## Appendix I. Post-Accession Funds in Various EU Countries: Experiences and Lessons ## Source details **Canonical URL:** [Appendix I. Post-Accession Funds in Various EU Countries: Experiences and Lessons](https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2014/_wp1421.pdf) ## Other formats - [Markdown version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2014/_wp1421.pdf.md) - [Structured JSON version](/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2014/_wp1421.pdf.json) --- ### Purpose, scope and main findings - Paper purpose: - provides an overview of Bulgaria’s absorption of EU post-accession funds—particularly the Structural and Cohesion Funds (SCFs)—during the 2007–13 program period; - lists measures the authorities have taken to accelerate initially very slow absorption; - briefly discusses the potential impact on growth; and, - identifies additional measures for the next program period 2014–20. - SCFs roles and potential impact: - SCFs boost demand and can temporarily boost output; for Bulgaria (currency board) such grants could be a useful demand management tool to mitigate a recession. - For permanent increases in potential output, SCFs must add—in volume and/or quality—to production factors. - Ex-ante studies (assuming effective, efficient spending) estimate growth increases of: - around 3 percentage points (Varga and Veld, 2010); - 3.6 percentage points (Gáková, 2009) per year in the medium term. - Bulgarian government SIBILA model estimates accumulated GDP could increase by 9.3 percentage points during the 2007–15 period compared to the baseline. - An official Bulgarian government document notes: “Initial studies suggest that Cohesion Policy programs in Bulgaria may contribute substantially to an overall increase in gross domestic product (GDP), estimated at 15% by 2020”. - Risks and caveats: - SCFs can have adverse direct impacts from suboptimal management (political interference, mismanagement, corruption) and indirect adverse effects from supply constraints and distortion of relative prices. - Quality of spending and social-return–oriented cost-benefit analysis should be prioritized over absorption level alone. ### Absorption performance, patterns and risks - Pre-accession (2000–06) Bulgaria: - absorbed 72 percent and contracted 83 percent of available pre-accession funds; - €2.6 billion allocated pre-accession and remaining pre-accession resources of €0.7 billion lost. - EU / CEE context (2007–13 program period, end-2012 figures): - EU SCFs overall for 2007–13 amounted to €347 billion (contextual figure). - The 10 CEE EU countries had contracted 83 percent at end-2012; contracting varied between 70 percent and 100 percent. - Absorption ratios across CEE ranged between 12 and 59 percent; 2012 average absorption ratio of CEE countries was 44 percent. - Best performers (2007–12 contracting): Bulgaria, Czech Republic and Baltic countries (91–100 percent contracting). - Baltic countries and Czech Republic led absorption with ratios between 56 and 59 percent. - Bulgaria-specific evolution: - SCFs disbursed during 2011–12: €1.6 billion (almost triple 2007–10). - SCFs disbursements during 2007–10: €680.7 million or 10.2 percent of the available EU funding. - At end-2012 Bulgaria had made grant payments of 34 percent (27 percent actually certified and 100 percent contracted) of the available funds, or about 4½ percent of 2012 GDP. - At end-June 2013 Bulgaria’s absorption had increased to 41 percent. - Romania: SCFs absorption 12 percent at end-2012 and 18 percent at end-June 2013. - A significant improvement in contracting occurred during 2011–12, but more than €4 billion will have to be used (or they are lost). - Risks from accelerated absorption: - Faster absorption driven by larger advance payments and faster interim verification can expose the government budget to increased deficit risk if irregularities are later discovered and the EC refuses reimbursement (the MA/government having accepted financing responsibility). ### Management weaknesses identified and measures already taken - Initial weaknesses impeding absorption: - Compliance reports and control systems did not initially observe EC requirements; inconsistent information management systems. - Cumbersome application procedures, administrative burdens, complicated procurement procedures, vague processes and guidance. - Fragmented procedures and responsibilities in EU assistance administration; insufficient staff skills and resources. - OP priorities not clearly promoted; beneficiaries lacked capacity for timely project preparation leading to long verification and payment lags. - Frequent problems with tender procedures, expropriation, environmental permissions and financial irregularities. - Measures taken (highlights): - Public Procurement Law amended in early 2012 to simplify and unify tender processes, introduce ex-ante control on bidding documentation for all EU financed projects, and harmonize procurement forms. - Electronic application and reporting through the EU funds information portal introduced (http://www.eufunds.bg). - One central and 26 district information centers established. - Preparation phase of major infrastructure projects for EC approval streamlined using IFI expertise (JASPERS, etc.). - Role of banks in financial evaluation and project monitoring strengthened; use of innovative financial instruments including PPPs and JEREMIE/JESSICA/JASMINE initiatives. - Creation of a new ministry for investment and strengthening of the Central Coordination Unit of the Council of Ministers. ### Main recommendations for the 2014–20 program period - Complete mid-term evaluations of all OPs implemented during 2007–13 by external evaluators to draw lessons; specifically: - develop a well-designed strategy with clear and measurable objectives and priorities for the next program period, allowing implementation of integrated projects (draft Partnership Agreement between Bulgaria and the EC on EU structural and investment funds published in August 2013). - provide recommendations for adjusting each program, including changes to financial allocations and continuity of some projects, and improvement of implementation, management, control systems, delivery mechanisms and scheme design. - advise on more effective cost-benefit analysis, using more detailed success criteria, including social returns, not just absorption. - Make EU structural assistance documents available for stakeholder discussion prior to 2014 to ensure ownership and reduce misunderstandings. - Continue strengthening the Central Coordination Unit’s coordination, and foster cooperation between central government and municipalities via EU funds information centers. - Strengthen regional units of managing authorities to provide information, guidance and advice to final beneficiaries. - Adopt a law on EU funds assistance and management with secondary legislation specifying: - (i) documents of various OPs; - (ii) authorities and beneficiaries involved; - (iii) procedures for application, use, disbursement of structural and cohesion assistance; - (iv) procedures for supervision over grant use; and - (v) procedure for challenging the proceedings. - Review procurement legislation to complement 2012 amendments; consider e-procurement to improve accountability and transparency. - Encourage PPPs to apply for SCFs use, provided a fair risk-reward structure. - If a bonus system is used to motivate quick project preparation and assessment, ensure bonuses at managing authorities are only paid after clearly defined steps have been successfully achieved. - Additional draft allocation notes (as of August 21, 2013 draft documents): - draft proposal assumes a cut of SCFs by around €0.4 billion from €6.7 billion to €6.3 and of agricultural funds by €0.6 from €2.7 to €2.1 billion. - planned allocation of €363 million to the new OP Science and Education for Smart Growth. ### Macroeconomic impacts, models and scenarios - Demand-side estimates: - If SCFs fully absorbed, demand could increase by around 3½ percent of GDP during the remaining program period. - If Bulgaria only absorbs 72 percent (similar to pre-accession funds), demand would increase by around 2 percent of GDP. - Substitution factor α (Rosenberg and Sierhej, 2007 formulation): - α typically ranges between 0.55 and 0.65 in CEE countries; α = 1 if no substitution. - Production-function (conservative Cobb-Douglas) findings: - Under conservative assumptions, SCFs increase annual potential output by 1 percentage point of GDP, but effect peters out as capital depreciates unless new investments are made. - General equilibrium (GIMF / DSGE) evidence: - Prior findings: public sector investments have the largest permanent impact on output (about 3 percent higher than baseline). - Varga and Veld (2010): Bulgaria output increases by almost 3 percent in the medium-term. - Gáková et al. (2009) using HERMIN: with full absorption, GDP increases by about 3.6 percent during implementation and cumulative impact by 2020 around 1.9 percent of GDP. - IMF staff recalibration: Bulgaria has relatively low fiscal multipliers; public investments multipliers 0.5–0.7; short-term tax increases multipliers 0.3–0.6; medium-term output impact in the range of 1½ –3 percent under plausible scenarios and efficient use. - Scenario illustrations: - Scenario 1 (Green): Absorption as initially scheduled, grant element only — medium-term output increase consistent with 1½–3 percent range. - Scenario 2 (Blue): Absorption at pre-accession level (72 percent), grant element only — lower medium-term impact. - Scenario 3 (Brown): Scheduled absorption including domestic co-financing financed by a VAT increase — could boost growth by up to 3 percent (but will peter out); VAT assumed least distortive in model. ### Institutional roles, operational procedures and timelines - Key institutional roles (selected): - Council for EU Funds Management: coordinates activities; chaired by deputy prime minister responsible for EU Funds. - Deputy prime minister of EU Funds: coordinates EU funds structures and monitors priorities and targets. - Central Coordination Unit: EU Funds Programming Directorate, EU Funds Monitoring Directorate and Information Managing System Directorate; supports Council and deputy prime minister. - Managing Authority (MA): responsible for managing and implementing each OP (Art. 60 of EC Regulation 1083/2006); approves applications, monitors implementation, performs spot checks and verifies beneficiaries’ payments. - Intermediate Body (IB): acts under MA responsibility to implement interventions (Art. 2 (6) of EC Regulation 1083/2006). - Certifying Authority (CA): National Fund Directorate (NFD) in the MoF (Art. 61 of Council Regulation (EC) No. 1083/2006). - Audit Authority (AA): Agency of Audit of EU Funds at the MoF (Art. 62 of Council Regulation (EC) No 1083/2006). - Agency for Public Procurement: executes ex-ante control of bidding documentation for EU-financed projects. - AFCOS of the Ministry of Interior: specialized unit for fraud reporting; reports may be made to OLAF. - National Audit Office: audits and certifies all public resources and EU-funded projects; prepares methodological guidelines and assessment reports. - Application, tendering and procurement timelines and thresholds: - Tender organization typically takes five to six months. - Tender contestation legal deadlines up to three to four months (introduced in 2010). - Tender complaints process: contested in 10 days; Protection Competition Commission assesses within two months; court appeal in 14 days; court decides within one month (total ~ four months). - Large infrastructure projects: over €50 million require DG REGIO cost‑effectiveness approval. - Environmental projects: over €25 million require DG REGIO cost‑effectiveness approval. - Small projects threshold: up to Levs 110 000 apply Ordinance for Public Procurement