Explanatory Memorandum to COM(2018)465 - Instrument for Pre-accession Assistance (IPA III)

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dossier COM(2018)465 - Instrument for Pre-accession Assistance (IPA III).
source COM(2018)465 EN
date 14-06-2018


1. CONTEXT OF THE PROPOSAL

• Reasons and objectives

This proposal should be viewed as part of the multiannual financial framework outlined in the European Commission’s Communication ‘A modern Budget for a Union that Protects, Empowers and Defends – The Multiannual Financial Framework for 2021-2027’ 1 . The Communication sets the main priorities and overall budgetary framework for EU external action programmes under the heading ‘Neighbourhood and the World’. This includes the Instrument for Pre-Accession Assistance (IPA III).

This proposal provides for applying IPA III from 1 January 2021. It is put forward for a European Union of 27 Member States. This is in line with the notification by the United Kingdom of its intention to withdraw from the European Union and Euratom based on Article 50 of the Treaty on European Union. The notification was received by the European Council on 29 March 2017.

Article 49 of the Treaty on European Union provides that any European state which respects the values of respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities, and that commits to promoting these values, may apply to become a member of the Union. A European state which has applied to join the Union can become a member only when it has been confirmed that it meets the membership criteria established at the Copenhagen European Council in June 1993 (the ‘Copenhagen criteria’), and provided that the Union has the capacity to integrate the new member.

Contents

1.

The Copenhagen criteria relate to:


·the stability of institutions guaranteeing democracy, the rule of law, human rights and respect for and protection of minorities:

·the existence of a functioning market economy and the capacity to cope with competitive pressure and market forces within the Union; and

·the ability to assume not only the rights but also the obligations set out in the Treaties, including adherence to the aims of political, economic and monetary union.

The enlargement process is built on established criteria and fair and rigorous conditionality. Each candidate or potential candidate is assessed on its own merits. The assessment of progress achieved and the identification of shortcomings aim to provide incentives and guidance to the candidates or potential candidates to pursue the necessary far-reaching reforms. For the prospect of enlargement to become a reality, a firm commitment to the 'fundamentals first' 2 approach remains essential. The enlargement process strengthens peace, democracy and stability in Europe and allows the Union to be better positioned to address global challenges. The transformative power of the enlargement process generates far-reaching political and economic reform in the enlargement partners which also benefits the Union as a whole. Progress towards accession depends on each applicant’s respect for the Union’s values and its capacity to undertake the reforms necessary to align its political, institutional, legal, administrative and economic systems with the rules, standards, policies and practices in the Union.

In November 2015, the European Commission set out a medium-term strategy for the Union's enlargement policy 3 , which remains valid today. The current enlargement agenda covers the partners of the Western Balkans and Turkey. Accession negotiations have been opened with candidate countries Turkey (2005), Montenegro (2012), and Serbia (2014). The former Yugoslav Republic of Macedonia has been a candidate since 2005 and Albania obtained candidate status in 2014. Bosnia and Herzegovina (which submitted its application to join the EU in February 2016) and Kosovo 4* (with which a Stabilisation and Association Agreement entered into force in April 2016) are potential candidates. On 17 April 2018, the European Commission recommended to the Council the opening of accession negotiations with the former Yugoslav Republic of Macedonia and Albania in light of the progress achieved. This would maintain and deepen the current reform momentum.

The European Commission reaffirmed the firm, merit-based prospect of Union membership for the Western Balkans in its recent Communication ‘A credible enlargement perspective for and enhanced EU engagement with the Western Balkans’ 5 . This is a strong message of encouragement for the whole Western Balkans and a sign of the Union’s commitment to their European future.

The Commission has maintained an open and constructive dialogue with Turkey and is using every opportunity to emphasise that Turkey’s stated commitment to its EU accession needs to be matched with corresponding measures and reforms. It is also keen to continue engaging with Turkey in a number of key areas of shared interests. These include trade and economic relations, energy, transport, migration and asylum, foreign policy, security and counter-terrorism.

2.

Three key elements have guided this proposal for a Regulation:


·For 2021-2027, IPA III should be clearly framed by the new Western Balkans strategy, and should reflect developments in relations with Turkey. IPA III reflects the objectives of that new strategy in order to:

·maximise the impact of the flagship initiatives set forth in the strategy;

·help the transformation process in the Western Balkans in the next period;

·implement robust economic reform programmes ; and

·renew the focus on reforms necessary for future membership.

