Position of the Commission

Services on the development of

Partnership Agreement

and programmes in
ROMANIA

for the period 2014 2020

Bucharest, 5 November 2012

Main Economic challenges

Economic slowdown, fuelling budget deficit Low employment rate: 62,8% Shrinking FDI flows Widening regional disparities Structural weaknesses on competitiveness factors

G D P & B U D G E T D E F I C I T

Main Challenges
G D P8.0
10.0

Economic Slowdown
G D P & B U D G E T D E F I C I T

&6.0Economic slowdown, fuelling budget deficit B4.0Low employment rate: 62,8% U D2.0Shrinking FDI flows G GDP growth E0.0Widening regional disparities 2012* T budget deficit 2007 2008 2009 2010 2011 2013* D-2.0Structural weaknesses on competitiveness E -4.0 factors F
I -6.0 C I T -8.0
-10.0

Main challenges Global Vision

Europe 2020 headline targets
3% of expenditure on research and development 20% greenhouse gas (GHG) emissions reduction compared to 1990

Current situation in Romania

0,47% +9% (2010 emissions compared to 2005) -7% (2020 emissions compared to 2005 23,4 Under revision 62,8 (2011) 17,5% (2011) 20,4% (2011) -788,000 (2011)

National 2020 target in the NRP

2% +19% (national binding target for non ETS sectors compared to 2005) 24% 10 Mtoe 70% 11,3% 26,7% -580,000

20% of energy from renewables 20% increase in energy efficiency 75% of population aged 20-64 should be employed The share of early school leavers should be under 10% At least 40% of 30-34 years old should have completed a tertiary or equivalent education Reducing the number of people at risk of poverty or exclusion by 20 mill. In the EU

Cohesion Policy in Romania

Extremely low absorption rate (<10%)

Failure to overcome the corresponding shortcomings (Priority Action Plan)

Deficiencies in the management and control system

Low labour market participation

Underdeveloped infrastructure endowment

Main Challenges:

Low competitiveness and weak RDI system Inefficient use of natural resources Weak administration and public governance

Low labour market participation

Challenges
Labour force potential insufficiently tapped Low employment levels combined with increasing youth unemployment High share employed in agricultural activities Difficult labour market integration for vulnerable groups, Roma in particular Total Unemployment rate and youth Bottlenecks (20-64 years) and youth Total Employment ratein education and training unemployment rate (15-24 years) employment rate (20-29 years) Romania underperforming for early school leaving, tertiary attainment and basic skills Mismatch between labour market needs and labour skills Low participation in lifelong learning High share of population at risk of poverty & social exclusion People living in rural areas and vulnerable groups especially affected, particularly the Roma
Year Year

Low labour market participation

Challenges
Bottlenecks in education and training Romania underperforming for early school leaving, tertiary attainment and basic skills Mismatch between labour market needs and labour skills Low participation in lifelong learning High share of population at risk of poverty & social exclusion People living in rural areas and vulnerable groups especially affected, particularly the Roma
Early leavers from education and training, by country (%) - 2011

Data for 2011 for ME, US and JP not available

Low labour market participation

Improving human capital through higher employment and better social inclusion and education policies

1. Funding priority: Increasing the employment rates of young people and vulnerable groups

Integration of young people not in employment, education or training into the labour market more individualised measures and access to apprenticeship and work-based training Target vulnerable groups (Roma, elderly, women, long-term unemployed, inactive, people with disabilities and employed in low productivity agriculture) through active and preventive labour market measures and personalised support

Low labour market participation

Improving human capital through higher employment and better social inclusion and education policies

2. Funding priority: Improve access to, participation in and quality of education and training

Reducing early school leaving targeting particularly students from rural and disadvantaged areas Improving quality, efficiency and labour market relevance of education and training Promotion and diversification of life-long learning (LLL) targeting mainly low skilled Upgrading and modernising education and training infrastructure

Low labour market participation

Improving human capital through higher employment and better social inclusion and education policies

3. Funding priority: Promoting social inclusion, in particular by enhancing access to healthcare and social services

Expanding, diversifying and improving access to social and healthcare services in particular for vulnerable groups and isolated localities Modernisation of the health system, including through the rehabilitation of infrastructures Fostering community-led local developments in rural areas, to promote social inclusion Diversification of activities in coastal and maritime areas affected by the restructuring of the fisheries sectors

