Tourism and Optimal utilisation of EU Funds

Chris HarrisChris Harris

December 2008December 2008

Supported by the European Union

ExperienceNominated for ‘ Scottish Entrepreneur of the Year Nominated for ‘ Scottish Entrepreneur of the Year 2007’2007’

20 years working with EU funds and policy development based in 20 years working with EU funds and policy development based in Scotland and BulgariaScotland and Bulgaria

Raised over Raised over €€150m for a wide variety of project types, scale, locations, 150m for a wide variety of project types, scale, locations, sectors, sectors,

Worked in NGOs Governments, research, public and private sectors Worked in NGOs Governments, research, public and private sectors across the EUacross the EU

Specialists in commercialisation of science and technology – KTSpecialists in commercialisation of science and technology – KT

Training and capacity building to help clients manage their own EU Training and capacity building to help clients manage their own EU funded projectsfunded projects

FYRM Accession Process‘The Sun, too, is a star’

You are joining a club and it has rules

The Club will give you money to help improve social and economic conditionsstarting at a regional level, but you have to follow the rules.

You are lucky to have good partners in Bulgaria, Gotse Delchev who can help the transition and accession process with you.

There are some key ideas and concepts that the European Commission would like you to adopt – ‘Think Strategic and Think Partnerships’

Copenhagen Accession Criteria

FYRM Priorities for 2007-2009 – Total Budget 210.5 mneuro

1. Support to Institution Building

2. Improve cross-border cooperation

3. Prepare for participation in the Community's cohesion and rural development policy

4. Prepare for decentralised management of EU funds

Financial Allocation

Component 2007 2008 2009 Total

I – Institution Building 41.6 39.9 38.1 119.6

II – Cross-border cooperation 4.2 5.3 5.6 15.1

III – Regional Development 7.4 12.3 20.8 40.5

IV – Human Resources Development 3.2 6.0 7.1 16.3

V – Rural Development 2.1 6.7 10.2 19

Total 58.5 70.2 81.8 210.5

INDICATIVE ALLOCATIONS TO MAIN AREAS OF INTERVENTIONComponent I (Transition Assistance and Institution Building)

Good governance and the rule of law 25 % - 40 %

Economic development and social cohesion 10 % - 25 %

Ability to assume the obligations of membership 35 % - 50 %Programming Support and Participation in CommunityProgrammes and Agencies 5 % - 15 %

Component II (Cross-Border Co-operation)

CBC with Bulgaria 22 %CBC with Greece 24 %CBC with neighbouring CCs/PCCs and participation inERDF transnational/interregional programmes andENPI sea basins programmes (as appropriate) 54 %

Regional DevelopmentEnvironment 20 % - 30 %Transport 70 % - 80 %

Human Resources DevelopmentEmployment 40 % - 50 %Education and training 30 % - 40 %Social inclusion 20 % - 30 %

Rural DevelopmentPriority 1 50 % - 80 %Priority 2 (not foreseen for the present MIPD)Priority 3 20 % - 50 %

The Key FundsThe Key Funds

Pre Accession Instrument (IPA)Pre Accession Instrument (IPA)

IPA is the key instrument for countries aspiring to IPA is the key instrument for countries aspiring to join the European Union for the period 2007-2013. join the European Union for the period 2007-2013.

It is based the lessons learnt from previous external It is based the lessons learnt from previous external assistance and pre-accession instruments.assistance and pre-accession instruments.

The aim of the IPA is to enhance the efficiency and The aim of the IPA is to enhance the efficiency and coherence of aid by means of a single frameworkcoherence of aid by means of a single framework..

IPA - Aims

Support for transition and institution-building aimed at financing capacity-building and institution-building

Cross-border cooperation - with the Member States or within the framework of cross-border or inter-regional actions.

IPA cont

Regional Development, aimed at countries' preparations for the implementation of the Community's cohesion policy, and in particular for the European Regional Development Fund and the Cohesion Fund ;

Human resources development, which concerns preparation for cohesion policy and the European Social Fund ;

Rural Development, which concerns preparation for the common agricultural policy and related policies and for the European Agricultural Fund for Rural Development ( EAFRD ).

