of the system (given the low number of transactions under this
component and the involvement of a partner country). In
2011, the Commission conducted a follow-up audit on the conferral of management
powers for IPA Component II. The Croatian authorities have started to address
the relevant findings.

In 2011
the Commission, under the initiative of the national authorities, carried out
twelve meetings of the sectorial monitoring sub-committees
(two times six sectorial meetings, in April and October) and two TAIB Sectorial
Monitoring Committees, in June and December.

Whereas
the sectorial monitoring sub-committees reviewed the progress of each
individual project, the interest of the sectorial monitoring committees was to
explore the ways to accelerate the implementation of projects and review the
progress in the implementation of the roadmap for the waiver of ex ante controls.

In
parallel, the on-the spot visits to the projects being implemented have
continued, and some of them have been carried out jointly with the implementing
bodies. The EU Delegation thus had the opportunity to give recommendations
which do not deal only with project implementation, but with improving the
monitoring process carried out by the national institutions.

PART
II - FINANCIAL DATA

On
implementation of assistance at 31 December 2011

IPA Croatia

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

IPA 2007 || 82,704,005 || 82,584,944 || 99.86% || 73,242,931 || 88.56%

IPA 2008 || 183,318,922 || 182,899,550 || 99.77% || 114,461,570 || 62.44%

IPA 2009 || 103,600,000 || 64,472,406 || 62.23% || 36,213,965 || 34.96%

IPA 2010 || 72,100,000 || 39,551,787 || 54.86% || 15,620,838 || 21.67%

IPA 2011 || 68,900,000 || 4,200,000 || 6.10% || 3,990,000 || 5.79%

Total || 510,622,927 || 373,708,687 || 73.19% || 243,529,303 || 47.69%

IPA – Component I National Programme
Croatia

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

IPA 2007 || 42,302,572 || 40,775,209 || 96.39% || 33,309,085 || 78.74%

IPA 2008 || 41,374,000 || 34,257,159 || 82.80% || 18,999,249 || 45.92%

IPA 2009 || 44,601,430 || 15,015,505 || 33.67% || 8,945,672 || 20.06%

IPA 2010 || 38,623,458 || 10,576,022 || 27.38% || 9,932,625 || 25.72%

IPA 2011 || 39,159,128 || 0 || 0.00% || 0 || 0.00%

Total || 206,060,588 || 100,623,895 || 48.83% || 71,186,631 || 34.55%

IPA – Component II (CBC) Programme Croatia

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

IPA 2007 || 2,653,020 || 1,536,854 || 57.93% || 628,439 || 23.69%

IPA 2008 || 2,706,080 || 2,410,832 || 89.09% || 1,176,506 || 43.48%

IPA 2009 || 2,760,202 || 472,357 || 17.11% || 282,033 || 10.22%

IPA 2010 || 2,200,000 || 0 || 0.00% || 0 || 0.00%

IPA 2011 || 2,200,000 || 0 || 0.00% || 0 || 0.00%

Total || 12,519,302 || 4,420,043 || 35.31% || 2,086,977 || 16.67%

              TURKEY

1.
SUMMARY

In
2011, positive developments in the management of the financial assistance were
observed in Turkey. The country is continuously improving the
capacities of key institutions in charge of programming, implementation and
monitoring of EU funds. The implementation of IPA projects, under all IPA
components, is now well underway and is starting to show a substantial impact
as all necessary operating structures for the management of IPA funds are about
to be granted conferral of management powers.

Important
reforms have improved the programming of funds, with the new MIPD 2011-2013
adopted in June 2011 following the sector approach logic.
The first steps towards a more strategic, focused and inclusive approach to
programming has been taken while programming 2011 funds for Transition
Assistance and Institution Building (Component I) focused on a limited number
of sectors identified in the MIPD, with larger projects on the priorities of
the accession process as well as aligned with sector priorities, for a total
value of EU contribution of EUR 229.968 million.  Following the elections in
June 2011, particular emphasis has been given to the justice, home affairs and
fundamental rights sector priorities aiming to implement the necessary reforms
to build an independent and efficient judiciary, law enforcement services as
well as developing civil society dialogue.

Efforts
were also made to improve the monitoring of funds by reforming the monitoring
system, setting out the roles and responsibilities of
each institution and the various tools available for this purpose as well as 
strengthening the capacities of Turkish authorities.

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

The new Multi-Annual Indicative Planning Document for Turkey covering the years 2011-2013 was adopted on 28 June 2011. 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 outlined in the
Commission’s own assessment of past performance and on recent audits and
evaluations.

The MIPD 2011-2013 puts the stress on a more sector based
approach together more ownership towards setting priorities for assistance as
it was drafted based on the priorities established by Turkish authorities. In order to support a more effective delivery of IPA and to
move towards a more sector based approach with more focus and impact, the
following strategic objectives for the new MIPD have been chosen.

In line with the MIPD sectors and identified priorities the
2011 IPA funds have been programmed mainly supporting projects in  sectors
justice, home affairs and fundamental rights, private sector development,
energy, social development and agriculture and rural development,  environment
as well as horizontal support activities.

The selection of a limited number of sectors in the MIPD
allows for a targeted approach towards EU assistance that aims to deliver the
expected results and meet the envisaged objectives in a sustainable manner. The
sectors and priorities chosen have potential to support the catalytic effect and
additional EU support. Where linkages between sectors exist, these are closely
explored in order to ensure that assistance provided is mutually reinforcing.
This is the case, especially where strong ownership and political commitments
are present. 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.

Table
1: MIFF[8]
allocations per component, in EUR million

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

I – Transition Assistance and Institution Building ||      231.26 || 227.49 || 246.20 || 704.95

II – Cross-border cooperation || 5.13 || 2.17 || 2.21 || 9.51

III – Regional Development || 293.40 || 356.83 || 378.00 || 1028.23

IV – Human Resources Development || 77.60 || 83.93 || 96.00 || 257.53

V – Rural Development || 172.50 || 189.78 || 213.00 || 575.28

TOTAL || 779.90 || 860.22 || 935.50 || 2575.62

2.2 Programming 
2.2.1 Component I

In order not to delay the
implementation of mature projects, it was decided to split the national
programme for 2011 into two parts. The IPA 2011 component I programme part 1
(adopted on 25 July 2011) includes 9 projects, which have been selected among
the priorities identified in the 2011-2013 MIPD after analysis of the Turkish
authorities and in consultation with the Commission under sector 1 – justice,
home affairs and fundamental rights, 2 – acquis harmonisation in areas
of transport and 3 – social development. Projects under above mentioned sectors
were selected as they were mature for implementation and are of high priority
for Turkey. Additional sectors of the MIPD are supported under the IPA 2011
part 2 programmes which have been adopted by the Commission on 25 July 2011.
These are based on the second part of the priorities of the MIPD, national
programme for 2011 and support 16 projects in the sectors justice, home Affairs
and fundamental rights, private sector development, energy, social development
and agriculture and rural development as well as horizontal support activities.
In addition, in the sector environment and climate change, a sector measure has
been included in the programme which could be considered as a first step
towards sector approach.

While
programming 2011 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 crime
and corruption and improved integrated border management and prevention of
illegal migration. For example the project ''Protecting victims of human
trafficking'' (EUR 1.7 million) aims to contribute to the
effective implementation of the national strategy and policy
on organized crime including trafficking of persons. A number of the projects
included into 2011 programme are follow-up actions to previous projects, which
allow achieving the full impact in the concerned area over a multi-annual
basis, where an approach in stages was required due to the complexity of
reforms.

Besides
further projects in other priority sectors, the National Programme part 2 also
introduces the "Enhanced Support Activities to Strengthen the European
Integration Process" (ESEI) a flexible facility to address gaps of a
limited scope, identified in the implementation of the acquis. Twinning
and Technical Assistance projects are financed and mobilised in a rapid manner
without having to undergo the full programming cycle. The facility is managed
by the Turkish Ministry for EU Affairs (MEUA).

All of
the programme's projects have been designed to achieve concrete results and we
expect them to make a significant impact in bringing forward the reform efforts
of Turkey in the concerned areas.

There
was continuous information exchange between the EU Delegation in Ankara and donor organizations working in Turkey with a view to avoid duplication of
financial assistance and support complementary actions where appropriate.
During 2011 the Commission and the EU Delegation in Ankara conducted several
coordination meetings on the coordination of financial cooperation in Turkey also following evaluation report on Mapping of European Commission, IFI & Donor Activity
in Turkey financed by the EU Funds. Following the recommendations provided in
the report it has been proposed to Turkey to take a stronger lead in donor
coordination through Ministry of EU Affairs (for accession related donor
coordination) and the Treasury/Ministry of Development (for investment related
donor activity).

In
terms of programming, progress could be noted by the Commission as regard
further cooperation with IFIs, in particular the cooperation with the World
Bank. Under 2012 IPA Component I programme Energy project is being developed
together with the World Bank, which will be implemented under joint management
mode.

The
Commission and the World Bank will further coordinate their future strategies
and their implementation in order to explore further areas where synergy and value
added can be found through a joint approach.

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

Priority Sector || Projects || Budget

Sector: Justice, Home Affairs and Fundamental Rights || 101.36

2011 NP part 1 || TR2011/0324.01 Trafficking || 1.71

2011 NP part 1 || TR2011/0324.02 Civilian Oversight || 3.80

2011 NP part 1 || TR2011/0136.03 IDPs in Van || 3.42

2011 NP part 1 || TR2011/0136.04 Local planning || 1.80

2011 NP part 1 || TR2011/0136.05 Cultural heritage || 2.70

2011 NP part 1 || TR2011/0136.06 Students EU || 3.21

2011 NP part 1 || TR2011/0135.07 CS Development || 6.62

2011 NP part 2 || TR2011/0124.10 Demining || 39.45

2011 NP part 2 || TR2011/0124.11 Witness Protection II || 1.50

2011 NP part 2 || TR2011/0124.12 Forensic Capacity || 8.00

2011 NP part 2 || TR2011/0123.13    Data protection || 2.00

2011 NP part 2 || TR2011/0123.14 Ombudsman || 2.00

2011 NP part 2 || TR2011/0135.15      CS Dialogue IV || 10.60

2011 NP part 2 || TR2011/0135.16 Trade unions dialogue || 1.60

2011 NP part 2 || TR2011/0136.17 Jean Monnet || 14.75

Transport || 1.84

2011 NP part 1 || Maritime Strategy || 1.84

Social Development || 63.07

2011 NP part 1 || Union programmes || 56.27

2011 NP part 2 || TR2011/0319.22 ÇASGEM || 2.25

2011 NP part 2 || TR2011/0336.23 Sports inclusion || 1.80

2011 NP part 2 || TR2011/0328.24 Cancer || 2.75

Environment and Climate Change || 25.18

2011 NP part 2 || Environment and climate measure || 25.18

Private Sector Development || 15.35

2011 NP part 2 || TR2011/0318.18 Statistics || 5.35

2011 NP part 2 || TR2011/0465.19 TK participation 7 FwP || 10.00

Energy || 3.00

2011 NP part 2 || TR2011/0315.20 Energy efficiency || 3.00

Agriculture and rural development || 1.35

2011 NP part 2 || Training for MARA || 1.35

Support and other activities || 17.00

2011 NP part 2 || ESEI envelope || 17.00

TOTAL || 229.95\*

\*
The figure only concern National Programme 2011 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 ENPI Black Sea Basin programme[9],
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.

2.2.3 Components III-V

Component III and Component IV programmes were adopted in
2007 and 2008 covering the 7 year programming period.

As concern 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 the transport and the environment
sector, the pipeline is continuous while in the regional competitiveness sector
new operations needed to be identified in 2011. In 2011 there was an increased
interest from the Turkish civil society, municipalities and regions regarding
projects to be founded under the regional competitiveness programme. The short
listing of these projects was finalised by the end of 2011.

In regard
to the revision of Human Resources Development (HRD) OP
under IPA component IV, which was revised in 2010, the related Financing
Agreement was concluded by the Commission and by the Turkish authorities in
December 2011. Furthermore and in line with the recommendations of the
Commission to improve the involvement of NGOs and other stakeholders in the
design of the operations, the Operating Structure (OS) started to organise
consultation meetings for the new operations under preparation. The OS has started
the revision of HRD OP for years 2012-2013 by organizing workshops involving
active participation of relevant stakeholders together with the EU Delegation.

The
latter has also intensified its dialogue with the World Bank in the context of
IPA Component IV. The World Bank is involved in the management meetings of an
operation to improve the quality of the public employment services for the
purposes of strengthening policy dialogue and avoiding duplications between the
operations of the EU and the Bank. Talks have also been initiated for possible
cooperation under the same component of IPA for concrete operations. However
this is still subject to agreement of the hierarchy as well as to the possible
implementation modalities under IPA Component IV.

As regards
IPA Component V, the third modification of the IPA rural development programme
(IPARD) was adopted by the Commission on 22 June 2011 following technical work
recommendations started in 2010. The programme
amendments mainly concerned the fine-tuning of the definition of eligibility
conditions, beneficiaries, the requirements for the implementation of EU
standards as well as the geographic scope.

3.
IMPLEMENTATION OF EU FINANCIAL ASSISTANCE IN 2011
3.1 - Success stories

IPA Component I, 2008 project “Promoting
Gender Equality in Working Life", EUR 950 000

The Twinning project helped to the Turkish authorities
transpose the equal opportunities acquis and has delivered positive
results. The Turkish, German and Austrian experts have jointly scrutinised the
labour and social security legislation to identify the gaps vis-à-vis the acquis,
as well as from a gender mainstreaming perspective. As a first step, gender
elements have been merged into the draft trade union legislation. The work of
the project is critical for when negotiations on Chapter 19 begin. Furthermore
the project initiated a gender equality award for the Turkish companies, which
will be sustained by the Turkish authorities annually. This should intensify
the debate on harmonisation of work and private life in the private sector.
Overall the project had more favourable impact on men and women in Turkey in the medium term. It has also helped trigger further debate in the public
administration concerning a fundamental EU principle.

IPA
Component I 2007 project ''Modernisation of the Turkish Customs

Administration
- IV'', EUR 3.145 million

The
Project financed under IPA 2007 programme was implemented in 2011. The customs
laboratory project aimed to modernize the Turkish Customs Administration for
strengthening its position to fulfil the tasks and obligations of EU Member
States by establishing effective classification systems for goods in order to
improve trade facilitation in Turkey and enhance the capacity of Turkey to better compete on the international market. Under Twinning Light component,
Turkish and Italian customs laboratory experts studied the management policies
and working methods in consideration with the EU best practices and trainings
were delivered on certain analyses and accreditation. The customs
administration took on board the Italian experts' recommendations on the
organisation and established a central customs laboratory department to
coordinate the activities of regional customs laboratories. Modern laboratory
equipment, specific to the needs of customs, was supplied and placed in use.
This project has made a very tangible and visible impact to start up the ISO
17025 accreditation process of Turkish customs laboratories.

IPA
Component I 2008 project “Strengthening the Court Management System” EUR 5.5 million

The
latter is a follow-up of a project implemented from
2007 till 2009 which assisted Turkey in re-designing the court management
system and in implementing the new system in five pilot court houses: new
positions of court managers and judicial assistants to free the judges and
prosecutors from the administrative tasks; guidance and information desks
set-up; brochures and guidebooks for the public; media spokespersons trained;
restricted access to certain areas in the pilot court houses. The success of
this project led to full ownership of the second IPA 2008 project which started
in September 2011. Not only high level support from the Ministry bureaucracy,
(e.g. up to the unusual Undersecretary level participating to steering committee)
but also from the High Council of Judges and Prosecutors and majority of the
Bar Associations has been established during the implementation. Other court
houses which were not selected as “pilots” are volunteering to take part in
this project.

IPA
Component I 2007 project ''Training of Military Judges and Prosecutors''

EUR
2 million

The
project aims to train all military judges and prosecutors (appr.350) on the
European Convention on Human Rights and the case law of the European Court of
Human Rights (ECtHR). The project, whose beneficiary is the Ministry of
National Defence, is being implemented with the Council of Europe.
Implementation started in November 2010 and gained momentum in 2011-12. The
project will come to an end by October 2012. As a result of the training
component a pool of 52 national trainers has been established. The translation
of 20 ECtHR judgements was completed and they were put on the intranet web-site
of the Ministry. The analysis of military justice systems in other European
countries and Turkey in light of the case law of the ECtHR was launched and two
reports have been drafted as a result of the work conducted by the second
working group. The findings and recommendation of the working group will be
disseminated at the final international conference. It is hoped that the
increased institutional capacity will ultimately lead to a decrease in the
number of cases against Turkey on the decisions given by the military
judiciary.

IPA
Component I ''Post-earthquake Support to the Province of Van'' EUR 4 million

Following
October 2011earthquake in the Van Province (Erciş) around 40,000 people
were homeless due to the considerable number of collapsed or damaged buildings.
A direct grant of EUR 4 million was signed with Turkish Red Crescent to provide
temporary housing to the earthquake victims in the province of Van. The installation and furnishing of 950 housing units was completed in January 2012,
accommodating 6,000 people rendered homeless after the earthquake.

Under IPA Component III and IV:

A high number of relevant projects have been approved in 2011.
Even if their implementation did not begin in 2011, their approval can be
considered as a success as a good project pipeline is an important premise for
a full absorption of funds and a positive step to reach the purpose to
prepare Turkey for the management of the Structural Funds.

An important achievement under the environment
operational programme (IPA component III) is an impressive IPA Major Project
pipeline put in place by the operational structure (Ministry of Environment and
Forestry). During the second half of 2011, the Commission adopted 10 major
projects and respective Bilateral Project Agreements were signed. In
total, these signatures led to 12 major projects approved under this programme
and ensured that the programme during 2011 was able to request payments
exceeding EUR 28.7 million. In parallel, work
continued on the preparation of new IPA projects to further strengthen the
pipeline.

In 2011, the transport sector
mirrored considerable success as two major railway projects were contracted
successfully and their implementation has started as well. These two railway
projects are key investments under the Transport Operational Programme (TROP),
which identifies joint policy priorities in the transport sector in the context
of EU accession. The overall objective of the programme is to re-establish a
reasonable balance between road and rail transport in Turkey. In this respect, rail lines and rail connections to maritime infrastructure have
been given priority over other investments. Under TROP, the EU is providing a
EUR 600 million grant for Turkey to support the modernisation of railway
infrastructure and ports.

The
first major project that EU is financing is the last leg of the high speed
railway between Ankara and Istanbul by providing a EUR 136 million grant
complementing the EUR 1.45 billion loan by the European Investment
Bank. This flagship project will lead to significant time gains for travellers.
It will also support economic development, improve quality of life and generate
major environmental benefits. With the completion of the route, travel time
between Ankara and Istanbul will be reduced to only three hours. The project is
expected to generate more than EUR 3 billion of economic benefits for the
Turkish economy. It will also greatly benefit the Turkish environment by
encouraging car and airplane travellers to use trains, thus reducing greenhouse
gas emissions and increasing environmental protection.

The second major project is the
modernization of the Ankara-Karabük-Zonguldak Railway Line with the largest
contract ever funded in Turkey (EUR 188 million). This is the first major
improvement of this north-south freight line since it was constructed in the
early times of the Turkish Republic to serve the steel mills around Western Black Sea Coast. The EU provides a total amount of EUR 330 million for
the project, including a loan by the European Investment Bank (EIB). The
Irmak-Karabük-Zonguldak line in its history has played an important role in the
development of the region by providing effective means of transportation to the
steel industry. Modernization of the line will thus increase competitiveness of
the local economy and quality of life in the region.

Lastly
in 2011, Filyos Port major project, which is a new planned port the end point
of Irmak-Karabük – Zonguldak rail line, has been submitted for IPA financing in
March 2011 and its appraisal was finalised in July 2011.

Under
the Environment Operational Programme (EOP) of component III, implementation of
the major project “Urdu Wastewater Treatment Plant” had started in the last
quarter of 2011 with the signature of one service and one works contract. Total
cost of the project is EUR 25 634 950 with a maximum EU
contribution of EUR 19 226 213. The overall aim of the project is to achieve a
high level of environmental protection and compliance with EU Directives
relevant to the wastewater sector. More specifically, this project is to
protect the Black Sea from the negative effects of the raw wastewater discharge
by establishing a sound wastewater management system to the Municipality of Urdu in accordance with EU and Turkish Legislation. Moreover, the treatment
will enable the improvement in the quality of coastal waters in Urdu, such that
the coastal sites will be suitable for bathing. The project targets to develop
activities in the tourism and fishery sectors and reducing negative health
effects (water borne diseases) imposed by the present situation. The project
will also cover leak detection surveys and rehabilitation of sewer and water
networks. In this context, the realization of the Urdu Wastewater Treatment
Plant Project will be a major contribution to the improvement of the
infrastructure for the protection of the environment, since it will improve the
wastewater services and enhance the ecological status of the Black Sea which is
at increasing risk of eutrophication and has been considered as a sensitive
area with specific attention given to the reductions of nitrogen and
phosphorous loads.

A
couple of examples of selected projects under the IPA component IV call for
proposals in the vocational education and training (VET) field that were
implemented in 2011:

Promoting Women's Employment Operation (completed in 2011,
approximately EUR 24 million):

A grant scheme supported under the operation with a total
value of about EUR 24 million has improved women’s employability, supported
women’s entrepreneurship and helped diminish cultural and other obstacles that
hinder women’s participation in the labour market through 131 projects
implemented in the less developed regions of Turkey by NGOs, education
institutions, professional organisations, social partners and local
authorities. A variety of actions including the fisheries sector, care
services, tourism, food processing, entrepreneurship, information technologies,
viniculture, and mosaics design have been supported throughout the
implementation. The projects have not only increased the employment prospects
of women, but also led to social empowerment and increased the awareness of the
target group about the public employment services. About 9 900 women have
benefited from projects, completed in November 2011. The eventual job placement
rate in the formal sector is around 20%, and is expected to increase.

Promoting Lifelong Learning Operation (grant component
completed in 2011, service component still on-going, approx. EUR 13 million):

The objective of this operation was to promote the
development and implementation of coherent and comprehensive strategies for
lifelong learning. In this context, the operation with a total value of approx.
EUR 13 million has financed institutional capacity building activities as well
as training activities in different formal and non-formal institutions on basic
skills and further development of skills provided by different actors. In
addition, the operation supported the National Qualification System and
VOC-test Centres. The beneficiaries of this operation include teachers, students
in VET (Vocational Education and Training) institutions, illiterate, low
skilled and unemployed adults particularly women as well as formal and
non-formal education providers. For instance, around 2,800 people have received
a certificate after having followed basic skills courses. About 350 teachers
have benefited from technical trainings in different sectors. 23 occupational
standards were developed by VOC-Test Centres and endorsed by the Vocational
Qualifications Authority.

Increasing Enrolment Rates Especially for Girls Operation
(started May 2011 and will end May 2013 - with a total value approximately EUR
4 million).

The overall objective of the operation is enhancing
investment in human capital by increasing the quality of education, improving
the linkage between education and the labour market, and raising enrolment
rates at all levels of education, especially for girls. Under the operation,
national awareness campaigns were initiated through the three-spot films
produced featuring the president, the prime minister and the minister of
education. The films are currently being broadcasted in two campaigns –the
first more than 4000 times on TV within a single month with an overall target
of 19 million viewers. Through social networks an increasing number of young
people are following and commenting this campaign (Twitter and Facebook, target
2 million people). Approximately 200 trainers have been trained in counselling
and psychological guidance of students targeting the students at risk of
dropping out. Teacher training in counselling is on-going (the target is 1,500
teachers trained). Assessments, studies and field research plans are finalised
and field research is stillon-going. Internal IT/web-based monitoring system is
developed for the project and optional for wider use by the Ministry of
National Education. Research-based action plans for further work on increasing
enrolment and decreasing drop-out are being developed. They will be implemented
and monitored in the 16 pilot provinces during 2012.

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 substantially
compared to the last year and Turkey is positively making up for the back-log
created in the initial years of IPA. The financial performance has been
positive overall in 2011 thanks to a substantial effort and the good
cooperation among different institution at the end of the year that resulted in
contracting almost 90% of the NP 2007 part 1.

Due to
the reallocations of funds under the 2008 programme and extension of the final
contacting deadline the high risk of loss of funds was avoided in 2011.
Nonetheless despite good contracting rates of 2007 and 2008 funds the
contracting less than 2009 and 2010 programmes was facing huge delays. The
lengthy preparation of the tender files and then of the evaluation process,
explains the long time required to get to the contract signature.

Payments
however 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.

3.2.2 Component III

The implementation of the operational programmes (OPs) under
component III could start only following the conferral of management powers and
signature of the Financing Agreements (autumn 2009). The Ministry of
Environment and Urbanisation, responsible for the environment OP, and the
Ministry of Science, Industry and Technology, in charge of the regional
competitiveness OP, obtained their accreditation in 2011. This process was
still on-going last year for the Ministry of Transport, responsible for the
transport OP. Nonetheless there has been substantial
progress in implementation of transport sector projects. A total of 9 contracts
have been signed with a total value of EUR 390 million. A total of 4
new projects were programmes in civil aviation, maritime and land transport
fields. Absorption rate is high and the outlook for 2012 is even better. The only
possible risk area is the programming where efforts need to be renewed in
establishing a project pipeline.  EU contribution to the twelve projects
approved in 2011 is EUR 84 million. In total, ten tenders were launched; 6
contracts were signed (EU contribution is EUR 22 million), hence increasing the
contracting rate to 17.25 %.

Progress
in programming exercise, which remained to date at 65%, did not reach to the
expected level in 2011 since the staff of the Ministry of Science, Industry and
Technology concentrated more on the accreditation process of their finance and
contracts department.  It should be noted that if the whole programming
exercise cannot be completed by mid-2012, there is a risk of de-commitments
starting in 2012.

The
EU Delegation provided regular on-the job training / support to the staff of
the Ministry in order to accelerate the programming exercise and to ensure a
smooth transition period for taking over the procurement responsibilities form
the CFCU.

Under the environment OP, Turkey submitted 1 new major project (MP) applications and 10 revised MP applications in
2011. The Commission approved 10 MP through a formal decision. This OP has a
long list of project applications awaiting approval amounting to more than
EUR 600 million while the available funds for 2007-2011 are only EUR 393
million. As regards the transport OP one major project was submitted and one MP
was approved in 2011. For the regional competitiveness OP, one MP was
re-appraised by the Commission, however due to the low quality of the
supporting documents it was sent back again for further clarification and
revision.

3.2.3 Component IV

Progress is on-going concerning the Human Resources
Development Operational Programme - IPA Component IV. A total of 16 contracts,
5 service and11 supply contracts were signed in 2011 with a total budget of EUR
17.8 million. The total contracted amount since the beginning of the programme
reached EUR 111 million (IPA share: EUR 94.3 million). This represents 60%
contracting rate for the IPA funds allocated to the first period of the HRD OP
covering 2007-2009 (EUR 158.7 million). The disbursement rate has shown a
significant increase and reached 35%. In 2011 more than 400
grant projects finished implementation under the operations concerning the
promotion of women's employment, youth employment, registered employment and
increasing enrolment rates especially for girls. New operations were identified
by the Ministry of Labour and Social Security for improving the quality of VET
and increasing the adaptability of employers and employees in the tourism
sector.

3.2.4 Component V

Major progress was achieved for IPA Component V, when the
implementation of Component V started in the second half 2011 following a
conferral of management for implementation granted by the Commission on 29
August 2011. A first set of three calls for proposals was organised in 2011 for
which some 250 applications were received. Before the end of the year, the
first four contracts were signed with beneficiaries under the first call and
the assessment and contracting of projects from the second and third call will
continue in 2012. Complicated application procedures, a lack
of guidance for potential beneficiaries and overlap with national rural
development measures are considered as major obstacles to implementation. The
Turkish authorities have been requested to set up an Action Plan to address
these issues.  Under the on-going Twinning Light project "Capacity Building for Extension/Advisory Services for IPARD" (SEI 2008, EUR 250 000)
training is being provided to 400 advisors, helping to improve the availability
of guidance.  Measures are also underway for  the implementation of the second
phase of the Programme, including a further 22 provincial offices and three
additional measures (agro-environment, LEADER and technical assistance).

3.3 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 "Further Support to the Local Administration Reform in Turkey (IPA 2007- EUR 4 million)" which was managed by the UNDP (as a direct grant
recipient), the Ministry of Interior and the Turkish Union of Municipalities
(co-beneficiaries) was successfully completed in December 2011. The project
aimed to develop and strengthen the administrative capacity and co-operation of
Turkish Ministry of Interior (particularly the General Directorate for Local
Authorities, Governorships and District Governorships), Unions of Local
Authorities and local authorities themselves in the task of ensuring the
effective implementation of new policy and legislation on local administration.

Project "Decision making
and Performance Management in Public finance" (IPA 2008 – EUR 2.176 million)
is on-going with the aim of strengthening financial decision making, strategic
planning and performance management capacity of strategy development units in
the Ministry of Finance, Prime Ministry, Undersecretaries of the State Planning
Organization, and Undersecretaries of Treasury. Through the Twinning contract
with Finnish experts, the aim was to provide training and preparation of a
draft legislation harmonised with EU best practices.

Project
"Improving Data Quality in Public Accounts" (IPA 2008 - EUR 1.721
million) is on-going with the aim of developing and piloting a public
accounting system and to improve the quality of government financial statistics
by means of different training and best practice exchange activities.

In
2011, SIGMA carried out regular annual assessment missions. The Regional
Conference on Public Procurement was organised in Turkey in March 2011. The
SIGMA-instrument also delivered a number of public procurement-specific
seminars to the Turkish officials, particularly a key seminar organised on
external and internal audit in October 2011.

Twinning:

In
Turkey, one of the main challenges is the need to strengthen their
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 Twinning administrations and agencies.

In
2011, 13 Twinning contracts have been signed with Member states (Finland,
Italy, France, Greece, Germany etc.) in the area of improving skills of
forensic experts, modernisation of the Turkish customs administration,
strengthening the capacities of civil enforcement offices etc.

In
total, 84 out of 117 projects initiated over the period 2002-2010 have been
implemented and completed in 2011. 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 is
reviewed once a year.

TAIEX:

Partner
administrations benefit from TAIEX’s flexibility to help meet wider training
needs on EU legislation by reaching a significant number of officials,
especially in the fields of heavy acquis chapters such as agriculture,
environment and justice and home affairs.

During
2011, more than 60 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.

Two
examples in order to better illustrate these activities:

A
workshop on Chemical Safety Assessment was held in İstanbul on
5-6 October 2011 with broad participation by different ministries,
associations, unions and manufacturers. The participants had different levels
of background knowledge and experience. At the end of the workshop, their
knowledge on chemical safety assessment under Registration, Evaluation,
Authorisation and Restriction of Chemicals (REACH)
regulation was improved.

Another
example is the workshop on Irregular Migration held in Ankara in December 2011.
Around 60 people from various ministries, institutions and provinces
participated in the workshop. In the workshop many topics were discussed
regarding irregular migration and cooperation between Turkey and EU in the field of combating irregular migration. It was considered very beneficial,
especially for the Asylum and Migration Bureau of the Ministry of Interior.

3.4 Sector II Justice, Home
Affairs and Fundamental Rights

One of the objectives set in
the MIPD 2011-20213 under the justice, home affairs and fundamental rights
sector is to implement the necessary reforms to build an
independent, impartial and efficient judiciary. The second objective is to
foster effective law enforcement, successful fight against crime and corruption
and improved integrated border management and prevention of illegal migration.
The third objective is to achieve measurable progress towards the full
enjoyment of all fundamental rights and freedoms by all individuals without
discrimination. The fourth objective is to set up strong democratic
institutions and civil society promoting pluralism and the values of European
integration. Several IPA projects have contributed to these objectives during
2011.

Under
the first MIPD sector objective, ‘Enhancing the Role of the Supreme Judicial
Authorities in respect of European standards’ (IPA 2008 – EUR 3 million)
project was on-going which was designed to enhance the respective roles of the
High Council of Judges and Prosecutors and of the higher courts (Constitutional
Court, Court of Cassation and State Council) as the superior judicial
authorities in the accession process and in the adoption of the European high
judicial standards. It aims to enhance the commitment level of the Turkish
Superior Judiciary to the EU accession criteria by raising the awareness of the
leading judicial actors and establishing stronger relations with the EU and
with its member states’ judicial institutions with a view to benefiting from
their experience in the harmonisation of legislations and judicial practices

In the
penitentiary field ‘Dissemination of Model Prison Practices and Promotion of
the Prison Reform in Turkey’ (IPA 2007 – EUR 7.2 million) project is still
on-going with the aim of supporting the improvement of the penitentiary system
in Turkey in line with European Prison Rules and international standards.

The
Twinning Project "Implementation Capacity of the Turkish Police to prevent
disproportionate use of force" (IPA 2008, EUR 1.9 million) had a very
dynamic start in September 2011 and implementation of activities is in full swing.
The Turkish National Police shows particular interest in and strong ownership
of this project. The Minister of Interior has participated in the opening
ceremony and the Twinning partners from the German and Austrian Police have
expressed great satisfaction with the open and cooperative attitude of their
Turkish counterparts.

The
project "Justice for Children" (IPA 2010, EUR 3.15 million) is
implemented via a direct grant agreement with the United Nations Children Fund
(UNICEF). It aims to make a contribution towards humanisation of the juvenile
justice system in Turkey via the introduction of child and youth friendly
methods of dealing with offences against the law. The project started in
February 2012 with the participation of the Minister of Justice and the
Minister of Family and Social Policies. Furthermore, several other institutions
are actively participating in the project, namely the High Council of Judges
and Prosecutors and the Justice Academy.