of Small Orders. - Payment mechanics: - Advance payments by MA after contract approval range from 10 to 20 or 35 percent of project amount. - Advance payments for investment projects and operational expenditures increased from 20 to 35 percent. - Deadline for verification and payments to beneficiaries reduced to max 2½ months (Box 4). - About 70 percent of the EU funds projects are subject to the Public Procurement Law (Box 4). - Verification, certification and audit process: - MA verifies expenditures via monthly document review and on-the-spot checks; NFD (CA) declares certified expenditure to EC for reimbursement. - Audit Authority performs annual audits and provides EC with annual audit opinion on legality and regularity of expenditure declared to the EC. - Non-eligible payments must be reimbursed to the EU Budget; systemic problems could pose a major challenge for national budget deficit. ### EU, IFI and multilateral initiatives to support absorption - JASPERS: - assists preparation of major projects (transport > €50 million; environment > €25 million); - managed by EIB, DG REGIO, EBRD and KfW; - Bulgaria in 2011: 19 assignments completed and 60 projects in progress; 35 new projects added in 2012. - JEREMIE: - enables use of SCFs to finance SMEs via equity, loans or guarantees through a Holding Fund and financial intermediaries; - signed agreements: Bulgaria ratified framework on May 26, 2010 with funding amounting to €199 million; amendment on June 6, 2012 for €133 million; JEREMIE Funding Agreements signed for member states total €1161.5 million. - JESSICA: - supports sustainable urban development via Urban Development Funds using ERDF (and where appropriate ESF); - Bulgaria: EIB and Bulgaria signed agreement on July 29, 2010 establishing a JESSICA Holding Fund of €33 million (€28 million ERDF + €5 million national co-financing). - JASMINE: - promoted by EIF for microcredit development; not designed for structural funds absorption. - EBRD and FLAG: - 2008 EBRD credit €35 million to FLAG to strengthen municipal project development capacity. - FLAG established 2007; operating since January 2009; for 2009–12 about Lev 113.4 million financed ~400 municipal projects. - World Bank cooperation: - August 2010 Memorandum of Understanding with Bulgaria to cooperate on infrastructure development and leverage EU funds with financing and technical assistance. - European Economic Recovery Plan (November 2008): - national and EU level stimulus of €200 billion, equivalent to 1.5 percent of EU’s GDP. - DG REGIO proposed regulatory responses; CEE allocation additional 2 percent, equivalent to about €4.5 billion. ### Fiscal interactions, demand effects and numeric tables (selected exact figures) - Bulgaria aggregate post-accession amounts (end-June 2013, Table 3, Millions of euros): - TOTAL SCF: OP EU Funded Budget 2007–13 = 6,673.6; Contracted amounts = 7,130.2; Paid amounts = 2,761.2; Received payments from EC = 2,669.5. - TOTAL AGRICULTURAL FUNDS: OP EU Funded Budget 2007–13 = 2,755.1; Contracted amounts = 2,082.0; Paid amounts = 1,264.1; Received payments from EC = 1,402.9. - Total EU funds: OP EU Funded Budget 2007–13 = 9,428.7; Contracted amounts = 9,212.2; Paid amounts = 4,025.3; Received payments from EC = 4,072.4. - Selected OP line items (Millions of euros): - OP Transport: Budget 1,624.5; Contracted 1,608.8; Paid 793.7; Received payments from EC 842.0. - OP Environment: Budget 1,466.4; Contracted 2,215.5; Paid 358.7; Received payments from EC 305.0. - OP Regional Development: Budget 1,361.1; Contracted 1,317.6; Paid 585.7; Received payments from EC 533.2. - Competitiveness: Budget 987.9; Contracted 835.7; Paid 477.8; Received payments from EC 495.6. - OP Human Resources Development: Budget 1,031.8; Contracted 984.0; Paid 453.3; Received payments from EC 410.0. - OP Rural Development: Budget 2,679.2; Contracted 2,019.1; Paid 1,239.9; Received payments from EC 1,378.4. - OP Fisheries Sector Development: Budget 75.9; Contracted 62.9; Paid 24.2; Received payments from EC 24.5. - Pre-accession funds absorption (Bulgaria, 1998–2006, € million): - PHARE: EU Funding = 1,438.5; Contracted = 1,080.3; Absorbed = 930.1; Unused resources = 508.4; Payments as % of EU funding = 64.7; Contracted as % = 75.1. - ISPA: 783.2; 744.0; 706.8; 76.4; 90.3; 95.0. - SAPARD: 443.1; 376.7; 285.8; 157.3; 64.5; 85.0. - Total: 2,664.8; 2,201.1; 1,922.7; 742.1; Payments as % of EU funding = 72.2; Contracted as % = 82.6. - Fiscal and budgetary interactions (Bulgaria, 2007–12, percent of GDP, Table 4 highlights): - Revenues (net): 2007 = 38.2; 2008 = 38.0; 2009 = 35.3; 2010 = 32.7; 2011 = 32.4; 2012 = 34.2. - o/w EU grants: 2007 = 1.8; 2008 = 1.5; 2009 = 1.8; 2010 = 2.1; 2011 = 1.8; 2012 = 2.8. - o/w SCFs, incl. advances: 2007 = 0.5; 2008 = 0.6; 2009 = 0.8; 2010 = 1.1; 2011 = 1.4; 2012 = 2.1. - Expenditures (net): 2007 = 34.9; 2008 = 35.2; 2009 = 36.2; 2010 = 36.7; 2011 = 34.4; 2012 = 34.6. - o/w EU financed spending: 2007 = 0.8; 2008 = 0.7; 2009 = 1.4; 2010 = 2.5; 2011 = 2.1; 2012 = 3.2. - o/w SCFs spending: 2008 = 0.1; 2009 = 0.4; 2010 = 0.9; 2011 = 1.5; 2012 = 2.2. - o/w National co-financing: 2007 = 0.2; 2008 = 0.3; 2009 = 0.5; 2010 = 0.9; 2011 = 0.6; 2012 = 0.8. - o/w Contribution to EU budget: 2007 = 1.0; 2008 = 1.0; 2009 = 1.1; 2010 = 0.9; 2011 = 1.0; 2012 = 1.0. - Cash deficit (not ESA95): 2007 = 3.3; 2008 = 2.9; 2009 = -0.9; 2010 = -4.0; 2011 = -2.0; 2012 = -0.5. - Adjusted balance (percent of GDP): 2007 = 3.2; 2008 = 3.1; 2009 = -0.2; 2010 = -2.7; 2011 = -0.6; 2012 = 0.9. - EU net transfers (percent of GDP): 2007 = -0.1; 2008 = 0.2; 2009 = 0.7; 2010 = 1.3; 2011 = 1.4; 2012 = 1.4. - Demand impulse examples: - Advances received in early years were placed in the treasury and did not directly affect demand; actual demand impact occurs when money is spent. - If SCFs fully absorbed, demand could increase by around 3½ percent of GDP during remaining program period. - If Bulgaria absorbs 72 percent, demand increase around 2 percent of GDP. ### Operational Programs (selected Bulgarian OPs and budgets, exact figures) - OP Transport: - Total amount: €2.003.481.166 - European funding: €1.624.479.623 - National co-financing: €379.001.543 - OP Environment: - Total amount: €1.800.748.085 - European funding: €1.466.425.481 - National co-financing: €334.322.604 - OP Regional Development: - Total amount: €1.601.274.739 - European funding: €1.361.083.546 - National co-financing: €240.191.213 - OP Human Resource Development: - Total amount: €1.213.869.575 - European funding: €1.031.789.139 - National co-financing: €182.080.436 - OP Competitiveness: - Total amount: €1.162.215.551 - European funding: €987.883.219 - National co-financing: €174.332.332 - OP Rural Development: - Total amount: €3. 279 billion - EU funding: €2.642 billion, incl. €36, 830 million allocated under the European Economic Recovery Plan - National co-financing: €637 million - OP Fisheries’ Sector Development: - Total amount: €106.679.611 - European funding: €80.009.708 - National co-financing: €26.669.903 - OP Administrative Capacity: - Total amount: €180.789.087 - European funding: €153.670.724 - National co-financing: €27.118.363 - OP Technical Assistance: - Total amount: €56.819.427 - European funding: €48.296.513 - National co-funding: €8.522.914 ### Main success factors and obstacles (cross-country evidence) - Main success factors: - Political commitment. - Forceful and effective inter-ministerial coordination and capable institutions. - Simplified planning and implementation system. - Prompt support to weaker areas in overcoming gaps and weak capacity. - Effective management and control systems to fight corruption. - Transparent and user friendly legislative procedures, including public procurement. - Promotion of financial instruments supporting beneficiaries. - Promoted partnership and consensus among stakeholders. - Main obstacles: - Poor administrative capacity, insufficient skills and resources. - Inconsistency in management and control systems across OPs. - Fragmentation of the process and confused procedures with no guidance. - Large administrative burden and lack of beneficiaries’ project-preparation capacity. - Insufficient beneficiary financing for co-financing and VAT/land costs. - Problems with tender procedures and land appropriations for big infrastructure projects. - Long deadlines for payments, weak monitoring, lack of transparency, inaccessible financial instruments, no active IFI/bank involvement, financial irregularities and frauds. *Source: _wp1421 - Appendix I. Post-Accession Funds in Various EU Countries: Experiences and Lessons (excerpt).* ### Appendix I. Post-Accession Funds in Various EU Countries: Experiences and Lessons ..... 50 ### Appendix I. Post-Accession Funds in Various EU Countries: Experiences and Lessons ### Covered appendices and their locations - Appendix I. Post-Accession Funds in Various EU Countries: Experiences and Lessons ..... 50 - Appendix II. Post-Accession Funds: Overview of Types of Bulgarian OPs .......................... 54 ### Boxes referenced in the content unit - Box 1. Background on Purpose of EU Post-Accession Funds ............................................... 12 - Box 2. Organizational Units Involved in EU Post-Accession Funds Absorption .................. 29 - Box 3. Concepts of Operational Procedures of EU Post-Accession Funds ............................ 31 - Box 4. Main Measures Implemented to Accelerate Absorption of EU Funds, 2009–13 ....... 34 *Source: _wp1421 - Appendix I. Post-Accession Funds in Various EU Countries: Experiences and Lessons (PDF chapter/section)* ### Box 5. EC, EBRD, EIB and World Bank Initiatives for EU Funds Absorption .................... 40 ### Box 5. EC, EBRD, EIB and World Bank Initiatives for EU Funds Absorption ### Introduction and main findings - Purpose of the paper: - (i) provides an overview of Bulgaria’s absorption of EU post-accession funds—particularly the Structural and Cohesion Funds (SCFs)—during the 2007–13 program period; - (ii) lists measures the authorities have taken to accelerate the initially very slow absorption; - (iii) briefly discusses the potential impact on growth; and, - (iv) identifies additional measures for the next program period 2014–20. - SCFs roles and potential impact: - SCFs boost demand and can temporarily boost output; for Bulgaria (currency board) such grants could be a useful demand management tool to mitigate a recession. - For permanent increases in potential output, SCFs must add—in volume and/or quality—to production factors. - Ex-ante studies (assuming effective, efficient spending) estimate growth increases of: - around 3 percentage points (Varga and Veld, 2010); - 3.6 percentage points (Gáková, 2009) per year in the medium term. - Bulgarian government SIBILA model estimates accumulated GDP could increase by 9.3 percentage points during the 2007–15 period compared to the baseline. - An official Bulgarian government document notes: “Initial studies suggest that Cohesion Policy programs in Bulgaria may contribute substantially to an overall increase in gross domestic product (GDP), estimated at 15% by 2020”. - Risks and caveats: - SCFs can have adverse direct impacts from suboptimal management (political interference, mismanagement, corruption) and indirect adverse effects from supply constraints and distortion of relative prices. - Quality of spending and social-return–oriented cost-benefit analysis should be prioritized over absorption level alone. ### Absorption performance, patterns and risks - Pre-accession and post-accession absorption highlights: - Bulgaria absorbed 72 percent and contracted 83 percent of available pre-accession funds (2000–06), with €2.6 billion allocated pre-accession and remaining pre-accession resources of €0.7 billion lost. - The 2007–13 program period included €347 billion in SCFs overall for the EU (contextual figure from the 2007–13 