The Phare Programme: An interim evaluation

Published by the European Commission This report was produced by the Evaluation Unit of the European Commission, Directorate General for External Relations: Europe and the New Independent States, Common Foreign and Security Policy, External Service (DG 1A F/5), in close collaboration with George Mergos and Andreas Tsantis as external consultants. The opinions expressed herein do not necessarily reflect those of the European Commission. The European Commission does not guarantee the accuracy of data included in this report, nor does it accept any responsibility for any consequence of their use. June 1997 European Commission

Table of contents Glossary 5 Foreword 7 Executive summary 9 Chapter 1 Introduction 13 Chapter 2 Methodological issues 2.1. The database 2.2. Evaluation methodology

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Chapter 3 What is Phare? 17 3.1. From emergency assistance to preparation for accession 3.2. Programme means 3.3. The demand driven principle and the programme cycle Chapter 4 Assisting transition23 4.1. Privatisation or decentralisation of control over productive assets 4.2. Enterprise restructuring and solving bad-debt problems 4.3. Developing markets for goods, services and production factors Chapter 5 Rolling back government involvement 5.1. Public Administration 5.2. Fiscal Policy 5.3. Monetary and financial policies 5.4. Assistance to customs and statistical services 31

Chapter 6 Restructuring the economic base 37 6.1. Private sector development and investment 6.2. Restructuring agriculture and the rural economy 6.3. Restructuring the infrastructure sector Chapter 7 Human resources, social development and health 49 Chapter 8 Seeding democracy and civil society 53 Chapter 9 Conclusions 55 Annexes 61 Annex A: Basic data on Phare Annex B: List of evaluation, monitoring and assessment reports available

Glossary ACE Acquis BSC CBC CECs CENTREL COP DG DIS EA EBRD EC EFTA EIB ESA EU FDI FRC GDP GTAF HRD IFI IMF IT JEP JOPP LEED MCP MCEP MECU NGO OECD Action for Cooperation in Economics or acquis communautaire The body of rules which govern the operations of the EU internal market. Business Support Centre Cross-Border Cooperation Central European Countries Central European Electricity Grid Country Operational Programme Directorate General (of the European Commission) Decentralised Implementation System Europe Agreement European Bank for Reconstruction and Development European Commission European Free Trade Association European Investment Bank Employment Service Administration European Union Foreign Direct Investment Foundation of Rural Cooperatives (Poland) Gross Domestic Product General Technical Assistance Facility Human Resource Development International Financial Institutions International Monetary Fund Information Technology Joint European Project Joint Venture Phare Programme Local Economic and Employment Development (OECD) Multi-Country Programmes Multi-Country Energy Programme Million ECU Non-Governmental Organisation Organisation for Economic Cooperation and Development

PALMIF PART PAU PIP PMU PUMA R&T SIGMA CECs) SMEs STRUDER SOE TA TAM Tempus TENs VAT VET

Proactive Labour Market Intervention Fund Public Administration Reform and Training Programme Policy Advisory Unit Public Investment Programme Programme Management Unit Public Management Service (OECD) Research and Technology Support for Improvement in Governance and Management (in Small and Medium-Sized Enterprises Regional Development Programme in Poland State-Owned Enterprises Technical Assistance Turn Around Management Trans-European Cooperation Scheme for Higher Education Trans-European Networks Value Added Tax Vocational Education and Training

Foreword The Evaluation Unit of the Directorate General for External Relations (DG IA) of the European Commission was set up in response to the Commissions Sound and Efficient Management initiative (SEM 2000) and has been operational since January 1997. It has the mandate of conducting, on a systematic, timely and rigorous basis, evaluations of the programmes for which this Directorate General is responsible. One of the first tasks of the newly formed unit has been to undertake interim evaluations of both the Phare and Tacis Programmes. These evaluations are part of the Commissions answer to the European Parliaments demand, put forward in its Resolution on the General Budget of the European Union for the 1996 Financial Year (A4-0235/95), that an interim evaluation of the Programmes should be transmitted to the European Parliament before the end of June 1997. The call for an interim evaluation issues a challenge which is daunting in terms of both the methodology to be followed and the amount of data to be processed. The methodology of evaluation of technical assistance programmes, more than any other form of assistance, is a disputed issue among specialists. The measurement of the impact of such programmes is more difficult in countries evolving as swiftly and variably as those of Central and Eastern Europe and Central Asia. And lastly, the Phare and Tacis Programmes have since their genesis been so broad in scope that no single study can really hope to do justice to the subject. This evaluation of the Phare Programme takes as its starting point the body of individual evaluations which have been carried out prior to the establishment of the Evaluation Unit. That database has been supplemented from other sources, as is described. It is accordingly an evaluation of evaluations: a stocktaking exercise which has its value from the methodological point of view, but is necessarily limited in scope by reason of the raw material available. Its conclusions are tentative, but a message emerges. The impact of the Phare Programme has been appreciable; it has adapted in response to the perceived

needs of the partner countries and the requirements of the EU institutions; the requirements of accession have dictated further adaptation of the Programme; however, there is an overemphasis on administration at the expense of performance which needs to be addressed. The two interim evaluations are intended to be benchmarks upon which the Evaluation Unit will conduct further sectoral and country evaluations, using different methodologies and focusing more closely on the individual issues involved. The Commission is bound to report regularly to the European Parliament and the Member States. By means of this dialogue the Commission hopes to contribute to a better understanding of the processes of transition in the countries of Central Europe as they face the challenge of accession, and in the countries of Eastern Europe and Central Asia as they develop their relationship with the European Union. Michael Lake Head of the Evaluation Unit

Executive summary This interim evaluation is prepared in response to Parliament Resolution N A4-0235/95 of 24 October 1995, which called for an evaluation of, inter alia, the Phare Programme by way of preparation for the 1998 budget procedure. It is based primarily on a desk review of existing evaluation reports of Phare assistance, complemented by monitoring and assessment reports and other sources of information. It covers all the CECs that received Phare financial assistance, have an Association Agreement with the EU and are candidate member countries. It excludes Albania and the countries of former Yugoslavia (except Slovenia) that benefited from Phare support in quite different contexts and circumstances. It covers Phare from its inception in 1989 to date. However, in view of inherent time lags in the implementation of programmes and the production of ex-post evaluation reports, coverage of such reports does not reach much beyond the 1994 programming year. Accession-oriented assistance launched after the Essen summit is accordingly only marginally covered. What is Phare? The Phare Programme is a financial instrument designed to assist the CECs in the transition process. It was established in 1989, starting with Poland and Hungary, and was rapidly extended, in terms of both countries and budget. Cumulative commitments at the end of 1996 amounted to ECU 6.636 billion in the form of non-reimbursable grants. Phare has shown remarkable flexibility in addressing the needs of the partner countries. Although the CECs share a legacy of half a century of political and economic centralisation, they embarked on transition from different starting points, with different needs and paces of reform. Phare, being demand-driven and policy-taking, has adapted to and supported the varying paces and accents of reform specific to each country, adapting to their changing economic and social needs in the course of the transition process. It initially emphasised critical aid and support for institutional reform; later, as transition progressed, it emphasised legal and regulatory measures for the creation of a market economy and measures promoting development and investment. No other agency, multilateral or bilateral, proved to be as responsive as Phare in providing technical assistance on a grant basis and on such a large scale.

The Essen European Council in December 1994 was a turning point for Phare, confirming the prospect of membership for the CECs and adopting the pre-accession strategy, for which Phare was identified as the main financial instrument. In this context, Essen increased the investment focus of Phare by raising the ceiling for the co-financing of major infrastructure works, introduced by the Copenhagen Council in June 1993, from 15% to 25%. In addition, Essen provided Phare with a multi-annual framework which led to the conclusion of multi-annual indicative programmes agreed with the CECs, identifying the priorities for Phare support with indicative budgetary envelopes until 1999. In March 1997 the Commission elaborated new orientations for the Phare Programme, building further on the Essen pre-accession strategy by focusing Phare on accessiondriven support, namely on institution building and investment in the acquis. Phares assistance to transition Effectiveness of Phare support has depended to a large extent on the receptivity of the environment in which it operated. Since Phare provided essential inputs to the implementation of reforms agreed upon within IMF and World Bank programmes, Phare effectiveness depended on consistency in reform implementation. Still, Phare was by and large a policy-taker and did not actively participate in policy negotiations with governments, being more vulnerable to policy changes. Privatisation of productive assets constitutes the core element of economic transition. Phare has assisted the privatisation efforts of the CECs at two levels: through institutionbuilding, support for strategy development and the implementation of mass privatisation and other efforts; and through the provision of direct support to individual enterprises for their development and management. The impact of Phare programmes on the privatisation effort has been significant, especially where the political environment was conducive to privatisation. Phare programmes supported bank and enterprise restructuring through technical assistance, with varying results. In many countries very effective Phare interventions were undertaken in bank restructuring. Enterprise restructuring has been a difficult area for interventions and has achieved mixed outcomes. When Phare activities were undertaken in conjunction with IFI financing, they were better targeted and more effective. In these cases, there was follow-up capital to complement Phare-financed restructuring plans. Phare programmes have also assisted in setting up the legal and regulatory market frameworks. Assistance to ministries of labour to develop a more efficient operation of labour markets was especially effective. Less well known is Phare support to develop a new core of trade union leaders and entrepreneurs, through the provision of study visits to counterparts in the European Union and through training in negotiation and organisation development. Rolling back government involvement in the economy Phare interventions include many institution-building components for public administration within sectoral activities. Innumerable examples can be given from various Phare programmes across sectors where institution-building, training and equipment have been provided to support structural changes and the improvement of the performance of public administration. In addition, several Phare programmes have strengthened the capacity of the public administration training institutes to provide training to civil servants. However, a weakness of the training programmes noted in

many evaluation reports is that training is not based on needs assessment studies linked to the reform of the functions of public administration. Phare assistance was relevant to public administration reform needs, but its effectiveness suffered from a number of factors, such as lack of a cohesive long-term plan of action for reform, lack of coordination among donors, and the creation of islands of success rather than the improvement of overall performance. As a result, despite various assistance programmes, overall performance of public administration in the CECs has not basically improved. Much is still needed to change both the culture and the ethos of the public service. An area which received positive Phare assistance is the establishment of indirect economic management, both by strengthening government ability to introduce and implement fiscal policies and by developing the central banks capacity to implement monetary policies and supervise the operation of the banking system. Phare assisted the introduction of VAT legislation and new company accounting systems in the CECs. Phare also supported improvements in budget management and the introduction in some countries of project investment programmes. Two areas in public administration where Phare programmes had an especially positive impact are the statistics and customs services. Restructuring the economic base Phare activities in SME development have been very relevant to the reform process, have introduced new institutions for SME development and have extended support to SMEs on an unprecedented scale. The programmes had a significant impact on institutionbuilding and on developing and promoting local business consulting centres while at the same time enhancing local links and local development. But there was also a lack of proper attention at an early stage to the issue of the sustainability of business support centres after the end of Phare support. Phares support of private sector development has also taken the form of supporting foreign investment and export promotion, with positive results. Foreign investment agencies were established with Phare assistance in almost all the CECs. Export promotion programmes have also made their mark. But it is difficult to establish a cause and effect relationship between Phare support to the agencies and the increase in investment or exports. Phare support in the agricultural sector assisted land reform and the restructuring of collective and state farms, privatisation and restructuring of SOEs, policy and strategy formulation and institutional development. Phare also supported the creation of an enabling environment for private sector development, with credit and extension services designed to provide assistance to the emerging private farm units. Although assistance was relevant and projects have generally delivered the technical results expected, impact has been delayed or is still in the making in most cases due to lack of ownership. Overall, Phare-supported activities in the agricultural sector have had limited results. The projects have delivered their anticipated outputs, but in most cases with considerable delays due to inadequate attention to delivery mechanisms, recurrent costs and ensuring ownership of the recipient. Phare activities in the infrastructure sector provided assistance for restructuring, for developing reform policies and strategies, for increasing efficiency and for introducing financial transparency with respect to impact on government finances. They also involved upgrading the links of the CECs to the Trans-European Networks (TENs) in transport, the improvement of border crossings and the interconnection of energy systems to western European grids. In addition, Phares greatest investment has been in the area of

infrastructure development. Phares activities contained an initial emphasis on policy, strategy and institution support, shifting later to investment and expansion of the TENs. Phare assistance was also successful in leveraging substantial loan funds for investment, in particular in the trans-European corridors. Overall, Phare activities in infrastructure have been relevant and well focused. Project performance varies considerably, however. While some projects have been very successful with a strong impact, others have experienced significant delays with adverse effects on both results and impact. Environment and nuclear safety are important priorities in creating a safe society. After many years of neglect, in 1989 almost all environmental indicators for the CECs showed a very high level of air, water and soil pollution. The incidence of unsafe operation of nuclear reactors was unacceptably high by western European standards. Phare responded to these challenges by assisting the CECs in taking steps to address environmental problems, with varying success and mainly with modest results. Human resources and social development The Phare allocation for education is among the highest on a sectoral basis, with most of it devoted to the higher education Tempus programme. Allocations for labour market and social development programmes have been limited, but they have introduced important changes in the countries that received them. Human resource development has also been an important part of Phare programmes in other sectors, such as training for private farmers, training activities in all infrastructure sectors, within both national and multi country programmes. Tempus evaluation reports comment positively on the dynamic evolution of the programme and its transformation, demonstrated by a number of shifts over the years. Critics of the programme, however, point out its island character, the difficulty, compared with other more traditional projects, of restructuring higher education, and the need to define precisely who are now the main beneficiaries and who should be in the future. The programme, as stated in all the evaluation reports, is highly appreciated and has been well received in the partner countries. Seeding democracy and civil society The Europe Agreements commit all parties to pluralist democracy based on the rule of law, human rights and fundamental freedoms, a multi-party system involving free democratic elections, and the principles of the market economy and social justice. Phare has supported civil society development both in the context of a regional development programme and directly with NGOs. Evaluation findings indicate that supported leading institutions are playing a crucial and significant role in the development of the scope and size of the NGO sector. The Phare-Tacis Democracy programme is a complementary programme that aims to promote the use of democratic principles and procedures in the various spheres of society. A global evaluation of the Phare-Tacis Democracy programme is currently under way. Overall remarks The Phare Programme has developed into the single largest source of donor financing of know-how transfer to the CECs. Its objectives and activities have been very relevant in addressing important issues of the transition process. Its contribution, particularly in areas in which other donors have shown little interest and have devoted limited resources, such as democracy and civil society, has overall been positive. The

Programme has shown remarkable flexibility in adapting to the rapidly changing political and economic environment of the CECs. The demand-driven nature of the Programme has been both a strength and a weakness; it may have enhanced ownership by the partners but it has also led to fragmentation of effort and dispersion of resources with adverse effects on programme performance. The Programme has realised less than its full potential: its effectiveness and impact have, to an extent, been diluted by lack of leverage to ensure good programme performance, by deficiencies in project cycle management and by a preoccupation with financial and procedural control to the detriment of substantive programme design and performance. Chapter 1 Introduction This report covers all the Central European countries (CECs - see map) that received Phare financial assistance, have an Association Agreement with the EU and are candidate member countries. It excludes Albania and the countries of former Yugoslavia (except Slovenia) that benefited from Phare support in quite different contexts and circumstances. It should be viewed as an interim evaluation which will be followed by more comprehensive and in-depth evaluations as we move towards the end of the European Unions current financial horizon, ending in 1999. As is described in Chapter 2, which treats the issue of methodology, the report is based primarily on a desk review of existing evaluation reports of Phare programmes, complemented by monitoring reports and other sources of information. Until recently, when the Phare Monitoring and Assessment system and the Evaluation Unit itself were established, no systematic assessment and/or evaluation of Phare programmes had been undertaken. No new data collection exercises or special studies were commissioned for this report. The database on which this report is based is therefore necessarily incomplete in its geographical, sectoral and thematic coverage. Furthermore, this interim evaluation covers Phare from its inception in 1989 to date. However, in view of inherent time lags in the implementation of programmes and the production of ex-post evaluation reports, coverage of these reports does not reach much beyond the 1994 programming year. As such, more accession-oriented Phare programmes, launched after the December 1994 Essen summit, are only marginally covered. Where available, monitoring and assessment reports have been used as a source of more recent information. Chapter 3 describes the phases that the Phare Programme has passed through since its inception, in response to the political and economic evolution of the CECs and the changing perception of needs. It describes the means available and the modus operandi followed. Chapters 4 to 8 explain what sort of programmes Phare has supported, their relevance and results. Programmes are classified by themes according to the reform logic of the transition process, rather than by sector or type. Two background working papers have been prepared in support of this evaluation, one on the general procedures and orientations of Phare and another with sector-wise details on evaluations. They are not published as part of this report but may be made available from the Evaluation Unit DG IA/F/5 on request. The report should be seen in the context of other Commission initiatives recently taken or in the course of preparation. On 19 March 1997, the Commission approved its Communication on New Policy Guidelines for the Phare Programme in the Framework of Pre-Accession Assistance. This is a major reorientation of the Phare Programme focusing on an enhanced pre-accession strategy for the candidate countries. The Commission will shortly put forward its opinion on the requests for accession from each

of the candidate countries. This report accordingly presents an evaluation of Phares transition-oriented era, which is now coming to an end, and may provide some guidance for Phares reorientation as the new era of EU enlargement begins.

Chapter 2

Methodological issues

2.1. The database This report is primarily based on a desk review of 81 existing evaluation reports and 25 monitoring and assessment reports of Phare programmes. A list of these reports and breakdowns by both country and sector are presented in Annex B. The evaluation reports cover primarily the activities decided upon in the framework of programmes launched in the period 1991-1993. Most of these programmes were completed during 1995 and 1996. Few programmes agreed in 1994 and 1995 have yet been completed, and mid-term evaluations and other reports are available in only a few cases. Most of the reports were commissioned at the initiative of Commission officials responsible for programme implementation (task managers) and in agreement with country authorities, sometimes in response to specific programme issues, but rarely for the sake of an evaluation in its own right. Some of them were standard evaluation reports of good or reasonable quality. They addressed primarily the varied interests of task managers who were seeking recommendations from contractors on how to proceed in follow-up interventions or new programmes. As a result, these reports contained a mixed array of stocktaking of sector developments, reviews of implementation progress and programme issues, and contractors suggestions on the future course of Phare in the area do not have a common thread; in fact, they are distinguished by their extreme heterogeneity in structure, content and organisation do not cover all sectors and countries. In addition to the above reports, there are another 25 monitoring and assessment reports, written under the aegis of the Monitoring and Assessment Unit. This reporting system was set up in 1995 and became fully operational in 1996, to provide direct and operational management information and feedback on all on-going programmes, thus allowing management to monitor the implementation of programmes and refocus programmes where necessary. Some of the data constraints have been addressed by seeking information from additional documents, by confirming in interviews with country coordinators, and task managers with institutional memory, the wider application of some report findings, and by seeking material for case studies from Commission Delegations in the countries concerned. Given the limitations in the evaluations available, neither the Phare activities nor the country examples presented here are intended to provide either a comprehensive picture of the Phare Programme or a global evaluation of it. Case studies have been added to illustrate Phare achievements, rather than to provide a general and comprehensive picture. 2.2. Evaluation methodology Phare is predominantly a technical assistance programme that focuses on institutionbuilding or institutional reform, although the infrastructure and investment component has rapidly increased over the years and is set to increase further in the near future. The purpose of technical assistance is to transfer know-how, either through investment in

human capital (training and advisory services) or in the form of organisational capital (legislative and organisational reform proposals). This creates several methodological difficulties for evaluation. First, it is seldom possible to compare with/without project scenarios, especially in the turbulent economic and institutional context of transition economies. This makes it hard to estimate the impact of a programme: what would have happened without it? Second, technical assistance outputs are intangibles, identifiable through indirect indicators only. These outputs may be indistinguishable from outputs of other programmes sponsored by other donors, making it impossible to gauge the specific impact of any particular programme. The intangibility of outputs has also contributed to an inputs and activities bias in the formulation and evaluation of many Phare programmes, making it even more difficult to identify specific impacts. Because of these methodological constraints, this interim evaluation report has primarily focused on reviewing the relevance of programmes with respect to the problems to be addressed, the type of inputs required and the responses of other donors. The report also looks at the effective outputs or direct results of programmes, and tries to judge how effective these outputs have been in the environments at which they were targeted. Since Phare is predominantly a technical assistance programme, typical outputs are trained staff, advisory documents, legal drafts and organisational proposals. The impact of these types of outputs on the institutions for which they were designed is often difficult to trace. They are less tangible than the outputs of investment projects, which are usually physical and visible. Furthermore, the lack of counterfactual evidence renders it difficult to know the outcome for the institutions if these programmes had not been established. In most cases, information on the actual impact of the outputs on the performance of the targeted institutions and sectors is very limited. Neither is there much information on sustainability: whether or not changes in performance can be maintained over time, or whether the changes are impermanent due to lack of ownership or lack of resources. Because of these methodological problems, judgements on the success or failure of programmes require careful analysis. Phare programmes may have produced the expected outputs in terms of trained staff, policy and legal advice, etc. For the programme to be successful, however, outputs have to be put to effective use, which largely depends on the appropriate policies being pursued by the partner institutions. There must be a change in the behaviour and performance of the institution(s) at which the outputs were targeted. Establishing a link between changes in institutional performance and specific Phare Programme outputs usually requires more detailed information and analysis than is available in most of the 81 evaluations on which this report is based.

Chapter 3

What is Phare?

