EUROPEAN COMMISSION. Observations on the Partnership Agreement with Malta

Transcription

1 Ref. Ares(2014) /06/2014 EUROPEAN COMMISSION Observations on the Partnership Agreement with Malta PART I Introduction The observations set out below have been made within the framework of the Common Provisions Regulation (CPR) and the fund-specific regulations. The observations take into account the 2013 country-specific recommendations (CSR) adopted by the Council on 9 July 2013 ( its supporting analysis (SWD) ( and are based on the Commission's Position Paper for the use of the European Structural and Investment (ESI) Funds in The observations refer to the Partnership Agreement (PA) submitted by Malta on 1 April The observations are presented following the structure of the PA as set out in the template. The most critical issues for the Commission are noted in part I. 1. ASSESSMENT OF MEMBER STATE POLICY OBJECTIVES (1) The PA agreement is a framework document that should set out clear political and policy commitments to the strategic goals and address the key challenges identified by the Europe 2020 strategy, the CSRs and the National Reform Programme (NRP) for Malta. It should define a well-planned and thoroughly considered framework for achieving the maximum European value added of European Structural and Investment Funds (ESIF) investments in Malta for by addressing the bottlenecks hampering growth and by pursuing an ambitious development strategy that enables the enhanced longterm competitiveness of the Maltese economy and further reduces regional disparities. By establishing strong links between ESIF interventions, the NRP and the strategic development vision of Malta, cohesion policy can deliver a positive impact in reaching the Europe 2020 targets set for Malta. (2) The Commission appreciates the commitment undertaken by Malta to address the national Europe 2020 targets through an efficient and effective use of ESI Funds over the next programming period. However, given the challenges lying ahead, the PA will have to outline more specifically how these targets can and will be achieved through and within the envisaged funding priorities. This applies in particular to those areas where there are critical gaps that need to be filled so as to achieve the targets, as indicated by the Commission, and where only limited steps seem to have been taken with respect to the previous version of the PA and the Commission Services' recommendations in its Position Paper (CPP): the promotion of renewable energy sources (RES) under thematic objective (TO) 4, in particular large-scale renewable energy facilities and renewable energy from marine sources; the promotion of sustainable transport mobility under TO7; and the improved management of natural resources, in particular waste and water under TO6.

2 (3) The Commission recognises the specific physical and natural constraints of Malta as an island state and the necessity for this to be reflected in the PA strategy. At the same time, rather than seeing these constraints just as limits or a justification to continue current policies, these geographical circumstances should also be considered from the angle of the opportunities they provide to look into new, alternative solutions to the current challenges. (4) The PA recognises that transport is the second highest source of greenhouse gas (GHG) emissions in Malta and that the decarbonisation of the transport sector is a priority for the programming period. However, despite the recognised critical aspect of this issue, TO7 still lacks clear objectives and concrete targets, and it continues to be too generic in terms of the measures envisaged to address the issue. As indicated in the Position Paper and in the Commission's letter of observations on the previous version of the PA, Malta needs to focus on the promotion of sustainable urban transport modes that are capable of providing a real solution to the increasing use of vehicles. The PA recognises the need to reduce car transport (and high car use), but the proposed measures seem to accommodate the amount of car traffic, rather than prioritise alternative modes of transport other than passenger cars as requested in the relevant CSR for the transport sector. This means focusing on investments in the different modes of public transport, including the promotion of an intermodal shift, in line with an integrated public transport strategy. The PA continues to reiterate the difficulties linked to the shift in modal transport from land to sea without outlining and substantiating an overall alternative solution that is capable of actually addressing Malta s transport issue and the ensuing GHG emissions problem. (5) Malta's stated commitment towards a low carbon economy within the framework of TO4 should translate into sufficiently concrete and specific measures that are capable of enabling Malta to achieve the 10 % renewable energy target. Considering the current stated level of only 2.7 % (source Ministry for Energy and Conservation of Water), the distance to the target is large. At the moment, the PA is definitely too tentative and generic in its approach and does not allow the Commission to conclude that with the proposed measures the gap will actually be closed. For example, as far as wind energy is concerned, while the analytical part devoted to renewable energy foresees that the largest source of renewables will be large-scale wind farms (almost half of Malta's overall consumption of renewables in 2020), the TO section merely mentions that the government will explore the possibility of wind technology as far as this is feasible and commercially viable without providing further indications. Moreover, the Commission has been informed that the use of wind energy, in particular offshore wind energy, is likely to be ruled out by the Maltese government in the short term. The Commission also wishes to reiterate that shifting the generation of electricity from fossil oil to natural gas cannot be considered as promotion and distribution of renewable energy sources : natural gas is not a renewable resource within the meaning of Directive 2009/28 EC. As such, it does not contribute to the achievement of the Europe 2020 target and cannot be co-financed by the European Regional Development Fund (ERDF) or the Cohesion Fund. (6) The situation of waste continues to be critical in Malta. The quantities of landfilled waste continue to be extremely high (87 %), while the recycling rate remains very low (13 %). In 2010, with the single exception of plastics, Malta failed to meet the waste targets in the Packaging and Packaging Waste Directive. In this respect, the Commission welcomes the new priorities set in the January 2014 Waste Management Plan (WMP), which contains new plans and installations that allows for more separate collections and sorting of waste for recycling purposes. However, in order for Malta to reach its 2020 recycling target and landfill diversion targets, the priorities/projects of the WMP need to be effectively implemented and reflected in the Partnership Agreement and in the operational programme so as to lead to positive results/trends which can be gauged accordingly. At the moment this does not seem to be the case. The PA continues to 2

