Debates on European Union Formation of the Inhabitant’s Regional Networks for Knowledge Dissemination and Open Dialogue Duration of the project: 10/2008 – 05/2009

The project is funded by the European Commission The

Baltic Institute of Social Sciences

is fully responsible for the content of the project

The project aims and objectives

AIMS

    To stimulate the social, economic and political

initiative

inhabitants of To

disseminate knowledge

among people To facilitate

dialogue

among people and decision makers hailing from various levels, in the regions of Latvia Contribute to the

effective and sustainable EU funding acquisition

and application

OBJECTIVES

      To organize

discussions

with small and medium (SME) entrepreneurs on the effects of the EU over their professional activities and live To organize discussions among the representatives of SME entrepreneurs, the local government and the state government policy makers To involve

mass media

in discussions and result dissemination To gain knowledge about

the problems and barriers to the EU funding acquisition

To spread positive experience, in order to

create motivation

to use the EU funding To form and strengthen regional

contact networks

of SME entrepreneurs, including farmers, so as to create the local and informal support among inhabitants

1. Stage (2008/10-11) 2. Stage (2009/01-02) 3. Stage (2009/03-04)

The project implementation

-

Discussions of small and medium entrepreneurs in the regions

Aim:

exchange of the experience in the EU funding acquisition creation of the entrepreneurs and farmers’ support networks for the efficient EU funding acquisition -

Discussions of small, medium entrepreneurs and social partners in the regions

Aim:

to introduce regional level decision and policy makers with the results of the first stage to discuss SME entrepreneur s’ recommendations, plans with respect to the effects of the EU over development of the territories they represent, as well as their everyday life to indentify the problematic stages of the EU funding acquisition and to model solutions, thus promoting the use of opportunities provided by the EU -

Discussion of entrepreneurs, social partners and national level decision makers in Riga

-

Aim:

to introduce higher level decision makers and social partners with the results of the two previous stage discussions to discuss recommendations and novel changes with respect to the EU funding acquisition to provide opportunities for the dialogue between inhabitants and all level administrative bodies

I STAGE SME ENTREPRENEURS and FARMERS

THE EXPERIENCE IN THE EU FUNDING AQUISITION

WHO?

WHERE?

WHAT ABOUT?

The first stage discussions in the regions

The

SME entrepreneurs

, individual entrepreneurs,

farmers

and prospective entrepreneurs

In the all regions of Latvia :

In Zemgale (the city of Jekabpils) – In Vidzeme (the city of Cesis) – In Latgale (the city of Rezekne) – In Kurzeme (the city of Kuldiga)

An awareness of opportunities provided by the EU funding & preparation of a project application

   making decision to apply for the EU funding information accessibility about the EU funding and programs drafting a project application and preparing the documents for an application

Utilization of the received funding

 organization of the financial flows and management of the received funding  difficulties in the process of the received funding management and strategies to solve these difficulties

Closing of a project

 the efficacy of the EU funding acquisition and its effect over the enterprise development

Future plans in the context of the EU funding

 future plans and necessary support

Cooperation with local and regional institutions

DRAFTING A PROJECT Project application

The information

about the available EU funding

is not organized structured

according to the needs of the EU funding receiver and

The language

used in a project application documents for the EU funding

is difficult

, thus it is a burden for entrepreneurs in the process of drafting a project application

Short period available for a project preparation

, due to the time-consuming procedures of the project criteria development and their approval

Financial criteria

Problem

: The finance criteria and requirement, to have experience in administration of the EU funded projects, has been requested to project applicants. However, it is difficult to be achieved by new entrepreneurs

=> the activity of NEW entrepreneurs facilitated

to utilize the EU funding

is not Planning the national economy in the context of the EU funding Problem

: The development strategy of the state and its regions is not lucid => it makes it difficult for entrepreneurs to elaborate ideas for projects

Result

: (1) only development of individual enterprises and farms is facilitated, instead of the total development for the state and its regions

=>

the aim of the EU funding acquisition – to promote sustainable development at regional and national level – is not reached (2) There is

a clash of interests

among national economy sectors and leading entrepreneurs of these sectors, when the selection of sectors, which should be financed by the EU funding, is done

APPROVAL AND IMPLEMENTATION OF A PROJECT Project examination Co-finance

The time necessary to examine project application

is too long in comparison with market changes.

