European funds generate absorption anxiety

Blighted by a significantly low absorption rate of European funds, Romania needs to make great efforts to increase this indicator and improve the system by which beneficiaries can access EU financing, experts say, if the vast sums available are not to remain unused.

Anda Sebesi

Systemic weaknesses

One of the most pressing problems that Romania is facing at present is a lack of efficiency in absorbing and accessing European funds.

According to the latest data available, the absorption rate of EU funds was just 5.55 percent at the end of 2011 and 6.3 percent in February 2012. These results are far from satisfactory, as Romania has been allocated over EUR 19.2 billion of European funds for 2007-2013. So what is the problem?

“Difficulties in managing European funds are just a result of general inability, but on a larger scale. A healthy and strong system wouldn’t have had any problem in implementing financing that was established on a coherent economic base. Until the system matures, projects won’t be implemented successfully,” says Ionut Ilie, founder of mobileOutlook, a company specialized in consultancy services for accessing non-repayable funds, project management and research and development for Smartphone/mobiles.

He adds that while the accessing system lacks an integrated vision, coherent approach and specific targets, there will be no efficiency. “The difficulty in accessing funds is also due to some unmotivated beneficiaries,” says Ilie.

If Romania secured all the available EU structural and cohesion funds, it would post a 1.8 percent increase in its annual GDP, while an absorption rate of 100 percent of the funds allotted to agriculture would raise the GDP by 0.6 percent, Prime Minister Mihai Razvan Ungureanu told the inter-ministerial committee on the absorption of community funds.

According to Victorita Meirosu, an expert in structural funds, the absorption rate of European funds for rural development is about 20 percent at present. “From the procedural perspective there are many things to improve. Given the 20 percent absorption rate in 2012, we have no chance of absorbing the remaining 80 percent by 2013, when the first period of the program ends, as the procedures get more and more complicated,” says Meirosu.

She adds that financing guides need to be simplified so the individuals they are meant for can understand them. “Besides, procedures need to be the same, both at central and local level,” she says. Asked what financial contribution is required for potential beneficiaries of funds for rural development, Meirosu says that some categories – semi-subsistence farmers and young farmers – are exempt, those seeking funds for agricultural exploitation must contribute between 25 and 60 percent, while microenterprises must put up 30 percent.

In related developments, the Ministry of European Affairs received an official letter from European Commission last month, announcing the suspension of the Operational Program for the Development of Human Resources (POS-DRU). The measure came in response to management failings. “With POS-DRU, there should have been an implementation stage for strategic programs for regions, to generate implementable results through necessary small and local projects,” says Ilie.

According to him, local difficulties in accessing European funds stem from projects that are not based on real identified needs, a lack of documentation and figures in the project budgets , and the co-finance required of beneficiaries. “Furthermore, the fluctuation of exchange rates can make a project unfeasible from the beginning,” says Ilie.

Call for clarity

According to the businessman, one permanent problem is the lack of a fixed annual schedule for launches, which would allow investors to prepare for financing programs.

“The long selection and evaluation periods for projects, meaning that it can take a year from presentation to approval, is another drawback,” says the mobileOutlook founder.

He adds that the gaps between the intermediate reports and the payments that are essential both to the smooth flow and chronological development of project activities may sometimes fatally compromise the implementation of the project. And he warns that the feedback given by experts on management authorities to beneficiaries about the write-up and completion of financial application is often imprecise about what further information is needed. “Sometimes it comes very late or not at all,” says Ilie.

Finally, he bemoans the inadequate promotion of structural and European financing programs to the relevant beneficiaries and the failure to adapt the type of information to their needs and individual characteristics.

anda.sebesi@business-review.ro

OPERATIONAL PROGRAMS (OP)

Name: Regional Operational Program (POR)

Allotted sum: EUR 4,568.3 million over 2007-2013

Strategic objective: supporting the economic, social, territorially balanced and sustainable development of the regions

Priority axes: sustainable development of cities; improving regional and local transport infrastructure; improving the social infrastructure; developing the regional and local business environment; developing and promoting tourism

Management Authority (AM): Ministry of Regional Development and Tourism

Who can apply?

