Programme for Development of the Regions 2021 – 2027 AN ANALYSIS OF THE POSSIBILITIES TO IMPLEMENT TERRITORIAL INSTRUMENTS EUROPEAN UNION European Regional Development Fund Programme for Development of the Regions 2021 – 2027 AN ANALYSIS OF THE POSSIBILITIES TO IMPLEMENT TERRITORIAL INSTRUMENTS EUROPEAN UNION European Regional Development Fund This report is a product of the International Bank for Reconstruction and Development / the World Bank. The findings, interpretation, and conclusions expressed in this paper do not necessarily reflect the views of the Executive Directors of the World Bank or the governments they repre- sent. The World Bank does not guarantee the accuracy of the data included in this work. The report has been prepared under a Reimbursable Advisory Services Agreement (RAS) on Enhancing the Regional Development Process in Bulgaria and supporting Ministry of Regional Development and Public Works in the programming process for the period 2021 – 2027, signed between the Ministry of Regional Development and Public Works (MRDPW) of the Republic of Bulgaria and the International Bank for Reconstruction and Development / the World Bank on April 8, 2019. This report constitutes Output 4.1 — Report con- taining analysis of the possibilities to implement territorial instruments under the next operational programme for regional development 2021 – 2027 of the above-mentioned RAS. The first draft of this report was delivered to MRDPW for comment on September 30, 2020. The Government of Bulgaria’s programming process is evolving, and this report captures the status as of October 2020 to the extent possible. Budget line BG16RFOP001-8.002-0005 “Budget line of “Strategic planning and programming” Unit, GD “SPPRD” Cover design and typesetting: Wojciech Wolocznik, Cambridge, United Kingdom Interior design: Piotr Ruczyński, London, United Kingdom CONTENTS Acknowledgements   6 Abbreviations and Acronyms   7 Executive summary   8 CHAPTER 1  Introduction   17 Bulgarian regions keep growing, though disparities linger   18 European Union advocates territorial instruments to overcome disparities   20 EU provided Bulgaria with the following guidance   21 Rationale of and key considerations about the integrated territorial approach   24 New approach is shaping up   25 Its regulatory and institutional framework is also being designed   27 CHAPTER 2  Development needs of Bulgarian regions (NUTS 2 level)   31 Thematic scope of interventions that are to match identified regional needs   32 Territorial scope for implementing these interventions   34 CHAPTER 3  Strategic planning framework for territorial instruments in Bulgaria   37 National Concept for Spatial Development of Bulgaria (NCSD)   38 Integrated Territorial Strategies for the Development of NUTS 2 regions   39 Plans for Integrated Development of Municipalities (PIDMs)   40 CHAPTER 4  Integrated territorial approach in Bulgaria   43 Lifecycle of PA1 and PA2 projects    44 Role and capacity of key stakeholders in the integrated approach   46 Legal framework   55 Thematic and territorial coverage   59 Financial framework    61 Guidelines for elaboration and implementation of territorial instruments   63 Project proposal evaluation and project selection mechanism   65 Coordination mechanism    68 Monitoring and evaluation   71 CHAPTER 5  COVID-19 pandemic and its potential implications for regional policy and the new integrated approach in Bulgaria    77 CHAPTER 6  Summary of key findings and recommendations   83 ANNEX 1 EU framework for supporting territorial instruments 2021 – 27    88 ANNEX 2 Lessons learned from the application of territorial instruments in Bulgaria and selected EU countries   94 ANNEX 3 List of sources providing insights with regard to the COVID-19 implications for regional policy and the elaboration and implementation of territorial instruments   96 BOXES BOX 1.1 Expected added value of ITIs 20 BOX 1.2 EC’s guidance to Bulgaria on policy design 21 BOX 1.3 EC’s guidance to Bulgaria on investment targeting 22 BOX 1.4 Guidance on EU funds management and capacity building of key stakeholders 23 BOX 2.1 Regions’ investment needs 33 BOX 4.1 ITI concept project pipeline and ITI flagship projects 53 BOX 4.2 Advisory Hub for building capacity of municipalities 54 BOX 4.3 Thematic interventions allowed under the PDR PA1 59 BOX 4.4 Thematic interventions allowed under the PDR PA2 61 BOX 4.5 Key characteristics of a robust evaluation and selection mechanism 65 BOX 4.6 Two-tier selection process of integrated projects 66 BOX 4.7 Recommended arrangements for merit-based competition between project proposals 67 BOX 4.8 Coordination Council for the Territorial Approach (CCTA) 70 BOX 5.1 COVID-19-related initial recommendations for regional policy and territorial instruments 80 BOX A1.1 Expected added value of ITIs 90 BOX A1.2 EU policy objectives for 2021 – 2027 91 BOX A1.3 Key characteristic of the integrated territorial approach for 2021 – 2027 92 FIGURES FIGURE E.1 Integrated approach — overall structure   10 FIGURE 1.1 Evolution of GDP per capita in PPS among Bulgarian NUTS 2 regions   18 FIGURE 1.2 European Regional Competitiveness Index 2019 for Bulgaria and EU average (overall RCI score and three sub-indices)   19 FIGURE 1.3 Europe’s population change (2007 – 2060) and predicted immigration patterns   19 FIGURE 1.4 Building blocks of the integrated territorial approach   26 FIGURE 2.1 Division into urban and rural municipalities during the 2021 – 27 period   34 FIGURE 2.2 Ten urban centers of growth supported by PDR PA1    35 FIGURE 4.1 The lifecycle of the PA1 projects   44 FIGURE 4.2 Lifecycle of the ITI concept (PA2)    45 FIGURE 4.3 Levels of the integrated approach implementation    47 FIGURE 4.4 Outline of the integrated territorial approach   60 FIGURE 4.5 Funding structure of the integrated approach (EU’s contribution)   62 FIGURE 5.1 Current and expected drops in turnover reported by industry (share of turnover)   78 TABLES TABLE E.1 Checklist of key milestones for preparing and implementing the integrated territorial approach   13 TABLE 2.1 Most common development potential and challenges of Bulgarian NUTS 2 regions   32 TABLE 4.1 National legal framework for the implementation of the integrated territorial approach in Bulgaria for the programming period 2021 – 2027   56 TABLE 4.2 Coordination needs at the implementation stage of the integrated approach    69 TABLE 4.3 Proposed distribution of roles within the monitoring framework    72 TABLE 4.4 Proposed scope of monitoring of the implementation of the integrated approach   73 TABLE 4.5 Proposed evaluations of the integrated approach   74 FIGURE 5.2 GDP impact at regional NUTS 2 level across EU Member States excluding the impact of policy measures    79 ACKNOWLEDGEMENTS This report was prepared under the supervision of Christoph Pusch (Practice Manager, Urban and Disaster Risk Management, Europe and Central Asia) and Fabrizio Zarcone (Country Manager, Bulgaria, the Czech Republic, and Slovakia), with technical guidance from Paul Kriss (Lead Urban Specialist, Europe and Central Asia). The report was prepared by a team led by Joanna Masic, Senior Urban Specialist (Task Team Leader). The report was authored by Grzegorz Wolszczak (Urban Development Specialist) and Anna Banaszczyk (Senior Regional Planning Specialist) with contributions from Atanas Kirchev (Senior Legal Consultant), Aleksandar Hinov (Senior Financial Specialist) and Zdravko Petrov (Regional Development Specialist), and inputs from Yana Georgieva (Senior Public Administration Specialist), Dobrinka Karadzhova-Nedkova (Public Administration Specialist), Maria Raytcheva (Public Administration Specialist), Daniela Ivanova (Public Administration Specialist), and Solene Dengler (Urban and Regional Analyst). Administrative support was provided by Albena Samsonova. Country Manager: Fabrizio Zarcone Practice Manager: Christoph Pusch Task Team Leader: Joanna Masic Authors: Grzegorz Wolszczak and Anna Banaszczyk 7 ABBREVIATIONS AND ACRONYMS CCTA Coordination Council for the Territorial Approach CCU Central Coordination Unit CLLD Community Led Local Development CoM Council of Ministers DIC District Information Center EC European Commission ERDF European Regional Development Fund ESF European Social Fund ESIF European Structural and Investment Funds EU European Union FG Focus Group GDP Gross Domestic Product GoB Government of Bulgaria ITI Integrated Territorial Investment ITSD Integrated Territorial Strategy for Development MA Managing Authority MRDPW Ministry of Regional Development and Public Works NAMRB National Association of Municipalities in the Republic of Bulgaria NCSD National Concept for Spatial Development NSI National Statistics Institute NUTS Nomenclature of territorial units for statistics OECD Organization for Economic Cooperation and Development OP Operational Programme OPRG Operational Programme for Region in Growth 2014 – 20 PA Priority Axis PA1 Priority Axis 1 of PDR 2021 – 27 PA2 Priority Axis 2 of PDR 2021 – 27 PDR Program for Development of Regions 2021 – 27 PIDM Plans for Integrated Development of Municipalities PSU Project Selection Unit PSC Project Selection Committee RAS Reimbursable Advisory Services RDA Regional Development Act RDC Regional Development Council RDP Rural Development Program 2014 – 20 SPARD Strategic Plan for Agriculture and Rural Development 2021 – 27 WB World Bank 8 An Analysis of the Possibilities to Implement Territorial Instruments early lessons from other countries relevant for Bulgaria. The premise of the integrated territorial EXECUTIVE approach is that multi-sector interventions delivered by partnerships (partnership principle) should be designed and imple- SUMMARY mented together (thematic integration) and tailored to the specific needs of indi- vidual territories (territorial dimension) to unlock their development potential. In this document, such investments are called This report is one of the outputs prepared by ‘integrated interventions’ or ‘integrated in- the World Bank (WB) team for the Ministry vestments. Since the bottlenecks to growth of the Regional Development and Public in EU regions have multiple root causes, any Works (MRDPW) within the framework of response to them needs to be addressed in a reimbursable advisory service (RAS) on a comprehensive way and thus will be inher- Regional Development. The aim of the report ently multi-sector in character. Integration is to analyze and review the opportunities to of different sector interventions into a single implement integrated territorial interventions and comprehensive intervention that targets in Bulgaria during the 2021 – 27 programming the needs of a specific territory can also help period. This report summarizes key analyses break sector silos that often are implement- performed by the WB team within the scope ed via generic tools without any connection of the RAS with regard to the new integrated to other sectors. Moreover, the collaboration approach for territorial development designed of stakeholders, and in particular local stake- by the MRDPW. Some of the analyses have been holders, is a crucial element of the integrated shared with the Ministry in a series of notes approach, because comprehensive solutions and other reports delivered under the RAS. This often lie beyond the capacity of a single in- report also includes additional analyses and stitution and need to be developed following recommendations pertaining to new aspects both a bottom-up and a top-down approach. of the integrated approach, which is continu- ously being developed and refined by MRDPW Bulgaria is home to some of the EU’s poor- together with other stakeholders as part of the est regions, with five out of its six NUTS 2 ongoing programming process. regions considered lagging due to their low-income status. Previous Government Integrated territorial interventions, if well of Bulgaria (GoB) and EU funding have failed planned and implemented, can have a pos- to adequately address regional inequalities itive impact on addressing inter- and in- in Bulgaria. GoB is therefore looking to de- tra-regional inequalities. As such they are be- vise a new era of regional development fund- ing promoted and adopted as a regional devel- ing that will program integrated territorial opment tool across European Union (EU) mem- interventions targeted at the root causes of ber states. Experience so far across EU member the individual growth bottlenecks in each states suggests that there have been signifi- region. The plan is for a radically new ap- cant updates to new territorial strategies that proach that will allow packages of projects have encouraged innovative approaches in the based on regional needs, identified under form of more integrated interventions, at dif- newly developed regional strategies, to be ferent spatial scales, and using more collabo- funded from different Programs under the rative models of governance.1 The use of terri- European Structural and Investment Funds torial strategies and the links with program- (ESIF). These integrated territorial strate- ming are still a work in progress but there are gies for development (ITSDs) are envisaged 1. Integrated territorial and urban strategies: how are ESIF adding value in 2014 – 2020? European Policies Research Centre (2017). Executive summary 9 as an intermediate and connecting strate- of integrated instruments as a key tool for gy between national sectoral policies and achieving regional development policy goals. programs, from which they draw, and plans The resources identified for the integrated for integrated development of municipali- approach will come from combining the re- ties (PIDMs), for which they set forth the re- sources of eight programs: the Program for gional development framework the PIDMs Development of Regions 2021 – 27 (PDR), five should reflect. selected sectoral Programs, as well as from the Strategic Plan for Agriculture and Ru- This report reflects the GoB’s current think- ral Development (SPARD) and the Maritime, ing about the integrated approach to ter- Fisheries and Aquaculture Program4. These, ritorial development as of October 2020. except PDR, are referred to in this Report as It does not aspire to describe the final re- “contributing Programs”5. sult of the government’s planning process, which is ongoing and subject to change. PDR provides its full budget to the approach, Since the design of the approach is dynamic and five other Programs earmark 10 percent and involves many stakeholders, not all as- each of their allocations.6 PDR is divided into pects of the approach were defined or for- two priority axes (Figure E.1). Priority Axis 1 malized at the time of preparing this report.2 (PA1), targets the 10 largest urban municipali- Moreover the approach is likely to continue ties with a budget EUR 0.4 billion. PDR Priority to evolve. This report pinpoints key parts or Axis 2 (EUR 1.1 billion) offers financing to the ‘nodes’ of the implementation system of the remaining 40 urban municipalities. PDR under integrated approach that will influence its fu- PA1 and PA2 will also support investments in ture functioning and then offers recommen- rural areas for industrial zones, national road dations that should facilitate further work infrastructure, sustainable urban mobility and on further designing the approach and put- healthcare infrastructure if these are part of an ting it in action. Integrated Territorial Investment (ITI) concept. SPARD will provide resources for infrastructure The introduction of the integrated approach projects of rural municipalities that will par- to territorial development and streamlin- ticipate in integrated investments under PA2. ing territorial investments into sectoral The funding from five out of the seven contrib- programs at the scale planned by the GoB uting Programs (EUR 0.6 billion), which com- (EUR 2.2 billion, representing almost a quar- plements PDR PA2 resources, will be made avail- ter of the participating programs’ budgets3 ) able to both the 50 urban municipalities and is ambitious and commendable. The pro- the participating rural municipalities7. While posed reform introduces significant chang- both priority axes allow a similar thematic es to the institutional and organizational di- scope of interventions, they will offer differ- mensions of regional policy planning and im- ent types of projects to beneficiaries governed plementation for all stakeholders and ben- by different selection procedures and man- eficiaries. It also brings to the fore the use aged by a different institutional framework. 2. The Council of Ministers’ Decree on integrated instruments is not in place. The Partnership Agreement and Operational Programs are in early stage of planning with regard to the integrated approach. 3. The amount of EUR 2.2 billion corresponds to EU co-financing only. It represents 23 percent of the overall allocation for the participating programs. This amount does not include the expected contributions from the budgets of SPARD and the Maritime, Fisheries and Aquaculture Program 2021 – 27, since they are not currently defined. All figures in this report regarding the budget refer to the EU co-financing only. 4. SPARD is a successor of the Rural Development Program 2014 – 20. 5. The total eight programs are the following: PDR; Competitiveness and Innovation; Human Resources; Education; Research, Innovation and Digitalization; Environment; Maritime, Fisheries and Aquaculture; and SPARD. The term ‘contributing programs’ in this report excludes PDR, which is treated separately as the main financial contributor. Depending on the context, ‘contributing programs’ may then refer to i) five sectoral programmes that are known to contribute at least 10 percent of their budgets, ii) five plus the Maritime program (‘six contributing programs’), and iii) six plus SPARD (‘seven contributing programs’). 6. Details about the SPARD and Maritime Program’s contributions still need to be published. 7. More details in sections 1.5 and 4.5. 10 An Analysis of the Possibilities to Implement Territorial Instruments FIGURE E.1 Integrated approach — overall structure Integrated Approach 10 biggest urban centers Territory 40 remaining urban municipalities 215 rural municipalities* (in four clusters) PDR Priority Axis 1 (EUR 0.4 billion) PDR Priority Axis 2 (EUR 1.1 billion) SPARD** Financing 10% from five contributing Programs (EUR 0.6 billion) + Maritime Projects Type 1 and Type2 ITI Concepts (+ PA1 Type 3) * Rural municipalities will also be able to obtain financing from PDR under priority axes 1 and 2 in the following areas: industrial zones, national road infrastructure, urban mobility, and healthcare infrastructure if these are part of ITI concepts. **  SPARD — Strategic Plan for Agriculture and Rural Development; Maritime Program — Maritime, Fisheries and Aquaculture Program 2021 – 27. Source: Authors GoB’s intent is to enhance regional cohe- from other institutions. ITI concepts will be sion by counteracting the socio-economic bundles of interventions (sets of individual trends, which have led to growing dispar- projects) with a common development goal ities among Bulgarian regions, which are covering a specific area (territory) and gen- driven by a monocentric growth pattern erating positive regional impact. They will be centered around the capital city, Sofia. The designed and implemented by partnerships new integrated territorial approach signifi- of various stakeholders (ITI partnerships), cantly modifies the framework of the strate- which are an obligatory element of the new gic planning for regional development at the approach. The three types of integrated in- national, regional and local level (see Chapter vestments financed from the PDR PA1 (urban 3), which influences the identification of ter- investments) will follow a different process. ritorial investments for the 2021 – 27 planning period (Chapter 2), and shapes a new imple- Embedding RDCs and integrated territo- mentation system and investment modalities rial interventions requires the remodel- at the regional level (Chapter 4). ing of the system for EU funds management in Bulgaria, the latter being a network of The enhanced role of the Regional Devel- parts or processes that closely interact with opment Councils (RDCs) and broad utiliza- each other. The interconnected character of tion of integrated territorial interventions the system of implementing EU funds and the are two key pillars of the reform.8 Under multi-dimensional nature of the territorial the PDR Priority Axis 2 (PDR PA2) (territorial development means there is a need to rebal- investments), RDCs will exercise new func- ance the whole system when new elements tions and will be revamped into two-tier bod- are introduced. That applies to both strate- ies with a managerial (political) and a tech- gic and operational dimensions. The former nical (expert) level. For the first time, they refers to the national regulatory and planning will be involved in the process of selecting framework, issues of multi-level governance packages of integrated projects (i.e. ITI con- between government levels, and interjuris- cepts) and supporting prospective beneficia- dictional collaboration between municipal- ries in the application process. RDCs will have ities. The latter refers to a plethora of tech- three units with separate tasks (see Chap- nical details related to programs, shaping of ter 4). They will not have dedicated budget new institutions, describing tasks and func- or their own staff; staff will be nominated tions, coordinating mechanisms, establishing 8. In this report the term ‘integrated territorial investment’ (ITI) is used in the sense of the ‘another terri- torial instrument’ as defined by the EU’s Common Provisions Regulation. Executive summary 11 new procedures, conducting information cam- approach to reach its two strategic goals, name- paigns, building the capacity of stakeholders, ly i) generating territorial impact and deliv- adjusting IT systems, creating new monitor- ering expected developmental outcomes; and ing and evaluation (M&E) frameworks etc. ii) effective absorption of the 2021 – 27 EU funds. The integrated approach will affect a broad A valid questions in this regard is whether the array of institutions because its defining fea- integrated approach can be expected to solve ture is to cut across sectors and administra- the key challenges faced by Bulgarian regions. tive boundaries. Its success will depend on The infrastructure gap (visible in the lack of or the effectiveness of the entire interconnected insufficient roads networks and water, waste- implementation mechanism that will even- water and sewage systems etc.), especially in tually be set up. poorer and less developed areas, is one of them. Such deficiencies may also require a combina- The new integrated territorial approach tion of territorial (bottom-up) and sectoral has good potential to contribute to build- (top-down) policies to be fully addressed. All ing stronger and more resilient regions in in all, the breadth, depth and novelty of the Bulgaria. It primarily focuses on supporting reform, and the multitude of engaged stake- the 50 urban municipalities, while it also offers holders will pose challenges to its further plan- opportunities to the remaining 215 rural mu- ning and implementing. Additionally, a limited nicipalities. The Draft Partnership Agreement timeframe to design and prepare for imple- states that rural municipalities, which are the mentation does not leave much space for iter- least advantaged territories in Bulgaria, will ative testing, feedback gathering from stake- also be able to take advantage of the poten- holders, and polishing proposed solutions. The tial of the integrated approach as SPARD is to approach should be operational at the start mirror infrastructure measures that are en- of the next EU programming period (January visaged under PDR for urban municipalities. 2021), although the start is already delayed. The new approach promotes several promis- This calls for embedding a strong M&E sys- ing developments such as a focus on specific tem from the get-go to enable quick feedback (territorial/local) needs, more holistic (stra- loops and fine tuning of identified shortcom- tegic) planning, engagement of a broad set of ings. To remedy this set of challenges, the GoB local stakeholders (networking, coordination, relies on its experience with introducing pre- trust building, multi-level governance), coor- vious integrated instruments and good inter- dinated multi-sector investments that help national practices. A selected number of these use resources more effectively, capacity build- are presented in Annex 2. ing of local stakeholders, etc. These have po- tential to reinforce growth in urban munici- Ramping-up the administrative and insti- palities (see details in Chapter 1 and Annex 1). tutional capacity of institutions engaged in implementing the approach is a key recom- Introduction of the integrated territorial mendation of this report. International and approach and the restructuring of RDCs Bulgarian experience, as well as feedback from could also become the first step on a path stakeholders, indicate that higher institutional leading to stronger regionalization of devel- capacity will be vital for the successful devel- opment policy in Bulgaria. With this end opment and implementation of integrated in view, the long-term development of RDC projects. Training needs as a result will be sig- capacity and functions matched with their nificant. Enhanced capacity will be necessary stronger institutionalization (i.e. future pro- for both engaged institutions and prospective vision of a permanent budget and staff) could beneficiaries. For instance, i) RDCs will need constitute the next steps in this longer-term to be ready to start fulfilling completely new process in developing territorial bodies in and important roles in preparing and select- Bulgaria. ing ITI concepts, ii) in the ten biggest urban municipalities new units will be established The approach also bears risks related to its for the first stage evaluation of project propos- complexity, novelty, scale and timeframe als, iii) Managing Authorities (MAs) will need for implementation. These risks could poten- to be able to coordinate their activities related tially undermine the ability of the integrated to managing their Programs, preparing and 12 An Analysis of the Possibilities to Implement Territorial Instruments managing calls for applications, issuing com- to achieve its intended goals, which could plementary user’s manuals and implementa- undermine the introduced policy reform. tion guidelines, training beneficiaries, mon- itoring the preparation and implementation A second key recommendation of the WB of ITIs etc., iv) CCU will facilitate coordina- team is the need to further streamline the tion among MAs, prepare modifications to the ITI selection process and adopt selection IT system for managing EU funds (UMIS), and criteria that support the selection of im- should also be able to monitor the progress of pactful ITIs and strong sustainable ITI part- the overall implementation of the integrated nerships. The currently envisaged process of approach — in this regard, the WB team rec- selecting integrated projects could be further ommends establishing a national level coor- simplified. There are different selection ap- dination body, a Coordination Council for the proaches for the different types of projects (see Territorial Approach (CCTA). Chapter 1 and 4) under the PDR’s two Priority Axes, which might prove difficult for benefi- Beneficiaries of EU funds will need to demon- ciaries to navigate. The criteria and process- strate a new level of capacity to generate es of selecting integrated projects will need quality integrated projects and to imple- to be transparent and objective and it will be ment them. Prospective applicants will need important to promote a technical and mer- relatively sophisticated administrative capac- it-based assessment of applications. Since the ity to put forward high quality and compre- discussions with the European Commission hensive package of projects. They will need to (EC) are ongoing there are still uncertainties understand the functioning of the integrated about arrangements for the other participat- territorial approach; be able to not only con- ing Programs for 2021 – 2027, and the Partner- ceptualize more complex multisectoral and ship Agreement for 2021 – 2027 more broadly. territorially integrated projects, but also cre- In addition, the planned Council of Ministers’ ate lasting partnerships; fulfill more prerequi- (CoM) decree, which is expected to, among sites (from different funding sources) and fol- others, set out the arrangement amongst MAs low guidelines from different MAs; and imple- for the integrated territorial approach is still ment integrated interventions in a technical- to be elaborated. Therefore, it is not yet clear ly- and financially sound manner. All this will what the coordination of the selection pro- require more human and financial resourc- cess, nor the implementation and monitoring es as well as technical capacity. Beneficiaries between MAs, will look like. Close collabora- will need to develop this capacity in a short tion of MAs at the planning stage of respec- time to be able to start preparing ITI concept tive Programs and their technical solutions applications from the very beginning of the in the form of a technical working group for new programming period to ensure timely the new integrated territorial approach will contracting and disbursement of EU funds. be important The WB team recommends establishing It will be important to set out effective co- a central Advisory Hub to provide profes- ordination mechanisms for MAs and other sional, standardized, and regular train- stakeholders to ensure the smooth manage- ing, along with targeted advisory support, ment of the integrated territorial approach. as a possible suitable way to support pro- MAs of contributing programs have limited spective applicants. The beneficiaries’ abil- experience in collaborating in integrated proj- ity to tap into funding from the integrated ects. Most experience to date relates to the approach from the very start will be a key Community-Led-Local Development (CLLD) performance indicator of the reform. The and Cross Border Cooperation (CBC) proj- speed of early disbursement will be even ects that have a much smaller scale and bud- more important during the 2021 – 27 period, get than the envisaged integrated interven- because the overall timeframe for investing tions (ITI concepts in particular). Hence the EU funds will be one year shorter than during CoM’s decree is expected to shape the mech- the current perspective (n+2 rule). Without anism for MAs’ collaboration and will be one quick absorption, the integrated approach of the key building blocks of the implemen- will not be able to demonstrate the ability tation system. It is currently being drafted Executive summary 13 by an inter-ministerial working group and easier to implement for both beneficiaries is not available yet for review. and MAs. Considering the possibility to fi- nance them under the PDR through individ- Introducing more targeted measures in the ual projects could be a solution. PDR 2021 – 2027, including the possibility to finance investments for basic infrastruc- GoB have invested great effort to concep- ture in regions to close the infrastructure tualize the integrated territorial approach gap, could potentially enhance the devel- and prepare for its implementation. Many opmental impact of the new approach. GoB aspects have been already pre-designed, dis- shows a strong commitment to the new ap- cussed and consulted. Further work will be proach and plans to devote a majority of the required to finalize this design stage and EU funds related to the Policy Objective 5 un- shift into the implementation mode. Table E.1 der the PDR to the integrated projects. By do- offers an overview of key milestones that will ing so, GoB aims at solving key developmen- be vital for the implementation of the inte- tal obstacles these territories face. However, grated territorial approach together with the some of the needs, such as basic infrastruc- current status of each milestone. The table ture gaps, could be more effectively and effi- could be used as a simple method for moni- ciently addressed by more targeted sectoral toring the status of the approach and can be policies and simpler instruments (simple, expanded with additional data depending on non-integrated projects), which would be information needs. TABLE E.1 Checklist of key milestones for preparing and implementing the integrated territorial approach Item Status RDA and RDA Rules of Implementation Done CoM ITI Decree Pending (outline of contents proposed by the WB) Formation of new RDCs (letters of appointments) Ongoing (draft operational documents prepared by the WB) Partnership Agreement Pending (first draft ready) Draft Programs (demarcation line) Pending (second drafts ready, further elaboration of the approach required) Adoption of ITSDs Pending (ITSDs drafted by the NCTD) Adoption of PIDMs Pending Financial arrangements of the integrated approach Pending Selection criteria for PA1 and PA2 Pending (draft proposed by the WB) User’s Manual for PDR Pending (draft of ITI User’s Manual proposed by the WB) Methodological guidelines for beneficiaries under PDR PA1 and PA2 Drafts are published, selection criteria are pending Launching a broad information campaign for prospective applicants Pending Rolling out a systemic capacity building program for RDCs, MAs and Pending other entities responsible for the approach implementation Designing and implementing a systemic capacity building program for Pending prospective applicants and beneficiaries Procedure for ensuring compliance with state aid rules and procedure Pending for selecting economic operators within the initiation phase of the ITI concept Setting up CCTA to facilitate coordination and monitoring of the No information available approach implementation Adaptation of UMIS to allow monitoring of the integrated approach No information available Establishing a monitoring and evaluation framework of integrated Pending approach to track progress and assess effectiveness Source: Authors 14 An Analysis of the Possibilities to Implement Territorial Instruments This report has the following structure. provides recommendations that could help Chapter 1 provides information about re- implement the approach. Chapter 5 discuss- gional disparities in the country and EU’s es implications of the COVID-19 pandem- support for territorial instruments that ic for regional development policy. Finally, are followed by EC’s guidance to Bulgaria on Chapter 6 closes with the key conclusions regional development policy. Consequently, and recommendations. the rationale of, and key considerations for, the approach are presented and an overview The annexes review the EU framework for the of the new approach itself. Chapter 2 dis- implementation of territorial instruments cusses the development needs of Bulgar- and describe experiences from implemen- ia’s six NUTS 2 regions and Chapter 3 re- tation of integrated instruments in Bulgaria views the strategic planning framework and other countries. for the integrated investments in Bulgaria. Chapter 4 constitutes the core section of While the report can be read as a standalone the report and it analyzes the GoB’s pro- document, it does not reflect all detailed con- posed integrated territorial approach, high- siderations presented in prior analyses and lighting its strengths, potential risks, and other deliverables under this RAS. CHAPTER 1  INTRODUCTION 18 An Analysis of the Possibilities to Implement Territorial Instruments Bulgarian regions Regional disparities observed across Bul- keep growing, though garia continue to be recognized by the EC as one of the key challenges that require an disparities linger adequate policy response. The concentration of economic activity in and around the capital Although potential GDP growth has strength- region of Sofia (South – West region) is a prom- ened in recent years, this has not trans- inent and durable socio-economic phenome- lated into a rapid catching-up process at non, with the region generating 47 percent of the regional level. In addition to having the national GDP, and recording a per capita GDP lowest GDP per capita in the EU (53 percent of level double of that of other Bulgarian regions. the EU-27 average as of 2019)9, Bulgaria is also home to some of its poorest regions. Five out Regional disparities are also visible in oth- of six NUTS 2 regions in Bulgaria are consid- er dimensions. The 2019 European Regional ered lagging due to their low-income status10, Competitiveness Index shows that the capital with the Northwest region consistently dis- region significantly stands out on every dimen- playing the EU’s lowest level of GDP per cap- sion of competitiveness (Figure 1.2). The remain- ita at only 34 percent of the EU-28 average, ing regions score below the country’s average and North – Central and South – Central re- on most of three sub-indices, that is ‘efficien- gions not far behind with just 35 percent and cy dimension’ (higher education and lifelong 36 percent respectively (Figure 1.1)11. Accord- learning, labor market efficiency and market ing to the most recent EC Country Report 2020, size), ‘basic dimension’ (quality of institutions, Bulgaria has been slow to catch up with the infrastructure, health and basic education), and rest of the EU and still has one of the high- the ‘innovation dimension’ (technological read- est levels of poverty and income inequality. iness, business sophistication and innovation). FIGURE 1.1 Evolution of GDP per capita in PPS among Bulgarian NUTS 2 regions 90 80 70 60 % of the EU average 50 40 30 20 10 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 North-West North-Central North-East South-West South-East South-Central Source: European Commission 9. Eurostat, June 2020 https://ec.europa.eu/eurostat/statistics-explained/index.php/ GDP_per_capita,_consumption_per_capita_and_price_level_indices 10. Competitiveness in low-income and low-growth regions. The lagging regions report. European Commission, 2017. 