Microsoft Word - Apostoaie Constantin Marius_eng.doc Absorption capacity of Structural Funds in Romania Popa Florina, The Institute of National Economy Abstract The ability to finance and absorb more efficiently Eropean Union Funds has an important role in the process of real convergence of Romania, reported to the European Union, and recovery of gaps to other Member States. The study reveals both the essential elements of the absorption capacity and co- financing, as well as the challenges related to structural funds absor ion. Finally, we try a case study on Romania, with regard to the degree of European Funds absorption, made on the basis of statistics, in development (2007-2011). Keywords Structural funds, degree of absorption, co-financing. JEL Codes: R0, R38, R58 General approach The absorption of European Union funds, sensitive issue for the current stage of development of Romania, is an important process for the real convergence that Romania must meet in relation to European Union, recovering the gaps from other Member States. Absorption capacity expresses the degree to which a country is able to spend effectively and efficiently, the financial resources allocated through the Structural Funds. Achieving this objective depends on the one hand, on the ability of the institutional system established by that State to administer the funds in question, and on the other hand, on the beneficiaries potential to whom they are addressed, to create projects and to co-finance. To be eligible for assistance from structural instruments of the European Union, does not necessarily guarantee the success of Romania, but the key is represented by its capacity to fund and to absorb funds in an effective manner, respecting all the conditions laid down in regulations on structural instruments. At a country level the are three aspects of capacity: macroeconomic, administrative, financial. Macroeconomic absorption capacity Is defined in relation to Gross Domestic Product, which involves: - limiting the yearly Structural and Cohesion Funds amount of which a member state may benefit at 4% of GDP1; - the need to increase budget expenditures as a result of accession; since 2007 Romania have had to ensure the budget expenditures to 2% of GDP higher than the previous period2, 1 Coord. Gheorghe Oprescu Institutul European din România – Studiile de Impact III Analiza capacit ii de absorb ie a fondurilor europene în România - citeaz „Regulamentul Consiliului nr.1260/1999 , www.ier.ro 2 Idem 1 Studies and Scientific Researches - Economic Edition, no. 15, 2010 266 determined strictly by the obligations undertaken in the context of European integration, respectively: the contribution of Romania to the European Union budget, the amounts allocated from the national budget for co-financing of some measures and priorities financed by European Union funds. Administrative absorption capacity It refers to the ability of central and local authorities to prepare plans, projects and programs in a timely manner, to organize an effective partnership, to meet the administrative obligations, to finance and supervise the implementation process, avoiding irregularities. To strengthen the administrative capacity, there are necessary investments to help improve the policy and decision-making process, at the level of public management, create the performance of the institutional system, competence and motivation of human resources, improvement of quality standards in the provision of public services. Fulfilling these elements can make the public central and local authorities, important players in the process of funds absorption. This implies: institutional development. It is needed an institutional convergence able to absorb European Union funds and to ensure good governance at all levels, to interact effectively with governance at European Union level, wich means strengthening the administrative capacity to ensure the necessary co-financing by local authorities. For Romania, there has been created a number of appropriate institutional structures; the coordinator of management authorities which manages the Structural Funds is the Ministry of Economy and Finance. For each operational programme there are management organizations, represented by ministries. qualification and motivation of human resources refers to the ability to estimate and recruitment of necessary personnel, his qualification, providing in advance, an experienced and motivated personal being one of the determining factors for successful funds management. transparency in the management of European funds. Without the existence of a system for monitoring the European Union financed projects, can not be made effective coordination of them. This includes: responsibilities and tasks sharing to institutions or to their units and departments, taking into account the phases related with the stages of the Structural Funds running: management, programming, implementation, monitoring and evaluation. Each country organizes its institutional structure according to the local specific; the purpose is the efficient use of Community Funds. One of the new changes emerging in the public administration principles is the intercommunality concept. The measure consists in cities and regions joining for the purpose of necessary budgetary resources establishing, to support major infrastructure projects. Cooperation of local authorities makes it possible to run large projects, at European standards, where each, severally, would not have the necessary resources. Financial absorption capacity It expresses the central and local authorities opportunities to co-finance programs and projects