Low labour market participation

Improving human capital through higher employment and better social inclusion and education policies

Elements of particular relevance for rural areas

Creating new employment opportunities in agricultural and nonagricultural sectors Promoting acquisition of new skills for farmers and non-farmers Fostering community-led local development initiatives for increasing growth and employment and retaining population

Underdeveloped infrastructure endowment

Challenges
Continuous decline of the rail sector: Shrinking demand due to declining reliability Excessive length of the network with respect to the traffic & maintenance capacity Low performance of the railway companies and obsolete equipment Low international accessibility and regional connectivity: Low motorway endowment hampers attractiveness for FDIs and contributes to congestion and fatalities rate Untapped potential of inland navigation Low broadband coverage Low broadband take-up and low rate of internet usage Rural areas more affected

Underdeveloped infrastructure endowment

Developing modern infrastructure for growth and jobs

1. Funding priority: Building accessibility of growth poles to the internal market by investing in the TEN-T network

Streamlining the railway system, upgrading the core networks, including ERTMS investments and modernising the railway companies; Extending and upgrading the road and motorway network, improving connectivity of major urban agglomerations Supporting other modes and interconnecting points, in particular to foster navigability of the Danube

Underdeveloped infrastructure endowment

Developing modern infrastructure for growth and jobs

2. Funding priority: Enhancing access to and use and quality of ICT

Extension of broadband infrastructures in market failure areas, in particular rural areas Promoting the extension of New Generation Access in case of market failure Developing monitoring and mapping tools Fostering the use and demand for ICT, through development of products and services and e-commerce and the promotion of ICT training

Low competitiveness and weak RDI system

Challenges
Fragile economic structure, largely composed of SMEs: Specialised in low added value areas Low productivity Obstacles to development Territorial imbalances Uneven development between regions and urban / rural areas Need to tackle the untapped potential of rural and fisheries and maritime areas Inefficient RDI system Low public expenditure, poorly demand driven Fragmented R&I system Low private expenditure reflecting unfavourable framework conditions for business R&I

Low competitiveness and weak RDI system

Promoting economic competitiveness and local development

1. Funding priority: Supporting innovation and competitiveness of economic operators and improving business environment

Fostering innovation and transfer of knowledge, including through the development of clusters and providing tailored access to services; Supporting the life cycle of enterprises: from the setting-up and during their lifetime; Improving the business environment and facilitating access to public funding (onestop-shop mechanism)

Low competitiveness and weak RDI system

Promoting economic competitiveness and local development 2. Funding priority: Promoting entrepreneurship, including in rural, maritime & fisheries areas and improving the economic environment in rural & coastal areas, including related local infrastructure

Promoting entrepreneur skills for potential and existing managers Facilitating the reconversion and diversification of agricultural activities, by supporting the conditions for local development, including through investments in local infrastructures Promoting supply structures in the fisheries sector to support producer groups Diversifying the economic base e.g. better exploit the potential of the blue economy

Low competitiveness and weak RDI system

Promoting economic competitiveness and local development

3. Funding priority: Smoothing access to finance and advanced business services for SMEs

Supporting access to tailored services for SMEs, including to access international markets; Promoting access to finance, through financing engineering instruments; Easing access to microfinance, in particular in agricultural sector and for young people

Low competitiveness and weak RDI system

Promoting economic competitiveness and local development

4. Funding priority: Boosting demand driven R&D capacity and infrastructures

Supporting public research, focussing on key sectors stemming from demand driven national strategy and excellence centres Promoting private research, tackling current impediments and facilitating the commercialisation of research outcomes Enhancing the capacity of Romanian R&D institutions to integrate EU and international networks

Low competitiveness and weak RDI system

Promoting economic competitiveness and local development

Elements of particular relevance for rural areas

Increasing added-value of agricultural and forestry products through processing and marketing and better integration in the food chain Developing new products, services and activities Improving and developing local infrastructure and services for economic development

Inefficient use of natural resources

Challenges
High energy intensity and GHG emission levels Hinder the competitiveness of economic operators Low profitability of energy efficiency measures due to regulated prices