3.1. From emergency assistance to preparation for accession Phare, which originally stood for Poland Hungary Aid for the Reconstruction of the Economy, is the European Unions financial instrument designed to assist the CECs in their transition from an economically and politically centralised system to a decentralised market economy and democratic society based on individual rights, and to support the reintegration of their economies and societies with the rest of the world and especially with western Europe. It was established in 1989, covering at that time only Poland and

Hungary. Within two years the programme was extended, in terms of both countries and budget. By 1997, 13 CECs have become eliglible for Phare support. At the end of 1996, cumulative commitments amounted to ECU 6.636 billion, all in the form of nonreimbursable grants. Although the CECs share a legacy of half a century of political and economic centralisation, they embarked on transition from very different starting points and with different needs. They therefore embraced varying paces of reform. Being both demanddriven and policy-taking (see below), Phare has adapted to and supported the varying country-specific paces and accents of reform programmes. Flexible Phare Phare has also adapted to the changing economic and social needs of the CECs in the course of the transition process. In the early stages of the reform process, Phare emphasised critical aid, but rapidly moved towards support for institutional reform. The initial stages of decentralisation of central government, and the transfer of its productive assets to the private sector, urgently required a new legal and regulatory framework, new institutions and the application of new laws. Phare responded by putting emphasis on the transfer of predominantly economic skills and know-how. This was mainly but not exclusively related to private sector development, including privatisation, restructuring of state-owned enterprises, the modernisation of the banking and financial system, the development of the markets, particularly the labour market and the social safety net, and finally the encouragement of foreign investment. Initial Phare activities included technical assistance, training, and studies for preparing new legislation, developing new institutions and for preparing sector reform strategies, sometimes accompanied by some equipment support. Another important instrument for private sector development was the provision of credit lines for SMEs. As the reforms began taking hold in a number of countries and the first phase of the legal and regulatory framework came into effect, the requirements began to reflect a mixture of specific transition-related reform needs and pure economic development and investment perspectives. Turning around economies and the restoration of medium-term growth became major objectives. This necessitated more support for the restructuring of the economy, greater emphasis on physical and human capital investments, and more support for changing the role and impact of government through public administration reform (see Table 1). During this second stage of transformation, Phare activities focused on the consolidation of reforms, institutional development and investment operations. Emphasis was placed on investment, reflected in the increase in Phares overall ceiling on investment financing. Support for pre-accession strategies The European Council meeting in Copenhagen (June 1993) confirmed the prospect of membership for the CECs and set the criteria for accession. The Essen summit (December 1994) confirmed the goal of accession and designated Phare as the main financial instrument to support pre-accession strategies. This was first reflected in the 1995 programming exercise where Phare evolved further to provide, in addition to the previous types of assistance technical assistance for the approximation of laws and conformity of standards in the CECs with those of the EU more direct financial assistance for investments in transport links, energy interconnections, regional development and cross-border cooperation. Furthermore, in response to these new demands, multi-annual indicative programmes (MIPs) were agreed with the partner countries for the period 1995-1999 (for some

countries they were delayed to 1996-1999), whereby the strategies for Phare implementation and indicative budgetary envelopes were agreed, in the context of a preaccession strategy. The recent Commission Communication on the new orientations of the Phare Programme has established that accession-driven objectives and strategies will determine the content of the Phare Programme in the CECs. Together with the Commission Opinions on accession, this will determine the priorities and objectives of Phare over the coming years. As a result, Phare will become less demand-driven and policy-taking, and more accession-driven and policy-making. This will have important repercussions on Phare management and organisation. Table 1: Phare priorities, 1990-1993 and 1994-1996 (% of total Phare commitments) Sector 1990-93 (%) 1994-96 (%) Critical aid 10.3 5.3 Economic restructuring 38.7 20.8 Human resources and social development 19.6 16.4 Environmental and nuclear safety 9.9 6.4 Infrastructure (including cross-border) 8.5 36.2 Public administration, civil society, general technical assistance, etc. 13.0 14.9 3.2. Programme means National programmes constitute the core of the Phare Programme. They account for about 78 per cent of total commitments over the period 1990-1996. Their composition has reflected the changing priorities discussed earlier. Table 2 presents the country distribution of the national programmes in 1990-1996.

In order to promote intercountry cooperation as well as regional economic activities and integration, other kinds of Phare programmes have been devised, such as cross-border programmes, multi-country programmes and horizontal programmes. Cross-border programmes, multi-country and horizontal programmes have their own budgets. Table 2: Country distribution of national programme commitments, 1990-1996 Country Total Phare Country Share of PhareShare of commitments population funds population 1990-1996 MECU (million) (%) (%) Poland 1,388 Hungary Czech Rep. Slovakia Slovenia Romania Bulgaria Estonia Lithuania Latvia 132 Total 4,505 38.5 684 429 207 91 726 539 130 179 2.5 105.3 30.8 10.3 10.3 5.3 2.0 22.7 8.4 1.5 3.8 2.9 100 36.3 15.2 9.5 4.6 2.0 16.1 12.0 2.9 4.0 2.5 100

21.5 9.8 5.0 1.9 21.5 8.1 1.4 3.6

Note: Population data from World Bank tables. Allocations to Czech and Slovak Republics include the allocations to the Czech Slovak Federal Republic of 222 MECU. Cross-border cooperation Recognising the specific development problems faced by border regions, and the key role cross-border cooperation initiatives can play in the creation and development of networks between the EU and the CECs, cross-border programmes were initiated for the first time in 1994. They followed the positive results generated within the EU by the INTERREG programme (cooperation between border regions in different Member States), financed from the Structural Funds. These programmes are primarily financing infrastructure (border crossings) and environmental projects (see box 1). Box 1 : The cross-border cooperation programme The cross-border cooperation programme (CBC) fosters cooperation among states, regions and interest groups along borders of the EU and the CECs as a key element of the pre-accession strategy. It started in 1994 and focused on regions with development problems or areas where border conflict had taken place. Although infrastructure projects continue to have the largest share of the programme, several other sectors are included, such as environment (e.g. waste water treatment projects), tourism, trade, human resources, etc. Within the context of the CBC programme the Baltic region has developed a specific cooperation framework and certain Phare programmes support this effort. Similar regional cooperation activities include a Poland-Baltics initiative and the group Poland, Hungary, Czech Republic, Slovakia, Slovenia. Example of Poland-Germany CBC The CBC programme on the Polish side and the INTERREG programme on the EU side are used to jointly identify and discuss projects in regional Polish-German working groups. These projects are approved by the Joint Phare CBC/INTERREG II PolishGerman Monitoring and Programming Committee. The criteria used for selecting projects are: cross-border impact, regional development effect, environmental impact, internal rate of return, minimum (25 per cent) local financing, and fully developed technical specifications of the project. Examples of projects are: the construction of the Swiecko Freight terminal, a new student house at Viadrina University, support of the Baltipartenariat 1996, and the Euroregions Small Project Fund. Multi-country programmes Since 1991, the Phare Programme has included multi-country programmes (MCPs, called regional programmes until 1994). MCPs stimulate cooperation between CECs on issues of common interest, aim to increase awareness of the commonality of problems facing partner countries, bring countries sharing common issues or problems together, increase communications and understanding through sharing of planning and implementation of activities, and so on. Over the 1990-1996 period, financial support of 704.2 MECU was provided, embracing virtually every sector of Phare activity; these programmes are mostly known by their acronyms: ACE, COSINE, Tempus, JOP, and SIGMA. The rationale for MCPs was that it would be more cost-effective to use common delivery mechanisms to implement similar programmes in a number of countries. Horizontal programmes

However, it was increasingly recognised that if the objectives of the MCP to promote demand-driven regional cooperation programmes among the CECs were to be met, another delivery vehicle would have to be developed for regional programmes initiated by the Commission itself. As a result, a number of the above programmes were progressively transferred after 1993 to a separate facility named horizontal programmes. These programmes are initiated by the Commission and partner countries are invited to participate. They concern primarily areas of common interest to the EU and the CECs, requiring consistency in implementation or justifying a common delivery mechanism. Coordinating support with other donors Since the beginning of the Phare Programme, coordination with other donors (in the context of the G-24) and with the international financial institutions (IFIs) has been an important goal. The Commission has been given responsibility for overall aid coordination within the G-24. In most CECs national aid co-ordination units have been set up (some with the support of the Phare Programme) to assist with on the spot donor co-ordination. At the sectoral level, the financing mechanisms put in place for Phare programmes provided assistance to other bilateral donors. Of much greater impact has been the co-financing with IFIs, where Phare funds have been used for pre-investment and investment co-financing with IFIs in infrastructure. However, collaboration with the IFIs has extended beyond the infrastructure sectors to include the banking sector and enterprise restructuring, company privatisation transactions, credits line to the private sector, and so on. The use of Phare Programme funds in activities that have been followed up by IFI investment has increased the leverage of the Phare Programme. Cofinancing is an integrated part of Phare programming. However a very successful formal arrangement exists with the EBRD, referred to as the Bangkok facility. It finances feasibility studies and related activities, of which the majority are followed up by EBRD investments (see box 2). Box 2 : The Bangkok facility Under the 1991 Bangkok facility, Phare provides grant financing to EBRD to support the technical assistance requirements of its operations. The facility has played a crucial role in enabling the EBRD and the partner countries to build up and implement a portfolio of successful investments. Up to 30 September 1996, a total of 131 technical cooperation operations had been financed under the Phare Bangkok facility. A direct link can be established between 95 of these operations and 51 signed investments worth ECU 1.2 billion. This means that about 75 per cent of all Phare operations under this technical cooperation have supported or led to EBRDs investments. 3.3. The demand driven principle and the programme cycle A unique and steady feature of the Phare Programme so far has been its demand-driven nature. Once a countrys financial envelope is determined by the Commission and an overall sectoral allocation agreed upon between the Commission and the partner countries, the latter initiate an internal process for the tentative allocation of the envelope among sub-programmes. Prior to the introduction of multi-annual programming in 1995, this allocation process rarely involved decision-making on proposals received from ministries and agencies according to predetermined priorities and criteria. While in all countries governments did establish structures for inter-ministerial consultation for the approval of priorities before these were presented to Phare, requests were sometimes informally selected at the Phare national coordinators office. This approach implied that

Phare acted as a policy-taker rather than a policy-maker, largely accepting policies and programmes as proposed by the government. The introduction of multi-annual indicative programmes (MIPs) in 1995 has improved the selection process by creating a long-term policy framework and programme selection criteria focused on pre-accession strategies, and introducing multi-annual financial perspectives. The acquis communautaire As Phares emphasis gradually shifts towards pre-accession strategies and work related to the adoption of the acquis communautaire (the body of EU legislation, regulation and directives), the demand-driven and policy-taking characteristic of the Phare Programme will disappear. Programmes will be increasingly set by the accession agenda and the Commission will play an increasingly important role in policy formulation in the candidate member states. This shift commenced in 1995 when country programmes started to include components related to the acquis communautaire. In the recent Commission Communication on the new orientations of the Phare Programme, the demand-driven principle is explicitly replaced by the accession-driven principle. In future, once the Commission Opinions on accession have set the stage for enlargement, the absorption of the acquis will be identified as a prime target for achievement. The Phare programming challenge for the Commission and the CECs will be narrowed down to finding the most cost-effective way to achieve the desired results. Decentralisation of programme management Downstream of the programming cycle, Phare implementation tasks have been progressively decentralised to partner countries. Once the financial envelope is determined, contractors are selected, through tendering procedures. A Programme Management Unit (PMU) is set up in the partner country, usually by the relevant partner institution or ministry. Contractors work with the PMU. Since 1994, the operations of the PMU have been regulated by the Decentralised Implementation System (DIS) Manual. The PMU may carry out part of the work itself or further subcontract some activities. Some - mostly horizontal and multi-country - programmes are still managed directly by Commission headquarters, but over the last few years nearly all national programmes are implemented under the DIS. The Decentralised Implementation System did not only respond to a genuine political aspiration to transfer certain responsibilities to the partner countries for the implementation of the programme and to bring programme management closer to the intended beneficiaries; it also facilitated communications and flexibility of programme implementation in the context of the often rapidly changing requirements of the transition environment. Guided mostly by rather general terms of reference, the contractor has considerable flexibility in proposing ways of meeting the demands of the programme. Taking into account the considerable time lag between initial programme identification and the start of operations, and the changing environment, such flexibility is to be considered as an asset. There are disadvantages too. PMU staff become the technical interlocutors of the partner institutions and only part of their often detailed knowledge of the local situation flows back to Phare task managers at Commission headquarters. In its implementation of the Phare Programme, the Commission has a tendency to contract out expertise and keep administration in-house. Travel budget constraints for task managers, rapid turnover of staff and time-consuming administrative procedures further aggravate this situation, with negative consequences for feedback on programme substance, corrective actions and identification of new programmes.

In addition, vague definition of objectives and expected outcomes, as was often the case in the early years of the Phare Programme, makes assessment of results very difficult. When assessing the specific results of the programmes it was often possible to trace only their general contribution. Although the work of contractors should be controlled by the PMUs in their parent ministry, by the Delegations and by the task managers at Commission headquarters, it sometimes happened that the contractors informational advantage allowed them to drive the future course of action through their workprogrammes.

Chapter 4 Assisting transition Transition has meant that a system of centralised and hierarchical economic and political decision-making, including centralised appropriation (or property rights) has had to be transformed into a decentralised and non-hierarchical system, through a massive transfer of decision-making and property rights to individuals and companies. The dimensions of decentralisation have been immense, touching on all aspects of economic, social and political life and entailing enormous legal, structural and institutional changes. However, rather than simple liberalisation and deregulation, it also implied considerable reregulation of interactions: regulatory frameworks for markets and enforcement mechanisms for property rights have had to be set up. Phare has been involved in most aspects of transition. These have been regrouped here according to three themes: typical transition issues, development issues and sociopolitical issues. We start with a discussion of Phare programmes aimed at solving typical transition issues and supporting the creation of a market economy (Chapters 4 and 5). This includes support for privatisation of state-owned assets, solving bad-debt problems and restructuring of state-owned enterprises, development of market regulation structures and rolling back direct government intervention in economic decision-making. Thereafter (Chapters 6 and 7), attention is given to more development-oriented Phare programmes, such as investments in private enterprises, rural development, public infrastructure and human and social capital. Finally, Phare support for more political reform and the empowerment of individual citizens is discussed (Chapter 8). 4.1. Privatisation or decentralisation of control over productive assets Background Privatisation of productive assets is the core economic issue of transition. Collective ownership rights are decentralised to individual citizens in order to provide stronger incentives for the efficient use of these assets. Because it completely upset the existing distribution of economic power, privatisation has been the subject of often acrimonious debates on the sale of the national patrimony. It has proceeded at varying speeds, using a plethora of approaches and instruments, influenced by opposing economic and political objectives. Factors of strategic importance, such as the development of private capital markets and future corporate governance, were rarely considered. Sequencing restructuring before privatisation often resulted in considerable delays. Privatisation required the development of appropriate strategies, policies and instruments. National institutions were set up to implement the transition. It had to be underpinned by a proper new legal framework. Direct sales of company assets as well as indirect mass privatisation campaigns had to be set up. Phare assistance and results

Phare has assisted the CECs in their privatisation efforts both through providing support for general policy development via national privatisation institutions and through providing direct support for individual enterprises. Phare provided an essential input; the professional skills required for private enterprise development and management were in very short supply at that time in the CECs. No other agency, multilateral or bilateral, proved to be as responsive as Phare in providing technical assistance on a grant basis and on such a scale. Phare technical assistance produced a variety of outputs, such as advisory services, the transfer of skills through formal training and more informal learning-by-doing. Institution-building consisted of support in the creation of a number of agencies to take the lead in the process of privatisation. These were the Privatisation Agencies in most countries, the Ministry of Privatisation in Poland and the State Property Agency in Hungary. In Bulgaria, the Mass Privatisation Centre was created and functioned concurrently with the privatisation agency which was also developed with Phare support. With Phare technical assistance, many of these agencies developed the framework for privatisation worked on strategies and policies developed the legal and institutional framework for privatisation transactions in most cases initiated the first pilot privatisation transactions worked with the IFIs became the first call for everyone interested in privatisation in their respective countries. Phare assistance was also used for activities related to privatisation transactions, and for the resolution of last minute crises in the countries privatisation programmes, such as lack of funds to print the privatisation certificates. Phare participated in privatisation transactions by financing technical assistance to prepare company privatisation plans and financial statements, and to seek investors. An important associated Phare activity was support for public awareness campaigns in most countries, ensuring that citizens would claim certificates or vouchers under the mass privatisation programmes. The campaigns took different forms: advertising in both newspapers and on TV, sponsoring articles in the mass media and even the development of special TV programmes. In Slovenia, a newspaper was also published and issued free to its citizens. Effectiveness of Phare support depended to a large extent on the receptivity of the prevailing environment. Advisory outputs of technical assistance can easily be discarded when political priorities change. In Romania and Bulgaria at some point, governments downgraded the privatisation processes which the agencies had been charged to implement, leaving them languishing for a while. Since Phare provided essential inputs to the execution of reforms agreed upon within IMF and World Bank programmes, Phare effectiveness depended on consistency in reform implementation. However, since Phare was by and large a policy-taker and did not actively participate in policy negotiations with the government, it was more vulnerable to policy changes. The impact of Phare programmes on the privatisation effort has been extremely significant, at least where the politically charged environment was conducive to privatisation. According to an assessment report on the programme in Poland, Phare contributed to the successful implementation of the Polish Governments privatisation strategy (see box 3). Without the Phare Programme, lack of skills would have been an obstacle to implementation of the reforms agreed under IMF and World Bank

programmes, which included specific privatisation targets. It also helped individual companies through successful direct or indirect privatisation. It is not known how many privatisation transactions have been supported in this manner and what the success rate has been. Reference in the evaluation and assessment reports is made only to notable successes, like SOMAT in Bulgaria (a large transport company) and the advice provided for the privatisation of MATAV (Hungarys telephone company). In Hungary, a Phare Programme helped in the privatisation of 75 companies and assisted in the classification of another 200 according to their privatisation potential. However, another active privatisation programme which had included on average ECU 500,000 per transaction did not work out as, according to the evaluation report, local savings were not adequate for the purchases, and the management of the companies was not cooperative. In Romania, Phare and the EBRD collaborated in an evaluation of all state-owned commercial companies for the purpose of identifying those that had better chances to be sold to a strategic investor. The institutions created for privatisation are not supposed to be sustainable in the long run. In the medium term they have been sustained by budgetary resources, but their dismantling will take place when the privatisation process is complete (as the Czech Republic has already announced). Other initiatives may sustain themselves or spin off in other directions. For example, the newspaper mentioned above in Slovenia is still being published, providing commercial news and stock exchange information, and is financially self-reliant. The sustainability of individual company privatisation transactions will depend on the financing package and management performance. No data appears in the evaluation reports; anecdotal evidence existing for some companies sold to strategic investors (Romania) indicates healthy expansion of activities and profitability.

Box 3: Privatisation initiative in Poland In Poland, many small and medium-sized enterprises are under the jurisdiction of provincial governors. The Ministry of Privatisation wanted to stimulate privatisation at regional level and asked for Phare assistance to implement a programme to this effect. A batch of 186 companies were initially selected to participate in a Phare Programme of 2.9 MECU. Expert advice was provided in choosing the optimal privatisation path for these companies, finding investors, assisting in the preparation of all documents necessary to carry out the transactions, providing negotiation advice and working with the management and employees of the companies to assist them to both understand and participate fully in the process as well as in restructuring operations. Out of the 186 state-owned companies, 64 have been privatised (35 per cent), 87 are in the process of being privatised (47 per cent) and 33 remain as state-owned companies. This regional privatisation effort has had a significant demonstration effect on stateowned companies. The privatised companies have shown improved financial results as they implemented restructuring programmes, introduced new products and found new markets. But, in addition to these direct results, the Phare Programme has helped overcome psychological barriers, unwillingness and a negative attitude among enterprises and trade unions towards privatisation. It has also created awareness, among the enterprises that did not participate, of the need to implement ownership changes in order to adapt to the new market conditions. Finally, another important development was the transfer of know-how and skills to consulting companies in the regions, as the latter

worked with experienced foreign contractors. This skills acquisition will assist in the regional privatisation process and other related activities in the future. Source: Materials contributed by the EC Delegation in Poland. 4.2. Enterprise restructuring and solving bad-debt problems Background Privatising productive assets is relatively easy if companies continue to operate in a fairly stable market environment, as is generally the case with privatisations within the EU. However, for the CECs, transition has implied very substantial changes in markets. Prices and exchanges rates were liberalised, often upsetting input and output price structures. Energy-intensive companies were particularly hard hit by the introduction of world market prices. Market conditions changed drastically with trade liberalisation and the collapse of the COMECON trade regime. Poor product quality made many companies uncompetitive on markets, piling up unsellable stock. Many companies linked to the military-industrial complex ran into serious problems. As a result, state-owned companies that were viable, or received a steady stream of subsidies, under the old regime, suddenly ran into heavy losses and accumulated debts. Either governments had to intervene with (more) subsidies, creating fiscal problems, or banks had to (re)finance unsustainable debt burdens, thereby undermining their own financial situation. Strict fiscal and monetary stabilisation programmes prevented the former solution. Banking sector prudential considerations, where and when implemented consistently, prevented the latter. Tampering with government-financed forms of bailout without solving the root of the problem has backfired, often derailing economic stabilisation programmes, as the cases of Romania (1992-1993) and Bulgaria (1996) demonstrate. Many state-owned companies ran into large payment arrears. In the absence of effective bankruptcy procedures and in view of the economic and political magnitude of the problems, negotiated settlements and reconciliations were the only way out. Privatisation of these companies was not necessarily a solution; they needed to be restructured or closed down. Clearly, this particular transition problem has two sides: bank bad-debt restructuring and enterprise restructuring. Phare provided essential inputs for the resolution of these twin problems. Phare assistance and results Phare technical assistance supplied scarce skills for auditing bank portfolios, setting up and running debt work-out units, designing prudential regulations and bankruptcy procedures, and management and industrial restructuring of state-owned enterprises. No other donor was in a position to provide these skills on a similar scale and on a grant basis. These inputs were essential for the success of macroeconomic stabilisation programmes, financed by the IFIs. Bank restructuring In bank restructuring, work initially consisted of diagnostic studies of the banks and an assessment of the bad-loan problem within bank portfolios. Out of these studies specific policy recommendations were developed for the central banks and the banks themselves. Often following these recommendations, the central bank issued related prudential regulations, for example on bad-loan provisioning and the classification of bad loans, and their assessment of the banks balance sheets.

Box 4: Bank restructuring in Slovenia The creation of a modern banking sector has been an important priority in Slovenia. This included, inter alia, the restructuring of the two major banks, Nova Ljubljanska Banka (NLB) and Nova Kreditna Banka Maribor (NKBM). These two banks catered for more than half of the banking sectors assets. NLB was and still is the only bank with major international connections. Given Slovenias dependence on the external sector (twothirds of GDP is realised in exports), the banks performance is crucial for the economy at large. Both banks were burdened by the bad debts of the state-owned enterprises. From early 1993, a Phare Programme assisted the two banks with their restructuring. The contractors selected were banks themselves. In effect, an informal twinning arrangement was developed between the Slovenian banks and the consulting foreign banks, with additional technical assistance provided by the EBRD and bilateral agencies. Both banks have now virtually completed their restructuring. Objective indicators of the effectiveness of the programme are the international credit ratings which NLB recently received, among the strongest for banks based in central and eastern Europe. Continued cooperation with foreign banks, including the EBRD, has been established and this will strengthen the sustainability of the restructuring impact. Source: Materials contributed by the EC Delegation in Slovenia.

