Банкеръ Weekly



Champagne was drank on Tuesday (January 21) to celebrate the signing of the financial memorandum between Bulgaria and the European Commission (EC) for the commitments under the ISPA-2002 programme, which gave the governors the consecutive dose of euro-optimism. Several minutes after signing the document for financing projects in the sphere of the environment and transport worth a total of EUR240MN, the Finance Minister Milen Velchev assured Dimitris Koukoulas, head of the delegation of the EC in Bulgaria that the Government guarantess the utilization of 75% of the allocated free grant for the construction of the Lyulin motorway and of water treatment stations in six regional towns.In the last days of last year Mr. Velchev and Mr. Kourkoulas again drank champagne. The occasion then was the memorandum for releasing EUR94.9MN under the PHARE-2002 programme. And then again there were declarations on the part of Bulgaria that we'd be utilizing the money better. However, Mr. Velchev who was appointed national coordinator of the pre-accession financial assistance under the programmes PHARE, ISPA and SAPARD in end-2002, did not specify how that would be done. He did not go into details this week either. However, everything will be good if the money are not again left in the accounts.The next ten months will be practically a test, on which the amount of the money from the EU, to be received by Bulgaria in the pre-accession period till 2007, will depend. Under the annex to the Road Map for Bulgaria, approved at the summit in Coppenhagen in December 2002, the financial assistance under the EU programmes could be increased after 2004 by 20, 30 and 40% over the present EUR300MN, only if we show adequate capacity for utilizing the money. The evaluation will be made by Romano Prodi's officials in the next report of the progress of our country, to be published in November 2003. Statistics so far is not at all hopeful. For example, the budget under signed memoranda for the 1998-2002 period under the PHARE programme amounts to EUR491,407,124, while the really allocated (and in fact utilized) money is EUR266,509,735. During the two years after the launching of the ISPA programme Bulgaria signed nine projects worth a total of EUR670,450,000, but contracts were closed for EUR10,500,000 only and the really utilized money in end-2002 was just EUR1,135,000. Things stirred up a little with the signing of contracts for the technical projects of the Sofia Airport and for the construction of the second Danube Bridge. And Agriculture Ministry data show that a total of 271 projects worth almost BGN180,362,000 have been approved under SAPARD since 2001 till now. From them only 95, worth BGN46,109,000 have been completely implemented and the subsidy paid for their realization is worth BGN23,054,000.The rational utilization of money from the EU is also one of the obligatory conditions for finalizing the negotiation under the Regional Policy Chapter, which Bulgaria would like to close within the Greek presidency (January 1 - June 30, 2003). Thus, one of the most important documents that should trace Bulgaria's road to Brussels is the Strategy for Participation in the Structural Funds and the Cohesion Fund of the EU, approved by the Bulgarian Parliament in mid-2002. The condition for the strategy's implementation has been explicitely writen both in the regular report of the EC of October 2002 and in the medium-term targets, set in Bulgaria's Road Map.The strategic document, which provoked high tension between Finance Minister Milen Velchev and the former Deputy Premier Kostadin Paskalev, envisions that the preparation and implementation of projects under PHARE, ISPA and SAPARD, should be undertaken by seven executive agencies, liable to authorization by the EC. The Finance Ministry has informed that the unit responisble for SAPARD (within the Agriculture Ministry) ia already a fact. The official blessing came from Brussels in mid-January. The process of authorization of the other six agencies is expected to be completed by the end of 2004. The National Fund department in the Finance Ministry is responsible for that and it works under the direct supervision of the Deputy Minister of Economy Kiril Ananiev.The authorization of the executive agencies is part of the so-called process of expanded financial decentralization of the EU pre-accession support. In other words, by the end of 2004 the Finance Ministry should be entirely ready to chose the projects and approve the tender dossiers for the tenders for their implementation. It will be also responsible for the preparation and submission of applications for payment and the receival of funds from the EC. It will be also responsible for the ex-ante and еx-post control of their spending. Currently, these functions are shared by the headquarters of the EC in Brussels and its delegation in Sofia. Last year the EU even allocated to Bulgaria a free grant of EUR800,000 as a beginning of the introduction fo centralization. The agreement for that money was approved by the Cabinet at one of its last sessions for 2002.The fever for several more million euro under the three pre-accession programmes of the EU resulted in structural changes in the Finance Ministry. Thus, in the beginning of September 2002 the department for management of EU funds began work, headed by Boryana Pencheva. It includes 25 employees and practically does all the operative work for the coordination of EU funds. Its activity is organized in three divisions. Two of them monitor the spending of funds under PHARE and ISPA. The third one - Coordination and Planning - watches if the financial assiatance from the EU does not overlap with the money from other international donors. The funds, to be received by Bulgaria under the Plan for Economic Reconstruction of the Balkans, will pass through it. The Agency for Economic Analyses and Forecasts, whose team will be increased by 14 new employees, has already fulfilled the task to draft an updated Plan for Economic Development, complying with the requirements of the EC structural funds. It had to describe the priority spheres where financing over the next few years should be directed. The plan is among the requirements for the successful finalization of negotiations with the EU under the Regional Policy Chapter. According to Boryana Pencheva, the new plan's draft has been presented to the business circles, syndicates and local authorities for their opinion. Only after that it will be moved for discussion to the Council of Ministers.Meanwhile, in the Finance Ministry and the Ministry of Regional Development and Public Works preparations have already started for selecting the projects for the national programmes PHARE and ISPA for 2003. Ms. Pencheva told the BANKER weekly that a mission of the EC will visit Bulgaria January 27-30. Bulgaria has preparted proposals worth a total of EUR138MN. Some of them should be deleted from the list, as the amount earmarked for our country id EUR94.9MN. There was a similar problem a year ago.

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