IMPLEMENTATION OF THE EUROPEAN UNION COHESION POLICY FOR PROGRAMMING PERIOD: EVOLUTIONS, DIFFICULTIES, POSITIVE FACTORS

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1 IMPLEMENTATION OF THE EUROPEAN UNION COHESION POLICY FOR PROGRAMMING PERIOD: EVOLUTIONS, DIFFICULTIES, POSITIVE FACTORS PhD Candidate Ana STĂNICĂ Abstract In an European Union that integrated over the last years twelve countries: ten in 2004 and later on, in 2007, Romania and Bulgaria, new challenges have emerged due to the effort to mitigate the gap between the regions levels of development and strengthening the economic and social cohesion. Globalization, climate change, energy security, demographic decline and migration are issues that affect all Member States. Key words: cohesion policy, EU funding, programs, projects, results, difficulties, positive factors. *** Cohesion policy is and will remain a pillar of the harmonious development of the European Union. The objective of economic and social cohesion has been established in the Single European Act and became reality in 1988 by adopting the first regulation that gave birth to the cohesion policy. The Strategic guidelines on cohesion have the goal to make Europe and its regions more attractive for investments and employment, to improve knowledge and innovation. The regulations of the current programming period ( ) were endorsed with the goal to achieve these priorities. Please note that the Council Regulation (EC) no. 1083/2006 of 11 July 2006, laying down general provisions on the European Regional Development Fund, European Social Fund and Cohesion Fund, established the obligation of the Member States to submit to the European Commission a report that includes information on the contribution of the programs cofinanced by European funds in order to accomplish the cohesion policy objectives. In this context, the national strategic reports received from the Member States represent key tools for monitoring the implementation of the strategic commitments of the Member States in order to fulfill the high level of EU objectives, through cohesion policy. Based on the national strategic reports, the European Commission issued the report on the implementation of the programs during the period ), offering for the first time, a complete overview of the implementation of cohesion policy in all the 27 member states of the European Union. Revista Română de Statistică nr. 8 / 2010

2 Having in mind that the cohesion policy has the role to mitigate the disparities of socio-economic development levels between the European Union s regions, by means of supporting the areas and the regions left behind, the competitive position of regions in the world economy shall be improved also. With a budget of 347 billion EUR for the programming period , the cohesion policy represents the largest source of financial support for investment in areas like economic growth and employment at European level, thus enabling all regions to compete effectively on the domestic market 2). The Council Regulation (EC) no 1083/2006 is also designed to improve transparency and to encourage accountability at national level 3). The report 1 confirms that the European Union was also affected by the economic crisis started in Developments at EU level in 2009: - An average decline in GDP of over 4%, with strong negative rates in the Baltic States (between 14 and 18%), except Poland, which had a growth of 1.2%. In Romania, GDP declined by 14.5% to a negative value of 7.4% 4) compared to 2008, when a value of 7.1% was recorded ; - Unemployment rate was 9.6% in December 2009 compared to 8.2% in December The unemployment rate has doubled in Ireland and Spain and tripled in the Baltic States. Latvia (22.8%) and Spain (18.8%) scored the highest rates at the end of Romania had an unemployment rate of 7,5% in November 2009, compared to 4,1% in November 2008; - Total investments declined about 15% in 2009 compared to the previous year, while consumption decreased by around 3%; - Exports of goods and services diminished by almost 20% and foreign direct investment declined in several Central and Eastern European countries (Hungary, Latvia, Slovakia); - Public expenditure increased mostly from the protection offered by the national welfare systems and the stimulus plans adopted. According to the EC report 1, following a period of around 18 months of active implementation, the reported financial volume of projects selected is 93.4 billion EUR, representing 27% of available EU resources for the period. By comparison, Romania had a number of 2,672 projects approved by , amounting to EUR 5.3 billion, out of which 3.2 billion euro represented EU contribution. (This means a rate of 16.65% from the total amount of EUR billion allocated to Romania for the period , approximately 11% below the European average). In implementing the cohesion policy programs, Member States have identified a number of difficulties, the ones needing more regard being: changes in the rules on financial control, some time to adapt to these rules Romanian Statistical Review nr. 8 / 2010