3 provide for the possibility to invest in new landfill facilities, which is also included as an expected result. This decision is not the logical way to address one of Malta's most critical issues and is not a viable option for the use of the ERDF, which will need to be used in favour of investments that go towards preventing and minimising waste, and managing it with methods high in the waste treatment hierarchy. (7) Little attention seems to be given to social innovation in TO8 to 11. It would be useful for the PA to cite the general obligation of Member States that the ESF shall promote social innovation (Article 9(1) of Regulation (EU) No 1304/2013). Promoting social innovation can take place in all areas falling under the scope of the European Social Fund (ESF), including those which aim to test and scale up innovative solutions. This approach establishes a more direct link between social innovation and the policies that the PA sets out to promote. The formal Maltese PA now states specifically that the drive towards this [...] outreach approach, presenting tailored solutions [...] meets directly the recommendation of the Commission in its Social Investment Package. We invite Malta s authorities to clarify how they intend to promote this regulatory observation. (8) Support to cultural heritage is also an important aspect of Malta s strategy for in terms of financial allocation under TO6. However, an integrated, long-term strategy designed to guarantee that investments in this sector will effectively have an economic and social impact, provide added value and avoid wasteful resources is still missing from the PA. (9) Investments under the investment priority Supporting investments in the Trans- European Transport (TEN-T) network will have to be limited to the upgrading of the TEN-T road and port infrastructure in line with the requirements for TEN-T core and comprehensive networks, as well as to cost-effective solutions for an improved connection between Malta and Gozo, as indicated in the Position Paper. Any cofinancing by the ERDF/Cohesion Fund of roads outside the above definition, such as secondary and local roads, should be ruled out. The envisaged expected result under TO7 should be specified and/or adjusted accordingly. (10) The general approach proposed by the PA under TO3 seems too uniform to be able to tackle all the elements that make it difficult for Maltese small and medium-sized enterprises (SMEs) to grow and emerge competitively. An undifferentiated strategy takes the risk of not selecting the merit and keeping the status quo, without really promoting the change towards smart specialisation and being in line with the smart specialisation strategy (RIS3). Even if the RIS3 is an ex ante conditionality only for TO1, its conclusions and priorities should also set the framework for TO3, so that an integrated policy-to-business support can be achieved A more strategic long-term approach and a more reasonable exit strategy is required for the PA. For example, the priority areas of Malta's smart specialisation strategy should be targeted, while placing the remainder of the business sector in the best situation to put forward further proposals for innovation through modernisation, reconversion or radical change. (11) While air quality is referred to in both TO6 and TO7, the PA fails to recognise that air quality is directly related to the priorities Malta wants to achieve with the ESI Funds (e.g. tourism and maritime transport). Measures on reducing carbon dioxide (CO 2 ), particulate matter (PM) and nitrogen dioxide (NO 2 ) emissions should be embedded in Sustainable Urban Mobility Plans (SUMPs) that are coordinated with Air Quality Plans. While promoting renewable energy in TO4, it is vital that any use of biomass also includes measures that reduce emissions, especially of PM. This should be considered particularly in areas with intensive road and/or shipping transport, high population densities and/or complex climatic and geographical conditions. Horizontal principle on sustainable development should include the principle that any project or measure should not harm and preferably contribute to air quality. A reference to 3

