TACIS UKRAINE ACTION PROGRAMME 2003

1. Identification

Form of programme: National

Beneficiary Ukraine
Country/Title:
Budget year: 2003
Financial allocation € 50 million (including € 4 million for Tempus to be implemented
by DG Education & Culture)
Budget Line: B7-520
Legal basis: Council Regulation (EC, EURATOM) No 99/2000 of 29
December 1999 concerning the provision of assistance to the
partner states in Eastern Europe and Central Asia
Duration: Contracts financed under this programme shall enter force no
earlier than the signature of the Financing Memorandum in due
form by the competent signatories, and no later than 36 months
after the entry into force of the relevant budgetary commitment.
The technical activities provided for under this programme and all
contracts must end by 31.12.2007.
Programming: RELEX E/2 for the Indicative Programme
Implementation: EuropeAid Co-operation Office with deconcentration of
management responsibility for project implementation to the
Commission Delegation to Ukraine, Moldova and Belarus in Kiev
Remarks: No administrative expenditure will be financed under this
programme

2. Summary of the programme

The Country Strategy Paper 2002-2006 and the National Indicative Programme 2003 for
Ukraine were approved by the Tacis Committee of 2001. This Action Programme 2003 is
developed fully in line with these strategic documents. The proposed activities are focused
on three areas of co-operation: (i) support to institutional, legal and administrative reform;
(ii) support to the private sector and economic development and (iii) support in addressing
the social consequences of transition. Support in the area of institutional, legal and
administrative reform will focus on seven issues: border management and migration
control; development of PCA-compatible legislation and WTO accession; reform of the
justice system; development of media; civil society development. Activities in the area of
support to the private sector and assistance for economic development will focus on three
priorities: support for tax reform; the development of a policy environment and
administrative culture of SME growth in targeted priority development regions, including
co-operation with IFC; and rural development through support for development of
insurance market in the agriculture sector. To address the social consequences of
transition, support will cover three areas: the development of multi-sectoral approaches
towards disease prevention; strengthening regional social services; and vocational training
and labour market. In addition, support will be provided through the following small
project programmes: the Institution-Building Partnership Programme (through both
components: the Key Public Institutions and the Civil Society and other Local Initiatives),
Managers’ Training Programme (MTP), Bistro and Tempus.

3. Country update

A detailed country assessment can be found in the Country Strategy Paper 2002-2006
presented to the Tacis Committee in November 2001, and an up-dated version was made
available in the Indicative Programme for 2004-06, adopted by the Tacis Committee on 23
April 2003. There have been no substantive developments since then.

In EU-Ukraine relations, the sixth Co-operation Council at ministerial level was held in
March 2003. Four priority areas for co-operation were discussed : (i) investment and trade,
with an emphasis on accelerating the negotiating process for Ukraine's accession to the
WTO; (ii) approximation of Ukraine's legislation and (iii) justice and home affairs
focusing on the implementation of the EU Action Plan; and (iv) energy, transport and
environment. The EU confirmed its commitment to continue support of democratic
development, human rights, the rule of law and market oriented economic reforms, with a
view to strengthening Ukraine's European orientation.

4. Co-ordination with other donors

The Delegation is responsible for co-ordination with other donors in Kiev. In addition, a
team from EuropeAid held a round-table with all Member States present in Kiev and met
the other main donors in Ukraine (US, World Bank group, EBRD, IMF) during their
project identification support mission in February 2003.

In addition to consultation with other donors in developing the general approach, this
Action Programme contains a number of activities where specific collaboration is
foreseen. Funds are allocated for working with the International Finance Corporation (IFC)
to ensure coherence of approach, notably in terms of support to the SME sector, where IFC
conducts an annual survey, of great value in ensuring assistance is well targeted. Together
with the World Bank, Tacis will support tax reform. Tacis assistance in the fight against
HIV/AIDS will build directly on the results of EU/US joint activities in this sector.

