Awaiting record European funding

More than 25 billion euros are planned for Bulgaria until 2027, but will they be invested effectively?

European funds for Bulgaria have already been allocated according to priorities in nine programs for the period 2021-2027, financed by the European structural and investment funds, as well as 57 investments and 47 reforms laid down in the National Recovery and Sustainability Plan (NRSP) until 2026 The record financing for over 25 billion euros requires that the funds be used in the most expedient, efficient and synergistic way in the areas with the greatest need, where they will help the long-term sustainable development of the Bulgarian economy. For this purpose, however, all interested parties must be actively involved in the process of forming and implementing the specific goals and measures of the programs. This would increase not only the effectiveness of the planned interventions but also their legitimacy, which will also reflect on public trust in the management of European funds, says Dimitar Ganev, executive director of New Eye. And here’s what else he warns about:

We observe a prevailing lack of awareness on the part of businesses about financing opportunities, which is reinforced by

insufficient publicity and transparency

of the process of developing and publishing the procedures. Businesses for the most part learn about the conditions and specifics of the procedures only after they are open for public discussion, and it is permissible for the funding body to set only one week for familiarization with the procedure and submission of written objections and proposals. This leads to a discrepancy between the expectations of the beneficiaries and the requirements and evaluation criteria developed by the ministries. The lack of prior clarity is one of the reasons for the low interest from some potential beneficiaries. The time for carrying out preparatory activities and developing quality projects turns out to be insufficient. It is necessary to apply the principle of partnership more effectively and ensure wide publicity and equal access to information through diverse communication activities.

Little known among Bulgarian companies are

the centralised programs

(Horizon Europe, LIFE, Innovation Fund, Digital Europe, Creative Europe, etc.), which are managed directly by the European Commission, despite their no less attractiveness in terms of eligible investment activities, amount of grant funding and implementation conditions of the projects. The low awareness of the business, the lack of experience regarding the application process, and the fragmented and difficult access to information in Bulgarian are limiting factors that can be overcome through a targeted campaign by the national contact units responsible for the implementation and promotion of the programs in the whole country.

The communication strategy of both the centralized and national programs, including the NRSP, should include

emphasis on effects

The good practices and successful examples of various enterprises to disprove the perception that European funds are mainly intended for a narrow circle of large companies and organizations with significant economic and political resources.

A key point in the next few years is to increase the awareness of the target groups about the specifics and priorities of the programs through informative initiatives and training on the important topics for the new program period, including integrated territorial investments, circular and resource-efficient economy, smart specialization, digitization and implementation of technologies from Industry 4.0, the synergistic cooperation between higher education, research institutions and business.

Support through financial instruments is another

feature

of the current 7-year program period. Funds provided by the EU for financial instruments are managed by the Fund of Funds and reach the final recipients through financial intermediaries such as banks and funds. European funding is gradually moving from pure grants to various combinations between grants and financial instruments (loans, guarantees, equity and quasi-equity financing), including within a single project.

The combination of financial instruments with public support has certain advantages over pure grant funding.

Financial instruments

mobilise additional private financing, which increases the available funds for the recipient, and the loan funds returned by the beneficiaries can be recycled through investments in other projects. Due to their relaxed conditions, these instruments allow access to capital for small and medium-sized enterprises with economically viable projects, but without a long business and credit history, which is why they experience difficulties in raising funds from traditional financial sources on the free market.

The majority of Bulgarian companies are still targeting primarily grant aid due to insufficient knowledge of the financial instruments offered and concerns that the requirements for recipients will be more stringent due to the nature of debt and equity financing. To increase the technical readiness and competence of enterprises to use financial instruments, it is necessary to take timely measures to popularize through various channels the upcoming opportunities, their conditions and potential benefits. There is a risk that Bulgaria will leave an unused resource – at the moment, our country has absorbed a little more than half of the funds from European funds planned for the period 2014-2020, which testifies to constant challenges to the management of European funds in our country and the unrealised growth potential. Strengthening the business capacity to utilise grant, equity and loan funds at the micro level will help to more effectively absorb European money and the more tangible positive impact of European resources on the main macroeconomic indicators of the country.