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Important aspects to know about grants for SMEs as of February 2018

Small and medium-sized enterprises (SMEs) will also have a wide range of sources of non-reimbursable funding this year – 2018. Regrettably, however, as every year, there is no fixed timetable for calls for projects, the deadlines only become certain after the launch of the call guideline in public debate, usually just one month before the calls are opened.

However, it is important to know what funding possibilities the SMEs have and what are the general conditions for accessing the funds, as the preparation of a project is not an easy task for any entrepreneur. And this is not because the entrepreneur, promoter of the project does not know what he wants but because the project must meet certain eligibility criteria. As regards the allocation of public funds, the substantiation of the project can not be based on the applicant’s business instinct but on “evidence” supported by documents issued by third parties and by financial forecasts drawn up on the basis of a profitable activity history of the firm.

Take for example the common case of European funds dedicated to SMEs for investment in tangible assets in the production equipment category. The price of such a good can be estimated by the entrepreneur according to his own research or field observations but his own assessment would not be scored. It is important that the price comes from the manufacturer of the equipment or from an authorized dealer and that it bears the written form of a price offer obviously non-binding. At least three such offers are required for the price to become credible to the public authority responsible for managing the non-reimbursable funds allocated to that call for projects. Getting these price offers may take even weeks, which is why the call for tenders should take place before the call for projects is opened.

It is also useful for an entrepreneur who intends to apply for a grant to check in advance the legal status of the company. Even if the company is complying every month with its tax payments, there may be registration errors, so it is healthy for the company to get its tax clearance in advance to ensure that it has no outstanding debts. At the same time, the company will have to prove ownership / concession / use of the space intended for the implemention of the investment for usually at least 5 years. It is therefore advisable to check in advance those documents because they are generally hard to be obtained / rectified within a short time, being dependant on a multitude of external factors. If the funds are requested for a new construction, the urbanism certificate must be issued on the company’s name and indicate the destination of the construction according to the requested activity.

Moreover, because we find ourselves during the closure of 2017 accounts, it is good to know that on all SMEs financing lines an eligibility criterion is the recording of operating profit  as a rule in the year before application for grants . As the difference between profit and loss can be extremely small from an accounting point of view it is advisable that the 2017 balance sheet show a profitable activity. In this way, the state will be confident that the allocated non-reimbursable funds will be more likely to succeed when SMEs are making profits in their current work.

Also in the category of the common evaluation criteria of the projects promoted by SMEs, there is also the proving of the project implementation capacity. This capacity translates primarily through the human resource that will complete the proposed project and the context in which it will be carried out. A formal adaptation of an expert’s biography is not enough to overlap exactly with the project requirements, but also a broader context to show that the company can support the proposed project through its current workflow. Recommendations from customers and suppliers, independent market studies can help by adding points to the evaluation. Again, they can not be obtained overnight, they must be prepared early.

These are just a few things that need to be prepared in advance to make sure that you can develop a competitive application to get a grant from European or national funds.

In the table below we included the main non-reimbursable financing lines for private companies open at February 2018:

No. Program Grant value Private contribution / Beneficiaries Eligibile activities
OP Competitiveness POC 1.2.1Innovative Technology Project Max. 22.500.000 lei Depending on the type of beneficiary / enterprises for which the research activity is not the main activity. Mandatory in the project:– experimental development

– the introduction of research results (initial investment for innovation) into production.

Only eligible domains:

– Bioeconomy.

– Information and communication technology, space and security

– Energy, Environment and Climate Change.

– Eco-nano-technologies and advanced materials.

– Health, a priority area of national interest.

PO Large Infrastructure POIM 6.2 Max. 200.000 Euro Industry companies with over 1,000 consumptiontoe / year. – Acquisition and implementation of the energy consumption monitoring systemlevel of the industrial platform.

– Preparation of the project (elaboration of studies, obtaining approvals, authorizations, etc.).

– Project management, project audit.

PNDR 4.1a Investments in fruit-growing holdings Variabile Between 10 şi 50% – Investments in the setting up and modernization of the fruit farms, including the setting up and conversion of fruit plantations and the modernization of the agricultural machinery and equipment park.– Investments in setting up and upgrading of fruit nurseries, including the increase of the areas occupied by planting material.

– Establishment and upgrading of fruit processing units at farms.- setting up and / or upgrading access to the farm, including utilities and connections.

– investments to meet Community standards for young farmers, where support can be granted over a period of maximum 24 months from the time of installation.

– Other investments.

 

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Average gross salary to rise significantly in Romania starting with 2018

We are living this period in Romania not only the count down for the Christmas and New Year but also for the new salary payment system which will be introduced starting January 2018.

The gross salaries of the Romanians will rise spectacularly but net salaries will be hardly maintained at the level from December 2017. Till now only employees working in the public sector are guaranteed the same net salary.

In brief, according to the new fiscal legislation, the employer and the employee will negotiate the gross salary which would comprise all related taxes paid currently shared by the employee and the employer namely pension and health contributions. Those taxes would continue to be paid in the name of the employee by the employer in the future as well. But the failure to do so will constitute for the employer a criminal penalty and not just a contravention sanctioned with an administrative fine.

Until now, the gross salary of the employee included only a part of health and state pension contributions, the other part was paid by the employer without being accounted for in the gross salary, though it was calculated for each employee based on the employee’s gross salary negotiated with the employer.

First, we have to understand that this transfer of contributions from the account of employer to the account of each employee stipulated by the law which will enter into force on January 1st, 2018, is not done automatically. Thus, each employer be it public institution, state owned company or private firm, has to negotiate and establish the new salary for each employee. A related Government’s ordinance set the obligation to do so from the end of November 2017 up until this Christmas.

Second, it is nonetheless important to observe that the employers may choose to keep constant the expense with the salaries or to transfer the currently paid contributions to their profits and not to the net of the employees in order to maintain their existing net salary.

In order to encourage employers to keep current net salary of the employees, the Government decided to lower tax on salary from current 16% to 10%. This move would compensate the fact that the contributions to health and pension funds paid currently by the employers are related to the existing gross salary of the employees which are lower than the future salaries which would include all contributions.

There are at least 2 categories of employees who will be disadvantaged by this transfer of contributions, namely the IT staff and the researchers who are currently benefitting of no tax on salary. Consequently, for them the lowering of tax on salary from 16% to 10% does not help. In case their employers choose to maintain their overall expense with salaries, then the net salaries of IT and R&D employees will decrease if no other specific legislation will be adopted during next 10 days. In addition, a new tax is introduced for the employers called solidarity tax with a level of 2,25% applied to the overall salary expense.

In brief the new fiscal legislation is including health and pension contributions paid by the employer and employee in the gross salary of the employee as follows:

  • Unified social contribution for state pension fund included in the gross salary of the employee – 25%
  • Unified social contribution for health included in the gross salary of the employee – 10%
  • Tax on salary after deduction of the health and pension contributions – 10%
  • Social contribution for the employer – 2,25% on the overall expense with salaries. In addition, the employer will have to pay some extra contributions for hard labor conditions.

The new labor contracts, by exception, can be registered with the national register up until March 31st in order to be considered valid although applied from January 1st.

Following the above described changes, the minimum salary established by law will become from next January, 1.900 ROL.

