This paper argues that it is the task of the European Union to provide a perspective to the people in South-East Europe to overcome a legacy of conflict and war. The long term perspective is to help develop the region in a way, that it will be able to participate in the European integration process.

The research for this paper is comparative and focuses on three specific case studies of countries in different stages of development: Bulgaria, Albania and Georgia. Why these three states? They represent three levels of relationships to the EU. Accession - Partnership - Cooperation. In all three states the socio-economic situation has deteriorated over the last decade due to regional conflict and has resulted in a dramatic decline of living standards. Socially weak parts of the population are affected most, young and educated people are leaving their countries in search of a better life elsewhere.

The governments fail in taking much needed political responsibility. Most political actors follow their own personal interests instead and refuse to take steps for improving socio-economic conditions. Their actions are at most limited to rhetoric promises before elections. Management of foreign aid is therefore subject to power struggles over the control of resources.

Who can help? Outside actors such as aid donors can improve the situation and are doing so. But, the donors need to find better ways to take control over the management of funds. In order to improve the situation a different system of managing available funds should be considered. Provision of funds should be made conditional upon achieved results. A network of reliable partners should be developed and investment into human resources stepped up.

In order to evaluate and compare the present situation, the policy paper takes three sources into account - interviews with providers of aid and recipients of aid, evaluation reports from auditors and other independent sources and finally recions of policy makers. It analyses experience from Central Europe and applies the lessons to South East Europe.

The setting up of reliable implementation structures bears a danger of raising already existing conflict potential with executive structures and official government bodies. Thus, short-term activities are often implemented. Long-term strategies and projects should be given priorities however. A network structure should be developed to make this possible. A central problem is also corruption. It can be curbed by investing into people and creating sustainable implementation structures (task teams) loyal to the donors’ long-term philosophy.

After careful analysis of the present aid delivery system, the paper provides a number of policy recommentations - Draft Policy Recommendations

The European Union has an enormous potential to address the challenge. It describes its role in South-East Europe as follows:

It is the largest donor in the region and is doing an important job to help the respective countries on their way towards building a society based on democratic principles, the rule of law and human rights, as well as in their efforts to consolidate a market-based economy. None else than the EU has a comparable potential to develop a long-term philosophy with individual states in the region. Existing Partnership and Co-operation Agreements (PCA) provide a suitable legal basis so far, Bulgaria takes already part in the EU enlargement process.

It is imperative that management in the European Commission be streamlined and communication between individual projects improved. Training and teambuilding of task teams should be prioritised to create incentives and motivation.

With task teams in place, priorities can be addressed in shorter time spans, EU funding can become more responsive to actual needs. Loyal task teams will create considerable advantages to the present system and improve the ability to better control invested funds.

The financial aspect of this recommendation is based on an estimate, that 10% of available funds should be earmarked for the investment into the development, training and further education of task teams. This amount could be easily saved from misappropriated funds under the present system. The implications for the relations with the government are that maximum independence from political influence should be ensured. The selection process for eligible projects should be transparent and free from political intervention. This can be partly achieved by having dedicated and independent staff on evaluation committees and clear selection procedures.

The key message for the project management philosophy should be simple ”Better results for less money”. This principle should first and foremost influence the initial definition of priorities for funding.

The OSI Policy Paper will raise the following questions:

• Which task teams are in place and how can further task teams be set up?
• Which implementation methods are currently preferred by the EC Delegations and why?
• What are the primary reasons for project failure and misappropriation of funds?

• Analyse the current experience with aid management and respective evaluations in the three selected countries – Bulgaria, Albania and Georgia
• Collect feedback and experience from key stakeholders in the aid provision institutional structure, i.e. the European Commission, its Delegations in the region, partner governments and recipients
• Develop a set of indicators as well as an analytical methodology to assess necessary preconditions for project implementation

The research project will identify several main categories to measure important aspects of successful aid project implementation.

• Planning – analysis of steps leading to definition of funding priorities, input from donors and partners and methods of consultation and definition of funding priorities
• Selection – analysis of procedures on the basis of which actual projects are selected for implementation, with special regard to the methods how evaluators are chosen and to what extent the definition of selection criteria is transparent
• Implementation – once an implementation contractor is selected, an analysis of project quality is intended, i.e. how the successful implementation of a project is being assessed.
• Sanctioning – the question of what measures are being taken when fraud or improper implementation o project objectives occurs. What consequences can be taken on the basis of the valid legal framework, how is project control being carried out, how do donors react to fraud, corruption or clienteles misusing funds
• Evaluation – how are project results being evaluated and what kind of recommendations are being given for follow-up activities. Who is carrying out evaluation of projects and how can meeting of objectives be measured.

The project will examine individual aspects within these categories which will tentatively comprise the following indicators:

• Decision-making about funding priorities
• Transparency of the tendering procedure
• Availability of information for potential aid recipients
• Selection procedure of submitted projects
• Procedure for the nomination of evaluation committees
• Conditions for delivery of funds after contract signature
• Possibilities for corrective action in case of non-fulfilment of contractual obligations
• Project supervision
• Post-project evaluation

• Develop a set of indicators that can be used for measuring and monitoring the provision of financial aid to recipient countries
• Provide a framework of analysis and statistical methodology to evaluate the success of allocated funds
• The comparative nature of the research will make it useful for evaluation of aid provision project in the whole region
• The results may be used by donor organisations (especially EU and Worldbank) for reforming present aid provision mechanisms and to design more effective ways how to provide aid
• The results may encourage potential beneficiaries to apply for funding and successful recipients to conduct project implementation in a more transparent manner

Ultimately, the findings of the research should help to improve the much needed implementation of foreign aid projects in South-East Europe and the Black Sea Region, in order to support stable institutions, rule of law, regional co-operation and economic prosperity in order to meet conditions for a successful accession process to the EU.