Forms Assistance

Investment, procurement contracts or subsidies;

Administrative cooperation, involving experts sent from the Member States;

Action by the Community acting in the interest of the beneficiary country;

Measures to support the implementation process and management of the programmes;

Budget support (granted exceptionally and subject to supervision).

Convergence with Structural Convergence with Structural FundsFunds

ERDF to help:

cultural and natural heritage,develop accessibility and mobility related infrastructure promote ICT, innovative SMEs,business networks and clusters,higher value added services, joint cross-border tourism strategies inter-regional exchange of experience

Convergence with Structural Convergence with Structural FundsFunds

ESF to help:Educational programmes and training in order to enhance productivity and the quality of employment and services in the tourism sector.

Labour Market quality and flexibility

Horizontal Themes

FP7research on information and communication technologies, satellite applications, cultural heritage and land use.

Cross Border Co-operation with Bulgaria

To improve and extend existing or create new links among local/ regional administrations, associations, NGOs or enterprises to enhance economic and social development of eligible border regions;

To improve tourism and transport infrastructure with a view to increase the potential for the development of tourism as well as, in line with or apart from it, to contribute to the protection of the environment.

To intensify contacts at local level among citizens from inside and outside the EU

To help with programme implementation and to contribute to timely delivery of results.

Key Tourism Development issuesKey Tourism Development issues

Think globalThink global Act localAct local

Quality issuesQuality issues Awareness Awareness raisingraising

Competition and competitive edgeCompetition and competitive edge

Partnerships & StakeholdersPartnerships & Stakeholders

‘‘Eco’ Tourism & sustainabilityEco’ Tourism & sustainability

Economy/marketsEconomy/markets

Horizontal Themes - Horizontal Themes - environmental sustainability equal environmental sustainability equal opportunities, social inclusionopportunities, social inclusion

EU Tourism PolicyEU Tourism PolicyEU Tourism policy to support actions at national regional and local EU Tourism policy to support actions at national regional and local levels with many tourism projects supported by EU funds.levels with many tourism projects supported by EU funds.

Key issue is the tourism relationship between EU, National, Key issue is the tourism relationship between EU, National, Regional and Local.Regional and Local.

Mainly dominated by SMEs, it accounts for 4% of the Community’s Mainly dominated by SMEs, it accounts for 4% of the Community’s GDP, with about 2 million enterprises employing about 4% of the GDP, with about 2 million enterprises employing about 4% of the total labour force (representing approximately 8 million jobs.total labour force (representing approximately 8 million jobs.

Besides growth and jobs creation, tourism plays an important role Besides growth and jobs creation, tourism plays an important role in the development of the vast majority of European regions. in the development of the vast majority of European regions. Infrastructure created for tourism purposes contributes to local Infrastructure created for tourism purposes contributes to local development, and jobs are created or maintained even in areas in development, and jobs are created or maintained even in areas in industrial or rural decline, or undergoing urban regeneration.industrial or rural decline, or undergoing urban regeneration.

‘‘A RENEWED EU TOURISM POLICY: Towards a stronger A RENEWED EU TOURISM POLICY: Towards a stronger partnership for European Tourism’ 2005partnership for European Tourism’ 2005

Lisbon StrategyLisbon StrategyA new policy approach is being developed, A new policy approach is being developed, linking tourism to the ‘Lisbon strategy’, which linking tourism to the ‘Lisbon strategy’, which seeks to stimulate European competitiveness seeks to stimulate European competitiveness and growth.and growth.

European Agenda 21 for Tourism - Sustainable European Agenda 21 for Tourism - Sustainable tourism plays a major role in the preservation tourism plays a major role in the preservation and enhancement of the cultural and natural and enhancement of the cultural and natural heritage in an ever expanding number of areas, heritage in an ever expanding number of areas, ranging from arts to local gastronomy, crafts or ranging from arts to local gastronomy, crafts or the preservation of biodiversity. the preservation of biodiversity.

