Commission Report 2002 (Hungary)

Community Assistance

Three pre-accession instruments have been financed by the European Community to assist the applicant countries of Central and Eastern Europe with their pre-accession preparations: the Phare programme; SAPARD, which provides aid for agricultural and rural development; and ISPA, which finances infrastructure projects in the fields of environment and transport. The support provided by these programmes is focused on the Accession Partnership priorities, which are intended to help the candidate countries meet the criteria for membership.

For the years 2000 to 2002, total financial assistance to Hungary amounts to around EUR 96 million annually from Phare, EUR 38.7 million from SAPARD and between EUR 72.8 million and EUR 104 million from ISPA.

The Phare programme has been providing support to the countries of Central and Eastern Europe since 1989, helping them through a period of fundamental economic and social transition and political change. Its current ``pre-accession'' focus was established in 1997, in response to the Luxembourg European Council`s launching of the present enlargement process.

Phare provides the applicant countries of Central and Eastern Europe with support for institution building, investment to strengthen the regulatory infrastructure needed to ensure compliance with the acquis, and investment in economic and social cohesion. This support comprises co-financing for technical assistance, ``twinning'' and investment-support projects, to help these countries with their efforts to adopt the acquis and strengthen the institutions necessary for implementing and enforcing the acquis. Phare also helps the candidate countries develop the mechanisms and institutions that will be needed to implement Structural Funds after accession and is supported by a limited number of measures (investment and grant schemes) with a regional or thematic focus. In the context of the Action Plans for strengthening administrative and judicial capacity, particular emphasis is placed on the issue of institution building and associated investment intended to ensure compliance with the acquis. For 2002, the Commission has mobilised special financial assistance of up to EUR 250 million to accompany negotiating countries' efforts, over and above the indicative annual allocations for each of the Phare countries, bringing total Community assistance for strengthening the administrative and judicial capacity of the negotiating countries in 2002 to around EUR 1 billion.

The Phare programme allocated commitments of EUR 1.03 billion to Hungary during the 1992-1999 period, EUR 119.8 million in 2000, and EUR 108.8 million in 2001. The 2002 Phare Programme for Hungary consists of an allocation of EUR 87 million for the National Programme, complemented by EUR 24.7 million under the Phare 2002 supplementary institution building facility. The 2002 Phare programme focuses on the following priorities:

• developing of administrative capacity in sectors including agriculture, social policy and employment, regional policy, the environment, justice and home affairs, and customs;
• establishing capacity for the efficient use of future Structural Funds assistance;
• participation in Community programmes and agencies.

An additional EUR 19 million have been allocated for cross-border co-operation programmes (CBC), whereof EUR 10 million for co-operation with Austria, EUR 5 million for co-operation with Romania, EUR 2 million for co-operation with Slovakia and EUR 2 million for co-operation with Slovenia.

Hungary also participates in and benefits from Phare-funded multi-country and horizontal programmes, such as TAIEX, the Small- and Medium-sized Enterprises Facility, SIGMA and the nuclear safety programme.

Furthermore, Hungary participates in the following Community programmes: fifth Framework Research Programme (including Euratom), Leonardo da Vinci, Socrates, Youth, the multi-annual Programme for Enterprises and Entrepreneurship, Culture 2000, Life III and Fiscalis. Following the ratification and entry into force of the agreement, Hungary`s formal participation in the European Environment Agency started in January 2002. In order to streamline Community legal procedures and thereby facilitate Hungary`s future participation in Community programmes, a Framework Decision was adopted in December 2001 by the Association Council establishing the general principles for such participation.

Overall, the impact of Phare has been positive. Effective transfer of know-how, equipment and financial resources has taken place in a number of important fields such as agriculture, aid co-ordination, education, trade and investment promotion, transport and the environment. Phare support for the environment, privatisation and restructuring and SME development has contributed to the successful development of sector strategies and essential institutional and financial mechanisms serving enterprises in these sectors

For example, in Hungary, Phare has played a particularly important role in the following:

• In the justice and home affairs sector, EUR 30.3 million was allocated between 1997 and 2001 to purchase surveillance equipment such as patrol boats, mobile thermal camera systems and radio communication equipment in order to step up the fight against cross-border crime and prevent illegal immigration, particularly at Hungary`s southern and eastern borders. This investment was complemented by twinning operations aimed at strengthening border management systems and training officials (EUR 3.9 million since 1997). The 2002 programme also includes a (EUR 6 million) project for establishing an information system in line with Schengen requirements.
• Support for the Roma minority has been a priority of the Phare programme since 1999. Several projects have been carried out to promote the social integration of the Roma population in Hungary, by reducing the primary school drop out rate and focusing on supportive schooling and on vocational training at the level of secondary education. Practical support was provided by renovating two dormitories in a school for exceptionally able Roma pupils and by providing 17 school buses. The Phare contribution to these projects amounted to EUR 7 million;

In the social and employment sector, in response to a need identified during the negotiations, a twinning project is being financed under the 2001 National Programme (EUR 2 million) to strengthen ``autonomous'' social dialogue. The objective is to help establish of a functioning social dialogue system by complementing the existing tripartite social dialogue structures with more independent bipartite channels. The project supports the creation of sectoral committees that will not only provide the social partners with the opportunity to exert influence on domestic issues but will also prepare them for participation in similar sectoral structures at European level.

