Combination of grants and financial instruments will lead to EU growth

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Team of Stroitel

The combination of grants and financial instruments is the future for development not only of the construction sector but of the entire economy of Bulgaria and the EU. Around this united the participants in the Third International Conference “Challenges to Cohesion Policy 2014 – 2020. Flexible European Budget and Financial Instruments in Support of the Construction Sector.” It was organized by Iskra Mihaylova, Chair of the European Parliament’s Committee on Regional Development, Bulgarian Construction Chamber (BCC) and Stroitel Newspaper. The forum was opened by Iskra Mihaylova and the Chairman of the MB of BCC Eng. Nikolay Stankov. Jyrki Katainen, Vice-President of the European Commission for Jobs, Growth, Investment and Competitiveness, and Vazil Hudak, Vice-President of EIB, were special guests at the event. It was attended also by President-elect of FIEC Kjetil Toning, in office in 2018. Frank Lee, Head of Division Financial Instruments Advisory, EIB, gave a presentation “Advisory Support to Financial Instruments”.

From the Bulgarian part the forum was attended by Deputy PM Tomislav Donchev, Nikolay Nankov, Minister of Regional Development and Public Works, Ivaylo Moskovski, Minister of Transport, Information Technology and Communications, Lilyana Pavlova, Minister for the Bulgarian Presidency of the Council of the EU 2018, Mayor of Sofia Municipality Yordanka Fandakova. The event was also attended by Deputy Ministers of Regional Development and Public Works Denitsa Nikolova and Malina Krumova, Ivelina Vasileva, Chair of the Parliamentary Committee for Environment and Water, Halil Letifov, Chairman of the Parliamentary Committee on Transport, Information Technology and Communications, Iskren Veselinov, Chairman of the Parliamentary Committee on Regional Policy, Public Works and Local Self-Government, Arch. Zdravko Zdravkov, Chief Architect of Sofia Municipality, Nadya Dankinova, Executive Director of the FLAG Fund, Eng. Galina Vasileva, head of MA of Operational Program “Transport and Transport Infrastructure”, Tsonka Dryankova, Director General of DG “Operational Program Environment”, Eng. Ioanis Parteniotis, Vice-President of CL “Podkrepa”, experts from MF, MRDPW, National Company Railway Infrastructure, Fund Manager of Financial Instruments, and many others.
The conference on the part of BCC was attended by Honorary Chairman Eng. Simeon Peshov, Eng. Nikolay Nikolov, Deputy Chairman of the MB of BCC and Chairman of the Regional Office of BCC – Burgas, Eng. Hristo Dimitrov, Deputy Chairman of the MB of BCC and Chairman of the Regional Office of BCC – Varna, the members of the Board of Directors of BCC Eng. Lyubomir Kachamakov, Nikolina Filipova, Lyubomir Peynovski, Ivan Ivanov, chairmen of Regional Offices of the Chamber.
Among the participants were also: Arch. Borislav Ignatov, Chairman of the Managing Board of the Chamber of Architects in Bulgaria, Eng. Ivan Karaleev, Chairman of the Managing Board of the Chamber of Engineers in the Investment Design in Bulgaria, Prof. Dr. Arch. Borislav Borisov, Rector of the Lyuben Karavelov University of Structural Engineering and Architecture, and others.
“It is a pleasure and great honor for me to open for the third consecutive year already the traditional conference organized by BCC and by me as a representative of the EP. I have the great desire the Bulgarian construction industry and all those involved in infrastructure investment in Bulgaria to be fully informed and actively involved in the decision-making process for the native position in the context of the common European policy. For me the conference is a mandate given to me by the Bulgarian construction industry for further work on very important business and industry issues to be considered in the European Parliament,” said Iskra Mihaylova at the opening of the forum and added that the European project faces a number of challenges – migration, security, climate change, economic recovery, low growth rates and investment scarcity. In her words, we need to be able to maximally attract additional funds from public and private sources. “We have already learnt to work with the European structural funds, to rely on the EU budget as support for development of the Bulgarian regions and the competitiveness of our economy. But nowadays we live in different times with a variety of challenges and that is why we are talking about a flexible budget, modernization of cohesion policy, possibilities for combining the structural funds with other EU financial instruments, as the European Fund for Strategic Investments (EFSI). I am very glad that the Vice-President of the European Commission Jyrki Katainen agreed to participate in the conference because he is the man who is responsible for the implementation of EFSI,” stressed the Chair of the EP’s Committee on Regional Development.