3 (Austria, Belgium, Czech Republic, Denmark, Italy, Portugal), complexity of managing during overlapping programming periods ( and ), unclear distribution of tasks nationally, insufficient experience, lack of administrative capacity at both managing authorities and beneficiaries levels and the internal reorganization processes of public administration (Bulgaria, Romania, Lithuania), the impact of global economic recession, the consequences in public funding restrictions from national and local levels. In the beginning of the implementation process of operational programs and then in the actual implementation of projects, România 5) has faced various obstacles, such as: difficulties in preparing the projects portfolio and launching the calls for project proposals, delays in project evaluation and selection (usually 6 to 10 months between the moment when a project is submitted and when the beneficiary is notified over the result of the appraisal result), difficulties in implementing the project at the beneficiaries level, particularly major projects (delays in awarding the public procurement contracts in case of preparation of tender documentation delayed by beneficiaries, different interpretations of some legal provisions relating to public procurement by the representatives of the monitoring and control bodies, large number of appeals filed), difficulties in securing the financial resources necessary to initiate the projects or the own contribution to project financing, a limited capacity and expertise of some beneficiaries from the local and central administration in preparing and implementing projects - insufficient and inexperienced staff, especially within the local authorities from the small and medium size towns, lack of strategic planning and a rigorous budget planning, legislative barriers, relatively limited capacity of UCVAP 6) to effectively fulfil the role of ex-ante verification of public procurement procedures, according to the legal provisions in force, the institutional problems mainly related to the complexity of working procedures and staff stability. Insufficient human resources and sometimes a poor financial motivation represent some of the major problems facing the entire management system of structural instruments. Despite the encountered difficulties, the good practice examples provided by the Member States reveal a number of positive factors related to the implementation of these programs. I.e.: close cooperation between the Member States and the Commission during the finalization of the Regulations and Guidelines, positive links between cohesion policy objectives and sectorial reforms in areas such as education, science/research, health and business environment, use of information and communication technologies, simplification of administrative procedures (national and/or regional). Cohesion, which is the second largest policy group, representing Revista Română de Statistică nr. 8 / 2010

4 almost a third of the budget, remains problematic and is the area most affected by errors. The Court estimates that at least 11 % of the total amount reimbursed should not have been paid out 7. In the annual Report of European Court of Auditors 8, adverse opinions on the legality and regularity aspects for the policy groups Cohesion, Research, energy and transport, as well as External aid, development and enlargement were issued. Payments in these policy groups are materially affected by errors, although at different levels. In this context, simplification and effectiveness of cohesion policy were the main objectives of European Commission. In this respect, the analysis of the results obtained in implementing cohesion programs provides important data. It should be noted that in September 2007, within the Fourth European Forum on Cohesion, European Commission officially launched the debate on the future of cohesion policy. Member States, together with other relevant actors in the cohesion process, were invited to express their opinion and recommendations on future policy by 31 January 2008, in the context of the challenges facing the European Union and given the results and impact of the current policies. In order to present Romania s position in this large and important debate at European level, a supporting document based on the questions raised by the European Commission through the Fourth Report on Economic and Social Cohesion Growing Regions, Growing Europe was submitted to public consultation. The document was drafted with the participation and contributions of key institutions involved in the implementation of the cohesion policy in Romania and in the management of structural instruments: the Managing Authorities of the Operational Programmes, Regional Development Agencies, and local organizations in Romania. From the approaches 9 included Romania s position, we highlight the following: keeping the cohesion policy as a significant share of the amounts forming the Community budget, this policy should focus even more on supporting the less developed countries and regions within EU, especially in the context of increasing disparities resulted from the recent enlargements, increasing the financial support per capita and maintaining the principle of national and regional allocations; the Member States would preserve their right to apply their own recipe as regards the approach on the Lisbon measures, according to their specific regulations, the cohesion policy continuing to provide its support to achieve the Lisbon reviewed objectives; paying a special attention to development of economy based knowledge and Romanian Statistical Review nr. 8 / 2010

5 on a continuous improvement of human capital, the future corresponding budget should be set by paying special attention to integrating climate change mitigation and to adapting economic activity to certain requirements thereof; exploiting ecologic component by developing new market sector, as well as implementing clean technologies. Another objective is to increase the occupancy rates, to diversify the employment framework, to increase the youth employment, to provide for adequate wages - attractive enough to fight against labour migration, to promote active aging by applying the flexibility model for employment field. The effectiveness of the cohesion policy implies something more than simply to absorb the EU funds, the expected effects being attained only in combination with other coherent and comprehensive national and regional policies. In this case, a proper setting of priorities and a uniform strategic approach by integrating all relevant policies at national and Community level will become essential. Consolidation of cooperation through cross-border or neighbourhood programs (essential in a globalized economy with limited resources available) is beneficial in many areas such as research, development, promotion of knowledge economy, environmental protection, improving cross-border contacts for promoting a sustainable development and trading. Many of the aspects raised by Romania were also to be found in the positions of the other Member States 10. The results were summarized within the Fifth progress report on economic and social cohesion from 2008 and showed that: financial support should be provided to all EU regions, with priority for those lagging behind, the convergence can not be achieved without competition; the rejection of any attempt at renationalising the cohesion policy; a strong support is granted for an ambitious cohesion policy; the investments for innovation, education, sustainable development and health should be a priority without losing sight of traditional infrastructure needs; the coordination with other Community policies should be consolidated (e.g. research policy); the rules on state aid should be reformed and simplified; the best way to implement strategies is from down upward; the available resources should be directed to sectors with growth potential; the simplification of the cohesion policy should be continued; the N+2 rule should be provided with more flexibility; regional cooperation is considered to be the best example of the added value of cohesion policy. In October 2008, the European Commission adopted The Green Paper on Territorial Cohesion, launching a broad public debate on territorial cohesion and its definition. The Commission was pleased to receive 391 responses 11, including contributions from all Member States, from nearly Revista Română de Statistică nr. 8 / 2010

