Q&A: Cooperation between Bulgaria and the World Bank on EU funds

Press release: Bulgaria’s knowledge partnership with the World Bank on EU Funds Q&A 

1. What is the importance of EU Funds for Bulgaria’s development?
Over the last decade, Bulgaria performed comparatively well. Average annual growth between 2000 and 2010 was 4.7%, which supported Bulgaria’s convergence to EU average per capita income levels – from 28% in 2000 to 44% in 2010. Fiscal buffers were built and public debt declined sharply from over 70% of GDP in 2000 to one of the lowest debt levels in the EU. Budget deficits have been kept low, and today, Bulgaria is among the most disciplined EU member states – an important fact in the context of global and European economic uncertainties.

But moving to a higher growth path in the current economic environment requires bold Government actions and investments to remove key constraints to growth: Bulgaria needs further improved roads, rail and water infrastructure, Bulgaria needs a better business environment to stimulate private sector development and innovation, and delivery of public services would need to be further strengthened. Bulgaria also seeks to ensure the inclusion of all its citizens in the growth process.

At times of tight Government budgets, EU funds play an absolutely crucial role in financing needed investments to remove these constraints to growth. Until 2013, Bulgaria has access to EU Structural and Cohesion Funds in the amount of of roughly 7 Billion Euro, but the Government estimates that only about 20% has been absorbed so far.

2. Why is Bulgaria partnering with the World Bank, the European Investment Bank, and the European Bank for Reconstruction and Development on EU Funds implementation?
While Bulgaria has significantly increased EU Funds absorption over the last 12 months, the Government is eager to fully absorb all EU Funds at the end of the current Programming Period 2007-2013 and to prepare itself much better for the next period. Therefore, the Government has put an absolute priority on EU Funds absorption and implementation, including by reaching out to international partners like the World Bank, the European Investment Bank (EIB), and the European Bank for Reconstruction and Development (EBRD) to forge a new partnership in this effort. These international institutions have been partnering with Bulgaria for a long time. They are familiar with both Bulgaria’s achievements and remaining challenges, and have objective “third party” knowledge of the country.  

The World Bank has been partnering with Bulgaria over the last 20 years, providing financing, knowledge and advice. The World Bank has provided over US$ 9 billion for some 90 separate operations in Bulgaria since the transition.  The 2011-2013 World Bank Group Country Partnership Strategy (CPS) aims at supporting Bulgaria in strengthening institutions and policies to achieve smart, sustainable, and inclusive Growth. The CPS is uniquely focused on Bulgaria’s European agenda and is anchored in the National Reform Programto implement the Europe 2020 Strategy. The Strategy reflects the Government’s request in strengthening knowledge and advisory services to boost EU funds absorption. This enables Bulgaria to tap into the World Bank’s global and European knowledge and experience, as well as its in-depth country knowledge.

While the World Bank will provide global and regional knowledge and practice in a tailored manner, it will also innovate and learn with and from Bulgaria for the benefit of other countries.

3. What are World Bank knowledge and advisory services?
While the World Bank is providing financing to countries across the globe, knowledge and advisory services – either linked to financing or free-standing – are at the heart of the partnerships with client countries. 

Knowledge and advisory services can take many forms, depending on country demand, including strengthening institutions, analytical work, impact evaluations, research services, and delivery of training.

Free-standing knowledge and advisory services are either (i) directly financed by the World Bank, i.e. cost-free for client countries, or (ii) financed by client countries, i.e. countries covering the costs of World Bank services through fee-based service (FBS) arrangements. In many cases, both forms are combined, and many countries use FBS to scale up World Bank financed knowledge and advisory services. Over recent years, the World Bank has provided cost-free advisory services to Bulgaria in the value of up to about USD 1 million per year.

For many High- and Middle-Income Countries, like Bulgaria, World Bank fee-based knowledge and advisory services are becoming increasingly important – see question 5. Under FBS programs, the World Bank works with countries at their request, providing technical advice and expertise without providing lending. The World Bank is reimbursed for the costs of its advice. 

