European Union Funds for Rural Development

fourLINK Blog

European Union Funds for Rural Development

10th May 2016

Western and Northern European countries like Germany, France, the United Kingdom, Spain, and the Scandinavian countries are not only the most developed countries of Europe they are also among the most developed countries in the world. Their economy has developed for over 60 years, based on the free movement of capital and people. In comparison, during the same time period, within the Eastern European countries of Croatia and Slovenia access to technology, capital and innovation was more difficult.

Private property did not exist and development was based on the labour force. At the end of the 20th Century there was a huge development gap between the countries of the EU and countries of the former Yugoslavia.

The aim of the European Union is to create Europe as a community of equal and equally developed countries. For this reason, the European Union created programmes and funds which can be used by the ascending countries to reach the same level of economic development, quality of infrastructure and the strength of public institutions as other members of the EU.

During the pre-accession period between 2007 to 2013, Croatia had EU funding made available to it with the goal to reaching EU standards in the various chapters. For example, the food industries could use funds to achieve technical and infrastructure standards for production, standards of labour and environmental safety and food security. After entering the EU in 2013, Croatia has even more funds available for increasing the competitiveness of business enterprises and equalising the forces in the single market.

From 2014 to 2020 there are a number of open funds sources:

OP Competitiveness and cohesion, IP Effective Human Resources, Rural Development, OP for Maritime Affairs and

Fisheries, Territorial Cooperation and Programming.

EU funding is a great way of entering greenfield investments, because one can save up to 90% or a maximum €3,000,000 of the investment; ensure profitability at a time when the business starts  and shorten the return on equity.

From my perspective, as a senior consultant in the food production industry, the most interesting is the Programme for Rural Development. Under this there are 19 different measures available and €2.3 billion, for the 2014 to 2020 period.

These measures are directly related to investment in the private sector, aimed at small and medium companies and family farms. Measure 4 and 6 are particularly interesting.

Measure 4 refers to investment in physical assets, with the following possibilities:

•4.1. Investments in agricultural holdings - primary agricultural production with a maximum 90% of grant funds available;

•4.2. Investment in processing, marketing and / or development of agricultural products - processing of agricultural products with a maximum of 50% grant funds available;

•4.3. Investment in infrastructure related to the development, modernisation and the adaptation of agriculture and forestry - 100% grant aid available;

Measure 6 refers to the development of farms and operations, with the following possibilities:

•6.1. Support for young farmers - with a €50,000 grant aid;

•6.2. Support for running non-agricultural activities on the farm - with a €50,000 grant aid;

•6.3. Support for the development of small farms - with €15,000 support;

•6.4. Investments in the development of non-agricultural (small hotels, houses and apartments for rent, production of traditional souvenirs) economies in rural areas - with a maximum of 70% grant aid but not more than €200,000.

•Other measures that exist within the programme can be used by public institutions and local governments.

The measures are available so that companies can increase their competitiveness and that within the European market everybody has the same opportunities and performances. Also, these funds provide access to cheaper financing in two ways. The first is related to the companies receiving a minimum of 50% of the investment which is non-refundable, carries no interest, and at no cost. On the other side, on the part of the investment company, it can loan money with much lower interest and all due to signing of a Contract for EU grants. For example, the Croatian Bank for Reconstruction and Development can provide a loan with only 2% interest. Compare that to business banks in Croatian which are giving credit with 6-9% interest. The difference is significant.

Although the process of making application documents and the implementation phases are demanding, I believe there is never a reason not to apply. The resulting benefits of EU funding financial grants are much greater than the effort invested in the process of the application and the implementation.

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