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POLICY PAPER

Towards a Revised Regional Development Policy Framework for 2010‐2020

June 2010

Purpose

This paper outlines the main elements of the revised Policy Framework for Regional Development in Albania. It draws on the already developed Cross‐cutting Strategy for Regional Development (2007) and the draft Law on Regional Development (2008), and on recent developments in relation to EU‐funding and domestic policy instruments and resources for regional development. The critical developments that ask for a revised regional development concept are: the introduction of Regional Development Fund (reformed competitive grants) as the central financial investment instrument at sub‐national level, the acceleration of preparations towards IPA III (Regional Development) and the need to increase administrative resources in relation to EU assistance. Given these developments certain parts of the policy framework are already quite clear and constitute the basis of the proposed approach. Others should be further developed in the course of policy detailing once the general policy directions have been agreed upon. Where applicable, options are presented and their impact analyzed.

This paper serves the purpose of framing a strategic view of regional development in Albania, on which a revised Regional Development Strategy and relevant legislative documents should be based. It confers to a broad policy choice for approximating the domestic regional development policy to the EU principles and practices, allowing increased convergence of instruments and mechanisms over time.

Implemented by UNDP in partnership

Integrated Support for Decentralization Project

‘Working for Regional Development’

with the Government of AlbaniaThis programme is co-funded by the European Union and UNDP Albania

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Contents

Summary ................................................................................................................................. 3

Rationale and background ....................................................................................................... 6

Main components of Regional Development Policy Framework for 2010‐2020 ........................ 7

1. FrameworkforIPAIII‐themacro‐frameworkforregionaldevelopment........................7

2. Frameworkfordomesticregionaldevelopment.........................................................................8

a. RegionalDevelopmentFund...........................................................................................................................10

b. Institutionalset‐upandroleofregionalandlocalauthorities........................................................11

c. Donorsupport.......................................................................................................................................................13

3. ConvergenceofEU‐systemanddomesticframeworkforregionaldevelopment......13

Related issues ........................................................................................................................ 16

ANNEX I: The roadmap for Framework implementation ......................................................... 18

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Summary

This document presents a pathway towards a revised Regional Development Policy Framework for 2010‐2020 relative to the 2007 Cross‐Cutting Strategy for Regional Development.

In the context of application for a candidate country status vis‐à‐vis the European Union, and related to that expected opening of EU‐funding for regional development (IPA III), Albania wishes to integrate EU‐system and the domestic framework for regional development in order to increase the effectiveness and efficiency of regional development policy.

Starting from a position of having an ambitious and complex Cross‐cutting Strategy for Regional Development (CSRD, 2007) which falls short of implementation on the one hand, and an operating Regional Development Fund (RDF, 2010) on the other, Albania is faced with high demands for structures and capacities development related to the EU membership preparations. In this context it is advisable to move incrementally and integrate functioning domestic and expected EU policy instruments. The proposed Regional Development Policy Framework answers positively to the current context by providing a set of building blocks and phases which allow gradual convergence of the domestic policy and EU‐requirements and practices.

The following components are included in the revised policy framework:

1. Framework for IPA III, focusing especially on transport, environment and eventually also

regional competitiveness

It is expected that the first Operational Program for IPA III for the period 2012‐2013 will concentrate

on a limited number of projects of national importance, primarily covering European transport

corridors and most acute environmental problems. Later programs will expand to regional

competitiveness. This provides a window of 3‐5 years when pressures for co‐financing IPA funding

will be low and when domestic regional development can be shaped up to best correspond to the EU

requirements.

2. Framework for domestic regional policy, focusing especially on:

a. The Regional Development Fund as important fund and instrument for regional

development

b. Institutional set‐up and role of regional and local authorities in fostering regional

development in Albania

c. Donor support

Currently the RDF plays a central role in investment support to the regional and local authorities and

is flexible enough to be incrementally improved to resemble (regional) competitiveness approach of

the European Union. In principle it can initially concentrate on addressing domestic regional

development disparities and eventually become the key co‐financing mechanism to assist absorption

of EU‐funding by regional and local authorities.

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It is consequent that the institution responsible for coordinating and managing RDF as the general

secretariat, namely the DSDC within Prime Minister’s Office, will coordinate regional development

policy formulation. This can be done with a long term vision for DSDC to strategically take

responsibility for coordination of EU‐funding with national priorities or with a prospect of

transferring the management of regional development policy to a chosen ministry when the policy is

mature enough. The DSDC seems the most suitable institution to play this focal role. Also, well

defined and expanded investment roles of LGUs (especially qarks) should be promoted in order to

develop robust EU project pipelines.