As of December 2017, this legislation although adopted by the Government and in force from January 2018, is under debate in Parliament and important amendments could be voted.

If all those changes apply and the employers will maintain the net salaries of the employees at their current level than Romania will register a significant increase of the average gross salary. In October 2017, this indicator was 3.327 ROL (around 725 Euro). Starting with January 2018, we will assist to a significant increase of this parameter, which could go up to around 950 Euro throughout 2018 but the net gain of the employees will stagnate.

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After 25 years of restructuring, Romanian power sector at a crossroad

In November 2016, the Romanian Ministry of Economy posted for public consultation a preliminary draft of the energy sector 2016-2030 with a year 2050 perspective.  It tackles all energy resources such as crude oil, natural gas, coal, biomass and energetic waste and includes special sections for electricity. It is thus an occasion for a review of the Romanian power sector and its evolution during the past 25 years.

From the beginning, it is important to note that the country’s energetic system was designed at national scale, during ‘50s, and at that time it took into account not only, on one side, the natural endowment of the country which disposed of virtually unlimited resources of low quality coal (lignite and low caloric hard coal), limited reserves of natural gas and crude oil supplies and good water resources but also, on the other side, an ever-increasing consumption of electricity. For decades, the country’s power system was engaged in a race against time to meet the huge demand coming from a developing economy and a population in process of urbanization.

Large power plants based on lignite and hard coal were built during ‘60s with the role of supplying the country a constant volume of electricity, with a continuous functioning regime. In addition, to deal with peak consumption periods or shortages of coal electricity, some large hydro power plants were built totaling approx. 5,2 TW of installed power and around 100 dams (out of which 89 large dams) playing a significant role also in preventing overfloods. Due to shortage of electricity caused by ever-growing consumption of the metal processing, machine-building and chemical platforms, cement factories, mining exploitations and irrigation systems, in 1978, it started the construction of the first nuclear power unit (finalized 20 years later).

Thus, in 1990, Romania had an integrated electricity system with an installed power of 23 TW of which 16,8 TW in thermal power plants (73%) and 5,5 TW in hydro (24%). In addition, some natural gas fired power plants were built in larger cities or on important industrial platforms to supply the households and the economy with hot steam for industrial purposes or for households heating in centralized distribution systems including Bucharest. The first nuclear power unit whose construction started in 1978, would be commissioned only in 1996, and a second unit a decade later.

After 25 years of restructuring the energetic system, mainly the power producers, by: i) shutting down the loss producing entities; ii) focusing investments on lower cost producers (hydro power plants, nuclear units and lower cost lignite fired plants) with the aim to keep price of electricity down to protect the population whose consumption decreased dramatically during ‘90s; and iii) promoting green energy (with generous subsidies schemes for wind and solar electricity producers, state aid meanwhile drastically reduced) especially after integration into EU in 2007 in accordance with European strategy, the installed power for electricity generation has remained constant at 23 TW but with a different breakdown: coal based power plants – 27%,  hydrocarbons – 21% (natural gas, heavy oil), hydro – 28%, nuclear – 6%,  wind – 13%, solar – 5%. In brief, the 25% reduction of coal fired power plants capacity was replaced by wind, solar and nuclear generated electricity.

Not only the power producers side has restructured during those past 25 years but the consumption as well. According to industry data3, in 1989, Romania registered the highest consumption of electricity of all times equal to 84 TWh produced domestically and additional 9 TWh imported. After 1990, the drastic restructuring of the industry which took place mainly in the period 1995 – 1999, through massive lay-offs and closures of assets especially of those energy intensive such as the metal processing industry, machine building units, petrochemical platforms, mining exploitations and dismantling of the irrigation systems, was reflected by more than significant reduction of the electricity consumption, from the all times high 93 TWh registered in 1989 to a minimum of 49 TWh in 1999 (when the country was closed to default).

Afterwards, the consumption of electricity resumed growth in parallel with the economy, but since the economic crisis of 2008, the GDP advance decoupled from electricity consumption reflecting the end of the restructuring process of the economy and the introduction of new technologies with a low demand for electricity. Consequently, the country’s electricity consumption has stabilized during the past years to around 60 TWh.

Concluding, it is important to observe that the installed capacity of electricity generation has remained constant during past 25 years although the country’s consumption has significantly decreased leading to the idea that some production capacities are underutilized (exports are limited). Thus, it would be important for any power sector strategy to first assess the perspectives of the electricity consumption based on a national long term development strategy. The theory of the ever-increasing demand is not anymore actual and the export of significant electricity volumes could not constitute a reliable argument for investments in the sector unless agreed via long term secured purchase agreements.

 

Note: This article was first published in the section Voices of http://emerging-europe.com/

 

2017

Fiscal highlights for the beginning of 2017

Year 2017 begins with important fiscal changes some of them announced for quite some time, e.g. over one year as it is the case for the reduction of standard VAT level from 20% to 19% (return to its 2008 value, increased in 2009 due to the crisis to 24%), others modified overnight in the first days of the current year effective immediate or starting with February 1st, e.g. taxation of microenterprises, tax on profit exemption for the companies which activate exclusively in the field of research and development, removal of minimum threshold for the revenues obtained by software companies in order for their employees to benefit of tax on salary exemption  a.o.

Overall, apparently, there is a certain move of the new Government towards the reduction of taxation level in order to boost economic activity in the field of SMEs and in sectors with high value added such as research and software. It is still unclear how that loss of income will be compensated having in view that some categories of state employees will also benefit of increased salaries. In addition, a law adopted by the Parliament just before the parliamentary elections held in December last year, cancelled over 100 parafiscal taxes such as the tax for state radio and television, the green stamp tax which was used to stimulate the acquisition of new cars, tax on constructions and many others.

Romania registered in 2016 the highest GDP growth of all EU, according to the latest forecast released in November 2016 by the National Commission for Prognosis, the advance of the country’s GDP would be 4,8% for the past year after being 3,8% in 2015. For the current year the estimated advance is around 4,3%. Considering those high values for the GDP growth, and the fact that in 2016 the budget deficit did not exceed the established ceiling, it is obvious that there is space for a fiscal relaxation.

The big problem is that there is still unclear how this loss of income for the state budget will be compensated. By mid-year we could realize that fiscal deficit goes higher and higher and that it becomes more and more expensive for the government to borrow to cover the deficit. It will be then necessary to impose some new taxes which would affect the credibility of the government with even more negative impact on the country’s rating and borrowing capacity.

One solution would be of course to limit the public investments in order to keep the budget deficit under control but this would hamper the economic growth and would make even greater the development gap between Romania and the EU average. Other solution which is under consideration at the governmental level would be to replace those taxes which were either cancelled or reduced with some other fiscal measures which would affect only higher salaries or incomes.

A first measure was approved by the Government last week, the ceiling of five average gross salaries for the payment of the contributions to state pension and to state health care was removed starting with February 2017. In October 2016, the average gross salary was 2.874 ROL (around 640 Euro) which means that the measure will be applied for the employees earning more than 3.200 Euro gross per month. According to the Government, there are 36.000 people affected by this measure including the prime minister, the president and other high ranked officials. But this measure which is estimated to bring additional 2 billion ROL (approx. 450 mil. Euro) to the state budget will only cover the increase of salaries granted for some categories of civil servants beginning January 2017 and the general increase of the pensions.

