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ON SAPARD IMPLEMENTATION IN THE REPUBLIC OF BULGARIA For the period JUNE 1ST 2001 – DECEMBER 31ST 2002 (in pursuance of Article 8, Section B of the Annex to MAFA) June, 2003 Table of Contents 1.1. Developments in the macro-economic situation 2. Assessment of the progress in the implementation of objectives and measures 2.2. Implementation progress – by measure and by region 2.3. Degree of achievement of measure objectives 3. Measures for the improvement of SAPARD implementation 3.1. Managing Authority’s organizational activities 3.3. SAPARD Monitoring Committee 3.4. Monitoring and Evaluation System 3.5. Actions taken in order to overcome any problems encountered in implementing the Programme 3.6. The use made of Technical assistance 3.8. Steps taken to ensure publicity for the SAPARD Programme 4. Co-ordination of SAPARD and the other financial instruments of international support 5. Review of expenditure per measure 5.4 Sanctioned (cancelled) projects Annex 1 – Indicators for SAPARD Programme monitoring and evaluation LIST OF TABLES Table 1. Main macroeconomic indicators for the period 1998-2002 Table 2. Distribution of the population in Bulgaria Table 9. Reimbursed projects in sensitive sectors LIST OF FIGURESFigure 1. Population in the country, the rural and the less developed rural areas Figure 3. Approved, rejected and completed projects per measure for the period 01.06.01-31.12.02 The National Agriculture and Rural Development Plan 2000-2006 (NARDP) under SAPARD is the basis for the implementation of Council Regulation 1268/99 of 21 June1999, on Community support for pre-accession measures for agriculture and rural development in the applicant countries of central and eastern Europe in the pre-accession period. In pursuance to article 1 of this Regulation, the Community support shall: a) contribute to the implementation of the aquis communautaire concerning the common agricultural policy and related policies; b) solve priority and specific problems for the sustainable adaptation of the agricultural sector and rural areas in the applicant countries. The start of SAPARD implementation is preceded by the approval of the European Commission of a National plan for agriculture and rural development, the accreditation of a SAPARD Agency, and concluded Multi-annual financing and annual financing agreements. Thus, in 1999, the Ministry of agriculture and forestry of Bulgaria prepared a National agriculture and rural development plan, which on the basis of a thorough socio-economic sector analysis, set the strategy and priorities for agriculture and rural development in the period 2000-2006. The NARDP was coordinated with the three core government documents: Accession partnership, National program for adoption of the aquis communautaire, and the National economic development plan. The NARDP 2000-2006 of Bulgaria was reviewed by the STAR Committee of the European Commission on 13 September 2000 as the Program for agriculture and rural development for the period 2000-2006 and officially adopted on 20 October 2000. Thus Bulgaria fulfilled the first obligatory pre-condition before the start of SAPARD implementation. The accreditation of State Fund “Agriculture” as the SAPARD Agency in Bulgaria on 15 May 2001 led to the accomplishment of another key pre-condition. On 18 December 2000 the Multi-annual financing agreement under SAPARD between the European Commission and the Republic of Bulgaria was signed, whereas the first Annual financing agreement was concluded on 12 February 2000. Thus, Bulgaria fulfilled all requirements of the Regulation 1268/99 and became the first country to be granted a conferral of management of the SAPARD funds for the period 2000-2006. On the 1 June 2001, with the publication in the Sate Gazette of the ordinances for terms and procedure for granting aid under the three main measures of NARDP, SAPARD program implementation was officially started. Since the start of measure implementation until 31 December 2002 two substantive modifications were made into the NARDP:
1.1. Developments in the macro-economic situation The stable trend of progress in the Bulgarian general economic development remained unchanged for the four-year period (1999-2002), despite the fact that almost all regions in the world marked a slow-down in their economic development for the same period. The stability of the Bulgarian currency and the financial situation of the credit institutions remained intact. The interest rates were kept at low levels and also remained stable for the period. The Gross Domestic Product (GDP) reached 16 527 MEURO in year 2002 at current prices (preliminary data), keeping with a stable trend of increase over the whole period. The GDP per capita value also increased reaching 2,106.6 euro in year 2002. The highest economic growth rates were recorded for the industrial and services sectors. The agricultural sector (including forestry) marked a 0,6% increase in Gross Value Added (GVA) in year 2002 and remained the sector with the lowest share in total GVA -12.5%; this was coherent with the trend that started in 1997 of constant decrease in the sector contribution to the GVA. The agricultural sector was seriously affected by the unfavorable climatic conditions and large-scale forest fires during the last two years of the period. Apart from the natural factors, other sector specific conditions kept having unfavorable impact on its development – the fragmentation of the land plots, the harder access to credits, the low investment activity in Bulgarian agriculture. The investments in agriculture marked an increase only in year 2000, which was an exception from the general trend. The investments in the agricultural sector (including forestry and hunting) reached 74.3 MEURO in 2002; these were investments in long-term assets. The foreign trade balance of the agrarian sector is positive for the reported period. In year 2001 it reached 113.6 MEURO, thus marking a decrease compared to the year 2000 value due to the 2.99% increase in agricultural exports and 14.84% increase in imports compared to the year 2000 figures. The inflation by the end of November 2002 was 2.5%. The level of unemployment (calculated as number of unemployed/number of economically active) kept growing in the 1998-2000 period. In 2002 it was 16.3% and marked a decrease compared to the unemployment level in the previous year. The incomes of the employed also marked a small increase. The main indicators characterizing the condition of the Bulgarian economy for the 1998-2002 and the share of the agrarian sector are presented in Table 1. Table 1. Main macroeconomic indicators for the period 1998-2002
