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FINANCIAL INSTRUMENTS USED TO INCREASE THE ABSORPTION OF EU FUNDS BEFORE AND AFTER ACCESSION, IMPORTANT INFLUENCE ON ROM

FINANCIAL INSTRUMENTS USED TO INCREASE THE ABSORPTION OF EU FUNDS BEFORE AND AFTER ACCESSION, IMPORTANT INFLUENCE ON ROMANIAN AGRICULTURAL POLICY. SASU Georgică

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FINANCIAL INSTRUMENTS USED TO INCREASE THE ABSORPTION OF EU FUNDS BEFORE AND AFTER ACCESSION, IMPORTANT INFLUENCE ON ROM

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  1. FINANCIAL INSTRUMENTS USED TO INCREASE THE ABSORPTION OF EU FUNDS BEFORE AND AFTER ACCESSION, IMPORTANT INFLUENCE ON ROMANIAN AGRICULTURAL POLICY SASU Georgică Ph.D. student (POS-DRU/88/1.5/S/52614), Faculty of Animal Science, " University of Agriculture and Veterinary Medicine " Bucharest, Romania, georgica.sasu@yahoo.com IONCEF Cezar-Săndel Main Inspector, General Directorate of Public Finances of Cluj-Napoca Municipality, Cluj-Napoca, Romania, cezar_ioncef@yahoo.com

  2. 1. ROMANIAN AGRICULTURE situation and perspectives With an infrastructure that includes a geographical harmonious all forms of relief, with a temperate humid enough, a vast river system and an agricultural area of ​​about 14.7 million hectares and favorable conditions for growth and exploitation of all species livestock animals of interest, Romania may easily provide in terms of food a population of about 80 million.

  3. standardized, expansive, very slow technological progress • / • heterogeneous, highly physical and moral wear • small productions, resources allocated by the plan, low productivity, theft • / • Chaos, productions saw tooth • Land ownership and farm structures • agricultural production • Infrastructureand technology ROMANIAN AGRICULTURE situation and perspectives • nationalization, socialist economic system • / • privatization, restitution, • market economy For the first time in this paper are analyzed compare the two perspectives of the agricultural sector before (lie) and after (chaos) 1989 items were analyzed: features:

  4. management nationalized, cooperative, agricultural production finance other branches • / • crumbled, disinvestment, disorganized market • Social impact • Education & research • Strategy-farmingeconomy • systematization of rural to urban migration, giving up tradition • / • return to tradition, returned to rural, local awareness of product quality ROMANIAN AGRICULTURE situation and perspectives • well structured entirely state funded • / • average technical preparation deconstructed, underfunded, restricted to a minimum land items were analyzed: features: Thus, the agricultural sector in Romania, modernized poor, underfunded face facing economic crisis, in addition to existing problems.

  5. ROMANIAN AGRICULTURE situation and perspectives • decapitalization masive • effective holdings in size and form associations • rejected the active population in the area problems • amid chronic shortage of domestic capital, • social tensions dissolution of state authority Investment a possible solution

  6. number and value of investment projects financed • statisticalresearch • mathematicaldetermination 2.MATERIAL AND METHOD In order to characterize financial instruments that have orchestrated the absorption of EU funds, statistical investment projects financed situation from the five years about the initiation of theseandeconomicseffects, the following indicators were used: • legal basis of its mechanism of action and its control • Regulations and the Commission's communication type of State aid: credit Guarantee The period analyzed in this study is 2005 – 2010. Data, collected from Ministry of Agriculture and Rural Development, Commercial Banks, Payment Agency for Rural Development and Fisheries, Guarantee non-bank financial institutions, have been statistically processed and interpreted.

  7. 3. FINANCIAL INSTRUMENTS INVOLVED IN AGRICULTURE European Financial instruments Since 2000, the EU supports the candidate countries of Central and Eastern Europe in their efforts to prepare for accession by three financial instruments: PHARE, ISPA and SAPARD After 2007- Post accession Romanian agriculture and rural development is financed by the EAFRD Romania is now part of CAP and participate in medium-term strategy for the period 2014 -2020

  8. 3. FINANCIAL INSTRUMENTS INVOLVED IN AGRICULTURE Pre-accession period

  9. 3. FINANCIAL INSTRUMENTS INVOLVED IN AGRICULTURE Post-accession period

  10. 3. FINANCIAL INSTRUMENTS INVOLVED IN AGRICULTURE Timetable for approving new CAP

  11. 3. FINANCIAL INSTRUMENTS INVOLVED IN AGRICULTURE main themes and CAP guidelines

  12. 3. FINANCIAL INSTRUMENTS INVOLVED IN AGRICULTURE main themes and CAP guidelines

