Project management: Romania's key to the EU funds door
Romania felt the pinch of EU funds during the 2007-2013 financial framework, ranking among the last places within the EU on absorption ratio. This was mainly due to legal instability, poor administrative capacity and lack of knowledge in terms of project management, according to experts.
However, the country managed to absorb around 70 per cent of the available funds at the end of 2015, while the 2014-2020 financing period is expected to perform better thanks to lessons learned from the past. Alexandra Cioboata (Lopotaru) talks to experts to analyze Romania's ways to ramp up from the ground.
Many European countries, especially during the early post-accession years, faced difficulties in absorbing the structural funds from the EU budget, say experts. The most cited reasons are the lack of a coherent long-term vision of the authorities, insufficient resources to co-finance projects, low administrative capacity at central and local levels, and insufficiently-skilled human resources... and Romania is no exception. It is well known that the country always ranked among the last places within the EU on the absorption rate of EU money, the most critical years out of the 2007-2013 financing period being the first five. As of the end of April 2012, the absorption ratio was very low, at 7.5 per cent out of the 19.14 billion Euro available. Moreover, by the end of 2012, Romania managed to have six operational programmes suspended, with a total of almost six billion Euro, due to irregularities found by the European Commission audits, including suspicions of fraud.
However, according to the latest data available on the European Commission website, the absorption rate of Romania towards the end of November 2015 was 69.9 per cent, representing the percentage of funds paid (including interim payments and pre-financing) compared to the total available budget for EU Cohesion Policy, while the level of payment done by the Romanian authorities to project beneficiaries stood at 74 per cent at the end of 2015 (amounts covering both state budget and EU contribution). Moreover, according to EY Romania experts, as beneficiaries may still submit requests for reimbursement in the first months of this year for expenditure paid until the end of 2015, which will constitute the basis for further requests for reimbursement from the European Commission, there are reasons to expect the absorption rate will increase until the definite closure of the budgetary exercise 2007-2013.
How has Romania managed to increase its absorption rate after it had such a very difficult start and how can it increase further? Experts say that the answer relies in the concept of project management: at the beginning of the financial period, the notion of project management was quite vague and caused administrative burdens in both accessing and implementation of funds. However, with time it started to be increasingly used in the vocabulary of subjects directly interested in European funds, managing to enhance the process.
"In my opinion, there was a rather complicated start because many, at first, did not possess the knowledge on how to properly write a project," Octavian Aron, trainer, public manager and member within the Executive Board of the Public Managers' Trade Union, tells The Diplomat - Bucharest. "In the early 2000s, there were only a few private institutions or persons that had an advanced knowledge in the field of project cycle management. Several public institutions became pioneers in project management, especially those that fulfilled the role of Management Authorities. Overall, I can argue that in the beginning, the knowledge regarding project management was, generally speaking, at a lower level and many problems emerged exactly from that. However, I am always seeing the glass half full and now, looking at the latest data, I can say that the situation has strongly changed in a positive way. Both the private and public sectors have strengthened their knowledge on project management and accumulated experience, leading to better results."
The same view is echoed also by Catalin-Teodor Dogaru, partner at TSP (smartprojects.ro) and consultant and trainer in project, programme and process management (past-president of PMI Romania Chapter), who confesses that in the first financing years - 2007 to 2013 - the lack of knowledge in project management was acute, leading to an inefficient bureaucracy. "Do you know how it is? Every time the snow comes, we use to say that the authorities were caught by surprise," Dogaru tells The Diplomat - Bucharest. "This was the same with project management during the first financing period. So, people had to learn along the way and the Management Authorities have applied their own rules, their own principles and their own way of working. In the end, this led to an inefficient bureaucracy. However, at some point, they stopped and realised that they needed to align to a single set of rules and to simplify procedures. The learning curve has been very slow, but maybe from now on things will go smoothly due to the lessons learned."
