With four EU-funded programs in the pre-suspension phase over suspicions of fraud and poor management, the authorities could work with the private sector to streamline absorption and help companies tap into the EUR 23 billion EU funds pot allotted to Romania, according to specialists.
In October the EC fully suspended the Economic Competitiveness Increase program, while the Transport and Regional Operational Program was partially suspended. The Commission urged Romania to increase the credibility of its management and control systems, especially in public acquisitions. The country has to work more on preventing fraud and conflict of interest.
The Human Resources Development program was pre-suspended this August and the EC proposed cutting the funding by 25 percent.
PM Victor Ponta said two of the programs – human resources and the regional program –could be unblocked this December, and the other two next year.
Romania had developed projects worth EUR 3.1 billion by 2011, while the available budget for the 2007-2013 period stands at EUR 23.2 billion, according to a KPMG report on EU funds. This includes EU co-financing and the matching national funds.
The absorption of cohesion and structural funds amounted to EUR 1.8 billion by October, according to the Ministry of European Affairs. The absorption rate reached 9.97 percent in the first ten months.
Romania has pinned its economic expectations for next year on EU funds, which can sustain the building of highways and other critical infrastructure. President Traian Basescu recently said the domestic economy could grow by 2.5 percent next year, boosted by EU funds.
However, the current absorption figures are disappointing and officials are trying to prevent a reduction of funds in the next EU budget.
“Low absorption could be put down to variables such as fragmented policy-making capabilities, too ambitious a choice of operations for this first management period governed by new procurement/state aid rules, cumbersome procedures, inexperienced human resources, and a blame- and fear-driven management culture,” said Cristina Ana, senior associate at law firm Tuca Zbarcea & Asociatii and head of the firm’s structural funds practice group.
The constant changes in national legislation further hampered the efforts of applicants for EU funds, especially in regarding the required documentation, according to Catalin Baiculescu, deputy managing partner at law firm Musat & Asociatii.
“The government’s decision to raise VAT (to 24 percent) has significantly impacted the business plans of the already few applicants, while the unknown launch calendar of project requests, exacerbated by the delay in launching and filing deadlines, has led to unjustified delays in the evaluation and approval of these projects,” stated Baiculescu. He added that the authorities’ lack of flexibility on the permitting required for projects has held back entrepreneurs.
“In many cases there have been delays of over a year in the assessment and approval of applications for financing, and of more than six months in the verification procedure for reimbursements,” said Dinu Bumbacea, partner in management consulting, and Florin Banateanu, senior director, public sector consultancy, at professional services firm KPMG.
The Musat & Asociatii partner added that applicants’ lack of experience and understanding of EU funds meant that many projects were rejected. Only a few were assisted by a consultancy specialized in EU funds.
The setting up of a co-financing guarantee system for private companies could convince more to apply for EU funds, according to Baiculescu of Musat & Asociatii.
The KPMG representatives stated future support from the private sector could help the effective administrations of EU funds.
“This support could be ‘pro bono’, involving the passing on of useful advice, and through paid work too, taking advantage of the technical assistance funds available for operational programs, only 15-20 percent of which have been used up to now,” said the KMPG officials.