Principles for the EU FundsPrinciples for the EU Funds

De-centralisation – De-centralisation – PARTNERSHIPS!PARTNERSHIPS!TransparencyTransparency

financial managementfinancial managementManagement control of specific measuresManagement control of specific measuresproject selection proceduresproject selection procedures

Sharing InformationSharing InformationConcentration of resourcesConcentration of resourcesResponsibilityResponsibilityValue for MoneyValue for MoneyMonitoring and AuditMonitoring and Audit

Key principles the EU promotes Key principles the EU promotes on best practiceon best practice

Responsibilities need to be defined and divided between Responsibilities need to be defined and divided between those involved in the programming, those managing the those involved in the programming, those managing the measures and those paying for them; measures and those paying for them;

Information networks need to be set up to collect and Information networks need to be set up to collect and transmit data for monitoring;transmit data for monitoring;

The responsibility of all those involved needs to be The responsibility of all those involved needs to be increased to improve transparency of financial flows;increased to improve transparency of financial flows;

Scope for initiative needs to be widened to improve Scope for initiative needs to be widened to improve operational efficiency and simplify proceduresoperational efficiency and simplify procedures

‘‘Towards inclusive and responsible partnership’ Towards inclusive and responsible partnership’

‘DG Regio’ ‘DG Regio’

Brings together ALL those organisations involved in the Brings together ALL those organisations involved in the programming and management of European Structural programming and management of European Structural Funds leading to economic and social development.Funds leading to economic and social development.

Includes Bulgarian Govt, European Commission and Includes Bulgarian Govt, European Commission and other relevant public authorities, at regional and local other relevant public authorities, at regional and local level for instance, economic and social actors, level for instance, economic and social actors, designated by the national authorities in accordance with designated by the national authorities in accordance with the rules and practices in force. the rules and practices in force.

The EC view of partnershipsThe EC view of partnerships

‘‘Its the commitment and necessary Its the commitment and necessary consensus between the various parties consensus between the various parties involved to achieve through ongoing involved to achieve through ongoing dialogue throughout the programming dialogue throughout the programming process. They are indispensable process. They are indispensable prerequisites for the success of any prerequisites for the success of any development action.’development action.’

Scottish ExperienceScottish Experience

The East of Scotland European Partnership (ESEP) established in 1995 is a network of 300 local organisations working together to achieve the best use of European Structural Funds.

The Partnership includes representatives from a host of public agencies and umbrella organisations (all not for profit) which are engaged in varying ways in economic and social development.

The Programme Management Executive (PME) a central part of ESEP was established to support the Partnership.

PPP FeaturesPPP Features

What is a What is a Public Private Public Private Partnership (PPP) Partnership (PPP)

A cooperative venture between the public A cooperative venture between the public and private sectors, built on the and private sectors, built on the expertise of each partner, that best meets expertise of each partner, that best meets clearly defined public needs for the clearly defined public needs for the purpose of delivering projects or purpose of delivering projects or services traditionally provided by the services traditionally provided by the public sector through the appropriate public sector through the appropriate allocation of resources, risks and allocation of resources, risks and rewardsrewards. .

Whose at it!Whose at it!

Europe:Europe:United Kingdom, Ireland, Netherlands, Germany, United Kingdom, Ireland, Netherlands, Germany,

Portugal, Spain, France, Portugal, Spain, France, Hungary, Poland, Czech Republic, Romania, Hungary, Poland, Czech Republic, Romania,

BulgariaBulgaria

Outside Europe:Outside Europe:United States of America, Canada, Japan, United States of America, Canada, Japan,

Australia, South Africa, in most of the third world Australia, South Africa, in most of the third world countries supported, initiated by UNDP, GTZ countries supported, initiated by UNDP, GTZ etc.etc.

Main Direct ApplicantsMain Direct Applicants

Public sectorLocal and regional authorities (e.g. municipalities)State authorities, governmental bodies

Non – profit sectorNGOs (e.g. environmental, social enterprise, labour market etc. services)Associations Foundations (under specific conditions)

Indirect/Partnership applicants or Indirect/Partnership applicants or beneficiariesbeneficiaries

Private sector

Corporations (e.g. companies, corporations)

SMEs (e.g. grants, equity financing, investments)

Banks and Investment Funds

Pre Conditions for PPPsPre Conditions for PPPs

Ensuring open market access and fair competition Ensuring open market access and fair competition (state aid principles)(state aid principles)

Protecting the public interest and maximising Protecting the public interest and maximising added value to citizensadded value to citizens

Defining the optimal level of grant financing Defining the optimal level of grant financing neededneeded

Social ContractingSocial Contracting

Why PPP?Why PPP?

