Course 10 - MPE - 2012-2013_Decrypted

7/30/2019 Course 10 - MPE - 2012-2013_Decrypted

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G. & D. CHIRLEAN, Management of the International Projects Course

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Chapter 10: STRUCTURAL INSTRUMENTS (part I)

STRUCTURE OF THE COURSE 10:

10.1:Structural Instruments

10.1.1.: Definition

10.1.2.: The Future of EU Structural & Cohesion Funds post-2006

10.1.3.: EU Cohesion Policy and the Structural Funds

10.1.4..: Romania and the Structural Funds

10.1: Structural Instruments

10.1.1.: Definition

Structural Instruments denominatethe Structural Funds and the Cohesion Fund in their

totality.

Structural Funds represent financial instruments by which the European Union actions to

eliminate the economic and social disparities between regions, in the purpose of realising the

economic and social cohesion:

a. European Regional Development Fund(ERDF, FEDR in Romanian) is thestructural fund supporting the regions less developed, by financing investments

within the productive sector, infrastructure, education, health, local development and

SMEs (Small and Medium Size Enterprises);

b. European Social Fund(ESF, FSE in Romanian) is the structural fund destined toEUs social policy, which supports measures in the field of labour force employment

and human resources development.

Cohesion Fund (CF, FC in Romanian) is the financial instrument that supports investments in

the field of environment and transport infrastructure.

The Structural and Cohesion Funds are the European Unions main instruments for

supporting social and economic restructuring across the EU. They account for over one third of

the European Union budget and are used to tackle regional disparities and support regional

development through actions including developing infrastructure and telecommunications,developing human resources and supporting research and development.

10.1.2.: The Future of EU Structural & Cohesion Funds post-2006

The former round of Structural and Cohesion Funds programmes has come to an end at

the end of 2006. At the European Council of 15-16 December 2005 a settlement was reached on

the next EC budget, including future Structural and Cohesion Funds expenditure, for the 2007-

2013 Financial Perspective.

Following the December Council, the Member States have now completed negotiations

on the package of Structural Funds Regulations that will govern future spending programmes.


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The Regulations were formally signed off by both the Council and the European Parliament on

31 July and they entered into force on 1 August 2006.

The only remaining step in the EU-level negotiations is for the Member States and the

European Parliament to agree a final set of Community Strategic Guidelines, which willestablish the high-level EU priorities for future Structural Funds spending. The Member States

have completed their discussion of the Guidelines, and the Finnish Presidency aimed to reach

final agreement on the document in October.

As part of the process of implementation agreed in the negotiations, each Member State

will publish a National Strategic Reference Framework setting out its priorities for support from

the Structural Funds.

10.1.3.: EU Cohesion Policy and the Structural Funds

Why does EU need a Cohesion Policy?EU is one of the most prosperous regions in the world. Since its enlargement at 1st of

May 2004, EU had the strength of an internal market formed by 25 member states, having more

than 454 million inhabitants who live in 254 regions (after Romania and Bulgaria joined EU in

2007, the number of its regions increased with more 14 regionsRomania came with 8 and

Bulgaria with 6). Unfortunately not all Europeans have the same socio-economic advantages and

chances of success. The difference is made by the zone they live in: a rich zone or a poor on,

rural or urban, a zone at the EU periphery or within one of its economic centers, etc.

Thus significant disparities exist between the EU member states and its zones.

First 10 most dynamic regions in EU have a GDP 5 times greater than the GDP of the last

10 less developed EU regions. For example, Romania has a GDP equal with 35% of the

Community average (inside Romania, its regions have even smaller levels: in 2002 the N-Eregions GDO was 20.2% of the Community average, while UK had a GDP 2.7 times bigger

than the Community average!).

More complex disparities between EU member states and regions are given by the:

- infrastructure;

- environment quality;

- unemployment and the labor force competencies necessary for future development;

- size and diversity of the business environment;

- differences concerning the use of new technologies.

