Plan to reform Tacis scheme

Date: 10/12/1998

By Simon Taylor

THE European Commission is planning a major overhaul of its 500-million-ecu a year aid programme for Russia and the former Soviet Union countries.

The reforms are aimed at making better use of precious resources and contributing towards improved security on the Union's borders as it prepares to expand eastwards.

Under the plans due to be unveiled later this month, the Commission will propose setting up a new programme to replace the existing Tacis scheme, which offers technical assistance to the former Soviet Union countries and Mongolia to help them make the transition to market economies. The new scheme, which will be renamed to reflect the reduced emphasis on technical assistance, will run up to 2006.

Commission officials argue that the future Tacis programme should reflect the EU's interests in the region more closely, focusing on creating a zone of stability on the enlarged Union's eastern border, promoting trade and investment, and tackling problems like drug trafficking and environmental damage.

Following consultations with the vast range of parties involved in the programme, which has distributed more than 3 billion ecu since its launch in 1991, the institution has decided that precious resources should be concentrated on fewer, larger-scale projects (up to a maximum of three in each country), with their average size increased from the current level of around 1 million ecu.

"In the past, Tacis has been very fragmented", said a senior Commission official, "but bigger projects have more political visibility and are easier to manage."

The 13 Tacis countries have criticised the existing programme for treating all of them as though they were at the same level of development. The new scheme will take a more differentiated approach. Economic performance varies enormously across the region, from Uzbekistan where the economy is operating at 90% of 1989 levels, to Moldova where gross domestic product is languishing at 40% of the 1989 figure, according to a study by the European Bank for Reconstruction and Development (EBRD).

One of the main changes planned by the Commission is to use funds to encourage investment in local projects by international financial institutions. While the programme does not have enough money to make large-scale loans, the Commission wants to use grant aid to catalyse investment from international lenders such as the EBRD and World Bank.

EU funds would be used to carry out preparatory work, which is vital before foreign investors will consider getting involved, such as feasibility and environmental impact studies.

The Commission will also try to improve the quality of projects receiving funding by setting up an 'incentive scheme', under which a percentage of the total budget will kept back in each year and put into a special fund. This would allow Tacis beneficiaries to submit additional proposals for funding at a later date. The new scheme will also transfer more responsibility for the projects to the Union's delegations in these countries.

But the institution does not want to give more control to partner countries themselves, arguing that a "lack of legal security and insufficient administrative capacity" means that the Union should remain in charge for the time being.