strategic report of the republic of bulgaria for 2009

STRATEGIC REPORT

OF THE REPUBLIC OF BULGARIA FOR 2009

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List of used abbreviations EA Employment Agency NCA National Customs Agency RIA Road Infrastructure Agency SAA Social Assistance Agency AFCOS Anti-Fraud Co-ordination Structure Council GDP Gross Domestic Product RES Renewable Energy Sources WSS Water Supply and Sewerage DG Directorate General SG State Gazette EIF European Investment Fund EC European Commission EU European Union ERDF European Regional Development Fund PPA Public Procurement Act ICT Information and Communication Technologies IGs Integrated Guidelines ISPA Pre-accession Programme UMIS Unified Management Information System of the Structural Instruments in Bulgaria MC Monitoring Committee CF Cohesion Fund IBRD International Bank for Reconstruction and Development MI Ministry of Interior IB Intermediate Body MEYS Ministry of Education, Youth and Science MEW Ministry of Environment and Water SMEs Small and Medium-Sized Enterprises MLSP Ministry of Labour and Social Policy NSSI National Social Security Institute NSRF National Strategic Reference Framework OP Operational Programme OP HRD Operational Programme “Human Resources Development” OPAC Operational Programme “Administrative Capacity” OPC Operational Programme “Development of the Competitiveness of the Bulgarian Economy” OPE Operational Programme “Environment” OPRD Operational Programme “Regional Development” OPT Operational Programme “Transport” OPTA Operational Programme “Technical Assistance” RTA Road Traffic Accidents FDI Foreign Direct Investment PPP Public-Private Partnerships CSS Civil Society Structures SCF Structural and Cohesion Funds CA Certifying Authority MA Managing Authority PHARE Pre-Accession Programme FLAG Fund for Local Authorities and Governments CCU Central Coordination Unit

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Table of Contents 1. Social and Economic Status and Trends. ............................................................................... 4

1.1. Changes in the social and economic situation in the country regarding the objectives and strategies of the operational programmes........................................................................ 4

1.2. Development of and trends in the social and economic and territorial disparities, including any interregional disparities in the country that might influence the implementation of EU structural instruments in Bulgaria. .................................................... 8

2. Progress in the Implementation of the Programmes Funded by EU Structural Instruments and Future Challenges................................................................................................................ 9 2.3. Expected or implemented contribution to other priorities of the National Reform Programme within the context of the Lisbon Strategy............................................................. 21 3. Delay of the implementation of the programmes and overcoming of difficulties ............... 22

3.1. Difficulties identified in the process of implementation of the strategic documents.... 22

3.2. Measures for overcoming the difficulties...................................................................... 23 4. Application of measures set in the European Economic Recovery Plan. ............................ 30 5. Examples of good practice. .................................................................................................. 32 6. Conclusion............................................................................................................................ 32

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1. Social and Economic Status and Trends.

1.1. Changes in the social and economic situation in the country regarding the objectives and strategies of the operational programmes1.

After its accession to the EU on 1 January 2007, Bulgaria continued its economic development, formed as a trend since the beginning of the new millennium. The country’s GDP grew in real terms by 6.2% in 2007 and 6% in 2008 compared to an average annual growth of 5.6% in the period 2000-2006. The GDP per capita reached 41.3% of the average EU level in 2008, which marked a growth of 4.8 percentage points compared to 2006. Thus the country is about to achieve its ambitious goal of reaching a GDP per capita of 51.2% of the average EU level by 2013.

The global turmoil caused by the financial crisis in the USA also affected the country and the GDP marked a drop by 4.7% in real terms for the first nine months of 2009. It should be noted that the stable financial system and the cautious fiscal policy prevented more serious impact of the global financial crisis on the national economy, as that is what occurred in part of the newly acceded Member States. Economic recovery is expected to start in 2010.

In the post-accession period domestic demand remained a key growth factor. On one hand, this was due to the higher income inducing the population to incur larger consumer expenses, while on the other hand, fixed capital investment was positively influenced by the country’s joining the European Economic Area of the EU. The share of investments as part of the GDP grew from 25.9% in 2006 to 33.4% in 2008. On this benchmark, Bulgaria is fairly ahead compared to the EU average levels of about 20%.

The macroeconomic stability, the progress in structural reforms, and the high rate of return increased the country’s attractiveness to foreign investors and Bulgaria registered an inflow of foreign direct investment (FDI) of EUR 15.1 billion in 2007-2008. Thus, in only a couple of years after its accession in the EU, the country achieved 69.6% of the target value on this benchmark for the whole programming period. The global financial crisis resulted in a significant loss of investor confidence and the inflow of new FDI dropped by 60.2% on an annual basis in the period January-October 2009. Nevertheless, it should be mentioned that there is no withdrawal of investors from the country but just a reduction in newly attracted investment.

The positive labour market trends of the pre-accession period continued to be manifested in 2007 and 2008. The rate of employment increased steadily and reached 64% in 2008. The higher employment rate was meanwhile accompanied by a decrease in unemployment and growth in economic activity. On these benchmarks, the country has already reached the target values for the end of the programming period, while the unemployment rate has been at levels lower than the EU average.

High demand for labour has led to a pressure for wage increase. Parallel to the rising income from work, there was growth in labour productivity as well, albeit at a slower pace. Thus, real unit labour costs increased in the reporting period which worsened the competitiveness of the economy to a certain extent. Despite this fact, Bulgarian producers expanded their foreign markets and the exports of goods and services registered a growth of 5.2% and 2.9% for 2007 and 2008, respectively. Foreign demand depressed by the global economic crisis led to a drop of 12.8% in the country’s exports for the first nine months of 2009. The recovery from the recession expected next year will lead to a gradual recovery of the positions of Bulgarian exporters.

The population’s educational structure has improved over the last two years. In 2008 the share of people2 with higher education reached 22.8%, while the share of people with higher than primary 1 This part of the document uses, unless otherwise specified, the official data of the institutions in charge of

collection, processing and publication thereof, i.e. the National Statistical Institute, the Bulgarian National Bank, the Ministry of Finance, etc., which are available as of the date of drafting this report (21 December 2009).

2 The population at the age of 25-64 years

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education was 77.6%. By comparison, the figures for 2006 were 21.9% and 74.4%, respectively. Public expenditures on education increased from 3.9% of GDP in 2006 to 4% of GDP in 2008.

For the 2008/2009 school year, classes are being held at 2,171 general educational schools, which are 380 fewer than two years ago. This is mostly due to the closure or restructuring of elementary and primary schools. Enrolment has dropped by almost 56,000 or 8% over the same period. In 2008/2009, 93.7% of the pupils are studying at least one foreign language, which is 0.3 percentage points more than in the 2006/2007 school year. Nevertheless, the Trends in International Mathematics and Science Study (TIMSS) of 2007 show results similar to the previous study of 2003 and demonstrate the need of improving the quality of education in the country.

Vocational training is conducted in 487 schools in the country. The number of schools of this kind has dropped by 3.8% in the last two years. This is due to the reduction in the number of vocational high schools over the same period. Enrolment in these schools is 169,000, a drop with 13.3% compared to the 2006/2007 school year. About half of all secondary education pupils attend vocational schools during the 2008/2009 school year.

The number of higher educational institutes in the country is 53, and their number remained unchanged over the last couple of years. Enrolment has been steadily growing and reached 274,000 in the 2008/2009 academic year, thus registering growth of 6% compared to the 2006/2007 academic year.

At the same time, the participation of the population in various forms of lifelong learning remains at unsatisfactorily low levels. According to Eurostat data, just about 1.4% of the population aged between 25 and 64 participated in any kind of training in 2008, compared to 1.3% in 2006.

In 2007 and 2008, for healthcare was allocated 4.2% per annum of the country’s GDP, which was 0.1 percentage points more compared to the year before Bulgaria’s accession to the EU. In 2008 there were 351 hospitals with 49,507 beds, which means that for the last two years the number of hospitals has increased by 11.1%, while the number of beds there increased by 3.7%. In the same period, the number of general and specialized hospitals has increased by 35, while beds there have gone up by 3.9% to 45,353.

Occupational accidents in 2008 fell off to 3,815 or 93.1% of their number two years earlier. The same period saws a drop in the loss of working days due to occupational accidents: from 260,200 in 2006 to 234,500 in 2008.

The National Health Strategy 2008-2013 was adopted at the end of 2008. Enhancing the financial stability, the effectiveness and efficiency of healthcare expenditure, and improving the access to healthcare and the management of the system and the processes remain the major challenges to this sector.

The country’s average poverty level rose 0.5 percentage points to 14.4% in 2008 compared to 2006. From the point of view of age, poverty is most significant concerning children under 15 and adults over 64. While the proportion of the poor in the first group was 17.1% in 2008, which has been an increase by 2 percentage points for the last two years, this proportion dropped by 0.2% in the second group to 17.8%. Between 2006 and 2008 the number of the poor in both groups increased by about 16,000, which is 37 - 37.5% of the country’s impoverished population for the reporting period. The poverty level for women is above the country’s average and reached 15.8% in 2008.

The poverty risk is considerably higher for some of the most vulnerable population groups such as the unemployed and pensioners. In 2008, 43.3% of the unemployed fall into this category, which is an increase by 7.5 percentage points compared to 2006. As to pensioners, the impoverished were 17% in 2008, which is 0.1 percentage points more compared to two years earlier. The average monthly pension in 2008 was BGN 209 or 37.4% more than in 2006. According to NSSI data, 484,000 people received invalidity pensions in 2008, which is a drop by 2.9% compared to 2006. The total number of invalidity pensions due to impaired working capacity was 845,000 in 2008, of which 701,000 were with an impaired working capacity over 70%. Invalidity pensions for 2006 were by 24,000 more, while those for impaired working capacity over 70% decreased by about 36,000 for the last two years.

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The period after the country’s accession to the EU and the launch of strategic document implementation has witnessed a considerable improvement of the business climate. The procedures required to incorporate a new company were reduced from 9 in 2006 to 1 in 2009, while the maximum number of days for incorporation of a new company was reduced to 2 days (32 days in 2006). Thus, the benchmark’s target values set for 2013 are almost reached (1 day and 1 procedure).

The corporation tax rate was reduced from 15% to 10%, thus reaching one of the lowest EU levels. Meanwhile, the social insurance contribution was also reduced by 3 percentage points and the employer/employee ratio was changed, too, in 2008, i.e. from 65/35 in 2007 to 60/40 as from 2008. By doing so, social insurance payments made by employers were lowered by 3.6 percentage points, which boosted investment activity and the creation of new jobs.

The development of transport infrastructure is relatively slow. The total length of public roads increased by 52 km reaching 19,425 km at the end of 2007. 24 km of motorways were constructed during that year, their total length reaching 417.7 km. 23.2% of country motorways are not in good condition, compared to 29.8% at the end of 2004. 38.8% of the 2,974.8 km first-class roads in the country are not in good condition. This has been an improvement by 10.4 percentage points for the last three years or, in other words, first-class roads in medium or bad condition have decreased by 304 km. Just 6 km of new first class roads were constructed in 2007. By the end of 2007, 58.3% of second-class roads and 69% of third-class roads need reconstruction and rehabilitation. Compared to the end of 2004, this drop is 5 and 3.2 percentage points respectively. 22 km of new third-class roads were built in 2007. Goods carried by road increased by 10.6% on an annual basis in 2007.

There was a slow decrease in the number of road traffic accidents (RTA) in 2007 and 2008 compared to the pre-accession level. By 30.09.2009, 5,314 road traffic accidents occurred and if this trend persists, a further drop is expected by the end of 2009.

In order to reduce traffic congestions and facilitate traffic in the capital city, the underground railway section from the Obelya to the Mladost Residential Areas was commissioned in September 2009. Its total length is 17.9 km and it has 14 stations which are part of the first metro line in Sofia. This is a substantial improvement, compared to 2006 when a 10 km section having 8 stations was in operation.

