The biggest share of the amount will go to environment and transport (more than 20 percent, each), but less than 8 percent to education, according to an Erste Bank report.
The total allocation from EU structural and investment funds in 2014-2020 for Romania is EUR 23.0 bn. It means annually 164 EUR per capita and 2.5 percent GDP, at half of Estonia (roughly EUR 387 per capita/year) Slovakia (EUR 369) and Hungary (EUR 316), according to Cohesion Policy in 2014-2020, an Erste Bank report. The biggest share of this amount will go to environment and transport (more than 20 percent, each), but less than 8 percent to education. In Erste analysts view, education and health are two key areas where much more funds should be allocated in the upcoming years as those two sectors are heavily under – financed. Medical services are in poor shape (lack of medical equipment in public hospitals, obsolete hospitals and medical units, doctors’ fleeing to western countries). As for the education, an increasingly higher number of primary schools in the rural areas have been shut down, making it difficult for children to reach school, while the dropout rate is worrisome. Higher and more efficient funding for these two sectors – health and education – should be considered also from the perspective of Romania’s need to increase its R&D spending , from 0.5 percent of GDP in 2012 to 2 percent of GDP by 2020.
The analysis is about six Central and East European countries – Croatia, Czech Republic, Hungary, Poland, Romania and Slovakia – which will get about half of the total cake, EUR 167.1 bn. The amount for 2014-2020 reaches EUR 351.9 bn in current prices and is 1.3 percent higher than in 2007-2013.
Poland could be named as the main winner of tough negotiations over the billions of euros from the EU funds. The biggest economy in the CEE will welcome EUR 77.6 bn between 2014 and 2020, which is the largest amount among all the EU member states. The available funds are as follows: EUR 22.9 billion (13.8 percent of the total) for Romania, EUR 21.9 billion (13.2 percent of the total) each for the Czech Republic and Hungary, EUR 13.9 billion (8.4 percent) for Slovakia and EUR 8.6 billion (5.1 percent) for Croatia. According to the International Monetary Fund (IMF)’s calculations, Romania’s Gross Domestic Product per capita was USD 8,630 in 2013, compared to the Czech Republic – USD 18,868 and Slovakia – USD 17,929. Romania also reported the lowest European fund usage rate between 2007 and 2013, when it was granted EUR 19.1 billion through the cohesion policy. “Romania lacks behind (37.8 percent) due to shortage of experience and weak performance of public administration”, Erste notes. Until December 2013 Romania received only a bit more than a third of the allocation for 2007- 2013.
To fully utilize the potential of money from the European structural and investment funds, lots of work needs to be done. In order to increase the absorption capacity of CEE-6, Erste recommend a set of measures. Most of them will need to be adopted on the national level: a significant decrease of bureaucracy, a more transparent process of projects selection to avoid (a suspect) of corruption, higher quality of performance of public administration, simplification of the implementation system with a smaller number of operational programmes and shorter deadlines in accessing and contracting the projects, wider cooperation with pre-and co-financing commercial banks.
Average absorbtion has potential to increase to around 80 – 90 percent in next budgeting period mainly due to experience in applying for and managing the funds. In this context, Hungary and Romania should enjoy the biggest increase in growth, 0.7 percent and 0.8 percent respectively, due to funds utilization. Croatia has potential to grow faster by around 0.6 percent with EU funds.
Rail project Arad-Brasov-Bucharest-Constanta, highest potential to support economic growth
“Economic growth should continue to accelerate. The main impact of EU funds on growth dynamics should come through increase in investment level”, said the report. In this sense, the rail project Arad – Brasov – Bucharest – Constanta, that will connect the Western border of Romania with the Black Sea coast on the Eastern border, under the Rhine – Danube corridor project of the European Commission, has the highest potential to support economic growth, according to Austrian analysts, both during the construction stage and after 2020. Reduced transportation time for freight and passengers should encourage foreign investors and local entrepreneurs to open new businesses in Southern and Eastern Romania, areas that were somewhat neglected until now due to poor infrastructure. At the same time, this could be an important step in the strategy of the Romanian government and private business sector to revive tourism on the Black Sea coast and improve the service balance in the current account.