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News from Members KPMG - EU Funds Absorption Rate in Central & Eastern Europe: Romania Needs a Competitive Country Project to Evolve From the Last Place

KPMG - EU Funds Absorption Rate in Central & Eastern Europe: Romania Needs a Competitive Country Project to Evolve From the Last Place

The contribution that EU Funding brings to the economies in Central & Eastern Europe (CEE) cannot be overstated, but how can the process be made more efficient?

Answers may be found in KPMG's recently issued survey, EU Funds in Central & Eastern Europe, Progress Report 2007-2014, which shows the history of how these funds have been used over the last programming period – 2007-2013 – analyses the results and makes suggestions as to how the information can be used to formulate the best possible policy measures to make the 2014-2020 period run as smoothly as possible.

Within the last funding period, 11 countries within the region were able to access nearly EUR 176 billion, which translates to as much as 15.5% of the average regional GDP for CEE. Moreover, at the individual country level, EU funds comprised from 11% to as much as 24% of their individual annual GDP values. These substantial contributions have been important for the development of these countries’ economies and in several cases helped them weather the post-2008 economic downturn more easily.

Overall usage of EU funds in CEE has been impressive, according to numbers at the end of 2014: by then, 77% of the total budget and 72% of contracted grants had been distributed to the beneficiaries.

Serban Toader, Senior Partner at KPMG in Romania, comments: “In terms of contracting ratios, our analysis shows that the region did quite well, contracting close to or surpassing 100% of available budgets.” „Payments, however, did not always follow”, he says, citing payment ratios of 52% in Romania and 65% in Slovakia, where there is clearly room for improvement. “While countries may be able to contract the funding, that doesn't always mean they are able to spend it accordingly, although most have accomplished this quite efficiently.”

Estonia (11%) and Lithuania (12%) had the smallest gap between contracted and paid ratios from 2007-2014. With much higher differentials, Romania, Slovakia and Bulgaria should learn from the experience of their more successful peers if they are to achieve a better payout rate in the next funding period.

Daniela Nemoianu, Executive Partner at KPMG in Romania and President of AmCham Romania, points out that the funding has given a real boost to areas long neglected by the former political systems in many of the countries in CEE, with EU financing being applied to refurbish areas like infrastructure, utilities and environmental protection. She explains: “These investments via EU funding have contributed to the overall economic development in our region.”

Nemoianu adds: “Payment rates for European funds in Romania still lag behind many other countries in the region, due to difficulties from the beginning of the programming period, although the contracting rate is presently at a very good level. The measures that have been adopted over the past two years have had a significant positive effect to accelerate the implementation of projects and to simplify procedures, and the lessons learned will contribute to better planning in the 2014-2020 period. An essential part will be played by a systemic reform of public acquisitions, as determined by the European Directives adopted by Romania and which come into effect as of January 1st, 2016.”

Florin Banateanu, Director European Funds and Public Sector Services, KPMG in Romania, notes that according to the survey's results some delay in contracting and fund disbursement was seen in the first couple of years of the 2007-2013 programming period. He recalls: “Contracting of the funds began only in the year following the start of the period, and it took a further two years after that for any of the programmes to pay funding to beneficiaries. The risk of corrections remains present, as well as a limited administration capacity. A remedy could be to intensify the use of the technical assistance component”, adds Banateanu.

About KPMG

KPMG is a global network of professional firms providing Audit, Tax and Advisory services. We operate in 155 countries and have 162,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.

KPMG in Romania and Moldova operates from six offices located in Bucharest, Cluj-Napoca, Constanta, Iasi, Timisoara and Chisinau.

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