Croatia: 2014-2020 Partnership Agreement and Operational Programmes

1. Croatia: 2014-2020 Partnership Agreement and Operational Programmes V4+ Croatia and Slovenia Expert Level Conference Budapest, 16-17 June 2014

2. Key challenges for Croatia • Economic decline • Croatian economy has been in recession since 2009 • real GDP has dropped 12% in the last 5 years • low competitiveness and narrow export base • High unemployment • rate of unemployment has doubled since 2008 (17.6% in 2013) • effect of the crisis especially on youth employment and workers with lower education • Pronounced regional differences • in terms of income and living standards • mainly as a consequence of the Homeland war, weak connectivity and low economic activity • Poverty / social exclusion • a high percentage of the population who live in poverty or at risk of poverty • 32.3% of total population

3. Effect of EU funds on growth • Access to nearly 3.2% of GDP per year • approx. EUR 1.5 billion per year in EU grants • 6 times more than in the 2007-2013 period • Croatia will need to contribute 1.2% of GDP to the EU budget annually • EU transfers – treated as a development budget • Results will depend crucially on: • Adequate administrative capacity to efficiently manage the implementation process • Design of measures and quality of projects • Fiscal capacity to accomodate pre- and co-financing needs (at around 1.5% of GDP p.a.)

4. Croatia: Multiannual financial framework

5. 2014-2020 programming documents • Two operational programmes: • OP Competitiveness and Cohesion – ERDF and Cohesion Fund • EUR 6 881 million • OP Efficient Human Resorces – ESF • EUR 1 582 million • Agriculture & Fisheries: • Rural Development Programme – EAFRD • EUR 2 026 million • OP EMFF • approx. EUR 280 million

8. PA and programmes – State of play • Partnership Agreement • Proposal has been submitted to the EC on April 22 • EC observations on the PA expected by midJuly • Public hearing in early September • Formal negotiations with EC in September • Adoption of the PA expected in October / November • Programmes • Informal negotiations in progress • Formal submission by July 22 (except OP EMFF) • EC observations expected by mid September • Formal negotiations Oct – Dec 2014 • Adoptionearly 2015

9. Croatian priorities in the context of ESIFs • All investments under ESIFs must contribute to three national development goals - determined with respect to national distance to the headline targets of Europe 2020 strategy: • Strengthen the competitiveness of the economy, increase employment and ensure growth based on the use of own knowledge • Reduce poverty and strengthen social inclusion • Reduce regional disparities and ensure quality living conditions • andbe measurable in terms of: • Economic growth (GDP) • Employment growth (employment rate) • Conservation of natural resources (ecological footprint)

10. Strengthening the competitiveness of the economy TOs 1-4: ERDF EUR 2.426 billion + EAFRD EUR 874 million • ERDF: • increased impact and relevance of scientific research in the areas of smart specialization- health, advanced engineering, environment, biotechnology • effective commercialization of research results • increasedcreationof new and improved products through innovation that will contribute to better economic results • increased formation and growth of small businesses • modernization of production and diversification of the economy • better broadband coverage- backhaul and fast / ultrafast internetaccess • reducing costs in manufacturing industries and the service sector through the promotion of energy efficiency and renewable energy • stimulation of the economy and employment through energy renewal and localized production of energy from renewable sources • EAFRD: • restructuring and modernization of farms, generational renewal • strengthening the competitiveness of primary food producers and better integration in the agri-food chain • increased food production and processing, increased competitiveness of the food processing industry • increased availability and use of renewable energy sources and by-products in agriculture for bio-economy

11. Balanced regional development and better life qualityTOs 5-7: ERDF/CFEUR 3.560 billion + EAFRD EUR 703 million • ERDF and Cohesion Fund: • integrated territorial investments in areas in cities with over 50,000 inhabitants, which will promote the concept of smart and sustainable cities as engines of regional growth anddevelopment • investment in transport infrastructure to facilitate connectivity and better access to regions and localy - improving territorial cohesion and connection of isolated and difficult to reach areas (e.g. islands) • development of intermodal transport services, railway modernization • improving water management system - sewerage networks and wastewater treatment • investment in waste management systems, increasing waste collection and recycling • protection andvalorisation of the natural and cultural heritage - in order to increase the tourist offer, diversification of supply and economic activity in certain locations (integrated destinationtourism) • flood protection • EAFRD: • improving water management on agricultural land (incl. irrigation) • improved soil quality, reduced erosion and preservation of organic ingredients, the transition to organic agriculture • conservation of biodiversity • reduction of derelict and unsustainable agricultural and forest areas (forest conservation)

12. Reducing povertyTOs 8-10: ERDF / ESF EUR 2.005 billion + EAFRD EUR 397.8 million • ERDF and ESF: • special measures for disadvantaged and vulnerable groups (children without parental care, elderly, persons with disabilities, youth, people in or threatened with poverty) • activation of long-term unemployed, reducing youth unemployment • increased effectiveness and coverage of active labor market policy measures • increased quality and efficiency of labor market institutions • increased quality and relevance of education (vocational training, lifelong learning, tertiary education, e-schools) • promotion of self-employment and social enterprises • improved access to education and adequate social services for disadvantaged and vulnerable groups • strengthening community based social services and the implementation of deinstitutionalization in social welfare and health care systems • integrated investments in degraded areas (mainly war-affected) in order to reduce social and economic inequalities (including schemes for the promotion of social entrepreneurship, the development of appropriate community based social services, housing, etc.) • EAFRD: • increased employment opportunities in rural areas • increased availability and quality of lifelong learning and vocational training in agriculture and forestry

13. What we try to take into account when programming • Impact on the real economy(businesses) • Need to support structural reforms - linksto theNRP • Limited financial resources - the need for prioritization • Consideration of the development needs and growth potential while respecting the rules of thematic concentration • An integrated approach and multiplier effect • Capacity to implement • Sustainability of investments • Plans for the fulfillment of ex-ante conditionalities • Pipeline / project readiness, timeframe for implementation, liquidity • Cooperation and coordination

14. Challenges • Nationally • Weak strategic planning, lack of / or uncoordinated national strategic documents • Inadequate administrative capacities • Overlap with 2007–2013 SCFs (both in planning and implementation) • Predominant sectoral approach – ‘silo’ thinking (barrier to integration) • Too many bodies responisible for different funding strands and weak coordination • Dealing with the EC • Small country – low priority • At odds oppinion of REGIO/EMPL vs. other line DGs - became evident following inter-service consultations • Major remarks – lack of prioritisation of investments

15. We are interested to know your experience in ... • Implementation of NGN broadband - bachhaul and access / last mile – combination of ERDF and EAFRD ? • Support to (large) enterprises in meeting the requirements of the Industrial Emissions Directive – requires energy industries, production and processing of metals, mineral industry, chemical industry, waste management, rearing of animals, etc. to obtain environment permits - new, less polluting, technologies instalations ?

16. Thank you!