Nevertheless, Stefan Einfalt, managing director of Voestalpine Steel Service Center Romania - one of the first companies that applied for funding from the European Union Structural Funds in Romania - is sceptical regarding Romania's current performance, saying that the very recent effort to raise the absorption ratio now at the end of 2015, intending Romania to avoid losing open funding from the 2007-2013 period for good, has to stand the test of time first before it should be applauded: a five-year monitoring period applies during which funds can and have to be withdrawn for projects that do not meet the contractually-agreed-on targets or the general targets of the ERDF (European Regional Development Fund) or the Cohesion Fund.
"Even if now at the very end of the financing period 2007-2013 the absorption ratio might have been raised, we definitely should not fail to consider those hurdles created and very negative effects caused by incapability, mismanagement and total overkill in bureaucracy sustained by the Romanian Management Authorities which worked oppositionally to the potential and actual beneficiaries," Einfalt tells The Diplomat - Bucharest. During the years of the financing period 2007-2013 Romania constantly took last place within the European Union when it came to absorption ratio and first place when it came to the difference between contracting ratio and absorption ratio, showing lack of administrative capability to actually process the projects and transfer the available funds. (...) I do not want to point out that funds may have been paid out in a rush before 2015 ended, just to meet the absorption ratio goal, but I am very well astonished by the fact that what could not have been achieved in a seven-year period was now easily met within a comparably very short period of time."
"Institutional and managerial illiteracy" at the beginning of the first financial period
In the context of Romania's poor performance in attracting EU funds, Victor Bostinaru, member of the European Parliament and vice-president on Foreign Affairs of the S&D Group, launched on May 1, 2009, the study "White Paper of the Administrative Capacity - European funds absorption by small and medium-sized communities", the first large-scale research seeking to identify the problems faced by local participants in the process of absorption of EU funds. With a sample of 847 municipalities, representing over seven million Romanian local inhabitants, the study revealed that, in addition to the absence of trained personnel and weak fiscal capacity of local governments, the important bureaucratic obstacles, the abundance of rules that were too bulky and difficult to understand, non-transparent regulations on financing, small chances to exchange experiences between project proponents and undeveloped possibilities for inter-regional coordination were influencing the administrative capacity to manage any kind of project. Thus, not only did the lack of knowledge in terms of project management affect Romania's absorption ratio, but the inadequate administrative capacity completed the picture.
"The concept of project management is closely related to two other key elements: administrative capacity and institutional capacity," Bostinaru tells The Diplomat - Bucharest. "The first one is defined as a set of competencies belonging to the central, regional and local authorities that allows them to develop projects, while the second one is the capacity of institutions involved in the absorption process to cooperate, to elaborate projects together in order to meet the specificities of the Cohesion Policy. I am referring to reducing the gaps in terms of economic development, training, and competitiveness within the region and between regions. Romania is a classic case with most of its regions far from the European average. So, instead of preparing the necessary expertise for the 2007-2013 financial period, which had started to consolidate due to the pre-accession funds, we left things to happen by themselves. And the result was that we managed to absorb only seven per cent in the first five years. The causes of the failure were the instability of the legal framework and the administrative capacity which - in the end - was merely symbolic. We even can say that at that time there was a sort of institutional and managerial illiteracy."
Bostinaru goes on to add that the importance of both administrative capacity and project management determined at EU levels the idea to elaborate a new professional specialization: the management of the projects financed with EU funds. Thus, the Directorate-General of Administrative Capacity at the European Commission was founded in 2013 to test, through several pilot projects, the idea of having a discipline of European projects management within universities of each Member State. According to Bostinaru, countries like Poland and the Netherlands joined the pilot projects, but Romania did not.
"I have asked the Romanian Government to be among the first countries to implement such pilot projects, but, obviously, nothing was done in this regard," says Bostinaru. "The idea is to create experts in the field of European financing and the result would lead to obtaining recognized and scientifically accredited competences at EU level - a European curriculum. This would represent a great help for private companies that will recruit the newly-built experts from universities, while on the other hand, the experts could work anywhere in the EU as the trunk of information would be the same. I think that with the huge need for expertise in project management, particularly amid a very weak administrative capacity in Romania, the country should have had introduced this discipline at least a year ago."