  13. 3. FINANCIAL INSTRUMENTS INVOLVED IN AGRICULTURE Special Pre-Accession Program for Agriculture and Rural Development (SAPARD) was the first major program of structural policy, which contributed significantly to the restructuring of agriculture • Areas of funding. In Romania, in 2000-2006, according NPARD were financed projects in the following areas:

  14. 3. FINANCIAL INSTRUMENTS INVOLVED IN AGRICULTURE • SAPARD was a pre-accession co-financing of investment activities, works and services in agriculture and rural development and worked on the principle of reimbursement of expenses made ​​by the beneficiary under the contract. Often applied at random or in any case, lacking coherence, absorption due to rush at all costs, this program has generated the first national agricultural Strategy after 1989, the financiallyfeasible. Were necessarynational measuresto createthe frameworkand conditions foreffective absorption of the support. scheme to access SAPARD funds

  15. 3. FINANCIAL INSTRUMENTS INVOLVED IN AGRICULTURE amounts allocated Post accession Romanian agriculture and rural development is financed by the EAFRD. European Agricultural Fund for Rural Development (EAFRD) is a created by EU funding to support member countries in Agricultural Policy implementation Commune. European funds EAFRD funding is an opportunity for Romanian rural space in worth about 7.5 billion Euros, from 2007 until 2013 bottlenecks Similar to the SAPARD program, the EAFRD is based on the principle of co-investment project grant public / or private funds are allocated and developed by the National Rural Development Plan (RDP). Is given to an advance of the eligible project contractor and the contracting beneficiaries are not required to provide proof of financing their contribution. access Difficult problems persist in applying NRDP appetite investment in agriculture and rural areas of the banking system in Romania is still very low Add to the market instability problems caused by economic crisis and recession in the years 2008, 2009, 2010 and even 2011.

  16. 3. FINANCIAL INSTRUMENTS INVOLVED IN AGRICULTURE missing or guarantees are agreed in the credit, the beneficiaries access to home financing - up is virtually impossible projects submitted and the contract cannot be achieved due to lack of funding their own absorption rate than the support is still insufficient, given the advances cannot be accessed due to lack of letters of guarantee for repayment of the advance in favor of APDRP, absolutely necessary to secure European funds . Add to the market instability problems caused by economic crisis and recession in the years 2008, 2009, 2010 and even 2011. pre and post EU accession Romania used a variety of instruments and financial schemes of public funds with private financialsystem involvement

  17. 3. FINANCIAL INSTRUMENTS INVOLVED IN AGRICULTURE Although financial and accounting mechanisms are created in harmony with EU legislation, EU funds earmarked for the development, the absorption rate is very low until 2005, Romania risking losing significant funds, with effects hard to predict the long term. Are created first national financial instruments to combat the difficulties of reform and the modernization of agriculture and rural development. In the present study are explained and systematized these toolsand determine their influence on the strategic objectives of national agricultural policy I Credit instruments (Farmer program) • Is the most powerful instrument of its kind in Romania created with public funds for SAPARD was an absolute record of absorption, the launch were contracted in only two months and required all amounts allocated to supplement the funds allocated from European funds with about 500 million USD. public funds used for the entire period ca.580 million allocated financial institutions selected title loan which were granted loans amounting to approx. 1 billion lei. The first instrument of this category was called "The Farmer" and has been implemented since mid 2005, effectively implemented between 2006-2009, such loans contracted are currently underway. • The amount so absorbed in European funds is about. 2.5 billion Euro.Institution responsible for implementation is the Ministry of Agriculture and Rural Development.

  18. 3. FINANCIAL INSTRUMENTS INVOLVED IN AGRICULTURE Farmer program was governed by a legislative package that with the Law. 231/2005 on stimulating investment in agriculture, food industry, forestry, fishing and non-agricultural activities Notified that aid upon accession to the EU, farmer program could be used by beneficiaries to December 31, 2009

  19. 3. FINANCIAL INSTRUMENTS INVOLVED IN AGRICULTURE

  20. 3. FINANCIAL INSTRUMENTS INVOLVED IN AGRICULTURE • Because the value of public co-financing grants for investment projects within the SAPARD submitted by 31 July 2006 exceeded the fund allocated to Romania through this program was necessary to issue a bill which has been allocated to 1350.0 million lei, the state budget, public co-financing grants to cover, namely the Government Emergency Ordinance no. 59/2006 regarding the insurance from the state budget grants to public co-financing investment projects within the SAPARD • Direct investment projects eligible for grants of up to 50% of their value, depending on the objective, to repay the loan. • Financial analysis for granting letters of comfort and loan takes into account the internal rules of lending by banking institutions, subject to conditions imposed by MARD on the life of the loan (up to 10 years), grace period on repayment rates (up to 5 years - depending on the type of investment project), the maximum interest rate of 5% per year (rate of interest charged by the bank was the selection criteria laid auction procedure). • This credit program based on Law no. 231/2005 was a success for providing private financing for investment projects secured in 2006 through the SAPARD program. Although it was extended in 2008 and to finance projects submitted by the RDP being allocated significant amounts (720 million), has never enjoyed the same success because the obligation of Romania as a EU member state to observe the intensity of public support given for investments.