What is EU Cohesion Policy?

EU economic and social cohesion policy is, first of all, apolicy of solidarity. It has the

aim to promote a high level of competitiveness and labor force employment, offering support to

less developed regions and to those confronting with structural problems.

The Cohesion Policy is apolicy established by EC for its member states & partners, and

the responsibilities regarding the implementation are shared between EC and the Member States.

The Cohesion Policy is materialized in Structural and Cohesion Funds (SCF).

Implementation of the SCF means providing information and disseminating it, and also

effective implementation procedures.

In the view of an efficient implementation, the European Commission has elaborated the

Project Cycle Management Methodology which contains the analysis of the:

- interested parties;- problems;


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- objectives;

- strategies

all these being necessary in designing and applying for a project in the framework of the

structural instruments.

EU established the objectives through different treaties and political documents:Treaty of Maastricht

Lisbon Strategy

Broad Economic Policy Guidelines

European Employment Strategy

Regulations of EU Council

Thus, Art. 2 of the Treaty of Maastricht (1993) states that EU must promote the

economic and social progress and an increased level of labor force employment through :

- creation of a space without internal borders;

- strengthening of the economic and social cohesion;

- setting up an economic and monetary union.

Art. 158 of the Treaty establishing the creation of the European Community (Treaty ofRome, 1957) refers to reducing the differences of the development level for different

regions. and Art. 159 of the same treaty requires this action to be supported by Structural

Funds, investments of the European Investment Bank and other financial instruments.

Lisbon Strategy (2000) has the main objective EU to become, until 2010, the most

dynamic and competitive economy and society based on knowledge in the world.

The EU evolution in each domain is stipulated by the last documents above-mentioned,

specifying the specific ways of implementation. There are 5 regulations of the EU Council that

regulate the implementation of structural instruments:

1 general regulation (referring to ERDF, ESF and CF and presenting ways of using the

funds);3 specific regulations (one for each fund: ERDF, ESF, CF);

1 ETC regulation(regulations for the European Territorial Cooperation)

How the Cohesion Policy functions?

There are three main mechanisms by which this policy is implemented:

a) by re-directing the funds towards the regions in difficulty;

b) by providing financing through multi-annual programmes;

c) by developing partnerships between socio-economic actors.

The assistance offered through the Structural and Cohesion Funds relies on several

principles:

Complementarity, consistency, coordination.

Planning

Partnership

Sharing the responsibilities between EC and the Member States

Additionality

Equal opportunities

Sustainable development

The principle of complementarity refers to the fact that within the funding programmes

85% of the total cost of the projects is financed by EU and 15% must be provided as co-financing.


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Unlike within other EU programmes, the applicants for Structural Funds will relate only

with local and national authorities, and not with any other European institution.

In order to be financed projects must clearly emphasize the principles of equal

opportunities and of sustainable development.

Sustainable development targets on efficiently spending the actual resources, thus thefuture generations to benefit of the same conditions as we have nowadays. The chart below

illustrates the concepts of sustainable development:

There are several European Institutions involved in Structural Funds. Some of them are

decision organisms:

Council of European Union;

European Commission;

European Parliament;

and other are having a consultative character only:Economic and Social Committee

Committee of the Regions.

The Council of European Union has a major role (it acts as Europes Government) as

each 7 years it proposes a new regulations (as those 5 regulations mentioned above).

The Economic and Social Committee is composed by representatives of bodies of

employers, unions, NGOs, etc. while the Committee of the Regions is formed by representatives

of the local committees.

The EU economic and social Cohesion Policy for the period 20072013 hasthree main

objectives:

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Convergence

This objective is financed with 80%of the budget destined to Structural and Cohesion Funds. It

targets to:

- regions of the Member States having a GPB smaller than 75% of the Community averageGDP;

- regions falling under the so-called statistic effect.Regional competitiveness and labor force employment


targets to:

- regions which are not eligible in the framework of the objective Convergence. European Territorial Cooperation


refers to:

- transnational cooperation;- trans-border cooperation;- inter-regional cooperation.