period). - Contracting vs. absorption (CEE experience, end-2012): - The 10 CEE EU countries had contracted 83 percent at end-2012; contract ratios varied between 70 percent and 100 percent. - Absorption ratios across CEE ranged between 12 and 59 percent; 2012 average absorption ratio of CEE countries was 44 percent. - During 2007–12, best performers for contracted funds were Bulgaria, the Czech Republic and Baltic countries (ranging between 91 and 100 percent contracting); Baltic countries and the Czech Republic led absorption with ratios between 56 and 59 percent. - Bulgaria-specific figures and evolution: - During 2011–12, Bulgaria disbursed SCFs grants amounting to €1.6 billion, or almost triple the absorption during the 2007–10 period. For the 2007–10 period, SCFs disbursements amounted to €680.7 million or 10.2 percent of the available EU funding. - At end-2012 Bulgaria had made grant payments of 34 percent (27 percent actually certified and 100 percent contracted) of the available funds, or about 4½ percent of 2012 GDP. - At end-June 2013 Bulgaria’s absorption had increased to 41percent. - Romania’s SCFs absorption was 12 percent at end-2012 and 18 percent at end-June 2013. - A significant improvement in contracting occurred during 2011–12, but more than €4 billion will have to be used (or they are lost), posing a major political and administrative challenge. - Risks from accelerated absorption: - Faster absorption driven by larger advance payments and faster interim verification can expose the government budget to increased deficit risk if irregularities are later discovered and the EC refuses reimbursement (the MA/government having accepted financing responsibility). ### Management weaknesses identified and measures already taken - Initial weaknesses impeding absorption: - Compliance reports and control systems did not initially observe EC requirements; inconsistent information management systems. - Cumbersome application procedures, administrative burdens, complicated procurement procedures, vague processes and guidance. - Fragmented procedures and responsibilities in EU assistance administration; insufficient staff skills and resources. - OP priorities not clearly promoted; beneficiaries lacked capacity for timely project preparation leading to long verification and payment lags. - Frequent problems with tender procedures, expropriation, environmental permissions and financial irregularities. - Measures taken to improve absorption (recent years): - Public Procurement Law amended in early 2012 to simplify and unify tender processes, introduce ex-ante control on bidding documentation for all EU financed projects, and harmonize procurement forms. - Electronic application and reporting through the EU funds information portal introduced (http://www.eufunds.bg). - One central and 26 district information centers established to help overcome application and implementation gaps, especially at municipal level. - Preparation phase of major infrastructure projects for EC approval streamlined using IFI expertise. - Partnership with all involved parties fostered. - Role of banks in financial evaluation and project monitoring strengthened. - Innovative financial instruments, including PPPs, expected to leverage SCFs. - Creation of a new ministry for investment (to prepare investment projects for 2014–20 program period). - Central Coordination Unit of the Council of Ministers strengthened to provide horizontal guidance and monitoring. ### Main recommendations for the 2014–20 program period - Finalize mid-term evaluations of all OPs implemented during the 2007–13 program period by external evaluators to draw lessons. Specifically they should: - develop a well-designed strategy for the government with clear and measurable objectives and priorities for the next program period, allowing implementation of integrated projects. (A draft Partnership Agreement between Bulgaria and the EC on EU structural and investment funds was published in August 2013.) - provide recommendations for adjusting each program, including changes to financial allocations and continuity of some projects, as well as improvement of the implementation process, management and control systems, the delivery mechanisms and design of the schemes. - bestow advice on more effective cost-benefit analysis, using more detailed success criteria, including social returns, than just the level of absorption. - Make available EU structural assistance documents for discussion with pertinent stakeholders prior to 2014 to ensure ownership and reduce the risk of time-consuming misunderstandings; improve cooperation between the managing authority and ultimate beneficiaries. - Continue strengthening the coordination role by the Central Coordination Unit of the Council of Ministers to ensure clear and strong horizontal guidance and monitoring. - Foster cooperation between central government and municipalities, including through the EU funds information centers to provide general information to beneficiaries. - Strengthen the role of regional units of managing authorities in providing information, guidance and advice to final beneficiaries. - Adopt a law on EU funds assistance and management together with respective secondary legislation to specify: - (i) documents of various OPs; - (ii) authorities and beneficiaries involved in the process; - (iii) procedures for application, use, disbursement of structural and cohesion assistance; - (iv) procedures for supervision over the grant and use of structural and cohesion assistance; and - (v) procedure for challenging the proceedings. - Review procurement legislation to complement the 2012 amendments to assess major shortcomings and address them; consider e-procurement to improve accountability and transparency. - Consider encouraging public-private partnerships (PPP) to apply for the use of SCFs, provided a fair risk-reward structure between private and public sector. - If a bonus system is used to motivate quick project preparation and assessment, ensure bonuses at managing authorities are only paid after clearly defined steps have been successfully achieved. - Additional contextual notes on allocations (draft figures as of August 21, 2013 draft documents): - draft proposal assumes a cut of SCFs by around €0.4 billion from €6.7 billion to €6.3 and of agricultural funds by €0.6 from €2.7 to €2.1 billion. - planned allocation of €363 million to the new OP Science and Education for Smart Growth. *Source: _wp1421 - Box 5. EC, EBRD, EIB and World Bank Initiatives for EU Funds Absorption (excerpt of provided IMF PDF content).* ### 2012. Despite the fact that Bulgaria increased significantly the pace of disbursements during ### _wp1421 - 2012. Despite the fact that Bulgaria increased significantly the pace of disbursements during ### Disbursement pace and absorption - Bulgaria increased significantly the pace of disbursements during 2010–12. - Both Bulgaria and Romania need to take measures to catch up with the pace of the other CEE countries (Figures 1). ### Comparative group: "Older new member states" - The Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia (entered on May 1, 2004). ### Key numeric details and procedural notes (from footnotes) - Available ISPA funding amounted to €1.5676 billion (€0.783 billion EU funding, €0.259 billion national co-financing, €0.286billion from IFIs, and €0.239 billion in additional national and other financing). - This was the contracting deadline after which the EU audit agency checked the project completion declaration by end-June 2013. Then the funds are declared to be reimbursed, but there is no deadline for the EC to finalize the procedure. - The SCFs absorption rate of Bulgaria was only 2.6 percent at end-2009. - For different country experiences, see Appendix I. *Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2014/_wp1421.pdf* ### Box 1. Background on Purpose of EU Post-Accession Funds ### Box 1. Background on Purpose of EU Post-Accession Funds ### Purpose and institutional background of Structural and Cohesion Funds (SCFs) - Article 158 of the Treaty on the European Union: “reducing disparities between the levels of development of the various regions and the backwardness of the least favored regions”. - Main instruments historically: European Fund for Regional Development (EFRD), European Social Funds (ESF), European Agricultural Guidance and Guarantee Fund (EAGGF / FEOGA), Cohesion Fund (since 1993). - Later instruments and changes: - European Fisheries Fund established in 2006. - European Agricultural Guarantee Fund established in 2007 (replacing EAGGF), and European Agricultural Fund for Rural Development for member states’ rural development programs. - SCFs underpin three objectives: convergence; regional competitiveness and employment; European territorial cooperation. - Early major beneficiaries (“Objective 1” countries): Spain, Greece, Ireland, Italy–Southern, Portugal, UK–Northern Ireland, East Germany. - Historical scale examples: - 1989: SCFs = ECU 37.3 billion (at 1989 prices), or 2.1 percent of the average of the receiver countries’ GDP. - 1992: SCFs = ECU 208.7 billion (at 1994 prices), or about 2 percent of receiver countries’ GDP. - 1997: SCFs amounted to about 1.6 percent of cohesion countries’ GDP on average (about 3 percent of GDP for Greece and Portugal). - Agenda 2000: provisioned for pre-accession EU financing to CEE candidate countries. - Additional procedural note: projects with total cost over €50 million in transport, environment and energy require ex-ante cost-benefit analysis and EC approval (with a 2009 amendment allowing member states to start spending before EC approval). ### CEE countries and SCFs 2007–13 (end-2012) - Table 2 highlights country-level SCF allocations and absorption indicators (selected exact figures): - Bulgaria: Available SCFs 2007–13 (€ billion) = 6.7; Available SCF 2007–13 (% of 2007 GDP) = 16.8; Available SCFs 2007–13 (€ per capita) = 911; Paid grants 2007–12 (€ per capita) = 311; Contracted grants 2007–12, % of available budget = 100; Paid grants 2007–12, % of available budget = 34. - Czech Republic: 26.3; 17.2; 2,504; 1,543; 90; 57. - Estonia: 3.4; 20.0; 2,541; 1,538; 91; 59. - Hungary: 24.9; 25.5; 2,503; 1,000; 78; 40. - Latvia: 4.5; 20.4; 2,227; 1,300; 94; 56. - Lithuania: 6.8; 20.7; 2,253; 1,333; 91; 59. - Poland: 67.2; 17.6; 1,743; 849; 83; 49. - Romania: 23.5; 17.8; 1,102; 131; 70; 12. - Slovakia: 11.4; 16.1; 2,128; 889; 73; 41. - Slovenia: 4.1; 11.6; 1,995; 952; 72; 50. - Total (CEE sample): 178.9; 18.4; 1991; 782; 83; 44. - Source for table: Eurostat and KPMG 2013. ### Bulgaria: post-accession SCFs 2007–13 — allocations, contracts, payments (end-June 2013) - Aggregate post-accession amounts (Table 3, exact figures): - TOTAL SCF: OP EU Funded Budget 2007–13 = 6,673.6 (Millions of euros); Contracted amounts = 7,130.2; Paid amounts = 2,761.2; Received payments from EC = 2,669.5. - TOTAL AGRICULTURAL FUNDS: OP EU Funded Budget 2007–13 = 2,755.1; Contracted amounts = 2,082.0; Paid amounts = 1,264.1; Received payments from EC = 1,402.9. - Total EU funds: OP EU Funded Budget 2007–13 = 9,428.7; Contracted amounts = 9,212.2; Paid amounts = 4,025.3; Received payments from EC = 4,072.4. - Selected OP line items (Millions of euros): - OP Transport: Budget 1,624.5; Contracted 1,608.8; Paid 793.7; Received payments from EC 842.0. - OP Environment: Budget 1,466.4; Contracted 2,215.5; Paid 358.7; Received payments from EC 305.0. - OP Regional Development: Budget 1,361.1; Contracted 1,317.6; Paid 585.7; Received payments from EC 533.2. - Competitiveness: Budget 987.9; Contracted 835.7; Paid 477.8; Received payments from EC 495.6. - OP Human Resources Development: Budget 1,031.8; Contracted 984.0; Paid 453.3; Received payments from EC 410.0. - OP Rural Development: Budget 2,679.2; Contracted 2,019.1; Paid 1,239.9; Received payments from EC 1,378.4. - OP Fisheries