The total length of the railways was 4,144 km at the end of 2008, 68.2% of which were electrified. This benchmark remained almost unchanged in comparison with the end of the pre-accession period. Goods carried by rail registered a 10% decline on an annual basis in 2008 after a moderate growth of 3.4% a year earlier.

There is no substantial development in the field of environmental infrastructure in the reporting period. The issues related to the unsatisfactory condition of the draining, wastewater treatment and fresh water supply infrastructure remain largely outstanding. The high level of wear of the water supply network preconditioned the huge losses of 61.5% of water supplied in the network in 2007 г. Yet, this benchmark registered an improvement of 0.2 percentage points compared to the previous year. The relative share of the population having access to public sewerage system amounted to 69.6% at the end of 2007, compared to 69.4% a year earlier. However, if the value of this benchmark is 95% in urban areas, in rural areas it is only 9%.

Waste management systems also remain ineffective and insufficient in terms of quality and scope. In 2007 the waste collection system covered 92.5% of the country’s population, including mostly urban dwellers. A great part of the rural areas, however, do not have any organized waste collection services. It should be pointed out that despite the increase of 8.3% in landfilled waste in 2007, the share of recycled waste remains at an extremely low level. The legislative waste management amendments made in August 2009 are expected to provide for a substantial increase in the share of recycled waste.

The harmful emissions of major atmospheric pollutants included in EU Directive 2001/81/ЕС on national emission ceilings for certain atmospheric pollutants (SO2, NOx, CO2, N2O and NH3) diminished in comparison with the levels of the pre-accession period. Comparing emissions to GDP demonstrates a sustainable trend towards a reduction in the pollution of a unit of produced GDP. As to greenhouse emissions, the country currently sticks to the Kyoto Protocol limit values.

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Strategic Objectives Benchmark Baseline Value Target Value Value Achieved in 2008

1. Percentage of GDP per capita from the EU average level

34.5% (2005)

51.2% (2013)

41.3%

2. GDP growth (annual average)

5% 2000-2006 5.73% (2007-2013)

6%

1. Strengthening the competitiveness of the economy to achieve high and sustainable growth;

3. Exports/GDP 60.8% (2005) 89.77% (2013) 60.5%

1. Employment level; 55.8% (2005) 64% (2013) 64%

2. Unemployment level; 10.1% (2005) 7% (2013) 5.6%

2. Development of human capital to ensure higher employment, income and social integration;

3. Poverty risk 14.2% (2005) 13% (2013) 14.4%

1. Generating economic growth as a result of improving the transport connectivity and reducing transport costs;

0

2. Time reduction, mln hours; 0 (railways)

0 (motorways)

2.3 (2013) – railways

1.3 (2013) – motorways

0

0

3. Making certain regions and destinations more attractive as a result of improving the environmental living conditions

0

Strategic Priorities

1.Improving basic infrastructure;

4. Population having access to water supply and sewerage

40.5% (2004) 66.46% (2013)

1. Economic activity level – 15-64 years of age.

62.1% (2005)

68.5% (2013)

67.8%

2. Share of the population aged between 25 and 64 years participating in training and retraining courses

1.3% (2005)

5% (2013)

1.3%

2. Increasing the quality of human capital with a focus on employment;

3. Share of the population aged between 18 and 24 years with lower than secondary education not participating in any education and training forms

20% (2005) 16% (2013)

1.Labour productivity 3.5% (2005) 5% 2.7% 3. Fostering entrepreneurship, favourable business environment and good governance;

2. Foreign direct investment

EUR 3.2 billion (2005)

EUR 21.7 billion

EUR 6.2 billion

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2. Maximum number of days needed to incorporate a new company

32 (2006) 1 (2013) 2

3. Maximum number of procedures needed to incorporate a new company

9 (2006) 1 (2013) 1

4. Supporting balanced territorial development.

1.Increasing of income and employment in less developed and peripheral regions as a result of Cohesion Policy interventions

0%

The progress registered with regard to the attainment of NSRF objectives is largely due to the momentum gained by the economy. Nevertheless, it should be noted that the implementation of the NSRF and the operational programmes, which has started, has at least an indirect effect on the dynamics of strategic document benchmarks. Thus, for instance, the expectations of economic agents for significant government investment (and improvement) in basic infrastructure have undoubtedly played a positive role for making investment decisions, and explain the investment boom in the period under consideration. That is how EU Cohesion policy and its implications for the country have already started generating positive results with regard to the overall social and economic development of the Republic of Bulgaria.

1.2. Development of and trends in the social and economic and territorial disparities, including any interregional disparities in the country that might influence the implementation of EU structural instruments in Bulgaria.

Regionally, no major changes took place during the period under consideration. In Bulgaria as a whole there are no clear-cut interregional disparities, but there are considerable intra-regional disproportions as well as such along the urban/rural direction.

Ageing and diminishing of the population continued in all planning regions in 2007. At the same time, the substantial differences in the value of the demographic indicators at the lower territorial levels compared to the national average were preserved. The natural growth rate was negative in all planning regions (NUTS 2), as well as in the administrative districts (NUTS 3). There was an insignificant improvement of this indicator in comparison with 2006. The most unfavourable figures were registered in the North-western region where the rate was almost two times above the national average level of -5.0 per mille (-5.1 per mille for 2006), followed by the North Central region. At the lower territorial levels the value of the indicator was about -10 per mille for the regions of Vratsa and Montana, while the region of Vidin registered the most sizeable drop in the population -14.7 per mille (-15 per mille for 2006) resulting from the negative birth rate. The huge rate difference between the towns (-1.9 per mille for 2007 and -2.1 per mille for 2006) and the villages (-12.2 per mille for 2007 and -12.4 per mille for 2006) was preserved.

The trend of reducing the relative share of persons under active working age registered in all planning regions continued in the years after the country’s accession to the EU. This benchmark amounted to 14.5% in 2007 compared to 14.6% for 2006. Meanwhile, the deviation of the figures registered at the level of the planning regions was not considerable compared to the national average. The smallest relative share of the population under active working age was registered in the South-western region (13.6% for 2006 and 2007), while the largest one was in the South-eastern region (16.4% for 2006 and 16.3% for 2007). In 2007 an inconsiderable rise in the share of persons in active working age was observed for all planning regions compared to the previous year. The relative share of the population in active working age was smallest in the North-western region and amounted to 58.3% (57.8% for 2006), and largest in the South-western region 65.1% (65% for 2006). These disparities are greater at the lower territorial levels where the figure for the region of Vidin was 56.7%, while it was 67.1% for Sofia. The North-western region contributes the largest share of population over active working age,

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with the figure for the region of Vidin being 30.2% as opposed to the national average of 22.5%. It should be pointed out that according to a Commission staff working document3, Bulgarian regions (the North-western region especially) run the risk of a 25% drop in the population in active working age. Structural policy measures should address this challenge by means of special interventions aimed to overcome the effects of the negative demographic trends.

The regional section of the labour market shows that despite the observed improvement of the indicators, the interregional disparities in the levels of employment, unemployment and economic activity are preserved, while they continue to be considerable at lower levels. The North-western region continued to stand out with the most unfavourable characteristic features of the labour market where for 2007 the economic activity ratio and the employment ratio amounted to 62.8% (60.1% for 2006) and 57.1% (53.5% for 2006) respectively, and the unemployment level reached 9% (11% for 2006). The South-western region, respectively, continued to have the best indicators not only in comparison to the national average but to the rest of the regions as well. The economic activity ratio and the employment ratio registered in 2007 for the region were 71.3% (69.5% for 2006) and 68.5% (65% for 2006), while the unemployment level was 3.9% (6.5% for 2006).

A gradual process of convergence and minimizing the disparities between the country and the Community has been observed in the period after Bulgaria’s accession to the EU. EU structural instruments are expected to play a crucial role in this respect while the effects of implementation thereof will be seen as early as in the medium turn. Although it is still too early to observe a specific contribution of EU cohesion policy in this respect, there are no indications for the time being that the measures programmed within priority interventions will not lead to the implementation of the objectives outlined. Therefore, programming institutions do not consider it necessary to make any changes in the NSRF strategy.

2. Progress in the Implementation of the Programmes Funded by EU Structural Instruments and Future Challenges.

After the approval of the seven Operational Programmes at the end of 2007, partial progress was made in 2008 and 2009 in the implementation of the objectives and measures set in the National Strategic Reference Framework and the Operational Programmes. At that, it is more a matter of results generated from the speed gained by economy, than any effects from the implementation of measures and activities under the strategic documents themselves. On the one hand, this is due to the late real launch of the programmes and the difficulties encountered by the Managing Authorities and the Beneficiaries when working with the new instruments whereto our country gained access after accession to the EU. At the same time, as of now it is still too early to anticipate any significant effects from strategic document implementation for in order to generate those effects some technological time is needed even after intensifying the process of contracting SCF funds since the middle of 2008. By 30.09.2009 project proposals totalling EUR 2.5 billion have been approved, which makes 29.7% of the total NSRF budget for the whole programming period. The progress in implementing those projects will help achieve some positive effects as to the attainment of the desired objectives but currently just EUR 161.7 million had went into the economy (in the form of advance, interim and final payments under the projects launched within the seven operational programmes) by 30.09.2009.

Nevertheless, it should be mentioned that the first positive effects on the country’s business environment have already been observed as a result of the projects implemented to strengthen the administration’s capacity so as to perform its functions. For instance, an updated version of the Methodological Guidelines for Public Private Partnership has been drafted and put into practice and the respective training has been conducted under a project of the Ministry of Finance funded by the Operational Programme Administrative Capacity. This project has a direct effect on improving the

3 Background document to Commission staff working document3 sec (2008) 2868 *(final)

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application of public private partnership in the country as a way of effective co-operation between administration and businesses and optimisation of the use of public resources. Through projects under the same programme implemented by the Council of Ministers’ administration, the Public Procurement Agency, the Commission for Protection of Competition, as well as through projects of the former Ministry of State Administration and Administrative Reform, results are seen concerning concessions, assessment of the impact of legislation and policies, public procurement (a public Procurement Gateway has been developed under a project implemented by the Public Procurement Agency), electronic payment environment for delivery of public e-services, etc. All these have a direct effect on businesses, with this impact being expected to become manifested over time.

During this period the Bulgarian government and administration made considerable efforts to attain optimum organization of the management and control systems in view of the effective and transparent management of EU funds. In this regard, a number of actions were taken to optimize the institutional framework, refine the legislation, simplify the procedures, enhance public awareness, and improve the dialog with the social and economic partners and the European Commission.

In order to strengthen coordination in the management of EU funds, a Management of EU Funds Council has been established at ministerial level. A single centre for coordination of EU funds management and control has also been established, with the functions of the Central Coordination Unit being transferred from the Ministry of Finance to the Council of Ministers’ administration.

With regard to ensuring the necessary protection of the Community’s financial interests, the Act on the Avoidance and Disclosure of Conflicting Interests and the Act Amending the Public Procurement Act were adopted in 2008. A number of amendments were initiated to Council of Ministers’ Decree No. 121/2007 Establishing the Procedure for the Award of Grants under the Operational Programmes Co-financed by the Structural Funds and the Cohesion Fund of the European Union, and under the PHARE Programme of the European Union, and Council of Ministers’ Decree No. 55/2007 on the Terms and Procedure for Selection of a Contractor on the Part of Beneficiaries of Grants Contracted from the Structural Funds of the European Union and from the PHARE Programme of the European Union. The amendments were aimed to optimise the procedures for the selection of a contractor on the part of the beneficiaries of grants contracted under the operational programmes and raise publicity and transparency in the process of evaluation of project proposals under the operational programmes and the subsequent selection of project contractor.

