Projecting the Future
In light of the 2007-2013 programming period experience, where Romania faced major difficulties in attracting European funds, The Diplomat - Bucharest organized in early February the first 'Project Management and European Funds' conference
to stress the strong connection between the two concepts, to underline past mistakes and ways to avoid them during the new financial period and also to offer concrete solutions to improve Romania's prospective.
By Alexandra Cioboata (Lopotaru)
In 2014, more than seven years after its accession to the European Union, Romania was among the last countries in attracting European funds, with an absorption rate under 40 per cent of the 2007 - 2013 allocation of 19.2 billion Euro. Even with one year in addition granted by the EU for reducing the risk of losing from the allocated amounts, Romania could not meet the level of the other countries in the region, which had in 2013 absorption rates between 48.8 per cent (Bulgaria) and 78.3 per cent (Estonia). The main bottlenecks stressed by experts that made the absorption of EU funds in Romania hard include poor management, poor control systems and practices from the procurement sector, 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, insufficiently-skilled human resources, and last but not least, the conflicts of interest.
However, absorption of European funds "exploded" in the last month of 2015 and, according to the latest data available on the European Commission website, the absorption rate of Romania towards the end of November 2015 was 70 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 made by Romanian authorities to project beneficiaries stood at 74 per cent at the end of 2015 (amounts covering both state budget and EU contribution). Moreover, as beneficiaries may still submit requests for reimbursement in the first months of this year for expenditures 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 to reach 80 per cent until the definite closure of the budgetary exercise 2007-2013, according to the Ministry of European Funds.
How did authorities manage to increase the absorption rate in such a short period of time and what are their priorities for the following months? Has Romania learned from past mistakes or are there still many things to improve? How will the new 2014-2020 programming period stand, where Romania received 33 billion Euro in EU money? These were the main aspects that were stressed during the first edition of the "Project Management and European Funds" conference, organized by The Diplomat - Bucharest, under the High Patronage of the Ministry of European Funds, together with strategic partner PMI (Project Management Institute) Romania Chapter, at the InterContinental Bucharest hotel. The event was also organized with the support of BCR, Borsec, Transgaz and Transelectrica.
The panellists of the event were Aura Raducu, the Minister of European Funds; Victor Bostinaru, member of the European Parliament and vice-president on Foreign Affairs of the S&D Group; Octavian Ciprian Alic, the director of the European Funds and International Relations Division at Transgaz; Bogdan Tanasescu, EU office manager within the Public Sector and Infrastructure Financing Division at BCR; Teodor Darabaneanu, the president of PMI Romania Chapter; Octavian Aron, trainer, public manager and member within the Executive Board of the Public Managers′ Trade Union, and Dragos Iorga, the executive director of the OIR POSDRU (Regional Intermediate Body for the Sectoral Operational Programme Human Resources Development), Bucharest - Ilfov region. The moderator of the event was Sofia Ionescu, senior manager, Advisory Services, Ernst&Young (EY) Romania, who took the floor to underline that, although the past was gloomy, Romania seems to have learned from its mistakes and increased over the years its administrative and managerial capacities, two critical concepts that have drawn the country back in the first years of the 2007-2013 programming period.
"Authorities are preparing to start the closing procedures of operational programmes financed in the 2007-2013 period and, lo and behold, Romania is gradually approaching the closure of a complete cycle management of operational programmes: we have tangible results, we have success stories, lessons learned and, moreover, we feel and believe that we have an increased administrative and managerial capacity against the period of 2007 among both public administrations and beneficiaries of funding," said Ionescu. "All these are things that deserve to be presented and discussed in terms of financial package designed to the period of 2014-2020. Here also, authorities are focusing their efforts on the effective launching of financing. From the beginning of the year already, we have witnessed the launch of the first calls for project proposals and more applicants' guides have been published for consultation, which is a clear sign that intensive launches will follow."
What did the panellists debate? The Diplomat - Bucharest writes further.
The Ministry of European Funds is changing its approach
The closing of the 2007-2013 financial period, the execution of payments and the achievement of a higher absorption rate of EU funds - close to 80 per cent - represent the main priorities of the Ministry of European Funds at the time, Aura Raducu, Minister of European Funds, noted during the event. For the next period, however, the Ministry wants to change its approach to increase the quality of projects, the main aspects including the fulfilment of the Ex Ante conditions for attracting the European funds in the 2014-2020 programming period and the acceleration of the implementation of the 2014-2020 FESI (European Structural and Investment Funds) programmes.