Sector Development: Budget 75.9; Contracted 62.9; Paid 24.2; Received payments from EC 24.5. - Notes: - The amount for post-accession funds (stated elsewhere) is €9.4 billion EU funding (excluding CAP first pillar). - Co-financing: ranges from 15 percent for ERDF and ESF to 20 percent for Cohesion Fund (CF). National authorities also finance VAT and about 90 percent of appropriation of land for infrastructure projects. - The N+2 rule: projects must be approved by 2013; last payments by 2015. - Absorption and disbursement status (end-July 2013): - Bulgaria had made payments of €3.3 billion of EU funds to beneficiaries, or 41 percent of the total committed appropriations (includes advance payments, expenditures verified by the EU and certified by the MoF). - EC announced a risk for Bulgaria of losing €276 million in EU funding in the case of four OPs by end-2013. ### Pre-accession funds absorption (Bulgaria, 1998–2006, as of July 2013) - Table: Pre-Accession Funds (exact figures, € million): - PHARE: EU Funding = 1,438.5; Contracted EU Funding = 1,080.3; Absorbed EU funding = 930.1; Unused resources = 508.4; Payments as % of EU funding = 64.7; Contracted EU Funding as % of EU Funding = 75.1. - ISPA: 783.2; 744.0; 706.8; 76.4; 90.3; 95.0. - SAPARD: 443.1; 376.7; 285.8; 157.3; 64.5; 85.0. - Total: 2,664.8; 2,201.1; 1,922.7; 742.1; Payments as % of EU funding = 72.2; Contracted as % = 82.6. - Source: Bulgarian Ministry of Finance. ### Fiscal and budgetary interactions of EU transfers (Table 4: Bulgaria, 2007–12, percent of GDP) - Revenues (net) by year: 2007 = 38.2; 2008 = 38.0; 2009 = 35.3; 2010 = 32.7; 2011 = 32.4; 2012 = 34.2. - o/w EU grants: 2007 = 1.8; 2008 = 1.5; 2009 = 1.8; 2010 = 2.1; 2011 = 1.8; 2012 = 2.8. - o/w SCFs, incl. advances: 2007 = 0.5; 2008 = 0.6; 2009 = 0.8; 2010 = 1.1; 2011 = 1.4; 2012 = 2.1. - Expenditures (net): 2007 = 34.9; 2008 = 35.2; 2009 = 36.2; 2010 = 36.7; 2011 = 34.4; 2012 = 34.6. - o/w EU financed spending: 2007 = 0.8; 2008 = 0.7; 2009 = 1.4; 2010 = 2.5; 2011 = 2.1; 2012 = 3.2. - o/w SCFs spending: 2008 = 0.1; 2009 = 0.4; 2010 = 0.9; 2011 = 1.5; 2012 = 2.2. - o/w National co-financing: 2007 = 0.2; 2008 = 0.3; 2009 = 0.5; 2010 = 0.9; 2011 = 0.6; 2012 = 0.8. - o/w Contribution to EU budget: 2007 = 1.0; 2008 = 1.0; 2009 = 1.1; 2010 = 0.9; 2011 = 1.0; 2012 = 1.0. - Cash deficit (not ESA95): 2007 = 3.3; 2008 = 2.9; 2009 = -0.9; 2010 = -4.0; 2011 = -2.0; 2012 = -0.5. - Adjusted revenue (Revenue - EU transfers): 2007 = 36.4; 2008 = 36.5; 2009 = 33.5; 2010 = 30.6; 2011 = 30.7; 2012 = 31.3. - Adjusted expenditure (Expenditure - EU funded expenditure - Contribution to EU budget): 2007 = 33.2; 2008 = 33.4; 2009 = 33.7; 2010 = 33.2; 2011 = 31.3; 2012 = 30.4. - Adjusted balance (percent of GDP): 2007 = 3.2; 2008 = 3.1; 2009 = -0.2; 2010 = -2.7; 2011 = -0.6; 2012 = 0.9. - EU net transfers (percent of GDP): 2007 = -0.1; 2008 = 0.2; 2009 = 0.7; 2010 = 1.3; 2011 = 1.4; 2012 = 1.4. - Notes: - During 2007–09, Bulgaria received advances that exceeded actually spent amounts on SCFs; SCFs spending is thus higher toward the end of the program period. - In the case of Bulgaria, the grant element of SCFs increased from ½ percent of GDP to 2 percent of GDP during the 2007–12 program period. ### Absorption implications and immediate demand effects - Advances received in early years were placed in the treasury and did not directly affect demand; actual demand impact occurs when money is spent rather than when reimbursed. - Estimated demand impulse if SCFs fully absorbed (ignoring spillovers and co-financing demand effects): - If SCFs fully absorbed, demand could increase by around 3½ percent of GDP during the remaining program period. - If Bulgaria only absorbs 72 percent (similar to pre-accession funds), demand would increase by around 2 percent of GDP. - Rosenberg and Sierhej (2007) formulation and substitution factor α: - D = α (Tr + NC) - C - A - D_SCF = α (Tr_SCF) - α (substitution between EU funded and domestic spending) typically ranges between 0.55 and 0.65 in CEE countries; α = 1 if no substitution. - Figure-based projections (as reported): - Estimated demand effect of various EU funds, 2007–15: projections shown for α = 0.55, α = 0.65, α = 1.00 under full absorption assumptions. - Estimated impact on demand of SCF transfers, 2007–15: actual and scheduled absorption scenarios vs. pre-accession absorption level. ### Impact on potential output — production function approach and quantitative findings - Conceptual approach: - Use Cobb-Douglas production function to assess how transfers financed as capital accumulation affect steady-state output per capita. - Key formula variables: y* (steady-state output per capita), s (savings rate), TR (transfers fully used for capital accumulation), Y (nominal GDP), n (labor growth rate), δ (depreciation rate), α (share of capital). - Bulgaria-specific conservative calibration and assumptions: - Only the grant element of SCFs is included (co-financing assumed not to change net fiscal resources). - OPs included in the capital accumulation calculation: transport, regional development, environment, competitiveness. OP Human Resources and other smaller OPs were ignored in this exercise. - Grants for the 2014–20 program period were excluded. - Full absorption assumed equally distributed during remaining period (2013–15) for the scenarios modeled. - Quantitative estimates and results: - Under conservative assumptions, SCFs increase annual potential output by 1 percentage point of GDP, but the effect will peter out in the medium-term as additional capital depreciates unless new investments are made. - The quality of spending matters for potential output (example: Bulgaria’s energy intensity is almost five times the EU-27 average; reducing energy intensity is a priority). - Demographic constraint: World Bank predicts the labor force will have been exhausted as of 2015, making productivity the sole driver of GDP growth—another reason to use SCFs to boost the production possibility frontier rather than consumption. ### Macroeconomic general equilibrium (GIMF / DSGE) evidence and ranges - Prior model-based findings (literature): - Allard et al. (2008) using GIMF: public sector investments have largest permanent impact on output (about 3 percent higher than baseline). - Varga and Veld (2010): for Bulgaria, output increases by almost 3 percent in the medium-term. - Gáková et al. (2009) using HERMIN: with full absorption, GDP would increase by about 3.6 percent during implementation and cumulative impact by 2020 around 1.9 percent of GDP. - GIMF calibrated to Bulgaria (Weber and Muir 2012; updated IMF staff recalibration): - Bulgaria has relatively low fiscal multipliers; largest multipliers are for public investments (0.5–0.7). - Short-term tax increases have negative impacts (multipliers in 0.3–0.6 range); VAT increases are among the least distortive. - Given the grant component of SCFs and efficient investment use, net positive impact in short- and medium-term is expected. - IMF staff updated GIMF calibration confirms medium-term output impact in the range of 1½ –3 percent. - Scenarios illustrated: - Scenario 1 (Green): Absorption as initially scheduled, including only the grant element — medium-term output increase consistent with the 1½–3 percent range. - Scenario 2 (Blue): Absorption at pre-accession level (72 percent), only grant element — lower medium-term impact. - Scenario 3 (Brown): Scheduled absorption including domestic co-financing financed by a VAT increase — could boost growth by up to 3 percent (but will peter out); co-financing financed by VAT assumed least distortive in model. ### Risks, adverse effects, and implementation considerations - Potential adverse effects and constraints (literature and conceptual): - Suboptimal use in economies without supply constraints. - Indirect adverse effects due to changing relative prices in economies with supply constraints (e.g., structural unemployment, Dutch disease). - Adverse effects positively correlated with the size of available SCFs; risk of approving inferior projects toward the end of program period to avoid losing funds. - Possible future fiscal burden from maintenance costs of low-quality projects. - Irregularities discovered later may require repayment by the beneficiary, posing additional fiscal challenge. - Common practical impediments to positive impact: - Weak administrative capacity. - Rent-seeking behavior, including corruption. - Rising consumption displacing investment. - Timing issues that adversely affect private investment. - Information asymmetries between disbursing authority and beneficiaries. - Public choice issues (national priorities diverging from SCF objectives). - Additionality principle and implications: - Additionality principle stipulates EU structural funds may not replace national structural spending; applies to structural funds (not to cohesion funds). - Enforcement of additionality has been difficult in practice. - Many ex ante simulations assume additionality, well-functioning markets, and effective absorption — assumptions that tend to exaggerate SCFs’ impact. ### Key analytical findings and policy-relevant conclusions (drawn from the Box) - Estimated magnitudes of macro impact: - Demand-side: scheduled full absorption could raise demand by around 3½ percent of GDP; absorption at pre-accession levels (~72 percent) implies about 2 percent of GDP. - Production function (conservative): SCFs raise annual potential output by about 1 percentage point of GDP during implementation, with effects diminishing over time absent continued investment. - General equilibrium (GIMF) evidence: medium-term output impact in the range of 1½ –3 percent under plausible scenarios and efficient use. - Policy implications emphasized in the Box: - SCFs need clear priorities and prudent cost-benefit analysis focusing on type and quality of spending to increase the production possibility frontier rather than only pursuing high absorption rates. - Use SCFs to finance investments that augment capital and productivity rather than only consumption. - Where co-financing is required, finance it by the least distortive taxes (e.g., VAT) to minimize medium- and long-term adverse effects on labor supply and capital formation. - Strengthen administrative capacity, monitoring, and project selection to avoid inferior projects, fraud, and later repayments that could reduce net benefits. - Prioritize projects that address structural challenges (e.g., energy intensity, demographic decline) to maximize lasting gains from SCFs. *Italic: Source — Box 1. Background on Purpose of EU Post-Accession Funds (excerpt from provided IMF content).