What should we focus on in attracting funds?

The European Commission has prepared a document outlining its views on the areas that Croatia should focus on in attracting funds from European funds during the seven-year budget period 2014-2020.

The document serves as a basis for initiating dialogue with the government, which needs to prepare a framework document for program development by the end of the year, which will be co-financed with European money.

This is a document prepared for each member state, with which the Commission begins negotiations with each individual member. The result of these negotiations is a partnership agreement, a framework document prepared by national authorities that identifies the main areas to be financed from the EU’s Cohesion and Structural Funds. The document was presented to Croatia at the end of this week, and the opportunity for a more detailed discussion will be the upcoming visit of Commissioner for Regional Policy Johannes Hahn, who is expected to be in Zagreb on February 11.

The Commission has identified four thematic areas to which Croatia should direct the majority of European funds available to it within the next seven-year budget period: strengthening the competitiveness of the economy; promoting employment, improving the education system, and reducing poverty; preserving the environment and natural resources; and strengthening administrative capacities and greater involvement of the civil sector.

The Commission has formulated its position for each individual member state with the European strategy for promoting smart, sustainable, and inclusive growth – Europe 2020 in mind. The EU has set goals in this strategy that need to be achieved by 2020 in five main areas. The first goal of the EU is to achieve an employment rate of 75 percent for the population aged 20 to 64, then spending on research and development should reach 3 percent of GDP, meet energy targets in the fight against climate change, namely, reduce greenhouse gas emissions by 20 percent compared to 1990 levels, raise the share of energy from renewable sources to 20 percent, and increase energy efficiency by 20 percent. The fourth goal is to reduce the number of early school leavers to below 10 percent and ensure that at least 40 percent of the population aged between 30 and 34 has higher education, and as a fifth goal, reduce poverty with the aim of lifting at least 20 million people out of the risk of poverty and social exclusion.

The Commission has identified the main challenges Croatia faces by comparing its current status with the goals of the Europe 2020 strategy.

Croatia lags far behind the European average in investment in research and development, at only 0.7 percent of GDP, of which 50 percent comes from public funds, the share of renewable energy sources is at 14.6 percent of total energy consumption, the employment rate for the population aged 20 to 64 is 57 percent, and the share of residents aged 30-34 with a higher education degree is 24.5 percent.

The Commission cites cumbersome administration as an obstacle to the development of small and medium-sized enterprises. It also highlights the low productivity of agriculture, which contributes 15 percent to the total number and only 5.5 percent to GDP, structural problems in fisheries, which have growth potential due to rising demand, both in the domestic market during the tourist season and external demand.

In the transport sector, it is noted that attention over the last 15 years has been focused on building highways and that all other forms of transport need quality improvements, especially railways. Railways are not aligned with the European management system to ensure their interoperability with neighboring countries, and the navigability of the Danube and Sava does not meet international standards.

One of the challenges is also the further development of information and communication technology, with internet availability for households below the European average, especially in rural areas, and improvements are also needed in the strategy for broadband internet development.

A major reform of regional policy is underway in the European Union, with the main goal of achieving the highest added value for the money invested from European funds. The Commission wants European money not to be spent on unrelated projects that provide a weak multiplier effect, but rather to direct funds precisely to those areas that will contribute the most to common national and European goals.

Therefore, one of the main criteria for project approval will be the measurability of results – the Commission will require that it be stated in advance what is intended to be achieved with a specific investment so that the desired and achieved results can be compared at the end, and member states will have to take this into account when drafting the partnership agreement, based on which operational programs for environmental protection, transport, and other areas for which money from European structural funds is to be used will be developed.

A prerequisite for using funds from the European Regional Development Fund (ERDF) for investments in research and innovation will be the development of “smart specialization.” Smart specialization refers to identifying the unique characteristics and comparative advantages of each country and region, in order to make the best use of this through investments in research and development.

The European Commission speaks positively about the progress in increasing Croatia’s capacity to draw funds from European funds. They particularly highlight the fact that in the last year, most of the funds from the pre-accession IPA fund have gone towards completing projects on railway corridor number 10 from the border with Slovenia to the border with Serbia and on corridor 5b from Rijeka through Zagreb towards the Hungarian border. On average, it takes about three years from the start of project development to the first bulldozer on the construction site, so it is important to start designing on time so that construction funds can be utilized quickly after entering the EU.