Amendments have been made to Council of Ministers’ Decree No 18 of 2003 on the establishment of an Anti-Fraud Co-ordination Structure Council. The amendments thereto provide for a number of changes in the reporting of irregularities on a national level towards optimisation of the procedure concerning the analysis and reporting of irregularities and fraud with EU Funds. These amendments aim at the further strengthening of control mechanisms with a view to prevent any irregularities and fraud with funds under EU programmes. The AFCOS structure within the MI is vested functions related to carrying out administrative checks and exerting control over the implementation of the procedure concerning the administration of warnings received and irregularities found in the structures in charge of the management of EU funds.

A new Regional Development Act was adopted in 2008 regulating the planning, programming, management, support, monitoring, control and assessment of conducting government regional development policy. The Act amends the territorial scope of NUTS 2 regions whereat cohesion policy is targeted. Meanwhile, the mechanisms used to implement the integrated approach to programming and implementation of programming documents funded by national and Community funds have been reinforced. The Act establishes regional co-ordination committees relating to the regional co-ordination of operational programmes.

The actions taken have contributed considerably to the optimization of the processes of planning, management, monitoring and control of the funds from EU structural instruments in Bulgaria, and have provided for the prerequisites required to implement the operational programmes effectively and really absorb the available financial resource.

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2.1. Progress in the implementation of the operational programmes

OP “Transport” is the operational programme with the largest budget of EUR 2 billion in Bulgaria. It is oriented towards the financing of large infrastructure projects the implementation of which contributes to the implementation of the NSRF Strategic Priority 1 “Improving Basic Infrastructure”. About 87% (EUR 1.4 billion) of EU co-financing under the Programme are allocated for activities contributing to the attainment of the Lisbon Strategy objectives. In this regard, OP “Transport” incorporates priorities related to the development of railway and road infrastructure along the priority national and trans-European transport axes; improvement of intermodality for passengers and freights, and improvement of the maritime and inland-waterway navigation.

The ERDF and CF funds set in OP “Transport” for the financing of activities contributing to the attainment of Lisbon Strategy objectives are as follows:

− CF – EUR 1.1 billion;

− ERDF – EUR 312.8 million.

As of 30.09.2009, grant contracts have been signed under four out of the five priority axes of OP “Transport” (except for Priority Axis 4 “Improvement of the Maritime and Inland-Waterway Navigation”). The contracts signed under the Programme total EUR 231.3 million, EUR 25.8 million of which from the CF and EUR 169.1 million from the ERDF.

The low rate of contracted and disbursed funds results from the delay in project preparation as well as in their approval, contract signing and implementation respectively. By the end of September 2009 two infrastructure projects have been approved under OP “Transport”: the Extension of the Metropolitan Sofia Project financed by the ERDF under Priority Axis 3 and Electrification and Reconstruction of the Svilengrad-Turkish Border Railway Line Project. Preparation of the other large infrastructure projects is funded by Priority Axis “Technical Assistance”.

As of 30.09.2009 no real implementation of the benchmarks set in the Operational Programme can be reported. This is due to the delay in project preparation and implementation, on the one hand, and to the specifics of the large infrastructure projects, on the other, the implementation of which takes place in a period of 2-4 years. Therefore, any real progress in the implementation of the physical benchmarks would be reported after the closure of the individual projects in the period 2011 – 2015.

Encouraging is the fact that EC approved the first large Bulgarian infrastructure project under OP “Transport” in September 2009. On the other hand, the Government has committed itself to priority implementation of infrastructure projects in the road sector whereto half of the Programme’s budget is allocated.

OP “Regional Development” is mostly oriented towards the implementation of NSRF Priority 4 “Balanced Territorial Development” by contributing to the implementation of the other NSRF priorities as well.

After the official Programme approval, 21 calls for proposals totalling EUR 890.4 million have been published, with 532 proposals being approved for financing. 277 contracts/grants totalling EUR 287.4 million have been signed. Disbursements under the contracts signed amount to EUR 19.4 million.

A Memorandum of Understanding was signed on 27 May 2009 between the Government of the Republic of Bulgaria and the European Investment Bank on the implementation of the Joint European Support for Sustainable Investment in City Areas (JESSICA) in Bulgaria. This initiative will be implemented by the Managing Authority of Operational Programme “Regional Development 2007-2013”. It embodies the new approach to supporting sustainable and integrated urban development through EU Structural Funds. Through JESSICA, Operational Programme “Regional Development” will be financing innovative projects on urban reconstruction and development which are part of an integrated sustainable urban development plan and have the potential to return the resources invested therein.

By 30.09.2009, Programme implementation per priority axis is as follows:

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• On Priority Axis 1. Sustainable and Integrated Urban Development:

Under Sub-priority 1.1 in the field of educational, social and cultural infrastructure 62 contracts totalling EUR 122.2 million (of which EUR 121.7 million are grants) have been signed with municipalities. Expected outcome of project implementation: more than 100 renovated and modernized buildings of the educational, cultural and social infrastructure, over 60,000 pupils, vulnerable people and citizens favoured by the improved infrastructure, energy saving as a result of the introduction of energy efficiency measures.

Contracts have been signed with specific beneficiaries: with the Ministry of Education and Science on the renovation and energy efficiency of educational infrastructure amounting to EUR 0.9 million.

Under Sub-priority 1.4 have been signed 17 landslide fortification contracts with municipalities, totalling EUR 7.6 million (of which EUR 7.5 million are grants). Expected outcome of project implementation is fortification and stabilization of more than 30 landslides and landslips.

Contracts have been signed with a specific beneficiary – Ministry of Interior on fire prevention amounting to EUR 7 million.

• On Priority Axis 2. Regional and Local Accessibility:

Twenty-nine contracts concerning municipal road infrastructure and totalling EUR 66.1 million (of which EUR 62 million are grants) have been signed. The expected outcome of project implementation is over 310 km of reconstructed and rehabilitated municipal roads.

• On Priority Axis 3: Sustainable Tourism Development

One contract totalling EUR 0.5 million has been signed with the Ministry of Culture as beneficiary under Sub-priority Axis 3.1 “Enhancement of tourism attractions and related infrastructure”.

One framework agreement and 9 contracts totalling EUR 22.2 million have been signed with the Bulgarian State Agency for Tourism as beneficiary under Sub-priority Axis 3.3 “National tourism marketing”.

• On Priority Axis 4. Local Development and Cooperation:

Under Sub-priority 4.1 have been approved 99 proposals for financing and 58 contracts totalling EUR 26.8 million have been signed. The expected outcome of project implementation is that more than 80 buildings of educational infrastructure will be renovated and modernized, i.e. kindergartens and nurseries, primary and secondary schools; over 5,000 pupils will favour from the improved infrastructure; energy will be saved as a result of the introduction of energy efficiency measures.

14 contracts on the fortification of landslides in small villages totalling EUR 4.3 million have been signed. As a result of project implementation more than 25 landslides and landslips are expected to be fortified and stabilized.

Under Sub-priority 4.2 “Inter-regional Cooperation” have been signed 55 contracts totalling EUR 6.4 million. What is planned thereunder is an exchange of good practices, making study visits, improving regional and local policies and strategies.

• On Priority Axis 5. Technical Assistance:

Under Priority Axis 5 are being carried out 29 orders, totalling EUR 28 million.

The implementation of Operational Programme “Human Resources Development” (OP HRD) is in conformity with NSRF Priority 2 “Increasing the Quality of Human Capital with a Focus on Employment”.

The Programme reports real development of performance indicators and results under five of the eight priority axes. There is some improvement concerning the adaptability of employees, improvement of the quality of services in education and training, strengthening of relations between educational and training institutions, the R&D sector and businesses, access to education and training of vulnerable

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groups, children and youths in education and society, social services delivered to prevent social exclusion and overcome the consequences thereof.

Since the approval of OP HRD 50 grant procedures totalling EUR 468.7 million have been published. 1,365 proposals totalling EUR 246.7 million have been approved. As of 30.09.2009 996 contracts amounting to EUR 220.74 million are under implementation. The disbursements made amount to EUR 31.6 million.

Implementation per priority axis is as follows:

5 procedures totalling EUR 138.5 million have been launched under Priority Axis 1 by 30.09.2009. Activities are being implemented within 2 procedures amounting of EUR 17.9 million with the Employment Services Directorate General to the Employment Agency (EA) as beneficiary. They provide for the inclusion of 10,400 young people in key competence courses and of 50,000 persons in entrepreneurship skill courses. Disbursements under the projects amount to EUR 0.03 million.

Resulting from the impact of the economic crisis on the labour market, in June the EA published two procedures totalling EUR 95.1 million aiming to improve the access of unemployed persons from vulnerable groups to the labour market and provide employment to persons laid off as a result of deteriorated economic conditions. As of 30.09.2009, the activities under these procedures had not started yet.

In July 2009 the call for proposals for one of the procedures was terminated due to the lacking interest on behalf of potential beneficiaries.

11 procedures totalling EUR 87.6 million have been published under Priority Axis 2. Activities under 4 procedures have been launched, with funds amounting to EUR 29.7 million being contracted and disbursements amounting to EUR 2.7 being made.

307 contracts totalling EUR 17.5 million have been signed under 2 grant schemes aiming to improve the adaptability of employed persons. While 24 projects had already been completed, 31 contracts have been terminated resulting from the impact of the economic crisis and the need to optimize the staff of enterprises.

General Labour Inspectorate Executive Agency is a beneficiary under a procedure amounting to EUR 7.7 million and aiming to improve the working conditions in enterprises. The expected outcome is to develop systems for professional and health risk management in enterprises, as well as to elaborate and disseminate practical instruments providing motivation towards healthy labour.

8 procedures within Intervention “Raising labour market flexibility and effectiveness through active measures on behalf of the social partners” totalling EUR 36.4 million were published in June 2009. The first contract amounting to EUR 4.6 million was signed in September.

As of 30.09.2009, 115 contracts totalling EUR 42 million have been signed within the scope of 8 interventions under Priority Axis 3. Disbursements amounting to EUR 5.6 million have been made.

As to Interventions 3.1 and 3.2, units of the Ministry of Education, Youth and Science (MEYS) are beneficiaries under 4 procedures totalling EUR 31 million which are aimed to raise the quality of education. Resulting from project activities, 400 testing and training ICT centres are expected to be established and at least 1,000 new courses and manuals to be developed. 2,500 teachers and 1,000 lecturers in universities are to be included in qualification courses, and training courses on the acquisition of director qualification are to be held. Likewise, external and internal evaluation and rating standards for universities in the Republic of Bulgaria are to be elaborated, and 219 municipalities are expected to introduce the delegated budget system on their territory.

108 contracts amounting to EUR 9.1 million have been signed within the scope of 4 grant schemes under Intervention 3.3. They are aimed at school and student practices and at participation of doctoral candidates, post-doctoral candidates, post-graduates and young scholars in scientific programmes.

4 Including private co-financing

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5 procedures totalling EUR 41.1 million have been published under Priority Axis 4. Contracts amounting to EUR 30.4 million have been signed and disbursements amounting to EUR 10.4 million have been made.

64 contracts amounting to EUR 2.8 million have been signed within the scope of Intervention 4.1 under a procedure aimed to include children and pupils from ethnic minority groups in the process of learning. MEYS has been implementing a project amounting to EUR 2.5 million which aims to minimize the drop-out reasons and to support talented pupils.

251 contracts totalling EUR 5.3 million have been signed within the scope of Intervention 4.2 under stage 1 of the scheme “Making School Attractive to Young People”. They aim at participation of 60,000 children in extracurricular and out-of-school activities. The Ministry of Education, Youth and Science has already signed contracts with the beneficiaries approved under the second stage of this procedure. Likewise, MEYS is a beneficiary under a procedure amounting to EUR 20 million whereunder at least 15,000 students are to receive scholarships and 50,000 prizes are to be awarded.