It is thus necessary to have an overall increase of the state budget revenues which could be achieved by curving the tax evasion, by recovering the seized assets from those who were convicted for frauds and by a more efficient and higher absorption of the non-reimbursable European funds which would not only fill the budgetary gaps but will also support a healthy growth of the economy.

In brief, the fiscal landmarks of the year 2017 are the following:

  • Standard VAT level is 19% starting with January 2017.
  • Increase of the ceiling of 100.000 Euro to 500.000 Euro for the revenues of a company in order to qualify as micro-enterprise.
  • According to new regulations, tax on revenue for micro-enterprises will be 1% for the companies with one or more employees and 3% for those with no employees.
  • Companies active exclusively in Research, Development and Innovation (R&D&I) are exempted of tax on profit for the first 10 years of activity with the observance of state aid regulation. As a transitory measure, companies with R&D&I profile, established before the adoption of that legislation, are exempted of tax on profit for the period January 6th, 2017 – January 6th, 2027.
  • Beginning with February 2017, medical services paid by the employees can be also deducted from the taxable income up to 400 Euro along with voluntary health care insurance.
  • Removal of the ceiling of five average gross salaries for the payment of the contributions to state pension and to state health by the employees and employers starting with February 2017.
  • For the real estate transactions done by natural persons, the 3% tax will be applied after the deduction of 450.000 ROL (100.000 Euro).
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Consumption increase as growth engine in 2015

National Statistics Institute, published mid-February 2016, preliminary GDP growth rate for 2015. The advance of 3,7% looks impressive although only an estimate which might suffer certain adjustments. In addition, European Commission forecasts a 4% increase of Romanian GDP in 2016. The question now is whether this performance reflects a genuine increase of the economy or is owed to certain favorable fiscal measures taken throughout 2015-2016 period which led / will lead to a consumption increase.

Noteworthy, in June 2015, VAT for food products was reduced from 24% to 9% which automatically determined an advance of the consumption. Moreover, salaries in the public sector have been applied an overall increase of 10% starting December 2015 after medical staff benefitting of a 25% growth of earnings from October 2015 and professors of 15% since December. And good news continues, with the new fiscal code applied from January 2016, VAT general level was decreased from 24% to 20%, tax on dividends was reduced from general rate of 16% to 5% for natural persons while the minimum gross salary on economy is planned to be increased with 19% from May 2016.

We are thus facing an avalanche of fiscal reduction and personal income growth for each Romanian which would ultimately lead to a strong increase of consumption, which in turn should produce more tax revenues, higher than those lost through tax reduction measures. This is a simple equation which would certainly work as such in a developed economy where local producers could absorb this rising demand. The question is whether Romanian economy is prepared to take its share of this consumers’ money surplus. According to the Government, apparently the calculations done by the Ministry of Finance indicate that the budget deficit will be maintained under 3% as agreed with the European Commission for 2016 in spite of all those fiscal relaxations and increase of salaries in the public sector.

Representatives of the National Bank of Romania have recently expressed serious concerns on the sustainability of such growth rates on medium term. Their opinion is that GDP growth of about 3.5% – 4% was achieved due to the advance of consumption due to the 9% reduced VAT for food products, to salary increases and to ever reducing bank interest. NBR representatives fear that in the near future the effect of all those fiscal relaxations and salaries increases will melt and stimulating the economy through fiscal measures will stop. Then, the wind will blow in reversed direction leading to excessive budget deficit. Currently Romania is spending 1,6% of GDP on financing public debt and if this debt will go higher than we would need to cut spending from health, education, defense etc.

Thus, it is important to note that if Romanian economy should not rely on internal consumption for GDP increase, then the alternative would be to push the exports, consequently relying on foreign consumption for its growth. But what does this mean? It means first an increase of investments level be it domestic or foreign. It’s a fact that the budget deficit in 2014-2015 remained under 3% because the Government did not implement the investments as planned. The absorption of EU funds had been a total failure therefore co-financing was not anymore needed. The irregularities found in public acquisition put a halt in many major local public investments project while at national level, the political disputes and government reshuffling have determined the postponement of any major infrastructure project.

It would be difficult to rely on local capital for increase of exports. During past 25 years there has been little opportunity for a Romanian class of true entrepreneurs to emerge, corruption and lack of a functional judicial system plagued the business environment. In addition, the largest exporters are by far foreign companies therefore, as usual we would need to rely on foreign investors in order to increase our exports. Minimum salary will go higher starting May 2016, it will in premiere reach 1 Euro/hour. Would it be possible to still be attractive if the employees will be more expensive?

The response is affirmative, if the same employees will become more competitive or if the business environment overall will be more competitive. This means that Romania could not afford anymore low cost jobs, our salaries will be too high for those. But we cannot all be software programmers or car engineers which leads to the necessity of establishing reliable professional schools where people can acquire high level skills in partnership with the industry and as a response to the demand coming from labor market. This also means that employment level will have to go up with more unemployed people especially from rural areas and from Eastern part of Romania become active on the labor market.

And above all those, we would need an infrastructure to support private investments which in turn would boost exports such as fast transport connections between borders, a strong educational system at all levels, a reliable medical care network. Otherwise we will all remain stuck into the idea that there are outside forces which want us underdeveloped.

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Largest Romanian Operational Program of 2014-2020 period – Large Investments (LIOP), approved by European Commission

The European Commission approved on July 10th, 2015, the largest Romanian operational program of the 2014 – 2020 budgetary period namely Large Investments (LIOP) with a non-reimbursable European contribution of approx. 9.4 billion Euro. This program addresses several development priorities of Romania as highlighted below:

  1. Transport infrastructure – allocated 5.1 mld. Euro (6.8 mld. Euro with national financing) which include i.a. finalization of the three main transport corridors (road, train and Danube) belonging to TEN-T network from Nădlac in West of Romania at the border with Hungary to Constanṭa, largest port on the Black Sea. Most challenging of all projects to be financed from LIOP will be the construction of the highway between Sibiu and Piteşti which will ensure the smooth passage of the mountains, contribute to the increase of traffic safety and reduce travel time, thus leading to significant economic savings and gains.
  2. Environment related infrastructure – allocated 3.8 mld. Euro (4.47 mld. Euro with national financing) with the aim to complying with EU Directives and with the commitments of Romania’s Integration Treaty for water and waste sectors as well as in view to protecting biodiversity and coastal erosion.
  3. Energy and energy efficiency – allocated 0.52 mld. Euro (0.6 mld. Euro with national financing) with complex objectives in compliance with Europe 2020 strategy of sustainable, intelligent and inclusive growth. Important to note that during 2007-2013 with EU support, Romania fulfilled the commitments for 2020 in the field of renewable energy but only for solar and wind due to the very generous incentive scheme implemented by the Romanian Government (on investment side with 50% subsidy and on operational side by supporting a rewarding price for the green certificates). POIM financing dedicated to green energy production will be directed only for sectors not enough exploited such as biomass, waste to energy, geothermal etc. In addition funds are available for energy efficiency major projects such as rehabilitation of district heating network in Bucharest, cross border interconnection of gas pipes and strengthening of electricity transport network in order to better cope with the renewable generators connection to grid.