A substantial part of this work was undertaken in collaboration with the IFIs. In these cases, one of the IFIs assumed the technical supervision of the inputs financed by Phare. In Romania, for example, major work was done with the EBRD on an analysis of the bad-loan/arrears problem with the objective of identifying core issues and proposing viable solutions that would prevent the reoccurrence of the problem and the risk of additional bailouts. In Slovenia, support was extended to the bank Rehabilitation Agency and to the banking sector to deal with the bad-loan overhang, inherited from the former Yugoslavia (see box 4). Debt work-out units were established in many banks with Phare support. They provided expertise and trained local staff. In Poland, the government decided to use the banks to lead enterprise restructuring for privatisation. It empowered the banks by special law to undertake a debt reconciliation process. Phare financed 35 consultancy years of technical assistance to support debt work-out units in seven stateowned banks, as part of the government policy, with additional support from the EBRD and a foreign commercial bank. Phare financing of the above activities may have been initially an ad hoc decision, but it met an important need for which other financing was limited, was not as readily available and certainly not on Phares favourable terms. The diagnostic/strategic studies providing the first inputs of this kind to bank managers were described as useful, but it is not known exactly how the managers used them. The Phare-financed activity that apparently had the greatest impact in most countries where it was introduced was the debt work-out units in the banks. In Poland, this programme was especially successful. While the impact of the assistance can only be evaluated in the medium term, the immediate benefits were many, as reported in a Phare publication: substantial skills development in the banks; financial improvement of the banks and enterprises; development of new financial instruments, such as debt sale and debt for equity swaps. Inevitably, there was also a spillover effect into the economy, as these enterprises did not cease operations. Enterprise restructuring

This has been a very difficult area for interventions by Phare. Initially, top-down approaches that involved the undertaking of industry sector studies to determine comparative advantage and provide a framework for both restructuring and new industrial development were undertaken, with mixed results. According to evaluation reports, they were found to have been useful inputs in Poland and Slovenia in the elaboration of industrial strategies. In both countries, even firms used these studies as the background for their own business plan development. But similar studies in Romania were too general and were mostly shelved. In Bulgaria, studies were stopped before any practical use could be made of them. Various bottom-up approaches have also been tried out. Phare programmes financed Turn Around Management (TAM) teams and special restructuring programmes. Where assistance was extended independently of other agencies, the impact on the enterprise was more of an operational support type than thorough restructuring, according to an evaluation report on Slovakia. Nevertheless, strong positive results were achieved at enterprise level particularly in the area of marketing and production arrangements. An evaluation report on restructuring in Poland points out that once the restructuring plans were done, there is often no money available for their implementation, working capital is lacking or is insufficient, and the company has no access to either equity or debt. A similar comment was made in a report on the enterprise restructuring programme in Bulgaria. In that country, according to an assessment report, ministries selected enterprises for restructuring in an arbitrary fashion; the financial allocations were similarly arbitrary. Because of poor results, a new concept was introduced: managementled restructuring. Phare supported company restructuring programmes by financing technical expertise consisting of European senior managers in the field of operations of the enterprises. There were some success stories, but the programme suffered from a lack of language skills among the experts and some difficulties with the relevance of advice in the context of the Bulgarian situation. Where Phare programmes included specific financial allocations for restructuring or cofinancing (e.g. the post-privatisation funds) with the EBRD or other restructuring efforts, the outcomes were different and more positive. In Hungary, two unsuccessful attempts were made to establish investment companies to assist in the restructuring of enterprises so that these would be attractive prospects for privatisation. Learning from experience, a third attempt in 1994 proved more successful. Only companies that had previously benefited from Phare restructuring advice were allowed to submit proposals for financing. A total of 10 MECU was allocated to six companies out of eighteen initially selected. According to the evaluation report, while Phare procedural needs delayed the approval of the disbursement of the funds, the companies were able first to obtain local financing, on the expectation of forthcoming Phare funds. In the Czech Republic, 27 enterprises were benefiting from a Phare restructuring fund at the time of the programme evaluation. According to the evaluation report, the effort was focused on operational (not financial) restructuring. In most cases, enterprises derived substantial benefits. In some cases a turnaround of the enterprises operations occurred. But the evaluation report also noted that the positive aspects of the programme contrasted with the lack of support or recognition given to the programme at Government level. The report further said that there was a lack of integration of private sector development programmes with the Governments own initiatives. In a number of restructuring programmes, there has been a substantial leverage of Phare resources. In the above programme in Hungary, the evaluation reports that the total

financing commitment of the financial intermediary and additional financing prior to the project was 7.8 times Phares input. But anticipated support from the EBRD did not materialise. In Slovakia and Romania, post-privatisation funds are being implemented jointly with EBRD additional financial commitments. Where a financial restructuring package was developed by Phare programmes in support of EBRD initiatives or the World Banks Enterprise and Financial Sector Adjustment Loans, the targeting of companies was more effective. In Slovakia, for example, the government identified 20 state-owned enterprises with the largest amount of nonperforming loans to the banking system. A Phare Programme was designed to support eight of these enterprises. Somewhat similar arrangements were followed in the enterprise restructuring programme in Romania, but lack of commitment by government and company management led to poor results. In other cases, the effectiveness of Phare programmes was reduced when ministries selected enterprises in an ad hoc manner and where technical assistance was provided according to an almost standard package of support and was not therefore tailored to the requirements of the enterprises. The evaluation report on the Slovakia programme found that on the whole, enterprises seem to have been selected that could benefit from the type of assistance offered, and the report suggested that a mini appraisal of the targeted company would have ensured that the type of support provided was more responsive to the needs of the enterprise. In many countries, the Phare restructuring programmes touched a relatively small number of companies. This was not the case in Slovenia. There, Phare Programme support covered analysis of ten sectors, restructuring and training assistance for 63 enterprises (a significant number given the size of Slovenia, where only 350 firms have more than 500 employees), funding of TAM teams and a Special Restructuring Programme, conducted in collaboration with the EBRD, benefiting another 40 mediumsized enterprises. Finally, Phare-financed contractors have played an important role as eye openers and sounding boards in addition to providing management experience and restructuring skills. According to a programme evaluation in Poland, the contractors have also been used by the management of the enterprises in the useful role of scapegoats for the implementation of unpopular restructuring measures. The conversion of defence-related factories has generally been a very difficult endeavour. Various options have been sought in Phare programmes: identifying spare capacity for manufacturing inputs needed by foreign companies; promoting enterprises for western investment in the sector; providing direct enterprise support. Phare assistance has mostly focused on providing technical assistance to help the companies market themselves. This included facilitating direct contacts with European manufacturers and organising conferences in European Union cities for company presentations. These conferences have been successful in terms of attendance by European companies, but follow-up interest developing into investment has not been forthcoming, thus limiting the impact of such Phare assistance. 4.3. Developing markets for goods, services and production factors Privatisation of productive assets cannot work without the concomitant creation of regulatory frameworks (markets) within which private owners can freely exchange their assets and the goods and services which they produce, subject to a number of legal and contractual constraints. By property rights is meant all rights related to the use, transfer, sale, purchase and protection of private property, movable or immovable. The establishment of clearly defined and enforceable property rights, quality standards, etc.

reduces transaction costs on markets and makes them more transparent and efficient, thereby enhancing economic growth. Phare has been involved in setting up these market frameworks. In this section, four key markets will be discussed: goods and services, land, labour and capital markets. Markets for goods and services The markets for goods and services were liberalised early in the transition process, with some countries opting for immediate price liberalisation while others preferred a more gradual schedule. Through these markets, buyers and sellers have been able to expand their ownership rights. There has been active concern about the efficient operation of some markets. Existing monopolies, or newly created ones through mergers and acquisitions, may control markets. A new area of interest that has developed is the protection of consumers from unscrupulous business behaviour. Phare assistance and results This is an area where assistance for general economic legislation was frequently offered in Phare programmes. As a result, a number of agencies have been developed in various countries, falling primarily into two groups: those promoting competition in the market, named either Anti-Monopoly Offices or Competition Commissions and/or Offices; and those advocating consumer interests, usually called Consumer Protection Agencies. Phare Programme assistance to all these agencies has consisted of the provision of technical assistance for development of the necessary legal and regulatory framework and some equipment. An assessment report has reviewed a regional consumer protection programme which supported the development of consumer legislation and encouraged the exchange of information in this area between countries. At the time of the assessment, consumer legislation had been passed or was pending in parliament in seven countries. Land markets The land market is still in its infancy in most countries. Although the restitution or distribution of ownership rights of previously collectivised land is mostly complete, taking physical possession of land and the sale and purchase of land are not yet easy. There are, however, differences between urban and rural land, urban land transactions being easier than rural. The property markets depend either on registration of land or on cadastral activities. Cadastral activities need a long time period to be successfully completed, compared with land registration activities. Progress in either varies considerably among the CECs. The results of both could be used for market purposes, but the fact remains that land values or land rents are frequently not market determined but fixed by administrative decisions. In many countries, the land market is dormant due to many unresolved reform issues. Land ownership constitutes the cornerstone of the private economy: restitution of collectivised land to original owners has been one of the first actions of reform and the operation of a land market is a priority. As a result of 45 years of neglect, land title records, and land registration and land information systems, had to be reconstructed from scratch. Whilst privatisation of urban land and urban property has been fairly straightforward, privatisation of agricultural land and of productive assets has been a painful experience. The method of land privatisation, linked in many cases with specific country policies towards agricultural cooperatives, has been strongly debated and each country has followed its own unique route. Some countries have opted for the liquidation of cooperative structures while others have encouraged the preservation of private cooperative production units as farming entities due to fear of excessive farm fragmentation and a loss in efficiency.

In the process of land reform, governments had to make many difficult decisions with regard to the desired farm size, distribution and organisation, types of ownership, types of cooperative, inheritance laws, and mechanisms of restitution and compensation. The process, although now approaching completion, proved much longer and more painful than originally thought. In general the land market is still not functioning and it will take some time before this objective is achieved. Phare assistance and results From the early stages of transition, Phare programmes have been the main source of funds for cadastral activities and land registration programmes in almost all countries. This financing has been provided mostly under agriculture sector support programmes. Initially, the financing included technical assistance for the organisation of the activities, the training of local officials and other individuals to assess land values, and the operational costs of these undertakings. Land offices have been created and have been provided with basic computer and other equipment needed to perform their functions. Phare activities assisted partner countries in accelerating redistribution or restitution of land by providing equipment, training, and technical assistance in order to speed up the process of land registration and the issuing of titles. The objectives were to provide legal security for financing, help establish cadastral services, set up a nationwide land information system, promote the development of a land market, and, often, to provide a basis for taxation. Phare assistance strengthened the capacity of the countries to manage the process of land reform. The evaluation report for Hungary gives a very brief, yet accurate assessment of the results: the project has definitely provided the country with a basic and indispensable tool of great usefulness. However, a characteristic shared by Phare-supported land registration activities in all countries is the lack of attention to questions of cost recovery, charges for services provided, and recurrent costs of the system, including the maintenance and replacement of equipment provided by Phare. Phare assistance for land reform and land registration (equipment and technical advice) has been greatly appreciated by the partner countries. The process of land reform is slow for reasons unrelated to the Phare Programme. However, an overemphasis on land registration in some countries may have been made at the expense of Phare allocations to agriculture, without significant results in accelerating land registration (e.g. the Czech Republic and Slovakia). This trade-off may have, perhaps inadvertently, delayed restructuring and private sector development in agriculture, by focusing on technical land registration issues rather than on sector-wide institutional issues. Labour markets The labour markets quickly attracted government interest in the early stages of the transition process. Interventions consisted primarily of removing regulations that had been inhibiting labour mobility, the determination of wages in the private sector, and the role of trade unions. A new process of national labour representation was established and resulted in the creation of (vertical) occupational or branch labour federations. The new legal framework also created the foundations for interaction and negotiations between trade unions and employer associations. The labour markets have been faced with complex problems. Labour shedding by SOEs has created the first wave of chronically unemployed people in the CECs; however, unemployment has been cushioned as the private sector has created new jobs. With rising unemployment, there has been intense pressure on governments to develop a more effective social safety net and to restructure their labour market institutions to make them more efficient and responsive to local conditions. Much progress has been made in the expansion and transformation of local labour offices of the ministries of labour, to

help them move from their previous passive role to a new proactive one, serving the ranks of the unemployed and meeting the demands of local entrepreneurs for manpower. Labour ministries are adapting to their important new role of identifying the demand for skills development and providing proactive training policies, in order to avoid the paradoxical situation of simultaneous unemployment and skills shortages. Phare assistance and results Phare has had substantial involvement in and impact on the early transformation of the labour markets in the CECs. Assistance appears to have been extended in two directions: institution-building at national and local levels introduction of innovative schemes to promote new thinking at local level on local employment problems. Phare programmes often worked in a complementary fashion with those of the World Bank to strengthen the capacity of the ministries of labour for strategy and policy development and for database development and analysis. At local level, Phare programmes assisted in the development of new local development initiatives. A programme in Poland was complex, but according to an evaluation report it was successful and had a widespread impact. Not only did it create activities leading to training and employment but it also had substantial institution-building impact. Local Development Committees were set up in 15 communities with high unemployment, involving the voluntary efforts of over 500 local people. Phare extended grant schemes for the implementation of employment initiatives and socio-economic development. Fifty-six projects were implemented by the Local Development Agencies. These agencies have been sustained after the end of Phare involvement, with funding from other sources. Phare has also assisted in making local labour markets more efficient by reorienting the functions of the local labour offices and by the provision of equipment and training. Less well known is Phare support to develop the new core of trade union leaders and entrepreneurs through the provision of study visits to counterparts in the Union, training in negotiations and organisation development. While the main objective of these actions was to promote social dialogue, they also had a direct influence on the operation of labour markets. The impact of Phare interventions has varied. The most obvious impact was on the functions of ministries and, especially, local labour offices. There has been a delivery of new proactive training programmes. The greatest impact of these programmes is on the change of mentality towards addressing unemployment problems and introducing a decentralisation process into the identification of labour market problems and proposed solutions by local authorities. However, while much progress has been accomplished institutionally, according to evaluation reports, the impact that these programmes may have exerted is less clear: on changing labour laws (prohibiting, for example, the use of funds to train those who are not registered as unemployed), or on affecting the environment in which those trained will have to function (for example, access to working capital by the newly trained so that they can start a small business). Even more difficult is an evaluation of the impact and sustainability of new processes that have been introduced by Phare programmes (see box 5). Box 5: Proactive Labour Market Intervention Republic Fund in the Czech

Phares Proactive Labour Market Intervention Fund (PALMIF) was launched in the autumn of 1992. At that time, the Employment Services Administration was newly

established. Its staff in the Ministry and local labour offices had no experience with labour and employment issues in a free market economy. Further, there was little, if any, belief in decentralised decision-making or in local participation in programmes. The immediate goals of PALMIF were to develop policy, tools and institutions to support employment and labour market efficiency and to fund projects that were proactive, innovative and local. While PALMIF trained disadvantaged persons that could not have been reached otherwise, it had a much wider institutional impact. Under PALMIF, not only has decentralisation been gradual, but it has also evolved according to Czech design and decision-making. One of the most innovative aspects of the programme has been the process itself, because it allocated funding based on project proposals and because it decentralised authority. As a result, while PALMIF started as a tool applied to the Employment Service Administration (ESA) to encourage proactive policies, PALMIF has now become the tool of an ESA that seeks to advance its proactive agenda. Source: Evaluation report by the OECD Local Economic and Employment Development Programme (LEED). Capital markets The creation of markets where ownership titles can be traded has attracted attention. On the whole, their development has been intimately linked to privatisation, especially the mass privatisation process. Although the trading activity of some emerging markets has gained headlines, they are all still in an embryonic stage. Capital markets are supposed to provide another option to business financing. However, given the limited resources available in most of the CECs economies, these markets have not yet played a major role in the mobilisation of capital. Phare assistance and results This is an area in which substantial bilateral interest and assistance has been extended. As a result, direct Phare assistance programmes have been limited in number and scope. They have included technical assistance for the development of the legal and regulatory framework, staff training and some equipment. The biggest programme has been that in support of the Polish Securities Commission and the Polish Stock Exchange. Phare has also responded to a small number of requests for technical assistance in other parts of the financial sector, such as leasing and insurance. It should be noted, however, that while direct Phare support has been limited in this sector, much assistance has been extended indirectly for the development of capital markets, through Phare support to mass privatisation programmes that included the preparation of companies for public trading in primary and secondary stock exchanges.

Chapter 5

Rolling back government involvement

With the transition to decentralised decision-making and ownership rights, the role of government changes completely. Whereas before transition, government action reached down to the level of individual economic and political decision-making, with civil servants, politicians and enterprise managers amalgamated into a single hierarchical structure, the transition to a decentralised society should reduce government

interventionism. However, this does not imply that government is absent from individual decision-making. It sets and enforces collective rules and regulations that enable individuals to interact efficiently, and creates a stable economic platform that is conducive to private economic decision-making. It should do so in a predictable way, in accordance with the democratic mechanisms foreseen in a constitution, minimising uncertainty, transaction costs and discretion by officials. In this section, we will start with an examination of Phare support for general public administration reform. The aim of this support was to create a professional and modern civil service. The decentralisation of power to regional and local administrations also plays a role here. Reducing government interventionism finds concrete applications in fiscal and monetary policy, where macroeconomic stabilisation becomes the main policy target rather than detailed interventions in microeconomic decisions. While economic stabilisation programmes were mostly run by the IMF and the World Bank, Phare delivered some essential inputs into the institutional reforms that underpinned stabilisation efforts. Finally, we will look at Phare support for statistics and customs reform. 5.1. Public Administration Background In the centrally planned regimes, all economic activity was defined by law. With volumetric output targets legally binding on the workforce, the law also played a control function. The enactment of many of these laws implied that the targets would be reached, since penalties existed for failure to do so. In the new democratic regimes, laws define the framework for activities and the rules of action. What is also required, but is often absent, is the corresponding development of structures and skills to implement the legislation, the preparation of clear and simple rules and regulations that limit diverse personal interpretations among civil servants, and the consistent application and enforcement of laws, rules and regulations. The gap between formulation and application of law has persisted; strengthening application is accordingly one of the major objectives of the more recent Phare programmes. For an effective and sustainable transition to a market economy, the performance and ethos of public administration must go through a re-engineering process itself: from controlling, it must increasingly become decentralised, fostering the development of local government and civil society. From directly steering the economy, it must move to indirect economic management whilst cultivating a market mentality. The civil service must be transformed into a politically neutral public corps that is development- and service-oriented, and is responsive to the needs of the market economy. This, in turn, requires civil service statutes that protect civil servants from political pressures, and new organisational and managerial arrangements within ministries. Successful transition implies a change in attitudes and culture which cannot be introduced by law. The change in public governance can, however, be achieved with a combination of institution-building, training, exposure and example. The commitment to and progress in modernising public administration among the CECs has varied. In some cases, it has not complemented the progress in economic reform (Czech Republic). In other countries, in the absence of uniform concepts and a long-term strategy, reform has been incremental. The Baltic States showed a greater zeal for reform, as they had an immediate desire to change the inherited Soviet administrative system. Latvia and Lithuania established special ministries to handle the modernisation of the public sector. Latvia was the first country to introduce a new civil service law. Although Latvia was followed by a few other countries (such as Lithuania in 1995 and

Poland in 1996), many CECs have not yet addressed this need. Most CECs took initiatives to upgrade the skills of civil servants through the provision of in-service training. Some created training institutes for that very purpose. Phare assistance and results Most of Phares interventions in this sector have institution-building components for public administration reform. Several have been discussed in previous sections of this report. Phare programmes have also specifically focused on certain segments of public administration and improvements in governance. An independent overview indicates that, in the 1990-1996 period, there were more than 220 Phare projects or components of projects dealing with public administration including European integration, rising in value from 0.4 per cent of annual Phare commitments in 1990 to 12.1 per cent in 1996. Half of the programmes dealt with central government and only about 7 per cent with local government. The rest were programmes extending support to areas pertinent to European integration, such as the approximation of legislation. Innumerable examples can be given from various Phare programmes across sectors where institution-building, training and equipment have been provided to support structural changes and the improvement of the performance of public administration. Some of these programmes have targeted improvement in general public administration, by supporting the development of civil service legislation, improving the performance of specific departments and providing training for civil servants. A concurrent objective has been convergence of the legal framework to that of the EU. Other programmes have promoted local (regional) socio-economic development, seeking decentralisation of decision-making by developing both initiative and operational capacity at the level of local communities and non-governmental organisations. In these cases, Phare programmes provided technical assistance to local communities to develop local development agencies and, through them, local development programmes. Assistance focused on training local officials and on micro projects such as local social policies, intercommunal cooperation and rural development, with funds also committed to small infrastructure projects. Conferences and seminars were also organised with many objectives: to provide a forum for various viewpoints on the relationship between central and local public administration; to provide other types of working inputs that could be used to develop improvements in the legal framework; to promote the dissemination of information on local success stories to other communities. In more detail, the activities supported in Phare programmes include (with some country examples): training programmes in most countries; developing informatics policies for public administration (Estonia, Hungary); studies and assistance for decentralisation of government and local government development (Bulgaria, Estonia, Latvia, Poland, Romania); assistance to associations of local governments (Slovakia, Romania); support to improve public procurement (Latvia, Poland); assistance to State Audit Offices or Court of Auditors (Latvia, Romania); restructuring of ministries (Poland, Romania); support to various offices like Inventions and Trademarks, Standards, Metrology, etc.

