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The efficient use of funds for local and

regional authorities under the

IPA-II regulation

This report was written by Aston Centre for Europe

(Aston University, UK).

It does not represent the official views of the Committee of the Regions.

More information on the European Union and the Committee of the Regions is

available online at http://www.europa.eu and http://www.cor.europa.eu

respectively.

Catalogue number: QG-05-14-128-EN-N

ISBN: 978-92-895-0796-7

DOI: 10.2863/115689 © European Union, November 2014 Partial reproduction is allowed, provided that the source is explicitly mentioned.

Table of contents List of abbreviations

Introduction

1 IPA and IPA II

1.1 The Instruments for Pre-Accession Assistance (I & II) and their relevance to LRAs

1.2 Examples and lessons learned from previous experience

Lessons learned and general recommendations to increase LRAs’ 1.3 absorption capacity

2 The institutional context

2.1 Albania

2.2 Bosnia and Herzegovina

2.3 The former Yugoslav Republic of Macedonia

2.4 Iceland

2.5 Kosovo*

2.6 Montenegro

2.7 Serbia

2.8 Turkey

References

List of abbreviations BiH Bosnia and Herzegovina CoR Committee of the Regions DAs Development Agencies DG Directorate General ENP European Neighbourhood Policy ERDF European Regional Development Fund FYROM The former Yugoslav Republic of Macedonia IPA Instrument of Pre-accession Assistance LRAs Local and Regional Authorities MFF Multiannual Financial Framework MIPD Multiannual Indicative Planning Document NGOs Non-Governmental Organisations UOM Union of Municipalities (Montenegro) i Introduction The Instrument for Pre-Accession Assistance (IPA) is the principal means by which the Union provides financial assistance and expertise to candidate and potential candidate countries to help them on their path towards European integration and eventual EU membership. As emphasised in the Enlargement strategy (Commission, 2013a), the launch of the new IPA – the IPA II Regulation (European Parliament & Council, 2014a) – constitutes an enhanced opportunity to ensure that enlargement and assistance evolve in parallel, and that candidate and potential candidate countries strengthen their capacities to benefit fully from EU assistance (Commission, 2013a, pp. 3, 16).

The Committee of Regions (CoR) has consistently argued for a greater degree of involvement by local and regional authorities (LRAs) in disbursing IPA funds effectively (see for instance CoR, 2008). The case for such involvement by LRAs is clear given that the purpose of IPA funds is to improve the quality of public administration, the rule of law, democratic governance, to support economic development and to assist in the fight against both organised crime and corruption. European integration cannot advance without serious involvement on the part of LRAs. In particular, the CoR believes that IPA should be made more targeted, efficient and coherent, and that this instrument should devote more attention to strengthening administrative capacity at local and regional level (CoR, 2008, p.7).

The new IPA II regulation came into force on 16 March 2014 and is applicable retroactively from 1 January 2014 (European Parliament & Council, 2014a).1 The aim of this paper is to investigate and analyse the extent to which the new IPA-II regulation will facilitate a greater level of participation by LRAs in using IPA funds. It is structured in two parts. Part I presents an overview of the IPA programme, charting continuity and change in the regulation between IPA-I and IPA-II and is followed by some suggestions for policy options. Part II takes a closer look at the administrative setting and administrative capacity of each candidate and potential candidate country in order to provide an analysis of their capabilities vis-à-vis the effective use of IPA funds.

1 For more information, see http://ec.europa.eu/enlargement/instruments/overview/index_en.htm.

1 1 IPA and IPA II This first part of the report examines the general background of the IPA II Regulation and its relevance to the local and regional authorities of the candidate and potential candidate countries. The first section highlights the main features and objectives of both IPA and IPA II so that key differences and areas of continuity can be identified. This is followed by a discussion of the most important and relevant lessons learnt from the implementation of IPA. On the basis of the lessons learnt, the section concludes with a presentation of key recommendations to help enhance the absorption capacities of local and regional authorities for IPA II.

1.1 The Instruments for Pre-Accession Assistance (I & II) and their relevance to LRAs IPA I – Objectives and Coverage The new Instrument for Pre-Accession Assistance (IPA II) sets a new framework for providing pre-accession assistance for the period 2014-2020, replacing the Instrument for Pre-accession Assistance I (IPA I). Before describing the main characteristics of IPA II, it is necessary to outline briefly the objectives and components of the IPA I so that we can see more clearly where and how IPA II differs from its predecessor.

The first Instrument for Pre-Accession Assistance (IPA I) was an instrument designed to replace several European Union programmes and financial instruments (PHARE, PHARE CBC, ISPA, SAPARD, CARDS and the financial instrument for Turkey) with one single instrument and legal framework (Council, 2006). The IPA was made available to pre-accession countries, i.e.





candidate and pre-candidate countries, not European Neighbourhood Policy (ENP) countries.

IPA funds had two main objectives:

1. First, they were designed as a means of co-financing some of the expensive and difficult reforms that all candidate countries must undertake in order to prepare themselves for membership of the EU, and the full participation in all EU policy fields that comes with this (Council, 2006).

3

2. Second, they aimed to prepare countries for the post-accession receipt of the Structural and Cohesion funds that would help modernise their infrastructure and support long-term economic and social convergence within the Union in line with the Europe 2020 strategy (Council, 2006).

Approach

Financing under this single umbrella was provided through five components:

1. Component I (Transition Assistance and Institution Building) provided financing for institution-building and associated investments. It supported measures to drive stabilisation and the transition to a democratic society and market economy. Component I was open to all candidates and potential candidates and was managed by Directorate-General Enlargement.