As of 30.09.2009, 8 procedures totalling EUR 89.5 million have been published under Priority Axis 5. Contracts amounting to EUR 35.2 million have been signed under 6 of them and disbursements amounting to EUR 11.2 million have been made.

Projects amounting to EUR 22.8 million are being implemented under 4 procedures within the scope of Intervention 5.2. They are aimed to deliver services to persons with disabilities and people living alone, and support the provision of alternative services to children and youths living in specialized institutions.

The Ministry of Health is a beneficiary under 2 procedures amounting to EUR 12.4 million within the scope of Intervention 5.3. They will allow the conduct of public awareness campaigns on the behavioural factors presenting risks as well as the early diagnosis of cancer diseases.

Contracts have been signed and an order has been issued on the implementation of 7 projects amounting to EUR 32.4 million under Priority Axis 6 and disbursements amounting to EUR 0.6 million have been made.

4 projects totalling EUR 19 million are being implemented within the scope of Intervention 6.1. Beneficiaries are the Ministry of Labour and Social Policy (MLSP) and the Employment Agency. Among the expected results from these activities are studies of the needs of vulnerable groups and inactive and discouraged persons, improvement of services delivered by MLSP to citizens, improved access of employers to the Employment Agency, as well as introduction of a telecommunication and information data transfer system within the Employment Agency.

3 projects amounting to EUR 13.4 million are being implemented within the scope of Intervention 6.2. Beneficiaries are the Social Assistance Agency (SAA) and the Ministry of Health. These projects aim to improve the quality of services delivered by SAA through further development and introduction of an integrated information system and data bases, to improve the quality of emergency and development of the hospital accreditation system.

No procedures have been launched under Priority Axis 7 during the period under consideration.

6 projects amounting to EUR 39.4 million are being implemented under Priority Axis 8 (Technical Assistance) and disbursements amounting to EUR 1.1 million have been made.

The support rendered under HRD OP contributes directly or indirectly to the implementation of the Integrated Guidelines for Growth and Jobs 2005-2008 in the part Guidelines for Employment in the following key areas: competitive and qualified labour force in response to labour market needs, social inclusion, education and training. The operations financed under priority axes 1 and 2 of OP HRD help achieve several underlying objectives of the Guidelines for Employment: achieving an employment level of 70%, participation of 25% of long-term unemployed persons in an active labour market measure and reaching an average level of lifelong learning forms for the EU of not less than 12.5% of population aged 25-64 years.

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The Guidelines for Jobs and Growth were the starting point for the elaboration of the National Reform Programme 2007-2009 (part 4 Employment and education). OP HRD is one of the instruments to raise employment and the quality of labour force in 3 main directions of the NRP: increasing the economic activity of population and the level of employment in accordance with Integrated guidelines 17, 18, 20, 21 and 22; effective integration of disadvantaged people in the labour market in line with Integrated guideline 19 and education and training to support the transition to a knowledge-based economy in accordance with Integrated guidelines 23 and 24.

The operations launched under each priority axis of OP HRD as of 30.09.2009 contribute to the attainment of one or more of the Guidelines for Jobs except for Integrated guideline 22. According to the Management Information System of EU Structural and Cohesion Funds, as of 30.09.2009 17 procedures under HRD OP have been opened on topics of priority contributing to the achievement of Lisbon Strategy objectives. 1,000 contracts totalling EUR 72.2 million have been signed. Benchmarks show a real contribution of the Programme to the implementation of Integrated Guidelines measures within Guidelines 17, 18, 19, 20, 23 and 24.

OP HRD is the operational programme which to an utmost degree supports the achievement of objectives set in the National Report of the Republic of Bulgaria on the social protection and social inclusion strategies. All priority axes of the Programme set measures in support of the social inclusion policy. Access of vulnerable groups to the labour market, access to education, special measures for the integration of vulnerable groups, development of social services and access to health care are all included in the Operational Programme schemes. The key priorities of Bulgarian policy aimed at social protection and social inclusion are to limit the passing of poverty and social exclusion from generation to generation (focusing on child poverty and social exclusion), active inclusion of those farthest from the labour market, equal opportunities for the most vulnerable groups of society. All schemes launched under OP HRD so far contribute directly or indirectly to the attainment of National Report objectives.

OP “Administrative Capacity” (OPAC) is part of NSRF, contributing to the implementation of the Framework’s two strategic objectives.

The activities and projects financed by OPAC during the period under consideration have been determined in accordance with the EU Lisbon Strategy on Economic and Social Cohesion and with NSRF.

In order to achieve the NSRF objectives, OPAC renders support in three main directions: good governance, human capital management (human resources in particular) and quality administrative service delivery to citizens and businesses. These three directions support the implementation of measures set in the NSRF executive summary with a focus on:

• Optimization of the business environment in order to provide for better prerequisites for enhanced competitiveness and sustainable growth;

• Investment in human resources and enhancing the qualification of staff both in key areas of the administration and the judiciary and of civil society structures.

Some significant results are:

• On Priority Axis 1:

60% of the funds under this priority axis have been contracted, with 24% having been disbursed. 82 contracts and orders totalling EUR 24.9 million, including EUR 21.1 million EU co-financing, have been signed thereunder. A considerable part of the projects along this axis have beneficiaries. These are horizontal projects mostly aimed towards target groups or even towards the whole public administration and envisage important and founding measures in relation to modernization of the administration and administrative reform in certain fields.

Some major improvements within the administration have been initiated which will ultimately have a significant impact on the business environment in Bulgaria. As an example of good practices we may refer to the projects related to introduction of mechanisms evaluating the impact of legislation on

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economic operators and citizens, activities in the field of better regulation, elaboration and realisation of public private partnerships, as well as refinement of mechanisms for consideration and granting of concessions.

Part of the results of the projects launched within this procedure are oriented towards special target groups such as young people, disabled people and people from minority groups and a more intense participation thereof in the processes related to laying down and implementation of policies and EU standards.


32% of the funds under this priority have been contracted, with 20% thereof having been disbursed. 112 contracts totalling EUR 23.6 million, including EUR 20.1 million EU co-financing, have been signed thereunder. As a result of project implementation some progress has been registered in achieving the priority objectives. The qualification of administration and judiciary staff has been enhanced by conducting training courses on various topics related to their professional competence. A great part of the projects under this priority axis have also led to strengthening the capacity of civil society structures for better interaction and cooperation with public administration.

The effects of forming up local level capacity are salient not only in civil society structures but in the representatives of regional and local administration and of the judiciary.


Within this priority axis, 37% of the funds have been contracted and 11% paid. 53 contracts and orders totalling EUR 20.7 million, including EUR 17.6 million EU co-financing, have been signed thereunder. The implementation of projects has led to an almost 100% progress in the introduction of quality management systems in the target administrative structures, which is a factor of stabilisation, enhanced traceability and accountability of administrative actions both on the part of the administration itself and on the part of the users of administrative services: individuals, businesses and non-governmental organisations.

Another positive development is the considerable progress (40%) in the introduction of practices to ease access to administrative servicing of disadvantaged people and improve the conditions for their full integration into public life.


Within this priority axis, 33% of the funds have been contracted and 11% paid. 6 contracts amounting to EUR 2.4 million, including EUR 2 million EU co-financing, have been signed and are being implemented thereunder.

Operational Programme “Environment 2007-2013“ (OPE) contributes to the implementation of Strategic Goal No. 1 of the National Strategic Reference Framework (NSRF), targeted at strengthening the competitiveness of the economy with a view to achieving high and sustainable growth by creating preconditions for upgrading and development of the ecological physical infrastructure in the country. Thus, the funds provided within the projects approved under OPE will contribute to an improvement of the country's image as a competitive and attractive destination for investment and work, as well as for strengthening the link between environment protection and economic growth.

Regardless of the practical progress made on some of the projects, the reporting period did not see higher values of the benchmarks at programme level and, respectively, a contribution to the target values of the benchmarks under the NSRF.

As of 30.09.2009, on Priority Axis 1 of OPE, 157 contracts for granting financial aid within the procedure “Technical assistance for drafting investment projects” and 29 contracts within the procedure “Improvement and development of water and wastewater infrastructure” are under implementation, and the Minister of Environment and Water has signed one order on the award of a grant within the

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procedure “Development of river basin management plans”, with the financial aid granted under this priority totalling EUR 358.7 million.

Under the 29 signed infrastructure contracts within Priority Axis 1 of OPE, some 235,555 residents are expected to be connected to new sewerage networks, including to wastewater treatment plants, and some 304,415 residents are to be connected to the water supply network or will benefit from the upgrading of this network.

On Priority Axis 2 of OPE, 33 contracts for granting financial aid within the procedure “Technical assistance for drafting investment projects” to the amount of EUR 10.4 million are under implementation. Eight of the approved projects envisage setting up of new regional waste management systems compliant with environmental legislation, thus increasing by 874,927 residents the population serviced by integrated waste management systems. The other project proposals envisage preparing the requisite documentation for the closure of landfills which do not meet statutory requirements, as well as making morphological analyses or improving the waste management infrastructure of existing waste management systems or ones under construction.

On Priority Axis 3 of OPE, the Minister of Environment and Water has issued three orders on award of grants within the procedure “Development of the NATURA 2000 Network” and 7 orders and 16 contracts for granting financial aid within the procedure “Preservation and restoration of the biological diversity of the Republic of Bulgaria”, to an aggregate amount of EUR 23.3 million, have been issued and signed.

OP “Technical Assistance” (OPTA) is an instrument providing support to the structures participating in the co-ordination, management and control of structural instruments in Bulgaria. The Programme finances activities for strengthening the capacity of the EU funds management systems at national level, building a Unified Management Information System (UMIS) and popularising EU Cohesion Policy. Full coverage of the three priority axes within OPTA was achieved during the reporting period. Twenty-three projects to the value of EUR 12.8 million are under implementation. A total of EUR 12.9 million were contracted for 27 projects, accounting for 22.7% of the funds within the programme. Of these projects, one has been completed successfully with verification of all of expenditures, and three have been terminated.

• Priority Axis 1

The activities envisaged for building administrative capacity at central level and enhancing the competence of administration staff within Priority Axis 1 are successfully implemented. As many as 146 various training courses and seminars on EU regional policy and management of the Structural and Cohesion Funds have been delivered, and 681 employees of the central administration involved in the processes of management of structural instruments in Bulgaria have been trained.

A project within which some 140 training courses are to be held and some 3,000 local government experts are to be trained through distance learning and specialised seminars was approved in late 2008.

In connection with the operation of the Certifying Authority, 19 on-spot inspections at the Managing Authorities, Intermediate Bodies and specific beneficiaries were conducted with the help of external experts, which made it possible to certify the first expenditures under the Structural Funds and duly enhance implementation and management processes as a result of the recommendations made.

Within a project of the Audit Authority, an audit of the security and reliability of the accounting, monitoring and financial reporting systems in electronic form existing under the operational programmes was carried out in 2008 in compliance with the requirements of Regulation (ЕC) No 1083/2006 and, in particular, of the basic functionality of UMIS.

Two evaluations of the Operational Programme were made within a project of the Managing Authority of OPTA: an analysis of the progress and an analysis of the overall framework of OPTA implementation with a focus on the evaluation of the system of benchmarks.

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The OPTA Managing Authority also organised a series of specialised training courses and seminars for OPTA beneficiaries to familiarise them with the rules for project drafting, implementation and reporting and to assist in practice their teams in the implementation of the overall project cycle within OPTA.