Evaluation reports exist for two programmes which are devoted exclusively to improving general public administration: the Public Administration Reform and Training Programme in Hungary (see box 6) and SIGMA (Support for Improvement in Governance and Management in the central European countries). The latter is financed by Phare and administered by the OECD. Box 6: Public administration reform in Hungary In 1992, the Government of Hungary began the process of modernising the public sector. A series of laws and government decisions were enacted defining the legal status of civil servants and setting the framework for human resource and institutional development in the sector. No strategy for the development of public administration existed at that time. The Phare Public Administration Reform and Training (PART) programme of 5 MECU commenced in 1992 and was completed at the end of 1995. Under the programme, over 300 civil servants were trained, including a group of trainers; a wide range of positive experiences was obtained in the modernisation of local government with the implementation of six network (information exchange among groups) and eleven pilot projects (in intermunicipal cooperation, human resource management, financial and property management and other areas); development of an IT strategy for special areas within four ministries; and, reports were prepared on IT strategy development for local governments as well as an overview and evaluation of the use of IT in local government. This was the first completed Phare public administration reform programme. The evaluation report states that each component addressed its stated objectives and in most cases fully achieved the intended output. The completed training programme prepared a corps of officials who were presented with alternative concepts and ways of working and through whom future changes in public administration can be delivered. While the programme delivered the outputs, the use by the government agencies and the local governments of the new skills, the pilot results and the IT reports lagged behind. For example, at the time of the evaluation in mid-1996, those trained in human resource management were not being used in their agencies. Similarly, trainers were trained, but there was no coherent system to exploit their newly acquired skills. Source: Evaluation report of Public Administration Reform and Training programme in Hungary. The SIGMA programme was established in 1992 to assist the CECs in the design and implementation of public administration reform. Through the maintenance of a core staff and networks of experienced professionals, it has concentrated assistance mainly on a few individuals in each country who form the cells for public administration reform. The assistance consists of in-country and multi-country seminars, provision of advice for the drafting of laws such as the civil service law, or making literature available. An evaluation report notes the contribution of SIGMA and how well it is received by the individuals with whom it interacts. However, it also suggests that more emphasis should be given to developing strategies so that SIGMA can expand its impact beyond the limited direct beneficiaries mentioned above. It also recommends that SIGMA give more emphasis to jump start long-term assistance programmes and actively contribute to mobilising resources and coordinating Public Administration Reform assistance inputs. Assistance to SIGMA should be leveraged with other public administration programme inputs by Phare or other IFIs.

Two evaluation reports on Phare regional and socio-economic development in Poland highlight the contributions of these programmes at local administration level. In one of these programmes, local development committees were set up in 15 communities, involving the voluntary effort of over 500 local people. These committees have continued their work after the end of Phare funding, funded from other sources. The evaluation report points out that this support for local development in a non-directive manner, allowed development of capacities for local self-determination and that many outstanding local leaders emerged from the process of strategy and programme formulation and implementation at local level. The evaluation report on the Polish programme for regional development indicated that the small infrastructure project component not only helped to meet the urgent requirements of local communities in such areas as water supply, sewage and telecoms, but that it had a confidence building impact on the local authorities: their experience helped them realise that they could successfully identify and carry out investments for the area they covered. Many of the Phare programmes have strengthened the capacity of public administration training institutes to provide training to civil servants. Rather than reinforcing a monopoly position in training, the evaluation report on Hungary recommends the use of private sector training providers and that future support should be oriented to local training institutions not only to deliver training, but also to design future programmes and change their content as appropriate. Some of the weaknesses of the training programmes are that many of them are not based on needs assessment studies, linked to the reform of the functions of public administration, and that the effective use of trained staff and trainers is not assured, as noted in the evaluation of the programme in Hungary. Phare assistance for public administration reform was highly relevant in the CECs reform process. In some cases, Phare inputs were catalysts for discussion and action in an area where a centralisation mentality has continued to dominate, a legacy from the past. But the effectiveness of this assistance has suffered from a number of factors. In most countries it has been difficult to develop a cohesive long-term plan of action for reform in public administration in the absence of an effective local interlocutor. There is a need for more coordination among donors, so that different successful individual projects do not become islands (according to an evaluation report), but are embedded in more comprehensive horizontal programmes. The link between the approximation of laws with the EU and the reform of public administration has not been strongly acknowledged. Finally, as one evaluation report noted, despite various assistance programmes, overall performance of public administration in the CECs has not improved. Lack of management skills and qualified personnel pose the most serious bottlenecks to a sustained improvement of administration performance. 5.2. Fiscal Policy Background With the changes in the regime of asset ownership, the public revenue base (profits from firms) and the expenditure objectives were completely changed. Governments had to revamp completely their systems of public finance, introducing new instruments of taxation and new categories of expenditure. At the same time, severe pressures developed in the area of fiscal deficit: the reduction of economic activity lowered tax revenues, while the liberalisation of prices and political interests increased pressure for more consumer and enterprise subsidies. Phare assistance and results With the overall objective of strengthening government fiscal capacity and performance, the Commission, through Phare programmes, provided a wide range of assistance,

helping to enhance revenues through new sustainable instruments and to rationalise public expenditures. Assistance in this area of macroeconomic stabilisation was often extended in collaboration with other institutions such as the IMF. A major priority for most countries has been to introduce tax reform. The biggest impact of Phare programmes in this area has been registered through assistance to introduce VAT legislation and to implement its introduction in most of the CECs. Phare support included technical assistance for the preparation of the legislation and associated rules, regulations and procedures, and the financing of related equipment and public education campaigns. In addition, there has been parallel assistance to the ministries of finance to build up internal capacity and become more effective, through the reorganisation of services, staff training in new processing and auditing activities and the provision of equipment. The results and impact of these Phare interventions can be seen in how quickly and effectively these measures took hold. VAT collection immediately became one of the top revenue sources of the governments, thus addressing the problems of fiscal deficit and promoting economic stability. Another major contribution of Phare was its assistance to develop and introduce new company accounting systems in many countries. Phare financed technical assistance and equipment, related accounting training (through professional associations and the ministries of finance) for the introduction and application of the system, and related publications. Various problems and delays were encountered, but the task has been successfully completed in those countries where it was undertaken. It contributed not only to bringing these countries closer to western accounting systems, but also to developing acceptable accounting standards that could later be used across the economy for the valuation of companies and financial management. On the expenditure side, Phare assistance was limited and spread over different activities. The focus was primarily on strengthening systems and resource management, but initiatives differed in various countries depending on other available technical assistance, especially from the IMF and bilateral agencies. Phare programmes included support for improvements in budget management, budget accounting systems, Treasury operations, IT development for the ministries of finance, etc. Some programmes also attempted to help governments develop investment criteria and a system for public investment prioritisation. The preparation of Public Investment Programmes (PIPs) in the Baltic States has now been institutionalised in the budget process. In the case of Romania, a Phare Programme financed a study for the reorganisation of the Ministry of Finance and Economy. While a foreign consulting team was working at the technical level, the Ministry was split to accommodate political considerations. Important lessons learned from these experiences were that government ownership of such initiatives must exist before technical assistance can be committed. 5.3. Monetary and financial policies Background On the monetary/financial front, many visible changes have been registered. Progress has, however, been uneven. In all countries the central bank assumed new functions, equivalent to those of their counterparts in the European Union. In most countries, the central banks reflect some of the strongest institution-building accomplished. The central banks gradually introduced new monetary policy instruments and prudential regulations. They quickly became adept at implementing the former and for the most part have been in the forefront of transition, leading their economies along the path of stabilisation within the framework of IMF standby arrangements.

Where the development of the system lagged was in the application of prudential regulations. Weaknesses in this area often prevented the central banks from anticipating bank failures, thus avoiding or at least containing the subsequent damage such failures inflicted on public confidence in the banking system. A major challenge to the authorities has been to improve the performance of state-owned banks. Since in many countries these banks continued to dominate banking in certain activities and sectors, improvements in their management and performance were important not only to make them more attractive for privatisation, but also to make them effective participants in the application of monetary policy. The financial sector is not only one of the most dynamic sectors in the economy, it is also pivotal to the development of the economy. Its diversity of services and increasing sophistication must respond to the changing needs of the economy. New banking practices, instruments and technology must continuously be imparted to banking staff. Continuous training for banking staff is a top priority for each bank and for the sector at large. Phare assistance and impact The banking sector is one in which Phare has had substantial involvement in all countries. The main objectives have been to support the development of the sector and to shore up its contribution to the reform process. Phare assistance was extended to: the central banks (all countries), especially to strengthen supervisory capacities commercial banks (most countries), strengthening them institutionally through strategic and diagnostic studies, expert assistance for management development, strategy development, reinforcement of credit departments and human resource development, and also helping in their restructuring (some countries) banking training institutes and training activities (in almost all countries). According to an evaluation report on Poland and an assessment report on Lithuania, Phare supported government efforts to use the sector as an agent of change within the economy. Major assistance programmes were extended almost on an annual basis. In other countries, Phare inputs were spread over a number of more discrete and selective activities, often complementing other assistance programmes. Hence, on the contrary, results were obtained but the contribution was marginal both in resources and impact. Given the immensity of the problems, Phare was requested to provide assistance in the development of supervisory capacity. The acquisition of sophisticated banking supervisory skills and experience requires continuous practice and assistance over a long period. Assistance to enhance supervisory capacity was extended to central banks (such as in Latvia, Czech Republic, Bulgaria, Lithuania, Slovakia, Romania) and to a bank supervisory agency (Hungary). Support to the central banks also extended to other areas affecting the efficiency of the banking system at large: payments and clearing mechanisms (for example, Hungary, Poland, Slovenia), IT systems (Czech Republic), and the development of an accounting system for banks (Lithuania, Romania). Where assistance was extended on a short-term basis, its impact was limited: regulations, systems and practices may have been developed and left in place by the experts, but the impact of the assistance can only be considered in the context of their actual use and application. Support to the commercial banks has taken different forms. For the first time, diagnostic studies and strategic plans introduced the bank management to new techniques of financial management and strategy development. External audits, initially financed by Phare, demonstrated the value of such activity to the bank management, who have subsequently financed them from the banks own revenues. Assistance for bank

restructuring was extended to a number of countries, either to the banks directly (Hungary, Poland, Lithuania) or to the state Bank Restructuring Agency (Slovenia). Various advisers were posted in individual banks to improve the banks know-how in credit analysis, credit monitoring, treasury management, assets and liabilities management. Other areas of advice included the development of bank expertise in business planning, in strategy development and on some occasions to assist in the preparation for the privatisation of the bank. One of the most important contributions to institution-building has been Phares support to national banking training institutes (Hungary, Romania, Bulgaria, Poland, Czech Republic, Lithuania). Training assessment studies were undertaken in these and other countries. These became the blueprints for the development of the institutes activities or of separate training inputs. In Romania, the assessment study was used for the coordination of donor aid to the Romanian Banking Institute. Phare programmes also supported training within banks, either through special courses, such as in credit analysis, or through delivery of specialist assistance with the advantage of on-the-job training. Given the extensive needs of the sector and its immense absorptive capacity for technical assistance, it is not surprising that Phares assistance was highly relevant and had substantial results in most cases. It is, however, difficult to evaluate the impact of specific outputs at any point in time, given the dynamic development of the sector, and the fact that the banks are being buffeted by a series of other shocks exogenous to Phares interventions. For example, the expertise provided to strengthen supervision may have filled an important void at the time it was extended. However, where does the blame lie if at some later stage the supervisory department of the central bank is not able to identify and act on bank prudential regulation violations? Particularly if this leads to a collapse of the banks and an undermining of confidence in the banking system, as happened in several countries? On the other hand, the Commission offered Phare funding to provide technical assistance to the central bank of Bulgaria to strengthen its supervisory capacities, but the offer was not accepted. The impact of Phares interventions and their sustainability can be seen in other cases: the national training institutes have radically changed banking training; the institutes have expanded their operations, while increasing their own revenue base as well as their reliance on local trainers assistance to introduce the concept of human resource development in the personnel departments of banks laid the foundations for the reorganisation of these departments and their request for additional assistance (Romania) finally, the impact and sustainability of such systems as clearing and payments, IT, etc. are evident in the general improvement of the operation of the banking system and in efficiency gains. Among the many Phare activities in this sector, a number of them were not effective. A sub-sector where Phare programmes had marginal impact or none at all was the assistance to banking associations (Hungary, Romania), primarily due to a lack of receptiveness. A different example, at the bank level, is the case of assistance to the Romanian Development Bank. The legal framework for bank privatisation in Romania had not changed and it remained incompatible with activities scheduled under the Phare Programme. 5.4. Assistance to customs and statistical services Two public administration areas that have received much attention from Phare are statistics and customs services. In fact, Phare programmes have financed the majority of

activities in these areas. Implementation has been channelled largely through Eurostat and Eurocustoms. Compared with other public administration services, here it is relatively easy to define the requirements for upgrading standards and procedures and the improvement of technical capacities. The objectives of Phare programmes have been to modernise both services and bring their systems and procedures closer to European standards. Assistance was extended in the context of the national programmes as well as through two regional multi-country programmes. Programmes covered all countries but evaluation reports are available only for the Baltic States and Poland, and for the regional programmes. A global evaluation of Phares assistance to customs services is currently underway. The national programmes included both equipment and training. The regional programmes provided technical assistance only. Performance indicators were identified after 1994, but, according to the evaluation report, these were cast in very general terms not lending themselves to measurement. Statistical services The work of EuroStat is invaluable. Together with the statistical offices of the Baltic countries they drew up Country Strategy Papers. They produced the Statistical Requirements compendium for all CECs. Despite this, evaluation reports mentioned that national programmes supporting the development of statistical services were not drawn up in the context of any strategic plan for the development of the services. In small countries, like Latvia and Lithuania, where annual programmes are small, allocations for hardware and software have been determined each year since 1992. As the evaluation report notes, these allocations were arbitrarily determined and the contractors had to suggest what systems and software ought to be bought each year. Clearly a more efficient system would have been to determine the long-term needs required to reach certain objectives, and to use the annual allocations (as dictated by the limitations of the national programme) for purchases. The regional statistical programme was designed primarily to seek improvements in the harmonisation of data development and reporting, and to promote an exchange of information and experience among the statistical services. The programmes had both qualitative and quantitative impact in all countries. The training programmes were sensitively adjusted to the needs of each national service and they had a direct impact on upgrading the quality of the statistics and the coverage of the sectors. The number of published reports has increased and substantial changes have been introduced in their content. Much of this success is attributed to the synergy of efforts on the part of the statistical services in the partner countries, Member States and Eurostat, and to the staff continuity that has prevailed both in the project management units in the countries and in Eurostat. The evaluation report, though, raises questions about the sustainability of the impact of the upgrading of both equipment and software in the Baltic countries. The annual renewal of software licences and the maintenance of equipment will require budgetary resources that were previously not available. Customs With regard to the customs programmes, both equipment and training were provided. In the case of Poland, a needs study had been undertaken to specify the equipment requirements for the service. The main objectives of the regional customs programme were to help the countries prepare customs legislation (a new Customs Code) compatible with EU legislation, train staff to facilitate the introduction of new customs documents and procedures, and help with the computerisation of customs offices in some countries. The assistance was extended through the provision of technical expertise, training and

short visits to customs administrations in the Member States. The programme was executed by Eurocustoms, a consortium of the customs administrations of the EU Member States and EFTA. Most objectives were generally met in both the national and regional programmes. Over 600 customs officials visited EU customs administrations; 60 per cent of them went to Germany and France. Compared with support to the statistics services, achievements lagged due to the more sensitive nature of customs services compared with statistics, a high staff turnover and less effective organisation both at country and Eurocustoms levels. An evaluation report indicated that it would have been more effective if Eurocustoms had established a permanent team of experts to provide the assistance needed.

Chapter 6

Restructuring the economic base

This chapter deals with the long-term investment and development-related problems of the CECs, which are to be distinguished from the institutional reform issues related to the transition process. Even without the institutional transition, the CECs would have had to address a number of problems related to insufficient investment in public infrastructure and human resources and an almost total lack of private sector investment in productive assets. 6.1. Private sector development and investment Background Private sector development is enhanced by privatisation, but it is driven by an environment that allows the entry and growth of new companies through domestic and/or foreign investment. The dramatic growth of new companies, mostly SMEs, attests to the dynamism and creativity of the private sector in these countries. In Poland there are about 5 million owner-operated businesses. In Slovenia, there are 59 enterprises per 1000 head of population, second to Ireland if compared with EU statistics. With a few early exceptions, mostly in the Visigrad countries, the recognition of the pivotal role of the sector as an engine of growth, as an effective solution to the inevitable unemployment problem and as a potential profit centre for the banks has been slow. In most countries, the legacy of the past heavily influenced public attitudes to the private sector: centrist and control tendencies, suspicion and lack of trust, ambiguous rules and arbitrariness, and inconsistent interpretation of these rules. Further, the culture and experience of dealing with big state-owned companies, within the safe confines of the previous state credit plans, decidedly biased the state-owned banks in the orientation of credit allocations. They were both unwilling and ill prepared to meet the emerging requirements and challenges posed by the private SMEs. In many countries, actions or coherence in the measures taken to address their needs (legal, administrative, fiscal, financial) have not matched government rhetoric on the importance of these companies to the economy. There is still a lack of an effective force lobbying for the interests of this dynamic sector of the economy. The growth of the private sector in many countries attests more to its resiliency and creativity, as it has taken place in spite of practices that have not been conducive to its development. Among the CECs, foreign investment has been the highest in Hungary and the Czech Republic. This partly reflects the privatisation policies in those countries. In Hungary, for example, many enterprises were offered in cash sales to foreigners. But equally important

incentives for investment are the local economic environment, the consistency of economic policies and the marketing abroad of opportunities in the country. Phare assistance and results A large number of Phare programmes have supported SME development and the promotion of investment, exports and tourism. SME development Phares objectives regarding the development of SMEs were multifaceted, and in most countries took the form of a combination of elements: creation of new national support institutions and support to ministries for strategy and policy development stimulation of local initiatives (including the setting up of new local development agencies in the context of regional development programmes) creation of a large number of regional business consulting and other support centres a variety of financial support schemes support to entrepreneur associations and to entrepreneurs themselves through study trips. Evaluation reports of SME programmes point out the schemes had a multitude of objectives which were articulated in a very general manner. Specific targeted outputs were rarely stated, making an evaluation very difficult. For example, the evaluation report on the programme in Slovakia states that the objectives set for the Phare Programme are sufficiently general that in many cases it is hard to assess whether they may have been successful or not. Further, the lack of policy objectives is a hindrance to making an assessment of the instruments. In most cases, Phare assistance for SME development has been extended in the absence of country strategies for SMEs. The exception is Hungary where not only was such a strategy articulated as early as 1991, but the agency created was well resourced by the government and its board consisted primarily of individuals from the business sector. In Hungary, Phare resources for SMEs were matched by the government. As a result, Phare assistance there reinforced and strengthened government policies. This Phare Programme was among the most successful in the sector and had a significant impact. For the rest of the countries, in the absence of a country strategy or national consensus, the results were mixed. In Slovenia, for example, in the absence of a national consensus on SME policy, the authorities focused on constructing rather complex central and regional institutional structures, rather than on delivering direct support to SMEs at the local level. Phare programmes encouraged the development of new institutions that would play a proactive role in the development of the SME sector. At the centre, a major preoccupation was with creating agencies that would help in the organisation of the sector, lobby for it and also provide support to regional initiatives. In the regions, the main focus was on direct support for SMEs through a number of instruments, such as consulting services, training and credit lines. Central institution-building met with mixed success, as it was very difficult to introduce new concepts and ideas. A true lobbying force for SMEs is still lacking in most countries. A positive experience was in Slovakia where, according to an evaluation report, the SME Agency is also involved in policy preparation and policy development. Important policy documents like the SME Act and a State Support Programme were drafted by the Agency. Local SME support centres

At regional level, a series of SME support centres were created with Phare assistance in almost all the CECs. These were designed to address some of the main constraints in SME development: information on the market and on the legal and regulatory framework; lack of knowledge in marketing, management and other technical matters. In essence, Phare programmes helped create in many countries an SME support network to address these constraints. Other assistance, especially bilateral, has complemented this effort. Support centres have been very successful in most countries and, according to evaluation reports and observations, have played a positive role in the development of local economies. They mainly consist of small lean offices, with two to four enthusiastic and often young individuals committed to serving SMEs. However, much improvement is needed in the availability of their skills and their work practices. Evaluation reports suggest that the centres should use more research and needs analyses to determine their services. Regional support for SMEs Schemes that involved SMEs in the context of regional development programmes were quite successful. Some of these programmes addressed the needs of the poorer regions of a country. Others supported the conversion of important local industries in the context of regional development. In Slovakia, for example, the conversion of the armaments sector (under a Phare-supported privatisation and restructuring programme) was centred on a region where Phare also supported a regional development agency, a regional investment fund (with EBRD management assistance) and other actions targeted at SME development. Much reference has also been made to the successful implementation of a 42 MECU scheme in the context of a regional development programme in Poland (STRUDER programme). At that time, bank credit was tight in Poland and borrowing costs high. It is striking that 40 per cent of the SMEs which applied for funds in six districts supplied, on average, more than 50 per cent of their own funds to make up the financing, compared with the 20 per cent anticipated in the Financing Memorandum. The evaluation report concluded, on the basis of interviews with SMEs, that an additional contribution of the Phare Programme was to bring forward, in terms of time, the investment that these companies were contemplating. Financial support for SMEs A single programme often included a variety of SME credit schemes: micro loans, small loans, guaranteed funds, lines to buy imports, lines to buy equity in SMEs, etc. Substantial amounts of resources were made available to SMEs at a time when they had no real access to bank credit. No information exists in the evaluation reports on the record of debt servicing. Funds in early equity schemes were not utilised and the available amounts were reallocated to other credit lines (Poland). In many countries, the impact of financing schemes was blunted by the reluctance of the banks to participate, a factor that could have been identified if more preparatory and design work had been undertaken earlier. Much preparatory work is also required before deciding to allocate funds to certain schemes. The evaluation report of the Phare SME programme in Slovakia states that a targeted grant scheme may be a better way of addressing the poor gearing of many SMEs than an equity scheme, given that most SMEs are not incorporated and the capital market is undeveloped. In many countries, the impact of the financing schemes was affected by the reluctance of the banks to participate because of small interest rate spreads, lack of desire to change practices at branch level to accommodate programme needs, and so on. Again, these are problems that could have been identified if more preparatory and design work had been undertaken. Funds that were placed with central government authorities were not

