Walter Deffaa: Simplification should play a central role in the debate for the future of cohesion policy

Svilena Grazhdanska Reneta Nikolova Mr. Deffaa, your first interview for Bulgarian print media is for “Stroitel” newspaper. You come to Bulgaria to participate in the Second International Conference “Challenges of the EU cohesion policy 2014 – 2020”, which will bring together representatives of the executive authorities, municipalities and BCC, which represents construction companies contractors of infrastructure projects. What are the highlights in your speech? The main message I will be giving to the conference is there is undoubtedly still room for improvement when it comes to simplifying the implementation of Cohesion Policy on the ground. Firstly, while we made progress in the new 2014-20 framework for Cohesion Policy compared to the 2007-13 period, we in the Commission are open to seeing how the simplification opportunities that exist in the regulations for 2014-20 can be maximised, not forgetting the responsibilities of Member States to simplify their own procedures. Secondly, I would not exclude some legislative changes if they are targeted and we can be sure to bring real simplification. However, there is only a short window for what can be done in the current period without destabilising the current framework. The possibility for a more radical reflection on how the delivery system can be made simpler will come when designing the framework for the post 2020 period. What are the most important priorities for the EU cohesion policy by 2020? The European Structural and Investment (ESI) Funds will invest €454 billion in Europe's cities and regions by 2020. Taking into account the national contribution of Member States and the leverage effect of financial instruments, the overall impact will be more than €640 billion. This amount represents an important share of public investments in the EU. The Funds are a vital tool for delivering more prosperity, a better quality of life and a better environment for all the citizens in Europe. They will create jobs and growth across Europe by supporting SMEs, kick-starting innovation and fostering the low-carbon economy. 2015 was a year of great achievements with the adoption of some 300 programmes. Now the challenge is to focus on the implementation of the policy on the ground translating the ambitious objectives into high-quality projects and concrete results. In order to achieve the expected results, we have ensured that the best conditions for investments are being put in place. We have introduced several changes when reforming the policy, such as thematic concentration, so that resources are allocated to those areas where they are the most needed and make a real difference. As a result of those reforms, the expected impacts of our investments are promising. To give you some examples: by 2020, our funds will support more than 2 million companies and provide over 14 million additional households with access to high-speed broadband. Moreover, over 12 million people will get improved access to drinking water. The concrete topic of the forum is simplification of the implementation of cohesion policy. What problems are facing participants in the process and what measures should be taken to overcome them? The size of the regulations has increased from period to period to reflect the increased sophistication of the policy, such as its increased focus on EU level objectives and the link to economic governance. In addition, there is a desire to do more with the policy, enabling it to be flexible to changing circumstances and address diversity. That is why Commissioner Corina Creţu set up the High Level Group on simplification for beneficiaries of ESI Funds – to ensure there is also a focus on reducing the administrative burden on those who receive the funds and who deliver the projects on the ground. The setting up of the group certainly seems to have sparked the debate on how to improve and simplify both among those on the ground delivering the programmes but also between the Member States, in the European Parliament and the Committee of the Regions. There are a number of key areas for simplification measures to have a real impact in this period and these are the areas we have asked the High Level Group to focus on in its first year: e-Governance, simplified costs, access to EU funds for SMEs, financial instruments and the national gold-plating of rules. We are currently analysing the recommendations already made by the group on e-Governance and simplified costs and expect recommendations on the other topics over the course of the year. What is the vision of the EC for the future of cohesion policy, what will it be after 2020? It is too early for talking about the future in any detail, as we first have to see what the present programmes are delivering. But there are four key issues that should be addressed: flexibility, alignment with EU priorities, simplification and performance. First flexibility, we should reflect on how to reconcile the need for stable investment with the imperative of responding to new priorities or unexpected crises. The refugee crisis has shown that the current governance of the policy does not provide swift answers. It has also shown that Member States are not always open to use this policy to tackle crisis situations. Second, stronger alignment with EU priorities and closer linkages to economic governance could make our investments more effective in particular when it comes to structural reforms. Cohesion policy cannot operate in isolation from the wider economic governance of the EU. Third, simplification should play a central role in this debate. I am sure the High-level Group on Simplification