·The Western Balkans strategy indicates a potential accession date for at least some candidates under the strict condition that all conditions should be met. Financial means must be available to support the preparations and investments required in the years before accession. This includes ensuring a gradual and seamless transition from pre-accession status to that of member state. It also requires partners to develop the necessary capacity to absorb EU funds, in particular to implement agricultural and cohesion policy.

·The implementation of IPA II is still under way and continuity should be preserved.

In terms of political priorities, IPA III will be shaped around the key ones laid down in the relevant enlargement policy and strategy documents. These are: the rule of law, fundamental rights and governance; socio-economic development; Union policies and acquis; people-to-people contacts and reconciliation, good neighbourly relations and regional cooperation. While these were already spelt out under IPA II, other key challenges such as migration, security, protection of the environment and climate change are taken on board more visibly in the proposal.

• Consistency with existing policy provisions

The Commission is simultaneously proposing a major streamlining of the external financing instruments. The objectives of the Instrument for Pre-Accession, however, remain substantially distinct from the general objectives of the Union’s external action, as the IPA aims to prepare partners and support their accession process. It is therefore essential to maintain a dedicated instrument in support of enlargement policy, while ensuring that it complements the general objectives of Union’s external action and in particular those of the Neighbourhood, Development and International Cooperation Instrument (NDICI) 6 .

This proposal will allow the Union to continue delivering on the objectives of pre-accession. Like the current external financing instruments, IPA III should continue to be an enabling Regulation, which sets the objectives to be pursued in preparation for accession while facilitating the targeting of assistance to the needs of each candidate.

As pointed out in the mid-term review carried out for the external action instruments 7 , IPA II has served its purpose and was considered relevant. Therefore only minimal changes are proposed. The main one is that the objectives should be restructured in line with the overall aim of measuring performance.

• Consistency with other Union policies

In the implementation of this Regulation, consistency with other relevant Union policies and programmes is to be ensured.

The proposal will continue to position pre-accession as a key component of the external action policy. IPA III will continue to be very linked to other external action programmes.

3.

The enlargement process extends the internal policies of the EU to the enlargement partners. It contributes to, among other things:


·the expansion of the internal market, the European Area of Justice and Freedom and the trans-European energy and transport networks;

·job creation, skills development, education and social inclusion and poverty reduction;

·protection of the environment and reduction of trans-boundary pollution;

·alignment with the common agricultural policy and the common fisheries policy;

·efforts to diversify energy sources and ensure energy security, including the development of renewable energy and promotion of energy efficiency and the transition to a circular economy, improve disaster resilience, risk prevention and disaster management; and

·efforts to achieve a more integrated and strategic approach to maritime policies, scientific excellence and the digital agenda.

In addition, convergence with the Union’s climate policy and legislation should bring significant benefits to the enlargement partners through low-carbon development and the creation of greener jobs in a region highly vulnerable to the impact of climate change.

The Commission proposal for the 2021-2027 Multiannual Financial Framework set a more ambitious goal for climate mainstreaming across all EU programmes, with an overall target of 25% of EU expenditure contributing to climate objectives. The contribution of IPA III to the achievement of this overall target will be tracked through an EU climate marker system at an appropriate level of disaggregation, including the use of more precise methodologies where these are available. The Commission will continue to present the information annually in terms of commitment appropriations in the context of the annual draft budget.

To support the full utilisation of the potential of the programme to contribute to climate objectives, the Commission will seek to identify relevant actions throughout the programme preparation, implementation, review and evaluation processes.

4.

The programme will therefore seek complementarities with a wide range of Union programmes. These include:


·the internal policy programmes (synergies with the policies on security, migration, research and innovation, environment and climate action, connectivity and energy); and

·the Neighbourhood, Development and International Cooperation Instrument, by keeping a set of common rules applicable to all external financing instruments, keeping a common investment component and simplifying the contribution of the external financing instruments in support of the external dimension of Erasmus.

The beneficiary listed in Annex I should continue to benefit from thematic programmes of the Neighbourhood, Development and International Cooperation Instrument in particular in support of human rights.

IPA should also be part of the European Fund for Sustainable Development Plus set out in the NDICI Regulation and contribute to the provisioning needs of the External Action Guarantee for what concerns operations in the beneficiaries listed in Annex I. The External Action Guarantee, financed by this Regulation and NDICI, shall also cover the provisioning for macro-financial assistance to address balance of payments crises in beneficiaries listed in Annex I and other relevant countries. The provisioning of the External Action Guarantee for macro-financial assistance should be commensurate to address the political challenges and economic instability of these countries, taking as a reference point the annual lending volume agreed in the Mid-term Review of the Multiannual Financial Framework 2014-2020. This non-programmable support should be complementary to other assistance modalities laid down in this Regulation.

