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Department of Communications, Marine and Natural Resources OPERATIONAL PROGRAMME FOR ECONOMIC INFRASTRUCTURE 1994 –1999 IRELAND FINAL REPORT (Original print 17-02-03) Updated 26 March 2003 TABLE OF CONTENTS Preface to EIOP Page 3 · Chapter 1: Delivery of EIOP Page 4 · Chapter 2: EIOP Sub-Programme – Energy Page 26 2.1 Peat Generation 2.2 Energy Efficiency 2.3 Renewables 2.4 Cut-away Bog 2.5 Rural Networks · Chapter 3: EIOP Sub-Programme – Communications Page 71 3.1 Telecommunications 3.2 Postal 3.3 Broadband 3.4 E-commerce · Chapter 4 : EIOP Sub-Programme – Technical Assistance Page 99 4.1 General Technical Assistance 4.2 IT Awareness Campaign · Chapter 5 : Expenditure under EIOP Page 108 · Chapter 6 : Audit Dimensions of EIOP Page 124 · Appendix 1: European Commission Decisions for EIOP Page 154 · Appendix 2: Composition of EIOP Monitoring Committee · Appendix 3: EIOP Additions and Re-allocations · Appendix 4: EIOP Monitoring Committee’s Report on Mid-term Review · Appendix 5: EIOP Monitoring Committee’s paper on Community Structural Assistance and Employment · Appendix 6: Equal Opportunities for Men and Women · Appendix 7: EU Regulations · Appendix 8: Memorandum of Understanding regarding Peat Fired Electricity Generation · Appendix 9: Energy Audit Grant Scheme · Appendix 10: Energy Efficiency Investment Support Scheme Payments · Appendix 11: Renewable Energy - AER III Projects Funded by ERDF · Appendix 12: Renewable Energy – Feasibility Grant Scheme · Appendix 13: List of rural Sub-Post Offices Automated · Appendix 14: E-commerce Project Impact Data · Appendix 15: EIOP Verification Group’s Questionnaire · Appendix 16: List of Audits · Appendix 17: List of Irregularities 26 March 2003 2 Preface to EIOP Economic Infrastructure Operational Programme IRELAND 1994-1999 Pursuant to Commission Decision C(94) 1971/2 of 29 July 1994 (as amended by C(97) 1945 of 8 July 1997; by C(1998) 2115 of 23 July 1998; by C(1999) 3779 of 26 November 1999 and by C(2000) 1292 of 8 June 2000), concerning the granting of assistance from the European Regional Development Fund (ERDF), to an Operational Programme for Economic Infrastructure under the Objective 1 Community Support Framework for structural assistance for Ireland. ERDF : 94.04.09.005 ARINCO : 94.IR.16004 26 March 2003 3 CHAPTER 1 Delivery of the EIOP 26 March 2003 4 1.1 Background to EIOP 1.1.1 This is the Final Report of the Economic Infrastructure Operational Programme (EIOP), 1994-1999 for Ireland. 1.1.2 The EIOP was approved by the European Commission on 29 July 1994 and it was officially launched and published on 30 September 1994. 1.1.3 The EIOP, as published, provided for investment of €320 million in energy, postal and telecommunications infrastructure and services, of which €108 million was to be provided by the European Regional Development Fund. While the title of the Programme refers to the years 1994-1999, the European Commission in a Decision of 26 November 1999 extended the final date for taking account of expenditure under the Programme’s Measures to 31 December 2001. 1.1.4 By way of introduction, the EIOP stated that it was “…an application for assistance in the form of an Operational Programme, the provision of which are consistent with the EU Community Support Framework for IRELAND 1994-1999”. The EIOP went on to state that the “…programme is designed to assist in providing infrastructural support for EU and National economic objectives, particularly the achievement of further substantial progress towards the National and EU goals of economic and social cohesion and improvement of the competitiveness and efficiency of the economy by investing in upgrading economic infrastructure on a basis which best supports the improvement of economic activity. Furthermore energy efficiency initiatives in this programme will help make significant progress towards the EU objective of improving the efficiency of final energy demand”. 1.1.5 The EIOP was divided into three sub-programmes:- · The first concerning energy investments which contribute to the cost effective supply and consumption of indigenous and imported fuels; 26 March 2003 5 · The second concerning communications investments which are necessary to maintain and develop efficient postal and telecommunications services to industry and consumers in general, and · The third concerning technical assistance expenditure, which is necessary for appropriate management, control, planning and appraisal of the Operational Programme as a whole. 1.1.6 Details of activities and developments under each of these Sub-Programmes are set out later in Chapter 2, Chapter 3 and Chapter 4 of this Final Report. Within each of these Sub-Programmes, a number of Measures addressed specific areas of energy, postal and telecommunications infrastructure and services. In total there were eleven Measures at the close of this Operational Programme. 