for beneficiaries which I have already mentioned will provide interesting recommendations. And finally, we need to reflect on performance. Performance means that we should be able to deliver tangible results that make a difference for our citizens but also to report back on delivery. The new programmes have a sound performance framework in place, which will be key in demonstrating performance. How do you interact with the Regional Development Committee of the European Parliament and with its Chair Mrs. Iskra Mihaylova who together with BCC is the initiator and main driver of the conference on cohesion policy? We have a very good working relationship with the Committee for Regional Development of the European Parliament, which is the lead committee within the European Parliament for the Union’s regional development and cohesion policy, as set out in the Treaties. There are regular meetings/exchange of views (2/3 per year) and events to which either our Commissioner Corina Creţu or myself are invited to exchange views with the members of the Committee on recent developments within regional policy. At this time, for example, there is a huge work on simplification, where I would like to praise Mrs Mihaylova's strong commitment, and where we should get concrete proposals for further simplifying the life of cohesion policy beneficiaries both in the current funding period and in the future. In parallel, Mrs Mihaylova initiated an implementation working group, recently re-labelled as the Cohesion Policy Working Group to have an informal, frank and open exchange of views on selected topics with Commission representatives. What are the prospects for searching new funding opportunities for the countries using alternative financial instruments similar to the Juncker Plan and is this the way to develop? The Investment Plan for Europe (or the so called 'Juncker Plan') is an ambitious initiative to boost investments across the Union. It is based on three pillars: ✓Mobilising finance s in a new way through the creation of a new European Fund for Strategic Investment (EFSI); ✓Making finance reach the real economy; ✓Improving the investment environment. Cohesion policy, as implemented through Member States' programmes is indeed significantly supporting the Juncker Plan. In particular, with a view to mobilising additional resources, the Commission is encouraging Member States to at least double the use of financial instruments in key investment areas such as SME-support, energy efficiency, information and communication technology, transport and R&D support. Bulgaria is very much going in this direction with its new generation of programmes. Combination between ESI Funds and EFSI is also possible and desirable in order to reach a critical mass for the implementation of projects or target riskier or remote markets. And finally yes, financial instruments are an alternative to grants for projects which are financially viable. They become more and more popular as a delivery mode to achieve cohesion policy objectives in the context of limited budgetary resources, given their revolving character and leverage effect. What is the place and role of construction industry for the successful absorption of EU funds and for the economy of Europe? The construction sector is by far the largest industrial sector in Europe with about 9% of GDP and 18 million jobs. It has a larger than average number of SMEs. It is also a labour intensive sector with low productivity. Therefore there is still a lot of scope for technological change in the production process. But also the design of the buildings is expected to be impacted by new energy efficiency measures and European standards. Building is responsible for nearly 40% of energy consumption and has the greatest potential for energy savings together with transport. Improving the position of the construction sector will be an important catalyst for the economic transformations in the regions in the next years. The use of ESI Funds, particularly the investments under low carbon economy and resource efficiency will play an important role to achieve these goals. About 875,000 houses are expected to be renovated with improved energy performance, and 5,2 billion TWh/year will be saved in public buildings. In addition to that, ESI funding is available for innovation in the construction sector and will be used for training the labour force on new skills in sustainable construction. The gap between some regions in EU is huge. How can it be overcome? Progressively, we are recovering from the economic and financial crisis that shook the world in 2008. The EU is getting back on the path to growth but many of our regions and cities are still bearing scars of the crisis, which wiped out the gains from social and economic convergence achieved in several Member States since 2000. Improvements in the economy clearly depend on increased investments. In this context, cohesion policy plays a major role. The bulk of the funding will be concentrated on less developed European countries and regions in order to help them to catch up, to fulfil their economic potential and to reduce the economic, social and territorial disparities across Europe. Without this funding, much needed public investment in the less developed Member States would have collapsed. In your opinion, to what extent connectivity of Europe and good infrastructure are a prerequisite for economic growth? Transport is a strong driver of economic growth, jobs and trade, and it is a priority of the Commission to boost investments in this sector. Key infrastructure investments in sustainable transport will help to connect people and regions within Europe. This connectivity will improve accessibility, facilitate international