Ronald Hall - What is regional development about and when does it work? EU Regional Policy

1Regional PolicyRegional Policy

EU regional policy: a review of (project

management) experience

Ronald HallEuropean Commission

21 May 2014


Ten issues in the history of managing EU regional policy

• Developing and communicating a European strategic vision of what is to be achieved: developing sectors or territory, or both

• Dedicated regional fund(s). Complementarity with sectoral funds. Objective (non-political) method for allocating resources. Exclusive or inclusive approach to (regional) beneficiaries?


Ten issues in the history of managing EU regional policy• Grant or loan support, or both;• Flexibility to move resources between

programmes and sectors to accelerate execution;

• Integrated programmes or individual project approach;

• Dissociation of the legal framework from project decisions - what institutional architecture?


Ten issues in the history of managing EU regional policy

• Importance of formal and informal institutional capacities: financial management and control; economic development capacities; identification of suitable partners;

• Monitoring and evaluation;• What conditionality? Importance of

competition/public procurement rules• Transparency in procedures, communicating

results


A key issue: identification and timely implementation of projects: European Commission experience

• Basic principle is one of decentralization of responsibilities to national and regional level

• However, the Commission has project management experience (a) in the approval of major projects (b) in the (especially pre-2007) management of the Cohesion Fund

• The latter provides lessons which are considered useful


The issue of project management and the Cohesion Fund

A. Why do we have the Cohesion Fund (in addition to a European Regional Development Fund)?

B. How was it delivered pre-2007 (the Cohesion Fund is now included in the programmes reflecting more decentralisation but with more technical help: JASPERS) ?

C. Where are the weaknesses?


A. Why do we have the Cohesion Fund?


History

A dilemma …• Less developed Member States need public

investment in infrastructure, etc to compete in the single market while…

• keeping public deficits under control for economic and monetary union (Maastricht criteria)

Part of the solution …• Maastricht Treaty (1992) created the central

Cohesion Fund to support investment budgets in the poorer Member States. Financed from the global EU budget to which Member States contribute on a progressive basis


Who has benefitted?

• For eligibility, an objective statistical rule was adopted: beneficiaries are those with GNI per capita less than 90% EU average

• 1993-2003 : Greece, Spain, Ireland, Portugal

• 2004-2006 : Greece, Spain, Portugal and (from 1 May 2004) Cyprus, Czech, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, Slovenia


Rules governing the Cohesion Fund

Cohesion Fund management:•individual projects identified by the Member State•approved by the Commission on behalf of the European Union. Commission role is ex-ante•administered in partnership.

Traditional decentralized programme management:•overall strategy approved by Commission•identification and approval of projects by Member State (exception: major projects). Commission role is ex-post •administered in partnership


What kind of projects have been supported?

Principal identifiable sub-sectors:• Rail transport• Waste water disposal• Roads• Water• Solid waste disposal• Mixed water supply waste water• Ports

• Other, incl airports, urban transport


B. How was the Cohesion Fund delivered pre-2007?


Delivery: key features

1. Pre-conditions for receiving support (EU law)

2. Applying for project support (Member State)

3. Appraisal (Commission)

4. Decision-making (Commission)

5. Managing payments (Commission)

6. Monitoring (shared, mostly national)

7. Ensuring timeliness (Commission)

8. Financial Control (shared)


1. Pre-conditions for receiving support

• Beneficiaries must respect EU’s macro-economic objectives in the control of public deficits

• Projects should conform to a national economic strategy, agreed with the key partners

• Only two sectors covered, reflecting EU priorities:• Environmental projects respecting the

environmental “acquis” consisting of EU and national rules and policies

• Transport projects included in the EU’s TransEuropean Network Strategy (important for the single market)


2. Applying for project support

Key requirements in all applications:• Description of the project, its location and

implementing body• Feasibility studies• Financing aspects (cofinancing, financial plan

over time)• Financial analysis (incl. revenue generated)• CBA (value for money, IRR)• Indicators (physical, socio-economic)• Compliance with standard conditions:

environment/public procurement rules/ state aid rules


3. Appraisal (Commission)

Principal concerns:• “Value for money” of the project as revealed by

CBA• Grant rate calculation (revenue generation and

the financing gap)• Respect for EU rules and priorities in

environment and transport • “Polluter pays” principle• Expert opinion: inter-departmental coordination

important with specialist Commission departments in transport, environment, state aid, etc, and externally from EIB or consultants


4. Decision-making (Commission)

Time limit from receipt to decision set at 3 months for:Appraisal, including internal and external adviceLegal control of the draft decisionFormal financial commitment of the resourcesNotification of decisions by the Commisison for the EU to Member State containing:

description of what is to be financed start- and end-date of financing period grant amount, grant rate, financing plan compliance conditions (publicity, control,

procurement, other rules) any special conditions


5. Managing payments (Commission)

• Advance payment of 20% made when procurement contract signed

• Member States makes payment declarations reflecting the progress of the works

• Reimbursement by Commission normally within 60 days

• Final balance of 20% normally retained until project completion

• Closure requirements (confirming: compliance, expected benefits, revenues)


6. Monitoring (shared)

• Primarily a national responsibility • Monitoring committee with Commission

participation: bi-annual meetings• Supported by monitoring indicators (financial;

physical, overall costs; schedule of works)• On-site visits by Commission• Ad hoc evaluations for “problem” projects• Proactive approach to anticipate and avoid undue

delays or cost overruns• Annual report by Commission on Cohesion Fund

activities


7. Ensuring timeliness (Commission)

Two important mechanisms used:• "M+12" rule: repayment of the advance can

be requested if there is no payment request from the MS within 12 months of the date of the initial advance payment

• "M+24" rule: the project can be cancelled if works have not started within 24 months of the date indicated in the formal decision


8. Financial control (shared)

• National responsibility in first instance• Systems for financial management explained

(notified) to Commission • If national detection of irregularities - grant can be

retained• If detection by EU - corrections apply (loss of

grant).• More severe than before 2000 when corrections

were agreed with MS but grants could be reattributed


C. Where are the weaknesses?


Recurrent issues preventing successful and timely implementation of EU projects

• Reconciling individual projects with the overall strategy (major issue for the Cohesion Fund after 2006): lost negotiation time

• Lack of administrative capacity: regional policy is administration-intensive

• Procurement procedures (transposition, project modifications, illegal direct award of contracts with no call for tender; contracts for additional works signed with no calls for tender; splitting of contracts; use of experience as award criterion; conflict of interest cases etc)


• Recurrent issues preventing successful and timely project implementation in the EU

• Compliance issues: environmental impact, etc

• State Aid issues: more complex after the Leipzig-Halle judgement

• Financial engineering schemes • Revenue-generating projects


Presentations & Public Speaking

Ronald Hall - What is regional development about and when does it work? EU Regional Policy