G. & D.

CHIRLEAN, Management of the International Projects Course

Chapter 10: STRUCTURAL INSTRUMENTS (part II)

STRUCTURE OF THE COURSE 11: 10.2.: ERDF European Regional Development Fund 10.3.: ESF European Social Fund 10.4.: CF - Cohesion Fund

10.2: ERDF European Regional Development Fund

We remind here that the European Regional Development Funds (ERDF) is one of the EU main structural instruments and has as principal objective the promotion of the economic and social cohesion within the European Union, through the reduction of imbalances between regions or social groups. ERDF resources are mainly used to co-finance: productive investment leading to the creation or maintenance of jobs; infrastructure; local development initiatives and the business activities of small and medium-sized enterprises. In practice, all development areas are covered: transport, communication technologies, energy, the environment, research and innovation, social infrastructure, training, urban redevelopment and the conversion of industrial sites, rural development, the fishing industry, tourism and culture. For those who have projects which might benefit from ERDF support (whether they are ordinary citizens, the directors of companies, and members of local development association or local officials) summaries of the Regional Programmes may be consulted. Thus, summaries of most of the Regional Development Programmes 2000-2006 that have been officially adopted by the European Commission are available on the Regional Policy Inforegio web site at http://ec.europa.eu/regional_policy/country/prordn/index_en.cfm Summaries are all available in English, in French and in the language(s) of the country(-ies) concerned. On the same site there are posted the archives of the European Regional Development Fund (ERDF) Programmes for the period 1994-1999. As part of its task to promote regional development, the ERDF contributes towards financing the following measures: Productive investment to create and safeguard sustainable jobs; Investment in infrastructure which contributes, in regions covered by Objective 1, to development, structural adjustment and creation and maintenance of sustainable jobs, or, in all eligible regions, to diversification, revitalisation, improved access and regeneration of economic sites and industrial areas suffering from decline, depressed urban areas, rural areas and areas dependent on fisheries. Such investment may also target the development of trans-European networks in the areas of transport, telecommunications and energy in the regions covered by Objective 1;

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Development of the endogenous potential by measures which support local development and employment initiatives and the activities of small and medium-sized enterprises; such assistance is aimed at services for enterprises, transfer of technology, development of financing instruments, direct aid to investment, provision of local infrastructure, and aid for structures providing neighbourhood services; Investment in education and health (only in the context of Objective 1). The areas in which these measures provide support include development of the productive environment, research and technological development, development of the information society, protection and improvement of the environment, equality between men and women in the field of employment, and cross-border transnational and inter-regional cooperation. Note: Pursuant to the general Regulation, the Community's Interreg III Initiative and innovative measures (studies, pilot projects, exchanges of experience) in the field of regional or local development are financed exclusively by the ERDF. However, the scope of the ERDF may be extended to overlap with the other Structural Funds in order to cover the necessary measures for the implementation of the Initiative programmes or pilot projects concerned. The European Development Fund (EDF) is the main instrument for providing Community aid for development cooperation not only to Member States but also in the ACP States (African, Caribbean and Pacific States) and OCTs (Overseas Countries and Territories). The 1957 Treaty of Rome provided for its creation with a view to granting technical and financial assistance, initially to African countries which at that time were still colonised and with which some Member States had historical links. Even though a heading has been reserved for the Fund in the Community budget since 1993 following a request by the European Parliament, the EDF does not yet come under the Community's general budget. It is funded by the Member States, is subject to its own financial rules and is managed by a specific committee. The aid granted to ACP States and OCTs will continue to be funded by the EDF, at least for the period 2008-2013. Each EDF is concluded for a period of around five years. Since the conclusion of the first partnership convention in 1964, the EDF cycles have generally followed the partnership agreement/convention cycles. First EDF: 1959-1964 Second EDF: 1964-1970 (Yaound I Convention) Third EDF: 1970-1975 (Yaound II Convention) Fourth EDF: 1975-1980 (Lom I Convention) Fifth EDF: 1980-1985 (Lom II Convention) Sixth EDF: 1985-1990 (Lom III Convention) Seventh EDF: 1990-1995 (Lom IV Convention) Eighth EDF: 1995-2000 (Lom IV Convention and the revised Lom IV) Ninth EDF: 2000-2007 (Cotonou Agreement) Tenth EDF: 2008-2013 (Revised Cotonou Agreement) The EDF consists of several instruments, including grants, risk capital and loans to the private sector. The Stabex and Sysmin instruments designed to help the agricultural and mining sectors were abolished by the new partnership agreement signed in Cotonou in June 2000. This

