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The East: The EU Rethinks Its Funding To The East

By William Echikson

Brussels, 3 September 1997 (RFE/RL) -- The European Union set up its Tacis and Phare programs five years ago to aid the nations of Central and Eastern Europe and the former Soviet Union. But when investigators polled Ukrainians this year, some 60 percent responded that Tacis was a U.S. program.

A poor or non-existent public image represents only one of the multiple problems plaguing the two controversial EU aid efforts. Four separate reports released this spring and summer criticize their effectiveness. None uncover rampant corruption. But all call for urgent reform.

When the two programs were launched in 1989 after the collapse of communism, they focused on providing emergency food and transport aid. Over the years, they have expanded and evolved into more than $2 billion programs spread over hundreds of separate projects in 25 countries.

Under a mandate from the European Parliament, independent consultants prepared so-called interim evaluations in August. At the same time, the EU's Luxembourg-based Court of Auditors audited the two programs.

Significant overlap was uncovered in the two aid programs. In principle, Phare helps Central and Eastern Europe, while Tacis is designed for the former Soviet Union except for the Baltics. In practice, the two often duplicate one another -- for example, funding duplicate nuclear-safety programs that double the bureaucracy needed.

Worse, almost two-thirds of the aid money goes to highly-paid Western consultants, including wealthy multi-national consulting and accounting groups. These expensive consultants don't even record their working hours, the Court of Auditors complained. In particular, the auditors said, consultants working in Ukraine didn't even bother "to warn their superiors of the alarming situation in the nuclear-power stations."

The auditors found that, because of the heavy use of consultants, the aid money produced few concrete, lasting results. Their report concluded: "About 80 percent of Phare projects managed on a decentralized basis are spent on contracts for services (technical assistance), supplies or work."

Also, EU officials prefer to stay in comfortable Brussels rather than resettle in the often difficult living conditions in countries receiving the aid. Despite being the home of Chornobyl, in Ukraine only one EU official monitors the country's critical nuclear-aid program.

The supposed benefactors of the EU's aid are furious. One Russian parliamentarian told EU investigators. "Tacis programs are supervised now by foreign specialists whose work is paid at the expense of funds allocated for our country....Thus Tacis pays -- and rather well! -- for the work of its own employees. In fact, Tacis (helps solve) the problem of unemployment in the European Union."

Bureaucratic bumbling means that much money approved by the EU's political leaders never even is spent. Phare still has not managed to disburse $2.2 billion -- more than one year of its budget. And yet, the Phare budget is scheduled to rise from this year's $1.4 billion to $1.76 billion in 1999.

Tacis' budget is about half that level, even though the Tacis countries are more backward than their neighbors in Phare. In one notorious case, the EU Court noted that only a third of the $180 million allocated to improve Ukrainian nuclear safety actually had been disbursed.

Months are needed to get EU programs up and running. At the same time, the countries receiving the aid are moving fast towards market economies. The EU's own Tacis Interim Evaluation report acknowledged the result: "Most projects are outdated even before the tenders make their bids and strategy proposals."

Even so, the same report notes that "poor projects are rarely terminated." Only 10 Tacis projects were canceled due to poor performance. But 80 programs were able to finish their contracts despite signs that they had failed to reach their interim objectives. The two programs are funding too many separate projects, the auditors said. Under present regulations, the minimum value of a project is only $220,000.

Phare and Tacis officials are pledging to change their ways in response to such criticisms. "This is a wake-up call," admits one (unnamed) Phare official. "We realize that our program has to be revised." Phare officials now say that in the future only projects costing more than $2.2 million will be approved, the hope being that fewer larger projects will be easier to control than many smaller ones.

Instead of dividing money up into 13 areas, as it has in the past, Phare will re-focus its activities on funding infrastructures. For example, the main Berlin to Warsaw road will be upgraded. Up to 70 percent of the overall program will be spent on such concrete projects.

The second reform priority will be preparing recipients to join the EU. Money will go to computerizing customs facilities and upgrading other public institutions to EU standards.

The image problem also is being attacked. Some Phare and Tacis officials would like to change the two programs' names to something more recognizable such as "Europa." When the Rowland Company's contract to promote the two programs ran out this summer, a new public relations firm was hired for the job. Maybe Ukrainians will finally discover that Tacis is actually a EU, not a U.S., program.

(William Echikson, who runs the Brussels-based East-West News Agency, regularly contributes to RFE/RL. )