The
project "Democratic Citizenship and Human Rights Education" (IPA
2009, EUR 9.1 million) is managed by the Ministry of National
Education and implemented via a direct agreement with the Council of Europe.
This project has begun with its first activities back in 2001. The purpose of
the project is to increase the institutional capacity of the Ministry of
National Education on democratic citizenship and human rights education through
developing and revising regulations and curricula on democratic citizenship and
human rights education; producing educational materials and increasing the
capacity and awareness on democratic citizenship and human rights education
from pre-school, primary and secondary school communities (teachers, pupils,
students, non-teaching staff, parents and community leaders).

3.5 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, particularly in the regions
where employment and business stocks are low. In this framework the following
activities are being implemented:

There
has been significant progress 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 (EIB Group) for the benefit of SMEs operating in Turkey, has become fully operational in 2011. With a project budget of EUR 32 million,
complemented by an EIB loan programme of EUR 250 million, the project provides
loans to SMEs through Akbank, Yapı Kredi, Vakıfbank and Halkbank and
micro-credits through Kredi Garanti Fonu.

Another
project is the G43 Venture Capital Fund also launched during 2011 which should
establish a venture capital fund targeting the least developed regions of Turkey. The project (EUR 16 million) is expected to become fully operational in early 2012.

Lending
activities accelerated 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.
Thanks to this programme, small businesses started to receiving loans from
local banks to meet their working capital and investment needs, including
investments for energy efficiency.

Lending
activities under the Small Enterprises Loan Programme (SELP-II), a lending
facility implemented by German Development Bank KfW in association with the
Council of Europe Development Bank (CEB), remained active during 2011.

Under
the 2011 ESEI portfolio, a project regarding the information society and the
telecommunications sector was initiated - “Technical assistance for
achieving the information society and stimulating high-speed broadband services
to the benefit of consumers". The main objective of the project is to
support the creation of multi-service, high-speed, country-wide Next Generation
Networks (NGN) and enhance consumer welfare in electronic communication sector,
in order to spread out high-speed broadband services to consumers at affordable
prices.

3.6 Sector IV: Environment and
climate change

Environment
and climate change continued to be one of the highest priorities under MIPD and
IPA I. EU support has been increasing over the years in line with the MIPD
horizontal priorities on environment, nature protection and climate change. A
national Climate Change Strategy and a National Climate Change adaptation plan
have been adopted by the Turkish Authorities in line with the MIPD priorities.

Environment
and Climate Change projects portfolio has a wide range of environment and
climate related projects including environmental investments reaching up to EUR 720
million active project assessments, including all available pre-accession
instruments. Under Component I and III, 179 contracts are active in different
implementation stages The OP Environment is the most significant result of
pre-accession assistance programme.

Started
in in 2011, the Control of Volatile Organic Compound (VOC) emissions'' project,
worth EUR 2.6 million, is meant to improve environmental quality in Turkey and to reduce or prevent the potential risks to human health and to prevent ground
level ozone pollution. The project focuses on the development of administrative
and legal conditions and structures meant to harmonise and implement the three
EU Volatile Organic Compound Directives (Storage-94/63/EC, Solvents-99/13/EC,
and Paints-2004/42/EC).

Another
project started in 2011 is 'Improving Emissions Control'' worth EUR 2 million
on the establishment of the necessary capacity to transpose and implement
National Emission Ceilings Directive (2001/81/EC) in Turkey. The main focus is
based on a legal gap assessment, the preparation of draft legislation for the
National emission inventory and emission projections with various scenarios for
four pollutants (SO2, NOx, VOC and NH3).

The
regulatory impact assessments for the implementation of different national
emission ceilings and an agreed long-term comprehensive strategy are destined
to improve the air quality from pollutants defined in NEC Directive.

3.5 Sector V: Transport

The transport sector priorities in the MIPD 2011-2013
originate from the technical assistance studies that are prepared, with EU
financing, for each transport sub-sector. 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.

Transport is a sector where donor coordination is necessary
and very real, especially on railways. The EU Delegation is in close contact
with the EBRD, the EIB and the World Bank on infrastructure and acquis
related issues in the transport sector. The World Bank is cooperating with the
EU Delegation on reform issues and the EIB is very active in co-financing
infrastructure investments that are prepared by EU funding.

A number of projects were ongoing in the transport sector in
2011, mainly dealing with building technical capacity for Turkish institutions
to take on responsibility for acquis implementation. A good example is
the project on 'The Reform of Turkish Railways project' (IPA 2007, EUR 3.6
million) which aims to prepare a strategy and action plan for establishing
framework conditions of restructuring and strengthening of Turkish rail sector.
The main elements are a system for infrastructure capacity allocation and
charging, a network statement as well as safety management systems (SMSs) of
Business Units (BUs). The project implementation is becoming a success story in
particular for the second and the third component. The strategy component is
still under development given huge political boost after the major
re-structuring of the Ministry of Transport in late 2011. After the approval, a
wide array of other rail sector areas will be supported from the EU and
eventually EU players will be able to find the same safety, security and market
conditions in Turkey in railways.

3.8 Sector VI: Energy

The
energy sector is defined as a priority sector under MIPD document (2011-2013).
Within this context, three main objectives are described; the first objective
is increased capacity and better alignment in the energy efficiency field. The
second objective is further alignment with and implementation of acquis
on the internal gas and electricity market. The third objective is to bring
nuclear safety in line with EU standards. The selected objectives are key
priorities for Turkey, derived from the NPAA and DP and the strategies of the
relevant laws concerning energy efficiency and the electricity market. In
addition the types of indicators to measure developments towards these
objectives are the followings:

Promoted energy efficiency and renewable
energies.
Targeted activities to support the implementation
of the acquis on the internal gas and electricity market
cross-border exchanges in electricity and gas transmission.
Supported nuclear safety, in particular
through the safe management of spent fuel and radioactive waste.

Within
this framework, one of the main targets foreseen under the second bullet was
successfully achieved with the positive results of the 2007 project TR0702.05
“Rehabilitation of the Frequency Control Performance of Turkish Power System
for Synchronous Operation with European Network of Transmission System
Operators for Electricity (ENTSO-E), [former UCTE], Project in Turkey".
The latter has significantly contributed to the interconnection of the Turkish
electricity grid with the European electricity grid.

In addition, several
contributions have been provided in improving the "Improving Energy
Efficiency in Buildings (IEEB)" project fiche under the 2011 portfolio.
The main objective is to improve energy efficiency in buildings through better
design of new buildings and retrofit of the existing ones.

A
framework project “Technical Assistance for Strengthening the Institutional
Capacity of Iller Bank on the Direct Utilisation of Geothermal Energy” was also
successfully implemented in line with the MIPD energy related priorities
particularly on the promotion of the renewable energy sources.

3.9 Sector VII: Social
development

The
first objective of this sector is 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. Concerning employment related targets, operations such
as Promoting Women's Employment, Promoting Youth Employment (PYE) and Promoting
Registered Employment (PRE) and Improving the Quality of the Public Employment
Services (PES) were implemented during 2011. Operations on Promoting Lifelong
Learning (LLL) and Increasing School Enrolments Rates of Girls (ISERG) were
implemented under education priority axis.

IPA
Component I 2007 project "Improvement
of Occupational Health and Safety Conditions at Workplaces in Turkey" (EUR
3.932 million) has assisted the Turkish government to upgrade
OHS related recording system and to promote OHS culture among workplaces with
specific focus on mining, construction and metal industries – that has high
risk of occupational accidents and diseases. A long awaited national OHS
recording system has been developed, expected to be operational in 2012.

IPA
Component I 2007 project "Development of Regional Laboratories of the
Occupational Health and Safety Centre" has helped enterprises, especially
SMEs, apply effectively and efficiently the harmonized Occupational Health and
Safety (OHS) legislation. ISGUM (Occupational Health and Safety Centre) staff
has received substantial training on laboratory techniques. At the end of the
project ISGUM will be able to conduct measurements for lead in air and noise
parameters in line with internationally recognised standards.

IPA
Component I 2007 ''Strengthening Vocational Qualifications Authority (VQA) and
National Qualifications System project'' have started in October 2010
supporting the VQA and Occupational Standards Development, Vocational Knowledge
and Skills Testing and Certification Centres (VOC-TEST) to establish and
initiate an efficient and sustainable National Qualifications System based on
agreed occupational standards with an appropriate system for assessment,
grading and certification at all levels in line with European Qualifications
Framework. Project activities are concentrated in the industrial regions of Turkey, focusing on priority commercial / industrial sectors.

3.10 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 are particularly successful:

The
current projects "Technical Assistance and Data Collection for
Strengthening the Statistical Capacity of MFAL" (IPA, 2007, EUR 1.15
million) and "Extending the Pilot Farm Accountancy Data Network Project
and Ensure Sustainability" (IPA 2009, EUR 1.45 million) are helping to
improve the capacity of the Ministry of Food Agriculture and Livestock in the
collection of agricultural statistics and farm level accounts respectively.

The
projects "Environment and countryside under IPARD"(IPA 2009, EUR 1.14
million) and "Support for implementation of LEADER measure under
IPARD" (SEI 2007, EUR 0.25 million) were both completed in 2011.
They helped to develop the institutional capacity for implementation of pilot
agro-environmental and community development measures respectively under the
second phase of the IPARD programme.

The
project "Plant Passport System and Registration of Operators"(IPA
2007, EUR 1.14 million) which was completed in 2011 helped Turkey establish the plant passport system and its implementation in Turkey.

The
project “Introduction of Stock Assessment to the Fisheries Management System of
Turkey” (IPA 2007, EUR 2.2 million) which was completed in 2011, contributed to
capacity building in the field of stock assessment and fisheries management. It
would help to reach objective of integrated and sustainable fisheries
management with the implementation of action plans and road map developed by
the project.

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

In
2011, the implementation of the ENPI programme for the Black Sea basin was
on-going. A number of projects contracted under the first call for proposals
have started the implementation of the activities. The second call for
proposals was launched in 2011 and the evaluation process is still on-going.

As
concerns the implementation of the Turkey-Bulgaria CBC programme, the first
call for proposals was finalised and grant contracts concluded in 2011. Those
projects were contributing to boost sustainable economic development in the
co-operation area and build on the comparative advantages, to improve overall
social development and 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.

The
evaluation process of the applications under the second call for proposals is
on-going.

4.
IMPLEMENTATION AND MONITORING MODALITIES AND STRUCTURES

In
2011 the national authorities of Turkey progressed substantially with the
preparation for conferral of management for IPA components III, IV and V.

Progress
has been made also made concerning the conditions attached to the conferral of
management decisions under IPA Component I. Upon request by the Commission
significant steps have been taken by the Turkish authorities with a view to set
a comprehensive action plan aiming at remedying shortcomings (related to the
supervisory function of the NAO, staffing and monitoring by the national
authorities as well as legal bases and procedures) that have been identified in
the management and control systems for IPA component I. The 
established comprehensive action plan was an important step forward towards
improvements of management and control system in Turkey and overall if further
properly implemented could bring major improvement to the functioning of the
system. Following the establishment of the comprehensive action plan the
national authorities took actions to address the outstanding issues and in 2011
progress was made towards the strengthening the role of NAO, and capacities of
MEUA. Nonetheless further critical weaknesses remain related to CFCU
supervision (staffing, procurement planning and payments as well as lack of
supervision of the SPOs), therefore further efforts are needed in order create
adequate capacity to absorb funds for all the operating structures of IPA
funds.

For the accreditation of the operating structures under
component III and IV good progress has been achieved in 2011 as all necessary
procedures for granting the conferral of management were about to be completed
in the end of 2011.

Regarding Component III, DG REGIO carried out the accreditation audit from 21-25 November
2011, upon the request of the NAO, to accredit the Ministry of Science Industry
and Trade for conferral of the tendering, contracting and financial management
functions from the CFCU to the MoSIT. The audit found the MoSIT ready for conferral and the
preparations of the Commission Decision were started. The same audit was
carried out for the Transport OS in the Ministry of Transport, Maritime Affairs
and Communication. However, the findings did not make possible the conferral of
management powers to the transport OS yet. As regards the Environment sector
the Commission adopted a Decision on 20 January 2011 conferring the management
power to the Ministry of Environment and Urbanisation.

Under
IPA Component IV, despite delays in 2010, good progress has been achieved in
2011 in view of transferring tendering, contracting and financial management
functions from the CFCU to the Ministry of Labour and Social Security. The
legal basis for the Ministry to take over these tasks has been established by
the Turkish authorities. The necessary staff has been recruited and trained.
Procedures for procurement and calls for proposals have been defined.

In May 2011 the National Authorising Officer notified the
Commission about the accreditation of the Ministry of Labour and Social
Security for the tendering, contracting and financial management functions
relating to the Human Resources Development Operational Programme. Following
a Commission audit, the Commission launched the procedure in view of amending
the conferral of management decision adopted by the Commission itself.

For
IPA Component V 2011 was marked by major progress and by the Commission's first
decision to confer the IPARD management to Turkey for 17 provinces and three
major measures (farm and food processing investments as well as rural economic
diversification projects). While it is still too early to assess the actual
effectiveness of the delivery systems based on programme implementation, the
loss of funds at the end of 2011 could be avoided mainly due to pre-financing
payments. The risk will however be high for 2012, where a significant amount of
projects must be implemented and paid in order to avoid the loss of larger
amounts. The Commission undertook immediate action to improve the absorption
rates by establishing an action plan with the country, inter alia, supporting
advisory and extension services, improving the publicity, ensuring the
provision of credit and strengthening of the Managing Authority.

Monitoring:

Overall, important
progress was achieved in the monitoring of EU funds in comparison to the
previous year. In order to address the shortcomings in
the monitoring system a major reform of the monitoring system has been decided
between the Commission and Turkish authorities in the Joint Monitoring
Committee meeting in July 2011. The latter, is since then under implementation
by all relevant Turkish authorities.  The monitoring reform
was initiated by launching a joint mapping exercise with the Turkish national
authorities to set out the roles and responsibilities of each institution and
various tools available for this purpose. The
reform led to the following improvements, i.e.  Strengthening the role of SMSC
to address issues related to programming (sector level overview) and donors'
coordination with a view of reviewing the deployment of assistance in a more
comprehensive manner, more regular Steering Committees
coordinated on spot monitoring and better reporting to take corrective actions.

As concerns the capacities of
the Turkish authorities, the major improvement was related to the upgrading of
the Secretariat General for EU Affairs (EUSG) to the Ministry of European Union
Affairs (MEUA). Although the capacities of the 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.

Despite good progress in terms
of management of IPA funds, there was a lack of cooperation between national
authorities. Therefore further efforts are needed to
disclose a more cooperative approach on monitoring issues with all
stakeholders, including the EU Delegation.

In terms of on
spot visits of the projects, the EU Delegation's monitoring system has also
been further developed in 2011 by establishing more elaborated monitoring maps
and checklists that are used for 'on the spot' checks. The EU Delegation has
intensified the 'on the spot' monitoring in the second half of 2011.

The IPA
Monitoring Committee for all five components took place on 6 July 2011 in Ankara discussing progress and challenges in implementation. The main concern raised was
related to the high risk of loss of significant amount of funds allocated for
the Components III, IV and V due to the reasons linked to the lack of
coordination between institutions, insufficient human resources and long
accreditation processes. The IPA Monitoring Committee drew the attention to the
fact that the coordination between institutions should be strengthened, as well
as exchanging best practices and lessons learnt. The IPA Monitoring Committee
welcomed the preparation of the comprehensive action plan which should be
properly followed. Other concerns were raised over the CFCU capacities
outlining it should reprioritise its work taking into account the risk of loss
of funds across all components.

Two
transition assistance and institutional building (TAIB) sector related
monitoring committees were held on 2 February and on 6 July 2011 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 2011 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 programme modification for 2012-13, accreditation of the Ministry of Science, Industry and Technology as well as
the Ministry of Transport, Maritime Affairs and Communication for the
tendering, contracting and financial management functions for the regional
competitiveness and the transport programmes, project pipelines and
implementation progress for each of the programmes, including assessments of
progress with tendering. Special attention was paid to the RCOP, as the project
pipeline needs to be reinforced.

The
human resource development sector monitoring committees for Turkey were held on7 July 2011 in Trabzon and on 1 December 2011 in Ankara. During these
meetings, the Committee examined the results of implementation of the
operational programme on the basis of the 2010 sector-oriented annual report on
the implementation and the results of the interim evaluation of the operational
programme. 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 the progress achieved in transferring tendering,
contracting and financial management functions from the CFCU (Central Finance
and Contracts Unit) to the Ministry of Labour and Social Security.

Last but not least, rural development sectorial committees were
held on 6 July and 7 December 2011. The main topics for
discussion were focused on broad issues related to the absorption of funds and
to future of non-accredited measures such as support to producer groups and
local rural development strategies.

PART II
- FINANCIAL DATA

On
implementation of assistance at 31 December 2011

IPA Turkey

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

IPA 2007 || 257,202,720 || 232,700,542 || 90.47% || 135,113,422 || 52.53%

IPA 2008 || 257,125,297 || 177,628,020 || 69.08% || 119,398,270 || 46.44%

IPA 2009 || 205,550,810 || 113,150,079 || 55.05% || 97,977,919 || 47.67%

IPA 2010 || 218,809,826 || 75,048,075 || 34.30% || 73,142,253 || 33.43%

IPA 2011 || 232,968,023 || 0 || 0.00% || 0 || 0.00%

Total || 1,171,656,676 || 598,526,717 || 51.08% || 425,631,864 || 36.33%

IPA – Component I National Programme Turkey

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

IPA 2007 || 256,202,720 || 231,767,544 || 90.46% || 134,773,281 || 52.60%

IPA 2008 || 256,125,297 || 177,429,358 || 69.27% || 119,247,313 || 46.56%

IPA 2009 || 204,550,810 || 113,150,079 || 55.32% || 97,977,919 || 47.90%

IPA 2010 || 217,809,826 || 75,048,075 || 34.46% || 73,142,253 || 33.58%

IPA 2011 || 229,968,023 || 0 || 0.00% || 0 || 0.00%

Total || 1,164,656,676 || 597,395,056 || 51.29% || 425,140,766 || 36.50%

IPA – Component II (CBC) Programme Turkey

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

IPA 2007 || 1,000,000 || 932,999 || 93.30% || 340,141 || 34.01%

IPA 2008 || 1,000,000 || 198,663 || 19.87% || 150,957 || 15.10%

IPA 2009 || 1,000,000 || 0 || 0.00% || 0 || 0.00%

IPA 2010 || 1,000,000 || 0 || 0.00% || 0 || 0.00%

IPA 2011 || 3,000,000 || 0 || 0.00% || 0 || 0.00%

Total || 7,000,000 || 1,131,661 || 16.17% || 491,098 || 7.02%

              ICELAND

1.
SUMMARY

Following
Iceland's application for EU membership in July 2009 and due to the
country's level of economic and social development and its extended degree of
alignment with EU legislation (Iceland is a member of the European Economic
Area (EEA) and Schengen), IPA financial support to Iceland is to be exclusively
implemented under IPA Component I 'Transition Assistance and Institution
Building'.

The
Multi-annual Indicative Planning Document (MIPD) 2011-2013, which is the key
strategic planning document for financial assistance under IPA in Iceland, was adopted on 8 April 2011.

Based
on the priorities set in the MIPD 2011-2013, an IPA National Programme 2011 for
Iceland was adopted on 2 December 2011. The MIPD sets out two strategic
objectives to be financed under IPA assistance. On the one hand, to further
enhance Iceland's ability to assume the obligations of membership by supporting
institutional capacity building for acquis transposition and
implementation and, on the other, to reinforce Iceland's institutional capacity
in its preparations for participation in and implementation of Structural and
other EU funds.

The
2011 Programme will support seven projects. The budget is EUR 12 million and
balance between the two priority axes set in the MIPD was taken into
consideration.

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 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.

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 9 November 2010, the Commission adopted its 2010
enlargement package. The 2010 Progress Report for Iceland, the first of its
kind, confirms and further supports the priorities for pre-accession financial
assistance that were identified in the Commission Opinion.

Table 1: MIFF[10] allocations per
component, in EUR million

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

I – Transition Assistance and Institution Building || 12 || 12 || 6 || 30

2.2 Programming
2.2.1 Component I

2011
National Programme

The
National Programme was set between December 2010 and June 2011. A number of
consultations took place in July 2011, with Civil Society organisations, the EU
Member States and International Financial Institutions (namely the IMF) in Iceland. The programme was presented to the IPA management committee in October 2011.

The
total EU contribution for the 2011 Programme is EUR 12 million. The additional
national contribution is EUR 3.74 million. Out of the EUR 12 million, EUR 9
million is for four projects falling under 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) and EUR 3 million for three projects under the second
strategic priority  (to reinforce Iceland's institutional capacity in its
preparations for participation in and implementation of Structural Funds  and
other EU funds). EUR 9.8 million is targeted at institution building
activities and EUR 2.2 million is dedicated to investments.

First
lessons learned in the implementation of TAIEX assistance in Iceland confirm the specificity of needs in light of the high standard of public administration in Iceland, the very small size of the Icelandic administration and, linked to this, the
limited absorption capacity for large scale technical assistance support. This
specific setting underlines the need to ensure flexibility and synergy in the
provision of IPA assistance under the National IPA Programme, TAIEX short and
medium term assistance, and the Multi-Beneficiary Programmes.

Iceland
National Programme 2011 under IPA Component I

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 || 1,900,000 || 9,200 || 1,909,200

Project 2: Preparation for Implementing the Habitats and Birds Directives || 3,.685,000 || 751,100 || 4,436,100

Project 3: Strengthening National Accounts || 825,000 || 245,000 || 1,070,000

Project 4: Translation of the acquis and support to setting up the conference interpretation programme at the University of Iceland || 1,500,000 || 1,923,000 || 3,423,000

Total Axis 1 || 7,910,000 || 2,928,300 || 10,838,300

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 || 560,000 || 187,000 || 747,000

Project 6: Increasing employability of low qualified workers through the development of a skills recognition system in adult education || 1,875,000 || 625,000 || 2,500,000

Project 7. Technical Assistance and Structural Funds Preparation Facility || 1,655,000 || - || 1,655,000

Total Axis 2 || 4,090,000 || 812,000 || 4,902,000

Total Axis 1 + Axis 2 || 12,000,000 || 3,740,300 || 15,740,300

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 || 1,722,400 || 587,195 || 2,309,595

Project 2: Translation of the acquis || 1,000,000 || 2,281,305 || 3,381,305

Total Axis 1 || 2,722,400 || 2,968,500 || 5,690,900

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 || 9,275,000 || 2,595,000 || 11,870,000 ||

Total Axis 2 || 9,275,000 || 2,595,000 || 11,870,000 ||

Total Axis 1 + Axis 2 || 11,997,402 || 5,563,500 || 17,560,900 ||

3.
IMPLEMENTATION OF EU FINANCIAL ASSISTANCE IN 2011

The National Programme 2011 for Iceland is the first programme for the country, so no implementation has taken place yet.

PART II
- FINANCIAL DATA

On
implementation of assistance at 31 December 2011

IPA Iceland

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

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

IPA 2011 || 12,000,000 || 0 || 0.00% || 0 || 0.00%

Total || 12,000,000 || 0 || 0.00% || 0 || 0.00%

IPA – Component
I National Programme Iceland

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

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

IPA 2011 || 12,000,000 || 0 || 0.00% || 0 || 0.00%

Total || 12,000,000 || 0 || 0.00% || 0 || 0.00%

              THE
FORMER YUGOSLAV REPUBLIC of MACEDONIA

1.
SUMMARY

The
former Yugoslav Republic of Macedonia
continued accession-related reforms with the support of IPA, though core
challenges remained in 2011. For the first time the implementation of all IPA
Components, except Component II- Cross-border cooperation, took place under decentralised
management, which implies that the management of programmes is undertaken by
the relevant national authorities, currently subject to ex ante controls
by the European Commission.

Public
administration efficiency was low, reflecting heavy procedures, weaknesses in
staffing and a high turnover of officials. In comparison to previous years,
greater efforts were made by the beneficiary country to utilise the available
funds from all IPA Components, although there were evident delays in
procurement. Limited availability of appropriate experts to draft tender
documents or evaluate proposals hampered the procurement process mainly
affecting IPA Components I, III and IV. The level of commitment and capability
differed between line Ministries. Greater awareness and commitment are needed
to strengthen capacity in order to successfully absorb IPA funds. This,
moreover, requires greater ownership in the area of strategic programming and
project preparation in the future.

The
2011 Component I National Programme, with an EU contribution of EUR 28.903
million, was approved along a streamlined sector-clustering of the projects
along the main reform priorities of the country. EU support previously
programmed under IPA 2007-2008 and managed by the EU Delegation has been fully
contracted.

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

The
Commission took a number of steps to enhance the strategic nature of
programming over the last few years and to strengthen the link between the priorities
established in the progress reports and the programming of assistance. To
better illustrate this focus, and to strengthen ownership by the beneficiary
countries, the Commission started moving to a sector-based logic in its
planning of pre-accession assistance.

In
agreement with the national authorities it was decided to concentrate efforts
on targeted sectors, with concrete indicators. The priority sectors as
described in the MIPD 2011-2013 are: public administration; justice, home
affairs and fundamental rights; private sector development; agriculture and
rural development; transport; environment and climate change, and social
development.

Table
1: MIFF[11]
allocations per component, in EUR million

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

I – Transition Assistance and Institution Building || 28.80 || 27.20 || 27.94 || 83.94

II – Cross-border cooperation || 5.12 || 5.03 || 5.24 || 15.39

III – Regional Development || 39.30 || 41.03 || 51.80 || 132.13

IV – Human Resources Development || 8.80 || 10.38 || 11.20 || 30.38

V – Rural Development || 16.00 || 18.22 || 21.02 || 55.24

TOTAL || 98.03 || 101.88 || 117.21 || 317.11

2.2 Programming
2.2.1
Component I

The
programming of Component I for 2011 begun in 2010 and the programme was adopted
in November 2011. Efforts were made by the Commission to focus on sector
approach and that required re-programming the annual package in order to better
focus on results and MIPD targets and indicators. Participation in Union
Programmes and Agencies was once more part of the support given to the country
as well. In 2011 the preparatory measures for the Lifelong Learning and Youth
in Action Programmes, suspended in 2010, were resumed. Furthermore, a new
Memorandum of Understanding for the Intelligent Energy - Europe II (IEE II)
pillar of the Competitiveness and Innovation framework programme (2007-2013)
was adopted by the European Commission in May 2011, and signed in June,
allowing the participation of the country in the open 2011 call for proposals
of that programme.

The
2011 National Programme was the first drafted following a sector approach, with
10 interventions in the areas of public administration, rule of law,
agriculture, private sector development, environment and social development. In
addition, a sector measure tackling other important flexible administrative
capacity needs was included in the programme. Only the most relevant and
implementable projects proposed by the national authorities were considered.

When it
comes to donor coordination, EU assistance to the national authorities in their
efforts to strengthen the public administration reforms, environment,
competitiveness and fight against corruption was designed to be in synergy with
funds from the Organisation for Security and Cooperation in Europe (OSCE),
Norway, United States Agency for International Development (USAID), the World
Bank, and the Netherlands and followed by assistance from Germany, UNDP and
other multilateral donor.

Stronger
participation and input by the beneficiary institutions along the programming
cycle has been supported by IPA 2007 and 2008 projects dealing with Public
Internal Financial Control, Local Infrastructure, and targeted support to the
Ministry for Information Society and Public Administration.

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

SECTORS || Projects || Budget

PUBLIC ADMINISTRATION REFORM ||

1. Public Administration Reforms and E-Government || 3.595

2. Further development of the Civil Society || 1.200

JUSTICE, HOME AFFAIRS AND FUNDAMENTAL RIGHTS ||

3. Strengthening the Rule of Law in the field of organised and serious crime, alignment with EU acquis on Fundamental Rights as well as strengthening the judiciary's knowledge on the case-law of the European Court of Justice || 2.397

4. Freedom of Expression – Support to Media Reforms || 1.460

PRIVATE SECTOR DEVELOPMENT ||

5. Bankruptcy and voluntary liquidation of companies || 1.269

AGRICULTURE and RURAL DEVELOPMENT ||

6. Upgrade of institutional and administrative capacities in line with Common Agricultural Policy (CAP) requirements || 2.537

SOCIAL DEVELOPMENT ||

7. Mutual Recognition of Professional Qualifications || 1.373

8. Local integration of refugees, internally displaced persons and minority groups ((mainly for the construction of housing units) || 2.962

SUPPORT AND OTHE ACTIVITIES ||

9.  Reinforcement of Administrative Capacity to meet the obligations of membership (including Twinning arrangements) || 7.495

|| Including a TA Flexible Facility || 3.000

10. Union Programmes and Agencies || 4.613

TOTAL || 28 90

2.2.2
/2.2.3/2.2.4 - Components III, IV and V

As far
as Component III programming is concerned, the modification of the country
Operational Programme (OP) for Regional Development - with a total budget of
EUR 128.47 million out of which EUR 109.2 million is the IPA
contribution 2007-2011- was agreed the previous year and the modified Financing
Agreement entered into force on 10 January 2011.

No
programming under Component IV to be reported in 2011 as the revision of the
2012-13 OP is planned for the first semester of 2012.

In
December 2011 the third modification of the Component V IPARD Programme was
adopted (COM (2011)9923). It included adaptation of the financial tables in the
OP in order to take into account the new financial allocation for 2011
according to the MIPD 2010 - 2012. According to the new financial allocation
IPARD funds for 2011 were increased from EUR 14 million to EUR 16 million.
Furthermore, in December 2011 the Sectorial Agreement concluded between the
country and the EU was modified in order to reflect the amendment of Article
188 of Commission Regulation (EC) No 718/2007. With this amendment the basis
for calculation of the pre-financing was changed from "the first three
years" to "the three most recent years". This prevented de-commitment
of funds through increasing the rate of pre-financing not only for Component V
but also for Components II and IV.

3.
IMPLEMENTATION OF EU FINANCIAL ASSISTANCE IN 2011

The
year 2011 has seen several major achievements in operational terms:

·
The
contracting of all outstanding projects under IPA 2008- Component I

·
3
call for proposals launched under the IPARD Programme and first direct payments
to farmers made in the country and 62 contracts signed for a value of more than
EUR 1 million.

·
The
European Commission and the Government of the former Yugoslav Republic of
Macedonia concluded a Memorandum of Understanding on the association of the
country to the Intelligent Energy - Europe II (IEE II) pillar of the
Competitiveness and Innovation framework programme (2007-2013).

3.1. Success stories

Among
the success stories, the IPA 2007 Project Local infrastructure for Social and
Economic Cohesion supported improvement of the infrastructure in municipalities
through completion of selected small-scale projects as well as of staff capacity
reinforcement in the Ministry of Local Self-Government and municipalities, in
particular in decentralised sectors and in areas targeting the most
economically vulnerable. The total contracted value amounted to EUR 6.572
million, of which 11 works contracts (of a total value of EUR 4.582
million) were implemented (construction phase) throughout 2011. They included
installation of hydraulic stoppers in the old city of Skopje to preserve the
historical centre from road traffic, renovations in over 20 school buildings
across the country; constructions of buildings for youth, culture or sport
activities in different cities. The project had a substantial impact on the
selected municipalities including enhancement of EU visibility thanks to the
Municipal Awards.

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

During
2011 the Delegation contracted EUR 14 million and
paid EUR 25 million, under IPA Components I and II, which represents EUR 6
million more paid than in 2010. This can be broken down as follows:

- 34 Contracts under IPA 2008 Component I = EUR 11.5 million;

- 15 Contracts under IPA 2007 Component II, CBC with Albania = EUR 0.8 million;

- 7 Contracts under IPA 2007 Component II, CBC with Greece = EUR 0.7 million;

- 5 Contracts under IPA 2008 Component II, ERDF European Territorial
Co-operation transnational programme 'South-East Europe' = EUR 0.4 million;

- 7 Contracts under IPA 2010 Information and Communication = EUR 0.6;

- 3 Contracts under IPA ATA 2011 = EUR 0.08;

Insufficient
absorption capacity by the national authorities was still evident across IPA
Components and was mainly related to the shortcomings of key institutions
(NIPACs office, Central Financing and Contracting Department-Minister of
Finance, Audit Authority and most Line Ministries). The introduction of
Decentralised Implementation System (DIS) for Component I in December 2010
triggered a remarkable slow-down in procurement, as it has been the case with
Components III and IV where DIS was introduced in 2009. Under these two
Components we still observed a considerable number of hick-ups in 2011.

During
2011 implementation of IPARD advanced as compared to 2010 and three calls for
applications were announced. The results from the calls showed that farmers
maintained their interest to apply under IPARD, while at the same time the
quality of submitted applications improved, leading to a decrease in the
rejection rate.

3.3 Sector I: Public
Administration Reform

IPA
provided substantial support to the tax reform since 2007 aiming at improving
the quality of services towards the taxpayers, as well as strengthening the
administrative and operational capacity of the Customs Administration. Support
under IPA Component I - 2007 for strengthening the capacity of the General Secretariat
of the Government - Sector for Policy Analysis and Coordination was crucial for
designing the 2010-2015 Strategy for PAR.

The
Twinning instrument was used successfully in many priority areas to transfer
experience from Member States' experts and helped the country to prepare for
the implementation of EU policies and laws in 2011. Some of the most successful
ones were the one supporting the Energy Regulatory Commission, the Tax
Inspectorate for Corruption Prevention and Special Proceedings Units, in order
to conduct special investigations for fighting tax evasion and corruption, as
well as a project to increase the correct application of procurement and
financial management procedures by authorities in charge of managing EU funds.

All
relevant 2007 projects under Component I (4 overall) were completed, and other
4 financed under IPA 2008 were under implementation in 2011.Institution and
capacity building activity under the TAIEX instrument was also intense, like
every year, particularly in the fields of agriculture, internal market and
justice and home affairs, as can be seen from the tables bellow. Out of 212
requests received from different ministries, 143 were accepted.