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agreement also streamlined the EDF and introduced a system of rolling programming, making for greater flexibility and giving the ACP States greater responsibility. The development aid provided by the EDF forms part of a broader European framework. Within the European Union, the funds of the Community's general budget may be used for certain types of aid. Moreover, in addition to managing part of the EDF's resources (loans and risk capital), the European Investment Bank (EIB) will contribute a total of 1.7 billion from own resources for the period covered by the ninth EDF. The Member States have their own bilateral agreements and implement their own initiatives with developing countries that are not financed by the EDF or any other Community funds. Through the innovative measures (studies, pilot projects and exchanges of experience) the ERDF contributes is to reinforce competitiveness in Europe by reducing the gaps between regions and supporting innovation, RTD (Research and Technological Development) and the use of new information and communication technologies. It therefore forms part of the strategy approved at the European Council in Lisbon on 23/24 March 2000, which aims at boosting employment, economic competitiveness and social cohesion in the framework of a knowledgebased economy. In the period 2000-2006 the innovative measures therefore concentrated on three priorities: regional economy based on knowledge and technological innovation: helping the lessfavoured regions to raise the level of their technology; the information society at the service of regional development (e Europe-region); regional identity and sustainable development: promoting regional cohesion and competitiveness through an approach which integrates economic, environmental and social activity. Implementing the innovative measures should also make it possible to: improve the quality of assistance under the Objective 1 and 2 programmes to which the ERDF contributes; enhance and strengthen the public-private partnership; exploit the synergies between regional policy and the other Community policies; have exchanges between regions and collective learning by means of the comparison and spread of best practice. The innovative measures form part of regional programmes of innovative measures whose strategy is determined, in line with the regional partnership principle, by a steering committee. Programme proposals must be submitted to the Commission by 31 May each year at the latest from 2001 to 2005 so that the Commission can select those to be part-financed by the ERDF. The innovative measures have an annual allocation of EUR 400 million, or 0.4 of the ERDF's annual funding. Part-financing of their cost may amount to up to: 80%, in Objective 1 regions; 50%, or even 60% where the Community relevance of the measures justifies it, in Objective 2 regions. For reasons of consistency, it would be preferable if the bodies responsible for payment and monitoring were the same in the case of both the programmes of innovative measures and the Objective 1 and 2 programms. Below there are presented the main focuses of the ERDF programme: Page 3 of 12

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In the regions eligible under Objective 1, the emphasis is on catching up: large infrastructure projects essential for economic development, particularly in the context of trans-European networks (transport, telecommunications or energy) and environmental protection (in particular management of water resources). Tangible investment in the fields of education and health. In the areas eligible under Objective 2, efforts focus on the diversification of economic activities and the establishment of businesses in an attractive setting: rehabilitation of industrial sites and run-down urban areas, opening up and revitalisation of rural areas and regions dependent on fishing (renovation, environmental improvement, investment in infrastructure and equipment, etc.). In all disadvantaged regions (Objectives 1 and 2): direct investment in production to create sustainable jobs. Assistance for SMEs and local development: business services (management, market surveys, support for innovation, financial engineering, etc.), infrastructure on a local scale, facilities for local community services, and tourist and cultural activities. Special attention is given to local employment initiatives and, in particular, those drawing on the experience of the territorial pacts for employment. Capacity building in research and technological development (RTD). Development of the "information society". The ERDF also finances the Community initiatives Interreg III and Urban II.