11. EUROSTAT, 2018 and Eurostat Press Release: Regional GDP per capita in EU regions, March 5, 2020. https://ec.europa.eu/eurostat/documents/2995521/10474907/1-05032020-AP-EN.pdf/ 81807e19-e4c8-2e53-c98a-933f5bf30f58 Chapter 1 Introduction 19 FIGURE 1.2 European Regional Competitiveness Index 2019 for Bulgaria and EU average (overall RCI score and three sub-indices) 80 67.19 68.1 70 60.3 57.2 RCI 2019 (0-100 scores) 55.8 60 46.28 44.29 50 41.76 40.69 39.68 34.21 40 31.02 28.85 27.23 25.08 30 21.18 21.21 20.01 19.21 19.14 18.25 15.74 20 13.74 13.79 12.96 9.72 7.16 5.98 7.6 10 3.04 2.77 2.56 0 BG: Bulgaria BG31: BG32: Severen BG33: BG34: BG41: BG42: Yuzhen EU Average Severozapaden tsentralen Severoiztochen Yugoiztochen Yugozapaden tsentralen 12_Basic Sub-index 13_Efficiency Sub-index 14_Innovation Sub-index 15_RCI 2019 Source: European Regional Competitiveness Index 2019 Demographic developments also heavily is also exposed to seismic hazards with the and negatively influence regional trends in south-west (including Sofia), south-central, GDP per capita. The NUTS 2 regions that were and north-east regions at risk of seismic most affected by demographic changes are events (as well as Tsunami’s from the Black North – West (-29 percent) and North – Central sea) that could negatively impact both na- (-23 percent). These trends translate into a short- tional GDP and regional development. age of workers in the local labor market, espe- cially those with higher skills. Bulgaria’s pop- FIGURE 1.3 Europe’s population change (2007 – 2060) ulation is predicted to shrink by 35 percent and predicted immigration patterns between 2007 and 2050, the fastest depopu- lation rate in Europe (Figure 1.3). LV: RU: –22.4% –24.3% Bulgaria’s location makes it particularly UK: +15.0% BY: vulnerable to the effects of climate change, –28.2% PL: mainly through temperature increase and DE: –10.3% –20.5% UA: extreme precipitation, resulting in increas- –33.0% ing occurrence of droughts and floods . FR: The risks inflicted by climate change-relat- +10.7% RO: –25.7% ed events may significantly affect economic BG: growth and prosperity, both nationally and IT: –35.2% –7.2% on a transboundary basis in future. All sectors of the economy are expected to be affected by ES: +4.8% 377,000 the anticipated changes. Climate change im- African pacts do not affect all people and territories migrants 1.2 million coming to the Asian migrants equally due to different levels of exposure, West every year coming to the until 2050 West every year existing vulnerabilities, and adaptive capac- until 2050 ities to cope. The risk is greater for the seg- ments of the society and businesses that are Source: United Nations quoted in Horizon 2030 Demographic Tendencies in Bulgaria, less prepared and more vulnerable.12 Bulgaria Friedrich-Ebert-Stiftung, 2018, http://library.fes.de/pdf-files/bueros/sofia/15329.pdf 12. World Bank, Draft National Climate Change Adaptation Strategy and Action Plan for the Republic of Bulgaria, 2019, https://www.moew.government.bg/en/climate/international-negotiations-and-adaptation/ adaptation/ 20 An Analysis of the Possibilities to Implement Territorial Instruments Finally, the economic outlook for Bulgaria European Union is heavily impacted by the implications of advocates territorial the COVID-19 pandemic, as the country’s real GDP is projected to contract by over 7 percent instruments to overcome in 2020.13 Retail, transport, hotels and restau- disparities14 rants, art and entertainment sectors are among those that were hit hardest by anti-pandemic The current EU programming perspective measures leading to substantial reduction of 2014 – 2020 marked the inclusion of terri- their operating capacity. The negative spill- torial instruments into the mainstream overs of the pandemic response in Bulgaria and of EU development policy and the 2021 – 27 in the whole region are still difficult to assess. programme perspective reinforces this di- The impact of COVID-19 will most likely have rection. Territorial instruments became an a regional dimension, as specific sectors — such obligatory and prominent part of investments as tourism — are predominant in specific parts supported by ESIF. It was preceded by the in- of the country. troduction of territorial cohesion as one of the fundamental aims of the European Union in The EC indicates that broad-based structur- the Lisbon Treaty of 2007. Stronger focus on al reforms and additional investments are specific territory were to make sectoral pol- needed to boost productivity and achieve icies more impactful and capable of making sustainable and inclusive growth. A better a lasting positive difference for development business environment, accurate identification prospects. For the 2021 – 27 period, a dedicat- of investment needs in green technologies ed territorial policy objective ‘A Europe clos- and sustainable solutions to deliver on cli- er to citizens’ was included in the set of five mate and energy objectives, better transport, consolidated overarching EU development energy and environmental infrastructure are objectives to further highlight the need for all needed to strengthen Bulgaria’s compet- more territorially impactful development itiveness and boost investments. Major pro- interventions. ductivity gains can also be generated through more and better targeted investments in dig- The aim of the ‘territorialization’ of develop- italization and in R&D. ment policy instruments is to promote inclu- sive and sustainable growth of territories by tailored interventions that strengthen their BOX 1.1 Expected added value of ITIs individual endogenous potential and help • Strategic dimension (integrated strategies for territorial development): solve challenges in their individual context. strengthening synergies between different strategic frameworks by This marks a shift towards a policy response bringing together investment priorities and developing a comprehen- that is more sensitive and responsive to the sive, multi-sectoral strategy for a given territory individual characteristics of territories and • Financing dimension (operational programs): combining different fund- ing streams to create critical mass and facilitate coordinated invest- away from a one-size-fits-all approach. ment in territories • Territorial dimension (NUTS 2 regions): strengthening focus on functional The integrated approach is also to stim- areas to ensure tailored, place-based policy responses for a given territory ulate more flexible and innovative policy • Operational dimension (ITI beneficiaries): enabling the elaboration and governance approaches, and capacity build- implementation of more complex and tailored sets of integrated proj- ing of broader range of involved stakehold- ects through the multi-fund approach and thanks to enhanced admin- istrative capacity ers. Integrated instruments were to encour- • Intangibles (culture of cooperation): building mutual trust, promoting age multi-level governance, involve broader sustainable cross-sectoral and interjurisdictional cooperation, creating groups of stakeholders into planning, imple- a sense of shared ownership and responsibility for joint development mentation and monitoring of territorial devel- efforts at the regional level opment instruments, and facilitate creation Source: Authors of new functionally based partnerships. See Box 1.1 for more details. 13. EC, Spring 2020 Economic Forecast. 14. Annex 1 presents more details about the legal framework of the territorial instruments in the EU and European experience with this approach, its promises, challenges and lessons learned. Chapter 1 Introduction 21 The European regulatory framework defines (or less sectoral-driven), ii) enhanced target- three forms of support for integrated ter- ing of investments and iii) strengthening ritorial and local development. First, inte- institutional capacity. The below section pro- grated territorial investment, when a territo- vides an overview of key themes pertaining rial strategy receives funding from multiple to these three topics.15 This dialogue reflects priorities, programs, funds or policy objectives. on experience from the 2014 – 20 period and Second, community-led local development suggests lessons for solutions proposed for (CLLD), when a local strategy is designed and the 2021 – 27 period. implemented using an exclusively bottom-up approach. Third, ‘another territorial tool’ sup- ports integrated initiatives designed by the Policy design Member State for investments programmed for the European Regional Development Fund Regional policy planning, implementation (ERDF) under the policy objective 5. and coordination have scope for improve- ment. The EU has signaled that limited admin- Preparation of territorial and local devel- istrative capacity and insufficient data avail- opment strategies is a prerequisite for ac- ability undermine credible assessment of the cessing EU funds devoted to territorial in- effectiveness and quality of implemented sup- struments. The Common Provisions Regu- port measures and investments. These gaps also lation (CPR) prescribes specific technical and weaken the prospects for more evidence-based procedural aspects concerning these strate- policymaking and more adequate policy re- gies with regard to i) their contents, ii) their sponses. To address these, the EC provided guid- ownership by relevant territorial authorities/ ance to GoB that is presented in Box 1.2. bodies, and iii) involvement of relevant terri- torial authorities/bodies in selecting invest- BOX 1.2 EC’s guidance to Bulgaria on policy design ments compliant with these integrated terri- torial strategies (see Annex 1 for more details). • The link between the macroeconomic and structural conditions (European Semester) and regional development (Cohesion Policy) should be strengthened. Unfavorable macroeconomic and structural The territorial approach must fulfil two framework can undermine the effectiveness of territorial investments minimum requirements to use EU funds. and the benefits they can bring to the citizens. This means that even Investments must be based on integrated well-targeted investments cannot produce optimal and lasting develop- ment outcomes if not reinforced by adequate improvement of frame- territorial or local development strategies work conditions. (multi-sectoral, multi-stakeholder, optionally • Economic activity poles need to be further developed to enhance con- multi-territorial) and a relevant local or ter- vergence between regions and create the linkages with the surround- ritorial body shall select or shall be involved ing areas. Not only the major urban areas should be supported as import- ant drivers of growth, but also the development potential of smaller cities in the selection of operations (multi-level, should be reinforced so they can act as local centers of growth. Ensuring optionally community-led). better connectivity among them and to major cities is a key prerequisite if they are to effectively retain or attract people. • Innovation-focused smart specialization strategies should be instru- EU provided Bulgaria with mental in stimulating growth. The regional innovation systems should the following guidance seek to improve interactions among businesses and between businesses and research institutions. • Existing gaps in infrastructure observed in regions should be reduced The regular dialogue between the GoB and and major investments should be made in education to attract and EC indicates three areas regarding regional retain high quality human resources. Reducing these gaps, e.g. by improving the road network, in combination with investments in human policy and territorial instruments that capital, skills and innovation, will help improve the competitiveness of require the country’s attention. These are regions and increase their attractiveness for people. i) policy design that is more spatially sensitive 15. The reviewed documents (prepared by EC services or commissioned by the EC) include: Country Reports 2019 & 2020 (versions published in February 2020, and May 2020) with annexes containing invest- ment guidance for Bulgaria with regard to 2021 – 2027 programming perspective and the Just Transition Fund; OECD pilot action on frontloading administrative capacity (2019 – 2020); Competitiveness in low-income and low-growth regions The lagging regions report (2017), EC Spring Forecast (2020), EC’s observations on draft Partnership Agreement 2014 – 2020, EC’s recommendation for a Council recommendation on the 2019 National Reform Program of Bulgaria and delivering a Council opinion on the 2019 Convergence Program of Bulgaria. 22 An Analysis of the Possibilities to Implement Territorial Instruments Better targeted investments such as the European Quality of Government Index, the Worldwide Governance Indicators Investments should help solve problems and the Global Competitiveness Index. The lat- a territory faces and since territories are di- ter ranking assesses that institutions in Bul- verse, their needs vary, and the resulting in- garia are the weakest element of its enabling vestments should reflect this diversity. The environment (57 out of 100 but on par with its least developed areas, such as Bulgaria’s North peers in Central Eastern Europe), significant- West region and many rural areas have dif- ly behind on infrastructure, ICT adoption and ferent needs compared to urban hubs and re- macroeconomic stability, respectively 71, 73, 90). quire different support. Such a nuanced, but According to the European Quality of Govern- also more coordinated, approach is expected ment Index, Bulgaria is among the lowest per- to pave the way for more territory-sensitive formers together with Italy, Greece, Romania and concentrated investments and help tack- and parts of Croatia and Hungary. This index le the growing regional disparities in a more assesses government performance with regard efficient way. Box 1.3 provides EC’s guidance to three pillars: quality, impartiality and cor- on investment targeting to the GoB. ruption. Bulgarian NUTS 2 regions are among the lowest scoring regions in the EU, with the Northwest, Southeast and Southwest regions BOX 1.3 EC’s guidance to Bulgaria on investment targeting ranking respectively at 200th, 199th and 195th Sectoral investments should be better tailored and coordinated to reflect place out of the total of 202 European regions the individual characteristics of specific territories and more effectively address observed imbalances and support endogenous potentials. EC represented in the survey. offered examples of thematic types of investments where more territorial targeting should be applied: research and innovation, transport, water infra- The quality of the institutional framework structure, waste, energy infrastructure and energy efficiency, labor market, education system (especially with regard to disadvantaged groups, rural for administration and implementation of areas and most deprived regions). ESIF in Bulgaria also leaves space for im- Investments should be implemented in line with a needs-based approach provement . Enhanced efforts are needed to to ensure sustainability of results. strengthen the capacity of relevant authori- Investments should be financially and territorially concentrated to gener- ties to deliver policies and strategies for the ate the critical mass necessary to achieve measurable improvement. The implementation of the funds, as well as im- fragmentation of investments limits the impact of regional policy. proved coordination between central level High priority investments should be identified to foster the integrated socio-economic local development of the following types of territories: stakeholders to ensure integrated service de- rural areas (also through CLLD); major urban centers; smaller cities and livery, and greater complementarity of devel- towns (local growth centers); and regions/areas affected by the transition opment endeavors. from the carbon-intensive industry Complementarities between investments should be reinforced. This in turn The administrative capacity of engaged requires strong and effective coordination mechanisms across territories, sectors and funding sources — e.g. investments addressing the needs of a stakeholders (MAs and beneficiaries) is specific territory affected by the transition from carbon-intensive industry a fundamental factor behind the perfor- financed under the Just Transition Fund should complement those under mance of EU funds. Effective management of Cohesion Policy to maximize positive development outcomes; it should be considered whether same or similar investments, e.g. a technology park, the investments process relies on the admin- are needed in neighboring municipalities. istrative capacity of Managing Authorities of Investments should address to a greater degree the needs of different individual operational programs, as well as of types of functional areas, and not focus on standard administrative divisions. that of a diverse range of stakeholders (local government, SMEs, NGOs, etc.) involved in its implementation. The recent study identified Strengthening institutional a set of specific challenges faced by the Man- capacity aging Authority (MA) of the Operational Pro- gram Regions in Growth (OPRG) 2014 – 202016. The enhanced quality and functioning of The three main bottlenecks are: i) organiza- institutions would strengthen the econom- tional structure of the MA does not support ic and social potential of Bulgaria. Bulgaria an efficient work cycle, ii) insufficient ap- scores low on quality of governance indices, plication of the bottom-up approach for the 16. Pilot action on frontloading administrative capacity building to prepare for the post-2020 programming period. Roadmap And Diagnosis, OECD, 2020. Chapter 1 Introduction 23 purposes of integrated strategic planning and efficiency and effectiveness of investments implementation of the OPRG, and iii) insuf- largely rely on their abilities to understand in- ficiently transparent framework conditions vestment priorities, prepare high-quality proj- and regulations. The study concluded that ef- ect proposals, find and convince project part- forts to enhance the administrative capacity ners, implement planned activities in a timely of not only the MA OPRG, but also key stake- manner and in a foreseen budget. Their in- holders (e.g. Regional Development Coun- sufficient skillset is one of the main obstacles cils and municipal authorities) are needed to effective investments and the relevant MAs for the improved performance of regional should facilitate this knowledge and skill gap investment process. Key recommendations during the programming and the implemen- for GoB are presented in Box 1.4. tation phase of the 2021 – 2027 financial per- spective. The complexity of the implemen- The quality of investments will directly de- tation framework foreseen for the oncoming pend on beneficiaries’ capacity to plan and programing period requires the continuous execute projects. Beneficiaries are the back- reinforcing of expertise and capacity of ben- bone of the investment cycle and the adequacy, eficiaries, including the prospective ones. BOX 1.4 Guidance on EU funds management and capacity building of key stakeholders Horizontal guidance: • quality of institutions and regional administrative capacity should be supported via investments aimed at increasing the effi- ciency, transparency and accountability of public services, promoting e-government, reducing regulatory red tape, modernizing public procurement, and supporting anti-corruption measures and judicial reform. • implementation procedures of the EU funds should be comprehensively simplified to eliminate excessive burden for applicants and beneficiaries; • public consultations should be one of the key tools for strengthening the capacity of beneficiaries, stakeholders, social partners, civil society and other bodies to prepare and implement high quality projects, to shape policy, and to build their sense of owner- ship of development undertakings; • public procurement performance should be improved for more effective implementation of EU funds; • measures to prevent and address conflict of interest, fraud and corruption should be further improved. Key recommendations with regard to supporting the capacity of beneficiaries: • MAs need to know beneficiaries of OPs they manage and understand their actual capacity at the start of the programming period to provide beneficiaries with tailored support ; • operational modalities of offered support schemes should be transparent, procedures clear and unambiguous, processes stream- lined and simplified to avoid excessive burden for applicants and beneficiaries; • the process of interacting with and supporting beneficiaries should be streamlined (e.g. by creating a single point of contact for beneficiaries throughout the project delivery cycle); • regular and constant information exchange with beneficiaries should be maintained through interactive workshops, networks, online tutorials, etc.; • MAs should be actively partnering with consultants, business chambers, and subnational government associations to identify capacity needs of beneficiaries and to address them Selected key recommendations for MA OPRG: • a more bottom-up approach to project design and implementation should be supported by the MA to help ensure that munici- pal/local development priorities are sufficiently recognized and effectively funded through the OP, while also building the capac- ity of local administrations to engage with EU programming and funding opportunities • the capacity of local authorities to implement integrated territorial development strategies should be strengthened; MA could begin building capacity for implementing an integrated territorial approach as one of preparatory measures before the 2021 – 2027 programming period starts. • strengthened coordination a with line ministries, other MAs, and OP beneficiaries is needed to more effectively tackle territorial imbalances and generate much needed complementarities with other types of support measures, effectively integrating sec- toral and territorial dimension of regional policy. a. The issue of ensuring effective coordination has proven to be a significant one for the EC as manifested during the negotiations of the Partnership Agreement 2014 – 2020 with the Government of Bulgaria. MA OPRG planned to support a multi-OP ITI for South West region, but the EC was not convinced that sufficiently concrete coordination arrangements are in place to support its successful implementation. As a result, the ITI in question was not implemented. Source: Observations on the Partnership Agreement with Bulgaria Part I, European Commission, June 2014. Source: Authors on the basis of Strengthening Governance of EU Funds under Cohesion Policy. Administrative Capacity Building Roadmaps, OECD 2020, https://www.oecd.org/publications/strengthening-governance-of-eu-funds-under-cohesion-policy-9b71c8d8-en.htm 24 An Analysis of the Possibilities to Implement Territorial Instruments Rationale of and key by a partnership of stakeholders) is to allow considerations about beneficiaries to flexibly prepare comprehen- sive projects that are tailored to specific needs the integrated territorial of individual territories. There are numerous approach scenarios for integration of infrastructure and ‘soft measures’ related to different thematic The main premise of the new integrated areas. For example, an integrated interven- territorial approach is that more complex tion related to industrial development could (integrated) projects that are designed bot- cover technical infrastructure from PDR; sup- tom-up have a greater potential to solve the port for SMEs from the Competitiveness and developmental bottlenecks of territories Innovation in Enterprises Program; vocation- than individual and fragmented projects. al schools related with the needs of the busi- Such investments are to be planned and im- ness from the Education Program; water sup- plemented by stakeholders operating in a spe- ply and sewerage infrastructure in industrial cific territory (a municipality or municipali- zones from the Environment Program. An in- ties). Hence, the new approach could pave the tegrated project related to tourism could cover way for implementing investments tailored renovation of cultural heritage sites and con- to local needs, creating new sustainable and struction of supporting tourist infrastructure cross-sectoral partnerships across administra- from PDR; training for the staff and mobili- tive boundaries, promoting multi-level gov- ty of the working force from Huma Resource ernance, involving broader groups of society Development Program; and protection of nat- in the territorial development, and creating ural zones for protection of biodiversity from a sense of shared ownership and responsi- the Environment Program. bility for joint development undertakings at the regional level. However, the integrated territorial ap- proach will not be a silver bullet that will Under the new approach, integrated inter- solve all regional problems and equalize dis- ventions will be territorially focused to parities. Broad-based structural reforms and generate optimal regional impact . Such tar- additional central-level investments will also geted territories could be for instance defined be needed to boost productivity and achieve based on their joint goals, like solid waste col- sustainable and inclusive growth across re- lection, flood management, development of gions, especially in the context of adverse de- an economic zone. Ideally, they would involve mographic trends, considerable shortages of collaboration between more and less devel- workers, climate change risks, and the pre- oped areas to support the socio-economic viously mentioned basic infrastructure gaps. development of a broader territory and not only growth centers. That could help address The new approach brings a major change the existing territorial imbalances and con- to the current system of strategic region- trasts between the highly urbanized and the al planning, the institutional framework peripheral territories observed at all levels for regional development, and selection in Bulgaria. It actually means investments and implementation mechanisms of in- that are split between different locations in vestments (projects). It is to ensure great- larger territories but creating adding value er impact on regions, especially the lagging together or investments in one particular ones, thanks to a more bottom-up strate- territory but with significant regional role gic planning, and selection of integrated and functions. investments. Due to its novelty and broad scope, the proposed reform requires intro- The approach has the potential to generate ducing significant legal, organizational, in- added value for Bulgaria and its regions at stitutional, financial, and procedural mod- several dimensions. The integrated nature of ifications. These changes should be embed- investments (intermunicipal coverage, coor- ded in the system of EU funds management dinated projects from different sectors, merg- in Bulgaria prior to the start of the next pro- ing different funding sources, implemented gramming period. Chapter 1 Introduction 25 The integrated territorial approach also planned implementation model with an im- requires putting in place several other ele- portant role of the RDCs, collaborative man- ments that will constitute a system of con- agement by MAs, integration of funding sourc- nected vessels that complement each oth- es, and presence of partnerships is new to all er. These various elements are discussed in stakeholders. The MAs will need to reinforce detail in Chapter 4, and they include for in- their capacity to create and manage a stream- stance: the and exact functions of the RDCs, lined, transparent and well-coordinated im- a selection process and criteria for ITI con- plementation system to support swift uptake cepts and partnership projects under PA1 of of funds. Though integrated projects are not PDR 2021 – 2027 (Type 1b and Type 2 projects), fully novel to Bulgaria, none of the MAs has division of financial envelopes between re- the experience with implementing them at gions, monitoring of actual spending and a large scale and in collaboration with each their potential future reassignment, collab- other. The beneficiaries will also need to oration among the MAs, capacity building of boost their capacity to take advantage of the involved institutions and prospective appli- integrated approach and its flexibility. Their cants and beneficiaries, manuals for benefi- ability to acquire new skills, such as intersec- ciaries, upgrading of the IT system (UMIS), toral planning, creating and managing part- financial and substantive monitoring and nerships, following procedures from differ- evaluation of the integrated approach. All ent Programs, and their speed will be a key these parts are tightly intertwined, and mu- success factor of the new approach. tually reinforce and supplement each other. The effectiveness of the new approach will New approach depend on the interaction of all these ele- ments and managing this complexity is is shaping up the key challenge of the proposed reform. The quality of the territorial approach and its The GoB intends to introduce a new inte- impact on the regions’ growth will depend grated approach to regional development on the quality of individual elements of the to counteract negative development trends implementation system. in its regions. In essence, the GoB plans to channel most of the EU funds devoted to re- The effectiveness will also hinge upon the gional development (PDR 2021 – 27 and ten per- ability of the GOB to monitor the functioning cent of the allocation of most of the sectoral and results of the new approach, to quickly Programs 2021 – 27) via integrated investments, identify and fine tune underperforming el- which will amount to around EUR 2.2 billion17 ements. Implementation of innovative solu- (more details in the section 4.4 and 4.5). The tions usually faces uncertainties and an ef- approach is oriented toward the whole coun- fective monitoring system can mitigate some try. 50 urban municipalities will be eligible of them, because it feeds evidence-based in- beneficiaries under both priority axes of PDR, formation into the decision-making process and in two groups: ten largest urban centers and helps adjusting the implemented solu- and the remaining 40 urban municipalities. tion. For that reason, the ability of the GOB Both groups will have different financing op- to monitor from the get-go the new system tions for their development, see Figure 1.4 for will be imperative. the overall arrangement. Rural municipali- ties will have an opportunity to be involved The proposed integrated territorial ap- in ITI concepts since they will be eligible for proach will be more demanding for en- financing their ’soft’ measures from the six gaged stakeholders (MAs, beneficiaries) contributing sectoral programs and also ‘hard’ than the 2014 – 20 period and they will infrastructural measures from SPARD, that will need enhanced capacity to handle it. The mirror those envisaged under PDR. 17. This amount does not include the expected contributions from the budgets of SPARD and the Maritime, Fisheries and Aquaculture Program 2021 – 27, since they are not currently defined. 26 An Analysis of the Possibilities to Implement Territorial Instruments FIGURE 1.4 Building blocks of the integrated territorial approach Integrated Approach 10 biggest urban centers 40 remaining 215 rural Territory (in four clusters) urban municipalities municipalities* PDR Priority Axis 1 PDR Priority Axis 2 (EUR 0.4 billion) (EUR 1.1 billion) SPARD** Financing 10% from five contributing Programs (EUR 0.6 billion) + Maritime Type 3 PA2 ITI Concepts Projects Type 1 Type 2 ITI Concepts (participation in (thematic scope of (simple project) (territorial integration) (integrated projects) PA2 ITI concepts) 6 Programs + SPARD) PSU/PSC + PSU/PSC + RDC + MAs RDCs + MAs Selection PDR MA PDR MA Partnership not At least two required (Type 1a) Together with Obligatory Together with Applicants municipalities and required PA2 ITI Partnership ITI Partnerships PA2 ITI Partnership in urban cluster (Type 1b) Legend: PSU — municipal Project Selection Unit, PSC — municipal Project Selection Committee, MA — Managing Authority, RDC — Regional Development Council, PDR — Program for Development of Regions 2021 – 27, SPARD — Strategic Plan for Agriculture and Rural Development; Maritime Program — Maritime, Fisheries and Aquaculture Program 2021 – 27. * Rural municipalities will also be able to obtain financing from PDR under priority axes 1 and 2 in the following areas: industrial zones, national road infrastructure, urban mobility, and healthcare infrastructure if these are part of ITI concepts. It still needs to be clarified, whether all rural municipalities will have this opportunity. ** The amount of SPARD and Maritime Program’s contributions is currently undefined. They will be determined on the basis of a methodology that considers the specifics of the European Maritime, Fisheries and Aquaculture Fund, the European Agricultural Guarantee Fund and the European Rural Development Fund. Source: Authors The ten largest municipalities will be fi- 120 million. Project selection will have two nanced by the PDR PA1. Three type of proj- phases, the municipal administration (terri- ects are envisioned under this ‘urban dimen- torial bodies) will be engaged at the first stage sion’ of the PDR: simple investments in a single and the MA PDR will take the final decisions municipality (Type 1), territorially integrated in the second stage. within borders of an urban cluster (Type 2), and integrated with PA2 ITI concepts (allowing The 40 remaining urban municipalities will PA1 – PA2 as well as urban-rural collaboration be able to tap into financing from PA2 and in the thematic areas covered by the partic- the six contributing Programs to finance ipating Programs) — Type 3. Unlike the case their ‘ITI concepts’ and rural municipalities, with ITI concepts under PA2 of PDR, integrat- participating in ITI concepts, will addition- ed investments for ten largest urban munic- ally have access to SPARD. Within the ‘territo- ipalities (Type 1 and 2) will only be financed rial dimension’ of the PDR (i.e. the Priority Axis from PDR, without the possibility to finance 2) a single integrated territorial intervention individual projects from other Programs. The (‘ITI concept’) will be composed of a bundle of partnership principle is not required in Type projects. Projects within the ITI concept can 1a projects. The PA1 projects will need to be in come from different sectors, for instance wa- line with municipal strategic documents (Plan ter, education, infrastructure, energy efficien- for Integrated Development of Municipality, cy, that have a joint goal aiming at addressing PIDM). More details about the PA1 lifecycle and development challenges or strengthening de- types of projects are presented in Chapter 4. velopment potentials of a specific territory. ITI Type 1 and Type 2 projects will have alloca- concepts will be prepared by obligatory part- tion of EUR 280 million and Type 3 around EUR nerships of stakeholders (future beneficiaries Chapter 1 Introduction 27 of projects) that can (but are not obliged to) will regulate the new territorial approach have an intermunicipal character. The proj- and collaboration of the MAs is currently dis- ect selection will have two stages. First the as- cussed within the GoB. sessment of the whole ITI concept by the RDCs as the relevant territorial bodies (this stage Its regulatory and will require the provision of information on the overall concept). Then at the second stage institutional framework comes the assessment of fully developed proj- is also being designed ect proposals included in the ITI concept by the MAs of respective funding Programs. ITI con- The process of designing the integrated cepts will need to be compliant with region- approach is dynamic and this report cap- al strategies (Integrated Territorial Strategy tures the status as of October 2020. Many for Development, ITSD). Section 4.1 presents planning and organizational efforts are simul- a more detailed description of the lifecycle of taneously happening, some strategic aspects an ITI concept. may still evolve, and many technical ones definitely will. For that reason, the assessment A new governance mechanism at the region- provided here is far from being a final ver- al level with an enhanced role of the re- dict. Despite this dynamic situation, it seems vamped RDCs is one of the pillars of this ap- possible to identify elements vital for the cur- proach. The RDCs will be a key element of the rent stage of planning and successful imple- reform and will obtain new functions and or- mentation of the new approach and formu- ganizational structure as per the recently re- late recommendations to capitalize on them. vised Regional Development Act and its rules for implementation. They will help elaborate Some key framework documents that will ITSDs, that will guide future EU investments shape the new approach are still being dis- in the respective regions. The RDCs will also cussed by the GoB. Thus, information about support beneficiaries in the process of form- the final shape of the reform is not readily ing mandatory partnerships, and preparing available, consequently, technical details that ITI concepts under the PDR PA2. Finally, they depend on these higher-level documents can- will carry out a first-stage assessment of the not be developed at this stage. That includes for ITI concept applications and successful appli- instance a demarcation line between Programs, cations will be then passed on to respective financial arrangements, detailed