COHESION FUND

Title XIV "Economic and Social Cohesion" of the Treaty on European Union (the Treaty of Maastricht), effective as of 1 November 1993, states that the Community shall develop and pursue its actions in leading to the strengthening of its economic and social cohesion through the Structural Funds (European Agricultural Guidance and Guarantee Fund, Guidance Section; European Social Fund; European Regional Development Fund), the European Investment Bank and other existing financial institutions, the Community shall also aim at reducing the disparities between the levels of development of the various regions.

The same Title sets forth that the Council of the European Union, acting unanimously on a proposal from the Commission and after obtaining the assent of the European Parliament and consulting the Economic and Social Committee and the Committee of the Regions, shall define the tasks, priority objectives and the organisation of the Structural Funds, shall also define the general rules applicable to th the provisions necessary to ensure their effectiveness and the co-ordination of the Funds with one another and with the other existing financial instruments. The Treaty on European Union also establishes that the Cohesion Fund, set up by the Council, shall provide a financial contribution to projects in the fields of environment and trans-European networks in the area of transport infrastructure.

Having regard to the Treaty on European Union, the Council of the European Union, having regard to the Council Regulation (EC) No 1164/94 of 16 May 1994 establishing a Cohesion Fund, amended by Council Regulation (EC) No 1264/1999 of 21 June 1999 and Council Regulation (EC) No 1265/1999 of 21 June 1999, has adopted a decision to establish the Cohesion Fund.

The major objective of the Cohesion Fund – to contribute to the strengthening of the economic and social cohesion through reducing the disparities between the levels of development of the various EU regions and the backwardness of the least favoured regions.

The aforementioned Regulation also sets forth the eligible measures for contribution from the Cohesion Fund, possible forms of assistance, rates and conditions and the key fundamentals for approval, implementation, appraisal, monitoring and evaluation of projects.

The detailed rules as regards the management and control systems for assistance granted from the Cohesion Fund are laid down in Commission Regulation (EC) No 1386/2002 of 29 July 2002; and the special detailed rules as regards the eligibility of expenditure in the context of measures part-financed by the Cohesion Fund are laid down in Commission Regulation (EC) No 16/2003 of January 2003.

The principles of transport development policy of the European Community, in order to achieve the objectives envisaged, are the following:

1. to contribute to the establishment and development of trans-European networks in the areas of transport, telecommunications and energy infrastructures;
2. to promote the interconnection and interoperability of national networks as well as access to such networks;
3. to establish a series of guidelines covering the objectives, priorities and broad lines of measures envisaged in the sphere of trans-European networks; these guidelines shall identify projects of common interest;
4. to implement any measures that may prove necessary to ensure the interoperability of the networks, in particular in the field of technical standardization;
5. to support financial efforts made by the Member States for projects of common interest financed by Member States, also may contribute through the Cohesion Fund to the financing of specific projects in Member-States in the area of transport infrastructure.
6. Member States shall, in liaison with the Commission, co-ordinate among themselves the transport development policies pursued at national level, which may have a significant impact on the achievement of the above mentioned objectives.

Transport network is a very important impulsive force for the development of the EU common market. Therefore, improvement and modernisation of transport infrastructure is one of the key measures ensuring growth of economy while drafting (the National) Economic Development Strategies and Programmes both for the entire European Community and individual EU countries. Decision No. 1692/96/EC of the EU Council and Parliament on the Community Guidelines for the Development of trans-European network encourage EU Member States to implement projects of common interest in order to integrate land, water and air transport infrastructure networks within the territory of the European Union based on common technical and organisational requirements.

COHESION FUND IN LITHUANIA

Budget

The size of individual allocations for each country is determined on the basis of the following criteria:
· the size of population of a country;
· the total area of the country;
· GDP per capita;
· socio-economical factors, e.g. the uneven transport infrastructure.

For the period 2000-2006, the total Cohesion Fund budget is EUR 18 billion at 1999 prices. For the period 2004-2006, the total resources available to the new Member States of the EU amount to EUR 7,5905 billion at 1999 prices, where Lithuania’s indicative share shall be 6.15% - 8.17%. According to the revised data, the total allocation from the Cohesion Fund to Lithuania for the period 2004-2006 amounts to EUR 208,87 million:

Current situation

The European Commission approved the Cohesion Fund assistance for 14 projects (8 in the transport sector and 6 in the environment sector) that were submitted in the year 2004. Total value of the projects approved is EUR 413 million (LTL 1,427 million), the Cohesion Fund assistance amounts to EUR 338 million (LTL 1,168 million).

In 2005, the European Commission has already been provided with the applications of two transport and three environment investment projects for the assistance from the Cohesion Fund. The total value of the projects submitted is EUR 214.62 million (LTL 741.04 million), where the requested Cohesion Fund assistance makes up EUR 182.43 million (LTL 629.89 million). The European Commission was also furnished with an application for the additional financing of the components included into the environment investment project funded from the Cohesion Fund. The total value of this application amounts to EUR 10 million (LTL 34.53 million).
Earlier this year, an application for the technical assistance amounting to EUR 1,4 million (LTL 5 million) for the Cohesion Fund management in Lithuania was submitted.

The European Commission has already been provided with the transport investment project applications for the total available assistance from the Cohesion Fund, designed for upgrading of the entire Lithuania’s transport infrastructure in 2004-2006. Up to 2006, it is being planned to prepare and submit to the European Commission the remaining environment applications for the share from the Cohesion Fund intended for the environment in Lithuania, which makes up about EUR 14.03 million (LTL 48.44 million). This value may be modified after the European Commission takes the decisions on the assistance from the Cohesion Fund for the projects, the applications of which were submitted in the year 2005.

The requirements for the Cohesion Fund projects:

· the value of projects should be over EUR 10 million;
· Cohesion Fund covers up to 80 - 85% of the project value;
· funds are allocated between environment and transport sectors in equal shares.
The Cohesion Fund part-finances projects, group of projects and project schemes in the environment and transport sectors as well as technical assistance measures and studies which contribute to the appraisal or evaluation, approval, monitoring and supervision of projects; technical and financial expertise of projects; preparation of tendering and technical documentation of projects.

The Main Cohesion Fund Management Institutions:

· Managing Authority - Ministry of Finance, EU Programme Management Department;
· Paying Authority - Ministry of Finance, National Fund Department;
· Intermediate Institution - Ministry of Transport and Communications and Ministry of Environment;
· Implementing Institution - Transport Investment Directorate under the Ministry of Transport and Communications for transport sector and Environmental Projects Management Agency under the Ministry of Environment for environment;
· Cohesion Fund Monitoring Committee  - comprises of the representatives from the Managing and Paying Authorities, Intermediate, Implementing Institutions and other institutions directly concerned.

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