10.3: ESF European Social Fund

We remind here that the European Social Fund (ESF) is the main financial instrument allowing the Union to realise the strategic objectives of its employment policy: Assistance for individuals in the field of education and training: initial training, apprenticeships, development of work skills, careers guidance and ongoing training. Aids for employment and for self-employed activities. Training for executives and technical staff in research centers and businesses. Exploitation of "new employment sources", particularly in the social economy. Improvement of education and training structures (including through the training of teachers and of trainers), employment services and links with research centers. Anticipation of developments in working patterns and employment needs. Equal opportunities for men and women. Projects aimed at combating and preventing discrimination and inequalities of any kind in the labor market are also eligible for Social Fund assistance through the EQUAL Initiative. What are the ESF's key messages? Key financial instrument supporting the European Employment Strategy Investing in people Greater responsibility to Member States Simplification of administration Partnership, local action and evaluation of effectiveness Encouraging local solutions to local issues. More concretely, what is the European Social Fund? The European Social Fund (ESF) helps people improve their skills and, consequently, their job prospects. Created in 1957, the ESF is the EU's main source of financial support for efforts to

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develop employability and human resources. It helps Member States combat unemployment, prevent people from dropping out of the labour market, and promote training to make Europe's workforce and companies better equipped to face new, global challenges. The ESF is one of the EU's four Structural Funds, which were set up to reduce differences in prosperity and living standards and help areas of Europe which, for one reason or another are suffering difficulties. This is usually referred to as 'promoting economic and social cohesion'. To do this, the ESF spends European money on the achievement of the goals agreed in the European Employment Strategy. This strategy is bringing together the 25 Member States to work at increasing Europe's capacity to create good jobs, and providing people with the skills to fill them. The ESF channels its money into strategic, long-term programmes in Member States and regions across the EU, particularly those where economic development is less advanced. Seven-year programmes are planned by Member States together with the European Commission and then implemented through a wide range of organizations, both in the public and private sector. These organizations include national, regional and local authorities, educational and training institutions, non-governmental organizations (NGOs) and the voluntary sector, as well as social partners, for example trade unions and works councils, industry and professional associations, and individual companies. In the period 2000-2006, the ESF granted some 70 billion to people and projects across the EU. This money comes on top of Member State funding from public and/or private sectors in the country concerned. In 2007, a new programming period for the ESF begun. A new set of simplified rules were prepared, which will enable the Funds to respond more effectively to the challenges of the 21st century. For the beneficiaries of the ESF this will mean better jobs and opportunities for all. What are the ESF objectives? As one of the EUs four Structural Funds, the ESF aims to reduce the differences in living standards between the people and the regions of the EU by pursuing the following three objectives: Objective 1 promotes the development of regions whose GDP per head is below 75% of the EU average, outlying regions (the French overseas departments, the Azores, Madeira and the Canary Islands), and the sparsely populated regions of Northern Sweden and Finland. Objective 2 provides support for: areas adjusting to change in industrial and services sector rural areas in decline urban areas in difficulty economically depressed areas heavily dependent on fisheries Objective 3 provides funding to help adapt and modernize policies and systems of education, training and employment. The entire population of the EU outside Objective 1 areas is covered by Objective 3. What are the ESF priorities? The ESF aims to support and complement the activities of Member States in developing both human resources and labor market policy. It does this through action in 5 main areas: Page 5 of 12