Avoiding past mistakes
For the 2014-2020 financial framework, Romania has allocated around 33 billion Euro of EU money and, after the experience of the first financial programme, experts expect a better outcome, especially due to the lessons learnt so far and due to a better knowledge of project management. However, there are several important aspects that need to be taken into consideration during the second financial period, says Sofia Ionescu, senior manager, Advisory Services, EY Romania, that could lead in the end to a higher absorption rate. According to her, authorities should better plan the financial effort to co-finance and support the projects until reimbursement is received from the European Commission. This would be a task for the general public funds management, while the attention should be given to further facilitate the access of beneficiaries to EU funds by training programs, awareness campaigns, platforms for exchange of best practices so that they can prepare truly strategic, impactful or value-added projects. In addition, it is also key that organizational stability is ensured among the institutions managing the EU funds to avoid internal changes affecting the processes of evaluation, contracting, and the reimbursement they are running, she says.
"In doing so, we highlight the need for authorities to make use of the best practices developed during the period 2007-2013 and even to seek such examples in other Member States," Ionescu tells The Diplomat - Bucharest. "It is also our opinion that better use of the technical assistance funds attached to the new operational programmes should be ensured by improving the goal-setting of consulting assignments, as instruments of support to both authorities managing EU funds and beneficiaries."
Octavian Aron, trainer, public manager and member within the Executive Board of the Public Managers' Trade Union, is optimistic regarding the programming period 2014-2020, emphasising the need of better communication among all involved players. "If you do something once that is somehow good, the second time you do it, you can expect to improve your results," Aron tells The Diplomat - Bucharest. "During the 2014-2020 financial framework, I expect things to go faster, smoother, with an enhanced delivery of sustainable results. Finally, I think that emphasis should be given to the education in the field of project management, e.g. more calibrated training programmes for the general public and specialists."
The same perspective is echoed also by Teodor Darabaneanu, president of PMI Romania Chapter, one of the most important local association for the project management profession, who believes that the political will has changed for the better lately, an attitude that will lead to an improvement in the future absorption ratio. "The absorption of EU funds definitely depends on the political will," Darabaneanu tells The Diplomat - Bucharest. "The way one organises tenders and the timings of the task book need to be done efficiently, because those were the main obstacles so far [in attracting EU funds]. However, I think that the political will has changed for the better and that the situation will see an improvement in this regard, especially if authorities will work closely with experts."
Darabaneanu goes on to add that one of PMI's objectives this year is to cooperate with other important project management associations in order to further help the Ministry of European Funds with expertise on the management of the projects financed with EU money not only in the pre-accessing process, but also during the execution of the project. "Authorities need to assess all their past mistakes and try to avoid them in the second financial period with the help of experts," he says. "We, as PMI, together with other associations specialized in project management, could help them. I am optimistic regarding the 2014-2020 period due to the new technocrat Government, because I have noticed that the people want to professionalise. If things are going on the right path and people will get more confident, certainly the rates of submission of projects and absorption will increase, followed by a better execution of projects."
However, the most important segment which needs as soon as possible a higher and sophisticated managerial capacity is infrastructure, according to Victor Bostinaru, member of the European Parliament, vice-president on Foreign Affairs of the S&D Group. "The new financial framework will be definitely improved as the concept of the project management started to consolidate," says Bostinaru. "However, my biggest fear is Romania's infrastructure, the segment which still faces big challenges. Romania's development is done through large projects worth hundreds of millions [of Euro] which are very complicated. Thus, they need a larger and more sophisticated managerial capacity as the largest backlog of Romania in terms of EU funds absorption comes from the infrastructure sector," he concludes.
Next, The Diplomat - Bucharest talks to important players that have accessed EU funds to share their experience.