disbursed, as in the case of the Ministry of Industry in Bulgaria, which sat on the SME fund for two years with zero disbursement. The recommendation of the evaluation reports is to place these funds with independent organisations outside the public administration structure. General experience with both Phare and other agencies is that schemes designed to bypass the centre lead to a faster filtering down of funds to enterprises. Phares presence in SME development in the CECs has been very relevant to the reform process. Phare programmes have introduced new processes and institutions for SME development and have extended support to SMEs on an unprecedented scale. They are sowing the seeds of change, the impact of which cannot be evaluated in the context of one programme over a determined and short period of time. For example, according to one evaluation report on a programme in Hungary, Phare assisted in the development of a Local Enterprise Assistance network, providing about 100 contact points for start-ups and SMEs. In 1993, it is reported that 41,000 entrepreneurs contacted these centres seeking advice on such matters as legislation, finance, marketing, trade, planning, innovation, foreign investors, etc. Concurrently, a substantial annual training effort was undertaken at national and local levels with 6,300 entrepreneurs participating in the various training programmes. The effectiveness of the Phare programmes would have been enhanced with more preparatory work. An evaluation of the SME scheme in Bulgaria says that the programme was too ambitious to start up with basic legislation and supporting institutions not in place, banks reluctant to lend to SMEs and the responsible ministry not prepared for its tasks. In other cases evaluation reports point out that allocations for SME programmes were arbitrarily determined and contractors were subsequently asked to find relevant ways to distribute resources. The programmes had a significant impact on institution-building and on developing and promoting local business consulting centres, while also enhancing local links and local development. The evaluation report on the Polish regional development programme points out the contribution of the programme to increased networking between the SME sector and local/regional institutions, such as the regional development agencies, the banks, the business support centres and the chamber of commerce. The sustainability of support There are certain problems relating to sustainability. Programme designs did not address from the outset the issue of the sustainability of the business centres. Once these centres became operational, their continuation was secured by obtaining funding through a follow-up allocation within a Phare Programme for private sector development. The evaluation report on the Phare Programme that helped put into operation 32 business centres in Poland by the end of 1994, states that only 5-12 per cent of total costs of the activities of these centres were financed by revenue from clients, with some of the host organisations also supporting the centres (payment of rent, telephone). While a few centres can become self-sufficient by raising fees and/or diversifying their services, the question of sustainability is being raised almost at the very end of the availability of Phare funds. Another issue related to sustainability is that of the credit lines. While making financial resources available to SMEs in the poorer regions was the objective of the many and various credit schemes, emphasis on committing these resources may have deflected attention from designing credit schemes that would be viable over a longer period of time, beyond the end of the Phare Programme. The issue here is in the terms of the loans. Attracting the interest of IFIs in such schemes to improve programme sustainability did

not prove feasible, mainly because of the grant and subsidy nature of Phare funds. This raises a related issue, that of market distortion, at a time when efforts were being undertaken to cultivate a market mentality and healthy borrowing practices. Investment, export and tourism promotion Phares support of private sector development has also taken the form of supporting investment and export promotion in the CECs. These two areas have some similarities: development of strategy and policy formulation, development of institutions to promote these policies, and preparation of related materials. While Phare did combine its allocations for investment and export promotion within the same programmes, these activities were not necessarily undertaken in common in the countries themselves. Foreign investment Foreign investment agencies were established with Phare assistance in all the CECs with the exception of Latvia, where the agency was established with support from the UK Know-How Fund. The agencies in the Czech Republic, Hungary, Poland and Slovakia have been extremely active, although not equally successful. As a result of these programmes, in all countries sharp improvements can be seen in the materials used for promotion, in the quality of staff in the agencies and in the improved performance in international trade and investment fairs. However, as is noted in some evaluation reports, it is not possible to link all the specific investments to the outputs of these agencies, in view of the long gestation period that exists between an initial contact and the realisation of the investment, and the intervening factors in between. One of the most successful investment agencies is CzechInvest, which was established in 1992 as a post-privatisation agency. While Phare provided the initial financing for institutional development and the opening of two foreign offices, the Ministry of Trade and Industry recognised the contribution and future potential of this agency by increasing its annual funding. While the role of investment agencies is important, investments cannot be attributed directly to the effectiveness of their work. For example, the work of the agency in Slovakia is well regarded, according to an evaluation report of the programme, but its success rate in terms of contacts-to-contracts is very small. This is attributed to a lack of consistent policies and to contradictory statements from senior government officials regarding privatisation and the role of foreign investment in the country. Supporting export promotion Export promotion programmes have also made their mark. Here it is equally difficult to establish a cause and effect relationship between the work of the agencies and increases in exports. An evaluation of the export promotion programme in Poland states that, according to local estimates, about 1,000 companies have benefited to some degree in terms of participation in training and management courses, and a further 200 companies have been given detailed technical assistance and extensive financial assistance to draw up and implement export development plans. The same evaluation report finds the programme effective in general, but it also indicates that it has been difficult to define precise, measurable indicators of the ultimate impact of the programme. Tourism Grouped with the export promotion programmes is support for tourism. With Phare support a number of countries have established a Tourism Board or a State Tourism Department. Much assistance has been given to modifying legislation that regulates the activities of operators in the industry. In the Baltic states, certification systems for hotels, restaurants and travel agencies have been established through Phare programmes. Substantial training efforts have been extended to tourism operators. As in the above

case, however, it is difficult to discern an immediate and direct impact of these activities on the volume of tourism and its quality. However, some of the results of the programmes can be seen in the improved quality of both the marketing efforts and the organisation of the tourism trade in several countries. 6.2. Restructuring agriculture and the rural economy Background The importance of creating a private agricultural sector transcends the narrow limits of the sector, and influences the operation of industrial and tertiary activities upstream and downstream. In certain countries, stimulating economic activity in rural areas and providing employment, mainly in regions affected by industrial restructuring, have been important and difficult policy tasks. The approach to the restructuring of primary agriculture and agro-industry varies considerably from country to country, reflecting both differences in economic structure, and the level of development and progress in private sector activity. Progress in creating a private agricultural sector is therefore uneven. Primary production is mostly under private control in all countries, but a significant part of upstream and downstream industries is still directly or indirectly controlled by the state, adversely affecting private sector development. Despite significant progress towards establishing a private agricultural sector, the CECs are facing important challenges. First, completing reform and creating an efficient food chain is important for the operation of a competitive market economy. Second, in the context of preparing for accession, harmonisation of legislation and adoption of the acquis communautaire in the agro-food sector becomes a task of sizeable proportions. The strategic objective of the CECs in the agricultural sector, although varying according to the importance of the sector in GDP and employment, is threefold: to increase efficiency and competitiveness along the food chain to revitalise the rural economy by diversifying its economic base through links with SME development upstream and downstream to prepare for accession. Overall, much remains to be done in both agriculture and the rural economy, irrespective of its small contribution to the economy. Phare assistance and results In addition to support for privatisation of agricultural land and other agricultural assets and the restructuring of collective and state farms, the assistance extended by the Phare Programme in establishing a private agricultural sector included privatisation and restructuring of the state monopolies upstream and downstream, provision of technical assistance for the preparation of the basic legislative and regulatory framework, and support for undertaking the necessary sector studies. Phare has also supported the creation of an enabling environment for private sector development and of a competitive food chain, by supporting credit and extension services designed to provide assistance to the emerging private farm units. Furthermore, it has supported institutional development, the strengthening of local capacity for policy analysis and the development of a market infrastructure. Phare support to the privatisation and restructuring of agro-industries, although varying from country to country as a result of the demand-driven nature of the programme, has been mostly of a technical nature, such as preparing sectoral plans, elaborating privatisation, demonopolisation and restructuring alternatives for SOEs, and providing management training. The evaluation reports, for example for Hungary and Bulgaria, show that programme objectives were well chosen and assistance was much needed.

However, although projects have generally delivered the technical results expected, impact on the final objective of privatisation and restructuring of the agro-processing industries has been delayed. The report on Bulgaria states that: the government is unable to make the key decisions on privatisation due to social consequences ... As another example, in Romania, although the programme started in 1991, the government has only recently begun to make the necessary decisions. In the Czech and Slovak Republics much of the agro-industry is still controlled indirectly by the state. Extension and rural credit Extension services and rural credit were identified early as key elements for the support of an emerging private agricultural sector, and were included in Phare activities as early as 1991. The design and implementation of activities varies widely from country to country, as does performance. Lack of progress in private sector development and/or lack of sufficient preparation work have made these activities questionable with regard to their design and relevance. For example, the evaluation of the extension project in Poland states that ... selected projects were of small scale selection and design was deficient economic appraisal was lacking in project design ... and, for Romania, that major elements of the policy framework had not been decided before project implementation. Even more glaring is the case of credit lines in Poland and Bulgaria where funds were committed without a delivery mechanism in place. This later led to long delays and a redesign of the activities, not to mention the friction, waste of resources and loss of good-will on both Phare and government sides. There are positive examples too, such as the Rural Credit Guarantee Fund in Hungary, where good programme design, the commitment and support of the government, and a good delivery mechanism led to positive results, strong impact and the sustainability of Phare activities. Support to institutions Institutional development is a major contribution of the Phare Programme in general. Phare support included the provision of TA and know-how for the creation of new institutions for a market environment. Examples of Phare support to institutions are strengthening the Ministry of Agriculture in Hungary (quality control, tests on agricultural inputs, animal health control, etc.) the establishment and operation of a new cooperative base with a good regional focus in Poland Agriculture Ministry restructuring in various countries the reorientation of agricultural research systems. Developing policy Strengthening local capacity for policy formulation and analysis has been particularly interesting. The experience with Policy Advisory Units, although varying by country, is generally good and the assistance is highly appreciated. There are, however, cases where receptivity is low (Czech Republic). In many cases, besides successful routine policy work within Ministries (Slovakia), such units have contributed solid economic analysis of farm restructuring issues (Bulgaria, Romania) and assistance to the legislative process. Many staff members of these units have been trained either formally or on-the-job in western economic and policy analysis. Some immediate results of increasing the capacity for analysis could be directly relevant to the countrys pressing policy issues (for example, analysis of GATT commitments with respect to agriculture was undertaken in almost all countries). Market information services Starting very early, in 1991, Phare also supported the development of agricultural market information services and statistics and market infrastructure in various countries. In the

absence of real markets, up until that time, Phare activities focused on providing resources to study market information requirements for agricultural products, to establish systems for collection and dissemination of market data, and to provide market information to the business community, to farmers and to the wider public. The projects were generally successful in producing the expected outputs and were greatly valued by recipients in partner countries. For example, in Slovakia the market information and statistics project was highly appreciated by the Ministry, objectives were reached and an extension service was provided. A similar project in Hungary produced the expected results, while in Bulgaria, according to the evaluation report, ... technical impact has been greater than anticipated with high demand shown for data produced EBRD has stated they will pay for the data, provided they will continue on a high standard, for the wholesale markets they are planning to privatise. There was excellent support and inputs from the recipient In Romania, however, lack of communication between the contractor and the partner reduced project effectiveness. Overall, the level of effectiveness is high, because of the low cost and strong interest, but the impact on the objective of strengthening market operation is still questionable, in most cases, due to lack of sustainability. Phare phasing-out strategies have not been considered and costrecovery mechanisms have not been built into project design (see box 7). Conclusions Overall, Phare-supported activities have achieved positive results. The projects have delivered their anticipated outputs, but in most cases with considerable delay. Their impact and sustainability have, however, been less profound. Identification of factors that influence project performance and effectiveness in terms of delivery of anticipated outputs is not always easy. Factors leading to successful projects include good technical assistance management, good design and planning, and ownership of the programme by the partner. Elements common to projects that delivered substantially less results than anticipated were deficiencies in management and technical assistance, inadequate design and planning, overambitious targets, and the hesitancy of governments to take key decisions because of adverse social effects. Among deficiencies in project design, the lack of attention to the question of recurrent costs and an exit strategy for Phare is a prominent one. The lack of sustainability of market information activities has been mentioned above. But there are other similar cases. For example, the project supporting a new cooperative structure in Poland ran into problems at the time of the phasing-out of Phare assistance. Similar problems may arise in cases where Phare-supported equipment has to be maintained and replaced. Without proper cost-recovery mechanisms it is almost certain that government budgets will run into difficulties in maintaining and replacing the equipment. Other important deficiencies in project design are lack of adequate attention to delivery mechanisms and organisational structures (see box 7). According to several evaluation reports, inconsistent government policies have adversely affected project performance and effectiveness, despite genuine efforts by project staff at the planning and implementation stage. Political factors have in certain cases been responsible for changes in policies, in particular those involving changes in power structures. Hence, lack of a government policy or a frequent change in policy had profound impact on project performance. Governments have been criticised by some evaluation reports for not living up to their promises to provide space and resources for programme management, and for using inputs provided by the programme for other purposes.

Government officials in partner countries have charged technical assistance with a lack of efficiency, in particular for the amount and quality of technical assistance used, implying that use of local contractors could produce better results. In other cases, contractors were criticised on the grounds that they arrived with preconceived ideas, were unwilling to discuss and compromise, and proposed concepts and structures unsuitable for the partner country. Several evaluation reports mention that technical assistance is generally not appreciated enough and a perception prevails of limited value for money for partner countries. In the case of Poland, however, the evaluation of the 1991 and 1992 programmes comments positively on technical assistance as follows: ... the instrument to achieving the objectives has largely been the provision of TA. The benefits of this are difficult to measure in tangible indicators. What is certain is that such assistance has been important to introducing new techniques and ideas, bringing new perspectives to addressing problems, and in harnessing local initiative which often responded better to outside influence. The widespread use of local consultants has accelerated the development of the Polish consulting business both at regional and at national level, and in many cases has created relationships which continued beyond the length of the project. This has advantages for continuity and sustainability of project initiatives In other countries the experience varies, sometimes even within a country, depending on the level of communication reached between the partner and the contractor. Box 7: Inadequacy of project design An evaluation report on the agricultural extension project in Hungary provides some pertinent illustrations of the lack of proper project design that has led to delays, conflicts, need for redesign and questions about project relevance. The report comments as follows: The impact of the project has suffered from four changes in the extension service delivery policy. It is suggested that the delivery mechanism could be based on different types of farmers associations, the extension (workers could have) been agents of these associations and their costs supported by a minimal consultation fee paid by the user It is implied that, at the time of evaluation, the issue of a proper delivery mechanism has not been sorted out. The Phare-supported Rural Commercial Network project, which aimed at enhancing agricultural trade, is evaluated as follows: ... this potentially interesting but relatively small intervention has been disappointing for lack of proper support from the Ministry of Agriculture, conflicts of interest, poor relations with the ministerial department at large, and most of all fundamental ambiguity resulting from the creation by public authorities of an institution, which is to act as a counterweight to government action. On agro-industrial restructuring: restructuring brings major changes in the distribution of wealth and there are large risks of it being strongly opposed by those segments of the population who, for ideological or personal reasons, want to maintain the existing situation This implies lack of attention at design stage to project risks. On ownership: if the process is not fully backed by the political authorities the technical assistance effort might end up in theoretical schemes and empty structures and also, success of Phare interventions is prevalent in cases where Phare management was able to ensure from conception and project design down to project implementation discussion and consensus between all interested parties and coordination with other relevant departments or agencies Source: Hungary Evaluation of the Impact of the Phare Programme, Final Report.

6.3.

Restructuring the infrastructure sector Transport, energy and telecommunications are an essential part of the productive base of an economy. They needed substantial restructuring of their operations, although they did not necessarily require any change in ownership during the transition process. Efficient energy and transport sectors are a requirement for the efficient operation of a market economy. The legacy of the past has left the CECs with dilapidated and inefficient transport and energy systems using obsolete technologies, with serious environmental consequences. The main challenge for the CECs has been to restructure the sectors operationally and financially, upgrade their technologies, increase efficiency, develop regulatory functions, and develop skills for defining policies and strategies, including institutional and human resource development. The second objective during transition has been to reintegrate the infrastructure systems of the CECs into the western European systems. Energy, transport and telecommunications in the two regions of Europe had for decades been operating with little interaction. The challenge was to reintegrate the two within the development of a wider Europe. Finally, a strong effort to increase public investment was required. Public investment, an important determinant of economic growth and total investment in the CECs, is still substantially below 1990 levels. Its composition has radically changed with the downsizing of government and the reorientation of government expenditure. Investment spending has been controlled in the context of stabilisation programmes agreed with the IMF. At the same time, while other investment picked up in the economy, it has still not reached the mass needed to bring total investment to pre-transition levels. Demands for public investment were made for both rehabilitation of infrastructure as well as new investment. There are also large-scale investments required to upgrade standards to European levels, the most expensive being that related to meeting the Unions environmental regulations. All three objectives have been addressed by Phare activities in the infrastructure sector. The first priority was to provide assistance for restructuring the sector, for developing reform policies and strategies, for increasing efficiency and for introducing financial transparency with respect to impacts on government finances. The second priority involved the link of the CECs to the Trans-European Networks (TENs) in transport, the improvement of border crossings in order to facilitate trade, and the interconnection of energy systems to western European grids. The third priority was to stimulate investment. Phares greatest investment share has been in infrastructure development. While some countries initially benefited from emergency assistance (Romania in transport and Bulgaria in energy), two distinct periods can be distinguished in Phares assistance in 1990-1996: (a) a period of policy, strategy and institutional support; and (b) a period of investment and expansion of the TENs. During the first period, high-level policy advice was provided to develop policies and strategies in almost all countries in various sectors. The common threads of this advice were to develop for the various sectors national strategies, policy options, an appropriate regulatory and institutional framework for the sectors operations in the market economy, restructuring of operators, development of investment planning capabilities, and the upgrading of management, administrative procedures and human resources through training and transfer of knowhow. In energy, additional priorities included energy-efficient strategies and

environmental safety. Evaluation reports indicate that the technical assistance had a significant impact on addressing these priorities. Transport Background The key issues facing the CECs in restructuring their transport sectors were developing policies and strategies suitable for a market environment restructuring the operation of their transport companies developing appropriate regulatory frameworks promoting institutional and human resource development enhancing capacity for investment planning financing investment. Phare assistance and results Phare activities developed over the years 1990-1996 focused on responding to both the needs of the CECs and the policies of the EU, with the aim of bringing the countries of the region into the mainstream of the European economy and society. Besides the initial provision of transport-related spare parts in the case of Romania, transport-related activities within the national Phare programmes evolved gradually, adapting to a changing economic and political context. The specific objectives of the Phare national programmes reflected the main issues and constraints facing the CECs (see box 8). The focus of the first programmes, on institutional support and easing bottlenecks at border crossings in order to facilitate trade, was an appropriate choice. The later shift to more long-term goals for policy and strategy, regulation and institution-building, and increasing local capacity for investment planning, shows programme flexibility and adaptation to the needs of the partner country. While programme priorities and objectives were well focused and appropriate, programme design and implementation has suffered from several weaknesses. In several cases projects were not adequately designed: goals were almost invariably overambitious and could not be achieved; in several cases projects were designed unrealistically (e.g. E20 in Poland); and resources were often spread too thin without achieving concrete results and impact (for example the national programme of Romania). Box 8 : Evolution of a national transport programme in Poland This example drawn from the Phare Programme in Poland shows how Phare support adapted to the changing needs of the partner country. 1991 programme. Emphasis on legislation, institutional reorganisation of the transport sector, formulation of policy options, definition of guidelines for privatisation, review and analysis of road and rail tariffs and costs, and human resource development with training, workshops, study visits, seminars. 1992 programme. Identification of high priority investments to improve transit and border-crossing infrastructure on the Polish-Lithuanian border, financed by the multicountry programme. 1993 programme. Continuation of the elimination of border-crossing bottlenecks and of strategy and policy development. Also, the Warsaw Metro feasibility study and training of Ministry management staff. Co-financing (30 MECU) with EIB, EBRD, and Polish Railways of the E-20 from Kunowice to Warsaw.

1994 programme. Emphasis on investment and on pre-investment technical assistance. Motorways ( A-4 and 11 other projects including A-1, E-30, etc.). Co-financing with EBRD and EIB. 1995 programme. Emphasis on integration of Polish transport infrastructure to EU standards with emphasis on railways. Modernisation of five railway stations on the E-20 line. General TA on aviation law and for feasibility studies. 1996 programme. Investment in A-4 motorway, TA, eastern border infrastructure. Cofinancing with EBRD and EIB.

Almost everywhere implementation has experienced considerable delays. In Poland, delays were attributed by the evaluation report to lack of feasibility studies (in the case of investments), delays in receiving the contribution from the Polish budget, lack of an appropriate level of communication between partner and contractor, and inappropriate planning of activities that were dependent on institutional change. Considerable delays in the implementation of the national programme were also experienced in Bulgaria for similar reasons. Phare assistance was successful in leveraging substantial loan funds for investment. The co-financing of investment (following the Copenhagen decision) is an instrument used to leverage substantial investment by the IFIs. Without Phare funds such transport financing would have been either cancelled or at least postponed for some time. Examples are projects in the E-20 and A-4 transport programmes co-financed with the EBRD and EIB in Poland projects in the M-2, the M-5 (Kecskemet by-pass) the Budapest intermodal logistics centre in Hungary projects in the No. IV corridor and the rehabilitation of E-roads in the Czech Republic projects in corridor No. IV and corridor No. V in Slovakia. Energy Background Since 1989, there has been a dramatic decline in energy demand, especially from the industrial sector. Energy intensity (energy use in the economy per unit of GDP) remains high, however, indicating substantial energy wastage. Other key issues in the sector include the need to diversify supply and address the vulnerability of dependence for energy on one source (in most cases the former Soviet Union) the lack of efficiency of distribution systems and the waste of energy environmental and safety considerations in the field of power generation financial restructuring of power companies more transparency on budgetary effects of the sector. Phare assistance and results Phare activities have supported the restructuring of the energy sector. There are, in addition to Phare, other EU programmes that are assisting the transformation of the sector: the THERMIE and SYNERGY programmes for research and technology development, operated by DG XVII. The Phare Programme has focused on those actions in the sector that have been considered most urgent for the reorganisation of the sector such as energy efficiency, including public awareness on energy-saving issues, on renewable energy demonstration projects and on institution-building, including substantial work on the legal framework. There has been an emphasis on assistance to

Bulgaria and Lithuania, as these countries depend on nuclear energy and there is a need to promote diversification of energy resources. The initial focus of Phare activities was on legislation, regulation, energy saving and price transparency. Later on, moving towards these objectives, the focus shifted to restructuring and market orientation of energy companies. After 1994, harmonisation with EU legislation in the context of the pre-accession strategy was included in the projects that were implemented in the energy sector. A multi-country approach The multi-country energy programme (MCEP), as part of the general multi-country programmes, aims to support the process of economic transformation and democratisation in the CECs, by promoting regional issues of common interest and concern the development of a demand-driven and consensus-based approach to programme formulation and project selection the stimulation of an ongoing dialogue the creation of a more cohesive approach to programme formulation that address supra-national rather than national issues, such as interconnection of energy networks, twinning and training programmes, and energy and environmental issues. However, a very recent evaluation report of the MCEP (January 1997) identifies two main constraints: (a) the diverging philosophy and objectives of DG IA and DG XVII; and (b) the organisational difficulties that emanate from the simultaneous operation of both a national energy programme and a multi-country energy programme. In addition, in the actual implementation of the MCEP, several projects have a national character (energy policy, energy efficiency, renewable energy, demonstration, etc.), while projects concerning pre-accession policy do not, according to the evaluation report, motivate the Phare partners (they are vague and not oriented towards tangible results). The multi-country programmes have generated studies that have improved knowledge on interconnections, with one of them already in effect since November 1995 (CENTREL). What emerges, however, from the evaluation reports is (a) a different philosophy in DG IA and DG XVII operations, with DG IA favouring a decentralised approach and DG XVII concerned about the political aspects of the pre-accession strategy; and (b) organisational difficulties emanating from the simultaneous operation of both a national and a multi-country programme in energy. National energy programmes Among all national programmes, Bulgaria has received the largest share of Phare funds in the energy sector. Phare assistance to the conventional energy sector in Bulgaria over the period 1990-1996 amounts to 75.4 MECU, which includes emergency supplies of 20 MECU for the winters of 1991/92 and 1992/93. Also, 15 MECU has been allocated to the co-financing of the Maritsa East Thermal Power Plant, as part of an effort to assist diversification of energy supplies and facilitate the closure of some units of the Kozloduy plant for safety reasons. Technical assistance has concentrated on overall energy policy, the adaptation of the legal and institutional framework to the market economy, promoting energy efficiency, and interconnection of Bulgaria with the European energy networks. In other CECs, Phare activities provided much-needed technical assistance for policy analysis and guidance for restructuring several sub-sectors. This has led to a number of studies and applications, tariffs and taxes, charges studies, analysis of regulatory institutions, etc. None of this could have been accomplished without external advice and financial assistance.

