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Transcript of Dissertation msc midp cristina insuratelu frankenthal
EU Structural Funds in Romania: Factors of Success and Failure
in
Tourism Projects
A dissertation submitted to the
University of Manchester for the degree of Master of Science MSc in the
Faculty of Humanities
2012
By
Cristina Insuratelu
The Institute for Development Policy and Management (IDPM)
School of Environment and Development
The University of Manchester
2
TABLE OF CONTENTS
TABLE OF CONTENTS .......................................................................................................... 2
LIST OF ILLUSTRATIONS ...................................................................................................... 4
LIST OF ABBREVIATIONS ..................................................................................................... 5
ACKNOWLEDGEMENTS ....................................................................................................... 7
DECLARATION .................................................................................................................... 8
INTELLECTUAL PROPERTY STATEMENT ............................................................................... 9
ABSTRACT ......................................................................................................................... 10
1. INTRODUCTION ............................................................................................................ 11
1.1 Tourism in Romania. Background ............................................................................ 11
1.2 Brief Theoretical Overview ...................................................................................... 14
1.3 Research Problem ................................................................................................... 15
1.4 Aims, Objectives and Research Questions ............................................................... 15
1.5 Scope of the study ................................................................................................... 16
1.6 Limitations of the Study .......................................................................................... 17
1.7 Structure of the Dissertation ................................................................................... 18
2. LITERATURE REVIEW ..................................................................................................... 19
2.1 Introduction ............................................................................................................ 19
2.2 Structural Funds, Tourism and Development: Theoretical Review ........................... 19
2.3 SFs, Tourism Projects and Development .................................................................. 21
2.3.1 Role of Tourism in Development ....................................................................... 22
2.3.2 Role of SFs in the promotion of Tourism ........................................................... 25
2.4 Summary ................................................................................................................. 26
3. METHODOLOGY AND RESEARCH DESIGN ...................................................................... 27
3.1 Study background ................................................................................................... 27
3.2 Research Problem ................................................................................................... 28
3.3 Aims ........................................................................................................................ 28
3.4 Objectives ............................................................................................................... 29
3.5 Research Questions ................................................................................................. 29
3.6 Methodology ........................................................................................................... 30
3
3.7 Research Design ...................................................................................................... 30
4. ROMANIA: CONTEXTUAL DESCRIPTION ........................................................................ 33
4.1 Economic Profile. Challenges and Opportunities ..................................................... 33
4.2 Regional development in Romania .......................................................................... 35
4.3 Scope of Tourism in Romania .................................................................................. 37
4.4 The Structural and Cohesion Funds aimed at enhancing Romanian Tourism ........... 42
5. CRITICAL EXAMINATION WITHIN THE CONTEXT OF TOURISM AND DEVELOPMENT ...... 45
5.1 Perspectives from two Case Studies ........................................................................ 50
5.2 Identification of factors of success and failure in Tourism Projects .......................... 53
6. MAIN RESEARCH FINDINGS AND ANALYSIS ................................................................... 57
7. CONCLUDING REMARKS ............................................................................................... 63
REFERENCES ..................................................................................................................... 67
APPENDIX I: STRUCTURED QUESTIONNAIRE SURVEY - RESULTS OVERVIEW ..................... 74
APPENDIX II: COMMUNICATION FROM THE ROMANIAN GOVERNMENT .......................... 78
Word count text 16, 049 Word count references and appendices 2, 679
4
LIST OF ILLUSTRATIONS
Figure 1: Financial allocations for Romania for the period 2007-2013 ......................................... 36
Figure 2: Tourism Contribution to GDP and employment, 2011 .................................................. 40
Figure 3: Estimates and Forecasts for Romania ............................................................................. 40
Figure 4: Romania’s eight Regions of Development ..................................................................... 45
Figure 5: Absorption rates in Romania: 16, 23% in 29th February 2012 ...................................... 47
Figure 6: Number of contracted projects by the regions in the field of tourism ............................ 48
Figure 7: Priority Axis 5, major intervention field 5.2: Creation, development and upgrade of the
tourism infrastructure in order to capitalize on the natural resources and to improve the quality of
tourism services ............................................................................................................................. 49
Figure 8: Romania’s Development Region North-East ................................................................. 50
Figure 9: Financial assistance - grant value by sector in the North-East Development Region .... 51
Figure 10: Romania’s Development Region South-East ............................................................... 52
Figure 11: Romania between Western Europe and Asia ............................................................... 63
Table 1: Evolution of tourist arrivals in Romania in the period 2006-2010 (thousand persons) ... 13
Table 2: Diversification of Destinations ........................................................................................ 13
Table 3: Structural funds absorption level within Operational Programmes in Romania ............. 21
Table 4: Regional Development Programmes 2007-2013 ............................................................. 25
Table 5: Lisbon priority themes related to beneficiaries and forms of finance ............................. 32
Table 6: Financial allocations for Romania for the period 2007-2013 .......................................... 34
Table 7: Tourism intensity, 2010 ................................................................................................... 38
Table 8: Tourism receipts and expenditure, 2000-2010 ................................................................ 39
Table 9: Regional Operational Programme’ priority axes ............................................................. 47
5
LIST OF ABBREVIATIONS
ANAT National Association of Travel Agencies in Romania
CBC Cross-Border Co-operation
CF Cohesion Fund
DG Directorate General
DG REGIO Directorate General for Regional Policy
ERDF European Regional Development Fund
ESF European Social Fund
EU European Union
EUROSTAT Statistical Office of the European Union
EU SF ROP European Union Structural Fund Regional Operational
Programme
IB Intermediate Bodies
JEREMIE Joint European Resources for Micro to Medium Enterprises
Initiative
JESSICA Joint European Support for Sustainable Investment in City
Areas
MA Managing Authority
MICE Meetings, Incentives, Conferences and Exhibition
MRDT Ministry of Regional Development and Tourism
NBR National Bank of Romania
NSRF National Strategic Reference Framework
OP Operational Programme
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RDA Regional Development Agency
RON Romanian New Leu (Currency in Romania)
ROP Regional Operational Programme
SF Structural Funds
SME Small and medium-sized enterprises
UNWTO World Tourism Organization, specialized agency of the United
Nations
USP Unique Selling Proposition
7
ACKNOWLEDGEMENTS
I gratefully thank my supervisor Professor Dr Farhad Hossain for his guidance and
persistence throughout the academic year of 2011-2012. Special thanks are also due to Dr.
D.C. Iancu - National School of Political Studies and Public Administration, in Bucharest,
Romania, Mrs Iulia Dangulea - Counsellor in the Ministry of Regional Development and
Tourism, Tourism Development Department, Professor Dr Gheorghe Zaman - Director of the
Institute of National Economy of the Romanian Academy, Viorel Vulturescu - Counsellor in
the Department for European Integration and International Cooperation at the National
Authority for Scientific Research in Bucharest, Mrs Corina Berica - “Alexandru Ioan Cuza”
University of Iaşi, North-Eastern Romania, Victor Nicolaescu - University of Bucharest,
Romania, Mrs Aleksandra Deletić - Danube Competence Centre in Belgrade, Serbia, Dr.
Esther Kramer and Mrs Ivana Katsarova from the European Parliament, Mrs Francesca
Tudini, Mrs Angela Martinez Sarasola and Dr. Astrid Brandt-Grau from the European
Commission in Brussels. They have made my research journey a rewarding experience.
Finally, I am endlessly indebted to my mother, Tatiana for her faith and encouragement, for
her love, support and patience during my fieldwork experience.
8
DECLARATION
No portion of the work referred to in the dissertation has been submitted in support of an
application for another degree or qualification of this or any other university or other institute
of learning.
9
INTELLECTUAL PROPERTY STATEMENT
i. The author of this dissertation (including any appendices and/or schedules to this
dissertation) owns certain copyright or related rights in it (the “Copyright”) and s/he has
given The University of Manchester certain rights to use such Copyright, including for
administrative purposes.
ii. Copies of this dissertation, either in full or in extracts and whether in hard or electronic
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amended) and regulations issued under it or, where appropriate, in accordance with licensing
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iii. The ownership of certain Copyright, patents, designs, trademarks and other intellectual
property (the “Intellectual Property”) and any reproductions of copyright works in the
dissertation, for example graphs and tables (“Reproductions”), which may be described in
this dissertation, may not be owned by the author and may be owned by third parties. Such
Intellectual Property and Reproductions cannot and must not be made available for use
without the prior written permission of the owner(s) of the relevant Intellectual Property
and/or Reproductions.
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commercialisation of this dissertation, the Copyright and any Intellectual Property and/or
Reproductions described in it may take place is available in the University IP Policy (see
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restriction declarations deposited in the University Library, The University Library’s
regulations (see http://www.manchester.ac.uk/library/aboutus/regulations) and in The
University’s Guidance for the Presentation of Dissertations.
10
ABSTRACT
This study analysed the factors which facilitated or discouraged potential beneficiaries, e.g.
tourism organizations and tourism SMEs, local stakeholders and businesses to apply for
support from the European Union Structural Funds for tourism development at local and
regional level. In the current recession it was important to attract as many applicants as
possible. Through a wide-ranging literature review, case studies, questionnaires and
interviews, the research study tried to answer questions about Romania’s modest success in
attracting funds from the European Union structural funds to sustain its declining tourism
sector. It was important to assess as well if the accession to EU structural funds represented a
feasible way of recovering the tourism affected by the global economic crisis. Another
question addressed the impact of structural funds implementation in the considered two
development regions of the country: North-east and South-East: Bucovina, Moldova and
Dobrogea. The research study introduced a number of specific recommendations for policy
makers at local, regional and national levels. Finally, the implementation of EU Regional
Policy through structural funding in Romania to improve tourism infrastructure and promote
the country’s image internationally would positively impact tourism demand for Romania, as
destination in Europe and globally.
11
1. INTRODUCTION
Over the last years the European Commission has taken action to enhance growth through the
use of structural funds, to counter the crisis and ensure the delivery of EU funding. Particular
attention has been given to Member States receiving special macro-economic assistance, the
programme countries such as Romania. The country could have its projects co-financed up to
95%, for the period that it was a programme country. Accordingly, Member States involved
in the implementation of Structural Funds (SFs) would need to pay more attention to project
preparation. The research was committed to identifying the difficulties applicants in Romania
faced when trying to access SFs for financing their tourism projects: the possibilities and
limitations for applicants in accessing Structural Funds.
1.1 Tourism in Romania. Background
The second largest consumer market in Central and Eastern Europe, Romania was a country
of great economic potential: richly endowed with agricultural lands, with an important
engineering tradition, various energy sources, a well-trained work force and low labour costs,
opportunities for expanded development in tourism and a prime strategic location on the
Black Sea and Danube.
The tourism industry played a significant role in the world economy, and was generally
acknowledged to represent an important source of economic growth for the European Union
(EU) and for Romania. The “natural strengths” of the Romanian tourism destinations
provided the basis for diversification and differentiation of the tourism offer in order to
satisfy the various requirements of the tourists and to compete successfully in the different
segments of the international tourism market. Due to the variety of its tourism potential,
Romania might be situated between the most attractive tourist destinations in Europe.
Favourable climate for tourism, diversified flora and fauna, inestimable cultural – historical
and architectural patrimony represented the unique selling proposition of the destination
country Romania. These characteristics of the national potential provided the basis for
elaborating and applying both diversification and differentiation strategies related to the offer
and the possibilities to enter all segments of the tourism market.
12
The most important tourist areas with great attraction of the natural landscape were the
seaside of Black Sea, the Danube Delta (south-east), the Carpathian Mountains (covering
35% of the country area) and the hills and planes areas with rich balneal resources. In
Romania tourism areas with cultural – historical value were Moldova, Bucovina (northeast),
Transylvania (centre), Banat, Crishana (west and north-west), Muntenia (south) and Oltenia
(south-west). The delimitation reflected the traditional vision in relation to the tourism areas
in Romania.
In the last years, the necessity to align to the EU norms and regulations, including in the area
of tourism statistics, led to an alternative that defined six main tourist destinations: seaside,
Danube Delta, mountain resorts, spas, Bucharest and county residence towns, and other
localities and tourism routes. Two major categories of destinations could be distinguished:
one with dominant natural potential (the first four areas), the other one with dominant
cultural-historical potential (the last two within the cultural-historical tourism areas). In terms
of tourism potential the political-territorial Romanian system could be appreciated for being
composed of complex elements, with unique and undiscovered attributes. From this point of
view, Romania could have a remarkable potential, not enough capitalized, with a living rural
world, anchored in many places in an archaic way of life, traditionalist and of priceless value.
