The European Agency for Reconstruction

1. European Agency for ReconstructionEU support to Western BalkansSerbia - Present and Future ProjectsLessons Learned European Agency for Reconstruction

2. The European Agency for Reconstruction • The European Agency for Reconstruction is responsible for the management of the main EU assistance programmes in Serbia and Montenegro (Republic of Serbia, Kosovo*, Republic of Montenegro), and the former YugoslavRepublic of Macedonia • The Agency is a body of the European Union with legal personality. It is accountable to the Council and the European Parliament and overseen by a Governing Board composed of representatives from the 25 Member States, chaired by the European Commission *Kosovo is under international administration, in line with United Nations Security Council Resolution 1244, of 10 June 1999 European Agency for Reconstruction

3. The European Agency for Reconstruction Kosovo • February 2000: Agency is established to implement reconstruction programmes in the war damaged Kosovo Serbia • October 2000: fall of Milosevic • EC emergency assistance package • December 2000: Agency’s mandate includes Serbia & Montenegro FYROM • December 2001: Agency’s mandate widened to include the former Yugoslav Republic of Macedonia European Agency for Reconstruction

4. Policy Framework • The Agency is an instrument of EU policy in the region: • Broader context • Copenhagen criteria • Democracy • Rule of Law • Human rights, protection of minorities • Market Economy • Thessaloniki summit • Perspective of EU accession is opened to countries of the region • Specific • Country Strategy Paper, MIP • Following political developments • European Partnership • Enhanced Policy Dialogue – (SA Process) European Agency for Reconstruction

5. Policy Framework EU Stabilisation & Association Process with Serbia & Montenegro, former Yugoslav Republic of Macedonia • Stabilisation & Association Agreements Contractual relations to bring the region closer to integration into EU structures (democratisation, civil society, education, justice & home affairs, political dialogue) • Preferential trade regimeDevelopment of economic & trade relations, removal of tariffs & barriers European Agency for Reconstruction

6. EU funds delegated to the Agency for implementation(2000-2005) European Agency for Reconstruction

7. From Reconstruction to Reform and Acquis Example: the Energy Sector in Serbia • Crisis management (2000-2001) • Emergency imports of electricity • Emergency import of medicines • Rehabilitation of basic infrastructure (2001-2004) • Power plants – Overhaul of 35% of thermal power plant capacity in Serbia • Coal mines – Provision of spare parts – 70% increase in overburden removal and 11% increase in coal production capacity • Transmission & distribution – 110 Km of transmission lines rehabilitated • Reform (2002-2006) • Creation of market based energy system • Development of a regional energy market • Restructuring EPS (separating Production from Transmission) • On 25 October 2005 Serbia signed the “Energy Community Treaty” - First multi-lateral treaty signed by all countries of the region which involves full acceptance of Acquis for the sector European Agency for Reconstruction

8. Examples of Agency’s work in Serbia Energy • Rehabilitation/Overhaul of Nikola Tesla A3 and A5 Thermal Power Plants (305 MW each) - > €M100 - Completed • Renovation and modernisation of the district heating in small cities (4 to 5) - €M20 – To be implemented Transport • Reconstruction of Sloboda Bridge in Novi Sad - €M40 - Completed • Clean the Danube and the Sava rivers from the unexploded ordnances left after the NATO bombing campaign of 1999 - €M6 – under implementation • Inland Waterway Master Plan study for the Danube, Sava and Tisa rivers - €M1.5 – Ongoing • Several feasibility studies to support IFI’s interventions, mainly covering the rehabilitation of Corridor X connecting Serbia to Western Europe and Greece – To be implemented • Provide technical assistance to manage EIB/EBRD combined loans (> €M350) to renovate the road network – Ongoing Environment • Construction of a physical Chemical Treatment facility for hazardous industrial waste - €M14 – To be implemented European Agency for Reconstruction

9. Support to Investment Climate, Trade& Privatisation process Examples of projects • Alignment with EU technical standards (strengthening various institutions in standardisation and metrology including provision of metrology and other specialised equipment - Service + Supply contracts) – Ongoing • Food safety chain, linked to EU agriculture standards • Streamline the granting of patents to ensure that the process of granting patents is compatible with EU standards (including digitalisation of the Patent Institute archives) – Ongoing • Technical Assistance for restructuring of socially-owned enterprises, in order to generate foreign direct investments – Ongoing European Agency for Reconstruction