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Developing active policies to combat unemployment, preventing long-term unemployment and providing support for those entering or re-entering the job market. Promoting social inclusion and equal opportunities for all. Developing education and training as part of a policy for lifelong learning. Promoting a skilled and adaptable workforce, fostering innovation in work organization, supporting entrepreneurship and job creation, and boosting human potential in research, science and technology. Improving the participation of women in the labor market. How much money is involved? The ESF is one of the EU's four Structural Funds. Together, the four Funds granted almost 195 billion EUR over the seven-year period 2000-2006 to projects across the EU. Through the ESF, the Commission provided some 70 billion EUR over the 7 years. This worked alongside public and private funding within Member States to tackle the specific problems of each area of the EU. How does money reach those who need it? In order to ensure that funds go to areas of greatest need, the Commission agreed with Member States a series of objective criteria for allocating funds across the EU based on labor market and economic development needs. For Objectives 1 and 2, the Commission has allocated the available resources on the basis of eligible population, national prosperity, regional prosperity, and the relative seriousness of structural problems, including unemployment. For Objective 3, the Commission has allocated the available resources on the basis of eligible population, the employment situation, the level of poverty, education and training levels, and the participation of women in the labor market. The way this is then broken down, and the specific projects which benefit from ESF cofunding under these programmes, is a matter for the Member State. How the ESF support can be accessed? The Commission does not directly fund ESF projects. Member States are responsible for identifying their priorities for funding and for selecting individual projects. For further information, applicants should contact the relevant national/regional authority. How do the social partners get involved? The development and implementation of ESF must take place in partnership with all the key players at a national, regional and local level. This includes involving relevant partners in the development and implementation of plans and in programme monitoring committees. Representatives of employers and trades unions have an important role to play. How does the ESF address the real needs of an area/region? The Commission set out very clear guidelines on how national, regional and local authorities should draw up their plans. The Commission also put a strong emphasis on the need for a thorough assessment of the labor market and economic development needs of the areas covered by ESF programmes. Together this package represents a huge investment in the prosperity and labor market development of Europe. As part of this process, the Commission has also encouraged decentralization of decision-making and those drawing up plans to consult widely on their priorities for ESF. This should ensure a better match of funds to specific local and regional labor market problems.

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What does the ESF do to tackle the social exclusion? The most important way to avoid or tackle exclusion is through employment. Through its sharp focus on supporting the European Employment Strategy, the ESF has a key role to play in dealing with social exclusion. A significant proportion of the 60 billion EUR available through the ESF is expected to go towards the fight against social exclusion. Member States can use the ESF both directly with individuals facing exclusion and indirectly by helping to build up the capacity of organizations helping the most disadvantaged. The ESF programmes must of course provide a balanced approach to a wide range of labor market problems across the EU. It cannot target all resources on just one area. What does the ESF do to support the needs of women? The Commission has taken a strong line on gender equality in negotiations with Member States over the new programmes. There are signs that the negotiations have secured further increases in the level of resources devoted to the specific needs of women. The Structural Fund Regulations set out clearly the need to maintain a balanced participation of women and men within individual programme Monitoring Committees. The Commission will review the implementation of this regulation over the coming year to ensure a fair representation of women in the decision-making process. There is evidence from 1994-99 that women were under-represented in some ESF programmes. That is why the new regulations place a strong emphasis on promoting equal opportunity. Gender mainstreaming across all ESF supported activities and specific actions will help women compete more effectively in the labor market. Which will be the future of ESF (ESF 2007-2013)? From 1 January 2007, a new programming round for the Structural Funds begun for 27 Member States (including Romania and Bulgaria). In preparation, a completely new set of regulations governing the operation of the Structural Funds was debated. These new regulations introduced some of the biggest changes in the operation of the Structural Funds for more than a decade. Policy framework: The links between the ESF and the policy framework the European Employment Strategy are being reinforced so that the ESF can contribute more effectively to the employment objectives and targets of the "Lisbon Strategy for Growth and Jobs". Particular importance is being placed on the strategy's three main objectives of full employment, quality and productivity at work, social cohesion and social inclusion. The scope of ESF intervention: The new ESF regulation for 2007-2013, which provides a common framework for ESF interventions throughout the Union, is more focused than the former regulation. Throughout the Union, under both the 'Convergence' and the 'Regional Competitiveness and Employment' objectives, the ESF provide support for anticipating and managing economic and social change. Its intervention will focus on four key areas for action: increasing adaptability of workers and enterprises enhancing access to employment and participation in the labor market reinforcing social inclusion by combating discrimination and facilitating access to the labor market for disadvantaged people. promoting partnership for reform in the fields of employment and inclusion Page 7 of 12

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In the least prosperous regions and Member States, the Funds will concentrate on promoting structural adjustment, growth and job creation. To this end, under the 'Convergence' objective and in addition to the priorities mentioned above, the ESF will also support: efforts to expand and improve investment in human capital, in particular by improving education and training systems. action aimed at developing institutional capacity and the efficiency of public administrations, at national, regional and local level.