• Priority Axis 2

The key project within Priority Axis 2 is related to the information system for management and monitoring of funds from the EU structural instruments. The basic configuration of the system is operational. As part of the extended configuration, additional modules have been developed, as well as an interface with the accounting system used within the operational programmes. Until 30.09.2009, a total of 9,192 project proposals, 2,335 contracts and other information related to the processes and the work of the separate Managing Authorities were entered into the system.

In the process of development of the system, base training courses for the employees who participated in defining the requirements to UMIS were organised to test and adopt the new functionalities. With a view to providing full utilisation of the information system and improving the effectiveness of the overall process of management of funds from the structural instruments, over 20 trainers of the separate Managing Authorities and Intermediate Bodies were trained under a separate OPTA project and targeted training of UMIS end users of the system has started.

• Priority Axis 3

A single portal for general and specialised information for the management of the Structural and Cohesion Funds in Bulgaria has been developed within Priority Axis 3.

After the development of a NSRF Communication Strategy, which defines the common communication goals, tasks and target audiences, a graphic vision was designed – a logo and a slogan lending identity to the overall process. This made it possible to carry out an information and advertising campaign to raise the awareness and popularise the newly created symbols.

Several studies of the information needs regarding the structural instruments in Bulgaria were conducted.

The financed activities and projects contributed significantly to a unification of the approach to communicating the Cohesion Policy by the various sources, as well as to the creation of single messages and a single vision about the process of approximation of the common European goals to the Bulgarian citizens.

A campaign for the promotion of the EU structural instruments in Bulgaria and ensuring of awareness and transparency regarding the absorption of the EU funds was launched in 2009.

The implementation of the Communication Strategy and the communication activities at national level are monitored and evaluated on a regular basis.

OP “Development of the Competitiveness of the Bulgarian Economy” is oriented towards implementation of Priority 3 of the NSRF, “Promotion of Enterprise, Favourable Business Environment and Good Management”, and contributes to the fulfilment of the first medium-term NSRF goal, “Strengthening the Competitiveness of the Economy with a View to Achieving High Sustainable Growth.”

The programme implementation is at the stage of accelerated signing of contracts within the hitherto launched calls. The funds extended under already approved project proposals are insignificant in size. For this reason, progress regarding the programme benchmarks is still insignificant.

As at 30.09.2009, 782 project proposals of a total value of grant of EUR 406.4 million accounting for 35% of the programme budget5 were approved under OP “Development of the Competitiveness of the

5 Exclusive of private co-financing

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Bulgarian Economy”. A total of 726 contracts aggregating EUR 377.4 million of a grant, which accounts for 32.5% of the Programme budget, have been signed. The funds paid amount only to EUR 0.8 million but are expected to increase significantly in the short term, considering that implementation of the contracts signed so far has started and closing of the first opened procedures whereunder only final payments are envisaged.

On Priority Axis 1, Development of Economy Based on Knowledge and Innovations, two project selection procedures have been completed, one new procedure is open, the stage of calls for proposals under the Support for Incorporation and Development of Innovative Start-Ups Procedure has been extended and two new procedures are to be announced in the near future. As of 30.09.2009 172 project proposals have been submitted within them. 41 proposals have been approved and 40 contracts have been signed of a total value of OP-provided co-financing amounting to EUR 16.2 million. Interventions under this Priority Axis contribute directly to the achievement of one of the priorities set in the Guidelines for Cohesion Policy 2007-2013, namely “Encouraging innovation, entrepreneurship and the growth of knowledge economy by research and innovation capacities, including new information and communication technologies”, and Guideline 2 “Improving knowledge and innovation for growth” in particular.

On Priority Axis 2, Enhancing the Efficiency of Enterprises and Development of Favourable Business Environment, five project selection procedures have been completed and another four procedures are to be announced in the near future. A total of 567 contracts aggregating OP-provided co-financing to the amount of EUR 106.2 million have been signed. As at 30.09.2009, the project activities on 37 of the contracts have been completed, and 51 final reports have been filed by beneficiaries with requests for payment.

The measures on Priority Axis 3, Financial Resources for Development of Enterprises, will be implemented through the financial engineering instruments and the establishment of a holding fund in compliance with Article 44 of Council Regulation (ЕC) No 1083/2006, as the European Investment Fund (EIF) has been set as manager of the holding fund within the JEREMIE Initiative. The draft framework and financial agreements between the Government of the Republic of Bulgaria and EIF were signed on 27 May 2009, approved by Council of Ministers Decision No. 403 of 28.05.2009, and ratified by a law, promulgated in State Gazette No. 44 of 12.06.2009. The agreements were promulgated in State Gazette No. 55 of 17.07.2009 and, respectively, entered into force on that date.

On Priority Axis 4, Strengthening the International Market Positions of the Bulgarian Economy, three calls for the award of grants have been launched and six project proposals have been submitted and approved within them. As at 30.09.2009, four contracts for direct grant awards totalling EUR 34.4 million were signed. Another two contracts for EUR 3.4 million are to be signed shortly.

On Priority Axis 5, Technical Assistance, contracts have been signed/orders issued for direct grant awards to the amount of EUR 20.7 million.

Interventions on the first four priority axes of OPC contribute directly to the achievement of one of the priorities set in the Guidelines for Cohesion Policy 2007-2013, namely “Encouraging innovation, entrepreneurship and the growth of knowledge economy by research and innovation capacities, including new information and communication technologies”, and Guideline 2 “Improving knowledge and innovation for growth” in particular with the following sub-guidelines:

2.1. Increase and better target investment in RTD – Priority Axis 1;

2.2. Facilitate innovation and promote entrepreneurship – Priority Axes 1 and 2;

2.3. Promote the information society for all – Priority Axes 1, 2, 3 and 4;

2.4. Improve access to finance – Priority Axis 3.

2.2. Progress in the implementation of the programmes under goal 3, European Territorial Cooperation.

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Bulgaria’s participation in territorial cooperation programmes is financed by the European Regional Development Fund under goal 3 “European Territorial Cooperation”, as well as by the CBC programmes within Instrument for Pre-Accession Assistance (IPA). Territorial cooperation aims to achieve a harmonious and balanced development on the territory of the EU and takes place through cross-border (along external and internal borders of the EU), trans-national and interregional cooperation. Programmes mostly support projects targeted at:

• Promotion of entrepreneurship, especially SME development, tourism, culture and cross-border trade;

• Promotion and enhancement of joint protection and management of natural and cultural resources and prevention of natural and technological risks;

• Promotion of links between cities and rural areas;

• Better access to transport, information and communication networks and services, and building of cross-border water, waste and energy systems and facilities;

• Development of cooperation, capacity and joint utilisation of infrastructure in sectors such as healthcare, culture, tourism and education;

• Urging the development of cross-border labour markets, local employment initiatives, equal treatment and equal opportunities, education and social inclusion;

• Development of institutional and administrative capacity at regional and local level and rendering technical assistance for the preparation of new projects.

Bulgaria-Serbia Cross-border Cooperation Programme within the Instrument for Pre-accession Assistance (IPA).

The programme budget for the 2007-2009 period totals EUR 13.5 million.

The first call for proposals was launched on 31.08.2009 with a deadline of 30.11.2009. The amount available within the call is EUR 7.2 million. The Joint Monitoring Committee is about to evaluate and approve for financing the accepted project proposals.

Bulgaria - Turkey Cross-border Cooperation Programme within IPA.



Bulgaria - Macedonia Cross-border Cooperation Programme within IPA.



Romania – Bulgaria Cross-border Cooperation Programme 2007-2013.

The programme budget totals EUR 262 million.

Within the first call for proposals, the Joint Monitoring Committee approved 18 projects of a total value approximating EUR 8 million and one strategic project of an approximate value of EUR 6 million. There are 14 leading partners on the part of Bulgaria within the first call.

A second call for proposals was launched on 08.10.2008 with a budget of EUR 101.5 million. About 200 project proposals have been filed by the end of October. The Joint Monitoring Committee is about to approve the accepted project proposals.

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A call for strategic project ideas of a total value of some EUR 40 million has been announced.

European Territorial Cooperation Programme Greece – Bulgaria 2007-2013.

The programme budget totals EUR 130 million.

The first call for proposals was launched on 09.09.2009 with a deadline of 30.10.2009. The amount available within the call is EUR 60 million. The Joint Monitoring Committee is about to evaluate and approve for financing the accepted project proposals.

Operational Programme Interregional Cooperation (INTERREG IVC).

The programme budget for the 2007-2013 period totals EUR 321 million. The first call for proposals was launched on 21 September 2007. Of a total of 492 submitted projects with 150 Bulgarian partners, the Programme Monitoring Committee approved for financing 41 projects: 6 capitalization projects and 35 regional initiative projects with the participation of 20 Bulgarian partners.

The second call for proposals was launched on 27 October 2008 and was open until 30 January 2009.

The third call for proposals will be limited to capitalisation projects. It will be open from 9 December 2009 to 5 March 2010.

Black Sea Basin Joint Operational Programme.

The programme budget totals EUR 18.8 million. The first call for proposals was launched on 30 July 2009 and was open until 12 October 2009. The submitted projects are pending evaluation and approval.

South East Europe Transnational Cooperation Programme.

The budget for the 2007 – 2013 period totals EUR 245 million.

The first call for proposals has been completed. Of a total of 40 project proposals approved for financing within the first call, 33 projects involve 48 Bulgarian partners. There are no leading Bulgarian partners in the approved projects.

A second call for proposals is about to be launched.

2.3. Expected or implemented contribution to other priorities of the National Reform Programme within the context of the Lisbon Strategy.

When programming EU structural instruments, Bulgaria has envisaged substantial resources to finance measures related to fulfilment of the Lisbon Strategy goals. These measures are contained in five of all seven operational programmes in the Republic of Bulgaria: “Transport”, “Development of the Competitiveness of the Bulgarian Economy”, “Human Resources Development”, “Regional Development”, and “Administrative Capacity”.

According to data from the Information System for Management and Monitoring of Funds from the EU Structural and Cohesion Funds as at 30.09.2009, the following progress in the implementation of National Reform Programme priorities other than employment has been observed:

⇒ Within OP “Development of the Competitiveness of the Bulgarian Economy”, six procedures on priority topics with contribution to the attainment of the goals of the Lisbon Strategy have been announced. A total of 623 contracts aggregating EU financing of EUR 135.5 million have been signed under them.

⇒ Within OP “Transport”, six grant contracts on procedures contributing to the attainment of the Lisbon Strategy goals have been signed. The EU financing under contracts signed totals EUR 183.5 million or about 13.1% of the funds provided for activities to fulfil Lisbon Strategy goals. The low rate of these contracts is a result of the overall programme implementation wherein 87% of funds have been foreseen for such kind of activities. In

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order to speed up the implementation of activities to fulfil Lisbon goals, an overall acceleration in the implementation of OP “Transport” is needed. The activities undertaken to this end are outlined in p.3, but they could be summarised as follows: speeding up the preparation of major projects and substitution of those that could not be implemented; enhancing the coordination in programme implementation at all levels; improving the capacity for programme implementation at all levels.

⇒ Within OP “Administrative Capacity”, five procedures on a topic with contribution to the Lisbon goals have been announced. 53 contracts and orders of a total value of EU financing of EUR 18.1 million have been signed. One more procedure of a total value of EU financing of EUR 17 million is to be opened by the end of the year for specific beneficiaries.

⇒ No progress has been registered within OP “Regional Development” concerning topics with contribution to the Lisbon goals.

The contracts signed as at 30.09.2009 on all topics contributing to the attainment of the goals of the Lisbon Strategy totalled a value of EUR 612.2 million6. They account for 17.9% of the funds envisaged for these topics within the operational programmes.

