1. Turkey’s regional development on the road to the EU September 2006

2. Page 2 Rationale of regional Policy and Background The guiding concepts behind regional policy in the EU are those of solidarity and balanced growth. On a practical level this involves the provision of Community level assistance to help the most disadvantaged regions overcome their handicaps and thereby reduce disparities in levels of development and standards of living between more affluent and less developed regions. The guiding concepts behind regional policy in the EU are those of solidarity and balanced growth. On a practical level this involves the provision of Community level assistance to help the most disadvantaged regions overcome their handicaps and thereby reduce disparities in levels of development and standards of living between more affluent and less developed regions. Regional disparities in Turkey are extremely high with some of the poorer regions having less than 10% GDP of regions with the highest level per capita. Regional disparities in Turkey are extremely high with some of the poorer regions having less than 10% GDP of regions with the highest level per capita.

3. Page 3 Instruments of solidarity Financial assistance is granted under multiannual regional development programmes negotiated between the regions, the Member States and the European Commssion. This assistance is delivered through the Structural Funds and the Cohesion Fund European Regional Development Fund (ERDF) European Regional Development Fund (ERDF) European Social Fund (ESF) European Social Fund (ESF) European Agricultural Guidance ad Guarantee Fund (EAGGF) European Agricultural Guidance ad Guarantee Fund (EAGGF) Financial Instrument for FisheriesGuidance (FIFG) Financial Instrument for FisheriesGuidance (FIFG)

4. Page 4 Role of Structural Funds and cohesion fund ERDF: Finances infrastrcuture, local development projects productive investment for job creation, and assistance to SMEs. Delivery is at NUTS II level. ERDF: Finances infrastrcuture, local development projects productive investment for job creation, and assistance to SMEs. Delivery is at NUTS II level. ESF: its main purpose is to fund training and recruitment schemes to assist adaptation of the workforce to changes in the labour market and help unemployed to get back into back into labour market ESF: its main purpose is to fund training and recruitment schemes to assist adaptation of the workforce to changes in the labour market and help unemployed to get back into back into labour market EAGGF: finances rural development measures mainly in lagging behind regions EAGGF: finances rural development measures mainly in lagging behind regions FIFG: finances structural reform in the fisheries sector FIFG: finances structural reform in the fisheries sector Cohesion fund: special solidarity fund that helps finance projects in environment and transport networks in MS whose GDP is 90% below EU average. Cohesion fund: special solidarity fund that helps finance projects in environment and transport networks in MS whose GDP is 90% below EU average.

5. Page 5 Priority Objectives of Structural Funds and Community İnitiatives Objective 1: to assist the development of regions (NUTS II level) whose average per capita is less than 75% that of the EU average (70% of budget =135.9 million) Objective 1: to assist the development of regions (NUTS II level) whose average per capita is less than 75% that of the EU average (70% of budget =135.9 million) Objective 2 assistance to regions (excluding objective 1 regions) facing structural difficulties to assist in the process of social and economic conversion(11.5% of budget Objective 2 assistance to regions (excluding objective 1 regions) facing structural difficulties to assist in the process of social and economic conversion(11.5% of budget Objective 3 all measures for human resource development (excluding objective 1 regions) Objective 3 all measures for human resource development (excluding objective 1 regions)

6. Page 6 Agenda 2000 reform of Regional Policy Structural assistance must be concentrated in the regions whose development is lagging most behind Structural assistance must be concentrated in the regions whose development is lagging most behind Simplification of structural policies with Member States and regions taking control and directly administering the funds provided by the EU. EU’s role reduced to coordination and monitoring that EU funding is properly used Simplification of structural policies with Member States and regions taking control and directly administering the funds provided by the EU. EU’s role reduced to coordination and monitoring that EU funding is properly used Establishemnt of partnership between the European Union, the Member States, the local authorities and the private sector focusing on development strategies defined to acheve Community level objectives. Establishemnt of partnership between the European Union, the Member States, the local authorities and the private sector focusing on development strategies defined to acheve Community level objectives.