It is the last operational program for 2014-2020 to be approved by EC, from now on Romanian authorities can start implementation of all seven programs if there are mature projects to be financed. This has been in fact one of the major obstacles which prevented a higher absorption during 2007-2013 besides corruption and indecision of authorities. Lack of viable projects could be the major threat during current programming period as well. Just as an example, the feasibility study for the much needed and discussed Sibiu – Piteşti highway has only recently been signed. It will take at least two years to finalize it and then 1-2 years for the tender related to construction works to be finalized. This means that we will see the complete highway from Nădlac to Constanṭa ready only after 2023. Still 10 years to go until final goal will be reached!

It is important to note that, according to EU Directives, TEN-T core routes have to be finalized until 2030 while the comprehensive network has year 2050 as deadline. Romania has two urban nodes on TEN-T core namely Bucharest and Timişoara. Other countries have one as it is the case of Austria with Vienna, or several such as Poland, UK, Italy, Germany, France and Spain.  Romania is well represented in the field of TEN-T core ports – i) seaports Constantza and Galatzi; ii) inland ports Calafat, Cernavodă, Drobeta Turnu Severin, Giurgiu. In addition, there are RRT (Rail-road terminals) envisaged within TEN-T core in Bucharest, Timişoara and Craiova. Under current TEN-T split between core and comprehensive only the core related projects will be allowed financing from EU 2014-2020 budget.

Same “core” rule applies to railways and naval/maritime routes with Danube strategy playing a key role in the allocation of funds. More specifically, in order to be allowed for financing from POIM, projects related to transport infrastructure have to be “core” and included as priority projects in the Danube strategy approved by EU in 2010 (where relevant) and in the General Transport Master Plan recently adopted by the Romanian Government. For 2014-2020, there are no new projects anticipated, only finalization of those which are under construction from 2007-2013.

A similar situation is met in environment related section of LIOP. All projects represent either continuation of investments started during 2007-2013, or investments planned since before integration (2007), supposed to be implemented some years ago but for various reasons, delayed. The aim of all those projects is to comply with EU environmental acquis in the field of waste water, waste management, Natura 2000 network and fight against effects of global warming (coastal erosion). In addition, given that Romania was the last member state lacking of centralized water distribution networks throughout the country (especially in rural areas), projects in this sector became a priority in 2007-2013 being integrated with waste water related investments. The ultimate objective is that all localities with more than 2,000 inhabitants to benefit of waste water sewage systems while localities with more than 50 people to have access to water distribution system which would supply safe drinking water.

In the field of energy and energy efficiency, LIOP comes with new priorities and projects. Given that an EU Directive stipulates the obligativity of smart meters until 2020, the financing of some such pilot projects is included in the list. The analysis will represent a basis for the Romanian government to plan further measures which would lead to a true liberalization of electricity market and thus to a significant decrease of electricity price. In addition green energy is allocated a certain important non reimbursable financing in order to capitalize on resources such as biomass, geothermal, waste etc.

The successful implementation of LIOP will contribute to the reduction of development gap between Romania and the average level of European Union Members.

 

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Public administration – the principal promoter of equal opportunities and sustainable development

Public administration – the principal promoter of equal opportunities and sustainable development

Equal opportunities and sustainable development are fundamental themes of Europe 2020 strategy, structural funds allocation in 2014-2020 period being conditioned on those. Even the standard format of operational programs (OPs) imposed by the European Commission to all Member States requires as a rule a minimum percentage allocations to initiatives that address sustainable development and social inclusion. The two principles represent, along with smart Europe, the three pillars of growth for the current financial programming period.

In this context, it is important to note the necessity for the real implementation methods from European and national strategies on equal opportunities to be reconsidered in relation with socio-economic activities – be it gender equality, inclusion of persons with disabilities (National Strategy for people with handicap) or social integration of disadvantaged groups (ex. Roma people) and those about sustainable development regardless of what field is approached, since, at least in theory, the principle of sustainable development has become an integral part of any sectorial or national development strategy.

It should be recalled that since 2008 Romania has adopted a National Strategy for Sustainable Development which was to be reviewed in 2013, something that did not happen even if it would have been an useful tool for the government to know the progress that has been achieved on the way to a sustainable growth of our country during this period despite the economic and social fluctuations in the last 7 years. At the same time, the revision of strategy would have allowed the setting of realistic targets for sustainable growth, suitable to the real potential of the country. However, National Institute of Statistics adopted a comprehensive set of indicators based on the mentioned strategy and in accordance with the requirements of EC, primarily designed to measure quantitative developments in the field of sustainable development and inclusion. The highlighted trends invite to reflect as well as to set realistic value targets which, through periodic evaluations, to lead to formulation of action plans on medium and long term in order to ensure the convergence with European average.

Such examples are many, from the increasing wage differences between men and women during recent years, to the raising rate of unemployment among young people under 25 years despite national and European programs designed to promote the employment of this age. Internet is crowded with examples of theories, strategies, programs, experts, and other such measures, but examples of success stories may hardly be found, even if they exist mainly as a result of policies implementation that promote the positive discrimination of the concerned targeted groups.

Thus, some countries have set minimum percentages for political parties regarding proposals of members for national parliaments – women or achievement of a minimum percentage of women on boards of publicly traded companies. A recent example is the appointment of Commissioners of the European Commission. The target was to have a minimum of 30% of EC members – women even if there was no specific legislation in this regard. Furthermore, within European Commission there is a constant concern to ensure a gender balance, of course while observing the principle of meritocracy.

Important to note that, the foundation of national legislation on inclusion and sustainable development, is based on the constitutional provisions adopted 25 years ago, from which we quote the relevant ones for equality and sustainable development:

ART. 16

Equality of rights

(1) All citizens are equal before the law and public authorities, without privileges and discrimination.

(2) No one is above the law.

(3) Public, civil or military positions or dignities, may be occupied, under the law, by persons who have Romanian citizenship and residence in the country. The Romanian State shall guarantee equal opportunities for men and women to occupy such positions and dignities.

(4) Given the Romania’s accession to the European Union, EU citizens who meet the requirements of the organic law have the right to vote and to be elected within local public authorities.

ART. 20

International Human Rights Treaties

(1) Constitutional rights and liberties of citizens shall be interpreted and enforced in accordance with the Universal Declaration of Human Rights, with the covenants and other treaties to which Romania is a party.

(2) If there is a conflict between the covenants and treaties on fundamental human rights to which Romania is a party and the internal laws, the international regulations shall prevail, unless the Constitution or national laws comprise more favorable provisions.

ART. 41

Labor and social protection of labor

(4) On equal work, women get equal wages with men.

ART. 50

Protection of disabled persons

Disabled persons shall benefit of special protection. The State shall ensure the achievement of a national policy for equal opportunities, prevention and treatment of disability, for an effective participation of people with disabilities in community life while respecting the rights and duties of parents or legal guardians.

ART. 35

The right to a healthy environment

(1) The State recognizes the right of every person to a healthy and ecologically balanced environment.

(2) The state provides the legal framework for exercising that right.

(3) Individuals and legal entities have the duty to protect and improve the environment.