trade links and boost business activity. The ESI Funds are investing a lot in transport to spur economic activity. The funds support in particular the Trans-European Transport Network. Close to € 70 billion of cohesion policy funds will go towards transport investments in the next years with an emphasis on smarter, safer, cleaner and multi-modal transport. The kinds of investment vary depending on the region. For example, in less-developed regions, the focus is on basic infrastructure and enhancing accessibility by investing in roads, railways, and ports. In more developed areas, investments are addressing missing links or bottlenecks. Other instruments exist as well to address transport infrastructure, such as the Connecting Europe Facility or the Investment Plan for Europe. What should be done to have more smart cities in Europe? When we talk about smart cities we usually associate them with the use of state-of-the-art technologies to improve the quality of local services: sensors, smartphone applications, interconnected databases, open data, and so on. Indeed, there is immense potential in the efficiency gains these technologies can offer. New technologies can help us in collecting and processing more accurate data in much less time. They can help optimise the use of the limited public resources available and to provide services better tailored to real local demand. However, it takes more than just technology to make cities smarter. If you look at the frontrunner cities applying smart technologies you see that all of them have clear visions and objectives on sustainable urban development and social inclusion translated into strategies and actions. What is more, there is strong local political commitment to the implementation of these strategies be it smart energy management, sustainable urban mobility, or e-inclusion. Last but not least, they work in a very transparent manner, consulting and sharing information with the local community via various information channels (websites, social media, etc.). In other words, to have more smart cities we first need better governance and an integrated approach in urban policy making to make the best use of the available new technologies. The European Commission launched the Smart Cities and Communities European Innovation Partnership five years ago to scale up the market for new technologies. It brings together the industry with cities to test new approaches in integrating energy, mobility and digital communication providing large scale support to flagship projects under Horizon 2020. Cohesion policy for its part provides significant support to improve both pillars. To help the technology side we invest more than 10 billion euros EU-wide in ICT infrastructure connected to intelligent energy distribution, intelligent transport systems, e-governance, e-learning, e-inclusion services, ICT solutions for healthy active ageing as well as ICT services for SMEs. To improve urban policy making we have launched the third generation of the URBACT, a learning and exchange programme for cities. They work in networks dedicated to specific issues of sustainable urban development involving more than 500 cities all over the EU. In addition, last year we also started an experimental initiative called Urban Innovative Actions to identify new and transferable solutions to urban challenges. Almost 400 urban areas came forward with ideas demonstrating an immense interest in the topic. In this period of cohesion policy cities also have more voice in the investment decisions. More than 500 urban authorities (almost 40 in Bulgaria) will take part in the selection of projects which comply with the priorities of their sustainable urban development strategies. For all of these reasons I strongly believe that cohesion policy plays an instrumental role in enabling more cities to become smarter, more sustainable and more inclusive – or simply put, better places to live for both the current and the future generations. Where is, according to you, our country in the implementation of cohesion policy? How do you assess the achievements of Bulgaria in the first for us programming period? The latest data from the previous period show that Bulgaria has done quite well given the fact that 2007-13 was the first cohesion policy programming period and the slow start of implementation due to some lack of experience and administrative capacity. In the past few years, however, we have witnessed some remarkable results, mainly due to the accelerated pace of investment. Bulgaria has indeed proven to be a fast learner of how structural funds function and can bring real results in terms of first mitigating the impact of the economic crisis and then seizing the opportunity of the recovery. It is of utmost importance that this learning curve continues. Cohesion policy will invest € 7.6 billion in the coming years and this represents a huge opportunity in terms of investment and possibility to deliver important structural reforms. In that respect, Bulgaria needs to demonstrate a more efficient and effective way of approaching the investment on the ground, free of irregularities and mainly, a results-oriented approach in its aim to achieve a better quality of life for Bulgarian citizens. This is the very sense of our reformed policy – a radical shift towards results and performance for the benefit of the people. What are your recommendations; will you give an advice what mistakes we should not repeat? The main reasons for the slow start of the previous programming period included a lack of administrative capacity of our beneficiaries and the public administration, high staff turnover and lengthy public procurement procedures. Even though a lot has been done, some of