7. Page 7 EU programmes in Turkey before candidate country status 1996 Start of EU funding for Turkey under MEDA Programme. Budget €33 mn, rising to €60 million in 1998. 1996 Start of EU funding for Turkey under MEDA Programme. Budget €33 mn, rising to €60 million in 1998. All projects centralised with European Commission as Contracting Authority All projects centralised with European Commission as Contracting Authority European Parliament decides that no projects should involve the government European Parliament decides that no projects should involve the government Projects implemented through NGOs and local authorities ( Mainly ad hoc projects, some in partnership with Municipalities e.g. Sanliurfa Drinking Water Project and rehabilitation of Balat and Fener districts of Istanbul) Projects implemented through NGOs and local authorities ( Mainly ad hoc projects, some in partnership with Municipalities e.g. Sanliurfa Drinking Water Project and rehabilitation of Balat and Fener districts of Istanbul)

8. Page 8 Key aspects of EU approach to regional development funding Participatory (or bottom up) approach to regional planning with involvement of both public and private sector local stakeholders. Participatory (or bottom up) approach to regional planning with involvement of both public and private sector local stakeholders. Integrated programming based on SWOT analysis and responding to local needs. Integrated programming based on SWOT analysis and responding to local needs. Funding directed primarily to the poorest regions or those with special needs (e.g. structural adjustment). Funding directed primarily to the poorest regions or those with special needs (e.g. structural adjustment). Capacity building at regional level to implement programmes in a decentralised manner. Capacity building at regional level to implement programmes in a decentralised manner.

9. Page 9 Harmonisation with EU Key driver for Turkish regional policies Key driver for Turkish regional policies Creation of new territorial units Creation of new territorial units Preparation of National Development Plan Preparation of National Development Plan Creation of new structures at regional level (PCUs, service unions, regional development agencies) Creation of new structures at regional level (PCUs, service unions, regional development agencies)

10. Page 10 EU pre –accession programmes in Turkey End 1999 Helsinki summit: Turkey accepted as candidate country for accession to EU End 1999 Helsinki summit: Turkey accepted as candidate country for accession to EU 2002 adoption of Turkey Regulations for funding. 2002 adoption of Turkey Regulations for funding. Decision to work with central government on EU funded programmes. Decision to work with central government on EU funded programmes. Programmes geared towards alignment with the acquis ( National Plan for the Adoption of the Acquis) Programmes geared towards alignment with the acquis ( National Plan for the Adoption of the Acquis) Regional development programmes required to fulfill requirements of Chapter 21 (now 22) on Regional Policy Regional development programmes required to fulfill requirements of Chapter 21 (now 22) on Regional Policy One third of funding to be spent on institution building One third of funding to be spent on institution building Turkey creates 26 NUTS II regions. Turkey creates 26 NUTS II regions. 2003 Turkey moves towards decentralised implementation system with the establishment of the Central Contracts and Finance Unit to implement programmes according to EU procurement rules. 2003 Turkey moves towards decentralised implementation system with the establishment of the Central Contracts and Finance Unit to implement programmes according to EU procurement rules.

11. Page 11 Ongoing EU funded regional programmes in Turkey Gap regional development programme (2001 budget – MEDA regulation) – Budget €47 million (no Turkish co-financing) Gap regional development programme (2001 budget – MEDA regulation) – Budget €47 million (no Turkish co-financing) Eastern Anatolia Development Programme (2001 budget – MEDA regulation – Budget €45 million (no Turkish co-financing) Eastern Anatolia Development Programme (2001 budget – MEDA regulation – Budget €45 million (no Turkish co-financing) Samsun, Kastamonu, Erzurum NUTS II Regional Development programme - Budget €52.33 million (of which EU contribution €40 ) Samsun, Kastamonu, Erzurum NUTS II Regional Development programme - Budget €52.33 million (of which EU contribution €40 ) Malatya, Ağrı, Konya, Kayseri NUTS II regional Development Programme – Budget €90.62 million of which EU co-financing € million Malatya, Ağrı, Konya, Kayseri NUTS II regional Development Programme – Budget €90.62 million of which EU co-financing € million