4 environmental criteria or sustainability may not be enough as these are sometimes wrongly understood to be only climate measures (e.g. a reduction of GHGs). Air quality measures under Directive 2008/50/EC should therefore be explicitly included, e.g. reductions of PM, NO 2 and sulphur dioxide (SO 2 ), which in contrast to CO 2 is directly harmful to the health of citizens, ecosystems, crops and buildings. (12) Whereas the PA describes the problems and challenges associated with an ageing society, it still does not include any detail on the type of measures envisaged to address the issue. (13) In terms of employment, the text is mainly concerned with trends and figures, but it would be important to see a well elaborated reflection on the key obstacles and remaining challenges for higher employment rates, notably for women and for older workers. It would be important to understand the employment-rate dynamics of female workers, particularly within the age brackets, and how policies such as flexible working conditions, affordable childcare and other measures, might contribute to helping with such challenges. (14) The Commission wishes to see the Marine Strategy Framework Directive, and its objective to reach good environmental status by 2020, highlighted as the core tool for delivering the environmental dimension of the EU's Integrated Maritime Policy, notably in light of the Commission's recent report on the implementation of the Directive (COM(2014)97), and the forthcoming development of programmes on monitoring and measures under that Directive. (15) Malta has indicated its willingness to make use of the opportunities offered by the SME initiative following the conclusions of the European Council of 25 October In line with the Commission's letter of 26 November, Malta has indicated the envisaged ERDF contribution. We invite Malta to also specify the type of financial instruments that will be supported through the initiative. (16) Complementarity/synergies between the different funds are not sufficiently addressed. Some areas have been identified where a potential overlap/gap in the funds exists, such as research, water management and rural tourism. However, no further information is provided under the relevant TOs' description in section 1.3. For example, it is not clear whether agricultural research will be financed through the European Agricultural Fund for Rural Development (EAFRD) or whether it will be dealt with in a horizontal manner, together with other sectors. 2. FINANCIAL ALLOCATION PROPOSED BY THE MEMBER STATE (17) The thematic concentration requirements set out in Article 18 of Regulation (EU) No 1303/2013 and in Article 4 of Regulation (EU) No 1301/2013 are respected; nevertheless, the allocation of funds does not fully address the importance of individual thematic objectives vis-à-vis existing CSRs and the significant gaps that need to be filled to achieve the national Europe 2020 targets. In particular, the 12 % ERDF allocation to TO4 is not considered as sufficiently representing the importance of this TO and the challenge it is called to address, given the current situation; it should therefore be revised upward. On the other hand, as indicated in its observations to the formal version of the PA, the % ERDF allocation to TO6 (in addition to the % Cohesion Fund allocation) and the % ERDF allocation to TO9 seem overestimated. (18) The current PA only provides for a 10 % level of climate-related expenditure for all ESI Funds (EUR ) excluding the European Maritime and Fisheries Fund (EMFF). While the text indicates that the final amount will only be determined at the 4

5 level of the operational programme, in line with Article 15(1)(a)(iv) of Regulation (EU) No 1303/2013, the PA will need to indicate the total indicative amount of support envisaged for climate change objectives. It is recalled that the support to climate change objectives should take into account the ambition to devote 20 % of the EU s budget to those objectives (recital 14 of Regulation (EU) No 1303/2013). (19) Taking into account the need to optimise the leverage effect of funding, the Commission asks Malta to identify in which priority axes in the operational programmes it intends to modulate the co-financing rates in accordance with Article 121 of Regulation (EU) No 1303/2013 and recalls that, as set by Article 120 of Regulation (EU) No 1303/2013, the co-financing rate is to be determined on a case-by-case basis and the maximum cofinancing rates should not always be applied to their full extent. (20) The PA proposes a percentage of technical assistance (TA) for the ESF of around 6 %, which is approximately double the percentage of TA for the ERDF. This higher share of TA, compared to the ERDF, should be duly justified. (21) The allocation for the EAFRD (after transfers between pillars) is not in line with the latest modifications to Annex I of Regulation (EU) 1305/2013. The revised amount, net of transfers, should read EUR CROSS-CUTTING POLICY ISSUES AND EFFECTIVE IMPLEMENTATION (22) Malta is invited to critically review the expected results indicated for each TO under section 1.3. The majority of the proposed expected results is in fact not sufficiently specific and fails to identify the nature and dimension of the aimed-for change. They are limited to a very general reference to an increase, improvement, promotion or support to a generic topic, such as increase in entrepreneurship (TO3) or Increase in the number of households investing in RES and EE [energy efficiency] measures (TO4). In other cases (e.g. TO7: Increase in number of kilometres of reconstructed and upgraded roads), the reference is to elements that are instrumental to a result, but not a result per se (in the case of TO7, it could be one of the elements already listed, i.e. reduction in journey time ). The main results need to be expressed to a greater degree in quantitative terms, using, where applicable, indicators from the European Statistical System. (23) As already observed in the Commission Services Position Paper, as far as Gozo is concerned, the Commission considers that an integrated territorial investment (ITI) should be established for the island as this instrument appears to be the most effective way to address in a really integrated way the specific natural and demographic handicaps of the island. The proposal to earmark 10 % from the ERDF, the ESF and the Cohesion Fund in favour of the island to address its specific needs guarantees neither the integrated approach required nor an appropriate thematic distribution, and might result in purely financial monitoring. By contrast, an ITI drawing on different thematic objectives, programmes and funds would provide the framework for the necessary integrated approach to the development of Gozo. (24) According to Article 7 of Regulation (EU) No 1301/2013, sustainable urban development needs to be undertaken through one or more ITIs, a specific operational programme or a specific priority axis within the operational programmes. The PA does not clearly specify the option chosen, even if it seems to rule out the possibility of resorting to an ITI. At the moment the PA only mentions sustainable urban development as an investment priority under TO6. Article 5(6)(b) of Regulation (EU) No 1303/2013 only foresees actions to improve the urban environment and while TO6 can be among the TOs chosen to achieve the objectives of Article 7 of Regulation (EU) No 1301/2013 within the framework of one of the three options mentioned (ITI, axis and OP), it is not 5