5. Lessons learnt from Past EC Assistance

An evaluation of the EC Country Strategy for Ukraine has been recently completed. The
fieldwork was conducted between June and October 2002. A presentation of the main
findings was conducted by the evaluation team for the main stakeholders (including
representatives of the European Commission, the Ukrainian Government and the EU
Member States) on 18 February, coinciding with the start of the EuropeAid project
identification support mission. In this way, it ensured that the recommendations of the
report were able to feed directly into the current project identification process.

The full report will be published on the internet shortly. However, it is worth highlighting
the key points of relevant to this identification exercise. In particular, the report
emphasises the positive contribution Tacis has made on the issues of border management,
and further support is envisaged through this action programme, both in terms of
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infrastructure development and training of key personnel. The report stresses the need for a
comprehensive approach to the development of the NGO sector. This AP foresees a
project, which should contribute to an improved policy environment for NGO
development at both central and regional level. In the private sector, the report encourages
Tacis to focus on the creation of a favourable environment for business and investment,
and highlights the specificities of the rural sector. This AP will tackle the key issue of tax
reform, and will target support to SMEs and also for rural development. The report also
underlines the importance of the social sector, and the need for Tacis to ensure follow-up
of its existing activities. This AP includes a second phase of an HIV /AIDS project and
further support for the establishment of effective social services.

6. Programme Components

In line with the National Indicative Programme, this Action Programme will focus on three
areas of co-operation: (i) support for institutional, legal and administrative reform, (ii)
support to the private sector and assistance for economic development, and (iii) support for
addressing the social consequences of transition.

6.1. Institutional, Legal and Administrative Reform.

Tacis support for institutional, legal and administrative reform will address a number of
key priorities in the Country Strategy Paper: border and migration management, support
for PCA implementation, reform of the judicial system and of municipal administration,
addressing in particular the environment sector, development of civil society, and support
for independent media.

6.1.1. Border management improvement is a key priority in the Country Strategy Paper
2002-2006. In this context, Tacis will provide assistance to the Ukrainian authorities in
enhancing the country’s capacity to manage migration flows effectively. The overall aim
of the project is to ensure the effective management of borders and migration flows by :
(i) improving the management of the legal entry, residence, transit and integration of
foreigners in and through Ukraine; (ii) improving and reinforcing effective reception and
international protection capacities for asylum seekers and refugees; (iii) improving the
management of illegal migration; (iv) assistance in the fight against smuggling of migrants
and the trafficking of persons, notably in implementing the appropriate UN commitments.

6.1.2. Second, a specific project shall aim at stimulating cross border co-operation between
Slovakia and Ukraine, focusing on the increase of the border crossing capacity as well as
improved border crossing efficiency, especially in view of processing trucks and trade
increase. On the Slovak side, the construction of the proper facilities for trucks was
completed in 1997-1998 with the support of PHARE funding. Tacis will now support the
construction on the Ukrainian side of additional facilities for trucks, so as to have
matching facilities on both sides of the border.

6.1.3. Third, Tacis will provide targeted support in the areas of Policy and Legal Advice.
Ukraine is taking a number of significant substantial measures to ensure a consistent
approach to the process of approximation of national legislation to EU legislation. The
overall goal of the project is to continue supporting the development of PCA-compatible
legislation and WTO accession. The specific objectives of the project are (i) to assist
Ukraine in approximating and implementing its legislation in line with the requirements of

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the PCA, (ii) to assist Ukraine in approximating and implementing its legislation in line
with the requirements resulting from the EU Action Plan on JHA, (iii) to facilitate the
accession of Ukraine to WTO and help Ukraine to deal with regulatory work after a
possible accession, and (iv) to enhance the institutional capacity of the Ministry of Justice and
legal departments of line ministries in the sphere of approximation of Ukrainian legislation to EU
legislation. The terms of reference will take due account of the results of the on-going evaluation of
Policy and Legal Advice Centres funded through Tacis.

6.1.4. Fourth, Tacis will support strengthening the capacity of the Ukrainian judicial
system. The general goal of the project is contributing to the process of further
strengthening the independence of the judiciary as well as restoring public confidence in
the judiciary and its role in connection with law enforcement. The specific objective of the
project is to assist the court administration in strengthening an institutionalised system of
training for judges of all courts of the Ukrainian judiciary. This will include both pre-
service and in-service training, at the Law Academy, at the Department for Court
Administration and the creation of a system of alternative disputes resolution in order to
improve access to justice and to decrease the number of cases submitted to courts.