description MAs for final check and approval. In terms of of the project selection process. For that rea- structure, they will have two layers, a man- son, the sections where detailed data is avail- agerial (political) one with the participation able provide more in-depth analyses, while the of mayors and district governors, and a tech- sections with incomplete information base on nical one with experts nominated from oth- WB team’s assumptions and remain at a high- er entities. The RDCs will not be institution- er level of generality. Where necessary, infor- alized, they will not have a dedicated budget mation about specific missing documents and or permanent staff and office. clarifications is provided and implications of these gaps are presented. For instance, so The promotion of integrated investments far the description of key strategic modali- through an obligatory contribution by sec- ties of the integrated approach as provided in toral Programs to the new approach is the the draft Partnership Agreement is relative- second pillar. The CoM’s decree No.335 decid- ly limited, and some of the key elements still ed that most of the Programs will devote at need to be presented (e.g. coordination mech- least ten percent of their EU funds allocation anism, demarcation line, pre-mapping of sec- to supporting integrated investments under toral needs guiding the scope of integrated in- the territorial approach (PA2). That implies vestments). Moreover, a draft of the Council of the contributing MAs will need to coordinate Ministers’ ITI decree that is to provide details their work at the stage of preparation of ITI with regard to the inter-ministerial arrange- concepts, evaluation of specific projects in- ments for the coordination of implementation cluded in the ITI package, and their imple- of integrated investments is still under devel- mentation. The draft CoM’s ITI Decree, that opment, drafts of sectoral Programs have not 28 An Analysis of the Possibilities to Implement Territorial Instruments been finalized, and specific comments of the that could further shape the composition, EC to the draft PDR 2021 – 27 are pending the functions and specific tasks of engaged enti- formal negotiations process. ties as well as their institutional relations and future interaction and processes. The Different institutional arrangements for report also provides feedback on the proposed implementing the integrated approach are arrangements, identifies vital elements, and also being considered. Based on the analy- outlines solutions that could be considered ses of available information and international by the GoB as it further refines and develops experience, this report proposes solutions the new approach. CHAPTER 2  DEVELOPMENT NEEDS OF BULGARIAN REGIONS (NUTS 2 LEVEL) 32 An Analysis of the Possibilities to Implement Territorial Instruments Bulgaria’s NUTS 2 regions share similar economic activity also outside the capital and potential and challenges, though the in- main regional cities. tensity of each differs depending on each region’s individual characteristics. These The concentration of demographic and fi- are identified in the diagnostic sections of nancial resources in the capital city of So- key Bulgarian strategic and planning docu- fia, and a handful of the other biggest cit- ments, that is the National Concept for Spa- ies (Plovdiv, Varna and Burgas), are yet to tial Development (NCSD) and the six Inte- show positive spillovers into smaller ur- grated Territorial Strategies for the Devel- ban centers for them to reap benefits of a opment of NUTS 2 Regions (ITSDs). Table 2.1 balanced polycentric urban development summarized these developmental potentials model. This concentration of population and challenges. and GDP in a few key urban centers seems one of significant bottleneck to more bal- TABLE 2.1 Most common development potential and challenges anced growth in Bulgaria and the resulting of Bulgarian NUTS 2 regions imbalances have both interregional and in- Main development potential of Main development challenges of the traregional dimensions. The monocentric the Bulgarian regions Bulgarian regions development along the center — periphery • Strategic location and trans- • Unfavorable demographic situation axis is visible at all planning levels in Bul- port connections securing and prospects: population decline, garia: regional; district and municipal. Since the potential for industrial and deteriorating age structure, negative logistics activities; natural growth and migration leading the primary and secondary cities often are • Establishment of dense indus- to steady depopulation of peripheral drivers of the regional growth, they need trial zones, including clusters of territories and majority of cities, includ- industrial zones and reserved ing bigger towns and NUTS 3 level to be dynamic and be able to attract invest- territories for new industrial administrative centers; ments. However, it is also important that sur- and logistics activities; • Insufficient transport connectivity: • Concentration of universi- undeveloped transport and communi- rounding areas can benefit from the growth ties and scientific organiza- cation infrastructure restricting access of these main centers. Spurring growth in tions with potential to develop to public services and limiting appeal and implement R&D related to for the location of new investments; more remote and poorer areas that dispro- agriculture and industries and • Infrastructure gap: wastewater treat- portionally experience depopulation and the especially food processing ment and waste management, water industries; and sanitation networks, educational effects of the infrastructure gap constitutes • Well-established regional net- facilities, cultural infrastructure renova- a major challenge. works of educational facilities tion and preservation; (kindergartens, schools) and • Unfavorable labor market trends: educational centers (universi- reduction of the labor force with dete- ties and vocational schools); • Preserved biodiversity and riorating ratio of groups entering and leaving the labor market; Thematic scope natural resources supporting the development of effective • Low economic activity rate: a high share of people who are not working of interventions that agriculture, including organic farming; and also not registered as unemployed searching for a job; are to match identified • Rich cultural heritage which in combination with the natu- • Uneven and insufficient investments in research and development: they are regional needs ral resources creates opportu - mainly concentrated in the city of Sofia nities for the development of and their scale in insufficient; diverse tourist products; • Insufficient access to health care: ITSDs will become key strategic documents • Well-developed polycentric net- mainly in peripheral territories and even at the NUTS 2 level and will create a com- work of urban centers. bigger towns and NUTS 3 level centers. prehensive strategic framework for each re- Source: Authors on the basis of the NCSD and ITSDs gions’ development. Additionally, all Bulgar- ian municipalities should develop their Plans These identified development disadvan- for Integrated Development of Municipali- tages generate three types of challenges for ties (PIDMs) in accordance with the ITSDs in regional development. First, overcoming or such way that the local priorities reflect the at least limiting the consequences of negative regional ones. The planning nature of the demographic trends and fostering the devel- ITSDs is to fully cover the different region- opment of human resources. Second, reducing al needs, which makes range of possible in- the infrastructure gap, especially in the less vestment broad. On the other hand, limited developed areas, by providing investments financial resources available for investments for completion and renovation of technical call for prioritization of interventions on the and social infrastructure. Third, stimulating ones with the potentially biggest impact and Chapter 2 Development needs of Bulgarian regions (NUTS 2 level) 33 value added. The goal of ITSDs is to guide the BOX 2.1 Regions’ investment needs selection of interventions that could create synergies and thus help enhance regional de- The Integrated Territorial Strategies for Development (ITSDs) identify the following areas as regional needs at the NUTS 2 level: velopment. The ITSDs apply the integrated ap- Infrastructural aspects: proach logic especially in relation to the for- • Construction and reconstruction of technical infrastructures with a focus mulation of their priorities and specific objec- on key transportation links and water supply and sewerage infrastructures; tives. Otherwise, the six ITSDs set forth gen- • Renovation and energy efficiency of various buildings of the social infra- eral areas for interventions and offer limited structure, including healthcare and social services; guidance on specific investments for specif- • Construction and reconstruction of ecological infrastructure for waste- ic territories. They could be divided in four water treatment and waste management. categories: economic, social, infrastructure, Economic aspects: and environmental and cultural that are pre- • Establishment and development of industrial and logistics zones, includ- sented in Box 2.1. ing construction or reconstruction of technical infrastructures and pub- lic spaces; The ITSDs cover a variety of measures that • Improving energy and resource efficiency and also for implementation of new technologies, products, services, models and innovations in SMEs; are suitable for integration, yet, in gener- • Development of integrated tourist products securing year-round and al, they do not provide specific examples diverse tourist activities; of how and where these measures could • Transfer of technologies and establishment of partnerships between be combined. The development of industri- enterprises and educational organizations; al zones and tourist products are exceptions Social aspects: that are included in the lists of priority re- • Providing and training staff for securing quality and access for public ser- gional projects, which are part of the ITSDs. vices including healthcare, social services and education; In principle, the projects are divided by sec- • Integration in the labor market of economic inactive people, including tors and the strategies could more strongly educational activities for new skills for elders; opening new jobs with the involvement of the business; link the thematic interventions to specific • Development of vocational schools and implementing dual education territories or zones at the NUTS 2 level. The on different levels which are in line with the economic structure and ITSDs include ‘hard’ and ‘soft’ measures from business needs; a number of different sectors that could be Environmental and cultural aspects: combined. The ITSDs directly identify a few • Preservation of protected areas for natural resources and protection of types of investments that are suitable for ap- forest resources with utilization of their recreational potentials; plication of integrated territorial approach, • Research, conservation and socialization of cultural heritage and its inclu- but details are not provided. These types in- sion as part of integrated cultural and tourist products; clude construction or renewal of industri- Source: Authors on the basis of ITSDs al zones, investments in education (includ- ing for educational integration of vulnerable groups and for dual education), improving In principle, the ITSDs and Programmes labor market and work force potential, im- for 2021 – 27 will provide the framework provement of ecological infrastructures and that enables thematic integration of invest- protection of biodiversity. ments, especially for urban municipalities. The framework seems flexible and will allow Under the new integrated approach, it seems a broad range of investments. On the one hand, that prospective beneficiaries will have this is commendable, as it does not limit bene- a role of ‘discovering’ specific combina- ficiaries’ creativity in addressing needs of their tions of measures suitable for integration. specific territories. On the other hand, how- The strategic documents could benefit from ever, the lack of strategic guidance could lead streamlining their guidance about which ter- to dispersion of investments and insufficient ritories and zones would be most suitable for concentration of resources in areas that would targeting via the integrated approach and/or drive regional impact. The planned approach sectoral interventions. Such a coordinated will also provide financing encouraging the- message across the NCSP, ITSDs and PDR would matic integration of interventions and mix- help guide prospective beneficiaries in pre- ing hard and soft measures (Chapter 4 pro- paring applications. vides more details). 34 An Analysis of the Possibilities to Implement Territorial Instruments Territorial scope for the rural municipalities will have an oppor- implementing these tunity to participate in ITI concepts. They will be able to participate as partners of urban mu- interventions nicipalities with their own projects for small- scale infrastructure and basic public services During 2021 – 27 urban and rural municipal- supported by SPARD along with the other six ities will, to a certain extent, share sources contributing programs. The inclusion of ru- and modalities of investment financing. The ral territories is a positive development as it definition of an ‘urban municipality’ is adjust- could strengthen the socio-economic impact ed for the upcoming period. The rural-urban of ITI concepts that will go beyond urban cen- dichotomy is based on the population number ters and is likely to generate trickle-down de- of the administrative center. The cutoff point velopment effects for targeted functional areas. for rural municipalities was decreased from the previous 30,000 to 15,000 people and as a The urban-rural division is a key factor that result 50 municipalities in Bulgaria are now will shape 2021 – 27 investments opportuni- recognized as urban, and 215 municipalities ties and modalities in municipalities. This with administrative centers with the popula- classification, however, is applied neither in tion under 15,000 inhabitants are considered the National Concept for Spatial Development rural (Figure 2.1). In principle, the 50 urban (NCSD), nor in ITSDs. The former, proposed municipalities will obtain support from PDR the 20,000 citizens cut-off point as one of the 2021 – 27 and the rural ones from SPARD (see possible scenarios, but it is not consistently a description in Section 1.5). PDR PA1 will fi- utilized in the NCSD. Decreasing the popula- nance ten largest cities in Bulgaria (grouped tion threshold seems sensible however and in four clusters) — see Figure 2.2, PA2 will sup- should simplify the implementation of EU port investments in the remaining 40 urban funds for some urban centers. For instance, municipalities. Moreover, the urban munic- under the 2014 – 20 perspective, 28 munici- ipalities will be able to engage in integrated palities (identified by the NCSD as important interventions that are financed not only from development centers) had their financial sup- PDR 2021 – 27, but also from other programmes. port separated between the OPRG 2014 – 2020 With respect to the main goal of PDR, i.e. over- and RDP 2014 – 2020. This made the prepara- coming inter- and intra-regional imbalances, tion and implementation of projects more complex. For example, the renewal of a school FIGURE 2.1 Division into urban and rural municipalities in the administrative center of these munic- during the 2021 – 27 period ipalities had to be divided between the two programmes — sports fields and equipment under the RDP and energy efficiency under the OPDR. Measures will need to be put in place to avoid this type of situation repeating during the new programming period. There were also instances of municipalities that could not access EU funds because they fell through a gap in the description of eligible urban and rural municipalities (‘white spots’). This also should not be repeated during the next perspective as the proposed territorial scope of the PDR will cover all urban municipalities, while the SPARD will cover all the rural municipalities. The participation of SPARD in the integrated approach helps address the risk of ‘territo- rial discontinuity’ of ITI concepts, that would arise if SPARD would not be able to contribute Legend: yellow color marks rural municipalities, the remaining white, green and shaded with red lines represent 50 urban municipalities for the 2021 – 2027 period. to ITI concepts. SPARD’s participation could also Source: NCSD encourage formation of ITI concepts that would Chapter 2 Development needs of Bulgarian regions (NUTS 2 level) 35 have a greater territorial and thematic scope FIGURE 2.2 Ten urban centers of growth supported by PDR PA1 (investments in urban and rural municipali- ties) and promote functional linkages between them. The ‘territorial continuity’ of ITI con- cepts is important for supporting the develop- ment axes indicated in ITSDs as it could prevent the risk for spatial gaps (‘white spots’ in terms of lack of eligibility of some groups of munic- ipalities for funding)18. For instance, if a rural municipality is located between urban munic- ipalities that participate in a joint ITI concept and this ITI Partnership plans to enhance trans- port capacity by building a road connecting these urban municipalities, the construction of the road on the territory of the rural munici- pality will also be part of the ITI concept. The investments for industrial zones, national road infrastructure, sustainable urban mobility and healthcare infrastructure located in rural areas Legend: The ten cities marked with green squares are identified as growth centers and will be beneficiaries under the PA1 of the PDR 2021 – 2027. These are Vidin, Pleven, Ruse, Veliko Tarnovo, will not be supported by SPARD, because PDR Varna, Burgas, Stara Zagora, Plovdiv, Sofia and Blagoevgrad. will allocate resources for such investments19. Source: NCSD Key messages: NCSD and ITSDs identify a broad range of the investment needs of Bulgarian NUTS 2 regions that paves the way for planning of potential integrated interventions. It seems that some of them could more effec- tively be addressed via the integrated territorial approach, while some by sectoral interventions. NCSD offers directions on topics where integration could be most desirable and deliver highest impact with regard to this division, and ITSDs could further strengthen this section. Similarly, to the current approach, during the next financial perspective the territorial dimension of invest- ments will be shaped by the rural-urban divide. It would be beneficial to further elaborate how rural municipalities will be able to fully participate in the integrated approach and how SPARD will contribute to the integrated approach. The problem of ‘white spots’ from the previous perspective seems solved. 18. Without inclusion of SPARD into the integrated approach, there would be a risk that rural municipalities could not apply for financing as a part of an ITI concept. That would mean they need to separately apply for funds from other sources (e.g. SPARD). Such separate application would not guarantee funding even if an ITI concept would obtain funding. In turn, this could lead to the lack of ‘territorial continuity’ of ITI concepts. 19. At the time of preparing this report, there was no detailed description about the investments of PDR 2021 – 2027 in the rural areas in terms of beneficiaries and conditions for funding. CHAPTER 3  STRATEGIC PLANNING FRAMEWORK FOR TERRITORIAL INSTRUMENTS IN BULGARIA 38 An Analysis of the Possibilities to Implement Territorial Instruments The 2020 amendments to the Regional De- 3. development of regional tourist products velopment Act (RDA) introduced a new sys- based on natural resources and concentra- tem of strategic planning documents, which tion of cultural heritage, covering groups integrates spatial and socio-economic plan- of municipalities. ning to promote a more holistic approach to development processes in Bulgaria. It con- The NCSD also formulates the need for the sists of three tiers: national (National Con- concentration of resources and investments cept for Spatial Development), regional (In- in ten urban centers. Such an approach is tegrated Territorial Strategies for the Devel- to support the functionality of the nation- opment of NUTS 2 regions) and local (Plans al urban axes defined as polycentric linear for Integrated Development of Municipal- zones formed by the integration of devel- ities). These documents constitute the stra- opment poles (large and medium-sized cit- tegic framework for the implementation of ies) with the country’s transport and com- the new integrated approach and territori- munication network. According to the NCSD, al instruments. these ten main urban growth centers should focus investments for urban projects that could generate substantial trickle-down ef- National Concept for fects and boost the development of the en- Spatial Development of tire country. Bulgaria (NCSD)20 The investment needs of the remaining 40 urban municipalities are included into the The NCSD defines the medium-term spa- needs of broader territories. Such integra- tial framework for all development invest- tion into broader areas promotes the focus ments in Bulgaria . The Concept describes of the development efforts on intermunici- the basic model for polycentric development pal needs and potentials, with a view to gen- which integrates different levels of urban cen- erating a wider regional impact. ters and axes for development into a single spatial system. The Concept also identifies ‘functional zones’ as territories with a higher prior- The Concept supports the idea of the in- ity for investments. The selection criteria tegrated approach and promotes coopera- are derived from geographical characteris- tion between municipalities to effectively tics, specific location (e.g. mountainous) or address territorial challenges. A major up- on the observed vulnerability of territories date of the NCSD that took place in 2020 has to specific development risks (demograph- marked the departure from broadly defined ic, economic, environmental). They consti- territories and the application of much more tute ‘targeted territories for support’ and are territorially limited functional zones. The meant for the sectoral policies and opera- NSCD identifies the following sectors and top- tional programs. Since these targeted ter- ics where integrated approach to investments ritories are large in size, the NCSD defines is advocated: ‘functional zones for targeted support’ to narrow them down. The functional zones 1. provision of quality and accessible health, ed- are seen as a compact spatial system of inte- ucational, cultural, social and administrative grated territories and the NCSD uses them to services in peripheral and weakly-urbanized delimit territorial investments. Functional areas; zones share common or similar conditions and goals and are divided into two types: i) 2. joint implementation of key infrastruc- very stagnant (social zones) for mainly social tural projects, including improvement of measures and ii) zones for stimulated devel- transport access, gasification and construc- opment with the use of primarily economic tion of industrial zones; measures (economic zones). 20. NCSD covers the period of up to 2025; the Concept underwent a major review and a resulting update in 2020. Chapter 3 Strategic planning framework for territorial instruments in Bulgaria 39 In general, the functional zones could be Bulgaria. The draft PDR 2021 – 2027 acknowl- used to direct beneficiaries in developing edges the prominent role of ITSDs because integrated investments, but this concept they are recognized there as ‘territorial strat- is not elaborated in neither the draft PDR, egies’ described under Art. 23 of draft CPR for nor the ITSDs. This is especially true for the 2021 – 2027, which means they will guide pro- ‘economic zones’ because they are promoting gramming of integrated interventions (ITIs) continuous urban axes that bring together financed from EU funds in that period. The urban municipalities under PA1 and PA2 of draft PDR states that all types of activities to PDR 2021 – 27. These urban axes could consti- be supported under Priority Axis 2 with the tute the basis for different sets of integrated focus on territorial development of the NUTS 2 re- investments within a single NUTS 2 region gions need to be identified in ITSDs. The iden- and across the regions. The social zones that tification is to be based on the mapping of include only rural municipalities could also territorial (‘bottom-up’) and sectoral (‘top- be incorporated into integrated investments, down’) development needs. though more details are needed as to how SPARD will contribute to the integrated ap- The strategies introduce ITI Concepts as proach21. The general premise of the integrat- a new instrument for integrated regional ed approach is to stimulate the development development. The presentation of the inte- of weaker territories, which often happens grated territorial approach could be further thanks to link them with more developed enhanced by a more specific and detailed ones. The inability to combine rural and ur- description in the ITSD. The draft ITSDs reflect ban municipalities under the NCSD’s defini- the assumptions formulated in the NCSD with tion of the ‘social zone’ imposes restriction its models for spatial development includ- that would not allow reaping the full benefit ing the core urban centers, and territories of the integrated approach by rural munici- with specific characteristics, including func- palities. Current drafts of the PDR and ITSDs tional zones. do not build on the concepts of the functional zones. Though the ITSDs reflect them in their The draft strategies define regions’ direc- texts, the zones are not utilized for directing tions and areas for development. They pro- any integrated investments. vide comprehensive analyses of the regional socio-economic situation that focus on data available for levels NUTS 2 and NUTS 3, while Integrated Territorial lacking more detailed information and anal- Strategies for ysis with regard to specific groups of munic- ipalities.23 All six strategies have the same the Development structure and a similar approach to identify- of NUTS 2 regions ing trends, as well as formulating conclusions and proposals. Some of the specific objectives The six ITSDs 22 are envisaged as the main of the draft ITSDs directly indicate the scope of regional (NUTS 2) documents that will de- support to be provided under the integrated fine regional priorities and areas for invest- regional approach and a list of priority proj- ments. As of October 2020, draft the ITSDs ects. The prevailing types of investments for have not been finalized due to the need to all six regions include: conduct their environmental impact assess- ment before they are approved by the RDCs • Investments in education, including for edu- and endorsed by the CoM (expected date, cational integration of vulnerable groups Dec 2020). They are a new element in the and for dual education; three-level system of strategic documents in • Investments for cultural infrastructure; 21. It is expected that the SPARD 2021 – 27 will mirror the solutions used in PDR 2021 – 27, though details are still being worked out. 22. In 2019 National Center for Territorial Development (NCTD) was commissioned by MRDPW to prepare a draft of six ITSDs; the drafts were then consulted with RDCs and the general public (spring of 2020). 23. Insufficient availability of data at the local level continues to be one of the challenges for conducting comprehensive territorial analyses in Bulgaria. 40 An Analysis of the Possibilities to Implement Territorial Instruments • Construction and/or renewal of industrial The PIDMs are key municipal development zones; documents that guide future urban invest- • Measures aimed at improving labor market ments. The structure of the PIDMs includes: and enhancing workforce potential; i) an analysis of economic, social and ecolog- • Improvement of environmental infrastruc- ical status, needs and potentials for the devel- ture and protection of biodiversity. opment of a municipality, ii) objectives and priorities for the development of the munici- The draft ITSDs also formulate indicative pality, iii) a communication strategy, partners lists of key investment ideas and estimat- and stakeholders and forms of involvement ed budgets24, though these investments are in preparation and implementation of PIDM, not presented in an integrated way and do iv) zones for integrated approach for tackling not seem to have a strong integrated nature. identified needs and supporting potentials Most of them are structured by sectors and for development (they have different terri- focus on single-sectoral problems and not by torial coverage to ‘functional zones’ speci- territories or by cross-thematic problems that fied in the NCSD), v) program for the imple- would be addressed by a package of different mentation of the PIDM and description of the subprojects, as the integrated territorial ap- integrated approach (these programs are basi- proach proposes. Moreover, they require the cally the set of identified projects with their engagement of central-level stakeholders and territorial scope, financial and organizational cannot be solely implemented by local-level parameters), iv) adaptation measures on cli- stakeholders (following a bottom-up approach). mate change and disaster risk reduction, and These indicative investments are not defined vi) actions and indicators for the monitoring in the context of specific territories because and evaluation of a PIDM. the projects lists are the same for each of the six regions. Moreover, the ITSDs present only The zones for an integrated approach are infrastructure projects without ‘soft’ measures. used as the territorial focus of interven- Nonetheless, some of the investments pro- tions and investments envisaged in PIDMs posed in the ITSDs, e.g. industrial zones, tour- and thus could be the base for integrated ist products, or competence centers, could be territorial development. The Methodological included in ITI concepts of a broader nature. Guidelines distinguish five levels of urban cen- ters in Bulgaria and different requirements regarding the zones applying to these levels. Plans for Integrated The first three levels include 35 cities that compose the main network of urban centers. Development of They will have to define urban zones for the Municipalities (PIDMs) integrated approach within these city borders. Investments in these cities will be financed by The Plans for Integrated Development of the PDR 2021 – 27. The other 15 urban centers, Municipalities (PIDMs) represent the third, which also will be encompassed by the inte- municipal, level of the development plan- grated approach of the PDR, are not obliged ning system in Bulgaria. The framework to have such zones. Clarifying this discrep- for their preparation and implementation is ancy could streamline the implementation shaped by the Methodological Guidelines for the of the integrated approach in urban centers Plans for Integrated Development of Municipalities that will be supported by PDR. issued by the MRDPW. The 2021 – 2027 PIDMs will have an integrated character as they are The concept of zones for an integrated ap- the result of the merger of two former types proach is linked with the concept of joint of documents — the Municipal Development Plans projects and partnerships between neigh- and the Integrated Plans for Urban Regeneration boring municipalities, however their de- and Development. fining criteria are not available. Two types 24. These ideas were collected from central and regional stakeholders as part of the public consultation pro- cess which took place in March and April 2020. Chapter 3 Strategic planning framework for territorial instruments in Bulgaria 41 of zones exist: i) urban zones and ii) other border municipal territories’. The Guidelines, zones with specific characteristics. The other however, do not suggest or impose the need zones could be territories with potential for to link such intermunicipal interventions cooperation with neighboring municipalities. to the higher-level documents, such as a rel- However, criteria for defining the zones are evant ITSD of the NUTS 2 level. currently not yet elaborated. The Methodological Guidelines do not require municipalities to re- The above suggests that intermunicipal col- flect in their PIDMs territorial areas described laboration could be more strongly encour- in the higher-level documents. In turn, the aged and operationalized in the strategic PIDMs neither use territorial groupings of mu- documents. The strategic framework and op- nicipalities proposed by the NSCD, nor apply erational guidelines could provide clearer guid- territorial divisions defined in the ITSDs. ance for municipalities. Additionally, more pronounced complementarity of strategic doc- The Methodological Guidelines allow in- uments at different levels with regard to in- termunicipal cooperation as an option for tegrated planning and investments could fur- the integrated territorial development of ther facilitate intermunicipal links. Provision groups of municipalities. To facilitate such of a clear strategic framework and operation- solutions, the Guidelines stipulate that an al models for collaboration are important in analysis section of a PIDM should not only cov- a situation where municipalities have limited er the territory of an individual municipality, track record in implementing joint ventures. but ‘should also take into account all adjacent Including such elements in the Methodological territories within neighboring municipali- Guidelines for PIDMs could be a first step to ties which can affect the development of the move in this direction. Key messages: The revised strategic framework reflects the planned introduction of the integrated territorial approach on all planning levels (national, regional, municipal). For instance, the strategic documents propose various territorial divisions of the country and some discuss the need for thematic integration, which is in line with the new approach. The framework has scope for further finetuning, for instance a more consistent definition of different territorial types (e.g. functional zones, zones for integrated approach, ten core urban municipalities, 40 other urban municipalities) would enhance documents’ compatibility. Subsequently, these territories could be used for identifying the needs and growth potential and pro- posing intervention categories or specific integrated investments. The NCSD already advocates specific thematic areas suitable for integration yet does not attach them to specific territories. ITSDs enlist key regional interventions to address developmental gaps. They are, however, relatively general and to a large degree single sectoral. Their integrated nature and specific territorial orientation could be further reinforced as many of the indicated interventions have potential to be combined into joint projects. Stronger involvement of local stakeholders in preparing these stra- tegic documents could help better embed these documents in the local context. This seems to be one of the reasons why the future RDCs are to approve ITSDs. Another solution could be to build on rigorous ex-post evaluations of previous experiences with integrated investments and other accumulated evidence to more precisely identify areas where the need for such projects and their potential impact are highest. PIDMs objectives will need to be aligned with goals presented by ITSDs. Municipalities could choose to implement them in intermunicipal partnerships and in specifying zones for integrated approaches. MRDPW’s Methodological Guidelines for PIDMs would need to further specify how to operationalize these zones and partnerships and how to align their goals with planning documents at the higher level. CHAPTER 4  INTEGRATED TERRITORIAL APPROACH IN BULGARIA 44 An Analysis of the Possibilities to Implement Territorial Instruments This chapter reviews the solutions proposed regions. The territorially focused integrated under the integrated territorial approach, interventions are expected to spur growth identifies risks, and proposes measures that in not only a limited number of growth cen- could help further reinforce the design and ters, but also less advantaged territories. By future implementation of the approach in involving a broad group of local stakehold- Bulgaria during the 2021 – 27 period. It first ers, they are expected to help generate a high describes the lifecycle of PA1 and PA2 projects level of ownership, spur durable partnerships, and the roles and capacity of stakeholders and ensure the sustainability of investments. engaged in the new approach. Then it analyzes All of these should translate into the stron- the implementation framework of the inte- ger socio-economic development of individ- grated approach. Individual sections focus on ual territories and broader regions. It is too different aspects of the approach: role division early to cast a final verdict whether the inte- between stakeholders, legal framework, the- grated approach will rise to these expecta- matic and territorial coverage, financial frame- tions, as many strategic and technical aspects, work, guidelines for stakeholders, evaluation which will define it, are still under discus- and selection process, coordination mecha- sion. Nonetheless, this chapter attempts to nisms, and finally monitoring and evaluation. shed light on key aspects that require atten- Since these elements are closely intertwined tion during the further planning work and it is not always possible to make clear-cut dis- proposes strategic and