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Journal of Economic and Social Studies
The EU Cohesion Policy’s Impact on Regional Economic
Development: The Case of Bulgaria
Monika Moraliyska
University of National and World Economy
Bulgaria
mmoraliyska@unwe.bg
Abstract:
The EU cohesion policy has been a major driver of change
in the Member States, leading to positive effects as growth in
employment, economic development and modern infrastructure.
Since its EU accession in 2007, Bulgaria has been benefiting from
the Union’s investment and structural funds at an increasing speed.
Research shows that not only these funds contribute significantly to
the Bulgarian economy, but they seem to be its major driver.
Without them, the country would have recorded a zero growth in the
EU’s financial framework 2007-2013, and could be dumped in an
economic and social crisis. This paper explores the informational
sources that assess the influence of the EU cohesion policy and its
effects on Bulgaria. The goal of the paper is to make objective
conclusions about the impact of the EU cohesion policy on the
Bulgarian economy and how it has affected the level of economic and
social cohesion between the country’s regions and the most advanced
EU regions. For that purpose, the method of comparative analysis is
applied, as well as a historical analysis..
Volume 7 | Issue 1 |
Keywords:
EU Cohesion policy,
Bulgaria, regional economic
development
JEL Classification: 05, F36,
H77
Article History
Submitted: 16 February, 2017
Resubmitted: 15 June 2017
Accepted: 11 September 2017
http://dx.doi.org/10.14706/JECO
SS17713
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�Monika Moraliyska
Introduction
Overview of the EU’s Cohesion Policy
The cohesion policy of the European Union aims to support the job creation,
business competitiveness, economic growth, sustainable development, and overall
quality of life in the European regions and cities. It is implemented through three
main funds: the European Regional Development Fund, the Cohesion Fund and
the European Social Fund. Together with the European Agricultural Fund for Rural
Development and the European Maritime and Fisheries Fund, they make up
the European Structural and investment funds. These funds invest in different areas
with the common objective to reduce the economic and social disparities among the
EU Member States. The cohesion policy complements the other EU policies dealing
with education, employment, energy, research and innovation, the environment, the
single market and the like.
The budget of the Cohesion Policy for 2014-2020 is 351.8 billion euros - one third
of the EU’s total budget, which puts it on the second place after the Union’s
Common Agricultural Policy.
The EU’s regions (on NUTS2 leveli) are classified as “less developed” (in which the
GDP per capita is less than 75 percent of the EU average), “in transition” (in which
the GDP per capita is 75-90 percent of the EU average) and “more developed” (in
which the GDP per capita exceeds 90 percent of the EU average). The European
Union can provide 50-85 percent of the total financing of a project, with the poorest
regions getting the highest co-financing rates. The potential beneficiaries of the
funds include public institutions, companies, universities and nongovernmental
organizations.
For 2014-2020 the largest portion of the funds - 182 billion euros - will be used for
the “less developed” regions, which represent 27% of the population in the EU.
These include the bigger part of Poland, the Baltic States, the Czech Republic,
Slovakia, Hungary, Romania, Croatia, Slovenia, Bulgaria, Portugal, as well as
southern Italy and northern Greece. For many of these countries, the cohesion
instruments are a key part of their economies (especially Poland, Romania, the
Czech Republic, Slovakia and Hungary).
The EU’s cohesion policy is very important because it is the investment framework
needed to meet the goals of the Europe 2020.
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�The EU Cohesion Policy’s Impact on Regional Economic Development:
The Case of Bulgaria
Strategy for smart, sustainable and inclusive growth in the Union. It is the EU's
major investment tool for creating growth and jobs, tackling climate change and
energy dependence, and for reducing poverty and social exclusion.
This policy underpins the European solidarity, because the bigger part of its funding
is concentrated on less developed countries and regions to help them catch up and its
goal is to reduce the economic, social and territorial disparities in the Union. In
addition to that, the EU’s cohesion policy cushioned Member States from the worst
effects of the economic and financial crisis. It also was of critical importance at a
time of sustained fiscal consolidation and according to estimates, without it the
much-needed public investment in the less developed Member States would have
collapsed by an additional 45% during the crisis (European Commission, 2014a).