Source: NSI and MAF calculations * The data for year 1998 is expressed in denominated leva for easier comparison ** Preliminary data 1.2. PopulationThe population of Bulgaria was steadily decreasing. According to the data from the census that was conducted in year 2001, the country population was 7 974 000 people, 256 000 less than in 1998. The population in the rural areas and the less developed rural areas of the country was also decreasing. The comparison of the data for the years 2000 and 1998 indicated that in the rural areas the population decrease was by 1.5% and in the less developed rural areas by 10.7%. Table 2. Distribution of the population in Bulgaria
Source: Calculations based on data provided by NSI and the National Center on Territorial Development and Housing Policy * Preliminary data Figure 1. Population in the country, the rural and the less developed rural areas 1.3.1. Negotiations with the EU Bulgaria submitted officially its negotiation position on Chapter 7 "Agriculture" in June 2001 and it was registered as official document of the Accession Conference on July 6th 2001. On March 21st 2002 the Chapter was opened for negotiations at the Conference on accession of Bulgaria to the EU (Conference at deputy-ministers level). Bulgaria submitted officially the information requested in the EU Common position in October 2002. In compliance with the Government approved deadlines set in the Strategy and the Plan for acceleration of the negotiation process with the EU, the part of Chapter 7 "Agriculture" that deals with the veterinary and phytosanitary issues was cleared. Bulgaria intends to conclude the negotiations on the second part of the Chapter (dealing with CAP and rural development) at the latest in the beginning of 2004. 1.3.2. Changes in legislationIn its accession negotiation position Bulgaria has agreed to harmonize its legislation in the field of agriculture with the EU Acquis Communautaire until 2005. In the period 1999-2002 a number of laws and lower-tier legislative acts were harmonized with the European acquis:
In the period to EU accession, the following two major tasks have to be completed in the legislation field: 1. Full harmonization with the EU veterinary and phyto-sanitary legislation, including transposition of the latest EU directives in the field; 2. Enactment of legislation that allows for setting up of the needed administrative capacity and for pilot application of the CAP elements. In this respect, the legislation related to the payment and intervention agency(ies) of Bulgaria [as well as to the other administrative organs that will ensure access to EU funds] will be of primary importance. 1.3.3. State policy in the Agrarian sectorIn year 2002 the Ministry of Agriculture and Forestry (MAF) developed the Strategy for the provision of state support to the development of agriculture and the rural areas for the period 2003-2006. The strategy is based on several main principles, namely:
The Strategy is based on 4 types of financial instruments: investment credits, investment subsidies, subsidies for quality products (including export subsidies), interventions on the markets for agricultural goods. The investment credits provide funds for long term assets in agricultural holdings and for the diversification of economic activities in the rural areas of the country. The investment subsidies support investments in agricultural holdings, aimed at overcoming the general technical obsolescence in the sector and the high investments costs of new machinery, equipment and technologies. The following sectors are financially supported through the direct subsidies scheme in 2003:
In year 2003 the export subsidizing has to contribute for the achievement of two main goals:
The provision of long term credits is based on investment programs for plant growing, animal breeding, purchasing of agricultural machinery, alternative activities in the rural areas designed in coherence with the measures set in NARDP under SAPARD. The total 2003 budget available to State Fund “Agriculture” for agricultural support is distributed in the following manner:
2. Assessment of the progress in the implementation of objectives and measures The basic principles on the provision of aid under SAPARD are set in Regulation (EC) No 1268 of 21 June 1999 on Community support for pre-accession measures for agriculture and rural development in the applicant countries of Central and Eastern Europe in the pre-accession period. According to Art. 2 of the Regulation, SAPARD aid should relate in particular to: a. contributing to the implementation of the acquis communautaire concerning the common agricultural policy and related policies; b. solving priority and specific problems for the sustainable adaptation of the agricultural sector and rural areas in the applicant countries. The Strategy, goals and measures directed at the achievement of sustainable development of the agrarian sector and the rural areas of Bulgaria have been defined in the National Plan for Agriculture and Rural Development 2000-2006 (under SAPARD) prepared by the Ministry of Agriculture and Forestry. The Plan was reviewed by the Committee on Agricultural Structures and Rural Development, and endorsed by [decision of] the European Commission on October 20th 2000. The Bulgarian NARDP pursues the fulfillment of the following main goals: 1. Development of efficient and sustainable agricultural production and competitive food processing sector through improved market and technological infrastructure and strategic investment policies, ultimately aimed at reaching EU standards. 2. Sustainable rural development, consistent with the best international environmental practices by providing alternative employment opportunities, economic diversification, development and rehabilitation of infrastructure. The above goals are to be achieved through the implementation of 11 measures and one sub-measure as detailed in NARDP. The measure implementation is a function of the SAPARD Agency, which on 15th of May, 2001 was accredited to implement three of these measures [the official start of their implementation being as of 1st of June 2001]:
2.2.