specific solutions that tinctions between them, hence the sections could be implemented under the approach. are somewhat interlinked with each other. The main premise of the integrated terri- Lifecycle of PA1 torial approach is to counteract growing disparities between and within Bulgarian and PA2 projects 25 FIGURE 4.1 The lifecycle of the PA1 projects Under PA1, the three different types of proj- ects will, in principle, follow the same life- PUBLICATION OF APPLICATION GUIDELINES BY THE MA cycle, though they will also have individ- ual characteristics. The general model has the following stages: publication of the proj- PUBLICATION OF INVITATION TO SUBMIT FICHES WITH PROJECT IDEAS ect application guidelines; submitting project fiches; fiche evaluation at the level of munici- palities; submitting fully fledged project pro- SUBMISSION OF A PROJECT PROPOSAL posals; evaluation of proposals at the level of MA, project implementation; and the control and monitoring of the projects (see Figure 4.1 PHASE 1: The lifecycle of the PA1 projects.). A Type 1 PRELIMINARY SELECTION OF PROJECTS BY THE RESPECTIVE TERRITORIAL BODIES/ITI CONCEPTS project fiche is evaluated and selected at the municipal level by the PSUs and PSCs. This PROJECT SELECTION COMMITTEES REGIONAL DEVELOPMENT COUNCILS phase is followed by preparation and submis- sion of a full-scale project proposal, which is evaluated by the MA of PDR. A Type 2 proj- PHASE 2: EVALUATION OF THE PROJECTS BY THE MA ect fiche will need to be prepared by a for- mal partnership (a partnership agreement is required) between municipal administrations IMPLEMENTATION, CONTROL, MONITORING and/or stakeholders from at least two munici- palities within a single urban cluster (territo- Source: Authors rial integration). A project fiche prepared by 25. In October 2020, the GoB decided that SPARD and the Maritime Program will contribute to the inte- grated approach and that rural municipalities will be able to use financing from PDR’s PA1 and PA2 for spe- cific types of investments (industrial zones, national road infrastructure, sustainable urban mobility and healthcare infrastructure), if they will constitute a part of an ITI concept. Details of these arrangements still need to be provided, hence this chapter does not reflect this modality. Chapter 4 Integrated territorial approach in Bulgaria 45 a partnership is then evaluated by the PSUs The aim of the second phase of the ITI con- and PSCs of the respective municipalities. In cept preparation is to award grants to proj- the second phase the partnership submits the ects included in the positively evaluated ITI fully prepared project proposal to the MA PDR concepts. The phase starts with MA MDR (with at the national level for its evaluation. A Type MAs of other Programs) sending an invitation 3 project idea in general follows the PA2 path to candidates (partnerships) with selected through the RDCs. However, to join an ITI ITI concepts to present their fully-fledged partnership, a letter of support from the PSU project applications to the respective MAs. is required, then the ITI concept is prepared At this stage, the partnership needs to have and submitted to the RDC for the first stage fully prepared individual projects that cre- evaluation and then the complete project pro- ate the ITI concept. The application and grant posals are submitted to respective MAs for the award procedure (to be detailed in a dedicated second stage evaluation.26 CoM Decree on the implementation of the integrated approach) will follow the rules for The preparation phase of ITI concept (PA2) direct grant awards. The phase ends with the consist of two parts and it is matched by signing of grant contracts between respective a two-tier evaluation of project proposals. MAs and project beneficiaries. The RDCs will The MA PDR, as the leading MA for the integrated not participate in the second phase of ITI con- approach, will initiate a call for ITI concepts. cept selection. The entities involved in this During the first preparatory phase, stakehold- phase are the Steering Committee, MAs and ers develop an idea of an ITI Concept, which if ITI partners responsible for the implemen- successful, is concluded with signing of the ITI tation of the individual projects included in Concept partnership (Figure 4.2). The signing the selected ITI concept. of a formal partnership agreement is a precon- dition for the submission of an ITI concept for evaluation. A partnership can be composed of CLLD is a progenitor various types of stakeholders, such as: i) state of the new approach bodies, district administrations and municipal authorities, ii) representatives of the civil soci- The community-led local development ety, iii) business, and iv) scientific community. (CLLD) is a type of integrated territorial Municipal authorities will most likely be the approach that was most broadly applied in key actors in the partnerships. The ITI partner- Bulgaria during the 2014 – 20 period and ship further develops an idea of the ITI concept will be also implemented during the next and prepares a more specific, though still quite period. The CLLD model to some extent re- general, description of the ITI Concept and sub- sembles the envisaged ITI approach under the mits it via the UMIS for the first stage evalua- new PDR 2021 – 27, though the scale of both ap- tion. The concept is assessed by the RDC’s expert proaches varies. The CLLD’s goal was to tack- staff and voting members against previously le the joint challenges of rural municipali- approved selection criteria. ties through a package of projects financed FIGURE 4.2 Lifecycle of the ITI concept (PA2) Calls for ITI concepts ITIs concepts submitted in UMIS Assessment of ITIs concepts Approval of ITIs concepts PDR MA Beneficiaries Pre-selection unit, Expert staff RDCs’ voting members Developing a Approval of Signing of a Implementation and Coordination Council for the detailed proposal for project grant Monitoring of projects Territorial Approach, under the each project within within ITI agreement for and ITI concept leadership of Central Coordinating an ITI concept concept each project Unit, would monitor aggregated Beneficiary, PDR data about the implementation of Respective Respective Beneficiary and territorial branches and ITI concepts (PDR MA could act beneficiary MA respective MA RDCs; MAs as its Secretariat) Source: Authors 26. Monitoring and evaluation of PA1 and PA2 projects is presented in Section 4.9. 46 An Analysis of the Possibilities to Implement Territorial Instruments from various financial sources (OPs) and im- of a bigger number of municipal partners plemented by different beneficiaries. More (and total population) in the scoring criteria research is needed to fully evaluate experi- during the assessment process (only 11 per- ence of the CLLDs as they were implemented cent). For instance, a maximum financing relatively late in the current financing per- from the RDP 2014 – 2020 was EUR 1 million spective. This information could feed into for LAGs below 15,000 inhabitants and EUR 1.5 the planning and implementation of the in- million for larger LAGs. Other OPs offered sim- tegrated territorial approach. ilarly small differentiation for LAGs of differ- ent size, which in fact disincentivized larger The Local Action Group (LAG), which is a intermunicipal partnerships (see Annex 2 partnership of different stakeholders, is for more information about experience with the core of the CLLD approach; it prepares CLLD in Bulgaria). the development strategy and manages its implementation. The partnership may take Key messages: two different forms i) a cooperation between The project lifecycle of an integrated package of different municipalities and ii) a coopera- investments will involve many stakeholders at tion between different stakeholders includ- different governance levels. It will require their ing the local administrations, the business, collaboration to develop and implement invest- ments under this new approach that significan- the NGOs. The LAG prepares a Local Develop- tly differs to the previous model. Past experience ment Strategy and divides responsibility be- seems valuable and good practices should be tween partners in achieving its goals, which utilized, for instance related to the CLLD appro - ach, with the caveat though that CLLDs were usually translates in implementing individ- much smaller to currently proposed integra- ual projects. During the 2014 – 20 period the ted projects, especially ITI concepts. Utilizing CLLDs can be supported from the Rural De- ex-post evaluations and any other available evi- dence about integrated projects (both positive velopment Program, OP Science and Educa- and negative) could help finetune the proposed tion for Smart Growth (OPSESG), OP Human new model. Resources Development (OPHRD), OP Good Governance (OPGG), OP Innovation and Com- petitiveness (OPIC), and OP Environment (OPE). Combining different funding sources (OPs) Role and capacity was not obligatory. Eventually, 24 LAGs have of key stakeholders in been financed only by the RDP 2014 – 2020, the remaining 40 have combined funding the integrated approach from different OPs. National, regional and local level stake- The partnership between municipalities holders are involved in the implementation was not an obligatory element of the CLLD of integrated territorial approach. They approach and bigger intermunicipal part- will perform different functions in the im- nerships were not promoted. Smaller munic- plementation of the approach, but their tasks ipalities, below 10,000 inhabitants, could join are connected and will require strong coordi- LAGs only via a partnership. Hence, in prac- nation mechanisms. Figure 4.3 presents the tice, the CLLD concept stimulated coopera- overview of the stakeholders involved at dif- tion between smaller rural municipalities, ferent levels of the implementation system. while the larger ones tended to operate by Most of the entities are not administratively themselves. Out of 64 LAGs supported during subordinated to each other, except the rela- the 2014 – 20 period, only ten included three tion between MA PDR regional branches and municipalities and none had more, which the MA PDR. This is an important element of shows the limited scope of intermunicipal the system, especially under the PA2, where cooperation in LAGs. The two main reasons the so-called ‘networking principle’ will be why the CLLD approach did not stimulate big- applied in performing the new functions of ger partnerships were i) a low cap on a maxi- RDCs related to the evaluation and selection mum size of CLLD’s budgets and ii) low weight of ITI concepts. Chapter 4 Integrated territorial approach in Bulgaria 47 Building the administrative capacity of FIGURE 4.3 Levels of the integrated approach implementation stakeholders will be one of the key suc- National level cess factors for the successful implementa- tion of the integrated territorial approach. PDR MA Contributing MAs CCU (CCTA) Across all stakeholder groups similar sets of skills and capacities need to be developed though their specific character will differ de- Regional level pending on the role of a stakeholder in the system. All will require sufficient human re- RDCs PDR MA branches DIC sources equipped with information and tech- nical skills that allow them to implement integrated interventions, and have at their Local level disposal sufficient technical resources (e.g. PSUs / PSCs Beneficiaries IT system), as well as the financial means to carry out their tasks and potentially hire ad- Legend: PDR MA — Managing authority, Program for Development of Regions 2021 – 27, ditional expertise. New tasks and responsi- CCU — Central Coordinating Unit, CCTA — Coordination Council for the Territorial Approach, bilities will require new types of skills and RDCs — Regional Development Councils, DIC — District Information Center, PSU — Project Selection Unit, PSC — Project Selection Committee. capacity. The latter can be developed through Source: Authors the provision of high quality and relevant in- formation and training. One of the key rec- terms and conditions of calls: their territo- ommendations of this report is to design rial coverage, financial envelopes per NUTS 2, and implement early on a systemic and eligible beneficiaries, eligible activities under sustained capacity building program tar- each program, and the criteria for ITI concept geted at different stakeholders to facilitate selection. To facilitate the application and the implementation of the integrated ter- implementation process of integrated invest- ritorial approach. Slow uptake of the inte- ments by the beneficiaries, the MA PDR will grated instruments or low quality of invest- prepare a User’s Manuals for the prospective ments could negatively impact the perception beneficiaries. Last but not least, awareness of the new approach among the stakehold- raising campaigns about the new approach ers and lead to a gradual departure from the will be the task of the MA PDR, though the path to regionalize the development policy other MAs should contribute their experts implementation. and expertise. Such a broad information cam- paign will be a critical element for prepar- ing the implementation of the approach and National level activating future beneficiaries, because it is new to stakeholders and the provision of rel- The PDR MA is the main author of the inte- evant information and guidance will facili- grated approach and its main implement- tate the elaboration of a sufficient number ing entity. It will be responsible for the ini- of high quality integrated project proposals. tiation, coordination with other MAs and publishing calls for applications for ITI con- Other contributing MAs will support the cepts under the PA2 and all three types of implementation of the integrated approach projects under the PA1. It is not yet clear, how through financing projects constituting the calls financed by the ten percent contri- components of ITI concepts. Representatives butions of other Programmes will be pre- of the respective MAs will be delegated to the pared and coordinated (e.g. rolling calls, tem- RDCs to participate in the first stage of the porary calls, coordinated and launched by evaluation of ITI concepts with regard to the each MA separately or as part of a coordinated criteria of their respective Programmes. In cross-MA effort). The PDR MA will evaluate all the second stage of ITI concept evaluation, the PA1 and respective PA2 projects in the second MAs will evaluate the fully developed project stage. PDR MA will prepare the guidelines for proposals that fall into their purview and sign PA1 and PA2 projects that will present the grant agreements with responsible members 48 An Analysis of the Possibilities to Implement Territorial Instruments of ITI partnerships. The grant award proce- can act decisively. Potential working groups dure will follow the rules for direct grant of the CCTA could facilitate taking decisions awards for which the respective MAs are re- related to individual ITI concepts. They could sponsible. The MAs will independently pre- constitute a platform for inter-MA discussion pare guidelines for utilization of funds from needed for taking for example remedial ac- their Programmes. The MAs’ responsibility tions when one of the projects in the ITI con- will be to monitor their respective projects cept is underperforming. The ability to early (financial, substantive, division by priority on identify ailing projects under ITI concepts axes and by territories), exchange informa- and potentially support them or replace them tion with other MAs and report progress and will be key for the success of not only respec- results to the higher-level system. tive ITI concepts, but also of the whole inte- grated approach. The CCTA should be able to The Central Coordinating Unit (CCU) will take decisions concerning ITI concept imple- oversee the implementation of the inte- mentation and for resolving inter-MA barri- grated approach and ensure coordination ers to implementation. The participation of with other investing instruments and pro- the MA for SPARD and the Maritime Program grams. In principle, CCU’s responsibility will the Paying Agency (in the context of its func- be to achieve indicators included in the Part- tions with regards SPARD and the Maritime, nership Agreement and to this end it will co- Fisheries and Aquaculture Program, in addi- ordinate work of all MAs engaged in the im- tion to their MAs) in CCTA is also recommend- plementation of the integrated approach. To ed to enhance the compatibility of interven- that end the World Bank recommends estab- tions for both rural and urban municipalities27. lishing a Coordination Council for the Ter- ritorial Approach, with the CCU as the chair. The contributing MAs need to enhance their Additionally, the CCU will be responsible for ability to work together, fulfil new tasks incorporating any new instruments into the and use new tools. During consultations with ESIF management system, which could emerge MAs on the integrated approach, it was evi- during the programming period, for instance dent that over the previous programing peri- interventions from the Just Transition Mech- ods they have developed their own ways of anism. Finally, it is also responsible for up- managing EU funds. They have finetuned their grading the UMIS system, to adjust it to the specific internal procedures, adjusted their needs for managing and monitoring the in- organizational structure, and developed orga- tegrated approach. nization culture. With the new approach, they need to readjust many of these modalities to The Bank recommends establishing a na- facilitate joint preparation and implementa- tional level Coordination Council for the tion of the ITI concepts. The MA PDR as the Territorial Approach (CCTA) to help coor- leading MA needs to have sufficient human dinate and monitor the overall implemen- and technical capacity to further design and tation of the approach. It is recommend- program the new approach, then manage its ed that the CCTA is chaired by the CCU, the implementation, and be able to monitor prog- MRDPW being its secretariat, and the contrib- ress and evaluate results. Well-staffed depart- uting MAs becoming its members. CCTA meet- ments with experienced staff are needed to ful- ings would provide a formal format for dis- fil these tasks. Much detailed technical work is cussing the implementation of the integrated still needed on the further design of the inte- territorial approach and taking strategic deci- grated approach (recommendations for this sions, for instance the potential reallocation are described in the following sections) that of funds between regional envelopes. The will take time and require a number of itera- CCU’s chairmanship would ensure the CCTA tions. The CCU will need to upgrade the UMIS 27. The Ministry of Agriculture is the MA for SPARD and the Maritime Program. In the current program- ing period, many functions related to the management of both programs are performed by the Paying Agency. If a similar arrangement is applied in the next period, it is recommended that the Paying Agency is also involved in the monitoring of the integrated approach and the coordination mechanism. Though the report in sections devoted to coordination, and monitoring and evaluation refers only to the MA of SPARD and the Maritime Program, it also implies inclusion of the Paying Agency. Chapter 4 Integrated territorial approach in Bulgaria 49 system and all MAs will need to train their staff At the strategic level, the RDCs are respon- to use it. New platforms for day-to-day com- sible for adopting ITSDs that set the devel- munications and data flow between MAs will opment directions for NUTS 2 level regions. need to be developed to facilitate monitoring The current drafts of ITSDs were commis- of the integrated approach. Shall the CCTA be sioned by the MRDPW and prepared by the established, new procedures need to be put in National Center for Territorial Development place to embed it into the institutional system. (NCTD) based on local level consultations and Such broad capacity building efforts and mak- taking into account national plans and sec- ing changes to MAs’ collaboration patterns will toral priorities. The RDCs will have the task take time but should start as early as possible. of endorsing these strategies as documents that guide regional development and inte- grated investments. Regional level At the operational level, the most import- The revamped Regional Development Coun- ant function of the restructured RDCs will cils (RDCs) are now considered by the GoB to be conducting the first stage evaluation of be regional territorial bodies as defined by ITI concepts (PA2). The RDCs will also sup- the CPR 2021 – 2027. The recent amendment port prospective applicants of PA2 projects and of Regional Development Act and its Imple- PA1 Type 3 projects in preparing ITI concepts mentation Rules significantly reformed RDCs’ and creating ITI partnerships. These tasks composition and functions. They are two-tier are divided between the Public Consultation bodies representing both political and expert Unit, Mediation Unit, Preselection Unit and level. The ‘management level’ is composed of the RDC’s management tier and are described a chair, deputy chair and members, and is as- below. Figure 4.2 presents a lifecycle of the sisted by an expert team. The mandate of RDC ITI concept and engagement of actors at sub- chair and the deputy chair is four years, as is sequent stages. the mandate of all other RDC members. The RDCs comprise members with voting rights The RDCs will not have permanent staff, when taking all decisions, and observers with offices or budget and they will operate on deliberative voice. The head of the territori- the basis of a networking principle. This al unit of MRDPW is the secretary of the RDC. means that individuals performing tasks in The representatives of municipalities in the RDCs are delegated from other institutions. RDC are stipulated by the representatives of The head of MRDPW territorial branch28 is municipalities that are members of the rele- a secretary of the respective RDC and staff vant District Development Council on a ba- of MRDPW territorial branches is assigned sis of a selection procedure organized by the to perform separate RDC’s functions. Some National Association of Municipalities in the of them will be part of Pre-selection Units; Republic of Bulgaria (NAMRB). The so-called two employees of regional branches will be ‘named’ RDC members represent: CCU, the Ex- coordinating the work of Public Consultation ecutive Agency for Audit of European Union and Mediation Units respectively; the rest Funds, Ministries, National Statistical Insti- will be involved in implementation of OPRG tute, the Bulgarian Academy of Science, NAM- 2014 – 2020 and PDR 2021 – 2027. RDCs can also RB, nationally represented employer and em- be supported by external experts, shall a need ployee organizations and universities from arise for additional expertise. a given region. The ‘expert level’ consists of three units: Mediation Unit, Public Consul- The task of the Mediation Unit is to cre- tations Unit, and Preselection Unit. The first ate an enabling environment for the estab- two units consists of nominated experts from lishment of ITI partnerships by prospec- the District Information Centers (DICs) in the tive applicants and preparing ITI concepts. respective NUTS 2 region, and the last one is This unit will for example answer questions composed of PDR MA territorial branches and from ITI partners about the eligibility of ben- representatives of other participating MAs. eficiaries and activities, share templates of 28. This report also uses the term ‘MRDPW regional branch’ to refer to these units. 50 An Analysis of the Possibilities to Implement Territorial Instruments documents such as a partnership agreement, and scored against pre-defined selection crite- inform about the timeline of call for appli- ria. The MRDPW is currently working on their cations for ITI concepts, provide information first draft. A Pre-selection Unit will end its about required documents to be prepared work by preparing a list of all assessed and as part of the application and their specific scored ITI concepts. format, selection criteria, and availability of funding under regional envelopes. To pre- The RDC’s ‘management level’, on the basis of vent potential conflicts of interest, munici- pre-defined criteria, will take the final deci- pal authorities whose staff is delegated to the sion about the selection of ITI concepts that Mediation Unit, must ensure their functions were recommended by the Pre-selection are split at the municipal level. Also, there Unit. Then the selected ITI concepts will be should be no subordination between those further elaborated by the ITI partnerships and Mediation Unit members and the employ- individual fully prepared project proposals ees in municipalities, who are responsible will be submitted for the evaluation to respec- to prepare, submit, and implement ITI con- tive MAs. cepts. Finally, to minimize the risk of con- flict of interest, the Mediation Units should The Bank recommends that the MRDPW and not assist ITI partnerships in developing the the RDC establish a grievance or complaints content of ITI concepts and should restrict redress mechanism for the whole ITI concept their advice to technical and formal aspects selection process. The system would allow any of the preparation process. parties with complaints regarding the ITI con- cept selection process to lodge their complaints The Public Consultation Units will be re- and have them reviewed and responded. This sponsible for conducting consultations of will be important because the system needs submitted ITI concepts with broader audi- to allow for stakeholders to voice their con- ence as part of the selection process. This cerns (and respond to them, when such con- activity will aim at verifying public support cerns are grounded). for a given ITI concept and receiving feedback that the PCU will forward for review to an ITI The staff of the remodeled RDCs still need partnership. At this stage it is not fully clear to be stipulated and trained. The amended how the feedback and expressed support for RDA and its Implementation Rules created ITI concepts will be quantified and assessed. a framework for the networking principle for This process does not invite a merit-based as- the RDCs. The MAs and DICs that will delegate sessment and could pave the way for subjec- part of their staff to RDCs. This specific nom- tive decisions. Hence the Bank recommends inations are vital to avoid conflict of inter- modifying this function and tasking the PCU est and is especially important in the case with engaging target groups of ITI concepts of the MRDPW territorial branches and DICs. and seeking their view on the ITI concepts Specific tasks should be separated, such as to ensure their specific needs are reflected preparation of projects and their assessment, in the proposed scope of investments. Such or project implementation and their subse- a solution could mitigate an ambiguous as- quent evaluation. Furthermore, RDCs’ staff sessment of public support for the ITI con- who will support ITI partnerships in prepa- cept and could contribute to enhancing the ration of ITI concepts need to develop new quality of the ITI concepts by meaningfully skills and this should take place ahead of the involving target groups. launch of the approach to allow provision of support to beneficiaries from the beginning. The Pre-selection Units, composed of staff This will involve not only getting acquainted nominated from the MAs, will assess ITI with guidelines and procedures for ITI con- concepts in two stages. First, these units cept preparation and implementation, but will check the admissibility and eligibility also developing an ability to use an upgraded of ITI concepts by applying yes/no selection UMIS, familiarity with new selection crite- criteria. The process will end with preparing ria, an understanding of the new strategic a list with all eligible ITI concepts. Second, the framework (ITSDs), and an ability to inter- quality of each ITI concept will be assessed act with ITI partnership and representatives Chapter 4 Integrated territorial approach in Bulgaria 51 of other entities engaged in the ITI approach. regional stakeholders, as well as observers Development of soft and hard skills will be from the PDR MA. important for the effective management of these tasks. Capacity building activities for The PSUs and PSCs will partly inherit func- RDCs and MRDPW territorial branches should tions of the Intermediate Bodies (IBs) and be matched with a similar approach towards Working Groups (WGs) involved in the eval- building the capacity and understanding of uation of project fiches and project propos- prospective applicants and beneficiaries. als in the current financing period. The lat- ter two structures were responsible, at the In the medium- to long-term the stronger municipal level, for the selection of urban institutionalization of RDCs can be pur- projects under the Priority Axis 1 of the OPRG sued to continue the overall progress to- 2014 – 2020. The preparation of project fiches wards regionalization of development poli- by applicants as a step preceding the devel- cy in Bulgaria. Under the current design, the opment and submission of fully-fledged proj- RDCs will rely on the expertise of nominated ect proposals was introduced in the middle experts as they are not provided with their of the programming period 2014 – 2020. For own staff or budget. For stronger decentral- the sake of project fiche assessment, the WGs ization of regional development to take place, that included stakeholder representatives and further empowerment of RDCs will be a key their secretariats, which included two rep- step in the right direction. This would need resentatives of the IBs, were set up. The WG to be combined with turning RDCs into ad- secretariat evaluated the project fiches with ministrative bodies with permanent human assistance of other members of the IB. Then, and financial resources and expanding their the evaluations were presented for discussion tasks and responsibilities. and approval by the entire WG. In the pro- gramming period 2021 – 2027, the functions of secretariats and IBs as well as WGs will be Local level taken over respectively by the PSUs and PSCs. Under PA1, the newly designed Project Se- As the structures and functions of the PSU lection Units (PSU) and Project Selection and the PSC are still under development, Committees (PSC) are to take part in the there still appears to be space to consider first-tier selection of project proposals. ways to simplify the PA1 selection mecha- Similar to PA2, the project selection mecha- nism. If the selection mechanism from the nism under the PA1 (Type 1 and 2 projects) is period 2014 – 2020 is maintained, it is recom- to have two stages. Type 3 projects will fol- mended that the organization of both entities low the PA2 path, the only additional require- ensures a clear division between their mem- ment will be a municipality’s opinion indicat- bers and responsibilities. The Bank, in a sepa- ing that a planned investment (project idea) rate note under this RAS, proposed to MRDPW under an ITI concept is in line with relevant additional options for reducing the complexity PIDM.29 The first stage of evaluation will take of the PA1 selection mechanism and measures place at the municipal level and will be based for mitigating potential conflict of interest. In on project fiches submitted by applicants. The general, it is advisable that the PSCs, which are second stage, by the MA PDR at the national composed of different local stakeholders will level, who will base their evaluation on ful- act as a supervising group of stakeholders. They ly-fledged project applications. will review and confirm the quality assessment performed by the PSUs and not perform eval- The PSUs and PSCs have strong local rep- uations of criteria similar to the functions of resentation. The PSCs will consist of repre- the PSUs. In line with recommendations for sentatives from the municipal administra- PA2, it is important that MRDPW also estab- tion and the PSCs will involve representatives lishes a grievance or complaints redress mech- of the municipal administration, local and anism for the PA1 selection process. 29. It is not yet decided what will be the required format for the presentation of the project idea at the municipal level. 52 An Analysis of the Possibilities to Implement Territorial Instruments Experience from the current financing respondents already started some preparatory period reveals that municipalities still work. With a few exceptions, where initial need to develop stronger capacity to per- steps or preliminary expressions of interest form specific functions related to project are in place, the majority of the respondents selection. Provision of clear instructions have not started the establishment of ITI part- and working documents by the MA to PSUs nerships, and have not identified specific proj- and PSCs would be a first recommended step ects and partners for ITI concepts. Since the in this process. Further steps could include integrated approach is a new concept, targeted tailored training for municipal administra- national awareness campaigns, as a part of tions and stakeholders, together with exter- a broader capacity building campaign, could nal support and technical assistance where support prospective beneficiaries in better necessary. preparing for the start of the new program- ing period. Prospective applicants and The preparation of integrated projects will beneficiaries be a demanding process. For instance, the stages of the creation of the ITI Concept idea Though the group of potential beneficia- include: (i) defining, for a specific territory ries is broad, it is expected that municipali- of the NUTS 2 Region, common needs and ties will be the primary applicants for proj- potential for development; (ii) defining an ects under PDR PA1 and PA2. Other potential ITI Concept’s objectives corresponding to the applicants include district administrations, common needs/potential; (iii) identifying agencies (e.g. the Road Infrastructure Agency); project ideas which would best contribute representatives of civil society NGOs, employ- to addressing the needs and unlocking the ers’ organizations, trade unions; business rep- development potential based on: pre-defined resentatives (representatives of small, medium projects prioritized in the ITDS; measures and and large enterprises), educational commu- projects at the Municipal Plans for Integrated nity and academia, etc. Development; own analysis and as results of public consultations; (iv) identifying poten- While some stakeholders in Bulgaria have tial partners to implement the projects within experience with integrated projects, for the ITI Concept, following economic operator many it will be a completely new way of selection procedure and procedures of state planning and implementing investments. aid clearance. The experience from two types of intermu- nicipal collaborations during the current pro- The capacity (human resources, technical gramming period can be especially useful, and financial) of prospective beneficiaries namely CLLD and those established for waste will need to be enhanced to ensure prepa- management projects (see Annex 2 for more ration of high-quality integrated projects. details). Interviews with prospective appli- During the previous programming periods, cants reveal they have limited understanding the municipalities gathered ample experience of the new approach and are not fully aware with preparing and implementing by them- of the requirements they will need to fulfil to selves simple single-sectoral projects. The new be able to file ITI concept applications30. More perspective, however, will require from them than half of the respondents — potential ben- new skills and abilities to prepare and manage eficiaries — surveyed during work under the more comprehensive investments in collabora- RAS (to draft the ITI Users’ manual) have not tion with other stakeholders. The prospective yet started the preparation of ITI Concepts. beneficiaries who were surveyed assessed the The rest of the potential beneficiaries stated initial stage of developing the ideas for the ITI they had a general idea for a potential ITI con- concept as the most challenging part of the ITI cept they could develop. Some 20 percent of lifecycle. During focus group discussions for 30. In September 2020, the World Bank team organized a series of focus groups with potential beneficia- ries and other stakeholders engaged in the integrated approach to gather their feedback about the approach, better understand their knowledge of the proposed solutions, and gather questions regarding the new approach. Chapter 4 Integrated territorial approach in Bulgaria 53 the preparation of the draft ITI Users’ Manual, launched. A lack of well-developed projects beneficiaries suggested more detailed descrip- is often a bottleneck, and a project pipeline tions of this phases of the process should be could help mitigate that risk. The approach set out in the ITI Users’ Manual and combined could also benefit from pre-identification of with sufficient external support. Focus group regional flagship projects that would address participants voiced the need for intensive ex- key needs of a region. These flagships could ternal advisory assistance at the initial ITI con- be specific large projects that would ensure cept stage to support the preparation of anal- investing sufficient resources in critical ar- yses and feasibility studies. The participants eas. Box 4.1 presents more information about also requested substantial external techni- these two ideas. cal assistance throughout all stages of the ITI Concept lifecycle. The Bank recommends that High capacity beneficiaries will be crucial one of the goals of the assistance provided to for the success of the new approach and will applicants should be support to the identi- require an intensive and broad training pro- fication of a project pipeline of ITI concepts gram for beneficiaries. It is recommended that would set the basis for early absorption that such technical assistance is provided in of financial resources once the approach is an independent and centralized fashion also at BOX 4.1 ITI concept project pipeline and ITI flagship projects To facilitate early uptake of the integrated territorial approach two tools are recommended — the development of a project pipe - line for ITI concepts and the elaboration of flagship ITI concepts at the regional scale. Developing ITI concepts is likely to be a resource consuming and protracted process, hence preparing the ITI concept project pipe - line to speed up early applications is recommended by the Bank team. An effective application of this tool will support investment planning and lead to the generation of investment-ready projects through the provision of comprehensive advisory and institutional support to future beneficiaries at the ITI concept preparatory stage. The early engagement of prospective beneficiaries, and encour- agement for ITI partnership creation, coupled with expert support for project preparation, will facilitate faster uptake of funds boost- ing absorption rates of participating Programs. This will be especially important given the shorter timeframe given by the EC for the overall implementation of EU funds in the next programming period. The project pipeline can be used by the participating MAs as a tool for scouting, prioritizing and fast-tracking (by expediting and/or optimizing) projects that are strategically important for meeting horizontal sectoral objectives in the prioritized fields (currently these are energy efficiency and health care). The project pipeline can also support the development of ‘flagship’ ITI concepts which due to their foreseen thematic scope, required volume of finding and expected regional impact, can be especially important for meeting regional development goals as defined in ITSDs. The proposed Advisory Hub (see Box 7) could support the implementation of the project pipeline as one of its tasks. The overall objective of this task should be the enhancement of the capabilities of the future beneficiaries to successfully meet requirements concerning the preparation of ITI concepts and constituting projects eligible for co-financing under participating Programs. To this end, the scope of assistance provided to future beneficiaries could cover: the review of eligibility and definition of indispensable changes needed in the identified ITI concepts, provision of technical guidance on issues such as ITI concept applications, required attachments (feasibility studies, environmental impact assessments), estimating economic effects of projects; assistance in drawing up the required attachments (feasibility studies, environmental impact assessments, cost benefit analysis, business plans, descrip- tion of grant schemes), preparation of tender documentation (dossier) under standards and procedures applicable to the various type projects implemented under the integrated approach. Regional Advisory Teams could be established to actively scout ideas for ITI concepts in specific sectors/areas and act as ‘brokers of ideas’ in cooperation with future beneficiaries to stimulate and support the generation of viable ITI concepts. Flagship ITI concepts would need to be aligned with needs and development directions derived from the ITSDs. The below pro- posals for topics of potential ‘flagships’ build on the Bank’s review of the developmental needs described in regional strategies and NCSD and were created in line with the current vision of the integrated territorial approach. These could be further modified and com- bined to tailor them to the specific needs of concerned regions and territories. 