It is important to underline that IPA III financing will initially be limited to large infrastructure projects of national importance, while regional competitiveness support from the EU will only gradually be introduced. Thus donors’ support for regional and local development will be of crucial importance for the next 5‐7 years.

3. Convergence of the EU‐system and the domestic framework for regional development

Gradual alignment of both policy areas is preferred as the EU‐funding for regional development increases progressively and covers more domestic priorities in regional development. A four‐phase process is foreseen, including main actions and milestones:

Phase 1 (Framework setting – 2010) – assisted by UNDP‐ISD Project

Approval of the framework, its directions and actors responsible, preparatory work for consecutive phases:

Approval of the Regional Development Policy Framework 2010‐2020 by the Government (by September 2010)

Assessment of regional development capacities at regional and local levels (by October 2010)

Capacity building pilot interventions started in selected regions (October 2010)

Review of the Regional Development Fund in cooperation with DSDC started (July 2010)

IPA Strategic Coherence Framework and Operational Program for Regional Development drafted by the Government (by December 2010)

Phase 2 (Improved situation – 2011‐2013) – assisted by UNDP‐ISD Project

A revised Regional Development Strategy and legislative framework is elaborated, based on reformed RDF which approximates to the EU requirements:

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Recommendations on improvements of the Regional Development Fund in cooperation with DSDC (June 2011)

Legal framework for regional development prepared and submitted to the legislature by the Government (June 2011)

Regional Development Strategies and Investment Plans in selected regions in place (by October 2011)

Capacity building pilot interventions in selected regions completed (February 2012)

Changes to the Regional Development Fund implemented by the DSDC (by December 2011)

Revised Regional Development Strategy elaborated, consulted and approved by the Government (by December 2011)

Phase 3 (Near convergence – 2014‐2017)

As IPA III expands to support regional competitiveness co‐financing of EU‐funded projects from RDF becomes necessary:

Second Strategic Coherence Framework and Operational Program for Regional Development drafted by the Government (2014)

Domestic regional development policy based on a revised Strategy and legislative framework implemented (2014‐2017)

Further evaluations and reviews of RD policy and the RDF undertaken

Phase 4 (Convergence – 2018‐2020)

As Albania moves close to EU membership, full integration of domestic and EU policy takes place and RDF is extensively used as a co‐financing source made available to LGUs:

Further evaluations and reviews of RD policy and the RDF undertaken

This “Regional Development Policy Framework for 2010‐2020” builds on the existing strengths of domestic regional policy and its current main instrument (RDF) to respond positively to the expected sequencing and build‐up of EU‐funding programs. This approach is consistent with the integration of EU support with the national intervention priorities and policy management systems in the context of the governmental Integrated Planning System.

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Rationale and background

In 2007 the Government of Albania (GoA) adopted the Cross‐cutting Strategy for Regional Development (CSRD). In 2008 a partial legal framework was proposed for this in the form of a draft Law on Regional Development. This was not however enacted. Since then not much progress has been made in the implementation of this policy framework. On the contrary several new developments have taken place which call now for a revised policy framework.

Main reasons for revising the adopted policy framework are:

The opening up of EU‐funding for regional development (IPA III), which is linked to Albania’s

application for becoming a candidate member of the European Union;

An apparent lack of support for the implementation of major components of the adopted

policy framework as a result of complexity of proposed actions, lack of administrative

capacity and financial implications

The establishment of a new instrument for fostering domestic regional development

(Regional Development Fund);

The political wish to integrate the EU‐system and the domestic framework for regional

development as much as possible in order to increase the effectiveness and efficiency of

regional development policy in Albania.

The process of developing the “Regional Development Policy Framework for 2010‐2020” has taken place within the EU‐UNDP financed project ‘Integrated Support to Decentralization’ implemented in cooperation with the Government of Albania. Several technical and policy meetings have been organized, including consultations with social partners, and a good number of analyses carried out, among others: regional disparities assessment, RD institutional assessment, review of Cross‐cutting Strategy for Regional Development and draft Law on Regional Development, and IPA structures analysis.