10.4: CF - Cohesion Fund

What is the Cohesion Fund? The Cohesion Fund is a structural instrument that helps Member States to reduce economic and social disparities and to stabilize their economies since 1994. The Cohesion Fund finances up to 85 % of eligible expenditure of major projects involving the environment and transport infrastructure. This strengthens cohesion and solidarity within the EU. Eligible are the least prosperous member states of the Union whose gross national product (GNP) per capita is below 90% of the EU-average (since 1/5/2004 Greece, Portugal, Spain, Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia). For the Cohesion Funds EUR 15.9 billion (in 2004 prices) were available for the years 20042006. More than half of the funding (EUR 8.49 billion) is reserved for the new Member States. Who is eligible? Based on the regulation No 1164/94 of 16 May 1994, a Member States is eligible for Cohesion Funds, if:

has a per capita gross national product (GNP), measured in purchasing power parities, of less than 90 % of the Community average, has a programme leading to the fulfillment of the conditions of economic convergence as set out in Article 104c of the Treaty establishing the European Community (avoidance of excessive government deficits).

Four Member States: Spain, Greece, Portugal and Ireland were eligible under the Cohesion Fund from 1 January 2000. The Commissions mid-term review of 2003 deemed Ireland (GNP average of 101 %) as ineligible under the Cohesion Fund as of 1 January 2004. On 1 May 2004 with the EU enlargement, all new Member States (Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia) were qualified for the Cohesion Fund. Cohesion Fund support is conditional. The funding granted to a Member State is liable to be suspended if the country fails to comply with its convergence programme for economic and monetary union (stability and growth pact) running i.e. an excessive public deficit (more than 3% of GDP for Spain, Portugal and Greece, this threshold is being negotiated separately for each of the ten new Member States according to their own public deficit at the moment of the accession). Until the deficit has been brought back under control, no new projects might be approved. What kinds of projects are eligible? Projects to be eligible must belong to one of the two categories: a) Environment projects helping to achieve the objectives of the EC treaty and in particular projects in line with the priorities conferred on Community Environmental policy by the relevant Page 8 of 12

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Environment and Sustainable Development action plans. The Fund gives priority to drinking-water supply, treatment of wastewater and disposal of solid waste. Reforestation, erosion control and nature conservation measures are also eligible. b) Transport infrastructure projects establishing or developing transport infrastructure as identified in the Trans-European Transport Network (TEN) guidelines. There has to be an appropriate funding balance between transport infrastructure projects and environment projects. How are the Cohesion Fund projects managed? Member States submit applications for financing to the European Commission, which generally decides on funding within three months. The proposals must include key elements explaining what and why it is being proposed, the feasibility and financing of the project and the impact it will have in socio-economic and environmental terms. All projects must comply with Community legislation in force, in particular the rules on competition, the environment and public procurement. The Commission analyses, if all conditions for the financing are met, including: the economic and social benefits generated by the project in the medium term, as demonstrated by a cost-benefit analysis, the project's contribution to achieving Community objectives for the environment and/or the Trans-European Transport Network, compliance with the priorities set by the Member State, the project's compatibility with other Community policies and consistency with operations undertaken by the Structural Funds. The total rate of the EU assistance cannot exceed 85 % of public or equivalent expenditure and depends on the type of operation to be carried out. For projects, which generate revenue, the support is calculated taking into account the forecasted revenue. The polluter-pays principle (the body that causes pollution should pay for it) has an impact on the amount of support granted. For projects to be carried out over a period of less than two years or where Community assistance is less than EUR 50 million, an initial commitment of 80% of assistance may be made when the Commission adopts the decision to grant Community assistance. The combined assistance of the Fund and other Community aid for a project shall not exceed 90 % of the total expenditure relating to that project. Exceptionally, the Commission may finance 100 % of the total cost of preliminary studies and technical support measures in view of the limited budget available for such levels of support this is restricted to EU wide technical assistance. The Member States are responsible for implementing the projects in line with the Commission Decision, managing the funds, meeting the timetable, complying with the financing plan and, in the first instance, ensuring financial control. The Commission makes regular checks and all projects are subject to regular monitoring. Additionally the Commission regulation No 621/2004 (link to lays down rules regarding information and publicity measures concerning the activities of the Cohesion Fund which have to be fulfilled by the Member States. What are the available funds by country? For the years 2000-2006 the European Union provided over EUR 28.212 million (in 2004 prices) for the Cohesion Fund. The funds available for the countries are as follows: Cohesion Fund for the four eligible Member States in average, 200006 (1)