Through its Stabilisation and Association Agreements and other agreements with candidate countries and potential candidates, the Union actively encourages enlargement partners to establish competition regimes.

Making Europe a safer place is high on the Union's agenda. Improving the strategic orientation of financial assistance for pre-accession will help support enlargement partners in preventing and tackling organised crime and corruption and in strengthening their law enforcement and migration management capabilities including border management.

Enlargement gives the Union greater weight and strengthens its voice in international fora. The accession process with the Western Balkans and Turkey gives the Union a still greater interest and influence in the Mediterranean and Black Sea regions and in the Danube basin.

2. LEGAL BASIS, SUBSIDIARITY AND PROPORTIONALITY

• Legal basis

Enlargement policy is based on Article 21 of the Treaty on the European Union. This states that ‘the Union’s action on the international scene shall be guided by the principles which have inspired its own creation, development and enlargement, and which it seeks to advance in the wider world: democracy, the rule of law, the universality and indivisibility of human rights and fundamental freedoms, respect for human dignity, the principles of equality and solidarity, and respect for the principles of the United Nations Charter and international law’.

The legal basis for the Instrument for Pre-accession Assistance is Article 212(2) of the Treaty on the Functioning of the European Union.

• Subsidiarity

The Instrument for Pre-accession assistance is unique in addressing the objective of preparing candidate countries and potential candidates for Union membership. This objective can be adequately achieved at Union level only.

The added value of Pre-Accession assistance also rests on the scope of the instruments it employs. Intensive use of both the Twinning and TAIEX (Technical Assistance and Information Exchange instrument) initiatives brings the expertise of particular Member States to the IPA beneficiaries in order to help address their specific needs. Building long-term relations with similar counterpart institution in a Member State is a concrete outcome of Twinning.

The Instrument for Pre-accession Assistance actively promotes territorial cooperation, for example through cross-border programmes, transnational and inter-regional cooperation programmes and macro-regional strategies. The added value is obvious: reconciliation and confidence-building in the Western Balkans, the overcoming of geographical and cultural barriers and the development of good neighbourly relations. All these remain key aspects of the enlargement process that are addressed solely by Union programmes and not by other donors.

• Proportionality

In line with the principle of proportionality, the proposed Regulation does not go beyond what is necessary to achieve its objectives.

3. RESULTS OF RETROSPECTIVE EVALUATIONS, STAKEHOLDER CONSULTATIONS AND IMPACT ASSESSMENTS

• Retrospective evaluations/fitness checks of existing legislation

A mid-term review of the Instrument for Pre-accession Assistance II (IPA II) was carried out at the end of 2016. While implementation was in its early stages the external evaluation concluded that IPA II has met its objectives in terms of Union priorities and the needs of beneficiaries. The evaluation report highlighted that IPA II has become more strategic than its predecessor. In terms of priorities, it increasingly focuses on:

-promoting key reforms, i.e. the three ‘fundamentals’ of the enlargement strategy (the rule of law and fundamental rights, strengthening democratic institutions and public administration reform, and economic governance); and

-the results of reforms, through the introduction of a performance framework.

It has also demonstrated its capacity to react flexibly to emerging crises and challenges (such as floods, migration and security issues).

IPA II has increased focus on performance and results, but there is room for improvement: in the quality of indicators, in the development of monitoring and evaluation frameworks at local level and in the quality of data collection in beneficiaries.

The report also underlined that IPA II has good complementarity with the actions of other instruments, notably the European Instrument for Democracy and Human Rights (EIDHR) and the Instrument contributing to Stability and Peace (IcSP). However, coordination during both the planning and programming phase should be improved.

To address the findings of the mid-term review, IPA III should put performance at the core of the instrument. Through a more strategic programming, the proposal is expected to allow a greater steer in overall funding allocations reflecting beneficiaries' commitments and progress towards reforms. It will also allow for more flexibility in responding to emerging challenges.

• Stakeholder consultations

Stakeholders were consulted within the broader consultation exercise that contributed to the mid-term review of all external action instruments. Three types of consultations with stakeholders took place. Evaluators carried out around 1,000 structured or semi-structured interviews with EU officials and representatives from EU institutions, Member States and partners. Several technical workshops to present and discuss the draft evaluations were held with participants from the European Parliament, Council working groups, Member States committees, civil society organisations and local authorities. An open public consultation was held in early 2017. It aimed at gathering feedback from stakeholders on the findings emerging from the evaluations of the instruments and on post-2020 external action instruments.