* ### Box 2 illustrates the ### Box 2 illustrates the ### Organizational roles in EU post‑accession funds absorption - Council for EU Funds Management - Coordinates activities to ensure more effective absorption of EU Funds. - Members: ministers of foreign affairs; economy, energy and tourism; regional development; labor and social policy; transport, communications and information technologies; environmental issues and water; agriculture and food; the deputy minister of interior; the deputy prime minister responsible for EU Funds is the chairman. - Deputy prime minister of EU Funds - Coordinates EU funds structures with the Council of Ministers and other ministries. - Monitors that priorities are observed and targets achieved. - Secretariat of the Council - Supports activities and reports to the Council of Ministers. - Consists of three directors of each of the directorates and two experts. - Monitoring Committee of the National Strategic Reference Framework (NSRF) - Meets once per year; includes the deputy prime minister of EU Funds, chairmen of OP monitoring committees, and directors of the Central Coordination Unit. - Deputy prime minister of EU Funds is the chairman and oversees NSRF implementation. - Central Coordination Unit - Consists of Council of Ministers’ directorates: EU Funds Programming Directorate, EU Funds Monitoring Directorate and the Information Managing System Directorate. - Supports the Council, Secretariat, deputy prime minister for EU Funds and the annual Monitoring Committee meeting. - Monitoring Committee of an Operational Program (OP) - Set up in agreement with the Managing Authority (MA) within the respective ministry. - Draws up rules of procedure within the institutional, legal and financial framework of Bulgaria and adopts them in agreement with the MA (Art. 63 of EC Regulation 1083/2006). - Consists of chairman, members and observers; chairman and members vote, observers have advisory functions. The chairman is the deputy minister responsible for the MA. - Managing Authority (MA) - Responsible for managing and implementing each OP efficiently, effectively and correctly in accordance with sound financial management procedures (Art. 60 of EC Regulation 1083/2006). - Approves applications, monitors implementation, performs spot checks and verifies beneficiaries’ payments. - Typically located in the relevant line ministry with one exception. - Intermediate Body (IB) - Public or private representatives acting under responsibility of a managing or certifying authority, carrying out duties on behalf of such an authority vis‑à‑vis beneficiaries (Art. 2 (6) of EC Regulation 1083/2006). - Ensures implementation of one or more interventions per agreement with the MA. - Normally established or represented in the region(s) covered by the OP at designation. - Certifying Authority (CA) - National Fund Directorate (NFD) in the MoF. - Performs checks of certification reports and statements of eligible expenditures, spot checks as part of certification (Art. 61 of Council Regulation (EC) No. 1083/2006), re‑submits certificates to the EC. - Audit Authority (AA) - Agency of Audit of EU Funds at the MoF. - Performs audits of operations and system audits in compliance with internationally accepted auditing standards. - Provides EC annual control report and annual audit opinion for each OP on legality and irregularities of expenditure declared to EC. - Agency for Public Procurement - Executes ex‑ante control of bidding documentation of projects with EU financing to avoid mistakes leading to financial corrections, reimbursement to the EU budget, conflicts of interest, or biased bidding documentation. - AFCOS of the Ministry of Interior - Specialized unit for fraud reporting; reports may be made also to OLAF. - If fraud identified, case given to the prosecutor; confirmed fraud leads to repayment by beneficiary or MA. - National Audit Office - Audits and certifies all public resources and spending, including EU‑funded projects; prepares methodological guidelines and assessment reports on management and control systems of OPs; functions as auditing authority of OPs. - Beneficiaries - Central government, local government, public and private companies (legal or physical persons). - Prepare proposals (sometimes with consultants), identify co‑financing, pay VAT and 90 percent of the cost for land appropriation (10 percent may be eligible expenditures financed by the SCFs). ### Operational procedures and project lifecycle - Application and approval - Beneficiary prepares application, submits to MA, possibly assisted by IB. - Application phase for big infrastructure projects can take years; starts with preparatory work and cost‑benefit analysis by beneficiary (usually a government unit), submitted to MA and then to EC for approval. - Ministry for regional development prepares documentation for government infrastructure projects; municipalities concert projects when land is on their territory; Council of Ministers decides on land appropriation and payment of compensations to owners. - For large infrastructure projects over €50 million and environmental projects over €25 million, DG REGIO must approve cost effectiveness. - Tendering and procurement - After application approval, a tender is organized, typically takes five to six months. - 2009 amendments of EC Council Regulation No 1083/2006 allow tenders for big infrastructure projects to be organized before EC approval. - Tender results can be contested within legal deadlines up to three to four months (deadlines introduced in 2010 to address frivolous challenges). - Agency for Public Procurement conducts ex‑ante control of bidding documentation of big projects; proposed amendments aim to apply this procedure to all EU funded projects. - For smaller projects up to Levs 110 000, public beneficiaries apply the Ordinance for Public Procurement of Small Orders. - Tenders can be contested in 10 days; in Bulgaria such complaints are assessed by the Protection Competition Commission within two months, can be brought to court in 14 days, which decides within one month (process should take about four months). - Payments, verification, certification, and audits - Advance payments by MA after contract approval range from 10 to 20 or 35 percent of project amount depending on OP and beneficiary request. - MA verifies expenditures: monthly document review, on‑the‑spot checks; MA pays verified amounts to beneficiaries. - Payment limits’ procedure streamlined in 2010 allowing MAs to use current OP resources to speed verification and payments. - Certification: NFD executes Certifying Authority functions (Art. 61 of Council Regulation (EC) No.1083/2006) and declares certified expenditure to EC for reimbursement. - Audit Authority performs annual audits and provides EC with an annual audit opinion regarding legality and regularity of expenditure certified and declared to the EC (Art. 62 of Council Regulation (EC) No 1083/2006). - If payments are deemed non‑eligible, amounts must be reimbursed to the EU Budget; systemic problems could pose a major challenge for the national budget deficit. - MA registers irregularities and reduces corresponding amounts from expenditure reimbursed to beneficiaries; CA and AA may propose reductions of reimbursement; indications of fraud/criminal actions referred to prosecutor. - EU funded expenditures subject to checks by EU authorities (EC and European Court of Auditors) and national authorities (e.g., National Audit Office reporting to Parliament). ### Timelines, thresholds, and exact figures - Application/tender timelines and contestation - Tender organization typically takes five to six months. - Tender contestation legal deadlines up to three to four months (introduced in 2010). - Tender complaints process: contested in 10 days; Protection Competition Commission assesses within two months; can be brought to court in 14 days; court decides within one month (total ~ four months). - Financial thresholds and eligibility - Large infrastructure projects: over €50 million require DG REGIO cost‑effectiveness approval. - Environmental projects: over €25 million require DG REGIO cost‑effectiveness approval. - Small projects threshold: up to Levs 110 000 apply Ordinance for Public Procurement of Small Orders. - Land appropriation: beneficiaries pay 90 percent of cost for land; 10 percent of appropriation cost for land is eligible expenditure paid by the OP. - Payment mechanics - Advance payments range from 10 to 20 or 35 percent of project amount. - Advance payments for investment projects and operational expenditures increased from 20 to 35 percent (Box 4). - Deadline for verification and payments to beneficiaries reduced to max 2½ months (Box 4). - About 70 percent of the EU funds projects are subject to the Public Procurement Law (Box 4). ### Identified shortcomings and corrective measures (2007–13) - Main shortcomings identified - Conflicts of interest. - Weak financial supervision. - Limited administrative capacity. - Legislative flaws. - Problems identified in EC monitoring reports, annual reports to Bulgarian Parliament, and NGO analyses. - Measures implemented and reforms (highlights) - Legal and procedural changes to address conflicts of interest: Law on Prevention and Detecting of Conflicts of Interest (2008) and 2010 amendments regulating establishment of a [text continues in source]. - Increased advance payments for investment projects and operational expenditures from 20 to 35 percent. - Monthly briefs and financial data on SCF implementation available on single web portal. - Deadline for verification/payments reduced to max 2½ months. - Introduction of a methodology on financial corrections of projects with irregularities (other than fraud). - Mandatory public consultation at least 10 days before launch of a call for tender. - Collaboration between OP Regional Development management and Municipalities’ Association to boost municipal/regional project implementation. - Corrective measures and procedural changes in water and waste sector and OP Environment to invite all municipalities to submit projects. - Training vouchers financed by OP Human Resources to address labor market challenges. - Improved communication with beneficiaries via regular monthly meetings among municipalities, MAs, certifying authorities and Central Coordination Unit. - Centralized entry of MA information into UMIS on EU funds Information Portal and regular updates. - CoM Act 81/2010: VAT refunds to municipalities and beneficiaries of Program for Rural Development and SCFs OPs. - Methodology for verification and adjustment of prices of construction works for infrastructure projects under OP Regional Development. - Changes to primary and secondary legislation, including Law on Preventing and Disclosure of Conflicts of Interests and Ordinance for Implementation of Preliminary Control Procedures in Public Procurement. - 2012 Amendments to the Public Procurement Law aligned with Commission recommendations; implemented amendments allowed ex‑ante control of bidding documentation of all projects with EU financing by Agency for Public Procurement, helping avoid conflicts of interest. *Source: Box 2 and accompanying sections of the provided PDF content.* ### Introduction of electronic application for EU funded projects to simplify the application process. ### _wp1421 - Introduction of electronic application for EU funded projects to simplify the application process ### Measures to Address Weak Administrative Capacity - Guidelines for rules and procedures for granting aid under OPs by the CA to the MAs were rigorous to avoid deficiencies, irregularities and fraud, but were cumbersome for applicants. - Preparation of instructions on rules and procedures, and practical guidance on application documentation, implementation of projects, verification and certification of eligible expenditures, and functioning of management and control systems were not ready at the beginning of the program period. - Project preparation became more complicated than required by EU legislation as a risk-reduction measure. - Staff responsible for management and planning lacked experience and needed time to learn UMIS and the EU LOTHAR forecasting system. - UMIS became a core component of the EU Structural Funds Single Information Portal, but initially: - did not ensure enough information for audit findings; - until 2011 did not provide updated data on the OPs for rural and fishery sectors. - Recommendation implemented: creation of mobile groups of experts to assist beneficiaries in resolving problems related to EU project realization. - Proposed procurement amendments in mid-2013 aimed to: - involve small and medium-sized companies in EU funded infrastructure projects; - introduce an electronic public procurement procedure through an online platform to improve accountability and transparency. - Active use of EC and IFI initiatives for technical assistance and preparation of large EU funded projects; involvement of EBRD, EIB and World Bank experts in preparation and implementation (including energy efficiency under OP Competitiveness). - Cooperation with