Commission Report (2002): Latvia

• Progress since the last Regular Report
• Overall assessment
• Conclusions

Chapter 21: Regional policy and co-ordination of structural instruments

Progress since the last Regular Report

Since the last Regular Report, Latvia has made important progress in preparing for the implementation of structural policies.

As regards territorial organisation, in April 2002, an agreement was reached with Eurostat on NUTS classification for the purpose of collecting and disseminating regional statistics at Community level. According to the agreement, the whole of Latvia corresponds to NUTS I and NUTS II level. The five planning regions Kurzeme, Latgale, Riga, Vidzeme and Zemgale correspond to NUTS III level, but the precise borders of each of the 5 planning regions will be re-defined.

In order to establish the legislative framework, Latvia adopted the Regional Development Law in March 2002, which lays down the general system for regional policy. The new law includes provisions linked to the planning and co-ordination of the EC Structural Funds regarding regional development. The Spatial Planning Law, which defines the framework as well as institutional responsibilities for spatial planning at all levels, was adopted in May 2002.

Concerning institutional structures, in February 2002, the main institutions to be involved in the process of management of the Structural Funds and the Cohesion Fund were designated. The Ministry of Finance will become the Managing Authority for the future Single Programming Document and the Cohesion Fund. The State Treasury is designated as the paying authority for the Structural Funds and the Cohesion Fund. A number of partner institutions have also been assigned to implement activities of each particular Structural Fund. In addition two implementing bodies have been appointed for Cohesion Fund activities. In order to establish the implementation system of the Structural Funds and the Cohesion Fund, guidelines on the management, monitoring, evaluation and control of EC Structural Instruments were adopted in March 2002, defining tasks and responsibilities of the managing authority, paying authority, partner institutions and intermediate bodies. As of March 2002, a Structural Funds Inter-Ministerial Working Group is operating in order to facilitate inter-ministerial co-ordination on a day to day management basis and to become a permanent Structural Funds Steering Committee upon accession.

In order to strengthen the administrative capacity of the future managing authority, the Ministry of Finance started its reorganisation in 2002 by merging several institutions under its authority, creating new departments and through the recruitment of additional staff. In March 2002, an inter-ministerial working group was established to develop a Human Resources Development Plan for all the institutions that will be involved in the management, monitoring, evaluation and control of Structural Funds and Cohesion Fund.

In relation to preparation of programming, the National Development Plan (2002--2006) was submitted to the Commission in January 2002. This plan will serve as the basis for the establishment of the draft Single Programming Document as required by the Structural Funds regulations. The preparation of this draft and of the programme complement started at the beginning of 2002. In July 2002, the Government reached an agreement on the priorities of the draft SPD. They include five priorities: one for each Fund (EAGGF, FIFG, ESF) and two for ERDF (business development and infrastructure) with an additional priority for Technical Assistance. The Management Group is entrusted by decision of the Government of March 2002 with the task of steering the preparation of the development plan.

In the framework of the partnership principle and in order to promote co-operation among the public administrative levels (central, regional, local) and non-public partners, the Management Group of the National Development Plan (including representatives of ministries and planning regions) organised in March and April 2002 two partnership seminars with representatives of non-government organisations and planning regions to discuss the elaboration of the Plan. The new Regional Development Law provides inter alia for the establishment of the National Regional Development Council that will perform the functions of the co-ordinating institution in the area of regional development at the political level.

With regard to monitoring and evaluation, no particular developments can be reported other than the adoption the above mentioned guidelines. The Ministry of Finance as the managing authority will become responsible for setting up the monitoring and evaluation system and the Foreign Assistance co-ordination Department of the Ministry will be responsible for development and maintenance of an effective external resource monitoring system. Structures have already been established in other line ministries to ensure monitoring of pre-accession financial assistance.

In relation to financial management and control, the institutional structure established in the guidelines designates the State Treasury as the Paying Authority for the Structural Funds and the Cohesion Fund. On the control side, the Ministry of Finance will ensure the overall co-ordination of internal audit units of all public institutions. Internal audit units will be operational by the date of accession. The State Audit Office will perform the external financial control, entitling the State Audit Office to audit every element of the chain down to the final beneficiaries of EC funds.