Stefan Einfalt, Voestalpine Steel Service Center Romania: "Poor administrative capacity, the core weakness for Romania during the last financing period"
Voestalpine Steel Service Center Romania, which became operational in 2012 after an investment of around 20 million Euro, was one of the first projects that applied for funding from the European Union Structural Funds in Romania, namely for its POS CCE (Sectoral Operational Programme "Increase of Economic Competitiveness") programme. The company filed its application documents in October 2008 and received final aid approval on December 22, 2009 for the maximum aid amount of 18.5 million RON (around four million Euro).
The core weakness for Romania during the last financing period of 2007-2013 was the poor administrative capacity, according to Stefan Einfalt, managing director of the company. He notes that transparency in recruiting is poor, administration staff is lacking skills, while very high fluctuation completes the picture. In addition, according to him, unclear and partly completely unrealistic legal frameworks for financial management, public procurement and the lack of availability of appropriate funding lines in the national budget (co-financing capabilities) contributed and still contribute to the apparent difficulties.
"For Voestalpine for example, one major constraint related to the EU-funding process was the absolute and complete unreliability of the Management Authorities when it came to respecting contractually-agreed on [the financing contract between the beneficiary and the Romanian State] or legally settled time-frames and schedules," Einfalt tells The Diplomat - Bucharest. "While the evaluation of the projects after filing during the call for proposals phase was published to take maximum six weeks, it actually took 13 months(!). That makes it very difficult, nearly impossible for project management to somehow properly plan and schedule all project-related activities."
Einfalt goes on to add that similar problems appeared when it came to the actual reimbursement claims, so those stages in the process, when the beneficiaries are actually requesting payments to be made from the agreed-upon funds to their corporate accounts. The financing contract foresees a maximum of 45 days between the filing of the reimbursement claim related documents and the payment, while in Voestalpine's case for one claim it was exactly 299 days and for another one 217 days.
"For a company like Voestalpine Steel Service Center Romania that profits from sufficient creditworthiness to set-up an intermediary financing for those delay-periods, such situation can be easily overcome (at least as long as we do not consider the additional cost that such intermediary financing produces). But I've seen several economically sound projects that would have created jobs in Romania, which had to claim insolvency(!) because the Management Authorities did not respect the agreed-upon timelines and no other short-term source of financing was available to them," says Einfalt. "That, to me, turns the whole sense and reason of state grants upside-down."
Another aspect that the managing director of Voestalpine Steel Service Center Romania sees as a disadvantage in attracting EU funds is bureaucracy. However, according to him, one very concrete example that could be seen as a quick-win in reducing bureaucratic efforts in Romania would be to just do away with the necessity to stamp and sign and therefore to produce "original" documents whenever communicating with an authority. Further opening public administration to electronic means of communication would be a great improvement, he says.
"During the course of the whole project I personally had to stamp and sign more than 12,000 DIN A4 pages (Yes, we counted ...) of filing documents, contracts, requests, status and durability reports, claims and contestations and other types of correspondence," says Einfalt. "If I try to remind myself of those regulations that applied related to the process of public tendering in Romania I really have a hard time understanding how some of those very complicated procedures would actually contribute to and support the underlying aim of such a procedure: to make sure a company can award their contracts to the best bidders on the market within a reasonable time-frame, and to make sure that those bidders which have not been awarded the contract will not be provided with the power to endlessly delay the project by filing contestation after contestation on such awarding."
Based on five years of practically dealing with European Union grants retrieval in Romania, Einfalt says he collected lots of lessons-learned and experiences. According to him, for ensuring the success of every project, the project management and the project team are absolute key-factors. In addition, his most important - and indeed an overall major - recommendation for those interested in European funds is before even filing for grants, to perform a self-evaluation of the project based on the publicly-available evaluation criteria that the Authorities will apply later on to judge the eligibility of every single project.
"It would be a pity to spend time and money on preparation of hundreds of pages of filing documents and then having to find out that even so, your project does not meet on of the K.O. criteria for example," he says. "Furthermore, find a competent law firm with experience in carrying out public tender procedures to support you and ensure that the project team that is to prepare the documents for submission includes both technical experts and financial experts. Involve the consultant who is to be responsible for contact with the authorities in all preparatory measures for the documents to be submitted," he adds.