6.1.5 Fifth, Tacis will support training and the development of media skills through a
project that has as its main objective to promote a competent and independent media
sector. As identified in the CSP, training and a review of the existing curriculum at the
tertiary education level will be an important aspect in achieving this goal, in order also to
strengthen and sustain the development of civil society.

6.1.6 Six, Tacis will support civil society development, by enhancing the professional
skills of Non-Governmental Organisations (NGOs) in Ukraine and fostering the
collaboration of NGOs, at the grassroots level. Particular emphasis will be given to
supporting co-operation between NGOs and regional / local authorities, notably in regions
with limited donor support.

6.1.7 Seventh, Tacis will support municipal reform specifically in the field of waste
management in Donetsk oblast. A Tacis project has already effectively started in that area
in November 2002, with the aim of developing a strategy for waste management in the
Donetsk region. The aim of this new project is to support implementation by the Donetsk
regional authorities of the newly-defined strategy for solid domestic waste management,
with active involvement of civil society and business in the process. The project will build
on the results of the project due to end spring 2004. Attention will be paid to ensure that
compliance with the standards and requirements of EU waste legislation.

6.1.8. Finally, further to environmental concerns, a project will be developed regarding

renewable sources of energy (biomass). Support for the development of renewable energy
resources, including legislative alignment with EU norms, is an identified priority under
the Tacis National Indicative Programme 2002-2003. Under this umbrella, the project will
aim at reducing Ukraine's dependence on import of primary energy sources through the
development of renewable technologies and the promotion of legal and economic
measures to facilitate their introduction in economic activity. Tacis will conduct a
comprehensive assessment of biomass utilization/processing in Ukraine. Tacis will also
provide training and run a dissemination campaign on the basis of a pilot demonstration
project. Finally, Tacis will help design an Action Plan for biomass use, envisaging a
number of concrete steps to be implemented by relevant Ukrainian authorities; and will

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assist in preparing normative and regulatory framework conducive to business
development in the field.

6.2. Support to the Private Sector and Assistance for Economic Development.

Tacis support to the private sector and assistance for economic development will address
the following priorities, as set out in the Country Strategy Paper, and National Indicative
Programme 2002-03: taxation reform, support for SMEs, and development of the rural
sector.

6.2.1. As stated in the Indicative Programme 2002-2003, one of the main objectives is to
use the full potential of the Partnership and Co-operation Agreement between the EU and
Ukraine. In that context, the Government of Ukraine has initiated a broad reform of the
taxation system, one of the key aspects of which will be reform of tax legislation and
elaboration and approval of relevant by-laws and regulations. The objective of this project
will be to support Ukraine’s efforts in restructuring the taxation system aimed at increase
of budget effectiveness and improvement of investment conditions in the country, both
through assistance in drafting correspondent legislative documents and assistance in
operational reorganisation of the Tax Administration.

6.2.2. Second, Tacis will focus on risk management related to agricultural production. This
issue is raised as a direct result of current reforms in Ukraine’s agricultural sector and
growth of private ownership. In that context, the objectives of this project will be (i) to
contribute to the consolidation of private sector activities in rural areas; (ii) to enable
private agricultural enterprises to minimise their risks and improve financial sustainability,
including improved access to the credit resources and reliable protection of long-term
investments; and (iii) to improve agricultural infrastructure. Tacis will support the
development of the infrastructure of agro-insurance services in Ukraine and will assist in
increasing knowledge-base of target groups about methodology, tools and procedures
available and/or developed within the project framework; in designing a transparent
regulatory framework in line with EU practice and international standards. Tacis will
implement pilot activities in selected oblasts; and establish a dialogue between farmers,
SMEs, insurance operators and State authorities as well as ensure proper dissemination of
project results and experience.

