The EU Cohesion Policy The Case of Bulgaria

The EU Cohesion Policy: The Case of Bulgaria Prof. Dimitar Hadjinikolov University of National and World Economy, Sofia, Bulgaria

Part II 1. Briefly about Bulgaria as a member state 2. EU Cohesion policy in Bulgaria, priorities and institutional framework (2014 -2020) 3. Achievements during MFF 2007 -2013 4. Transport infrastructure projects 5. Environmental projects 6. Key problems

1. Briefly about Bulgaria as a member state Indicator Unit Population 1000 inh. Population growth pro mille Population aged 65+ GDP per head (PPS) % EU = 100 Government gross debt as a share of GDP % of total employment % of GDP 0 to 100 Public debt Employment in Agriculture R&D expenditure Competitiveness Index Population aged 25 -64 with high educational attainment Density of motorways Density of railways Employment rate, ages 20 -64 Unemployment rate At risk of poverty or exclusion Male life expectancy at birth Female life expectancy at birth % Index of length, relative to area and population % % of active population % of population Years Year(s) Bulgaria EU avg. 504265, 2012 7306, 8 9 20012011 -8, 0 3, 7 2012 18, 8 17, 8 2015 46 100, 0 2012 18, 5 85, 3 2011 2012 20, 0 0, 6 19, 7 5, 2 2, 0 54, 7 2012 2008 24, 0 32, 5 27, 7 100, 0 2012 2011 98, 3 63, 0 12, 3 49, 1 70, 7 77, 8 100, 0 68, 5 10, 5 24, 2 77, 4 83, 2

Since 2007 Bulgaria’s economy has grown at a faster rate than the EU average. See the graph below. The average growth of Bulgarian economy in the years 20072015 was 1. 8% and of the EU economy only 0. 7%. However, it is insufficient as at this rate, about a century will be needed for Bulgaria to catch up with the EU average level GDP per capita. 10 8 6 4 EU 2 1. 8 0. 7 0 -2 -4 -6 2007 2008 2009 2010 2011 2012 2013 2014 2015 Average BG

2. EU Cohesion policy in Bulgaria priorities and institutional framework Programs title Priorities Bulgarian organizations responsible for the programs Small enterprises and job creation support; Efficiency in energy and water Rural Development Ministry of Agriculture and use; Transport infrastructure; Reducing Program Food nitrous oxide and methane emissions; Organic farming Operational Program Transport infrastructure - motorways, Ministry of Transport, "Transport and Transport railways, Sofia metro; intermodal Information Technology Infrastructure" transport and Communications Water supply and sanitation infrastructure; Municipal waste Ministry of Environment Operational Program management; Biodiversity; Flood and Water landslides prevention; Air quality "Environment" Operational Program "Regions in Growth" Urban development (Sofia metro); Energy Ministry of Regional efficiency; Educational infrastructure; Development and Public Works Road infrastructure; Tourism EU funding (2014 -2020, € Mil. ) 2339 1605 1505 1312

Program title Bulgarian EU funding organisations (2014 -2020, responsible for the € Mil. ) programmes Priorities Operational Program "Innovations and Competitiveness" Operational Program "Human Resources Development" Techno, ogical development and innovations; Ministry of SMEs; Energy and Resource Efficiency; Economy; 1181 interconnections with the neighbouring gas Ministry of Energy systems (Greece, Turkey, Serbia and Romania) Reducing poverty; Promoting social inclusion (Roma integration); Ministry of Labour and Social Policy 938 Research and innovation - Centers of Excellence and Centers of Competence; Reducing and Operational Program "Science preventing early school leaving (Roma Ministry of Science and Education for Smart integration); Improving access to higher and Education Growth" education and lifelong learning for disadvantaged groups Increasing institutional capacity and efficiency Operational Program "Good of public administrations and public services; Ministry of Finance Governance" Anti corruption measures; E-government Ministry of Data collection, control, inspections; use of EU Maritime and Fisheries Agriculture and financial instruments Programme Food TOTAL 596 286 88 9850 Ministry of Agriculture and Food is managing 25% of the EU funding in Bulgaria! Ministry of Regional Development and Public Works only 13%. Question for reflection: Which Ministry is more important for the Cohesion policy?

3. Achievements during MFF 2007 -2013 What results have been achieved so far? The total allocation from Cohesion Policy funding for the 2007 -2013 period in Bulgaria was € 6. 9 billion. As of 31. 12. 2016 about 85% of the allocated funding was used. It means that Bulgaria has used in 2007 -2013 about € 5. 86 billion. In the same period Bulgarian GDP was € 356. 6 billion. The EU Cohesion Policy funding in Bulgaria was equivalent only to about 1. 64% of the country’s GDP. Nonetheless, EU Cohesion Policy funding has been an important driver for reforms in Bulgaria, a role which will further increase in 2014 -2020. EU Cohesion Policy funding has helped Bulgaria to develop the transport infrastructure and to improve the living conditions for a significant part of the population (especially in the capital Sofia).

EU Cohesion Policy funding has helped Bulgaria to: ü serve over 280, 000 more people by waste water projects; ü implement many transport infrastructure projects, such as the extension of the Sofia metro, Trakiya Motorway, the Sofia Airport; ü improve urban transport for some 1, 289, 744 citizens, mainly in the 6 biggest cities of Bulgaria, namely Sofia, Plovdiv, Varna, Burgas, Pleven, Stara Zagora; ü improve educational infrastructure for over 30, 000 students and pupils; ü provide scholarships to some 172, 000 students; ü provide social services in a family environment for more than 51, 000 persons; ü modernize 20 cultural facilities; ü invest in energy saving measures in public buildings and schools, etc.