12. Page 12 Need for capacity at local level to implement regional development programmes Typical areas covered: Infrastructure projects Infrastructure projects Human resource development Human resource development Income generation and employment creation Income generation and employment creation Agricultural extension and support Agricultural extension and support Tourism development Tourism development Rural development Rural development Environmental protection and quality of life Environmental protection and quality of life

13. Page 13 IPA and the Structural Funds after 2007 IPA is part of a proposal for a reformed cohesion policy in the EU and cannot be understood in isolation from it IPA is part of a proposal for a reformed cohesion policy in the EU and cannot be understood in isolation from it Major changes proposed for Structural Funds 2007-2013 Major changes proposed for Structural Funds 2007-2013

14. Page 14 The 3 political priorities The increase in disparities in the context of enlargement leads to concentration of cohesion policy on 3 priorities: The convergence of countries (GNI < 90% of the average) and regions (regional GDP < 75% of the average) and the regions concerned by the statistical effect, that is 33% of the population of the Union Regional competitiveness and employment: reinforce attractiveness and ensure that socio-economic changes are anticipated in other regions, without Community zoning European territorial cooperation: Cross-border, trans-national and inter-regional

15. Page 15 Re-orientation of Cohesion Policy based on the priorities of the Union (Lisbon & Gothenburg) Articulation around the 3 pillars of sustainable development: Competitiveness: innovation, research, education and Accessibility Employment and social inclusion Environment and risk prevention

16. Page 16 The general principles of the reform A more strategic approach based on Union priorities Budgetary and thematic Concentration Decentralised and Territorial approach through greater responsibility for countries, regions and towns Simplification of management methods Proportionality and efficiency of control and monitoring

17. Page 17 A more strategic approach Definition of Union priorities in the strategic guidelines established by the Council Translation by the Member States of these Community priorities in a national strategic reference framework decided by the Commission Operational implementation by means of regional and thematic programmes

18. Page 18 Concentration Budgetary resources are concentrated on those who need them most (budgetary concentration): 78,54% in favour of convergence: Less-developed regions Less-developed countries regions concerned by the statistical effect linked to enlargement (drop in GDP per capita) 17,22% in favour of regional competitiveness and employment 3,94% for cross-border and trans-national cooperation

19. Page 19 Significant simplification 3 funds in place of 6: ERDF, Cohesion Fund, ESF A single fund by programme Integration of projects of the Cohesion Fund in multi-annual programming Identical management rules for the Cohesion Fund and the Structural Funds Programming and financial management by priority and no longer by measure National eligibility rules for expenditures and no longer Community rules

20. Page 20 What is IPA An integrated Pre-Accession Instrument to assist candidate (Croatia, Turkey) and potential candidate (Western Balkan) countries An integrated Pre-Accession Instrument to assist candidate (Croatia, Turkey) and potential candidate (Western Balkan) countries Replaces Phare, ISPA, SAPARD and Turkey pre-accession instruments, as well as the CARDS instrument Replaces Phare, ISPA, SAPARD and Turkey pre-accession instruments, as well as the CARDS instrument

21. Page 21 The current pre-accession instruments Phare: implementation of the acquis, investments in economic and social cohesion, cross-border co-operation Phare: implementation of the acquis, investments in economic and social cohesion, cross-border co-operation ISPA: environment and transport infrastructure – precursor of Cohesion Fund ISPA: environment and transport infrastructure – precursor of Cohesion Fund SAPARD: CAP acquis and Rural development – precursor of Rural Development plans SAPARD: CAP acquis and Rural development – precursor of Rural Development plans Turkey pre-accession instrument : same scope as Phare Turkey pre-accession instrument : same scope as Phare

22. Page 22 The new pre-accession instrument Pre-accession aid performs a bridiging function which aims at progressively adopting the rules and principles of Structural Funds/Rural Development Fund management, by making available assistance to them through the components of Reg dev/Rural Dev/HRD. Candidate countries are thus given the opportunity to “practice” the Community rural and cohesion policies by applying rules as closely as possible to the Structural and Rural Development funds before accession. Pre-accession aid performs a bridiging function which aims at progressively adopting the rules and principles of Structural Funds/Rural Development Fund management, by making available assistance to them through the components of Reg dev/Rural Dev/HRD. Candidate countries are thus given the opportunity to “practice” the Community rural and cohesion policies by applying rules as closely as possible to the Structural and Rural Development funds before accession.