Public administration authorities

Public institutions

NGOs

Private companies, mainly SMEs and microenterprises

Strategic objectives by 2015:

Creating 15,000 new jobs by the end of 2015

Halting the increase of inter-regional differences in GNP (gross national product) per capita

Specific results proposed by 2015:

3,000 new jobs by supporting microenterprises

4,000 new jobs within the supported business infrastructure

500 hectares of renovated industrial space

50 investment projects for developing the potential of tourism in natural areas

Name: Sectoral Operational Program – Increasing Economic Competitiveness (POS-CCE)

Allotted sum: EUR 3,011.1 million over 2007-2013

Strategic Objectives: Increasing the productivity of Romanian companies in order to reduce the differences in average productivity between EU countries

Priority axes: 1. developing an innovative and eco-efficient manufacturing system; 2. research, technological development and innovation for competitiveness; 3. information technology and communications for the private and public sector; 4. increasing the energy efficiency and safety of procurement in the context of controlling climate change; 5. technical assistance

Management Authority (AM): Ministry of Economy, Commerce and Business Environment

Who can apply?

Axis 1: for productive investments: companies from productive sectors, SMEs and large companies, except for sectors stipulated in European legislation about structural funds and state aid; for other operations: SMEs

Axis 2: research institutes, universities, SMEs

Axis 3: SMEs, local authorities, NGOs

Axis 4: energy companies, local authorities

Axis 5: institutions responsible for the management and implementation of POS-CCE

Specific results proposed by 2015:

An average increase in productivity of about 55 percent of the EU average.

Name: Sectoral Operational Program for Transport (POS-T)

Allotted sum: EUR 5,697.6 million over 2007-2013

Strategic objective: promoting a durable transportation system ensuring the quick, efficient and safe transportation of individuals and goods

Priority axes: developing a durable transportation system and its integration with EU transportation networks; developing nationwide transportation infrastructure; increase in environment and public health protection and safety of passengers; technical assistance

Management Authority (AM): Ministry of Transport and Infrastructure

Who can apply?

National administrators of railway, naval and road transportation infrastructure

National and regional administrators of aeronautical infrastructure

Operators of public railway transportation for travelers can be potential beneficiaries for Axis 2

Name: Sectoral Operational Program for Environment (POS Mediu)

Allotted sum: EUR 5,610.7 million over 2007-2013

Strategic objective: protection and improvement of the quality of environmental and living standards

Priority axes: 1.extension and modernization of water and wastewater systems; 2. development of integrated waste management systems and restoration of historically contaminated sites; 3. reduction of pollution from urban heating systems in worst affected towns; 4. implementation of adequate management systems for the protection of nature; 5. implementation of adequate infrastructure for natural risk prevention in most vulnerable areas; 6. technical assistance

Management Authority (AM): Ministry of Environment and Forests

Who can apply?

Axis 1: regional water operators

Axis 2: county councils

Axis 3: local authorities and county councils

Axis 4: administrators and conservators of protected areas, regional and local environmental protection agencies, institutions and public authorities, non-governmental organizations, research institutes, universities, museums

Axis 5: National Administration Romanian Waters

Axis 6: management authority and intermediary bodies of SOP Environment.

Name: Operational Program for Development of Human Resources (POS-DRU)

Allotted sum: EUR 4,089.3 million over 2007-2013

Strategic objective: development of human capital and increasing its competitiveness by connecting education and long life learning with the labor market

Priority axes: education and professional training; long life learning connected with the labor market; increasing the adaptability of both workers and companies; modernizing the public service for holding workforce; promoting the active measures for holding workforce; promoting social inclusion

Management Authority (AM): Ministry of Labor, Family and Social Protection

Who can apply?

Ministry of Education, Research and Youth (MECT)

Agencies, structures under the coordination/subordination of the MECT and other public organizations involved in higher education

Public and private accredited higher education institutions

NGOs active in higher education, including student associations

Name: National Program for Rural Development (PNDR)

Allotted sum: EUR 7.5 billion over 2007-2013

Strategic objective: support the increase of competitiveness in the agro-food and forestry sectors, improvement of the environment, rural areas and quality of life in rural zones, diversity of the rural economy, starting and running local development initiatives

Priority axes: increase of the competitiveness of the agriculture and forestry sectors; improving the environment and rural areas; quality of life in rural zones and diversification of the rural economy.

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