We are facing one of the most interesting years for drawing EU funds

Croatia celebrated the tenth anniversary of its membership in the European Union last year, marking 10 years of full access to European funds. Although money from EU funds has played a very important role in economic development in recent years – and the ruling party often emphasizes the success of drawing EU funds – we still have not resolved some of the growing pains in preparing tenders for these funds, experts point out.

Data from the Ministry of Regional Development and European Funds shows that through the European Structural and Investment Funds, out of a total of 18,282 projects, 4,049 are currently in implementation. The contracted value of total eligible expenditures amounts to 8.3 billion euros, of which 760 public projects are worth 7.4 billion euros, while there are 3,289 private projects with a total value of just over 1 billion euros.

– The majority of projects still in implementation (2,825) are financed under the Rural Development Program, through which implementation is possible until 2025. For projects financed from the Operational Program Competitiveness and Cohesion 2014 – 2020, the Operational Program Efficient Human Resources 2014 – 2020, and the Operational Program for Maritime Affairs and Fisheries 2014 – 2020, the eligibility period for expenditures ended on December 31, 2023, and the submission of final requests for reimbursement of funds is currently underway. After their submission, the vast majority of projects will be completed – the Ministry stated.

Calls from the NPOO

According to their data, by January 11, 2023, a total of 14.9 billion euros was contracted through the European Structural and Investment Funds, 11.4 billion euros was paid, and 10.25 billion euros of non-repayable funds was certified.

– Regarding new programs from the financial period 2021 – 2027, 45 calls have been announced so far, with a total value of 1.36 billion euros – the Ministry emphasizes.

The government expects a new wave of investments in entrepreneurial projects financed by funds from the new financial perspective.

– In general, 2024 is expected to see an increased pace of call announcements, with 114 calls planned from the Competitiveness and Cohesion Program 2021 – 2027 and Integrated Territorial Programs 2021 – 2027, worth more than two billion euros – the Ministry notes.

Ivan Štrkalj, a manager at the consulting firm Mazars, points out that alongside the Multiannual Financial Framework 2021 – 2027, the National Recovery and Resilience Plan 2021 – 2026 (NPOO) is still relevant, from which various calls for entrepreneurship continue to be announced.

– The most generous call from the NPOO for entrepreneurs is ‘Support for companies for the transition to an energy and resource-efficient economy’, which is expected to be announced in the first quarter of 2024. It is important to note that this is a repeated call, as during the first announcement (at the end of 2022), out of a total of 252 million euros available, as much as 150 million remained unutilized. The reason lies in the rather restrictive criteria set by the tender, of which we highlight two most important ones that will almost certainly be repeated in the new call.

The first is that eligible applicants are exclusively SMEs or medium-sized enterprises (up to 3,000 employees) that had an energy cost share in revenue higher than two percent in 2021. The second criterion is that eligible applicants were exclusively those registered in 15 selected areas of sector C Manufacturing Industry according to NKD 2007 – explains Štrkalj.

Mostly direct grants

This year could be very interesting regarding EU funds as more than 150 different calls are announced, agrees Ariana Vela, director of the company Avelant and director of the EU Projects Institute.

– This largely concerns direct grants where funds are allocated to a specific user for a precisely predefined project; however, there will also be room for all others in limited and open calls. Of course, provided that they are actually announced. Sectorally, everything will be covered – from tourism, research, development and innovation, e-services, green transport, educational infrastructure, to some projects in the employment, social inclusion segment, and so on – Vela states.

In the previous period, Croatian entrepreneurs had a wide range of calls available from various programs (national and commission), through which it was possible to finance almost all types of investments. Štrkalj says that expectations for the next two years are the same (if not greater), as it took more than three years to announce the first calls for entrepreneurship from the MFF 2021 – 2027, while the NPOO 2021 – 2026 is still relevant at the same time.

– As the market suggests, the demand for co-financing entrepreneurial investments remains quite high. It is also important to note that Croatian entrepreneurs are increasingly interested in Union programs, such as Digital Europe, Erasmus+, EU for Health, Creative Europe, Life, and Horizon Europe, which are, in fact, an integrated series of activities that the European Union adopts to promote cooperation among member states in various areas related to common EU policies – Štrkalj notes.

Delays in calls

There is no doubt that EU funds are an important source of financing for all types of companies in Croatia as they provide opportunities for development, innovation, and business expansion. However, with rich opportunities come certain risks and challenges, especially regarding navigation through complex application systems and compliance with regulations, which vary greatly in each published call. When asked what the biggest challenges are in accessing European money, Ariana Vela says that, unfortunately, we carry them over from one financial perspective to another.

– They primarily relate to delays by bodies in management and control systems in announcing indicative plans for calls, then delays in announcing those same announced calls or, sometimes, a complete absence of announcements, as well as lengthy procedures for awarding non-repayable funds, which creates significant legal uncertainty for all who wish to submit their projects. For example, entrepreneurs have been waiting for an important call for months. It has been announced that it will be published by the end of the year. Of course, it has not yet been published, and when it will be, is unknown as it is stuck in consultations with the European Commission. It is irresponsible to announce a call for a certain date and then not publish it – emphasizes Vela.

Applicant errors

In addition to issues on the state side, there are also problems on the applicant side, that is, entrepreneurs, who still inadequately prepare their applications for EU funds.

– I must admit that I am still surprised at how much entrepreneurs can err when preparing to use EU funds. In the project preparation phase, these errors relate to inadequate assessments of the eligibility of their projects, activities, and costs, as well as inadequate accompanying documentation. In the implementation phase, they most often do not adhere to secondary contracts with suppliers or contractors that they themselves wrote. All these are mistakes that can be easily rectified, and we help them with this at Avelant when we manage their projects. The goal is to completely eliminate the risk of error and to reduce the amount of resources that the entrepreneur spends in preparing and implementing projects – Vela states.

Some entrepreneurs may think that hiring a consultant for EU funds is an unnecessary expense. This is a mistaken belief.

– Consultants are those who, with practical experience, follow the latest trends in the world of EU funds, adapt the project to the conditions of the call, communicate with other stakeholders in the preparation and implementation phase (designers, lawyers, ministries, and agencies), and bear administrative responsibility for the project, which has proven to be crucial for their engagement – claims Štrkalj.

In any case, the cost of a consultant is certainly less compared to the opportunity for long-term development of a company that is offered ‘once in a lifetime’.