Analytical work and consultations lead to the broad policy choice of approximating the domestic regional development framework to the EU cohesion policy requirements and practices, allowing convergence of these two paradigms over time. This direction was agreed at the Policy Group Meeting on 31 March 2010. This Policy Framework formulates the main building blocks and phases of such convergence.

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Main components of Regional Development Policy Framework for 2010‐2020

The revised policy framework, an outline of which is proposed in this document “Towards a Regional Development Policy Framework 2010‐2020” needs to be flexible enough to combine both the European perspective (“convergence of Albania towards the EU‐average”) as well as the domestic dimension of regional development in Albania (on the one hand “valorising the development potential of all regions in Albania” and on the other hand “reducing the disparities of lagging regions and/or localities in Albania”, as expressed in the objectives of the CSRD 2007).

The following components are included in the revised policy framework:

1. Framework for IPA III, focusing especially on transport, environment and eventually also

regional competitiveness;

2. Framework for domestic regional policy, focusing especially on:

a. The Regional Development Fund as important fund and instrument for regional

development;

b. Institutional set‐up and role of regional and local authorities in fostering regional

development in Albania

c. Donor support

3. Convergence of the EU‐system and the domestic framework for regional development;

1. Framework for IPAIII ‐ the macro‐framework for regional development

In 2009 the Government of Albania applied to the European Union for a candidate country status, and eventually membership. Once Albania will be accepted as a candidate country, it will have access to funding for the IPA components III (Regional Development) and IV (Human Resource Development). These IPA components are the forerunners of the future European Regional Development Fund and Cohesion Fund (IPA III) and European Social Fund (IPA IV) which are part of the Structural and Cohesion Funds, the main funds to achieve the important EU‐objective of economic and social cohesion across regions and social groups in the European Union.

In line with IPA regulations the Strategic Coherence Framework (SCF) will outline the current and future challenges and the strategic priorities for the development of Albania in the areas covered by IPA III and IV. This SCF will be translated in 2 operational programmes, one for IPA III and one for IPA IV. Given the fact that these programmes still have to be drafted and agreed upon, the first operational programmes in these areas will most probably cover the period 2012‐2013.

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IPA III will support strategic investments in the field of transport, environment, and (regional) competitiveness. Given the development needs in Albania, the limited funds that will become available in the first years of operation of IPA III, and the limited capacity to handle complex investments in the field of competitiveness, it is to be expected that the Government of Albania in close consultation with the European Commission will decide that the operational programmes for the period 2012‐2013 will concentrate on a limited number of projects that are of national importance.

The Strategic Coordinator (SC) is responsible for programming the SCF and coordinating relevant actions with the Operating Structures for IPA III and IV. The Ministry for European Integration will perform the SC‐function, in close cooperation with the Prime Minister Office (DSDC) and the Head of the Operating Structures for IPA III and IV. The Head of the Operating Structure for IPA III will be within the Ministry of Transport and Public Works, while individual priorities within programs will be delegated to designated units in the line ministries with priority actions in the Operational Programme for IPA III (Ministry of Transport and Public Works, Ministry of Environment and eventually also the Ministry of Economy, Trade and Energy).

Both the management and implementation of IPA III OP will be highly centralised within the National Administration (under the EU’s Decentralised Implementation System) especially in the initial programming periods as long as there is little capacity for programming, management and implementation in Albania. This does not mean that IPA III or projects or investments will be necessarily executed centrally – though initially this may well be so. Notably LGUs, universities, and other not‐for‐profit organisations (also qarks, depending on their investment mandate) can in principle access IPA funds for investments in eligible areas. At later stages of the IPA III Programme, some degree of delegated sub‐national implementation may be permitted, in Albania as elsewhere.

As has been indicated already IPA III will start with relatively limited funds in the first programming period (estimated at ca. 20‐30 million Euro per year in 2011‐2013). In the following years these funds will gradually increase. Once experience has been gained in using IPA III funds effectively and further capacity has been built, more funds will become available. These funds could then be used for funding a wider array of projects in the field of transport, environment and (regional) competitiveness, involving over time a greater participation from the wider development community including the sub‐national level. There is a need to provide co‐financing of minimum 15% of the total investment sums.

The critical requirement necessary to use IPA III and IV funding will be to have the national administration accredited under the EU Decentralized Implementation System (DIS). Capacity building in the area of EU integration will be a priority, leaving limited room to increase human resources in other policy fields.