The EU’s cohesion policy is also considered as a catalyst for further public and
private funding, because it obliges Member States to co-finance the projects with
funds from their national budgets, and also provokes investors’ confidence.
The EU’s cohesion policy is also criticized. The main argument for its existence is
that the funding it provides would eventually raise the different regions in the EU to
the same level of economic development. But it seems like after decades of
integration and billions of euros' worth of EU investment, a very modest level of
economic cohesion in Europe is achieved.
The reasons for the limited positive impact of the EU’s cohesion funds on the
economic and social coherence of the Union are different. A major problem in
numerous of the Member States is the high level of corruption, which prevent
cohesion funds from being exploited exactly where they would be most useful.
Besides that, Member States in many countries, particularly those in Southern and
Eastern Europe, still experience difficulties in absorbing these funds. In some cases,
the national and local authorities lack the know-how and institutional framework to
successfully apply for these funds, while in others the countries lack the capacity to
co-finance the projects supported by the European Union.
Some experts think that the EU’s cohesion policy is too complex and lacks clear
goals, and that the monitoring of the absorption of these funds has been
controversial, because a full control of the use of the money is impossible (Stratfor,
2015). There are often cases of corruption, where state officials in Member States are
bribed to award EU-financed contracts. In other cases, firms report inflated costs.
There are also cases when infrastructure projects are undertaken just because money
is available, and they are consequently abandoned for lack of use.
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�Monika Moraliyska
The future development of the EU’s cohesion is unknown, as due to the expected
Brexit, the estimated budget of the Union is going to be decreased significantly, and
the discussions between the Member States are likely to lead to a decision towards
cutting particularly the cohesion policy’s budget. Taking other conditions as equal,
the biggest challenge would be to ensure that its resources are used in the most
efficient way, helping the Member States to emerge from the continuing crisis and
the least developed countries to catch up faster with the others. With a budget of
over €450 billion (including national co-financing) for 2014 - 2020, the European
cohesion policy is expected to continue to be the main investment tool of the Union
and to make the largest contribution for supporting the SMEs, R&D and
innovation, education, low carbon economy, the environment, the fight against
unemployment and social exclusion, the infrastructure and Europe 2020 Strategy’s
objectives for smart, sustainable and inclusive growth.
Several sources provide information on the European cohesion policy’s effects and
the extent to which it is successful in achieving these objectives. Firstly, there is
quantitative information on the direct outcomes of the projects and measures
monitored by the Managing Authorities responsible for the programs. These
indicators are in the form either of the output produced (f.e. number of new
businesses supported to start up) or the results which they brought to (f.e. the
time/travel costs saved as a result of a new road opened). Secondly, there are
evaluations of particular programs, which assess the effectiveness of the funding
provided in achieving both the immediate objective of the measure and the wider
aim of strengthening the development potential of the places concerned. Thirdly,
there is an empirical evidence from the macroeconomic models that simulate how
the economies function to estimate the effect of the Cohesion Policy, mainly in
terms of main economic indicators, f.e. GDP, employment and trade. This they do
by simulating the way the economy would have developed in the absence of the
Cohesion Policy. There is also research (mainly econometric models) of independent
organizations.
Key Effects of the EU Cohesion Policy in the Period 2007 - 2013
The European Commission has analyzed the effects of the EU cohesion policy for
the programming period 2007 - 2013 and concluded that it has substantially
contributed to the investments in growth and employment in the Member States,
especially when they cut spending in order to balance their budgets in times of crisis.
The Commission’s estimates show that without the EU Cohesion policy the
investments in the most-affected by the economic crisis Member States would have
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�The EU Cohesion Policy’s Impact on Regional Economic Development:
The Case of Bulgaria
fallen by additional 50%, particularly in the Member States, which count
significantly on the EU financing. In some of them the cohesion funding represents
more than 60% of their public investment budget – Slovakia (over 90%), Hungary
(less than 90%), Bulgaria (over 80%), followed by Lithuania, Estonia, Malta, Latvia,
Poland and Portugal (European Commission, 2014b). Therefore in 2013, the
Commission acted on the crisis by redirecting some of the cohesion funds - more
than EUR 45 billion, to support measures against unemployment and social
exclusion and in favor of research, business support, sustainable energy, social and
education infrastructure.