banks using JEREMIE, JESSICA and JASPERS initiatives. ### Application Process - At the beginning of program period 2007–13, the application process was very cumbersome. - Repeated rejection of compliance assessment reports on management and control systems of OPs and lack of prioritization in announced grant schemes impeded and prolonged absorption. - Authorities’ decision-making did not ensure consultations for broad consensus. - Assessment of applications hindered by complicated decision-making and implementation approach by MAs. - Cumbersome evaluation procedures and delays in MAs' final decisions created delays and perception of corruption opportunities. - EU recommended introducing higher salaries for staff working on EU funded projects: - monthly salary increased and became twice as high as the salary of the other government experts with similar positions; - salary not linked to finishing the project, creating an incentive to keep projects alive and generating a “class society” within ministries between EU funds staff and others. - Training under OP Technical Assistance improved administrative capacity but led to movement of trained staff to private consulting companies with better pay, increasing turnover and obstructing smooth management. ### Tender and Procurement Process - Organization and implementation of tender procedures were problematic: - slow preliminary review of bidding documentation by the Agency of Public Procurement and the MAs; - preparation of bidding documentation required about two months for small projects and could take years for big infrastructure projects. - Preliminary review by Agency of Public Procurement and MAs required about one month. - Tenders frequently appealed after winner announcement, often on suspicion of conflicts of interest, impeding process. - Protection Competition Law adopted in 2008 changed appeal process: - appeals can be launched within 10 days; - loser must pay a fee and a guarantee to the Protection Competition Commission; - Commission makes an assessment and recommendations within two months; - further appeal to a court usually takes a month; - in principle a decision is found within about four months (deadlines observed for small projects; big infrastructure and environmental projects face additional obstacles). - Land appropriation procedures for big infrastructure projects are long and complicated involving multiple central and local institutions; some land owners contest prices; after procedural completion, CoM decision based on Regional Development Ministry proposal in concert with municipality; whole procedure can still take years but no longer stops implementation. - 2012 amendments of public procurement law simplified and unified ex-ante control procedures to avoid typical beneficiaries’ mistakes and now apply ex-ante control of bidding documentation by the Agency for Public Procurement to all EU projects. - 2013 proposed amendments expected to resolve remaining shortcomings, improve access for small and medium-sized companies, and develop an e-public procurement procedure through an online platform to include more information about committee decisions and improve accountability and transparency. - Appeal fee examples: - for small projects—about Lev 600; - for projects above Lev110.000—Lev 850; - for projects for which the Protection Competition Commission has to send information to the EC—Lev1700; - the Protection Competition Commission determines a guarantee in each case. ### Co-Financing, Resources and Payment - Co-financing generally varies between 15 and 20 percent for most projects; beneficiaries also pay VAT and land appropriation costs, so effective domestic contribution may be much more than 20 percent—in some cases even more than 40 percent. - If insufficient co-financing constrains projects, it may indicate non-priority projects. - Measures taken by Bulgarian authorities: - 2007 Framework Agreement between Bulgarian government and EIB on financing co-financing share amounting to €700 million; so far Bulgaria has received €279.4 million. - breakdown: €52.4 million in 2012, €82.4 million in 2011, €50 million in 2012, and €94.6 million in 2013. - 2007 establishment of Bulgarian Fund for Local Authorities and Governments (FLAG) to facilitate co-financing of municipal infrastructure projects; FLAG signed a long-term loan agreement with the EBRD; operating since January 2009; for 2009–12 about 400 municipal projects amounting to Lev 113.4 million financed through FLAG. - 2010 increase of advanced payments up to 35 percent for public beneficiaries of OP Regional Development, OP Transport and OP Environment to accelerate absorption (other SCFs OPs advances remained 20 percent). - previously about 20 percent could be made available as advance payment but rarely covered pre-financing needs. - Instead of waiting for certification, verification by the MA became sufficient to release advance and interim payments; this places fiscal responsibility on the MA if certification cannot be achieved later. - For public enterprises or public sector entities, a letter of comfort from a bank required at time of application to ensure projects are “bankable”. - Budget now includes multi-year aspects for EU funded projects; multi-year budgeting not yet introduced in Bulgaria, but government preparing on rolling basis medium-term budgetary framework to provide coherent quantitative statement of fiscal strategy. ### Preparation, Monitoring and Verification Process - Low project readiness, problems with expropriation procedures and environmental estimates delayed big infrastructure and environmental projects. - Involvement of IFI consultants under EC initiatives was delayed, causing loss of pace; Bulgaria later benefited from JASPERS, which provides technical assistance for: - transport and other projects with capital costs higher that €50 million; - environment projects with capital costs higher than €25 million. - JASPERS activity in 2011: completed assignments for 19 projects in Bulgaria and 60 other projects were in progress; main completed projects include Sofia Metro Extension (phase one), Burgas Integrated Urban Transport Project, electrification and reconstruction of some railway lines, closure and rehabilitation of some cities’ landfill, assessment of preparation process for water and wastewater projects. - Initial monitoring suffered from insufficient administrative capacity and incomplete, not fully integrated UMIS, hindering central oversight: - risk of suspension of approval limits for interim and final payments on all OPs due to UMIS shortcomings; - system proved inadequate and inconsistent and resulted in audit opinions. - Increased project justification requirements and inefficiency of chosen technologies caused problems for some projects. - High staff turnover impeded capacity to monitor and evaluate many projects. ### Auditing and Fraud Prevention - Many problems detected during audits or certification led to financial corrections and repayment to the EU budget. - MoF auditing agency of EU funds performs audits on behalf of the EC: - performs two types of audits: one on operations and one on management and control systems; - issues annual audit report and audit opinion for each OP presented to the EC; - procedure includes clearance of accounts, required additional information to prove eligibility of some expenditures and financial correction if needed. - Audit agency recommendations contributed to improvement of tender and verification procedures. - Publishing a sample of common errors of beneficiaries in the tender procedure was recommended by auditors. - Typical mistakes included implementing rules for pre-accession funds instead of post-accession funds (e.g., not publishing tender order in Official Journal of the EU), which: - breaches Directive 2004/18/EC and is qualified as significant non-compliance with publicity and transparency; - results in proportionate flat rate correction of 25 percent of the expenditure under the affected contract in accordance with EC Guidelines for determining financial corrections (COCOF 07/0037/03-EN). - Some municipalities implemented projects for which EC will not reimburse funds and had to cover resources from their budgets. - Mutual meetings of municipalities association and audit agency for EU funds became practice to facilitate proper implementation and avoid unconscious irregularities. ### Measures Taken by the EU and Other International Institutions - Absorption of EU SCFs is a challenge in all new member states; EU institutions initiated assistance: - 2008: EC announced the European Economic Recovery Plan as EU response to the economic crisis. - 2010: Memorandum of Understanding signed with the World Bank to leverage absorption with financing and technical assistance. - JASPERS provides technical assistance eligibility thresholds reiterated: - transport and other projects with capital costs higher that €50 million; - environment projects with capital costs higher than €25 million. *Source: _wp1421 - Introduction of electronic application for EU funded projects to simplify the application process.* ### Box 5. EC, EBRD, EIB and World Bank Initiatives for EU Funds Absorption ### Box 5. EC, EBRD, EIB and World Bank Initiatives for EU Funds Absorption ### JASPERS (Joint Assistance to Support Projects in European Regions) - Established in 2005 as a free of charge program to assist the CEE member states in the preparation of major projects to be submitted for grant financing under the Structural and Cohesion Funds. - Project scope: - Transport and other projects with costs higher that €50 million. - Environment projects with costs exceeding €25 million. - Management: team of experts from the European Investment Bank (EIB), European Commission (DG REGIO), European Bank for Reconstruction and Development (EBRD) and Kreditanstalt für Wiederaufbau (KfW). - Bulgaria-specific activity: - In 2011, Bulgaria had 19 EU projects for which JASPERS assignments had been completed and 60 projects were in progress. - 35 new projects were added in 2012. ### JEREMIE (Joint European Resources for Micro to Medium Enterprises) - Launched in 2006 by the EC and the European Investment Fund (EIF), part of the EIB Group. - Purpose: enables EU member states, through national/regional EU funds’ managing authorities, to use part of their SCFs to finance SMEs by means of equity, loans or guarantees. - Structure: a revolving Holding Fund acting as an umbrella fund targeting financial intermediaries, not SMEs directly. - Funding and Bulgaria-specific details: - Signed JEREMIE Funding Agreements for the member states amount to €1161.5 million. - On May 26, 2010, Bulgaria’s Parliament ratified the framework agreement to allow the launch of the JEREMIE initiative with funding amounting to €199 million. - On June 6, 2012, an agreement for amendment and supplement of framework and funding agreement was signed for €133 million. - The JEREMIE initiative is funded by OP Competitiveness and will control all finances on behalf of the Bulgarian government. - A JEREMIE Bulgaria EAD, a joint stock company incorporated under Bulgarian law wholly owned by EIF, was established. - On July 14, 2011 Bulgarian Minister of Economy, Energy and Tourism signed guarantee agreements with EIF, ProCredit Bank, Raiffeisenbank, United Bulgarian Bank and UniCredit Bulbank under the JEREMIE initiative. ### JESSICA (Joint European Support for Sustainable Investment in City Areas) - Launched in 2006 to help member states exploit financial engineering mechanisms to support investment in sustainable urban development within cohesion policy. - Allows managing authorities to use structural fund allocations—principally ERDF and, where appropriate, ESF—to invest in Urban Development Funds. - Coordination: Memorandum of Understanding signed on May 30, 2006 among the Commission, the European Investment Bank