The Greenfield project was pretty challenging as a whole, according to the managing director of the company, as it involved the edification and operative ramp-up of a complete industrial production plant - starting with the evaluation and acquisition of the land, identifying and obtaining available state aids and grants, tendering all necessary works, recruiting staff, designing company structures and procedures and, finally, ramping up the company's core processes to ensure flawless operations, growth and to meet financial targets. To that, one should add the financial crisis to complete the picture.
"For that particular project I will certainly always remember that dealing with the apparent effects of the 2008 crisis, being considered by many economists to be the worst financial crisis since the Great Depression of the 1930s, posed a major challenge," Einfalt tells The Diplomat - Bucharest. "Back then, in the end of 2008, the crisis in the first place manifested mainly as liquidity shock, as a complete ′evaporation of liquidity′ as PNP Paribas, for example, chose to describe it. When that happened, Voestalpine, most probably together with the rest of the industrialized world, immediately installed a task force to put measures into place to maintain the group′s high liquidity levels, to counteract the sudden complete inability of the financial markets to provide neither short-term nor long-term financing and through those measures to successfully steer the group through the absolutely opaque fog which was created."
The turnover of Voestalpine Steel Service Center Romania in the present business year (April 2015 - March 2016) will be around 50 million Euro, presently employing around 60 people. After having received primary material in form of hot-rolled, cold-rolled or surface-finished coils, Voestalpine Steel Service Center Romania, a member to Voestalpine Steel Division, is further processing such material at its own production facilities, by mechanically cutting those coils, based on customers' orders and specifications, in order to produce slit strips and cut-to-length sheets.
EY experts see reduction of administrative burden in both accessing and implementation of funds as of paramount importance
"Entrepreneur - Sustainable future!" is one of the two projects implemented by EY (Ernst & Young) Romania, one of the Big Four audit firms, with financial assistance from the European Social Fund granted under the Sectorial Operational Programme Human Resources Development 2007-2013. The overall value of the project was of 4.5 million Euro and it was implemented in a partnership including four top state universities - Cluj-Napoca Technical University, "Dunarea de Jos" University - Galati, "Alexandru Ioan Cuza" University - Iasi and "1 Decembrie 1918" University - Alba Iulia, along with S&T Romania. The project was addressed to entrepreneurs, as well as to managers and employees of small and medium-sized companies in north-west, north-east, central and south-east regions of Romania.
The project′s purpose was to promote managerial culture and to support the development of knowledge, skills and competences in key areas of business start-up and business development. In addition to project coordination and management as leading partner, EY has provided training and consulting services in areas related to budgeting, planning and financial management, accounting and taxation, reorganization, restructuring and performance improvement, preparation of business plans and business financing.
However, EY has faced several challenges in applying for funding and implementing EU financial assistance, according to Sofia Ionescu, senior manager, Advisory Services, EY Romania. Included in this list are delays in the evaluation of the application for funding, high administrative burden related to progress reporting and reimbursement of expenditure in compliance with applicable rules and legislation.
"Various types of weaknesses have affected the absorption of EU funds during the budgetary exercise 2007-2013. We have positively remarked that, in recent years at least, Romanian authorities, consultants, and members of the civil society have put effort into studying the factors affecting the absorption and identifying solutions for better EU funds management in the budgetary exercise 2014-2020," Ionescu tells The Diplomat - Bucharest. "However, the main weaknesses for the period 2007-2013 include the difficulties for beneficiaries to ensure the co-financing of projects in the context of the financial crisis, as well as for national authorities to temporarily ensure reimbursement of expenditure from state budget. In addition, we have seen an overall excessive bureaucracy in accessing the funds as well as in the implementation of financed projects, a lack of clear instructions or frequently changed instructions from authorities on the implementation of projects and insufficient project implementation capacity at the beneficiary level," she adds.