“It is my honor for a third consecutive year together with Mrs. Mihaylova to host the high-level international conference, which in 2017 is dedicated to the opportunities that the financial instruments provide in support of the construction sector,” said Eng. Nikolay Stankov.
“I would like to emphasize that cohesion policy is of crucial importance for the construction industry. Nearly 80% of the sector’s employment is generated from public procurement of projects funded by the European structural funds. You understand how important cohesive policy is for us,” he added. “Today the EU faces a number of challenges for which should be sought solutions in order to be overcome. Most probably changes will occur that will affect cohesion policy,” he stressed.
“Whatever the changes, the industry should be informed about them on the one hand, and on the other – should be sufficiently prepared. BCC is an organization that is looking forward to the future. We always strive to take a step forward to defend and guarantee in the best way the interests of one of the most important sectors of the economy – construction. That is why we welcome the organization of a conference exactly on this topic. The financial instruments will be the basis for attracting private investments as a supplement to public finances, which as we all know are always insufficient,” said Eng. Stankov.
“We need to hear from the first person – from top representatives of the European and Bulgarian institutions, representatives of the EIB – how the industry can take advantage of the opportunities provided by the financial instruments. We will also be glad to hear how to simplify the procedures because complicated procedures create barriers to the business and are able to refuse SMEs to benefit from the financial instruments. We expect to receive information on the opportunities for consultancy and technical support for the preparation of projects, especially for small and medium-sized enterprises,” he said.
“I would like to thank Mrs. Mihaylova, who is the engine of the event, especially Vice-President Katainen, and all guests from the European and Bulgarian institutions,” Eng. Stankov said.
“Led by the recommendation that looking at the present we have to think about the future, it is not possible to talk only about the implementation of this programming period and the funds allocated for financial engineering but we have to consider what will happen after 2020. Starting the debate about the budget and the future of cohesion policy, we need to answer a number of key questions. If I can make a joke with the three K of the Bulgarian Presidency, here we are also talking about K – how much, where, what, how”, said in his address Deputy PM Tomislav Donchev.
“I very much want the use of the instruments of financial engineering not to be a short-lived fashion. This should be a lasting part of the European funding palette. Unfortunately, back in time something very attractive appeared but then it disappeared,” he said. “We should not forget the great goal and it is besides maximum economic effect to wake up the sleeping money, so our talk is very important. Good projects can also move the funds,” Donchev explained.
“I congratulate you on the successful format and on the choice of topic for the conference because they concern the achievement of significant progress in one of the most important investment and infrastructure programs, namely Regions in Growth. I am convinced that we all see the positive effect of the implementation of cohesion policy both in the previous and in the current programming period,” said Minister of Regional Development and Public Works Nikolay Nankov. “We all realize that the world is changing. It is filled with new challenges and in times of budget cuts it is crucial to use the full potential of both all funds and the financial instruments under the operational programs,” he said.
“It is often said that after the end of the current programming period, the EU funding will have another dimension and character, going from grant funding to financial instruments. From 2020 we will be talking more often about the issue of recycled money, which is used more than once and continues to run economies far longer than grants. That is why as soon as we learn to take advantage of it the easier we will adapt to the new conditions,” Nankov said.
He recalled the experience with financial instruments gained during the programming period 2007 – 2013. Projects with high value added were implemented through the JESSICA initiative for a little over BGN 250 million. “And if the value is not so important, we can all realize what has been done by visiting the cities of Sofia, Plovdiv, Ruse, Varna, Burgas, Stara Zagora and Pleven, what projects were implemented in health, social, educational infrastructure, new markets, parking lots and cultural institutions were built,” said Nankov adding that within the framework of OPRD 2014 – 2020 for financial instruments there are resources of BGN 375 million. They will be divided into three funds for urban development, which should be launched by the end of this year as part of the Fund of funds. One will be for Sofia, the other two for Northern and Southern Bulgaria. They will finance projects of both municipalities and businesses. Public-private partnerships will be stimulated. “The offered low-interest lending under OPRD will certainly give Bulgarian cities the opportunity to become economically more developed and socially more attractive,” said in conclusion Minister Nankov..