Romania's international tourist movement was characterized by a contradictory trend, which
confirmed its sensitivity to changes in economic, social and political plan of the
contemporary world. Thus, a series of global events, specific to the world economy such as:
the intensification of integration and international cooperation process, globalization and
internationalization of economic life, penetration of ICTs in all sectors of the economy,
industrialization, but also crises and economic recession, poverty and unemployment,
impacted on the dynamics and structure of tourism demand. Along with these, the
development of the Romanian economy played an important role on the configuration of
international tourist arrivals.
13
Table 1: Evolution of tourist arrivals in Romania in the period 2006-2010 (thousand
persons)
Source: National Institute of Statistics Romania, 2010.
According to the UNWTO and the concept of Diversification of Destinations, in the 70’s
Romania had a considerable share of the international tourism market, with a potential
increase of 10%, as shown below:
Table 2: Diversification of Destinations
Source: UNWTO, 2011.
However, at present Romania occupied the 63rd
position out of 139 countries in the Travel &
Tourism Competitiveness Index 2011 of the World Economic Forum, and a regional rank in
Europe of 34, position coming after the Slovak Republic, Lithuania and the Russian
14
Federation. The current position could be compared against the previous year’s rank of 66th
out of 133 countries globally.
1.2 Brief Theoretical Overview
In recent years many tourism programmes of national and international interest have been
initiated, developed and promoted in Romania. These had been funded from internal and
international sources, i.e. European funds. An important part of finance for the Romanian
tourism programmes was represented by the EU funds, namely the Structural Funds. At
present, the EU structural funds represented: the European Regional Development Fund
(ERDF), the European Social Fund (ESF) and the Cohesion Fund, which contributed to the
fulfilment of the following three objectives: “Convergence”, “Regional Competitiveness and
Employment” and “European territorial cooperation”.
In 2007, the European Commission approved a Romanian Government proposal for a
Sectorial Operational Programme “Increase of Economic Competitiveness”. The objective of
it was to increase the productivity of Romanian companies in line with the principle of
sustainable development. The intention was to meet this objective through consolidation in
the productive sector and to create a business environment supportive of sustainable
development of SMEs. At the same time, the Regional Operational Programme was allocated
€ 1 billion from the European Regional Development Fund to support:
the setting up of business structures,
rehabilitation of industrial sites,
microenterprises,
Tourism infrastructure.
These operations have been run under the supervision of the Ministry of Regional
Development and Tourism acting as Managing Authority for the programme. Looking to
the period 2007-2013, studies estimated that cohesion policy would add 5.5% to 6% to GDP
in Romania on top of baseline scenarios. The Cohesion Fund operating in Romania was the
major source of finance for environment-related infrastructure projects (especially in energy
efficiency, renewable energy, rail transport and intermodal or public transport systems). It
15
provided funding for investment-intensive projects and indirectly helped develop the
infrastructure for tourism.
1.3 Research Problem
Romania has been awarded a number of structural funds for tourism development, as shown
in the brief theoretical overview above. In order to use them, projects must be developed that
required support from the private sector for their financing. The development and relaunch of
Romanian tourism and the creation of tourism products for the competitive tourist market
could be financed from European funds. Both structural and cohesion funds could be
accessed to implement tourism projects. These would be allocated to national and community
programmes for selection at European level. Successful SF programmes encouraged the
generation of projects that had the capacity to deliver smart, sustainable und inclusive
growth. The research addressed the specific context of the tourism industry under programme
management in Romania.
However, Romania had modest success in attracting funds from the European Union
structural fund to support its declining tourism sector. The question “Why” constituted the
research core and problem to be addressed in the study.
1.4 Aims, Objectives and Research Questions
For the purpose of analysis, the study sought to identify the main factors that applicants found
encouraging or discouraging when they considered applying for EU Structural Funds. One
theme was that of procedures being too complex. Romania and its regional and local
authorities involved in the implementation of Structural Funds would have to pay more
attention to project preparation and offer better services to potential applicants. The study was
committed to identifying the difficulties applicants faced when trying to access SFs for
financing their tourism projects: the possibilities and limitations for applicants in accessing
Structural Funds.
16
The main questions/issues addressed in this research study were:
a) Romania had modest success in attracting funds from the European Union structural
fund to sustain its declining tourism sector. Why?
b) Is accessing structural funds a feasible way of recovering the tourism affected by the
global economic crisis?
c) What is the impact of structural funds implementation in the considered two
development regions of the country?
The methodology of research made use of case studies in order to yield rich contextual data,
i.e. North-east and South-East Development Regions: Bucovina, Moldova and Dobrogea.
1.5 Scope of the study
The implementation of the Regional Policy of the European Union through Structural Funds
represented one of the main pillars of European Union action. These funds would offer
significant possibilities for job creation and investment in terms of supporting business
development and entrepreneurship. In the last three years, the EU has been devoted to
analysing the performance of the funds and to identifying and implementing the required
modifications. The most significant outcome of late analysis was the low absorption rates of
Structural Funds in the period 2007-2013. However, the accessibility of Structural Funds for
applicants has not been analysed yet. Little research has been carried out on the question of
stimulating and attracting potential applicants for funding.
In this context, the 2009 Barca Report drew attention to the performance of the Cohesion
Policy in the European Union. A considerable number of studies and reports about physical
infrastructure, businesses and jobs created have been produced. Most of these studies and
reports focused on the assessment of quantitative figures on output and absorption rates.
However, the findings rarely included the perceptions of target groups and beneficiaries.
In particular, figures showed that the take-up of funding opportunities was lower in Romania
than in other EU member states. This could partly explain why many Romanian citizens
remained sceptical of European Union performance. Shortcomings in administrative services
at local, regional or national level contributed to lower take-up rates. The question arising
17
would be why were businesses, local agencies and other bodies in Romania more reluctant to
apply for European funding? Against this background, the study tried to offer an informative
insight into the barriers the applicants faced when applying for ERDF-Funding in two
Development Regions in Romania.
Three main research approaches have been employed for this research study. The first
approach was a literature review, the second - case studies of two Development Regions in
Romania and the third - a series of on-line interviews, followed by a questionnaire. Several
interviews have been carried out and questionnaires have been widely circulated to
beneficiaries in the tourism industry. The research analysed the factors which facilitated or
discouraged local stakeholders and businesses to apply for support from Structural Funds
(SFs). Through a wide-ranging literature review, case studies, questionnaires and interviews,
this study tried to answer questions about what could be done to attract more applications,
and how the participation of successful applicants could be made more effective. It also put
forward a number of specific recommendations for policy makers at local, regional and
national levels. Based on these sources, focused research and considered analysis, the study
concluded with a number of specific recommendations for actions at local, regional and
national levels. The research and survey were based on the information and data from field
trips and from official statistical sources. Throughout the research there has been a consistent
focus on identifying “best practice” examples from different initiatives in the country’s
Development Regions. What worked well in one situation or Development Region context
could be adapted to work equally well in another.
1.6 Limitations of the Study
Romania had a short implementation period for the Regional Operational Programme.
Management bodies in the country had difficulties in handling the appropriate procedures.
This included a lack of administrative capacities and corruption. Within this context, the two
case studies might have failed to detect good or bad practice regarding successful or
unsuccessful applications for EU funding.
18
Finally, as Westwood (2007) suggested, among the weaknesses of qualitative research studies
time-consumption and researcher bias were both included. It was essential for the reader to be
aware of these factors which may have influenced the outcome of the research study.
1.7 Structure of the Dissertation
Chapter one in the dissertation offered an introduction to the Cohesion Policy and the
Structural Funds. Chapter two presented the literature review, followed by chapter three
which explored the Methodology and Research Design employed, the case studies selected
and the interviews; chapter four explored the perspectives for tourism development in
Romania under the current economic context with consideration for the economic profile of
the country. With chapter five, the reader would be introduced perspectives from two case
studies with the identification of factors of success and failure of tourism projects in the
North-East and South-East Development Regions of Romania.
Chapter six provided a critical analysis of the field work results. It covered a wide range of
elements relevant for the accessibility of Structural Funds for applicants through field work
research and concluding results. This chapter was devoted to factors relevant for applicants
at operational level through the provision of case studies. It would draw also on the
information gathered from the case studies and questionnaires. The case studies selected
involved organisations and businesses which have successfully applied for funding.
There was no European wide systematic analytical research related to the issue of barriers for
applicants. Accordingly clear cut figures for applicants’ appreciations of the 2000 - 2006 or
2007 - 2013 programming periods would not be provided in the study. The existing research
focused on specific thematic fields, in particular the Operational Programme and parts of the
programme life cycle. Chapter seven was the last chapter in the dissertation providing
conclusions and recommendations for policy-making in the area of project management for
tourism in the context of EU funding for local development.
19
2. LITERATURE REVIEW
2.1 Introduction
Based on the necessities of Romania, the European funds were destined in different
proportions to the economic and social sectors which needed to be developed. Thus,
according to the individual requests from Romania, the funds could be allocated to the
development of SMEs, agriculture, social sector and any other strategic domain for the
recipient economy, in the case of this research study Romanian Tourism.
Tourism was one of the areas of activity that would fully enjoy the favourable effects of
structural and cohesion funds usage. By accessing them, Romania would obtain the
stimulation of both components that made up the tourism phenomenon, i.e. the tourism offer
and tourism demand.
2.2 Structural Funds, Tourism and Development: Theoretical Review
According to the Official Journal of the European Union, the EU Funds providing assistance
under the Cohesion Policy were limited to the European Regional Development Fund
(ERDF), the European Social Fund (ESF) and the Cohesion Fund. The rules applicable to
each Fund have been specified in implementing regulations adopted under Articles 148, 161
and 162 of the Treaty (Council Regulation (EC) No 1083/2006).
Regional Operational Programme 2007-2013 (REGIO) was one of the Romanian Operational
Programmes in agreement with the EU, being a very important instrument for implementing
the National Development Strategy and the policies for regional development. The
programme was available to all eight regions of development in Romania. REGIO was
funded by the European Regional Development Fund (ERDF). It supported EU regions that
had a GDP per inhabitant of less than 90% of the European average (Scutariu, 2009).
Recent evidence suggested that the procedures of structural funds accession from the EU
budget were very rigid. According to the "n +3" rule, the projects would require to be
20
contracted, completed, implemented and disbursed within a maximum of 3 years after the
funding approval.
It was important to note that during the phase of projects implementation, the absorption of
structural funds may be subject to being influenced by the vulnerabilities of the
macroeconomic framework of Romania. Like other countries, Romania was affected by the
international financial crisis. After several years of economic growth, in 2009 Romania was
strongly affected by the global economic downturn. Given its effects on economic growth, a
possible straightforward adjustment of exchange rates and maintaining a high rate of inflation
for 2009-2012 were expected to create pressure on the contracts deployment, concluded in
local currency (Constantinescu, Badea, Dragoi, 2011).
A major vulnerability affecting the absorption rate of European funds was the rigidity of the
banking system, i.e. loans for the co-financing of projects. In the context of strengthening the
lending conditions imposed by the NBR National Bank of Romania, including mitigating the
effects of international financial crisis, interests and commissions charged by commercial
banks rose. Furthermore, applicants were asked to deposit a percentage of the amount
financed (up to 20-25%), as collateral. This cash remained locked until the loan had the bank
approval, which meant a delay of several months. This view was supported by the fact that
Romania occupied the last positions in terms of structural funds absorption level. In
comparison with other EU member countries, this had a negative impact upon the
performance indicator of sustainable development (Zaman, Cristea, 2011).
As shown in the table below, the Regional Operational Programme ROP registered the
highest degree of absorption, from almost 13% in the last month of 2009 to a level of almost
22% in the month of May 2011.
21
Table 3: Structural funds absorption level within Operational Programmes in Romania
Source: Calculated using data from the Ministry of Public Finance, 2009 and 2011; primary data:
http://www.eu.finan_are.info/documente/cit_pr_semnate_contractate.
It has conclusively been shown that debating the issue of European funds absorption in
Romania was confusing. The main reason was linked to the lack of transparency at the central
government, at the level of operational programmes management, i.e. the line ministries.
These were less disposed to admit vulnerabilities and to identify possible remedies. Instead of
an analytical image, an incomplete picture of European funds absorption had been presented.
This was used to report exclusively positive aspects, which made a purely scientific approach
difficult.