these problems still persist and Bulgaria needs to address them as a matter of priority. First of all, a pipeline of well-prepared projects is essential for the country to kick-start and speed up investment. It is necessary to empower beneficiaries at all levels to generate good quality projects in 2014-20. Poor planning and execution has also been one of the major 2007-13 implementation problems. Fulfilling the set of necessary pre-conditions and the designation of a solid management and control system (including anti-corruption measures), are also key elements of the picture. Which do you think are the best examples from our country? Transport projects come to mind. For example, only last month my services approved an investment worth over €368 million from the European Regional Development Fund to support the construction of a new line of the Sofia metro. The project "Extension of the Sofia metro, Line 3, phase I, Boulevard Vladimir Vazov-Centre-Zhitnitsa Street" aims to build almost 8 km of new line and construct eight new metro stations. Sofia metro was among the best examples of how funds from the EU budget improved EU citizens’ lives. I believe that the environment-friendly public transport system supported by our funds in both programming period improves the attractiveness of your capital for businesses and tourism. The EU funds have also supported and continue to support important transformations in the environmental sector in order to bring local standards up to the EU level. High environmental standards mean improved quality of life for citizens but they can also be translated into concrete economic opportunities. One of the landmark projects in this sector was the waste treatment plant in Sofia. The equity investments for start-ups and loans for SMEs have also worked well thanks to the JEREMIE instrument and, I hope, will continue to do so in the future with the help of the brand new SME initiative. Will the migrant crisis have an impact on the priorities of cohesion policy and if so – in what way? Migration is the biggest challenge we ever had to face as a Union, and for months now we have been working on a coordinated European response to address the emergency of the refugee crisis. Of course, in the first place, focus on short-term action is unavoidable. But we all know that the most effective solution is to work in the long term. And this means turning the migration challenge into an opportunity for all, by successfully integrating migrants in our societies. Cohesion Policy plays a crucial role here, as we already co-funded thousands of social inclusion projects. The Funds can promote integration, by supporting projects in social and education infrastructure, housing, childcare, health, but also business start-ups, languages courses or professional training. In September, we announced that we were ready to be flexible, and modify Cohesion Policy programmes to respond to new needs linked to the migration challenge. This can help address both short-term needs, on a case-by-case basis – first accommodation, mobile hospital, sanitation, water-supply – and longer term ones, helping migrants and refugees find their place in society through social and professional inclusion. The refugee crisis shows that our policy needs to be more flexible and to reconcile the need for a stable investment framework with the imperative of responding to new European priorities. This is one of our main axes of reflection for the post-2020 Cohesion Policy. What do you expect to be discussed at the Conference in Sofia? For 2014-20, ESI Funds investments in Bulgaria are directed at key areas where they are most likely to create jobs and have most impact for a sustainable development all over the country: supporting small businesses; creating a research and innovation system for Bulgaria; keeping the environment intact and reducing CO2 emissions; helping young people build a future, preventing intellectual brain drain; making sure that the fruits of increasing prosperity are equally shared; and supporting essential infrastructure and vital transport links. To increase the impact of the funds on the ground, I very much welcome the ambition of the Bulgarian authorities to go further with the use of financial instruments and to make use of simplification opportunities. It is in this context that at the Conference we will be discussing precisely how to make cohesion policy more accessible and simpler, so that also businesses, like the construction one, can make best use of ESI Funds for the 2014-20 period for creating jobs and for boosting the local economy. I am very keen to listen to the experience of participants with Structural Funds support and to their proposals for simplification. What will you wish to the readers of Stroitel Newspaper, edition of the Bulgarian Construction Chamber? The ESI Funds offer a real opportunity for Bulgaria and its citizens. EU cohesion policy is the main source of public investment in Bulgaria: supporting crucial structural reforms, helping Bulgaria's economy become more competitive and attracting more private and foreign investment. The Bulgarian Construction Chamber and your newspaper as a whole represent the construction business in the country that is part of the drivers of the local economy. Therefore, the construction business should play their full and fair role in the process of approaching and using our funds for the benefit of the country and always playing by the rules – in the interest of your country and the European taxpayer. I am also aware of your interest and commitment towards transparency, simplification and constantly improving the way the EU funds are spent which are important for achieving the shared goals of EU cohesion policy.