“Windows” under the new Program have to be distributed in a way
that will preclude any delays
An interview taken by Svetlana Trifonovska of “Agrozone” Magazine
Q: Mr. Porozhanov, what would be your comment on the Rural Development Program /RDP/ and the support under CAP Pillar I in terms of your experience not only as head of State Fund “Agriculture” with a second-term-in-office but also as a former Minister of Finance?
RP: I see as a main issue the lack of analysis of the agricultural subsectors that could clearly reveal the problems in each subsector and the kind of impact that support through subsidies or investment programs has on the market. The toolkit of supporting the sector is quite incomplete. Apart from financial instruments, the analysis should also include specific measures targeted at each subsector. Wherever farms appear doomed with regard to one type of production or another, their endless support should cease. Of course, this is a difficult decision to make, and a political one. You know that at present the overall economic and political situation is rather delicate and it won’t become any easier over the coming years. Therefore, those involved in analysis making could consider actions, funds and every other aspect in a much longer run, instead of tackling the problems on a year by year basis.
Q: What is the state of readiness to implement the new RDP?
RP: Over the recent months and weeks the Ministry of Agriculture has made an extraordinary effort to successfully close the correspondence with the European Commission on the initial draft of the Program. As you may know, we have received from the Commission over 400 observations and comments many of which substantial. What has been debated with the colleagues from MAF is to launch even prior to the final approval of the new RDP certain measures needed by the sector, notably in support of agricultural machinery renovation and improvement of production quality. The intention is to first of all open Measure 4.1. Work is already underway for drafting an ordinance that willspecify all the requirements under the measure, based on which we shall develop procedures, upload the Program software on our systems and launch projectapplication. We at the Fund have the organizational readiness to manage.
Q: Apart from Measure 4.1, what other measures are likely to be opened this year?
RP: It has been discussed with the Ministry to also support young farmers.
Q: Since September projects have been in the process of finalization under the previous RDP, for example under Мeasure 311 and Measure 312. Do you think you avail of the needed administrative capacity to deal with these projects along with the new measures?
RP: Under the previous program we shall finalize projects of Local Action Groups (LAGs), whose contracts have been submitted for approval. We have introduced organizational changes for the approval of municipal procedures under the Public Procurement Act. Restructuring is underway in the Directorate of Authorization, which has a staff of over 100 people, aiming at clear controls, methodology and coordination between units in order to comply with the deadlines and avoid unnecessary bureaucracy. What we do in organizational terms is to create conditions that will enable us to process all requested payments. Our goal was to achieve maximum budget absorption under contracts so that projects be implemented without losing funds at the end of each year. In many cases delays in execution and requests for deadline extension, provided for in the ordinance, have resulted in a sizeable crowding of projects, both by volume and value, a problem to be addressed this year. Furthermore, I anticipate to agree with MAF the finalization of certain projects in early 2016.
Q: Do you expect some of the current issues, including problems arising from the business, to persist under the next programming period? Which are in your view the most likely stumbling blocks to the new RDP?
RP: In my view it is very important to be able to draw lessons from the previous Rural Development Program. The truth is that this was the first programming period for Bulgaria as EU member state and by the end of the period it has become evident that much has been done in a way less than best possible. I allude to some of the measures financed in the private sector such as those for PV projects tied to formal employment creation in rural areas. I would also point out for example rural tourism, because in its current form it has been discredited as such. In the new programming period we should encourage workshops and other manufacturing facilities that will generate jobs in the rural areas rather than support investments in static assets that do not help these areas get off the ground.
Q: Perhaps change in regulations is needed?
RP: Many regulations have to be changed. In doing so we have to give priority to the economic needs and interests of the rural areas rather than favorthe interests of one stakeholder or another, including consultants. It will be of key importance to enter the new programming period with a national legal framework in place providing for clear-cut rules and regulations. What I am saying is that at least while I am in State Fund “Agriculture” there will be very strict enforcement of payment requirements aimed at high level of compliance. Even in case of unintentional errors there will be sanctions.
Q: Would you be able to meet the deadlines for examination of projects?
RP: It is a matter of organization, and of course of document management. While closing the program in 2013 many applications piled up that theoretically could not be processed within the time limits specified by the regulations. Therefore, the “windows” under the new program should be distributed in such a way as to preclude delays.
Q: Would you carry on with the trend of transparency you have started during your first term in office as head of SFA? The business demands project information as to the number of applications filed, winner’s name etc. to be published on the official website of State Fund “Agriculture”?
RP: Transparency is a requirement to the paying agencies, therefore anyone interested in getting informed about the movement of projects, project processing, including payments under Pillar I, could be duly consulted. Another task related to both transparency in SFA and improvement of services is to start creating prerequisites for online submission of applications under the RDP and direct payments, even though we understand that not everyone will benefit from such a development. For us transparency and improvement of services through online applications is one of the goals for the new programming period.
We also are working to create preconditions for a normal start of the applications procedure for direct payments as of March 1st, including the drawing up of each stated parameter. It is not an easy job, but I trust we could be up to it. Therefore, one of the major challenges is to catch up with the preparation for Pillar I.
Q: What are the mainissues faced by SFA in terms of Pillar I?
RP: One of the issues was how to certify that 30% of incomes are from agricultural production, provided that neither statistics nor tax returns specify the nature of farmers’ incomes. A decision on this issue has already been adopted by the Ministry. We did our utmost to disburse the basic payments by January 30th. Once overlaps are cleared and size of eligible area definitively set, a supplementary payment rate will be determined.
Q: Do you foresee any problems with redistribution payments?
RP: It will be problematic for us to effect these payments immediately. The amount of redistribution is about BGN 100 million. This is a new type of payment which requires approval of procedures. In view of tackling the documentary requirements, I expect the redistribution to be done together with the second payment. If by January 30th we manage to disburse the direct payments - more than BGN 800 million, we will be able to report to the Commission and have the funds reimbursed by March 5th. This will balance the parameters of the fiscal reserve, which is extremely important. After we have cleared the overlaps and specified the final rate of redistribution payment, which is currently at BGN 12.38, I think we will be in a position to make the redistribution disbursements in late March or early April.
Q: Do you anticipate problems in terms of direct payments? Where in particular do you see a potential for clashes between business and administration?
RP: While the scheme is rather complex, I believe that where well-functioning industry associations are in place they can be very helpful. They have an important role to play in terms of raising beneficiaries’ awareness. Of course I include here the municipal offices of MAF and SFA, which during the period of application filing could inform farmers on what exactly they could claim and under what particular procedures. We will organize an information campaign. Training the servants who will accept applications is also very important in terms of providing competent extension services to the applicants. Overall we anticipate an application campaign which will be nothing but easy.
RP: It is expected to ease the situation. Starting however next year. While the scheme provides support throughout the entire programming period, the current year is considered as base year during which farmers will have to apply under the scheme and the parameters of their support will be calculated just once based on the specific requirements for the various agricultural activities. Filing applications only once for the entire programming period will largely facilitate the small agricultural producers as they will save time and administrative costs in the coming years. At the same time, they will know what specific rate of support they can count on.
Q: Under the previous SFA management there seemed to be quite a big communication gap between the Ministry and the Fund. How are things running at present, with you at the helm?
RP: I have of course an absolutely normal professional communication with them. I cannot miss mentioning that BGN 700 million of payments have already been made only in the past month. A great number of projects have been closed in terms of payments and from an initial estimate of budget loss between 110 and 120 million Euro we managed to cut it down to 50-55 million Euro.
*An abbreviated version.