1. Industrial centers — Modern industrial zones and Water supply and sewerage; Efficient SMEs; Vocational schools and dual education; Trainings for elders; 2. Knowledge economy — Infrastructures for R&D and innovations; Internet connection 3. Integrated tourist products — Integrated tourist products; Vocational schools and dual education; Trainings for elders; Cultural heritage 4. Healthcare — Quality public services; Renovation of public buildings; 5. Recreational territories — Integrated tourist products; Quality green public spaces and corridors; Transport infrastructure 6. Territories in crisis — Modern industrial zones and Water supply and sewerage; Quality public services; Activation of eco- nomic inactive; Renovation of public buildings; Transport infrastructure Source: Authors 54 An Analysis of the Possibilities to Implement Territorial Instruments the ITI concept development stage (as a ‘stan- Moreover, an approach to the provision of dard’ Technical Assistance under projects will technical assistance to prospective appli- only be available when individual project con- cants could build upon good practices from tract are signed) that would be additional to previous approaches, for instance CLLDs. the technical guidance offered by the RDC Under this scheme, beneficiaries could ob- Mediation Units, since the latter would focus tain support for establishing and running on supporting the administrative side of ITI Local Action Groups (preparing strategies, concept preparation and not their substance. covering staff and running cost, etc.). With re- It would also provide beneficiaries with reli- spect to the integrated approach, it is recom- able and unified guidance for compliance with mended to allow ITI partnerships to finance the MAs’ guidelines. Similar assistance could their management body (up to two dedicat- also be required for analysis and legal advisory ed full-time equivalents) from such techni- support for potential public-private partner- cal assistance. The core responsibility of such ships. The Bank recommends creating a ded- an ITI partnership management body would icated Advisory Hub to support this systemic be to coordinate the ITI concept preparation capacity building effort (Box 4.2). and implementation. BOX 4.2 Advisory Hub for building capacity of municipalities One of the key identified challenges for the successful implementation of the new integrated approach is the insufficient experience and capacity of municipalities with regard to integrated investments. Though a wide range of stakeholders can participate in integrated investments, municipalities are likely to be prevalent beneficiaries of projects under the integrated approach, and it is expected that they will often play the role of a leader of ITI partnerships. Establishing an Advisory Hub for Municipalities is recommended to effectively, systematically and professionally enhance beneficiaries’ planning and implementation capacity. The Hub would act as a focal point for expertise with regard to the development and implementation of integrated investments.a It would not only function as a systemic provider of expert support to municipalities, but also help mit- igate identified risks with regard to conflict of interest arising from the foreseen direct engagement of RDC Mediation Units with applicants at the ITI concept preparatory stage. Through a sustainable and comprehensive support mechanism ensuring a sufficiently high and standardized quality of its advi- sory services, the Hub would also help to avoid potentially fragmented approaches applied by different RDC Mediation Units, and consultancies across regions. The Advisory Hub should support municipalities during both the development and implementation of integrated investments with regard to: • strategic planning, and integrated investment planning; • legal advice; • financial engineering and potential financing schemes of investments, including the opportunities and rationale behind combining different funding streams (e.g. other participating Programs 2021- 2027, Just Transition Fund, EU Resilience and Recovery Facility, private funds); • technical expertise regarding prefeasibility and feasibility studies, environmental impact assess- ments, sustainability of investments; • sharing experience and knowledge, and networking with other municipalities across the country to identify and solve common problems, exchange experience with regard to the development and implementation of integrated investments, search for potential partners for integrated investments (‘Partnership Academy’) etc. The Hub could also act as an ‘advocate of the local government’, identifying systemic problems, chal- lenges and potentials for development. These could be further channeled to the MRDPW and other key players at the central level. In the longer term the Hub could establish its regional offices in the NUTS2 regions. In the future, they could evolve into fully-fledged RDC Offices, if the decentralization is to take place as a major policy reform, or professional Regional Development Agencies that could later on assert the role of regional Intermediary Bodies for 2027+ Programs, if the deconcentration is to take place. a The fully developed proposals for the role, required capacity and institutional setup of the Advisory Hub is a subject of a separate proposal prepared by the Bank team to be delivered to MRDPW by end of October 2020. Source: Authors Chapter 4 Integrated territorial approach in Bulgaria 55 Key messages: The integrated approach will be a novelty to all stakeholders and will require higher capacity from both entities that manage it and prospective applicants and beneficiaries at every stage (programming, implementing and monitoring). A number of general and specific recommendations are offered below: Actions to address the insufficient capacity of institutions: • Develop an intensive and sustained capacity building program for staff in respective institutions (RDCs and their units, MAs, PSUs, PSCs, CCU) that will provide trainings during the whole programing period • Start building the capacity ahead of the system implementation to allow early uptake of funds • Carry out broad awareness raising campaigns • Introduce arrangements allowing interinstitutional learning • Establish the CCTA to help coordinate MAs and monitor the overall implementation of the approach Actions to address the insufficient capacity of beneficiaries: • Establish the Advisory Hub to provide systemic, professional and impartial capacity building to pro- spective beneficiaries • Early launch of a broad and intensive capacity building program for prospective applicants coordi- nated by the CCU and responsible MA • Step up public awareness campaign to disseminate information about the new approach and encour- age potential applicants to prepare project ideas • Clarify which institution will provide support to prospective applicants under the PA1 (Type1b and Type2 projects) in establishing project partnerships • Provide TA for hiring ITI Concept coordinators (ITI Partnership Manager) • Establish a mechanism for providing comprehensive advisory support to beneficiaries with regard to development of ITI concept and their implementation (Advisory Hub) Early uptake of the approach: • Utilize focus groups and active public engagement methods to gather feedback from stakeholders on the new approach to further finetune its design • Roll out broad participatory process for gathering ideas for ITI concepts • Establish the project pipeline to actively support generation of ITI concepts Managed potential conflict of interest: • Incorporate mechanisms mitigating conflict of interest in the RDCs and PSUs/PSCs during the devel- opment of integrated projects (only formal and technical guidance) and the project selection process by providing clear rules for separation of duties between the entities/units involved in project prepa- ration and evaluation of project proposals. • Establish transparent and objective project selection criteria • Design and put in place a grievance or complaints redress mechanism for PA1 and PA2 project selec- tion processes Move towards the further decentralization of regional policy: • Plan long term development of the RDCs, their functions and capacities to allow their more pronounced engagement in the regional policy planning and development in the future • Consider full institutionalization of RDCs with a permanent budget and staff. Legal framework From the formal point of view, delays in fi- nalizing and adopting most of the expect- The national legal framework, related to the ed acts that will regulate 2021 – 27 program- implementation of the integrated territo- ming period do not need to create a legal rial development interventions financed by gap. This is because the existing relevant acts, the ESIF, comprises of three groups of legal pertaining to the present programming pe- rules. These are the i) rules on regional devel- riod, could be extended to apply to the new opment (Regional Development Act or RDA, programming period subject to minor modifi- and RDA Rules of Implementation), ii) rules cations. The required changes are not expect- on intermunicipal cooperation (Act on Local ed to be essential and they need to reflect the Self-governance and Local Administration), potential changes in the new EU framework. and iii) rules on the management of ESIF (ESIF Furthermore, some of the essentials of those Management Act and related secondary leg- expected acts are dependent on the relevant islation). The basic acts of the national legal EU legislation on the ESIF, the former could framework are summarized in Table 4.1 and formally be adopted after the latter is adopt- discussed in the further subsections. ed and enacted. The CCU in collaboration with 56 An Analysis of the Possibilities to Implement Territorial Instruments the MAs engaged in the territorial approach interventions. Therefore, its preparation and will develop the expected acts. adoption are crucial for the timely preparation for, and implementation of that approach, in- The situation is, however, different with re- cluding inter-alia, the buildup of administrative spect to the dedicated CoM Decree on the im- capacity in RDCs and the establishing of an ITI plementation of integrated approach (‘ITI De- project pipeline by potential beneficiaries. Hence cree’). This decree will introduce for the first time its implementation should be prioritized in the a national regulation on integrated territorial process of adopting the integrated approach. TABLE 4.1 National legal framework for the implementation of the integrated territorial approach in Bulgaria for the programming period 2021 – 2027 Legal act Scope Regional development Regional Development Act (RDA) Basic rules for the planning, programming, management, resourcing, monitoring, control and evaluation of implementation of the system of the documents for strategic planning of the regional and spatial development. Rules for Implementation of the Detailed rules for: RDA, adopted by CoM Decree 1. conditions, terms and conditions for the preparation, coordination, adoption, updating and 183/2020 implementation of the National Concept for Spatial Development (NCSD), the integrated terri- torial strategies for development of the planning regions (NUTS 2 level) and the plans for inte- grated development of the municipalities; 2. organization and tasks of the Regional Development Council and of the District Development Council; 3. monitoring of the implementation of the NCRSD, the integrated territorial strategies for devel- opment of the planning regions (NUTS 2 level) and the plans for integrated development of the municipalities. Inter-municipal co-operation Act on Local Self-governance and General rules and procedure for involvement of municipalities in joint activities with other munici- Local Administration (Chapter 8) palities, central administration institutions and/or other legal entities ESIF programming and management 2021 – 2027 Acts In force ESIF Management Act The national institutional framework for the management of ESIF in Bulgaria. Basic rules for: grant awards; selections of contractors by grant beneficiaries; verification and certification of eligible costs; execution of payments; financial corrections under OPs Regulation, adopted by CoM Terms, procedures and mechanism for the functioning of the Information System for the man- Decree 243/2016 agement and monitoring of the funds from the ESIF (UMIS) and for conducting proceedings before the Managing Authorities through the UMIS CoM Decree 142/2019 Preparation of the strategic and programming documents for the management of the ESIF in Bulgaria for programming period 2021 – 2027 CoM Decision 335/2019, amended Indicative financial allocation of the ESIF in Bulgaria by policy objectives and programs for pro- by CoM Decision 496/2020 gramming period 2021 – 2027 Acts expected CoM Decree Establishment of monitoring committees for the Partnership Agreement and OPs co-financed by the ESIF for 2021 – 2027 programming period CoM Decree on grant award Detailed rules for the award of grants under OPs funded by the ESIF for the period 2021 – 2027 procedures (optional: existing CoM Decree 162/2016 could be extended, subject to minor modifications, to apply for programming 2021 – 2027 too) CoM Decree on eligibility of National rules for the eligibility of expenditure on OPs co-financed by the ESIF for the program- expenditure ming period 2021 – 2027 (optional: existing CoM Decree 189/2016 could be extended, subject to minor modifications, to apply for programming 2021 – 2027 too) CoM Decree on CLLD Rules for coordination between Managing Authorities and Local Action Groups (LAGs) and Fisheries Local Action Groups (FLAGs) related to the implementation of the Community-led Local Development (CLLD) approach for period 2021 – 2027 (optional: existing CoM Decree 161/2016 could be extended, subject to minor modifications, to apply for programming 2021 – 2027 too) CoM Decree on ITI Specific rules on the grant awards to, and implementation of ITI in programming period 2021 – 2027. Source: Authors Chapter 4 Integrated territorial approach in Bulgaria 57 Legal framework and functions of the RDC’s tiers and units are for regional development developed in detail in the new Rules of Im- plementation of RDA.34 In particular, the RDCs The regulatory framework for regional de- do not have their own technical or adminis- velopment has been recently amended to en- trative staff (they will be using experts nomi- able the implementation of the integrated nated by other entities) and do not dispose of territorial approach in the 2021 – 2027 pro- a dedicated budget to cover their operation. gramme. This involved a substantial amend- ment to the RDA in March 2020, followed by the The management tier represents the polit- adoption of the new Rules for Implementation ical level in the RDCs. It consists of voting of RDA in August 2020. members (district governors and represen- tatives of municipalities, NAMRB, socio-eco- The modified legal framework for regional devel- nomic partners, NGOs, local universities, busi- opment has the following main characteristics: nesses, etc.) and non-voting observers (rep- resentatives from ministries, CCU/CoM, Na- Simplified planning framework tional Statistics Institute and others). The Head of regional unit of MRDPW acts as Sec- • the previously existing separate spatial plan- retary of the RDC. ning documents and regional development plans have been merged, as the new type of The expert tier plays operational functions planning documents now combines both as- and is made of technical specialists. It con- pects. The new ‘integrated’ planning docu- sists of three units: Mediation Unit, Public ments at NUTS 2 level are envisaged to play the Consultation Unit and Preselection Unit. The role of ‘territorial strategies’, as a prerequisite first two units will be staffed with experts for the implementation of integrated territori- from the District Information Centers, while al development actions31 (ITI32 and CLLD33) un- the Preselection Unit will comprise of experts der the draft CPR 2021 – 2027. The Plan for In- from the MRDPW’s regional units and from tegrated Development of Municipality (PIDM) the contributing MAs, as well as contracted shall, respectively, play the role of a territo- external experts. rial strategy for the integrated territorial de- velopment interventions at municipal level. This two-tier structure accommodates four different functions of the RDCs, related to • the regional planning levels have been re- integrated regional development: duced from four to three, i.e. national, re- gional (NUTS 2) and municipal, by remov- • representation of the regional public and pri- ing the district (NUTS 3) planning level and vate stakeholders, related to their involve- deregulating the Integrated Plan for Urban ment in the development and implemen- Regeneration and Development (IPURD) as tation of integrated territorial strategies; a separate planning document for urban ar- eas, integrating it into the Plan for Integrat- • counselling and facilitation of prepara- ed Development of the Municipality. tion of ITI concepts, including partnership promotion; New structure and functions of RDCs • evaluation and preselection of submitted The RDA provides for a two-tier structure ITI concepts; (management and expert) and new func- tions of the RDCs. The structure, composition • public consultations on submitted ITI concepts 31. Articles 22 – 24 of CPR 2021 – 2027. 32. Integrated Territorial Investment under Article 24 of CPR. 33. Community-led Local Development under Article 25 of CPR. 34. A detailed description of the RDCs’ structure and functions are provided in the previous WB report delivered under current RAS agreements, Operational Programme for Regional Development 2021 – 2027: A proposed mechanism to involve Regional Development Councils 58 An Analysis of the Possibilities to Implement Territorial Instruments Integrated regional development inter- options for municipalities. The former can cov- ventions will be implemented through er, among others, i) joint development, manage- so-called ‘ITI concepts’, developed by ment and/or maintenance of infrastructure, ii) ITI partnerships delivery of public services, iii) implementation of joint actions/projects. The latter encompass- The RDA Implementation Rules define the es any possible form of joint actions between ITI concept as ‘a combination of inter-connected municipalities, other public institutions and/or and complementary (integrated) projects/project other legal and natural persons. For instance, ideas aimed at areas with common characteristics these could take a form of joint implementa- and/or development potentials, including an appro- tion of projects, establishment of joint commer- priate combination of resources and measures to cial or non-profit legal entities (between mu- be used purposefully to achieve a specific objective nicipalities or between one or more municipal- or priority of the integrated territorial strategy for ities and/or other legal and/or natural persons). the development of the respective level 2 planning More research is needed how the accumulated region’35. experience from the implementation of frame- work for intermunicipal collaboration could be An appendix to the RDA Implementation adapted to the ITI approach to support the cre- Rules regulates in detail the procedure for ation of sustainable project partnerships. the selection of ITI concepts for funding. It is to be carried with the combined efforts of RDC expert units (the Public Consultation and Legal framework Preselection Units) and of the RDC manage- for ESIF implementation ment tier under predefined evaluation criteria. The legal framework for ESIF implementa- tion, relevant to the integrated approach, Legal framework for inter- comprises of general ESIF rules and specific municipal co-operation rules on the integrated territorial approach implementation. The general rules on ESIF The legal framework for intermunicipal implementation, currently applicable to the cooperation is provided by Chapter 8 of 2014 – 20 period, are expected to also apply to the Act on Local Self-governance and Local the new 2021 – 27 programming period, after Administration. It contains rather general minor updates. The specific rules on the ap- rules for the involvement of municipalities proach implementation are currently being in joint actions with other municipalities, prepared by the GoB. central administration institutions and/or other legal entities. MRDPW and CCU have decided that the im- plementation of the integrated territorial Municipal cooperation is to be carried out approach should be regulated in a dedicat- on the basis of a cooperation agreement, ed CoM Decree. In a derogation of the gen- which has to be approved by the relevant eral national ESIF rules, this special piece of municipal councils. That cooperation agree- legislation will provide detailed specific reg- ment should specify, inter alia, the forms of ulation (lex specialis) of the complete selection, cooperation and/or the type of a joint legal grant award and implementation processes entity to be established, as well as the rules pertaining to ITI. In particular, the dedicat- for the set-up, powers, decision-making pro- ed legislation shall provide for a two-phase cess and termination of inter-municipal coun- grant award process to ITI partnerships sub- cils and/or commissions, when the munici- mitting ITI concepts, involving: i) a compet- palities have agreed to establish such bodies itive selection of ITI concepts and ii) direct for the purpose of their co-operation. grant awards by OP MAs to the fully-fledged individual projects (project proposals) in- The scope and forms of co-operation are cluded in the selected ITI concepts. The ap- broadly defined, providing a wide range of proach to have a separate CoM Decree on the 35. Cf. Clause 1, para. 1 of the Additional Provisions of the RDA Implementation Rules. Chapter 4 Integrated territorial approach in Bulgaria 59 integrated approach is in line with the rec- BOX 4.3 Thematic interventions allowed ommendations of the WB team.36 under the PDR PA1 The CoM ITI Decree will provide the basis for • Infrastructure supporting economic activity, including infrastructure and detailed elaboration of the implementation buildings for the development of business and industrial areas; system for the integrated approach and spe- • Energy efficiency and renovation of residential and public buildings; cific capacity building activities for stake- • Sustainable urban mobility; holders. As of now a first draft of this Decree • Road infrastructure, functional connections and road safety including is being prepared by an internal working group roads of I, II and III class (outside the TEN-T network); in MRDPW, as its details are not publicly avail- • Green urban infrastructure and security in public spaces; able. The WB team prepared an outline of the • Educational infrastructure; essential content for the CoM Decree and pro- • Municipal housing; vided this to MRDPW for use by the internal • Health and social infrastructure; working group.37 At a later stage, the draft will • Culture and sports; be discussed and agreed by an inter-ministerial • Tourism. working group comprising of representatives Source: Authors of all contributing MAs. Subsequently, it will be passed to the CoM for the formal adoption procedure. PDR Priority Axis 1 Key messages: for ten urban centers The legal framework is currently modified to accommodate the new approach. Some import- The biggest 10 urban municipalities will ant changes have been already accomplished, be supported by three types of projects such as modification of the RDA and its Rules financed via the PA1 and the six contrib- of Implementation. More work is still needed to fully shape the legal framework. The single uting Programmes (Type 3 projects) that most important document with regard to the need to be in line with the PIDMs, which integrated approach is the CoM ITI Decree that should follow the ITSDs. The ten selected will provide many details on how the approach will function. Its efficient development in col- municipalities are Vidin, Pleven, Ruse, Veliko laboration with all contributing MAs is recom - Tarnovo, Varna, Burgas, Stara Zagora, Plovdiv, mended to expedite further planning work. For Sofia and Blagoevgrad. These project types the success of the approach will be also needed to ensure that RDCs fulfil the prerequisites of a could be utilized to finance a wide array of ‘territorial body’ as prescribed by the CPR. interventions (see Box 4.3). The three types are as follows: • Type 1: simple projects in an urban munic- Thematic and territorial ipality — Type 1 projects are implemented coverage in a single municipality and they use PA1 funds only to finance single sector (‘sim- ple’) interventions. Eligible beneficiaries PDR will be dedicated to the implementa- are: i) a single municipality (from the ten tion of the integrated territorial approach selected, partnership with other stakehold- and will support all 50 urban municipali- ers is not required), ii) a single other entity ties in Bulgaria. The program will operate (partnership not required), or iii) a partner- via two PAs — urban and territorial; they dif- ship between different potential beneficia- fer in terms of targeted territories, offered ries (urban municipalities or stakeholders). support measures, engaged institutions, and The first two sub-types are referred to as implementation procedures. Figure 4.4 pres- Type 1a projects, where partnerships are not ents a simplified picture of the approach, com- required, the third sub-type is referred to as mon areas between PAs and their differences. Type 1b where the partnership is mandatory. 36. See p. 67 – 70 of the ‘Strategic Consultation Report’ of Nov. 2019 under Component 1 of the RAS. 37. ‘Proposal of the WB team on the scope and essentials of the CoM Decree on the terms and conditions for grant awards to, and implementation of, Integrated Territorial Investments’. 60 An Analysis of the Possibilities to Implement Territorial Instruments FIGURE 4.4 Outline of the integrated territorial approach Integrated Approach 10 biggest urban centers 40 remaining 215 rural Territory (in four clusters) urban municipalities municipalities* PDR Priority Axis 1 PDR Priority Axis 2 (EUR 0.4 billion) (EUR 1.1 billion) SPARD** Financing 10% from five contributing Programs (EUR 0.6 billion) + Maritime Type 3 PA2 ITI Concepts Projects Type 1 Type 2 ITI Concepts (participation in (thematic scope of (simple project) (territorial integration) (integrated projects) PA2 ITI concepts) 6 Programs + SPARD) PSU/PSC + PSU/PSC + RDC + MAs RDCs + MAs Selection PDR MA PDR MA Partnership not At least two required (Type 1a) Together with Obligatory Together with Applicants municipalities and required PA2 ITI Partnership ITI Partnerships PA2 ITI Partnership in urban cluster (Type 1b) Legend: PSU — municipal Project Selection Unit, PSC — municipal Project Selection Committee, MA — Managing Authority, RDC — Regional Development Council, PDR — Program for Development of Regions 2021 – 27, SPARD — Strategic Plan for Agriculture and Rural Development; Maritime Program — Maritime, Fisheries and Aquaculture Program 2021 – 27. * Rural municipalities will also be able to obtain financing from PDR under priority axes 1 and 2 in the following areas: industrial zones, national road infrastructure, urban mobility, and healthcare infrastructure if these are part of ITI concepts. It still needs to be clarified, whether all rural municipalities will have this opportunity. ** The amount of SPARD and Maritime Program’s contributions is currently undefined. They will be determined on the basis of a methodology that considers the specifics of the European Maritime, Fisheries and Aquaculture Fund, the European Agricultural Guarantee Fund and the European Rural Development Fund. Source: Authors • Type 2: territorial integration within an will be able to obtain financing from the six urban cluster — Type 2 projects will use contributing Programs. Eligible beneficia- PA1 to finance interventions (could be sin- ries are partnerships between eligible ben- gle-sector) that bring together a minimum eficiaries of i) PA1 (entities from 10 urban two municipalities of an urban cluster. Eli- municipalities), ii) eligible beneficiaries of gible beneficiaries: i) a partnership between PA2 (entities from the remaining 40 urban at least two urban municipalities belonging municipalities — see the following section), to the same clusters (PDR groups the 10 ur- and iii) rural municipalities for the imple- ban municipalities in four clusters 1. North mentation of ITI concepts. West region — Vidin and Pleven; 2. North Central and North East region — Ruse, Ve- PA1 offers the ten most developed urban liko Tarnovo, Varna; 3. South East and South municipalities access to financing for sim- Central region — Burgas, Stara Zagora and ple investment projects (Type 1a), the re- Plovdiv; 4. South West region — Sofia and Bla- maining urban municipalities do not have goevgrad), ii) a partnership of various types such an opportunity under the PA2. Such of stakeholders from at least two different an arrangement creates more favorable devel- urban municipalities included in a cluster opment conditions for the ten strongest cit- (including urban municipality). ies while not providing such an opportunity to smaller urban municipalities. It would be • Type 3: integration within an ITI con- important for the PDR to provide more evi- cept — Type 3 projects will contribute to dence to substantiate this differentiation and ITI concepts and the ten largest municipal- the size of the financial envelope dedicated ities involved in ITI concepts additionally to Type 1 and 2 projects. Chapter 4 Integrated territorial approach in Bulgaria 61 PDR Priority Axis 2 for the remaining BOX 4.4 Thematic interventions allowed under the PDR PA2 40 urban municipalities • Health and social infrastructure; PA2 will use ‘ITI concepts’ as a dedicated • Educational infrastructure; instrument to foster development at NUTS • Cultural infrastructure; 2 level and will focus at the remaining 40 • Sports infrastructure; urban municipalities. Rural municipalities • Residential accommodation; will also be able use the PA2 financing, though • Energy efficiency; to a limited extent. An ITI concept will com- • Investments for sustainable urban mobility; bine individual projects into a single ‘com- • Road infrastructure, functional connections and road safety plex’ concept that has a common set of goals, including roads of I, II and III class (outside the TEN-T network); is implemented by a partnership of various • Quality and safe environment; stakeholders, and is financed from different • Measures to promote economic activity; sectoral programs. The ITI concepts must • Tourism; directly link to the ITSDs to contribute to • Cultural-historical heritage. the achievement of a desired regional impact that is identified in these regional strategies. Source: Authors The integrated approach allows a broad array of investments, but it also emphasizes the importance of their economic impact. Hence, such situation offers prospective applicants at least one of the projects within the ITI con- needed freedom to tailor their interventions cept needs to be oriented towards the eco- to their specific needs, on the other hand, it nomic development or implemented by an does not prioritize investments in areas with economic entity. the greatest needs. A robust monitoring sys- tem will be needed to measure how territori- The ITI concepts will be financed not only al instruments are implemented and whether via PA2, but also by the selected six sectoral a sufficient amount of interventions is real- Programmes and SPARD and a part of PA1 ized in the most critical areas to bring about devoted to Type 3 projects. The specific scope the strategic goals of the integrated approach, of the ITI concepts will be decided based upon i.e. more cohesive growth. a set of criteria which will assure compliance between the projects and national sector pri- orities. The first draft of criteria is now being Financial framework developed by the GoB. Like PA1, the eligible thematic scope of interventions under the EU funds are to contribute around EUR 2.2 PA2 is broad (Box 4.4). billion for the integrated territorial ap- proach during the 2021 – 27 (EU co-financ- In general, the thematic scope of the con- ing).38 PDR will contribute its full budget or tributing programmes is almost all-encom- EUR 1.56 billion. The remaining EUR 0.6 bil- passing and reflects the variety of chal- lion will come from contributions from five lenges identified at the regional level. PDR of the seven contributing programs39 (the 2021 – 2027 covers a broad spectrum of inter- contribution from the remaining two: the ventions, though its second draft prioritiz- SPARD and the Maritime, Fisheries and Aqua- es two areas — energy efficiency, and health culture Program are still to be defined). Fig- care infrastructure and services. More details ure 4.5 presents the contribution of individ- are needed to understand how this prioritiza- ual programs to the integrated territorial tion will translate into guidance for the inte- approach and the division between the two grated territorial approach. On the one hand, priority axes. 38. This section provides values of budgets and contributions that refer to the EU co-financing only. 39. According to information received from the MRDPW, amendments in the CMD 335 of 2019, as last amended by CMD 496 of 2020, are being prepared which will exclude the Technical Assistance Programme form the scope of the ITI approach and will include the Strategic Plan for Agriculture and Rural Development and the Maritime, Fisheries and Aquaculture Program. 62 An Analysis of the Possibilities to Implement Territorial Instruments FIGURE 4.5 Funding structure of the integrated approach (EU’s contribution) Development approx. 