6 a viable option for carrying out the objectives of the article. Projects counting for the 5 % urban development should be based on an integrated urban development strategy and should contribute to its implementation. Such a strategy must draw funding from at least two thematic objectives and must ensure that the funding is used in an integrated manner to tackle the economic, environmental, climatic, demographic and social challenges affecting urban areas. All projects should also be based on an analysis of such challenges and ensuing needs. Moreover, urban authorities should be responsible for the selection of operations. At the moment the text only provides for a generic analysis of these aspects without outlining a clear strategy for sustainable urban development and, more specifically, without making any choice as to the specific areas targeted and the specific funding investments envisaged to promote development, apart from a general indication of the intention to use two unspecified TOs which do not include ESF-thematic objectives. PART II - further observations 1.1 ARRANGEMENTS TO ENSURE ALIGNMENT WITH THE UNION STRATEGY OF SMART, SUSTAINABLE AND INCLUSIVE GROWTH AS WELL AS THE FUND- SPECIFIC MISSIONS PURSUANT TO THEIR TREATY-BASED OBJECTIVES, INCLUDING ECONOMIC, SOCIAL AND TERRITORIAL COHESION (ARTICLE 14(1)(A) CPR) Section 1.1.1: Analysis of disparities, development needs and growth potential (25) The Commission wishes to recall that, for reasons of comparability, the assessments in the PA would need to preferably make use, where possible and relevant, of available European Statistical System (ESS) statistics. In case the necessary data is not available at the EU level, it is recommended to also provide next to the national data source links to similar datasets in ESS statistics. (26) Likewise, where possible and relevant, any territorial analysis at a sub-national level needs to make use of harmonised spatial definitions, for example Nomenclature of Territorial Units for Statistics (NUTS) 1. Urban 2, rural 3 and coastal 4 regions referred to in the analysis would need to be delineated according to the harmonised definitions published by the European Commission. As to the rural development programme, alternative national definitions may be used in accordance with Article 50 of Regulation (EU) No 1305/2013. (27) The analysis of the growth potential of the individual sectors should be reinforced. Moreover, the analysis of the economic performance overlooks the role of investment (both private and public) in economic development. An analysis of the trends of private and public investments would be ideal to align this section with the main objectives of the PA ( Government s strategy is that of creating an environment which encourages both private and public sector investment in all key areas of the economy ). (28) The territorial cooperation dimension is absent from the introductory part and the financial tables (mainly 44, 45 and 47). The territorial cooperation perspective should be strengthened and well-addressed across the whole PA. Furthermore, the footnote

7 number 247: this amount excludes the transfer to European Territorial Cooperation Goal should be corrected as follows: this amount excludes the allocation to the European Territorial Cooperation Goal. In addition, the Maltese authorities are requested to clarify if the notion of external consultations (p. 3 of the PA) refers to consultations carried out with other countries, or to some other types of consultations. (29) In several cases the actions that are proposed under the expected results per TO cannot be clearly linked to the description provided under the section for the respective TO. As an example, when it comes to information and communication technologies (ICT), there is still a weak link between the description of the development needs and the priorities that are included in the corresponding TO2 under section 1.3. (30) The importance of sectors, such as sea transport, fisheries and aquaculture, and tourism is well-acknowledged or explained, but given Malta's position as an island state and the fact that the government is putting significant efforts into setting an Integrated Maritime National Strategy, it would be advisable to give more prominence/visibility to the country's blue economy and present the various interconnected aspects, for example, strengths, weaknesses, opportunities and threats (SWOT) elements, in a more integrated manner in the document itself, notably as a stand-alone chapter under this section as well as within table 35: National SWOT. (31) ICT is identified as a key area of action to develop value-added manufacturing and services, but only a little data on the status of the situation is provided. This does not allow the proposed financial allocation to be evaluated or to consider whether the strategy is appropriate to cover the perceived gaps. (32) The text gives an indication of the e-business and e-inclusion strategies for , while referring to the forthcoming national ICT strategy for the creation of the digital economy, providing very general indications about the potential areas of action, including businesses, civil society, government and technology. An analysis of the status quo as well as the prospective gaps and opportunities is largely missing. The analysis is currently limited to broadband access, penetration, e-commerce, e- government and the use of ICT in SMEs. However, it is pertinent to also close the gaps in other domains covered by the Digital Agenda for Europe and to achieve the development objectives of the country, such as ICT skills (including for the farming population), digital literacy, inclusion, online public services (e.g. health, education, transport, etc.), ICT research and innovation, trust and security, and interoperability, as well as the training of high-level digital specialists (as mentioned in the Digital Malta Strategy). The text on the use and quality of ICT in this section makes no reference to the agricultural, tourism or agro-food processing industry, while the ICT action in the domains of e-health and e-education are not described in sufficient detail. (33) There is no clear reference to the relevant CSR in the energy sector. The remaining distance to the national Europe 2020 targets is not sufficiently analysed. In addition, the analysis of the failure to reach the mid-term renewable energy targets is missing. The relevant section needs to be based on revised national strategic documents currently in preparation, such as the revised National Renewable Energy Action Plan (NREAP). The energy efficiency section is not sufficiently developed, and an analysis of the current situation and needs is missing. (34) The high level of soil sealing in Malta is a threat that the SWOT analysis should recognise. The improvement of soil management is mentioned in the section on agriculture, but it should be specified that measures to fight soil erosion and favour the increase of the soil s organic matter should be given priority. A link needs to be made with the adaptation to climate change. 7