“What we have to strive for, I think, is to be rational, to be predictable and to make the most of the opportunities that will be provided to us in the coming years. Indeed, it does not really matter what the resource will be – whether free of charge, in the form of loans, financial guarantees, etc. the main aim we have to set is to realize projects with maximum added value. And Bulgaria has the potential to do it,” said Minister of Transport, Information Technology and Communications. “Although on the map there are only two main corridors that are priority for the EC, the real map shows that the only country which is crossed by five, is Bulgaria, one of which is the Danube River. These are potential opportunities for all of us and we have to cover them with adequate infrastructure. Of course, the challenge is great,” he explained. “If so far we have done that with the resources under the Operational Program Transport and the Operational Program Transport and Transport Infrastructure, from this year we have the opportunity to include also the other funding instrument – the Connecting Europe Facility. To a large extent the Juncker Plan can be used in certain projects that are structured on a purely market principle,” added Minister Moskovski.
“Our ambitious goal during the Bulgarian Presidency is to give direction to the debate on cohesion policy and the EU budget after 2020,” said during the conference Minister for the Bulgarian Presidency of the Council of the EU 2018 Lilyana Pavlova and also stressed that the first proposals of the EC under the next Multiannual financial framework will be presented during the Bulgarian Presidency – the first half of 2018.
“It is important for our country to come up with conclusions, arguments for the simplification of policies, for the linking of funding with the financial instruments and suggestions for how to implement these policies,” said Minister Pavlova. “The topic is in our hands and it is up to us not to be just present but to set the format and agenda, the messages, the direction and the framework, so that they cannot only be heard but the Austrian and above all the Romanian Presidency continue work on them,” she explained and added that apart from a balancer and neutral President of the Council of the European Union, our country should also defend its national position.
“Following the Seventh Cohesion Forum of the EC in Brussels last month Sofia hosted a conference on cohesion policy. I especially thank Iskra Mihaylova and BCC for these consecutive actions for a third time to organize a conference with the presence of both the construction business and all who shape the EU policies. The invitation addressed to me to participate I accept as a mayor of the host city and also as one of the main and final beneficiaries of EU funds,” said Mayor of Sofia Municipality Yordanka Fandakova.
According to her, it is extremely important for the cities the cohesion policy to continue. “We said this in Brussels, we say it here too. It should be more flexible and more result-oriented for people. At the same time I confirm the key importance of financial instruments to support the sustainable development of cities to improve the quality of life,” added Mayor Fandakova.
“It is necessary now to start preparing the next financial framework. Let us take the time to think about added value and why we are looking for an increase in the European resources,” said the European Commission Vice-President Jyrki Katainen. He pointed out that according to the Commission’s analysis, the increased investment in infrastructure would continue to be the engine for development of the construction sector. “We are aware that in Bulgaria the European funds mainly go to the industry – for development of the transport sector and the infrastructure. The European funds will continue to play an important role for such projects, as for example for zero-energy buildings,” he explained adding that improving the investment environment would be an important step. The EC Vice-President announced that in October the EIB will organize its local representation in Sofia.
“The EIB is the largest financial institution in the world. Last year we funded projects worth 74 billion euros. About 25 billion euros are for projects relating to the construction industry – infrastructure, roads, hospitals, etc.,” said Vazil Hudak, Vice-President of the EIB, and added that the construction industry could benefit from the financial instruments, from credits. He also stressed that an office of the bank will be opened in October in Sofia.
“Grants will continue to be used but they should be spent smarter. We need to look at them as part of a combination of different sources of funds,” said Frank Lee from the EIB. “Financial instruments are far from new to Bulgaria. You have a very competitive advantage because you have already realized successful projects on them. We have forecast events which we will organize this year in Bulgaria to explain the use of financial instruments,” he said.
“The European construction industry contributes to 8.6% of the GDP in Europe. In the sector are operating more than 3 million enterprises, for which work over 40 million employees. The total value of the companies’ production was 1.2 billion euros last year,” said Kjetil Toning, President-elect of FIEC, in office in 2018, who presented the state of the industry in Europe. According to him, a recovery process is under way, which started in 2014. According to him, among the main engines for the sector in 2016 was the construction of new private buildings.
“The combination of grants and various financial instruments is the way in which the future funding of different projects will be provided,” Eng. Nikolay Stankov summed up at the end of the forum.
“In Bulgaria we have many opportunities for concrete proposals, but also we need to arrange our priorities and decide what we can finance with what. So far, our country has focused on the effort to absorb the structural funds, now we have to focus on taking advantage of all the sources of funds,” said in conclusion Iskra Mihaylova, Chair of the European Parliament’s Committee on Regional Development, and thanked the participants in the conference.

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