Four Structural Funds allowed the European Union to grant financial assistance to resolve

structural economic and social problems:

the European Regional Development Funds (ERDF), whose principal objective is topromote economic and social cohesion within the European Union through the reduction

of imbalances between regions or social groups;

the European Social Fund (ESF), the main financial instrument allowing the Union torealise the strategic objectives of its employment policy;

the European Agricultural Guidance and Guarantee Fund (EAGGF - Guidance Section),which contributes to the structural reform of the agriculture sector and to the

development of rural areas; the Financial Instrument for Fisheries Guidance (FIFG), the specific Fund for the

structural reform of the fisheries sector.

Note:

After 1st

of January 2006, only ERDF and ESF remained under the umbrella of Structural Funds,

the last two instruments have formed a separate type of financial assistance (special funds for

agriculture).

Which are the objectives of the Structural Funds?

Objective 1: Supporting development in the less prosperous regions

Objective 1 of the Structural Funds is the main priority of the European Union's cohesion policy.

In accordance with the treaty, the Union works to "promote harmonious development" and aims

particularly to "narrow the gap between the development levels of the various regions". This is

why more than 2/3 of the appropriations of the Structural Funds (more than EUR 135 billion) are

allocated to helping areas lagging behind in their development ("Objective 1") where the gross

domestic product (GDP) is below 75% of the Community average.

All these regions have a number of economic signals/indicators "in the red":

low level of investment; a higher than average unemployment rate; lack of services for businesses and individuals;

poor basic infrastructure.
http://ec.europa.eu/regional_policy/funds/prord/prord_en.htmhttp://ec.europa.eu/regional_policy/funds/prord/prords/prdsb_en.htmhttp://ec.europa.eu/regional_policy/funds/prord/prords/prdsc_en.htmhttp://ec.europa.eu/regional_policy/funds/prord/prords/prdsd_en.htmhttp://ec.europa.eu/regional_policy/funds/prord/prords/prdsd_en.htmhttp://ec.europa.eu/regional_policy/funds/prord/prords/prdsc_en.htmhttp://ec.europa.eu/regional_policy/funds/prord/prords/prdsb_en.htmhttp://ec.europa.eu/regional_policy/funds/prord/prord_en.htm


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Some fifty regions, home to 22% of the European population, are covered in the period 2000-06.

The Structural Funds will support the takeoff of economic activities in these regions by

providing them with the basic infrastructure they lack, whilst adapting and raising the level of

trained human resources and encouraging investments in businesses.

Objective 2: Revitalising areas facing structural difficultiesObjective 2 of the Structural Funds aims to revitalize all areas facing structural difficulties,

whether industrial, rural, urban or dependent on fisheries. Though situated in regions whose

development level is close to the Community average, such areas are faced with different types

of socio-economic difficulties that are often the source of high unemployment. These include:

the evolution of industrial or service sectors; a decline in traditional activities in rural areas; a crisis situation in urban areas; difficulties affecting fisheries activity.

2000-2006: Objective 3: Development of human resourcesThe new Objective 3 combined the former Objectives 3 and 4 of the 1994-1999 programming

period. It covers the entire EU territory outside of areas covered by Objective 1.

Objective 3 served as a reference framework for all measures to promote human resources in the

Member States. It takes account of the Title on employment in the Treaty of Amsterdam and the

new European strategy for employment.

The Regulation takes account of the policies, practices and needs of the Member States as laid

down in their national employment plan. For the 2000-2006 period, Objective 3 has supported a

wide range of measures aiming to:

promote active labour market policies to reduce unemployment; improve access to the labour market, with a special emphasis on people

threatened by social exclusion ; enhance employment opportunities through lifelong education and training

programmes ;

promote measures which enable social and economic changes to be identified inadvance and the necessary adaptations to be made ;

promote equal opportunities for men and women[79].Former programmes on Structural and Cohesion Funds which runned from 1 January

2000 to 31 December 2006, have had 195 billion budget for Structural Funds, and 18bilion

for the Cohesion Fund.