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Ellda 3 388

Espaa 12 357

Ireland 584

Portugal 3 388

(1) Ireland only until the end of the year 2003 (million EUR commitments in 2004 price) Cohesion Fund for the ten new eligible Member States in average, 200406 esk Rep. Eesti Kypros Latvija Lietuva Magyarorszg Malta Polska Slovenija Slovensko 1 112,67 21,94 4 178,60 188,71 570,50

936,05 309,03 53,94 515,43 608,17 (million EUR commitments in 2004 price)

What has changed after 2006? Based on the European Commission proposal, the Cohesion Fund is more integrated into the operation of the mainstream Structural Funds (link to The third cohesion report on economic and social cohesion and the proposal of new legislative package). On one hand, the regulation proposal (link to) establishing the Cohesion Fund retains the eligibility criteria (threshold of 90 % GDP), the grant limit (85 %). Besides this the conditionality of Cohesion Fund assistance also continue to apply. On the other hand, the Commission proposed a switch from project-based support to programme-based support. The Commission approval will be required only in the case of major projects (EUR 25 million for environmental and EUR 50 million for transport projects). Therefore, the Cohesion Fund managing authorities will have increased responsibility in terms of selection, appraisal, grant award, monitoring, management and ensuring speedy implementation to avoid loss of assistance as programming spending discipline will apply, i.e. the n+2 rule. The assistance will not only cover major transport and environmental protection infrastructures, but also projects in the fields of energy efficiency, renewable energy and intermodal, urban or collective transport. The Commission proposal earmarked 26 % of the total allocation for the Structural Policy instruments to the Cohesion Fund (EUR 63 billion). The Cohesion Fund Regulations Regulation (EC) No 1164/94 (link to) established the Cohesion Fund provided the framework for its implementation. This regulation was subsequently complemented by Regulations (EC) No 1264/99 (link to) and (EC) No 1265/99. Financial control and corrections - REG 1386/2002 Eligibility REG 16/2003 Publicity - REG 621/2004 Following the Unions enlargement on May 1st 2004, the Cohesion Fund regulations apply to the 10 new Member States until the end of 2006 (see II Annex to the Act of Accession).

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EXAMPLES OF PROJECTS THE CITY OF BIRMINGHAM European Funding has provided vital funding where there were little or no other resources available in the city. The focus of the programmes over the years has widened. The Objective 2 programme has recognised the need to support capital investments of regional significance which will bring real benefits. These investments include projects such as the International Convention Centre (ICC) and Millennium Point. There are good examples of cross-authority projects such as the Midlands Metro line between Wolverhampton and Birmingham. The high levels of development investment in recent years is reflected in flagship projects such as Star City and Birmingham Great Park. There is also increasing evidence of diversification into fast growth high technology sectors for example in the A38 Technology Corridor.

Birmingham has been successful in projecting itself as a centre for business tourism, capitalising on world class physical assets such as the International Convention Centre (ICC), Symphony Hall, and National Exhibition Centre.

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Bibliography:

Summaries of Regional Development Programmes, http://ec.europa.eu/regional_policy/country/prordn/index_en.cfm European Regional Development Fund, http://en.wikipedia.org/wiki/European_Regional_Development_Fund ERDF in ACP States and OCT, http://europa.eu/legislation_summaries/development/overseas_countries_territories/r12102_en.ht m ERDF Innovative Measures, http://europa.eu/legislation_summaries/employment_and_social_policy/job_creation_measures/l 60015_en.htm European Social Fund, http://ec.europa.eu/employment_social/esf2000/introduction_en.html European Social Fund 2000 2006, http://ec.europa.eu/employment_social/esf2000/faqs_en.html European Social Fund 2007 -2013, http://ec.europa.eu/employment_social/esf2000/2007-2013_en.html

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