1.6 100% of Regions billion Euro Competitiveness 10% or Region 1 and innovation more Envelope Human 10% or Region 2 resources more EU's Envelope financing approx. 2.2 10% or billion EUR Region 3 Education more Envelope ESIF PA1 financing Research, Innovation 10% or 0.4 billion EUR Region 4 approx. 0.6 & Digitalization more billion Euro PA2 + Envelope contributing Programs 10% or 1.7 billion EUR Region 5 Environment more Envelope Region 6 SPARD Envelope amount to be decided Maritime, Fisheries and Aquaculture Note: PA1 and PA2 amounts do not add up to EUR 2.2 billion due to their rounding, moreover, PDR’s technical assistance contribution in the amount of EUR 60 million is not presented. Source: Authors PA1 will have a budget of EUR 400 million40, easily deplete the EUR 280 million budget for out of which around EUR 280 million (or 70 Type 1 and 2 projects, it is assumed there will percent) will be dedicated to Type 1 and 2 be strong demand for these resources. Thus, projects and EUR 120 million (or 30 percent) it is recommended that these investments are will go to Type 3 projects. PA1 is allocated to awarded through a competitive selection to four urban clusters: (1) North – western region ensure that projects with the highest quality (Vidin and Pleven) — 21.8 percent; (2) North and desired impact are promoted. Central and Northeast region (Ruse, Veliko Tarnovo, Varna) — 23.5 percent; (3) Southeast The budget of PDR PA2 and the contribu- and South – Central region (Burgas, Stara Zag- tions of five sectoral programs for financ- ora and Plovdiv) — 21.6 percent and (4) South- ing the ITI concepts will amount to about western region (Sofia and Blagoevgrad) — 33.0 EUR 1.7 billion and be implemented through percent. The indicative budget of each urban regional budgetary packages. The current cluster is calculated as per a methodology based draft PDR could provide more pertinent de- on four indicators: population (weight 15 per- tails about the budget management modali- cent); territory (15 percent); gross value added ties. PDR PA2 will contribute about EUR 1.1 bil- (20 percent) and infrastructure (50 percent). lion and the sectoral programs EUR 0.6 bil- Seventy percent of the budget of each cluster lion. The overall budget is divided into six in- is reserved for the implementation of Type 1 dicative NUTS 2 regional financial envelopes, (individual projects or partnership within the calculated as a share of the total budget. The territory of one urban municipality) and Type shares of the six regional financial envelopes 2 project (partnership within the territory of are calculated similar to PA1, and are defined the urban cluster), while the remaining 30 per- by applying percentages calculated through cent are allocated for participation of the po- the application of a methodology which in- tential beneficiaries from urban municipali- cludes four indicators — 3 general (popula- ties in Type 3 projects, i.e. ITI concepts under tion — weight 15 percent; territory — 15 per- PA2. Since ten largest urban municipalities can cent and gross value added — 20 percent) and 40. Second draft of the Programme for Development of the Regions 2021 – 2027 provided to the WB team. Chapter 4 Integrated territorial approach in Bulgaria 63 one specific indicator per program (50 per- Key messages: cent) that reflects sectoral nature41. As a result, Significant resources are dedicated to the implementation of the integrated the shares of the regional financial envelopes territorial approach (EUR 2.2 billion, EU co-financing) that will come from are the following: North – Western: 20 per- PDR and the contributing Programs. These resources represent almost a cent, North – Central: 19 percent, North – East- quarter of the participating programs’ budgets. It can be expected that the demand for PA1 Type 1 and 2 projects can easily exceed the available enve- ern: 15 percent, South – Eastern: 16 percent, lope, hence it is recommended to apply a merit-based competitive proce- South – Central: 16 percent, South – Western dure to award these grants. This would allow selecting projects with the (excluding Sofia): 13 percent. It is not yet clear highest quality and value added. In PA2 it could be useful to earmark sec- toral contributions per region to allow covering the most critical regional from the PDR whether these regional finan- needs and to allow weaker regions taking advantage of these resources. cial envelopes include earmarked budget al- Details about contributions of the Maritime Program and SPARD need to locations for each of the participating pro- be still developed and they will increase the overall allocation for the new approach. A proper monitoring system will need to be installed to keep track grammes reflecting the programs specific in- of different financial dimensions of the new approach (analyses per region, dicators per region. Such thematic earmark- per priority objective, per Program etc.). The UMIS system will need to be ing within the regional financial envelopes remodeled to enable proper monitoring of integrated projects, as well as providing access of a broader group of stakeholders to the monitoring data. is recommended to ensure that region-spe- cific needs are reflected and that applicants from one region would not have to compete against applicants from another. Guidelines for elaboration A well-developed system for monitoring and implementation the financial progress of the integrated of territorial instruments approach will be critical for understand- ing whether the new model gets traction The ‘ITI Guidelines’ developed by MRDPW to- among stakeholders and to identify issues gether with the ‘ITI User’s Manual’, endorsed with regard to absorption and disbursement by the MAs of contributing programmes, of available funding. The arrangements for constitute important elements of the ITI monitoring financial progress should serve framework and will be useful tools for the as an early warning tool allowing for identi- prospective beneficiaries throughout the ITI fication of underperforming regions and pro- project cycle. MRDPW developed two sets of grams or situations where the regional finan- guidelines for beneficiaries in the context of cial envelopes are being exhausted, and which the draft PDR and the other contributing pro- require timely corrective actions. This is par- grammes. These are PA1: Guidelines for the prepa- ticularly important in the context of the re- ration of urban development investments under PDR duced timeframe for utilization of funds (n+2) 2021 – 2027 and PA2: Guidelines for the preparation under the upcoming programming period. of projects under the ITI concept (ITI Guidelines)43. Responsibility for the financial monitoring The ITI User’s Manual, will supplement the ITI should be with MRDPW (as the coordinator Guidelines with the goal of mitigating the risk of the integrated territorial approach), RDCs of the fragmentation of documents regulating (supported by their Secretariats), CCU and the the application and implementation process. It MAs42 of the contributing programs. Their par- will also provide stakeholders with guidance at ticipation in monitoring activities would im- different stages of implementation of the new ply their access to the UMIS system and access approach, such as: preparing ITI concept ideas, rights that would enable monitoring cross sec- ITI partnerships, ITI concept/project’s devel- toral ITI concepts. CCTA, which the WB recom- opment, implementation, coordination and mends establishing, should monitor the over- sustainability. Considering differences in ap- all absorption of regional financial envelopes proaches under PA1 and PA2, separate manu- and decide on corrective actions if needed. als will need to be developed, one for the PA2 41. E.g. programme environment — “share of the population (%) connected to wastewater collection and treatment systems” 42. The responsibilities should also include setting milestones and estimate annual absorption and dis- bursement targets under each of OPs. 43. General instructions for preparation of projects supporting of the integrated territorial development of the NUTS 2 regions with EU funds 2021 – 2027. These instructions contain document templates: Partnership Agreement, ITI General Framework Agreement, ITI Application Form and ITI Selection Criteria. 64 An Analysis of the Possibilities to Implement Territorial Instruments (including Type 3 projects from PA1) and the support to potential beneficiaries, for instance other for the PA1 that reflects differences be- in preparing analyses and feasibility studies. tween Type 1a, 1b and 2 projects. Prior to pre- Such technical assistance would go beyond paring such a manual for PA1 projects, a final what is expected from the RDCs’ Mediation selection mechanism and institutional frame- Units. Beneficiaries also seem to prefer that work needs to be adopted. The endorsement of it is provided by an independent and central- the ITI User’s Manual by the MAs of relevant ized service, which ensures reliable and uni- OPs would ensure a standardized approach to fied guidance in compliance with the MA’s re- ITIs across Programs, uniformly applied under quirements. Beneficiaries also felt that such the 2021 – 2027 programming period. The lack external support could help mitigate the risks, of such standardization could have a negative which emerged with regard to integrated proj- impact on the efficiency of the system and the ects that were prepared back in 2015.45 At that creation of a unified approach would help ben- time, one of the reasons these integrated proj- eficiaries better understand the new approach. ects did not go beyond the planning stage was lack of funding for project preparation, for in- Final versions of the ITI Guidelines and ITI stance for feasibility studies. User’s Manual should provide sufficient and updated information about the life- The Guidelines and ITI User’s Manual should cycle of ITI concept. Currently, the majority describe the ITI concept development mech- of the strategic documents (Programs, ITSDs) anism and help applicants prepare high qual- are at the draft stage. This does not allow for ity ITI concepts. Focus group participants re- providing sufficient details with regards to peatedly requested a detailed description of the regional strategies’ indicative list of pri- the procedure for developing ITI concepts to ority investments, the minimum and max- ensure that they are compliant with the stra- imum scope of funding per ITI concept, eli- tegic documents, prioritized and coordinated gible types of projects per program, etc. The through public consultations at an early stage. ITI CoM Decree which is under preparation Since the integrated approach is new to most will aim to provide clarity on certain import- prospective beneficiaries, it could be benefi- ant aspects of the ITI concept development, cial to create a platform for exchanging in- implementation and sustainability E.g. calls formation about the experience with ITI con- for proposals, selection and complains, man- cepts’ development and implementation and datory integration of the projects under the searching for potential partners and/or ITI ITI Concepts and consequences in case of ideas. Such a ‘Partnership Academy’ could be a failure of an individual project, a coordina- part of the Advisory Hub’s functions, which tion mechanism of MAs related to the inte- is recommended to become a key institution grated approach, state aid clearance proce- responsible for systemic and professional ca- dure, etc. pacity building of beneficiaries (see Box 4.2). During focus groups (FGs) discussions held The ‘one for all and all for one’ principle of with prospective beneficiaries during the ITI concepts’ internal integration of proj- preparation of the ITI Users’ Manual, ben- ects could be relaxed to avoid the neces- eficiaries assessed the initial stage of devel- sity to terminate the whole ITI concept oping an idea for an ITI concept as the most because of the failure of a single project. important and most challenging task44. They While such ‘strict integration’ may seem to also indicated that this stage would need to be promote achieving the full impact of select- elaborated in detailed in the ITI User’s Manual. ed ITI concepts, it may also discourage poten- They also confirmed that potential benefi- tial beneficiaries from engaging in more am- ciaries would also need sufficient external bitious projects. Preparation of ITI concepts 44. During the period 9 – 14 September a survey and six focus groups with 25 stakeholders were carried out in the context of the ITI Users’ Manual. The FGs included representatives of all range of prospective benefi- ciaries and RDC expert units from the six NUTS 2 regions in Bulgaria. 45. In 2015, the National Center for Territorial Development led an effort to develop an integrated approach for investments for the North – West Region of Bulgaria. The effort was participatory and involved a range of local, regional, and national stakeholders and was perceived by key beneficiaries as being well-prepared. Chapter 4 Integrated territorial approach in Bulgaria 65 and their implementation will be a labori- objective, impartial, and carefully considered ous and long process that can take years. The decision making through a robust and trans- lack of flexibility to terminate or replace in- parent procedure, applying a well-thought- dividual projects within ITI concepts or mod- out set of evaluation and selection criteria ify some of their elements to adjust them to (see Box 4.5). Its streamlined design should changing socio-economic situations might also support the adequate pace of absorption lead to termination of high quality and high of available funding by future beneficiaries. impact ITI concepts. In turn, Programmes’ The evaluation and selection mechanism cover targets and indicators might also be nega- the following elements, which have to work tively affected. Hence ‘soft integration’ of the in concert with each other: ITI concept’s projects is recommended that would allow terminating or replacing indi- • procedures clearly distributing roles and vidual projects from the ITI bundle. For in- responsibilities between evaluating bodies, stance, it could be achieved thanks to defin- safeguarding against conflict of interest and ing different categories of projects within an ensuring transparency and credibility of the ITI concept, like core and non-core projects selection process (to be prepared by PDR MA); and/or main and complementing (subordi- nated) ones. Another option could be to al- • project selection criteria to assess the eli- low certain flexibility with regard to the ITI gibility, quality, and viability of project pro- concept’s ability to achieve approved indi- posals (to be prepared by PDR MA and other cators, e.g. through an ‘under-performance MAs of Programs involved in the imple- tolerance range’. mentation of the integrated approach, and endorsed by Monitoring Committees of these Programs), and Key messages: MRDPW is in the process of developing the Guidelines for beneficiaries (for PA1 and PA2) • guidance for applicants to support a well-in- and the ITI User’s Manual to help prospective formed process of elaborating project ap- beneficiaries understand the new approach. plications and good understanding of the This process of finalizing these should be a multi-MA endeavor as these documents will be selection process and its stages (to be pre- a key reference point for beneficiaries. MRDPW pared by PDR MA). has already started an information campaign and it is recommended that it is scaled up to raise awareness about the new system. Adequate capacity of both evaluators and This campaign could be rolled out together project applicants is a key enabler of this with a broad capacity building program and mechanism. The evaluators need to be able to complemented with establishing the Advisory Hub. Replacing the currently envisaged rule carry out impartial, expert evaluation of proj- of strict integration of the ITI concept with ects proposals. The project applicants must the soft integration principle could be bene- generate high quality project proposals in ficial and would introduce much needed flex- ibility in case a project within an ITI concept line with Programs’ requirements. is underperforming. BOX 4.5 Key characteristics of a robust evaluation and selection mechanism Project proposal • Streamlined design facilitating swift uptake evaluation and project of funds by prospective beneficiaries; selection mechanism • Effective arrangements to mitigate con- flict of interest and to enhance the trans- parency of the process;  The evaluation and selection mechanism • Partnership principle observed in line with are a key part of operationalizing the strate- the requirements for territorial instruments; gic framework of the new integrated territo- • Enabled prioritization of high quality, impact- rial approach and translating it into a set of ful projects through merit-based competi- tion between applicants. territorial investments conducive to achiev- ing development objectives. This mechanism Source: Authors should be designed to enable well-informed, 66 An Analysis of the Possibilities to Implement Territorial Instruments Evaluation and selection Some modalities of this horizontal division procedures (PA1 and PA2) of responsibilities and the sequence of the selection process are still being finetuned, The Monitoring Committees for relevant with a view to making this mechanism more Programmes will have the power to endorse streamlined. selection criteria for territorial investments prepared by relevant MAs. The Monitoring This ‘regionalization’ of the key stage of the Committees will be established after the ap- evaluation process confirms the intention proval of the Programmes for 2021 – 2027. The of the Bulgarian government to strengthen PDR MA will be responsible for organizing and the role of regional and local administra- launching calls for proposals for urban proj- tion in EU funds management and to apply ects (PA1) and ITI concepts (PA2). The sched- a more ‘territorial lens’ to project selection. ule of calls, their duration, financial alloca- The involvement of the RDCs (acting in broader tion and time dedicated for each of the stages format) and the Project Selection Committees should be closely coordinated with the rele- (PSCs) in the first stage of project selection rep- vant MAs, RDCs and municipal administra- resents the partnership principle in action, tions of urban municipalities eligible under as both these bodies cover a wide range of PA1 to ensure smooth cooperation of all key local (PSC) and regional (RDC) stakeholders. stakeholders. Measuring public support for submitted proj- ect proposals is also envisaged to be a man- A two stage evaluation of project applica- datory element of the first stage of evaluation tions is envisaged both for urban projects for urban projects and ITI concepts. under PA1, as well as for ITI concepts sup- ported from PA2 and from other relevant Despite its merits with regard to the great- Programmes (Box 4.6). The municipal (PA1) er involvement of the territorial tier, the and regional (PA2) tier will be entrusted with proposed institutional and procedural set- the responsibility to conduct the first stage of up of the selection mechanism is complex. the evaluation and selection process becom- It foresees the involvement of a high number ing the main ‘filter’ of project ideas (see sec- of different bodies assigned with different tion 4.1 for details). The relevant MAs will project selection functions, acting in paral- be in charge of the second and final stage of lel or one after another. It is also likely to be evaluation of fully developed project applica- time consuming and generate substantial ad- tions. The role of both territorial tiers will be ministrative burden for all involved entities substantial, as the right of the MAs to reject throughout the entire process, putting at risk project proposals will only be limited to situ- the prospects for swift uptake of funds. Last, ations where formal deficiencies are identified. but not least, the fact that some key functions belonging to different phases of the project cycle are merged under one entity (the mu- BOX 4.6 Two-tier selection process of integrated projects nicipal Selection Unit and Projects Selection First stage: Committee under PA1, and the RDC expert and • PA1: evaluation and selection of project fiches by municipal Project Selection management tier under PA2) raises concerns Units and Project Selection Committees with regard to the risks of potential conflict of • PA2: evaluation and selection of ITI concepts by RDC Preselection Units interest. This may negatively impact the trans- and RDC management tier Second stage parency and credibility of the selection mech- • PA1: evaluation and final selection of the fully-fledged project propo- anism. Furthermore, the proposal to include sals by PDR MA the measurement of public support as one of • PA2: evaluation and final selection of the fully-fledged project proposals the elements of the evaluation mechanism, by respective MA (depending on the thematic scope of the ITI concept, which could be prone to subjectivity, manip- these could be PDR MA and other contributing MAs). ulation and solicited lobbying also, raises con- Source: Authors cerns that should be addressed when finaliz- ing the design of the mechanism.46 46. Possible options to effectively address these risks while streamlining the selection mechanism were previously formulated by the WB team and submitted for the MRDPW’s consideration. Chapter 4 Integrated territorial approach in Bulgaria 67 Project selection criteria achieved so far with regard to the elaboration (PA1 and PA2) of project selection criteria they will likely be divided into two groups: The integrated nature of projects to be sup- ported under the upcoming programming • Criteria for the assessment of the integrated period requires a more strategic approach character of proposals and their territo- compared to the applied selection criteria rial impact — designed to assess how ade- used in the previous period. This is espe- quately submitted project ideas represent cially true at the first stage of evaluation. MAs the integrated approach to addressing devel- should be encouraged to build upon their rich opment challenges or potentials, including experience with individual project selection the combination of different projects, selec- and support the MA PDR in formulating a set tion of partners, expected impact of the inte- of strategic selection criteria that will facili- grated packages of projects for the targeted tate the identification and selection of proj- area and target groups; ect which: • Criteria for the assessment of the general • can contribute most to achieving territo- quality of proposals — designed to assess rial (bottom-up) development objectives key ‘regular’ parameters of a project proposal, as defined in the PIDMs (PA1) and in ITSDs including eligibility of applicants, capacity of for NUTS 2 regions (PA2) and are supported partners-applicants and organizational setup by viable partnerships of applicants, and of the project partnership, budget, indicators and target, implementation plan, identified • are in line with PDR 2021 – 2027 intervention risks and preventive measures etc. logic and of the other Programs involved in the integrated territorial approach. At this stage the final division of these spe- cific selection criteria between stages of the These criteria should also ensure that specific evaluation process and evaluating bodies is sectoral objectives (top-down) recognized as not finally decided, and different options high priority for the Bulgarian government47 are being considered. Regardless of the shape are adequately reflected and addressed in proj- of the eventually adopted set-up it is of par- ects selected for funding. amount importance that the applied set of selection criteria is comprehensive enough The preparation of project selection crite- to evaluate all key dimensions of the projects ria by the PDR MA and relevant MAs is still proposals and to support merit-based selec- at the early stage, but key prerequisites tion of projects (Box 4.7). for their formulation can already be in- dicated. These criteria should provide eval- BOX 4.7 Recommended arrangements for merit-based uating bodies at the municipal (PA1) and re- competition between project proposals gional (PA2) level, as well as at the central level (MAs), with an effective tool for con- • Organization during the programming period of several calls for proj- ducting credible and transparent assessment ect proposals with fixed closing dates and fixed budgets per the call; of submitted project applications. The aim • All project proposals submitted within the call’s deadline are evaluated in parallel by relevant evaluating body/bodies; is that this will lead to the selection of the • Ranking lists of positively evaluated projects proposals from one call most impactful projects to be implement- are prepared presenting the outcome of the evaluation process; funding ed by well-developed project partnerships. is awarded — within the limits of the given calls’ budget — to those proj- For the prospective applicants, these crite- ect proposals that received highest scores; ria should serve as a clear guidance with re- • Reserve list of positively evaluated project proposals which did not gard to the expected scope, impact and qual- receive funding due to the call’s budget being exhausted is kept; if during the next call’s the budget is not exhausted due to insufficient number of ity of integrated projects that will be useful quality projects the projects from the reserve list could be provided fund- in the process of elaboration of their appli- ing or if aby other funds are released from already contracted projects. cations, thus increasing their chances for ob- Source: Authors taining financing. Reflecting on the progress 47. These include e.g. energy efficiency measures, and health care infrastructure and services. 68 An Analysis of the Possibilities to Implement Territorial Instruments Merit-based competition should be at the Key messages: heart of the evaluation and selection mech- Project selection processes and criteria are cur- anism. Available funding will never be suf- rently being developed by MRDPW in collabora - ficient to exhaustively cover all territorial tion with other MAs. The Bank presented pro- development needs, therefore investments posals and drafts of these solutions to MRDPW and recommended a number of technical solu- selected for funding under the integrated tions, such as: approach should be impactful to maximize • Simplify the selection processes of projects development outcomes. Therefore, this limited under the integrated approach, especially funding should be made impactful through a for PA1 projects carefully considered selection process fa- • Design transparent selection procedures cilitating the identification and prioritiza- promoting merit-based selection of projects and mitigate conflict of interest tion of projects best contributing to munic- • Prepare transparent and possibly objec- ipal objectives.  tive criteria and align them with higher-level documents ‘First come-first served’ principle does not • Promote projects with biggest territorial promote the selection of highest quality impact through skillfully designed selection criteria to reap full benefits of limited avail- and the most impactful projects. It also does able funding when compared to regional not promote more complex integrated proj- investment needs ects addressing multi-dimensional develop- • ‘First come-first served’ competition prin- ment challenges which require more time to ciple should be avoided as it does not pro- be developed. Instead, it encourages simpler, mote the selection of projects with the high- est quality and impact. fragmented interventions that are less likely to generate expected development impact. Successful efforts to promote high qual- Coordination mechanism ity project proposals and to support their development do not start with the adop- The integrated territorial approach is in- tion of project selection criteria or with herently a multi-level governance policy ar- the announcement of the call for projects rangement since it requires the engagement proposals but should precede these. Apart of local, regional and central stakeholders from providing the prospective applicants for its development, implementation, and with clear and sufficiently comprehensive follow up. The multi-faceted nature of terri- and detailed information about the modali- torial instruments is particularly pronounced ties of the application process, the strategic with regard to PA2 ITI concepts, where multi- framework should be a useful tool for devel- ple funding streams are envisaged. Putting in oping sound project ideas. No efforts should place and maintaining an effective and effi- be spared to ensure that relevant territorial cient coordination mechanism to ensure prop- strategies are sufficiently prescriptive with er and sustained collaboration between key ac- regard to the scope and expected develop- tors and alignment of their actions will be one ment outcomes of investments that should of the key success factors for the new approach. be implemented to meet strategic objectives identified for a given territory. The more con- Coordination is needed to ensure compat- crete the strategies and plans the easier the ibility and interoperability of various el- task for applicants to generate specific project ements of the planned system in several ideas contributing to development objectives, dimensions at every stage of the policy life- as well as for evaluating bodies to assess stra- cycle. These include i) strategic planning phase, tegic compliance and prioritize most impact- when the approach is designed, ii) operational- ful projects. Considering that both ITSDs and ization and capacity building phase (prepara- Municipal Integrated Development Plans are tion of technical and financial solutions, pro- still under preparation there is still room to cedures, operational mechanisms and in the support the identification and prioritization process of capacity building of all involved of future investments in line with the oper- stakeholders), iii) the implementation phase, ational and financial framework of the new to manage project selection and flow of funds, integrated approach. and to monitor and assess the overall effects Chapter 4 Integrated territorial approach in Bulgaria 69 of the approach as well as to internally man- Robust coordination should also enable age individual packages of investment; iv) eval- the effective exchange of information and uation and finetuning phase, to identify ar- decision-making at the level of integrated eas with scope for improvement (see Section investments, especially important for ITI 4.8 for details of monitoring and evaluation). concepts (‘micro’ level), and at the level of integrated approach (‘mezzo’ level). The ‘mi- The multi-stakeholder nature of integrat- cro’ level coordination should ensure efficient ed investments requires a new approach to collaboration and alignment of actions with coordination among different types of ac- regard to smooth implementation of an inte- tors across levels of governance. Their major grated package to maximize development out- groups are presented in section 4.1 and include comes. On one hand, it should facilitate the national level (the participating MAs48 and CCU, work of partnerships implementing integrat- with the overall coordination exercised by CCTA; ed investments, on the other hand, it would inclusion of SPARD and the Maritime Program’s support MAs in taking decisions about indi- MAs in the works of CCTA is recommended), re- vidual integrated packages. The ‘mezzo’ level gional level (RDCs, DICs, and territorial branch- coordination refers to synchronizing sectoral es of MA PDR), local level (PSUs and PSCs), final- policies that contribute to the integrated ter- ly the beneficiary/project partner level. ritorial approach and ensuring every sector TABLE 4.2 Coordination needs at the implementation stage of the integrated approach Phase of Engaged implementation Actions to be coordinated stakeholders Project • development and endorsement of project selection criteria for territorial instruments across rele- Participating selection vant Programs (first and second stage of evaluation) MAs, RDCs • development of other key documents related to organizations of call for project proposals (e.g. catalogue of eligible costs under Programs, state aid schemes, specific rules for calls, financial envelopes with funds from participating Programs; schedule of calls for projects proposals with dedicated financial envelopes, identification of evaluating experts) • involvement of experts from participating MAs in evaluation of ITI concepts in line with the net- working principle (first stage of evaluation) and call schedule • evaluation of fully developed project proposals (second stage of evaluation) Implementation • signing and annexing (if required) of grant contracts for individual projects from ITI concepts/proj- Participating of projects ect packages MAs • financial management (e.g. disbursements, financial corrections) of projects • project controls • introduction of modifications to the Programs and their implementing documents with impact on the modalities of integrated approach Monitoring and • collecting data to estimate volume of projects and required funding prior to their official submis- RDCs, MAs, evaluation sion to allow for better-informed financial planning (data from the RDC Mediation Units) to better CCU, CCTA manage processes • collecting data with regard to financial and physical progress of supported integrated investments (UMIS) • early warning system to identify underperforming projects (and integrated packages) and take action • sharing data and outcomes of conducted analyses of monitoring data with the CCTA to support evidence-based decision-making • monitoring performance of the RDCs with regard to their new functions under the integrated approach (e.g. mediation, first stage evaluation of ITI concepts) • coordinated evaluation of ITI concepts/packages of projects or their specific types • coordinated evaluation of the overall effectiveness of the integrated approach as a new policy paradigm Communication • on-going assessment of the effectiveness of awareness raising activities dedicated to prospec- RDCs, partic- tive applicants (based on feedback from the RDC Mediation Units and quality of submitted ITI con - ipating MAs cepts), and development and implementation of mitigating measures • identification of cases of insufficient/outstanding demand for funding (e.g. with regard to territory, thematic objective, type of eligible beneficiary), and development and implementation of mitigat- ing measures Source: Authors 48. The term ‘participating MAs’ refers to MAs of all eight Programs contributing to the integrated approach. Since SPARD (and Maritime Program) was added to the integrated approach at the later stage, participation of these MAs is emphasized, otherwise, they are captured by the term ‘participating MAs’. 