2.3 SFs, Tourism Projects and Development
Preliminary work on the influence of the funding from the European Union on the tourism
offer was undertaken by Jiletcovici (2012). This influence on the tourism offer would
manifest itself indirectly, by creating new jobs. This would further encourage professional
development and improve the living conditions of tourists. All these might be accomplished
by stimulating the economic activity of tourism SMEs in order to improve their efficiency.
Considering that exceeding incomes were the premise for engaging in tourism activities, the
higher these incomes were, the higher the probability of asking for tourism services.
22
2.3.1 Role of Tourism in Development
In the 1970s and 1980s tourism researchers began to focus considerable attention on the
outcomes of tourism for development. The two approaches dominating much of the discourse
on tourism and development during this period were the dependency perspective (Britton
1982) and the life-cycle model (Butler 1980). These approaches emerged from different
theoretical lineages, i.e. Neo-Marxism in the case of dependency, and modernization theory
in the case of the lifecycle approach.
They were based on the shared premise that the industry’s mass
variant represented its crowning height. Companies minimized
unit costs by generating economies of scale, destinations
received increased visitor numbers, and tourists fulfilled their
wanderlust cheaply and efficiently (Milne and Ateljevic, 2001).
The modernization theory argued that societies developed in fairly predictable stages though
which they became increasingly complex. Development depended primarily on the
importation of technology and a number of other political and social changes that came about
as a result. The dependency theory in Neo-Marxism (late 1960's, early 1970's) suggested that
capitalist penetration led to and reproduced a combined and unequal development of its
constitutive parts. Accordingly, indigenous economic and social development should be
fundamentally predicted upon the removal of industrial capitalist penetration and dominance.
Both dependency and life-cycle approaches have been criticized. The Dependency Theory
was accused of being “obsessed by the global level and the world system” (Corbridge, 1986).
The theory ignored the possibility that what occurred within a nation or region may be just as
important as those influences originating outside its boundaries (Storper 1990; Lipietz 1993;
Peet and Hartwick 1999). There was also a failure in the case of both approaches. The
possibility that local government, industries and individuals could exert control over their
own destinies was not acknowledged. Preister (1989: 20) also noted that: “locally-affected
people are not shaped passively by outside forces but react as well, at times even changing
the conditions of the larger system”. Preister argued that the development outcome was a
“negotiated process” between local groups/individuals and structural forces. However, both
frameworks failed to consider the possibility that by empowering locals to have input into
23
development plans, the deteriorating cycle of evolution might be minimized or avoided
(Drake 1991; Priestly and Mundet, 1998).
Another approach emerged in the 1980s emphasized local agency, seeing communities and
their constituent members playing an active role in determining tourism’s outcomes (Murphy
1985; Taylor 1995). In contrast to the models discussed above, the community approach
viewed locals as being capable of planning and participating in tourism development and of
having the capability to control the outcomes of the industry. Murphy (1994: 284) argued that
if host communities could define the types of tourism they wished to attract, they would
manage to shape the type of industry most appropriate to their needs.
Furthermore, in 1993 Poon suggested the emergence of a “new tourism best practice” that
would offer an opportunity for less developed regions and small firms to achieve a greater
degree of self-determination:
The economics of new tourism is very different from the old –
profitability no longer rests solely on economies of scale and
the exploitation of mass undifferentiated markets. Economies of
scope, systems gains, segmented markets, designed and
customized holidays are becoming more and more important for
profitability and competitiveness in tourism.
There can be no denying that tourism has become a major global economic force. At the
global scale, tourism development has been influenced by broad-based economic change and
evolutionary pressures of demographics and technological change (Milne and Ateljevic,
2001). Global institutions, such as the IMF and World Bank, played a vital role in shaping the
economic environment for tourism investment and development in the world (Mowforth and
Munt, 1998). Multinational Corporations have driven the increases in business and leisure
travel, while restrictions to trade and human movements had been relaxed.
At the national scale macro-economic policy frameworks, infrastructure provision and issues
of socio-cultural cohesion played a vital role in influencing tourism’s development outcomes
(Milne and Ateljevic, 2001). Previous studies have found that the role of the nation state has
diminished as the stateless multinational corporation had come to dominate global economic
affairs and neo-liberal policies have led to a retreat of the welfare state (Hirst and Thompson,
1999). It has been argued however that the national scale remained significant to any
understanding of tourism’s development outcomes.
24
From a tourism perspective, national governments often appear
to be playing a more active role in coordinating the tourism
marketing campaigns and broad-based product development
that play such an important role in shaping tourism demand and
behaviour. Notions of regions stimulating economic growth
through a mixture of inter-firm networks, and cultural/political
attributes have dominated much of the social science discourse
on economic development since the early 1980s (Amin 1989;
Sayer 1995; Milne and Ateljevic, 2001).
As Scutariu (2009) reminded us, tourism became one of the most important industries in the
world, with a significant role for economic growth and regional development. The new
economic theory of tourism recognized the link between tourism and economic development
of a country such as Romania. Tourism has become an important element of the tertiary
sector and one industry with exceptional potential for the economy. One of the main reasons
why governments supported and promoted tourism throughout the world was that it had a
positive impact upon economic growth and development. "Economic growth" would mean a
complex process involving the entire economic system, determined by the results of
economic activity and considered the only factor ensuring the sustainable economic success
of a country.
If Romania used the opportunities with the EU SFs, the tourism industry in the country could
become an engine of regional development (Romanian Ministry of Development, Public
Works and Housing). The investments in tourism would allow the development regions to
use the advantages offered by their tourism potential in the consolidation of their identity.
This would further improve the competitive advantages in sectors with high added value and
high qualitative and cognitive content, and on traditional and new markets.
The capitalization of the tourist attractions of the country would contribute to the economic
growth of urban centres in decline, by favouring the development of local SMEs. This would
then transform areas with low economic competitiveness into attractive opportunities for
investors. The implementation of this Priority Axis of REGIO (EU Regional Policy), by
improving tourism infrastructure and by a sustained promotion of Romania’s image
nationally and internationally of the ensemble of the tourism practicing conditions, would
positively impact tourism demand for Romania, as destination in Europe and globally.
25
Furthermore, Tourism could contribute to achieving larger objectives, established by
governments as priorities in the general interest of citizens: fighting against poverty, living
conditions improvement, and intensification of international cooperation strengthening the
links between countries. The general objective of the Regional Development Programme was
to reduce existing regional imbalances, with emphasis on balanced growth and revitalization
of disadvantaged areas. This could be reached by stimulating the areas with tourism potential,
e.g. rural areas. The development of tourism by the capitalization of the existing potential
may also lead to the achievement of one of the ERDF objectives, i.e. the promotion of the
development and structural adjusting in the regions with difficulties, with GDP/inhabitant
less than 90% of EU average.
2.3.2 Role of SFs in the promotion of Tourism
In the tourism industry, the European financial instruments were acting mainly on the tourism
offer. This influence could be direct, i.e. on the tourism infrastructure, for developing new
accommodation facilities, or upgrading the existing ones, and indirect, i.e. by financially
sustaining the access infrastructure to tourism destinations. The latter category included
upgrading the national road, the marking of touristic paths, renewal of bridges and tunnels,
replacing damaged sewage systems, introducing or upgrading the existing energy, fresh water
or heating facilities in potentially touristic areas. Moreover, by using the structural funds,
commercial campaigns for the promotion of tourism at local, regional and national level
could be initiated and sustained.
In the field of tourism, Romania benefited of grants from the European Union in two
programmes: the Regional Operational Programme and the National Programme for Rural
Development. Within the Regional Operational Programme, infrastructure for tourism was
financed on Axis 5 – Durable development and tourism promotion, the major intervention
field was at 5.2 Creation, development, upgrading the tourism infrastructure in order to
better use the natural resources and increasing the quality of the touristic services.
Table 4: Regional Development Programmes 2007-2013
I. National programmes
Tourism and Culture
Romania
Operational Programme 'Regional Operational Programme'
26
II. Cross-border, transnational and interregional co-operation
Tourism and Culture
Romania
'Romania-Serbia' IPA Cross-border Co-operation Programme 2007-2013
Focus of programmes:
I. Developing basic infrastructure according to European standards;
II. Increasing long-term competitiveness;
III. Developing and using human capital more efficiently;
IV. Building administrative capacity;
V. Promoting balanced territorial development.
Targets
I. Contribute to 15-20% growth in GDP by 2015;
II. Increase the employment rate from 57.4 to 64%;
III. Invest in 1,400 km of new or renovated roads.
Source: EU DG REGIO, 2012.
With the effects of the worldwide crisis on tourism demand and supply, and banks reluctant
to finance new projects, the EU structural and cohesion funds made available would be a
source of funds, with positive impact at local and regional level (Jiletcovici, 2012).
2.4 Summary
Data from several sources have identified the positive effects of the attraction of EU
Structural Funds and the impacts for tourism development and economic growth in Romania
(Balogh, Coros, Negrea, 2010). The country was awarded a number of structural funds for
tourism development, but in order to use them, projects must be developed with support from
the private sector for their financing. Development and relaunch of Romanian Tourism with
the creation of tourism products for the international market can be achieved through finance
from European Funds. Structural and Cohesion Funds could be accessed for the
implementation of tourism projects after being previously selected at European level. In this
perspective, the question remained: Romania had modest success in attracting funds from the
European Union structural funds to sustain its declining tourism sector. Why?
27
3. METHODOLOGY AND RESEARCH DESIGN
3.1 Study background
In Romania, the modernization and development of Romanian Tourism, together with the
creation of competitive tourist products for the international market could be financed
through European funds. In order to implement a specific project in the tourism field,
structural and cohesion funds may be accessed, being allocated at national level. Community
programmes may become available also, where projects were selected at European level.
In the 2007 – 2013 timeframe, Romania would be receiving 19,667 billion EUR, in the form
of three Structural Funds:
I. ERDF - European Regional Development Fund: investments in the transportation
sector, generating new employment opportunities, rural development projects,
entrepreneurship;
II. ESF - European Social Fund: support for integrating disadvantaged groups and the
unemployed into the market of labour, through financing of measures and systems for
labour recruitment and assistance;
III. CF - Cohesion Fund: assistance for the newest member states of the European Union
with a GDP per capita smaller than 90% of the community average.
Structural funds could be accessed via operational programmes, documents by which
strategic actions were prefigured in the National Strategic Reference Framework (NSRF).
Structural funds contributed to the fulfilment of the EU Cohesion Policy objectives through
the implementation of Operational Programmes. This policy became applicable to all member
states including Romania (Gruescu, Pirvu, Nanu, 2010).
Existing operational programmes were comprised by the following categories:
I. The Sectorial Operational Programme Technical Assistance,
II. The Operational Programme Administrative Capacity Development,
III. The Regional Operational Programme,
IV. The Sectorial Operational Programme Human Resources Development, and
V. The Sectorial Operational Programme Transport.
28
From the two Regional Development Programmes 2007-2013, the Romania-Serbia IPA
Cross-border Co-operation Programme 2007-2013 will not be discussed in the study. The
programme which has been broken down into specific objectives by the participating
countries, i.e. Romania and Serbia, aimed to increase overall economic competitiveness in the
border area. In the case of Romania, the programme addressed the West Development Region
of the country, which was not in the research area of this study.
3.2 Research Problem
The EU fund covered by this research was ERDF - European Regional Development Fund,
with the Regional Operational Programme - ROP. Applicants who considered participation in
SF programmes, prepared projects and submitted them for funding, without any guarantee of
success. Successful applications would be the key to the rise of absorption rates. However,
evaluation reports seldom focused on the project level. The reason why evaluation reports
rarely included this topic may lay in the complexity and multitude of a Europe wide
comparable analysis of applicants and their success or failure in applying for SF support.
Programme management institutions have developed measures to improve the accessibility of
funds, to target and attract appropriate projects. Low absorption rates in Romania suggested
that obstacles to attracting sufficient valid projects still existed. Potential applicants and
beneficiaries complained about complicated procedures coming from Brussels.
3.3 Aims
The aim of the exploratory and analytical research was to identify the main factors that
applicants found encouraging or discouraging when they considered applying for EU
Structural Funds. One theme was that of procedures being too complex. The analysis helped
identify where such problems originated, if at national or regional level. Romania and its
regional and local authorities involved in the implementation of SFs may need to pay more
attention to project preparation. The research was committed to identifying the difficulties
applicants faced when trying to access SFs for financing their tourism projects: the
possibilities and limitations for applicants in accessing Structural Funds for local or regional
development.
29
3.4 Objectives
The research explored the difficulties encountered by applicants to EU Regional
Development Programmes 2007-2013, such as the Operational Programme “Regional
Operational Programme”.
