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Romania - at the threshold of
accession
• Infrastructure development
• Environmental workshop
– Stephen Pritchard part of UK twinning team
INSTRUMENTE STRUCTURALE IN ROMANIA
What this presentation will
cover:
• Part I - regulatory context
• Part II - why are structural funds
important?
• Part III - Importance of
administrative capacity
• Part IV - lessons from the last wave
of enlargement
INSTRUMENTE STRUCTURALE IN ROMANIA
I. Regulatory Context
• Indicative list of major projects must be
included in programming documents
• All major projects must have a CBA,
including:
– Risk assessment
– Sector impact assessment
– Socio-economic impact assessment
• EIA conducted separately but should be
integrated into appraisal
• EC carries out an appraisal of each
project
INSTRUMENTE STRUCTURALE IN ROMANIA
Definition of major projects
• EC approves projects in programme
documents (Preamble paragraph 38
and 41 General Regulations)
• Indicative list of major projects
(articles 36 (3). and 37 (1) h) of Gen
Regs)
• Article 39 defines major projects
as:
– greater than 50 M€ or
– 25 M€ in the case of environment
INSTRUMENTE STRUCTURALE IN ROMANIA
II. Why are structural funds
important?
• Improve EU & National
Competitiveness
• Meet challenge of globalisation
• Convergence with other MS - meet
the obligations of the acquis
INSTRUMENTE STRUCTURALE IN ROMANIA
Competitiveness is important
• Economic growth slowing down in the core
EU member states
• This might be compensated by fast
growth in new members states
– Average of EU 15 2.3% in 2005, (~ 3% 2006)
– Average of EU 10 5.7% in 2005, (~ 6% 2006)
• But the EU is still not as productive as
other economies
(source: www.IMF.org.com/eternal/pubs)
INSTRUMENTE STRUCTURALE IN ROMANIA
Globalisation is a challenge
• Technology leaders (developed economies
i.e. Japan & USA) are driving globalisation
– Economic advantage compared to low labour
cost advantage of technology followers
• But the EU is not keeping up with
technical advances, so EU losing
competitiveness.
– The fast growing economies of the new
member states are not yet giving the EU
technical advantage
INSTRUMENTE STRUCTURALE IN ROMANIA
Convergence is also important
• Convergence important as competitiveness
because it requires:
– Meeting the demands of the acquis
– Modernisation (technology)
– Restructured economy
• industry, employment, reskilling, administration,
development of services
– Investment in infrastructure
• Improve existing and invest in new
• Stimulate economic activity, especially energy,
environment, telecommunications & transport
INSTRUMENTE STRUCTURALE IN ROMANIA
How can Romania contribute
to the EU?
• EU membership brings responsibilities
– Implementing the acquis
– Meeting fiscal policies
• These are largely outside your control, so
what can you do?
– Develop national, regional and local capacities
– Select good projects
– Implement projects on time & budget
• The next part highlights some points about
capacity
INSTRUMENTE STRUCTURALE IN ROMANIA
Part III Why is absorption
capacity important?
• Ability to fully spend allocated
resources
– Effectively and
– Efficiently
• To do this requires management
capacity at all levels
– Macro economics
– Fiscal policy
– Administrations
INSTRUMENTE STRUCTURALE IN ROMANIA
Macro-Economic capacity
• Overall ability of the economy to generate viable
investment opportunities financed by external
investment support.
– This depends on level of economic development
(estimated ~4% of GDP)
– But the EC believes that there is limited macroeconomic capacity to absorb external investment
support effectively and efficiently.
INSTRUMENTE STRUCTURALE IN ROMANIA
Fiscal Capacity
• This is your ability to:
– Co-finance EU supported programmes and projects
– Meet additionality requirements
– Plan and guarantee national contributions in multi-annual
budgets and to collect these contributions from all
partners
• Does your ISPA experience reflect your ability
to do these things?
INSTRUMENTE STRUCTURALE IN ROMANIA
Administrative Capacity (i)
Ability of central and local authorities to:
• Prepare suitable plans, multi-annual programmes
and projects in due time;
• Decide on programmes and projects;
• Co-ordination of principal partners;
• Cope with administrative and reporting
requirements; and
• Finance / supervise implementation properly,
avoiding irregularities
INSTRUMENTE STRUCTURALE IN ROMANIA
Administrative Capacity (ii)
• Administrative absorption capacity:
– Demand
• Project applicants generating projects that
meet requirements
– Supply
• Authorities to manage effectively and
efficiently all stages of the programming
cycle
• From initial planning to implementation and
evaluation of projects.