=> There is no possibility to increase

a

budget estimate

of a project in order to compensate expenses linked to market changes.

Problem:

The selection of

the project evaluation criteria

is

UNCLEAR.

=>

Entrepreneurs think that the rejection of a project is not well argumented, that the evaluators are not objective, the allocation of the EU funding is biased and the project tender is just a formal matter.

Problems: The fund raising (loan and co-finance)

in order to uptake and implement a project.

New entrepreneurs

have difficulties to ensure for themselves start-up capital.

To attract co-finance, it is important to cooperate

with Latvian Guarantee Agency.

However, so far the access to

the guarantees has been provided to the few sectors of entrepreneurship

.

APPROVAL AND IMPLEMENTATION OF A PROJECT

Problem:

Inner activity of the EU funds

co operation institutions’

(LIAA, LAD)

personnel is NOT COORDINATED =>

To achieve agreement on project changes, taking place during a project implementation, is long and difficult process.

Cooperation with LIAA and LAD

During a project implementation entrepreneurs might find it necessary to prolong contract expiration date (especially this is the case with construction projects), however, LIAA and LAD are

not

enough

flexible

to prolong contract expiration date.

Problem:

The EU funds co-operation institutions

do not warn the EU fund receivers on the inspection visits timely =>

entrepreneurs cannot manage to prepare themselves properly for the control.

ACHIEVED RESULTS OF A PROJECT Efficiency criteria inadequacy with regional development plan

Problem:

There is INADEQUACY between the effectiveness indicators formulated in the regulation of the EU project funding and actual project results; the priority is given to the effectiveness indicators formulated at the EU level, but

NOT to the indicators promoting regional development.

Result:

The sustainable development of the Latvia’s regions is not promoted.

In the context of achieved results,

entrepreneurs once again point out

that (1) The EU funding does not promote the total development of the state and its regions. (2) SME entrepreneurs and farmers are not warned in advance about the visit of the inspectors.

II STAGE SME ENTREPRENEURS, FARMERS, LOCAL GOVERNMENT AND SOCIAL PARTNERS

THE EFECTIVENESS OF THE EU FUNDING AQUISITION AND ITS EFFECTS OVER REGIONAL DEVELOPMENT

WHO?

WHERE?

WHAT ABOUT?

Second stage discussions in the regions

Regional SME entrepreneurs, farmers and representatives of local governments, regional agricultural offices

,

planning regions development agencies, banks, EU funding information centres and EC information centres

In the all regions of Latvia:

In Zemgale (the city of Aizkraukle) – In Vidzeme (the city of Cesis) – In Latgale (the city of Daugavpils) – Kurzemē (the city of Liepaja)

Development policy, efficacy of the utilization of the EU financial tools

 local government, regional and national level territory development policy influence over effective utilization of the EU financial instruments  local government experience in the EU fund acquisition

Cooperation between local government and entrepreneur in the EU fund acquisition

 local government support for SME entrepreneurs and farmers  involvement of entrepreneurs in the planning of local development policy

Drafting and implementing a project – problem of praxis

 transparency of the procedures of the submitted projects examination  criteria required for a project applicant mismatch with the actual implementation possibilities and local context necessities

Co-finance and cooperation with a bank sector

EFFICIENCY OF THE EU FUNDING PLANNING

Planning of the national economy Problems: Priority sectors

of the Latvia’s national economy are not defined. The National Strategic Reference Framework (2007 – 2013) and related to it Regulations issued by the Cabinet of Ministers are NOT APPROXIMATED with the National Development Plan.

The positive effect of the EU financial tools over regional development

IS IMPEDED by the lack of conformity between the national, regional and local level development strategies.

Result:

sustainable and appropriate development of the state and its regions is obstructed.

Microeconomic evaluation

of the effects of the EU financial tools

has not been done.

The EU funding allocation and its efficacy evaluation Allocation of the EU financial recourses is not based

on the evaluation of the socioeconomic situation and according to the state defined development areas.

LOCAL GOVERNMENT INVOLVEMENT IN THE EU FUNDING AQUISITION Barriers for the successful local government involvement in the planning of the EU funding allocation in its territories Private and public partnership Problems: There are no tools, based in the National Development Plan

, for a local government to be mandated to implement real local territory development and promote the development of the entrepreneurship in its territory.