  21. 3. FINANCIAL INSTRUMENTS INVOLVED IN AGRICULTURE Status credit loans through the program developed under Law no. 231/2005 • Implemented as a financial tool to unlock the absorption of European funds allocated for agriculture and rural development, farmer program was also a very powerful tool of agricultural policy.Thus access to credit in the fund established under Law no. 231/2005 was subject to the fulfillment of conditions set agricultural policy instruments, allocation and distribution of funds was made taking into account the strategic objectives of the quality and quantity of crop production, livestock herds and yields obtained from them.

  22. 3. FINANCIAL INSTRUMENTS INVOLVED IN AGRICULTURE However, the credit institutions that have developed allocations for credit risk assessment in the procedure was a screening of approved investment projects which have received funding, depending on the repayment ability of the beneficiaries and guarantees provided, which distorted the proposed objectives, or action opposite end as shown in this paper. Subsequent corrective measures have not had the desired effect because they induce a domino effect able to compromise and made ​​the investment objectives and functional. II Guarantee instruments (Farmer program) The second tool created to increase the absorption of EU funds is to guarantee loans through guarantee funds guarantees granted by the limits of public funds allocated by MARD • Law 218/2005 stimulate absorption of SAPARD funds, the European Agricultural Fund for Rural Development, the European Fisheries Fund, European Agricultural Guarantee Fund, the assumption of risk by credit guarantee funds, • , GEO. No. 79/2009 regulatory measures to stimulate the absorption of funds under National Rural Development Programmer for renewal and rural development by improving the quality of life and economic diversification in rural areas The legal basis to guarantee instrument • Law No. 329/2009 on the reorganization of public authorities and institutions, rationalizing public spending, business and compliance support framework agreements with the European Commission and International Monetary Fund

  23. 3. FINANCIAL INSTRUMENTS INVOLVED IN AGRICULTURE Similar instrument was set up credit "credit guarantee fund" under Law no. 218/2005, the budgetary allocations This fund has been allocated funds by conventions guaranteeing the amounts needed to work up the coverage level, conditions were established for the granting of guarantees and the amounts allocated exposure (maximum exposure for all funds is 1 / 5). The Fund was reconstituted in amounts corresponding redundant as a result of diminishing credit guarantees were repaid and reused to issue new securities.

  24. 3. FINANCIAL INSTRUMENTS INVOLVED IN AGRICULTURE Loan Guarantee Instrument is currently the only support for investments.

  25. 4. THE INFLUENCE OF FINANCIAL INSTRUMENTS DESCRIBED ON NATIONAL AGRICULTURAL POLICY • The two types of financial instruments analyzed act synergistically and cause unexpected effects. • The collected data were processed statistically and mathematically based on established indicators obtaining final values ​​representing a range of final values ​​of the analyzed period deviation from the previous result of synergistic action of financial systems. • Thus the total effective indicator of cattle influence of the two instruments over the years from 2005 to 2010 can be precisely quantified. • their influence has decreased the total number of cattle in Romania with about 700 000 (36.38%) head in real terms and about 1500.000 (54.80%) head to the horizon expected by agricultural policy measures promoted.

  26. 4. THE INFLUENCE OF FINANCIAL INSTRUMENTS DESCRIBED ON NATIONAL AGRICULTURAL POLICY Influence of financial instruments used for increasing the absorption of total cattle and beef production in the period 2005 - 2010

  27. 4. CONCLUSIONS It was first created in Romania in support of agricultural policy instruments. But using these tools requires a complex assessment of the impacts of their use to effect the reform and modernization of agriculture, along with re-evaluation of control actions and public institutions on the compliance profile of quality and quantity of agricultural production and livestock, food security of the population (human nutritional comfort) and not least to create the institutional framework to ensure supervision of production processes even by the end user.

  28. Acknowledgments:This work was done by the project "Doctoral Scholarship to improve the quality of young researchers in agronomy and veterinary medicine" Contract Code: POS-DRU/88/1.5/S/52614 Beneficiary: University of Agricultural Sciences and Veterinary Medicine-Bucharest • This research work is part of the PhD project and was carried out with the support of: Thank you for your attention

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