8 (35) Although Malta provides recent statistics on the interdependence of tourism and natural and cultural heritage and their economic potential, further analysis is still needed to justify the important investments envisaged by the PA in favour of the sector under TO6. It is recalled that TO6 can only cover national/cultural heritage interventions and not support to private tourism activities (which should be part of TO3). (36) There is no clear reference to the relevant CSR that relates to the reduction of emissions in the transport sector. The analysis of the remaining distance to the national Europe 2020 target is missing. The relevant section needs to be based on the revised national strategic documents currently in preparation, such as the new National Transport Strategy and Plan. The content and priorities of TO7 need to be redefined accordingly. (37) With regard to the transport sector, the PA fails to fully outline the experience and lessons learnt from the programming period. Climate change mitigation needs regarding transport (including sea and urban transport) should be analysed in more detail. (38) The economic benefits of cruise liners for the local economy, in particular for Gozo, should be clearly analysed in order to better understand the actual need for investments in this field and the rationale for co-financing such investments with public funds. (39) References to the modernisation of customs should be expanded to include strategic attention to the development of external trade processes and funding the modernisation of customs and border crossing points for faster, safer and more secure trade (customs infrastructure, equipment, systems and institutional capacity building of customs, and relevant taxation services). (40) The needs and growth potential of the health sector in view of compliance with CSR 2 are still not sufficiently analysed; healthcare reforms should be better explained, particularly in view of the stated goal of achieving better sustainability of care beyond the transition to the community care approach and targeted infrastructure interventions. (41) The sentence at the end of sub-chapter should read: Moreover, during the programming period, the development of new infrastructure for the proper landing and storage of fish within designated ports and the building of a new fish market were also supported. (42) With regard to research and development (R&D) and innovation activity, the analysis appears to be quite comprehensive, but continues to lack focus. There is no clarity as to the areas of specialisation. Seven areas are mentioned in detail on p. 76 while eight are indicated on p. 14 where agriculture and rural development are added to the initial set of seven. Section 1.1.3: Analysis of the relevant territorial imbalances, development needs and bottlenecks (43) The section only covers territorial imbalances, development needs and bottlenecks relating to Gozo, while no territorial analysis is provided with respect to the rest of the country. For example, no information or mapping that indicates the most severely affected areas is provided with respect to soil erosion or floods. (44) Malta is encouraged to pursue investment in the implementation of cross-border e- government services as piloted by the Member States and to ensure synergies with the future European digital services infrastructure activities under the Connecting Europe Facility (CEF). 8