3. Delay of the implementation of the programmes and overcoming of difficulties

3.1. Difficulties identified in the process of implementation of the strategic documents.

NSRF for Bulgaria was officially approved on 22.06.2007 by the European Commission. The approval of all 7 operational programmes took place a couple of months later (October-November 2007). Strategic document implementation was practically launched at the end of 2007 and at the beginning of 2008. Following some delay (which continued from 6 to 12 months for the individual operational programmes), the contracting of funds between the Managing Authorities and the beneficiaries became very intensive. As of 30.09.2009 almost 1/3 of the NSRF budget for the whole programming period has been contracted, i.e. initial delay had already been made up for. There is still lagging behind as to funds disbursed (slightly over 2% of the total budget as of 30.09.2009).

The major problems identified at the launch of NSRF and operational programme implementation were a function of the complicated administrative procedures and the inadequate administrative capacity of both institutions in charge (Managing Authorities and Intermediate Bodies) and beneficiaries/recipients of funds. Difficulties to a large extent originated from the fact that both sides faced the new requirements for the first time and had to learn under way. Part of the Managing Authorities did not have any real experience in the implementation of EU pre-accession instruments.

The following could be highlighted as the more serious reasons for the delayed contracting at the start of strategic document implementation:

• Inadequate accessibility and purposefulness of information on the possibilities for application under the individual OPs;

• Lack of means of circulation of beneficiaries to finance projects in advance;

• Submission of incomplete project proposals by beneficiaries;

• Delay in the communication with beneficiaries during the process of evaluation;

• In some of the operational programmes there were problems related to the great number of project proposals submitted, which required a longer period of time to evaluate them and/or to engage more evaluators compared to the initial expectations of the Managing Authorities;

• Delay in the signing of contracts due to complicated administrative procedures.

6 See Annex 3.1.

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As to the still low rate of payment under all operational programmes, a trend could be reported for the Managing Authorities to “reinsure” themselves when disbursing funds under projects already approved given the irregularities found by the EC and the suspended funds under the pre-accession instruments.

A trend is observed to introduce and implement a full set of audit and control activities of preventive nature under the projects approved for financing. This trend inevitably leads to a greater spending of administrative resources and time so as to carry out all the checks and to ensure 100% eligibility and lawfulness of expenditure. This, on its own, leads to a slower recovery of expenditure made by beneficiaries and aid recipients. At this early stage of Cohesion Policy implementation in Bulgaria no weaknesses in the process of project implementation measurable to administrative costs have yet been found to call for a need to strengthen the preventive control activities in the absorption of the structural instruments at the expense of ensuring the beneficiaries’ greater flexibility when implementing projects and exercising effective ex-post control.

In most of the cases beneficiaries are required to submit a 100% guarantee for the advanced payments received. The negative effect of the global economic crisis should also be added here, as a result of which the beneficiaries’ possibilities for co-financing have diminished. Contracted global demand, on the one hand, impaired short-term and medium-term perspectives to the business while on the other hand, access to lending became more difficult and expensive.

One could also add here:

• A delay in the advance payments under grant contracts;

• A delay in implementation due to bad planning of project activities by beneficiaries and due to the higher administrative burden concerning financial and technical reporting.

An important factor for the acceleration of the process of real absorption of OP funds will be the receipt of a positive opinion from the EC on the compliance assessment.

A specific problem at the start of the past period was the lack of an effective approach to integrated planning of the investment process in the water sector management. A huge part of the projects selected were not based on regional strategic sectoral management plans but rather on reported local needs of individual towns and villages from a certain region without coordination and additionality between the investment proposals of these town and villages and the overall strategy of the region.

3.2. Measures for overcoming the difficulties.

The key measures for overcoming the difficulties upon the implementation of the operational programmes are oriented towards strengthening the administrative capacity and optimising the procedures.

3.2.1 Strengthening the administrative capacity.

A series of actions were taken with a view to strengthening the administrative capacity of the structures involved in the management of the EU funds:

- The staff of the Managing Authorities, the Intermediate Bodies, the Certifying Authority7 and the Audit Authority was increased.

- The pay-roll positions in the structures responsible for the operational programmes under the respective Rules of Procedure total 1,103, of which 992 are occupied.

7 The pay-roll positions of the National Fund Directorate, determined to be the Certifying Authority, were

increased from 40 to 75 in 2008 but later they were cut down to 69 positions.

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- Actions were also taken to strengthen the administrative capacity and functional independence of the Audit Authority as the Audit of EU Funds Directorate was restructured into an Executive Agency under the Minister of Finance. An Audit Committee was set up as supervisory and advisory body with the Agency to guarantee the impartiality and the high standard of performance of the Audit Authority.

- The structure for coordination of the management of the EU funds was also optimised. The functions of the Central Coordinating Unit, along with the respective experts, were transferred to the Council of Ministers’ Administration. Three new Directorates were established: Programming of EU Funds, Monitoring of EU Funds, Information and Systems for Management of EU Funds, which will perform the functions of Central Coordinating Unit.

- By amendments to the Rules of Organisation of the Finance Ministry, the Managing Authority of OP “Technical Assistance” was transformed from a department into a directorate.

- A series of training courses for the employees of the Managing Authorities, the Intermediate Bodies and the key beneficiaries of the operational programmes was held. Training courses for employees of the MA, IB, the internal audit units and the RIA were held through the School of Public Finance with the Finance Ministry on topics within the legislative framework and the financial performance and control over the EU funds. A total of 127 employees of the Managing Authorities and the Intermediate Bodies, 60 RIA employees and 20 employees of the municipalities have been trained.

- The Central Coordinating Unit implements two projects intended to strengthen the potential of the regional and local authorities to absorb the funds from the EU structural instruments. Within the first project, Improving the Mechanisms of Coordination, Management and Implementation of the EU Structural Instruments, an overall analysis of the needs of the regional and local authorities of training in the field of the absorption of EU funds was made and, on the basis of the analysis, a detailed training programme on the topics identified as having top priority for the municipalities as beneficiaries of the operational programmes was developed. Within the project, Strengthening the Capacity of the Regional and Local Authorities for Absorption of the EU Structural and Cohesion Funds, financed under OP “Technical Assistance”, based on the developed training programme, over 2,800 employees of the regional and municipal administrations will be trained on horizontal topics in the area of the Structural Funds. Meanwhile, the development of a distance learning programme on the same topics has started.

The following administrative capacity strengthening measures were undertaken within the separate operational programmes:

• For strengthening the capacity of its beneficiaries, the Managing Authority of OPE unveiled a reception centre for consultations on the management of projects within the operational programme at the Ministry of Environment and Water. The reception centre is designed for beneficiaries that have signed contracts for the provision of gratuitous financial aid under the programme. Experts of the Managing Authority, the Intermediate Body and the specialized directorates of the Ministry of Environment and Water are providing information and are answering questions related to the financial management, the reporting and implementation of public procurement contracts in connection with the fulfilment of the project activities.

With a view to enhancing the capacity of all participants in the process of implementation and management of OPE, a Framework Agreement on Organizing of Training of Beneficiaries for the Purposes of OPE was signed. Training for all beneficiaries of the programme, as well as for the structures of the Ministry of Environment and Water responsible for its management, is about to be organised.

• The MA of OPT undertook additional measures for enhancing the administrative capacity of beneficiaries. In January 2009 the MA of OPT drafted an Analysis of the Administrative

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Capacity of the End Beneficiaries of Operational Programme “Transport” 2007 – 2013, which served to establish the need of organising specialized training courses on the drafting and implementation of projects financed under the European Regional Development Fund and the Cohesion Fund. A contractor selection procedure within the Public Procurement Act is in progress.

• The staff turnover of the administrative structures, which are beneficiaries of OPTA, remained low during the year under review - below 10% - as the medium-term goal set has been overfulfilled. A methodology introducing a uniform approach to setting the obligations and the amount of remuneration of Finance Ministry employees was developed and endorsed to finance the so-called managerial costs related to project implementation.

A total of 146 various training courses and seminars on the EU regional policy and the management of the Structural and Cohesion Funds have been held within the operational programme. As many as 681 employees of the central administration involved in the processes of management of the structural instruments in Bulgaria have been trained.

• As at 30.09.2009, the MA of OPC (European Funds for Competitiveness Directorate) employed 82 people. The number of occupied pay-roll positions was 63. In the period from 1 January to 30.09.2009 nine new experts were appointed and a procedure for the appointment of a Head of the Accounting and Payments Sector, Finance Department, was announced. Four employees have quit.

As at 30.09.2009, the pay-roll positions at the Intermediate Body of OPC (Bulgarian Small and Medium Enterprises Promotion Agency) under the Rules of Procedure were 201. Of these 185 are occupied.

An initial large-scale information campaign presenting OPC was carried out in 11 cities countrywide with the participation of more than 1,000 potential beneficiaries in 2006. Two national information campaigns explaining the grant schemes under the programme were held in 2007 and 2008. Over 2,570 potential beneficiaries took part in the 2007 information campaign. Over 1,700 potential beneficiaries and 95 members of central and regional media took part in the campaign in 2008.

Eighteen practical training seminars for the business community within an EU PHARE Programme project entitled “Technical Assistance for Building Capacity and Drafting Projects Co-financed by the European Regional Development Fund” were held jointly with the MA of OPC.

In the period 01.01–30.09.2009, experts of the programme MA and IB took part in over 20 conferences, seminars and training courses, at which they presented and explained the priorities, launched and forthcoming procedures within the OP to some 1,000 potential beneficiaries.

• A series of information days have been organised within the OP HRD to promote the programme itself and the separate schemes. The idea of the main annual event for promotion of OP HRD in 2009 is to address citizens directly and provide them with useful information on the programme and the possibilities it provides and on the launched schemes for the award of grants through competitive selection of projects: Integration of Children and Pupils of the Ethnic Minorities into the Educational System and Assisting the Education of Children and Pupils with Special Educational Needs, implemented by the Ministry of Education, Youth and Science, as well as the schemes “Social Services for Social Inclusion” and “Family Care for Independence and Dignified Life of People with Disabilities and People Living Alone”, Social Assistant and House Attendant services, implemented by the Agency for Social Assistance.

• As at 30.09.2009 the staff of the Managing Authority of OPAC at the Finance Ministry numbered 32 employees. 20 events and 49 information days have been organised within OPAC to promote the programme itself and the separate calls for proposals. The mandatory information events for promotion of the European Social Fund have been held. The employees of the Managing Authority have participated in over 40 training courses for strengthening the programme management capacity. The Managing Authority has held 13 training courses for implementation and reporting on OPAC projects, including journalist training.

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• In 2007, information days for the launch of OPRD in the six regions were organised and eight training courses were held, within which 1,015 representatives of the programme beneficiaries have been trained. In order to strengthen the administrative capacity of beneficiaries, the OPRD MA have drafted a training programme for OPRD beneficiaries including a specific action plan that aims to support the absorption of OPRD financial resources and to fulfil Programme objectives, as well as to propose appropriate interventions so as to bridge the gaps concerning the knowledge, skills, interrelations and resources required for the active and effective implementation of Programme operations.

In this regard, in 2008 and 2009 information days on the announced calls were held with the participation of a total of 1,720 representatives of the beneficiaries under OPRD. A total of 12 training courses and four seminars for beneficiaries were held over two years.

In addition to that, an Analysis of the Needs for Training of the Staff of OPRD MA has been made within a project under Priority Axis 5 “Technical Assistance” as a result of which the need for holding specialised training has been ascertained and a two-year training programme has been devised.

3.2.2. Optimisation of procedures.

In order to respond to the problems identified that have led to a delay in strategic document implementation, a number of steps were made to optimise legislation, simplify procedures, reduce administrative requirements, improve the mechanisms for avoidance of conflicting interests, as well as to enhance publicity and transparency of spending funds. A significant part of the changes were initiated by the social and economic partners and the beneficiaries on the basis of the experience they had gained and the difficulties they had encountered when drafting their project proposals. At that, the major challenge was to find the balance needed between a reduction of the administrative burden, on the one hand, and generation of effective control mechanisms for protection of the interests of Bulgarian and EU taxpayers, on the other.