In summary the dissertation would address the following objectives:
identify factors that encourage or discourage applicants to EU SF ROP;
highlight the level of responsibility for the origin of problems and for finding
solutions (national, regional or local);
identify and describe factors contributing to success of applicants/beneficiaries of
Structural Funds;
identify "good practices" under respective administrative set-up;
propose measures for policy makers at national and regional levels.
3.5 Research Questions
The research question addressed was the following: “Romania has modest success in
attracting funds from the European Union structural fund to remedy its declining tourism
sector. Why?” This represented the research core and problem to be addressed in the study.
Success would be defined in terms of the extent to which the programmes have enabled the
local tourism industry to overcome obstacles to its development.
Other sub questions that followed were: “Was accessing structural funds the feasible way of
recovering the tourism industry affected by the crisis?”; “What was the impact of structural
funds implementation in the two considered development regions of the country?” Case
studies complimented and have been integrated with the survey method in an integrated
research design. The emphasis was on the qualitative case study method and how it can
complement more quantitative survey research. The research followed the Case Study
Methodology where North-East, South-East Development Regions in Romania: Bucovina,
Moldova and Dobrogea have been discussed and analysed. The two development regions
represented together Macro region of Development Two, in line with the EU SFs ROP
focusing on local development.
30
3.6 Methodology
The methodology used in the research was based on a literature review complemented by
case studies including interviews with implementing institutions and an online questionnaire.
The literature review provided the framework for the analysis of encouraging factors and
potential barriers to SFs, together with the case study analysis. The literature review
concentrated on the national level of ERDF implementation. However, there was little
information on these applications, resulting in a fragmented picture about the effectiveness
and efficiency of the application process. The case studies dealt mainly with the operational
level to fill the gaps and complement the published research. The objective of the case studies
in chapter five was to explore factors that encouraged or discouraged applicants at
operational level from the two development regions of the country.
The desk research was based on the following sources:
Academic literature on the topics of Cohesion Policy, Regional Policy in Romania;
Policy literature on the management and implementation of Cohesion Policy;
Evaluation reports and other analytical studies on the impacts, effectiveness and
efficiency of Cohesion Policy;
Results of recent research undertaken on the success factors and barriers at national
level.
3.7 Research Design
The dissertation employed the qualitative research methodology. The objective was to assess
in-depth perceptions of tourism beneficiaries in relation to EU SFs for the development of
tourism through specific projects. The direction of this research made it appropriate to apply
an intrinsic case study approach, where the interest was in understanding the particulars of
the case (Johnson, 2007). For the purpose of analysis, a questionnaire was generated
composing of 16 key questions, as shown in Appendix I. This questionnaire was developed
under consultation with tourism stakeholders. Five key areas have been examined:
1) Economic situation and tourism;
2) Project generation;
3) Project development;
4) Project implementation; and
31
5) Government Programme and initiatives.
The interviews were executed in a semi-structured manner allowing the interviewees to freely
express their point of view (Westwood, 2007). Structured interviews resembled
questionnaires or surveys. Semi-structured interviews used an interview guide with some
questions developed in advance, allowing the interviewer to go beyond the interview
guide. The semi-structured approach was chosen because the interviewee's responses to
prepared questions may raise issues the interviewer wished to explore further. Data were
gathered from multiple sources at various time points during the 2012 academic year. In
order to understand the poor accessing of structural funds in the field of tourism, a structured
questionnaire survey for the beneficiaries of this method of financing has been designed.
It was considered that case studies would usefully supplement and extend the qualitative
analysis. The case study approach would be used to support and analyse policy development:
it could generate information for policy (Rolfe et al., 2008) and be used to analyse past policy
experiences in detail (Shiffman, Stanton & Salazar, 2004). A case study approach was chosen
to allow an analytic generalization on issues (Russell & Gilson, 2006) and to complement the
literature review. Case study analysis from the EU SFs Regional Operational Programme has
been carried out. Each case study involved a mix of primary and secondary research and
focused on assessing the current situation, i.e. the barriers and problems faced by potential
beneficiaries in the context of the current Cohesion Policy programmes and the measures
adopted and planned to improve potential applicants’ interest.
The case studies began with a review of the programme documents and programme
evaluation reports in order to identify:
Different types of potential beneficiaries (linked to the different forms of support
provided by the programme), as shown in the table below;
The barriers/difficulties faced by the beneficiaries/applicants;
An assessment of whether certain types of beneficiaries faced more barriers and, if so,
why;
Significant measures for in depth appraisal through further research, i.e. calls for
projects; publicity and communication material disseminated by the Managing
Authority (MA) and Intermediate Bodies (IB) responsible for the
32
programme/measure. It also covered briefings and promotional materials from
organisations representing target groups.
Table 5: Lisbon priority themes related to beneficiaries and forms of finance
Source: 2012 Policy Department Structural and Cohesion Policies, European Parliament, Brussels.
Finally, an online questionnaire was elaborated and published via different management
bodies to cover the Operational Programme and the beneficiaries. The return rate registered
was low due to MAs and IBs bring reluctant to publicise the survey.
33
4. ROMANIA: CONTEXTUAL DESCRIPTION
With almost 22 million inhabitants, Romania was the seventh largest among the EU
countries, and the second largest in the Eastern part of the EU. Although the
country experienced strong economic growth in the period 2003-2006
(6.4% annually), it remained among the poorest of the EU. Romania had a
particular situation among the Central-Eastern European countries because it was not part of
the first wave of Eastern enlargement of the EU (May 2004). The request to join the
European Union was made in June 1995, but the accession was delayed for January 2007
(Horváth, 2008).
4.1 Economic Profile. Challenges and Opportunities
After the Communist regime was overthrown in 1989, the country experienced a decade of
economic instability and decline. From 2000 onwards however, the Romanian economy was
transformed into one of relative macroeconomic stability, with high growth, low
unemployment and declining inflation. The country’s economy was predominantly based on
services, which accounted for 55% of GDP. Industry and agriculture also had significant
contributions, making up 35% and 10% of GDP, respectively. Additionally, 32% of the
Romanian population was employed in agriculture and primary production, one of the highest
rates in Europe. However, in February 2010 the Romanian unemployment rate stood at 8.3%,
the highest rate since 2003. It was expected to rise further in 2011, particularly in light of the
government's planned cuts in the public sector.
In 2009 the Romanian economy contracted as a result of the global economic downturn. GDP
shrank by 7.2% in the fourth quarter of 2009 from the same period in 2008 (Romanian
Government). According to The Global Competitiveness Index 2011–2012 rankings
developed by the World Economic Forum, Romania occupied the 74th
position out of 142
countries globally, with a score of 4.08, its position coming after its neighbour Bulgaria 74th
position, Philippines 75th
and Croatia, 76th
position respectively.
The current economic difficulties had an impact for all tourism destinations in the different
countries. Tourism destinations in countries of all levels of development would suffer from
the current crises (Keller, 2009). Like all industries, tourism was strongly influenced by the
34
crisis. Along with other economic or financial measures, a way of enhancing the investments
in the sectors most affected became the process of accessing the no reimbursable financing
granted to Romania from the European Union’s budget (Jiletcovici, 2012).
Table 6: Financial allocations for Romania for the period 2007-2013
Source: Government of Romania (2007); EC documents; Benedek J., Horváth R. (2008).
An important role in the absorption capacity was played by the public institutions involved in
the management of European funds. For Romania to meet the objective of economic and
social convergence, strategies and policies must be implemented correctly and resulting in an
increased rate of absorption (Ranf, Dumitrascu, 2012). The main financing programmes of
projects from structural and cohesion funds were:
- Regional Operational Programme (ROP);
- Sectorial Operational Programme “Increase of Economic Competitiveness” (SOP-IEC);
- Sectorial Operational Programme Human Resources Development (SOP-HRD);
- Operational Programme Administrative Capacity Development (OPACD);
- Sectorial Operational Programme Transport;
- National Programme for Rural Development and European Cooperation Programmes
(cross-border, transnational and interregional).
A study by Zaman and Cristea (2011) on the obstacles of using Structural Funds in Romania
provided a good insight into problems in implementation, especially if the public
35
administration was weak and difficulties in the management systems of Structural Funds
occurred. Furthermore, the relationship between the absorption capacity of EU SFs and the
regional economic situation was a paradoxical one. Practice demonstrated that the most
disadvantaged regions were experiencing also the greatest difficulties in the absorption of
these funds. These were the regions that needed the largest financial support for restructuring
their economies (Zaman and Georgescu, 2009a).
4.2 Regional development in Romania
Regional development was a new concept that aimed at boosting and diversifying economic
activities, by stimulating investment in the private sector, bringing contribution to
unemployment cut-down and leading to an improvement of the living standards. In order to
apply the regional development policy, eight development regions had been established,
which included the entire territory of Romania.
The regional development policy was a series of measures planned and promoted by the
local government and central authorities. This came in partnership with different entities
(private, public, volunteers) that aimed at ensuring a dynamic and sustainable economic
growth in order to enjoy the benefits of an effective regional and local potential. The main
areas targeted by the regional policies were the following: employment, investment,
technology transfer, development of SMEs, improving infrastructure, quality of environment,
rural development, health, education and culture.
The implementation and evaluation framework of the Regional Development Policy was
represented by the development region, set up as a voluntary association of neighbouring
counties. The development region was not an administrative and territorial unit and had no
legal personality (Framework Document for the implementation of the ROP 2007-2013,
2008). The main objectives of the regional development policies were as follows:
to reduce the existing regional disparities, especially by stimulating the well-balanced
development and the revitalization of the disadvantaged areas;
to prepare the institutional framework in order to comply with the integration criteria
into the EU structures and to ensure access to the financial assistance instruments (the
Structural Funds and the Cohesion Fund of the EU);
36
to correlate the governmental sector development policies and activities at the level of
regions by stimulating the inter-regional, internal and international, cross-border
cooperation. This would contribute to economic development and was in accordance with the
legal provisions and the international agreements to which Romania was a party (Scutariu,
Nedelea, 2012).
Figure 1: Financial allocations for Romania for the period 2007-2013
Source: Romania Tourism Office, 2012.
In Romania, Regional Policy would bring the expected benefits in combination with a
comprehensive national policy development and a coherent policy direction. Regional
development policy could not be the main and only pillar for the general development of a
state. Regional development should be a partnership between administration, economy and
community. Tourism can be a significant sector for regional development particularly in the
creation of economic agglomerations, e.g. tourism industry in Bucovina, North-East
Development Region of Romania.
Thus, tourism was a highpoint industry and a crucial public policy area for Development
Regions in Romania through the EU SF ROP (European Union Structural Fund Regional
Operational Programme). A long term national policy would be necessary for sustainable
public and private investment in tourism and regional development initiatives. As tourism
and regional development were closely linked, regions and local authorities would play a key
role in the formulation of policy and the organization and development of tourism
(Constantin, 2000). Coordination between local authorities would increase the benefits of
policies such as large scale infrastructure projects as part of the regional development
initiatives.
37
4.3 Scope of Tourism in Romania
Tourism industry was recognized by specialists as a sector which supported and sustained
economic growth globally. It has proven its effectiveness as an agent for sustainable growth
in developed and developing countries. As a distinct component of the tertiary sector, tourism
was closely correlated with the level and pace of growth of the economy in general and with
trade, transport, construction, agriculture in particular. Researchers, academics and tourism
operators supported the idea that tourism was a tool for economic growth. Backward and
forward linkages were used to describe how the increase in the production of tourism
generated an increase in the demand for inputs from other sectors and respectively in the
supply to other economic sectors. These linkages provided a general image of how tourism
might sustain the economic growth in Romania (Surugiu, 2009).
In 2011 international tourist arrivals data showed growth of +13% for Romania (UNWTO).
More foreign visitors arrived in Romania in the first nine months of 2011, compared to the
same period of 2010. The number of international arrivals increased by 12.6% during this
period (National Association of Travel Agencies in Romania (ANAT)). However, “statistics
showed that the share of foreign tourists of the total tourists in Romania was the lowest in the
entire European community,” according to the ANAT report. International tourists preferred
cultural tours, health tourism – where the number of international tourists increased by
16.5%, the Danube Delta – with 45% more tourists in 2011, Black Sea cruises – 20% more
international tourists than in 2010, travel city break – Bucharest preferred by young people,
and the seaside.