"We mainly want to fulfil the Ex Ante conditions, which are very important for the new 2014-2020 period," said Raducu. "We have 36 conditionalities without which we cannot launch some sectors. The second target that we have imposed on ourselves is to have a larger transparency of the programmes financed by European funds, so beneficiaries could have access to all of the data, the process could move smoothly and accelerate the implementation of the structural funds. We find ourselves in the third year of the programme′s implementation. The first two years have been mainly allocated to the preparation and approval of the operational programmes and we want 2016 to be the year in which we launch more than 60 per cent of the financial allocation for structural funds or agricultural policy."
Raducu further presented the National Forecast Commission′s analysis regarding the effect of EU funds on the macroeconomic indicators during 2009-2015. In terms of GDP, funds and EU-funded projects managed to determine a ten per cent growth of GDP compared to the scenario without the use of European funds. Positive effects were seen both on employment, where, at the end of 2015, the employment rate was higher by 3.8 per cent due to European funds, and unemployment, which at the end of 2015 was 3.1 per cent lower than it would have been without funds. In addition, private consumption and the average monthly wage were higher by 19 per cent and 25.4 per cent respectively compared to the scenario where EU funds are absent.
"We are pleased to see this impact of EU funds on the living standard," said Raducu. "This reflects an increase in living standards, in particular by HR projects that have funded the salaries of people who have developed activities within the projects financed by EU funds."
Another aspect identified by Raducu as a bottleneck in EU funds absorption relates to the difficult and burdensome procedures that the beneficiaries and the management authorities must follow during implementation. Thus, in this regard, the authorities are developing a computerized system in order to simplify procedures as well as diminish the volume of documents submitted by the beneficiaries during the new financial period, 2014-2020.
"Starting with this programming period and especially with 2016, communication between Management Authorities and beneficiaries should be done through an IT system," said Raducu. "It is extremely important to reduce the excessive bureaucracy. For this, the Ministry has made a very big effort to create MySMIS, an integrated IT system, which will greatly help beneficiaries and simplify the process. It is in the stages of completion," concluded Raducu.
Administrative and institutional capacities, sine qua non factors for EU fund absorption
Administrative capacity and institutional capacity are the sine qua non factors not only for the absorption of EU funds, but especially to distinguish between quantitative absorption and qualitative absorption, said Victor Bostinaru, member of the European Parliament and vice-president on Foreign Affairs of the S&D Group, during the event.
According to him, all evaluations, including statistics from late 2015, show that Romania has performed very well on small projects, maximum on medium ones, while the large projects - which are more important - have been registering the worst performance. The main factor to properly develop large projects is the existence of an administrative capacity coupled with institutional capacity, said Bostinaru.
"The small-value projects do not produce the driving and multiplier effects, which are the essence of the Cohesion Policy, meant to reduce disparities between development areas or within development regions," said Bostinaru. "The essential factor to develop large projects is the existence of an administrative capacity coupled with institutional capacity, a set of institutions that can, know how to, and must cooperate with each other in order to develop the strategic planning dimension. Large projects, especially those of large infrastructure, have not only registered the weakest performance in terms of net absorption, but are the weakest in terms of their ability to achieve strategic planning requirements."
In the context of Romania′s poor performance in attracting EU funds in the first post-accession years, Bostinaru 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.
Since then, however, things have progressed through institutional reorganizations [creation of the Ministry of European Funds] and by stabilizing the legislative and institutional framework, said Bostinaru. "We must recall that in 2012 Romania had seven per cent absorption capacity," added Bostinaru. "Now, we are heading towards a relatively reasonable figure and, most probably, the maximum possible one, considering both our capabilities, including physical, to manage very large volumes of funding and the time horizon that is nearing completion."
Bostinaru also showed that, at European level, the European Parliament found that it is imperative to improve the administrative capacity. Thus, to stimulate the development of administrative capacity and to ease access of applicants to these funds, similar rules and technical criteria have been introduced for five European funds. In addition, the European Parliament has come up with two innovations that could make the difference between quantitative and qualitative absorption including in Romania: the integrated approach and multifonds financing.
"The integrated approach and multifonds financing enable the development of strategic projects and allow the generation of those spectacular effects in terms of driving and multiplication," said Bostinaru. "Romania, which has declined the acceptance of those two rules as official policy, accepted the integrated approach and the multifonds financing at the largest scale in the EU in one place: in the Danube Delta. It is a project little-known at European level, where people, using administrative and institutional capacity, have developed a project which surpasses one billion Euro and covers all sequences of a complex area, from waste treatment to vocational training. But, unfortunately, our authorities have not promoted it."