6.2.3. Tacis will also support the development of Ukrainian SMEs by contributing to the
development of a policy environment and administrative culture supportive of SME
growth in targeted priority development regions. This project will also focus on promoting
improved access to, and use of, business consultancy advice by SMEs and will introduce
more strategic conceptions both for businesses and support services. Tacis will also
provide small-scale support in a project aimed at designing and implementing detailed
recommendations on select regulatory procedures, as far as SMEs are concerned, (with a
focus on permits).

6.3. Support in Addressing the Social Consequences of Transition.

Tacis support in addressing the social consequences of transition will comprise three main
strands: further work on HIV/AIDS prevention; support for strengthening social services
provision, notably at the regional level, and support to the system of continuing education
at the workplace.

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6.3.1. Tacis support in addressing the social consequences of transition will, firstly, focus
on HIV/AIDS prevention. Under the umbrella of the joint EU-US HIV/AIDS Prevention
and Awareness Programme, the EU completed a full strategic planning cycle for targeted
HIV/AIDS prevention with regional and local health authorities in six pilot oblasts of
Ukraine and initiated various interventions for children and young people. This follow-up
initiative aims directly to strengthen multi-sectoral approaches towards HIV/AIDS
prevention targeting young people and introduce comprehensive education programmes at
the national, regional and local levels in order to reduce the spread of HIV in Ukraine.

6.3.2. Second, Tacis will support the strengthening of social services in selected regions of
Ukraine. The aim is to assist in the development and implementation of integrated social
services for exposed families and children by providing technical assistance to the network
of Social Services Centres for Youth in Kiev oblast. This will include (i) the development
of a working model of integrated social services for exposed families and children in Kiev
oblast, (ii) the improvement of legislative framework and (iii) capacity building of the
existing human resources.

6.3.3 Finally, as far as the educational system is concerned, and in order to facilitate the
enhancement of enterprises’ capacity to meet the challenges of the market economy, Tacis
will support the system of continuing education at the workplace. Considering the policy
process in the country and, namely, both the National Doctrine of Educational
Development adopted in April 2002, and its Implementation Plan (2001-2004), EC agreed
to include the Vocational Education and Training component into the National Indicative
Programme 2004-2006. Under this umbrella, this specific project shall support both the
development and the implementation of a system for continuing education at the
workplace in order to increase the quality of the workforce and to combat unemployment,
both at national and regional levels.

6.4 Small Project Programmes

6.4.1. Allocations are foreseen for the following small project programmes: Institution
Building Partnership Programme (IBPP) for both components, namely Key Public
Institutions and Civil Society and Other Local Initiatives; Managers’ Training Programme
(MTP); Tempus and Bistro. Both IBPP programmes are designed to support and
encourage institutional building through partnership and co-operation projects between
either public organisations or civil society organisations, in order to strengthen and sustain
either public policy and administrative reform or the development of civil society. MTP is
an important element of Tacis support for the private sector and economic development,
giving young managers from Ukraine the opportunity to gain direct experience of EU
business management practices. Tempus is a key instrument of co-operation in the field of
higher education and shall be implemented by DG Education and Culture. Bistro is a
demand-driven facility for micro-projects managed by the EC Delegation in Kyiv.

7. Complementary EC Assistance

EC Assistance to Ukraine in 2003 may also be provided through the following

instruments: the Tacis Regional Action Programme, Cross-Border Co-operation, and the
Nuclear Safety Programme. In addition, support is provided in the form of macro-financial
assistance and through the Chernobyl Shelter Fund.

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8. Programme Implementation

The Action Programme will be implemented in accordance with the following elements:

8.1 Implementation & Management

The Financing Memorandum shall be concluded by 31 December of the year following

that of the budgetary commitment.

Contracts financed under this programme shall enter into force no earlier than the
signature of the Financing Memorandum in due form by the competent signatories, and no
later than 36 months after the entry into force of the relevant budgetary commitment.
Therefore:

• Any relevant contract or grant must have entered into force, having been signed by all
the relevant parties, by this expiry date.
• Any contracts or grants that have not been entered into force, having been signed by the
signature of all the relevant parties by this expiry date will be not be finalised but will be
cancelled and considered null and void.
• Any balance of funds remaining available under this programme that have not been used
to fund contracts or grants that are in force by this expiry date shall be automatically
cancelled 18 months after the end of the implementation period of the Financing
Memorandum.
• An appropriate extension of the implementation period of the Financing Memorandum
may be accepted when properly justified. The extension must be requested and accepted
before the end of the implementation period of the Financing Memorandum.