Together with the Common Agricultural Policy, the structural and cohesion funds make up the

great bulk of EU funding, and the majority of total EU spending.

For 2000-2006, 135bilion was allocated to 50 "Objective 1" regions, with 22% of the

EU population. The primary criterion for inclusion as "Objective 1" is for a region having less

than 75% of average EU GDP per capita. The accession of 10 new member states in Eastern

Europe on 1 May 2004 has meant that many of the poorer regions in Western Europe no longer

qualify; there are some transition arrangements. All Objective 1 regions with less than 90% of

EU GDP per capita average have access to the Cohesion Fund.

Most EU funding is not paid directly by the European Commission but via the national and

regional authorities of the Member States
http://ec.europa.eu/regional_policy/funds/prord/guide/gui15_en.htmhttp://ec.europa.eu/regional_policy/objective1/index_en.htmhttp://en.wikipedia.org/wiki/January_1http://en.wikipedia.org/wiki/2000http://en.wikipedia.org/wiki/December_31http://en.wikipedia.org/wiki/2006http://en.wikipedia.org/wiki/Common_Agricultural_Policyhttp://en.wikipedia.org/wiki/GDPhttp://en.wikipedia.org/wiki/May_1http://en.wikipedia.org/wiki/2004http://en.wikipedia.org/wiki/2004http://en.wikipedia.org/wiki/May_1http://en.wikipedia.org/wiki/GDPhttp://en.wikipedia.org/wiki/Common_Agricultural_Policyhttp://en.wikipedia.org/wiki/2006http://en.wikipedia.org/wiki/December_31http://en.wikipedia.org/wiki/2000http://en.wikipedia.org/wiki/January_1http://ec.europa.eu/regional_policy/objective1/index_en.htmhttp://ec.europa.eu/regional_policy/funds/prord/guide/gui15_en.htm


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Below there are rendered the objectives and the financial instruments for 2007 - 2013

Instruments

European RegionalDevelopment Fund (ERDF)

European Social Fund

(ESF)

Cohesion Fund

(CF)

Objectives Convergence Regional

Competitiveness andlabor forceemployment

European TerritorialCooperation

Convergence Regional

Competitiveness andlabor forceemployment

Convergence

Priorities Accent on LisbonStrategy

Infrastructure Investments Research &

Development

SMEs

Accent on LisbonStrategy

Training Employment Institutional capacity

and administrativeefficiency

Transport andEnvironment

Network (TEN)

Transport outsideTEN

Urban transport Energy

UE financing for Romania

(maximum)85% 85% 85%

Concerning the Financial Perspective 20072013, we may emphasize that the Structural and

Cohesion Funds represent approx. 35.7% of the EU budget for the period 20072013 (out of a

total budget in amount of 864,316 bilion Euro).

2007 2008 2009 2010 2011 2012 2013 Total

(bln Euro)

42,863 42,318 43,862 43,860 44,073 44,723 45,342 308,041

Instruments European Regional

Development Fund

European Social

Fund

Cohesion Fund

Allocations 78,54% out of the total 17,52% out of the total 3,94% out of the total

Source:[78]

10.1.4.: Romania and the Structural Funds

For the period (20072013) the foreseenbudgetary allocation from the community

budget for Romania, in the form of Structural Funds, is in amount of 29.5 bilion Euro. This


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amount will be obtained only based on applied projects. In the same time Romania has a

contribution equal with 8.1 bilion Euro.

Related to the Planning of the Structural Funds, we may emphasize three types ofdocuments:

Strategic Economic Guidelines regarding Cohesion (they stipulate the Cohesion Policybetween 20072013); Reference National Strategic Framework (refer only to Structural and Cohesion Funds,

not to any other field, such as agriculture, etc.)