9 1.2 A SUMMARY OF THE EX ANTE EVALUATIONS OF THE PROGRAMMES OR KEY FINDINGS OF THE EX ANTE EVALUATIONS OF THE PARTNERSHIP AGREEMENT, WHERE UNDERTAKEN BY THE MEMBER STATE AT ITS OWN INITIATIVE (45) The document reports the main findings of the ex ante evaluation of the PA. The section should, however, be reinforced by including the critical aspects identified by the evaluation for the ERDF that goes beyond the elements highlighted by the recommendations made by the experts, which were limited to the EAFRD and the EMFF. For example, in some cases, such as with reference to ITI, the text simply indicates that the evaluators noted Malta's decision not to utilise the instrument without further explanation. The Maltese authorities are also invited to provide the full text of the evaluation. (46) The summary does not contain any reference to climate mitigation and adaptation-related issues emerging from the ex ante evaluations. 1.3 SELECTED THEMATIC OBJECTIVES, AND FOR EACH OF THE SELECTED THEMATIC OBJECTIVES A SUMMARY OF THE MAIN RESULTS EXPECTED FOR EACH OF THE ESI FUNDS (47) There is still no explicit reference to the sustainable development of fishery areas under the EMFF to either CLLD or the LEADER approach. Thematic objective 1 (48) The PA should clarify that TO1 will only finance actions that are consistent with the areas of specialisation identified by RIS3. (49) Information needs to be provided on how the entrepreneurial discovery process within the National Research and Innovation Strategy 2020 has been set up and how it will be run in the future so that it can lead to a narrowing down of more competitive niches within the chosen thematic specialisation areas. (50) The Commission can agree with a certain level of flexibility embedded in the National Research and Innovation Strategy 2020 in order to react to a changing economic and social environment. Nevertheless, this flexibility can be guaranteed by establishing an adequate mechanism within the strategy: i.e. by maintaining a proper monitoring mechanism and a review system for the strategy, including an early warning system for any deviation from the foreseen objectives, as well as continuing the entrepreneurial discovery process. Any changes to the approach, the selection of priorities or the specialisation sectors must always be based on fact/evidence. (51) Under the expected results, a reference is made to rural areas but not to agriculture. No reference to the European Innovation Partnership (EIP) has been included under rural development, as well as the provision of farm advisory services and skills development for the farming community. Although agriculture and rural development have been added in the analysis under point (p. 14) to the sectors for which interventions are foreseen, no trace can be found in the text under 1.3. (52) While the PA acknowledges that quality infrastructures will enable the development of technologies, there is no clear explanation to illustrate how the specific priority areas of investment (for example climate change) will translate into the desired results. (53) Although an improvement to health and wellbeing is one of three priorities listed in the PA for the programming period, and although, under funding priority 3 (p. 85), Malta is committed to creating opportunities towards this priority through 9

10 investment in human capital and improving health and wellbeing, the PA does not elaborate on plans for research in relation to health and only refers to other policy documents, such as the National Research and Innovation (R&I) Strategy 2020 or a policy document on national strategy for health research and innovation, which is only at a drafting stage. (54) The Commission appreciates the fact that amongst the sectors identified in Malta's draft National R&I Strategy 2020, and therefore the ensuing framework for smart specialisation and funding under priority 1, a number of maritime-related sectors have been included, such as, for instance, tourism marketing, maritime services and aquaculture. Nevertheless, the potential for investing in R&I in other sectors, such as blue biotechnology or sea observation, should not be ignored given the longer term perspective of the PA. The role of clusters in supporting research and innovation in the marine and maritime fields should also be taken into account, especially when considering the future maritime hub and its potential. It is unclear why a bullet point on Integrated Maritime Policy (IMP) has been included under the Strategic overview of the agriculture and fisheries sector (p. 64). The content of the relevant bullet point is very valid and should stay in the text but given that the IMP should not be limited to fisheries and should be mainstreamed through several funds i.e. not just the EMFF but also the ERDF the Commission would prefer having a stand-alone paragraph on the IMP that is separate from fisheries. (55) Within funding priority 1, ICT is identified as a horizontal enabler impacting on the development of all other thematic objectives. In this respect, it is clearly indicated that ICT will be applied to sectors such as health education, etc. However no data on such uses has been provided. (56) The PA should contain a clear reference to the synergies between the ESI Funds and the priorities and actions defined in the Commission Communication A Reinforced European Research Area Partnership for Excellence and Growth (COM(2012)392 final). (57) The use of the ESF is envisaged under this TO for the increase in R&D employment. The relevant allocation and intervention should be transferred to TO8 and/or 10, which are appropriate for the ESF. (58) A reference to European territorial cooperation (ETC) should be included as TO1 forms part of the MED programme in which Malta participates. Thematic objective 2 (59) Based on the analysis carried out in chapter 1.1, investments in high-speed broadband are no longer included among the planned interventions. If confirmed, the expected results table should be modified accordingly by deleting the Introduction of very high broadband result. Given the intention of Malta to become the hub for international ICT-based services, the Maltese authorities should nevertheless verify whether the existing broadband infrastructure is capable of supporting the combination of services in the different areas mentioned in the digital strategy within the country (health, education, transport, justice, welfare and taxation, the cloud, etc.) and whether the international connections are sufficiently strong and affordable to sustain this ambition (as mentioned in the Maltese Digital Strategy). Any potential investment in the nextgeneration network (NGN) domain should be foreseen within the context of a NGN plan developed in alignment with the criteria of the NGN ex ante conditionality (at present not satisfied). (60) The main focus of the PA is on infrastructure and the top-down provision of e-services, with little emphasis given on the users (in terms of skills upgrading, awareness raising 10

