European union

EUROPEAN UNION Delegation to the Republic of Azerbaijan

Overview of Bilateral EU Support to Azerbaijan (updated February 2013)

1) Background

Between 1992 and 2010, EU support to AZ amounted to just over €475 million, with annual allocation reaching around €20 million over the last few years.

EU assistance has changed over time. Initial assistance during the 1990's and early 2000's focused on humanitarian aid, food security and social protection. Following political stabilisation in AZ and the arrival of new instruments under the ENPI in 2007, EU assistance has shifted towards the implementation of the ENP Action Plan, diversification of the non-oil economy, and capacity building of government structures, although it still maintains a focus on poverty reduction and social protection.

Since 2009, the EU also supports CSO implemented actions under the Human Rights, Democratisation and Non State Actor budget lines (EIDHR and NSA-LA financing).

2) ENPI assistance 2007-2013 - €68m + €75m

The National Indicative Programme (NIP) for the period 2007-2010 foresaw an indicative budgetary allocation of €92m, although only €68m were committed. The follow-up NIP for 2011-2013 foresaw an indicative budgetary allocation of €122.5m, but reductions applied due to the cancellation of a budget support programme on Public Finance Management (PFM) under AAP 2012 and further cuts under AAP 2013, resulting in a final commitment of only €76m for the NIP 2011-2013.

This allocation includes €19m for the Comprehensive Institution Building (CIB) Programme, intended to assist a limited number of core institutions central in preparing for and implementing on-going and future Agreements under the Eastern Partnership and €9m for the PRDP (Pilot Regional Development Project).

The main instruments for implementing the ENPI assistance are Budget Support and Twinning.

Budget Support and accompanying Technical Assistance (€64m)

Since 2007, the EU has committed funds to four budget support programmes, namely: €14m for Energy in 2007; €16m for Justice in 2008; €14m for Agriculture in 2009; and €20m for Regional Development in 2011.

Bureaucratic administrative procedures and difficulties in assessing PFM eligibility have resulted in significant delays in initiating the BS programmes, although they are now picking-up: to date, regular annual payments were made under the Energy and Justice Programmes, and a first payment under Agriculture. In 2012, €11,6 m were disbursed in budget support to the Government of Azerbaijan out of total €19,5 m.

The €20m Rural Development Budget Support Programme developed under AAP2011 will begin this year. Its purpose is to develop labour and entrepreneurship potential in rural areas so as to meet demand of rural businesses to accelerate their integration in the world economy.

During 2012, a significant setback was experienced with the €22,5M Public Policy Reform Programme SPSP foreseen under AAP2012. Developed in close consultation with the Government as a means to ensure a long term PFM reform process, unexpectedly, the Government refused to endorse the programme at the last minute, leading to its cancellation and loss of the funds.

This setback has also had the impact of cancelling the Budget Support component initially foreseen in AAP2013, and has led to a loss of those funds as well.

Twinning (€24m)

The Twinning instrument continues to be very successful, with one of the highest implementation rate in the Region. Currently 27 twinning projects (including a Twinning light project) are under different stages of implementation: eight have been completed, eleven are on-going and 10 under preparation. During 2012, five Twinnings were signed and with one expected to be signed in Q1 2013. Twinning fiches for six projects to be financed under AAP 2010 are under development. Identification of a further nine projects to be funded under AAP2011, is ongoing. Some 34 applications were received for TAIEX in 2011 against 20 received in 2010, showing a better understanding and use of the instrument by the AZ authorities.

An evaluation of the Twinning instrument in Azerbaijan was carried-out in 2012, confirming the positive results highlighted above. The evaluation made also some detailed recommendations on how to further improve the political relevance and the effectiveness of the instrument in the AZ context.
Comprehensive Institution Building programme (CIB)

The CIB supports the implementation of the new agreements offered under the Eastern Partnership, and is based on three Institutional Reform Plans (IRPs), the first of which focuses on deepening trade integration & on the Association Agreement (IRP1); the second on rule of law, human rights & migration (IRP2), and the third one on training of civil servants on EU affairs (IRP3). A total €19m has been allocated to the CIB in 2011-2013, with a first €3m earmarked under AAP2011 (signed in 2011) and another €7m under AAP 2012.

In terms of current status, IRP1 is at the final stage of approval with Government adoption expected in early 2013. IRP2 was approved by the GoA in July 2012, and IRP3 was approved in April 2012. At this stage activities have only begun under IRP3, where a FWC to support the Beneficiaries (Azerbaijan Diplomatic Academy and Civil Service Commission) in IRP3 implementation has started in October 2012.

Pilot Regional Development Programme (PRDP)

The PRDP instrument promotes regional development in Azerbaijan along the lines of EU regional cohesion policy, with a focus on reduction of disparities between regions. With a €9M budget for 2011 - 2013, its objective is to finance projects in line with a country's regional development strategy, or if the strategy lacks sufficient quality, support development of it. In October 2012, a techical assistance project has started with the aim of assisting the Ministry of Economic Development in advancing the regional development agenda and in designing the various component of the PRDP programme.

2) Civil Society Grant Programmes (EIDHR , NSA/LA, CSF) since 2007 – €7.6m

The EU is the largest foreign donor supporting civil society in Azerbaijan. Under the Non-State Actors (NSA) Instrument and European Instrument for Democracy and Human Rights (EIDHR), between 2007-2011, 39 projects with a total EU contribution of €7.2m have been funded. Themes of the last call for proposals included support to human rights and democracy, human rights defenders, environment, and assistance to vulnerable groups.

In addition, in 2011, under the recently introduced Neighbourhood Civil Society Facility (CSF), the Delegation allocated €0.5m to 2 projects in areas of good governance and monitoring Public Finance Management to complement the originally planned PFM Budget Support Programme.

A call for the EIDHR instrument was launched in late 2012, and a call for the NSA instrument expected this year, for a combined total of €3m. Positive to note is the increase of funding to civil society through these calls in comparison to the past.

Annexes

Table 1: Overview National Indicative Programme (NIP)

	NIP 2007 – 2010 (€92M)				NIP 2011 – 2013 (€122.5M)
	2007	2008	2009	2010	2011	2012^* (indicative)	2013^* (indicative)
BS	€14M	€16M	€14M	-	€20M	-	-
TW/TA	€5M	€6M	€6M	€7M^**	€11M^**	€19.5M^**	€25.5M^**
	€19M	€22M	€20M	€7M	€31M	€19.5M	€25.5M
Total				€68M			€76M

* FA not yet signed by GoA BS: Budget Support + Accompanying Technical Assistance

** Includes CIB TW/TA: Twinning/Technical Assistance Facility

Table2: Overview of Budget Support Programmes

Financing Decision	Programme Title	Budget	Time period	Status
AAP2007	Energy Reform Support Programme	€13m BS + €1m TA	2009-2012	1^st tranche paid 2010 2nd tranche paid 12/2011