Generally, demand followed the same line as GDP (estimated at 1.8% in 2012) and airport
passenger movements (estimated at 8%). Accordingly, it has been estimated that tourism
demand also would increase in 2012. Even if Romania had an important tourism potential, in
the last twenty years tourism didn’t contribute more than 2-3% to the national GDP. In
correlation with the whole national economy, tourism acted as a factor that stimulated the
global economic system. The sector can be an engine of economic growth, not only as creator
of GDP, but with an important contribution to value added (Minciu, 2000). Tourism value
added was significantly and positively related with nominal GDP per capita and public
investment in tourism.
38
Among tourism indicators, Tourism Intensity, also called carrying capacity, represented the
ratio of nights spent in hotels and similar establishments relative to the total permanent
resident population of the area (EUROSTAT, 2011). Tourism Intensity in Romania would be
the lowest in all the 27 EU member countries and Norway, Switzerland and Iceland, if
Republic of Macedonia did not come last with a ratio of 0.6%.
Industry and services Tourism
Table 7: Tourism intensity,
2010
(nights spent by residents and non-residents in collective tourist accommodation per inhabitant)
2010 EU-27 (1)
4.5
Euro area (1) 5.8 Malta 18.4
Cyprus 17.2
Austria 11.7 Spain 7.9 Ireland (2)(4) 6.8 Italy (3) 6.3 Greece (4) 5.7 Sweden 5.1 Netherlands 5.1 Denmark 4.9 Luxembourg (2) 4.5 France 4.4 Portugal 4.2 Slovenia 4.1 United Kingdom (4) 4.1 Germany 4.0 Finland 3.6 Czech Republic 3.5 Estonia 3.5 Belgium 2.8 Bulgaria 2.1 Hungary (3) 1.9 Slovakia 1.9 Poland 1.5 Latvia 1.3 Lithuania 0.8 Romania 0.7 Iceland 9.2 Croatia 8.4
Norway 5.9
Switzerland 4.7 Liechtenstein 4.6 FYR of Macedonia 0.6
(1) Estimate made for the purpose of this publication, based on annual and quarterly data.
(2) 2009. (3) Provisional. (4) Estimate based on monthly data.
Source: EUROSTAT, 2012.
0
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10
15
20
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(1
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39
Industry and services Tourism
Table 8: Tourism receipts and expenditure, 2000-2010
Receipts Expenditure
(EUR million) Relative
to GDP, 2010 (%)
(EUR million) Relative to GDP, 2010 (%)
2000 2005 2010 (1) 2000 2005 2010 (1)
EU-27 (2) : 65,737 73,028 0.6 : 84,943 87,737 0.7
Belgium : 7,934 7,761 2.2 : 12,047 14,151 4.0
Bulgaria 1,163 1,956 2,747 7.6 582 1,053 931 2.6
Czech Republic 3,232 3,769 5,043 3.4 1,387 1,940 3,074 2.1
Denmark 4,008 4,248 4,135 1.8 5,076 5,526 6,532 2.8
Germany 20,007 23,449 26,156 1.1 57,427 59,766 58,596 2.4
Estonia 549 784 815 5.7 221 353 460 3.2
Ireland 2,886 3,863 3,075 2.0 2,858 4,898 5,826 3.7
Greece 10,068 11,037 9,611 4.2 4,947 2,446 2,156 0.9
Spain 32,446 38,558 39,621 3.8 6,454 12,125 12,664 1.2
France 33,301 35,385 34,939 1.8 19,227 25,582 29,686 1.5
Italy 29,905 28,400 29,244 1.9 17,010 17,960 20,490 1.3
Cyprus 2,101 1,875 1,655 9.5 448 750 873 5.0
Latvia 143 279 480 2.7 268 475 485 2.7
Lithuania 424 742 778 2.8 274 599 594 2.2
Luxembourg : 2,904 3,109 7.7 : 2,398 2,698 6.7
Hungary 3,758 3,300 4,049 4.2 1,508 1,908 2,241 2.3
Malta 640 611 813 13.2 218 216 348 5.6
Netherlands (3) 7,813 8,421 9,718 1.7 13,241 12,996 14,807 2.5
Austria 10,593 12,904 14,078 4.9 6,767 7,506 7,717 2.7
Poland 6,183 5,056 7,157 2.0 3,606 4,485 6,181 1.7
Portugal 5,720 6,199 7,610 4.4 2,422 2,454 2,953 1.7
Romania 391 849 859 0.7 463 747 1,239 1.0
Slovenia 1,039 1,451 1,743 4.9 554 708 905 2.6
Slovakia 519 972 1,729 2.6 372 680 1,534 2.3
Finland (3) 1,528 1,757 2,189 1.2 2,009 2,461 3,201 1.8
Sweden 4,414 5,970 8,392 2.4 8,718 8,672 10,149 2.9
United Kingdom 23,702 24,672 23,038 1.4 41,650 47,940 36,829 2.2
Iceland (4) 246 332 402 4.6 509 788 383 4.4
Norway (4) 2,110 2,680 2,909 1.1 4,812 8,187 8,871 3.3
Switzerland (4) : 8,105 9,937 2.8 : 7,141 7,619 2.1
Croatia (4) : 5,961 6,367 13.9 : 604 723 1.6
Turkey (3) 8,268 14,591 15,847 2.9 1,855 2,309 3,650 0.7
Japan (4) 3,656 10,018 7,397 0.2 34,548 30,229 18,051 0.5
United States (3)
#########
82,043 101,90
7 0.9 72,589 58,934 62,712 0.6
(1) Provisional data.
(2) Extra EU-27 flows.
(3) 2010 estimated using quarterly data.
(4) 2009 instead of 2010.
Source: EUROSTAT, 2012.
Tourism receipts defined as expenditures of international inbound visitors including their
payments to national carriers for international transport (Community Methodology on
Tourism Statistics, 2010), accounted for EUR million 859 in 2010 on an increasing trend,
based on provisional data from EUROSTAT, as shown above in the table.
40
Figure 2: Tourism Contribution to GDP and employment, 2011
Source: World Travel & Tourism Council (WTTC), 2012.
The direct contribution of Travel & Tourism to GDP in 2011 was RON 7.7 billion (1.4% of
GDP). This was forecast to rise by 14.8% to RON 8.8 billion in 2012. This primarily
reflected the economic activity generated by industries such as hotels, travel agents, airlines
and other passenger transportation services. It also included the activities of the restaurant
and leisure industries directly supported by tourists. The direct contribution of Travel &
Tourism to GDP was expected to grow by 6.9% per year to RON 17.2 billion (1.8% of GDP)
by 2022 as shown in the table below (WTTC, 2012).
Figure 3: Estimates and Forecasts for Romania
Source: World Travel & Tourism Council (WTTC), 2012.
41
The indirect contribution included the GDP and jobs supported by:
Travel & Tourism investment spending – an important aspect of current and future
activity that included investment activity such as the purchase of new aircraft and
construction of new hotels;
Government 'collective' spending, e.g. tourism marketing and promotion, aviation,
administration, security services, resort area security services, resort area sanitation
services;
Domestic purchases of goods and services by the sectors dealing directly with
tourists, e.g. purchases of fuel by airlines, or IT services by travel agents.
The induced contribution measures the GDP and jobs supported by the spending of those who
were directly or indirectly employed by the Travel & Tourism industry. Travel & Tourism
generated 184,500 jobs directly in 2011 (2.2% of total employment). This was forecast to
grow by 7.5% in 2012 to 198,000 (2.3% of total employment). It included employment by
hotels, travel agents, airlines and other passenger transportation services. It also included the
activities of the restaurant and leisure industries directly supported by tourists. By 2022,
Travel & Tourism would account for 233,000 jobs directly, an increase of 1.6% per year over
the next ten years. According to the WTTC, the Travel & Tourism industry related to the
activity of travellers on trips outside their usual environment with duration of less than one
year.
Additionally, a study by Eugenio-Martín (2004) explored the relationships arising between
economic growth and tourism. The research considered the relationship between tourism and
economic growth for Latin American countries for the period 1985-1998 (21 Latin American
countries) and conducted an analysis based on a panel data approach. The author considered
two models:
I. one model tried to explain economic growth depending on the number of tourists;
II. the second one attempted to understand how much tourism growth depended on the
rate of growth of GDP per capita and other potential determinants of tourism.
The observation made was that tourism growth was associated with economic growth only in
low and medium income countries, but not in high income countries. Also, for all countries,
tourist arrivals were positively related with GDP per capita and international trade.
42
Through its characteristics, i.e. service activity, high consumption of labour, intelligence and
creativity, tourism participated in the creation of value added in a higher proportion than the
related industries in terms of the level of development (Minciu, 2000). Tourism created
demand in destinations for other economic sectors; it created a market for them, and
employment opportunities in hotels and tourism agencies, in the food industry and other
commercial activities. Furthermore, tourism created reasons to improve the infrastructure,
bringing revenues to destinations. Finally, Tourism would contribute to the economy in terms
of foreign currency volume, the tax revenue generated and the generation of new employment
and business opportunities (Surugiu, 2009).
The Romanian Tourism Offer would need to be adjusted to the international tourism market,
especially the international tourism market demand for each of the ten segments considered
by the UNWTO to be the most important and dynamic: seaside, sports, adventure, cultural,
urban, rural, cruises, theme, MICE (Meetings, Incentives, Conferences and Exhibition) and
ecotourism’ segments (Băleanu, Irimie, Ionicã, 2008). In order to capitalize on the
opportunity with the EU SFs ROP, issues of the Romanian Tourism should be addressed
through:
- Improvement of the tourism product/services quality, and the regional infrastructure;
- Construction of the image identity (branding) for the tourism destination and promotion on
the international market;
- Diversification of the market segments aimed to be reached, including neighbouring
regions.
This would require substantial investment efforts in “hard” components of the tourism
industry related to infrastructure and in the “soft” ones such as personnel training,
management and marketing, in order to attain the quality level needed for successfully
competing on the international market.
4.4 The Structural and Cohesion Funds aimed at enhancing Romanian
Tourism
After joining the European Union in 2007, Romania has become contributor and beneficiary
of the structural funds. The verdict of this would need to be given by the country’s capacity
of using the post-accession funds in value of 29, 2 billion euro (12 billion euro for the
43
Common Agriculture Policy and 17, 2 billion euro for the Structural and Cohesion Fund) for
the period 2007-2013.
In relation to Tourism, Romania benefited of grants, i.e. no reimbursable funding, from the
European Union in two programmes: the Regional Operational Programme and the
National Programme for Rural Development. Within the first programme, the touristic
infrastructure was financed on Axis 5 – Durable development and tourism promotion, the
major intervention field 5.2 Creation, development and upgrade of the tourism infrastructure
in order to capitalize on the natural resources and to improve the quality of tourism services.
The eligible recipients for the financing were the territorial administrative units, the
partnerships between local public administration authorities and NGOs, inter-communities
development associations and the SMEs in the field of tourism. The general conditions for
the applicants stipulated that they should not be in a state of insolvency, with no debts to the
state/local budget, should not be the object of a res judicata lawsuit and should not be in any
difficulties. The maximum intensity of the grant (i.e. the maximum percentage computed on
the eligible value of the project) was differentiated according to the type of the recipient:
I. Public authorities, their partners, partnerships between public authorities and NGOs,
inter-communities development associations: 40% for the Bucharest – Ilfov area and
50% for the rest of the country;
II. Medium companies: 50% for the Bucharest – Ilfov region and 60% for the rest of the
country;
III. Small companies, micro-companies: 60% for the Bucharest – Ilfov region and 70%
for the rest of the country.
The eligible projects may target:
To create infrastructure for visiting natural objectives with tourism potential;
To valorise the mountains tourism potential;
To develop the balneal-climatic tourism;
To modernize and extend accommodation structures and the related units;
To create, rehabilitate and extend tourism infrastructure.
Within the National Programme for Rural Development, the investments in the field of
tourism would be financed through the measure 313 “Encouraging the tourism activities”.
44
Projects aiming at developing new accommodation facilities in the rural areas, extending or
modernizing the existing ones would be financed through the National Programme. Other
conditions besides the general ones concerned the solvency of the company, i.e. the tourism
SME. The beneficiaries should also observe certain rules regarding the quality standards and
need to develop their project in the rural area (Jiletcovici, 2012).
Perspectives from two different cases, i.e. two Romanian Development Regions, the North-
East and the South-East: Bucovina, Moldova and Dobrogea would be addressed and analysed
in chapter five that followed in the dissertation. The two case studies were meant to identify
factors of success and failure in tourism projects through the experience of the fieldwork in
the regions considered for analysis and discussion.
