Bulgaria and EU funds: challenges of absorption prepared by Irena Panayotova Polina 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 will allocate to Bulgaria more than 11 billion euro Low absorption capacity (WHY?)

Pre-accession funds Bulgaria is entitled for: 1.PHARE 2.ISPA 3.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 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

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

Absorption of EU funds: Issues 1)Size of municipalities 2)Human resources 3)Financial resources 4)Information availability 5)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 Majors BG estimated capacity needed = ! 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

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