11 and the development of framework conditions to enhance the use of ICT). Little attention seems to be given to social innovation and societal challenges, which could be reasonably identified as the main objective of ERDF investment (e.g. for an enhanced use of ICT having a direct impact on people s wellbeing and tackling the conditions that hinder the dissemination of better living conditions in Malta, such as traffic congestion, high population density, etc.). (61) There is no information on the promotion of competences in information technology (IT) within the farming community by the EAFRD. Thematic objective 3 (62) The Commission welcomes the reference to the need to promote and further strengthen cooperation between SMEs and large companies using all the funds. However, as far as the ERDF is concerned, support under TO3 is exclusively limited to SMEs. (63) The description of the business support to be given under TO3 appears generic, which risks repeating the experience of the period; it was characterised by a high degree of fund dispersal. There does not appear to be any link with the areas identified under RIS3 or with any other instrument of priority setting. The Commission would also like to see a clear commitment that generic horizontal business support will be channelled predominantly, if not entirely, through financial engineering instruments. (64) With respect to agriculture, it is important to stress that the thematic objective focuses on the competitiveness of the entire agricultural sector. Enhancing employment level in the agricultural and agri-food processing industry is not limited to rural areas. The reference to increase the EAFRD investment contributing towards economic activity in rural areas is better suited to TO9. (65) Possible integration of biodiversity in TO1 and TO3 provides opportunities for ecoinnovation developments and can influence SMEs performance and practices. Such an approach can answer the challenges outlined under TO6 for unsustainable consumption and production patterns. Thematic objective 4 (66) Activities related to smart metering and demand response should be addressed under TO4; smart grid development at transmission level should be addressed under TO7. (67) Given the long-term nature of the PA, the Commission strongly advises the Maltese authorities not to rule out possible investments that could lead to further research or innovative solutions for sea energy generation in the context of Malta's strategy for boosting its blue economy. Thematic objective 5 (68) The PA on p. 97 states that Government will seek to support investment aimed at climate change adaptation and mitigation primarily through the EAFRD. It should be clarified what 'primarily' means. What are the other sources of financing? (69) Improved sustainable water management (including that of nitrates and pesticides, which should be mentioned) in the agricultural sector as well as through improved valley management is mentioned as an expected result but is not discussed sufficiently in the preceding text. Genetic resources are discussed but are not described as a result. Proper agricultural technology and management systems are mentioned as an aim but are not expanded on and are not indicated as a result. Air quality measures should also be mentioned here as prefaced in the introduction. 11

12 Thematic objective 6 (70) As regards water, there is only a reference to the Programme of Measures under the Nitrate Directive but not to the Programme of Measures under the Water Framework Directive. In the PA. a reference is missing to measures related to water efficiency, such as: leakage reduction; use of water efficient appliances and production technologies; controls on illegal and over-abstraction; metering of self-extraction; water pricing on water abstraction to reflect economic and environmental costs of water resources; implementation of the cost-recovery principle. These issues are presented in Annex 10: A Water Policy for the Maltese Islands, but is not reflected in the PA. (71) The proposal to expand ground water abstraction from existing stations in order to, among others, prevent a loss of this water, is not in line with the CPP. Given the fact that the over-abstraction of ground water is identified as the principal pressure on Malta's ground water resources, the proposed broadening of ground water abstraction is considered inappropriate. In addition, the CPP indicates that chemical parameters and indicators should be met for drinking water and remedial action taken, if necessary, to achieve this. (72) An integrated approach towards conservation and the protection of the landscape and environment should also take into account climate change and resource efficiency policies. There is no mention of forestry-related approaches. (73) Improved water efficiency and an increase of alternative sources of water supply should be added as an expected result. (74) The Commission is not in favour of co-financing investments in the sewage network by connecting recently formed centres to the main sewage network as these investments should be financed by the relevant developers. (75) An increase in the number of new landfills is not an acceptable indicator. Please refer to comment 6. (76) With regard to the investment priority (d) Protecting and restoring biodiversity, soil protection and restoration and promoting ecosystem services, including through Natura 2000 and the Green Infrastructure it should delineate which priorities are to be financed by each of the funds involved: the ERDF, EAFRD and EMFF. (77) Sustainable urban development as per Article 7 of Regulation (EU) No 1301/2013 needs to be carried out in line with one of the options provided for by the article itself. Please refer to comment 23. In addition, the focus on industrial zones is not the aim of TO6, but of TO3. Moreover, the policy priority is the development of the Green Infrastructure in cities and not the 'greening' of industrial zones. Thematic objective 7 (78) Maintenance costs are not eligible. With regard to investments in ports, private investment opportunities should be investigated before considering public ones. (79) The co-financing of investments in the logistical infrastructure for the transportation and storage of natural gas is not favoured by the Commission. (80) Potential investments in cruise liner facilities in Gozo are mentioned both under investment priorities (a): Supporting a multimodal Single European Transport Area and (b): Developing and improving environmentally friendly and low-carbon transport systems. This double inclusion needs to be clarified. 12