Operational ProgrammesOPs (there are separate OPs for each programme and they arecustomized for each of the 8 regions in Romania and for each authority which

administrate them).

The financial aid may be obtained through financing schemes:

Small and normal size projects / major projects Grant schemes Scheme for state aid (support) Projects generating incomes

Each project has a public contribution (EU + RO) and a contribution on behalf of the beneficiary

(co-financing).

For normal size projects the allocation is of maximum 25 million Euro. They areapproved at national level. The language of the projects is Romanian.

For major projects the allocation is of maximum 25 million Euro (for environment) andof maximum 50 milion Euro (for transport). They are approved by EC. The language of

the projects is English.

In relation to the stage ofRomanias preparation for accession, it is important to see the

interdependence between the pre- and post-acession funds:

Pre-accession Post accession

PHAREEconomic and Social Cohesion European Regional Development Fund European Social Fund

PHARETrans-border cooperation ObjectiveEuropean TerritorialCooperation- European Regional

Development Fund

ISPA Cohesion FundSAPARD European Fund for Agriculture and Rural

Development

The EC reporting for Romania concerning the absorption of the PHARE funds is 92-94%!

For ISPA Programme 47 infrastructure projects and the same number of transport projects have

been financed. Only 1 project was finalised!

For SAPARD Programme almost the entire budget has ben spent (only few measures are still

financed).


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The financial allocation pre- and post-acession are rendered below (data of EC - DG Regio, in

bilion Euro):

Cohesion Fund Convergence Territorialcooperation

Total

5,769 11,143 0,404 17,317*

*Plus an amount to cover the inflation (the average inflation EU 27)

Fund / Period 2000-2006 2007-2013 Differences

ISPA / CF 2,460 5,769 2,3 times

PHARE / SF 2,039 11,143 5,5 times

Total 4,500 16,912 3,7 times

SF & CF Territorial

cooperation

Agriculture Fishery (pescuit)

16,9 0,4 7,1 0,2

The financial package for Romania for the period 20072013:

(Milion of Euro, 2004 prices) 2007 2008 2009 Total

Allocated funds

Agriculturemarket measures 249 244 239 732

Agriculturedirect payment 0 405 476 881

Agriculturerural development 577 770 961 2,308

Sub-total agriculture 826 1,419 1,676 3,921

Structural Instruments 1,399 1,972 2,603 5,973

Internal Policies 244 248 252 744

Institutional Development 26 17 8 52

Sub-total internal policies 270 265 260 796

TOTAL LLOCATED FUNDS 2,495 3,655 4,539 10,690

Payments 1,109 2,195 2,823 6,128


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The amounts for the Structural Funds are increasing. This is an important aspect. Why they

increase? Because:

- it is suppose that better and better projects will be designed and applied, which means anincreased rate of finance absorption;

- Romania had around 400 million Euro from the PHARE Programme, to which StructuralFunds will be added.Romania is now on its way from Pre-accession Funds towards Structural Funds. There will be

differences in funds allocation, meaning:

Allocation will be done through multi-annual programmes (7 years) A decentralized (national) fund management will be applied The allocated amounts will be significantly higher (4 times higher) The required co-financing will be higher The funds operates based on the reimbursement principle Rules n+3 / n+2 are applied

TheInstitutional Framework for the implementation of the Structural Funds in Romania iscreated by thenational authorities and thebeneficiaries involved:

National Coordination Comittee Monitoring Committees Management Authority for Community Supporting Framework Management Autority for the Cohesion Fund Management Authorities for the Sectoral Operational Programmes and for the Regional

Operational Programme

Intermediary Organisms Payment Authorities

Audit Authority Final Beneficiaires

TheLegislative Framework is created by the following reference documents issued by the

Romanian Government:

1. Government Decree no. 497/2004 regarding the establishment of the institutionalframework for coordination, implementation and management of the structural

instruments (modified);

2. Government Decree no. 1200/2004 regarding the creation, organization and functioningof the National Coordination Committee of the preparation process for structural

instruments administration;

3. Law no. 315/2004 regarding the regional development in Romania (modified);4. Government Decree no.1.115/2004 regarding the elaboration in partnership of the

National Development Plan.