These constitutional provisions have found their practical expression in social and economic life through a complex legislation designed to implement them and also to meet the related imperative European directives and regulations. However, the positive results are slow to appear on some levels or there is a lack of efficiency in the sense that the authorities’ efforts are rewarded with no effect, even though at a declarative level, there is a suitable context for inclusion and sustainable development. At the same time, there are fields in which significant results are recorded, but not necessarily as a result of law enforcement or particular strategies’ implementation but as one of the few positive effects of the prolonged transition from Romania. The improvement of air quality and carbon emissions reduction may be considered as an example in this regard, situation recorded mainly due to reorganization of industrial activities by major closures and restructuring of production facilities and not necessarily due to measures implemented to this purpose.

Both European strategies and legislation as well as national documents requires for public policy making process that the principles of equal opportunities and sustainable development to be an integral part of the strategy or the aimed action plan. Partnership Agreement (PA) 2014-2020 is a good example in this regard, especially taking into account that it constitutes the envelope of all OPs.

Within PA 2014-2020 the importance of promoting such cross-cutting themes that will contribute to fulfilling the Europe 2020 Strategy is emphasized. According to PA, the current European programming period will give priority to developing and implementing targeted actions specifically designed to promote equal opportunities between women and men, to prevent discrimination on grounds of race, ethnic origin, religion or belief, disability, age or sexual orientation, paying particular attention to groups that face multiple discrimination. The integrative approach involves the implementation and the systematic integration of horizontal principles in every phase of the OPs lifecycle, at all government levels and among all actors involved, as well as their assimilation for all programs and objectives at all levels, down to individual projects.

Understanding and recognizing the need to promote equality between men and women, non-discrimination, accessibility and sustainable development is a prerequisite in this regard. The training of authorities’ personnel involved within FESI management and control represent an ex ante conditionality. In this manner, those who manage financial resources of the current European programming period will be able to allocate the available resources to areas characterized by inequality and exclusion. They may also identify their weaknesses in terms of this cut-crossing themes, through a critical self-assessment, in order to deal with them through targeted actions, thus become role models for European funds applicants. The examples of best practices and the experience sharing are actions that may be permanently promoted in order to create a synergy within the program and disseminate the positive results to the other OPs.

Even though the actual effects of integration of the equal opportunities principle within projects implemented at local and central government level within Romania appear difficult to be measured as quantitative and/or qualitative aspects, however, monitoring indicators may be formulated in this regard. Accessibility represents a requisite for equal opportunities and may benefit for output indicators, for example – how easy is for a disabled or an elderly person to access a public institution’s counters? How simple (what knowledge is required, how much time is a taxpayer spending etc.) is to find out what fees he/she has to pay to local City Hall? Which is the ratio between men and women regarding the leadership positions within public institution and how it may be balanced?

Europe 2020, as a strategy for smart, inclusive and sustainable growth, focuses on results. Eight key indicators were established by which to monitor the results of the largest budget allocation in EU history. The intention is to pass from words – smart strategies nicely drawn on paper, to systematically implemented action plans with results measured and evaluated so that corrections may be performed in real time. On 31 December 2018 the first comprehensive overview of the results versus estimates is scheduled (based on the Annual Implementation Reports) following that programs which are not accomplishing their designed indicators to lose a part of money in favor of performers.

Europe 2020 places a particular emphasis on sustainable development – no more than 3 out of 8 key indicators monitor the progress in this area. PA 2014-2020 underlines the need to widening Romania’s commitment to preserve and protect the environment from potentially harmful effects and to provide results through net social, environmental and climate benefits. Through the application of minimum requirements, project proposals will have to approach a more efficient use of energy and other raw materials, to implement the recommendations on reducing costs by minimizing waste and management of critical resources (i.e. Drinking water), to increase use of green purchases etc.

The compliance of equal treatment, non-discrimination and equal opportunities principles with the applicable regulations within the projects’ selection process was generically established through the OPs already approved by the EC for Romania. At the same time, the OPs include a separate section (the format required for all OPs by the EC’s standard) which refers to equality and non-discrimination through which the pro-active orientation of the program towards these cut-crossing themes is established.

Thus, the OPs requires that during the programs implementation: i) to provide access to information to all potential beneficiaries of the program – opportunities, funds, launching schedule; ii) to introduce eligibility and evaluation criteria for projects which take into account supporting and promoting initiatives with a positive impact in terms of ensuring equal opportunities, gender equality and discrimination; iii) to monitor and report the specific actions performed in order to promote the principles of equal opportunities, gender equality and non-discrimination.

At the same time, the OPs also stipulate that the Management Authorities (MAs) shall provide guidance for potential beneficiaries on how the equality principles shall be considered within their project design, as well as how targets on gender equality, equal opportunities and non-discrimination shall be set and measured within their projects.

In this regard, MA of each program will provide an information document to the potential beneficiaries regarding the principles of equal opportunities, sustainable development and public procurement as a tool to support the identification of sustainable development, equal opportunities issues, imposed by national and Community legislation, since the writing stage of projects,.

During 2014-2020 programming period it is necessary to move from declaratively measures, to practical actions that reflects to a greater extent the horizontal themes in implementation process of FESI. England may constitute a very good example as an active actor in terms of respecting gender equality, equal opportunities and non-discrimination, by the fact that the Monitoring Committee for OPs includes a specific subcommittee on gender equality, equal opportunities and non-discrimination. The purpose of this subcommittee is to provide active support and advice to MAs for a better implementation of national strategies and plans within financing projects regarding the respect of cut-crossing themes. Also, the initiation of a prizes competition for those projects that have largely respected the principles of gender equality, equal opportunities and non-discrimination is another good practical measure implemented in England.

The change of behaviour at the local and central government level as well as among public services providers is an ex ante conditionality for Romania in order to practically reach the level of developed countries regarding the principle of equal opportunities and to become a state which effectively guarantees inclusion and sustainable development. Reconfiguring infrastructures in order to facilitate equal access for all citizens to public services may represent a first opportunity in this respect. Furthermore, practical measures are required through which the identified actions to be implemented. Each of us could think about what we would need if we would ever find ourselves in a situation that temporarily affect our mobility and sensorial abilities. And act accordingly in order to improve the existing environment and ensure equal opportunities for all!

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Recycling economy within the European Union

Recycling economy within the European Union

Human society has experienced a fast evolution in the last two decades, which has led people to change their consumption behavior following an upward trend. Thus, there has been a bigger demand for goods and services that gradually resulted in a sharp increase of economic welfare among European states.

In relationship with the linear economy, whose model is to extract (resource) – to produce (product) – to dispose (waste), consumption growth has always been likely to generate a progressively increased amount of waste resulting from human activities. In this context, the European Commission (EC) identified the necessity of a greater concern regarding compulsory regulations, mainly for waste prevention, but also to ensure the proper control of waste streams, especially by recycling, in order to prevent spreading of negative effects on the environment and human health.

Thus, in 2008 was adopted the Waste Framework Directive (WFD), each Member State being obliged to transpose it to national law. The preamble of this Directive summarizes previously existing regulations, directives, decisions and communications of the European institutions regarding the waste sector which EC integrated within WFD. So, the rules of good practices covering all aspects resorted from the previous experience on the waste prevention and management within Member States are subscribed to a consolidated act, within a global framework.

