Bulgaria and EU funds:

challenges of absorption

prepared byIrena PanayotovaPolina Rousseva

Anna Stoeva

Bulgaria:Brief Economic Overview

Bulgaria: lowest GDP per capita in EU. Amounts to app.30% of EU avg.

All six regions of Bulgaria allegeable for EU funding

The EU budget 2007-2013 will allocate to Bulgaria more than 11 billion euro

Low absorption capacity (WHY?)

Pre-accession funds Bulgaria is entitled for:

1. PHARE2. ISPA3. SAPARD

PHARE - Objectives

1. Building efficient administration and institutions in Bulgaria

2. Integrating the acquis communautaire in the national legislation

3. Fostering economic and social cohesion

ISPA (Instrument for Structural Policies for Pre-accession) It assists countries in environmental and transport policies.

SAPARD (Special Accession Program for Agriculture and Rural Development)It assists countries in creating employment & sustainable economic development in rural areas.

Overall objectives: * help future member states develop economically* help acquire the necessary skills for post-accession funds ( i.e.managing decentralized aid, meeting deadlines and requirements, developing cooperation habits)

ISPA & SAPARD

General information on EU funds

For the period between 2000 and 2006, the funds redistributed through Structural funds amounted to $213 billion, or 1/3 of the expenses of the Union for this period. $18 billion from them have gone for the Cohesion fund.

For the period 2007-2008 Bulgaria will receive 8 billion euro in structural and cohesion funds and around 6 billion in agricultural funds.

2006 Objectives

Objective 1 - promotion of development and structural adjustment of lagging-behind regions. “Objective 1 regions” with GDP less than 75% of the

Community average 70% of the common financing goes to the so called

Objective 2 - economic and social cohesion. support countries with weak growth due to structural

problems 11,5% of the funds designated for regional development

Objective 3 - support and modernization of policies and systems of education, training and employment. financial support outside the frame of Objective 1 a framework for a competent policy in human resources

development for a country as a whole, with high consideration ov regional divergence and interests

2007-2013

34%

50%

11% 5%

Agriculture - 1,562 million

Structural activities - 2,300million

Internal policies andadministration - 498 million

Budget compensation andSchengen agreement aid -240 million

Bulgaria will receive 4,6 billion Euro.

Convergence speeding up the development of the least advanced member states

and regions improving the conditions for growth and employment stimulating investments in human capital, development of

innovations and the knowledge-based society, as well as environment and administrative efficiency

financed from the ERDF, the ESF and the Cohesion fund

Regional competitiveness and employment not limited only to the poorest regions target competitiveness through innovation, trade openness,

entrepreneurship financed from the ERDF and the ESF

European territorial cooperation transborder cooperation through joint initiatives, networks for

experience exchange, etc. financed exclusively from the ERDF.

Objectives 2007-2013

Absorption of EU funds: Issues

1) Size of municipalities2) Human resources3) Financial resources4) Information availability5) Corruption and transparency

Size matters

Only 22% municipalities are large (over 100,000 ppl), the rest 78% are small and medium sized

Large municipalities operated 70 Phare projects; the medium & small ones together - only 35

Approximately 72% of municipalities have NO approved projects; only 7% have 3 or more

Medium and small municipalities struggle with: Administration capacity

Scarcity of resources available (Internet, trainings, co-financing)

Lack of interaction and cooperation with local businesses and NGOs

Human Resources:insufficiency and incompetence

Insufficiency of HR:

SU+AUBG for 7 years = 700 EU MajorsBG estimated capacity needed = 20 000!

Can compensate with trainings?- Reluctance of the state and the

municipalities to finance trainings- App. half of the trainings lasted only ½

day; max 3 days

Low wages = low motivation = low efficiency = less successful projects

Corruption = harms the most efficient applicants

Language barrier: only 4% of the municipality staff know English

Human Resources: continued

Financial constraints:

* limited own resources

* insufficient or no provision of funds for projects in municipalities’ budgets

* difficulty to finance both project implementation and project design

* the most common amount allocated to co-financing projects is between 10,000 & 50,000 BGN

Municipalities as co-financing partners:

2) Limited personnel: - often, only 1 person per municipality manages projects limited ability to design the co-finance of projects

3) Perceptions for high requirements: - they serve as a disincentive for municipalities to engage in projects

4) Insufficient clarity on municipalities’ role in projects - the scale of the need to co-finance is not completely understood

4) Municipalities see each other as competitors: - often, they do not understand the benefits of cooperation in project co-financing (mistrust each other)

- the political affiliation of mayors can be an obstacle to this type of cooperation

- sense of unequal distribution of benefits due to: • insufficient consideration for the common good • lack of long-term vision • difficulty to overcome the feeling of rivalry

Positive attitude towards partnership has started to grow.

Information Starvation

only 23% of municipalities have enough knowledge on project funding opportunities

About 1/3 of those that believe they are ready are poorly informed about the structural funds

almost 1/3 have no experience with pre-accession instruments

and 8% have no project experience at all 1/5 do not have employees specifically trained in the field of

structural funds in 1/5 of the cases only one or two employees have been

trained in the last years. 82% of municipalities state they need specialized surveys

and evaluations linked to project development 2/3 of the municipalities have used consultant support for

the preparation of planning documents. less than 60% of small municipalities have used consultants

(as compared to 80-90% for the large municipalities)

Corruption

Some 10-12% of the EU budget which amounts to 110 billion euro are misappropriated (OLAF)

In Bulgaria:

54 Cases of Funds Misappropriation Revealed

20 of tehm connected to ISPA

32 with SAPARD

2 with PHARE

over 7.5 million euro drained on SAPARD programme

Sources:

http://epp.eurostat.cec.eu.int www.undp.bg http://www.isoc.bg www.evropa.bg http://ec.europa.eu www.lex.bg