Implementation progress – by measure and by region
The figure below shows the trend in contracted project investments since the start of SAPARD implementation till the end of the period covered by this report – 31.12.2002. As the general trend shows, there is an increase in the total value of investments approved at each successive meeting of the Project Selection Committee; this fact is mainly due to the accumulation of experience in implementing the accredited SAPARD measures. During the reporting period the number of projects approved under measure “Investments in agricultural holdings” totaled 205 (69% of total number of approved projects). Total project investment value reached 87,663,870.00 BGN (41.5% of total approved investment costs). The corresponding total value of the approved EU subsidy amounted to 32,833,980.20 BGN. The average approved investment costs per project under the measure were 427628.63 BGN. The number of projects approved under measure “Improving the processing and marketing of agricultural and fishery products” totaled 65 (22% of total number of approved projects). Total project investment value reached 116,039,678.91 BGN (55,0% of total approved investment costs). The average approved investment costs per project under the measure were 1,785,225.83 BGN. The number of projects approved under measure “Development and diversification of economic activities” totaled 28 (9 % of total number of approved projects). Total project investment value reached 7,308,673.31 BGN (3.5 % of total approved investment costs). The average investment costs per project approved under the measure were 261,024.05 BGN. The figure below shows the regional breakdown of contracted investment by measure. Figure 4. Distribution of approved subsidy (EU + national co-financing) by measures and by districts in the period - 01.06.2001 - 31.12.2002. The distribution per district of the total approved investment costs under the three measures indicates that the majority of approved investments were concentrated in the districts of Plovdiv (14.8% of total approved investments under SAPARD), Bourgas (9,9%) and Stara Zagora (9.8%). The majority of the approved investments [in value terms] under measure “Investments in agricultural holdings” are concentrated in the district of Silistra (9.5% of total approved investment costs under the measure), followed by the district of Stara Zagora (9.4%) and the district of Bourgas (9.2%). The majority of the approved investments [in value terms] under measure “Improving the processing and marketing of agricultural and fishery products” is concentrated in the district of Plovdiv (23% of total approved investment costs under the measure), followed by the district of Bourgas (14.7%) and the district of Stara Zagora (10.8%). The geographic scope of measure “Development and diversification of economic activities, provision of multiple activities and alternative income” includes 230 municipalities (out of total 263 municipalities in Bulgaria), defined as rural areas in NARDP. The municipalities are located on the territory of 27 districts out of total 28 districts (excluding for support the Sofia-city district). The three districts that have concentrated the majority of approved investments under the measure are Bourgas (16.8% of total approved investment costs under the measure), Lovech (10.8%) and Sofia – region (10%). However, on the territory of 10 districts there were no approved investment projects for the reported period. 2.3. Degree of achievement of measure objectivesMeasure 1.1 “Investments in agricultural holdings” The main objective of the measure is the improvement of the incomes from agricultural activities, the living and working conditions of the agricultural producers as well as better utilization of human resources. The investments supported under the measure contribute to: the improvement of product quality; the decrease in production costs and the improvement of the efficiency and competitiveness of the agricultural holdings; improving the hygiene conditions and animal welfare to reach the EU requirements; adherence to the phytosanitary requirements in the perennials sector; modernization of production practices; the exercise of control over environmental pollution by the agricultural holdings. The measure supports private investments in the following sectors: milk production, meat production, fruits and vegetables, viticulture. The table below provides information on the number and the value of the projects approved and reimbursed under the measure. Table 3. Measure “Investments in agricultural holdings” – number and value of the approved and reimbursed projects per measure sector for the period 01.06.01 – 31.12.02
