Банкеръ Weekly



Bulgaria is expected to receive EUR120.855MN from ISPA for the building and reconstruction of water-supply and sewerage networks in five Bulgarian towns. The total value of the projects in Sofia, Kyustendil, Sliven, Rousse and Bourgas that were approved by the European Commission last week is EUR168.700MN. About 25% of this money will be provided as co-financing by the republican budget.
The biggest part of the money, EUR58MN, will be used for improvement of water-supply in Sofia. The water-supply network of the already existing waste water purifying station in the quarter of Koubratovo is planned to be expanded and reconstructed and purifying stations for drinking water from the Beli Iskar dam lake will be built.
The Rousse project amounts to EUR46.800MN. EUR21MN is allocated for Bourgas - 48% of the money will be provided by ISPA and 52% - as a credit from the EBRD. EUR21.2MN will be used for the water-supply and sewerage network in Kyustendil. The money needed for the Sliven project will come from three resources - 75% from ISPA, 10% as national co-financing, and 15% as a credit from EBRD.
The two transport projects concern the rehabilitation of the railway lines Gorna Oryahovitsa - Mezdra and Bourgas - Plovdiv. They rely on EUR12.3MN from ISPA.

If it is true that good blood tells, Bulgaria should stay calm about the series of thirteen partners inspections of the European Union (EU) before the European Commission (EC) publishes its final report.
The first inspection by Brussels started on January 9 in order to establish how the country is getting ready to utilize the EU Structural Funds money after 2007. As it is known, the implementation of this assignment was associated with the gravest remarks in the reports released last autumn.
The good news for Bulgaria is that as a whole, the head of the EC Regional Policy General Directorate Jean-Charles Leygues who chaired the inspecting team remained satisfied with what he saw. During their stay on Bulgarian territory, the Brussels inspectors talked with the country's chief negotiator Meglena Kouneva and the finance minister Plamen Oresharski.
What deserves to be marked in Mr. Leygues' meetings with the Bulgarian representatives is his support to the administrative model Bulgaria chose for coordination of the EU assistance. By resolution of the National Assembly issued in the spring of 2002, the Ministry of Finance became Bulgaria's European Funds National Coordinator. After the parliamentary elections last June and the forming of the three-partite coalition government this scheme was questioned. The Minister of Public Administration Nikolay Vassilev as well as the administration of the Council of Ministers declared willingness to coordinate the EU funds. Finally, the Sergey Stanishev-led cabinet decided in early December 2005 that the coordination of the European funds remained within the competence of the financial ministry.
We can only guess what would have happened if only few months before the EU accession the country had begun to change the model. When a lot of money is concerned (this time it amounts to EUR6BN under the regional and the cohesion fund alone in 2007-2013), temptation always exists.
The remaining part worth some EUR5.1BN which the country will receive from the single budget after 2007 will be absorbed as financing from the European Social Fund and through the new tool for encouragement of agriculture, plus payments for the farmers. The national co-financing for the entire seven-year period will amount to 15% of the assistance from Brussels. Practically, that means that the treasury will allocate about EUR900MN for regional development.
Exactly how this money will be spent is still to be clarified. As a whole, the scheme is clear since at the end of 2005 the Council of Ministers approved the initial variant of the National 2007-2013 Development Plan, as well as the six regional micro plans enclosed. The availability of these strategic documents was among the reasons why Bulgarian administration gained a few more positive marks by Jean-Charles Leygues and the accompanying experts.
However, a lot of work is still to be done on the adoption and application of the necessary legislation on the Regional Policy chapter. For example, as soon as possible the National Assembly will have to discuss and vote amendments to the operating Public Procurement Act which will provide full transparency of the tender procedures for European financing contracts. There is also more to be done regarding the financial control of the absorption of the funds. As it is known, the Council of Ministers recently approved three projects for reforming the public internal financial control that were waiting in Parliament. When the three acts are published by the Official Gazette, special auditors will be appointed to all departments that operate with resources from the republican budget and the budget of the EU.
However, the real test of the country's readiness to absorb European funds' assistance is the EC accreditation of Bulgaria's agencies under PHARE, ISPA and SAPARD programs which is scheduled for the middle of 2006. A positive assessment from Brussels will allow the financial ministry to control the tender procedures independently and not as it is now - with the help of the EC Delegation in Bulgaria.
In the meantime, in the heat of the inspection on January 10 another seven memoranda under ISPA were signed by the Bulgarian Government and the EC worth EUR183.220MN. EUR133.197MN of this amount is to be provided by the program and the rest - by the budget. Five of the seven agreements refer to projects in the Environment sector and two - to transport projects.
According to the financial ministry, by November 30, 2005 Bulgaria has absorbed 47% of the EUR734.332MN launched in 2000-2005 in the field of transport and environment. A few projects under ISPA, like the building of regional depots in several Bulgarian towns, have already been completed. The Transit Roads 3 project as well as the construction of the Sofia Airport passengers terminal are in an advanced stage, too.
Experts from the budget department told the BANKER weekly that by the time the ISPA program expires in December 2006 projects worth EUR10MN more will be negotiated. Bulgaria has prepared 26 proposals for building water-supply and sewerage infrastructure (in towns with population above 10,000), for building and reconstruction of purifying stations, as well as for building regional centres for solid household waste management. Meanwhile, the construction and strengthening of administrative structures that are now responsible for the ISPA resources and later for the Cohesion Fund ones will continue. In the Ministry of Environment and Water they are the Cohesion Environmental Policy Directorate and the European Environment Funds. In the Ministry of Transport the European money will be absorbed by the Railway Infrastructure National Company along with the Marine Administration established last year and the Roads Executive Agency. A special direction is also to be opened at the Ministry of Regional Development and Public Works.
A curious detail is that within a 19-month period after Bulgaria joins the EU the ISPA experts will be paid salaries equal to those of their colleagues in Brussels.

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