The deadline by which all contractual activities under this programme must cease is
31.12.2007. Therefore:

• no addenda to any contract or grant funded by this programme shall be entered into after
the implementation deadline1.

The Programme will be implemented by the Commission in conjunction with the

Ukrainian authorities based on financing memoranda (see Article 3(5) of Regulation
99/2000), project counterparts and contracting firms and institutions. For the government
of Ukraine, the general co-ordinating responsibility will be with the Tacis National Co-
ordinator, supported by the Tacis National Co-ordinating Unit.

The Programme will be managed by EuropeAid Co-operation Office with deconcentration

of management responsibility for project implementation to the Commission Delegation to
Ukraine, Moldova and Belarus in Kiev. Tempus will be managed by DG Education and
Culture. The procedures laid down in Art 13 of the Council Regulation (EC, Euratom) No.
99/2000 are applicable to this Programme.

8.2 Monitoring, Evaluation and Audit

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Note that the end date for contractual activities refers to project implementation activities, and not the date
for submission of final report or final invoice.

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Monitoring
In addition to regular follow-up and controls carried out on the spot, if necessary by the
Commission services and the Court of Auditors, a contract has been concluded with
independent consultants to monitor the programme. This contract covers the whole Tacis
programme, and will work upon requirements for periodic assessments of project progress
against objectives. These will include on-the-spot visits to projects and interviews with
stakeholders. Reporting will be in standardised formats giving scores to aspects of project
performance.

Evaluation
Evaluations at programme, country or policy level will be carried out in line with the
evaluation work programme of EuropeAid's Evaluation Unit H6 that is working under the
direct authority of the Board. Furthermore, Directorate EuropeAid/A is in the process of
establishing an additional evaluation capacity at sector/subsector level to support its
planning and project identification activities in the Tacis area. Priority areas for such sector
evaluations will be selected on the basis of political priorities and significance of spending.
As appropriate these might also include evaluations related to the programme under
reference.

Audit
Operations financed under this programme will be subject to supervision by the relevant
Commission services and the Court of Auditors to be carried out on the spot if necessary.
The accounts and records of expenditure under the present Programme may be checked at
regular intervals by an external auditor contracted by the Commission, without prejudice
to the responsibilities of the Commission, including the European Antifraud Office
(OLAF), and the Court of Auditors.

8.3 Tendering Procedures

The contracts for services, works and supplies shall be concluded in accordance with the
tendering and contract award procedures laid down in the Financial Regulation and other
relevant instructions.

9. Cost and financing

The Programme will be financed through a Community grant of € 50 million, allocated as

follows among the different actions:

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Area/Project Total Area (€ million)

1. Institutional, Legal and Administrative Reform 22.0

• Border management – migration management

• Border management infrastructure, Uzhgorod
• UEPLAC
• Strengthening the capacity of the justice system
• Development of media skills
• Strengthening civil society
• Municipal reform: waste management in Donetsk
• Development of renewable sources of energy (Biomass)

2. Support to the Private Sector and Assistance for 8.0

Economic Development

• Taxation reform
• Improvement of Risk Management Capacity of SMEs in
Agriculture
• SME support services in priority regions
• Reduction of regulatory and administrative barriers for SMEs
and start-ups

3. Support in Addressing the Social Consequences of 7.0

Transition

• Support for HIV/AIDS prevention among youth

• Development of integrated social services for exposed
families and children
• Development of the system of continuing education at the
workplace

4. Small Projects Programmes 13.0

• IBPP – Key Public Institutions 2.0

• IBPP – Civil Society & Other Local Initiatives 3.0
• Tempus 4.0
• MTP 3.0
• Bistro 1.0

Total 50.0

10. Government Commitment. Conditionality.

Assistance is provided on the existence of the necessary elements for the continuation of
co-operation through assistance, in particular respect of democratic principles and human
rights as well as the obligations of Ukraine as set out in the Partnership and Co-operation
Agreement.