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Legal Framework and Objectives of the Cohesion Fund

The first prerequisite for the Cohesion Fund is consolidated in the Chapter XIV of the Economic and Social Cohesion of the Treaty on EU (the Treaty of Maastricht), effective as of 1st November 1993. As it is stated in the aforementioned Treaty and in the Council regulation No 1164/1994 establishing the Cohesion Fund, the main objective of the Cohesion Fund is to provide an instrument of financial support for strengthening the economic and social cohesion of the European Community.

The Fund provides financial contributions to investment projects that develop transport and environment infrastructure. The assistance is committed to the projects that are consistent with the long-term Lithuanian policy objectives and EU policy guidelines in transport and environment sectors. Therefore, the preliminary list of projects is negotiated in the Ministry of Environment and Ministry of Transport and Communication and must be accorded with the European Commission in advance. The decision to finance a project from the Cohesion Fund is taken by the European Commission when an application of a high quality and of full package is received.

Since the Cohesion Fund establishment till the EU enlargement in 2004, the Cohesion Fund used to be allocated to Spain, Ireland (till 1st January 2004), Greece and Portugal. In the period 2004 - 2006, the Cohesion Fund shall be also allocated to the new Member States: the CzechRepublic, Estonia, Cyprus, Latvia, Poland, Lithuania, Malta, Slovakia, Slovenia and Hungary.

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.

Information prepared by

Strategic Planning and Finance Department