23. Page 23 Aims of IPA Potential candidates: support for participation in the Stabilisation and Association process all the way to their future accession Candidate countries: full pre-accession support to help countries to: Adopt and implement the acquis Adopt and implement the acquis Implement EU funds on accession Implement EU funds on accession

24. Page 24 Structure of IPA Five components: a) Transition Assistance and Institution Building b) Regional and Cross-Border Co-operation c) Regional Development d) Human Resources Development e) Rural Development

25. Page 25 Regional development component Aims to support policy development as well as preparation for the implementation and management of the Community’s cohesion policy and in particular the preparation for the European Regional Development Fund and Cohesion Fund. Aims to support policy development as well as preparation for the implementation and management of the Community’s cohesion policy and in particular the preparation for the European Regional Development Fund and Cohesion Fund. Applies to Candidate Countries only Applies to Candidate Countries only Emulates ERDF and Cohesion Fund approach Emulates ERDF and Cohesion Fund approach Finance investments and technical assistance Finance investments and technical assistance

26. Page 26 Programming Assistance based on European Partnership (Annex I) or Accession Partnership (Annex II) Assistance based on European Partnership (Annex I) or Accession Partnership (Annex II) Indicative multi-annual framework with allocation of funds per component/country Indicative multi-annual framework with allocation of funds per component/country Programmes on the basis of a single framework per country and per component. TR authorities to prepare a coherent strategıc framework (CSF) document following preparation by EC of multi annual indicative planning document (MIPD). Programmes on the basis of a single framework per country and per component. TR authorities to prepare a coherent strategıc framework (CSF) document following preparation by EC of multi annual indicative planning document (MIPD). Programming for Regional, HRD and Rural development components to emulate the relevant EU Funds on accession Programming for Regional, HRD and Rural development components to emulate the relevant EU Funds on accession

27. Page 27 Regional development operational programmes 3 operational programmes Environment Environment Transport Transport Regional Competitiveness Regional Competitiveness

28. Page 28 The future: more spending on heavy cost investments As the pre-accession support budget for Turkey rises further fromunder regional development will therefore focus on investment projects ( with 25% co-funding from national sources) As the pre-accession support budget for Turkey rises further fromunder regional development will therefore focus on investment projects ( with 25% co-funding from national sources) Much of this spending will go on heavy cost investment to improve infrastructure such as drinking water and sewage treatment facilities and bring them up to EU standards. Much of this spending will go on heavy cost investment to improve infrastructure such as drinking water and sewage treatment facilities and bring them up to EU standards.

29. Page 29 Important role for municipalities in heavy cost investment A project is currently under way to assıst Turkey in 1) identification and prioritisation of infrastructue projects in the field of water, waste, air and industrial pollution control 1) identification and prioritisation of infrastructue projects in the field of water, waste, air and industrial pollution control 2) the development of an efficient financial mechanism for financing projects related to EU environmental investment heavy directives, which will include an analysis of the existing funding mechanisms. As the Municipalities are the main actors in the management of environmental resources, they will be closely involved in the consultation (survey ) phase, in the identification process, and in proposing priority projects. The second part of the project also includes a specific activity, intended to improve the ability of Municipalities to efficiently and effectively manage solid waste, wastewater and drinking water services.

30. Page 30 Rationale of Components The rational of these components is that Candidate Countries will be confronted with exactly the same situation in the Community’s agricultural and cohesion policies after accession. The rational of these components is that Candidate Countries will be confronted with exactly the same situation in the Community’s agricultural and cohesion policies after accession. Under the regional development component this means giving the beneficiary country the highest possible approximation to Structural and Rural DevelopmentFund practice under external Aid Rules. Under the regional development component this means giving the beneficiary country the highest possible approximation to Structural and Rural DevelopmentFund practice under external Aid Rules.

31. Page 31 Implementation and management Implementation shall take place according to the rules of External Aid. Implementation shall take place according to the rules of External Aid. Components may apply different implementation methods where this is justified. Components may apply different implementation methods where this is justified.