The empiric evidence suggests that the Cohesion policy funds have had a significant
positive impact on the economic and social development of the EU Member States
and brought to numerous positive effects in the programming period 2007-2013.
In the first place, the cohesion policy of the EU has led to the creation of jobs and
economic growth. The income has increased in the poorest EU regions with GDP
per capita growing in these areas from 60.5 % in 2007 to 62.7 % of the EU average
in 2010 (European Commission, 2016a).
As a direct result of the cohesion policy, 769,900 new jobs were created in 20072013 (Figure 1), and 2.4 million participants in ESF actions supporting access to
employment found a job within 6 months in 2007-2010 (European Commission,
2014b). In addition to that 225,560 small and medium-sized enterprises received
direct investment aid and more than 274,000 jobs were created in SMEs. 97,640
start-ups were supported (Figure 2).
Figure 1: Number of EU Aggregate
Jobs Created by the Cohesion policy
Volume 7 | Issue 1 |
Figure 2: Number of Start-Ups
Supported by the Cohesion policy
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�Monika Moraliyska
Positive effects were also created by the 72,920 research projects that were supported,
and the 35,125 new long-term research jobs that were created. 27,800 co-operation
projects were financed, and 5 million more EU citizens were covered by broadband
connectivity. Concerning the environment, 11,050 projects connected with the
cities’ sustainability were financed. Water supply systems were modernised,
benefiting 4.2 million citizens (Figure 3).
In terms of transport infrastructure, 3,752 km new roads were built (Figure 4) and
20,104 km were reconstructed. Also 335 km of railways were built and 3,128 km
were reconstructed. In addition to that, more than 5.5 million citizens were served
by waste water projects.
Figure 3: Number of People Served by
Water Projects Financed by the Cohesion
Policy
Source: European Commission, Regional Policy,
https://cohesiondata.ec.europa.eu/en/dataset/CoreIndicators-2007-2013-EU-Water-projects-Chart/vziv5wz2
Figure 4: Km of New Roads Built by the
Cohesion Policy
Source: European Commission, Regional Policy,
https://cohesiondata.ec.europa.eu/en/dataset/CoreIndicators-2007-2013-EU-new-roads-Chart/kb97-pmsd
Monfort, Piculescu, Rillaers, Stryczynski, and Varga (2017), cited by the latest
European Commission’s paper assessing the EU cohesion and rural development
policies during the period 2007 - 2013 and their impact on the European economyii,
provide further evidence that the cohesion and structural funds brought significant
gains and contributed to the achievement of a more balanced structure of the
Member States’ economies. The effects have resulted in increased GDP, which was
on average 4.1% higher in the countries that joined the EU after 2004. The highest
impact was found in Hungary (+ 5.3%), Latvia (+ 5.1%) and Poland (+4.3%)iii.
Other positive effects in the long-term are associated with a significant positive
impact on the factors’ productivity, as a result of the direct investments in
technology but also because of the improved business conditions encouraging
investment in tangible and intangible assets.
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Journal of Economic and Social Studies
�The EU Cohesion Policy’s Impact on Regional Economic Development:
The Case of Bulgaria
Economic and Social Cohesion of the Bulgarian Regions
Even though the EU’s cohesion policy is contributing to the growth goals of the
Europe 2020 Strategy by creating jobs and reducing disparities across Europe, it is
far from reaching its goals and the case of Bulgaria is an example that illustrates this
policy’s low efficiency.
Even though the legislative framework of Bulgaria’s regional policy is harmonized
with the Europe’s ten years after the country became an EU member, it hasn’t
shown a big progress in reaching even the EU average levels. The comparison covers
both – the economic development in terms of GDP and the social development
measured by the Social Progress Index (SPI).
The comparison of the Bulgaria’s six NUTS 2 regions to the EU28 average in terms
of generated GDP as purchasing power per inhabitant shows that the poorest region
in Bulgaria (and in the whole EU), Severozapaden region (Northwest region), is
under one third of the EU average, and almost 7 times less than the richest one – the
region of Hamburg, Germany (Table 1).