Local governments

don’t have enough possibilities

to influence the EU funding allocation in its territory. (Local governments has gave their proposals to the Local Government Association and the Association of Big Latvian Cities, as they have the vote in Supervisory Committee.)

There is no triangular cooperation between the state, local government and entrepreneurs,

to promote development of Latvia and its regions

.

At the moment the EU funding is not allocated for the projects on

PUBLIC - PRIVATE

partnership, to be implemented in cooperation with local governments.

Problem:

There is no proper judicial regulation that would allow partnership between entrepreneurs and local governments, in order to implement successfully public-private partnership projects.

Evaluating the work of the EU funds co-operation institutions

Project examination time

For the LAD programs

the time necessary to examine projects

is too long. Regional agencies of LAD in some cases lack the capacity to examine the submitted projects in a shorter time.

Inconsistence of the project application submission dates

LIAA in some cases does not announce the EU fund programs on the dates as stated in the Regulations issued by the Cabinet of Ministers, as well as the dates of project application submission are inconsistent.

=>

This is an obstacle for successful planning of entrepreneurship.

Staff competency Effectivity of the project examination The auditors

of the implemented projects of the EU funds co-operation institutions

in some cases does not have enough competency

as they are not at the head with the regulations binding to the EU fund project management. It makes difficult the work for project implementers .

Problem:

At the moment project examination is not effective.

Solutions:

The bank representatives offer to examine projects at two levels: Firs level –

examination of company’s viability

(competency of banks) Second level –

examination of a project idea

administrative institutions) (competency of the EU fund

The EU funded project financing and co-financing

Co-financing Problem:

Both entrepreneurs and local governments face

difficulties to attract co-finance

.

Result:

Therefore some local governments and entrepreneurs

are forced to refuse to implement the projects

which are already approved.

The efficiency of the EU fund utilization

The EU fund utilization is not effective, as

the implemented projects are expensive and not beneficial for banks

, which are the partners of projects because of co-finance.

=> Bank interest in cooperation

with the EU funded project implementers in the area of co-finance

decreases

.

Prepayment

Entrepreneurs and local governments implementing the EU funded projects

DO NOT receive prepayment

.

=>

In the case of introducing it, the financial burden of entrepreneurs would significantly decrease.

I and II STAGE SME entrepreneurs, FARMERS AND SOCIAL PARTNERS

RECOMMENDATIONS BY PARTICIPANTS

Participants’ recommendations and wishes

Planning of the EU fund acquisition efficiency for the development of Latvia and its regions

Lucid and

HARMONIZED development policy of the state and its regions, in order to understand

which projects have to receive the EU fund contribution.

The criteria posed for a project

has

to comply with the development plan of a region => AS

one of the aims of the EU funding in Latvia is to promote regional development.

The acquisition of the EU funding in Latvia would be more effective and conform with the state development strategy,

strategy.

if the interpretation of the EU regulation were approximated to the Latvia’s development

For the EU fund allocation in the regions, it is necessary to consider (i)

local government development policy

and (ii)

socioeconomic circumstances of each local government.

It is NECESSARY to EVALUATE the territories of the local governments

which have

low development index

and have not utilized yet at satisfactory level the EU funding, because they cannot fulfill the criteria posed

=>

To give them this opportunity, to access the EU funding, the criteria have to be more flexible.

Society’ awareness

The state has to do

qualitative analysis

about the results of the EU funding investment in the development of Latvia and its regions, and to

inform society about these results

.

Participants’ recommendations and wishes

Financial support for entrepreneurs Greater support intensity of the EU funds

(i.e. the part of eligible project costs which may be financed from EU funds) – at the moment the support intensity for entrepreneurs and farmers is 35 – 50%.

Greater

STATE involvement in ensuring CO-FINANCE for entrepreneurs

bank” which provide guarantees on loans for entrepreneurs).

, particularly new entrepreneurs, when they apply for the EU funds (the “state In the area of the EU funding acquisition,

the state can develop mechanisms

to define

LOWER

interest rates for loans for entrepreneurs utilizing the EU funds (The view of the Bank representatives).

The

PREPAYMENT

for the EU fund receivers should be considered, if the projects are implemented in the area of business, as well as for projects implemented by local governments.