Asked about the aspects that could be done to improve EU funds management for the programming period 2014-2020, Ionescu adds that it becomes of "paramount importance the reduction of the administrative burden in both accessing and implementation of funds, ensuring financial flows for reimbursement of expenditure in acceptable deadlines, as well as increasing the operational and managerial capacity of both authorities managing EU funds and beneficiaries." In addition, Ionescu recommends to applicants that in terms of higher probability of accessing and receiving the funds, they should take ownership of the process, being better-informed on applicable rules and implementing their projects in-line with them, regardless of whether or not they are supported by a consultant.
Cristina Martin, manager, Advisory Services, EY Romania, echoes the same idea as her colleague, saying that bureaucracy in accessing and implementing EU funds projects was one of the factors hindering absorption. According to her, one key requirement of the European Commission for 2014-2020 is the electronic exchange of information between beneficiaries and authorities implementing EU Funds, which has the potential to reduce the administrative burden.
"The European Commission encourages implementation of administrative burden measurement and reduction projects through which they have up to now, in certain areas, identified specific bureaucratic bottlenecks and solutions to simplify the legislation and subsequent regulations and procedures for the benefit of citizens or the business environment," Martin tells The Diplomat - Bucharest. "Such studies, followed by operational changes, should also be done in the very near future for EU funds for the sake of more clarity and faster processes in contracting and spending these funds."
EY is one of the world′s leading professional services firms with approximately 212,000 employees in 700 offices across 150 countries, and revenues of around 28.7 billion USD in the fiscal year that ended on June 30, 2014. In Romania, EY was set up in 1992 and now has 650 employees in Romania and Moldova, providing seamless assurance, tax, transactions, and advisory services to clients ranging from multinationals to local companies. The offices are based in Bucharest, Cluj-Napoca, Timisoara, Iasi and Chisinau.
"EY will continue to follow its vision of Building a Better Working World by providing excellent client service in our professional services arena and by promoting initiatives in our key areas of concern such as sustaining entrepreneurship and business culture in Romania, encouraging youth and tackling other social problems," says Martin. "In particular, as regards EU Funds management, our dedicated teams will continue to focus on assisting our clients from the public administration who are responsible for the management of EU Funds in Romania, as well as our clients from both public and private sectors who intent to promote and implement significant initiatives financed from EU Funds. In this sense, we make available to our clients both our local expertise on EU funds matters, but also that of the network of other relevant EY teams in the European Union."
Constantinescu, BD Lemntech: "It's not easy to access EU funds, but it's worth it"
BD Lemntech, a wood processing company founded by Andrei Constantinescu, managed to grow faster over the years due to several projects implemented with the help of EU funds, purchasing machinery, software and building a new production space. The total value of the projects implemented so far is five million Euro, for which there were different co-financing percentages ranging from zero to 45 per cent. The last project co-financed with EU money that the company has just finished implementing consisted in purchasing a complete dust extraction and recycling unit, a thermo-laser installation and a kiln drier for wood.
"I can say that most of our investments were made using non-refundable financing," Constantinescu tells The Diplomat - Bucharest. "We used mostly EU-financing opportunities available and we consider this opportunity we've had to be a great help. There were of course many difficulties in communication with the authorities, implementation, compliance with legislation, regulations and so on. Now, when we draw the line, we can state without any doubt that it was worth it. Probably we could have not developed in such a short period at this level without the help of EU financing. With the help of non-refundable EU funds, we have managed to build what is generally known as the most technologically advanced factory for wood processing in Bucuresti-Ilfov county."
Constantinescu goes on to add that Romania has made some important steps in attracting EU funds during the last years, especially in terms of relaxed purchasing procedures which helped the small and medium enterprises to implement their projects more efficiently, with less correction from the Management Authority and fewer resources involved in the project. Regarding Romania's performance, achieving 69.9 per cent absorption rate, the founder of BD Lemntech describes it as decent, yet with many things to be improved and lessons to learn for the following financing period. "I am sure that the same problems we have had in Romania with implementing the EU funds were also present in other countries," he says. "The difference between our decent performance and other countries' better performance, I think, consists in the speed of reaction from the authorities in solving real on-site issues which beneficiaries had. Probably [another] 10-15 percentage points could have been achieved if decisions to improve had been taken earlier in the process."