Table 1: GDP by Selected NUTS 2 Regions in the EU in 2014
Country
Severozapaden
Yuzhen tsentralen
Severen tsentralen
Severoiztochen
Yugoiztochen
Yugozapaden
European Union
(28 countries)
Wien
Noord-Holland
Praha
Île de France
Hamburg
Code
Gross domestic product at
current market prices
(Purchasing Power Standard per
inhabitant, Euro)
BG31
BG42
BG32
BG33
BG34
BG41
EU28
8,200
8,700
9,300
10,800
10,800
20,600
27,500
Gross domestic product at
current market prices
(Purchasing Power Standards
per inhabitant in percentage
of the EU average)
30
32
34
39
39
75
100
AT13
NL32
CZ01
FR10
DE60
43,500
44,300
47,500
49,000
56,600
158
161
173
178
206
Source: Eurostat, 2016
At the same time, the draft version of the regional Social Progress Indexiv shows
significant variations within and between EU Member States in terms of access to
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�Monika Moraliyska
health care, quality and affordability of housing, personal safety, access to higher
education, environmental pollution, etc.
The SPI is an aggregate index of 50 social and environmental indicators that capture
three dimensions of social progress: Basic Human Needs, Foundations of Wellbeing,
and Opportunity. The index framework is identical to the one of the global SPI. It
includes all 272 European regions and scores absolute performance on a 0-100 scale
for each of the indicators included to measure the twelve social and environmental
(not economic) indicatorsv.
The Southeasteuropean states, among which the Bulgarian ones are, are among the
most undeveloped in social terms (Figure 5).
Figure 5: Map of the SPIin the EU in 2016
Gross domestic product
(GDP) per inhabitant, in
purchasing power standard
(PPS)
Gross domestic product
(GDP) per inhabitant, in
purchasing power standard
(PPS), by NUTS level 2
region, 2013 (% of the EU-28
average, EU-28 = 100) (¹)
Source: European Commission, 2016b.
The SPI is the lowest in Bulgaria and Romania. The Bulgarian Southeast region has
the lowest SPI value (38,7), less than half of the highest value of 81,3 in Övre
Norrland, Sweden (Table 2).
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�The EU Cohesion Policy’s Impact on Regional Economic Development:
The Case of Bulgaria
Table 2: Social Progress Index in selected EU regions (NUTS2) in 2016
Region’s
Region’s name
Basic
Foundation
Opportunity
ID
BG34
Yugoiztochen
42.5
45.8
28.8
EU SPI
38.7
BG31
Severozapaden
44.7
47.0
28.0
39.4
RO31
Sud - Muntenia
43.9
43.3
35.8
40.9
RO22
Sud-Est
43.3
45.5
37.2
41.9
RO21
Nord-Est
43.4
42.3
41.8
42.5
BG42
Yuzhen tsentralen
47.9
49.7
32.7
43.1
BG33
Severoiztochen
46.3
46.7
40.4
44.4
BG32
Severen tsentralen
47.3
49.3
38.7
45.0
RO41
Sud-Vest Oltenia
47.9
45.9
42.2
45.3
RO11
Nord-Vest
49.1
47.9
45.6
47.5
RO12
Centru
51.2
50.1
44.0
48.4
ITF3
Campania
62.0
48.1
37.3
48.6
RO42
Vest
51.9
49.4
45.5
48.9
ITG1
Sicilia
62.0
49.6
37.1
49.1
BG41
Yugozapaden
52.7
54.8
41.3
49.4
FI20
Åland
………….
88.6
72.8
79.8
80.3
DK04
Midtjylland
87.6
73.2
80.3
80.3
FI1B
Helsinki-Uusimaa
84.6
74.0
82.6
80.4
DK01
Hovedstaden
86.6
71.9
84.6
80.9
SE33
Övre Norrland
89.4
73.9
81.0
81.3
Source: European Commission, 2016b
It is also evident that all six Bulgarian regions are among the 15 least developed
regions in the EU in terms of social progress. This is an indisputable empirical proof
that the EU’s cohesion policy goals are far from achieved. On the other hand, its role
as a major factor for regional development should not be exaggerated. The initial low
level of economic and social progress and still ongoing transition to modern
economy in Bulgaria is another reason why the positive progress of the country
towards EU average levels remains almost invisible.