INSTRUMENTE STRUCTURALE IN ROMANIA
Administrative Capacity (iii)
• Organisation structure:
– clear assignment of tasks and responsibilities to
institutions involved in the management process.
• Human resources:
– ability to detail tasks and responsibilities to appropriate
staff and train or recruit staff to fill the identified job
posts.
• Tools:
– availability of various aids that enhance the system’s
function, such as:
• equipment, methods, guidelines, manuals, systems,
procedures,.
INSTRUMENTE STRUCTURALE IN ROMANIA
IV. Lessons from the last
wave of enlargement
• Choose projects that are going to be
successful
– build on ISPA experience
• Identify priority locations for projects
– this needs integrated sector strategies
• Remember:
– 50% split each for transport and environment
– Projects chosen jointly with the EC.
INSTRUMENTE STRUCTURALE IN ROMANIA
Absorption capacity
• EC believes that the new Member
States have limited absorption
capacity because of:
– Ensuring additionality
– Finding co-financing and
– Preparing coherent programmes
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Additionality
• Structural funds may not replace public or
other expenditure by the member state.
• This principle seeks to increase leverage
and economic impact of cohesion policy
• Member states must keep national support
equal in real terms to the existing levels
• This applies only to the Structural funds
• For the Cohesion fund, EU expenditure
may replace national expenditure
INSTRUMENTE STRUCTURALE IN ROMANIA
Co-financing
• Encourages responsible management
• Prevents potential moral hazard, i.e.
– Spreads the investment risk and
– Makes project selection processes transparent
• Public and/or private sources may co-finance
projects
• Compatible with additionality since member
states can use existing expenditure to cover cofinancing requirements, providing that they
reprioritize existing expenditure in line with
cohesion policy priorities
INSTRUMENTE STRUCTURALE IN ROMANIA
Programming
• Comprehensive multiannual development plan and
programming documents
• Outlines of key strategic investment priorities
on national and regional levels.
• Commitment to defined priorities by:
– Describing concrete investment opportunities
– Making financial resources available
– Implementation & management structures in place
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Fiscal constraints
• If public deficit greater than 3% GDP then CF
support may be withdrawn
• Romanian deficit: 1.4% in 2004 and 1.6% in 2005
– Will co-financing more projects make this worse?
• In 2001 Portugal had a deficit of over 4%, but
responded quickly to reduce it and so avoided EC
retribution
• Estimated 2006 deficit (IMF)
EU -2.6%
France & Germany -3.7%
Poland -4.8%
Hungary -4.5%
INSTRUMENTE STRUCTURALE IN ROMANIA
Fiscal policy
• Need sufficient national financial
resources to co-finance investments &
respect additionality.
• Some new member states may find it hard
to restructure their budgets
– Potentially conflicting national & EU priorities
(e.g. agriculture, health care contributions into
the EU budget, etc.)
• High national budgets, i.e. “fixed” current
expenditure might create a budget deficit
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Programme design
•Sort out administrative and macroeconomic absorption capacity
•Identify priorities for the use of
available resources based on needs &
capabilities
•Administrative decision should be
based upon EC guidelines and priorities
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Is it possible to meet the EU’s
cohesion objective?
• To conclude:
– Investment objective is to provide foundation for:
• Long-term competitiveness & job creation
• Sustainable development
– Member States need an effective and efficient
absorption capacity to manage increasing financial
resources
– But even if your administrative capacity is good you may
not be able to fully absorb resources … why? …
• Economy may not be able to generate sufficient
investment opportunities because:
– Co-financing not available
– Capacity insufficient at local or national levels
INSTRUMENTE STRUCTURALE IN ROMANIA
In summary - key messages
The challenge to you is:
• Select & prepare projects properly
• Know why you need the money (acquis
& competitiveness)
• Make sure your local, regional &
national institutions work
• Hope your economy continues to
grow!
INSTRUMENTE STRUCTURALE IN ROMANIA