supported by the European Union, to plan and ensure such internal contributions in annual budgets, to collect them from the partners involved in a project or programme. Co-financing, a factor of influence of absorption capacity, constitutes a basic principle of cohesion policy and it considers the supplementing of the Community assistance grants, by the financial contribution of Member States. The beneficiaries of Structural Funds must support some of the costs of drawing up and implementing the proposed projects, and funds may come from government resources of public central and local authorities, other state resources, or private funds. Studies and Scientific Researches - Economic Edition, no. 15, 2010 267 Romanian ability of co-financing involves government responsibility to ensure the co- financing of costs with implementation of cohesion policy; this commitment of both technical and political kind, is to identify co-financing problems that beneficiaries encounter and to take necessary measures. The aim is both to find solutions for ensuring the necessary funding, and to create conditions to attract private investment. Public co-financing is ensured from the central or local budgets of state, by other public institutions or associations of public institutions. If the budgetary resources are insufficient, may resort to borrowing from the domestic or foreign bank market. As regards the effort to co-finance of the public local authorities and of the Local Council (as a regulator) and Hall (as executive), there are a noticeable number of issues that characterize the possibilities of absorption in this sector. a) The need for increased resources for funding generated by several factors: - increased responsibilities without a corresponding allocation of resources. The promoted decentralization by the process of integration requirements, as well as the local political imperatives brought to public authorities, more delegated powers, not always accompanied by appropriate resources allocated; - massive investment requirements resulted from the accession to the European Union, in particular, in the environment and infrastructure area, where local public administrations will have to contribute through necessary co-financing, to obtain Community Funds. b) Main sources of co-financing which may be considered by local governments, consist of: - increasing the amount of own resources from tax incomes, based on the increase of local taxation base, which means the local economic power growth; - raising loans. c) Banks have an important role in providing funds for applicants who need them, to supplement their own sources while financial institutions offer is materialized into the loan and bank letters guarantee. d) The conditions for loans obtaining by local authorities, as well as their capacity of loans repayment, involve take into consideration several issues: - the level of local authorities indebtedness is limited, so that they can not trust credits or letters of bank guarantee if the annual debt service for the whole portfolio, is achieving a rate of 20% of the own revenues3; - the loans repayment source is from their own revenues, rates, interests and commissions and it must be reflected in the structure of local budgets expenditures, throughout the loan. Case study. The degree of European Union Funds absorption in Romania Romania's capacity to absorb European Funds, has proved to be reduced, and the comparison with other Member States at a similar moment, draw a warning, regarding the modest place occupied by Romania, in comparison with other European countries. Thus, in the first year of accession, according to analysis made by the Romanian National Bank, the rate of absorption was only 21,7%, while other admitted countries in 2004, like the Czech Republic, Poland, Slovakia, Hungary, recorded a nearly double, around 42% in the year in question. In that Romania managed to draw only 0,440 billion Euros in 2007, in the allocated amount of 2,0 billion Euros, while the contribution to the European Union budget was 1,2 billion Euros, put our country in a situation of net contributor; also, it is the only Member State that found in this situation4. Data below, shows the years staggering of Romania's contribution to the European Union budget, compared with the allocated amounts. 3 Idem 1 4Is rescu Mugur (2008), Atragerea fondurilor europene în România i perspectiva economico–financiar în 2008, Banca Na ional a României, www.bnr.ro; Studies and Scientific Researches - Economic Edition, no. 15, 2010 268 Table nr.1 Total allocated European Union Funds and the contribution of Romania to the European Union budget 2007-2011 2007 2008 2009 2010 2011 mld. EUR % în PIB mld. EUR % în PIB mld. EUR % în PIB mld. EUR % în PIB mld. EUR % în PIB 1Total allocated European Union Funds 2,0 1,7 2,9 2,2 3,9 2,5 4,3 2,5 4,5 2,4 2 The contribution of Romania to the European Union budget 1,2 1,0 1,4 1,0 1,2 0,8 1,3 0,8 1,3 0,7 Sursa: Mugur Is rescu(2008)– “Atragerea fondurilor europene în România i perspectiva economico – financiar în 2008”, Banca Na ional a României, Ministerul Economiei i Finan elor, Institutul Na ional de Statistic , Comisia Na ional de Prognoz , www.bnr.ro In graphical below representations, the purpose is to strive for the change of net absorption ("+") and, respectively, net contribution ("-"), depending on the drawn funds, considered both at the actual amount (in 2007) and at virtual values, per year. Notice: FA – funds wich are allocated to Romania CR – Romanian contribution FT – drawn funds AN/CN = FT –CR, in which: AN = net absorption, if FT-CR > 0 (FT>CR) CN = net contribution, if FT-CR < 0 (FT