As emphasized above, a set of national relevant documents have been issuedprogrammatic

documents:

- National Development Plan [NDP];- National Strategic Reference Framework [NSRF] (divided in 7 Operational

Programmes, it represents the global strategy for utilizing the Structural

Instruments);

- Operational Programmes [OPs].


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National Development Plan

Theoverall objective of National Development Plan is to reduce the disparities related to

development between Romania and EU Member States and to increase the GDP per capita to

41 % of the Community average until 2015.

National Development Plan has asspecific objectives the following:

- Increasing on long-term the competitiveness of the Romanian economy- Developping at European standards the basic infrastructure- Improving and utilizing more efficiently the local human capital.

The NDPspriorities for 20072013 are:

Increasing the economic competitiveness and developing the knowledge based economy; Developing and modernizing the transport infrastructure Protecting and improving the environment quality; Developing human resources, promoting employment, social inclusion and strengthening

the administrative capacity; Developing the rural economy and increasing the productivity within the agricultural

sector;

Diminishing the development disparities between the regions of the countryNational Strategic Reference Framework

In the National Strategic Reference Framework there are4 thematic priorities:

Developing the basic infrastructure at European standards. Improving the Romanian economy competitiveness on long term Developing and utilizing more efficient the human capital Building an efficient administrative capacity

and oneteritorial prioritytargeting to promote an equilibrate development of the whole territory.

Operational Programmes

All programmes are part of the National Strategic Reference Framework and they

observe the followingstructure:

Presentation of the current situation Analysis of the strong and weak points of the current situation Strategy of the field/domain Presentation of the identified priorities in relation to the community ones Targets, indicators Financial plan Provisionsrefering to implementation Indicative list of the major projects[78]


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Bibliography:

Government Decree no. 497/01.04.2004 concerning the establishment of the institutional

framework for coordinating, implementing and managing the structural instruments, Published in

the Official Monitor no. 346/20.04.2004

European Structural Funds,

http://www.dti.gov.uk/regional/european-structural-funds/index.html

European Structural Funds, Future of Funds post 2006,

http://www.dti.gov.uk/regional/european-structural-funds/future/page26013.html

EU Cohesion Policy and Structural Funds, Romanian Training Institute, Training course titled

Financing projects from Structural Funds, Sibiu-Romania, 16-17 October 2006.

The Structural Funds,http://ec.europa.eu/regional_policy/funds/prord/sf_en.htm

Structural Funds and Cohesion Funds,

http://en.wikipedia.org/wiki/Structural_Funds_and_Cohesion_Funds
http://www.dti.gov.uk/regional/european-structural-funds/index.htmlhttp://www.dti.gov.uk/regional/european-structural-funds/index.htmlhttp://www.dti.gov.uk/regional/european-structural-funds/future/page26013.htmlhttp://www.dti.gov.uk/regional/european-structural-funds/future/page26013.htmlhttp://ec.europa.eu/regional_policy/funds/prord/sf_en.htmhttp://ec.europa.eu/regional_policy/funds/prord/sf_en.htmhttp://en.wikipedia.org/wiki/Structural_Funds_and_Cohesion_Fundshttp://en.wikipedia.org/wiki/Structural_Funds_and_Cohesion_Fundshttp://en.wikipedia.org/wiki/Structural_Funds_and_Cohesion_Fundshttp://ec.europa.eu/regional_policy/funds/prord/sf_en.htmhttp://www.dti.gov.uk/regional/european-structural-funds/future/page26013.htmlhttp://www.dti.gov.uk/regional/european-structural-funds/index.html

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Course 10 - MPE - 2012-2013_Decrypted