Transgaz plans to attract 400 million Euro in non-refundable funds until mid-next year
Through a strategic decision, Transgaz, the technical operator of the national natural gas transmission system in Romania, established in 2014 a department for accessing European funds and international relations, in order to attract more grants to underpin the Development Plan for the National Gas Transmission System (NTS) during 2014 -2023. So far, the department has attracted 200 million Euro in non-refundable funds, while the target is 400 million Euro until the middle of next year, according to Octavian Ciprian Alic, director of the European Funds and International Relations Division at Transgaz.
"If we look at the situation of the energy market and, if we take into account that the EU is totally reconsidering its energy map, we see that Romania′s position is favoured," said Alic. "Within the Development Plan for the NTS during 2014 -2023, there were estimated investments of 1.5 billion Euro, which will be financially supported in the ratio of 35 per cent from internal resources and 65 per cent from external sources. We are in the middle of a very comprehensive investment development plan and the target of the department that I lead is the attraction of 400 million Euro, non-refundable funds, until the middle of next year."
As an important success, Transgaz will receive from the EU 179 million Euro for the works on the Bulgaria - Romania - Hungary - Austria (BRUA) interconnection project, phase 1, the decision being taken in January by the CEF-Energy (Connecting Europe Facility - Energy) Coordination Committee, which approved 15 projects with a total value of 207 million Euro, including the 179 million for Transgaz. The project goal is to create a transmission capacity between interconnection points existing between the Romanian system and those of Hungary and Bulgaria respectively.
According to Alic, it is necessary to rehabilitate some pipeline trails and to construct new pipelines in the south of Romania towards the western border, on the route of Giurgiu - Podisor - Bibesti - Jupa - Horia, with an approximate length of 550 km, and as well as three new compression stations. The total project value is 551 million Euro, of which the first phase is estimated at 470.6 million Euro and the second phase 80.4 million Euro, with a European funding of almost 40 per cent.
"In this case, the administrative capacity is very important and we must mobilize ourselves very hard," said Alic. "We have certain conditionalities to fulfil. In one year, we need to do work assignments, and in two years we need to get started, otherwise, we lose the money."
Another project that has been developed by Transgaz using European funds was "The modernization of Sinca Turbochargers station and associated facilities" within the 2007-2013 POSCCE (Sectoral Operational Programme Increase of Economic Competitiveness), designed to provide increased operational safety of the Sinca Turbochargers station (Brasov county) to maintain a constant flow of gas on the Bucharest consumption direction. The project had a value of 21.5 million Euro, of which 50 per cent were grants, and was inaugurated in late last year.
Another project on Transgaz's agenda is "The development of the National Transmission System in order to increase transmission capacity in the Northeast region of the country and on the Romania - Republic of Moldova Interconnector", within the 2014-2020 POIM (Operational Programme Large Infrastructure). The project is worth 119 million Euro, and grants represent 50 per cent. The deadline for completion of the investment is Q4 of 2018. "We are in the stage of the feasibility study," said Alic. "In three months we are prepared to submit the application. Whether the project will be successful remains to be seen. The fact is that those amounts will be attracted."
BCR granted loans of over 1.5 billion Euro for projects with European funds
During 2007-2015, BCR (Romanian Commercial Bank) has granted loans of over 1.5 billion Euro for the pre-financing/co-financing of over 1,300 projects with European grants, on all operational programmes. The beneficiaries were represented by SMEs and large companies from production or agriculture, state-owned companies, local public authorities, but the financial institution has also funded suppliers of goods, services and works within projects financed with European funds. According to Bogdan Tanasescu, EU office manager within the Public Sector and Infrastructure Financing Division at BCR, the bank has been quite actively involved in the project cycle, from the project idea and optimization of financing structures to assistance during the entire implementation period and monitoring of indicators.
"We tried to stand by the beneficiaries in all stages of the project, from the concept to the implementation phase," said Tanasescu. "We tried to optimize the financing structures, taking into account the conditionalities of the funds, and to grant various types of loans. We also assisted beneficiaries throughout the entire implementation period and we have watched the indicators of the projects during the loaning process. There are various cases where successfully implemented projects, which find themselves in the monitoring period, reach the last three, five years of monitoring and are asked to give the money back because they have not met the outcome indicators. And so, we tried to help them with various products, with various credit lines to fulfil these indicators."
Among the successful projects of BCR include one with Indra Import Export, a company active in the field of polyethylene bags manufacturing, where BCR granted a loan for the purchase of an extrusion line within the project dubbed "The increase of the company competitiveness through the acquisition of technologies for polyethylene foil production", a project implemented under the POSCCE. The project was worth 2.5 million RON, while the grant was of 1.1 million RON.