2. Framework for domestic regional development

The Cross‐cutting Regional Development Strategy (2007) recognised the need to execute a regional development policy with 2 strategic objectives: 1) valorising the development potential of all regions in Albania, and 2) reducing the disparities of lagging regions and/or municipalities in Albania.

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No progress has been made with respect to the implementation of the CRDS since its adoption in 2007. The main reasons for that seem to be the lack of political support for important components of the adopted policy framework, notably with respect to:

The institutional complexity and lack of content of proposed actions;

The far reaching decentralisation implications, especially with respect to the role of the qark

and setting up RDAs that will become responsible for establishing and implementing regional

development strategies;

The financial implications.

In parallel, starting from 2006, the government developed a budgetary mechanism to promote

investments into regional and local infrastructures, by which LGUs applied for investment grants on

competitive basis. The system of competitive grants has been consequently implemented with

gradually increased funding from the central budget. In order to better align the regional and local

projects with national priorities and to make management of the grants more effective, the system

was reformed by establishing the Regional Development Fund (RDF) in 2009 and making it

operational in 2010. As this instrument is currently the only instrument for fostering regional

development in Albania and has also potential for funding regional development actions in relation

to future EU‐funds, it is worthwhile exploring RDF in more detail.

In the context of the UNDP‐ISD Project further analyses have been undertaken regarding regional

disparities in Albania. From the analyses the following conclusions can be drawn:

1. Presently, especially in comparison to the New EU Member States, there are no extreme

disparities at qark level (in 2007 the estimated GDP index (Albania=100) for Diber was 58

while for Tirana 145, in 2008 the unemployment rate was between 20.5% in Shokder and

6.1% in Diber). In general, Albania has a relatively developed centre composed of Tirana and

Durres and close to that also Vlore, while the rest of the country is less developed with Diber

and Kukes scoring lowest. From the European perspective though all qarks are substantially

lagging behind other regions, even in respect to most neighbouring countries;

2. Disparities at municipality/commune level are more considerable (top 10 municipalities

collect own incomes per capita at 252% of the national average, while 77 poorest communes

only at 6% of the average), especially in relation to basic infrastructure and poverty. These

disparities at municipality/commune level can be found in most qarks;

3. The principal causes of the largest disparities (Tirana/Durres versus the rest) relate to the

economic structure of regional units, of which the dependency on agriculture and levels of

urbanisation are the dominant factors. Important underlying conditions stem primarily from

geographic elements: altitude and accessibility, land productivity, population density, and

others. These factors also influence the attractiveness and quality of life as in several regions

and municipalities/communes the basic infrastructure is considerably lagging behind other

regions.

Given the fact that regional and local disparities are non‐uniform (even the most developed qarks

and localities face serious structural problems) and that socio‐economic development of the various

regions in Albania is contributing to the overall performance of the country, there is clearly a need to

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develop a regional development policy that will tackle the disparities at both regional/qark level and

municipal/commune level. With respect to the latter further discussion will be needed whether this

should be part of regional development policy or rural development policy as the main part of the

lagging municipalities/communes are very rural in origin. Some consideration of IPA V and of the

wider evolution in recent and future years of the EU’s Rural Development Policy should be factored

into this discussion.

a. RegionalDevelopmentFund

The Regional Development Fund (RDF) was established in November 2009 by the Law no. 10190 on the budget for the year 2010 and will be used in 2010 to support investments at regional and local levels through a competitive grant system in several policy areas. The RDF is a follow‐up of the system of competitive grants that was established in 2006 and that has been running under a partly different regime since then.

The RDF has the following features:

Has been set‐up for the budgetary year 2010 only;

Line ministries are responsible for the selection of projects and implementation, while the

overall coordination is performed by DSDC with advice of the Ministry of Finance and ADF;

Each policy domain has its own financial allocation and budget line for regional

development;

This apportioned funds per policy domain are distributed over the qarks on the basis of

several criteria;

The budget per project is allocated on the basis of a competitive grant system;

The projects are appraised on the basis of an evaluation grid, using several indicators and

respective scores, including their relevance to a given sectoral policy priorities

The system that has been established for RDF is quite complex and is for sure not compatible yet to EU‐requirements in the context of IPA and the Structural Funds. The main comments and suggestions for improvement are:

1. The system is complex with several bodies that are involved in the coordination and

implementation of the allocation of the funding (DSDC, Ministry of Finance, ADF, line

ministries, advisory function for qarks), including the need to interact in a very limited

timeframe.