The former Yugoslav Republic of Macedonia - 2011 ||

Event type || Single Country Events || Multi-country Events || All events || Experts mobilised (Single country and multi-country events ||

AGR || 3 || 14 || 17 || 133 ||

AGR IND/EXP || 14 || || 14 || 20 ||

AGR IND/STUD || 6 || 4 || 10 || 10 ||

INFRA || 1 || 2 || 3 || 19 ||

INFRA IND/EXP || 5 || || 5 || 6 ||

INFRA IND/STUD || 3 || 1 || 4 || 6 ||

INT MARKT || 14 || 14 || 28 || 222 ||

INT MARKT IND/EXP || 14 || || 14 || 20 ||

INT MARKT IND/STUD || 18 || || 18 || 23 ||

JHA || 36 || 15 || 51 || 247 ||

JHA IND/EXP || 6 || || 6 || 10 ||

JHA IND/STUD || 41 || || 41 || 39 ||

LAF || || 1 || 1 || 14 ||

P2P || 1 || 18 || 19 || 256 ||

RTP || || 5 || 5 || 68 ||

Grand Total || 162 || 74 || 236 || 1093 ||

|| || || || ||

3283 participants from former Yugoslav Republic of Macedonia attended TAIEX events in 2011 ||

In
addition, a number of study tours were organised in the area of Climate Change,
Vocational Training, Tourism, Rural Development, Conservation of cultural
heritage and public procurement, where staff from municipalities and regional
administration were the main beneficiaries. Regarding the People to People
Programme (P2P), some study tours were organised for CSO's and other
organisations in the areas of tourism, gender, HIV/AIDS, media freedoms,
cultural heritage, environment, waste management, education, public health,
etc.

3.4 Sector II: Justice, Home
Affairs and Fundamental Rights

IPA
Component I 2007-2008 projects focused on legislative reforms in integrated
border management, immigration and asylum, fight against crime and corruption,
upgrading the  country's border posts, providing support to institutions, such
as the Parliament, the Directorate for Personal Data Protection, the Ombudsman,
juvenile justice and the Unit for the implementation of the Roma Strategy, that
have a key role in ensuring appropriate levels of transparency and
accountability and protecting the fundamental rights of the citizens.

The
Twinning contract "Support to the Ombudsman" (budget
EUR 600,000)can be highlighted as a success story. The project financed
under IPA 2008 is jointly implemented by the French national Ombudsman (the
former 'Médiateur de la République', now 'Défenseur des Droits') and the
Spanish 'Defensor del Pueblo'. It started in February 2011 and will be ending
by November 2012.

The
goal is to strengthen the capacities of the Ombudsman Office, based on four
pillars: internal revision of the working methods and of the IT systems used in
the Ombudsman Office; preparation of a strategic plan for communication meant
to increase public awareness about the Ombudsman’s work; introduction of three
new units. Another goal of the project is to contribute towards implementation
of new proposals and reforms which may optimize the functioning of the
institution and strengthen its financial independence.

With
the ratification of the Optional Protocol to the Convention against Torture and
Other Cruel, Degrading and Inhuman Treatment or Punishment (OPCAT) by the
national Parliament, the Ombudsman Office was entrusted the role of the National
Preventive Mechanism, in a similar way as its Spanish counterpart. Throughout
the whole project implementation, a Counsellor of the Spanish Ombudsman has
been based in Skopje as Resident Twinning Adviser.

3.5 Sector III: Private sector
development

The
sector has been mostly supported through projects under regional projects, like
the Western Balkans Investment Framework (WBIF) as well as TAIEX.  IPA
Component I and IV funded several relevant actions, aiming at strengthening
government administrative capacity for protection of competition, for
modernising the Employment Service Agency and for coordination of social
security systems and participation in EURES (European Employment Services
Network) in the framework of the freedom of movement of workers.

3.6 Sector IV: Agriculture and
rural development

In 2011
three calls for IPARD (IPA Rural Development) applications were organised. The
first two calls resulted in 62 contracts signed, while the 92 applications
received during the third call were still under processing and contracting at
the end of the reporting year. The analysis of the results from these calls
showed that the majority of contracted projects are under 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
products. Preparation of projects under measure "Diversification and
development of rural economic activities" seemed to be most difficult and
most of the projects submitted were rejected as ineligible.

The
first payments of IPARD funds to final beneficiaries were made in 2011, which
at the end of the year amounted to approximately 1.000.000 Euro of EU
contribution, still a modest amount representing only 2% of available funds
2007-2011 under IPA Component V.

Despite
the encouraging evolution of the IPARD Agency in 2011, the speed of programme
implementation was still slow as the majority of the previously identified
problematic issues were still not solved, and the Technical Assistance measure
was still not accredited.

In
October 2011 an audit mission on the local IPARD procedures and structures was
carried out, revealing serious deficiencies, notably in the internal control
standards, and on some procedures for the attribution of investment aid.  Those
shortcomings will need to be fully addressed by the national authorities in the
coming months in order to avoid any corrective measure by the European
Commission.

Under
IPA Component I – 2008 the project Design of a functional Integrated
Administration and Control System (IACS) and associated institutional capacity ended
in November 2011 (Contract value EUR 538,750). Project activities had
been fully implemented with excellent co-operation between contractor and
beneficiaries. The following main results were achieved: campaign for
setting up a functional LPIS in the whole territory of the country prepared and
implemented; cooperation agreements relating to land identification between
farmers/ breeders and the IACS unit developed and introduced -around 1,700
meetings with farmers have been completed (over 8,000 parcels digitised); and
basis for a functioning LPIS established and operational on the whole territory
of the country.

As far
as Veterinary policy is concerned, two vaccination campaigns - spring (May –
June 2011) and autumn (October 2011) – were completed successfully (about 90%
of foxes vaccinated).Contract amount was EUR 940,000 financed under IPA
Component I -2008.

3.7 Sector V: Transport

2011
was a year of progress, yet the progress remains uneven. Although two more
contracts were signed during the reporting period (for Skopje railway station
rehabilitation and for the OP's own interim evaluation) under IPA Component
III, the contracting rate and real payments to beneficiaries remained very low.

After
severe delays in the preparation of the major project under Component III
"Construction of new motorway section Demir Kapija-Smokvica as a part
of pan - European Corridor X" throughout 2010, the project file
was finally approved by the Commission on 18 November 2011. The Bilateral
Project Agreement was signed by both sides on 9 December 2011 in Skopje, during a visit by DG REGIO. The project was tendered already in the fall of 2011
and fifteen offers were received from a large range of operators. Evaluation
will be finalized by spring 2012.

There
was some progress regarding other projects in the transport sector, as six
different Operational Identification Sheets were ready and would be approved in
early 2012 (railroad station rehabilitation; railroad security upgrades;
project preparation for a new railway line to Kicevo).

3.8 Sector VI: Environment and
climate change

After
lengthy preparation the major project for the construction of the waste water
collection and treatment system for the municipality of Prilep, supposed to
serve as a learning exercise for the preparation and later implementation of
similar projects, was approved by the Commission in November 2011. However, the
procurement process faced delays and will start only in 2012.

The
national authorities faced the challenge of preparing a sufficient pipeline of
mature projects able to absorb the planed allocations. Despite considerable
acceleration in project selection and approval under the OP Regional Development,
implementation has not yet fully covered the allocations of the environment
axis. This is not only due to the complexities of procurement preparation but
to more important difficulties in the set-up of the institutional framework
necessary to operate such projects in the long term; for example, the newly
established – also with IPA support - regional waste management bodies are
still not operational.

Under
Component I support was also given to strengthen the central and local level
administrative capacities for waste management and related aspects of
industrial pollution prevention and environmental impact assessment concerning
landfills.

3.9 Sector VII: Social
development

The
financial plan of the Operational Programme Human Resources Development (OPHRD)
2007-2011 amounted to EUR 39 million. By end 2011, the national authorities had
declared certified expenditure incurred only to the amount of EUR 3.5 million,
i.e. less than 10% of the financial plan. De-commitment of funds at end 2011
was largely avoided because of the availability of an additional pre-financing
for the OPHRD following the modification of the IPA Implementing Regulation.

The
administrative capacity of IPA units in the Line Ministries (Ministry of Labour
& Social Policy and Ministry of Education and Science) was reinforced with
the contribution of the expertise provided by 5 Twinning projects, 3 of which
started in 2011:

1.
Support on the preparation of the country to
manage the European Social fund through implementation of the Human Resources
Development Component of IPA instrument, under implementation since February
2011

2.
Support to the National Employment Policy,
started in September 2011:

3.
Support to the Modernisation of the Educational
and Training System, IPA Component IV Human Resources Development, on-going
since October 2011.

The
audit carried out by DG EMPL in May 2011 identified a number of shortcomings in
staff in the Operating Structures, which would be partially addressed by the
upcoming additional hiring of 15 staff positions for IPA component IV in 2012.

3.10 Cross-border Cooperation

The former Yugoslav Republic of Macedonia participates in four bilateral IPA cross-border programmes
with its neighbouring countries Albania, Bulgaria, Greece and Kosovo, as well
as in the transnational South-East Europe
programme.  A total of 27 new grant contracts were signed, distributed per
programme as follows:  7 contracts under the first Call for proposals of the
programme between the former Yugoslav Republic of Macedonia-Greece (IPA 2007,
EUR 0.7 million; 15 grant contracts under the CBC with Albania (IPA
2007, EUR 0.8 million); and 5 Contracts under the ERDF European
Territorial Co-operation Transnational Programme 'South-East Europe' (IPA 2008,
EUR 0.4 million).

Under
the CBC Programme with Albania 17 contracts were under implementation, in
important areas for the cross-border region such as eco-tourism, collaboration
between Chambers of Commerce on both sides of the border; promotion of business
women enterprises; awareness campaigns on the protection of the area of
Shebenik-Jablanica trans-border natural park as well as promotion of the
Galicica and Prespa national parks as tourist destinations; and development of
services in order to create better employment opportunities in the border
region.

4.
IMPLEMENTATION AND MONITORING MODALITIES AND STRUCTURES

In
light of the accreditation for decentralised management of all IPA Components
by national authorities  ( yet with the exception of Component II CBC),
Sectorial Monitoring Committees for all IPA components were organised
regularly, including the annual IPA Joint Monitoring Committee held on 2
December 2011. Two Transition Assistance and Institution Building Sectorial
Monitoring Committees were held in Skopje in 2011 (one in May, the second in
October). In addition, progress in the area of monitoring of the IPA
Operational Programmes was attained by larger involvement of the national
structures; nevertheless, the monitoring capacities within NIPAC and CFCD
should be further reinforced.

Regarding
implementation and monitoring activities under centralised management, the EUD
conducted monitoring of the on-going projects on regular quarterly basis in the
form of Project Review meetings where different operational and financial
issues were discussed. Besides the monitoring done by each Component sectorial
committees, a number of projects under IPA 2007/2008-Component I started to be
included in the Result Oriented Monitoring (ROM) which operated on a
multi-country basis. This tool complemented the internal monitoring activities
carried out by the EU Delegation under various forms (regular reporting,
steering committee meetings, project implementation reviews).

Weaknesses
in the management and control system reached a new, higher level of concern at
the end of 2011. Despite good progress made during 2010 in establishing the
institutional framework, national authorities faced problems with an increase
workload hard to manage by understaffed institutions, and the challenges of
implementing four out of five IPA Component under decentralised implementation
system.

In 2011
all necessary legal steps to establish the IPA Audit Authority were formally
completed, in particular as regards the appointment of the General IPA Auditor.
However, some specific shortcomings, in terms of its operational budget,
contractual arrangement of its staff and professional qualifications of the top
management, together with the Commission's common concern on under-staffing in
key IPA management bodies, were the underlying reasons of the qualified
opinions of the Commission auditors in 2011. That might cause in the medium
term some corrective measures or even the activation of an interruption of
payments for Components III, IV and V. Last but not least, current performance
would be one of the benchmarks to decide future IPA country allocations;
therefore urgent remedy actions were expected from the national authorities to
see IPA back on track in 2012.

There
has been increased attention by the European Parliament's committee on Budgetary
Control (CONT) to the former Yugoslav Republic of Macedonia's use of
pre-accession funds. Following a visit to the country by European Parliament
Committee in June 2011, a feedback report was established and discussed in the
relevant Parliamentary committees. The findings of the report in connection to
the use of IPA funds were largely positive but referred also to the need to
strengthen administrative and absorption capacities of the national
administration.

PART II
- FINANCIAL DATA

On
implementation of assistance at 31 December 2011

IPA former Yugoslav Republic of
Macedonia[12]

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

IPA 2007 || 34,474,174 || 32,536,093 || 94.38% || 28,653,393 || 83.12%

IPA 2008 || 38,969,289 || 34,599,666 || 88.79% || 20,233,246 || 51.92%

IPA 2009 || 39,086,742 || 152,310 || 0.39% || 91,386 || 0.23%

IPA 2010 || 40,012,429 || 0 || 0.00% || 0 || 0.00%

IPA 2011 || 32,028,678 || 0 || 0.00% || 0 || 0.00%

Total || 184,571,312 || 67,288,069 || 36.46% || 48,978,025 || 26.54%

IPA –
Component I National Programme former Yugoslav Republic of Macedonia

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

IPA 2007 || 34,021,154 || 32,268,206 || 94.85% || 28,438,058 || 83.59%

IPA 2008 || 37,122,001 || 34,234,716 || 92.22% || 19,999,925 || 53.88%

IPA 2009 || 37,060,500 || 152,310 || 0.41% || 91,386 || 0.25%

IPA 2010 || 36,917,068 || 0 || 0.00% || 0 || 0.00%

IPA 2011 || 28,903,410 || 0 || 0.00% || 0 || 0.00%

Total || 174,024,133 || 66,655,232 || 38.30% || 48,529,369 || 27.89%

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

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

IPA 2007 || 453,020 || 267,887 || 59.13% || 215,335 || 47.53%

IPA 2008 || 1,847,288 || 364,950 || 19.76% || 233,321 || 12.63%

IPA 2009 || 2,026,242 || 0 || 0.00% || 0 || 0.00%

IPA 2010 || 3,095,361 || 0 || 0.00% || 0 || 0.00%

IPA 2011 || 3,125,268 || 0 || 0.00% || 0 || 0.00%

Total || 10,547,179 || 632,836 || 6.00% || 448,656 || 4.25%

              MONTENEGRO

1. SUMMARY

Montenegro
continued, throughout 2011, its efforts to address the key priority areas
highlighted in the 2010 Commission Opinion. The progress achieved by the
country was confirmed by the recommendation of the European Commission in
October 2011 to open accession negotiations. Assistance to Montenegro under IPA in 2011 further supported the progress and reform efforts of the
national authorities, as highlighted by the Commission's on-going monitoring
and reporting.

The bulk of IPA assistance was
programmed under IPA Component I – Transition Assistance and Institution
Building National Programme, with an overall EU contribution of
EUR 26.494 million. Implementation of IPA funds continued to be
primarily the responsibility of the EU Delegation in Podgorica. In parallel,
the Montenegrin authorities started preparations for moving towards
decentralised management. In light of having received candidate country status
in December 2010, IPA funds in Montenegro also supported the national
authorities in the necessary preparations for the management of assistance
under the Regional Development, Human Resources Development, as well as
Agriculture and Rural Development IPA components.

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

In
November 2011, the Commission adopted a revised Multi-annual Indicative
Planning Document (MIPD) for the years 2011-2013, which entered into force
following the amendment of the IPA Regulation by which Montenegro was
transferred from Annex II of the regulation (potential candidates) to Annex I
(candidate countries)[13].
Montenegro will receive an indicative allocation of
EUR 104 853 687 of pre-accession funds during the period
2011-2013. This amount includes the IPA Component II, Cross-Border-Cooperation,
which is included in a separate MIPD.

The
new MIPD took into account the needs identified in the European Partnership, Montenegro’s own national sectorial strategies, as well as the key priorities of the Commission’s
Opinion[14],
and also taking into account the newly granted candidate country status for Montenegro.

The
Government of Montenegro, local stakeholders, EU Member States, as well as
other international donors were all extensively consulted during the process of
drafting the MIPD.

Taking
into account that other donors are also actively involved in Montenegro, the
areas where IPA can contribute best to the accession process of the country are
linked to the following priorities: (i) address the key findings of the
Commission Opinion; (ii) preparation for the use post-accession funds; and
(iii) alignment to the acquis and (iv) achieving decentralised
management of IPA funds.

To
achieve these priorities in the programming period 2011-2013, the Commission
decided to focus its assistance on the following sectors:  1. Justice and home
affairs and fundamental rights; 2. Public administration reform; 3. Environment
and climate change; 4. Transport; 5. Social development; 6. Agriculture and
rural development. These sectors have been established on the principle of a
more focused approach on a more limited number of sectors. The switch to a more
sectorial approach in programming EU assistance in Montenegro in 2011, although
only in the incipient stages, already helped increasing the donors' and
beneficiaries' coordination and the identification of existing gaps in each
priority area.

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, as illustrated by the
priority sectors 3 to 6.

Table
1: MIFF[15]
allocations per component:

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

I – Transition Assistance and Institution Building || 29,843, || 16,346,471 || 5,238,958 || 51,429,028

II – Cross-border cooperation || 4,310,344 || 4,588,551 || 4,418,687 || 13,317,582

III – Regional Development || || 8,000,000 || 15,200,000 || 23,200,000

IV – Human Resources Development || || 2,800,000 || 2,957,077 || 5,757,077

V – Rural Development || || 3,300,000 || 7,600,000 || 10,900,000

TOTAL || 34,153,943 || 35,035,022 || 35,414,722 || 104,603,687

Following
the decision of the European Council to grant Montenegro the candidate country
status, in 2011 Montenegro became also eligible for assistance under IPA
Components III, IV and V. Taking into account the experience of other IPA
beneficiary countries with the implementation of assistance under these three
components, discussions took place on how to best to share the financial
envelope between all the IPA components. In order to allow time for the
preparatory work necessary for setting up the necessary legal and institutional
framework for initiating assistance under IPA Components III to V, the
Commission services decided to allocated funds for these components only
starting in 2012, while in 2011 Component I projects will give support to the
national authorities for setting up the necessary structures.

2.2 Programming
2.2.1 Component I

The
2011 National Programme for Montenegro under the IPA Transition Assistance and Institution Building was adopted by the European Commission on 14 November 2011,
following extended consultations between the European Commission, the national
authorities and other stakeholders.

The
National Programme is split between six sectors in line with the MIPD
2011-2013: (1) Rule of law; (2) Public administration; (3) Environment and
climate change; (4) Transport; (5) Social development and (6) Agriculture and
rural development.

The EU
assistance under this programme focused on supporting the key priorities of the
Commission's Opinion (reference), the continuing the efforts for aligning to
the EU acquis, but also on preparatory work for setting up of IPA Components
III, IV and V of IPA; and on supporting the acquis.

The first
two sectors are a priority for Montenegro, as they allow the implementation of
the 'key priorities', as well as for preparing for decentralised management of
EU funds. Sectors 3 to 6 are essential for the socio-economic development of
the country as well as for preparing components III to V of IPA. The programme
also includes support for the participations in Union programmes such as the 7th
Framework programme in Research; Entrepreneurship & Innovation; and Culture
and Customs 2013.

Consultations
with donors held in the country showed that priority areas for future
development assistance are environment, good governance and rule of law, as
well as EU accession. Donor coordination with IPA is crucial for the efficient
use of scarce funds. And in 2010, a specific position for donor coordination
has been created within the Prime Minister's office. To date, no "lead
donor" from EU Member States was identified for a given sector, due to the
small size of the country and given that IPA is by far the largest donor.

Lessons
learned, both from the enlargement process of the now EU-10 and EU-2 countries
were integrated in the design of assistance in Montenegro. A key lesson learnt
from the previous enlargements was that reforms in the judiciary and rule of
law should be tackled at an early stage of the pre-accession process in order
to produce results on time, and this was integrated in the design of the MIPD
and 2011 National Programme. Furthermore, experience showed that in the sectors
of environment and transport an adequate project pipeline and quality project
preparation is essential to success; and competent and strong managerial
capacities should be in place, at local and national levels. These issues
represent now the focus of the project preparation facility,

In
2011, Montenegro was allocated under IPA a total amount of EUR 34 153 943,
out of which EUR 4 310 344 was earmarked for Cross Border
Cooperation Programmes (IPA Component II). From the remaining EUR 29 843 599
for Component I, EUR 3.35 million was allocated for the participation of Montenegro in multi-beneficiary programmes such as Tempus (EUR 1 200 000), Nuclear
Safety and Radiation Protection (indicative EUR 350 000) and the
Civil Society Facility (EUR 1 800 000). Therefore, the assistance
programmed under the 2011 Component I National Programme totalled EUR
26 493 599, divided as follows:

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

Priority Sector || Projects || Budget

Sector 1: Justice and Home Affairs and Fundamental Rights || 3.70

|| 01 - Strengthening justice reform || 1.20

|| 02 - Identifying durable solutions for (I)DPs and residents of Konik camp || 2.50

Sector 2: Public Administration Reform || 2.50

|| 03 - Support to the Human Resources Management Authority || 0.60

|| 04 - Support to Local Self-Government Reform II || 1.90

Sector 3: Environment and Climate Change || 7.60

|| 05 - Waste water treatment systems in Cetinje and Bijelo Polje || 6.80

|| 06 - Developing sustainable energy use || 0.80

Sector 4: Transport || 2.80

|| 07 - Vessel Traffic Management Information System (VTMIS) and response to marine pollution incidents || 2.80

Sector 5: Social Development || 0.70

|| 08 - Introducing ECDL standards in the Educational system || 0.70

Sector 6: Agriculture and Rural Development || 2.50

|| 09 - Strengthening the Rural development programme and IPARD || 1.80

|| 10 - Strengthening Veterinary Service || 0.70

Supporting programmes and implementation of the acquis ||

|| 11 - Development of Quality Infrastructure and Metrology (DQIM) || 1.20

|| 12 - Strengthening State Aid management || 0.50

|| 13 - Project Preparation Support for IPA Component III || 2.30

|| 14 - Support for participation in Union programmes || 0.52

|| 15 - Technical Assistance and Project Preparation Facility (TA/PPF) || 1.66

TOTAL || 26.50

2.2.2
Component II

The
2010-2011 Decisions implementing CBC programmes with 4 neighbour countries (Albania, Bosnia and Herzegovina, Croatia and Serbia) were adopted in 2010. In 2011 the new
programme, the CBC Kosovo – Montenegro for the years 2011-2013 was adopted on
21 December 2011, with yearly allocation of EUR 600 000 for each side of the
border.

This
new cross-border cooperation provides Kosovo with an opportunity for economic
and social development and reconciliation. The aim of IPA assistance under
Component II is to develop local administrative and project management capacity
in Kosovo’s border regions and identify a pipeline of local development
projects. The global objective of this programme is to improve the socio economic
situation in the eligible area by fostering cooperation and joint initiatives
between Montenegro and Kosovo in the following priority sectors: environmental
protection and climate change, sustainable agriculture and forestry, and
tourism in the mutual interest of Kosovo and Montenegro citizens.

In the
course of 2011, all 2008 CBC programmes between Montenegro and neighbouring countries
(4 programmes) were granted an extension of contracting deadline in order to
allow using the whole allocation.

Montenegro
also participated in transnational programmes under the European Cooperation
Objective of the Structural Funds (i.e. ERDF-SEE & ERDF-MED) and the sole
interregional programme (i.e. Adriatic) including regions of EU Member States.

3.
IMPLEMENTATION OF EU FINANCIAL ASSISTANCE IN 2011
3.1 Success stories

Intelligence-led
policing (IPA 2010 EUR 0.25 million)

The
fight against organised crime is one of the key priorities for Montenegro in moving towards the EU. Within this context, the EU put into action a Twinning
project implemented by the Austrian Criminal Intelligence Police to strengthen
the institutional and operational capacity of the Montenegrin police. The
objective of the project was to support the implementation of an Intelligence
Led Policing System, a model of policing in which intelligence serves as a
guide to operations, rather than the reverse. The impact has been substantial:
the Montenegrin Police have strengthened their capacity to fight organised and
serious crime; threat assessments, control strategies, pro-active
investigations and the analysis and process of criminal intelligence data are
all being used for this purpose; the police now have an Organised Crime Threat
Assessment and control strategy as well as Organised Crime Mapping; it is now
easier for the police to collect and process criminal intelligence data and to
conduct pro-active investigations.

Strengthening
the regulatory and supervisory capacity of the financial regulators (IPA 2008
EUR 1.2 million)

This 2
year Twinning project with partners of Bulgaria and Netherlands contributed
substantially to the harmonisation of Montenegrin legislation with the EU acquis
in the area of banking, securities, pension, insurance and anti-money
laundering and terrorist financing (AML/CFT). It strengthened financial
stability and cooperation between the beneficiary country institutions and
enhanced their administrative capacity. The project results also represent an
important step towards the preparation of the country for the negotiation
process to EU accession. The main results include: eight new laws, including
three adopted by the Parliament - the Law on Financial Stability Council, the
Law on Take-over Bids and the Law on Investment Funds; an Action Plan for Basel
II implementation; a new Capital Adequacy Decision; a framework for the
implementation of Pillar 2 requirements of Basel II Accord; establishment of a
Financial Stability Council and preparation of action plans for crisis
management situations; gap analysis on the compliance of Montenegrin
legislation with EU requirements as well as guidance papers for the
transposition of all major directives in the area of securities and pensions.
The direct beneficiaries of the project were the Central Bank of Montenegro
(CBM), the Securities and Exchange Commission (SEC), the Insurance Supervision
Agency (ISA) and the Ministry of Finance of Montenegro. Indirect beneficiaries
include citizens of Montenegro and all individuals and organisations having
financial transactions with Montenegro.

Development
of Quality Infrastructure in Montenegro (IPA 2007, EUR 2 million)

In the
area of standardisation, this project resulted in a revised process of adoption
of European standards involving public inquiry and the establishment of the
first four Technical Committees. Around 7000 European standards were
implemented. An information service on standards was harmonised with the
requirements of Directives 98/34/EC and 98/48/EC in the standardisation area.
The capacity for accreditation was significantly strengthened and a quality
management system was introduced resulting in a positive audit and full
membership in European Accreditation in November 2011. In the area of
conformity assessment an inventory was established and the first conformity
assessment bodies were trained to serve as Notified Bodies. This was followed
by simulated accreditation assessments for notification purposes in selected
Conformity Assessment Bodies. In the area of metrology, the project
re-established an unbroken chain of metrological traceability in the fields of
mass, length, pressure, temperature and electrical quantities. The project also
developed the first six new approach directives.

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

During
2011 IPA was consolidated by additional contracts (EUR 29 million) and higher
payments. By the end of the year 82% of all IPA funds available to Montenegro (IPA 2007-2010) were committed and more than 50% disbursed. All projects
financed from instruments predating IPA had already been finalised by 2011.
There are no backlogs in the implementation and by the end of 2011 more than
250 contracts were on-going for around EUR 130 million. The reason for the high
number of contracts is that, due to the small size of the country and low
absorption capacity of beneficiary institutions, the contracts need to remain
fairly small.

The
implementation of all these funds directly contributed to the recommendations
by the Commission to open negotiations (ref).

While
IPA component I showed high rates of implementation, both in terms of
commitments and disbursements, IPA component II continued to suffer from slow
procurement processes

As
regards IPA Component II, Cross Border Cooperation, the second round of calls
for proposals under the CBC programmes between Montenegro and Bosnia and
Herzegovina, Croatia and Serbia, Bosnia and Herzegovina and Montenegro, Croatia
and Montenegro and Serbia and Montenegro was launched from April to December
2011, while the evaluation of the second call for proposals for the programme
with Albania was already completed by the end of 2011..

In
every call of this second round, the number of applicants was greater than for
the first one, which proves the grass-root interest in this type of instrument,
its increasing popularity and a recognition that the programmes are being
instrumental in fostering good neighbourly relations and contributing to
stability. Finally, the CBC programme document of the joint programme with
Kosovo was commonly submitted by the participating partners and adopted by the
IPA Committee in October 2011, paving the way for the corresponding Commission
Decision, the set-up of administrative structures and the likely launch of a
call in 2012.

3.3 Sector I: Justice and Home
Affairs and Fundamental Rights

The
MIPD 2011-2013 for Montenegro envisages support to the independence,
efficiency, effectiveness and accountability of the judiciary, including the
penitentiary sector and the law-enforcement institutions, with
a view to strengthen the fight against corruption and organised crime. This
includes (a) the enhancement of cooperation and coordination, at domestic and
international level; (b) reaching a de-politicised and merit-based appointments
of the members of the judicial and prosecutorial councils and of state
prosecutors as well as the reinforcement of the independence, autonomy,
efficiency and accountability of judges and prosecutors; (c) the implementation
of the government's anti-corruption strategy and action plan; (d) the
establishment of a solid track record of proactive investigations, prosecutions
and convictions in corruption and organised crime cases at all levels – which
requires an increased cooperation with regional and EU partners;  an efficient
processing of criminal intelligence; and enhanced law enforcement capacities
and coordination.  In this framework, the following main results have been
achieved during the implementation of the projects in the Justice and Home
Affairs sector in Montenegro in 2011:

The
project "Strengthening the Capacity of Police Administration (IPA 2009 EUR
2 million) has established a solid track record of proactive investigations,
prosecutions and convictions The track record
on organised crime and corruption was established and is being consolidated.
The Police enhanced its capacity to collect and process criminal intelligence
data and to conduct pro-active investigations. An Organised Crime Threat
Assessment (OCTA) and control strategy was prepared, which includes an
Organised Crime mapping with a geographic information system and spatial crime
analysis. The Police Anti-Drug Unit enhanced its administrative and
institutional capacity (in the area of surveillance, controlled deliveries,
collection and documentation of evidence, crime scene procedures) resulting in
an improved investigation and prevention of drug trafficking.

In the
fight against corruption, the capacity of the Montenegrin authorities
responsible for corruption repressive measures was strengthened by the setting
up of a Joint Investigative Team including police; customs, judges,
prosecutors, Anti-Money Laundering Administration (see intelligence-led
policing in section 3.1)

In the
area of penitentiary reform, the project Support to Penitentiary Reform (IPA
2009 EUR 0.2 million) provided a comprehensive feasibility study,
which helped the Montenegrin Government to establish a
probation system which is being consolidated. A comprehensive strategy and
action plan for penitentiary matters was prepared and adopted and is being implemented.
This resulted in the strengthening of the prison administration capacity, and
in the improvement of prison conditions.

3.4 Sector II: Public
Administration Reform

One of
the objectives set in the MIPD 2011-2013 is to further support the country's
efforts (centrally and locally) in its reform of the public administration: to
enhance professionalism and de-politicisation of the administration; to improve
the financial management systems including for decentralised management of EU
funds; to strengthen control and supervision bodies (e.g. Court of Auditors,
Ombudsman, etc.); to consolidate efforts in the statistics in line with EU
requirements. The majority of projects on Public Administration Reform are at
an early stage in Montenegro. However two projects implemented in 2011 which
have had encouraging results in this sector are in the statistics and municipal
development areas.

The two
year project Assisting Montenegro in approximating EU standards in Statistics
(IPA 2007, EUR 815,000) has been very successful in preparing the new Law
on Statistics (adopted by the Parliament in March 2012) in establishing the
first metadata in the Montenegrin Statistical Office (Monstat) and in
introducing the concept for quality management and quality reporting. The
project contributed to improving the system of National Accounts by focusing on
improving the existing data and introducing new sources, and strengthening the
links with business statistics. Pilot calculation of quarterly GDP was
introduced. The project also improved the availability of business statistics -
the Structural Business Statistics (SBS) and Short Term Statistics (STS) and
the improved the Statistical Business Register. The project contributed to the
introduction of the Production Index and value added method and review of the
imputation system for SB Survey and method of implementation. The tools for the
tourist survey were prepared and Household Business survey was enlarged to
cover tourism. A separate spin-off project, funded with additional EU funds,
resulted in the first tourism satellite accounts.

The
project Municipal Development Grant Scheme (IPA 2008 and 2010 EUR 5.4 million)
is a grant scheme addressing municipal infrastructure development needs. The
scheme was successfully contracted and began implementation in 2011 when
contracts were signed with 14 municipalities in Montenegro.  The projects
include investments in fire and rescue protection, road and parking
construction, supply of equipment for waste management, cultural and touristic
infrastructures and equipment. As these projects require important secondary
procurement activities, the grantees are supported in the implementation of
their project by EU funded technical assistance service contract. These calls
for proposals were the first of their kind in Montenegro to directly address
the investment needs of municipalities. At the same time, the projects are
building the capacity of beneficiaries to manage EU grant contracts according
to best practices and to deal with the future demands of the structural funds.

3.5 Sector III: Environment and
climate change

As
indicated in the MIPD 2011-2013, the National Strategy for Sustainable
Development of Montenegro highlights the importance of developing
infrastructure, including wastewater treatment, as a pre-condition of
implementing its strategy.  The recommendations of the MIPD state that
“assistance to the environmental and climate change sector will look into the
preservation of natural resources and environmental protection by providing
improvements in the solid waste and waste water infrastructures". In this
framework, the project Upgrade of the sewage system in the municipality of
Niksic, (IPA 2008 EUR 3.5 million), which began implementation in 2011 will
fully correspond to these needs by providing an equipped and operational waste
water treatment plant, including collector pipelines in this large
municipality. The main purpose of the project is to improve the quality of Montenegro’s environmental wastewater infrastructure base, in particular targeting the protection of
environmentally sensitive receiving waters such as Skadar Lake. Two thirds of
the 20 km of sewage network has already been built. This is the first project
in Montenegro where parallel funding, together with the European Investment
Bank has taken place. Involvement of the EU and other financial stakeholders,
and the fact that these types of projects are of national interest, ensures
future sustainability and continuing benefits to both citizens of Niksic and
the environment of Montenegro.