Cooperation with banks in the area of co-finance The loans for entrepreneurs should be given on the grounds of a business plan

, not against a pledge as a loan security

=>

At the moment entrepreneurs has pledged most of their property and thus

they are not able anymore

to take additional loan issued against a pledge.

Banks

has to pay more attention

to the individual analysis of every client

, INSTEAD OF implementing common policy towards all entrepreneurs. For example, by increasing loan interest for all entrepreneurs.

Participants’ recommendations and wishes

Cooperation TO IMPROVE the cooperation

between the EU funds co-operation institutions (LIAA, LAD) and project implementers

=>

thus ensuring precise and swift information and knowledge circulation.

Project succession LOOSENED REQUIRUMENTS

of the project submission for

the entrepreneurs

, who have already successfully utilized the EU funds, in order to ensure further development of existing initiatives.

The security of entrepreneurs and enterprises AN APPEAL INSTITUTION for entrepreneurs

,

who utilize the EU funds

, in order to have security mechanisms for entrepreneurs in the cases when project deadlines are delayed due to the bad time management of involved partners.

The possibilities to INSURE agricultural production,

which has been developed as a result of the EU fund acquisition, against market risk.

The Ministry of Economics and the government has to

RESTRICT the aggressive policy implemented by banks

risk for enterprise insolvency.

=>

Otherwise there is a

The contracts offered by banks

have to be

approximated

Consumer Rights Protection Law.

with the

Participants’ recommendations and wishes

Promotion of the competition between banks

In order

TO EVADE that “Hipotēku un zemes banka” (bank) has the monopoly over the co-financing of the EU funded projects

, it is necessary to provide a chance for other commercial banks to administer some credit facility.

Information about Latvian Guarantee Agency More extensive information about Latvian Guarantee Agency is necessary.

For example, what are its functions and role in the SME entrepreneurship development, particularly in the context of the EU fund acquisition.

III STAGE SME entrepreneurs, FARMERS, SOCIAL PARTNERS AND POLICY MAKERS

FINAL DISCUSSION

WHO?

WHERE?

WHAT ABOUT?

Final discussion process

Representatives

of the regional SME entrepreneurs –

participants of the first and second stage discussions Representatives of

the local governments Representatives (policy makers) of the state administrative bodies

: The Ministry of Finance, The Ministry of Economics and The Ministry of Agriculture The representatives of

the EU funds co-operation institutions

: Latvian Guarantee Agency, The Rural Support Service (LAD), Investment and Development Agency of Latvia (LIAA)

The representatives of banks

The mission of the

European Commission

in Latvia representatives

RIGA European Union house (“Eiropas Savienības māja”)

The

aim

of the discussion was

to introduce

the higher level decision makers and social partners with the results of the previous discussions, to discuss the recommendations of SME entrepreneurs, farmers and local governments on the EU fund acquisition stimulation, and to have open dialogue between inhabitants and all level decision makers on the EU fund acquisition in the regions of Latvia.

Topics for Final Discussion

So far achieved, planned and still requested for more swift and effective examination of the EU funded projects

 The possibilities for the EU regulation interpretation to facilitate the efficiency of the EU fund acquisition  Timeliness of the EU funded project tender announcement  Loosened criteria for the project drafting and examination

Possibilities for entrepreneurs and farmers to receive co-finance

 Prepayment for the EU funding receivers  Better criteria for loans for entrepreneurs and farmers  The state provided guarantees on loans for entrepreneurs

The effect of the national, regional and local development strategies over the EU funds acquisition and their mutual coherence in the context of the EU funds acquisition

 the EU funding allocation based on the evaluation of the socioeconomic situation and development areas, as defined by the state and its regions  evaluation of the effects of the EU financial tools over Latvia (including microeconomic evaluation)

Possibilities of the local government to influence the planning and efficiency of the EU funds acquisition and thus promote sustainable development of the local governments Development of the cooperation networks between entrepreneurs and social partners for effective utilization of the EU funding

 Possibilities for the triangular cooperation between the state, local governments and entrepreneurs, to promote development of Latvia and its regions  Possibilities and strategies of entrepreneurs to express their interests to decision makers

Baltic Institute of Social Sciences Elizabetes iela 65 – 16, Rīga Tel: 67217553 Fakss: 67217560 www.biss.soc.lv