Suggestions for improvement: The UNDP‐ISD Project will come up with suggestions for simplification of the present system for management and implementation of the RDF

2. There is at the moment no consistent regional development policy/strategy that governs the

allocation of the RDF.

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Suggestions for improvement: This can be improved by elaborating a strategic program for RDF as indicated under the section of regional disparities.

3. The budget and operational set‐up for the RDF is only guaranteed for 2010.

Suggestions for improvement: This can be easily overcome by providing the RDF a legal basis that will not only work for a specific year, but could be used for consecutive years. The funding could be decided upon on a year‐by‐year basis.

4. For each qark a certain amount of budget is guaranteed for different policy areas

irrespective whether good quality projects will be sent in by LGUs; within this budget

allocation per qark a competitive grant system is operated with an advisory role of the qarks.

Suggestions for improvement: The allocation of budgets per qark and policy area is not compliant with EU‐requirements. Especially in a few years time when EU‐funds for regional development will increase, this might endanger co‐financing possibilities as the EU‐approach is to select projects that will provide the best value for money. The principle of competitive grants can be easily used in that context, but should not be used at national level.

5. The use of certain indicators in the allocation of budgets across the qarks and the selection

of projects for these budgets is not always fully clear.

Suggestions for improvement: The UNDP‐ISD Project will assist the DSDC in evaluating the implementation of the RDF in 2010 and coming up with concrete recommendations for improving the implementation of the RDF, including the use of criteria to allocate funds and to select project for implementation.

Despite these comments and suggestions for improvement the set‐up of the RDF has good potential as an instrument for regional development that can be made compliant with EU‐requirements and –practices.

b. Institutionalset‐upandroleofregionalandlocalauthorities

With respect to the CSRD it was the Ministry of Economy, Trade and Energy that was to manage and coordinate policy implementation. Now that RDF is currently the only instrument that is fostering domestic regional development actions, it is consequent that the body that is most suited to coordinate its functioning, that is the DSDC within the Prime Minister’s Office, will become the main body responsible for both policy preparation and the implementation of its main instrument.

Making DSDC responsible for this has several advantages:

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‐ DSDC is also responsible for establishing and coordinating Development Strategies at

national level and donor coordination: the body has already a role for aligning

investment strategies at government level and can therefore exercise its coordination

role towards ministries and lower government levels;

‐ DSDC is also responsible for the Integrated Planning System which over time will need to

foresee complete integration of EU financing with national investment planning system;

‐ As DSDC is closely involved in establishing the SCF/OPs for IPA, it is relatively easy to

establish the coordination between international programmes under IPA and domestic

development programmes;

Other bodies that should be involved in the preparation, management and implementation of the domestic regional development policy, are:

Line ministries: these ministries undertake the implementation of their part of the

investment budget of the RDF in collaboration with the DSDC;

Ministry of Interior: has a special advisory function regarding selection criteria and the

role of qarks;

Albanian Development Fund: this fund is involved in assessing project applications and is

the implementing body for regional/local roads;

LGUs and other local/regional stakeholders: make project applications for funding from

the different budgets per policy area;

Qarks: their development departments provide advice in what way project applications

are in line with development priorities in the respective qarks and municipalities. This

role is quite different than the one that was suggested under the CDRS where the qarks

together with to be established RDAs would be responsible for the preparation and

implementation of a regional development strategy and decentralised funding from the

national line ministries institutionalised through a development contract per qark with

each line ministry.

In making the assessment of the 2010 experience with the RDF the UNDP‐ISD Project will also analyse whether other roles and functions for each of the bodies and stakeholders indicated could result into a more effective and efficient system for fostering regional development in Albania, that at the same time is compliant with EU‐requirements and ‐practices.

The CRDS also proposed the establishment of a National Partnership Council for Regional Development and the establishment of 12 Qark Partnership Councils. So far none of the councils have been set‐up, although in some qarks and at national level stakeholders have been invited for ad‐hoc meetings and consultations. A more systematic approach towards partnership involvement would be necessary. This is in line with EU‐requirements. The UNDP‐ISD Project will provide further

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assistance in detailing the role and function of these partnership councils in selected qarks and will present best practices at a later stage to all qarks and other relevant stakeholders.

c. Donorsupport

From the regional development perspective is it also important to recognize extensive and valuable involvement of external donors, who over the last two decades through various infrastructure investments and capacity building measures have greatly supported regional and local development in Albania.

