EU funds may be lost without good implementation

Interview with Zsombor Essősy, the CEO of Hungarian Grant Agency

The home entrepreneurs'' " tender writing spirit" and willingness to invest are quite positive, but the proceeding, the illogical calling for tender in same cases and the paucity of funds makes their position so difficult - says Zsombor Essősy, the CEO of Hungarian Grant Agency.

Hungary may obtain 8000 billion HUF as EU funds between 2007 and 2013. According to your own experiences what is the probability that a company manages to get funds?

670-700 billion HUF can be reached via the economic development operational program of the New Hungary development plan (GOP). Of which 170 billion HUF can be gained for financial instruments, 240 billion for R+D and the remaining 250-300 billion can be used for direct investments. All of these have to be distributed for 7 years, that means 30 maximum 40 billion HUF direct investment can be allocated per year. So in Hungary 30-40 billion HUF subsidy can be allocated compared with the 3000 billion HUF annual investments, that rate is not so much. I do really believe more funds should be reached for these purposes.
In this situation it is more important, that selection process be more perfect among the potential winners. Under the facilities the applicants have to meet a great number of requirements. The calls for tenders are rather advantageous for strong companies. The conception is not definitely bad. The reason is that the funds are less than required. In the current application system the small firms cannot count for significant changes. The companies, which would like to take a big step compared with their small size, cannot obtain financial resources. The paucity of funds can be seen on the support intensity of 30-40%, that means signal own funds are required.

How can be met the investment requirements?

Within the investment typed applications, the projects were announced in the following subjects: purchase of machines (technological developments), investments targeting foundation of logistical and industrial parks, IT developments. The total budget of these projects is about 40 billion HUF. Besides them there are applications for start-ups. In their cases the higher the estimated income, the lover the probability that the application is accepted. In the practice there is chance to get funds, if the company going to invest reaches low income. In my opinion, it is not a good solution. During the application planning process, it shouldn't be forget what is useful for domestic start-ups and what is not.

Does it stand for all the applications?

Fortunately, there are exceptions as far the enterprise promotion tenders are concerned. There are ones with good criteria. The programme was closed in 1st of May, and the targeted amount was fully covered with applications. About 400-450 applications of investment were given in exceeding the amount of 50-100 million HUF, that is considered as high-value project according to the Hungarian circumstances. These figures confirm, the tenders were good, practically. The big-sized companies were allowed to join the application solely on backward regions, therefore principally the smaller entrepreneurships will execute investments.

Which companies won't be able to join, although they feel like doing it, have ideas and talents?

The small and medium-sized companies in many cases cannot take part in since they cannot procure the 60-70% of own capital. These firms are not strong enough to apply for guarantees or loans for increasing own capital, and cannot provide the collaterals required, either. In certain situations, even if the entrepreneur could receive the aid for the intended investment, he would not procure the own capital and the necessary amount for prefinancing via loans. For them such a complex product can offer a solution, that contains the own capital, the aid, the credit and the risk capital, as a new element.

Theoretically all the entrepreneurial segment may get EU funds?

The corporates were left out from the current tenders. We were afraid that the funds would not be utilised entirely and there would be enough applicant who can spend the money. Finally it happened differently. In spite of this fact it is important to support the corporates. Naturally we need more funds and 60 billion HUF would be required annually. At the same time I would specify that only such corporates can be winners which have Hungarian supplier or subcontractor in 20-40 percentages. In this way the smaller companies may indirectly partake of the aid.

How fluent is the decision making process regarding to the application, defining and paying the amount?

We have not spent the lion's part of the funds. One of the reasons is the slow administration that depends on the contributory bodies. They call the tenders by the mandate of NFÜ (National Development Agency) created for productive use of EU funds, they prepare and make decisions and finally pay the funds. They have direct connection with the applicant. It is quite often, that red tape set a bar against the applications during administrative process. We had an experience for example, that a certain participating organ made it expressly difficult to pay the tender resources out, although its income stems from the obtained and outpaid applications. So it was against its own self-interest. Or last September a tender was submitted regarding to a project which aimed to make transport easier for those who are disabled. Decision was taken in 8 months, although a government regulation says decision-making process cannot be longer than 3 months. We speak about some 10 million HUF worth of tenders. In my opinion as long as the intermediary organisation is not able to function as a service provider, cannot function in a transparent and logic way and take objective decision, cannot consider the applicants - who is the protagonist in this story - as a partner, the real economic integration remains a dream. Entrepreneurial tender spirit is given. They would like to invest. The subjects of tender are appropriate, but the positive attitude of participating organisations is very important, if not the most important one.