National energy programmes have produced the expected results with varying degrees of effectiveness and efficiency. However, the impact of these programmes on the economy takes time to register. For example, in Romania, significant allocations were made to energy under the GTAP in the 1991, 1992 and 1993 Financing Memoranda. The projects produced studies which were sometimes used by donor or lending agencies for investment decisions. The programmes were considered by the evaluation reports as well structured and well focused. No serious problems were observed in their implementation. However, they did not produce legislation, most of the studies were of a diagnostic nature, and hence the results may be of limited impact and sustainability. Similar experience has been observed by the evaluation report for Bulgaria, where the results of the 1991 programme are considered mixed. The evaluation observes that the 1991 policy formulation project produced outputs used for the preparation of draft energy laws and developed many good ideas. It also financed a successful training visit to an EU country, where participants were exposed to an entirely new approach, learning new concepts and gaining confidence. Assessing the impact of the 1991 project on energy efficiency in Bulgaria, the evaluation report states that the scope of the work was ambitious but appropriate, valuable material has been produced that can be used by the counterparts, but time is required for the output to be appreciated and put to use. This time lag between the production of project outputs and the putting to use of results is a general issue that needs to be addressed more fully at the programming stage. Telecommunications Background In telecommunications, reintegration with the world economy has been the main objective of the CECs. Action has been required on two fronts: the institutional development of management systems and personnel suitable to a telecommunications sector operating in a market economy; and the upgrading of telecommunications services to generate a social and economic impact. Phare assistance and results Phare activities in this sector included both national and multi-country programmes. According to evaluation reports, the Phare programmes in the sector have been properly focused and have had a coherent approach. The first programmes gave an overview of sector difficulties in the CECs and laid the foundations for more successful and useful subsequent programmes. Some programmes were overambitious and this led to delays in implementation. However, it is reported that most of the objectives of these programmes have been realised. This is also a sector where Phare Programme outputs have led to substantial follow-up investments by the IFIs. For example, in Bulgaria the national programme produced studies that led to investments by the EBRD, EIB and the World Bank. The Phare Programme also succeeded in starting the restructuring of this sector in Bulgaria, introducing a market environment that foreign investors found attractive, leading to the formation of joint ventures. The evaluation report of the multi-country programme in telecommunications reveals an important weakness in programme/project design; it indicates a striking difference of success in project components that needs explanation. According to the evaluation report, the training and information part of the programme was considered very successful and was greatly appreciated by the partners. Against this, the project did not succeed in achieving its goal of formulating and preparing common activities or of initiating preparation of common investment projects to be submitted for loan financing. Training is not an output in itself, however; it is a means to an end. If training was used

to foster regional cooperation by increasing awareness of common problems and thus to initiate actions for common solutions, the approach has still failed, by failing to lead to the formulation of common activities at regional level. This experience indicates the difficulty of achieving adequate project/programme design and the need to devote quality resources at the outset for a better preparation of activities. Environment Background Environmental and nuclear safety are important priorities in the creation of a safe society. One of the most difficult and most demanding sectors in terms of needs and assistance at the beginning of the reform process was the environment. In 1989, almost all environmental indicators in the countries of the region showed a very high level of air, water and soil pollution as a result of decades of inappropriate practices, lack of political will to address the problems, and lack of appropriate equipment and mechanisms to define, measure and enforce standards. The challenges at the outset of the reform process were to rectify previous damage to the environment establish appropriate institutional and management structures to address environmental problems assist in the harmonisation of standards to EU norms. Phare assistance and results During 1990-1996, all the CECs took steps to address their environmental problems, with varying success and mainly with modest results. They have been assisted by Phare programmes that had twin objectives: urgently to improve environmental quality and remedy environmental damage from the pre-1989 period; and to set up as a mediumterm objective an efficient environmental management system. Phare activities in national programmes included support for legislative, policy and institutional work provision of equipment for monitoring pollution technical feasibility studies and pilot projects for urgent environmental programmes setting up environmental funds. Actions in the context of multi-country programmes included support for management and coordination agencies, developing strategies and master plans, supporting the monitoring of pollution systems, and providing capital investments for multi-country projects, to be carried out on a national basis. Two principal activities of the multicountry programme are the regional environmental programme in the Black Triangle, the Danube River, the Black Sea and the Baltic Sea the project preparation facility which supports the identification and preparation of major capital investment projects. Very early in the transition process, Phare activities contributed positively to the realisation of environmental strategies and policies in many countries that, later on, provided the framework for government actions in this area. However, overall programme implementation has taken longer than anticipated due to the initial lack of policy and strategy frameworks, and due to difficulties in translating broad objectives into actual project activities (leading to fragmentation of each programme and a reduction of impact). Major programme risks had also not been considered in the project design, such as problems related to interministerial collaboration and linkages with the activities of other donors.

Phare-supported environmental funds and eco-banks (Czech Republic, Poland, Hungary and Slovak Republic) had mixed results. In order to increase public awareness and participation in dealing with the sectors problems, NGOs have been encouraged in many countries to prepare educational materials. However, as pointed out in a programme assessment report, there is substantial gap between the preparation of the material, its actual use, and achieving the final objective which is to increase public awareness. Nuclear safety Nuclear safety issues represent a major safety risk to the CECs and the EU countries alike. Phare has addressed problems of nuclear safety through financial support and technical assistance. Because actions are not directly related to the economic or political transition process as such, entirely different criteria have to be applied in determining their impact. Phare has financed nuclear upgrading programmes in Bulgaria, Hungary, the Czech Republic and Slovakia, the only countries in the region that operate the two types of Soviet-designed reactors presenting serious safety problems. The objective of these programmes is to achieve operational safety and technical improvements, and to enhance safety regulation regimes, with regard to the upgradeable reactors. A 1996 evaluation report reaches the conclusion that Phare assistance has enabled some progress to be made in tackling the security deficiencies of the plants. But this progress has been neither as comprehensive nor as focused at it might have been, mainly due to a lack of response and commitment by the partner countries and a lack of coordination among donors. While the costs of necessary improvements to the plants are far beyond the financial capacity of the Phare Programme, focused aid could make a significant contribution.

Chapter 7 Human resources, social development and health The switch from a planned to a competitive market economy in the CECs is creating dramatic changes in the requirements for investment in human capital. Previously, a job was guaranteed, independently of ones skills. In the market system skills must match job requirements, and job security is no longer guaranteed. As a result, new systemic approaches are required to address the education, training and health needs of the population and support the most vulnerable groups in society. This section reviews requirements and assesses Phares contributions in training and education, in the development of new skills in social protection, and in health. Background The impact of transition was immediately felt in the labour markets. Labour shedding in state-owned enterprises created the first wave of chronically unemployed people. However, new entrants to the labour force were substantially absorbed by a rapid growth in the private sectors demand for labour, especially in the urban areas and in services. Nevertheless, labour markets have been faced with complex problems. With the sharp rise in unemployment, the pressure to develop an effective social safety net and to restructure labour market institutions became more intense. Much progress has taken place in the expansion and transformation of local labour offices of the ministries of labour, from their previous role as regulators of the mobility of the employed to their

present role of serving the ranks of the unemployed and responding to the demands of entrepreneurs for manpower. A number of approaches are being pursued, including the introduction of a variety of training and innovative programmes, the development of social workers, and training for minority groups that were previously excluded from the labour force due to disabilities, etc. It has been recognised that while the social dimensions of adjustment have to be addressed rigorously, it is also essential that new efforts be undertaken to introduce a substantial change in the formal education and training systems, to improve both their internal (cost-effectiveness) and external efficiency (meeting the markets needs). All countries see the strategic importance of education and training for human resource development as a major tool to introduce fundamental changes in attitudes, values and behaviour in addition to providing occupational and management skills. Phare assistance and results Developing human resources Phare is playing an important role in human resource development in the CECs. The allocation for education is among the highest on a sectoral basis, with most of it devoted to the higher education Tempus programme. Allocations for labour market and social development programmes have been limited, but they have introduced important changes in the countries that received them. Human resource development has also been an important part of Phare programmes in other sectors not covered here, such as training for private farmers, training activities in all infrastructure sectors, within both national and multi-country programmes. From the early years of transition, Phare has supported government efforts to reform and increase the effectiveness of employment and social policy in the CECs, and especially to encourage initiatives and enhance the operational capacity of local communities and NGOs. Proactive labour development and employment policies were encouraged throughout the CECs either in dedicated programmes or as components of other programmes. In the Czech Republic, a Proactive Labour Market Intervention Fund (PALMIF) was established as part of the effort to restructure the labour market and train individuals in vulnerable groups. According to the evaluation report on the programme, PALMIF supported about 50 local projects, contributed to creating 630 jobs, trained more than 3,000 workers and tested more than 350 affected by disability. In Romania, a 10 MECU programme for active employment measures has led to the development of local consortia identifying and delivering active employment measures within and beyond the financing of the programme. Vocational education and training In education/training, Phare programmes have focused on developing an education strategy, strengthening the ministries of education, introducing major changes in curricula and above all revamping the concept and content of vocational training. Phare programmes set multiple objectives in order to address the need for reform in the sectors at various levels. Examples include the vocational education and training (VET) programme in Poland which supported a major change in the structure and content of vocational education and training three other programmes in Poland which aimed to promote innovation and reform in secondary and technical schools, structural development and adaptation of post secondary institutions and the strengthening of the management of education

 a National Training Fund for the Czech Republic and Slovakia to improve the quantity, quality and availability of training to key managers in commercial and public organisations and to improve the national network of training providers and institutions the introduction of a Business Education Reform Programme in Estonia. Evaluation reports show substantial results in line with the goals of the programmes. An evaluation of the vocational education and training (VET) programme in Poland found it very successful in directly and indirectly stimulating the whole VET system; encouraging other countries to participate as donors or recipients and strengthening the internal structure of the institutions concerned. The overall results of the programme included new occupational classifications, reduced from 500 to 140; new modules based on pilot curricula on an international level; introduction of new methods in schools; new educational research activities and new cooperation among schools in different countries. The expected outputs of the Training Fund in the Czech Republic at the end of 1996 included training about 10,000 managers, setting up 73 programmes in 25 institutions and developing a modular management training programme. An interim evaluation report found the programme largely on track and commended the National Training Fund on the simple, transparent policy of quick movement of funds directly to providers of training. The report also noted, however, that there were no formal visits to inspect the quality of the courses given. The implementation of a similar programme in Slovakia lagged, because of administrative problems and delays in accepting technical assistance. The evaluation report states that while the Fund has become increasingly proficient in providing funding to training providers, it has failed to clearly target these programmes to ensure that they deliver modern human resource management skills to Slovak managers, and to use its funds to develop the capability of training providers to provide modern human resource training. The evaluation reports imply that the new institutions established are sustainable, but there are no estimates as to the recurrent expenditures of these new institutions and their programmes or of the burden they place on the budget of their respective governments. Much progress was also made in Estonia in introducing a Business Education Reform Programme. This included, among other things, establishing a business college programme, training of staff, providing adult training, and introducing business curricula and concepts in other institutions. An interim evaluation report underlined some of the problems associated with such an undertaking, such as a lack of local skills to teach some of the specialised courses. The Danish Ministry of Education extended much support for this programme and had contributed more resources than Phare at the stage of the interim evaluation. The problem that exists with all training programmes is that often only the result is given, that is, the number of people trained. Yet a major objective of any training programme is to meet gaps in skills. Designs of training programmes have underemphasised the importance of training needs assessment studies and follow-up studies to see how those trained are actually using their new skills. While recognising the importance of these, one evaluation report comments that given the large skills gaps that exist, there is little risk of error in the training provided at the beginning of the transition period. A Phare Programme also financed a pilot multi-country distance education network. The objective was to promote distance education by building up a transnational network and establishing multinational programme committees. An interim evaluation report found that the central aims of the Pilot Project have been achieved In the absence of the arrival of agreed Phare funds, other sources of funding from national sources have been found, demonstrating the domestic commitment to the development of new structures

for distance education. In four countries visited for this evaluation, staff development in distance education methods had taken place, issues of legislative frameworks and accreditation were being addressed, and invitations to students to participate in two trans-regional programmes of Training the trainers and European studies had been set in motion. Tempus and ACE Two multi-country programmes in higher education are Tempus and ACE. The Tempus programme absorbs the biggest relative allocation in this sector. It promotes changes in higher education and requires the collaboration of higher education institutes in CECs and the EU. ACE promotes economic policy research and fosters research collaboration between researchers in the EU and the CECs. Tempus is based on the transfer of knowledge, the provision of equipment and student and staff exchange. The Tempus programme is spearheading new ideas and curriculum development. The staff and student exchanges foster change and as Tempus programmes spread to other universities beyond the participating institutions, they generate spin-off activities. Over the years the programme has increasingly focused on responding to the more obvious needs of higher education in the context of the transformation of the economy. All evaluation reports on Tempus comment positively on the dynamic evolution of the programme and its transformation, demonstrated by a number of shifts: a shift from exchange and mobility to structural and strategic objectives a growing degree of ownership by partner countries with projects increasingly determined according to national priorities increasing emphasis on horizontal issues, such as university-enterprise links increasing emphasis on sustainability and dissemination of the growing inventory of transferable outputs the transfer of administrative tasks to the national Tempus offices in partner countries. However, critics point to the island character of Tempus activities, the difficulty, compared with other more traditional projects, of restructuring higher education, and the difficulty of defining precisely who are now the main beneficiaries of Tempus, and who should be in the future. The programme, as stated in all the evaluation reports, is highly appreciated and well received in the partner countries. The majority of projects are considered as having delivered their anticipated outputs, leading in some cases to spin-offs. It is generally accepted that the Tempus programme is fostering change and awareness; it is engendering new ideas and public opinion at higher education institutions through contacts, exchanges, equipment and university management; and it is a means of bringing new ideas to a society long deprived of contact with the outside world, through its university teachers and students, who happen to be the most influential of its members. The last allocation for Tempus II is for 1997/98 (lasting for three academic years) but the Council has approved Tempus II Bis lasting until the year 2000. The evolution of Tempus after 1997 is to be seen in the context of the further opening up of EU programmes. The next phase of Tempus will be developed in the context of the preaccession strategy as defined at the Essen Council meeting. It is envisaged that the participation of the CECs in EU programmes such as Socrates, Leonardo and Youth for Europe III, will gradually take the place of Tempus. It will be complementary in consolidating university reform to help prepare universities for participation in Socrates. However, participation in the Erasmus strand of Socrates will take place in 1998/99.

Further consideration is to be given to how to interface Tempus and Socrates, thereby combining their modalities, objectives and instruments. Social welfare and protection Ministries of labour usually have statutory and practical responsibilities for the development of social policy, which includes the provision of social welfare (assistance). Some Phare programmes have addressed the new requirements for the modernisation of social benefit systems, often in conjunction with World Bank projects for employment promotion and services. A Phare programme in Poland was designed to improve the quality and management of social services, by developing the professional skills of social workers, improving the cost-effectiveness of non-cash benefits and involving NGOs in the delivery of services. According to the evaluation report, when the programme commenced the Ministry of Labour and Social Policy was not fully prepared for its implementation and had no real understanding of the processes entailed in the management and implementation of such a programme. Implementation picked up speed, however, and the programme was successful with widespread impact. Not only did it create activities leading to training and employment, but it also had a substantial institution-building impact. Among other things, it created a national post-secondary curriculum for social worker training resulting in 200 teachers trained; 15 post-secondary colleges of social work were established; and minimum standards for residential care homes were adopted by legislation. The report noted that a main outcome of the project is the contribution made to the advancement of Polands social welfare policy in residential care. It has initiated many changes leading to the creation of a modern system of care management similar to that in western European countries. Recommendations for minimum standards were adopted in new social welfare legislation. Support for health care Phare has also contributed to human capital development through support for the health sector. The programmes helped interested CECs to restructure their health care systems, while targeting more effectively the delivery of services to the population. This is perhaps the only sector in the Phare Programme where a coherent policy framework was formed at the outset and the assistance programmes drawn up were consistent with it. In this sector there was also great emphasis on sector strategies and policies, with no interest in financing a crop of independent activities. The first Phare programmes in the CECs responded to short-term financial needs. They addressed the reorganisation of health services (reform of the health system in Lithuania and health management training in Hungary and Poland) the introduction of private medical practice the reform of pharmaceutical policies (new policies in Bulgaria - see box 9, Latvia, Lithuania and Romania) improving the effectiveness and efficiency of health services (restructuring blood transfusion services in Romania and developing emergency medical aid in Bulgaria) some procurement for the most vulnerable services (emergency hospitals and clinics). Box 9 : Reconstruction of the pharmaceutical sector in Bulgaria

In 1993, a two-phase Phare Programme of 1.4 MECU was approved to assist in the restructuring of the state-controlled pharmaceutical sector in Bulgaria. It included the introduction of new pharmaceutical legislation in line with EU requirements, doing away with COMECON standards and establishing a new inspection system and guidelines in accordance with EU directives; improving the role and performance of the National Drug Institute (NDI); and developing new strategies for achieving the objectives of the national drug policy and monitoring that policy. Almost all the objectives set at the beginning of the programme have been realised. In addition, the NDI has been registered in the harmonised European Network of National Official Control Laboratories. Taking into consideration the difficulties faced in reforming the drug sector in the specific context of Bulgarias turbulent transition, the Phare Programme has had a significant impact on the reorganisation of the sector. The sustainability of the new institutions and the enforcement of the new standards and regulations will depend to a large extent on the importance that the Ministry of Health attaches to them in its budgetary allocations. Source: Materials prepared by the EC Delegation in Bulgaria. In addition to the modernisation of the pharmaceutical sector in Bulgaria, there was also a successful programme for the reorganisation of emergency services, while a pilot programme in seven districts, introducing a new approach to preventive health care, is being replicated throughout the country by a World Bank project. The 1991 programme in Poland was completed in 1996. One of its unique features was the inclusion of an innovation fund of 2 MECU to which individuals and municipalities could apply for funds to introduce innovative practices in home care and general health. Although the performance of certain components of this programme was reasonable, the programme also suffered from high staff turnover that affected the management of the Ministry of Health. In Romania, the Phare Programme in the health sector was part of a joint activity with the World Bank. The results of the programme are considered satisfactory, given the poor commitment to reform of the previous government. At the end of the programme, 7.3 MECU (out of a total of 25 MECU) was left unutilised because of the Ministry of Healths incapacity to commit Phare funds according to agreed objectives and deadlines.

Chapter 8

Seeding Democracy and Civil Society

The Europe Agreements commit all parties to pluralist democracy based on the rule of law, human rights and fundamental freedoms, a multi-party system involving free democratic elections, and the principles of the market economy and social justice. A major dimension of democratisation and civil development is the development of active citizenry. Through the development of NGOs, charities, foundations, unions, political parties, mass media outlets, chambers of commerce, professional associations, etc. the space between people and government is filled. The true commitment of governments to this amorphous grouping of organisations can really be tested not only by the legal and financial environment that governments provide for it, but also by the manner in which they treat it. Providing an enabling environment for these organisations to develop and flourish is a measure of civil development.

According to the evaluation report of four country programmes for the development of civil society (Bulgaria, Czech Republic, Poland and Slovakia), the NGO sector in many countries developed in the mid-1980s, growing mostly out of dissident and human rights groups, the environmental movement, and the self-help and humanitarian groups that managed to work inside and around the state-controlled national front groups. In Poland, the sector developed much earlier than in the other countries and reached a larger proportion of the population through the Catholic Church and Solidaritys initiatives. In Bulgaria, there was limited interest in an opposition culture and the NGOs still contained old world NGOs and individuals with new names and programmes. Further, the lack of a strong legal environment and a clear identity for the sector, a number of scandals, and the lack of government support have had a major impact on citizens confidence and trust in NGOs. Phare assistance and results Phare is financing civil society development programmes in most of the CECs. These include the development of entrepreneur associations and trade unions, support of political parties, the preparation of all three of these groups for constructive social dialogue, training support for accounting associations in connection with the introduction of new accounting systems, etc. In the context of Phare regional development programmes, substantial activities have also been undertaken by NGOs, especially in Poland. In that country, with a large number of NGOs involved in the social welfare field, technical support and training was extended to NGOs through the establishment and operation of five regional support centres. NGOs were provided with information, training and advice. According to the evaluation report on the socioeconomic development programme in Poland, a striking effect of the project is the introduction of active cooperation between NGOs and the local administrations of social welfare services. Only four dedicated civil society programmes have been evaluated so far for the express purpose of learning from their experiences. Of these, the Bulgarian programme was at too early a stage for substantive work. It was recommended that a deeper evaluation be undertaken later. A global evaluation of the Phare-Tacis Democracy programme is currently under way. The objectives of Phares four civil society programmes that have been evaluated were to strengthen the capacity of leading institutions and to assist them in expanding the range of their activities, increasing their self-reliance and enhancing their participation in society and their support of NGOs. The instruments used for Phare assistance were grant aid for information and service activities, training activities and project-related activities. Evaluation findings indicate that supported leading institutions are playing a crucial and significant role in the development of the scope and size of the NGO sector. They have encouraged the development of new and small NGOs are affecting most parts of civil society, including the areas of minorities, human rights and small regional NGOs as they try to get off the ground have impacted on a significant number of citizens with small amounts of funding (a Polish survey estimates that the programmes grant aid has reached 4 million citizens, of whom 580,000 have received some service have contributed to improving public and media understanding of NGOs are contributing to the development of democratic civil society in their countries and to the accession strategies. The Phare Democracy Programme

The Phare Democracy Programme is a complementary programme that aims to promote the use of democratic principles and procedures in the various spheres of society, such as government, parliament, the administration, the media, and professional groups and associations, through access to training and technical assistance. Interested parties can submit direct proposals based on specific Commission guidelines. Macro projects are large partnership projects that are intended to promote sustained activities for up to two years and may well continue afterwards. Micro projects are intended to contribute to citizens initiatives. A pilot programme was launched in 1992, based on a European Parliament resolution on a European Democracy Initiative. The Advisory Group to the Phare Democracy programme included informal participation by representatives of the European Parliament. The guidelines of the programme required that eligible projects must show cooperation with both east and west European organisations. The final list included 52 projects in 11 countries, in the following categories: - parliamentary practice (10 projects); - promoting and monitoring human rights (11); - independent media (5); - development of NGOs and representative structures (10); - local democracy and participation (8); - education and analysis (8). No global impact evaluation of these projects was attempted. However, the evaluation report thoroughly examined the projects central administration in Brussels, which it found inadequate. The administration began within the Commission and was subsequently subcontracted. However, the budget for the task was so limited (there were not even enough funds for adequate telephone communications) that it restricted the effectiveness of administration. Another important finding was that too many demands were placed on the NGOs for reports and confirmation information. These requests were rarely handled in a homogeneous way by the recipients, leading to additional administrative difficulties.