1.1.7 The EIOP Secretariat, which is the Monitoring Authority for the EIOP, was formerly located in the Planning Unit of the Department of Public Enterprise. It was transferred to the Department of Communication, Marine and Natural Resources in July 2002. 1.2 Economic Context for EIOP 1.2.1 When the Operational Programme was published in September 1994, annual economic growth in Ireland was 5.8 per cent, as measured by Gross Domestic Product (GDP). At that stage the unemployment rate was quite high at 14.7 per cent. Low inflation and fiscal consolidation were underpinning low interest rates and exchange rate stability and sustainable growth in investment, output and employment. As a consequence, the period from 1994 to 2001 was one of unprecedented, sustained growth. In that period, GDP grew by over 86 per cent at constant prices (i.e., having excluding price changes). 1.2.2 The substantial growth that was recorded over the period was generated by a combination of productivity growth (i.e., increased output per person at work) and 26 March 2003 6 increased numbers at work. In 1994, the number at work had been around 1.2 million. By 2001, this had increased to over 1.7 million; half of this increase was accounted for by the increased number of women at work. As a consequence, women’s share of employment increased from 37 per cent of total employment in 1994 to over 41 per cent in 2001. The overall increases in employment led to the unemployment rate falling dramatically over the period of the Operational Programme, from 14.7 per cent in 1994 to just 3.8 per cent in 2001. 1.2.3 The growth in exports has been especially marked over the period. Since 1994, the volume of exports increased by 184 per cent. The other demand components making up GDP also rewarded considerable increases over the period. Investment grew in real terms by over 130 per cent; personal consumption grew by 59 per cent and public expenditure grew by 40 per cent. As regards imports of goods and services, they showed a growth in real terms of 170 per cent between 1994 and 2001. 1.2.4 The experience of the different sectors of the economy has demonstrated quite different growth rates over the years 1994 through 2001. Agriculture, forestry and fishing rose by just 10 per cent in real terms over the period. By contrast, the output of industry (including building) rose by more than 140 per cent. There was an especially strong increase of over 107 per cent in the real output of distribution, transport and communications. All services (including public administration) grew in real terms by 46 per cent over the period 1994 through 2001. As a consequence of the different growth rates, the contributions of the different sectors changed over the period, with industry showing an increase of 10 percentage points in its share of national output. The shares of national output for the other sectors also changed over the period, by between 2 and 5 percentage points, in some case with increases, in other case decreases - see Table 1.1. 26 March 2003 7 TABLE 1.1: SECTORAL SHARES OF GROSS DOMESTIC PRODUCT * Sector of Origin 1994 Shares 2001 Shares Agriculture, forestry and fishing 8.5% 5.0% Industry (including building) 35.6% 45.8% Distribution, transport and communication 15.8% 17.6% Public administration and defence 5.3% 3.2% Other services** 34.8% 28.3% Gross domestic product at constant factor cost 100% 100% * Source: Central Statistics Office ** Including rent, adjustment for financial services and statistical discrepancy. 1.2.5 The consumption of personal income also showed a considerable increase in the years 1994 through 2001. As mentioned in Paragraph 1.2.3 above, such consumption grew by 59 per cent in real terms. Two items of particular relevance to the EIOP also recorded growth over the period –‘communication’ and ‘fuel and power’. In the case of communication, the real growth from 1994 to 2001 was over three-fold. In the case of fuel and power, the growth was more modest, at 23 per cent in real terms. In the same period, there was a considerable improvement in overall energy intensity, as measured by the ratio of Total Primary Energy Requirement (TPER)) to GDP (at constant 1990 prices). The TPER/GDP ratio was reduced from a 1993 value of 83 (Base Year 1980, value 100) to a 2001 estimate of 63, a reduction of twenty percentage points in the ratio compared to a 1999 target value of 75. 1.3 Decisions of the European Commission on EIOP 1.3.1 The first European Commission Decision (C(94)1971/2), approving the Economic Infrastructure Operational Programme, was taken on 29 July 1994. Over the period of the Programme it was necessary to seek revised Commission Decisions to take into account re-profiling of expenditure; the Mid-Term Review of the Operational Programme; the accommodation of additional funding under the “deflator” process and the addition of new Measures to the EIOP.