13 (81) With respect to the government's stated intention to promote greener vehicles and fuels through the provision of the necessary enabling infrastructures and equipment, it is not clear which specific measures and kind of incentives are envisaged and whether the measure will involve the public or the private fleet or both. (82) The presentation on the reinforcement of the public transport plan should provide specific information on the steps already taken and/or envisaged to implement the required shift from private to public transport in a quantifiable way. Thematic objective 8 (83) Apart from the diversification into non-agricultural activities, it is not clear whether other forms of job creation, such as the support for business creation (SMEs and micro enterprises) in rural areas, will be financed from the EAFRD. (84) Despite mentioning Diversification within the Agricultural and Fisheries Sector under the expected results of implementing TO8, a more concrete link should be indicated between this TO and the EMFF, following the suggestion in the Position Paper to Support integrated, sustainable development of coastal areas, as well as economic diversification in fisheries and coastal areas, creation of businesses and business support services outside fisheries, and enhanced mobility between maritime sectors: Support education and professional diversification of fishers as well as maritime education, science and research and the qualification and skills relevant to Malta's blue economy. Thematic objective 9 (85) Investments in health and social infrastructure were not foreseen by the Position Paper. However, the health sector is referred to in CSR 2 and therefore the Commission can agree to investments in this sector provided that i) they are in line with the ongoing reform of the sector; ii) will lead to a reduction in the health budget; and iii) that the needs and growth potential of this sector are profoundly analysed. The proposed investments have to correspond to those identified in the mapping exercise performed as part of the relevant ex ante conditionality. (86) Large-scale investments in sports facilities should be discarded. Only small-scale infrastructures providing recreational services, which include sports, in order to promote social inclusion and combat poverty, particularly among marginalised communities, may be supported. Thematic objective 10 (87) ERDF investments in higher education should build on higher education strategies in accordance with the criteria set out in the relevant ex ante conditionalities and should be part of the relevant mapping. They have to be individually justified as being costeffective and sustainable while taking account of demographic trends. (88) The investment priority on improving labour market relevance of education and training systems provides little information on how the investment support will tackle more work-based learning/apprenticeships in vocational education and training (VET) and on how Malta aims to improve the labour orientation in higher education. There are no policy indicators regarding the ambition in this area. Thematic objective 11 13

14 (89) A reference to the ETC needs to be included as TO11 forms part of the MED programme in which Malta participates. (90) In terms of the judiciary and associated reforms, the needs analysis and strategies do not sufficiently cover the challenges outlined in the CSR. Consequently, there is a need to better explain what is planned and to ensure proper coverage in the PA. 1.4 THE INDICATIVE ALLOCATION OF SUPPORT BY THE UNION BY THEMATIC OBJECTIVE AT NATIONAL LEVEL FOR EACH OF THE ESI FUNDS, AS WELL AS THE TOTAL INDICATIVE AMOUNT OF SUPPORT FORESEEN FOR CLIMATE CHANGE OBJECTIVES (91) Information on the 30 % ring-fencing for environmental climate actions under the EAFRD needs to be provided. 1.5 THE APPLICATION OF HORIZONTAL PRINCIPLES AND POLICY OBJECTIVES FOR THE IMPLEMENTATION OF THE ESI FUNDS Section 1.5.1: The Partnership principle and multilevel governance (92) There is little evidence of the involvement of the civil society in the process (the socalled quadruple helix ), not only via its established organisations (e.g. consumers, users, etc.) but also as aggregations of citizens or just as individuals. In order to more comprehensively support the vision towards Malta's smart specialisation, it would be recommendable to identify a few boundary spanners, which would facilitate unconventional dialogue between the partners and between those and the public administrations, and to make use of a variety of communication/involvement tools which could more easily reach those areas of the civil society that are not usually intercepted by the more traditional forms of partnership consultation. (93) Information on the main added value of partnership should be more specific. Section 1.5.4: Horizontal policy objectives (94) It is recommended that ESIF investments should be subject to climate proofing (when relevant) to (1) minimise the emissions of greenhouse gases over the lifespan of the concerned investment and (2) ensure and enhance the resilience of the investment to the adverse impacts of climate change over its lifespan. This should be reflected in the PA. 2.1 THE ARRANGEMENTS, IN LINE WITH THE INSTITUTIONAL FRAMEWORK OF THE MEMBER STATES, THAT ENSURE COORDINATION BETWEEN THE ESI FUNDS AND OTHER UNION AND NATIONAL FUNDING INSTRUMENTS AND WITH THE EIB (95) The strategic approach on the complementarity/synergies between different EU funding sources like ESI Funds, Horizon 2020 and other EU programmes/instruments for example Marie Sklodowska-Curie Actions, Public-Public Partnerships (Joint Programming Initiatives, ERA-NET, Article 185 initiatives), Public-Private Partnerships (Article 187 initiatives), COSME, and actions under Part IIIa of Horizon 2020 relating to Spreading Excellence and Widening Participation, in particular Teaming, 'Twinning' and 'ERA Chairs' needs to be addressed in more detail. (96) The common agricultural policy (CAP) reform has strengthened the common objectives between both pillars. Following this, certain actions can be targeted, both under the first and second pillar (greening, young farmers, areas with natural constraints, producer cooperation, small farmers). Information should be provided on how coherence between both pillars will be ensured in relation to these topics. 14