Europe’s new aid strategy for the Balkans: A boon for consultants

European Fund for the Balkans Executive Director Hedvig Morvai-Horvat, second from right, attends a Dec. 22, 2008, panel discussion in Belgrade on the results of the Gallup Balkan Monitor. Photo by: European Fund for the Balkans

A new European Union aid package for the Balkans has been rousing spirits in the region - and a whole new interest in foreign aid. As Eastern European governments prepare for the influx of funds, demand for consultancy services has increased, as well as the awareness that they would be desperately needed if recipient countries are to maximize the benefit of the increasing E.U. assistance.

The European Union established the Instrument for Pre-Accession Assistance in 2006 to channel 11.5 billion euros to countries in the Western Balkans - namely Macedonia, Serbia, Montenegro, Kosovo, Croatia, Bosnia, Herzegovina, Bulgaria, Greece, Turkey and Albania - between 2007 and 2013. It is part of a larger E.U. effort to mainstream and consolidate its external cooperation efforts, and replaces five aid packages: Poland and Hungary Aid for Restructuring the Economy, or PHARE; the Instrument for Structural Policies for Pre-Accession, or ISPA; Special Accession Program for Agriculture & Rural Development, or SAPARD; Community Assistance for Reconstruction, Development, and Stability, or CARDS; and the Turkey pre-accession instrument.

Since its creation, IPA has become almost synonymous with development in the Balkans. Governments, industry and civil society are eager to ride this new wave of EU support. Training on how to best use IPA funds has exploded throughout the region. Governments have been building institutional capacity in order to be able to maximize its effects. Expectations are sky-high.

“It was great news that the E.U. introduced the IPA,” said Pavlina Nikolova, an independent expert and lecturer on international issues. “Before that, the problem was that assistance programs evolved and changed as the applicant states from Central and Eastern Europe progressed towards the EU. There were many add-ons to the aid programs that made them hard to understand, let alone to practice.”

PHARE has been the most problematic lately, Nikolova said, because it was put together at the time when E.U. enlargement did not yet exist.

“At one point in time there were so many different strands to it and such a jumble of procedures for management that it stopped being effective,” Nikolova said.

Governments prepare for IPA

Although it was supposed to be ready by January 2007, IPA was delayed when the European Commission took until the middle of that year to pass implementing rules. It took many governments another year or longer to put in place necessary institutional and legal frameworks to comply with the conditions for managing IPA funds by themselves. All in all, IPA is only just kicking in - the bulk of funding has yet to be disbursed.

The government of the Republic of Macedonia, for instance, is still waiting for a final word from the European Commission on whether the country is ready to receive funds - and manage some of them with greater degree of autonomy from Brussels. Officials in Skopje only submitted accreditation documents in January.

How come all the excitement about IPA? After all, the Balkans have, in the past decade and a half, been one of the most generously assisted regions in the world in terms of aid per capita. (The European Union has been the single largest donor, followed by Germany, the United States and the World Bank’s International Development Association.)

The major reason may be ownership. In the past, control over the aid process rested almost completely with donors. As a result, recipient governments often lacked responsibility and interest in development, many experts noted. Under IPA, governments in the Balkans will for the first time have real, if not full, control over how to spend grant monies.

Money can only start flowing once the European Commission certifies a partner country is ready, and accreditation may be revoked if the commission feels that funds are not managed well. Something similar happened to Bulgaria, already a E.U. member, in the second half of 2008, when the E.U. suspended huge amounts of so-called structural funds due to the suspicion of mismanagement and corruption. IPA participation may be seen as a litmus test for a country’s readiness to receive structural funds, which are given to E.U. member states.

Wanted: Consultants

One central issue for IPA recipient countries is what is called absorption capacity: Although the European Commission commits certain amounts annually for each partner country, the money can only be claimed for projects that are found to be high-quality. But recipients often lack the capacity to produce good projects, and this lack of capacity only increases on the regional and local levels, where a substantial share of IPA funding should be spent. Preparing a good project application for E.U. funding, for one thing, requires advanced administrative capacity and considerable experience.

A lot of the IPA money is aimed at supporting local and regional levels of government. But most local government officials are intimidated at the very sight of an E.U. project application: Proposal templates are often 20-50 pages long and come with a manual of up to 80 pages or more. This opens a huge market for consulting services.

“Consultancies with better reputation are the well-established ones abroad and national authorities prefer to work with them because this is an insurance that the project is good and the money will be well-spent,” Nikolova said. “In a final run, each government will prefer better absorption rates, even if some of the money is eventually lost to foreign consultancies, than having poor rates and seeing unused IPA funding transferred to other candidate countries.”

Key should be to equip public officials with the skills and competencies for effective management of the pre-accession aid. This will take time and a lot of well-targeted effort. There has already been training, but experts say a lot of it was generic and not sufficiently tailor-made.

IPA money comes with huge bureaucratic strings attached. Even simple projects can sometimes require a lot of complicated paperwork, usually in English. This is often too much of a burden for small actors, such as NGOs, farmers associations and small municipalities, many of which may decide not to apply for the funding.

The burden of red tape especially on small organizations has long been cited as a shortcoming of Europe’s funding process. Many IPA projects are simply inaccessible to local and regional actors, the criticism now goes. In tenders, IPA terms of reference would require annual turnover that no consultancy in the Balkans can possibly have. Only the biggest E.U. consultancies would likely apply. Even when it comes to grants, the red tape is too much for small Balkan organizations, be they private or public, according to nonprofit sources.

“Even if projects are directed at strengthening civil society, only a handfull of CSOs [civil society organizations] are able to meet the high technical and financial criteria to compete as partner in consortiums for technical assistance, and if, as local partners, not leaders,” said the Balkan Civil Society Development Network in recent comments on the European Commission’s 3-year plan for IPA implementation.

Such issues cannot be overcome through training or capacity building - they will require advocacy by organizations in the Balkans. But they need to act fast. In the past, Eastern European countries that are now E.U. members irretrievably lost out on funding opportunities because they were not prepared to claim it. The design of IPA remedies for some of that rigidity from the past. Still, a lot is up to the potential beneficiaries.

About the author

  • Ristokarajkov.07

    Risto Karajkov

    Risto Karajkov is a doctoral student in development at the University of Bologna, Italy. His thesis focuses on foreign aid to the Balkans. Risto has 10 years of experience as a development practitioner in that region, and he writes frequently about international development, foreign aid, and the work of NGOs, including for Devex. Risto runs Consulting Macedonia, a young development and management consultancy.