The
MIPD also states "The Opinion concluded that Montenegro will have to make
considerable and sustained efforts to align with and especially to implement
and enforce the environmental and climate acquis". Activities of
the project Technical Assistance for implementation of Energy Community Treaty
(IPA 2007 EUR 1.5 million) are complementary to the efforts in climate
mitigation since a significant part of the project is related to energy
efficiency. This project has helped to develop and implement energy sector
policies that will ensure the implementation of Montenegro's commitments under
the Energy Community Treaty, including the implementation of the Regional
Energy Market. The key achievements in 2011 were adoption of Grid-Code,
Electricity market rules, Interim methodology for final consumers and Interim
methodologies for use of transmission and distribution systems. The main
beneficiaries were the Ministry of Economic Development and the Energy
Regulatory Agency. It is important to mention synergy and complementarities
with the World Bank funded project "Energy Efficiency in Montenegro" which is focused on investments in energy efficiency. The main results of
this project will enable proper management and operation of electricity networks;
catalyse investments in energy efficiency, renewable energy sources and
cogeneration, as well as ensuring better regulatory quality in line with
requirements of Energy Community Treaty.

3.6 Sector IV: Transport

MIPD
2011-2013 states that “The opinion mentions the need to strengthen
administrative and implementation capacities in the transport sector. For the
course of this MIPD, IPA will contribute to investments in the maritime and
railway sectors.” In this framework, a substantial investment into the railway
sector in Montenegro is ongoing through the following projects:

The
foundation for any improvements in the railway sector has been provided by
developing the main design for the rehabilitation of the entire railway line
from the Port of Bar (Montenegrin coast) until the border with Serbia in Vrbnica. This has been achieved through the project Development of the Transport
Sector - Preparation of Main Design for Railway Infrastructure Investment (IPA
2007, EUR 1 million). The finalization of this large project enabled
the Montenegrin Railway Infrastructure Company to start planning the
rehabilitation of different parts of the railway line and other very expensive
infrastructure objects such as bridges, tunnels and stations. It also provided
a documentary basis for financial applications to several International
Financial Institutions. The project approach through a chain of parallel
actions was particularly successful - firstly, to harmonise laws and
regulations, secondly to enable the institutional bodies to plan and finally,
to provide funds for practical and visible changes.

In 2011
a section of almost 10 km of railway line between the capitol of Montenegro, Podgorica, and the capital of Serbia, Belgrade, was systematically rehabilitated through
the project Major rehabilitation of the main rail line Bar – Vrbnica, Section
Kolasin – Trabaljevo  (IPA 2009 EUR 5 million). The technical
improvement of the railway track and overhead line provided a major upgrade to
the safety and comfort of rail transport in the country. Until the upgrade,
trains were forced for safety reasons to reduce the speed down to 40 km/h due
to the state of the track. The difficult terrain around the entire section,
which contains eight bridges and a long tunnel, meant the implementation of the
works required special logistical efforts and coordination with on-going rail
traffic. The expected result, increased speed up to 80 km/h and improved safety
for passengers, has been fully achieved.

In
terms of strengthening implementation capacities in the transport sector, two
projects have had encouraging results. The project Support to rural roads in
northern part of Montenegro - Supply of road maintenance machinery (IPA 2009
EUR 1.2 million) improved local governments’ capabilities in 12
municipalities in North Montenegro[16] 
to maintain the rural road network in a sustainable and cost effective manner
that will support the agriculture sector and wider socio-economic development.
Finding sustainable solutions for rural roads maintenance is a crucial factor
in terms of the access of rural communities to basic services such as
education, primary health care, water supply, local markets and economic
opportunities. Based on common EU practice, the Ministry of Agriculture and
Rural Development identified four machinery rings as the most appropriate
solution to maximise available resources to maintain the existing rural road
network in North Montenegro. In this manner municipalities have access to
machinery in partnership. The project strengthened the capacity of the
machinery rings through the delivery of specialized machines. The main
beneficiary was the Ministry of Agriculture and Rural Development.

A
successful project which has contributed to the implementation of Montenegro's Strategy for Integrated Border Management by improving the efficiency,
effectiveness and safety of its border control and processing procedures is
Construction works in border crossing points Dobrakovo and Dracenovac (IPA 2008
EUR 2.37 million).  Rehabilitation of the physical border infrastructure is key
not only to integrating Montenegro into regional trade and tourism networks but
also to improve traffic flows and border safety measures in line with EU
standards. Border crossing point "Dobrakovo" is strategically important
as it processes 80% of all international freight and passenger movements
between Port of Bar and Belgrade, while "Dracenovac" is located on
the second busiest road transport route between Serbia and Montenegro. The completion in October 2011 of the construction works has had a significant
impact on passengers and goods transport by considerably reducing the time
taken to perform inspections of vehicles by security, customs and veterinary/phytosanitary
officers. The main beneficiary was the Ministry of Internal Affairs.

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 2011.

Some of
the key achievements of the project Labour Market Reform and Workforce
Development (IPA 2008 EUR 1.8 million) included the development of a national
Employment and Human Resources Development Strategy with the corresponding
Action Plan, a web based Information Platform, Skills Needs Surveys in the
sectors of tourism, construction and wood processing and the development of
Curriculum Modules within these three vocational training areas. The project
addressed factors creating structural unemployment, affecting its human
resources and the widening disparities between municipalities. Active labour
measures included a call for proposals/grant scheme (EUR 470,000)
promoting local employment projects and the opening of five Career Guidance
Centres, including staff training of the staff and development of guidelines on
quality guidance.

The
project  National Qualification Framework (NQF) and Quality assurance (QA)  in
Education (IPA 2007 EUR 1.5 million) has made substantial progress in
developing  a more coherent EU aligned policy in lifelong learning, in line
with the Lisbon agenda, amongst policy makers, practitioners, employers and
civil servants in Montenegro. The 21 month project which ended in 2011
achieved: extensive capacity building of quality framework staff and bodies; a
strategy for development of the NQF; development of an NQF info management
system; clarification of occupations, qualifications, formal and non-formal
learning; QA in education planning and strategy including assistance to
reforming higher education planning and budgeting in line with the Bologna
process; creation of a university information and monitoring system.

In
terms of social inclusion, the project Social Welfare and Child Care System
Reform: Enhancing Social Inclusion (IPA 2010 EUR 2.9 million) is a three year
programme with the Ministry of Labour and Social Welfare, the Ministry of
Education and Sport, UNDP and UNICEF which began implementation in January
2011. Results are still at an early stage but in 2011: the  Law on Social and
Child Protection was revised to bring it into line with international
standards; a Strategy on Fostering was developed; workshops were held on
standards in fostering, day care centres and shelters for child victims of
violence as part of the process of developing national standards and guidelines
for child protection; a child protection database was developed to monitor and
process data and information on vulnerable children; technical expertise was
brought in to prepare and advise on de-institutionalisation for children
residing in homes; 18 grants were awarded to organizations and institutions at
municipal level to help build capacity in the development of community based
social services.

3.8 Sector VI: Agriculture and
rural development

The
need outlined in the MIPD 2011-2013 to support the Ministry of Agriculture and
related services/institutions to prepare for implementation of the rural
development policies (IPARD) was addressed through a 2 year Twinning project
Support to Establish an IPA Rural Development Programming and Implementation
System (IPA 2008 EUR 1.5 million). This project tackled the acquis-related
reforms prioritised in the 2009 and 2010 Progress Reports notably with regards
to the applicable binding rules necessary to prepare for the future functioning
of the common agricultural policy (CAP) and it contributed to establishing the
institutional framework, the preparation of operational documentation, as well
as training the available staff.  The project has notably developed strong
synergies with other stakeholders and aid interventions. Through cooperation
with the World Bank MIDAS project, national grant schemes financed under this
WB support were implemented as "IPARD-like" measures. Such synergies
provided concrete training activities to the newly developed institutional
capacities, and shall contribute to the impact and sustainability of the
results of the Twinning project. A follow up project funded under IPA2011 and
to be implemented in 2012-2014 will support finalising the accreditation
package for component V to be submitted to the Commission and strengthen
advisory and extension services capacities.

In
terms of the MIPD 2011-2013 objective to support the on-going development of a
sustainable agriculture sector …and to assist alignment to the common
agricultural policy and EU standards, several IPA projects are noteworthy.

Within
the project Control and eradication of rabies and classical swine fever (IPA
2008 EUR 1.36 million) the first oral rabies vaccination campaign was
successfully carried out in autumn 2011. A total of 275,000 vaccine baits were
distributed by aircraft at a density of 20 baits per square km on the whole territory of Montenegro (except water surfaces and urban areas). The dropping of the
vaccine baits was recorded using special GPS based software which allowed later
analysis of the effectiveness of the bait distribution. The aerial vaccination
campaign was supported by an awareness campaign with the slogan "Together
against rabies" anticipating the involvement of the different institutions
and stakeholders involved. Further vaccination campaigns will now be carried
out until the disease is eradicated. This activity is contributing in
achievement of the overall objective of the project which is to improve animal
health in Montenegro thus ensuring consumers' safety and public health,
development of agriculture and improved quality of life of agricultural
producers. Given the trans-boundary character of this disease, rabies
vaccination in Montenegro is a part of the larger eradication effort that is
being carried out in parallel in other Western Balkan countries through EU
support.

Another
project in this sector, Animal identification and registration, Phase II (IPA
2007 EUR 1.2 million) has  been successful in: improving
implementation of the Law on Identification and Registration of Animals and its
amendments; strengthening the Identification System for cattle, sheep and
goats; introducing a Veterinary Information System (VIS) linking disease
control measures to the animal identification system;  implementing the first
campaign for sheep and goats identification and registration in Montenegro;
raising public awareness on the Veterinary Information System and ear tagging
of small ruminant by implemented publicity campaign (by TV, radio, billboards,
posters, leaflets).

Through
the project Development of Food Safety Services (IPA 2008 EUR 2.1 million)
laboratory equipment for use in the food safety system was successfully
delivered, installed and being used effectively in the laboratories involved.

3.9 Implement effectively the acquis

MIPD
2011-2013 states “A priority for IPA is to support Montenegro’s efforts through
significant strengthening of administrative and implementation capacities in
the areas of the acquis.”  In this framework the following projects have
been particularly successful:

The
project Accession to Internal Market (AIM) – Components I and II (IPA 2009,
EUR 800,000) covered four sectors - competition, state aid, and market
surveillance and competition protection. The project contributed to the
preparation of six strategic and programme documents, trained more than 220
people, and initiated 15 pilot cases. Three key new laws were drafted and are
being adopted – the Law on Competition protection, on Consumer protection
(transposing nine EU directives) and on Consumer credits with the related
bylaws.  In the area of Competition policy, the enforcement record of Montenegro was substantially improved and the first cases of abuse of dominant position
were solved according to the current legislation. In the area of State Aid, the
project resulted in the preparation of a Regional Map, the elaboration of an
Adjustment programme, the establishment of a State Aid inventory and the
introduction of the annual reporting on State Aid in Montenegro, along with 
strengthening the capacity for managing specific cases of state aid that were
of significant public importance. In the area of market surveillance and
consumer protection, the project helped the establishment of a
"national" RAPEX system, strengthening the coordination between the
market surveillance bodies and improving the methodology for market
surveillance, which resulted in 21,000 dangerous goods being withdrawn from the
market.

The
purpose of the Twinning project Support to the Customs Administration (IPA
2008  EUR 1 million) was to modernise the Customs System in full
compliance with  EU standards in support of trade facilitation. The Ministry of
Finance drafted a new Customs Law in line with the new modernised Community
Customs Code and implementation began in January 2011. A detailed Business
Change Management Plan was elaborated and a Strategic Development Unit has been
established in order to coordinate, communicate, monitor, review and report on
its implementation. An internal affairs database for professional standards has
been developed, an audit management system has been introduced and training
programmes have been developed and implemented in order to familiarise auditors
with new systems, procedures, attitudes, methodologies and to upgrade their
skills and experience for better performance and higher standards of customs
auditing. The project has resulted in further aligning customs legislation and
procedures with the EU acquis which is one of the EU Partnership priorities for
Montenegro. Integrated Border Management and Enforcement have also been
enhanced through establishing improved communication systems at national and
international level. Cooperation and networking have been enhanced between
customs administrations, other relevant border agencies, neighbouring countries
and the EU Member States Workflow and procedures at Border Crossing Points have
been implemented and updated.

The
two-year Twinning project strengthening the regulatory and supervisory capacity
of the financial regulators, IPA  2008 EUR 1.2 million,  has substantially
contributed to the harmonization of Montenegrin legislation with the EU acquis
in the area of banking, securities, pension, insurance and anti-money
laundering and terrorist financing (see section 3.1 for details).

3.10 Cross-border cooperation

The
year 2011 has been the first in which IPA Component II has been in full swing
in Montenegro. All CBC programmes, including transnational programmes under the
European Cooperation Objective of the Structural Funds (i.e. ERDF-SEE &
ERDF-MED) and the sole interregional programme (i.e. Adriatic), are now well
established and running smoothly. For the first time, the population of the
border municipalities and the citizens of Montenegro have had the advantage of
benefiting from concrete field actions promoting the economic and social
development of the border areas or sustaining a large variety of joint cultural
undertakings by local actors in these areas. All CBC programmes have also
benefitted from IPA assistance providing coverage for the preparatory,
management, monitoring, evaluation, and information and control activities
related to the implementation of the programmes, together with activities to
reinforce the administrative capacity of the structures in charge of that
implementation.

In
2011, the project two languages - One book (IPA 2007 EUR 39,800) was a
particular success. This cross border project between Montenegro and Albania was implemented by an NGO from Podgorica and the University of Shkodra under a priority measure targeting joint initiatives of local groups in the field of
culture. Activities included: the establishment of a bilingual website; an
awareness raising campaign; the organisation of public debates and a conference
in both countries with the famous writer and Nobel Prize nominee Ismail Kadare;
the publication and dissemination of a bilingual book in two volumes with works
in drama, prose and poetry by contemporary authors from the cross-border
region. The books were distributed free of charge in public libraries and the
website[17],
which will be maintained after the project, offers a comprehensive bilingual
database with information on local institutions of culture and education,
publishers and artists. Both the Albanian minority in Podgorica and citizens,
state institutions and municipalities in the two countries showed significant
interest in how the two cultures were related by common historical events,
despite the different languages. Cultural cooperation proved to be an effective
way of ensuring familiarity and communication, whilst stimulating socio-economic
exchanges in the Albanian-Montenegrin cross-border area.

4.
IMPLEMENTATION AND MONITORING MODALITIES AND STRUCTURES

In 2011
the national authorities of Montenegro progressed substantially with the
preparation for conferral of management for IPA components I, II, III and IV,
while starting also work for IPA Component V.

In 2011
the preparations for decentralised management advanced significantly for all
components. The legislative framework was finalised with the exception of the
signature of the implementing and operational agreements for IPA Components
IIb, III and IV. All bodies and authorities involved
in decentralised management were designated and the respective appointments
were finalised with the exception of Head of Operating Structure for Component
II and the Head of the CBC Body. For both positions personal appointments exist
but are still not integrated in the organisation chart of the Ministry of
Foreign Affairs and European Integration.

A
High-level Working Group was established in the last quarter of 2011. It is
headed by the CAO and meets twice a month with a clear result of speeding up
the preparations for decentralised management. The Manuals of Procedures for
the first two components were prepared for Components III and IV and advanced
drafts of the Manuel of Procedures have been completed. IPA Component I
provided support for decentralised management, provided through 6 projects,
amounts so far to EUR 4.7 million for all components.

As
regards the Monitoring of the Implementation of IPA funds, an IPA Monitoring
Committee took place in June 2011 with a follow up meeting
in November 2011.

Following
this meeting the Commission indicated that as regards ownership, there is a
need for a more systematic delegated approach and delegated power in all
ministries has been highlighted by the Commission and the NIPAC. Furthermore,
the Commission stressed the importance of strategic planning, in order to
better meet the pre-conditions (delivery of permits, etc.) necessary before
project implementation can start and in order to prevent delays.

In
terms of monitoring, 16 projects with a value of EUR 22.3 million (22% of the
overall portfolio) were subject to external monitoring. All projects and
contracts were monitored throughout the year and all major projects have
quarterly steering committees. In addition, on-the-spot checks are
systematically carried out for works and supply contracts. Lastly, as a recent
Court of Auditors report pointed out a lack of monitoring of many small grants,
the Delegation contracted an audit company to monitor the majority of small
grants from the year 2012.

PART II
- FINANCIAL DATA

On
implementation of assistance at 31 December 2011

IPA Montenegro

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

IPA 2007 || 25,254,128 || 24,971,292 || 98.88% || 22,350,434 || 88.50%

IPA 2008 || 28,847,296 || 28,320,804 || 98.17% || 20,768,014 || 71.99%

IPA 2009 || 31,744,421 || 22,487,156 || 70.84% || 15,064,469 || 47.46%

IPA 2010 || 30,938,823 || 17,225,840 || 55.68% || 4,804,421 || 15.53%

IPA 2011 || 29,693,599 || 0 || 0.00% || 0 || 0.00%

Total || 146,478,267 || 93,005,092 || 63.49% || 62,987,338 || 43.00%

IPA –
Component I National Programme Montenegro

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

IPA 2007 || 23,870,504 || 23,639,048 || 99.03% || 21,350,218 || 89.44%

IPA 2008 || 26,800,000 || 26,683,713 || 99.57% || 19,917,200 || 74.32%

IPA 2009 || 28,432,179 || 22,335,932 || 78.56% || 14,986,732 || 52.71%

IPA 2010 || 28,638,823 || 17,175,840 || 59.97% || 4,764,421 || 16.64%

IPA 2011 || 26,493,599 || 0 || 0.00% || 0 || 0.00%

Total || 134,235,105 || 89,834,532 || 66.92% || 61,018,571 || 45.46%

IPA –
Component II (CBC) Programme Montenegro

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

IPA 2007 || 1,383,624 || 1,332,244 || 96.29% || 1,000,215 || 72.29%

IPA 2008 || 2,047,296 || 1,637,091 || 79.96% || 850,814 || 41.56%

IPA 2009 || 3,312,242 || 151,224 || 4.57% || 77,737 || 2.35%

IPA 2010 || 2,300,000 || 50,000 || 2.17% || 40,000 || 1.74%

IPA 2011 || 2,900,000 || 0 || 0.00% || 0 || 0.00%

Total || 11,943,162 || 3,170,559 || 26.55% || 1,968,767 || 16.48%

              ALBANIA

1.
SUMMARY

EU
financial assistance to Albania has played an important role during 2011
in further supporting the country on its way towards European integration.
On-going projects in the areas of justice and home affairs, public
administration reform and the fight against corruption have further advanced
and have shown concrete results. This support has been important for Albania in order to fulfil relevant key priorities listed in the 2010 Commission Opinion on Albania's application for membership of the European Union.

There
has been overall progress in infrastructure projects, in particular in the
transport sector (construction of rural roads), while progress in the water
sector (construction of water treatment plants) has been slower partly due to
unresolved property right issues. The Albanian authorities also need to focus
on long-term maintenance of infrastructure projects.

Many
technical assistance projects continued to support different line Ministries
and state institutions, with the result that many relevant pieces of
legislation for the acquis alignment have been prepared. However, in
2011 the political stalemate between the ruling coalition and the opposition,
which was overcome by a political agreement in November, prevented substantial
progress on the adoption of key legislation.

The
share of funds contracted under the IPA programmes 2007, 2008, 2009 and 2010 is
very high, continuing the positive trend that began in 2009.

Concerning
the preparation for the decentralised management of IPA funds, further progress
has been made. Under IPA Component I, the key structures and systems have been
put in place and Albania submitted its application for the conferral of
management in the beginning of 2012. European Commission auditors are currently
analysing the application. Work has also continued on IPA Components II-V, with
Component V more advanced than the others.

2011
also saw further progress towards a sector-based programming. Some questions
remain open regarding its practical implementation, notably the need for the
Albanian Government to develop a realistic medium-term budget perspective for
the sector strategies in place.

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 European Commission on 8 July 2011. The strategic priorities
identified in the 2011-2013 MIPD are supporting the strengthening of the rule
of law, improving the capacity and efficiency of the public administration, and
supporting social and economic development as well as the acquis
alignment. The following six sectors of interventions have been identified:
i) justice and home affairs, ii) public administration reform, iii) transport,
iv) environment and climate change, v) social development, vi) agriculture and
rural development.

Overall
ownership on the side of the government to move towards a more sector approach
has further improved during 2011, in particular with a view to coordination and
monitoring mechanisms at the central level. At the same time, there are
shortcomings regarding the administrative capacity in some line Ministries as a
key pre-condition to implement sector policy strategies.

The IPA mid-term evaluation,
conducted during 2010, recommended the concentration
on fewer specific priorities in line with the beneficiaries' strategic
framework reform. Additionally, the
report also revealed that some of the prerequisites for a sector-based approach
do exist in Albania. However, it was also noted that at present the
administrative capacity to adopt a sector-based approach is in many line
Ministries relatively low. Therefore, well-targeted assistance will have to be
provided and continued efforts will have to be undertaken to complete on-going
reforms (functional strategies and monitoring system). These findings have been
fully taken into account in preparing the MIPD 2011-2013 as the document was
fully based on the national strategic framework and put future IPA intervention
into perspective with on-going donor involvement.

2.2 Programming
2.2.1
Component I

The
programming of IPA 2011 for Albania has proven particularly effective, bringing
to the unprecedented situation of the signature of the Financing Agreement
between Commission and the country government and the following starting of the
contracting within the programme year.

The IPA
2011 programme focused in the different sectors to a large extends on
investments and to a smaller extent on institution building projects. This was
mostly due to the fact that a significant number of institution building
projects, in particular in the area of rule of law and public administration
reform from earlier programmes were already under implementation and/or were
about to start soon.

Overall, the IPA 2011 programme
has as always been developed in close cooperation and consultation with
national authorities. However, the programming exercise has shown some
shortcomings, compared to the previous year, due to the administrative slowdown
in the course and follow-up of the local elections in May 2011. 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 as well as with EU and non–EU donors have been organised
on a regular basis. These primarily focused on strategic orientations, the
regional dimension and donor coordination of IPA planning and programming

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

The
programming exercise for IPA 2012 started already early during the reporting
year, based on the six sectors of the MIPD 2011-2013. Lessons learned, in
particular regarding the maturity, timely planning, better links between EU
assistance and sector strategies as well as sustainability have been taken into
account during the initial programming of IPA 2012. 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. Some capacity building projects are clearly linked to
give support in further developing the sector or sub-sector approach (e.g.
technical assistance to justice sector, law enforcement sector or transport
sector).

Table 1: Indicative financial
allocations for the year 2011 per component, in million EUR

ALBANIA || 2011

I. Transition Assistance and Institution Building || 84.30

Of which: ||

National Programme  || 82.00

Tempus Programme\* || 2.00

Nuclear Safety and Radiation Protection\* || 0.30

II. Cross-Border Cooperation || 10.48[18]

Of which: ||

CBC Montenegro-Albania || 0.85

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

CBC Kosovo-Albania || 0.60

CBC Greece-Albania || 1.66

CBC IPA Adriatic\*\* || 6.01

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

TOTAL || 94.68

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

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

Table 2: Indicative financial
allocations for the year 2010 under the National Programme, per priority axis
and per project, in EUR million

Priority Axis/Projects || Budget

Political Criteria || 23.00

|| Construction of a new pre-detention centre and prison in Shkodra || 18.50

|| Support to the Albanian Customs Administration || 3.00

|| Supporting Social Inclusion of Roma and Egyptian communities || 1.50

Economic Criteria || 48.50

|| Construction of Vlora Bypass || 19.36

|| Rehabilitation of Vocational Education and Training (VET) schools in Leyha, Fier and Cerrik || 2.20

|| Support to Agriculture and Rural Development || 10.00

|| Improvement of rural roads in Albania || 14.50

|| Support for participation to Union Programmes || 2.44

Ability to assume the obligations of membership || 10.50

|| Construction of Sewerage System and Waste Water Treatment Plant in Velipoja area Phase III || 10.50

TOTAL || 82.00

2.2.2
Component II

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

As set
out in the 2011-13 MIPD for IPA Component II - Cross-border Co-operation, these
four CBC Programmes aim at (i) supporting economic, social and territorial
cooperation in border areas, (ii) addressing common challenges in fields such
as environment, natural and cultural heritage, public health, prevention of and
fight against organised crime, (iii) ensuring efficient and secure borders,
(iv) promoting joint small scale local actions ("people-to-people") 
and (v) supporting networks, accessibility and emergency preparedness.

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.

In 2011
these four CBC Programmes have been revised in order to include the 2012-13
appropriations in line with the updated financial plan set out in the 2011-13
MIPD for IPA Component II - Cross-border Co-operation. The objectives, priority
axes and measures of the four multi-annual programmes have remained unchanged.

In the frame of the European
Territorial Co-operation objective of the Structural Funds 2007-2013, Albania is also part of the ERDF transnational programme "South-East Europe" (SEE) since
2007 and of the ERDF transnational programme "Mediterranean" (MED)
since 2009. IPA funds from 2011 were integrated in the SEE and MED programmes.
They are managed by the Commission's Directorate-General for Regional Policy,
which is in charge of the programming of both ERDF and IPA funds within these
programmes. The involvement of Albania in these two programmes reflects the
Commission's intention to promote the inclusion of Albanian applicants (e.g.
regional and local institutions, civil society organizations, universities,
etc.) in joint transnational co-operation activities with partners from EU
Member States. This participation will also facilitate the country's learning
process regarding European territorial co-operation programmes' rules and
procedures under EU Structural Funds.

Since
2007 Albania is also member of the IPA Adriatic cross-border cooperation
programme, whose global objective is to strengthen sustainable development
across the Adriatic region. Therefore, Albanian applicants may also experience
joint transnational co-operation activities with partners of this specific
region.

2.2.3
Component III, IV and V

Albania
has still no access to these IPA components, but the preparation for
decentralised management of IPA funds of the corresponding nature is already
underway, so to prepare the administrative structures and programmes for the
future. This preparation has shown to be a challenging administrative
capacity-building exercise for the Albanian government on the road towards EU
integration and has become one of its main priorities during the year 2011.

2011 the draft Strategic
Coherence Framework has been provisionally finalized and the Operational
Programmes have been further elaborated. However, due to the open question of
candidate status and the limited time, which will be available under the
current financial perspective, it is very unlikely that these documents can be
implemented before 2014.

On
Component V (Rural development), Albania has continued to adapt already
existing structures in order to set up the Managing Agency and the Paying
Agency for the Instrument for Pre-Accession Assistance for Rural Development
(IPARD). The draft IPARD programme has been prepared by the Albanian side on
the basis of sectorial analyses of priority sectors in agriculture, aiming at
identifying the current situation in the milk and dairy products sector, the
meat sectors, the fruit and vegetables sector. An IPA 2011 project has been
foreseen to launch a pilot project to introduce "IPARD like"
measures, in order to establish a grant scheme for farmers and make use of the
already existing structures in accordance with IPARD rules. For
Component V, the establishment of a rural cadastre and farm remained a crucial
and challenging element for defining the scope of future rural beneficiaries.

3.
IMPLEMENTATION OF EU FINANCIAL ASSISTANCE IN 2011
3.1 Success stories
3.1.1
Reaction to the incident in Gërdec: roads rehabilitated and a new school

On 15
March 2008, in the depot for dismantling munitions in the village of Gërdec in
the Municipality of Vora (14 kilometres from Tirana),
two severe explosions created a huge crater with a hit wave that shocked the
entire surrounding area. The powerful explosion in a
populated area caused human losses, severe damages to the environment and
destruction of houses and businesses.

The
European Commission took the lead on the Gërdec reconstruction providing the
support for revitalization of the area in the fields of infrastructure,
education and environment. The project aimed at improving the living conditions
and creating favourable conditions for starting the normal social-economic live
in the area affected by the incident of Gërdec.

Out of
an overall EU contribution of EUR 3.12 million, 3.5 km of roads have
been reconstructed in the Municipality of Vora and a new elementary school with
sport facilities has been constructed in the village of Marqinet, close to the
area of the incident.

Roads
are completed with sidewalks, street lights and a proper drainage system,
improving the environment and safety in the area. Moreover, it contributed on
enhancing the development of local businesses.

The new
school has a capacity for 500 pupils. The sport facilities comprise an indoor
gymnasium and a football field, as recreational areas for the entire community.
These modern premises have been designed and constructed taking into
consideration European standards and building codes: access to people with
disabilities, adequate fire protection measures, energy efficiency, etc.

The
living conditions of the affected area have drastically improved as a result of
this intervention. A final aspect to underline is the high level of commitment
and involvement showed by the Albanian counterparts - Vora municipality and
relevant line ministries - during the implementation of the project,
contributing to a successful completion in 2011 as per schedule.

3.1.2
Data Protection Commissioner Office (DPC)

Data
protection, in particular regarding private data, is an important right for the
socio-economic development of a society. The IPA 2009 project
"Strengthening of the Data Protection Commissioner office (DPC) for
alignment with EU standards" (EUR 0.6 million), has produced
important results during the year 2011. The Technical Assistance support
strengthened the enforcement of Data Protection related legislation in line
with European standards and reinforced the administrative capacity of the DPC.
The Technical Assistance has also assisted in the development of internal
procedures concerning the execution of the DPC competences. Finally,
legislative packages related to other sectors have been elaborated, for example
in the area of Police and Civil Registry as well as in the health and banking
sectors.

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

The implementation of pre-IPA instruments in 2011 was almost
completed with the exception of CARDS 2004 (committed to 97%), CARDS 2005 and
2006 (both committed to 99%).

2011 has been the best year to
date regarding IPA implementation, as regards commitments and disbursements.

The EU-Delegation contracted a
total amount of EUR 100.38 million.

The payment of EUR 64.42
million exceeded the performance in 2010 where EUR 56.38 million were
paid. As mentioned before, 2011 saw for the first time a contract signed under
IPA 2011 in the same year as the financing decision was adopted.

3.3 Sector I: Public
Administration Reform

In
the sector of public administration reform the following priorities for IPA
support over the period covered by the 2011-13 MIPD have been identified: (i)
completing essential steps in public administration reform with a view to
enhancing professionalism and de-politicisation of public administration and to
strengthening a transparent, merit-based approach to appointments and
promotions and (ii) improving coordination of the economic and fiscal policies
to assist in the stabilisation of the macroeconomic environment and ensure the
sustainability of public expenditure, while strengthening the capacity of
institutions providing statistical data.

During
2011, the reform of public administration in Albania was guided in particular
by the key priorities related to this sector. The Department of Public
Administration continued to receive EC support in order to increase its
capacities and with a view to ensuring the enforcement of the civil service
law. The necessary amendments to this law were unfortunately blocked in the
Parliament due to the lack of the 3/5 majority. As regards public financial
management, positive results have been achieved in relation to the
effectiveness, efficiency and transparency of the public procurement, public
actions and concessions systems in Albania (IPA 2008 project "Support to
Public Procurement").

Two
Twinning projects financed from IPA 2008 regarding the improvement of customs
procedures and the support to the competition authority were successfully
concluded throughout 2011.

 In the
difficult political context of 2011, a sensitive Twinning project to support
the Parliament has started, contributing to operative of this institution on
the basis of a constructive and sustained political dialogue.

Four Twinning projects started practical implementation
during 2011 ("Strengthening the Assembly of Albania", "Support
to the Albanian Penitentiary Reform", "Enhancement of the operational
and logistical capacities of the Directorate of Witness and Special Persons
Protection" and "Support to Anti-Money Laundering and Financial
Crimes Investigations Structures").

SIGMA continued to support during 2011 Albania in the area of public administration reform. In particular SIGMA 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, SIGMA helped the Ministry of Finance on
several levels.  Finally, SIGMA: provided assistance in the area of public
procurement and concessions, e.g.  with the establishment of a new review body
(Public Procurement Commission).

TAIEX implemented 38 national events and 66 multi-country
events (workshops, expert missions, study visits).

In
2011, Albania participated in the following EU programmes: 7th Research
Framework Programme, Competition and Innovation Framework Programme (CIP), Europe for Citizens. Furthermore, the beneficiary signed an MoU enabling it to participate
in the “Culture” Union Programmes.

3.4 Sector II: Justice, Home
Affairs and Fundamental Rights

The
overall objective identified in the 2011-13 MIPD is to strengthen the
independence, transparency and efficiency of the judiciary and to enhance the
rule of law. Therefore, the financial assistance provided via the 2011 National
Programme for Albania, as well as through previous envelopes, aimed at (i)
strengthening the professionalism of judges and prosecutors, (ii) increasing the
level of execution of court decisions, (iii) improving the infrastructure in
the judicial sector, i.e. the courts, prison and pre-detention systems and (iv)
reinforcing the capacity of the law-enforcement bodies and coordination between
prosecutors and state police. In addition, several on-going projects include
the fight against corruption as a cross cutting area of intervention, since the
2010 Commission Opinion considers corruption as a key challenge for the rule of
law in Albania.

The
"EURALIUS" (EUR 3.3 million) assistance mission first of all provided
support for the definition of the national strategy for the justice sector,
which has been approved in July 2011. Under
the leadership of the Albanian Government, all institutional stakeholders, i.e.
the Ministry of Justice, Courts and the General Prosecutor Office, have been
involved in this exercise and other donors active in this area have been
consulted. EURALIUS experts also focused on (i) the
development a more efficient and transparent administration of the courts and
(ii) the increase of the capacity of the School of Magistrates in terms of
judges training. On the other hand, the "PAMECA" assistance mission
provided support to the Albanian State Police in areas of money
laundering, drug trafficking, fight against organised crime and integrated
border management.

New
pre-trial detention centres with more than 100 places capacity have been built
in Elbasan, Fier and Berat and new prison in Fier with 600 places capacity is
under construction. Through the twining project
"Support to the Albanian Penitentiary Reform" alternative
measures to detention have been implemented in order to ease overcrowding in
prisons. This package of assistance is going to help Albania fulfil its
engagement to improve treatment of detainees, as set out in the 2010 Commission
Opinion.