Volume 7 | Issue 1 |
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�Monika Moraliyska
Estimated Effects of EU’s Cohesion Policy in Bulgaria
There are several different sources providing information about the effects of the
European cohesion policy on Bulgaria. Even though the analyses made by different
official instuitutions and organizations show overall dominating positive impact of
the EU funds on the Bulgarian economy, it cannot be claimed with certainly that the
EU’s cohesion policy has achieved its main goal aim in Bulgaria – to support the
country in overcoming the enormous economic and social underdevelopment that
differentiates the Bulgarian regions from the other European regions.
The allocation from the Cohesion Policy funding for Bulgaria in the 2007 - 2013
period was €6.9 billion. According to the European Commission, it has helped the
country to: create more than 1,300 jobs; serve over 280,000 more people by waste
water projects; enable more than 137,000 persons to acquire or upgrade their
vocational qualification and over 178,000 persons to acquire key competencies;
implement many transport infrastructure projects (incl. Sofia metro extension, Sofia
Airport); improve urban transport for 1,289,744 citizens, mainly in the 6 biggest
cities (Sofia, Plovdiv, Varna, Burgas, Pleven, Stara Zagora); improve educational
infrastructure for over 30,000 students; enable more than 398,000 m² of renovated
parks, pedestrian areas, bicycle lanes, playgrounds; provide scholarships to 172,000
students; provide social services in a family environment for more than 51,000
persons; modernise 20 cultural facilities; invest in energy saving measures in public
buildings and schools (European Commission, 2015).
A trustworthy model to estimate the effects of EU’s cohesion policy in Bulgaria is the
macroeconomic model SIBILA - a SImulation model of the Bulgaria’s Investment in
Long-term Advancevi (“long-term" because it evaluates the effects of the investment
in human capital, ICT, R&D, infrastructure and physical capital, which are factors
for long-term economic growth). It is based on the EU approaches to modeling of
the impact of structural instruments, as well as on modern macroeconomic theory
and it is adapted to the Bulgarian specifics. It consists of 170 equations, including
econometric estimates, macroeconomic identities and calibrated dependencies (based
on historical links and applying existing knowledge (ECORYS – CPM – NEW i”,
2011).
The main objective of the model is to assess the net effects of the Structural and
Cohesion Funds (SCF) on the Bulgarian economy (key macroeconomic indicators),
as well as to support the decision-making process concerning the allocation of funds
in the next programming period. It examines the economic development in two
scenarios: baseline scenario in which there is no SCF, and an alternative scenario that
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Journal of Economic and Social Studies
�The EU Cohesion Policy’s Impact on Regional Economic Development:
The Case of Bulgaria
considers the SCF funding. The difference between the results of these two scenarios
in terms of economic indicators’ performance measures the net impact of SCF.
In 2017, the Ministry of Finance of Bulgaria presented a report with detailed
calculations of the SIBILA model, encompassing the period of Bulgarian
membership in the EU from 1 January 2007 till the end of 2016. It showed that the
overall effect of the EU investments on the added value of the Bulgarian economy is
highly positive:
- A cumulative increase of 11.5% of GDP by the end of 2016 in comparison to the
baseline scenario with no EU funds (mainly through the positive effects of
government spending on the production, and hence on the induced changes in
private consumption and investments);
- A cumulative increase in the volume of private investment by 22.3% by the end of
2016 compared to a scenario without EU funds (a large part of the measures under
the operational programs are intended for investment; they also lead to additional
investments by the business);
- Reducing unemployment and boosting employment (as a result of the absorption
of the EU funds by the end of 2016 the unemployment rate in the country was 6.5
percentage points lower than it would have been without the inflow of these funds.)
At the same time, the number of employees in the economy increased by 15.2%
towards the end of 2016 compared to the scenario in the absence of EU funds
(almost 390 thousand employed people more);
- Higher wage levels in the country - by the end of 2016 the cumulative increase in
average wages compared to the scenario without EU funds was expected to reach
14.9%;
- Increased export potential of the Bulgarian enterprises (By the end of 2016,
Bulgaria's exports would be by 1.7% higher compared to the scenario without EU
funds. The growth of the export potential is a long-term effect and is related to the
improvement of the quantity and quality of the production factors, which in turn
leads to an increase of the economic growth of the country);
- A positive impact on the state of public finances (increased tax revenues outweigh
the spending related to the absorption of EU funds, such as providing co-financing
for some of the projects). By the end of 2016, the cumulative positive effect on the
budget balance was 2.1 percentage points of GDP. The positive impact is expected
to be sustained in the longer term as the increased production potential, higher
employment and higher income imply higher values of the tax base, and hence
higher tax revenues).