--BCR products included a letter of comfort for project submission and pre- and co-financing credit worth 2.14 million RON, from EBRD sources, over a period of five years.
Another project is represented by the collaboration with Oltenia Impex Prodcom, a company active in the milling, baking and pastry sector, where the bank has provided loans for the implementation of two projects within the National Rural Development Programme (PNDR). The first project, "The wheat mill" was worth 2.04 million Euro and the grant amount was 1.8 million Euro. BCR has provided a co-financing credit amounting to 1.36 million Euro, for a period of five years. The second project, "The bread factory", had a value of 7.39 million Euro and the grant amount was 5.6 million Euro. BCR products consisted of a bank guarantee letter for pre-financing, 6.51 million RON, and co-financing credit of three million Euro for five years. The projects have created about 200 new jobs. In the future, BCR wants to continue its activity of financing EU funds projects, said Tanasescu.
"The European funds represent one of the major sources of funding for the Romanian economy, with multiplier effects and a major role in the coverage of the development gap of Romania compared to the European Union," said Tanasescu. "We want to continue our project financing activities. In addition, at the moment, we are looking closely at those projects that have not been completed until 2015 and which must be implemented until 30 June 2016, otherwise the grants could be required to be returned. These projects are worth several hundred million Euro. We will try to help them [beneficiaries] carry out their projects."
"Adoption of programme management should be top priority for the Government"
The successful implementation of programme, portfolio or project management would allow the Romanian Government to effectively and consistently fulfil public policies, to make savings in the public budget, to increase the quality of public services and to restore the citizens′ trust in the Government, according to Teodor Darabaneanu, the president of PMI (Project Management Institute) Romania Chapter, one of the most important local associations for the project management profession.
How to create the legal framework for implementation? First, according to Darabaneanu, one should create a position associated to the profession of programme manager in the Romanian Government and, subsequently, one should develop a standardized programme management model, unique for all public institutions subordinated to the Government. Moreover, one should establish in each institution executive positions, responsible for the strategy and policy of programme management, and, not ultimately, one should establish, at the central level, a Programme Management Council to align all programme management strategies.
"We recommend the adoption of the programme management discipline in all public institutions as the Government′s top priority," said Darabaneanu during the event. "We are always talking about European programmes, EU projects, but we do not mention the profession of programme manager. So it is not a position, it is a profession. The project manager and programme manager are independent professions. In terms of legal framework, we should see the programme manager in Romania's Occupations Code. There are project managers, but no programme managers. It is desirable to see the discipline implemented at the governmental level. There is no guarantee of success, but if the management programme is adopted and made with qualified and certified people, based on internationally recognized PMI professional standards, surely exceptional results will be much more."
Darabaneanu said that PMI Romania can be a specialized partner of the Romanian Government that could provide access to internationally recognized standards, access to training and education programmes, access to certifications of great reputation and access to industry experts for consulting and audit. Moreover, Darabaneanu has brought into discussions the business analysis, a discipline that comes in close contact with project and programme management. According to him, business analysis was overlooked in Romania, but it is very important for European projects.
"Business analysis is a discipline that has been overlooked in Romania and we need to change this," said Darabaneanu. "Within the European projects, business analysis is not very often mentioned, although it is critical for their approach. PMI started to develop skills and certifications for several years now in business analysis. It has an increased attention on outcomes and benefits and develops a collaborative organizational culture that ensures effective learning, reducing resistance to change," he concluded.
Public manager, a partial solution to the administrative capacity issue
Octavian Aron, trainer, public manager and member within the Executive Board of the Public Managers′ Trade Union, stressed during the event the role and responsibilities of a public manager, saying that it represents a partial solution for improving the administrative capacity of public institutions. According to him, there around 300 public managers within the Romanian Public Administration, of which more than half work in structures that manage or implement projects. However, the number is very small compared to the size of the administration, he said.
"The position of public manager was created in 2003, when two PHARE projects had been written with an allocation budget of about 7.5 million Euro," said Aron. "Through this position, the premise of a group of people was created, people who have subsequently been placed in the Public Administration to support its reform for a better integration in the EU. Currently, there are a limited number of public managers working in the Public Administration, around 300, a very small number compared to the size of it."