4. Transport infrastructure projects Total length of motorways in 2007 – 418 km; in 2016 – 707 km In Bulgaria, construction of motorways started in the 1970’s. However, construction speed was very slow – about 1015 км annually. Only since 2007 there has been accelerated construction. The only fully completed motorway in Bulgaria is Sofia-Burgas motorway. It is part of EU Orient-East Med Core Network Corridor. Another part of the corridor is Sofia-Thessaloniki motorway, which is under construction.

The picture shows the bridge called “New Europe” over the Danube river in the Bulgarian town of Vidin. It is 1971 m long, includes two lanes in each direction, electrified railway track and a bicycle lane. This long northwest-south eastern corridor will connect central Europe with the maritime interfaces of the North, Baltic, Black and the Mediterranean Sea, making it possible to optimize the use of the ports concerned and the motorways to the seas. The corridor starts in Greece (Athina – Patra/Igoumenitsa) and reaches to Berlin and Hamburg in Germany. There are plans to develop Bulgaria’s railway system, to guarantee higher speed of trains, in compliance with EU standards. There allocated investments for development of the Black Sea ports and those at the Danube river.

Project “Electrification and reconstruction of Svilengrad-Turkish Border railway line” to reach a speed of 160 km/h. The first railway line in Bulgaria was opened in 1866 and has a length of 223 km. Railway electrification began in 1963 and since then there have been double track railways. The state company BDZ operates the railway transport. 5. Еnvironmental projects Although there is a separate operational program “Environment”, the implementation of environmental projects can be found in all operational programs. In the period 2007 -2013, through this operational program about € 1. 2 billion or € 170 million annually were utilized from the EU budget. Most of these funds were used for funding local projects, run by municipalities, predominantly in the capital municipality and some other big municipalities.

Project №DIR-592113 -1 -9 “Integrated System of Municipal Waste Treatment Facilities for Sofia Municipality “ Funding sources EU funding Value in € Mil. isposed in landfills 150 % of eligible project costs 85 Own contribution from Sofia Municipality, incl. EIB loan 27 15 Total cost of the project with VAT: 177 100 Waste management is a serious problem in Bulgaria as well as in other southern EU members states. Sofia and other big cities have accumulated huge amounts of household waste kept in temporary landfills. Recycling is one of the solutions. Another one is to process the waste into useful biomass. Part of the waste is burnt into modern waste treatment facilities like the new one.

Priority axis 1: Water Project: Improving and developing the infrastructure for drinking water and waste water in the municipality of Veliko Turnovo The project provides construction of new sewerage network (including collectors) and water pipeline network (€ 3766. 69 m). Amount of the project € 22 Mil. (85% from the EU). Similar projects were implemented also in a number of other Bulgarian municipalities: Burgas, Vratsa, Gabrovo, Dimitrovgrad, etc.

6. Key problems - Duplication of responsibilities and activities. This leads to waste of resources and overexpansion of administrative staff. Example: Road infrastructure development is a task of three different Operational programs: "Transport and Transport Infrastructure“; "Regions in Growth“; “Rural development”. Тhis creates prerequisites for duplication of projects. It is difficult to implement complex regional projects for infrastructure development because in Bulgaria there are no real regions. After joining the EU , 6 purely formal Planning Regions were created (according to NACE 2 - Nomenclature of Territorial Units for Statistics). In reality, the infrastructure is managed centrally by the government or the municipalities which are quite different. The largest and strongest is the capital municipality – with a population of 1. 5 million. The smallest municipality in Bulgaria has 625 people! Guess where money would go?

- Strong geographic concentration of resources – mainly in the capital Sofia and several big cities The result is:

And it should be like this:

- Lack of effective system of impact assessment. Financial parameters of projects are mainly monitored, while monitoring of economic, social and environmental impact is formal. Example: Under Operational program “Development of the Competitiveness of the Bulgarian Economy” a total of € 15 million were spent to create clusters of SMEs in Bulgaria in the period 2007 -2013. About 250 new clusters were created. However, according to the Association of Business Clusters most of them are incidental communities, created for the sole purpose to utilize EU funds. No impact analysis has been made, but again in 2014 -2020 another € 10 million have been allocated for “clusters”. - Poor sustainability of projects, financed with EU funds Example: A key activity, funded by the EU is road construction. These projects, however, do not allocate funds for maintenance of roads already built. This is one of the reasons for the poor state of Bulgaria’s road infrastructure, in spite of the fact that more and more new roads are built.

- Subsidizing can become a good environment for corruption, especially if there is no transparency in tender procedures. Bulgaria consistently ranks among the EU Member States with the highest perceived level of corruption, and corruption is considered to be one of the most important barriers to doing business in Bulgaria. As part of its anti-corruption strategy, the Bulgarian government has launched a number of initiatives targeting corruption more generally throughout the public administration. These include a reform of the administrative inspectorates, measures to improve the public procurement system, and the preparation of sectorial anticorruption plans containing preventive measures in a number of specific sectors considered to be at high-risk of 'low-level' corruption.