WFD underlying principles are represented by respecting the waste hierarchy and extended producer responsibility, principles designed to foster the transition of the entire European community area towards a recycling society and towards a zero waste economy.

The principle of waste hierarchy establishes the phased structure to be followed from planning stage of the product’s life cycle. Thus, planning a product must first consider the efficient use of raw materials in order to prevent unnecessary waste, design of product with multiple reuse capacities, using as many recyclable components as possible, capitalization of non-recyclable items, aiming the final purpose of dispose zero quantities of waste.

WFD sets out the meaning of each action of the hierarchy in generic terms, while establishing, in a general framework, a set of policy objectives and real recycling targets to be achieved by Member States within the waste sector. We further present the actions required for an efficient waste management:

  • In terms of waste prevention, WFD stipulates the need for Member States to develop National Waste Prevention Plans until 12th December 2013, either as part of the National Waste Management Plans or as separate documents. At the same time, the Member States have the task of defining eco-design policies for products, developing measures to amend the current consumption patterns in Europe and setting targets for waste prevention in 2020, actions which must consider the best available practices in force.
  • Regarding the reuse and recycling, it is necessary to adopt appropriate measures to promote the reuse of products while implementing high quality recycling processes. For the recycling activities were also imposed a series of targets with deadlines that Member States should comply with as follows:
  1. introduction of separate collection systems for at least paper, metal, plastic and glass by 2015;
  2. preparation for reuse and recycling, at least for paper, metal, plastic and glass from households and from other sources, shall be increased to a minimum of 50% of the total by 2020 given that in 2008 some states recycled less than 5% of this category;
  3. preparation for reuse, recycling and other recovery actions of non-hazardous waste material from construction and demolition waste, shall be increased to a minimum of 70% by weight in 2020, in 2008 some states registering 5% recycled quantities from this category.
  • Capitalization of waste must be carried out only after the waste is separately collected and is not mixed with other wastes or materials with different properties, where this is technically, economically and environmentally possible;
  • Disposal must be carried out only after the waste was classified as belonging to an improper category for the other stages of the waste hierarchy.

The principle of extended producer responsibility is the environmental policy whereby producer liability is extended beyond the stage of the product life cycle. Thus, according to this principle, Member States may adopt legislative or non-legislative measures to ensure that any natural or legal person who professionally develops, manufactures, processes, treats, sells or imports products, accept their return as well as the waste that remains after using those products, while leading the subsequent management of waste and financial responsibility for such activities.

This principle also acts as a major tool to support the implementation of waste hierarchy and is intended to help Member States to rally on strands which will lead to performing the leap towards recycling societies and economies which will produce zero waste quantities.

EC introduced the principle of extended producer responsibility as a policy approach for four specific waste streams covered by the same number of Directive, namely: i) Directive 2000/53/EC on end of life vehicles; ii) the new Directive 2012/19/EU Waste Electrical and Electronic Equipment; iii) Directive 2006/66/EC on batteries; iv) Directive 94/62/EC on packaging and packaging waste.

All the Member States have established extended producer responsibility schemes for waste streams that subscribe to the four Directives mentioned above, but a large part of them have also applied the same principle to other existing wastes. If countries such as Romania, United Kingdom, Czech Republic limited only to the rules imposed by EU Directives, in contrast Belgium, Austria, France, Estonia are role models in terms of voluntary compliance, implementing the obligation of taking over the responsibility for other waste streams, some of them with a high risk impact on the environment and human health (tires, oils, medical waste, agricultural waste, graphic paper).

Noting this voluntary compliance of the majority of EU countries, in the future is most likely that the rules operating within their national law to constitute the basis for EC to developing new European Directives that would regulate the waste streams in a greater extent. The norms imposed by the European institutions have demonstrated that they are the most feasible methods for Member States to meet performant targets in recycling.

Waste streams that are subject to the principle of extended producer responsibility as mandatory resorting either from EU Directives (green), either from voluntary compliance of EU Member States (blue)

MS

Batteries WEEE Packaging End of life vehicles Tires Graphic paper Oils Medical waste Agricultural waste
Belgium

x

x x x x x x x

x

Austria

x

x x x x x x x
France

x

x x x x x x

x

Romania

x

x x x

Bulgaria

x x x x x
Hungary

x

x x x

x

Germany

x

x x

x

x

x

United kingdom

x x x

x

Estonia

x

x x x x x x

x

Czech Republic x x x x

Source: Development of Guidance on Extended Producer Responsibility, European Commission document

A major step towards converting the Member States into active recycling societies is represented by the  implementation of waste hierarchy principles, especially the one of extended producer responsibility. Thus, with the transposition of the WFD and the other Directives covering specific waste streams into national laws, governments are obliged to concern themselves more intensely by stimulating rethinking and redesign actions for products and services to assure an extended life, with the possibility of multiple re-uses, thus preventing the generation of unnecessary waste. At the same time, these principles help to encouraging the use of recyclable materials and to implementing high quality technologies for recycling.

On the other hand, the highest percentage of waste sent to recycling is achieved through the requirement resorting from the extended producer responsibility principle, especially for those waste streams for which the Directive impose regulations in all Member States (mainly packaging, batteries, WEEE, end of life vehicles). Given the rallying of EU policy towards sustainable development, the future can only bring an import of best practices from those EU countries which voluntarily complied with the principle of responsibility for several waste streams (end of life vehicles, graphic paper, oil, medical waste, agricultural waste), the best example being the one of Belgium which covers the most extended list of wastes.

Also as an obligation resorting from WFD, as mentioned above, is the development of National Waste Prevention Plans, documents drawn up by Member States covering policy objectives, not only at declarative level, but especially real measures through which to stimulate a rethinking of the whole process of a product design so the subassemblies component can start a new life cycle either through reuse or recycle.

Even if WFD stipulated 12 December 2013 as deadline for drafting the prevention plans, Romania is one of the states that didn’t comply, at the time of mid-2015 the procedure being in the initial stage of public procurement.

Other Member States, such as Belgium, Germany, England, France, Hungary, Poland and a further 15 (http://scp.eionet.europa.eu/facts/WPP) have already adopted national waste prevention plans which propose, in addition to compliance with European regulations within the waste sector, real actions to change the mentality of people towards a greater awareness of what means the importance of environmental protection, as well as practical measures to stimulating the respect of waste hierarchy. The majority of states have proposed the use of financial incentives approximately to the same course of action as follows:

    1. progressive taxes from year to year for waste disposal;
    2. increasing recycling targets, especially for those waste streams covered by producer responsibility;
    3. financial incentives to local authorities to create new integrated waste management facilities;
    4. funding for research and development to design products with a longer life and from which to result a small amount of waste;
    5. loan funds to stimulate the design of new integrated waste management capacities.

Romania, as EU Member State, fulfilled its legislative obligations regarding the transposition of all directives that stipulate the principle of extended producer responsibility by specific laws, and also of WFD by Law 211/2011 regarding waste which introduced the waste hierarchy principle into national legislation for the first time. However, even if the principle of producer responsibility registers good performances proved by recycled volume being close to targets set for specific waste streams, total recycled or recovered quantities of waste within our country is ranking the last among EU states. Environmental Report 2013 recorded that over 90% of households waste is landfilled, the recycling rate reaching only 7%, far away from the EU 28 average of almost 40%.