45
5. CRITICAL EXAMINATION WITHIN THE CONTEXT OF TOURISM AND
DEVELOPMENT
In 2012, Romania continued to fail with the absorption of EU funds, according to The
Economist. At around 7.4%, Romania was the state with the lowest absorption rate in the
EU. Absorption capacity was the extent to which a state was able to spend financial help
from the EU in an effective and efficient way. In this perspective, the Ministry of European
Affairs has been created since September 2011 to address all issues in relation to European
Funds absorption.
In the given context, activities for tourism were financed via specific axes within the
Regional Operational Programme (ROP). The Programme was managed by the Ministry of
Regional Development and Tourism (MRDT). It addressed the eight Romanian Development
Regions, assessed in compliance with EC Ruling No. 1059/2003 concerning the creation of a
common statistical classification system for territorial units. In accordance with the
aforementioned classification, eight Development Regions have been created in Romania:
1. Development Region North – East,
2. Development Region South – East,
3. Development Region South – Muntenia,
4. Development Region South – West Oltenia,
5. Development Region West,
6. Development Region North – West,
7. Central Development Region,
8. Development Region Bucharest – Ilfov.
Figure 4: Romania’s eight Regions of Development
Source: Transylvanian Review of Administrative
Sciences, 2010.
46
The case study research design considered the first two development regions, North – East
and South – East. Beneficiary surveys (structured questionnaire surveys) on main barriers
for funding have been carried out in the months of July and August 2012. The literature
review showed that barriers for applicants, especially at project level, have rarely been
analysed. National and regional assessments had been carried out with the aim of examining
the reasons for the low absorption rates. These assessments reported that barriers for
applicants were pervasive through the whole delivery process. Some examples of the most
critical factors in the process were described below.
The study by Zaman and Cristea (2011) on the obstacles of using Structural Funds in
Romania provided a good insight into problems of project implementation under EU SF
ROP.
At present, absorption rates for Structural Funds are very low in
Romania. Problems in the implementation of the OPs involve
many different aspects during the delivery process starting off
with a lack of a national and regional development planning.
The legal framework for financial management of Structural
Funds shows weaknesses, so do public procurement procedures
and the availability of appropriate funding lines in the national
budget…The guidelines sometimes did not reflect modifications
in national legislation, leading to complications in the
application process.
Furthermore, the circumstances of the international financial crisis have become a new
challenge for Romania. In this perspective, the EU structural funds absorption represented an
opportunity to sustain economic growth and reduce the development gap. Operational
programmes were designed to improve the economic and social conditions in Romania.
During the crisis period, the use of European funds could become an important source of
financing for the Romanian economy. Romania’s rate of absorption of structural funds for the
period 2007-2010 was of 13.48%, according to data released by the Ministry of Public
Finance in September 2010.
47
Figure 5: Absorption rates in Romania: 16, 23% in 29th February 2012
Source: Romanian Ministry of European Affairs, 2012.
New data from the Romanian Ministry of European Affairs reported absorption rates of
16, 23% in 29th
February 2012. The Regional Operational Programme registered the second
highest degree of absorption at around 27% (Romanian Ministry of European Affairs).
Table 9: Regional Operational Programme’ priority axes
Priority axis 5: Sustainable development and promotion of tourism
5.1 Restoration and sustainable valorisation of cultural heritage, setting up and modernization
of related infrastructure
5.2 Creation, development, modernization of the tourism infrastructure for sustainable
valorisation of natural resources and for increasing the quality of tourism services
5.3 Promoting the tourism potential and setting-up the needed infrastructure in order to
increase Romania’s attractiveness as tourism destination
Source: Romanian Ministry of Development, Public Works and Housing, Regional Operational Programme
2007-2013.
Tourism Development, the fifth axis of the Regional Operational Programme, has been
identified as a priority for regional development and part of the Regional Development
National Strategy. The tourism potential specific to all regions justified the financial support
offered for infrastructural rehabilitation and exploitation of national, historical and cultural
48
patrimony. Tourism projects would tend to be public sector-led and the project was part of
the tourism strategy for the local area (Cooper, Fletcher, Fyall, Gilbert and Wanhll, 2008).
The Regional Operational Programme would finance the high-potential tourism objectives
included in the UNESCO patrimony, from urban and rural environments, national cultural
patrimony of urban and rural provenience, and local cultural patrimony from the urban
environment (Gruescu, 2009).
Figure 6: Number of contracted projects by the regions in the field of tourism
Source: Ministry of Regional Development and Tourism (MRDT), 2010.
By analysing the graph above, significant differences emerged between the eight regions of
the country. The Northern-East Region has profited from the majority of projects together
with the central area, rising to a total of seven out of 29 projects contracted at the national
level. These two areas were immediately followed by the South-East region with 5 winning
projects. The Regional Development Agencies in all development regions had an important
role in the implementation of the Regional Operational Programme 2007 -2013 (REGIO).
This was one of the Romanian Operational Programmes agreed with the EU and financed by
The European Regional Development Found (ERDF). It represented an important instrument
to implement The National Development Strategy and the policies for regional development.
49
Figure 7: Priority Axis 5, major intervention field 5.2: Creation, development and
upgrade of the tourism infrastructure in order to capitalize on the natural resources
and to improve the quality of tourism services
Source: Romanian Ministry of European Affairs, July 2012.
Legend from Romanian to English
FEDR – EU SF ROP, European Union Structural Fund Regional Operational
Programme
nord est - North-East
sud est - South-East
alocat – assigned projects for EU SFs ROP
contractat – contracted projects
platit - approved reimbursements from the EU SFs ROP
According to the graph above, the North-East and South-East Development Regions have
been awarded a large number of contracted projects, i.e. North-East – 99% compared to the
South-East with 66% of the total projects. The value of the approved reimbursements from
the EU SFs ROP has been significantly higher for the South-East (35%) in comparison to the
North-East with the corresponding 19%. The North-East had a larger number of contracted
projects, but it was the South-East that was approved reimbursements at a higher value. It can
50
be observed that structural funds were used as an instrument for development and
modernization, and investments rose to very high values. The contribution of structural funds
was significant, exceeding 60% of the total value in all cases.
5.1 Perspectives from two Case Studies
North-East Development Region
Figure 8: Romania’s Development Region North-East
(Source: 2012, DG REGIO)
The North-East Development Region was situated at the border with
Ukraine and The Republic of Moldavia. Part of the historical
province of Moldova, the North-Eastern Region of Romania was an
area where history, culture and traditions completed the natural
environment. It included six counties: Bacau, Botosani, Iasi, Neamt, Suceava and Vaslui. The
analysis of available data revealed that the GDP/inhabitant in North East Region had the
lowest level comparatively to the other regions in Romania. At the same time, the region
contributed to the national GDP in value of 11% in 2006, percentage close to the national
level (European Commission, 2012).The North-East Regional Development Agency (RDA)
had the responsibility for the process of implementation of the EU Regional Operational
Programme. During the 10 years of activity the North-East RDA succeeded in achieving a
high funds absorption rate (85%) with around 400 projects submitted for being funded under
the Regional Operational Programme 2007-2013. The North-East RDA considered that
tourism services were not capitalised at the level of the existing potential.
In particular, the region hosted many monasteries founded by Moldavian voivodes (former
Moldavian rulers) and boyars: Voroneţ Monastery often called “the Sistine Chapel of the
East”, Humor, Suceviţa, Moldoviţa and Arbore Monasteries. The North-East Development
Region was home to one of the world’s greatest art treasures: the UNESCO World heritage
sites of the Painted Monasteries of Bucovina. Built in the 15th and 16th centuries and
featuring exterior frescoes depicting religious scenes, these richly decorated houses of
worships have been unique in the world (Romanian Tourist Office, 2012). The Painted
Monasteries of Bucovina could become the Unique Selling Proposition (USP) of Romania for
the international tourism market. The project that followed in the analysis would give insights
into the positive factors leading successfully to the development of initiatives for the region.
51
According to the graph below, Tourism (in Romanian: Turism) had a share of 4% in terms of
the awarded funding for local and regional development in the North-East Development
Region.
Figure 9: Financial assistance - grant value by sector in the North-East Development
Region
Source: Romania’s Development Region North-East, 2012.
Tourism Project “Pilgrim in Bucovina” had been financed through EU SF ROP in 2011.
The tourism project has been initiated by the Suceava County Council. “Pilgrim in Bucovina”
was an international ecumenical project that promoted especially Bucovina monasteries. The
project aim was to raise awareness about tourism attractions in the area, such as the Medieval
Festival of Suceava, the International Trout Festival in Ciocanesti, nature reserves and parks,
and scenic train rides.
According to Suceava County Council in north-eastern Romania, Bucovina will be highly
promoted as tourism destination. Tourism offers would be launched at the tourism fairs in
Vienna, Turin, Munich, Paris and New York, where the projects “Easter in Bucovina”,
“Bucovina’s Round Dance” and “Pilgrim in Bucovina” would be presented. Furthermore,
the resort Gura Humorului will host a “pilgrimage centre” for tourists wanting to visit
Bucovina. The Suceava County Council took over the administration of the railway line
52
linking Vama to Moldovita to complete and upgrade the infrastructure for tourism. A vintage
train with the oldest functional steam locomotive in Romania built around 1900 would travel
to monasteries Moldavita, Cacica and Putna during the “Pilgrim in Bucovina” project.
South East Development Region
Figure 10: Romania’s Development Region South-East
(Source: 2012, DG REGIO)
Geographically and historically, the South East Region was the mix of
Moldova, Muntenia and Dobrogea. The administrative structure of the
region included six counties: Braila, Buzau, Constanta, Galati, Tulcea and
Vrancea. Constanta was located between the Danube River and the Black Sea, and was
Romania’s largest port. The analysis of available data revealed that Regional GDP accounted
for 9.1% of the average national GDP and for 0.06% of the EU27 average over the period
2000-2008 (EUROSTAT).
The South-East Regional Development Agency was in charge of regional planning (i.e.
Regional Development Plan), management of the EU Structural Funds (Intermediate Body
for the Regional Operational Programme) and development of regional projects. As an
Intermediate Body for the Ministry of Regional Development and Tourism, the agency
managed the funds allocated for the region, particularly in the fields of transport
infrastructures, tourism and business support. It has been considered that the region held over
47% of Romania's touristic potential, due to the Black Sea coast, the Danube Delta and its
Biosphere Reservation, and unique touristic areas. The project discussed below provided
insights into the positive factors leading to the development of successful initiatives for the
region.
The South-East Regional Development Agency did not publish statistics on the latest
situation of the awarded financial assistance for projects in the field of tourism in the South-
East Development Region of the country.
Tourism Project entitled Tourism 365 days per year (2008) or “re-launching the tourism
at the seaside” had as primary objective the identification of alternative solutions for
addressing seasonality in tourism in the cross border regions of Romania and Bulgaria. Its
general objective was to contribute to the promotion of sustainable economic development of
53
the border region Romania-Bulgaria. The total budget of the project was in the value of
53.580 euro, with the duration of 12 months, i.e. August 2008 – July 2009. Constanta
Chamber of Commerce, Industry, Shipping and Agriculture, in partnership with Dobrich
Chamber of Commerce and Industry in Bulgaria, intended to assist tourism entrepreneurs
interested in cross border (CBC) business and take advantage of cross border cooperation
opportunities. According to Euro Dobrogea Centre for Business and Innovation in the
region, the local economic development would reduce disparities between border regions and
more developed central regions in Romania and Bulgaria. About the tourism project output,
specific tools have been created to contribute to the economic development of border regions
and extension of the seaside summer season:
two information points have been created in Constanta and Dobrich,
a guide “Tourism 365 days per year” has been produced, and
an on-line database with activities and events promoting local tourism offers in
Romania and Bulgaria. It was concluded that promotional actions, support and
development of cross border cooperation between private and public sectors and
between individuals should continue in Romania and Bulgaria.
5.2 Identification of factors of success and failure in Tourism Projects
A high efficiency of structural funds was conditioned by the quality of governance in general
and of public administration institutions in particular. However, their inability to remove or
minimize corruption has made that economic and social benefits coming from structural
funds absorption to be rather modest (Zaman, 2009). Previous studies identified the causes
for which structural funds could not be effectively utilized by the beneficiary countries such
as Romania in order to reduce disparities between the regions. One of them represented the
failures of government policies that led to improper spending of funds.
According to the latest EU technical and financial reports on the absorption of SFs, two types
of factors influencing the Structural Funds absorption in Romania have been identified:
1) Internal factors - related to the beneficiary, i.e. the legal entity or person in receipt of
an EU project grant for implementing projects;
2) External factors - related to the institutions, which monitored the implementation of
the projects, e.g. in the case of this study, the Ministry of Regional Development and
Tourism and Romania’s Development Regions.