Low endowment of environmental infrastructures Slow investment pace of water supply & wastewater infrastructures Highly deficient waste management system Significant source of water pollution and eutrophication

Numerous polluted soils, hindering development High energy intensity and GHG emission levels Hinder the competitiveness of economic operators Low profitability of energy efficiency measures due to regulated prices

Fragile biodiversity Confronted with challenging threats of losses, including in the Black Sea Vulnerability to risks Exposure to extreme weather conditions, exacerbated by climate change Lack of skills and tools to prepare risk prevention plans and implement risk management structures

Inefficient use of natural resources

Optimising the use and protection of natural resources and assets

1. Funding priority: Promoting energy efficiency and lowcarbon economy and strategies

Increasing energy efficiency Supporting sustainable urban transport strategies and infrastructures Promoting carbon sequestration through agroforestry systems

Inefficient use of natural resources

Optimising the use and protection of natural resources and assets

2. Funding priority: Reducing vulnerability to risks, supporting adaptation to climate change and developing disaster management systems

Supporting the national adaptation strategy Promoting risk prevention capacity Supporting risk management skills and structures

Inefficient use of natural resources

Optimising the use and protection of natural resources and assets 3. Funding priority: Protecting environment and biodiversity by valorising natural sites and implementing acquis related investments

Continuing water and wastewater investments Treatment of polluted soils Promotion of agricultural practices improving buffer and filter function of soils Preserving and enhancing biodiversity

Weak administration and public governance

Challenges
Ineffectiveness of the public administration Lack of policy making capacity Overregulated environment prejudicing business environment and public investment capacity Rooted in structural governance deficiencies Political interferences and blame and shame management => Fuels in turn aversion to decision and risks, together with bureaucracy and lack of ownership Inefficiency and poor performance of the judiciary Scattered e-government initiatives Ineffective as not mainstreamed in holistic modernisation schemes => Minimum endogenous conditions to efficiently make use of external assistance, wasted in vain, are not met

Weak administration and public governance

Modernisation and reinforcement of the national administration and of the judiciary

Increasing efficiency and effectiveness of the administration, through streamlined and simplified procedures Reinforcing coordination and policy making capacities and empowerment, including by improved recourse to partnership mechanisms Enhancing the professionalism, independence and attractiveness of the administration Tackling through structural endogenous reforms governance deficiencies Supporting the recommendations issued from the Cooperation and Verification Mechanism (CVM) Supporting the development of e-government instruments and measures, as part of underlying comprehensive ministerial modernisation schemes

1. Funding priority: Enhancing institutional capacity and an efficient public administration

2. Funding priority: Strengthening ICT applications for e-government

European Territorial Cooperation

Most relevant priorities: RDI fostering integration in international networks Climate change adaptation and risk prevention and management Initiatives in favour of marginalised communities Improvement of transport connections under the TEN-T policy Coordination and alignment between operational programmes and the EU strategy for the Danube Region (EUSDR) required

Aim at ensuring effective and efficient use of EU Funds 1. Strategy for reinforcing administrative capacity 2. Comprehensive and multimodal transport master plan 3. Adoption of national R&I strategy for smart specialisation 4. National strategy for poverty reduction 5. Effective public procurement system 6. National / regional strategy(ies) for health 7. Strategy for reducing early school leaving 8. Modernisation and strengthening of labour market institutions 9. Improved data collection for fisheries management 10. Reliable recording system for monitoring State aid expenditure 11. Agricultural strategy and functional cadastre system 12. Advisory capacity in agriculture and forestry sectors 13. Strategic plan for aquaculture

Ex-ante conditionalities

Effective programme design & delivery

Drawing lessons from the current period Programmes supporting sectoral strategies, anchored in overarching mid-term development strategic policy Preparation of pipeline of mature projects, support to reinforce the beneficiary capacity and streamline procedures Enhanced coordination (ACIS), possibly extended to other Funds (EAFRD, EFF, ECT, Connecting Europe Facility) Overcome weaknesses in the management and control systems Any management model cannot substitute reforms required to overcome current shortcomings

Next steps: the way forward

Negotiation process for Partnership Agreement (PA) in Romania

Position paper sent to Romania

Launch event

Informal dialogue with Romania (working groups)

Romania sends PA through SFC

observations sent to Romania

CPR adopted

October

2012

November

December

2013