This situation appears to be partially due to a permissive application of legal provisions, given that even the coercive organs of the state represented by environmental agencies and environmental guard create the impression of low degree of concern in relation to obligations assumed.

Law 132/2010 on selective waste collection within public institutions may be a particularly suggestive example regarding the relaxed observance of legal norms on waste selective collection. This law establishes the obligation of all state’s authorities to increase recycling and recovery of waste, along with raising the level of information and awareness by educating public officials, employees and citizens with regard to the selective collection and waste management of paper, cardboard, metal, plastic and glass.

Beyond the declaratively objectives, the law stipulates as real measures the development of action plans for selective collection and implementation of selective collection systems by placing three containers, colored and engraved with the name of materials for which are intended, in every office / site, storey, as well as at the entrance of public institutions.

With all these regulations, the practical experience is coming to support the idea of low compliance by the fact that some public institutions at central and local level are lagging behind with the measures aimed to implementing this normative act. The majority of waste prevention plans from other Member States mentioned above, stipulate that public authorities must take the role of lead actor on what means selective collection and recycling, constituting the model to follow for both private sector and entire society.

The lack of an active concern from the public sector in terms of compliance with the regulations within waste sector and launching of information campaigns in order to spread the importance of selective collection and recycling, are leading to a low interest among the population as well for an efficient waste management from the very begining in households. The population is insufficient informed about the advantages and importance of selective waste collection and recycling, and in a few cases when waste streams are separated at source, the sanitation operator does not have the tools for a distinct transportation and storage. Thus, by mixing all households waste, the quality of recyclable items is deteriorated, so that the operator must carry out a preliminary cleansing, before the waste is selected in sorting stations. Thus, a duplication of labor is performed that results in a low return from recycling process for economic operator.

In the same context, another obstacle is the lack of an adequate infrastructure favoring the integrated waste management process since taking over from source to sending waste to recycling or recovery.

Given those circumstances, Romania is still moving towards a recycling society, but with hesitant steps. However, the preocupation of EC to harmonize the best practices from waste sector around the European Community could represent the main driver of real actions to improve the situation of compliance with the waste hierarchy in Romania.

Consequently, Romania will face an increased pressure for a stricter application of waste law which will need to be balanced with rising awareness of society for the topic and development of appropriate infrastructure for an efficient waste management. EU operational programs 2014-2020 could become the main instruments through which these shortcomings could be financed and turn into performance. The Large Infrastructure Operational Programme may address the infrastructure deficiencies, by further developing the projects under SOP Environment 2007-2013 or by implementing new projects. Human Capital Operational Programme and Administrative Capacity Operational Programme may be the mainly instruments in terms of raising awareness actions and changing the mentality of the population, both being designed also for strengthening the principle of sustainable development among population.

 

 

arete1

Circular economy – an opportunity for Romanian Research, Development and Innovation sector?

Circular economy – an opportunity for Romanian Research, Development and Innovation sector?

It is a fact that Romania has registered the lowest level of R&D&I expense in EU with 0,42% of GDP in 2012 according to Eurostat as opposed to the first ranked Finland with 3,55%, Bulgaria with 0,64% and the average for EU 28 reaching 2,06%. Unfortunately, this is not a singular year for Romania, during the past 10 years the situation has worsened, even in the economic boom of 2004-2008, the maximum reached was 0,58% in 2008. And the prospects do not look encouraging although, the Romanian government committed for 2% in 2020 out of which 1% public contribution and 1% private investment in R&D&I. Could Romania reach this goal? Our purpose with this article is to illustrate the opportunities that circular economy open to our R&D&I sector.

First, let’s briefly introduce the concept of circular economy in the broader context of Europe 2020 strategy aiming for a smart, inclusive and sustainable European Union at the end of the implementation of current European programming period (2023).

A first approach would be to think to circular economy as opposed to linear economy whose classical model is take (resource) – make (product) – dispose (waste). Instead, circular economy ultimate objective is to produce zero waste or, alternatively, the waste disposed to be of a nutrient type to the environment.

As the first principles of the circular economy are to prevent and to think an efficient use of resources in a primary stage, the England’s National Waste Prevention Plan, under the motto “Prevention is better than cure”, bring in a diagram through which the circuit of a product under the new revolutionary vision is designed in a suggestive manner as shown below.

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Source: Waste Prevention Plan for England

 

The driver behind the five pillars of circular economy described above, firstly take into account the reduction of energy and raw materials consumption thus contributing to a sustainable growth and financial savings. Secondly, it is necessary from the early phase of design to incorporate the whole life cycle for the product including transformation from waste to a newly born resource through reuse. By starting from an early stage with redesign and increased efficiency for inputs, circular economy will be in the position to attract innovation and appropriate solutions for reducing the impact of human civilization on the environment.

An argument towards moving to a circular economy in Romania stands up as well from a comparative analysis between generated and recycled waste among EU Member States. According to Eurostat figures, the most economically advanced countries of Europe are included in the top of waste producers measured as volume of waste generated per inhabitant and in the same time in the top of recycling countries.

The indicator values for 2010 range between 588 kg/inhabitant of waste produced per year in Latvia to 8.556 kg/inhabitant in Estonia (this huge amount may reflect some different methodology in adding up various categories of wastes). The average of European waste generated is 1.847 kg/inhabitant, Romania being slightly above this value with 2.046 kg/inhabitant, as well as Denmark and Netherlands with 2.386 kg/inhabitant and 2.519 kg/inhabitant respectively, while Belgium is situated well above the EU average with 4.325 kg/inhabitant.

Waste generation indicator by countries and waste category, EU, 2010 (kg/inhabitant)

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Source: Eurostat

 

Although, some of them much above the EU average in terms of waste generated, most economically advanced countries of Europe are performers of recycling leading to reduced quantities of waste landfilled as opposed to EU member states such as Romania, Greece, Bulgaria, Portugal where almost all waste is reaching garbage dumps. This means that performers have already started adopting circular economy with increased efficiency in repairing, reusing, recycling and capitalizing through incineration, landfilling being the last resort option. Thus, performing countries are moving towards full compliance with the waste hierarchy imposed by the European Commission’s Waste Framework Directive not only at a declarative level but in real terms as well.

Waste landfilled, excl. major mineral wastes, by country and waste category, 2010 (kg/inhabitant)

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Source: Eurostat


In terms of landfilled waste, the indicators values range from 53 kg/inhabitant in Denmark and Netherland to 6.202 kg/inhabitant in Estonia, the EU average being 429 kg/inhabitant. Romania with its 928 kg/inhabitant of waste landfilled is an underperforming country, ranking the fourth at landfilling (being surpassed by Estonia, Greece and Lithuania), just as it is noted within the Environment National Report 2013 where the percentage of waste disposed reaches 93% from the total municipal waste while the recycling is barely mentioned, its percentage recording a negligible level.