The main messages from the stakeholders consulted are the following.

-Flexibility: stakeholders agreed that the new financing instruments should be more flexible in order to respond to unforeseeable challenges and crises. In particular, they underlined the need to make it easier to shift funds across regions and between aid procedures. However, it was also underlined that increasing flexibility should not weaken predictability, partner ownership or the focus on achieving long-term development objectives. To ensure flexibility and predictability some respondents argued for having sufficient unallocated reserves.

-Coherence: stakeholders considered it necessary to ensure greater coherence between the internal and external policies of the Union, as well as between the external instruments themselves. Most recommended that the Union take a leading role in improving the complementarity between various stakeholders both inside and outside the Union.

-Simplification: the Union was strongly encouraged to further simplify the overall architecture of the instruments. The Union should also continue its efforts to simplify cumbersome administrative and financial procedures.

-Leverage: there was an agreement amongst stakeholders that innovative financing instruments can play an important role in leveraging public and private financing for Union external assistance.

This proposal for a Regulation establishing IPA III responds to most of the concerns expressed by the stakeholders consulted.

-It introduces more flexibility by not establishing partner allocations from the onset. The IPA programming framework should be based on evolving needs and ensure a balance between predictability and performance-based funding.

-The new architecture of the external action instruments will facilitate coherence and synergy between the IPA III and the Neighbourhood, Development and International Cooperation Instrument. This is the case particularly for the thematic and rapid reaction components, which should be deployed for initiatives whose objectives cannot be achieved effectively by the geographical programmes.

-IPA III should also further mobilise the leveraging potential of international financial institutions and other partners, including the private sector. Its overall performance framework will be strengthened and simplified.

• External expertise

The mid-term review report (published in December 2017) and associated staff working documents 8 covering the external action instruments were largely based on a set of independent evaluation reports conducted in 2016-2017 (One evaluation was performed for each instrument including the Instrument for Pre-Accession).

At the same time, the Commission also commissioned an independent report to look at the set of external action instruments covered by the mid-term review report and to draw key lessons and messages from them. 9

• Impact assessment

In 2018 the Commission carried out an impact assessment that analysed which external action instruments could be streamlined into one broad instrument.

The impact assessment analysed the impacts of streamlining the current instruments Development Cooperation Instrument, European Development Fund, European Neighbourhood Instrument, European Instrument for Democracy and Human Rights, Instrument contributing to Stability and Peace, Instrument for Nuclear Safety and Cooperation and Partnership Instrument. It concluded that the Instrument for Pre-accession assistance should remain a self-standing instrument.

The impact assessment received a positive opinion with reservations by the Regulatory Scrutiny Board on 27 April.2018.

The main reservations concerned the proposed Neighbourhood, Development and International Cooperation Instrument and in particular its governance structure, the justification for merging several instruments into one, the funding and policy implications of integrating EDF in the EU budget, the funding baseline, prioritisation and possible ring-fencing as well as the monitoring and evaluation framework. The Impact Assessment was modified accordingly to address the issues raised by the RSB. It should be noted that none of the reservations of the RSB concerned the proposed Regulation establishing IPA III or its interaction with the broader instrument.

• Simplification

This proposal makes minimal changes to the current Regulation. It contributes to the overall objective of simplification in the following ways.

-It will ensure coherence with the Neighbourhood, Development and International Cooperation Instrument. (The use of thematic programmes will be complementary to the geographical programmes, and it will draw on the Guarantee for external Actions established under that instrument).

-It will continue to apply a single set of rules for the external actions by using the financial rules set out in the Neighbourhood, Development and International Cooperation Instrument (previously included in a separate Regulation on common implementing rules for external actions). Whenever possible it will rely on the Financial Regulation.

-During implementation, the change of approach in programming will reduce the number of partner-based programmes adopted by the Commission. This will also result in simplification for beneficiaries, which will be able to respond to the priorities set with their own strategic documents and a larger ownership by the beneficiaries.

• Fundamental rights

The political priorities of IPA III will be shaped around the key ones laid down in the relevant enlargement policy and strategy documents, and in particular focus on the respect of the rule of law and fundamental rights.

4. BUDGETARY IMPLICATIONS

In its Communication of 2 May 2018 10 the European Commission proposed to allocate EUR 14 500 000 000 (current prices) to the new Programme for Pre-Accession Assistance for 2021-2027.