10. Programming Development of programming guidelines & strategies on the basis of objectives laid out by Stabilisation & Association Process (SAP) & ‘CARDS’ Assistance Programme Preparation by the end of each year, specific to each region Result of discussions with national authorities Approval process: Agency’s Governing Board ‘CARDS’ management committee European Commission Signature with partner governments Implementation How the Agency works: Programming & Coordination • Coordination • Ongoing consultation with • International Finance • Institutions (IFIs) • EU Member States • Other donors, e.g. • Sweden, Norway, Switzerland, USA, Canada, Japan,… European Agency for Reconstruction

11. How the Agency works – Programme design Programming phaseAnnual Programme in line with the MIP already agreed by EC • Consultation with the Government, aid co-ordination unit (MIER) and all relevant line ministries • Consultation with Member States in the country (monthly) • Consultation with other donors (including IFIs) (ad hoc) • Preparation of the individual draft project fiches (September – October) • Consultation with EC including Delegation (November – December) • EC inter-service consultation • Presentation of the draft programme to the Governing Board (January – February) • Presentation to the CARDS Committee (February – March) • Commission decision (April – May) • Financing Agreement signed by the Beneficiary Country (May – August) The Agency is also authorised to manage bi-lateral support (e.g. co-operation with Greece for upgrading Corridor X) European Agency for Reconstruction

12. How the Agency works – Programme implementation Implementation phase • Preparation of the draft ToR’s • Approval of the Beneficiary • Publication of the tender on the OJ • Evaluation of bids with Beneficiary’s representative (+ external evaluators, if necessary) • Contract’s signature • Project’s supervision by EAR PM’s (Efficiency, effectiveness, regular project reporting by Contractor’s) • Project Monitoring • Evaluation (ex-ante, ex-post, project specific, thematic cross centre) • European Court of Auditors – Annual and special reports about EAR • CARDS and Agency evaluation was carried out by independent experts in 2004 European Agency for Reconstruction

13. Instruments of implementation • Services, supplies and works • Grants to beneficiaries following Calls for Proposals (Municipalities, NGOs and similar) • Twinning • In Serbia by the end of September 2005 • 61 projects completed • 83 projects on-going • 40 projects approved • 318 active contracts • Average duration of contracts 24-36 months European Agency for Reconstruction

14. Status of assistance as of 21/11/2005 European Agency for Reconstruction

15. Constraints, difficulties, short comings • The Agency has already moved to implement activities supporting the SA process • At the same time reconstruction and rehabilitation is still on-going • Government authorities are facing difficulties in shifting from a passive to an active role in project implementation • There is contention between the constraints imposed by the European Court of Auditors and the political will to: • Ensure more involvement of Government authorities • Include other international players European Agency for Reconstruction

16. Lessons learnt European Agency for Reconstruction

17. Discussion Topics • Perceived problems • Possible reasons • Possible solutions or ways forward European Agency for Reconstruction

18. 1. Perceived problems • Programme management is increasingly more difficult. • Procurement is overburdened. • Absorption capacity is low. • Beneficiary ownership could be better . • MIPs are a straightjacket. European Agency for Reconstruction

19. 2. Possible Reasons “Programme management is increasingly more difficult” • The current lack of focus is unmanageable, making programme management increasingly difficult, creating a backlog in contracting • EAR (Agency) Operational Centres (OCs) undertake many studies, but these are not sector studies – as needed – and usually relate to project preparation and not the necessary prior stage, that is, comprehensive ex-ante analysis and sector wide feasibility studies in general. European Agency for Reconstruction

20. 2. Possible Reasons “Procurement is overburdened” • There are too many small complicated projects which overburden procurement, which in turn create further backlogs, cancelled tenders etc., e.g. Call for proposals European Agency for Reconstruction

21. 2. Possible Reasons “Absorption capacity is low” • Important lessons from evaluation and monitoring have still to be taken on board (e.g. in public administration regarding new ways of delivering services versus the provision of computers and isolated training. • Absorption capacity could have been improved – in certain cases - with more preparatory work in project design. European Agency for Reconstruction