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�Monika Moraliyska
The positive impact of the EU funds on the the country's economic development
has been highlighted by eminent NGOs working in the economic field in Bulgaria.
They stress on the fact that in the period between the start of the EU’s membership
talks in 1999 and the country's accession to the EU in 2007, the GDP per capita in
terms of purchasing power has increased from 27% to 40.8% of the EU average, and
in 2016 it reached 48.1%. The EU’s cohesion policy has also helped to minimize the
weight of the global crisis and has kept the unemployment rate in Bulgaria low,
while labor productivity continued to increase. Positive effects are also identified in
terms of improvements in various aspects of the business and civil infrastructure in
the country constructed with the support of EU funding. In general, for the 10-year
period of membership, the average annual net transfer from the EU to Bulgaria is
about 4% of the country's GDP and this influx of funds is assessed to be of great
macroeconomic importance given the unfavorable conditions of the global
environment (Center for Liberal Stragtegies, 2017).
However, the effects from the EU Cohesion policy on the Bulgarian economy and
budget are also criticized by economists, arguing that the European funds in the
country are widely considered as a gift or free money, which is not the case (Ganev,
2016). The data from recent years show that the European projects swallow an
increasing share of the national resource and actually worsen the fiscal position of the
country. The costs of the European programs in the country have been increasing
steadily - in 2008 they were less than 1 billion BGN, in 2010 - 2 billion BGN, in
2014 they reached 4.5 billion BGN and in 2015 they boomed to 6.3 billion BGN.
These costs are not funded only by the EU, as annually the state makes transfers
from the national budget to the European programs. This is in practice the
participation of the taxpayers in the European funding.
In 2011 and 2015 the national transfers to the EU funds increased markedly and
reached about 40% of the costs of the European programs. From almost 6.3bn BGN
spent on EU programs in 2015, 2.5 billion BGN were paid by the Bulgarian
taxpayer. And the share of national financing in the EU aid has been increasing at a
high speed. This is a real cost, and when, in some cases, useless projects are
implemented, or projects’ costs are inflated only to increase the absorption rate, this
inevitably leads to a wastage of national resources (Ganev, 2016).
Other deficiencies stemming from the EU funds’ absorption process also led to the
lower efficiency of the EU’s cohesion policy in Bulgaria. The absorption of financial
resources of the SCF in Bulgaria in the first for the country programming period
2007-2013 was accompanied by numerous problems. The absorption rate of
Bulgaria in comparison to the other Member States was low and a major reason for
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�The EU Cohesion Policy’s Impact on Regional Economic Development:
The Case of Bulgaria
that was the lack of administrative capacity and experience in the procedures of the
operational programs’ project management. Even though the pre-accession programs
included education and training of the employees in national administration, the
administrative capacity was not satisfactory. One of the causes for the initial strong
ineffiency of the Bulgarian administration, responsible for the EU funds absorption,
is associated with its structure that is ineffectively organized into numerous
operational programmes, which leads to the management of the same types of
programmes in a different way and with varying effectiveness. The result is that
many functions are duplicated and there is an increase in the budget costs
(Nozharov, 2016).
Another important factor was the comparatively small competence of the staff in the
Bulgarian body managing the EU funds’ absorption. At least one third of the staff in
the public administration responsible for this activity is appointed without a
competition, and a big part of them is not highly-qualified, which leads to additional
government costs for employees’ re-qualification and support of their work through
outsourcing. In addition to that, there are considerable variations in the wages of
staff responsible for the management of EU funds and the other staff with the same
qualifications and fulfilling the same tasks (the former receiving five times more than
the latter), which leads to a lack of motivaton and ineffectiveness of the financial
processes at the public administration (Nozharov, 2014).