Chapter 9

Conclusions

The purpose of this chapter is to draw some general conclusions concerning the relevance, efficiency, impact and sustainability of both Phare-financed actions and the Phare Programme itself. From a methodological point of view, drawing general conclusions from a set of evaluation reports, representing no more than a patchy coverage of countries and sectors, is a hazardous exercise. Such reports naturally focus more on criticisms and weaknesses and less on the strong points of a programme. Care has therefore been taken to generalise only those conclusions that appeared repeatedly in reports or were confirmed by other sources of information such as monitoring and assessment reports, through interviews or other documents available. Overall strengths Emerging at an historical moment, in 1989, when the political momentum for transition was building, the Phare Programme has successfully responded to a window of political and economic opportunity which neither the EU nor the CECs could afford to miss.

 The Phare Programme is perceived as having delivered relevant support to the transition process in the CECs. It has adapted to the changing phases of transition, and has provided the right type of inputs (TA, know-how) at the right moment. The Phare Programme has developed into the single largest source of donor financing for know-how transfer to the CECs, a critical factor that was - and still is in many fields - in short supply in the partner countries and has turned out to be of decisive importance for the transition process. Without such large-scale technical assistance inputs, many of the economic reform and stabilisation programmes supported by the IFIs would not have been implemented on such favourable terms and on such a scale. The Phare Programme made a particular contribution in areas in which other donors did not devote much interest or resources: the development of democracy and civil society programmes, the development of national statistical services and customs offices, cross-border and multi-country programmes which provided one of the few forums for CEC officials to interact and network at the technical level. The Phare Programme has developed an approach to programming which has sufficient flexibility to allow it to respond to changing political and economic circumstances. Such flexibility has allowed Phare to respond to changing objectives and priorities as the transition process unfurled, starting with critical aid and procurement in the early years, progressing to institutional reform when the political momentum for fundamental reforms increased, and gradually increasing the infrastructure component when the need for more investments became apparent. Since 1995, following the Copenhagen and Essen Council summits, a progressive reorientation of Phare as a financial instrument in support of accession of the CECs to the EU has been taking shape. The demand-driven approach has allowed Phare to respond to country-specific situations and differences in emphasis and pace of reform. A perception that has been conveyed in interviews and discussions is that the contribution of the Phare Programme cannot be measured only by its financial yardstick and the impact of the designed programmes. Phare programmes also introduced new processes and new thinking, and had demonstration effects that are not necessarily captured in evaluation reports and are difficult to quantify. The introduction of transparency in operations such as tendering, the direct exposure to new ideas, the demonstration impact of technical assistance and of visits in the EU have all made a major contribution to changes in attitudes and mentality and have underpinned the process of transition. Overall weaknesses In general, the demand-driven approach is also responsible for several Phare weaknesses. With weakly and broadly defined priorities and criteria for selection of programmes, it has tended to dilute Phare country resources over a variety of topics, sometimes lacking critical mass to induce substantive changes. Within sectors targeted in the country programmes, a lack of prior sector analysis and strategic vision has sometimes resulted in a shopping list approach, though the introduction of MIPs from 1995 onwards has somewhat mitigated this situation. The fragmentation of the Phare Programme has also adversely affected the public perception in the CECs of the impact of EU assistance to reform. The switch to an accession-driven approach should allow clearer definition of priorities and also contribute to a tightening up of programming. The decentralised implementation approach has resulted in a tendency for the Commission to contract out expertise in the transition process and retain in-house expertise in financial and administrative procedures, thereby losing grip on the substance and impact of the programmes. Internal human resource constraints, high staff turnover

with concomitant poor institutional memory and little accumulation of experience, have all exacerbated this tendency. In a limited number of cases, this may have led to contractor-driven programmes. Political and budgetary spending pressures have favoured a strong emphasis on financial and procedural control in Phare rather than substantive design and performance. The patchy coverage of the existing stock of Phare evaluation reports, on which the present report is based, is an indicator of the lack of emphasis on performance. Rapidly changing and unstable economic and political environments on the partners side have not been conducive to a strong commitment to effectiveness and impact, even in cases where the expected programme outputs were indeed produced. The typical outputs of technical assistance programmes - training and advisory services can easily be sidetracked into ineffectiveness. The lack of commitment devices in Phare programmes themselves, through financial, political and other forms of conditionality, weakened the partners commitment to good programme performance. Furthermore, contracts based on inputs and activities specifications rather than on outputs and effective results, combined with poorly defined and non-measurable performance indicators, weakened contractor commitment to performance. The recent use of the Logical Framework approach has in most cases improved the formulation of programmes, introduced considerations of risks and the use of indicators of achievement. However, most programmes are still formulated in very general terms. Although this approach speeds up the start of a programme, it delegates great responsibility to the contractor and postpones critical issues to the implementation stage, with the risk of inducing major delays while programmes are reformulated. General operational conclusions Phare has been primarily a technical assistance programme emphasising the transfer of skills and know-how. Its main vehicle, technical assistance, has been more effective and has had a significant and sustainable impact where it reinforced existing government strategies and where political commitment to reform and continuity of high-level officials existed. The impact of technical assistance on local attitudes and culture was greatest where it was offered on a long-term basis and especially in twinning arrangements. The initial concerns of the Phare Programme were to assist in institution-building, introduce new working and networking arrangements especially at the local level, provide resources (financial and other) to enhance private sector development and enterprise restructuring, and develop skills through training. Explicit considerations of cost-effectiveness in achieving results did not enter into the picture. There is therefore a need to analyse the cost-effectiveness of options to reach specific results. The completion of a Phare programme on time has been the exception, not the rule. Where programme implementation was delayed, it was not uncommon for contract extension to be sought. The record of actual programme implementation since 1990 shows that it takes two to five years to complete implementation, irrespective of the sector. It is unrealistic to maintain a standard period of three years for all programme implementation, and there is a need to use a realistic time frame. Considerations of financial and other sustainability factors are usually brought forward during programme implementation, rather than at the outset. There is a need to analyse recurrent cost implications of proposals. Where new institutions and programmes are implemented by government agencies, the net fiscal burden of these must be calculated. In all cases, analyses and proposals are required on how to meet these costs

after the end of the Phare programme, in order to increase effectiveness and sustainability. Clear exit strategies should be designed at programme identification stage. Training has been a very important dimension in almost all Phare programmes, across all sectors. Given the gaps that existed between the available skills and the requirements for new skills, it has been safe to assume that the training provided in the early stages of the Phare Programme was justified. But, as skills requirements become more sophisticated, it is necessary to introduce systematic training needs assessments, so that training programmes respond to the respective needs of the markets. Additional considerations include the introduction of follow-up studies and feedback mechanisms to find out if and how the trainees use their newly acquired skills and knowledge in their work; developing a competitive environment for the provision of training through the development of training providers; and increasing the training capacities of public institutions not only to provide training, but also to undertake training needs assessments, identify training needs and the programmes needed to address them, and supervise the standards and the quality of training provided by the training providers. Gaps in sectoral and country coverage as well as qualitative weaknesses in the stock of Phare evaluation reports to date - on which the present report is based - are good indicators of the lack of emphasis on substantive performance of Phare programmes. Evaluations are essential investments in the improvement of programme relevance, effectiveness and impact. A performance-based approach starts at the design stage of programmes, by building in significant and objective performance indicators and means to monitor those indicators. The partners should be involved in the monitoring of indicators and evaluations should be built into the programme cycle. The monitoring and assessment system could be improved to ensure a better coverage of effectiveness and impact indicators and to enhance dissemination of summary monitoring information to all management levels and control institutions. Consistency must be introduced in the design and content of evaluation reports and the presentation of information. A process should be developed whereby the findings and recommendations are seriously considered and, where applicable, integrated into design and implementation decisions. Theme-specific conclusions Privatisation and restructuring Privatisation of productive assets and restructuring of state-owned enterprises in the wake of transition, including the restructuring of debt hangovers, formed the core of the economic transition to a market economy. Phare has effectively addressed many of these issues. It was in a position to supply essential technical assistance inputs on a large scale in order to ensure the required know-how transfer. Programme effectiveness and impact have sometimes suffered because of instability in political commitments and a lack of resources to implement company restructuring plans. Developing markets The efficiency of the operation of a market economy depends on the operation of its markets for goods and services and for the factors of production: land, labour and capital. New legislation and regulations, reduction of government interference and an increasing flow of information are enhancing the operation of the markets. Phare programmes in economic and other legislation have contributed to these developments. Phare programmes in the agricultural sector, financing cadastral and land registration activities, have uniquely helped in establishing the preconditions for the operation of the land markets. But there is still a large gap between the legislation and its consistent and predictable application in most CECs, inhibiting market performance. Phare programmes

must give equal weight to the enactment and application of laws, by strengthening the delivery capacities of public institutions. Rolling back government intervention One of the most dramatic changes that has taken place is the reduction of the role of government and the successful introduction of indirect economic management in almost all CECs. Phare programmes have contributed in key areas in the transformation of public revenue in many countries and, to a lesser extent, in the rationalisation of public expenditures. They have had a substantial impact in strengthening the supervisory functions of central banks, improving the efficiency of payments and clearance systems, and enhancing the role of commercial banks in the economy. However, the challenge still remains to change the culture and ethos of the public service, introduce transparency and create an environment that reduces incentive for personal gain among civil servants. Private sector development While overall movement is in the right direction, developments with regard to the SME sector are lagging behind in a number of economies. In some CECs government lipservice is paid to the important role that the SME sector can play in the economy, but there is little real commitment to addressing the problems of SMEs and, especially, to creating a supportive environment for their growth. Many bilateral agencies have bypassed the centre and have addressed the needs of SMEs either directly or through non-public administration agencies. Phare programmes have had success when this approach was followed. A policy framework is needed to create a supportive environment. The Commission does not, however, engage in discussions or use the leverage of the Phare Programme to ensure a suitable policy framework; it acts by and large as a policy-taker rather than policy-maker. In many countries, SMEs do not have a force lobbying for their interests. This is an area where much work and thinking is required to ensure that progress takes place both at the centre and at the SME level. Infrastructure The transformation of the CECs economies requires substantial investment in infrastructure to accommodate the progressive integration with the EU and to upgrade standards to EU levels. Following an initial period of emphasis by Phare programmes on policy and strategy development and institutional support, an increasing share of resources has been devoted to infrastructure investments. The combination of Phare programmes with those of the IFIs have increased substantially the leverage of Phare resources. At the same time, Phare has contributed to the development of an appropriate sector policy framework in the CECs for the sustainability of investment by implicitly supporting the sector policy conditions of the IFIs. Cross-border and multi-country programmes have enhanced both the impact of Phare programmes and the introduction of new interactive relations among countries. Agriculture Progress in agricultural sector reform is strikingly different across the countries. It is slower in countries where the importance of agriculture in the economy is smaller. The transformation of the sector touches on most dimensions of transition in the whole economy. Phare programmes, while responsive to the needs of the partner countries, were not as effective in the absence of country agricultural sector strategies or in the face of unwillingness by officials to implement them. The spread of the programmes over a wide range of areas led to a thinning out of resources and the development of a range of pilot projects with no resources to consolidate and expand achievements. Delays in land reform and in private sector development have also reduced the effectiveness and impact of Phare interventions.

Energy and nuclear safety The changes in the energy sector during the transition process have been particularly painful. While there has been a dramatic decline in energy demand, especially from the industrial sector, energy intensity has remained high, and energy saving and efficiency will continue to be important policy objectives. Phare has, along with other EU programmes, supported sector restructuring and has set in motion the process of harmonisation. Following an initial period of emphasis on legislation and institutionbuilding, more recently the emphasis has been on restructuring large companies and the rehabilitation of infrastructure. Two main constraints to the programmes have been the diverging philosophy and objectives of services within the Commission, and organisational difficulties emanating from the simultaneous operation of both a national and a multi-country programme. In nuclear energy, Phare assistance has facilitated some progress in the tackling of security deficiencies at nuclear power plants. However, a lack of coordination among donors and a lack of commitment from the partner countries have reduced the impact of this effort. Human resource development Well-targeted and focused investments in education and training are essential ingredients in the transformation of the CECs. While the impact of education has a long gestation period, it also underpins changes in attitudes and culture. Many countries undertook substantial reforms in their education and training systems to respond to the dynamic economic realities and the new social requirements. Phare programmes in all countries contributed to introducing innovation and change in the education and training systems and making them more relevant and efficient. A programme with significant impact has been Tempus. Exposing tens of thousands of staff and students to EU education systems has not only helped in the introduction of new curricula and new pedagogical and educational materials, but has also created the desire for change and emulation among the CEC visitors to the EU. Democracy and civil society An emphasis on the economic dimensions of transition means less prominence is given to the equally important dimension of democratisation and civil society development. The Europe Agreements commit all parties to pluralist democracy based on the rule of law, human rights and fundamental freedoms. While substantial progress has taken place in these areas, the development of an active citizenry is lagging. In most CECs there does not yet exist an enabling environment for civil society to develop and flourish. Phare programmes have increasingly focused on these areas, and NGO support, either directly or through leading organisations, is acquiring a more prominent role. Strengthening and improving the visibility of these activities is required, with new initiatives to allocate more resources both to the institutional development of these organisations and to increasing their activities and self-promotion. Lessons for an accession-reoriented Phare The present evaluation report basically covers a Phare era that is rapidly coming to an end. From its inception until the mid-1990s Phare was an instrument of support for transition. It was demand-driven and largely adapted itself to the individual needs and requests of the CECs. However, in line with the Copenhagen and Essen Council conclusions, Phare has gradually shifted its emphasis towards accession of the CECs to the EU. The recent Commission Communication on new orientations for Phare in the context of accession, as well as the expected Commission Opinions on Accession, will irrevocably turn Phare into a financial instrument for support for accession.

This will change the nature of Phare. It will become accession-driven, which implies that the EU, rather than the CECs, will set the agenda and programming priorities, focusing on remaining gaps in the application of the acquis communautaire. Accession will act as the ultimate commitment device, in which the setting up of intermediate performance targets for specific Phare-financed programmes could be helpful.

Annexes

Annex A Table A.1. Table A. 2. Table A.3. Table A.4. Table A.5. Table A.6. 65 Table A.7. 66 Table A.8. Table A.9.

Basic data on Phare 63 Expansion of the Phare Programme to partner countries 63 Distribution of Phare Programme funds by country 63 Annual Phare commitments, contracts and payments 64 Phare sectoral allocations by main sectors 64 National Programme sectoral allocations of Phare assistance 65 Phare commitments, contracts and payments by country, 1990-1996. Phare commitments, contracts and payments by sector, 1990-1996. Phare commitments by country by year Phare commitments by sector by year 66 67

Annex B Table B.1. Table B.2. Table B.3.

List of evaluation reports available

68 68

Evaluation reports by country and sub-sectors List of evaluation reports 69 List of monitoring and assessment reports 74

List of abbreviations Sectors Multidisciplinary, general TA AA Administrative and public institutions Agricultural restructuring AG Civil Society and democratisation DE Education, training and research ED Environment and nuclear safety EN Equal opportunity for womenET Financial sector FI

AD

Humanitarian, food and critical aid HA Infrastructure (energy, transport, telecoms) IN Approximation of legislation LE Consumer protection PC Private sector, restructuring, privatisation and SME's Integrated regional measures RE Social development and employment SO Public health SP

PR

Countries Albania AL Baltics BA Bulgaria BG Czech Republic Estonia ES Hungary HU Latvia LE Lithuania LI FYROM MA Poland PL Romania RO Slovak Republic Slovenia SL Multi-country ZZ

CZ

SR

Annex A: Basic data on Phare Table A.1. Expansion of the Phare Programme to partner countries

1989 1990 1991 1992 1993 1994 1995 1996 Poland Poland Poland Poland Poland Poland Poland Poland Hungary Hungary Hungary Hungary Hungary Hungary Hungary CSFR CSFR CSFR Czech R. Czech R. Czech R. Bulgaria Slovakia Yugoslavia Bulgaria E Germany Albania Romania Bulgaria Slovakia Albania Bulgaria Romania Albania Slovenia Bulgaria Albania Romania Romania Slovakia Bulgaria Albania Romania

Hungary Czech R.

Slovakia Bulgaria Albania Romania

Estonia Slovenia

Slovenia

Slovenia

Slovenia Estonia

Latvia Estonia

Estonia

Estonia

Lithuania Latvia Latvia Latvia Latvia Lithuania Lithuania Lithuania Bosnia Bosnia Bosnia FYROM FYROM

Lithuania

FYROM

Note: East Germany was also included under the Phare Programme in 1990, up until unification with Germany. The programme to Yugoslavia was suspended in 1991. Czech Slovak Federal Republic was replaced on 1 January 1993 by the Czech and Slovak Republics. Table A. 2. Distribution of Phare Programme funds by country Country Total Phare Country Share of PhareShare of Commitments Population Funds Population 1990-96 MECU (million) (%) (% ) Poland 1,388 38.5 30.8 36.6 Hungary 684 10.3 15.2 9.8 Czech Rep. 429 10.3 9.5 9.8 Slovakia 207 5.3 4.6 5.0 Slovenia 91 2.0 2.0 1.9 Romania 726 22.7 16.1 22.6 Bulgaria 539 8.4 12.0 8.0 Estonia 130 1.5 2.9 1.4 Lithuania 179 3.8 4.0 3.6 Latvia 132 2.5 2.9 2.4 Total 4,505 105.3 100 100

Table A.3. Annual Phare commitments, contracts and payments (as at 31/12/96)

Commitments Contracts MECU(%) MECU(%) 1990 494.7 487.1 98 490.6 99 1991 773.6 773.4 100 738.8 96 1992 1,010.1 951.0 94 895.8 1993 1,007.2 814.9 81 710.0 1994 972.9 611.5 63 514.3 53 1995 1,154.7 412.5 36 282.2 1996 1,222.9 251.3 21 95.5 1990-1993 3,288.6 3,026.4 1994-1996 3,350.5 1,273.3

Payments

89 70 24 8 92 38

2,835.2 892.0 27

86

Table A.4. Phare sectoral allocations by main sectors 1990-1993 1994-1996 MECU% MECU% Humanitarian, food & critical aid 337.7 10.3 Agricultural restructuring 392.8 12.0 85.5 Private sector (restructuring, privatisation, 876.4 SME, financial sector, regional) Education, training & research (and Tempus) Social development, employment, health 213.8 Environment (including nuclear safety) 325.9 Infrastructure 280.0 8.5 1,208.1 36.1 Administration, public institutions, legislation Civil society & democratisation 34.0 1.0 Other 229.6 7.0 157.2 4.7 Total 3,285.7 100.0 3,350.5 100.0

180.0 5.3 2.6 26.7 611.2 18.2 431.0 13.1 443.4 13.2 6.5 108.5 3.2 9.9 215.0 6.4 164.5 5.0 66.4 2.0 275.2 8.2

Table A.5. National programme sectoral allocations of Phare assistance BG ES HU LE Administration and public 3 6 7 9 institutions Agricultural restructuring 10 2 8 0 Civil society - democracy 1 0 1 0 Education, training, research 14 10 18 17 Environment-nuclear safety 12 2 1 0 Financial sector 3 1 6 4 Humanitarian, food, critical aid 0 0 0 0 Infrastructure (energy, transport, 9 56 14 19 telecommunications) Approximation of legislation 1 0 0 0 Consumer protection 0 0 0 0 Private sector, restructuring, 10 10 25 20 privatisation Integrated regional measures 0 3 1 0 PL 8 LI 7 RO 9 CS 6 CZ 7 SR 3 SL 0

3 0 16 4 3 5 35

11 0 18 11 15 0 16

1 0 11 5 5 0 15

14 0 16 8 11 0 9

3 1 11 2 1 0 23

11 1 17 1 0 0 27

0 0 16 15 0 11 20

3 0 22

0 0 25

5 1 10

0 0 16

3 0 13

0 0 20

0 0 30

Social development and employment 1 7 8 8 7 Public health 5 0 2 0 0 Multidisciplinary, GTAF, etc. 1 22 4 8 24 Total 100 100 100 100 100

3 2 1 100

4 0 27 100

9 3 2 100

3 0 19 100

4 0 10 100

2 2 22 100

Note: 1. (BG) Bulgaria; (ES) Estonia; (HU) Hungary; (LE) Latvia; (PL) Poland; (LI) Lithuania; (RO) Romania; (CS) ex-Czechoslovakia; (CZ) Czech Republic; (SR) Slovakia; (SL) Slovenia. 2. Multi-country and horizontal programme allocations are not included. Table A.6. Phare commitments, contracts and payments by country, 1990-1996 (as at 31/12/96) Commitments Contracts Payments MECU(%) MECU(%) 1,389.5 862.9 62 858.5 61 683.8 461.8 67 459.0 67 232.2 228.4 98 226.0 97 284.0 96.1 34 105.9 37 130.9 73.0 56 70.0 53 179.0 108.7 61 65.7 37 130.3 65.1 50 38.2 29 132.0 82.9 63 49.5 37 726.1 491.0 68 406.3 56 538.2 341.4 63 308.2 57 91.0 90.3 99 88.3 97 704.2 486.8 69 373.0 53 742.6 474.1 64 323.6 44 6,636.1 4,301.8 65 3,727.2