2. Component II (Cross-Border Cooperation) supported cross-border cooperation between candidates and potential candidates and with EU Member States. It could also fund participation in transnational cooperation programmes (under the Structural Funds) and Sea Basin programmes (under the European Neighbourhood Instrument or ENI). Component II was open to all candidates and potential candidates and was managed by DG Enlargement and DG Regional Policy.

3. Component III (Regional Development) financed investments and associated technical assistance in areas such as transport, environment and economic cohesion. It was open to candidate countries only and was managed by Directorate-General Regional Policy.

4. Component IV (Human Resources Development) aimed to strengthen human capital through education and training and to help combat exclusion. It was open to candidate countries only and was managed by Directorate-General Employment, Social Affairs and Equal Opportunities.

5. Component V (Rural Development) contributed to sustainable rural development. It provided assistance for the restructuring of agriculture and its adaptation to EU standards in the areas of environmental protection, public health, animal and plant health, animal welfare and occupational safety. It was open to candidate countries and was managed by DG Agriculture and Rural Development.

IPA components III–V were available only to candidate countries. They were designed to mirror structural, cohesion and rural development funds, in preparation for the management of such funds upon accession. This was 4 intended to help countries that are on the way to joining the European Union to learn how to develop the institutional capacity to manage EU funds appropriately. Much of the added value of IPA funds was intended to be found in the process of implementation itself; project ownership and management is regarded as an important means by which to strengthen and enhance decentralised governance capacity in the IPA recipient countries.

IPA II – Objectives and Coverage2

IPA I expired at the end of 2013. With a view to future accessions, the EU continues to offer candidate countries and potential candidates technical and financial assistance to overcome domestic challenges and develop in a sustainable fashion. The Instrument for Pre-Accession Assistance II (IPA II) is designed to create a single framework to achieve these ends, and to unite under the same instrument both candidate and potential candidate countries (Commission, 2011c, p.25; European Parliament & Council, 2014a, (2)).

Currently, the EU is dealing with six candidate countries (Albania, the former Yugoslav Republic of Macedonia, Iceland3, Montenegro, Serbia and Turkey) and two potential candidates (Bosnia and Herzegovina, as well as Kosovo under UNSCR 1244/994).5 Most indicators show that, with the exception of Iceland, enlargement countries are still well below the EU average with regard to socioeconomic development and, in some cases, even below the level of the weakest Member States. This low level of socio-economic development calls for substantial investments to bring these countries closer to EU standards and allow them to take on board the obligations of membership and to withstand the competitive pressures of the single market. Moreover, it is important that these countries are able to withstand global challenges such as climate change and to align with the EU's efforts to deal with this and other momentous and on-going challenges.

It is also important to note that, with the exception of Albania, the countries in the Western Balkans are still relatively young states, formed after the disintegration of former Yugoslavia. Political stability, the full establishment of the principles of democracy and respect for human rights and good governance — all fundamental values of the EU — still need to be strengthened – a point reemphasised in the conclusions on the beneficiary countries of IPA II in the 2013 2 Information on IPA II is derived from European Parliament & Council (2014), Commission (2013a) and the IPA II website: http://ec.europa.eu/enlargement/instruments/how-does-it-work/index_en.htm 3 The government of Iceland put on hold its accession negotiations in May 2013, which are still at a standstill (Commission, 2013, p.2).

4 This designation is without prejudice to positions on status, and is in line with UNSCR 1244/99 and the ICJ Opinion on the Kosovo declaration of independence.

5 See http://ec.europa.eu/enlargement/countries/check-current-status/index_en.htm#pc for more information.

5 Enlargement strategy (Commission, 2013a, annex). IPA II has the potential to help to achieve these objectives, especially as these countries cannot sustain alone all the efforts and costs of meeting the criteria for joining the EU.

Most lack the capacity to finance by themselves the institutional reforms and public investments necessary to stabilise their societies and economies and to put them onto a sustainable development path.

As with IPA I, EU pre-accession funds are designed to make political and economic reforms easier in the beneficiary countries, and to prepare them for the rights and obligations that come with EU membership, according to their specific needs and adapted to their individual enlargement agendas (European Parliament & Council, 2014a, articles 1 & 2). The allocation of EU preaccession funds helps to translate the political priorities of the enlargement strategy into concrete actions. Through IPA II, the EU will reinforce its guidance to the aspiring countries on the priorities necessary for aligning with EU standards and legislation (European Parliament & Council, 2014a, (4)).

In doing so, the coherence between the financial assistance and the overall progress made in the implementation of the pre-accession strategy should be strengthened.

Although the IPA I and IPA II regulations share the same overall objective (articles 1 of both regulations), the IPA II regulation reaffirms the specific objectives of pre-accession assistance with some nuances (European Parliament & Council, 2014a, article 2).

The core objectives are presented under four headings:

 Supporting political reforms: less emphasis is put on public administration reform compared to IPA I but the IPA II regulation outlines the “strengthening of public administration” as well as the importance of capacity building;

 Supporting economic, social and territorial development, with the aim to enhance the consistency of economic reforms towards sustainable and stable market economies;

 Strengthening the ability of the beneficiaries to fulfil the obligations stemming from EU membership: this wording makes explicit in the IPA II regulation the link between pre-accession assistance and membership;

 Strengthening regional integration and territorial cooperation, thereby reaffirming the importance of this dimension.

Annexes II and III of the IPA II regulation list potential thematic priorities respectively for assistance in general and for territorial cooperation in particular.

–  –  –

Evaluations of IPA conducted between 2007 and 2010 outlined the lack of strategic focus in the project-based programming approach, highlighting that this was weakening the impact of EU assistance (Commission, 2014b, p.35).



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