3.5 Sector III: Transport

Transport
is identified as a priority sector under the 2011-13 MIPD since an increase in
the stock of infrastructures has multiplier effects on the overall economy of
the country, increasing access to national and regional markets for the
Albanian businesses. The EC has been aligning its interventions to the
strategic direction of the Albanian Government to boost mobility first of all
via road networks. However, technical assistance has been provided to the
Ministry of Transport to plan and design infrastructure projects in the air,
rail, maritime and combined traffics, where substantial work remains to be
done. In addition, IPA assistance has focused on the approximation of the
Albanian legislative framework with the EU acquis.

Since
2008, a significant amount of IPA funds was foreseen each year for the
construction and rehabilitation of secondary and rural roads in order to
contribute to the economic development and poverty alleviation of rural areas
in Albania (overall about EUR 50 million). This has been done in a context of
full donor coordination, where IPA funds, combined with loans from European
Financial Institutions (EBRD and CoEDB), have been able to move a substantial
amount of financial resources towards the same objective to improve mobility
across rural areas. In addition, the EU funded a number of feasibility studies
for road transport infrastructures. With subsequent envelopes, the EU is
funding fund the construction works, as in the case of the Vlora Bypass (EUR
19,365,000 under IPA 2011).

The
rehabilitation project of the Port of Shengjin started in July 2011. The latter
includes the construction of a new quay and a new paved operating yard, with
necessary services including water, electricity, lighting and drainage and
storm bollards. As regards EU acquis compliance, an on-going Twinning
project is giving assistance to the Albanian Civil Aviation Authority (EUR 1
million under IPA 2008) to implement EU air safety oversight standards and to
upgrade the skills of its human resources.

3.6 Sector IV: Environment and
climate change

The
country faces numerous and increasing environmental problems, including poor
urban air quality, poor quality of drinking water, insufficient waste water
treatment, lack of sanitation, chaotic urban development, deforestation and
land degradation In the context of recent rapid growth and urbanization, the
hazardous quality of the urban environment is having increasing impacts on
public health associated with factors such as solid waste management, water
quality and air quality. For all this reason, the 2011-13 MIDP considers
environment as a key sector where to channel IPA financial assistance.

The
EU funded a number of projects to clean-up environmental hot-spots and to build
up waste water treatment plants and sewerage systems in selected
municipalities/prefectures (Velipoje, Lushnje, Berat/Kuçove, Fier, Saranda,
Elbasan and Korca).

In
addition, IPA technical assistance also aims at strengthening the
administrative capacity of the Albanian Ministry of Environment, Forests and
Water Administration, which plays a key role to raise awareness in the public
opinion and among all line Ministries (Public Works, Agriculture, Tourism,
Education etc.), which have responsibilities for environmental protection and
have to include environmental issues in their policies and strategic documents.

The
EU has been focusing on this sector also because 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 regard, through IPA technical assistance Albania has archived a remarkable result in 2011 such as the adoption of the new Law on
Environmental Protection, which sets a comprehensive framework for the whole
sector and translates into the Albanian legislation very important key EU
Directives.

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. IPA funds have already been used to address these
priorities in previous interventions via the 2008 and 2009 IPA envelopes.
However the IPA 2010 project "Human Resources Development" (EUR 3
million), started in September 2011, is providing 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, which are designed to improve the
vocational training system and to promote employment.

IPA
support to this sector reflects the Commission's objective to prepare Albania for the implementation and management of the European Social Fund and to bring Albania closer to EU policies, both in terms of social policy development and institutional
and administrative capacity for the future use of the IPA funds under component
IV (human resources development).

The
Commission is also looking at social development in a broader perspective,
which includes all the interventions aimed at increasing the level of
inclusiveness of vulnerable groups. Indeed, one of the key priorities
identified in the Commission's 2010 Opinion is that Albania takes concrete
steps to reinforce the protection of human rights, notably for women, children
and persons belonging to minorities, such as Roma and Egyptians minorities, and
to effectively implement anti-discrimination policies. Therefore, in the 2011
IPA National Programme envelope, the EC has envisaged a relevant intervention
designed ad hoc to increase the living conditions of the Roma and Egyptians
minorities.

3.8 Sector VI: Agriculture and
rural development

The
main goals of Albania's rural development policies are (i) to improve the
quality of life in rural areas through sustainable development of human and
natural resources and diversifying non-agricultural activities, (ii) to
increase the economic efficiency of the agricultural and agro-processing sector
through improved productivity and product quality and (iii) to guarantee higher
standard of food safety for the health of the population.

The
2011-13 MIPD has endorsed the objectives identified by the Albanian Ministry of
Agriculture. The Commission considers the sector as a priority for two
strategic reasons. More than half of the Albanian population still works in
agriculture, thus having has a considerable impact on the national GDP.
Therefore, financial assistance channelled to the sector has produced a
multiplier effect over the living conditions of the population and over the
macroeconomic situation of the country, helping Albania fulfil the enlargement
obligations as regards the economic criteria. In addition, the overarching
priority for the EC is to properly prepare Albania to use the funds available
under IPA component V (agricultural and rural development). Consequently, IPA
technical assistance has been provided to the Albanian Ministry of Agriculture
in order to set up the administrative structures devoted to the management of
IPA funds.

As
far as Food Safety is concerned, IPA technical assistance (EUR 5.65 million)
supported Albanian veterinary services in the fight against zoonotic diseases
and the recently-established National Food Authority to carry out risk
assessment and consolidate its operational capacity in terms of inspections to
food businesses. The attention given to food safety also reflects the
Commission's intention to boost the agricultural sector via an increase of
agricultural products exportations, which can be achieved if food quality
standards are respected.

3.9 Cross cutting sector: civil
society

IPA
funds from different yearly envelopes have been focusing on expanding civic
initiatives and on building CSOs' capacities. IPA civil society facilities have
fostered (i) sectorial and regional networking, (ii) exchange of experience and
information, (iii) sharing of common benchmarks and good practices. IPA civil
society facilities, financed under the National Programme for Albania, have been designed and implemented in full conjunction with other IPA assistance
for civil society (regional programmes and CBC programmes) and with the
assistance channelled under the European Instrument for Democracy and Human
Rights.

IPA
support towards civil society has 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). These areas have been chosen, taking
into reference the key priorities for Albania outlined in the Commission's 2010
Opinion (key priority number 8 anti-corruptions and number 11 protection of
human rights).

IPA's
support to civil society in Albania concerns the actions undertaken by the
Institute for Policy and Legal Studies in the area of anticorruption. The
Institute succeeded to have a decree issued by the Ministry of Justice
concerning transparency regulations for court proceedings in the entire
country. This was actually beyond the expectations of the project which aimed
at having at least internal regulations issued by some of the courts addressed
by the Institute. Excellent technical preparation and efficient lobby action
were the key elements to successfully accomplish more than initially planned.

3.10 Cross-border cooperation

During 2011, in the frame of the on-going bilateral
Cross-border Co-operation (CBC) Programmes with Montenegro, the former Yugoslav Republic of Macedonia (the former Yugoslav Republic of Macedonia) and Greece, an increased number of contracts have been signed following call for proposals.
2011 was also the year of the first fully-fledged CBC programme between Albania and Kosovo, with the simultaneous signature by the Albanian and Kosovar authorities
of the Financing Agreements with the European Commission in September 2011.

As regards the Programme between Albania and the former
Yugoslav Republic of Macedonia,  in 2011 a total of 15 grant contracts were
signed following the first call for proposals (total EU contribution of
approximately EUR 527 000). The second call, with an allocation of EUR 675 000,
suffered some delays and the evaluation process could not be finalised during
2011 (it was finally concluded in early 2012). The third call was launched in late
2011, with a total allocation of EUR 2 295 000 (2009, 2010 and 2011
appropriations).

As regards the Programme between Albania and Montenegro, the beneficiaries (NGOs and local authorities) of 6 grant contracts, emanating
from the first call for proposals (total EU contribution of approximately
EUR 522 000 - 2007 appropriations), started the implementation of the
projects. The evaluation process of the second call for proposals (total EU
allocation of approximately EUR 1 440 000 - 2008 and 2009
appropriations) experienced some delays and could not be concluded within 2011
(it was finalised in February 2012).

As regards the Programme between Albania and Greece, no
contract has yet been signed in the frame of the first call for proposals
(total EU contribution of approximately EUR 3,587,934), due to the delays
encountered in the evaluation process, which could only be finalized at the end
of 2011.

During
2011, in the frame of the Albania's participation to the ERDF South East Europe
Transnational Programme, 3 grant beneficiaries of the first call for proposals
started the  implementation of the projects (total EU contribution of EUR
180,000 - 2007 appropriation). In addition, 5 grants contracts were signed and
implemented following the second call for proposals (total EU contribution of
approximately EUR 365,700 - 2008 and 2009 appropriations).

However, during 2011 the implementation of the different
cross-border programmes in Albania faced serious shortcomings. The launching
and evaluation of calls for proposals experienced significant delays. This is
particularly the case of the evaluation of project proposals submitted under
the second call for proposals of the CBC programmes with Montenegro and the former Yugoslav Republic of Macedonia and under the first call for proposals of
the programme with Greece. These sometimes unjustified delays put the
implementation of the CBC Programmes at risk and caused the loss of some funds.
Due to delays, the Operating Structures of each CBC Programme have also
repeatedly requested the extension of the contracting deadlines fixed in the
relevant Financing Agreements.

One of the main shortcomings faced during 2011 was the lack
of proper functioning of the Joint Technical Secretariat (JTS) in Shkodra for
the Programme with Montenegro, as well as the JTS in Struga and antenna in
Elbasan for the Programme with the former Yugoslav Republic of Macedonia. Some
of the problems experienced by the JTSs were linked to the fact that the
Operating Structures faced serious challenges in implementing the grant
contracts for technical assistance signed with the EU Delegation to Albania. In addition, the JTS in Thessaloniki for the Programme with Greece was not set up as foreseen due to the considerable delays experienced by the Greek
Managing Authority in completing the procedure for the selection of the
relevant human resources.

4.
IMPLEMENTATION AND MONITORING MODALITIES AND STRUCTURES

The
2011 joint monitoring meeting undertaken by the European Commission with the
Albanian authorities in December reviewed the implementation of the currently
on-going IPA projects. Many shortcomings in the implementation of projects were
raised, in particular retaining trained staff and providing maintenance as well
as budgeting plans for finished infrastructure projects in order to ensure a
stronger impact and sustainability. These findings will be taken into account
for the upcoming IPA 2012 programming.

The
monitoring of projects is also carried out throughout the year. During 2011,
the Commission – in particular the EU Delegation - monitored 110 projects out
of 268 through 202 site visits. In addition 29 ROM monitoring activities have
taken place. In addition several audits and self-evaluations have taken place.
With regard to CBC, the Delegation engaged an external monitoring support
through ATA 2011 funds.

The
implementation of CBC programmes and Civil Society activities through grant
contracts remained a risk and 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
and technical assistance, in order to better prepare these organisations for
the participation in calls for proposals and future project implementation.

PART II
- FINANCIAL DATA

On
implementation of assistance at 31 December 2011

IPA Albania

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

IPA 2007 || 49,968,810 || 49,428,161 || 98.92% || 23,599,802 || 47.23%

IPA 2008 || 66,596,705 || 60,488,641 || 90.83% || 39,270,274 || 58.97%

IPA 2009 || 73,787,170 || 47,024,067 || 63.73% || 25,024,751 || 33.91%

IPA 2010 || 87,159,507 || 63,612,050 || 72.98% || 15,654,491 || 17.96%

IPA 2011 || 85,992,697 || 14,500,000 || 16.86% || 0 || 0.00%

Total || 363,504,889 || 235,052,918 || 64.66% || 103,549,318 || 28.49%

IPA –
Component I National Programme Albania

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

IPA 2007 || 49,268,790 || 48,748,161 || 98.94% || 22,979,445 || 46.64%

IPA 2008 || 64,037,000 || 60,053,318 || 93.78% || 38,986,283 || 60.88%

IPA 2009 || 69,860,000 || 46,777,605 || 66.96% || 24,827,581 || 35.54%

IPA 2010 || 83,200,000 || 63,612,050 || 76.46% || 15,654,491 || 18.82%

IPA 2011 || 82,000,000 || 14,500,000 || 17.68% || 0 || 0.00%

Total || 348,365,790 || 233,691,134 || 67.08% || 102,447,800 || 29.41%

IPA –
Component II (CBC) Programme Albania

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

IPA 2007 || 700,020 || 680,000 || 97.14% || 620,357 || 88.62%

IPA 2008 || 2,559,705 || 435,322 || 17.01% || 283,990 || 11.09%

IPA 2009 || 3,927,170 || 246,462 || 6.28% || 197,170 || 5.02%

IPA 2010 || 3,959,507 || 0 || 0.00% || 0 || 0.00%

IPA 2011 || 3,992,697 || 0 || 0.00% || 0 || 0.00%

Total || 15,139,099 || 1,361,784 || 9.00% || 1,101,517 || 7.28%

              SERBIA

1.
SUMMARY

During
2011, Serbia received pre-accession financial assistance from IPA under
the first two IPA components (Transition Assistance & Institution Building and Cross-border Cooperation) which were still managed by the EU Delegation in Belgrade. The EU contribution regarding IPA Component I, allocated in 2011, was EUR
178.556 million.

Serbia
continued preparations for decentralised management of EU funds for Components
I, II, III and IV by completing the Gap Plugging phase in December 2011. As a
result of the latter, IPA-financed Technical Assistance for carrying out the
Compliance Assessment began in January 2012.

The IPA
2011 National Programme was adopted by the European Commission on 8 July 2011.
Particular attention was paid to preparing for the progressive introduction of
a sector approach.

The
improvement of financial absorption capacity has continued. At the end of 2011,
the EU Delegation was managing a portfolio of 708 on-going projects including
substantial amounts for sectors such as public administration reform (EUR 26.3
million), justice and home affairs (EUR 11.95 million) and social
development (EUR 32.1 million).

Sector
prioritisation was achieved by 8 sector working groups, formed for the first
time by governmental and non-governmental stakeholders, on the basis of the
Multi-annual Indicative Planning Document (MIPD) 2011-13, the Annual Progress
Report, the Serbian Needs Assessment for international assistance as well as an
assessment of the quality of existing strategic documents.

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 the period 2011-13. To achieve the priorities
selected for EU support in this programming period, IPA support will primarily
focus its assistance on the following sectors:

(1)
Justice
and Home Affairs;

(2)
Public
Administration Reform;

(3)
Social
Development;

(4)
Private
Sector Development;

(5)
Transport;

(6)
Environment,
Climate Change and Energy; and

(7)
Agriculture
and Rural development.

During
2011, 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. This reform is implemented
gradually and at the end of 2011 was not fully effective in all areas. However,
once completed, it will be a major step towards better coordination and
ownership.

Table
1: MIFF[19]
allocations per component, in EUR million

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

I – Transition Assistance and Institution Building || 186.8 || 189.9 || 193.8 || 569.9

II – Cross-border cooperation || 11.1 || 11.9 || 12.0 || 35.6

TOTAL || 197.9 || 201.8 || 205.8 || 605.5

2.2 Programming
2.2.1
Component I

The
programming activity during 2011 included finalisation and approval of the IPA
2011 programme and start of programming of IPA 2012 programme.

The
Financing Decision for IPA 2011 programme was adopted on 8 July 2011. The 2011
Programme included 23 projects selected based on the 2010 Progress report and
in line with the 2011-2013 MIPD for Serbia. Particular attention was paid to
start the gradual move towards sectorial approach.

The
programming of IPA 2011 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 2011 under the National
Programme, per sector and per project, in EUR million:

Sectors/Projects || IPA support

Justice and Home Affairs || 11.95

1. Strengthening the rule of law in Serbia || 9.75

2. Implementation of anti-discrimination policies || 2.2

Public Administration reform || 26.3

3. Strengthening legislation, policy and coordination capacities at the central level || 6.5

4. Modernisation of Tax Administration || 7.6

5. Modernisation of the custom system || 4.1

6. Strengthening Capacities of the State Audit Institution and the Audit Authority || 2.3

7. Capacity building and IT Assistance to the Commission for the Protection of Competition || 3.0

8. Enforcement of intellectual property rights || 2.8

Social Development || 32.1

9. Support for the implementation of strategies for IDPs, refugees and returnees || 7.0

10. Support Human Capital development and research || 16.9

11. Support for deinstitutionalisation and social inclusion of persons with mental disability and mental illness || 4.7

12. Preparation of labour market institutions for European employment policy || 3.5

Private Sector Development || 18.5

13. Socio economic development in the Danube Region || 18.5

Transport || 13.8

14. Modernisation of Railways || 8.3

15. Access roads to the Žeželj bridge || 5.5

Environment, Climate change and Energy || 38.6

16. Construction of Waste Water Treatment Facilities || 15.0

17. MEGLIP-Municipal Environment Grant-Loan Investment Programme || 19.1

18. Law enforcement in the field of industrial pollution control, prevention on chemical accidents and establishing the EMAS system || 3.0

19. Capacity Building for the Energy Agency || 1.5

Agriculture and Rural Development || 6.0

20. Support for Food Safety, Animal Welfare and control/eradication of swine fever and rabies || 6.0

EU Acquis other Horizontal Activities || 31.3

21. Project Preparation Facility and Support Measures || 7.8

22. Alignment with the European Statistical System (ESS) || 19.5

23. Support for Participation in EU Programmes || 4.0

TOTAL || 178.55

2.2.2
Component II

Serbia
is actively participating in 3 Cross-Border Cooperation (CBC) Programmes with
Western Balkans countries (Croatia, Montenegro and Bosnia and Herzegovina), 3
CBC Programmes with Member States (Bulgaria, Romania and Hungary) and one transnational interregional programme (South East Europe).

All
these programmes are implemented on the basis of a multiannual programme
covering the entire financial period 2007-2013. Concerning the 3 CBC programmes
of Serbia with Croatia, Montenegro and Bosnia and Herzegovina multi-annual
programmes were adopted in 2007 by the Commission and revised in 2010. In 2011
the 3 programmes CBC intra-Western Balkans were slightly updated to include the
2012 and 2013 financial allocations in view of their adoption in 2012 as well
as to take into account new data following population census conducted in Montenegro.

3.
IMPLEMENTATION OF EU FINANCIAL ASSISTANCE IN 2011
3.1 - Success stories

Agriculture
and rural development

The
first three 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 already yielded noteworthy
results: the number of registered cases of rabies was substantially reduced. In
2009 (which was the last year prior to the start of oral vaccination), the
veterinary service of Serbia recorded 185 rabies cases in wild animals, while
in 2011 there were only 46 such cases, i.e. a decrease of 75% in the number of
cases has been recorded. Concerning the geographical spread of the rabies, the
difference is also remarkable between 2009 and 2011. In 2009, 21 out of 25
counties (okrug in Serbian) had cases of rabies in wildlife, by 2011 only 12 okrug
had such cases. The usual procedure within the EU is to have 10 consecutive
vaccinations within 5 years until complete eradication of this dangerous
disease. Rabies in wild animals is eradicated in most of the EU Member States,
in particular in Western Europe where eradication programmes started decades
ago. Elimination of this disease in the region neighbouring the rabies free EU
Member States is therefore vital both in order to protect the health of humans
and animals in the Beneficiary Countries, and reduce the risk of the disease
re-introduction in the EU. The total value of the programme for eradication of
animal diseases in Serbia to date is approximately 10 million Euros, while its
foreseen total value is around EUR 20 million.

Social
development

Through
the project "Education for All - Increasing the Availability and Quality
of Education for Children from Marginalised Groups"  (IPA 2008, EUR 3
million) – which seeks to contribute to 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, a number of important
results were achieved – 178 pedagogical assistants (PA) were trained to support
children form vulnerable groups, mainly Roma children and children with
disabilities, in their enrolment and everyday activities in the schools.

These
PAs are also in charge of the contact with the community and the family of the
children from vulnerable groups. The prevention of drop-out is their crucial
objective, in line with the main objectives of Serbia's strategies, but also in
line with the Europe 2020 objectives. Training for the school staff and
teachers, as well as a large campaign to sensitise the
schools/parents/communities was also part of this project, helping achieve
substantial progress in this area.

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

Overall,
by the end of 2011, contracts worth EUR 203 million were signed, this being a
substantial advancement compared to last year (excluding the general budget
support by IPA 2009).

By end
of December 2011, 99.1% of IPA 2007, 85.9% of IPA 2008, 96.1 % of IPA 2009,
55.7% of IPA 2010 and 39% of IPA 2011 have been committed. All remaining
contracts to be committed under IPA 2008 and IPA 2009 were in the last phases
of the tendering process and were expected to be signed during the first
quarter of 2012. Those good achievements are the result of the continued
efforts in terms of closely monitoring of the procurement cycle (contract
pipeline) by the EU Delegation.

The
early signature of the Financing Agreements for IPA 2009 (10 February 2010),
IPA 2010 (25 May 2010) and IPA 2011 (22 July 2011) allowed a timely
implementation of those programmes.

For IPA
2011 programme early signature allowed starting implementation in 2011 and
commitment of EUR 51 million by end of the year.

3.3 Sector I: Public
Administration Reform

In 2011
few projects supporting public administration reform were under implementation.
Some key projects should be highlighted.

The
main project - "Support to public administration reform process" -
began implementation in 2011 (IPA 2010, EUR 6.5 million). Its aim is to provide
support in three key inter-related segments of public administration reform:
general legal and institutional framework for public administration reform;
enhancement of the recruitment system and introduction of career development;
and e-Government development, both in terms of policy and of technological
capacities. With these three different axes, 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.

In addition
to this key project, successful scholarships were granted to civil servants who
got specialised training on EU acquis requirements in various Member
States (IPA 2008, "EU integration scholarships, EUR 4 million). These
activities showed to be particularly effective in enhancing human capacities in
charge of preparation, adoption, implementation and enforcement of EU-related
legislation.

Important
to mention is also the Twinning project "Strengthening the Serbian Public
Procurement System" (IPA 2007 EUR 2 million) which continued to support
reforms in the public procurement sector, especially in terms of legal analysis
against acquis requirements. The project also supported the development
of a strategy on public procurement, adopted by the Government in June 2011.
External assistance in this field was also useful to encourage
inter-institutional coordination, which proved to be inadequate in the past to
carry out reforms in the sector.  A SIGMA assignment assisting the line working
group in drafting the Law on General Administrative Procedures was carried out
all along the year, until the finalisation of the text. With regard to TAIEX, Serbia continued to be a very active user of TAIEX events. During 2011, 110 events (either
in Serbia or abroad) were organised with Serbia as a single beneficiary,
representing 9.6% of all classic TAIEX events. Further 159 events (either in Serbia or abroad) were organised with Serbia as one of the beneficiaries. Participation of Serbians
in the TAIEX events remained stable in 2011.

3.4 Sector II: Justice, Home
Affairs and Fundamental Rights

Important
activities have been carried out in 2011 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:

·
“Support
to the National Judicial Academy” (IPA 2007, EUR 1.45, million) provided
technical assistance for the establishment of the initial and continuous
mandatory training for Judges, Prosecutors and other relevant staff in the
Serbian Judiciary. The project was completed in September 2011.

·
“Improvement
of transparency and efficiency (prosecutors and penal system)” (IPA 2008, EUR
4.5million, technical assistance and supplies) provided assistance to the
Ministry of Justice to improve the efficiency and transparency of the Serbian
prosecution and penalty service through the development of a case management
system, including document handling and data collection.

·
“Improvement
of efficiency and transparency of judiciary system” (IPA 2007, EUR 3 million,
technical assistance and supplies) provided 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. Due to the use of different types of electronic
case management software by the Ministry of Justice and the courts in the past,
this project encountered delays and was not finalised at the end of 2011 as
initially planned.

Important
support to the penalty system has been also provided in 2011. This included
improvement of prison conditions for the inmates through the construction of a
new security fence in the prison of and the construction of housing units in
the Juvenile detention facility in Krusevac according to EU standards
(“Improvement of the penalty system” IPA 2007, EUR 5 million).

Also
important to mention is the support to alignment of Serbian penal system with
EU standards. Two components were supported: i) introduction of efficient
practical professional training program for convicts to enable them to be
employed once their sentence is finished, and ii) establishment of necessary
preconditions for an efficient and effective alternative sanctions system
(“Further Alignment of Penal system of Republic of Serbia with EU standards and
strengthening alternative sanction system,” IPA 2010, EUR 5 million).

Support
to the fight against corruption has been also continued. The project “Fight
against Corruption” (IPA 2008, EUR 2.4 million, technical assistance and
supplies) contributed to the reduction of corruption by supporting the
operational functioning of a comprehensive agency that is in charge of
coordinating the fight against corruption. Project implementation started in
February 2011 and will end in March 2013.

3.5 Sector III: Social
development

In 2011
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
thanks to 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.

Support
to social inclusion of other vulnerable groups has been also provided in 2011.
This included the following projects:

"Implementation
of priorities in the area of human rights and protection of national minority
groups" (IPA 2007, EUR 1.5 million): finalised in December 2011, the
project sought to support human rights standards and minority protection in Serbia and aligning them to EU standards.

"Social
Inclusion" (IPA 2008, EUR 5.5 million): contributed to the objective
of improving social inclusion and reducing poverty among the most vulnerable
groups in society (children with disabilities, women in rural areas and Roma)
through rationalisation and decentralisation of social protection services and
development of community-based alternatives. Thanks to support provided to
municipalities to develop community based services, the number of children with
disabilities placed in large-scale residential institutions has decreased and
local community-based services that foster employment of vulnerable categories
of youth and women have been strengthened. The project was in 2011 in its
second year of implementation.

Education
has been also a key element of EU support in 2011. Only Few projects have been
launched and/or continued supporting adult education; i.e. ("Second
chance" IPA 2008, EUR 4.5 million), assistance to the most
vulnerable children ("Education for all" IPA 2008, EUR 3 million),
or pre-school education ("Improvement of the preschool education" IPA
2009, EUR 3.75 million).

Children
from marginalised and special needs groups were the main beneficiaries, in
particular Roma population.

3.6 Sector IV: Private Sector
Development

Worth
to mention is the recently finalised project “Support to
Enterprise Competitiveness and Export Promotion” – SECEP (with a total budget
of EUR 3.5 million). The project aimed at supporting local SMEs to be more
efficient, improve the competitiveness of Serbian products in the international
market and enhance the long-term economic stability. In close cooperation with
the ministry in charge of economy and regional development as well as with
relevant agencies and local authorities the project organised 4 international
“Meet the Buyer” events where 60+ multi-national companies were in direct
contact with more than 1.100 potential Serbian suppliers. Through in-company
assessments, business improvement projects, international consultant support
and tailor-made workshops 50 companies from key sectors (automotive, metal
working, electronics, IT and packaging) were assisted to enter global supply
chains. During the project, Serbia appeared for the first time on the European
cluster network and intensive support to 6 prioritised clusters resulted in
more than 100 SMEs and over 20 partnering organisations (such as academia,
institutes, chambers) becoming cluster members. Just as an example, Serbian
Furniture Cluster came up with an innovative, award winning product that will
be exhibited in the Milan Furniture Fair. SECEP also supported establishment of
the first professional Exporters association of Serbia. All of the implemented
activities will further enhance preparation of the private sector in Serbia for the European single market.

3.7 Sector V: Transport

In
2011, important achievements in this sector concerned the development of
Corridors VII and X and the preparation for modernisation of railways sector.

Corridor
VII – Danube River and Corridor X

Few
projects were in 2011 under implementation to support the development of the
Corridor VII and the circulation on the Danube River. This included traffic
safety and monitoring ("River Information
Services" IPA 2007, EUR 11 million), preparation of future River training
and dredging works on selected locations in order to ensure swift navigation
(IPA 2010, EUR 2.2 million), removal of unexploded ordinances (IPA 2010,
EUR 3.8 million).

All
this projects once fully completed will have an important impact on the
navigation on the Danube and thus have an impact on socio-economic development
of the Danube Region in Serbia as well as in Member States.

In
addition, an important project has been signed at the beginning of 2011 for the
construction of Zezelj Bridge across the Danube River in Novi Sad (IPA 2009,
EUR 26 million). The new bridge will combine road, rail and pedestrian bridge
over the Danube and the removal of the existing temporary bridge. This project
is strategic for both corridors VII to improve navigation and X with two road
lanes of traffic one for each direction, two rail tracks together with
pedestrian and cycle lanes. The project is expected to be finalised in spring
2014.

Railways

Support
has been provided in 2011 to the harmonisation of Serbian railways sector with
the EU acquis. One project aimed at harmonising Serbian transport
legislation with the EU acquis (IPA 2008, EUR 1.5 million). The project
started in 2011 and is on-going until December 2012. Technical assistance has
been also provided for implementation of the organisational reform of Serbian
Railways in line with European Directives (IPA 2008, EUR 0.5 million).
Implementation will continue until March 2013.

In
addition, important support has been committed for the modernisation of
railways infrastructures. Technical assistance has been provided for the
preparation of the railway line between Novi Sad–Subotica (Hungarian border)
and railway bypass around the city of Niš (IPA 2011, EUR 8.3 million)

3.8 Sector VI: Environment,
climate change and energy

Environment:

In 2011
important progress has been made in the preparation of Serbia's alignment with the EU acquis in the field of environment. Three important
Twinning projects took place in 2011 on the preparation for the development of
Natura 2000 network (IPA 2007, EUR 1 million), on hazardous waste management
(IPA 2008, EUR 1.5 million) and implementation of chemicals management system
(IPA 2008, EUR 1 million). Thanks to these Twinning crucial pieces of
legislation have been prepared as well as proper strategies to tackle these
sensitive issues in the coming years. Numerous trainings and awareness raising
campaign have been also organised.

Important
support has been also provided for reduction of pollution generated by thermal
power plant Nikola Tesla. Significant reduction of the emissions was achieved
thanks to the completion of the project "“Retrofit of the electrostatic
precipitators in thermal power plant Nikola Tesla" (IPA 2007, EUR 11
million). This provided 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). As a
continuation, a new project started to be implemented in 2011 for the
rehabilitation of the electrostatic precipitators (IPA 2008, EUR 6.5 million).

In
addition equipment has been provided for continuous air emission measurement. This
equipment will enable continuous monitoring of emissions set by the “Directive
2001/80/EC for large combustion plants” (IPA 2008, EUR 1.7 million).

Energy:

The
finalisation of IPA 2010 project “Sustainable development in the energy sector”
provided the line ministry with Kyoto Protocol Implementation Plan in the
Serbian Energy Sector and the Plan for the Implementation of the EU legislation
regarding the quality of liquid fuels.

The
CARDS 2006 project (EUR 30 million) for the “Construction of a high voltage
electricity transmission line between Niš and the former Yugoslav Republic of
Macedonia border (toward Skopje)” was finished in 2011. The project will help
the creation of the regional electricity market in South East Europe and
increase stability and security of the electricity system of South East Europe.

3.9 Sector VII: Agriculture and
rural development

Throughout
2011, many projects are under implementation, whereas a few have been
concluded, such as Control and eradication of classical swine fever (CSF) and
rabies (IPA 2008, EUR 2 million) which supported the veterinary directorate of
the Ministry of Agriculture in development and implementation of strategic
plans for combating and eradication of rabies and CSF. The project furthermore
assisted in development of tender documents and verification of national aerial
vaccination campaigns of foxes against rabies and delivery of equipment for
surveillance of animal diseases.  The total value of the contracts for
combating of the animal disease concluded so far (IPA 2008, 2009, and 2010) is
about EUR 10 million. Two vaccination campaigns were organised in 2011 across
the country.

Support
was also provided to the phytosanitary directorate in preparation of the
strategy including harmonisation of national legislation and procedures for
registration of pesticides in line with EU requirements (IPA 2009, EUR 1.3
million). The latter had an impact not only on environment but also on food
safety both for Serbian and EU citizens.

Another
important project to highlight is the support to the renewal of viticulture
zoning and to the designation for wine with geographical indications (IPA 2008,
EUR 1.2 million). Thanks to a Twinning and to 2 supply contracts, small
and medium wine producers in different areas of Serbia were supported, mainly
through the harmonisation of the Serbian legal framework towards the EU
standards.

3.10 EU acquis and other
horizontal activities

In 2011
IPA funds supported the conduct of the population census held in Serbia in October 2011 (IPA 2011 EUR 19.5 million). Population
censuses present the most massive and the most complex statistical actions, and
had to be conducted in Serbia before 2014 as recommended by the UN to all
countries so that census data could be comparable, not only methodologically
and by contents but also by time period included. Furthermore, comprehensive
and accurate data is a key for drafting national policies and for negotiations
in view of EU integration.

Further
on, "Support to Civil Society" (IPA 2009, EUR 2 million), a
project concluded in December 2011helped providing support for the active
involvement of civil society in Serbia’s EU integration process, to strengthen
dialogue between CSOs in Serbia and the EU; to build social cohesion as well as
a solid contribution to overcoming discrimination in Serbia by promoting
tolerance and cultural diversity. Last but not least, to enhance cooperation
between public institutions and civil society in Serbia.

3.11 Cross-border cooperation

The
implementation of Component II (Cross-Border Cooperation, or 'CBC') is done
mainly through a bottom-up approach, favoured by Grant schemes based on joint
calls for proposals fully involving local communities. Throughout 2011, the
implementation started for grants financed by the Programmes between Serbia and Croatia, Montenegro and Bosnia and Herzegovina respectively and one transnational
interregional programme (South East Europe).

Following
the launch of the 1st Call for Proposals in 2009 and the selection
of successful grants in 2010, in 2011 all 3 IPA-IPA CBC Programmes were for the
first time running at full speed, a significant improvement compared to last year.
In total 53 grants were awarded, mainly focusing on environment, social and
economic development and people-to-people contacts. All structures were fully
staffed and became operational. This represented a great achievement in the
preparation for decentralised management of EU funds.

All
mentioned programmes were in an advanced stage of implementation over the
reporting period.