Note: the breakdown of the projects by sectors is conditional as some of them have applied for support under more than one sector at one and the same time. The data indicates that the biggest number of approved and reimbursed projects is concentrated in the sector “Cereals, essential oils perennials, medicinal perennials, tobacco, and cotton”. These were projects primarily directed at the purchase of specialized agricultural machinery necessary for the modernization of the production process. Next in project investment value and reimbursed subsidies are the projects in the sector “Meat”; they are directed at improving the hygiene conditions and animal welfare to reach the EU requirements. Third in project investment value and reimbursed subsidies are the projects in the sector “Fruits and vegetables”. The projects’ purpose was primarily the adherence to the phytosanitary requirements in the plantations with perennials. The smallest number of approved and reimbursed investment costs was recorded in the “Milk” sector. Measure 1.2. “Improving the processing and marketing of agricultural and fishery products”The general objective of the measure is to facilitate the improvement of the processing and marketing of agricultural and fishery products. The investments under the measure should contribute to: the improvement of product quality, product packaging and presentation; the introduction of technologies related to environmental protection; the achievement of the EU quality and health standards; the achievement of the EU production standards and requirements; better utilization of by-products, particularly by recycling waste; the improvement of storage capacity. Information about the approved and completed projects under the measure for the reported period per primary project objective is presented in Table 4. The biggest proportion of the completed projects aimed at adapting the enterprises to the EU requirements on food quality and hygiene conditions. Table 4. Breakdown of approved and completed projects by main objective of investments for measure “Improving processing and marketing of agricultural and fishery products” in the period - 01.06.2001 - 31.12.2002.
Note: the breakdown of the projects by objectives is conditional as some of projects have more than one objective. Measure 1.2 “Improving the processing and marketing of agricultural and fishery products” supports projects for private investments in the sectors: wine, fruits and vegetables, milk and dairy products, meat and fish and fishery products The table below presents the number and the value of the approved and reimbursed projects per measure sector. Table 5. Measure “Improving the processing and marketing of agricultural and fishery products” – number and value of approved and reimbursed projects per sector
The data indicates that the biggest number of approved and reimbursed projects is in the sector “Meat”. Next in project investment value and reimbursed subsidies are the projects in the sector “Wine”. Third in project investment value and reimbursed subsidies are the projects in the sector “Fruits and vegetables”. The smallest number of approved and reimbursed investment costs was recorded in the “Fish and fishery products” sector. Measure 2.1 “Development and diversification of economic activities, provision for multiple activities and alternative income” The main objective of the measure is the provision of support to the integrated development of the rural communities through supporting the diversification/strengthening of the activities of local agricultural producers, who may subsequently work in cooperation for the achievement of common integrated goals (i.e. integration of the activities in rural tourism / local craftsmanship and agro-industry / horse breeding, etc). The supported activities lead to better utilization and preservation of the local natural and historic/cultural potential, while contributing to the reduction of unemployment and the increase in gross incomes of local households. In the long-term period these effects should decrease the depopulation rates in the rural areas, and have positive impact on local environment. The measure supports private investments in the following sectors: rural tourism, local craftsmanship and agro-industry, timber sawing, carpentry and bio-fuels, silkworm breeding, bee keeping, horse breeding, aquaculture, mushroom production, processing of essential oil plants, herbs and mushrooms. The table below presents the number and the value of the approved and reimbursed projects per measure sector for the period 01.06.2001 – 12.12.2002.
The data indicates that the biggest number of approved projects was in the sector “rural tourism”, where more than 45% of the contracted investments had been allocated. These were projects primarily directed at the creation of accommodation for tourists [i.e. 200 new beds for tourists, in total]. The creation of these premises will allow longer tourist stays on the territory of the relevant settlements; this will result not only in incremental incomes for the people directly involved with the supported activity but in improved incomes for other local businesses that produce agricultural goods and foods, products from craftsmanship, or businesses that provide tourist services and attractions. The implementation of the measure in the “timber sawing, carpentry and bio fuels” sector was also progressing relatively well. Enterprises with total processing capacity of 39 932 m3 round woods had been approved for support. The supported projects will lead not only to higher incomes for the owners of the enterprises, but to the creation of new jobs and the reduction of local unemployment. The worst results were registered in the “silkworm breeding” and “horse breeding” sectors. No projects applied for support under these two sectors during the reported period. The lack of sufficient information and the lack of access to credits (due to the impossibility to provide the required bank collateral) are amongst the basic reasons for the lack of projects. 3. Measures for the improvement of SAPARD implementation 3.1. Managing Authority’s organizational activities The Managing authority of SAPARD (MA) is responsible for the efficiency of Programme management. It cont | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||