Amendments have been made to CoM Decree No 121/2007 towards a reduction in the administrative impediments to applicants, introduction of deadlines for the process of evaluation, enhancement of publicity and transparency mechanisms, as well as for avoidance of conflicting interests throughout the process of evaluation of proposals. In addition, measures have been taken to set up a centralised data base of evaluators, unify the mechanism for operation of the evaluation committee and fix deadlines for conducting the process of evaluation. The Decree has introduced a brand new point, i.e. the requirement for a check of double funding by the Contracting Authority before issuing the grant award decision which will give enough guarantees to avoid any doubling of grant awards and eliminate the risk of subsequent financial corrections by control bodies.

In line with the policy pursued to simplify the procedures implementing the operational programmes, amendments have been made to CoM Decree No 55 of 2007 on the terms and conditions and the procedure for the selection of contractor by grant beneficiaries under EU Structural Funds and the PHARE Programme. The purpose has been to optimise the contractor selection procedures for grants under the operational programmes outside the scope of the Public Procurement Act, to reduce the administrative burden, and to reach maximum unification between the Decree provisions and national public procurement legislation.

In connection with the delay identified in the effect of advance payments under grant contracts, the payment procedures within the Procedure Manuals under each operational programme have been simplified.

The instructions of the Minister of Finance, NFD No. 1-4 of 10 March 2009, concerning the operational programmes co-financed by EU Structural and Cohesion Funds were updated in 2009.

1. NFD No 01 of 10 March 2009 on the terms and conditions and the procedure for payment of EU Structural and Cohesion Fund grants and the corresponding national co-financing repealed NFD No 01 of 27 August 2007. The amendments concern the simplification of relations between participants in the SCF grant payment procedures and reaching better effectiveness of controls and feedback.

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NFD No 01 of 10 March 2009 was supplemented by NFD 5 of 16 March 2009 concerning the amount of payments to certain beneficiaries (municipalities and the Road Infrastructure Agency) under OP “Regional Development” and OP “Environment”.

2. NFD No 02 of 10 March 2009 concerning the certification of expenditure under the operational programmes co-financed by EU Structural and Cohesion Funds repealed NFD No 02 of 31 August 2009. Amendments thereto concern the simplification of relations between the Certifying Authority and the Managing Authorities as to the processes of certification of operational programme expenditure.

NFD No 07 of 22 July 2009 supplements NFD No 02 of 10 March 2009 concerning the opportunity for inclusion of expenditure for major projects within the meaning of Article 39 of Regulation (EC) No 1083/2006 submitted for approval by the EC in the Interim Certification Report and in the Declaration of Eligibility.

3. Amendments to NFD No 03 of 10 March 2009 concerning the procedure for registration, reporting and follow-up of irregularities under EU Structural and Cohesion Funds reflect the need to align the 2007 instructions with the amendments made to national legislation and optimise the procedure of administering irregularities in line with OLAF requirements.

4. NFD No 04 of 10 March 2009 concerning the organisation of the process of accounting in the Managing Authorities/Intermediate Bodies managing EU SCF resources and the corresponding national co-financing has been updated with regard to making further explanations as to the organisation of the process of accounting as a result of changes in the environment and reorganisation and supplementing of the annexes to the instructions so as to achieve clarity and utmost comprehensiveness of the process of accounting in the Managing Authorities and the Intermediate Bodies.

OP “Transport”

In August 2009 the Prime Minister issued an order on the establishment of an interdepartmental group in charge of accelerating the preparation and implementation of the OPT-financed projects on the Trakia and Maritsa Motorways Programme, as well as the ISPA-financed Lyulin Motorway. The purpose of the interdepartmental group is to ensure better coordination among the separate institutions upon the fulfilment of the law-stipulated procedures.

Cooperation with JASPERS has a positive influence on the quality of projects prepared under OP “Transport”. Based on a proposal by beneficiaries and after an analysis made by the MA of OPT, JASPERS action plans in the transport sector are devised at the start of each year. They include a list of all projects implemented under OPT and for the preparation of which JASPERS renders technical assistance. This is mostly technical assistance for making cost/benefit analyses and reviewing the application forms for large infrastructure projects.

An example of successful cooperation could be the joint work of experts from JASPERS, the MA of OPT and beneficiaries under the projects related to the Extension of the Metropolitan Sofia Project and the Electrification and Reconstruction of the Svilengrad-Turkish Border Railway Line Project.

The MA of OPT and JASPERS agreed in 2009 on the accelerated preparation of programme application forms by rendering further consultancy on behalf of JASPERS.

OP “Environment 2007-2013”

The Monitoring Committee adopted a Mechanism to Assist the Setting Up of the System of Regional Waste Management Facilities. The approach to the absorption of funding under Priority Axis 2 is based on direct award procedures targeting a designated specific beneficiary responsible for implementation of the activities for construction of waste management infrastructure.

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A similar Management Mechanism for Priority Axis 1, including Criteria for Grant Awards, is being developed. The mechanism prioritises construction of urban wastewater treatment plants in agglomerations with a population equivalent of more than 10,000, where such plants do not exist. For municipalities with priority projects which have not reached the required stage of design readiness, there are plans to announce simplified direct award procedures for technical assistance.

To ensure implementation, additional measures for monitoring and control have been designated through audits of the transactions of the identified projects and conduct of intensified ex ante and ex post control of the public procurement procedures. The possibilities of the technical assistance of the Programme will be used for the designation of additional investor control of the projects at risk.

The initially adopted approach to management of Priority Axes 1 and 2 was based on broadly defined requirements to beneficiaries and activities, which made it possible for all kinds of projects falling within the scope of OPE to be submitted. Considering the limited resources allocated to OPE and the nature of activities eligible for funding – intended to honour commitments according to the Treaty concerning the Accession of the Republic of Bulgaria to the European Union, it was decided to redefine the priorities and to particularise the requirements to the activities eligible for funding.

This necessitated the application of a different principle to the selection of project proposals for the forthcoming calls for proposals, namely, inviting directly a relevant beneficiary (municipality) to present a project proposal for funding. In this connection, amendments to Council of Ministers’ Decree No. 121 of 2007 were initiated on several occasions to supplement the definition of «specific beneficiary» so as to extend it to cover beneficiaries under OPE as well.

With regard to the successful implementation of OPE, measures have been identified for the improvement of national legislation in the sphere of organisation and co-ordination of operational programmes in the Republic of Bulgaria: Council of Ministers’ Decree No. 121 of 2007, as well as of environmental legislation, through the adoption of an Act to Amend and Supplement the Environmental Protection Act, an Act to Amend and Supplement the Water Act, an Act to Amend and Supplement the Waste Management Act, a Decree to Amend and Supplement Council of Ministers’ Decree No. 249 of 2007 on the Adoption of Detailed Rules on the Eligibility of Expenditure under Operational Programme “Environment” 2017 – 2013, Co-financed by the Cohesion Fund and the European Regional Development Fund of the European Union.

To resolve the issue related to the integrated investment process planning in the water sector management, the responsible government institutions in charge of water policy implementation and the water supply and sewerage sector united themselves around the regulation of the legislative changes needed:

• To outline clear-cut rules for the ownership and operation of the water supply and sewerage infrastructure;

• To balance the responsibilities of state and municipalities in the construction of the water supply and sewerage infrastructure and their interrelations with water supply and sewerage operators;

• To provide for conditions for the attraction of investment in the development of the water supply and sewerage sector through effective and efficient use of EU and national financing, as well as financing through PPP, etc.

The technical assistance under the ISPA Programme, in coordination with the JASPERS Initiative, helps prepare hydraulic models and general (master) plans for the management of the water supply and sewerage systems of 25 towns. In addition to that, such hydraulic model plans for 41 towns and villages with a population equivalent of more than 10,000 will be devised under a loan from the IBRD and national co-financing.

OP “Development of the Competitiveness of the Bulgarian Economy”

The OPC Managing Authority announced a competition for selection of external experts to share in the evaluation of project proposals so as to accelerate the evaluation process and improve its

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effectiveness. A database of evaluators has been created, and they will be involved in the process of evaluation of project proposals under the separate calls.

Considering the experience of the evaluation of project proposals under the first calls for proposals launched in 2007, the Managing Authority decided, regarding the calls for proposals launched in 2008, to restrict the possibility of requiring applicants to present additionally (while evaluation is in progress) appendices and/or accompanying documents they did not submit upon submission of the project proposal. In this way, the requirement to submit all appendices and/or accompanying documents was expressly included in the Guidelines for Applicants, and the applicants were given to understand that in case of a missing document or non-compliance with the requirements, the project proposal will be rejected.

Considering the inability of beneficiaries whose project proposals were approved for funding under the Grant Scheme 2007BG161PO003/2.1.1-01/2007 “Technological modernisation of enterprises” to ensure and submit to the Contracting Authority the documents required for the entry into effect of the signed contracts, the Managing Authority decided to extend the 60-day time limit for submission of documents under Article 2.1 and Article 2.4 of the contract for granting financial aid and under Point 5.2.2 of the Guidelines for Applicants until 31 December 2008.

Considering the difficulties that the beneficiaries under the first calls for proposals launched in 2007 encountered in ensuring a 100% security of the total eligible expenditures under the project, as a result of which a large part of the contracts concluded under Grant Scheme 2007BG161PO003/2.1.1-01/2007 “Technological modernisation of enterprises” did not take effect (of 125 contracts concluded, only 66 or 53% took effect), the Managing Authority decided to drop the requirement for 100% security of the total eligible expenditures under the project for the calls for proposals launched in 2008. This enables beneficiaries to implement their projects without securing the project expenditures in advance.

Considering the fact that the first calls for proposals launched in 2007 do not provide for the possibility of advance and interim payments but only for a final payment, the Managing Authority decided to provide for three options of payment for the projects under all calls for proposals launched in 2008. Thus, the Guidelines for Applicants provides for a possibility of three options of payment which the specific beneficiary can choose depending on the manner in which the beneficiary is planning to implement the project:

- Option 1: advance payment, interim payments and/or final payment; - Option 2: only interim payments and/or final payment; - Option 3: final payment.

OP “Human Resources Development”

The specific thing about the implementation of OP HRD, as a whole, is that it is tied up with the financing of many projects with a comparatively small budget. This, on the one hand, requires considerable administrative capacity and, on the other, leads to a comparatively slow absorption of funds. The Managing Authority has taken a series of measures and steps to reduce the risks related to that circumstance. The OP HRD Monitoring Committee approved a series of criteria for the selection of operations, which will be implemented through direct provision procedures, including criteria involving the use of vouchers. To respond to the commitment, which was set in the Government programme, for acceleration and alleviation of the process of absorption of EU funds, the Ministry of Labour and Social Policy has developed and already applies an innovative approach, namely to finance training and qualification activities by granting vouchers to physical persons. Such an opportunity is provided for in the Council of Ministers’ Decree No 251 of 21 October 2009 regulating the procedure and manner of granting training vouchers under Priority Axes 1 and 2 of the Operational Programme. By applying this mechanism, the requirement for filing project proposals under these schemes will be practically eliminated. The Employment Agency will become in charge of the projects themselves and the implementation thereof. Thus, costs will be saved and the administrative burden of businesses will be reduced. Such an approach of aggregating interventions will contribute to

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the accelerated absorption of Programme funds.

OP “Regional Development”

The MA’s Procedural Rules are being optimised, i.e. some procedures are being simplified, and better distribution of the work load is achieved through a more active inclusion of the MA regional structures. The purpose is to optimise the organisation of the management and control systems for effective and transparent management of funds.