22. 2. Possible Reasons “Beneficiary ownership could be better” • Varying levels of understanding of the programming process • Low levels of understanding of the long term impact of projects • Inadequate policy making capacity ‘’The central policy capacity (in terms of professional support to the government as a collegiate decision-making body, and to the Prime Minister for policy development, coordination and evaluation) is very weak…The policy and strategic capacity in the line ministries is even weaker and, in particular in Serbia, often provided by local consultants paid by donors, and therefore is not sustainable.’’ Balkans Public Administrative Reform Assessment Serbia and Montenegro (Sigma/European Union) May 2004 European Agency for Reconstruction

23. 2. Possible Reasons “MIPs are a straightjacket” • While some felt that the MIPs were a straightjacket (“Many issues are imposed from Brussels”), others confirmed that flexibility existed within limits. • The Annual Programming (AP) process is a lengthy one and requires commencement of strategic / longer term thinking at an early stage. European Agency for Reconstruction

24. 3. Possible solutions or ways forward “Programme management is increasingly more difficult” • Set agenda and focus on those sectors where the Agency has gained valuable experience and which are central to accession instruments (ISPA etc., such as Agriculture and Environment, Infrastructure, Public Finance and PAR, JHA, VET, Economic Reform, Energy and the like) and then prioritize. Need to think in multi-annual terms and thus plan beyond 2007. ‘’...the changing focus of the CARDS programme towards institution building and capacity development issues calls for a more intense involvement of Agency programme and task managers in activities related to change management…’’ Evaluation of the Implementation of Council Regulation 2667/2000 on the EAR European Agency for Reconstruction

25. 3. Possible solutions or ways forward “Procurement is overburdened” • Repackage programmes and do cluster work. In this way, we can address several sectors with few contracts and lesson the burden (and additionally have the benefit of improving the mainstreaming of cross cutting issues and teamwork); e.g. local development • More emphasis should be placed on (i) developing larger projects (ii) ensuring greater coherence between sector projects – as projects appear to be more successful when complementary and mutually reinforcing. The Danube project (IWT, Inter-modal transfer + Socio-economic impact strategies) is a good example of this. European Agency for Reconstruction

26. 3. Possible solutions or ways forward “Absorption capacity is low” • Make sure that programme design reflects realism and is based on the feasibility studies (i.e. that its objectives are not over ambitious with the financial, human and technical inputs available) and appropriate project design. • Gather all recent reports/studies in the sector (by World Bank, USAID, SIGMA etc) to ensure EAR studies leverage what has already been published. European Agency for Reconstruction

27. 3. Possible solutions or ways forward “Beneficiary ownership could be better” • Ownership can be improved by sharing the results of sector studies, involving the beneficiaries early in the process and explaining process and content. • Ensure the results of evaluation reports & monitoring are incorporated into programme design. • Improvement of logical frameworks and sharing of these with beneficiaries. • Signing of MoUs. ‘’… find their own way to fill the gaps towards European approximation and integration. Technical assistance should be delivered with the aim of building a learning process in the recipient institutions and not just providing advice and guidelines on the acquis…there should be specific and diversified actions to support partners’ capacity to run consultations, draft their own visions and strategic documents, prepare projects, manage, train and motivate staff.’’ Evaluation of the Assistance to Balkan Countries under CARDS Regulation 2666/2000 p.p. 69 European Agency for Reconstruction

28. 3. Possible solutions or ways forward “MIPs are a straightjacket” • Undertake a detailed analysis of totals to be contracted and paid per sector. Seriously question those sectors which have received large amounts of funding, and have backlogs; be prepared to NOT allocate under future programmes; Agency will be in a strong “negotiating” position vis-à-vis DG Enlargement (MIPs) and other DGs (ISC) if we have well founded arguments (via studies) of the justification or not for one sector or another. • Undertake early sector level discussion with EU Member States and other donors with strong interest/programmes in the sector to ensure full coherence of EU actions and, where possible, the joint development of projects. European Agency for Reconstruction

29. LESSONS LEARNED: SUMMARY • Changes require time, resources and commitment • As changes affect human behaviours, the process should be more interactive • Process is as important as the result • Future projects should take into account the absorption limitations and donors’ co-ordination • Decentralisation need to be considered carefully in terms of capacity building, transfer of resources, and organisational adaptations European Agency for Reconstruction