In relation to the Regional Development Policy Framework 2010‐2020, it is considered crucial to combine and closely coordinate the government’s and donors’ efforts. The following mechanisms are foreseen in order to make the best use of donor support in the process of development and implementation of the Framework:

Consultations on main decisions and documents pertaining to regional development policy, both within the existing Government‐Donor Sector Working Group on Decentralization and Regional Development, and within participatory mechanisms established by regional development policy;

Regular consultations during the Framework implementation by the UNDP‐ISD Project with other donor organizations, in cooperation with the Government, in order to synchronize interventions at the regional level, integrating best practices and disseminating policy guidance elaborated at the national level;

Financial support both for infrastructure and capacity building provided by donors in line with government regional development policy framework and priorities.

It is important to underline that IPA III financing will initially be limited to large infrastructure projects of national importance, while regional competitiveness support from the EU will only gradually be introduced. On the basis of current progress it can be estimated that donors’ support for regional and local development will be of crucial importance for the next 5‐7 years.

3. Convergence of EU‐system and domestic framework for regional development

Experience in other EU‐accession countries has revealed that once substantial EU‐funds are flowing in, the main part of domestic funds are necessary for co‐financing the EU‐funds. Should this co‐financing not or insufficiently be available, accession countries then risk losing EU‐money. In order to prevent this from happening it is of prime importance that all instruments and funds in Albania can be used in this perspective, and are made compliant with EU‐requirements.

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Given the fact that EU‐funds for IPA III will hopefully start as of 2012 and will be limited from the start but will gradually increase, the Government of Albania has still some time to make the full convergence between both systems. Full convergence is the best approach as this will prevent parallel systems, and make effective and efficient use of the EU‐funds to achieve goals that are important for Albania.

Annex 1 (Roadmap) lists a step‐by‐step approach to migrate towards convergence in several years. The RDF plays a crucial role in that perspective:

I. In the first step (Phase 1: Framework setting – 2010) key decisions will be taken by the

government in relation to RD policy framework, setting the direction of reforms of domestic

regional development (RDF) as well as shaping preparations for IPA3 with a view of

convergence of both policy instruments over time;

II. In the second step (Phase 2: Improved situation – 2011‐2013) a revised Regional

Development Strategy is elaborated and supported by legislative framework. It will be

appropriate to develop this at least partially on the basis of a “bottom up” process, involving

prior identification of the main areas of intervention appropriate to support the

development of regions. This could involve for example development of strategies according

to a required format in a selection of different regional types thus providing the key

elements for a more inclusive national regional development framework. There is no

convergence yet, although there is the possibility to improve the working of the RDF so that

is becomes gradually compliant with important EU‐requirements. Reformed RDF and IPA3

are being implemented independently but there are similarities between both instruments

(programming, participation of social partners, etc.). Importantly, government structures

are assigned to domestic RD with clear responsibilities for policy making and policy

implementation;

III. In the third step (Phase 3: Near convergence ‐ 2014‐2017) the IPA III Operational Programme

will already have widened its scope, opening perspectives to finance also projects that are

important from a domestic regional development perspective. As EU‐funding will increase,

the co‐financing of projects/investments that will be funded under IPA III will also have some

impact for financing projects from the RDF. Convergence between IPA III and RDF becomes

therefore an important issue. Highly likely this will also lead in splitting IPA III into IPA IIIA

(Transport), IPA IIIB (Environment), and IPA IIIC (Competitiveness). These operation/projects

that will be financed under each of these OPs will have to be co‐financed from the respective

line ministries and/or regional/local level. Most probably this will not leave much flexibility

anymore for funding projects that are important from a purely domestic point of view. Only

for a small number of areas that are not eligible under IPA III, there might be the need to

provide domestic funding separately;

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IV. In the fourth step (Phase 4: Convergence 2018‐2020) Albania might be close to EU‐accession

or eventually already become a new EU‐Member State. In the latter case the Structural

Funds and Cohesion Fund will finance a substantial part of the public investment budget in

Albania. Most of the own funds will have to be used for co‐financing. Full convergence

between the EU‐funding and domestic resources will therefore be essential in order to make

effective and efficient use of all funds and achieve the anticipated results.