The detailed estimated financial impact of this proposal is presented in the Legislative Financial Statement enclosed with this proposal.

5. OTHER ELEMENTS

• Implementation plans and monitoring, evaluation and reporting arrangements

Implementation will need to be accelerated, in particular in the early years, to prevent structural backlogs in contracting and implementation, and to progressively absorb current delays. The Commission will pay particular attention to indirect management with beneficiaries. The mid-term evaluation has shown that while the impact in terms of increased ownership is considered positive, contracting performance has been poor and there have been long delays in implementation, especially in Turkey.

Monitoring will be done on the basis of the indicators set out in the proposal. The relevant performance indicators will be defined and included in the IPA programming framework and proportionate reporting requirements imposed on recipients of EU funds. The enlargement reports will be taken as a point of reference in assessing the results of IPA III assistance. The performance reporting system should ensure that data for monitoring implementation and results are collected efficiently, effectively and on time.

The Commission will regularly monitor its actions and review progress made towards delivering results. In line with paragraphs 22 and 23 of the Interinstitutional Agreement of 13 April 2016 11 , where the three institutions confirmed that evaluations of existing legislation and policy should provide the basis for impact assessments of options for further action, the Commission will carry out an interim and a final evaluation. The evaluations will assess the Instrument’s effects on the ground based on the relevant indicators and targets and a detailed analysis of the degree to which the Instrument can be deemed relevant, effective, efficient, provides enough EU added value and is coherent with other EU policies. The evaluations will include lessons learnt to identify any lacks/problems or any potential to further improve the actions or their results and to help maximise their exploitation/impact.

The conclusions of the evaluations accompanied by observations will be communicated to the European Parliament and to the Council.


• Detailed explanation of the specific provisions of the proposal

As far as possible this proposal follows a similar structure to the other Union programmes. It also gives priority to a single set of rules for external actions. This is currently achieved by the common implementing rules for external actions, which have been integrated in the Neighbourhood, Development and International Cooperation Instrument. To maintain the simplification gains, the proposal introduces cross references to the Neighbourhood, Development and International Cooperation Instrument to the maximum extent.

Chapter I defines the scope of the instrument and sets out definitions, objectives, the budget and a set of cross-programme provisions. The definitions are aligned with the Neighbourhood, Development and International Cooperation Instrument with due care given to avoid duplicating the Financial Regulation. The objectives remain broadly similar to those pursued by the previous IPA II, only they are structured in a more coherent way to reflect the overall intention of performance-based budgeting, in which specific objectives are aligned to budgetary allocations (Titles). The budget is indicated as an overall amount, the intention being to remain as flexible as possible. An exception to this rule is the indication of the maximum amount of spending envisaged in cross-border programmes to maintain the current volume of spending. The cross-programme provisions contribute to the overall objective of simplification by indicating clearly which single set of rules applies when the IPA III contributes to other programmes.

Chapter II ensures consistency with the overall policy framework. It also sets out the commitment to work closely with member states to ensure coherence and overall donor coordination.

Chapter III details the different steps of implementation, from setting out the IPA III programming framework to adopting annual and multi-annual action plans and measures. The IPA programming framework shifts the focus from partner allocations to performance in achieving the objectives. Assistance will continue to be targeted and adjusted to the specific situation of the beneficiaries. However, access to funds should, in addition to a principle of ‘fair share’, be based on criteria such as project/programme maturity, expected impact and progress on the rule of law, fundamental rights and governance. The performance reward mechanism is therefore embedded in the overall allocations.

The proposal keeps a single set of rules for adopting annual and multi-annual plans as defined in the Neighbourhood, Development and International Cooperation Instrument. There are no major changes to the rules which were previously part of the common implementing rules for external actions.

Chapter IV brings into the proposal eligibility rules which were previously set out in the common implementing rules for external actions.

Chapter V sets out that the budgetary guarantee provided under the Neighbourhood, Development and International Cooperation Instrument will also cover IPA III beneficiaries. The governance established for financial instruments under the IPA III, notably the Western Balkans Investment Framework, will continue to be responsible for the operations covered by the guarantee.

Chapter VI sets out monitoring, evaluation and reporting arrangements which should continue to be covered by a common set of rules as laid down in the [Neighbourhood, Development and International Cooperation Instrument].

Chapter VII sets out the final and transitional provisions. In particular, to avoid disruption, IPA II will continue to apply to the operations financed by that Regulation.