Concerning statistics, preparatory work for a computerised monitoring data exchange system, covering the four funds is underway.

Overall assessment

Latvia has already organised its territory into units corresponding to the NUTS classification, but the exact borders of the currently defined five NUTS III planning regions need to be confirmed.

The establishment of institutional structures has advanced. Latvia has designated the bodies, which are to be responsible for the implementation of the Structural and Cohesion Funds. However, the allocation of tasks has still to be completed and implementing legislation remains to be adopted in order to define the management, monitoring and control system, the allocations of functions and the organisational relationship between the various bodies. The administrative capacity is presently a matter of concern and the Human Resources Development Plan concerning the institutions involved will have to be completed. Latvia will thus have to step up its efforts significantly to bring the administrative capacity of the managing and paying authorities, intermediate bodies and other relevant bodies up to the level required.

Latvia should pay particular attention to guarantee that project selection and decisionmaking will be managed within a framework that ensures transparency, efficiency and reliability in the implementation of programmes. It should also continue to work towards developing the necessary structures and co-ordination mechanisms to manage financial assistance from the different Funds in the context of the priorities and strategies of the European Union.

With regard to programming, the adoption of the National Development Plan for 2001--2006 and Latvia`s decision to opt for a Single Programming Document are important steps forward. However, Latvia still needs to significantly improve its programming capacity. To that end, there will need to be efficient and effective inter-ministerial co-operation and partnership throughout the whole process of preparing the draft Single Programming Document. The ex-ante evaluation of the draft Single Programming Document (SPD) is still to be started. Further progress must also be made with the technical preparation of projects eligible for Structural and Cohesion Funds assistance (project pipeline) and with building up adequate capacity at national and sub-national level. Concerning project implementation, the administrative capacity at sub-national level should be strengthened.

The final allocation of responsibilities for monitoring and evaluation has not been defined yet. Work on ensuring compliance with the acquis requirements for monitoring and evaluation must thus continue, in particular as regards the ex-ante evaluation of the draft Single Programming Document. To ensure effective and efficient implementation of the Structural Funds programmes, it is crucial that the computerised data exchange system for monitoring of the Structural Funds and the Cohesion Fund is tested and operational by the date of accession.

Regarding financial control, control units have been established within each Ministry, but the final allocation of functions between the managing authority, paying authority, partner institutions and intermediate bodies is not defined yet, so the process needs first to be completed. As far as statistics are concerned, efforts should continue to ensure the availability of relevant and reliable statistics for programming, monitoring and evaluation.

Conclusions

In its 1997 Opinion, the Commission concluded that Latvia manifested a clear political awareness of the need to address rising regional disparities. Given its small size, the decision to maintain regional policy within the framework of the national development strategy seemed justified. The Commission added that, although Latvia needed to improve the administrative structures intended to manage integrated regional development programmes, its administrative capacity should be able to meet these challenges, and subject to the necessary reforms should, in the medium-term, be ready to apply Community rules and channel effectively funds from the EC structural policies.

Since the Opinion, progress has been achieved mainly during the present reporting period with the adoption of the legal framework and the designation of the institutional structure. Latvia has continued to adopt the framework legislation related to the acquis covered by this chapter, but significant efforts are required to create the institutional structures and to translate legislation into concrete action.

Negotiations for this chapter have been provisionally closed. Latvia has not requested any transitional arrangements. Latvia is generally meeting the commitments it made in the accession negotiations in this field.

In order to be ready for membership, Latvia should focus further efforts on building up at national and sub-national levels an adequate and efficient administrative capacity for the management of the Structural Funds and Cohesion Fund. Moreover, preparation of an up-to-standard draft Single Programming Document should be speeded up and inter-ministerial co-ordination and partnership needs to be ensured. Generally, all systems and procedures for effective monitoring, financial management and control should be reinforced and the legal framework has to be completed. The focus in the forthcoming period should shift to the implementation of the commitments made. Latvia has started to take measures to address the weaknesses identified, including through the allocation of human resources. Ongoing efforts need to be continued and substantially stepped up.

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