It is important to note that the steps mentioned are indicative and subject to important decisions to be made by both the European Commission/European Council and the Government of Albania. Looking at some other accession countries this is a likely development path that is both realistic and challenging. All will depend on the progress that Albania can show regarding building up its institutional and development capacity in relation to programming and management, implementation and absorption of funds. Lessons can be learnt from other accession countries, but the most important factor is of course for Albania to make all necessary changes in order to reach the goals that it will set itself and together with the European Commission.

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Related issues

There are several issues that need to be tackled when implementing the revised framework for regional development. The most important are the following:

1. IPA III (GoA with support of UNDP‐ISD Project)

‐ Establishing and strengthening structures and bodies (GoA, also in discussion with EC) –

this will be tackled through a series of capacity building EU‐funded projects, the UNDP‐

ISD Project will provide capacity support for the first SCF and OP3 (Learning and

Professional Development component in line with programming assistance, while the

PPF Project will support general DIS preparations and OP4 programming);

‐ Outlining SCF and OP IPA III strategy and priorities for the period 2011‐2013;

‐ Integrating IPA III and domestic policy priorities – this will be done at different stages,

including revision of the RDF, and of the CSRD in 2010/2011.

2. Domestic Regional Development Strategy (GoA with support of UNDP‐ISD Project)

‐ Revising CSRD in context of IPA and other new developments– on the basis of reformed

RDF and lessons from pilot interventions at the regional level in 2010/2011;

‐ Outlining what will be the strategic interventions given the intensity of the regional

disparities in Albania – through the reform of the RDF in 2010/2011;

‐ Identifying the respective developmental interventions that might be considered

national/sectoral and those that might be considered regional – in relation to the

decentralization strategy developments;

‐ Continuing with RDF as the main instrument for domestic regional development and

making it compliant with EU‐requirements as much as possible;

‐ Outlining which bodies will be responsible for domestic regional development

framework and establishing a coherent system of tasks and responsibilities for all bodies

and stakeholders;

‐ Considering interfaces with other government policies, especially implications from

decentralization strategy (configuration, number and role of qarks and other LGUs)

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3. Convergence between IPA III and Revised Regional Development Strategy

In general the speed at which the convergence between IPA III and domestic regional development

strategy takes place, and what preparatory steps are taken, when and how, will depend on the level

of priority given to EU integration process.

The above mentioned issues will have to be revisited and analyzed while implementing the revised regional development framework for Albania. They should not however lead to delays in policy development and refinement, as this would have detrimental effect both on regional disparities and the use of EU assistance.

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ANNEX I: The roadmap for Framework implementation

Regional Development Policy Framework – Roadmap 2010‐2020

RD policy Domestic Instrument (RDF)

EU Instrument (IPA3)

Institutions Actions / Milestones Issues to be considered

‐Cross‐cutting Strategy for Regional Development not being implemented due to complexity of proposed actions and structures, lack of administrative capacity and financial implications ‐Regional Development Fund (reformed competitive grants) introduced as a budgetary instrument for investments in regional and local development ‐Revised RD policy framework elaborated within UNDP‐ISD Project

‐First/pilot year ‐Sector based, fragmented ‐No/limited programming ‐Allocation per qark based on a set of criteria ‐Centralized management and selection ‐Ad hoc procedures and documentation

‐Not available‐Programming for Strategic Coherence Framework and Operational Programs (including OP3) under way ‐Limited if any priorities within IPA3c (Regional Competitiveness)

‐Decision needed on policy development – proposed to converge domestic RD (based on RDF evaluation and improvements) to EU cohesion policy (IPA3) ‐Decision needed on key policy actor within government – proposed DSDC, already responsible for RDF and able to coordinate line ministries

‐Approval of the Regional Development Policy Framework 2010‐2020 by the Government (by September 2010)

‐Assessment of regional development capacities at regional and local levels (by October 2010)

‐ Capacity building pilot interventions started in selected regions (October 2010)

‐Review of the Regional Development Fund in cooperation with DSDC started (September 2010)

‐IPA Strategic Coherence Framework and Operational Program for Regional Development drafted by the Government (by December 2010)

Speed of domestic and EU instruments convergence ‐ how radical RDF reform should be – proposed incremental improvements year by year within budgetary law

PHASEI

FRAMEWORKSETTING

2010

19




Revised Regional Development Policy (under this framework) and Strategy in place, including legal framework (based on review of RDF in 2010/2011)

