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Economy: EU Speeds Up Pre-Accession Aid

The EU has kick-started its ISPA aid program, which is designed to help bring candidate countries up to scratch in the environment and transport sectors. Eighteen projects totaling 450 million euros yesterday received preliminary approval in Brussels. RFE/RL correspondent Ahto Lobjakas looks at what's on offer.

Brussels, 21 July 2000 (RFE/RL) -- EU candidate countries have been given about 450 million euros to help fight environmental pollution, purify drinking water and improve roads and railways.

The money comes from an aid program called the Instrument for Structural Policies for Pre-Accession, known by its initials as ISPA. Between 2000-2006, ISPA will hand out more than 1 billion euros a year to 10 Central and East European candidate countries.

Speaking yesterday to RFE/RL, ISPA's director Franc Marco said ISPA should not be seen as a panacea in the fields of environment and transport. He said ISPA's budget is small compared to the actual need for aid in candidate countries, and any contributions would have to be very carefully studied.

"As ISPA is grant-financing, it has to be handled very carefully and used in the right proportions. That means that grant-financing should never replace available private financing or financing by international financial institutions, that it should be complementary to that sort of financing, in order to have the maximum leverage effect, the maximum multiplier effect."

ISPA is one of three EU aid programs for candidate countries.

The best known is the "Phare" program, established in 1989 for Hungary and Poland but quickly extended to other Central and Eastern European countries. Its main aim is to assist candidate countries bring their laws into line with EU requirements, as well as to support investment. The EU contributed 6,7 billion euros to Phare projects between 1995-1999.

In 2000, the EU set up two programs alongside Phare: ISPA for environment and transport; and SAPARD for rural development.

SAPARD stands for the Special Accession Program for Agriculture and Rural Development, and its aggregate budget runs to 540 million euros a year. First SAPARD grants are expected to be announced later this summer.

ISPA announced its first grants yesterday, approving 18 projects in eight candidate countries. The final go-ahead from the European Commission is expected in the near future.

ISPA is committed to sharing its resources between projects in the transport and environment sectors as evenly as possible. Within the transport sector, a 50-50 breakdown is aimed at between projects dealing with roads and railways.

The majority of the environmental projects approved so far have to do with waste-water treatment in Poland, Romania and Hungary. There are also projects dealing with waste management.

In the transport sector, a balance has been struck between road rehabilitation projects in Poland, Romania and Bulgaria; and rail improvements in Poland, Slovakia and Slovenia. Once ISPA approves a project, it pays for up to 75% of the total cost. The remaining 25% comes from local sources.

The amounts ISPA allocates to individual candidates depend on the size of the country and its economy, and on the quality of projects submitted for appraisal. The greatest intended beneficiary is Poland, which is expected to get around a third of ISPA's budget. The smallest recipient is Slovenia.

ISPA's director Marc Franco stresses that assistance programs like ISPA have wider ambitions besides specific development support.

"ISPA is in the first place an instrument to help with investments in the sectors of environment and transport, but it has a second objective, which I would say is as important as the first, that is to prepare the countries for the implementation procedures and mechanisms that exist within the European Union. It has an institution-building effect."

Franco says that as the responsibility for implementing projects is put on candidate countries themselves, they are expected to amass valuable experience. Administering ISPA funds also helps candidates sharpen their administrative capacity, which could become an important accession argument, as Franco puts it.