After the experience with EU funds, the main recommendation of Constantinescu for applicants is that the owner or the general manager of the SME be fully involved in obtaining and implementing EU non-refundable projects and not leave the project entirely in the hands of a consultant. "It is vital that the owner or general manager to be involved in the obtaining (application documentation) and implementation of the EU funds," he says. "There is the need for a decision-maker on behalf of the SME to be present during all the important phases. In addition, in my opinion, I would not externalize the management of an EU project because no person knows the business better than its founder or its manager. A specialized project manager probably has more than one project to follow and might not give 100 per cent," he adds.
The 2015 turnover of BD Lemntech and the associated companies has exceeded 3.5 million Euro. Considering the already-signed contracts and the prospects the company has for 2016, Constantinescu estimates a turnover of 4.3 - 4.8 million Euro by the end of the year. In addition, the company will keep investing. Currently the production space consists of 9,000 sqm of concrete platform and 4,500 sqm of modern industrial buildings for manufacturing and storage. However, the company is at the final stage of closing in the acquisition of a neighbouring company, raising thus its concrete platform to 12,000 sqm and its industrial building space to more than 6,000 sqm. Currently, BD Lemntech has 42 employees, but by the end of 2016 it plans to reach 50 people.
Gosu, Ascendis: "All in all, our experience with EU funds was positive"
Ascendis Consulting, part of Ascendis Group, applied for EU financing in 2008. The project, called "Programme for development of entrepreneurial skills of entrepreneurs, managers and employees of SMEs", had as its objective to develop entrepreneurial skills and to promote an entrepreneurial culture for 1,600 managers, employees and entrepreneurs from more than 300 Romanian SMEs. The total value of the project was almost 7.5 million RON (around two million Euro), from which 6.69 million RON came from EU funds, 0.42 million RON came from national budget and 0.37 million RON was the value of the company's contribution as contractor. The project was delivered in 2009 and 2010. Although bureaucracy was the main challenge the company faced during the absorption process, Andrei Gosu, the general manager of Ascendis, tells The Diplomat - Bucharest that the overall experience was positive.
"All in all, even though it was difficult at the beginning, our experience with EU funds was positive, considering the fact that it overlapped with the decreasing budgets of multinational companies for training programmes," says Gosu. "We survived much more easily during the crisis with EU funding help and in a very tough time for our industry, we were able to see the light at the end of the tunnel thanks to our EU-funded project."
Speaking of the beginning of EU financial framework 2007- 2013, Gosu thinks that the biggest shock was the huge amount of paper needed in order to justify the expenses of a project. Besides bureaucracy, he thinks that the frequent changes in management authorities' leadership and the deficit of EU funds specialists in the public sector, who shifted towards the private sector for better wages, were the weaknesses of Romania in the first EU funds framework.
"Even though I don't think bureaucracy may be avoided, I believe that potential beneficiaries are more aware now of why they need to explain any Euro spent in a project and maybe find an internal method to better address this issue," he says. "During 2007-2013 a huge market of consultants specialized in EU Funds was developed, so obtaining the funds may not be that hard any more. Still, the potential beneficiaries in our field of human resources development programs need to pay attention in order not to establish a very large target of participants in the training programmes when asking for EU funding, because it may be difficult to reach."
Gosu adds that Romania had a surprisingly good absorption rate by the end of 2015, considering that at the end of 2014 this indicator was less than 45 per cent and in the past few years the payments from EU for some programmes, including POSDRU - the program for human resources development projects - were temporarily stopped. However, Romania still has to learn how to better use "free" money from EU and maybe follow, in the actual financial exercise (2014- 2020), the Polish example, he says.
"Poland joined the EU in 2004 and is now well known for its best-practice examples in using structural funds because of so called ′Polish miracle′, being the only EU country that succeeded to avoid recession during the crisis, and because of its amazing infrastructure development," says Gosu. "For example, they built more than 760 km of highways only in 2008- 2012 period, according to a PwC study," he adds.