and the Council of Europe Development Bank. - Bulgaria-specific arrangement: - On July 29, 2010, the EIB and Bulgaria signed an agreement establishing a JESSICA Holding Fund. - Fund size: €33 million, including €28 million from the ERDF and €5 million of Bulgarian national co-financing. - Focus: revenue-generating urban development projects, including rehabilitation of deprived urban areas in seven big cities; supports implementation of Bulgaria’s 2007–13 OP Regional Development. ### JASMINE (Joint Action to Support Micro-finance Institutions in Europe) - Promoted and managed by the European Investment Fund. - Objective: development of microcredit in support of growth and employment. - Note: not designed for absorption of EU structural funds. ### EBRD Support and Credit Lines - In December 2008, the EBRD extended a €35 million credit to FLAG to: - Strengthen the institutional capacity of local authorities to develop suitable projects. - Support municipal projects for rehabilitation of municipal infrastructure alongside Unicredit and HYPO Investment Bank. ### European Economic Recovery Plan (EC response to economic crisis) - Announced in November 2008. - Components: monetary and credit policies, fiscal policy, Lisbon-type structural reform and external co-operation. - Stimulus size: national and EU level stimulus of €200 billion, equivalent to 1.5 percent of EU’s GDP. - Proposed regulatory response: DG REGIO proposed changes in the Regulations guiding provisions for EU funds in relation to the economic crisis. - CEE allocation: CEE countries will receive an additional 2 percent, equivalent to about €4.5 billion. ### World Bank Cooperation with Bulgaria - In August 2010, World Bank and Bulgaria signed a Memorandum of Understanding to cooperate on development of Bulgaria’s infrastructure. - Focus areas: accelerating maintenance and investment in roads and railways to boost Bulgaria’s competitiveness and foster economic growth by leveraging EU funds with financing and technical assistance support from the World Bank. ### Contextual Conclusions and Policy Implications (from surrounding text) - EU funds can be used as a demand management tool to mitigate a recession, but require fully prepared EU funded projects ready in the pipeline for implementation when required by the business cycle; experience shows this is difficult. - Effective use of EU funds can increase long-term potential growth only if used to increase the production possibility frontier. - Using EU funds for demand management and medium-term potential output expansion requires good public financial management and governance practices, as EU funds absorption is prone to inefficiencies similar to development aid. - Priority recommendation: focus on using funds for projects that give an adequate social rate of return rather than on maximizing absorption rates. - Bulgaria has implemented successful measures to improve EU funds absorption but additional steps listed in sub-section A in the Introduction (page 9) would help ensure more effective, efficient and timely absorption during the next program period. *IMF Working Paper content unit: Box 5. EC, EBRD, EIB and World Bank Initiatives for EU Funds Absorption* ### APPENDIX I. POST-ACCESSION FUNDS IN VARIOUS EU COUNTRIES: EXPERIENCES AND ### APPENDIX I. POST-ACCESSION FUNDS IN VARIOUS EU COUNTRIES: EXPERIENCES AND LESSONS ### Main success factors and obstacles of EU funds absorption - Main success factors: - Political commitment - Forceful and effective inter-ministerial coordination and capable institutions - Simplified planning and implementation system - Prompt support to weaker areas in overcoming gaps and weak capacity - Effective systems for management and control of the OPs implementation, including to fight corruption - Transparent and user friendly legislative procedures, including in public procurement area - Promotion of financial instruments supporting the beneficiaries - Promoted partnership and consensus of different parties regarding the process - Main obstacles: - Poor administrative capacity, insufficient skills and resources - Inconsistency in the modules of the management and control systems of various OPs - Fragmentation of the process - Confused processes with no guidance provided and cumbersome application procedures - Large administrative burden - Lack of beneficiaries’ capacity for preparation of projects - Insufficient financing of beneficiary to sustain the process - Problems with tender procedures - Problem with land appropriations for big infrastructure projects - Long deadlines for payments to the beneficiaries - Weak monitoring systems - Lack of transparency in technical and financial validation by the MAs - Financial instruments are inaccessible and not promoted - No active involvement of IFIs and banks - Financial irregularities and frauds during the implementation of the projects ### Evidence from old EU members (1989–99 period) - General observation: - There is no single recipe; a variety of contributing factors to success were identified. - Ireland (joined the EU in 1973): - Outcome: GDP per capita rose from 64 percent of the European average in 1986 to 111 percent in 1999. - Reinforcing factors identified by the Economic and Social Research Institute: - Gradual accumulation of human capital - Fiscal control - Maintenance of wage competitiveness - Partnership became part of culture and integrated into general policy making. - Spain (joined the EU in 1986): - Observation: SCFs absorption probably contributed to GDP per capita increase from 70 percent of the European average in 1986 to 80 percent of the European average in 1999; other factors may also have contributed. - Portugal (joined the EU in 1986): - Outcome: GDP per capita rose from 54 percent of the European average in 1986 to 74 percent in 1999. - Contributing elements: - Strong regional coordination with municipalities delegated authority over certain public investments before accession - Municipalities able to take decisions and prioritize projects - Establishment and encouragement of municipal associations to foster implementation of regional OPs - Greece (joined the EU in 1973): - Outcome: GDP per capita rose from 61 percent of the European average to 69 percent in 1999 despite SCFs disbursement. ### CEE countries’ experience during the 2007–13 program period (selected country summaries and absorption rates at end-2012) - Latvia: - Absorption rate of SCFs: 56 percent at end-2012. - Measures: Promoted client-oriented institutional approach; reduced administrative and financial burdens; legislative modifications to facilitate application procedures; introduced weekly reports to follow-up payment rates. - Lithuania: - Absorption rate of SCFs: 59 percent at end-2012. - Strengths: Best in dealing with the European Regional Development Fund. - Measures: Developed Economic Stimulus Plan bolstering employment, business promotion and energy efficiency. - Slovenia: - Absorption rate of SCFs: 50 percent at end-2012. - Strengths and measures: Strong inter-ministerial coordination; quality institutions advising smaller companies; simplified payment procedures; approved VAT as eligible expenditure; timely announcement and separation of public tenders for small and large projects; on-the-spot control. - Czech Republic: - Absorption rate of SCFs: 57 percent at end-2012. - Measures: Introduced national model for cost-benefit analysis and a risk control system; sped up major infrastructure implementation and managed to triple disbursed funds in one year. - Estonia: - Absorption rate of SCFs: 59 percent at end-2012. - Measures: Introduced procedurally simpler and faster implementation system; prioritized high EU-funded projects (transport, environment, economic development); reallocated some resources in 2010 to address economic crisis consequences. - Slovakia: - Measures: Authorities enabled MAs to provide advance payments to all beneficiaries. - Hungary: - Absorption rate of SCFs: 40 percent at end-2012. - Measures: Focused on New Hungary Development Plan and reallocation among/within OPs; created less strict eligibility criteria via increased national support; reduced payment deadline from 60 to 15 days and imposed penalty interest for late payments; introduced ex-ante control of documentation. - Poland: - Absorption rate of SCFs: 49 percent at end-2012. - Measures: Prompt contracting of large infrastructure projects; average contract ratio of 53 percent; experienced delays in payments; Ministry of Regional Development manages all EU funds and coordinates relevant stakeholders. - Bulgaria and Romania: - Absorption rates at end-2012: Bulgaria 34 percent; Romania 12 percent. - Note: Bulgaria and Romania joined the EU three years later than other CEE countries; problems at program start were similar. Absorption rates at end-June 2013: Bulgaria 41 percent; Romania 18 percent. ### Appendix II. Post-accession funds: overview of types of Bulgarian OPs (selected Operational Programs and budgets) - Note: Operational programs listed include Transport, Environment, Regional Development, Human Resources Development, Competitiveness, Administrative Capacity, and Technical Assistance. - OP Transport: - Strategic objectives: Development of sustainable transport system; integration into European transport system; balance between transport types; supports motorways, first class roads, and some second class roads. - Priority axes: 1. "Development of railway infrastructure along the trans-European and major national transport axes". 2. "Development of road infrastructure along the trans-European and major national transport axes". 3. "Improvement of inter-modality for passenger and freight". 4. "Improving the conditions for navigation on the maritime and inland waterways” 5. "Technical assistance" - Program Budget: - Total amount: €2.003.481.166 - European funding: €1.624.479.623 - National co-financing: €379.001.543 - Managing authority: Ministry of Transport: Coordination of Programs and Projects Directorate. - Main beneficiaries: National Railway Infrastructure Company; Road Infrastructure Agency; Sofia Metropolitan; Danube Exploration and Maintenance Agency; State Enterprise "Port Infrastructure". - Major projects (selected): - Modernization of Vidin-Sofia railway line (along Trans-European transport corridor IV) - Modernization of Sofia-Plovdiv railway line (along Trans-European transport corridors IV and VIII) - Renewal of railway sections along Plovdiv-Bourgas railway line - Construction of bypasses along TEN-T network, Phase I - Construction of Struma Motorway - Construction of Maritsa Motorway - Extension of the Metropoliten Sofia from “Hemus” Hotel to Central Station and Central Bus Station”, “Drujba” and new terminal at the Sofia Airport - Improvement of navigation on the Danube in joint Bulgarian-Romanian parts: from rkm 530 to rkm 520 - Bathin; from rkm 576 to rkm 560 – Belene. - Main components: Construction works, signaling, telecommunications and information systems, supervision and long-term assistance; rail track renewal and related maintenance of signaling, telecommunications and catenary equipment; upgrading two-lane road to four lanes expressway with total length of 31.5 km; city bypass construction; improvement of navigational conditions in two critical Danube sections at low water levels. - OP Environment: - Strategic objectives: Improvement, preservation and restoration of the natural environment and development of environmental infrastructure. - Specific objectives: Conservation and improvement of water; improvement of waste management and soil protection; conservation of biodiversity and nature protection; investment in sewage systems and water supply infrastructure for settlements with population equivalents above 2000 inhabitants. - Priority axes: 1. “Improving and developing infrastructure for water and wastewater in settlements with over 2000 