KPMG: Romania's EU Fund Absorption Rate Still Lowest In CEE

05.18.2011 By Bostan Radu

Romania's European fund absorption continues to be the lowest in Central and Eastern Europe (CEE), with especially low payment ratios recorded for transport and environmental programs, according to a study compiled by consultancy firm KPMG.

The study says Romania paid grants of only EUR1.5 billion by the end of 2010, or 7% of the EUR23.3 billion budget available for 2007-2013 through seven operational programs, from the European Regional Development Fund, the Cohesion Fund and the European Social Fund.

The payment ratio for the ten states that joined the European Union after 2004 is 17%. Latvia has the highest ratio (30%), followed by Lithuania (29%), Slovenia (27%), the Czech Republic (26%), Estonia (21%), Slovakia (17%), Hungary and Poland (16%), Bulgaria (10%) and Romania (7%).

Romania contracted grants for EUR10.4 billion in 2007-2010, or 45% of the total available funds, but still below the CEE average, 53%, according to KPMG's survey "EU Funds in Central and Eastern Europe - Progress report 2007-10."

"EU funds present a unique opportunity for Romania to improve its infrastructure and encourage investment. They should form part of a strategic spiral of growth," said Daniela Nemoianu, Executive Partner KPMG in Romania.

"Moreover, in the short term, infrastructure projects will create jobs and provide a welcome boost to the economy, especially to the construction industry, which has been particularly hard hit by the recession. It is essential that the government maintains this top priority to make more effective use of this important source of financing," Nemoianu added.

Romania has been allotted the highest budgets for its transport and environment operational programs (OP). The transport OP has a budget of EUR5.698 billion for 2007-2013, but the state paid only EUR47 million by the end of last year, less than 1% of the available funds. Contracted funds only amount to EUR836 million, 15% of the budget.

Funds paid through the environment OP totaled EUR122 million, or 2% of the EUR5.611 billion budget, but contracts have been signed for EUR2.4 billion, or 43% of the available funds.

Projects run in Romania through the regional OP received EUR589 million, or 13% of the total EUR4.384 billion budget, while EUR3 billion, or 70%, had been contracted by the end of last year.

The EUR4.089 billion budget available to the human resources development OP has been contracted up to 72% (EUR2.93 billion), but payments amount to only EUR476 million, or 12%.

Romania has obtained EUR267 million through the increase of economic competitiveness OP, out of the total EUR3 billion budget, meaning a 9% absorption ratio, while contracted grants amount to 34%, over EUR1 billion.

The administrative capacity development OP has a budget of EUR246 million. Contracts have been signed for EUR80 million, or 33%, but payments have been disbursed for only EUR11 million, 4% of the total budget.

The technical assistance OP has released EUR10 million, 5% of its EUR213 million budgets, with contracts having been signed for EUR57 million, or 27%.