Ascendis recorded a turnover of more than five million Euro, up by 16 per cent compared to 2014, being the best year in Ascendis's history, says the GM. In addition, Ascendis has met more than 35,000 people in its training and teambuilding programmes and in assessment centres. At this moment, the team has 67 consultants.
Bilka plans to further access EU Funds
Bilka Steel, a Romanian-based company specialized in the production and development of complete roof systems for residential and industrial buildings, has invested in the past eight years over 13 million Euro, its main objective being to develop an optimum production capacity, an efficient logistic system, a wide range of products and a distribution at the level of the entire country. The investments were made from their own funds, bank loans, but also European funds. Last year, Bilka concluded a project, which aimed at the investment in a new technological line of roof accessories, where the total value of the project was 1.67 million RON, from which 1.43 million RON represent the non-reimbursable financing, obtained from the European Fund of Regional Development (FEDR). The company submitted the file in 2011 and the financing contract was signed at the beginning of 2014. Given the positive experience so far, the company is planning to further access non-reimbursable funds, according to Horatiu Tepes, owner of the company.
"Taking into account our development plans, the non-reimbursable financing projects have been and continue to be a solution for faster development," Tepes tells The Diplomat - Bucharest. "For Bilka, the projects were finalized successfully and we are aiming at new opportunities for attracting non-reimbursable funds. Given the fact that Bilka has a well-established business strategy for the next 20 years, we did not encounter any problems. We understood the requirements from the beginning, we complied with them and we were successful. I think our success is also due to the consultants."
Although the absorption rate of the European funds "exploded" in the last month of 2015, Romania still registers a loss of approximately five billion Euro from European money. The main weaknesses which blocked the absorption of European funds in all these years are listed by Tepes, including poor management, control systems and practices from the procurement sector, improper planning, poor prioritisation of the objectives and last, but not least, the conflicts of interest. In addition, in order to ensure the proper absorption of these funds, it is very important to inform and train the representatives of the private sector in order to have the information and knowledge specific to the accessing procedures, he says.
"Bureaucracy is one of the factors which made us deal in Romania with a very low level of European funds absorption," says the owner of Bilka. "It happened, in the case of some companies, even in our case, that at the moment of applying for a project, the company was classified in the category of small enterprises, and until the file is approved, the company grows into the category of medium enterprises, and automatically the file is not accepted and the funds are lost. Bureaucracy is a problem. The application procedures can be very much simplified, and especially the analysis time needs to be reduced. (...) Nevertheless, I consider that these years, in which we fought to attract funds, were an experience which we acquired and from which we will be able to capitalise during the next period for a higher absorption rate."
Bilka started in 2014 an investment plan with completion in 2016 estimated at ten million Euro. In the period 2014 - 2015, the total investments exceeded seven million Euro, an investment following which 13 new production lines of metallic tile, drain water system and roof accessories have been added in the portfolio, along with an area of over 27,000 sqm of land for storage, production lines and space for offices. In 2016, an important direction in the business strategy of the company is the continuation of the investment plan, says Tepes. This year, the company has budgeted investments of three million Euro and it aims to mainly purchase new production lines necessary for closing the series of investments for residential-purpose products. Bilka concluded the year 2015 with a turnover of over 190 million RON (more than 42 million Euro), 42 per cent more compared to 2014.
"We consider 2015 as the best year in Bilka history," says the owner of the company. "We are talking about a year at the end of which we drew the line and we have: financial performances much over the average of players from this market and according to the objectives established at the beginning of the year, investments of four million Euro and around 160 employees. According to our estimations, one of four metallic roofs sold in the first half of the year was purchased from Bilka."
Concerning the forecasts for 2016, Tepes is optimistic that it will be a year with significant growth. "The demand of new houses, the support offered by the state for purchasing new houses, the availability of banks to support the builders on one hand and the private customers on the other hand, together with the company development, are factors that make us estimate for this year an increase which can reach up to 20 per cent," he concludes.