• In the area of regional policy, Phare has provided considerable support since 1998, both for institution building through twinning projects and for pilot investment projects. As a result, under Phare 2002, the Commission and the Hungarian Government have agreed on a comprehensive two-year framework (2002 - 2003) for programming, implementing and monitoring Structural Fund-type measures as a precursor to actual implementation of the Structural Funds. This scheme, with an approved Phare contribution of EUR 41.5 million in 2002 and a planned contribution of over EUR 70 million in 2003, will be co-financed by Phare and the Hungarian Government.

The 2000 Phare Review confirmed the accession-driven approach and emphasised the importance of helping countries to prepare for the Structural Funds. The trends introduced in 1997 have continued, with an increased role for Commission Delegations, further streamlining of procedures and increasing emphasis on raising the verifiable and quantifiable impact of Phare projects on institution building, investment in compliance with the acquis and economic and social cohesion.

The Review also provided for the possibility of further decentralisation of Phare management, by waiving the requirement for ex ante approval by the Commission Delegations for tendering and contracting. For this to be possible, strict pre-conditions covering programme management, financial control and structures regarding public finance must be met. An extended decentralised implementation system (EDIS) should be put in place for each negotiating country at the latest by the time of accession. High Level Working Groups are being established for each country to oversee this process, along with other key procedural steps in the run up to accession.

The Hungarian SAPARD programme was approved by the Commission in October 2000. The indicative allocation for SAPARD in Hungary for 2002 is EUR 39.8 million at 2002 prices (allocation 2001: EUR 39.4 million at 2001 prices).

The programme is based on two major priorities, namely improvement of the agricultural sector and processing industry`s competitiveness, focusing on environmental protection aspects, and the enhancement of capacities for adaptation in rural areas (renovation and development of villages, diversification of activities, development and improvement of rural infrastructure).

The multi-annual Financing Agreement (MAFA), setting out the rules for implementing SAPARD, and the Annual Financing Agreement (AFA) setting out the Community financial commitment to Hungary for the year 2000, are both in force since June 2001.

The Commission agreed to the text of the AFA for 2001 in November 2001, which is still unsigned.

The following structures are responsible for the implementation of SAPARD; the National Fund, located within the Ministry of Finance administers SAPARD funds under the responsibility of the National Authorising Officer (NAO) and is responsible for the national accreditation of the SAPARD Agency; the Managing Authority is located within the Ministry of Agriculture and Regional Development (MARD); the SAPARD Agency is established within the Ministry of Agriculture and Regional Development and has got its own regional offices; the State Audit Office will act as the Certifying Body

The Hungarian authorities are proceeding with the preparation of their implementing and paying structures (SAPARD Agency and National Fund). No Community funds can be released until the Commission Decision conferring provisional management of aid to Hungary is taken.

A Monitoring Committee has been established by the Managing Authority and has met once.

The ISPA programming framework is governed by the national strategy papers, which the Hungarian authorities drew up in 2000 for transport and environment. The main transport objectives are: promotion of integration into the EU; improved co-operation with neighbouring countries; contribution to balanced regional development; protection of human life and the environment; and effective market-oriented transport regulations. For the environment, priority project areas for funding include waste management and waste water projects. The strategic objective for Hungary is to achieve sustainable development by integrating environmental protection considerations into all sectoral policies. The two priority areas for the first stage of ISPA financing (2000-2001) are water protection and municipal waste treatment. The priorities for the period 2000-2006 also include air quality.

For the years 2000 and 2001, the full (mid-range) allocation for Hungary has been committed, i.e. EUR 178.8 million (EUR 88 million in 2000 and EUR 90.8 million in 2001). The allocation for 2002 is approximately EUR 93.9 million.

Nine environmental projects were approved in 2001: a technical assistance (TA) project for the implementation of urban waste water directives (EUR 0.14 million), a further two TA measures for drinking and sewage water project preparation (EUR 0.3 million and EUR 1.1 million), a sewage network treatment project in Sopron (EUR 9.3 million), an extension of the sewer system in Pecs (EUR 10.8 million) and four solid waste collection systems in Miskolc, Tisza Lake, mid-Danube-Tisza, and Sajo-Bodva (EUR 32.15million). Two transport projects were approved in 2001: one providing TA for rail projects (EUR 1.5 million) and a road rehabilitation programme for achieving 11.5 tonnes loadbearing capacity on roads 3 and 35 (EUR 20 million).

Two transport projects were presented for approval in 2002, addressing the rehabilitation of the Szolnok-Lököshása railway line and the rehabilitation of roads 2, 6, 42, 47 and 56 for achieving 11.5 tonnes load bearing capacity. In the environmental field, five regional solid waste management systems are currently being approved, in South Balaton and the Sio valley area, in the regions of North Balaton, Homokhatsag, West Balaton and the Zala valley area, and in the north-east of Pest County. Further projects are in preparation.

A Gap Assessment has been carried out in preparation for the decentralisation process (EDIS).

Contracts have been signed for three projects in the transport sector. Tenders for the remaining projects under ISPA 2000 and 2001 are currently being launched or in preparation.

© European Commission; last modified 2003-05-21