4. What is the innovation that Bulgaria is introducing?
Over the last year, the Bulgarian Government has been reaching out to the European Commission (EC) and the World Bank, the EIB, and the EBRD, to develop a mechanism that allows the Government to draw on EU Funds to cover the costs of knowledge and advisory services of these international organizations. With the Memorandum of Understanding (MoU) between the Government of Bulgaria and the World Bank on partnership and support in the implementation of the EU Structural Instruments. the Government, in partnership with the European Commission, has finalized this mechanism. The Government is also signing parallel MoUs with EIB and EBRD, hence significantly strengthening its knowledge partnership with these three institutions.

5. What other countries have fee-based knowledge and advisory partnerships with the World Bank?  
Demand for the World Bank fee-based knowledge and advisory services has grown, including from many countries in Europe and Central Asia (ECA).  Since 2005, the World Bank has been partnering with ECA countries in 69 FBS knowledge and advisory programs, with more than half of these being launched over the last two years. Countries to which the World Bank is providing services under FBS arrangements include the Czech Republic, Estonia, Georgia, Kazakhstan, Latvia, Poland, Romania, the Russian Federation (the World Bank’s largest FBS client in ECA with a total of 39 signed agreements), Slovakia, and Slovenia.  Beyond ECA, Chile, Kuwait, Saudi Arabia, and Thailand, have been partnering with the World Bank through FBS mechanisms for many years.

6. How are knowledge and advisory services agreements with the World Bank and the other international financial institutions (IFIs) awarded in Bulgaria, and what are the costs of these services?
Contracts directly awarded to IFIscomply with the Bulgarian National Procurement Act and have been approved by the European Commission as consistent with the EC’s procurement directive. Direct contracting of “technical assistance” (knowledge and advisory services) is conditioned, as the services need to be provided by a recognized international organization.

Under the close coordination of the Government, the IFIs will be contracted directly and the contracts will be funded by existing EU programs. Individual contracts with the respective beneficiary of EU funds will define the scope of the work and the respective value of the contract. All World Bank knowledge and advisory services are provided on a non-profit basis, and only verifiable costs are reimbursed.

7. Who does what? What knowledge and advisory services will the World Bank, the EIB, and the EBRD provide?
The Minister responsible for EU Funds management has been coordinating with sector ministries and IFIs, as well as the “Joint Assistance to Support Projects in European Regions” (JASPERS)I, which is already providing technical support on EU funded projects. Going forward, the Bulgarian Government is committed to hold quarterly IFI coordination meetings to ensure that resources are used efficiently.

The MoU with the World Bank indicates six areas for the provision of knowledge and advisory services: (i) roads sector; (ii) environment (incl. water) sector; (iii) railways sector; (iv) innovation; (v) business regulatory environment; and (vi) Roma inclusion. At any time, the Bulgarian Government could request advisory services in additional areas.  

EIB, EBRD, and JASPERS will provide further support to the preparation and implementation of projects, sector strategies, as well as capacity-building of the relevant institutions.

8. When will the World Bank start providing knowledge and advisory services?                
The Government and the World Bank are working to finalize arrangements for the signing of specific contracts in the identified priority areas. The first knowledge and advisory FBS contracts are expected to be signed in Spring 2012. 

9. Are the IFIs taking the job of other consultants working on EU projects?
On the contrary. The consulting industry both in Bulgaria and abroad will continue to work on their traditional areas of business such as design or supervision. The IFIs will remain focused on areas in which they are highly specialized.

In the case of the World Bank, this includes developing sector strategies and capacity-building. As an international development institution, the World Bank’s rationale for providing tailored knowledge and advisory services is not to make profit, but to provide the impartial advice that governments seeks based on its global experience. Therefore, services are provided strictly on a cost-recovery basis. Success would be measured by the success of client countries, i.e. the speed of EU funds absorption, the number of kilometers of highway constructed, or the number of water facilities that meet EU standards. Indeed, if this key objective is achieved, the higher rate of absorption will generate significant additional work for the local consulting industry, and of course local Bulgarian experts would be used in IFIs activities.

Source: The World Bank