Even if the performing countries such as Denmark, Netherlands, Belgium a.o. appear to be pretty close to the adoption of circular economy model, nowadays this concept is still at an early stage. Considering this, the low level of Romanian R&D&I expenditure during past 20 years may reflect on one hand, the tough restructuring process of economy which resulted in closing down major R&D units and, on the other hand, diminished appetite for R&D&I activities which are long term investments with uncertain outcome. In addition, Romanian industry has substantially shrunk being at large dominated by foreign companies not really interested to set up R&D facilities locally if only taking in consideration the unclear intellectual property legislation and the limited efficiency of the judiciary system. Under those circumstances focusing on circular economy for the Romanian research and development seems to be an opportunity for new units and a way to comply with the Europe 2020 commitments of the Government namely reach the level of 2% of GDP expenses for R&D.

Thus, Romania would fulfill two objectives, raising its low level of expenditure within the R&D&I sector and, in the same time, complying with the waste hierarchy, given that through the European Funds 2014-2020, namely through Competitiveness Operational Program, there are 797 million Euro available only for R&D&I projects related to Europe 2020 goals.

 

ehic

Would the Health Card be beneficial to the patients?

Would the Health Card be beneficial to the patients?

We do not intend to respond to this question in this article, there is yet too little information to perform a pertinent forecast. Instead we will carry out a brief incursion during the past 25 years of health reforms in Romania to learn if the introduction of the health card starting May 1st, 2015 will have any chance to support the patient in getting better services.

The various reforms focused on healthcare system in the last 25 years are preparing for a significant leap towards digitization era by the compulsory use of health cards. At a first glance, based on medical authorities statements, this card will simplify patient access to health services and will help the overall system become more transparent and determine an increase of the efficiency of the allocated funds. Therefore, the first question that arises would be related to the real reform’s veracity for patients by introducing this card, in the way that it would prove useful to a greater extent for the deep disordered healthcare system characterized by inefficiency in spending money, or to the patients as final beneficiaries of these services? Thus, it is necessary to identify the real utility of those cards which, at a first glance, beyond what officials declare, appear to be more part of a controlling procedure for medical staff, related to their spending efficiency of social health insurance funds collected from taxpayers, who are thus entitled to actually receive high quality medical services, patient-oriented.

In a review of the past 25 years in terms of reforms implemented in the public healthcare system in Romania, an evolution in leaps that began quite lately can be noticed. Thus, during the first years that followed the fall of the communism, the healthcare system has been centrally coordinated by the Ministry of Health through the 41 County Health Departments and the Health Department of Bucharest. Consequently the first step of the reform was represented by the Social Health Insurance Law no. 145/1997 which restructured the financing of the system that included onwards compulsory health insurance based on the principle of solidarity and operating in a decentralized system consisting of county houses of insurance as autonomous public institutions, led by representatives of policyholders and employers boards, and by the National Health Insurance House.

Through the same Law 145/1997 was established the legal framework for foundation of family medicine institution as a medical specialty and academic discipline, by taking over the practice of general medicine. This phase preceded the hospitals reform, since at that time it was estimated that family medicine would cover 80-90% of medical needs of the population (usually those of a minimal gravity), resulting in a deagglomeration of hospitals, and consequently increasing performance.

After successive amendments over the coming years, Law no. 145/1997 was repealed by the Government Emergency Ordinance no. 150/2002 and replaced by an unitary legal act, Law 145/2002 – the organization and functioning of the social health insurance system, which maintained the status quo of the system.

In 2006, Law no. 95/2006 on healthcare reform was adopted, which provided the basic package of services covered by social health insurance which has remained to this day the legal basis of healthcare system in Romania.

After 2009, with the bursting of the economic crisis, a further reform of healthcare system became necessary in order to reduce arrears (debts older than one year accumulated by the healthcare system to drug suppliers) and curb expenditures. An important component of this process was the assesment process of hospitals in Romania and their classification into five categories based on which, starting with June 1st 2011, the financing methodology for medical facilities underwent significant changes, differences between hospitals from the same category being eliminated. Increase of budgets was considered especially for large hospitals, with best results, and expenses cut for hospitals with no adequate medical services. The assessment identified the need for closure of 67 hospitals on the grounds that staff and financial returns were too low to be further supported. Another component of the reform process was the transfer of hospitals under the local authorities management stipulated by new legislation introduced in 2010.

Public healthcare system in Romania benefits from a mixed funding facility: i) compulsory contribution; ii) allocations from central / local state budget. Therefore it is natural that public healthcare system be the main option of the Romanians even if the underfunding of the system and its defficiencies are well known and have been perpetuated over the past 25 years. The vulnerabilities caused by the low quality of health related services, especially within hospitals, additional costs for drugs encountered by patients during hospitalization and the high level of corruption are accompanied by the precarious state of infrastructure, the low level of salaries for medical staff, situation that encourages informal payments, leading to an inadequate quality of medical care and an unprofessional attitude from the system staff towards the patients.

According to Eurostat, in the year 2012, the medical system in Romania qualify for the lowest funding across the EU.

Expenditure on health as % of GDP within various European Member States

2006 2007 2008 2009 2010 2011 2012
Bulgaria 6,89 6,81 6,97 7,23 7,58 7,72
Czech Republic 6,69 6,52 6,82 7,85 7,43 7,50 7,55
Denmark 9,92 9,99 10,18 11,47 11,08 10,87 10,98
Germany 10,64 10,48 10,70 11,75 11,56 11,25 11,27
Estonia 5,02 5,16 6,06 6,93 6,32 5,83 5,89
Greece 10,19 9,48 9,79 9,27
Spain 8,39 8,49 8,93 9,60 9,65 9,44 9,30
France 10,85 10,78 10,91 11,60 11,55 11,52 11,61
Hungary 8,26 7,67 7,46 7,74 8,06 8,03 7,97
Austria 10,22 10,26 10,49 11,17 11,13 10,87 11,10
Poland 6,20 6,33 6,89 7,21 7,02 6,87 6,75
Portugal 10,03 9,99 10,22 10,81 10,80 10,23
Romania 5,09 5,24 5,44 5,66 5,95 5,60 5,56
Finland 8,34 8,04 8,31 9,17 8,99 8,95 9,09

In this context, the introduction of mandatory use of health card starting with May 2015 appears rather as a way to stop or reduce draining money from the system and  than as a benefit to the patient. Romanian authorities, namely the Ministry of Health, described the introduction of the health card as a reform designed to eliminate health system weaknesses and counter-performances by forecasting more stringent controls regarding in particular the effectiveness of money spending, but also by eliminating the bureaucratic process that citizens must undergo in order to access medical services for which they pay a compulsory contribution.

However, with only few weeks before seeing the card at work,  it appears to have more of a formal character, a minimal set of personal data being recorded on this magnetic media (e.g. holder’s insurance status, blood group etc.) with the aim to attach, exclusively with the consent of the patient, his/her medical file. The card cannot be used by third parties, requiring a validation code known only to the owner.

This card represents somehow the final stage of the reform started in 1997, but the results cannot yet be foreseen nor appear as potentially spectacular. Healthcare system, poisoned in the last 25 years with corruption and a chronic inefficiency of  public spending, seems quite difficult to be put on track by simply introducing a health card for the insured as an identity card to be shown to family doctor in order to be entitled to free of charge health related services. Healthcare professionals have expressed disagreement with the introduction of these cards, not really enthusiastic about the control exercised by use of such instrument. This opposition might translate into a new delay in the introduction of compulsory use of health card which yet not demonstrating their utility to patients by ceasing issuing prescriptions to false patients, rather than by an increase of the medical services quality.