The unpreparedness of the Bulgarian state administration in the EU funds’
absorption process is acknowledged in the latest report of the Bulgarian Academy of
Sciences (BAS), which blames the Bulgarian institutions for the lower-than-expected
results achieved by the country’s membership in the EU. The public administration
was not ready and was unable to learn for a long time to apply the modern
management style of the European Commission. It turned to be inadequately
trained professionally, unsufficiently expeditious and unable to defend its
independence from other state institutions and corporate interests, a part of which
was due to the low remuneration of its employees that made them susceptible to
corruption (Economic Research Institute of the Bulgarian Academy of Sciences,
2017). BAS has also criticized the European institutions for their policies and
requirements to the Bulgarian authorities that have not always been tailored to the
specific characteristics and traditions of the country, as well as to its citizens’
preferences. Namely the Institute has criticized the international institutions and
European Commission for the full opening the single European market to Bulgaria,
which at that moment has been an unsustainable and low-competitive economy.
The result of that is a total decline in a number of economic sectors, including a
collapse of production, exports, employment, income, consumption, as well as other
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�Monika Moraliyska
negative trends as emigration, social polarization, decline in budget revenues and
others. However, this part of the analysis has not been supported by any econometric
model or other mathematical or statistical tool that correlate the above-mentioned
negative trends in the Bulgarian economy after 2007 with the country’s EU
membership, which makes the report’s conclusions unreliable. After all, even the
author of this part confesses that it is difficult to define exactly which of the
Bulgarian economy’s weaknesses are a result of the EU membership or represent the
deteorating consequences from the country’s unsuccessful transition to market
economy after 1989vii.
Kaneva (2015) identifies four different groups of problems that hinder the EU
funds’ absorption process on the Bulgarian side – problems of the beneficiaries, a
human capital problem, organizational problems, and specific for the respective
Operational program problems. Her analysis proves that there are unsolved issues for
both - the beneficiaries and the state administration. Many of the problems discussed
are not reserved to Bulgaria only and could be addressed successfully by researching
and applying other Member States’ best practices.
Another serious problem was that the absorption process in Bulgaria was
implemented in contrary to the main principle of the European cohesion policy,
because instead of supporting the country’s underdeveloped regions, it concentrated
on the richest Bulgarian region. During 2007-2013, the EU allocated more than
81.56% of the its budget to the less favored regions, while in Bulgaria 40% of the
available resources were invested in the most developed one – the Southwest region
(incl. the capital Sofia), and only 7.5% in the least developed (Galabinova, 2015).
The Bulgarian Operational Programs in the 2014 - 2020 period follow the same
logic – the country did not choose to create regional Operational Programs, which
could support the underdeveloped regions, but seven national programsviii. There is a
risk that the investment funds continue to be concentrated primarily in the
Southwest region, which, instead of convergence of the level of development of the
six NUTS 2 regions, will lead to even bigger regional disparities. The city of Sofia
could be differentiated as a separate planning region, while the remaining of the
current Southwest region could merge with the South-Central region. In order for
greater socio-economic effect to be achieved, an analytical unit to assess the socioeconomic impact in terms of defined goals, not in terms of the funds utilized and
activities implemented, could be established (Hadjinikolov, 2015).
Besides that, some sectors of the Bulgarian economy still have not been restructured
and even when the absorption of the EU funding followed the common policies, it
18
Journal of Economic and Social Studies
�The EU Cohesion Policy’s Impact on Regional Economic Development:
The Case of Bulgaria
was not efficient. The SMEs’ low awareness of the operational programs in the
country was also a hinder and made it necessary to promote further the European
funds’ opportunities (Nikolova, 2014).
Conclusion
Econometric research has showed that the EU Cohesion Policy funding has been an
important driver for the reforms and economic development of Bulgaria since its
accession to the EU. It will continue to play this role, and for the programming
period 2014 - 2020 Bulgaria has been allocated around €7.6 billion in Cohesion
policy funding. The investment priorities have been set out in a Partnership
Agreement with the European Commission and include the raising of the
competitiveness of the economy, research and innovation, transport infrastructure,
urban development, improved water and waste management, employment, raising
the share of persons with higher education, strengthening the capacity of public
administration and the judiciary and promoting good governance (European
Commission, 2015).