70 An Analysis of the Possibilities to Implement Territorial Instruments is fulfilling its part and, if needed, designing MRDPW, despite being the champion of the in- actions to address issues that arise. It will be tegrated approach with the highest invested paramount for maximizing development ef- stake in this new policy paradigm, does not fects of the integrated approach for the whole have the primus inter pares status. It is one of country. Finally, also a ‘macro’ level coordina- the line ministries with a status equal to oth- tion will be required that oversees how the in- er ministries. Box 4.8 describes key potential tegrated approach is contributing to the over- features and functions of the CCTA. In order to all development policy of the country. That promote synergies between policies and en- is through using all available relevant fund- courage better cross-management of support ing streams from different policies to gener- measures especially with a view to more ef- ate envisaged impact (e.g. rural development fectively address the issue of urban-rural di- policy, COVID-19-related recovery efforts, en- vide the participation of representatives of ergy transition measures). This last level, how- SPARD MA in CCTA is recommended. ever, is beyond the scope of this document. The Partnership Agreement 2021 – 2027 and Establishing the CCTA as a formal inter-min- dedicated CoM Decree covering the integrat- isterial coordinator of the implementation ed approach are two key documents estab- of the integrated approach is recommend- lishing the coordination mechanism. They ed. Effective management requires sound in- will also provide the regulatory framework for ter-ministerial collaboration and synchroni- potential creation of the CCTA. The Partnership zation, and sustained commitment of all key Agreement and the CoM’s ITI Decree togeth- stakeholders. Experience of EU Member States er with the relevant Programmes for 2021 – 27 implementing integrated territorial instru- will, among others, set forth the demarcation ments in the 2014 – 2020 programming period line between the participating Programmes reveal that challenges generated by inter-min- (i.e. a division for what each of the Programs isterial cooperation are often underestimated. will finance to maximize the effects of avail- The most common challenges include differ- able funding by promoting complementari- ing priorities among ministries that negative- ties and synergies) and describe dimensions ly affect the smooth implementation of inte- and modalities of the collaboration arrange- grated investments and resource constraints. ments between participating MAs. A draft of The participating MAs will most likely not the Partnership Agreement has recently be- be able to efficiently solve these problems by come available and the CoM’s Decree is not yet themselves and introducing ‘a referee’ with available to the Bank team. This limited the sufficient political leverage is recommended. Bank team’s ability to conduct deeper analysis of the envisaged solutions. It is recommend- ed the GoB prioritizes the elaboration of the BOX 4.8 Coordination Council for the Territorial Approach CoM Decree and the Partnership Agreement (CCTA) to enable timely preparation and implemen- The proposed CCTA , to be supported by the CCU, should take charge of tation of the integrated approach. Active par- managing inter-ministerial collaboration with regard to the integrated ticipation of the contributing MAs in this pro- approach to guarantee effective collaboration between MAs. Such a coor- dination body is indispensable for the success of the approach. Its support cess will be crucial to allow the development by the Deputy Prime Minister’s Office would be an optimal solution to solve and consequent implementation of a coher- potential disputes among the MAs. PDR MA would perform the functions of ent framework. a Secretariat to the CCTA. The CCTA meetings would provide for key central level stakeholders a formal format for discussing the implementation of the integrated approach as a whole, including progress, identified challenges It is recommended that the MAs coordinate and risks, required mitigating actions, as well as desired scope of adjust- preparatory work with regard to specific ments to be introduced into the policy design. The CCTA should be entru- sted with the power to take strategic decisions with regard to the implemen- solutions and mechanisms that will apply tation of the new approach. Working group(s) of CCTA could be established to the integrated territorial approach un- to provide a regular format for MAs to discuss more technical implementa- der their respective Programmes prior to tion issues with regard to specific ITI concepts. Participation of SPARD and the Maritime MAs is recommended to allow urban-rural coordination. CCU ’s the adoption of the Partnership Agreement political supervision could promote sustained commitment of all key sta- and the CoM’s ITI Decree. Since PA2 ITI con- keholders throughout the entire programming period. cepts will be financed from different funding Source: Authors sources, it is critical that Programme specif- ic procedures and guidelines are compatible Chapter 4 Integrated territorial approach in Bulgaria 71 to help beneficiaries navigate the integrated Key messages: approach and successfully implement their The integrated territorial approach requires strong coordinating mechanisms projects. The procedures applicable to benefi- to facilitate its design, implementation and finetuning. A large number of ciaries could be split into two groups applica- diversified stakeholders, who contribute to the approach implementation at tion procedures and project implementation. different governance levels and at stages of the process, emphasizes the need for effective and efficient coordinating arrangements. Robust coordi- The application procedure covering the first nation should enable smooth information flow and facilitate decision mak- phase (ITI concept application) will be a sin- ing at the level of integrated investments and integrated approach. The gle process culminating in the evaluation by Partnership Agreement 2021 – 2027 and dedicated CoM ITI Decree are two key documents that will shape the coordination mechanism. The Bank pre- the RDCs, which will be supported by vari- sented the following specific recommendations with regard to this aspect ous MAs, hence it would not require specific based on the information available: regulation by the MAs involved. The second • Establish the CCTA to facilitate coordination and supervision of the imple- stage — the direct grant award by contrib- mentation of the integrated territorial approach at the MA level uting MAs to individual projects included in • Introduce separate chapters in the contributing Programs, related to the a selected ITI concept — foresees fully-fledged integrated approach, that will have compatible structure and content to allow prospective applicant easier overview of the implementation system project applications to MAs. The terms, con- • Establish cross-institutional working groups to allow contributions from ditions and timing of the direct grant awards different stakeholders at planning and implementation stage at this stage by various MAs could be regulat- • Consider possible flexible solutions in the demarcation line to allow ed in a possibly similar manner in the proce- future adjustments dural manuals of all involved MAs. This would • Establish clear and transparent procedures on how funds between provide clarity, certainty and equal procedur- Programs and their priority axes could be shifted, should some instru- al rules for all involved beneficiaries of indi- ments not perform as expected vidual projects, in order to ensure a smooth • Ensure the ability to replace individual projects within the ITI concepts, shall one fail, by creating the project reserve list and scoring all the appli- and predictable flow of ITI applications and cations that pass the formal assessment implementation process. • Ensure elaboration of compatible guidelines, user’s manuals and procedures A separate chapter, or section, in each con- • Create a platform for beneficiaries to exchange information about inte- tributing Programme devoted to the Pro- grated instruments gramme’s contribution to the integrated • Incorporate flexibility into the system to allow future additions of instru- approach and its modalities would provide ments/programs, for instance Just Transition Mechanism and Fund clarity on the implementation system for • Upgrade UMIS to allow proper management of projects supported under the integrated approach and the overall approach. prospective beneficiaries. These chapters should have a similar structure and differ only in so far as they reflect the organization- al and thematic characteristics of the individ- projects and their tangible and intangible out- ual Programmes. Described elements should comes. Given the approach is new and nov- include the processes for the appointment el, it will be important for CCU, MRDPW and of representatives to the RDCs, grant award participating Programmes to set up a robust procedures, applicable state aid schemes, ex- monitoring and evaluation framework that post control on contractor selection proce- goes beyond tracking financial and physical dures, verification of expenditures and pay- progress with regard to implemented invest- ments, on-the-spot checks, and administra- ments, but provides comprehensive, credible tion of irregularities. and timely information. This should be devel- oped in a way to allow for an evidence-based decision-making process that could lead to Monitoring the introduction of necessary policy adjust- ments to enhance the effectiveness of the ap- and evaluation proach. The implementation of the new ap- proach will pose a steep learning curve for The cross-sectoral and territorial nature of all key stakeholders and a robust monitoring the new approach requires adopting a new system should support this on-going learn- way for monitoring and evaluation (M&E). ing process throughout the entire policy cycle. The process of M&E will need to be broadened to cover not just tracking the performance of Monitoring will take place at several levels individual projects, but of entire packages of with regards to financial and substantive 72 An Analysis of the Possibilities to Implement Territorial Instruments implementation of the new approach. The ITI concept implementation that will be then granularity of monitored data and its terri- reviewed by a territorial branch of MRDPW torial and thematic scope will differ across and discussed by the RDC to solve potential these levels. A comprehensive monitoring bottlenecks. The latter could be also tasked system should consist of four levels: with reporting about the aggregated status of all ITI concepts in a given region to the CCTA • strategic (policy level covering the overall and informing about potential problems that integrated approach), were not solved at the regional level to bring • regional (NUTS 2), them to the attention of MAs. The procedure • single integrated project (PA2 ITI concept or for monitoring PA1 project is not fully spec- PA1 Type 1b and Type 2), and ified at the moment, but it seems it could re- • individual projects (components of ITI semble the PA2 path. concepts). The monitoring framework must be com- Monitoring will also have to be a multi-stake- plemented by arrangements with regard to holder endeavor, with the participation of data collection and management . The mo- all contributing MAs, relevant territorial dalities with regard to monitoring the imple- bodies (RDCs, PSUs, PSCs) and project bene- mentation of single projects are a permanent ficiaries. Identification of bodies engaged in fixture of the EU funds implementation frame- monitoring, clear distribution of roles and se- work in Bulgaria and therefore their adoption curing adequate resources to perform them for the new programming period will not be (e.g. trained staff, technical tools, reporting problematic. A key challenge will be to en- schemes) is important to ensure the overall sure the technical possibility to monitor the transparency and efficiency of the system. implementation of the overall packages of CCU — acting in close collaboration with the investments. The UMIS should be adapted to MA PDR — will have a leading role in organiz- reflect the specificities of integrated invest- ing the monitoring and evaluation frame- ments and to allow for effective monitoring work of the overall integrated approach. It of the overall implementation progress with is recommended that the CCTA will be the regard to packages of urban investments un- main recipient of the aggregated data flow- der PDR MA (PA1) and ITI concepts across the ing from the engaged institutions (MAs, RDCs, contributing Programs (PA2), including also PSUs/PSCs) necessary to track progress of the SPARD’s contributions for rural municipali- overall policy and to assess its efficiency. Ta- ties. That should include tracking progress ble 4.3 identifies four monitoring levels and with regard to meeting target values of out- proposes bodies responsible for each of these. come and result indicators. Introducing this modality into the UMIS is of crucial impor- At the level of an ITI concept (PA2) the Coor- tance to allow for: dination Team will be created on the basis of the ITI partnership agreement that will be • tracking progress with regard to contract- composed of all actors implementing proj- ing of the whole package of projects by ects under the ITI concept. This Team will relevant MAs (by relevant Programs) and prepare quarterly progress reports from the stepping in in case delays are identified, and tracking financial and physical progress of TABLE 4.3 Proposed distribution of roles within the monitoring the entire ITI concept; framework • tracking progress at the level of a rele- Monitoring level Leading body vant territory, for instance NUTS 2, urban cluster; Strategic CCTA (supported by CCU and PDR MA) • tracking progress for relevant policy Regional PDR MA (supported by RDCs and municipal administration) objectives; • identifying underperforming projects Single ITI concept (package Coordination Team of the ITI Partnership, terri- of projects) torial branches of MRDPW + RDCs and taking decision with regard to them that will not put the integrated nature of an Individual project in ITI Respective MA ITI concept at risk or — if it is not possible Source: Authors Chapter 4 Integrated territorial approach in Bulgaria 73 to be avoided — help decide on other mea- to date information about the progress and sures aimed at maintaining the integrated remaining available funding. This would pro- nature of an ITI concept in case an individ- vide potential applicants with up to date infor- ual project is beyond repair and fails; and mation and help them assess whether pre- • assessing the overall, combined impact paring new project proposals, which will be of ITI concepts. resource consuming, is worthwhile. The UMIS should also be adapted to allow Additionally, it is recommended to regu- the monitoring of the progress with regard larly collect key data. This will be vital for to the absorption of: managing the implementation process (e.g. estimating scope of required funding), track- • urban cluster budgets (PA1), ing progress (e.g. with regard to absorption • regional financial envelopes (PA2), and disbursement targets) and identifying • funds allocated for ITI concepts from the problems, risks and bottlenecks (as an ele- six contributing Programs, and ment of an early warning system) prior to • SPARD’s contribution to ITI concepts. official submission of applications into the UMIS. Table 4.4 presents data needs that will The financial monitoring system should be be necessary for monitoring the progress and accessible to prospective beneficiaries, stake- quality of implementation of the integrated holders, RDC Mediation Units and provide up approach at different levels. TABLE 4.4 Proposed scope of monitoring of the implementation of the integrated approach Level for collecting data / information Scope of data / information Municipal level • number of project partnerships in the making (Type 1b and 2) (PA1 PDR) • estimated volume of required financing, • identification of specific problems/challenges encountered by applicants at proj- ect fiche development stage (specifically with regard to Type 1b and 2 projects), • financial corrections. RDC prior to submission of ITI concepts: (PA2 PDR) • number of ITI partnerships ‘in the making’ (supported by RDC Mediation Units), • estimated volume of required financing and sources; • identification of specific problems/challenges encountered by applicants at ITI concept development stage. post-submission of ITI concepts: • territorial distribution of ITI concepts, • types of applicants, • quality of ITI concept application and most frequently encountered errors. MAs • quality of fully developed projects applications (second stage of assessment) and (including PDR MA) most frequently identified errors, • volume of project application rejected at the second stage of assessment and main reasons, • alignment of top-down and bottom-up objectives in ITI concepts, • absorption of regional financial envelopes under respective Programs, including monitoring the demand for funding in each region and with regard to Program’s specific thematic objectives, • identification of underperforming projects, financial corrections. PDR MA • functioning of the networking principle with regard to evaluation of ITI concepts, (specifically) • duration of assessment of ITI concept applications at the RDC level — on average, and in each of RDCs, • quality of assessment of ITI concept applications measured by success rate of fully developed project proposals in the second stage of evaluation, • progress with regard to contracting projects under ITI concepts across Programs and identification of delays and bottlenecks, • absorption of PDR MA regional financial envelopes and overall ten percent dedi- cated by contributing Programs, including monitoring the demand for funding in each region and with regard to specific thematic objectives, • progress towards dedicated 30 percent of the indicative budgets of each of the four urban clusters for Type 3 projects (PA1). Source: Authors 74 An Analysis of the Possibilities to Implement Territorial Instruments Evaluation should go hand in hand with mon- aspects of the implementation modalities and itoring and it requires the setting a multi-an- allow capturing the added value, the intangi- nual evaluation plan to assess the effective- ble results of the integrated approach. Their ness of the overall approach and its key ele- schedule should be planned to provide deci- ments. These two elements will form the basis sion-makers with relevant information and rec- for the evidence-based decision-making pro- ommendations at the specific decision points cess of managing the new policy. The scope of in the implementation cycle. Selected ideas for planned evaluation studies should cover key evaluation studies are presented in Table 4.5. TABLE 4.5 Proposed evaluations of the integrated approach Topic for evaluation (and type of Responsible evaluation) Timing body Effectiveness of the ITI selection pro - 2021/2022 PDR MA with cess (1st and 2nd stage) (on-going) (depending on when the actual implementa- CCU tion begins, the evaluation should take place approximately one year into the process) Comprehensive evaluation of the ex ante evaluation: 2021 PDR MA with implementation framework of the inte- on-going evaluation: in parallel with mid-term CCU grated approach (two evaluations: ex review of Programs (2024/2025) ante + on-going) Performance and capacity of RDCs with 2023 PDR MA respect to the fulfillment of new func- It is recommended that the performance of tions under integrated approach (medi- RDCs is regularly monitored to track prog- ation, ITI concept selection, awareness ress, identify potential bottlenecks and raising activities etc.) (on-going) capacity shortages in order to introduce mit- igating actions. This monitoring should be complemented with an evaluation study. Evaluation of ‘user’s experience’ with 2022/2023 PDR MA regard to integrated approach: com- (depending on when implementation actu- patibility with development objec- ally begins) tives, ‘user-friendliness’ of the over- all approach, capacity building needs of beneficiaries of projects under inte- grated approach (evaluation based on a selected number of ITI concepts across regions) (on-going) Tangible and intangible results of 2027 PDR MA with integrated approach and impact for participating regional development (ex-post) MAs, and CCU Source: Authors Key messages: A monitoring and evaluation system is indispensable for the success of the new approach. Monitoring will take place at several levels (national, regional, territorial, e.g. urban cluster, local) and in several dimensions (strategic, ITI concept, single project, policy objective, Program etc.) with regard to finan- cial and substantive implementation of the new approach. Monitoring will engage all contributing MAs, CCU, CCTA, relevant territorial bodies (RDCs, PSUs, PSCs), territorial branches and ITI concepts partners through the Coordination Team. One of the challenges will be to ensure technical possibility to monitor the implementation of the whole packages of projects (ITI concepts). UMIS will need to be adapted to enable robust monitoring and different entities (CCTA, MAs, but also territorial branches and preferably RDCs, PSUs and PSCs) will need to be provided with access to the UMIS and trained in its use. The mon- itoring should work as an early warning system for the implementation of individual projects, whole ITI concepts and the whole approach. Evaluation, on the other hand, should supplement data from regular monitoring with more contextualized information that explains causes of observed developments and recommends solutions. Establishing a list of data for regular monitoring and a multi-annual evaluation program prior to the program implementation will help keep track and finetune the system. CHAPTER 5  COVID-19 PANDEMIC AND ITS POTENTIAL IMPLICATIONS FOR REGIONAL POLICY AND THE NEW INTEGRATED APPROACH IN BULGARIA 78 An Analysis of the Possibilities to Implement Territorial Instruments The COVID-19 pandemic has caused the deep- economies overnight putting them into a state est global recession since the second world of ‘induced hibernation’, with economic ac- war and 90 percent of countries will face tivity dropping down almost instantaneously decreases in per capita incomes, a larger by around one third. It should be noted that impact than in any recession in the past the risks to forecast are estimated by the EC 150 years.49 The baseline forecast envisions to be extraordinarily large, as there is a lot a 5.2 percent contraction in global GDP in 2020 of uncertainty about the severity and dura- (downside scenario 8 percent)  — the deepest tion of the pandemic. global recession in eight decades, despite un- precedented policy support. As outbreaks of Economic output is set to collapse in the the virus constrain private consumption and first half of 2020 (EU GDP is forecast to con- investment economic activity is expected to tract by about 7.5 percent in 2020) with most contract in every sub-region of the world in of the contraction taking place in the sec- 2020: Central Europe by 5 percent; Western ond quarter. It is then expected to pick up Balkans by 3.2 percent; South Caucasus by (by 6 percent in 2021) based on the assump- 3.1 percent; Eastern Europe by 3.6 percent; tions that: (i) containment measures will be and Central Asia by 1.7 percent. lifted, (ii) the pandemic remains under con- trol (and the second wave does not materi- According to the Spring 2020 Economic Fore- alize), and (iii) that the policy response put cast issued by the EC in May 2020 the EU has in motion by each of the Member States and entered the deepest economic recession in horizontally by the EU is effective at reducing its history. The COVID-19 pandemic and its economic impact of the crisis and successfully aftermath has profoundly disrupted the en- stimulates the recovery process. tire economy, affecting global demand, sup- ply chains, labor supply, industrial output, A gradual (‘U-shaped’) recovery is expect- commodity prices, foreign trade and capital ed, as observed lower employment and lower flows. In an unprecedented effort EU Mem- volume of investment is likely to reduce po- bers States had to virtually close down their tential output, with the demand remaining FIGURE 5.1 Current and expected drops in turnover reported by industry (share of turnover) 0 –10 Share of turnover (percent) –20 –30 –40 –50 –60 –70 –80 Mobility intensive industries Txtile & cultural industies Digital Renewable Proximity & social Transport & Defence Creative energy Electronics economy Tourism Automotive Aerospace Construction Agrifood Energy Retail Q2 Q3 Q4 Source: European Commission, DG GROW survey, March and April 2020, page 37, https://ec.europa.eu/info/sites/info/files/economy-finance/assessment_of_economic_and_investment_needs.pdf 49. The list of sources providing valuable insights with regard to the implications of the COVID-19 pandemic for regional policy and the prospects of the elaboration and implementation of territorial instruments is provided in Annex 3. The inputs to this chapter are largely extracted from the World Bank global publica- tion from June 2020. Chapter 5 COVID-19 pandemic and its potential implications for regional policy and the new integrated approach in Bulgaria 79 subdued due to high uncertainty about em- FIGURE 5.2 GDP impact at regional NUTS 2 level across ployment, and the pandemic surging again EU Member States excluding the impact of policy measures in the coming months. –25.6% All EU Member States will suffer as a result –22.4% of the pandemic but the exact scope of –19.2% implications and actual impact for each of –16.0% the national economies is likely to be dif- –12.8% –9.6% ferentiated across the EU. It will primarily –6.4% depend on specific economic exposures and –3.2% initial conditions, as well as the effectiveness 0% of the policy response. A strong intercon- nectedness of the EU economies makes the economic effects of the pandemic potentially more ‘contagious’, as an incomplete recovery in one country may negatively impact the situation in other countries due to observed interdependencies. The territorial impact of the pandemic is not evenly spread across the EU Member States with least resilient and still-con- verging Member States and regions being especially hard hit. According to the EC’s analyses the pandemic will have a consider- able impact on GDP that will clearly manifest Source: JRC, Identifying Europe’s recovery needs, Commission Staff Working Document, SWD at NUTS 2 level as showed in the chart below. (2020) 98 final, https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=SWD%3A2020%3A98%3AFIN According to the EC’s Spring 2020 Economic income and employment adopted by the Gov- Forecast, Bulgaria’s real GDP is projected to ernment of Bulgaria. As observed across the contract by over 7 percent in 2020, largely EU, investment is expected to shrink by due to the adverse impact of measures tak- 18 percent in 2020 due to shocks negatively en by the government to contain the spread impacting economic standing of companies of the pandemic following the declaration of and is likely to be slow to recover (only by 1 a state of emergency on 13 March 2020. The percent in 2021). Imports are expected to con- sectors directly hit by these restrictive mea- tract in 2020 by more than 12 percent, main- sures — retail, transport, hotels and restau- ly due to the large fall in investment and the rants, art and entertainment — are estimat- decline in exports. ed to be operating at only 30 – 40 percent of their capacity, and negative spillover effects The unemployment rate has increased sig- are also expected on the rest of the economy. nificantly since the COVID-19 containment A rebound in economic activity is expected measures were put in place, partly as a re- in the second half of 2020 with the gradu- sult of the return of workers from abroad. al lifting of the confinement measures and Job losses are most pronounced in the ser- domestic demand is projected to strength- vices sector, which accounts for 60 percent en already in the third quarter and should of employment in Bulgaria. The unemploy- continue growing in the fourth, unless of ment rate is expected to increase to 7 percent course the country is hit by the second wave in 2020, which means a significant change of the pandemic, which would affect these as compared to 4.2 percent in 2019. Bulgaria projections. has a high share of informal work (ca. 30 per- cent), with these workers being more vul- Household consumption is expected to nerable to shocks and that may have been fall by almost six percent in 2020, as it will affected by lack of opportunities for season- only partially be offset by measures to protect al work abroad. 80 An Analysis of the Possibilities to Implement Territorial Instruments Bulgaria is facing the COVID-19 pandemic The diversified territorial impact of COVID-19 from a strong fiscal position (with budget within countries is likely to exacerbate in- surplus at 2.1 percent of GDP in 2019), and there- equalities and hard-hit local economies fore has significant room for fiscal flexibility that were focused on sectors most impact- to introduce new measures and increase expen- ed, therefore enhancing the need for terri- ditures. As part of the package of containment torial investments combined with general measures the government already announced national social protection policies to reduce a higher spending on medical equipment, wage the risk of increased poverty. As large cities bonuses and increases for the medical and and agglomerations have been generally most security staff, as well as subsidies, tax deferrals, affected by the crisis, this yields the risk for state guarantees and a reallocation of invest- funding to be channeled mostly to urban ar- ment funds to support the economy. Increase eas, leaving others behind, but also provides expenditures on unemployment and social opportunities to drive sustainable urban de- benefits are also expected. velopment transitions to create jobs and build resilience to shocks. Certain groups may be The COVID-19 pandemic and its aftermath disproportionately affected by the crisis, in- have created some major new challenges, cluding women, young people, elderly, mi- but also emphasized or revealed in full norities and people with low education. SMEs scope some already existing ones with re- will require substantial investments and sup- gard to territorial disparities, that have so port for digital marketing and supply. These far been tackled with mixed success across are all sectors that may require a territorial the EU. Therefore, the initial considerations lens, where these groups may be particularly with regard to the COVID-19 implications for affected given lack of capacity and flexibility regional policy and territorial instruments to adapt to the “new normal”. are to some degree similar to those present- ed in Chapter 4, which build upon the expe- In general, climate actions, the digital strat- rience with territorial instrument during the egy and EU health program should be better 2014 – 2020 programming period. But address- linked with EU cohesion policy as cross-cut- ing the aftermath of the pandemic is not only ting themes and effectively supported also about challenges, but also about taking ad- by territorial instruments. Local and re- vantage of opportunities it generates which gional governments as well planning insti- may reinvigorate the regional policy agenda, tutions/agencies at the central level should promoting more resilient regions, reduction be trained how to understand and better in- of territorial disparities, the restructuring of tegrate these topics into policy measures and regional economies, and transition to a low specific investments considering the effective carbon economy. potential of territories. BOX 5.1 COVID-19-related initial recommendations for regional policy and territo- rial instruments 1. Building regional resilience to withstand shocks and disasters and strengthening the capacity at subnational level to recover from crises should be a priority; some potential measures include: • greater national and subnational-level investment in health care and other public services (e.g. education). • investment in broadband networks particularly to reach underserved areas could help expand teleworking capacity of workforce, and availability of e-services, which could in turn strengthen urban-rural linkages and promote digital inclusion • providing affordable and accessible quality basic public services in all territories and for all peo- ple, including especially vulnerable groups 2. Public investments can play a crucial role as a major stabilizing factor before private invest- ment rebounds, but they need to be adequately targeted and selective, reflecting sectoral as well as territorial objectives: • selection criteria should be guided by strategic regional priorities which accurately reflect the sec- torial and territorial considerations Chapter 5 COVID-19 pandemic and its potential implications for regional policy and the new integrated approach in Bulgaria 81 • introducing resilience-building criteria for the selection of public investment should be considered • investments should contribute to decarbonization of the economy • a sound investment mix should be promoted with sufficient attention given to ‘soft’ measures as an incremental part of broader investments strategies 3. Enhanced coordination between different levels of government is a prerequisite of any effec- tive policy response — to maximize impact by exploiting complementarities and avoiding frag- mentation and overlapping of investments, promoting better communication between govern- ment levels, and building mutual trust 4. E-democracy tools (e-government, e-governance, e-deliberation, e-participation and e-vot- ing) should be promoted at local and regional level to ensure continuity of work of subnational administration, but also to promote meaningful engagement of key stakeholders as well as the general public in the decision-making process, and effective communication. CHAPTER 6  SUMMARY OF KEY FINDINGS AND RECOMMENDATIONS 84 An Analysis of the Possibilities to Implement Territorial Instruments This chapter provides key findings and The GoB is planning to channel significant recommendations on the current status financial resources into the integrated ter- of the design of the integrated territorial ritorial approach to achieve a critical mass approach, and its further development. The of investments to drive territorial devel- new approach will shape the strategic and opment. The novelty of the approach is that operational framework for regional develop- a large part of these interventions should ment in Bulgaria during the upcoming pro- cover various sectors (thematic integration gramming period 2021 – 27 and will guide ter- encompassing top-down and bottom-up de- ritorial investments that amount to around velopment objectives), be implemented by EUR 2.2 billion. Though the ongoing prepara- partnerships (partnership principle) of stake- tory phase — prior to the start of the imple- holders sometimes spanning more than a sin- mentation of the new approach — is dynamic gle municipality, and respond to the specif- and on-going, the main messages presented ic needs of a targeted territory (territorial below will remain paramount to its success. dimension). However, as the analyses of re- Regardless of the specific technical solutions gional needs show, Bulgarian regions are still and modalities applied, these themes provide dealing with a substantial infrastructure gap general guidance for the consideration of the that negatively impacts their development stakeholders involved. potential. These needs could potentially be more effectively addressed by stand-alone, The new approach is a commendable step non-integrated (sectoral) investments. The towards improving the territorial dynam- PDR 2021 – 27 will not offer such stand-alone ics of socio-economic development across funding opportunities with the exception of Bulgarian regions with a view to address- limited resources devoted to PA1 Type 1a proj- ing growing inter- and intraregional im- ects, that will be available to the ten largest balances. This gradual decentralization of urban centers. This potential mismatch be- development policy in Bulgaria will require tween investment needs and available sup- continuous learning, and approach adjust- port measures may limit the overall develop- ments, as well as sustained political commit- ment impact of regional investments during ment and support to reap its full benefits. The the next programming period if not giving new approach promises high value added by due consideration. i) a stronger engagement of local stakehold- ers in planning and implementing regional Rural and urban municipalities will be able development policy, ii) more efficient use of to collaborate within ITI concepts that could limited resources through developing and pave the way for impactful integrated inter- implementing comprehensive packages of ventions. The new integrated approach pri- investments to generate complementarities marily concentrates on 50 urban municipali- and synergies across administrative units, ties eligible under PDR, but it also now, in its and iii) making sectoral policies more terri- latest iteration, provides development oppor- torially sensitive by mainstreaming territori- tunities to rural municipalities. Urban centers al instruments and enhancing cross-sectoral are usually growth engines of territories and coordination, while promoting key national it is important they have sufficient resources objectives. The successful implementation of to develop. Indeed, they will be able to take territorial instruments requires a revamped full advantage of the new approach. It is pos- strategic, institutional and procedural frame- itive development that rural municipalities work, together with substantial capacity for will be able to participate in ITI concepts to the the development, selection, and implemen- extent covered by SPARD, the six contributing tation of integrated territorial investments. Programs and PDR’s PA1 and PA2. They require The new approach is highly innovative, as sufficient investment opportunities and the the experience with integrated investments ability to join forces with urban municipal- in Bulgaria has been limited so far. Hence ities to reach their development objectives. there will be a need for close monitoring and This is vital in light of the urban-rural divide assessment of progress to capitalize on the observed in Bulgaria and the fact that the most newly acquired experience and to further fi- deprived, least developed parts of the country nesse implementation modalities. are primarily located in rural municipalities. Chapter 6 Summary of key findings and recommendations 85 A key success factor of the new integrated redress mechanism, and proper supervision approach is building sufficient capacity of are imperative to mitigate these risks around stakeholders at local, regional, and central conflict of interest. level to develop and implement territorial instruments. The institutional capacity of It is recommended that an intensive and MAs and RDCs is critical for the implementa- sustained capacity building program and tion of the reform and both require strength- advisory support mechanism for prospective ening. Since the new approach significantly dif- applicants is established early on to facilitate fers from the previous model of implementing the development of impactful, high qual- regional policy, and new more advanced instru- ity and viable project proposals.  