Poland Hungary CSFR Czech Rep. Slovakia Lithuania Estonia Latvia Romania Bulgaria Slovenia MCPs Horizontal Total

56

Table A.7. Phare commitments, contracts and payments by sector, 1990-1996 (as at 31/12/96) Sector Commitments Contracts Payments MECU(%) MECU(%) Public administration 361.09 155.40 43.0 126.89 35.1 Agricultural restructuring 468.95 377.67 80.5 366.97 78.3 Civil society 69.40 39.61 57.1 29.77 42.9 Education, training 872.37 808.70 92.7 689.11 79.0 Environment - nuclear 538.90 364.38 67.6 302.93 56.2 Financial sector 258.84 222.81 86.1 201.29 77.8 Humanitarian, food aid 517.73 472.56 91.3 412.65 78.7 Infrastructure 1,469.00 416.45 28.3 407.81 27.8 Approxim. legislation 35.47 15.58 43.9 0.20 0.6 Consumer protection 11.00 10.00 90.9 5.28 48.0

Private sector 960.40 332.85 69.0 577.86 60.2 Regional measures 160.80 42.23 26.3 31.54 18.6 Social development 195. 20 132.41 67.8 115.47 69.2 Public health 101.50 81.44 80.2 66.28 65.3 Other (general TA, etc...) 615.47 499.67 81.2 393.12 63.9 Total 6,636.11 4,301.77 64.8 3,7270.18 56.2 Table A.8. Phare commitments by country by year 1990-1992 Albania 120.0 Poland 577.8 225.0 Hungary 306.8 CSFR 232.7 0.0 Czech Republic Slovakia 0.0 Lithuania 20.0 Estonia 10.0 Latvia 15.0 18.0 Romania 301.8 Bulgaria 223.3 Slovenia 9.0 FYROM 10.0 Bosnia 37.3 0.0 Multi-country 276.7 Horizontal 143.8 Total 2,284.3 1993 1994 75.0 49.0 206.8 174.0 99.0 85.0 0.0 0.0 0.0 60.0 40.0 40.0 25.0 39.0 12.0 22.5 29.5 32.5 139.9 100.0 85.2 85.0 11.0 24.0 25.0 25.0 0.0 0.0 112.0 86.0 74.3 119.1 1,001.4 1995 88.0 203.0 92.0 0.0 60.0 46.0 42.0 24.0 37.0 66.0 83.0 25.0 25.0 140.0 104.0 243.2 972.9 1996 Total 53.0 385.0 1,388.5 101.0 683.8 232.7 110.0 54.0 284.0 4.5 130.5 53.0 179.0 61.8 130.3 132.0 118.4 726.1 62.5 539.0 22.0 91.0 25.0 110.0 177.3 125.5 704.2 162.2 742.6 1,154.7 1,222.9

6,636.1

Table A.9. Phare commitments by sector by year 1990-1992 1993 1994 1995 Administration - Public institutions 61.5 Agricultural restructuring 305.0 78.5 Civil Society - Democratisation 9.0 Education, training, research 266.8 162.2 Environment and nuclear safety 289.8 Financial sector 91.7 61.0 56.0 Humanitarian, food and critical aid 292.8 Infrastructure (transport, energy, 145.1 telecommunications) Approximation of legislation 0.0 0.0 Consumer protection 0.0 5.0 4.0 Private sector, restructuring 436.0 194.3 Privatisation Integrated regional measures 20.8 10.0 Social development - employment 86.7 Public health 60.0 26.5 13.0 2.0 Other multidisciplinary (GTAF, etc.) 217.9 1996 65.7 17.0 10.0 169.9 34.1 40.5 44.9 114.9 0.0 2.0 93.4 4.0 15.0 0.0 179.4 Total 81.9 40.6 16.2 147.1 77.5 9.6 30.0 326.4

26.6 27.9 10.5 126.4 82.0 258.8 25.0 457.3

125.2 361.1 469.0 23.7 69.4 872.4 55.5 538.9 125.0 517.7 424.4 1,469.0 35.5 960.4 160.8 17.7 195.2 77.5 615.5

2.0 33.5 0.0 11.0 139.2 97.5 47.0 79.0 28.5 47.3 101.6 55.1 85.6

Total 2,284.3

1,001.4

972.9 1,154.7

1,222.9

6,636.1

Annex B

List of evaluation, monitoring and assessment reports available

Table B.1. Evaluation reports by country and sub-sectors BG CZ Total Private Sector ES HU LE LI PL RO SR SL ALL

-Privatisation/restructuring 1 -SMEs 3 -Finance 1 -BSCs -FDI 2 -Export prom. 2 1

1 6

1 1 1 1 1

1 1 1

Agriculture -Primary -Input industry 1 -Food industry 1 -Land 1 -Credit market 1 -Extension 1 -All agriculture 1 11 2 3 1 4 1 1 1 1 1

Public sector -Public admin. 1 2 1

-Statistics 1 5 -Customs 1 5 -GTAF 1 2 Infrastructure 1 3 -Energy 1 1 2 -Nuclear safety -Environment 2 -Telecoms 1 1 2 Human resources - R+T -Education 1 8 -Labour markets -Health 2 -ACE 2 -Tempus 3 3 Socio-political development -Democratisation 1 1 -Civil society/NGOs 2 2 -Drugs 1 European integration 1 2 Phare overall 3 Emergency assistance 2 4 6 5 81 1 -Transport

1 1

1 1

1 1

1 1 1

1 1

2 1 2

1 1 1 1 1 2 10 2 2 19 10 6 0 17

Table B.2. List of evaluation reports

Study Country X/BA/AG/9401 ZZ9301 X/BA/AG/9402 Agrisystems X/BG/AG/9401 Mergos

Sector Study title Date Author Programme BA AG Evaluation of Agriculture Project

Feb-94 FAI

Implementation BA AG Agriculture Programme and CPF Dec-94 ZZ9401 Monitoring, Evaluation and Supervision BG AG Phare Programme in Agriculture Jul-94 BG9206 (mid-term evaluation) & A'Bear BG9103 BG9001 BG IN BG9107 in Bulgaria BG IN Evaluation of Energy Programme May-95

X/BG/IN/9505 Sodeteg X/BG/IN/9401 Arup BG9104 X/CZ/ED/9501 J. Blakey X/CZ/FI/9501 CZ CZ9506

Telecommunications : Evaluation

Oct-94 Ove

of 1991 Programme CZ ED Evaluation of National Training Fund Oct-95 CZ9407 Programme FI Evaluation of Promotion of Foreign Sep-95 G. Dedovath

Direct Investment Programme X/CZ/AA/9501 CZ HA Evaluation of Technical Assistance to Nov95 J. Houston, CZ9304 Aid Coordination IDC X/CZ/LE/9601 CZ LE Framework programme of assistance Feb-96 TMC Asser CZ9304 to the Approximation of Legislation Instituut X/CZ/PR/9501 CZ PR Phare Support to Privatisation and Jan-95 Vuylsteke CZ9302 Restructuring - Operational and and Mruck, Programming Issues EBRD X/CZ/SO/9601 CZ SO Evaluation of the Pro-Active Labour Oct-96 OECD CZ9406 Market Intervention Fund, PALMIF - (DRAFT) X/ES/AD/9601 ES AD Evaluation of National Phare Nov-96 CRI ES9201 Programmes (1992-1993) for the Luxemburg ES9302 National Customs Board of Estonia (Executive Summary) X/ES/AD/9501 ES AD Evaluation of the Phare 1992-1993 Dec-95 Bureau ES9201 programme for the Estonian Van Heerde ES9302 Statistical Office

ES ED Mid-Term Evaluation of the Phare Mar-96 ES9403 Business Education Reform Programme Training Consultants X/HU/AA/9401 HU AA Evaluation of the Impact of the Phare Jul-94 ADE All HUProgramme - Final Report 90,91,92 X/HU/AD/9601 HU AD Review and Assessment of past and Sep-96 Birks Sinclair HU9207 current Phare supported interventions and Associates and preparation and support for further reforms in Public Administration X/HU/AG/9401 HU AG Auditor's report of Phare Programme Sep-94 Lubbock Fine HU9004 Development of Private Agriculture; 01/01/92 - 31/12/93 Study Country Sector Study title Date Author Programme X/HU/AG/9402 HU AG Auditor's report of Phare Programme Sep-94 Lubbock Fine HU9104 Development of Private Agriculture; 28/10/91 - 18/07/94 X/HU/AG/9501 HU AG Agriculture : Guarantee Fund Jan-95 ECO (Price HU9104 Waterhouse) X/HU/AG/9502 HU AG Food and Agriculture Appraisal Mar-95 ADE HU9304 HU9202 HU9104 HU9004 X/HU/ED/9501 HU ED Higher Education Reform Jun-95 ADE HU9010 X/HU/PR/9605 HU PR Review and Assessment Report on May-96 Ressenaar & . HU9404 the Hybrid Fund for Enterprise Partners B.V Restructuring and Privatisation X/LE/AD/9601 LE AD Evaluation of National Phare Nov-96 CRI LE9201 Programmes (1992-1994) for the Luxemburg LE9302 Customs Administration of Latvia LE9405 (Executive Summary) X/LE/AA/9601 LE AD Evaluation of EU Phare Statistics Oct-96 Arij L. Dekker LE9201 Sector Programmes / EIR Dev. LE9302 Partners LE9406 X/LI/AD/9601 LI AD Evaluation of National Phare Nov-96 CRI LI9201

X/ES/ED/9601 European

Programmes (1992-1994) for the LI9302,

Luxemburg LI9408 Oct-96 Arij L.

X/LI/AA/9601 Dekker LI9201

Customs Department of Lithuania (Executive Summary) LI AD Evaluation of EU Phare Statistics

X/MA/HA/9201 MA9201

Sector Programmes / EIR Dev. LI9302, Partners LI9409 MA HA Evaluation of the Phare Critical Aid Jun-96 Dalrup

Assistance (1992-1995) International MA9301 Consultant BV X/MA/HA/9201 MA HA Evaluation report on Phare's urgent Aug-94 GFE MA9201 medical imports programme MA9201 to FYROM X/PL/AD/9601 PL AD Central Board of Customs Oct-96 SDK ConsulPL9012 ting / CIS PL9305 International X/PL/AD/9602 PL AD Evaluation of Statistical Programmes Oct-96 Bureau PL9006 for the Polish Central Statistical Office Van Heerde PL9302 X/PL/AG/9301 PL AG Evaluation of Foundation for Rural Feb-92 Devco PL9105 Co-operatives (FRC) / Co-operative PL9205 PL9312 X/PL/AG/9302 PL AG Evaluation of FAPA (Foundation of Apr-93RDI PL9105 Assistance Programmes for Agriculture) PL9205 X/PL/AG/9401 PL AG Study on planning a re-oriented Jan-94 McCarrick, PL9105 continuation of the support for Polish Deshayes PL9205 rural co-operatives X/PL/AG/9402 PL AG Assessment of Phare Agriculture Feb-94 Nera PL9105 Programme PL9205 PL9312 Study Country Sector Study title Date Author Programme X/PL/AG/9501 PL AG Evaluation of FAPA (Foundation of Jun-95 IDC PL9105 Assistance Programmes for Agriculture) PL9205 extension services - 2 volumes PL9312 X/PL/AG/9601 PL AG Review of land cadastre programme Mar-96 T. Bogaerts PL9206

X/PL/AG/9602 PL AG Evaluation of credit line for the import Jun-96 FAI PL9005 of equipment for agriculture and agro-industry X/PL/AG/9607 PL AG Evaluation of Phare programmes Jul-96 Fapa PL9101 X/PL/ED/9501 PL ED Vocational education and training, Oct-95 GWZ PL9009 1990 (VET 90) - Establishment of PL9115 Language Training Centres, 1990 (Language 90) - Upgrading of Polish Education and Training, 1991 (UPET) X/PL/ED/9601 PL ED Evaluation of Education programmes Jan-96 European PL9210 in Poland : MOVE, TESSA, TERM Training PL9314 Consultants X/PL/IN/9601 PL IN Evaluation Report of Transport Nov-96 GOPA PL9107 Technical Assistance and Infrastructure 9308, 9309, Projects 9406, 9505 X/PL/AA/9601 PL PR Evaluation of EXPROM May-96 CTA Economic ZZ9501.01 (Export Promotion) Programme & Export Analysts Ltd X/PL/PR/9401 PL PR Evaluation of IDA (Industrial Sep-94 Bindert GmbHPL9003 Development Agency) - Enterprise PL9110 Restructuring Programme X/PL/PR/9305 PL PR Evaluation of Phare SME Support May-93 Segal Quince PL9109 Programmes in Poland Wicksteed PL9009, PL Limited O/PL/PR/9507 PL PR An impact study of internationally Jul-95 KPMG - Polska supported consulting services to SMEs in Poland 1991-1994 X/PL/RE/9605 PL RE Interim impact study of the struder May-96 LRDP PL9201 programme X/PL/SO/9401 PL SO Local Initiatives for Employment and Mar94 Birks Sinclair PL9111 Socio-Economic Development and Associates Mid-term report X/RO/AA/9601 RO AA Evaluation of Phare assistance between Feb-96 NEI and All Prog. 1991 and mid 1995 - Synthesis report Doxiadis 91-95

X/RO/AG/9601 All Prog.

RO

AG

Associates Agriculture : Mid-term review

Apr-96Rural

X/RO/FI/9601RO and All Prog. 91-95 X/RO/IN/9501 WS Atkins

1991-1993 assistance Development until 93 International FI Evaluation of Phare assistance between Feb-96 NEI 1991 and mid 1995 - Financial Sector Doxiadis

Associates RO IN Evaluation of the Phare 1991 Transport RO9111 Import Supply programme

Jun-95

Study Country Sector Study title Date Author Programme X/RO/PR/9601 RO PR Evaluation of Phare assistance between Feb-96 NEI All Prog. 1991 and mid 1995 - Industry and Doxiadis 91-95 Associates X/RO/PR/9601 RO PR Evaluation of Phare assistance between Feb-96 NEI All Prog. 1991 and mid 1995 - SME Development and Doxiadis 91-95 Associates X/RO/SP/9603 RO SP Evaluation of the 1991 project Feb-96 SODETEG, RO9106 rehabilitation of primary health Alain care rural centers Laurencau X/RO/SP/9601 RO SP Evaluation of Blood Transfusion Apr-96MPR RO9106 Programme 1991 X/RO/SP/9602 RO SP Rapport d'valuation des projets de Sep-96 A.S.P.H.E.R. RO9106 la composante Sant du programme RO9209 Phare 1991 et 1992 X/SR/AG/9601 SR AG Evaluation of technical assistance Jan-96 G. Mergos SR9513.04 provided in the framework of the food processing sector adjustment project X/SR/AA/9501 SR HA Evaluation of Technical Assistance Nov-95 Seconde CS9107.46.02 to Aid Coordination EC Services CS9201.47.01 X/SR/PR/9601 SR PR Evaluation of the Foreign Investment Jun-96 Strategic SR9302.02.02 Promotion Programme (SNAFID) Management SR9404.03 Services SR9512 X/SR/PR/9501 SR PR Assessment of Phare Support to Mar-95 Vuylsteke SR9302

X/SR/PR/9602 SR9302.01

Privatisation and Restructuring and Mruck, - (DRAFT) EBRD SR PR Evaluation of the Phare SME Jun-96 Ribble Programme Consultants SR9404.01 & EIM SR9509 Internartional Evaluation of the Human Resource Jul-96 G.

X/SR/SO/9601 SR SO Boulden, SR9306 Development Fund ALA International Ltd X/ZZ/AA/9510 ZZ AA Evaluation of Community Expenditure Oct-95 Robert All within the Phare Programme Holzmann programmes 90/94 X/ZZ/AA/9403 ZZ AA Phare : A performance review Mar-94 Internal All programmes 90/93 X/ZZ/AD/9401 ZZ AD Evaluation of 1991/92Customs Nov-94 LDK ZZ9105 Programme Consultants X/ZZ/AD/9601 ZZ AD Evaluation of SIGMA II Jul-96 IEWSPECAT ZZ9405 X/ZZ/AD/9402 ZZ AD Evaluation of 1991/92 Statistics Nov-94 Strathclyde ZZ9108 Programme University X/ZZ/DE/9501 ZZ DE Evaluation of 1992 Democracy Aug-95 Eberhardt ZZ9207 Programme X/ZZ/DE/9701 ZZ DE Evaluation of the impact of the Polish, Jan-97 Charities PL9412 Czech, Slovak and Bulgarian Civil Aid Foundation CS9207 Society Development Programmes BG9406 Study Country Sector Study title Date Author Programme X/ZZ/ED/9201 ZZ ED Evaluation of the 1992 Tempus May-92 Coopers & ZZ9115 Programme Lybrand Europe X/ZZ/ED/9501 ZZ ED Evaluation of Phare Multi-Country Mar-95 Open ZZ9413 Distance Education Network University UK X/ZZ/ED/9601 ZZ ED Evaluation of the 1st phase of Feb-96 GES All TEMPUS 1990-1994 + Report from Maiworm TEMPUS I the Commission to the Council, 90-94 the European Parliament, the Economic

X/ZZ/ED/9602 All TEMPUS II

and Social Committee and the Committee of the Regions ZZ ED Evaluation of the 1st two years of TEMPUS II 1994-1996 + Report

Apr-96GES

Maiworm

X/ZZ/ED/9301 Kolodko, ZZ9109 X/ZZ/ED/9502 ZZ9216

from the Commission to the Council & Over 94-96 on the evaluation of TEMPUS achievements to date and views on partner countries' needs ZZ ED Evaluation of the ACE (Action for Feb-93 ZZ9001 Cooperation in the fields of Economics) Pisani-Ferry, Programme 1990-1991 Bauer, Cuddy ZZ ED Evaluation of the ACE (Action for Jul-95 Adam,

Cooperation in the fields of Economics) Bauer, Faini, Programme 1992-1994 Radulescu X/ZZ/IN/9701ZZ IN Evaluation of the Phare Multi-country Jan-97 BCEOM ZZ9208 Energy Programme with MARCH ZZ9308 (INTERIM REPORT) ZZ9417 ZZ9511 X/ZZ/IN/9501ZZ IN Evaluation and Impact Assessment - Nov-95 The Evaluation ZZ9210 Regional Telecommunications Partnership Programme (Vol I,II, III) X/ZZ/PR/9501 ZZ PR Evaluation of Joint Venture Phare Jul-95 ECO ZZ9101 Programme (J.O.P.P.) ZZ9311 X/ZZ/RE/9502 ZZ RE Assessment of the pilot phase of the Dec-95 IPS ZZ9316.02 Drug Demand Reduction X/ZZ/RE/9501 ZZ RE Assessment of two Regional Quality May-95 Martin Ward ZZ9113 Assurance Programmes and Bolo ZZ9213 (RQAP 91/ RQAP 92) Tom (CEN) X/ZZ/SO/9601 ZZ SO Evaluation of NGO programme in May-97 Birks Sinclair ZZ9350 social sector and Associates ZZ9408 Ltd Table B.3. List of monitoring and assessment reports Study Country R/BG/FI/9611 BG R/BG/IN/9511 BG9307 Sector Study title Date Programme FI Financial Sector Nov-96 BG9102 BG IN Conventional Energy Programme Nov-96

R/BG/IN/9601 BG9308 R/BG/IN/9604 BG9403 R/BG/PR/9612 96 BG9105

BG BG BG

IN IN PR

1993 National Transport ProgrammeJan-96 1994 National Transport ProgrammeApr-96 Enterprise Restructuring / Privatisation and Dec-

SME Development R/BG/PR/9702 BG PR Assistance to the Centre for Mass Privatisation Feb-97 BG9405 R/BG/RE/9611 BG RE SME/Regional Reconversion and Development Nov-96 BG9204 R/CZ/AG/9702 CZ AG Agriculture and Land Registration Programmes Feb-97 CS9201.26 CZ9402 R/CZ/ED/9701 CZ ED Renewal of the Education System of the Jan-97 CS9204 Czech Republic R/CZ/EN/9701 CZ EN Environment Sector Programme Jan-97 CS9002 CS9102 R/CZ/PR/9702 CZ PR Export Development Feb-97 CZ9302.04 R/ES/PR/9704 ES PR Assistance to Economic Restructuring and Apr97 ES9302 Investment Promotion via the Estonian Investment Agency R/HU/RE/9702 HU RE Regional Development Feb-97 HU9210 R/LE/LE/9701 LE LE Assistance to the Development of Economic Jan-97 LE9201.0201 Legislation in Latvia R/LI/LE/9704 LI LE Assistance to the European Integration Sector Apr97 LI9504 R/LI/PR/9703 LI PR Assistance to the Banking Sector Mar-97 LI9405 LI9506 LI9607 R/PL/PR/9701PL PR Core Technical Assistance for the Privatisation Jan-97 PL9003 Agency in Poland R/PL/PR/9701PL PR Assistance for Industrial Restructuring in Poland Jan-97 PL9010 R/PL/PR/9703PL PR Industrial Restructuring, Demonoplisation and Mar97 PL9110 privatisation in Poland R/PL/RE/9611 PL RE Reform Programme of the Science and Nov96 PL9209 Technology Sector R/RO/FI/9705 RO FI Strengthening and Modernising the Banking May97 RO9303.01 System

R/SR/ED/9701 CS9204SR R/SR/EN/9612 CS9002SR R/SR/IN/9704 SR SR9303.03

SR

ED

Renewal of the Educational System of the

Jan-97

Slovak Republic SR EN Environmental Sector Programme CS9102SR Infrastructure-Environment Programmes

Dec-96

EN

Mar-97

SR9406.03 Study Country Sector Study title Date Programme R/ZZ/AD/9703 ZZ AD Regional Customs Cooperation Programmes Mar-97 EE9105 ZZ9201 ZZ9312 R/ZZ/AD/9704 ZZ AD Regional and Multi-Country Programmes of Apr-97ZZ9108 Statistical Co-operation ZZ9202 R/ZZ/DE/9704 ZZ DE Partnership and Institution Programme and Apr97 ZZ9315 Partnership Programme ZZ9516 R/ZZ/PC/9612 ZZ PC ZZ9410 R/ZZ/PR/9704 ZZ PR Apr-97ZZ9431 R/ZZ/SO/9701 ZZ SO ZZ9505 Consensus Regional Consumer Protection Dec-96

Regional Turnaround Management Programme Multi-Country Social Protection Reform Jan-97