To help cover the enormous financing requirements needed to develop the country across all sectors.

Mobilization of all economic and social actors

Increases value for money/leverage

Improves quality of services and infrastructure

Increases the social and economic sensitivity of development and addresses risk and market failure more effectively.

Makes planning and implementing economic development more ‘inclusive’

Helps to move into contracting culture sustainable in long term

Helps address State Aids and Additionality

Risk sharing

Key features

To provide additional capital (additional resources for financing)

To provide alternative management and implementation skills (expertise of private partners)

To provide value added to the consumer and public at large (more, new or better services)

To provide better identification of needs and optimal use of resources

To provide better allocation of risks

To provide more transparency and openness of the process

Key features (continued)

To provide innovation and transfer of expertise

To provide new business opportunities and employment synergies

To provide new division and opportunities of labour

To enable public authorities closed to the citizens

To maintain high levels of quality, security and safety

To ensure consumer and user rights

To monitor and to evaluate the performance

To provide legal certainty

PPPs imposes constraints on projects and applicants, given the Commission’s, overriding requirement to protect the use of grants in the public interest and ‘Best value’.

Types of PPPTypes of PPP

Design-Build (DB) - Design-Build (DB) - The private partner provides both design and construction of a project to the public agency. This type of partnership can reduce time, save money, provide stronger guarantees and allocate additional project risk to the private sector.

Operation & Maintenance Contract (O & M) - Operation & Maintenance Contract (O & M) - A private operator, under contract, operates a publicly-owned asset for a specified term. Ownership of the asset remains with the public entity.

Design-Build-Finance-Operate (DBFO)Design-Build-Finance-Operate (DBFO) - - The private sector designs, finances and constructs a new facility under a long-term lease, and operates the facility during the term of the lease. The private partner transfers the new facility to the public sector at the end of the lease term.

Build-Own-Operate (BOO)Build-Own-Operate (BOO) - - The contractor constructs and operates a facility without transferring ownership to the public sector.

Types of PPP Types of PPP Build-Own-Operate-Transfer (BOOT)Build-Own-Operate-Transfer (BOOT) - - The private partner builds a

facility to the specifications agreed to by the public agency, operates the facility for a specified time period under a contract or franchise agreement with the agency, and then transfers the facility to the agency at the end of the specified period of time

Buy-Build-Operate (BBO) - FBuy-Build-Operate (BBO) - Form of asset sale that includes rehabilitation or expansion of an existing facility. The government sells the asset to the private sector entity, which then makes the improvements necessary to operate the facility in a profitable manner

Operation License - Operation License - A private operator receives a license or rights to operate a public service, usually for a specified term

Finance Only Finance Only The private party finances the construction or expansion of a public facility in exchange for the right to build residential housing, commercial stores, and/or industrial facilities at the site

When to consider PPPWhen to consider PPP

If the service or project can’t be provided with the financial resources or expertise of the government or municipalities.

If the quality, range or the scale of public services can be improved through involvement of private partners

If the service or project can be implemented faster

If the service or facility can be provided more cost effectively or politically beneficial

When PPP is appropriateWhen PPP is appropriate

If there is support from the users of the service for the involvement of a partner

If there competition among prospective private partners

No legal restriction to involve private partners

If the project or service provides an innovation or new service

If there is track record of partnership between public and private sectors with opportunities to foster economic and social development

PPP Structure (1meuro example)PPP Structure (1meuro example)

0

100000

200000

300000

400000

500000

Total

Private

EU

Public

0%

20%

40%

60%

80%

100%

Total

Public

EU

Private• Risk profile

• Operational controls

• Best value

• Transparency

• Addionality

• Contract/SPV

Market failure/QualityMarket failure/Quality

Risks with PPPsRisks with PPPs

Loss of control and administrative power by governmental institutions or authorities

Increased costs – e.g. new charge or toll system long term credit

Political risks

Reduced quality or efficiency of service

Inability to benefit from competition

Unreliable service

Mismatch in expectations between public and private sector

Consumer disapproval

Failure in the structure of partnership – mismanagement, disagreements between parties, changed priorities, economy

Features of PPP Features of PPP contract/agreementcontract/agreement

Very detailed (100-200 pages plus annexes) Very detailed (100-200 pages plus annexes) depending on complexity of project.depending on complexity of project.