The new ments (integrated projects) and new actors approach will offer beneficiaries more opportu- (revamped RDCs) are envisaged, MAs and RDCs nities to address development bottlenecks, but will need to adjust their standard operating at the same time, it will place more responsi- procedures. In fact, RDCs will have a completely bilities on them compared to the previous pro- new set of functions that they have never had gramming period. Moreover, given that many before. Similarly, the contributing MAs will elements of the new integrated approach will need to adjust their procedures under the new be new to beneficiaries, it would be advisable approach. Not only will they share responsibil- for MAs to frontload capacity building activi- ity for joint preparation of user-friendly guid- ties for prospective beneficiaries to enable their ance and manuals for prospective applicants, early participation in the Programs. The pro- they will also participate in a two-stage evalu- spective applicants, for instance, will need to ation and selection of integrated project in col- be able to conceptualize more comprehensive laboration with subnational entities. MAs and cross-sectorial interventions and plan their RDCs therefore will need to more closely col- implementation side by side with project part- laborate, in almost every aspect of the imple- ners under the auspices of mandatory part- mentation cycle. These new elements will lead nerships. The applicants will also need to be to complexity of the system for implement- well versed in implementation procedures of ing the integrated approach, which twofold different Programs, since individual projects objective will be to ensure specific territorial from packages will be financed from different impact via integrated projects and satisfactory sectoral Programs. Establishing the Advisory disbursement of EU funds. Functioning in this Hub for Municipalities as a provider of pro- more intricate institutional environment will fessional, centralized and standardized sup- require stronger institutional capacity and port and technical assistance is recommended. sustained involvement of all engaged entities. It is also recommended that the GoB es- Transparent procedures and mechanisms tablish an effective mechanism for coor- minimizing potential conflict of interest dinating MAs’ work, with strong political will need to be embedded in the new imple- leadership and a robust M&E system. MAs’ mentation framework. Delegation of tasks to seamless collaboration will be an important regional and municipal level (RDCs, PSUs, PSCs) factor enabling the integrated approach, since will certainly build regional and municipal beneficiaries will implement projects combin- capacity and contribute to their enhanced abil- ing funding from different MAs and contrib- ity to program and implement development uting to the achievement of indicators from policy. However, it also provides the poten- different Programs. This implies the MAs will: tial for conflict of interest, since representa- regularly communicate and exchange data to tives of municipal administrations will on the be able to monitor progress of the integrat- one hand be project applicants and potential ed projects; identify bottlenecks to fund ab- beneficiaries, and on the other hand they will sorption and disbursement; ‘isolate’ the con- support beneficiaries in preparation of appli- tribution to their individual Programs; and cations (RDCs’ Mediation Units) and evalu- flexibly react to changing circumstances to ate submitted project proposals (RDCs, PSCs). ensure achievement of each Programs’ sub- Clear separation of these tasks, merit-based stantive and financial goals, and sound im- objective selection criteria, transparent proce- plementation of the integrated approach as dures, existence of a grievance or complaints a whole. MAs will also need to create clear 86 An Analysis of the Possibilities to Implement Territorial Instruments demarcation lines between their Programs work seamlessly throughout the whole policy and other instruments to avoid redundancies cycle to support the elaboration and selection and support complementarities and synergies. of high-quality integrated projects and their They will need to put in place transparent successful implementation and long-term evaluation criteria allowing the selection of sustainability. The failure to adequately pre- the most impactful integrated projects devel- pare for any parts of the system may result in oped by viable and capable partnerships. To unsatisfactory results that could undermine accomplish these, the current coordination the potential of the new integrated approach mechanisms needs to be adjusted to reflect to generate desired development outcomes. the specific characteristics of the integrat- ed approach. To this end, this report recom- Despite the identified challenges and de- mends formation of a Coordination Council manding nature of the policy shift, the bene- for the Territorial Approach, with the CCU fits of the new approach have the potential to and MA PDR acting as the chair and secretar- achieve tangible development outcomes. The iat, respectively. The CCTA would help syn- new integrated approach, if well-implemented, chronize the work of the participating MAs, has the potential to build and strengthen trust and be the platform for regular communi- between stakeholders, to promote sustainable cation, identification of emerging problems cross-sectoral and interjurisdictional cooper- and shortcomings of the system, and propos- ation, to create a sense of shared ownership ing remedy actions. Additionally, the infor- and responsibility for joint development un- mation system for managing EU funds (UMIS) dertakings at the local and regional level. This, will need to be adapted to allow the monitor- in turn, could reinvigorate the entire regional ing of not only individual projects, but also policy agenda and significantly improve its im- integrated packages of projects. pact on the socio-economic situation across re- gions in the longer term. Achieving these high- The success of the new integrated approach ly favorable outcomes will require significant will depend greatly on the effectiveness of efforts and that all key elements of the imple- the entire delivery mechanism. All its con- mentation mechanism be diligently managed stituting elements must be well-designed, and by the relevant decisionmakers. 88 An Analysis of the Possibilities to Implement Territorial Instruments ANNEX 1  EU FRAMEWORK FOR SUPPORTING TERRITORIAL INSTRUMENTS 2021 – 27 This chapter presents lessons learned about that is more sensitive and responsive to indi- the implementation of territorial instruments vidual characteristics of territories and away during the 2014 – 20 period and a new regu- from a one-size-fits-all approach. latory framework for their implementation during 2021 – 27. The integrated approach is also to stim- ulate more flexible and innovative policy 2014 – 2020 EU programming perspective governance approaches, and capacity build- marked the inclusion of territorial instru- ing of broader range of involved stakehold- ments into the mainstream of EU develop- ers. Integrated instruments were to encour- ment policy and the 2021 – 27 perspective age multi-level governance, involve broader reinforces this direction. Territorial instru- groups of stakeholders into planning, imple- ments became an obligatory and prominent mentation and monitoring of territorial de- part of investments supported by EU Cohesion velopment instruments, and facilitate cre- funds. It was preceded by the introduction of ation of new functionally based partnerships. territorial cohesion as one of the fundamental aims of the European Union in the Lisbon Treaty of 2007, which was followed by a major Lessons learned debate on reforming Cohesion policy heav- ily influenced by the 2009 Barca report50 and from the application of the World Bank’s World Development Report territorial instruments 2009.51 Both these reports recommended intro- across EU Member States ducing a more place-based approach to sec- toral policies, which were perceived as too during the 2014 – 2020 ‘spatially-blind’, horizontal and standardized. programming period Stronger focus on specific territory were to make these policies more impactful and capa- During the 2014 – 2020 programming pe- ble of making a lasting positive difference for riod the integrated territorial approach the development prospects. was implemented in the EU member states mainly via two instruments: Integrated Ter- The aim of the ‘territorialization’ of develop- ritorial Investments (ITI) for urban areas and ment policy instruments is to promote inclu- Community-led Local Development (CLLD) sive and sustainable growth of territories by for rural areas52. In that period, the Member tailored interventions that strengthen their States were obliged to invest five percent of individual endogenous potential and help their funding from European Regional De- solve challenges in their individual context. velopment Fund (ERDF) calculated at Mem- This marks a shift towards a policy response ber State level into integrated and sustainable 50. An agenda for a reformed Cohesion Policy. A place-based approach to meeting European Union challenges and expecta- tions, Barca F., 2009. 51. World Development Report: reshaping economic geography, The World Bank, 2009. 52. CLLD based on experience from the EU rural development policy; this approach has been successful applied since 1991 as LEADER program The LEADER program (an acronym in French — Liaison entre actions de développement de l’économie rurale –meaning Links between actions for the development of the rural economy) is an EU initiative to support rural development projects initiated at the local level in order to revitalize rural areas and create jobs. Annex 1 EU framework for supporting territorial instruments 2021 – 27 89 urban development (SUD)53 to strengthen the implemented under the Operational Program development potential of urban areas as key Development of the Regions 2021 – 2027 (OPDR drivers of growth across the EU. The aim was 2021 – 2027). The review of experiences under- to increase resilience of urban areas against lines added value of the integrated approach challenges they face (climate change and en- and the key challenges with its implementa- vironmental risks, demography, social and tion that are divided into capacity, regulato- economic inequalities etc.). To enhance the ry and governance aspects54. territorial dimension and give local actors more leverage, the cities and other sub-re- gional bodies were to be entrusted with the Added value of ITIs task of project selection. ITIs were to promote cross-sectoral, multi-fac- The most prominent example of the new eted, and integrated packages of interven- territorial approach embraced by the EU tions (projects) that would be tailored to the Cohesion policy was the instrument called socio-economic and spatial characteristics Integrated Territorial Investment. ITI was of specific territories. Integrated planning designed to link thematic development objec- and investments, in turn, were to unlock and tives with a specific territorial dimension. For strengthen development potentials of differ- instance combining soft and hard measures to ent urban territories, initiating more promis- a greater degree than before, combing invest- ing growth trajectories. The Commission ex- ments from different sectors, such as educa- pected ITIs to encourage the integrated use tion, transport, energy efficieny.EU required of available funding and thus overcome sec- three elements to allow tapping into funds toral confines, which have limited the terri- dedicated to ITIs: i) an integrated territorial torial impact of interventions so far. ITIs were development strategy for a designated terri- also perceived as a useful tool for mobilizing tory, ii) a package of actions or investments local stakeholders, building their adminis- supported by funding from at least two differ- trative capacity and networking by engaging ent EU priority axes or operational programs them in the process of elaborating territori- to ensure integrated, cross-sectoral approach al strategies and implementing integrated in- and iii) adequate governance arrangements vestments. Last but not least, it was expected to effectively manage ITI implementation. In that ITIs would be a flexible tool for integrat- principle, ITIs can be considered a template for ing different funding streams to simplify the a territorial instrument, thus reviewing the expe- implementation modalities and increase their rience with their implementation offers an overall development impact on selected ter- opportunity to analyze the added value, key ritories (Box A1.1). challenges and bottlenecks of this approach. The introduction of ITIs helped strengthen 20 EU Member States applied ITIs during the strategic framework for implementing the 2014 – 2020 period, Bulgaria (and the re- territorially impactful interventions and maining countries) chose different delivery catalyzed institutional changes in entities mechanisms for SUD. Moreover, the imple- responsible for planning and implemen- mentation of ITIs varied among the member tation of regional/local development pol- states. The analysis of selected cases of the icies. ITIs contributed to building administra- ITI implementation offers relevant insights tive capacity of participating local actors and that could be useful for the Government of encouraged novel configurations both terri- Bulgaria (GoB) in its further conceptualization tory- and stakeholder-wise. The selected key of the new territorial approach that will be lessons learned include: 53. Total allocation for SUD for 2014 – 2020 eventually amounted to EUR 14.5 billion (7.8% of ERDF), surpass- ing the required 5% by more than 50%, with half of Member States allocating much more than 5% of ERDF to this end. Sources allocated to ITIs represent half of the total dedicated allocation. 54. The list of sources providing valuable insights with regard to the experience with implementing ITIs across EU Member States and which were reviewed by the Bank team for the purposes of this subchapter is provided in Annex 1. 90 An Analysis of the Possibilities to Implement Territorial Instruments BOX A1.1 Expected added value of ITIs • Strategic dimension (integrated strategies for territorial development): strengthening synergies between different strategic frame- works by bringing together investment priorities and developing a comprehensive, multi-sectoral strategy for a given territory • Financing dimension (operational programs): combining different funding streams to create critical mass and facilitate coordi- nated investment in territories • Territorial dimension (NUTS 2 regions): strengthening focus on functional areas to ensure tailored, place-based policy responses for a given territory • Operational dimension (ITI beneficiaries): enabling the elaboration and implementation of more complex and tailored sets of inte- grated projects through the multi-fund approach and thanks to enhanced administrative capacity • Intangibles (culture of cooperation): build mutual trust, sustainable cross-sectoral and interjurisdictional cooperation, create a sense of shared ownership and responsibility for joint development efforts at the regional level. Source: Authors • Introduction of integrated governance ar- complex to plan and implement than single rangements has been conducive to reduc- sector, ‘regular’ projects. That is because they ing the ‘silo-like’ character of sectoral poli- require more coordination of various activ- cies and promoting enhanced cooperation ities, combining knowledge from different and better coordination at central, region- sectors, fulfilling requirements of different al, and local level. funding envelops, and involving broader spec- trum of stakeholders etc. The key challenges • The ITI approach has the potential to stim- related to ITIs’ implementation are following: ulate a change of culture in territorial plan- ning, build mutual trust between stakehold- Capacity challenges ers, show benefits of continued cooperation as a way to create critical mass needed to Planning and implementation of integrated overcome development challenges, and max- investments requires higher capacity from imize growth potential of a given territory. stakeholders than in ‘regular’ projects. The capacity relates to: • The partnership principle of territorial in- struments has the potential for mobilizing • understanding a more complex integrated partners in three dimensions: horizontal approach and learning how to use it to solve (different types of partners from the same one’s developmental problems, territory), vertical (partners from different • preparing, in a limited timeframe, high-qual- levels of government); and territorial (part- ity territorial and local strategies that meet ners from across different territories). EU’s prerequisites and underpin integrated territorial investments, • Thanks to the early engagement of the pub- • technical knowledge and the ability to plan at lic (and other key stakeholders) in the pro- a bigger scale and properly stage the process cess of developing a territorial strategy and • financial capacity to hire adequate human attractive incentives the ITIs could induce resources and prepare bigger and/or more stronger ownership of and shared respon- complex technical documentation, and also sibility for development goals and invest- to hire external experts to help fill in knowl- ments among local stakeholders. edge gaps, • the ability to engage a bigger and more diverse group of actors (partners), and manage the Challenges of the ITI approach long-term, cooperative and multi-stakeholder ITI implementation, The experience with implementing ITIs • the ability to coordinate and oversee par- points out three areas that demand special allel activities, often in different sectors, attention if ITIs are to be successfully com- • manage financial resources and settle accounts. pleted, they refer to capacity of stakehold- ers, regulatory framework and governance Higher capacity is required not only from mechanisms. ITIs by their nature are more beneficiaries that are to implement ITIs, Annex 1 EU framework for supporting territorial instruments 2021 – 27 91 but also from MAs and other entities that confusing for applicants, beneficiaries and need to be able to assess ITI application, mon- managing authorities. This had the poten- itor their implementation and match specific tial to generate tensions between stakehold- results to specific programs (indicators). ers at different levels of the implementation framework, resulting in further delays. The Key regulatory challenges complexity of the selection process often sur- passed that associated with other ESIF opera- ITIs are more complex than individual sec- tions, involving different stakeholders (MAs, toral projects and require proper regulatory Intermediate Bodies, local stakeholders etc.). framework to thrive. A regulatory environ- • putting in place an effective coordina- ment that establishes effective and efficient tion mechanism between MAs to support procedures that guide work of MAs and bene- multi-fund territorial instruments to en- ficiaries is key to the success of the integrated sure a streamlined implementation process approach. Selected challenges in this field proved to be a difficult task. It requires good, are following: frequent and regular communication and cooperation between different levels and • complexity of ITIs, due to the necessity of different policy areas at the design stage following different sets of implementation and throughout the entire process of ITI rules that are applicable to different funding implementation. sources, e.g. ERDF and ESF, or different OPs, • limiting nature of requirements with regard to thematic concentration; more flexibil- Supporting ity would facilitate stakeholders’ creativity territorial instruments in in addressing specific needs of territories, • lack of sufficiently clear guidelines coupled 2021 – 2027 programming with the limited administrative capacity of period: Policy Objective 5 stakeholders required issuing additional “A Europe closer to guidance with regard to rules and regula- tions for institutions involved in the man- citizens” and the legal agement of ITIs, as well as for implementing framework beneficiaries — that delayed the contracting and disbursement of funds, The EU intensifies utilization of the terri- • difficulties in effectively reconciling national torial integrated approach during 2021 – 27 sectoral planning frameworks with the ter- period. A dedicated territorial policy objec- ritorial dimension. tive ‘A Europe closer to citizens’ was included in the set of five consolidated overarching Key governance challenges EU development objectives for 2021 – 2027 to further highlight the need for more territo- Integrated investments could stimulate new rially impactful development interventions interactions between stakeholders and con- (Box A1.2). These policy objectives will guide tribute to denser networking across terri- investments during the oncoming financial tories and levels of governance. However, perspective. the management of integrated investments, which by nature involve a bigger number of BOX A1.2 EU policy objectives for 2021 – 2027 actors, also poses challenges, such as: 1. A smarter Europe (innovative & smart economic transformation) • the need to strengthen horizontal and verti- 2. A greener, low-carbon Europe (including energy transition, the circular cal coordination, providing an opportunity economy, climate adaptation and risk management) to connect local, regional and national lev- 3. A more connected Europe (mobility and ICT connectivity) els in policymaking to effectively plan and 4. A more social Europe (European Pillar of Social Rights) implement investments, 5. A Europe closer to citizens (sustainable development of all types of • complicated decision-making process, with territories). multiple stages of project assessment and Source: Draft CPR 2021 – 2027 approval proved to be time-consuming and 92 An Analysis of the Possibilities to Implement Territorial Instruments Additionally, two horizontal objectives were Full compliance with requirements stipu- defined to underline the importance of admin- lated in the CPR is a prerequisite for pro- istrative capacity building and cooperation viding funding to integrated territorial between regions and across borders. investments under the 2021 – 2027 opera- tional programs. The CPR draft modification The ITI approach and CLLD instrument have in May 2020 that adjusts the policy frame- been streamlined and simplified. The goal is work due to the COVID-19 pandemic, did not to allow more flexibility for Member States to change the legal provisions regarding terri- design and apply their own tailor-made deliv- torial instruments. ery mechanism suited to the specific needs of targeted territories55. A new instrument, CPR formulates a common approach to all the so-called ‘another territorial tool’, will territorial tools and defines a minimum be available to the member states. All instru- set of requirements for territorial strate- ments supporting territorial approach under gies57. Three forms of support for integrated policy objective 5 are supposed to share sev- territorial and local development are made eral common characteristics. available to the member states: • integrated territorial investment (ITI), BOX A1.3 Key characteristic of the integrated territorial when a territorial strategy receives fund- approach for 2021 – 2027 ing from multiple priorities, programs, funds EU expects that integrated investment in 2021 – 27 perspective will have or POs following features: • CLLD, when a local strategy is designed and • multi-sectoral, • multi-level governance, implemented using an exclusively bottom-up • multi-stakeholder approach, and They also should target different types of territories and go beyond tradi- • another territorial tool supports integrated tional administrative boarders, for instance functional areas, sub-regional initiatives designed by the Member State units, local communities. for investments programmed for the ERDF under the policy objective 5. Territorial instruments: Preparation of territorial and local develop- legal framework for 2021 – 2027 ment strategies is a prerequisite for access- ing EU funds devoted to territorial instru- Three documents set out legal provisions ments. The CPR prescribes some technical and with regard to territorial instruments. The procedural aspects concerning these strate- Common Provisions Regulation (CPR) defines gies with regard to i) their contents, ii) their the EU horizontal policy objectives (Art. 4) ownership by relevant territorial authorities/ and describes tools and requirements for bodies, and iii) involvement of relevant terri- integrated territorial development (Chap- torial authorities/bodies in selecting invest- ter 2 — Art. 22 – 28). The Fund-specific Reg- ments compliant with these integrated ter- ulations (ERDF/CF, ETC, ESF+, EMFF) define ritorial strategies. the scope and specific objectives, as well as requirements with regard to thematic con- The territorial approach must fulfil two centration and other fund-specific focus ar- minimum requirements to use EU funds. eas (e.g. urban earmarking for ERDF). The Sec- Investments must be based on integrated ond Pillar of Common Agricultural Policy territorial or local development strategies (European Agricultural Fund for Rural De- (multi-sectoral, multi-stakeholder, optionally velopment, EAFRD) provides a common set multi-territorial) and a relevant local or ter- of rules for CLLD56. ritorial body shall select or shall be involved 55. SIMPLIFICATION HANDBOOK. 80 simplification measures in cohesion policy 2021 – 2027, European Commission — Directorate-General for Regional and Urban Policy https://ec.europa.eu/regional_policy/ sources/docgener/factsheet/new_cp/simplification_handbook_en.pdf 56. As it is not envisaged by MRDPW to include CLLD as one of the delivery mechanisms under OPDR 2021 – 2027 specific regulations regarding CLLD will not be reviewed in this report. 57. Chapter 2, Art. 22 – 28. Annex 1 EU framework for supporting territorial instruments 2021 – 27 93 in the selection of operations (multi-level, Policies Research Centre, December 2017 optionally community-led). https://ec.europa.eu/regional_policy/sources/ docgener/studies/pdf/integrated_strategies/ MAs are obliged to accurately identify oper- integrated_strategies_en.pdf ations, outputs and results contributing to an ITI through an electronic system. 3. Scenarios for Integrated Territorial Investments, European Commission, Directorate-General Territorial instruments are also to be ap- for Regional and Urban Policy, Martijn De plied to deliver sustainable urban develop- Bruijn, European Commission, and Piotr ment during 2021 – 27. The member states Zuber, 2015 need to earmark at least six percent of their https://ec.europa.eu/regional_policy/sources/ ERDF resources to finance CLLDs, ITIs or oth- docoffic/official/reports/pdf/iti_en.pdf er territorial tools under the PO5 in this area, that is one percentage point increase from 4. Towards Cohesion Policy 4.0 Structural Trans- the 2014 – 20 period. Additionally, the terri- formation and Inclusive Growth, John Bachtler, torial tools used under PO5 can combine dif- Joaquim Oliveira Martins Peter Wostner ferent investments and activities financed and Piotr Zuber, regional Studies Associ- under all other policy objectives (see points ation, June 2017 1 – 4 in Box A1.2) — enabling a multi-sectoral https://www.regionalstudies.org/news/ and integrated approach tailored to the spe- towards-cohesion-policy-4-0-structural- cific territorial context. transformation-and-inclusive-growth/ List of sources providing insights with 5. Revamping Local and Regional Development through regard to the experience with imple- Place-based Strategies, Andrés Rodríguez-Pose menting ITIs across EU Member States and Callum Wilkie, working paper pre- pared for Reinventing Our communities: 1. Integrated territorial development: new instru- Transforming our Economies Federal Re- ments — new results? Martin Ferry, Stefan serve Bank of Philadelphia Biennial Con- Kah and John Bachtler, IQ-Net Thematic ference, September 21 – 23, 2016 Paper 42(2), June 2018, European Policies https://www.penniur.upenn.edu/uploads/ Research Center Delft media/Rodriguez-Pose_-_Wilkie_PennIUR- https://pureportal.strath.ac.uk/en/ Philly_Fed_working_paper_091616.pdf publications/integrated-territorial- development-new-instruments-new-results 6. Territorial Agenda 2020 put in practice. En- hancing the efficiency and effectiveness of Cohe- 2. Integrated territorial and urban strategies: how sion Policy by a place-based approach, Volume are ESIF adding value in 2014 –  2020? Final Re- I — Synthesis Report, CSIL, Centre for In- port, Arno van der Zwet — European Poli- dustrial Studies, May 2015 cies Research Centre, John Bachtler — Eu- https://ec.europa.eu/regional_policy/en/ ropean Policies Research Centre, Martin information/publications/studies/2015/ Ferry — European Policies Research Centre, territorial-agenda-2020-put-in-practice- Irene McMaster — European Policies Re- enhancing-the-efficiency-and-effectiveness-of- search Centre, Stephen Miller — European cohesion-policy-by-a-place-based-approach 94 An Analysis of the Possibilities to Implement Territorial Instruments ANNEX 2  LESSONS LEARNED FROM THE APPLICATION OF TERRITORIAL INSTRUMENTS IN BULGARIA AND SELECTED EU COUNTRIES Bulgarian experience During the 2007 – 2013 programming peri- with integrated territorial od, Operational Programme “Environment“ invested mainly in the establishment of re- instruments gional waste management systems to fulfill the commitments in this sector made during The Bulgarian experience with integrated the country’s accession to the EU. The princi- territorial investments is limited and it ples of partner projects financing have contin- pertains to three modalities. First, it is col- ued to be respected throughout the 2014 – 20 laboration in managing solid waste by groups programming period. of municipalities, second, the CLLD approach, already signaled in previous chapters, and Grant funding is awarded through direct third cross-border cooperation projects: award procedures addressed to one or to sev- eral regions at the same time, depending on their project readiness. All municipalities in Implementation of waste a given region are invited to participate in management projects the selection process. Waste management is organized on a re- Signing of a Partnership Agreement by all gional basis and is regulated by the Waste municipalities in the region is a prerequi- Management Act (WMA). The law defines the site for submitting a project proposal for principles and method of organization of the assessment. The grant contract is signed by waste management in the country. The ter- the MA of the programme and by the benefi- ritory of the country is divided into regions ciary (Lead Partner) and the rest of municipal- and covers all municipalities. Waste manage- ities as partners. The fact all members of the ment regions are functional. The leading cri- Association jointly sign the grant contract cre- terion for their determination is the distance ates conditions for sustainability of the project between the waste generating site and the and commitment by all to its implementation. regional landfill and other waste treatment facilities. The partnership agreement covers rights and obligations of the parties in relation to Each mayor is responsible for organizing the entire project cycle — preparation, as- the process of collecting, transporting and sessment, implementation and operation treating the waste generated on the terri- of the assets. In regard the project prepara- tory of the respective municipality. The law tion phases the municipal members of the re- provides for the municipalities in one region to gional association decide among themselves establish a regional waste management system. which municipality will be Lead Partner or The municipalities must establish a Regional beneficiary. The Lead Partner communicates Waste Management Association (RWMA). At with the MA on behalf of all members. They the same time, the legislation sets deadlines are obliged to assist the process of project for meeting regional targets for reducing the preparation and evaluation. In regard the proj- amount of landfilled waste. ect implementation phases the partnership Annex 2 Lessons learned from the application of territorial instruments in Bulgaria and selected EU countries 95 agreement laid down the provisions about authority for the implementation of the (1) financial contribution by each member, CLLD, as well as the establishment of a CLLD (2) financial flows related to advance, inter- Coordination Committee. The members of im and final payments under the project be- the Coordination Committee are representa- tween partners, and (3) public procurement tives of all programs involved in the imple- responsibilities. mentation of the CLLD, other authorities and bodies that have responsibilities for agricul- The Partnership Agreement also covers ture, social and regional policies, including other issues such as project implementation RDCs in Level 2 regions. reporting, project rules and publicity obliga- tions, etc. The Agreement is the main docu- The RDP MA supported establishment of LAGs ment regulating the relations between the through technical assistance. This helped partners, and between all of them and the MA the local communities organize themselves, throughout the entire term of project imple- develop skills and knowledge for preparation mentation. In the case of infrastructure mea- of CLLD strategies — the framework document sures this can be more than 5 years. guided the investments. The period for estab- lishment of LAGs and preparing the strategies took up to two years. Community-led local development MAs and LAGs sign an agreement for imple- mentation. MAs of the programs prepare The CLLD in Bulgaria during the current guidelines for the assessment of projects sub- programming period is implemented a as mitted under CLLD strategies. The guidelines multi-funded and as a single-funded ap- include requirements for applicants and proj- proach. This section offers information about ects to be funded under the relevant pro- the former one, because it used a similar model grams within the strategies and conditions as is intended under the integrated approach. for project implementation. Five operational programs participate in Monitoring for the implementation of the the CLLD. These are the Rural Development CLLD strategies is carried out by the MA of Program, OP Human Resources Development, the Lead Fund and the LAG. The RDP MA draws OP Environment, OP Innovation and Com- up reports on the implementation of the CLLD petitiveness, OP Science and Education for strategies at the end of every six months and Smart Growth. submits them to the Coordination Council for the management of the European Union funds The rules for coordination between MAs of and to the monitoring committees of the pro- OP and Local Action Groups (LAGs) related grams involved in the financing of the strategies. to the implementation of the CLLD are laid down in a special decree of the Council of The implementation of individual projects Ministers (CoM Decree 161/2016). The Decree within the CLLD strategies is carried out regulates the coordination of the develop- in compliance with the requirements of ment, selection and implementation of CLLD each program. Reporting, verification and strategies and projects supported by more monitoring of the projects on the CLLD strate- than one European Structural and Investment gies are implemented in the UMIS. The imple- Fund (ESIF). mentation of a project in the framework of a CLLD strategy is monitored by the LAG, as The coordination mechanism, outlined well as by the bodies responsible for the man- in the CoM’s decree, includes the designa- agement and control of the respective oper- tion the RDP MA as a responsible managing ational program. 96 An Analysis of the Possibilities to Implement Territorial Instruments ANNEX 3  LIST OF SOURCES PROVIDING INSIGHTS WITH REGARD TO THE COVID-19 IMPLICATIONS FOR REGIONAL POLICY AND THE ELABORATION AND IMPLEMENTATION OF TERRITORIAL INSTRUMENTS 1. Pandemic, recession: the global economy in cri- forecast-deep-and-uneven-recession- sis, Global Economic Prospects, World uncertain-recovery_en Bank, June 2020 https://www.worldbank.org/en/publication/ 7. Identifying Europe’s recovery needs, Commis- global-economic-prospects sion Staff Working Document, SWD (2020) 98 final 2. Fighting COVID-19, Europe and Central Asia https://eur-lex.europa.eu/legal-content/EN/ Economic Update, April 2020, World Bank, TXT/?uri=SWD%3A2020%3A98%3AFIN Washington, DC: World Bank https://www.worldbank.org/en/region/eca/ 8. COVID-19 demonstrates urgent need for cities to publication/europe-and-central-asia- prepare for pandemics, UN Habitat, June 2020 economic-update https://reliefweb.int/report/world/ opinion-covid-19-demonstrates-urgent-need- 3. Globalization in the Time of COVID-19, CESifo cities-prepare-pandemics Working Paper, Munich Society for the Pro- motion of Economic Research, Sforza, A., 9. Global report on food crises, 2020, World Food and M. Steininger, 2020, Munich, Germany Program https://www.econstor.eu/bitstream/ http://www.fightfoodcrises.net/ 10419/216580/1/cesifo1_wp8184.pdf food-crises-and-covid-19/en/ 4. World Development Report 2020: Trading for 10. Territorial impact of COVID-19: managing the Development in the Age of Global Value Chains, crisis across levels of government, OECD, 2020 2019, Washington DC: World Bank http://www.oecd.org/coronavirus/ https://www.worldbank.org/en/ policy-responses/the-territorial-impact-of- publication/wdr2020 covid-19-managing-the-crisis-across- levels-of-government-d3e314e1/ 5. Investment policy responses to the COVID-19 pan- demic, Investment Policy Monitor, Special 11. Spring 2020 Economic Forecast, May 2020, Eu- issue No. 4, UNCTAD, May 2020 ropean Commission https://unctad.org/en/PublicationsLibrary/ https://ec.europa.eu/info/business-economy- diaepcbinf2020d3_en.pdf euro/economic-performance-and-forecasts/ economic-performance-country/bulgaria/ 6. Spring 2020 economic forecast: a deep and un- economic-forecast-bulgaria_en even recession, an uncertain recovery, Europe- an Commission, May 2020 12. Firm survey, National Statistical Institute https://ec.europa.eu/info/business-economy- Bulgaria, May 2020 euro/economic-performance-and-forecasts/ https://www.nsi.bg/sites/default/files/files/ economic-forecasts/spring-2020-economic- pressreleases/ACT_NF2020-05_covid.pdf