Банкеръ Weekly

Briefs

FEVER ABOUT EUR6.8BN FROM THE STRUCTURAL FUNDS

The immense joy about the nearing financial boon from the European Union may appear slightly premature. At least for the Minister of Environment and Water, Dzhevdet Chakurov, and his team. According to several independent sources, it is likely that the ISPA executive agency with the ecological ministry
fails to get accreditation
from the European Commission (EC) to administer, after 2007, the funds not yet absorbed under the program for financing ecological projects. If the so called EDIS system is to be introduced from next year (i.e. if the Bulgarian administration is to be allowed to conduct PHARE and ISPA tenders on its own and not in collaboration with the EC delegation), the Ministry of Environment and Water must be blessed by Brussels. It will manage to, provided it has the necessary administrative capacity. As the BANKER weekly wrote last month, EC officials fulfilled a final auditing of the local administrative bodies which ran the PHARE and ISPA resources so far and will manage the money from European funds from 2007. However, the auditors were not quite satisfied with the results in the institution. Moreover, according to information from the financial ministry, of all EUR1.5BN launched to the country under ISPA since 2000 only EUR505.158MN, or 34% of the entire amount, has been negotiated. Tenders are still to be organized for the rest of the money.
Regardless of the dull perspectives of the ecological ministry failing to get ISPA accreditation, there is no danger yet of blocking the absorption of EUR1.466BN for the environment under the Structural and the Cohesion Funds of the EU, experts say. In practice, it means that the implementation of all 34 projects planned for the first three years of Bulgaria's membership (16 for waste management worth EUR313.3MN and 18 for purification of waste water worth EUR330.1MN) may begin from January on the account of blocking the construction of purifying stations, improvement of the water cycle, and utilization of wastes in dozens of municipalities with money under ISPA.
What is more unpleasant is that because of the sluggish work and the mistakes of another ministry - the agricultural one, at the end of September the EC voted
a special regulation
which allows that the subsidy to Bulgarian farmers be cut off up to 25% if irregularities are found out. Moreover, the commissioners included in their last monitoring report on Bulgaria a special protective mechanism regarding the Structural Funds. It stipulates that the first advance payments to the country amounting to up to 2.5% of the sum provided for the respective program be remitted only when Brussels gives its final approval to the Strategic Reference Framework project. Besides, the country may be deprived of intermediate transfers if it fails to prove that the local administering bodies have capacity to handle the money of European taxpayers. Finally, there is a possibility that the final transfers be stopped, frozen, or delayed.
Hopes that this scenario is not going to come true are mostly related to the offensive launched several months ago in the Ministry of Finance which coordinates the money from the community. Following the efforts made by experts in the EU Funds Administration Directorate,
the improved copy
of the strategic framework project has been prepared. It will be coordinated with the European commissioners on November 7 and its final approval will have to become true no later than May 2007. The editing of this document of such great importance to the country's membership was necessitated by the fact that its first copy was sent back with grave remarks. Once corrections have been made, it is to be noted that an exact amount has been finally fixed of the money Bulgaria will receive until 2013 under the Structural and the Cohesion Funds. It is EUR6.853BN and was calculated on the basis of prices for 2006. It has been considered so far that the assistance would go slightly above EUR6BN. Under the European Regional Development Fund the country is to receive EUR3.205BN and under the European and the Social Funds - EUR1.186BN. Bulgaria's budget from the Cohesion Fund is EUR2.283BN. In the next seven years the country is also going to rely on EUR179MN for territorial co-operation with its neighbours.
The transfer of money
among different operating programs last summer may be described as novelty, too. The last improved project of a Strategic Framework favours the development of the transport infrastructure rather than the regional growth. The indicative amount that experts in the financial ministry planned for construction of highways, first-class roads and railway roads until 2013 is EUR1.630BN, whereas the overcoming of regional differences will swallow EUR1.360BN. The amount planned for ecology is EUR1.466BN. The remaining part of the European money is spread among the operating programs Competitiveness (EUR987MN), Administrative Capacity (EUR153.670MN) and Human Resources (EUR1.031BN). The last, seventh, program - Technical Assistance - aims at preparation of projects and amounts to EUR50MN.
The reallocation of the EU assistance by priorities leads to the conclusion that Bulgaria is going to copy to some extent its southern neighbour, Greece. Once integrated into the community, Greece invested most of the European subsidies in
improvement of the infrastructure
Bulgarian projects which draw most attention are the construction of the highways Struma, Hemus and Maritsa, the modernisation of the Sofia-Plovdiv railway road, the enlargement of the Sofia underground, etc. According to financial minister Plamen Oresharski, however, it is not clear yet whether the three highways will be built with money from the Structural Funds only, or the scheme of public-private partnership will be applied (i.e. concessions).
As to the recent reproaches by European experts and Bulgarian politicians that the cabinet planned insufficient amounts for raising the competitive power of the economy, Mr. Oresharski disagrees. Competitive power should not only be considered investment in research and innovations, but also improvement of the basic infrastructure, he underlined.
Still, the financial ministry promises it will make everything necessary so that municipalities and small and mid-sized companies do not meet
problems with absorbing
the money from the European funds. One of the specific rules for using it is that expenses are first covered by the users and only then compensated by the single budget. Therefore, three years may pass until the cycle is closed - from the application with a project until the final payments on it. That is why the financial ministry is considering the establishment of a special insurance fund (along with Encouragement Bank). It is still to specify the activities that will improve the access to financing of small and mid-sized companies under the JEREMIE program of the European Commission, the European Investment Bank, and the European Investment Fund. The ministry of Plamen Oresharski will also develop rules by which private companies or NGOs that use European resources will assign orders to contractors or subcontractors of the projects. This is necessary as the regulations of the Public Procurement Act only refer to state departments and companies.
Further consolation comes from the news that the special information system for European money administration is subject to tests. The system will help Bulgaria meet the requirement of the European Commission for transparency in the absorption of the assistance and for keeping a register of the names of the so called beneficiaries. Thanks to the online system applicants will be able to check any time at what stage of the preliminary selection their project is.

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