Turkey - Eu Financial Cooperation
Financial cooperation between Turkey and the EU can be chronicled into four periods:
· 1964-1995-Prior to the Customs Union: Within the framework of the four Financial Protocols, the Supplementary Protocol and the Special Aid Package, Turkey received a total of ECU 1,05 billion from the EU, 78 million as grants and 927 million as low-interest credits.
· 1996-1999-In the framework of the Customs Union: The EU committed in credits a total of ECU 557 million, 340 million of which was given in the framework of the New Mediterranean Policy, 205 million in the framework of MEDA-I and 12 million as risk capital. In the same period, the EU's commitment as grants totaled ECU 393 million, 376 million of which came from MEDA-I, 3 million from Administrative Cooperation, and 14 million from various individual projects on the environment, the fight against drugs, AIDS,etc. These grants are still being disbursed on a project-by-project basis.
Through the unilateral declaration it made in 1995, the EU pledged to provide Turkey with an additional ECU 375 million as budgetary grants, and ECU 750 million as EIB (European Investment Bank) credits. However, none of these pledges could materialize at the time due to the veto of a Member State. In the post-Helsinki period, the EU took the initiative to make available a portion, if not all, of the above-mentioned 750 million. In this context, on 4 December 2000, the EU General Affairs Council adopted the Regulation on the allocation to Turkey of EUR 450 million EIB credits. The programming of those credits covering the period between 2000-2004 is pending. Actual disbursements are planned to start in 2002.
As for the 375 million-worth grants, the EU Commission prepared two regulations of 15 and 135 million respectively, the process for the adoption of which have been completed. The regulations have also been promulgated in the Official Journal of the European Communities. A part of those grants is committed in 2001 for projects that will start to be implemented as of 2002. The remaining resources will be allocated to projects in the framework of 2002-2004 Financing Agreement.
· 2000-......-Post-Helsinki period: Between 2000-2006, the EU is planning to grant a total of EUR 889 million under MEDA-II (an annual average of € 127 million), and provide EUR 1,470 billion as EIB credits (an annual average of € 210 million).
· The Framework Regulation which lays down the legal basis for Turkey's Accession Partnership and which stipulates that all financial cooperation between Turkey and the EU be used for the process of accession and alignment entered into force in March 2001.
· The Council Regulation concerning pre-accession financial assistance for Turkey, on the other hand, combines under a single framework the EU's grant assistance to Turkey which is currently supplied through various instruments. This regulation, also known as the "Single Framework", was adopted at the Fisheries Council on 17 December 2001. The Regulation regulates the three financial instruments for grant aid to Turkey1 as a programme based on standardized procedures and ensures that the aid shall be used solely for the Accession Partnership priorities. With the entry into force of the "Single Framework", the commitment and disbursement process of grant assistance to Turkey will no longer be subject to the rather complex and tiresome MEDA procedures, but to those applied to the other candidates.
· The EU Commission has decided on a lump sum allocation of the MEDA-II grants (EUR 150 million) to support Turkey's structural and sectoral reforms that are being carried out in collaboration with the IMF and the World Bank. This allocation is made directly, without being tied to any projects. The EU Commission decided to release the 75-million-worth first tranche of this aid on 7 December 2001.
· In line with the Framework Regulation and the "Single Framework", the EU's financial assistance to Turkey will have to be used exclusively in areas directly linked to the process of accession and alignment, and allocated solely to those programmes and projects decided together with the EU in the form of periodic financing programmes. In this context, €167 million was committed in 2001 to 14 projects which will be implemented in the period 2002-2003. Implementation is due to start in early 2002.
· The legal ground to open to Turkey the Pre-Accession Facility which offers a total of EUR 8.5 billion EIB credits during 2000-2003 to the public and private sectors from all the candidates was completed on 15 May 2001.
The Pre-Accession Facility is administered on a "first come-first served" basis; i.e. the available budget is not apportioned among the possible beneficiaries, and the allocations are determined case-by-case upon the presentation of projects and without any pre-set "quotas" for the candidate countries. On the other hand, for the public sector projects, the EIB maintains as a prerequisite that the beneficiary country should possess an international credit rating of "BBB". Similarly, for private sector projects, the beneficiary is required to bear a credit rating of "A+". Due to the recent economic developments, Turkey is currently unable to meet those prerequisite criteria. In fact, only some of the Candidate Central and Eastern European Countries (CEEC) can fulfill the criteria and actually benefit from the Pre-Accession Facility. However, for those candidate CEEC's that fail to meet the criteria, and therefore cannot utilize the Facility, there exists a separate financial instrument called the "CEEC or PECO Fund" which is free from any prerequisites and is worth € 8.68 billion. Hence, the problems of those CEEC's that cannot use the Pre-Accession Facility are solved considerably, while Turkey remains the only candidate which has no access to both instruments.
To rectify this situation, Turkey has been working on alternative solutions in consultation with the EIB. In this context, the contacts are maintained on the possibility of making the prerequisites somewhat more flexible for Turkey or granting Turkey an exception in this regard for a large-scale project.
· 1999-...-Earthquake assistance: The EU's earthquake assistance to Turkey is independent from the resources explained above, and consists of EUR 35 million grant aid, and EUR 600 million credits named TERRA (Turkey Earthquake Relief and Rehabilitation Aid). TERRA covers the period 2000-2003, and agreements concerning the release of EUR 375 million credits out of this fund have been signed as of end-2000.
1 These are namely: i) An annual average of € 127 million in the framework of MEDA-II grants, ii) An annual average of € 45 million between 2001-2003 in the framework of the Regulation to support economic and social development (135-million in total), iii) An annual average of € 5 million in the period 20002-2002 in the framework of the Regulation to support the Customs Union (15 million in total).