The
impact of CBC in terms of fostering dialogue and reconciliation is huge, as it
produced direct positive effects on both local and national level between the
countries.. These programmes help former enemies to sit together and to take
joint decisions.

Data
from the 2nd Call for Proposal, launched during the summer 2011, revealed the
success of the IPA CBC Programmes: overall, over 450 applications were
received, with applicants requesting globally between five and six times the
available allocations (only about 1 in 5 application will be funded):

-
SER-BIH:
150 proposals received, i.e. an increase of 268% compared to the 1st
Call (56 proposals received);

-
SER-MNE:
102 proposals received, i.e. an increase of 182% compared to the 1st
Call (56 proposals received);

-
CRO-SER:
156 proposals received, i.e. an increase of 142% compared to the 1st
Call (110 proposals received).

Success
stories:

Integrated
solution of border specific problems

"Environmental
Binocular" project, SER-BIH CBC Programme

The two
Municipalities of Priboj (SER) and Rudo (BiH) have a very specific border area:
several villages in Priboj gravitate for basic services and economic activity
around Rudo, which is just few kilometres away. As a consequence, members of
the local communities have to cross the state border several times per day.
This project aims to address the lack of organised communal solid waste
collection service in villages remote from the centre of their Municipality.
Several garbage containers and two trucks, one for each municipality, were
purchased through the project. A Memorandum of Cooperation between Priboj and
Rudo will allow each of the two municipalities to collect solid waste from
nearby villages and local communities located just on the other side of the
border.

Establishment
of networks to increase competitiveness of local economies

"Apple.net2"
project, spell out CRO-SER CBC Programme

The project
organises joint workshops and exchange of best practices between Serbian and
Croatian apple producers, promoting the creation of clusters to enhance the
competitiveness of the local productions on local and international markets.
This project builds upon the results achieved during the previous
"Apple.net1", a national programme funded in Croatia from CARDS 2004. Compared to that earlier experience, the joint dimension allows a
more enriching experience for the participants. Croatian producers gained experience
about relations Serbian producers entertain with owners of cold storage
facilities, while Serbian producers acquired experience from the Croatians
regarding economic cluster formation. A joint web site contains all relevant
information regarding apple production and commercialisation.

Effective
communication and strong visibility

"UPSTREAM"
project, spell out SER-BIH CBC Programme

The
project aims at improving the quality of life of the mental health patients
through the promotion of a new model of psychiatric assistance as well as a new
model of re-socialisation of mental health patients in their own society and
community. This is achieved through exchange of best practices between the
mental health therapists of Valjevo (SER) and Tuzla (BIH). These are some areas
which are heavily affected by the conflict of the nineties and where
post-traumatic diseases among local communities abound.

As part
of its sensitisation campaigns, the project took advantage of the "Night
of Museums” organised in Serbia every year to organise a “Night of Psychiatry”
within the Health Centre Valjevo to raise awareness and reduce social stigma
around mental health problems. About 220 people visited the event, which
included art exhibition of mental health patients, books, movies and photos
exhibitions. Most participants entered the Centre for the first time and some
of them returned afterwards as patients. The cornerstone of the project was to
promote the des-institutionalisation of mental health patients and the introduction
of new treatment approaches.

4.
IMPLEMENTATIONAND MONITORING MODALITIES AND STRUCTURES

During
2011, Serbia, still being a potential candidate country, received pre-accession
financial assistance from IPA under the first two IPA components (Transition A ssistance & Institution Building and Cross-border Cooperation). The EU
Delegation in Belgrade was still responsible for managing these two components.

Serbia
has continued preparations for decentralised management of EU funds. This will
enable Serbia to take responsibility for and hence increased ownership over,
the implementation of IPA components. During 2011 Serbia continued working
towards this objective for Components I, II, III and IV by completing the Gap
Plugging phase during December. IPA financed technical assistance for
performing the Compliance Assessment began in January 2012.

In
regard to Component V the required structures, i.e. the future paying agency
and the future managing authority, are being established with the support of a
Twinning project and a technical assistance project.

Monitoring

The
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 monitoring (ROM) and
internal monitoring through specific on the spot visits.

Regular
monitoring:

·
Monthly
project meetings of task manager 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
sectorial meetings between Task Managers, beneficiary institutions and other
stakeholders (such as other donors, contractors, project implementation units, NAO
or DACU) are organised to discuss relevant developments concerning both
tendering and implementation from the sectorial point of view. In the future
and in the context of the move towards a sector approach and DIS, the
introduction of SMSC (Sectorial Monitoring Sub Committees) is foreseen.

·
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 the 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

The ROM
facility is systematically used by the EU Delegation. On the basis of our risks
analysis, selected contracts are subject to ROM, giving the possibility to the
Delegation to have an independent opinion on the efficiency of project
implementation and its impact. Accordingly, a substantial number of the
on-going IPA projects will be monitored by an independent team of experts.

Internal
Monitoring

A
formalised Internal Monitoring mechanism was introduced in January 2011. Based
on the risk analysis, task managers ensure regular internal monitoring of
projects. Proper monitoring of the implementation of projects is one of the
core duties of the Operational sections and follow up corrective actions will
be  taken in case of monitoring findings. Findings are communicated to the
national authorities for follow up. As of 2012, follow up will be centralised
through SEIO rather than directly with beneficiaries, thereby strengthening its
involvement and making them responsible as part of preparations for
decentralization.

PART II
- FINANCIAL DATA

On
implementation of assistance at 31 December 2011

IPA Serbia

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

IPA 2007 || 172,410,580 || 170,874,010 || 99.11% || 136,173,774 || 78.98%

IPA 2008 || 170,629,827 || 132,621,599 || 77.72% || 76,296,812 || 44.71%

IPA 2009 || 174,415,926 || 157,354,419 || 90.22% || 122,245,437 || 70.09%

IPA 2010 || 177,406,679 || 90,957,390 || 51.27% || 33,452,959 || 18.86%

IPA 2011 || 181,156,810 || 51,000,000 || 28.15% || 20,095,851 || 11.09%

Total || 876,019,822 || 602,807,419 || 68.81% || 388,264,833 || 44.32%

IPA –
Component I National Programme Serbia

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

IPA 2007 || 164,836,352 || 163,325,813 || 99.08% || 129,273,667 || 78.43%

IPA 2008 || 168,641,314 || 131,128,601 || 77.76% || 75,377,800 || 44.70%

IPA 2009 || 170,551,643 || 156,966,734 || 92.03% || 121,935,288 || 71.49%

IPA 2010 || 174,806,679 || 90,957,390 || 52.03% || 33,452,959 || 19.14%

IPA 2011 || 178,556,810 || 51,000,000 || 28.56% || 20,095,851 || 11.25%

Total || 857,392,798 || 593,378,537 || 69.21% || 380,135,566 || 44.34%

IPA –
Component II (CBC) Programme Serbia

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

IPA 2007 || 2,114,228 || 2,088,198 || 98.77% || 1,470,107 || 69.53%

IPA 2008 || 1,988,513 || 1,492,998 || 75.08% || 919,012 || 46.22%

IPA 2009 || 3,864,283 || 387,686 || 10.03% || 310,148 || 8.03%

IPA 2010 || 2,600,000 || 0 || 0.00% || 0 || 0.00%

IPA 2011 || 2,600,000 || 0 || 0.00% || 0 || 0.00%

Total || 13,167,024 || 3,968,881 || 30.14% || 2,699,268 || 20.50%

              BOSNIA AND HERZEGOVINA

1.
SUMMARY

Throughout
2011, EU financial assistance to Bosnia and Herzegovina played an important
role to support the country on its way towards European integration. IPA
continued supporting the country's efforts to comply with the requirements of
the EU accession process and to fulfil its obligations under the Stabilisation
and Association Agreement and the Interim Agreement. 2011 priorities strongly
focused on public administration reform and the strengthening of the rule of
law, in addition to alleviating the heavy consequences of the economic and
financial crisis. The EU contribution allocated in 2011 was EUR 92.885 million.

The
implementation of EU financial assistance in 2011 showed tangible results,
including the adoption of the revised action plan for the public administration
reform strategy, the introduction of the electronic publication of public
procurement notices, the installation of 34 permanent GPS Station Networks
throughout the country, which facilitated the accurate measuring of land
parcelling. Further tangible results were the creation of a Small and Medium
Enterprise (SME) Council, the construction of sewage collectors in Zivinice,
and the successful implementation of the first ever country-wide rabies
vaccination campaign.

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

The
strategic priorities identified in the 2011-2013 MIPD are supporting the
strengthening of the rule of law, improving the capacity and efficiency of the
public administration, and supporting social and economic development. The
following sectors of interventions and specific objectives have been
identified:

- Justice and home affairs with the objective of assisting the country
to reform its justice sector and to fight against corruption and organised
crime.

- Public Administration Reform with the objective of setting up a professional
civil service and to improve the functioning of the institutions at all levels
and to adopt the legal framework for public financial management in compliance
with EU standards.

- Private sector, transport and environment sectors with the objective
of developing the SME sector and investing in transport and environment
infrastructure.

- Social Development with the objective to alleviate unemployment and
to reform the education system.

The
priorities and objectives have been selected because of their remarkable
significance for the country's progress in the pre-accession process.
Overcoming the economic crisis, social inclusion and strengthening the rule of
law and public administration were identified as key challenges in the
Enlargement Strategy 2010–2011. Justice and Home Affaires were chosen as a
pilot for the sector approach, because it fulfilled the basic requirements for
sector approach, in particular the adoption of relevant strategies, the
availability of national funding and the interest of multiple donors to engage
in the sector.

The
Europe 2020 agenda offers the enlargement countries an anchor for reforms. IPA
supports Bosnia and Herzegovina to follow priorities of the 2020 agenda, in
particular where it offers support for the environment, for promoting social
inclusion and for fighting poverty.

Table 1: MIFF[20]
allocations per component, in EUR million

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

I – Transition Assistance and Institution Building || 102.68 || 104.67 || 106.87 || 314.22

II – Cross-border cooperation || 4.75 || 4.80 || 4.94 || 14.49

TOTAL || 107.43 || 109.47 || 111.81 || 328.71

2.2 Programming
2.2.1
Component I

The
programming exercise based on a series of consultation workshops in June 2010,
to which national stake holders, selected donors and civil society organisations
were invited to participate. Workshops were held in the areas of social
inclusion, SMEs, education and employment, civil society, judiciary, law
enforcement, public administration reform, environment, transport and energy.
The workshops identified strategic objectives, expected results, benchmarks and
indicators for financial assistance in the period 2011-2013.

The
Commission ensured the cooperation and coordination with the national and
international stakeholders, including Member States, International Finance
Institutions, civil society, and other donors through taking lead in the
consultations in sector working groups, regular coordination meetings with
Member States and through participation in the Donor Coordination Forum chaired
by the Ministry of Finance. The coordination increased the effectiveness and
the efficiency of the programming and implementation of assistance through
actively developing synergies between projects. Other donors could plan their
interventions based on IPA priorities. For example, the Council of Europe
Development Bank is preparing a programme to support social inclusion and
integration at schools which will be complementary to planned IPA interventions
on schools reconstruction under the IPA 2013 national programme.

The active
participation of the beneficiaries in the programming and identification
exercise since the very beginning of the exercise took into account the
overarching lesson learned in all previous assistance programmes, in particular
that assistance projects did not achieve the expected results because of an
insufficient sense of ownership on the part of the beneficiaries. However, as
experienced in the course of the 2011 programming exercise, even the active
participation of the beneficiaries in the early stage could not avert later
political disagreement on already agreed projects.

The Commission acted as a mediator between high political
levels and brokered a compromise which included agreement on the most of the
projects, some of them with modifications to satisfy concerns raised by the
Republika Srpska. There was ultimately no agreement on the usage of EUR 8.2 million from
the 2011 basket so the remaining funds were reallocated to increase the funding
of the demining activities (by EUR 2 million), of the project preparation
facility (by EUR 1.2 million) and by allocating additional funds to
the multi-beneficiary programme to create a Bosnia and Herzegovina window in
the Sarajevo Process on refugee return. The Commission Implementing Decision on
a budget of EUR 91.28 million was adopted on 5 December 2011.

The main results expected from the 2011 programme are the
alignment of the legislative framework with the EU acquis in sectors
relevant to EU accession, civil service reform, an improved legal framework for
public procurement and public finance management, reform of judiciary and law
enforcement, promotion of SME development and support for Bosnia and
Herzegovina adhering to (or implementing?) its obligations under the
Interim Agreement and the Stabilisation and Association Agreement. Another
relevant result was the development of a strategic framework for the transport
sector, the improvement of transport and environment infrastructure, and the
reform of the education and social protection systems. Last but not least, the
judicial reform was selected as a pilot for a sector approach.

Emphasis
was placed on the selection of interventions resulting from reform priorities
in the Enlargement Package, in particular where the enlargement strategy
concluded that Bosnia and Herzegovina has to step-up its efforts in the areas
of justice and public administration reform and that despite a moderate
economic recovery, unemployment remains 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.

The IPA
2011 national programme was programmed to be implemented through service,
supply, and works contracts, a number of Twinning projects with Member States
and a number of Joint Management Agreements with the Council of Europe, the
EIB, the EBRD, and the World Bank. Considering the weak public financial
management and the non-availability of sector and macro-economic policies,
budget support was not an option.

The programming exercise for the IPA 2012 and IPA 2013
national programme kicked-off on 17 November 2011 in Sarajevo, where the
Commission presented the key priorities, in particular the sectors justice and
home affairs, public administration reform, private sector development,
transport, social development,

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

Priority Axis || Projects || Budget

Political Criteria ||              30.25

|| 01.19.10 Strengthening social protection system at all levels of governance || 7.50

|| 01.23.03 Support to the Justice Sector Reform || 5.20

|| 01.32.02 Strengthening Public Financial Management || 4.00

|| 01.34.01 Public Administration Reform || 4.05

|| 01.36.12 Confidence building by demining and preservation of cultural heritage || 9.50

Economic Criteria || 10.00

|| 02.07.05 Support to the improvement of the institutional and legal framework as well as coordination and harmonisation of private sector development related public policies || 7.00

|| 02.20.06 Support to the Local Economic Development in BiH || 3.00

Ability to assume the obligations of membership || 45.60

|| 03.15.11  Support to energy market liberalisation || 2.50

|| 03.21.07 Modernization and Development of Transport Infrastructure on the South East Europe Transport Observatory (SEETO) Comprehensive Network in BiH || 14.00

|| 03.24.04 Support to the Law enforcement infrastructure || 9.50

|| 03.26.09  Strengthening human resources and institutional capacities for better employability || 3.50

|| 03.27.08 Support to infrastructure development and the approximation of environmental standards || 16.10

Supporting programmes || 5.43

|| 04.65.14 Participation of Bosnia and Herzegovina in European Union Programmes || 2.40

|| 04.72.13 Project Preparation/General Technical Assistance Facility || 3.03

TOTAL || 91.28

2.2.2
- Component II

The
cross-border cooperation programmes between Bosnia and Herzegovina and its
neighbours Croatia, Montenegro and Serbia were revised in 2011 to include the
financial allocations for the period 2011-2013, as adopted in the MIPD
2011-2013.

Some
progress on the decentralisation of the implementation system (DIS) for the
component II can be reported. The Council of Ministers adopted the Decision on
the Establishment of the Operating Structure in September 2011, and the formal
notification of this decision by the National Authorising Officer (NAO) was
made in December. The Control, Finance and Contracting
Unit of the Ministry of Finance has assumed the role of the First Level
Controller with the assistance of the EU framework contract for the 19
contracts under the IPA Adriatic CBC programme, which were implemented in the
shared management mode.

3. IMPLEMENTATION
OF EU FINANCIAL ASSISTANCE IN 2011
3.1 Success stories

In 2011, the
Commission implemented four demining projects with a budget of EUR 3.1 million. Three of the projects focused on reducing suspected areas
through technical survey and clearance activities of mines, cluster bombs, and
other unexploded devices. The result was the clearance of 1.2 million square
meter land. Direct beneficiaries were the inhabitants of the affected areas,
but also all citizens and visitors to BiH as well as companies operating in the
area. Those projects saved lives (the Progress Report 2011 reported 6 landmine
accidents) and supported economic development and prosperity.

In addition to the
three "hard demining projects", the EU funded a "soft"
demining project in the amount of EUR 0.2 million. The project helped
municipalities to carry out their mine risk education plans focused on at-risk
population in contaminated areas. The project visibly marked the risk areas and
supported capacity building in municipalities.

Beside the
humanitarian aspect of demining, there is direct link to economic and ecologic
development. Sectors like agriculture, tourism, construction, transport, water
management, agriculture, and employment depend on demining and the release of
land resources.

2011
marked the first year of implementation of the 5-year Western Balkans animal
disease eradication programme. The EU allocated EUR 30 million for the fight
against animal diseases in the Western Balkans region from IPA national and
regional programmes, with EUR 6 million allocated for Bosnia and Herzegovina for the 5-year programme. In BiH, the first ever oral vaccination
campaign against rabies was completed in December 2011. The aim was to improve
animal health and to fight against serious health risks for the population,
caused by rabies outbreaks. The vaccination campaigns, which will be continued
during the next five years throughout the Western Balkans, will help to
eradicate the disease in neighbouring Member States.

3.2 Overview of the implementation
status of the different instruments

The implementation of pre-IPA instruments in 2011 was almost
completed with the exception of one PHARE project on the reconstruction of
architectural heritage in Stolac, with a budget of EUR 0.1 million.
The project started in July 2011 and is expected to be completed by January
2014.

On IPA, the positive trend on increasing commitment and
disbursement figures of 2009 and 2010 did not continue in 2011. There were
several reasons for the decreasing rates:

(a) Lengthy adoption procedures on the side of Bosnia and Herzegovina on financing agreements on IPA assistance.

(b) More than 50 % of the budget of the IPA 2010 national
programme (EUR 51.6 million), which was planned for commitment in 2011, was
allocated to large scale infrastructure projects in joint management with the
European Bank for Reconstruction and Development (EBRD), the European
Investment Bank (EIB) and the World Bank (WB). However, the conclusion of
financing agreements between Bosnia and Herzegovina and the Banks was delayed.

In addition to the before mentioned high level meeting in
November 2011, the Commission, the EBRD, the EIB and the WB sent a joint letter
to the Chairman of the Council of Ministers and the Prime Ministers of the
entities, in order to draw their attention on the problems of delays in the
adoption of financing agreements and asked to review the possibility to
accelerate the ratification procedures and to improve the internal
coordination.

In IPA
component II, the implementation of the bilateral cross-border programmes
is continuing, with the second calls for proposals
launched for all three programmes in 2011.

Coordination and sharing of information proved to be
valuable tools to enhance the capacities of the national Operating Structures
and should be enhanced in the future. The implementation
of programmes was coordinated through Technical Working Group meetings,
comprising representatives of EU Delegations in the region, and the Technical
Assistance project CBIB II.

3.3 Sector I: Public
Administration Reform

The main needs identified in the current and previous MIPDs
were the implementation of the public administration reform (PAR) strategy, the
reform of the civil service and the advancement of the public internal
financial control. The needs identification followed the conclusions of the
Enlargement Packages, which ask Bosnia and Herzegovina to improve the
functioning of its institutions to be in a position to adopt, implement and
enforce the laws and rules of the EU.

There were positive developments in public administration
reform (PAR). An IPA 2007 project (EUR 1.8 million), which was completed
at the end of 2011, supported the PAR Coordination Office (PARCO) to develop
and adopt the review of the PAR implementation strategy, to develop and to
adopt a revised PAR Action Plan , and supported PARCO in the management of a
multi-donor Fund. The Fund is sustainable and has seen an increase in resources
and the number of donors subscribing to it.

Another MIPD priority and an acquis-related area
supported by IPA 2007 was Public Internal Financial Control (EUR 1.1 million).
Two projects supported capacity building of the Central Harmonisation Units in
the state and entities' ministries of finance, their Coordination Board,
trained internal auditors and controllers and supported the development of
primary and implementing legislation (amendments to internal audit laws and
laws on financing, financial management and control legislation, rules of
procedures, charters and codes of conduct). Internal control, together with
external audit, comprised the substance of Chapter 32 of accession
negotiations. All activities were coordinated with assistance of the Swedish
International Development Agency (SIDA) to the Supreme Audit Institutions, with
USAID assistance to internal audit functions in public enterprises and SIGMA.
Assistance will continue over the next years.

During 2011 twelve Twinning projects have achieved
satisfactory results concerning acquis-related sectors (Integrated
Border Management, Customs and Taxation, Statistics, Insurance, European Common
Aviation Area, and Transport, to name a few.).

Beside the regular assessments of policy areas of BiH
administration, SIGMA provided assistance for the conduct of a peer review of
the public procurement system, a peer review of the Supreme Audit Institutions,
commented the draft law proposal for public procurement, the draft amendments
to the entities civil service laws, the strategy for civil servants training in
the Federation of Bosnia and Herzegovina (FBiH) and contributed to public
internal financial control. In addition, SIGMA received ad hoc requests for
strategic advice.

TAIEX implemented 14 national events and 18 multi-country
events including workshops, expert missions involving MS-Experts and study
visits to MS- institutions.

The EU supports Bosnia and Herzegovina in its participation
in EU programmes, such as the EU's Seventh Framework Programme for Research
(FP7), the Culture Programme, and the Europe for Citizens Programme.

3.4 Sector II: Justice, Home
Affairs and Fundamental Rights

The main needs of the Justice Sector identified in the MIPD
have been addressed by projects supporting the efficiency, the effectiveness,
and the independence of the judicial system. An important project was the
support for the judiciary which advanced the automation of courts and
prosecutor offices and reduced the number of small claims cases in first
instance courts. Thus it supported the MIPD objective to reduce the length of
court proceedings and the backlog of cases. Another significant activity in
2011, co-financed by several Member States, was the support for the processing
of war crime and organised crime.

MIPD priorities in the Home Affairs sector were addressed by
the implementation of the electronic data exchange system for police and
prosecutor registries, which provides systematic access to data necessary for
the fight against serious and organised crime. A joint training project for the
State Investigation and Protection Agency (SIPA) Financial Intelligence and
Crime Investigation Units, prosecutors, financial regulatory agencies and other
relevant institutions aimed to improve the reporting of suspicious transactions
and of financial investigations to support the fight against money laundering.

3.5 Sector III: Private sector
development

MIPD
priorities in the private sector development have been addressed by a project
on local and regional economic and SME development, which provided a
functional voucher scheme mechanism for a SME consultancy pilot initiative for
regional and local development and a project pipeline for community level
interventions.

The SME policy support development project
established state level structures (SME Council), prepared a strategic
framework for the period of 2012-2015, and the approximation with the SME
Charter and Small Business Act principles. IPA support to competitive sectors
focused on tourism because of its potential for growth and job creation. This
was complemented with a grant scheme fund for direct support for public
and private partnerships at community level in sectors with high potential to
export and to create jobs (metal, wood, agriculture/food production, tourism).

The Turn-Around Management and Business Advisory Services
(TAMBAS) programme of the EBRD demonstrated an effective mechanism for
counselling and business planning.

Further activities addresses the alignment with EU central
banking standards, provided capacity building for the three insurance
supervision agencies and strengthened the capital base for the deposit
insurance agency.

3.6 Sector IV: Transport

The
EU invested EUR 1 million in an IPA 2007 project to provide technical
assistance to railway authorities, in particular to the Railways Regulatory
Board to harmonise regulations for the maintenance of railway infrastructure
and rolling stocks with EU directives and technical specifications of
interoperability. Some of the regulations originate back to the 1930s, were
never updated and represent a serious obstacle for the implementation of safety
directives, the upgrading of railway infrastructure, and the opening of the
railway market. This IPA project supported the MIPD objective to create  a
functioning institutional and regulatory framework for all transport areas, and
in particular opening of the railway transport market and improvement of the
railway safety.

Transport is a key element in the EU's cooperation with its
neighbouring countries to promote sustainable economic growth, trade and
cultural exchange. Candidate and potential candidate countries are called to
align themselves with EU legislation on transport in the interest of a
well-functioning internal market. Bosnia and Herzegovina is a transit country
for the trans-European networks, in particular for the Corridor Vc from Budapest to the harbour of Ploče in Croatia. On the corridor the EU supported the
modernisation of the railway network (EUR 9 million, joint management
with the EIB) and the construction of the Mahovljani highway exchange (EUR 5
million, joint management with the EBRD).

 3.7 Sector V: Environment and
climate change

In
the water quality sector, the IPA 2007 assistance ‘Support for Bosnia and Herzgovina Water Policy’ (EUR 1 million) provided outputs which are the basis
for the sector’s acquis-related reforms. A water policy and a series of
strategies on implementation of the directives on drinking water, urban
wastewater treatment, and flood management were prepared. In the pollution
prevention and control sector, the IPA 2007 Project ‘Support for the Implementation
of the Directive on Integrated Pollution Prevention and Control’ (EUR 1.2
million), expected to finish by February 2012, and prepared the implementation
plan for the directive. The progress in these sub-sectors served as a basis to
move forward into the next phase of EU assistance to be implemented under the
IPA 2008 programme. This involved the preparation of an Environment
Approximation Strategy including climate change, and a pipeline of projects for
investment in the post-2014 period. This assistance is being provided through
the ‘Support for Bosnia and Herzegovina Environment Institutions and
Preparation for Pre-accession Funds’, a technical assistance project of EUR 2
million which started in late 2011. The interventions supported the MIPD Environment
sector objective "transposition and implementation of the environmental acquis
and other international obligations."

3.8 Sector VI: Social
development

The MIPD sector objectives to improve the social protection system
at all levels of governance and addressing specific needs of vulnerable groups,
particularly children, was in the focus of IPA. A Social Protection and Social
Inclusion project for children Phase III, implemented by UNICEF, aimed
strengthening the capacities of social service providers, in particular the
application of a needs-based approach for social services. Support for
vulnerable groups, including Roma, was targeted with a project "Support
for National Action for Roma inclusion" implemented under IPA 2008 and
with a project "Reconstruction of small infrastructure in support of
sustainable return" implemented under IPA 2007. This helped 40 families to
return to their re-constructed pre-war homes.

In the
education sector, the focus of assistance concerned the reform of higher
education through the implementation of two IPA 2007 projects. The process of
harmonisation of the curricula of eight public universities was supported. The
results were uneven because in some cantons the relevant legislation did not
exist. However, capacity building, management training and tailor made
recommendations for further institutional development of each public university
and other bodies were provided. An attempt to draft a state level law on
recognition of diplomas and qualifications failed due to political
disagreements. However, guidelines for recognition in line with the Lisbon
Convention were drafted and adopted by all Ministers of Education. A Baseline
Qualifications Framework for a national system of educational qualifications
was adopted by the Council of Ministers. A strategy for entrepreneurial
learning was drafted and adopted by the Council of Ministers.

In the sector labour and
employment, the focus was on capacity building of public employment services
implemented with an IPA 2007 project "Improving active labour market
measures". The on-going project "Institutional and capacity building
of the employment sector ", funded from IPA 2009, aims to improve the
institutional capacity of labour market management and employment service
delivery at national, entity- and sub-entity levels.

Although
the MIPD did not specifically address the health sector, the EU provided
support for the creation of basic conditions in the sector. A project dealing
with the reform of the financing of secondary health care, funded under IPA
2008, provided assistance to the health authorities in introducing the output
based system of financing, which will contribute to more cost-effective and
efficient secondary health care, based on health care standards. A project
financed under the IPA 2007 budget introduced a system of data collection and
statistical reporting in public health in line with the requirements of WHO and
EUROSTAT. Reporting for international purposes on the health status of the
population is improving. The first National Health Report for Bosnia and Herzegovina was published in 2011.

3.9 Sector VII: Acquis-related
and other actions

There is less progress concerning agriculture and rural
development due to political disagreements on the degree of autonomy of rural
development programming and budget control by the entities vis-à-vis the state
level.

2011 saw the implementation of assistance for food safety
(IPA 2007, EUR 1.0 million) and phytosanitary (IPA 2008, EUR 0.8 million) where
support was provided to approximate to the acquis. Results were the
preparation of an implementing legislation and of laboratory investment
strategies.

The
MIPD objective confidence building and promoting reconciliation has been
supported by the reduction of suspected mined or at risk areas, to enable the
return of population to demined areas, improved safety and protection of
citizens against abandoned mines and unexploded explosive ordnances, reduction
of mine casualties and assistance to mine victims, creating the preconditions
for sustainable socio-economic development in demined areas through
implementation of the IPA 2007 and 2008 demining projects.

3.10 Cross-border cooperation

Bosnia and Herzegovina participates in six Programmes: IPA Adriatic CBC
Programme (shared management, 19 on-going contracts), three bilateral CBC
programmes with neighbouring countries: Croatia, Serbia and Montenegro, and two trans-national programmes: South-East Europe (SEE) and Mediterranean
trans-national programme (MED). In 2011, 60 contracts were being implemented. The 2007-2010 programmes have the following
allocations: Croatia-Bosnia and Herzegovina EUR 4 million, Serbia-Bosnia and
Herzegovina EUR 2.8 million, Bosnia and Herzegovina-Montenegro EUR 2 million,
ERDF SEE EUR 1.8 million, and ERDF MED EUR 0.3 million.

There was a visible progress in the implementation of the
bilateral CBC programmes. The preparation and publication of the second calls
for proposals under bilateral programmes with the neighbouring countries has
provided opportunity to apply lessons learnt from the previous calls, such as
increase of the maximum amount of grants, merging evaluation steps in order to
accelerate the selection procedure, and inclusion of cross-cutting issues in
the scoring lists of some calls.

Some recently completed projects from the first call for proposals
in the bilateral programmes with Montenegro and Serbia can be regarded as
success storys. The close cooperation of institutions on both sides of the
borders successfully led to achievement of the expected
results in the project 'Selective waste collection'
implemented by Municipality Modrica in BiH and Municipality Ub in Serbia. The project reduced the amount of disposed waste, enabled the development of
recycling, improved the system of waste management, reduced the negative
impacts on the environment, and raised the public awareness of environment and thus contributed to the improved quality of the border area environment as an economic
resource as well as created cooperation for joint protection initiatives in the
future.

Another successful project
“Social cohesion and cultural exchange through institutional and
people-to-people interventions” was implemented by the Centre for Democratic
Transition in Montenegro and the Centre for Promotion of Civil Society in BiH.
Through education and training, the project encouraged self-development of
project participants and stimulated them to play active role in the
socio-political development of their countries and communities in the future.
Having in mind the post-conflict reality in which the BiH society lives, these
young people crossed the real and imaginary borders and became friends with
their peers at the other side.

4.
IMPLEMENTATION AND MONITORING MODALITIES AND STRUCTURES

Implementation
of Component I and II programmes: No change compared to previous reporting.

Multi-Beneficiary
programmes: No change compared to previous reporting.

Monitoring:
During 2011, the Commission monitored all active contracts through field
visits, on the spot checks and verification of progress of construction works
and delivery of supplies.

With
regard to CBC, the Delegation engaged external monitoring experts through ATA
2011 funds to monitor all 55 contracts in the second half of 2011, after first
progress reports for most of the contracts were delivered.

Implementation
Reviews took place in April and October 2011 on the implementation of ongoing
projects and on the project pipeline with a focus on the problematic issues.

The
bi-annual IPA Monitoring Committees took place in July and December 2011.

Thirty-six
projects of total value of EUR 65 million were subject to external
result-oriented monitoring (ROM).

The
average performance score is 2.84 on a scale from 1 (serious deficiencies) to 4
(very good). The projects "Programme of technical assistance for the
Central Bank of BiH", the "Spatial information services for BiH –
phase two – digital orto-photo maps", the "Support to the BiH
Judiciary", the "Support to implementation of the IBM Strategy and
Action Plan" and the "Support to trade policy and capacity building
in BiH" were assessed as best, proving to be very relevant, effective and
sustainable (average score of these five projects' performance is 3.5).

The
five performance criteria against the scores provided in the ROM reports
indicate that projects are generally well designed (91% of 36 monitored
projects were graded either A or B for relevance), efficiency of project
implementation is reasonable (73% of 36 projects were graded A or B) as well as
impact (70% of 36 projects were graded A or B), while project effectiveness
appears problematic (42% of 36 projects were graded C) and the sustainability
is questionable (49% of 36 projects were graded C).

PART
II - FINANCIAL DATA

On
implementation of assistance at the end of December 2011

IPA Bosnia and Herzegovina

Bosnia & Herzegovina || Allocated || Contracted || % Contracted || Paid || % Paid

IPA 2007 || 56,602,436 || 54,734,316 || 96.70% || 46,979,146 || 83.00%

IPA 2008 || 74,257,435 || 57,771,852 || 77.80% || 35,649,614 || 48.01%

IPA 2009 || 87,987,738 || 56,774,550 || 64.53% || 31,478,627 || 35.78%

IPA 2010 || 107,455,724 || 42,328,794 || 39.39% || 12,372,915 || 11.51%

IPA 2011 || 99,975,106 || 4,889,987 || 4.89% || 4,400,988 || 4.40%

Total || 426,278,439 || 216,499,499 || 50.79% || 130,881,291 || 30.70%

IPA –
Component I National Programme Bosnia and Herzegovina

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

IPA 2007 || 49,736,394 || 47,925,528 || 96.36% || 40,605,690 || 81.64%

IPA 2008 || 66,754,783 || 51,284,476 || 76.83% || 29,524,176 || 44.23%

IPA 2009 || 80,500,000 || 50,747,014 || 63.04% || 25,795,156 || 32.04%

IPA 2010 || 99,954,423 || 37,027,493 || 37.04% || 7,336,679 || 7.34%

IPA 2011 || 92,885,119 || 0 || 0.00% || 0 || 0.00%

Total || 389,830,719 || 186,984,512 || 47.97% || 103,261,702 || 26.49%

IPA –
Component II (CBC) Programme Bosnia and Herzegovina

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

IPA 2007 || 1,453,020 || 1,395,765 || 96.06% || 960,435 || 66.10%

IPA 2008 || 1,506,080 || 790,633 || 52.50% || 428,694 || 28.46%

IPA 2009 || 1,560,202 || 100,000 || 6.41% || 52,312 || 3.35%

IPA 2010 || 2,200,000 || 0 || 0.00% || 0 || 0.00%

IPA 2011 || 2,200,000 || 0 || 0.00% || 0 || 0.00%

Total || 8,919,302 || 2,286,398 || 25.63% || 1,441,441 || 16.16%

              KOSOVO\*

1.
SUMMARY

The
European Union Office in Kosovo (EUO) continued managing the
implementation of EU assistance to Kosovo. It managed to exceed its financial
targets, both in terms of contracts and payments. The preparations of the IPA
2011 Annual Programme (AP) for Kosovo have been completed, allocating EUR
62.900 million, and programming of the 2012 and 2013 Annual Programmes has
started. Kosovo's participation in IPA Cross-Border Cooperation (CBC) programme
proceeded well in 2011; the first Financing Agreements for Programmes, with
preparations of the CBC-programmes with Albania and the former Yugoslav Republic of Macedonia were signed, as well as an additional programme with Montenegro which was finalised and subsequently adopted in December 2011. In terms of
projects, important successes include the reconstruction of the last five
bridges on the M2 Road connecting Kosovo to the former Yugoslav Republic of
Macedonia. In addition, during 2011, Kosovo carried out the first population
and housing census after almost three decades, providing valuable statistical
information on the population and the living conditions, important for policy
planning in the coming decade. The latter was funded through a trust fund
co-financed by IPA 2010.