To emphasize the importance of public managers, Aron said that there are a number of projects already implemented by them, including "The development of a monitoring system of performance indicators in the community services sector of public utilities", project funded by the 2007 - 2013 PODCA (Operational Programme Administrative Capacity Development), within the Ministry of Regional Development and Public Administration (MDRAP) or "The institutional capacity increase of the public service supply of informing Romanian emigrant citizens", financed by 2007 - 2013 PODCA, within the Ministry of Labour, Family and Social Protection. In addition, other public managers have dealt with the coordination of infrastructure projects of strategic importance for Romania as SMURD and Iasi - Ungheni pipeline.
Furthermore, Aron has made a parallel between the public manager and the project manager, saying that the first can be found only in the public sector, while the second - in both public and private institutions. However, there is a notable difference: the project manager, as a position, does not exist in public institutions and this should change, said Aron.
"The position of project manager should be recognized not only for public managers, but for all positions that deal with the management of European funds," added Aron. "In addition, the current requirements for a project manager are very low. Unfortunately, to get a project manager diploma, one can take courses for three or four days, take an exam and get a certificate. However, to be a good project manager, this is not enough."
To professionalize the position of project manager, Aron suggested several solutions: reforming the process of obtaining professional ′project manager' certification, creating a database with project managers of public institutions (networking) and creating a body of authorized project managers. "Why such a body? Because their interests can be combined in a single place and better promoted and protected," said Aron. "In addition, we would also like to see the development of integrated or customized training programs (basic knowledge and advanced knowledge). They exist on the market. There is the PMI model, which is very well developed, but, on the public market, there are very few professional programmes in the real sense of the word," he concluded.
Bottlenecks in implementing projects with European financing
The lack of experience of the human resources involved in projects, changes in primary, secondary and tertiary legislation during the implementation of projects, and also the lack of cash flow of the beneficiaries and their partners are the main bottlenecks in the implementation of projects with European funding, according to Dragos Iorga, the executive director of the OIR POSDRU (Regional Intermediate Body for the Sectoral Operational Programme Human Resources Development), Bucharest - Ilfov region.
"The reasons for the blockages occurring in implementing EU-funded projects are multiple," said Iorga. "First, the lack of human resource experience involved in projects financed from European funds. I can tell you that I have found over time that the persons designated to play certain roles have not always really done their job, in a professional way. In this regard, I appreciate PMI's initiative to request the Romanian Government to amend the occupational standard and, eventually, to introduce some legal requirements in this area of project management. Secondly, I would like to stress the changes in primary, secondary and tertiary legislation (guides and instructions) arising during the implementation of projects, changing the rules during the game. This was not a desire of the Ministry of European Funds, nor a desire of the Management Authority, the changes occurred as a result of recommendations that came from the audit authority that monitors the management of the programme and, often, we had no choice but to introduce these changes."
The lack of cash flow at the level of beneficiaries and their partners represents another problem. According to Iorga, this issue comes primarily from their limited financial capacity, but also from the delays in the processing of reimbursement applications submitted to the Management Authority and intermediate bodies, which led to delays in payments and outright jams. Another problem mentioned by the executive director during its speech was the limited administrative and operational capacity of the organizations that play the role of intermediary bodies.
"Again, I am referring here to the professionalism of officials working in the area of monitoring and verification," said Iorga. "The certifications issued by ANC (National Authority for Qualifications) do not guarantee to increase the expertise or the professionalism of these public servants. At the intermediate body level, I believe that all employees have completed various courses in the area of public procurement, project management, but the results have not materialised into a better activity, I don't see better results."
Furthermore, Iorga brought into discussions the 2014-2020 POCU (Operational Programme Human Capital) with a total allocation of about five billion Euro (of which 4.3 billion euro is EU contribution), which sets out Romania's action priorities in employment, social inclusion and education. According to him, to have better results in the new period compared with the previous one - where 3.7 billion Euro EU money was allocated - one should change the management and control system. "If we remain in the same paradigm, in the same existing management and control system, I doubt that future results will be better," he concluded.
Romania, among the six European countries with no project within the Juncker investment plan
Andreea Maria Paul, the first vice-president of PNL, took also the floor to underline that 22 EU countries have several projects approved through the European Fund for Strategic Investments, currently based on the Juncker plan, while Romania is among the six Member States that have not yet managed to have a signed project. This should be the ambition of the Ciolos Government this year, she said. "Although it missed the start, Romania still has chances to get projects approved," said Paul. "The Juncker plan is extending over three years: 2015-2017. We must show that we can be responsible partners, capable of attracting new investments. This investment plan provides that each Euro invested through the European Fund for Strategic Investments to attract other 15 Euro."
UPDATE: The European Funds Ministry launched on 28 March the ′Submitting Funding Application′ public module in MySMIS.