As a result of the restructuring of the Ministry of Regional Development and Public Works, the functions of monitoring and financial management and control of the Cross-Border Cooperation Programmes were delegated to the newly appointed Management of Territorial Cooperation Directorate General. Thus, the capacity available within Programming of Regional Development Directorate General concentrates upon the growing volume of work related to the implementation of OP-funded projects.

The MA of the programme held a competition for the selection of external experts to participate in the evaluation of project proposals so as to speed up the process of evaluation and its effectiveness. A data base of evaluators to be included in the process of evaluation of procedures has been created.

During programme implementation and given the volume and complexity of assignments, the MA internally reallocates the experts available to strengthen the functional units of utmost importance for programme implementation.

OP “Administrative Capacity”

In order to reduce the administrative burden in the course of OPAC implementation, the Managing Authority has used the possibility of running indirect costs declared on a flat-rate basis within three open procedures on the provision of grant financial aid through competitive selection, oriented towards civil society structures. For these procedures the OPAC Managing Authority has applied an average rate of 18%. The beneficiaries within them have been paid a total of EUR 1.3 million. Flat-rate costs calculated by application of standard scales of unit cost have been used for the other beneficiaries – public administration structures at central, regional and municipal level, as well as for the judicial authorities. The flat-rate costs calculated by application of standard scales of unit cost account for up to 10% of the total value of the project as the OPAC Managing Authority has paid about 9% or EUR 1.3 million on the average.

4. Application of measures set in the European Economic Recovery Plan.

The most tangible effect of the global economic crisis on the implementation of the operational programmes consisted in limitation of beneficiaries’ financial capacity, difficulties in finding funds for pre-financing and co-financing of the projects. For this reason, on 9 March 2009 the Council of Ministers adopted Decision No. 143 on an Increase in the Amount of Advance Payments for Implementation of Projects and Activities by Beneficiaries under Operational Programme “Regional Development” and Operational Programme “Environment”. The change achieved an increase in the amount of working capital for the municipalities and the RIA.

To mitigate the effects of the financial crisis, measures were taken to revise the regulatory framework so as to simplify the procedures and to reduce administrative obstacles to the award of grants and the subsequent selection of a project contractor.

In order to facilitate the access of Bulgarian enterprises to financial resources for investment, the Government has ensured additional EUR 255.6 million at the disposal of the Bulgarian Development Bank. Part of these funds has been aimed to develop the activity of the National Guarantee Fund which supports through guarantees the lending to SMEs by commercial banks.

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The Fund for Local Authorities and Governments (FLAG), set up as a state policy instrument for regional development, became operational at the start of 2009. Its main purpose is to overcome the issue with ensuring pecuniary resources for municipalities when drafting project proposals and financing projects approved within the operational programmes.

The global financial crisis and the overall reduction of the budgets of government bodies also have an effect on the budget of major beneficiaries under large infrastructure projects. In this regard, the Government works in cooperation with the EIB to receive a loan to ensure national co-financing for infrastructure project implementation. EIB has been offered two projects for financing under the Structural Programming Loan Agreement between the Republic of Bulgaria and the Bank to the amount of EUR 700 million.

OP “Regional Development”

Meeting on 30 April 2009, the Monitoring Committee decided to modify the Operational Programme by rechanneling funding.

1) EUR 120,095,607 from operation 1.3, Organization of Economic Activities, to operations 1.1, Social Infrastructure, and 1.4, Improvement of Physical Environment and Risk Prevention. The distribution of the financial resource is as follows:

- EUR 17.1 million for support/upgrading of universities within operation 1.1;

- EUR 20 million for assisting the building/reconstruction/upgrading/reconstruction of social institutions for children deprived of parental care and disabled children;

- EUR 40 million in support of the measures for energy efficiency and introduction of RES into the municipal educational infrastructure within operation 1.1 Social Infrastructure;

- EUR 10 million for the establishment and promotion of innovative cultural events within operation 1.1;

- EUR 33 million re-channelled to 1.4, Implementation of the Integrated Plans for Urban Restoration and Development to Fulfil the JESSICA Initiative.

2) within operation 4.1, Small-scale Local Investments, the financial resources allocated for two schemes – support of the reconstruction/rehabilitation/upgrading of industrial and business zones and a scheme supporting the organising of waste collection and transportation systems – of a total value of EUR 13.9 million will be re-channelled in support of the measures for energy efficiency and introduction of RES into educational infrastructure, owned by municipalities outside the city agglomerations.

On the whole, the revised priorities for regional development do not lead to a shift of the logic of the interventions planned in Operational Programme “Regional Development”. The modifications largely affect the scope of the planned interventions related to the concentration of efforts on the part of the local authorities, the business community and the non-governmental sector and the possible support available to the various institutions and organisations. Implementation of OPRD is consistent with the priorities of the individual regions with a view to achieving sustainable and balanced territorial development.

OP “Human Resources Development”

To satisfy the needs of Bulgarian citizens and Bulgarian companies for additional action for job security, measures have been taken for the fullest possible absorption of financing from the European Social Fund in addition to the measures financed by the State budget. In order to facilitate and speed up the access of Bulgarian individuals and companies to financing from OP HRD, vouchers will be given to employed and unemployed persons to participate in trainings under three grant schemes.

“Development” is a scheme under which BGN 250 million have been allocated for the training of at least 65,000 people who have lost their jobs since 1 November 2008 as a result of the changed economic situation. Under the same scheme, employers will be offered financial incentives to the

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amount of the minimum wage to hire the trained unemployed for a period of up to twelve but not less than nine months.

“Back to Work” meets, on the one hand, the requirements of the labour market to provide employment and, on the other, the need of adequate care of children aged between 1 and 3. The scheme will be implemented by hiring unemployed as babysitters for children of families in which both parents are employed.

“Adaptability” is a grant scheme intended to deter collective dismissals and the leaving of workers of enterprises which have switched to short hours for economic reasons. For a period of six months persons who have been put on short hours will be enrolled in vocational training and will be paid a monthly study grant of up to BGN 176. The planned allocation amounts to EUR 90 million.

The “Can Do” Scheme will enable at least 27,000 persons working under an employment contract to join courses for professional qualification or key competences. The idea is to enhance their adaptability to labour market demand, and the planned allocation amounts to EUR 26 million. Beneficiaries will be given registered training vouchers.

In addition, two grant schemes are to continue being implemented through a competitive selection of projects whereunder businesses could apply.

The Qualification Services and Promotion of Employment Scheme aims to counteract the rising level of unemployment in Bulgaria as a result of the negative effects of the global financial crisis. Training for getting or improving the professional qualification of unemployed will be conducted under this scheme, and those who finish the training successfully will get a three-month practice. The scheme totals EUR 18.4 million.

The deadline for implementation of the Qualification Services and Promotion of Employment Scheme, Stage 2, which delivers qualification services and training to employed persons with the aim to increase labour productivity and provide for sustainable employment, has been extended to the end of 2013. The funds provided thereunder amount to EUR 25.6 million. The individual amount of grant could reach EUR 2 million and depending on the component selected and the size of the enterprise, the support under the Operational Programme could cover 100% of eligible project costs.

OP “Development of the Competitiveness of the Bulgarian Economy”

As a response to the financial and economic crisis, the following actions were taken under Operational Programme “Development of the Competitiveness of the Bulgarian Economy”:

- increasing the budgets of the grant schemes launched;

- making available advance and interim payments;

- enabling beneficiaries to make a contribution in kind;

- raising the ceiling of the grant awarded, insofar as permissible according to the relevant State aid regimes;

- On 27 May 2009, the Bulgarian Government and the European Investment Fund signed a Framework Agreement and a Financing Agreement on implementation of the JEREMIE Initiative. The total cost of activities amounts to EUR 200 million, of which EUR 170 million are financed by the EU.

5. Examples of good practice.

In separate annex

6. Conclusion.

Implementation of the first measures, operations and schemes under the operational programmes was launched at the beginning of 2008, which does not allow drafting a clear and simple evaluation of

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Cohesion Policy contribution. After Bulgaria’s accession to the EU there is an acceleration of the GDP growth, a drop in unemployment and a sizeable growth of FDI. It is still early, however, to assess the specific contribution of Cohesion Policy to the improvement of the overall economic and social situation in the country. Until 30.09.2009, beneficiaries have been paid EUR 161.7 million from EU structural instruments, while approved project proposals amount to EUR 2.4 billion, or almost 30% operational programme budgets. The cost of projects approved provides optimism that in the short and medium run the delay in programme implementation will be made up for.

On the other hand, the low rate of funds really paid demonstrates the existence of shortcomings in the process of project implementation. These are shortcomings mostly related to the existence of administrative difficulties and burdens which both Managing Authorities and beneficiaries face. Second, the lack of enough capacity at national, local and regional level for management and absorption of funds under the operational programmes has become a serious issue. The lack of sufficient financial resources at the disposal of beneficiaries in project implementation should also be taken into account.

The above issues have been identified in the course of strategic document implementation and measures have been taken to simplify administrative procedures, build and store administrative capacity and ensure further financial resources.

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Strategic document implementation and the future of Cohesion Policy

At the end of 2009 Bulgaria is about to end its third year of European Union membership and its second year from the process of implementation of the operational programmes co-financed by EU structural instruments. It is still early at this stage, however, to assess unequivocally the specific contribution of Cohesion Policy to the improvement of the overall economic and social situation in the country. Yet, the progress achieved with regard to the benchmarks and the cost of funds contracted under the operational programmes provides optimism that in the short and medium run programme implementation will result in attainment of the results set in advance.

Based on the experience gained in implementing the operational programmes, we believe that Cohesion Policy orientation should be enhanced towards attainment of specific results and in this regard emphasis should be laid on the mechanisms demonstrating the results, effects and value added of this policy. This, on its behalf, presupposes finding the balance required between improving the quality of structural interventions towards the attainment of sustainable results, on one hand, and applying the necessary control mechanisms for sound and lawful financial performance, on the other hand.

In this regard, we acclaim the debate on further simplification of policy implementation rules and consider that the efforts made thereto will contribute to improving the access of beneficiaries to those funds and generating more tangible benefits for the given regions.

At the same time we believe that it is necessary to continue trying to get good coordination with the other Community policies while, in particular, the link with rural development policy should be improved so as to ensure the synergies required of all Community-funded interventions.

Despite the comprehensive coverage of city area development policy in 2007-2013 legislation, we consider that the strategic Cohesion Policy orientation that direction needs further focus. We believe that EU regional policy would benefit from a further concentrating of interventions towards diminishing of inter-regional disparities. We note, though, that sharp balance should be sought between the drive towards further regional policy decentralization and the sectoral approach to implementation thereof applied by the Member States.

We support the ongoing dialog on adequate coverage of new global challenges within the Cohesion Policy scope. We believe that fighting climatic changes, energy efficiency and security, as well as the negative demographic changes should take a key place in building the future Community policy, including the Cohesion Policy.

We acclaim the debate on re-formulation of Cohesion Policy objectives and believe that this policy is and should continue to be an expression of one of the underlying Community principles, namely that of solidarity. In this sense we consider that EU regional policy should continue being mostly oriented towards supporting the less developed regions. At the same time, we emphasize the importance of territorial cooperation since, on the hand, it supports the implementation of the objective for cohesion and provides for the generation of synergic effects from using the integrated approach, on the other.

Bulgaria fully supports the principles of the renewed Lisbon Strategy and we consider that it is necessary to find its proper place in Cohesion Policy priorities.

We believe that the future Cohesion Policy burdened with more and more ambitious goals should be adequately reflected in the EU budget. We are concerned about the possibility for current fiscal problems of many of the Member States to result in a pressure to reduce the expenditure for one of the most important Community policies set out in the Treaty Establishing the European Community.

strategic report of the republic of bulgaria for 2009

Documents