54
One important factor was related to the project portfolio preparation. Local and Central
Public Authorities had limited capacity to establish priorities and prepare projects of
significance in terms of their impact and quality for tourism development at local/regional
level. This factor has been designated as “in-house expertise” in the conducted survey and
interview. The Managing Authority, i.e. Ministry of Regional Development and Tourism and
Intermediate Bodies, i.e. Romania’s Development Regions, may not have the necessary
expertise readily available. This would potentially lead to failure of tourism projects locally
or at the level of the region.
The internal factors contributing to the low absorption rate of funds were connected to the
two stages of the management cycle of a project: in writing the financing requests and in
implementation. The most important factor was represented by the applicant’s own financial
contribution. For the majority of projects, the beneficiary had to own funds for developing the
activities until the eligible expenses would be reimbursed. When sending the reimbursement
requests, the money would arrive effectively to the beneficiary after several months. From the
submission of a project to its approval, signing of financing contracts and the effective
absorption of structural funds, the process of assessment (compliance, eligibility, technical
and financial), including strategic assessment could take more than a year.
Furthermore, the role of applicants in the preparation and programming of Structural Funds
has not been analysed at the European level. One key element of the success of any
programme would involve identifying and approaching its potential target group. One of the
categories of applicants who would benefit from Structural Funds would be tourism SMEs.
Thus, the research study analysed the position of applicants such as tourism SMEs in the
Structural Funds implementation process. It also traced the different phases of the application
process, with emphasis on the roles and possibilities for potential applicants:
Information operations constituted the first phase where potential applicants were
made aware of the programmes they may apply to for funding.
In the second phase, potential applicants decided to prepare an application. The
information and support services available would play a central role as did the
capacity of the applicant to develop their application. Public bodies, universities and
larger businesses could be better equipped to prepare and submit application than
small or even single-person (tourism) businesses.
55
The third phase involved the selection process, while the fourth was the actual
awarding of funding. The last two phases were within the remit of the implementing
bodies (i.e. Managing Authorities, Intermediary Bodies). Their activities influenced
the award and the way potential applicants viewed the process as a whole.
The research approached the different barriers for applicants by focusing on the operational
level of tourism projects in two Development Regions:
The operational level denoted the interface between programme and project level, i.e.
EU SF ROP and tourism projects in general. The operational level included activities
linked to project generation, approval and implementation. In this respect the degree
to which national funding existed (the role of banks!) and the degree to which it was
integrated into EU funding could be a crucial factor for determining the success of the
operational level in tourism projects. The arrival of the financial engineering elements
of JEREMIE (Joint European Resources for Micro to Medium Enterprises) and
JESSICA (Joint European Support for Sustainable Investment in City Areas)
added a degree of sophistication and complication to the operational funding.
According to KPMG in Central and Eastern Europe, consultations and meetings between the
Ministry of Regional Development and Tourism and DG REGIO have confirmed the
significant interest towards JESSICA. However, authorities had reservations in committing
themselves until further progress would be achieved regarding the JEREMIE initiative.
In relation to the operational level, information and support services would become of
critical importance for potential applicants who may be confused by the variety of
opportunities offered. Previous experience and research showed that when programme
management developed “one-stop shops” where applicants could view the range of
possibilities open to them, this had been highly positive.
The use of external consultants may become necessary, in particular for first time applicants
and micro enterprises (tourism SMEs). In the latter case, in-house expertise would be lacking
or highly engaged in running the tourism business. External services could be offered by
agencies or public bodies such as Chambers of Commerce or private consultants. In this latter
56
case, the access to pre-project support would be highly welcomed. This first phase of
attracting and assisting applications was followed by the phase during which applications
were evaluated. This evaluation process may challenge Managing Authorities and
Intermediate Bodies and their expertise. One issue of concern for applicants had been high
rejection rates for proposals. This may discourage tourism SMEs or any organisation in
tourism from making future applications. This may also discourage other potential applicants
who became aware of these rejections.
57
6. MAIN RESEARCH FINDINGS AND ANALYSIS
The methodology used in the study was based on a literature review complemented by case
studies with interviews of implementing bodies and an online beneficiary questionnaire. The
contacts established through the online interviews were outlined below:
- Ms Loredana Tifiniuc Vasiliu, Director, Ministry of Regional Development and Tourism;
- Ms Ivana Katsarova, Policy Department Structural and Cohesion Policies, European
Parliament;
- Dr. D.C. Iancu, National School of Political Studies and Public Administration, Bucharest,
Romania;
- Constantin Apostol, General Manager, North-East Regional Development Agency;
- Ciprian Popescu, Administrator, Constanta Chamber of Commerce, South East Romania.
Their insights have been presented also in the discussion from the previous chapter and will
be outlined below. The South-East Regional Development Agency did not respond to e-mail
requests for interview, but Constanta Chamber of Commerce provided inputs in relation to
EU SFs in the South-East Development Region. Dr. D.C. Iancu completed the online
interview, Ms Loredana Tifiniuc Vasiliu and Ms Katsarova participated in the online survey
and they all provided inputs on the matter of EU SFs in North Eastern and South Eastern
Romania.
Among the factors that had an influence on project development in the regions, the
interviewees mentioned:
1) Positive (stimulating) factors: existence of previous networks with people
experiencing European funding; clear-cut guidelines for application;
2) Negative (inhibiting) factors: poor advisory capacity of public organizations; poor
motivated civil servants;
3) Other factors: political instability, lack of interest from the media for European
subjects.
The participants expressed their beliefs that:
1) Developing a scheme for motivating civil servants engaged in European funding (e.g.
a raise in their salaries);
58
2) Increasing the visibility of European projects by promoting networks between
beneficiaries (not only on formal level); and
3) Involving universities in developing projects for third parties, - would potentially
improve project development in the regions.
In particular, Tourism projects that have worked particularly well presented the following
identified elements (positive internal factors) which made them successful:
1) High quality of political leadership of the project;
2) Good network with all partners (for communication and dissemination purposes);
3) Well trained human resources.
However, the biggest obstacle to project development for tourism at present in the regions
was “the political agenda of elected officials that do not concentrate on tourism
development”. “A combination between low motivated in-house capacities to develop projects
and a lack of communication on funding opportunities and results of successful/failed
projects” had determined and accentuated this low rate of absorption of EU funds in the two
regions.
In addition, the field work study was mainly based on interviews with programme
beneficiaries, during which details of their operational practice have been discussed. The
factors of success or failure in tourism projects have been designated as shown below:
1) Communication and dissemination of information;
2) Provision of advisory services to applicants;
3) Capacity and skills at local / regional level (i.e. in-house capacities);
4) Capacity for project development at local / regional level;
5) Finance available from different sources.
The general trend apparent through the analysis of the results was that managing authorities
generally focused on primary mechanisms. They did not have the formal capacity to provide
support which would be ideal in all respects, i.e. comprehensive, localised, geographically
consistent, fully informed, interactive, timely and on-going. This negative outcome was due
to low levels of capacity building measures for training programme managers. Long delays
between programme approval, the opening of financing lines and the publication of guidance
documents discouraged applicants. The provision of support from the managing authorities
59
was not designed to develop the capacity of applicants. Tourism small firms and micro-
enterprises have found the application workload more demanding than larger organisations,
and therefore required more support. The use of consultants would be problematic for these
applicants as it would entail costs diminishing the potential financial support received.
The study identified a number of specific difficulties for applicants:
1) The application process had a long duration, i.e. 5 to 10 months from project
submission to the actual contracting of projects;
2) The quality of the documents was low; beneficiaries faced significant problems when
preparing the necessary documents (e.g. financing application files for SMEs);
3) If awarded a project, payment delays caused by the Managing Authority forced
companies/SMEs to terminate their projects in the early stages;
4) Another reason for early termination was that potential beneficiaries lacked business
management capacities;
5) With the financial crisis, financial resources became limited. This was also partly due
to depreciation rates between the EUR/RON.
Furthermore, the economic and financial crisis in the period 2009-2011 affected many
beneficiaries, especially from the private sector, which had used a certain EUR/RON foreign
exchange rate within the projects submitted, a rate which subsequently depreciated. This has
generated significant modifications to the estimated economic and financial parameters. It has
been suggested that this negative factor led to either:
giving up the implementation of projects in progress,
giving up the submission of new projects,
difficulties in fulfilling the project activities initially established and agreed with the
financers.
In order to illustrate the factors influencing the absorption rate of EU funds for tourism
development in the regions, a structured questionnaire survey has also been carried out. The
questionnaire directly addressed the research aims and objectives. It also assessed the degree
of information of persons eligible and able to access European funds through the Regional
Operational Programme. The intention was to identify the positive (stimulating) factors, the
negative (inhibiting) and other factors influencing the absorption rate of EU SFs for tourism
projects in the regions. The eligible recipients for the financing were the territorial
60
administrative units, the partnerships between local public administration authorities and
NGOs, inter communities’ development associations and tourism SMEs.
In order to complete this survey, the data collected from the beneficiaries of funds for tourism
development have been used. Of the study population, 30 subjects completed and returned
the questionnaire. The results of this study showed that at the level of the two Regions around
28% of respondents considered that they were very well informed about the Regional
Operational Programme, while 33% asserted they were not at all informed about it. More
than a third of respondents refused to answer this item. The results for this question were
consistent with the one in relation to how familiar the respondents were with the ERDF -
European Regional Development Fund. The majority of respondents felt that the main cause
for the poor accessing of structural funds was due to the lack of “Finance available from
different sources” and the lack of “Capacity and skills at local / regional level (i.e. in-
house capacities)”. A general trend in this study was that smaller organisations with lower
in-house capacities expressed greater dissatisfaction at the requirements of Structural Funds.
Smaller organisations had lower levels of disposable resources and proportionally higher
costs in preparing and submitting Structural Funds applications.
One third of those surveyed reported that the relationship and communication between the
institution responsible of project implementation and the beneficiaries was very
important. Over one third of those who were interviewed indicated that the language to be
used in the application procedure was the National language, i.e. Romanian. Less than a third
of the participants said that they knew which documents were required for submitting
applications to European financing through the EU Regional Operational Programme. Over
two thirds of the respondents refused to answer this item. No respondent was aware of what
documents were needed in detail for the application procedure.
Over half of those surveyed did not comment on the question why “Romania had modest
success in attracting funds from the European Union Structural Funds to support its
declining tourism sector.” A small number of those interviewed suggested that “Capacity for
project development at local / regional level” was good in their region, as opposed to the
factors “Finance available from different sources” and “Capacity and skills at local /
regional level (i.e. in-house capacities)” which scored very low (fair poor). Only a small
61
number of respondents indicated that “Communication and dissemination of information”
was excellent.
More than a half of the respondents that completed the questionnaire indicated that they did
not have concrete ideas for improving project development in the field of tourism in their
region. A minority of participants (20%) indicated and outlined factors of success for known
cases where project development for tourism had worked particularly well. Among the
success factors mentioned, it was mentioned:
- “activities with a perfect matching results and proposed budget estimated”;
- “regular payments from management authority”;
- “cross border cooperation programs, because proper function of the specific
authorities, methods application for growing the peoples interests from borders` parts
etc.”;
- “good necessity arguments, respect of procedure”;
- “well-informed, professionalism”; “persuasion and endless patience”;
- “qualified staff and quality services”.
In response to Question 15, i.e. “Which are at present the biggest obstacles to project
development in the area of tourism in your region?”, most of those surveyed indicated the
following:
- “lack of financial resources” ;
- “bureaucracy, people’s cooperation etc.”;
- “lack of funding and credits; lack of qualified people”;
- “lack of co-finance and people are low motivated to apply because of the high
number of particularities they have to meet to be successful, difficult procedures”;
- “lack of interest for developing the tourism sector”;
- “bureaucracy and communication with the central authority”;
- “political climate, which led to loss of our credibility”.
At the level of perceptions and impressions gathered, applicants assessed EU programmes to
be bureaucratic and beyond their reach. The answers to the final questions in the survey
addressing the factors of success or failure in tourism projects were consistent with and
supported the research findings and outcomes of the interviews.
62
Among the measures suggested for a better accession of funds, the following have been
highly mentioned:
1) the promotion of Tourism as National Priority,
2) a greater support on behalf of the government,
3) sharing a common interest in promoting tourism at the level of tourism SME’s,
4) information through mass media coverage,
5) the reduction of the number of documents to be drafted.
