EUROPE: Push in Balkans 'leaves white elephants'
By Andrew Bounds in BrusselsA
tourist complex with a dry swimming pool, a half-built conference
centre and an equity fund that devoured almost half as much in fees as
it invested are some of the white elephants left by the European
Union's drive to prepare Romania and Bulgaria for membership. Up
to half the €1.9bn ($2.4bn, £1.3bn) of aid given to the two Balkan
states ahead of their expected entry next year has been poorly spent,
the EU's financial watchdog said yesterday. A
Court of Auditors report into funds granted between 2000 and 2004 said
that "for over half of the investment projects the assets were not, or
were only partially, being used for the intended purpose". Some
projects were up to two years late while others had failed completely. This
was due to local authorities' lack of administrative capacity and
sometimes poor selection by the European Commission, which controlled
the so-called Phare funds. The report illustrates the difficulty in
top-down nation-building, especially in impoverished former
dictatorships. The Commission in effect policed the approval of
contracts but local authorities often failed to deliver. A
3.1m bridge across the river Prut between Romania and Moldova was
finished in 2004 but could not be used until recently because there was
no road to it on the Moldovan side. Work on an international conference
hall in Constanta, Romania, stopped in 2004 when the county council
withdrew its construction permit for unspecified technical reasons. The
€6.4m centre will probably never be built. Another
failure was the Bulgarian post-privatisation investment fund, set up by
the European Bank for Reconstruction and Development in 1998. The EBRD
put in €30m while the EU offered to pay an asset manager and
consultants. Before it was wound up in 2002, Czech-based ECM and its
advisers had been paid €4.5m while investing just €11.6m in six
companies. Some €4m went to one company that went bankrupt. The
Commission said: "Eligible investment opportunities were hard to find,
as the manager claimed shortly after the commencement of the project.
Most companies with potential had been taken up already by foreign
investors." Maarten Engwirda, the report's author,
said the experience was similar to that with the eight former communist
countries that entered the EU in 2004. "Administrators are poorly paid
and there is a big turn-over as they move into the private sector," he
said. The
Commission said the two countries' capabilities had improved in the
year since the research for the report was conducted. It is also
working on updating its mechanism for funding projects to aspirant
countries, the instrument forpre-accession. That would enable it to
lever in more funds from lenders such as the EBRD. | 