‐Reviewed RDF as a single RD policy instrument ‐Program based, less sector stress, more development theme based (interventions identified) ‐Centralized management and selection but information fed from Regional Strategies (participatory mechanisms in place) ‐Standardized procedures and documentation ‐Allocation per qark based on criteria and/or a special envelope for disadvantaged areas (possibly only specific measures financed) ‐Option: Qarks to apply for inter‐communal projects

‐IPA OP3 prepared, possible OP3c priority (Regional Competitiveness) ‐Centralized management ‐HOS for IPA3 composed of: Ministry of Transport, PIUs/BROPs: Ministry of Transport, Ministry of Environment, Ministry of Economy ‐Financial management: CFCU

‐DSDC to take responsibility for RD policy alignment to EU cohesion policy – reform RDF, coordinate line ministries’ involvement ‐Option: ADF to become responsible for implementing RDF (implementing agency)

‐Recommendations on improvements of the Regional Development Fund in cooperation with DSDC (June 2011)

‐Legal framework for regional development prepared and submitted to the legislature by the Government (June 2011)

‐Regional Development Strategies and Investment Plans in selected regions in place (by October 2011)

‐Capacity building pilot interventions in selected regions completed (February 2012)

‐Changes to the Regional Development Fund implemented by the DSDC (by December 2011)

‐Revised Regional Development Strategy elaborated, consulted and approved by the Government (by December 2011)

‐Optimal ways to effectively reform RDF (to be analyzed by body responsible for RD) ‐Possibilities of reforming LGUs functions, including investment competences of qarks (decentralization)

PHASEII

IMPROVEDSITUATION

2011‐2013

20



Institutions Actions /Milestones Issues to be considered

Revised Regional Development Policy (this framework) and Strategy in place, including legal framework, with further improvements

‐Reviewed RDF as a single RD policy instrument ‐Program based, less sector stress, more development theme based (interventions identified) informed by standard process for development of Regional Strategies (participatory mechanisms in place) ‐Centralized management and implementation ‐Standardized procedures and documentation ‐Allocation per qark based on criteria and/or a special envelope for disadvantaged areas (special measures financed) ‐RDF opened to co‐finance IPA3, programmed in line with IPA3 interventions ‐Option: increased role of qarks (regionalization of some investment functions) ‐Option: RDF split between regional (qark) and local (municipalities and communes) investments

‐IPA OP3 with priority for Regional Competitiveness (IPA3c) ‐LGUs invited to compete for projects (grant schemes) ‐Centralized management ‐Separate OS for each IPA3 subcomponent: transport, environment and regional competitiveness ‐Financial management: CFCU ‐Option: Financial management transferred to OSs

‐Single ministry responsible for IPA OP3c (Regional Competitiveness), and domestic RD (RDF) – function emerging from DSDC or from existing line ministries

‐Second Strategic Coherence Framework and Operational Program for Regional Development drafted by the Government (2014)

‐Domestic regional development policy based on a revised Strategy and legislative framework implemented (2014‐2017)

‐Further evaluations and reviews of RD policy and the RDF undertaken

‐Possibilities of reforming LGUs functions further, including expanded investment competences of qarks (decentralization)

PHASEIII

NEARCONVERGENCE

2014‐2017

21




Revised Regional Development Policy (this framework) and Strategy in place, including legal framework, with further improvements Possibly preparation of first National Strategic Reference Framework for Structural Funds

‐Reviewed RDF as a single RD policy instrument ‐Program based, less sector stress, more development theme based (interventions identified) ‐Centralized management and selection but information fed from Regional Strategies (participatory mechanisms in place) ‐Standardized procedures and documentation ‐Allocation per qark based on criteria and/or a special envelope for disadvantaged areas (special measures financed) ‐Reformed and improved RDF to integrate with Structural Funds interventions

‐IPA OP3 with priority for Regional Competitiveness (IPA3c) ‐LGUs invited to compete for projects (grant schemes) ‐Centralized management ‐Separate OS for each IPA3 subcomponent: transport, environment and regional competitiveness, extended implementing structures (IBs) ‐Financial management: OSs

‐Single ministry responsible for Regional Competitiveness and domestic RD (RDF) ‐Single ministry responsible all EU funds

‐Further evaluations and reviews of RD policy and the RDF undertaken

‐Option: Same ministry responsible for RD (Ministry for RD) and all EU funds

PHASEIV

CONVERGENCE

2018‐2020

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