inhabitants and settlements with below 2000 inhabitants within the urban agglomeration areas” 2. “Improvement and development of infrastructure for waste treatment” 3. “Preservation and restoration of biodiversity” 4. “Technical assistance” - Program Budget: - Total amount: €1.800.748.085 - European funding: €1.466.425.481 - National co-financing: €334.322.604 - Managing authority: Environment Cohesion Policy Directorate, Ministry of Environment and Water - Intermediate unit: EU Funds for Environment Directorate in the Ministry of Environment and Water - Beneficiaries: Municipal administrations; associations of municipalities; basin directorates; regional inspectorates of environment and water; Department of National Parks; management structures of Natura 2000; NGOs. - Major projects (selected): - Kurdjaly waste water and sewage project - Yambol waste water and sewage project - Plovdiv waste water and sewage Project - Construction of regional waste management centre in Kocherinovo - Construction of regional waste treatment facilities in Stara Zagora region and Varna region - Closure of the existing landfill for municipal solid waste – Rouse - Main components: Reconstruction and construction of sewerage networks; extension of sewerage network; new regional landfill; development of material recovery facilities; invessel composting facilities; windrow composting facilities for green waste; transfer station; development of recycling centers. - OP Regional Development: - Strategic objectives: Improving quality of life and working environment with better access to major services; creating new opportunities for regional competitiveness and sustainable development; development of second and third class roads and municipal roads in urban agglomeration areas; investment in sewage systems and water supply infrastructure in settlements with population at or below 2000 inhabitants. - Specific objectives: Development of sustainable and dynamic urban centers with their less-urban peripheral areas; better access to travel, telecommunication and energy networks in underdeveloped regions; developing regional tourism and marketing of region-specific tourism products with higher added value; mobilization of regional and local technical and institutional capacities and resources. - Priority axes: 1. “Sustainable and integrated urban development” 2. “Regional and local accessibility” 3. “Sustainable tourism development” 4. “Local development and cooperation” 5. “Technical assistance” - Program Budget: - Total amount: €1.601.274.739 - European funding: €1.361.083.546 - National co-financing: €240.191.213 - Managing authority: General Programming of Regional Development Directorate, Ministry of Regional Development and Public Works. - Beneficiaries: Companies and public institutions (municipalities and associations of municipalities; municipal or state enterprises; companies; public transport; medical and health facilities; social and educational institutions; local, regional and national tourism associations; regional administrations and others). - Major projects (selected): - Burgas Integrated Urban Transport Project - Varna Integrated Urban Transport Project - Sofia Integrated Urban Transport Project - Main components: Modernization of public transport; alternative modes of transport. - OP Human Resource Development: - Strategic objectives: Improving quality of life through improving human capital; achieving higher levels of employment; increased productivity; access to quality education and lifelong learning; promoting social inclusion. - Specific objectives: More and better jobs and higher productivity; increased investment in human capital through better and more accessible education; more social capital, networks and partnerships and the development of social economy. - Priority axes: 1. “Promotion of economic activity and development of the labor market” 2. “Increase productivity and adaptability of employees” 3. “Improving the quality of education and training in accordance with the needs of the labor market to build a knowledge-based economy” 4. “Improving access to education and training” 5. “Social inclusion and promotion of social economy” 6. “Increasing the efficiency of market institutions, labor, social and health services” 7. “Transnational and interregional cooperation” 8. “Technical assistance” - Program Budget: - Total amount: €1.213.869.575 - European funding: €1.031.789.139 - National co-financing: €182.080.436 - Managing authority: European Funds, International Programs and Projects Directorate, Ministry of Labor and Social Policy. - Intermediate units: Ministry of Education, Youth and Science; Employment Agency; Agency for Social Assistance. - Beneficiaries: Socio-economic partners; municipalities; NGOs; governmental institutions; social enterprises; community centers; representatives of different communities; education, training and research institutions; scientific organizations; employers; industry and sector organizations; and others. - OP Competitiveness: - Strategic objectives: Development of dynamic economy through stimulating the development of the knowledge economy and innovation; competitiveness of Bulgarian enterprises; increasing investment and exports; creating a favorable business environment. - Priority axes: 1. "Development of a knowledge-based economy and innovation activities” 2. "Increasing efficiency of enterprises and promoting supportive business environment" 3. "Financial resources for development of enterprises” 4. "Strengthening the international market positions of Bulgarian economy” 5. "Technical assistance" - Program Budget: - Total amount: €1.162.215.551 - European funding: €987.883.219 - National co-financing: €174.332.332 - Managing authority: Directorate General “European Funds for Competitiveness, Ministry of Economy and Energy. - Intermediate unit: The Bulgarian small and medium enterprises promotion agency, Ministry of Economy and Energy. - Beneficiaries: SMEs (including start-up), large enterprises, NGOs, universities and research institutions, experimental laboratories and research institutions, municipalities, district administrations, other institutions and organizations in support of business. *Source: APPENDIX I and APPENDIX II, _wp1421 - APPENDIX I. POST-ACCESSION FUNDS IN VARIOUS EU COUNTRIES: EXPERIENCES AND* ### 6. OP Administrative Capacity ### 6. OP Administrative Capacity ### Strategic objectives - Improving the functioning of public administration to implement effective policies, quality service to citizens and businesses and creating conditions for sustainable economic growth and employment. - Increasing the professionalism, transparency and accountability in the judiciary. ### Priority axes - 1 “Good governance” - 2 “Human Resources Management” - 3 “Quality of administrative services and e-government development” - 4 “Technical assistance” ### Program Budget - Total amount: €180.789.087 - European funding: €153.670.724 - National co-financing: €27.118.363 ### Managing authority - OP Administrative Capacity Directorate, Ministry of Finance. - The composition, structure and functions of MA remain unchanged after moving the MA from the Ministry of State Administration and Administrative Reform to the MoF in 2009. ### Beneficiaries - Central, regional and municipal administrations, bodies of the judiciary, socio-economic partners and NGOs. --- ### 7. OP Technical Assistance ### Strategic objectives - Improvement of coordination, monitoring, implementation and evaluation of Structural Funds in Bulgaria for the period 2007–13. - Provides tools and resources to ensure efficient functioning of the structures involved in coordination, management, certification, auditing and evaluation of Structural Funds absorption. ### Specific objectives - Strengthening the capacity and functioning of the structures of the central and local administrations involved in SCFs absorption. - Improving awareness and public awareness of effective and efficient use of Structural Funds and Cohesion Fund in Bulgaria. ### Priority axes - 1.“Supporting the activities’ implementation of the central level structures; Capacity building measures for other SF implementing structures” ### Program Budget - Total amount: €56.819.427 - European funding: €48.296.513 - National co-funding: €8.522.914 ### Managing authority - OP Technical Assistance Directorate, Council of Ministers. ### Beneficiaries - Central Coordination Unit - Central Information Office - Certifying Authority - Audit Authority - Managing Authority of OPTA - AFCOS Directorate, Ministry of Interior - Municipalities, on whose territory the administrative centers of 28 districts in the Republic of Bulgaria are - Archives State Agency - Public Procurement Agency - State Agency for Child Protection - National Association of Municipalities in the Republic of Bulgaria - Real Sector Finance Directorate, Ministry of Finance - Ministry of Economy and Energy --- ### European Agricultural Fund for Rural Development (EAFRD) and European Fisheries Fund (EFF) ### 1. OP Rural Development #### Strategic objectives - Improving the competitiveness of agriculture, forestry and processing industries, building local capacity and partnerships, diversifying the economy and improving quality of life in rural areas, protection of biodiversity and water resources. #### Priority axes - 1 "Improving the competitiveness of agricultural and forestry sector” - 2 "Improving the environment and countryside (land management)” - 3 "Quality of life in rural areas and diversify the rural economy” - 4 “ Leader” - 5 "Technical assistance" #### Program Budget - Total amount: €3. 279 billion - EU funding: €2.642 billion, incl. €36, 830 million allocated to Bulgaria under the European Economic Recovery Plan - National co-financing: €637 million #### Managing authority - Rural Development Directorate, Ministry of Agriculture and Food. #### Intermediate unit - The Payment Agency at the Agricultural Fund, Ministry of Agriculture and Food. #### Beneficiaries - Farmers, younger farmers, producer organizations, SMEs, municipalities, NGOs, and educational institutions. --- ### 2. OP Fisheries’ Sector Development #### Strategic objectives - Transforming the fisheries sector into a competitive, modern and dynamic one based on sustainable development of fisheries and improving the quality of life in fishing areas. #### Specific objectives - Ensuring competitiveness and sustainability of the fisheries sector; - Developing the market of fisheries products and aquaculture production; - Supporting the sustainable development of fisheries areas and improving the quality of life in those areas; - Supporting the implementation of operational programs within the Common Fisheries Policy of the EU. #### Priority axes - 1 "Adaptation of the fishing fleet” - 2 “Development of aquaculture production, processing and marketing" - 3 "Promotion of activities of collective interest" - 4 "Sustainable development of fisheries areas" - 5 "Technical assistance" #### Program Budget - Total amount: €106.679.611 - European funding: €80.009.708 - National co-financing: €26.669.903 #### Managing authority - European Fishery Fund Directorate, Ministry of Agriculture and Food. #### Intermediate unit - Payment Agency at the Agricultural Fund, the Ministry of Agriculture and Food. #### Beneficiaries - Owners of fishing vessels, fishermen associations and owners of fishing vessels and fishermen, private, public or public-private companies / organizations, associations or organizations of producers, ship owners for inland fishing; individuals; veterinary authorities; NGOs; State Enterprise "Fishery Resources of Foods”; national, regional and local authorities; market organizations; scientific and educational organizations. *Source: _wp1421 - 6. OP Administrative Capacity* --- _Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2014/_wp1421.pdf_