Contract/agreement needs to take account Contract/agreement needs to take account of every conceivable issue.of every conceivable issue.

Takes time to get right Takes time to get right

Negotiation complexNegotiation complex

Needs government approval as it uses Needs government approval as it uses public fundspublic funds

Private Sector Motivation?Private Sector Motivation?

Higher the risk bigger the return - profit marginHigher the risk bigger the return - profit margin

Sufficient/sustained demand (long, medium and Sufficient/sustained demand (long, medium and short term gains)short term gains)

Speed of return Speed of return

Strong viability (Strong viability (limits to risk taking)limits to risk taking)

Strong political commitment (recognising mStrong political commitment (recognising market arket failure v quality required to raise standards)failure v quality required to raise standards)

Risk v ReturnRisk v Return

Pre contracting ProcessPre contracting ProcessRisk analysis for each partner

Identification of the main indicators for risk analysis (case studies)

Weighting of indicators for risk analysis

How risk analysis can be carried out

Distribution of risks between partners/ parties involved in Public-Private Partnership (risk allocation)

Feasibility Study

Tender ProcessTender ProcessSelecting a procurement process Preparation of the tender documents concerning the specific procurement procedure (legal document particularly if it involves OJEC tender.Carrying out the tenderEvaluation of the proposals/ applications (based on evaluation/ selection criteria) – analysis and ranking of proposalsSelecting a most suitable private partner Contract negotiations concerning the responsibilities as well as objectives to be achieved by each partner.Preparation of application (ESF/ERDF)Finalisation of PPP contract

Ongoing management issuesOngoing management issues of the PPP contract of the PPP contract

Communication between partners

Reporting requirements to funders

Financial control

External Evaluation

Conflict Management

Ongoing monitoring/reporting/audit

Dissolving of partnerships

Key EU Compliance IssuesKey EU Compliance Issues

State AidsState Aids AdditionalityAdditionality

ProcurementProcurement Financial Financial Control/ClaimsControl/Claims

AuditAudit Management Management TransparencyTransparency

Performance Reporting and Monitoring Performance Reporting and Monitoring

Document control – 7 year ruleDocument control – 7 year rule

Vision for the East of Scotland Vision for the East of Scotland Regional economyRegional economy

‘‘To create a dynamic, innovative and To create a dynamic, innovative and competitive East of Scotland Programme Area competitive East of Scotland Programme Area where people and businesses are well where people and businesses are well equipped to face the challenges of new and equipped to face the challenges of new and emerging European and international markets’emerging European and international markets’

Scope of Eastern Scotland European Partnership

250 million Euros 2000-2006 250 million Euros 2000-2006 (grant)(grant)East of Scotland population East of Scotland population 2,400,000 2,400,000

Priorities (Axes)Priorities (Axes)Creating a strong Creating a strong internationally competitive internationally competitive economy in the East of economy in the East of ScotlandScotlandBuilding Regional capacity and Building Regional capacity and promoting and marketing the promoting and marketing the strategic sectors in the East of strategic sectors in the East of ScotlandScotlandCommunity Economic Community Economic DevelopmentDevelopment

East of Scotland

NUTS II

Scottish Programmes 2007-2013Scottish Programmes 2007-2013Following the Following the Lisbon Strategy for Growth and Jobs

2 Programmes for Scotland:

Objective 1 Highlands and Islands € 158m

Objective 2 Lowlands (formerly) Scotland €570-

650m

Proposed ERDF priorities:

1. Enterprise Growth2. Community Regeneration3. Rural Development

Proposed ESF priorities

1. Progressing into Employment2. Progressing through Employment3. Access to Lifelong Learning

Management of Funds in the East of Scotland

European CommissionEuropean CommissionScottish ExecutiveScottish ExecutiveLocal GovernmentLocal GovernmentSocial Enterprise SectorSocial Enterprise SectorFurther Education sectorFurther Education sectorHigher Education and Higher Education and research sectorresearch sectorScottish EnterpriseScottish EnterpriseChamber of CommerceChamber of CommerceCED partnershipsCED partnerships

The Difference Between Structural Funds and The Difference Between Structural Funds and Community InitiativesCommunity Initiatives

Community Initiatives such as PHARE, Leader Plus, Urban, Community Initiatives such as PHARE, Leader Plus, Urban, Equal etc are designed to address very specific issues Equal etc are designed to address very specific issues including pilot projects/test beds for activity (generally including pilot projects/test beds for activity (generally small scale and short term) which, if effective, are small scale and short term) which, if effective, are mainstreamed into the Structural funds.mainstreamed into the Structural funds.

Structural Funds are aimed at Structural Funds are aimed at reducing disparities between reducing disparities between regions. They promote sustainable economic regions. They promote sustainable economic development in regions which are lagging behind or in development in regions which are lagging behind or in decline and tackle long term unemployment and social decline and tackle long term unemployment and social inclusion. They are therefore large scale and long terminclusion. They are therefore large scale and long term

Scottish ExperienceScottish ExperienceHeritage and Culture – Roman antiquities, Industrial heritage, natural environment.

Tourist Boards on a national, regional and local level

‘Gems’ of Midlothian – connecting diverse tourist attractions into one package.

‘Falkirk Wheel’ Largest single investment by ERDF

Set targets – turnover, increase tourists, increase range of attractions, Increase market share EU, target key areas,

Addressing economic inactivity and regeneration (eg the social economy)

Scottish ExperienceScottish Experience

Cycling and walking networksGastronomy – Food and DrinkFestivals/showsHoliday centresAccommodationGolfTartanBuilt heritage – castles, housesNatural environmentClean energy

Scottish Tourism PolicyScottish Tourism Policy• identifying our future markets, both domestic and overseas• addressing the decline in the Scottish market• improving and maintaining quality• maximising Information Technology• boosting tourism in the remoter areas• extending the season• improving training and skills standards• providing the products to meet market expectation and demand• making Scotland more accessible• making sure our tourism industry is environmentally sustainable• the method of funding Area Tourist Boards

Key IssuesKey Issues

Project Concept to ApplicationProject Concept to ApplicationWhat is the project idea?

Determine why the project is needed – need/opportunity?

Is it supported -by who and how many? – ‘The Partnership’

Business Plan/justification?

Does it fit with the chosen OP priorities – read the OPs and support docs and compliance rules etc

Develop the ‘logical framework’ for the project –Project description, methodology and goalsProject Implementation PlanCosts and resourcesMeasurable deliverables/outputsRisk, contingencies/monitoringEvaluationPublicity (an EC favourite!)

Some of our clientsSome of our clientsEuropean Commission- European Commission- DGs Regio, Research, EmployDGs Regio, Research, EmployUK GovernmentUK Government Scottish ExecutiveScottish ExecutiveRoslin InstituteRoslin Institute Edinburgh UniversityEdinburgh UniversityOxford UniversityOxford University Moredun ResearchMoredun Research

InstituteInstituteSanger CentreSanger Centre Scottish EnterpriseScottish Enterprise30 SMES all technology sectors30 SMES all technology sectors32 UK Municipalities32 UK Municipalities MotorolaMotorolaNECNEC VolvoVolvoINRAINRA DIASDIASUniversity of BonnUniversity of Bonn FBNFBNUniversity of MunichUniversity of Munich China Agricultural UniversityChina Agricultural UniversityUNDPUNDP Ministry for Regional Ministry for Regional Medical University of SofiaMedical University of Sofia Development and Public WorksDevelopment and Public Works

Contact DetailsContact Details

chris.harris@argentix.co.uk