All respondents considered that the Romanian Tourism was in great need of promotion and
was lacking a positive image of its tourism offer. In consequence, these issues represented a
major cause for the poor development of Romanian Tourism. Romanian experts in EU SFs
have made recommendations for a better absorption of European funds for the next period,
namely the period 2014 - 2020:
1) reducing the number of documents required for preparing the application file;
2) improving procedures for accessing funds;
3) improving projects’ evaluation, public acquisition procedures;
4) increasing the level of professional training;
5) using the commercial banks’ expertise for accessing funds;
6) partnerships between public administration and consulting companies and generally
increasing the number of public-private partnerships.
In September 2011, Romania had a rate of absorption of European funds of approximately
17%. These results may indicate the existence of an imperfect practice of project
management in Romania. Identifying the causes of the low degree of sophistication in project
management could become a priority for the Romanian society in order to turn EU structural
funding into opportunity, also in relation to Priority axis 5: Sustainable development and
promotion of tourism.
Finally, in August 2012 a number of 690 projects have been assigned from all regions in
value of RON 1, 02 billion, out of which 344 have been contracted, in value of RON 684, 5
million. At the same date, the value of the reimbursements to the beneficiaries was of RON
34, 7 million which represented 5, 4% of financial allocation to this high Priority axis
(Ministry of Regional Development and Tourism).
63
7. CONCLUDING REMARKS
Through the geopolitical position held within the European continent, Romania could enjoy a
great advantage over competing countries in the region and globally. The country was located
at the crossroads of the most important trade routes of the continent: midway between
northern and southern Europe, and on the road that linked Western Europe to Asia.
Figure 11: Romania between Western Europe and Asia
Source: Romania Tourist Office, 2012.
Countries rarely visited in the past, especially from Central and Eastern Europe, among
which Romania, have become more and more attractive, due to their economic transition and
transformation, offering a significant potential for tourist development. Among those
countries, Romania was gifted with the wealthiest and most varied tourism resources,
conferring it great opportunities for tourism.
64
The valuable tourist potential was materialised in spectacular
landforms and picturesque landscapes, harmoniously joining
across the whole country, mineral waters, a climate favouring
the practice of tourism all year long, an abundant flora, animal
species rising the hunters’ interest, peerless historical, artistic
and architectural monuments, folklore traditions, etc., and can
satisfy, through a multitude of tourism forms, various impulses
of Romanian and foreign tourists (Butnaru, Timu, 2011, p. 4).
This was the result of a diverse configuration of its ancient land and several millennia history,
enabling Romania to have a tourism potential of great complexity and distinct value. The
geographical position offered Romania the status of a Carpathian-Danubian-Pontic country,
due to the presence of the three natural elements defining the landscape structure of
Romanian territory and tourism: the Carpathian Mountains, the Danube River, and the Black
Sea. Romania’s tourist vocation was supported by the network and multitude of natural and
artificial lakes generating diverse landscapes, offering a large area for varied tourism
activities. The country was considered by Romanian and international specialists a
destination with tourism potential, which could compete with any other country in the world
concerning the wealth of its tourism resources. According to the tourism development
strategy developed by the Government, a quarter of Romania’s surface was considered a
tourists’ heaven. A study realised by the Tourism Research Institute showed that more than
half of Romania’s surface had high and great value tourism potential.
Methodologically, this dissertation has sought to highlight and reflect upon various aspects of
the funding opportunities from the EU and the stimulating and inhibiting factors that
impacted on the success or failure of tourism projects in the North-East and South-East
Development Regions of Romania. An interesting aspect of researching on EU SF ROP has
been the relation between the presented opportunities in connection to the international
financial crisis. The research questions addressed the matter upon which these funds might
become the financial instruments for recovering the Romanian tourism industry. Returning to
the question posed at the beginning of this study, it is now possible to state that the accession
to EU Structural Funds might grant the recovery of Romanian Tourism affected by the crisis.
The question “Why did Romania have modest success in attracting funds from the European
65
Union structural fund to sustain its declining tourism sector?” has been addressed and the
responses to it have been outlined below.
A final consideration would relate to the generalizability of the findings of the research.
Thinking more broadly, it was important to assess if the findings presented would be seen as
unique and general at the same time in order to address the research core in the study. The
research outlined the positive effects of the attraction of EU Structural Funds for Romania in
the field of tourism for local and regional development. However at present, absorption rates
for Structural Funds in Romania were considered to be very low. This was due to issues in
the implementation of the Regional Operational Programme and its delivery process. The
lack of a National and Regional Development Planning, especially in relation to the
availability of appropriate funding lines in the national budget, were important factors in the
failure of tourism projects regionally and nationally. Managing Authorities and Intermediate
Bodies lacked experience and expertise in dealing with Structural Funds. At the local level,
public authorities had limited capacity to identify and prepare projects relevant for the
programme.
Furthermore, the discussion and analysis aimed to emphasize through case studies the
potential of the tourism industry for regional development in order to identify current
challenges and opportunities for sound public policies. Tourism created regional and local
economic growth opportunities and contributed to the creation of new jobs by capitalizing the
cultural and natural patrimony specific to all eight Romanian development regions. The funds
had specific objectives and the support for tourism development manifested itself in regions
that already had an established tourism industry (North-East Development Region) and in
cross-border cooperation (South-East Development Region). The Romanian government
declared that the EU Structural Funds were a priority on its agenda and represented the
solution for handling the crisis. One of the more significant findings to emerge from this
study was that Romania did not succeed to be at the medium level of EU funds absorption.
The absorption of these funds would represent a feasible source of economic growth in
overcoming the negative effects of the international financial crisis.
An issue that was not addressed in this study was the detailed procedures of the application
process. The study placed no emphasis on the detailed application processes and procedures
requested from Brussels. These regulations especially in terms of EU legislation, would
66
surely impact on the success factors and barriers for project development at national and
regional level. This issue was an intriguing one which could be usefully explored in further
research. An implication of the presented findings was that application process procedures
and both factors, internal and external to project development should be taken into account in
a comprehensive manner when trying to identify and assess best practices in managing
tourism projects under structural funds funding. Increasing the competitiveness of Romanian
tourism could be achieved or at least partly sustained through the integration of EU SFs to
complement private investment and public money at local, regional and national level in the
field of tourism and for its comprehensive and planned development.
In particular, the implementation of the high priority ROP axis number 5 on tourism
development and promotion was expected to determine the qualitative growth to European
standard levels of all conditions for the tourism practice. This would have a direct impact on
tourism demand in Romania, also by improving tourism infrastructure and by sustainably
promoting Romania at national and international levels. The country enjoyed a historic-
cultural and ethno-folkloric patrimony of great value for tourism. In this perspective, the
restoration and long-term capitalization of cultural patrimony, the creation and modernization
of infrastructure would stand out as “must – do’s”.
In general, Romania's international tourist arrivals were characterized by an evolution
reflecting the changes and transformations at the political, economic, and social level
internationally. The economic crisis might be a chance for Romanian Tourism to raise the
bid, as within this context, the tourist eye would look for closer destinations and Romania
might become a “must see” destination after all!
67
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APPENDIX I: STRUCTURED QUESTIONNAIRE SURVEY - RESULTS
OVERVIEW
EU Structural Funds in Romania: Factors of Success and Failure in Tourism Projects
Respondents: 30 displayed, 30 total
Launched Date: 10/08/2012 Closed Date: 09/09/2012
1. The accession of EU Structural Funds can grant the recovery of Romanian Tourism affected by the crisis. Do you agree?
Response
Total Response Per cent
Points Avg
Yes
12 67% n/a n/a
No
6 33% n/a n/a
Total Respondents 18
(skipped this question) 12
2. Romania has modest success in attracting funds from the European Union Structural Funds to support its declining tourism sector. Why?
Total Respondents 14
(skipped this question) 16
3. How informed are you about the EU Regional Operational Programme?
1 2 3 4 5 Response
Total Response Average
1-not informed;5-very well informed
33.33% (6) 16.67% (3) 11.11% (2) 11.11% (2) 27.78% (5) 18 2.83
Total Respondents 18
(skipped this question) 12
4. How familiar are you with ERDF - European Regional Development Fund?
1 2 3 4 5 Response
Total Response Average
1-not familiar;5-very familiar
33.33% (6) 16.67% (3) 11.11% (2) 11.11% (2) 27.78% (5) 18 2.83
Total Respondents 18
(skipped this question) 12
5. Banks offer support to people who want to appeal to European financing through the EU Regional Operational Programme. Are you informed about it?
Response
Total Response per cent
Points Avg
Yes
9 50% n/a n/a
No
9 50% n/a n/a
Total Respondents 18
75
(skipped this question) 12
6. Did you receive support from the EU Regional Operational Programme for developing your project idea on tourism?
Response
Total Response per cent
Points Avg
Yes
1 7% n/a n/a
No
14 93% n/a n/a
Total Respondents 15
(skipped this question) 15
7. Which documents are required for submitting applications to European financing through the EU Regional Operational Programme?
Total Respondents 8
(skipped this question) 22
8. Which language must be used in the application procedure?
Response
Total Response per cent
Points Avg
English
3 20% n/a n/a
National Language
11 73% n/a n/a
Other
1 7% n/a n/a
Total Respondents 15 100%
(skipped this question) 15
9. How important is the relationship and communication between the institution responsible of project implementation and the beneficiaries?
1 2 3 4 5 Response
Total Response Average
1-not important;5-very important
20% (3) 13.33% (2) 0% (0) 0% (0) 66.67% (10) 15 3.8
Total Respondents 15
(skipped this question) 15
10. How would you rate the present situation in your region with regard to the following factors?
Excellent Good Neutral Fair Poor Response
Total Points Avg
Communication and dissemination of information
20% (3) 26.67% (4) 6.67% (1) 33.33% (5) 13.33% (2) 15 n/a n/a
Provision of advisory services to applicants
15.38% (2) 23.08% (3) 23.08% (3) 15.38% (2) 23.08% (3) 13 n/a n/a
Capacity and skills at local / regional level (i.e. in-house capacities)
7.14% (1) 21.43% (3) 14.29% (2) 28.57% (4) 28.57% (4) 14 n/a n/a
Capacity for project 14.29% (2) 42.86% (6) 14.29% (2) 14.29% (2) 14.29% (2) 14 n/a n/a
76
development at local / regional level
Finance available from different sources
7.14% (1) 7.14% (1) 28.57% (4) 21.43% (3) 35.71% (5) 14 n/a n/a
Total Respondents 15
(skipped this question) 15
11. Which of the below factors are the ones that accentuate this low rate? Please assess the level of importance for project development in tourism.
Very
Important Important Neutral Unimportant
Very Unimportant
Response Total
Points Avg
- Communication and dissemination of information
46.67% (7) 46.67% (7) 0% (0) 6.67% (1) 0% (0) 15 n/a n/a
- Provision of advisory services to applicants
46.67% (7) 40% (6) 6.67% (1) 6.67% (1) 0% (0) 15 n/a n/a
- Capacity and skills at local / regional level (i.e. in-house capacities)
53.33% (8) 26.67% (4) 13.33% (2) 6.67% (1) 0% (0) 15 n/a n/a
- Capacity for project development at local / regional level
46.67% (7) 33.33% (5) 13.33% (2) 0% (0) 6.67% (1) 15 n/a n/a
- Finance available from different sources
66.67% (10) 13.33% (2) 6.67% (1) 6.67% (1) 6.67% (1) 15 n/a n/a
Total Respondents 15
(skipped this question) 15
12. Are there other factors that have an influence on project development for tourism in your case? If so, which ones? Please give examples. A. Negative (inhibiting) factors: B. Positive (stimulating) factors:
Total Respondents 10
(skipped this question) 20
13. Do you have concrete ideas for improving project development in the field of tourism? Which ones?
Response
Total Response per cent
No
7 24%
Yes
6 21%
Please mention
3 10%
Total Respondents 12
(skipped this question) 18
14. Were measures undertaken by the Regional Development Agency to raise the capacity at
77
local/regional level?
Response
Total Response per cent
Points Avg
Yes
5 50% n/a n/a
No
5 50% n/a n/a
Total Respondents 10
(skipped this question) 20
15. Which are at present the biggest obstacles to project development in the area of tourism in your region?
Total Respondents 12
(skipped this question) 18
16. When you consider cases where project development for tourism has worked particularly well, what were the success factors?
Total Respondents 11
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Excerpt Q2: Romania has modest success in attracting funds from the European Union Structural
Funds to support its declining tourism sector. Why?