Difficulties in implementing public procurement legislation, non-correlating projects to the national economic situation and management problems are only few of the hindrances which have to be overcome so that Romania would be able to accelerate the accession of European structural funds.
Improvement is yet to come
Based on the old saying “God gives, but he won’t stuff it into your bag”, an article from June 2012 published by “The Economist” shows that Romania, which ranks second in the top of the poorest EU countries, continues to rank last in the absorption of structural funds More than half a year away, the situation seems not to improve. According to the data published by the Romanian Ministry of European Affairs , the absorption rate amounted to only 11.47% of the total sum of RON 86.651 Billion granted by the EU for 2007-2013. The total cost of the projects approved by the end of 2012 (11,360) was of RON 76.320 Billion and that of the contracts signed (9,222) amounted to RON 67.227 Billion. Internal payments to beneficiaries amounted to RON 20,972 Billion.
SOP-T has the most unfavourable situation
On 31 December 2012, the operational programme with the highest absorption rate was the Regional Operational Programme with 24.70%, followed by the Operational Programme Administrative Capacity Development with 24.63%. On the other hand, the programme with the lowest absorption rate was the Sectoral Operational Programme Transport with 6.46%. SOP-T is, in fact, the programme with the lowest rate of the internal payments to beneficiaries, 9.15% or an estimated RON 1.885 Billion. At the same time, SOP-T is the programme with the smallest number of projects approved and signed contracts. At the end of last year, out of 154 projects submitted as part of the programme, 93 were approved with a total cost of RON 12.481 Billion and 87 contracts were signed with a total cost of Ron 12.43 Billion, while the sum allocated by the EU for this programme is almost the double of RON 20.592 Billion.
Deep-rooted causes for failing to absorb the EU funds
Several studies carried out by the responsible bodies in the EU and in the country have stressed the fact that Romania’s incapacity to accelerate the absorption of European funds is generated by severe systemic problems.
In July 2012, a Information report on Bulgaria and Romania: unfinished transition , elaborated on behalf of the Committee for European Affairs by French senators Simon Sutour, Michel Billout, Bernadette Bourzai, Jean-François Humbert and Catherine Morin-Desailly, stated that the launch of operational programmes has been challenged by the lack of experience and mostly by the lack of proper administrative and juridical capacity. Highlighting once more the irregularities of public tenders and fraudulent practices, the report drew attention that funds could not be well absorbed and could not have the expected results because the rule of law had not been consolidated and because the administrative and juridical systems were not reliable.
Also in July, the Report from the European Commission to the European Parliament and the Council on progress in Romania under the cooperation and verification mechanism reached the conclusion that the efficient use of EU funds in Romania was affected by the problems in implementing public procurement legislation which favours corruption and abuses.
A recent study elaborated by the Institute for Public Policies (IPP) on the Systemic problems of the Structural Fund management’s failure in Romania identifies two categories of explanations for this “balance of failure”.
The first major cause for this situation is Romania’s incapacity to absorb structural funds because of:
1) the problems with the initial conception of operational programmes (the inexistence of an integrated development vision at national level on the medium and long term, with sectoral priorities, but also regional development priorities that would reduce disparities; the lack of attractiveness of accessing structural funds for the private environment; setting unrealistic or improperly laid down programme indicators);
2) the administration problems of management authorities which led to major gaps between the contracting rate and the actual payments reimbursed by the European Commission for each operational programme (poor quality of the human resources employed among management authorities; excessive politization; fragmentation of the management system of structural funds between ministries; the inefficiency of monitoring committees; lack of support for beneficiaries from management authorities or intermediate bodies);
3) problems with the strategic budget planning at national level (incomplete integration of structural funds into the systems of national public finances; confuse public procurement legislation which leaves room for interpretation; the integral or partial uncovering of major sectors with real financing needs; the uncorrelation of financing of European funds with the Agreement signed with the International Monetary Fund which has not permitted Romania to increase the absorption rate by reimbursing the cost of European projects first from the national budget after which they will be recovered from the sums allocated by the Commission).
The second systemic problem identified by IPP is the lack of transparency in the management of European funds. Although, a series of measures to repair this deficiency has been made lately, the process is still in the beginning and the centralisation of information suffers from the inexistence of a single date report format, IPP states.
Radical solutions to accelerate absorption
In conclusion, the IPP study recommends first of all improving the content of operational programmes by rethinking financing priorities and reallocating the unspent money to different priority axes for national interest programmes. At the same time, last June, the World Bank suggested Romania not to entirely copy European policies which had no connection whatsoever with national problems, but to correlate financing programmes with the need for growth of the domestic economic competitiveness.
According to IPP, another objective is improving the management of structural funds providing coordination by a single centre (Ministry of European Affairs), recruiting specialized staff among management authorities and intermediate bodies, clarifying the situation of financial corrections for each operational programme, using money from technical assistance to actually support project beneficiaries in correcting their implementation and imposing mandatory transparency among management authorities.
Last but not least, the IPP study shows that structural funds need to be integrated into national public financing systems being necessary for the state budget to support priority projects and harmonise sectoral development plans and national interest investment objectives.
At the same time, it is imperative to align national public procurement legislation to European standards.
Promises for a better future
The need for urgent implementation of efficient solutions is incontestable. In January, the European Commissioner for Regional Development, Johannes Hahn, drew the attention that 2013 was a very important year for Romania, the year when it would have to ensure the absorption of over EUR 5 Million of European funds. In fact, the Commissioner promised that Romania would have all the EU support in doing so, because “Romania is one of the most active markets for European companies”, and said he hoped that the problem of pre-suspending payments in the Regional Operational Programme, Sectoral Operational Programme Transport and Sectoral Operational Programme Economic Competitiveness Growth would be solved to the interest of all.
The new Romanian Minister of European Affairs Eugen Teodorovici said in turn that the major objectives of the current government programme include increasing the absorption rate of European funds to 50% by the end of 2013 and to 80% by the end of 2015. The first measures to be made were the simplification and acceleration of the process of conveying reimbursement demands to the European Commission, analysing the possibilities to intervene in the organisation of the system without disturbing the activity of management authorities, imposing “zero” tolerance t any law infringement situation, including conflicts of interests and other aspects the European Commission is worried about and intensifying discussions with community partners to avoid dead ends and to change EU’s perspective on Romania.
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