6 100 regional authorities, from more than 150 regional and local associations as well as from cities, economic and social partners, civil society organizations, research institutions, and individual citizens. The European Parliament, the Committee of the Regions, and the European Economic and Social Committee have all adopted their opinions on the Green Paper on Territorial Cohesion. An overall agreement on the goal and basic elements of territorial cohesion emerged from this debate. The goal of territorial cohesion is to encourage the harmonious and sustainable development of all territories by building up on their territorial characteristics and resources. The three basic elements proposed to achieve this goal are: - concentration (achieving critical mass while addressing negative externalities); - connection (reinforcing the significance of efficient connections of lagging areas with growth centres through infrastructure and access to services); - cooperation (working together across administrative boundaries to achieve synergies). Territorial cohesion complements and reinforces economic and social cohesion. There is a strong demand for reinforcing territorial cooperation by making it more strategic, but at the same time more flexible and simple. Cross-border regions are regarded as laboratories of the European integration. The architecture of the future cohesion policy should be carefully analyzed, as the cohesion policy represents a powerful tool providing stability and securing financing sources, by investing in medium and long term strategies, on which regional and local partners could rely on. Conclusions Overall, the measures undertaken in order to achieve agreed objectives and strategies are implemented in a good manner within EU, although the slow start in certain Member States in the new programming period may jeopardize the effective use of funds. This first strategic reporting exercise represents a basis for a more thorough assessment of performance. The Member States can measure the rate of progress recorded for different priority EU topics compared to the EU s average, identifying areas of unsatisfactory progress. Article 3 of the Treaty of Lisbon makes from territorial cohesion an explicit objective of cohesion policy for the future. In addition, the current crisis and its asymmetric effects on different areas have increased the importance of Romanian Statistical Review nr. 8 / 2010

7 territorial cohesion in the EU, and discussion about this subject received a new impulse forward. Public consultation on the future of cohesion policy have resulted in a number of important issues for cohesion policy implemented at European level and against any attempt to renationalise this policy. National and regional authorities support the principle of earmarking and investment of resources of cohesion policy by Member States and regions, according to the Union s growth and jobs. Territorial cooperation is clearly recognised as an essential part of cohesion policy. Many regional and local authorities invoke the principle of subsidiarity, and intend to have a more important role in the implementation of cohesion policy. The challenges towards the European regions require for a policy based on structural factors such as: competitiveness, environmental and social sustainability and which promotes the restructuring of regional economies by using their own specific physical, institutional and human resources. It also calls for the reinforcement of cooperation actions across the Union for solving the problems connected to globalisation, climate changes, energy security, demography and social inclusion. 12 The Cohesion policy has an interdependent relationship with other EU policies: state aid, environment, transport, supporting innovation and informational society. The Europe s competitiveness can not be achieved only through policies in individual EU Member State or regional level, but through close cooperation of all involved actors. The European regional policy has the potential to transform common challenges into opportunities, being created in such a way as to involve individuals in conception and implementing of regional development strategies and local projects for the benefit of the whole Europe from the EU responses. The reflection on the future of cohesion policy is part of a complex debate, of the European budget for the next programming period and of EU s future priorities. Note: 1. Cohesion Policy: Strategic Report 2010 on the implementation of the programmes for , Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions COM (2010)110 final, Brussels, Article 29 of Regulation 4. Quarter III Government of Romania, National Strategic Report 2009 on implementation of the Structural and Cohesion Funds Revista Română de Statistică nr. 8 / 2010

8 6. By the Emergency Ordinance no. 30/2006 and further amendments, the Ministry of Economy and Finance was appointed through the means of UCVPP (Unit for Coordination and Verification of Public Procurement), specialized body of central public administration responsible for checking the performance of the procedural aspects of public procurement 7. Press release, European Court of Auditors, ECA/09/67, 10/11/ Annual report on budget execution in 2008, adopted at the meeting held on (2009/C 269/01), European Court of Auditors 9. contributions/ro_en.pdf en.cfm?nmenu=3 11. The Sixth Progress Report on economic and social cohesion, Brussels, COM(2009)295 final 12. Press release Cohesion Policy after 2013: underlined the necessity of investing in the future during a high-level debate held in Maribor, Slovenia, IP/08/538, Brussels, April 7, 2008 Selective bibliography - Working for the regions, EU regional policy , January 2008, CEC: DG REGIO / Mike St Maur Sheila, EU Regional Policy - The cohesion policy: challenges and issues, European Parliament, September EUROSTAT, News release, 25/2010, 18 February Study regarding the identification of main reforming streamlines of cohesion policy in terms of post-2013 for Romania, Study realized by the consulting company Deloitte Consulting Ltd. - EC Regulation, Reports, Press releases, EGO and other specific documents as foreseen in Notes. Romanian Statistical Review nr. 8 / 2010