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 based on 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. These initiatives envisaged the Commission
to 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 reflect Kosovo's own European Agenda.

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

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

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

•           Public
Administration Reform (focus on the functional review)

2.2 Programming
2.2.1
Component I

The
2011 IPA Annual Programme (AP) was presented to the IPA Committee in September
2011 and the Financing Agreement was signed in December 2011. This Annual
Programme had been prepared by the EU Office in close coordination with both
the Ministry for European Integration and all beneficiaries.

IPA
2011 continued to support the rule of law, good governance, public
administration reform, communities and education. It also addresses
socio-economic issues, such as employment creation and regional economic
development (including infrastructure, agriculture and rural development).
Lastly, the programme addressed the approximation of the legislation to
European standards, including on veterinary and food safety and energy sector
reform.

The
government has increased its overall efforts in terms of donor coordination.
The Regulation on Donor Coordination was adopted by the government meeting in
June 2011. The aim of this regulation is to increase the role of the government
on the coordination of the foreign aid, creating a system that ensures
effectiveness and transparency between the government and donor activities.
Subsequently, sector and sub-sector working groups were better coordinated.

The Aid
Management Platform continued to support the government in improving aid
management and donor coordination, aiming mainly at reducing transaction costs
in gathering and reporting on donor assistance, improving the alignment of
donor assistance to the government’s sector wide strategies and at providing
up-to-date and publicly available information on on-going and planned aid
activities.

A
concrete example of functioning donor coordination is the support to Office of
the Auditor General (OAG). The EU-funded Twinning was completed during 2011
and, in agreement with the Swedish Development Agency (SIDA), it was decided
that SIDA will provide 'bridging' support to OAG until the new Twinning
financed under IPA 2011 will start (expected: Q3 2012).

Another
good example of coordination was the support to the Public Procurement sector.
The EU Office throughout 2011 persistently worked with all relevant donors to
ensure and agree that there was no duplication/overlap. Consequently, it was
agreed that the World Bank would cover e-procurement, while the EU redirected
its efforts towards other aspects of procurement.

Table 2: Indicative financial
allocations for the year 2011 under the National Programme, per priority
measure identified in the MIPD 2011-2013, in EUR million

Priority Measures || Projects || Budget

Justice and Home Affairs || 8.90

|| 01/2011/1: Border Management Readmission and Reintegration || 3.70

|| 02/2011/1: Financial Crime and Road Policing || 2.00

|| 03/2011/1: Judiciary || 3.20

Private Sector Development, Smart, Sustainable and Inclusive Growth || 41.75

|| 04/2011/2: Regional Economic Development || 5.70

|| 05/2011/2: Municipal, Social and Economic Infrastructure Facility || 10.00

|| 06/2011/2: Economic Development – Intellectual Property Rights || 1.00

|| 07/2011/2: Energy || 4.00

|| 08/2011/2: Agriculture and Rural Development || 4.50

|| 09/2011/2: Veterinary and Food Safety || 2.95

|| 10/2011/2: Youth and Media || 2.60

|| 11/2011/2: Social Welfare and Community Stabilisation || 4.00

|| 12/2011/2: Education || 7.00

Public Administration Reform || 8.70

|| 13/2011/3: Public Administration Reform || 2.70

|| 14/2011/3: Public Finance || 3.50

|| 15/2011/3: Institution Building (TAIEX) || 2.50

Support and Other Activities || 3.55

|| 16/2011/4: EU Programmes || 0.50

|| 17/2011/4: Support Measures and Technical Assistance Facility || 3.05

TOTAL || 62.90

2.2.2
Component II

The
2010-2011 Cross-Border Cooperation Programmes for Kosovo-Albania and Kosovo-the
former Yugoslav Republic of Macedonia were approved in December 2010. The
Financing Agreements were finalised in the third and last quarter of 2011. The
programme with Albania will be implemented through a call for proposals. In the
programme with the former Yugoslav Republic of Macedonia, the allocation for
first year (2010) foresees a strategic project: a border crossing point while
the second year (2011) will be implemented through a call for proposals.

The
programming of the Kosovo – Montenegro programme for 2011-2013 was finalised
and adopted in December 2011.

3.
IMPLEMENTATION OF EU FINANCIAL ASSISTANCE IN 2011
3.1Success stories

The new
Border Management System (BMS) is an achievement for Kosovo in the area of rule
of law. Kosovo's borders can now be managed in accordance with European
Standards, as the border authorities have installed a potentially Schengen
compatible communication system and received equipment for border control.
Financed under the IPA 2008 (EUR 3.0 million), the BMS will allow a structured
and formalised border crossing for people entering and leaving Kosovo. It will
alert Border Police when wanted criminals attempt to enter or leave the
country.

Furthermore,
Kosovo carried out its first population and housing census after three decades.
With an EU contribution of EUR 2.5 million to a Multi-Donor Trust Fund (under
IPA 2010) this census provides valuable statistical information on the
population and its living conditions, information that will direct policy
planning over the next decade. The final results will be published later in
2012.

In Roma
Mahalla, an additional 14 Roma, Ashkali and Egyptian families have moved to
their new homes. Until now the families were living in dire conditions in
Osterode camp. This brought the total number of families resettled by the EU
from the lead-contaminated camps in north Mitrovica to 65 (in total: 253 men,
women, and children). This move also brought the permanent closure of Osterode
within reach. The programme financed under IPA 2007 with EUR 5 million covered
the physical relocation of Roma, Ashkali and Egyptian families into new houses,
as well as vocational training, medical screening and treatment, health
education, increasing access to formal education, provision of legal support,
and community development projects.

The
last five reconstructed bridges on the M2 road (connecting Kosovo with the former Yugoslav Republic of Macedonia) were inaugurated in 2011. The M2 road is the primary
access route in and out of Kosovo for both freight and passenger transport.
With all the bridges reconstructed according to European standards, safe
conditions for traffic are ensured and economic development is facilitated.
This project was financed under IPA 2007 with EUR 6.7 million.

The
first Regional Cultural Heritage Centre in the Balkans was inaugurated in
2011.  The Centre located in the Beledije (in Turkish 'municipal house')
building in Prizren which was refurbished with EU funds under the PHARE Project
"Development of a regional cultural heritage facility in Kosovo"\*
(EUR 1.5 million,) offers accredited training programmes in the field of
cultural heritage for all types of professionals across the region (public and
private experts, practitioners and students), in line with EU and international
standards and based on a multi-disciplinary approach.

Continuous
assistance to procurement reform in Kosovo has led to the adoption of a new
acquis-compatible public procurement law. This new law provides a building
block for an effective public procurement system which promotes efficiency and
effectiveness in the use of scarce public funds. It also aims to increase
transparency and equal treatment. The project was funded under IPA 2007 with
EUR 1.9 million.

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 2008, 2009 and 2010).

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).

Component
2: contracting yet to start (apart from technical assistance contracts)

Components
3, 4 and 5: not applicable

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 related institutions
in Kosovo, with the aim of contributing to a transparent, independent judiciary
system, which respects human rights. EU funds continued to support the integrated
border management system and the Kosovo Police with the necessary equipment, in
order to enable these structures to provide services closer to EU standards.

IPA
assistance in the rule of law area also supported preparations for the visa
liberalisation process, which is expected to start in 2012. A concrete example
is the EU-RAM (Re-admission and asylum) Twinning project aiming at aligning
asylum and migration legislation with the EU acquis and at further
strengthening the administrative capacity of the Kosovo institutions to
implement it. The project's main concrete outputs are: (i) improvement of the
managerial, administrative and legal capacities of the Department for
Citizenship, Asylum and Migration; (ii) enhancement of the capacities of the Department
for Citizenship, Asylum and Migration in dealing with challenges due to the
management of an increasing number of returning Kosovo citizens
(re-integration). The project ended in February 2012.

In the
field of document security and proper functioning of civil status related procedures
as one of the key criteria in the visa liberalisation process, the EU continued
its support to the civil registry key institutions in Kosovo. The IPA 2009
project "Support to the Civil Registration Agency and Unified Address
System" directly contributed to the drafting and adoption of the Law on
Address System in Kosovo and is still supporting the drafting of the
administrative instructions on civil registration and address system.

Other
relevant areas supported by IPA are: fight against trafficking in human beings;
legal education reform targeting university and other institutions in the
judiciary such as the Kosovo Judicial Council; support to juvenile justice
reform.

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. In particular, the Ministry of Trade and Industry
received support focusing on two important aspects of EU accession:

§
Support to access to the EU Internal Market. EU
support was provided through TAIEX for better use of Quality Infrastructure
related laboratory equipment provided by the EU. In addition, a comprehensive
assessment of further needs of the Ministry and related Quality Infrastructure
bodies was produced by EU experts as guidance for future IPA support in this
sector.

§
Support to competiveness of the private sector.
An EU technical assistance project in support to the Ministry, the SME Agency,
and Investment Promotion and Export Support Agency facilitated the adoption of
Kosovo's first SME Strategy. The project also improved the legal environment
for business registration and economic activity by supporting the drafting of
the respective laws. The same project allowed the start of a restructuring
process of the institutions in support to Private Sector Development in Kosovo.

3.4 Sector III: Public
Administration Reform

In 2011 the assistance to this third 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 and statistics. 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.

IPA assistance produced a number of concrete
results in 2011.

The multiannual EU scholarships for future civil
servants (Young Cell Scheme) continued in 2011; 40 new students started a
degree programme at an EU university and 31 returned to Kosovo to start their
work in the public administration.

The preliminary results of the Population and
Housing census carried out in 2011 were published in July 2011. The results
will contribute to the strengthening of Kosovo's statistical system that will
be used as a basis for decision-making by public authorities, as well as a
fundamental pillar for the statistical system.

The legal framework for public procurement was
adopted and increases compliance with EU Directives in this area. The law
introduces legislative provisions which modernise and facilitate efficient and
effective procurement, increasing transparency, equal treatment and
proportional use of resources.

The EU Office continued to use the Twinning
instrument as implementing modality for capacity building projects. An example
is the project involving the Office of the Auditor General: the Twinning
contributed to improving the capacity of the Office of 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.

3.5 Cross-border cooperation

Kosovo's Operating Structure for cross-border
cooperation, the Ministry of Local Government Administration, received support
from an EU technical assistance project in order to start the implementation of
three cross-border programmes: Kosovo-Albania, Kosovo-the former Yugoslav Republic of Macedonia and Kosovo-Montenegro. The Ministry received a grant
from the EU in order to ensure participation of Kosovo in the Joint Technical
Secretariat established for the Kosovo-Albania programme. Preparations of a
study and technical design for a joint border crossing point between Kosovo and
the former Yugoslav Republic of Macedonia started.

4.
IMPLEMENTATIONAND MONITORING MODALITIES AND STRUCTURES

In 2011
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.

51
national projects with a total value of approximately EUR 119 million were
covered by ROM assessments carried out through four missions. The 51 ROM
assessments included two ex post ROM reports.

The
average score of the 51 projects’ performance is 2.89 on the scale from 4 -
very good to 1 - serious deficiencies. The range of scores went from 1.91
(Contract 251905 – Support to legal translators and legal linguists) to 3.71
(Contract 226595 – New construction and upgrade of 400 and 110 Kv Overhead
Transmission Lines – Lot 2). Other highly rated projects (good practice
examples) were Contract 245805 – Capacity Building of Kosovo Medicines Agency
(Score: 3.59) and Contract 230219 – Support to Kosovo participation in the European
Common Aviation Area (Score 3.57).

Overall,
the monitoring reports have indicated that that design and relevance were
strong points in the monitored projects while sustainability was identified as
a point for attention.

Efforts
have been made by the EU Office to ensure that the role and tasks of the
Operations Section (OPS) were tailored to the new environment by increasing the
role of the Contracts & Finance Section in ex-post controls. An
in-depth and systematic ex post control is performed by financial
officers at the time of the invoice analysis. Ex post controls and
joint monitoring missions with OPS will be performed for:

a) All supply
and work contracts at the time of the provisional and final acceptance.
Those missions will be conducted in close cooperation with OPS while C&F
will have as main responsibility to control the rules of origin (alignment
between certificates and the products,…), to check the quantity and eventually
the quality of the items delivered and to ensure that the requirements as
specified in the TS have been respected (width and thickness of road,…)

b) Grant
agreements will be submitted to a financial verification by EU Office
staff. Such missions will have as main objective to ensure the existence
and eligibility of the expenses encountered for a determined period, as well as
to assess the control environment, taking into consideration the size of the
organisation.

PART
II - FINANCIAL DATA

On
implementation of assistance at 31 December 2011

IPA Kosovo

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

IPA 2007 || 82,704,005 || 82,584,944 || 99.86% || 73,242,931 || 88.56%

IPA 2008 || 183,318,922 || 182,899,550 || 99.77% || 114,461,570 || 62.44%

IPA 2009 || 103,600,000 || 64,472,406 || 62.23% || 36,213,965 || 34.96%

IPA 2010 || 72,100,000 || 39,551,787 || 54.86% || 15,620,838 || 21.67%

IPA 2011 || 68,900,000 || 4,200,000 || 6.10% || 3,990,000 || 5.79%

Total || 510,622,927 || 373,708,687 || 73.19% || 243,529,303 || 47.69%

IPA –
Component I National Programme Kosovo

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

IPA 2007 || 62,000,000 || 61,880,939 || 99.81% || 52,538,926 || 84.74%

IPA 2008 || 182,700,000 || 182,576,330 || 99.93% || 114,138,350 || 62.47%

IPA 2009 || 103,600,000 || 64,472,406 || 62.23% || 36,213,965 || 34.96%

IPA 2010 || 63,900,000 || 32,491,787 || 50.85% || 8,590,620 || 13.44%

IPA 2011 || 62,900,000 || 0 || 0.00% || 0 || 0.00%

Total || 475,100,000 || 341,421,462 || 71.86% || 211,481,860 || 44.51%

IPA –
Component II (CBC) Programme Kosovo

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

IPA 2007 || || || || ||

IPA 2008 || || || || ||

IPA 2009 || || || || ||

IPA 2010 || 1,200,000 || 60,000 || 5.00% || 30,218 || 2.52%

IPA 2011 || 1,800,000 || 0 || 0.00% || 0 || 0.00%

Total || 3,000,000 || 60,000 || 2.00% || 30,218 || 1.01%

Status
of Implementation of IPA financial assistance per country at 31st
December 2011 of total committed funds (2007 – 2011):

At 31st
December 2011 IPA Component I managed by DG ELARG:

EUR Million || Committed || Contracted || Percentage || Paid || Percentage

Albania || 348.37 || 233.69 || 67.1% || 102.45 || 29.4%

Bosnia and Herzegovina || 389.83 || 186.98 || 48.0% || 103.26 || 26.5%

Croatia || 206.06 || 100.62 || 48.8% || 71.19 || 34.5%

the former Yugoslav Republic of Macedonia || 174.02 || 66.66 || 38.3% || 48.53 || 27.9%

Iceland || 12.00 || 0.00 || 0.0% || 0.00 || 0.0%

Kosovo || 475.10 || 341.42 || 71.9% || 211.48 || 44.5%

Montenegro || 134.24 || 89.83 || 66.9% || 61.02 || 45.5%

Serbia || 857.39 || 593.38 || 69.2% || 380.14 || 44.3%

Turkey || 1,164.66 || 597.40 || 51.3% || 425.14 || 36.5%

Multi Beneficiary || 729.18 || 597.32 || 81.9% || 431.30 || 59.1%

Total || 4,490.85 || 2,807.30 || 62.5% || 1,834.51 || 40.8%

At 31st
December 2011 IPA Component II managed by DG ELARG:

EUR Million || Committed || Contracted || Percentage || Paid || Percentage

Albania || 18.59 || 2.76 || 14.8% || 2.16 || 11.6%

Bosnia and Herzegovina || 12.52 || 4.77 || 38.1% || 3.12 || 24.9%

Croatia || 12.52 || 4.42 || 35.3% || 2.09 || 16.7%

the former Yugoslav Republic of Macedonia || 15.53 || 1.97 || 12.7% || 1.05 || 6.7%

Kosovo || 3.00 || 0.06 || 2.0% || 0.03 || 1.0%

Montenegro || 14.94 || 5.45 || 36.5% || 3.62 || 24.2%

Serbia || 16.37 || 6.57 || 40.1% || 4.63 || 28.3%

Turkey || 7.00 || 1.13 || 16.2% || 0.49 || 7.0%

Total || 100.47 || 27.13 || 27.0% || 17.19 || 17.1%

At 31st
December 2011 IPA Component II managed by DG REGIO:

EUR Million || Committed || Paid || Percentage

Adriatic || 166.49 || 45.22 || 27.2%

Slovenia-Croatia || 28.95 || 11.28 || 39.0%

Hungary-Croatia || 35.54 || 12.57 || 35.4%

Hungary-Serbia || 33.97 || 12.33 || 36.3%

Romania-Serbia || 36.01 || 10.17 || 28.3%

Bulgaria-Serbia || 21.26 || 5.78 || 27.2%

Bulgaria-the former Yugoslav Republic of Macedonia || 12.14 || 3.30 || 27.2%

Bulgaria-Turkey || 18.49 || 5.02 || 27.2%

Greece-the former Yugoslav Republic of Macedonia || 10.20 || 3.93 || 38.5%

Greece-Albania || 7.67 || 2.95 || 38.5%

Total || 370.72 || 112.54 || 30.4%

At 31st
December 2011 IPA Component III managed by DG REGIO:

EUR Million || Committed || Paid || Percentage

Croatia || 257.35 || 78.03 || 30.3%

the former Yugoslav Republic of Macedonia || 109.20 || 26.96 || 24.7%

Turkey || 1,055.50 || 333.11 || 31.6%

Total || 1,422.05 || 438.09 || 30.8%

At 31st
December 2011 IPA Component IV managed by DG EMPL:

EUR Million || Committed || Paid || Percentage

Croatia || 69.98 || 22.20 || 31.7%

the former Yugoslav Republic of Macedonia || 33.50 || 9.61 || 28.7%

Turkey || 299.70 || 64.51 || 21.5%

Total || 403.18 || 96.32 || 23.9%

At 31st
December 2011 IPA Component V managed by DG AGRI:

EUR Million || Committed || Paid || Percentage

Croatia || 129.40 || 25.78 || 19.9%

the former Yugoslav Republic of Macedonia || 47.50 || 10.25 || 21.6%

Turkey || 463.00 || 80.94 || 17.5%

Total || 639.90 || 116.96 || 18.3%

B.        MULTI-BENEFICIARY
1.
SUMMARY

Progress
has been made in regional cooperation in the Western Balkans in the areas of
justice and home affairs, statistics, energy, environmental and civil
protection, cultural heritage and refugee return. The Regional School of Public
Administration (ReSPA) is now fully operational. New bilateral agreements on
police cooperation and on mutual legal assistance are encouraging signs for the
commitment of several Western Balkan countries to strengthen judicial
cooperation. Similar efforts promoting and facilitating local and regional
cooperation at government level as well as through the inclusion of
Non-Governmental Organisations have been undertaken with the aim of moving
forward to lasting reconciliation, notably through the Igman Initiative, the
RECOM initiative on reconciliation and the Sarajevo Process on refugee return.

2.
STRATEGIC PLANNING AND PROGRAMMING

2.1 Multi-Annual
Indicative Planning Document

The
Multi-beneficiary (MB) Multi-annual Indicative Planning Document (MIPD)
2011-2013 identifies the following priorities: (1) to maintain the momentum of
reform of the judiciary and public administration; (2) to enhance regional
cooperation in the fight against organised crime and corruption; (3) to
contribute to ensuring non-discrimination and respect for human rights as well
as freedom of expression; (4) to help completing the process of reconciliation
in the Western Balkans; (5) Contribute to building a vibrant civil society; (6)
to help the Beneficiaries overcome the economic and financial crisis and
prepare for sound recovery by jointly working on increasing competitiveness and
investments in infrastructure; and (7) to foster reforms and regional
cooperation in education.

To
achieve the priorities selected for support in the programming period
2011-2013, the MB MIPD contains seven (7) sectors on which IPA assistance will
be focused:

·
Justice
and home affairs, including fundamental rights and vulnerable groups

·
Public
administration reform

·
Support
to civil society

·
Private
sector development

·
Transport
and energy infrastructure, including nuclear safety

·
Environment
and climate change

·
Social
Development.

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 strong coordination and coherence has been
highlighted to the Commission during consultations as very important by the
authorities of the region, including hands-on involvement of the EU Delegations
in the implementation.

2.2 PROGRAMMING

2.2.1 Component I

The
MIPD for the years 2011 – 2013 was adopted on 20 June 2011. The sector working
groups that had been set up in the framework of the consultation process with
all stakeholders for the MIPD proved instrumental to enhance the programming
process for the MB annual programming process for 2011 and 2012.

All
priorities and sectors identified in the MIPD were addressed in the programming
exercise but to facilitate programming, the various projects have been
consolidated into separate Programmes:

·
Multi-beneficiary
Programme 2011;

·
Tempus
Programme 2011;

·
Horizontal
Programme for Nuclear Safety and Radiation Protection.

·
The
Civil Society Facility.

The MB
annual programme 2011 was adopted on 18 July, followed by the adoption of the
Tempus Programme on 20 July. Two amendments to the MB programme 2011 have been
prepared to meet additional needs and to support the new regional programme for
refugee return (Sarajevo process). The first amendment was adopted on 16
December, whereas the second amendment was prepared to be adopted early 2012.

The
Horizontal Programme for Nuclear Safety and Radiation Protection was adopted on
11 November with a focus to not only address current needs in the area but also
to pave the way for the implementation of specific road maps for the period
2012 – 2015 that were developed in full consultation with the beneficiaries as
well as experts of the EU Member States.

As
regards the Civil Society Facility, the design of a single financing decision
for civil society support for the period 2011-2012 was completed and the
implementing decision for 2011-2012 adopted on 5 December 2011. This decision
includes the national IPA allocations as well as the MB assistance.

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

MULTI-BENEFICIARY || 2011

I. Transition Assistance and Institution Building || [21]

Of which: ||

Multi-beneficiary Programme 1 || 132.38

Amendment to MBP 1 || 3.50

Civil Society Facility || 21.20

Support to the operational budget of the Office of the High Representative (OHR) in Bosnia and Herzegovina || 4.89

Support to the Interim Civilian Office Kosovo || 4.20

Tempus || 15.30

Nuclear safety and radiation protection || 4.61

Contribution to the Energy Community Secretariat || 2.94

TAIEX || 12.00

Information and Communication || 11.00

ERDF || 1.34

Evaluation, Monitoring and Audit || 3.65

TOTAL || 217.01

The
projects that formed part of the 2011 annual programmes were selected 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 had achieved sufficient readiness for
implementation were accepted.

Table
2: Indicative financial allocations for the year under the Multi-beneficiary
Programmes, per sector and per project, in EUR million

MIPD Sector || Projects || Budget

Sector Justice and Home Affairs || 3.60

|| MBP 1: PF 1: Promoting Human Rights and protecting || 3.60

Sector || Public Administration Reform || 10.70

|| MBP 1: PF 2:Local Administration Facility || 2.50

|| MBP 1: PF 3:MB Statistical Cooperation Programme || 8.20

Sector || Support to Civil Society || 21.20

Sector Private Sector Development || 35.28

|| MBP 1: PF 4: Trade logistics || 1.50

|| MBP 1: PF 5:Regional programme on trade and investment || 1.28

|| MBP 1: PF 6: Quality infrastructure || 2.50

|| MBP 1: PF 7: Western Balkan Investment Framework || 30.00

Sector Transport and Energy Infrastructure || 50.21

|| MBP 1: PF 7: Western Balkan Investment Framework || 40.00

|| MBP 1: PF 8: Horizontal support to coordination with International Financial Institutions || 2.00

|| MBP 1: PF 9: Support to Transport Community Treaty || 3.60

|| Nuclear Safety || 4.61

Sector Environment and Climate Change || 2.20

MBP 1: PF 10: Building resilience to disasters || 2.20

Sector Social Development || 36.80

                             MBP 1: PF 11: Erasmus Mundus Action 1: Western Balkans - Turkey Windows || 8.00

                             MBP 1: PF 12: Erasmus Mundus – Action 2: Partnerships, Lot - Western Balkans || 12.00

                             MBP 1: PF 13: Youth in Action || 1.50

                            Tempus || 15.30

Supporting programmes || 57.02

|| MBP 1: PF 14: Participation in EU agencies || 8.00

|| MBP 1: PF 15: CBIB+ || 2.50

|| MBP 1 & Amendment No. 1: PF 16: Strengthening European Integration  || 6.50

|| Support to the operational budget of the Office of the High Representative (OHR) in Bosnia-Herzegovina  || 4.89

|| Support to the Interim Civilian Office Kosovo || 4.20

|| Contribution to the Energy Community Secretariat || 2.94

|| TAIEX || 12.00

|| Information and Communication || 11.00

|| ERDF || 1.34

|| Evaluation, Monitoring and Audit || 3.65

TOTAL || 217.01

3.
IMPLEMENTATION OF EU FINANCIAL ASSISTANCE IN 2011

3.1 Success Stories

In the
area of fight against organised crime and corruption it is worth mentioning the
projects CARDS 2005 International Law Enforcement Coordination Units (ILECUs,)
which ended on 28 February 2011 and IPA 2008 Police Cooperation: Fight against
Organised Crime, in particular Illicit Drug Trafficking, and the Prevention of
Terrorism (DET ILECUs II) which is still on-going. The projects amount
respectively to EUR 2 and EUR 2.5 million. Their aim is to improve
and enhance international strategic and operational capacities in the fight
against organised crime.

In the
framework of the ILECUs project six Law Enforcement Coordination Units (ILECUs)
were established. By signing the Memorandum of Understanding the Beneficiary
Countries ensured their political commitment to setting up the units.
Furthermore, national Memoranda of Cooperation were signed in the Beneficiary
Countries providing sustainable legal bases, which ensured internal cooperation
between the various Ministries of Finance, Interior and Justice. The necessary
infrastructure was set up and individual knowhow transfers were provided to
make the ILECUs effective. The newly established units incorporate all branches
of the international Law Enforcement Agencies (Europol, INTERPOL, EUROJUST,
SELEC, foreign liaison officers, SIRENE, European judicial networks, FRONTEX
and OLAF) creating a single interface. The organisational as well as
operational structure and processes were defined in the ILECUs Guidelines,
which resulted in faster processes for information exchange. The Guidelines
were adapted in DET-ILECUs II to take account of changes in the Western Balkan
region and the project (ILECU Kosovo).

DET-ILECUs
II: within the first six months of the follow up project the legal framework
was set up for ILECU Kosovo and it was up and working by June 2011. All ILECUs
units in the region were linked by a network through holding regular meetings
and building a common training platform. A working relationship with Turkey could also be achieved. In the framework of the Network a quality management system
was established for Standard Operational Procedures; these are regularly
updated by the network in order to respond to the changes in crime environment.
In addition to the ILECUs network a counter terrorism network was established
in the region. The founding of these networks and the exchange and transfer of
regional and international knowledge contributed to the ILECUs becoming strong
interfaces for both, national and international matters. Faster and more
efficient law enforcement processes resulted in a more effective fight against
organised crime. Currently a new Memorandum of Understanding is being developed
by the Network, which is aimed at ensuring the sustainability of the ILECUs in
relation to cooperation and will also incorporate the prosecutors responsible
for organised crime. The ILECUs are an answer to the adaptable and anarchical
nature of organised crime and their future perspective is the regions alignment
with the EU Member States, legally as well as operationally.

The
Western Balkans Investment Fund (WBIF) gained momentum and allowed identifying
a considerable number if investment projects which will attract private
funding, thereby multiplying the impact of IPA funds.

In 2011
and since the creation of the WBIF in December 2009 the pipeline of projects
has grown to represent 123 grants for a value of EUR 220 million, that will
trigger nearly EUR 5 billion in loans and a total potential
investment of nearly EUR 10 billion across the five key sectors – energy, environment,
transport, social issues and private sector development.  The 4th Meeting of
the Steering Committee of the Western Balkans Investment Framework (WBIF) in
June 2011 in Hamar, Norway, approved grants in excess of EUR 21 million
for 19 projects in the region. These included for example a pre-feasibility
study for the Regional Project of Ionian Adriatic gas Pipeline (520 km total
length) contributing to the construction of a regional gas ring, a feasibility
study on an electrical 400 kV Interconnection between Serbia, Montenegro and
Bosnia and Herzegovina and the preparation for the construction and further
development of the Regional Centre for Entrepreneurial Learning in Croatia.

At the
5th meeting of the WBIF Steering Committee in December 2011 in Luxembourg, 22 grants for a total value of EUR 59 million were approved. It is expected
that those grants could eventually trigger loans and funds from the
International Financial Institutions (IFIs) of more than EUR 1 billion for
investments in infrastructure. The Steering Committee approved the Western
Balkan Enterprise Development and Innovation Facility (EDIF), funded under the
IPA 2011 MB programme as the first action in Private Sector Development to be
financed by the WBIF.

The
on-going Tempus projects continued to promote reforms in higher education, both
at institutional and national level. The projects dealing with curriculum
reform contributed in particular to the implementation of the Bologna process
in the countries of the Western Balkans, notably by putting into practice and
widening the use of European Credit Transfer System (ECTS), the Diploma
Supplement and the three-cycle structure. Among other initiatives, a concrete,
national-level, Bologna contribution was achieved in the former Yugoslav Republic of Macedonia, where a Tempus project successfully developed a
National Qualifications Framework for higher education. Many projects also
promoted the regional cooperation in the Western Balkans, for example the
project "Enhancing the quality of distance learning at Western Balkan
higher education institutions" coordinated by the University of
Kragujevac and the "South East European Project for the Advancement of
Language Studies" coordinated by the University of Montenegro.

The
selection for the 4th call for proposals ended in July 2011 and a total of 62
new projects were proposed for funding. These included 17 projects targeting
the Western Balkans. The projects started their activities on 15 October
2011. The 5th Tempus Call for Proposals was published in November 2011 and was
followed by an information campaign in the participating countries including
Albania, Bosnia and Herzegovina, Montenegro, Kosovo\* and Serbia.

The
network of Higher Education Reform Experts (HERE) funded by Tempus also contributed
to the implementation of higher education reforms in the Western Balkans. These
experts organised events at the local level to promote aspects related to the
modernisation of higher education and were involved when Ministries in their
countries were planning legislative reforms. The Tempus programme continued to
offer regular opportunities for the HERE network to meet and be trained – one
of such events was organised in Albania in February 2011 and focused on Quality
Assurance and Accreditation. The seminar led to a series of recommendations on
the improvement of quality assurance systems for higher education in the
Western Balkans.

3.2 Sector:  justice and
home affairs, including fundamental rights and vulnerable groups

Strengthening
capacities in the fight against cybercrime CyberCrime@IPA

IPA
2010, EUR 2.5 million

The
project aims to strengthen the capacities of criminal justice authorities of
Western Balkans and Turkey to cooperate effectively against cybercrime.

Within
18 months of implementation, CyberCrime@IPA delivered extensive benefits for
the beneficiaries. The project engaged the authorities in a broad process of
reform towards a concerted and consistent approach to cybercrime. This process
is based on a better understanding of cybercrime as a threat against society,
as well as of the complex set of measures to be taken at national, regional and
international levels to meet this challenge. Furthermore, the project generated
dynamics of cooperation between different organisations and projects while
bringing in European and international expertise.

An
in-depth analysis of the existing capabilities with regard to cybercrime was
prepared in the beginning of the project and complemented during various
activities. This analysis allowed the project to address real needs and provide
targeted assistance. As a result, the project has achieved significant policy
and strategic impact in a range of fields such as: stronger involvement of
decision-makers in supporting measures against cybercrime; harmonisation of the
legislation, in particular support for legislative amendments as well as
signing/ratifying the relevant international treaties; increased the efficiency
of the 24/7 network in the region, provided a good practice study on
specialised cybercrime units and contributed to networking and developing a
culture of cooperation in the region; provided a strategy for law enforcement
training; raised awareness of the need to confiscate proceeds from crime on the
Internet and strengthened interagency and public-private cooperation against
criminal money on the Internet; and provided guidance for strengthening
cooperation between law enforcement and internet service providers against
cybercrime.

Regional
programme for durable solutions for refugees and internally displaced persons
during 1991-1995 in South-east Europe IPA 2010, EUR 1.5 million

The
main purpose of the project is to provide legal advice, counselling and
information to returnees as well as repatriation assistance to eligible
refugees in the form of transport of persons and refugee belongings in the
region.