However, in general the EU Cohesion policy has failed to achieve or still has not
achieved its main goal: creating a more homogeneous Europe in economic and social
terms. A proof of that are the vast economic gaps between Southern and Northern,
and between Eastern and Western Europe. The record high unemployment levels,
especially among the youth, the vast emigration from Eastern to Western Europe
and the rise of political parties that criticize the European Union and propose to
reverse the process of European integration, is another symptom of the lack of
cohesion (Stratfor, 2015). However, analyses show that this unsuccessful story is
tightly connected with the poorest Member States’ initial economic situation, which
is the case with Bulgaria, and their inability to make most of these development
funds on a later stage.
The result of the analysis shows that the scientifically-proved (through econometric
model) positive effects of the EU cohesion policy on the Bulgarian economy prevail
over the negative, which remain quite hypothethic. The EU cohesion funds are a
very important source of financing for the Bulgarian economy, the possibilities of
which should be used to the fullest to support the economic growth and
employment in the country. For their absorption rate and efficiency to be enhanced,
however, further steps are necessary towards state admnistration’s strengthening,
project management’s improvement, fight against corruption and others.
Volume 7 | Issue 1 |
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�Monika Moraliyska
References
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Volume 7 | Issue 1 |
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i
See Nomenclature of territorial units for statistics (NUTS).
Based on a set of simulations conducted with QUEST, a dynamic stochastic general
equilibrium model with endogenous growth and human capital accumulation.
iii
In the EU-15, the impact is more modest but it remains substantial for some Member
States like Greece (+2.2%), Portugal (+1.8%) and Spain (+0.7%) which benefited from
support of the Cohesion Fund.
iv
The index is the result of cooperation among the Directorate-General for Regional and
Urban Policy of the European Commission, the Social Progress Imperative and OrkestraBasque Institute of Competitiveness. It follows the overall framework of the global Social
Progress Index, customised for the EU using indicators primarily drawn from Eurostat data.
It isn’t created for the purpose of funding allocation and doesn’t bind the European
Commission.
v
There are three dimensions of the SPI: 1) Basic Human needs incl: nutrition and basic
medical care; water and sanitation; shelter; personal safety; 2) Foundations of Wellbeing, incl:
access to basic knowledge; access to Information and Communications; Health and Wellness;
Ecosystem Sustainability; 3) Opportunity, incl: Personal rights; Personal Freedom and
Choice; Tolerance and Inclusion; Access to Advanced Education.
ii
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Journal of Economic and Social Studies
�The EU Cohesion Policy’s Impact on Regional Economic Development:
The Case of Bulgaria
vi
The development of the econometric model for impact assessment of the Structural and
Cohesion Funds of the EU called SIBILA is implemented under project № 0018-ЦИО-3.2
„Development of a model for impact assessment of SCF”, financed by Operational
Programme Technical Assistance.
vii
The authors of the Bulgarian Academy of Sciences’ report have also reached the conclusion
that “Bulgaria’s membership in the EU has no other alternative”.
viii
“Good Governance”, “Transport and Transport Infrastructure”, “Regions in Growth”,
“Human Resources Development”, “Innovation and Competitiveness”, “Environment”,
“Science and Education for Intelligent Growth”.
Volume 7 | Issue 1 |
23
�
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The EU Cohesion Policy’s Impact on Regional Economic Development: The Case of Bulgaria
Author
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Moraliyska, Monika
Abstract
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Abstract: The EU cohesion policy has been a major driver of change in the Member States, leading to positive effects as growth in employment, economic development and modern infrastructure. Since its EU accession in 2007, Bulgaria has been benefiting from the Union’s investment and structural funds at an increasing speed. Research shows that not only these funds contribute significantly to the Bulgarian economy, but they seem to be its major driver. Without them, the country would have recorded a zero growth in the EU’s financial framework 2007-2013, and could be dumped in an economic and social crisis. This paper explores the informational sources that assess the influence of the EU cohesion policy and its effects on Bulgaria. The goal of the paper is to make objective conclusions about the impact of the EU cohesion policy on the Bulgarian economy and how it has affected the level of economic and social cohesion between the country’s regions and the most advanced EU regions. For that purpose, the method of comparative analysis is applied, as well as a historical analysis..
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International Burch University
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doi: 10.14706/JECOSS17713
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ISSN 1986 – 8502,
HC Economic History and Conditions