During
the reporting period, 1,801 refugees received legal advice/assistance and 1,019
Croatian-Serb returnees in Croatia received assistance regarding individual
durable solutions.  A total of 130 received assistance to voluntary return and
182 were assisted to locally integrate in the region.

Legal
advice and assistance was also provided to beneficiaries in Bosnia and Herzegovina, Montenegro and Croatia to take informed decisions on their future: 456
beneficiaries were assisted in Bosnia and Herzegovina, 524 refugees received
legal advice/assistance in Montenegro. Repatriation assistance was provided to
returnees to Croatia from Serbia and Montenegro and to Bosnia and Herzegovina.

At the
technical meeting in November in Banja Luka, UNHCR Bosnia and Herzegovina and
Croatia discussed the recently adopted Croatian laws on Foreigners and
Citizenship, repatriation process and data exchange. It was agreed
that UNHCR Croatia would produce a draft leaflet with step-by-step instructions
for the former residents in Croatia to regulate their status upon return
pointing out defined procedures and possible obstacles.

Migration
for Development in the Western Balkans (MIDWEB)

IPA
2009, EUR 1.95 million

The objective
of the action is to support informed migration from the Western Balkans (WB) to
the EU Member States and to contribute to the positive impact of labour
migration on socio-economic development in the Western Balkans.

During
the reporting period, the expansion of the Migrant Service Centres
(MSCs) network and adequate refurbishment with office supplies took place in a
number of project locations (new MSC offices became operational in Serbia and Montenegro, refurbishment continued in the new MSCs in Bosnia and Herzegovina). The MSC
information campaigns and outreach events were carried out in a number of
project locations. Consular Exchange Meetings bringing together MSC
staff, national governmental stakeholders and consular officials from EU Member
States embassies and consulates took place in all project locations. The
development of a database on labour market data and shortage occupations for
the Western Balkans and a selected number of EU key migration destination
countries was completed in partnership with the International Organisation for
Migration (IOM).

The International
Conference Fostering Partnerships for Return of Skills and Human Capital to
the Western Balkans took place in Budapest from 19-20 October. A total of 68
governmental and non-governmental stakeholders, from the Western Balkans and
the EU Member States, came together to discuss challenges and constraints to
the permanent return of qualified nationals to the countries of origin. The
Conference provided a platform for policy makers and non-state actors to
exchange best practices and identify strategies to minimise ‘brain drain’ and
‘brain waste’ resulting from the migration of qualified migrants to more
lucrative labour markets and to prepare a set of policy recommendations for adequate
responses to the realities of migration today.

3.3 Sector: public
administration and reform

Concerning
the Regional School of Public Administration (ReSPA) (phase II), a service
contract (aiming at assisting the development of ReSPA and its institutional
and operational capacity to deliver professional training) was finalised in
September 2011 and a direct grant (supporting ReSPA in the organisation
of its activities) is under implementation. The two contracts are financed
under IPA 2009 for an amount of EUR 4.4 million.

Among
the results achieved by the service contract are: support to the recruitment of
ReSPA staff, implementation of the induction plans for newly employed ReSPA
staff, short-term external expertise for public procurement, supply of publications
and books for ReSPA support to the Liaison Officers in the region.

In June
2011, an agreement between by the Minister of Foreign Affairs of Montenegro and
the Director of ReSPA, made ReSPA fully responsible for the running of the
premises in Danilovgrad. According to the agreement, ReSPA has the status of an
International Organisation acknowledged by the host country authorities. It has
legal personality and capacity to perform its functions. The 5th Governing
Board meeting was held in December.

During
the period July - December 2011 various trainings were organised and financed
under the grant scheme: namely, a workshop on the development of leadership
skills for managing staff, a training for civil servants on principles and
practices of decentralisation in relation to good governance, a training on
membership in the EU and the challenges for national administration, a training
for civil servants on recruitment and selection, performance management and
development and a training on policy impact assessment in the public
administration. Moreover, a summer school in European Integration and
Regionalism, EU Law and its implementation took place in July, as well as the
18th Intensive Seminar on the European Union.

In
terms of multi-country assistance, the project Support for Improvement in
Governance and Management in the Western Balkans and Turkey (SIGMA), financed
under IPA 2010 for the amount of EUR 10 million, worked on developing a
training programme on ethics for ReSPA and Western Balkan countries and on
drafting policy papers on the rule of law and the rationalisation of
inspectorates. In the area of financial control, SIGMA drafted the overview
section of the Commission's compendium on financial control systems in EU
Member States, organised a 2nd regional Public Internal Financial Control
conference, and provided support to the candidate countries and potential
candidates Supreme Audit Institutions' Network. In the area of public
procurement, SIGMA published a second set of public procurement policy briefs
and provided advice to the Commission on the implementation of the IPA regional
training project.

3.4 Sector: civil
society support

The
overall objective in this area is to strengthen civil society organisations and
their role in the political as well as European integration process in the IPA
beneficiaries. The aim is to improve dialogue on legislation and policies
between governments and civil society as well as to strengthen social
partnerships that underpin reforms. The support is mainly delivered through the
Civil Society Facility (CSF) which consists of both national and
Multi-beneficiary activities that are programmed in a coordinated manner.

By the
beginning of 2011, the CSF had received approximately EUR 41.5 million from the
Multi-beneficiary IPA programmes (IPA 2007, 2008, 2009 and 2010). During the
year, support at the Multi-beneficiary level continued to focus on three areas:

A.
Assisting civil society organisations (CSOs) to
increase their capacity, improve their democratic role and to promote
networking across borders through Technical Assistance 'TACSO' (IPA
2010, EUR 6.7 million).

B.
Helping CSOs to familiarise themselves with EU
institutions, policies and decision-making processes and offering them the
opportunity to network with their national, regional and European-level
counterparts through the People-2-People Programme (IPA 2010, EUR 1.785
million)

C.
Offering financial assistance to CSOs working
together at a regional level to implement projects on specific themes through Partnership
Actions (IPA 2008, EUR 5.4 million; IPA 2009, EUR 10 million and IPA
2010, EUR 3.3 million)

Under
Partnership Actions, three calls for proposals launched in late 2010 came into
operation in early 2011, namely 'Socio-economic Partners (EUR 5 million, 12 grants),
'Minority and vulnerable group organisations' (EUR 2.5 million, 10 grants) and
cultural organisations (EUR 2.5 million, 10 grants). In
addition, a contract with Unicef was signed in June 2011 targeting 'Children's
Rights' (EUR 1.65 million), while a further call for proposals focused on
'Empowerment of Women' (EUR 1.85 million, 11 grants) was completed in
November 2011. A number of grants awarded from IPA 2008 appropriations came to
an end, namely 'Environment, Energy Efficiency, Health and Safety at Work' (EUR
3.79 million, 15 grants) and 'Fight against Corruption, Organised Crime and
Trafficking' (EUR 1.61 million, 9 grants).

During
2011, the CSF was redesigned to improve its relevance, efficiency and
effectiveness. As a major change, CSF activities were brought under a single
Financing Decision with a multi-annual perspective (IPA 2011 and 2012, EUR
40.05 million).

A
thematic evaluation of EU's Support to Civil Society in the Western Balkans and
Turkey carried out in 2011 concluded that: "…it can be considered
that the EU's priority objective of supporting the development and building the
capacity of Western Balkan and Turkish CSOs has to a significant extent been
achieved. In particular the EU has played a decisive role and this not only in
the period following the conflicts in the former Yugoslavia (post-conflict
reconstruction), but also in the current process of not only preparation for
accession to the EU, but also reconciliation."[22]

3.5 Sector: private
sector and

European
Fund for Southeast Europe (EFSE) CARDS 2006, IPA 2007, 2008 and 2009; value by
31 Dec 2011 EUR 106 million

The
EFSE is a form of public-private-partnership. Its objective is to attract
capital from the private sector thereby leveraging public donor funds that will
assist the development of the private sector in the region. EFSE extends loans
to local commercial banks and micro-finance institutions in the WB for
on-lending to micro- and small enterprises and households.

At the
end of 2011, the EFSE had granted 300,285 loans for the amount of
EUR 1.8 billion (cumulative since 2005) via local partner lending
institutions, primarily to micro and small enterprises in Eastern and South
Eastern Europe and the Caucasus region. Approximately 315,000 jobs were
generated. Moreover, the EFSE has via the Development Facility provided technical
support to the value of EUR 6.7 million for 161 projects, including 26
studies. Furthermore, 27 microcredit organisations and microfinance banks and
16 commercial banks were supported. Following the Trusteeship Agreement, one
monitoring mission per year is conducted to verify the compliance of
investments with EFSE objectives.

Regional
Competitiveness Initiative (RCI) - Crisis Response Package IPA 2009,
EUR 3.8 million

The
overall objective of the RCI is to strengthen the competitiveness of the
economies in the Western Balkans in the medium to long term. The RCI focuses on
policy responses and capacity building support to improve human capital
development and innovation.

The
second meeting of the RCI Steering Committee in Sarajevo was organised in
December 2011. The Steering Committee reviewed the existing pilot projects and
endorsed the launch of three new pilots in Albania, Croatia and Kosovo. RCI
Steering Committee members with pilots felt that the mixed team approach and
study visits were extremely useful and that the committee should continue its
deliberations as an expert body following the conclusion of the RCI project in
2013.

3.6 Sector: transport
and energy infrastructure, including nuclear safety

Western
Balkans Investment Framework (WBIF) - Socio-economic Development
(infrastructure and private sector development)

The
WBIF was set up in December 2009 by the European Commission, the EIB, the EBRD
and the Council of Europe Development Bank (CEB). The WBIF has the endorsement
of the EU Member States and its purpose is to expedite the development and
implementation of priority investments in key sectors in the WB. This is
achieved through mixing loans and grants from the EU and IFIs for jointly agreed
priority projects nominated by the Beneficiaries.

The
current grant contributions to the WBIF total around EUR 220 million. These
grants are used for project preparation and co-financing of investments in
infrastructure for which financial support is provided by the partner IFIs;
EIB, EBRD, CEB as well as "Kreditanstalt für Wiederaufbau" (KfW) with
the World Bank as an associated IFI. Grants will support investments for a
value of EUR 10 billion for which IFIs will provide loans worth
EUR 5.5 billion.

The
largest grant contribution to the WBIF comes from the EU budget. The European
Commission has so far set aside more than EUR 180 million in EU funding.
Bilateral donors have contributed more than EUR 30 million and the partner IFIs
have set aside EUR 10 million each in grant contributions.

Either
the IFIs or the European Commission implement the grant assignments. For the
implementation of the EU grants, the Commission has awarded technical
assistance contracts under the Infrastructure Project Facility (IPF),
which was the forerunner of WBIF, and has signed contribution agreements with
the IFIs for implementation of the Municipal Window. Grants provided to
the WBIF from bilateral donors and from the IFIs are implemented directly by
the IFIs through various technical assistance assignments. The Commission also
provides support to enhance coordination between the WBIF stakeholders with
respect to policies and strategies in the different sectors.

Horizontal
programme on the Energy Efficiency Finance Facility IPA 2007,
EUR 34.7 million

This
programme is designed to assist beneficiaries promote investments in energy
efficiency and renewable energy generation in order to improve energy
performance of the building and industry sectors thereby contributing to energy
savings and reduction of CO2 emissions. This is achieved through the provision
of financing to commercial banks in the region to increase their portfolios in
energy efficiency and renewable energy projects for on-lending to final
borrowers. The IFI credit lines under the programme are combined with IPA
grants in the form of financial incentives both to partner banks and
end-borrowers to facilitate investments.

The
pace of implementation in the second half of 2011 increased compared to the
previous reporting period. With the signing of all pending loan agreements by
the end of 2011, credit lines for a total amount of EUR 145 million combined
with EUR 34.7 million IPA grants were fully allocated to projects. Under the
EBRD credit line approximately 38% of the grant funds have been allocated to
signed sub-loans; the Commission has made available EUR 368,000 to co-fund
the extension of the Facility's technical assistance. A joint monitoring
mission with EBRD was carried out in November 2011 visiting 5 renewable and
energy efficiency projects in the industry sector in Bosnia and Herzegovina as
well as Serbia.

3.7 Sector: environment
and climate change

Regional
Environmental Network for Accession (RENA)IPA 2009, EUR 5.2 million

The
purpose of the project is to enhance regional cooperation in the Western
Balkans and Turkey in the field of environment. More specifically, the project
aims at establishing tools to assist IPA Beneficiaries in harmonising legal
frameworks, improving capacity and designing appropriate intervention
mechanisms in line with the EU environmental acquis.

During
the year 2011 a number of workshops took place related to the accession
negotiations process, EU requirements and identification of environmental
projects, the regulations touching upon the use of chemicals ( REACH/CLP [23]),
the EU Emissions Trading Scheme, the development of Nature Site Management
Plans, investment plans, the Water Framework Directive and approaches to
transposition of the Environmental Impact Assessment/Strategic Environmental
Assessment directives, as well as the EU Climate and Energy Package, EU
policies and legislation in the field of climate change. External Country
assessment reports have been prepared for Serbia, the former Yugoslav Republic of Macedonia, Montenegro and Bosnia and Herzegovina.

Civil
Protection Cooperation for the candidate countries and potential candidates IPA
2009, EUR 3.8 million

The
project aims at increasing the IPA Beneficiaries' capability of working with
the Community Civil Protection mechanism and to contribute to the
development of their civil protection capabilities through training, workshops
and exchange of experts.

During
this reporting period a number or activities took place under the 3
lots/contracts of the project, including 8 country specific meetings under Lot
1 and 8 country specific meetings under Lot 2, the first Table-top exercise, 2
Basic Training Courses (BAT), 1 Operational Management Training Course (OMT), 3
exchanges of experts on Forest Fire Exchange to the Monitoring and Information
Centre (MIC), 1st Regional Field Exercise - scenario: earthquake,
mass casualty (19-22 Oct, Slovenia; about 400 participants), participation of 2
representatives of beneficiaries in the EU "Poseidon Exercise-earthquake
followed by tsunami in the Mediterranean Sea", the first 1.5-day Workshop
on the European Civil Protection Mechanism. A survey on Host Nation Support was
launched and visibility activities performed which resulted in a brochure and
leaflets.

3.8 Sector: social
development

Erasmus
Mundus, Action 1 and Action 2IPA 2007, 2008, 2009 and 2010, EUR 64 million

The
purpose of the Erasmus Mundus programme is to enable the exchange of academic
staff and students at all levels thereby enhancing their knowledge and skills. 
A new Call for Proposals for the 2012 selection of joint programmes,
partnerships and projects under all three Actions of the programme was
published in December 2011, with a deadline of 30 April 2012.

In
November 2011 the promotion of Erasmus Mundus programme in Albania in the framework of the conference "Europe 2020 strategy in the field of Science,
Research, Technology, and Education and Training" was organised by
TAIEX in co-operation with the Ministry of Education and Science of the Republic of Albania. A presentation of the programme and specific workshops were held in
order to increase the number of applications from partnerships which involve
Albanian institutions, as well as to disseminate the scholarship opportunities
open to Western Balkans students and staff.

Youth
in Action IPA 2007, 2008, 2009 and 2010, EUR 5.5 million

The
purpose of this programme is to promote the sector of non-formal education and
youth in the region by supporting exchanges of young people and those active in
youth work and youth organisations as well as initiatives that reinforce young
people’s mutual understanding, sense of solidarity and tolerance.

During
the second selection round 2011, 258 Youth in Action projects have been
submitted at centralised level. Within those projects, 125 have been presented
by Western Balkan applicants (48%). In September 2011, 121 centralised Youth in
Action projects have been selected for funding under this second selection
round 2011. Within those projects, 33 projects have been financed by the Youth
Balkan Window. The repartition of the projects selected was as follows: 16
projects presented by Serbian promoters, 11 projects presented by the Former Yugoslav Republic of Macedonia promoters, 5 projects submitted by Albanian promoters
and 1 project presented by a Kosovan promoter. In terms of thematic
repartition, 2 projects were granted under the Action 2 of the Programme (European
Voluntary Service) and 31 projects were selected under the Action 3.1 of
the Programme (Cooperation with neighbouring partner countries in the field
of youth exchanges, training and networking).

PART
II - FINANCIAL DATA

On
implementation of assistance at 31 December 2011

IPA Multi-Beneficiary

Multi Beneficiary || Allocated || Contracted || % Contracted || Paid || % Paid

IPA 2007 || 107,313,737 || 107,313,737 || 100.00% || 94,312,436 || 87.88%

IPA 2008 || 154,535,468 || 146,628,033 || 94.88% || 120,101,699 || 77.72%

IPA 2009 || 206,760,000 || 198,070,358 || 95.80% || 153,179,211 || 74.09%

IPA 2010 || 110,601,400 || 101,599,560 || 91.86% || 52,175,822 || 47.17%

IPA 2011 || 168,207,500 || 57,064,208 || 33.92% || 18,439,328 || 10.96%

Total || 747,418,105 || 610,675,896 || 81.70% || 438,208,496 || 58.63%

IPA –
Component II (CBC) Programme Multi- Beneficiary

Multi Beneficiary || Allocated || Contracted || % Contracted || Paid || % Paid

IPA 2007 || 8,753,000 || 6,534,717 || 74.66% || 4,784,595 || 54.66%

IPA 2008 || 7,285,021 || 3,439,224 || 47.21% || 2,065,757 || 28.36%

IPA 2009 || 2,200,000 || 120,000 || 5.45% || 54,637 || 2.48%

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

IPA 2011 || || || || ||

Total || 18,238,021 || 10,093,941 || 55.35% || 6,904,988 || 37.86%

C.        TOWARDS
A MORE EFFICIENT AND EFFECTIVE DELIVERY OF ASSISTANCE MORE CLOSELY TO THE
ENLARGEMENT POLICY PRIORITIES AND THE SECTOR APPROACH

Towards a new IPA Regulation for 2014-2020

At the strategic level,
2011 was marked by preparations for the new instrument for pre-accession
assistance for the post-2013 period. The result of the extensive stakeholder
consultation that had been launched with the 2010 IPA Conference fed into an ex
ante evaluation on the future pre-accession assistance instrument and
contributed substantially to shape the proposal for the IPA II Regulation that
the Commission adopted on 7 December 2011, as part of a package of external
action instruments. In line with stakeholders' input, provided at the 2011 IPA
Conference, the Commission proposal reflected the vision of a renewed IPA
instrument that should make financial assistance for pre-accession more
strategic and result-oriented, based on longer term planning and programming in
line with the enlargement strategy and priorities; more coherent as to the
support provided under the current components; more flexible and tailored to
address beneficiary countries' needs and capacities in an enlargement context;
more efficient, effective and simple, in the framework of a common approach
applying to all EU internal and external action instruments in the next 2014-2020
Multi-Annual Financial Framework[24]. Public administration
reform, good governance, the rule of law and the fight against corruption and
organised crime as well as socio-economic development and regional cooperation
will remain a key focus of future pre-accession assistance.

Work on the new
instrument will continue in 2012 and 2013. While the proposal for the IPA II
Regulation is subject to discussion and negotiation in Parliament and Council,
with view to adoption by ordinary legislative procedure by the end of 2012 or
early 2013, the Commission will prepare the draft IPA-specific Implementing
Regulation and the strategic planning documents, thus completing the framework
for programming and delivering IPA II assistance. The strategic planning
framework will be inspired by the methods in use in the EU for structural
funds, with an overall IPA Common Strategic Framework setting the general
policy for the assistance and country/multi-country strategy papers for the
full period of the next multiannual financial framework. The preparation of
sector (multi-annual) operational programmes to implement the strategy papers
will follow. The above will require enlargement countries to set up
comprehensive national strategies that IPA II can support. In IPA countries,
the main focus should be on securing strong local ownership and broad consensus
on the strategies to be put in place, and on improving the capacity to plan,
implement and monitor their implementation and to integrate this into the
broader preparations for EU membership.

2.         TOWARDS
A MORE EFFICIENT DELIVERY OF ASSISTANCE: GRADUALLY IMPLEMENTING THE SECTOR
APPROACH TO THE ENLARGEMENT POLICY PRIORITIES

The sector
approach

In 2011 the Commission
continued to work towards introducing a more comprehensive approach and to
gradually extend it to all policy priorities of pre-accession assistance. With
the support of the European Training Foundation, in June it organised a
three-day pilot training on sector support, designed for the Enlargement
context and to give staff in Headquarters and EU Delegations in enlargement
countries a more in-depth understanding of how support through sector
programmes or more systematic programme-based approaches can help improve
sustainable and more results oriented pre-accession assistance. Case studies
and examples of practical applications and experience were used, including from
Kosovo (developing a sector approach in Education), Turkey (evaluating Public
Finance Management) and Serbia (indicator setting for the Justice sector). The
aim was to help participants develop an approach to programming based
on national sector policies and action plans and improved needs assessment
and risk analysis. This would ultimately allow alignment with beneficiary
countries' systems and institutions, thereby building capacity and increasing
aid absorption. Feed-back on the training was overall positive. Knowledge
and commitment were reinforced through engaged and positive discussion.

The overall conclusion
drawn from the training was that the change from a project-based approach to a
sector-wide approach takes time and can only take place progressively.
There is no ready-made 'recipe' for implementing the sector approach, no unique
model applicable for all countries.

As a follow-up to this
training, the Commission set up a dedicated "task force" to make the
sector approach operational in all the policy priorities of the Enlargement
countries. Other steps envisaged included the revision of the IPA Programming
Guide and programming templates, for programming on a multi-annual basis
already for the period 2012-2013 and progressively in line with a sector
approach thereafter. A first revision of the programming templates was
completed by the end of 2011; resulting in sector identification fiches to be prepared
by beneficiary countries as a preliminary step to drawing up programmes and, if
needed, project identification fiches. Further revisions of the programming
templates will continue in 2012, together with a general revision of the
Programming Guide.

In 2012 the Commission
will also continue to provide seminars and workshops on sector approaches to
staff in EU Delegations and to beneficiaries. A Joint Commission/World
Bank-implemented project on Monitoring, Indicators and Evaluation in the
Western Balkans and Turkey, for which discussion started in 2011, should also
begin in 2012. The relevance of this project and, generally, of monitoring and
evaluation work in the wider context of implementing the sector approach rests
on the expectation that performance assessment frameworks setting clearer
objectives and measurable indicators for a sector will allow progress to be
quantified and that regular monitoring will help ensure that where a programme
in a given sector is not achieving its objectives, action can be taken to put
implementation back on track.

2.2 The main lessons learnt from evaluation

An evaluation to support the preparation of pre-accession
financial instruments beyond 2013[25], found that there is a strong
rationale for a future pre-accession financial instrument. The preferred option
of the evaluators was the continuation of the current programme with similar
levels of EU funding. The evaluation concluded also that the economic and wider
benefits to the EU of enlargement involving the current beneficiaries would
more than offset the cost to the EU of a new financial instrument.

The first part of a thematic evaluation of EU's support to
civil society in the Western Balkans and Turkey[26]
provided an assessment of the intervention logic, and concluded that
interventions are relevant for the objectives identified in the MIPDs[27].
However, measurement of progress is challenged by the lack of sufficiently
SMART[28] indicators and the wide definition
of strategic objectives.

An evaluation of Twinning in Turkey[29]
concluded that the vast majority of Twinning projects in Turkey achieved their
objectives, and the presence of synergies between Twinning projects and other
EU and/or donor funded projects was a key factor supporting that success.
The most common reasons for Twinning projects to fail to deliver included: lack
of political commitment, problems with procurement, inadequate expert
mobilization from the Member State institutions, and an outdated needs
assessment.

A
strategic interim evaluation of regional cooperation in the Western Balkans and
Turkey[30],
found that programming could be improved by increasing beneficiaries' ownership
of regional programmes, and through better interaction with the stakeholders. 
The evaluation also found that coherence between IРА regional and
national programmes needs to be increased through more systematic information
sharing during the programming phase.  Overall objectives should be linked more
closely with project objectives, and should be made measurable through SMART
indicators.  The evaluation concluded that efficiency and effectiveness have
been improving slowly.

A thematic evaluation of IPA-funded information and communication
activities[31] concluded that whilst
the overall objectives of IPA-funded information and communication activities
are clear and coherent at Headquarters and Delegation level, specific
objectives are too broad and do not meet the SMART criteria. IPA information
and communication funds have generally been deployed in an efficient manner.
However, efficiency could be increased by downscaling activities with limited
effectiveness and greater concentration of resources on fewer activities.
Information and Communication activities are clearly visible and effective for
audiences with an interest in enlargement but less so for “non-informed”
audiences and the broader public.

Further on, a
thematic evaluation of EU pre-accession multi-beneficiary assistance to Western
Balkans and Turkey in the fields of environment and disaster risk reduction[32]
was also completed.  It found that objectives are too broad and not
sufficiently linked across the different programming stages. Also, a key
contribution of the multi beneficiary programmes has been the promotion of
beneficiaries' institutional change towards working together on environment and
disaster risk reduction issues by encouraging networking and sharing
experiences.  Impact and sustainability of programmes is hampered by uneven
commitment and ownership of the beneficiary countries, which often dedicate limited
human and financial resources and sometimes do not plan follow-up actions
beyond EU assistance.  Multi-annual long-term projects have proved to be
effective in creating sustainable links between participants beyond the
projects implementation.  However, the evaluation also found that dissemination
and visibility activities are not fully effective in promoting sustainability.

2.3. Cooperation with
the donor community and aid effectiveness

In 2011 the Commission
continued to pursue the donor coordination agenda on various issues. Maximising
aid effectiveness and demonstrating results and impact was one of them.
During a key meeting hosted by the OECD in February 2011, some clear issues
emerged.
This
meeting concluded that there was a need for donor-initiated measurement systems
to help strengthen related systems in beneficiary countries and to support
rigorous, long–term data collection that meet the needs of multiple parties.
Future practice should promote greater convergence between the demand and the supply
side in results reporting. Joint monitoring and evaluation could help overcome
attribution problems in assessing the effectiveness of programmes and
strategies and the complementarity of efforts supported by different partners.
The issue of results was also a key topic at the 4th High Level
Forum on Aid Effectiveness in Busan in November 2011.

The Commission has
followed up on the 'results' issue through a dedicated EU Expert Group on
Results created in November 2011 with the participation of experts from Member States and other donors. One objective of the group, to be pursued in 2012,
is to develop a common EU approach to results as indicated in the Council
Conclusions of 14 May 2012 on the Communication 'An Agenda for the Change'. In
2012, the Commission will look into the possibility for a common EU results
framework to be developed so that it can also represent a reference framework
for measuring and communicating the results of future pre-accession assistance.

In 2012, the Commission
will also continue work on making data on pre-accession financial assistance
available according to the IATI[33]
standard for publishing aid information.

The importance of better
communicating results and adopting a more results-oriented approach to
programme design was raised by the Organization for Economic Co-operation and
Development,
Development and Co-operation Directorate members also in the framework of
discussions on the OECD DAC Peer Review of the EU 2011-2012, to which
the Commission contributed. With regard to pre-accession assistance, the
Commission highlighted how aid effectiveness principles were being incorporated
into the Enlargement policy and related financial instrument (IPA): ownership
and alignment have a key role in the pre-accession process; the sector approach
is gradually being extended in the management of IPA assistance, with focus on
key sectors in the enlargement countries such as justice and home affairs;
cooperation with other donors, including European and International Financial
Institutions (for example in the framework of the WBIF[34])
and EU Member States (through Twinning) is increasing; budget support is
already considered as a possible aid modality, and should continue to be so
under IPA II when necessary pre-conditions and guarantees are in place.

The Commission stressed
also the strong political leverage for reforms provided by the prospect of EU
membership while recalling that, in the context of preparing beneficiary
countries to join the EU, pre-accession assistance also has a development
objective (it qualifies as official development assistance (ODA), except in the
case of Croatia). Further developments in line with a more result-oriented
approach were to be expected from IPA II, with increased focus on indicators to
measure results and impact and the possibility for financial top-ups to reward
good performance.

Work will continue in 2012 to
make sure that pre-accession assistance is in line with the various initiatives
within the Commission, the Member States and the wider donor community, to
improve donor coordination and aid effectiveness and to demonstrate results.

D.        PHARE, CARDS, TURKEY
PRE-ACCESSION AND TRANSITION FACILITY –FINANCIAL DATA AT 31ST
DECEMBER
1.         PHARE, TURKEY PRE-ACCESSION AND TRANSITION
FACILITY FUNDS IMPLEMENTATION BY CPOUNTRY AT THE END OF
2011:

In
2011, there was no longer implementation of pre-IPA instruments (CARDS and
PHARE) in Croatia, except for some remaining payments.

Total commitments,
contracts and payments, in million EUR[35]

Partner Country || Commitments || Contracts

Bulgaria || 1,931,177,220.20 || 1,910,672,096.54

Czech Republic || 871,696,799.25 || 871,696,799.25

Croatia || 123,868,791.57 || 123,684,944.82

Cyprus(\*) || 303,952,990.68 || 232,888,782.84

Czechoslovakia || 231,820,000.00 || 228,880,000.00

East Germany || 28,860,000.00 || 28,860,000.00

Estonia || 321,151,322.78 || 321,138,766.78

Hungary || 1,407,718,324.16 || 1,407,685,972.16

Latvia || 399,445,389.60 || 399,445,389.60

Lithuania || 772,496,698.28 || 772,496,698.28

Malta || 51,952,164.42 || 51,952,164.42

Multi-country programmes || 2,865,235,557.01 || 2,818,942,866.87

Poland || 3,738,116,167.27 || 3,737,984,899.27

Romania || 3,325,958,278.96 || 3,325,776,203.07

Slovakia || 669,937,531.65 || 669,804,518.65

Slovenia || 342,581,764.85 || 342,581,764.85

Turkey || 1,496,653,099.42 || 1,496,653,099.42

Total || 18,882,622,100.10 || 18,741,144,966.82

(\*)
       Including assistance to the Turkish Cypriot community

2.         CARDS
FUNDS IMPLEMENTATION BY COUNTRY AT THE END OF 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%

[1]Enlargement Strategy and Main Challenges 2010-2011, COM(2010) 660 of
9 November 2010,

http://ec.europa.eu/enlargement/press\_corner/key-documents/reports\_nov\_2010\_en.htm

[2] European Court Of Auditors: "Has EU assistance improved Croatia's capacity to manage post accession funding?" Special Report No 14/2011

[3]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.

[4] Enlargement Strategy and Main Challenges 2010-2011, COM(2010) 660
of 9 November 2010,

http://ec.europa.eu/enlargement/press\_corner/key-documents/reports\_nov\_2010\_en.htm

[5]Supporting Public Administration Reform in Croatia – Thematic Evaluation of EU and other support, MWH Consortium, June 2009.

[6] Instrument for Pre-Accession Assistance for Rural Development.

[7] The report was published on 1 February 2012: http://eca.europa.eu/portal/pls/portal/docs/1/11760728.PDF

[8]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 (12.10.2011 COM(2011) 641 final)

[9]C(2010)7470

[10]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.

[11]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.

[12]Decentralised Management since 2009

[13]Regulation (EU) n° 153/2012 of the European Parliament and of the
Council of 15 February 2012 amending

Council Regulation (EC° n°1085/2006
establishing an Instrument for Pre-Accession Assistance (IPA)

[14]SEC(2010) 1334

[15]            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.

[16]Andrijevica; Bijelo Polje; Žabljak; Berane; Kolašin; Mojkovac;
Niksic; Plav; Plužine; Pljevlja; Rožaje; and Šavnik

[17](http://www.dvajezika-jednaknjiga.me/,
http://www.dygjuhe-njeliber.com/)

[18]The difference with Table 1 is explained by the allocation for
participation in ERDF transnational programmes (EUR 0.51 million)

[19]             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.

[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.

\*              
This designation is without prejudice to positions on status, and is in line
with UNSCR 1244/1999 and the ICJ Opinion on the Kosovo declaration of
independence.

\*              
This is the only PHARE programme implemented by the EU Office.

[21]             This amount includes national funds for Tempus, Nuclear
safety and radiation protection as well as Civil Society Facility, amounts in
other budget lines for actions specified in the Multi-beneficiary MIPD, as well
as the use of carried over assigned revenues.

[22]Thematic Evaluation of EU's Support to Civil Society in the Western
Balkans and Turkey – Draft Final Report (March 2012), commissioned by DG
Enlargement and implemented by IBF International Consulting I collaboration
with BAA (Spain), not yet finalised.

[23]REACH: Registration,
Evaluation, Authorisation and Restriction of Chemicals

CLP: Classification and
Labelling of Chemicals

[24]Cf. Proposal for a Regulation of the European Parliament and of the
Council on the Instrument for Pre-accession Assistance (IPA II), COM (2011) 838
final, 7.12.2011.

[25] Evaluation to support the preparation of
pre-accession financial instruments beyond 2013, 13 June 2011

[26] Thematic Evaluation of the EU's Support to Civil Society in the
Western Balkans and Turkey, June 2011

[27] Multiannual Indicative Planning Documents.

[28] Specific, Measurable, Achievable, Realistic and Time-bound.

[29] Review of Twinning in Turkey, 23 May 2011

[30] Strategic/Interim
Evaluation of Regional Cooperation in the Western Balkans and Turkey, May 2011

[31] Thematic Evaluation of Pre-accession assistance to support
communication activities, 7 June 2011

[32] Thematic Evaluation of EI pre-accession multi-beneficiary
assistance to Western Balkans and Turkey, in the fields of environment and
disaster risk reduction, May 2011

[33]             The International Aid Transparency Initiative.

[34]             Western Balkan Investment Framework, see below.

[35]             Instances of contracted amounts being slightly above
allocations are due to interest accruing assigned to the programmes. Instances
of decreasing contracted and paid amounts when compared to last year are
explained by closures and de-commitments by the local authorities and by the
Commission. Payments can also decrease due to some local contracts being
excluded from the final declarations.

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