Ukraine’s obtaining the status of a candidate country for EU membership and the start of accession negotiations with the European Council opened access to European resources and support programs that are part of the EU regional policy. What are the peculiarities of its functioning and what opportunities does it provide for Ukraine to attract financial resources? Olena Humeniuk, Advocacy Manager of the RPR Coalition, tells about this.

The EU regional policy is the largest EU investment policy, accounting for a third of the Union’s overall budget. In the current program period 2021-2027, it is planned to allocate 392 billion euros.

It is an important tool for the development of the Member States’ regions, aimed at reducing the difference in socio-economic development between them. Its overarching idea is a cohesion policy to improve the economic well-being of the EU regions, ensure their harmonious development, and prevent regional disparities. 

According to Article 174 of the Treaty on the Functioning of the European Union (TFEU), the European Union, to strengthen its economic, social, and territorial cohesion, should strive to reduce the differences between the levels of development of different regions and the underdevelopment of the least advantaged regions, and special attention should be paid to rural areas, areas affected by industrial transformation, and regions suffering from severe and permanent natural or demographic disadvantages.

For the period of 2021-2027, the EU Cohesion Policy is aimed at the following 5 goals:

• a smarter Europe through innovation, digitalization, transformation, and support for SMEs;

• a greener and carbon-free Europe, investing in renewable energy sources and fighting climate change;

• a more connected Europe with developed transport and digital networks;

• a more social Europe, including support for employment and education, social inclusion, and equal access to health care;

• Europe closer to citizens through support for local development strategies and sustainable urban development.

The EU cohesion policy is implemented through the so-called structural funds, which focus on reducing economic inequality between different regions of Europe. As a result, access to funding is open to all EU regions, but priority is given to the poorest, most vulnerable areas. The funds are distributed by providing grants, loans, guarantees, etc. that can be received by governments, non-governmental organizations, businesses, communities, and cities.  What are these funds?

• The European Regional Development Fund, which is one of the largest financial instruments (about €300 billion), supports infrastructure development, invests in job creation, and supports projects that promote local development. Some third countries, including candidate countries, can also access the fund.
• Cohesion Fund (EUR 49 billion), which invests in environmental protection and transport in EU countries with gross national income per capita below 90% of the average level of EU member states. 
• European Social Fund. The EU’s key financial instrument in the field of employment. Under the seven-year financing program, 135 billion euros are allocated to reduce unemployment and human resource development, promote social inclusion, and fight poverty.
• The Just Transition Fund, which is one of the three pillars of the Just Transition Mechanism under the European Green Deal.  Its goal is to mitigate the transition to a carbon-neutral economy by financing measures to modernize local economies and reduce the negative impact on employment by supporting retraining. More than €25 billion will be allocated to support projects in regions dependent on fossil fuels and carbon-intensive sectors of the economy.

Direct funding from these funds is available mainly to EU member states. Ukraine will be able to apply for these funds only when it becomes a full member of the EU. However, today it is important to understand how such funds function to be ready to effectively use the opportunities when they become available. It is the EU Structural Funds for Regional Development that can become a powerful financial instrument for regional development, investment attraction, and economic growth.

At the same time, there are financial instruments that are available not only to EU member states but also to others. In particular, Ukraine has access to

• programs to support Ukraine under the Neighborhood Policy (U-LEAD, EU4PAR, EU4PFM, EUACI EU4Digital, EU4 Environment, etc.);
• programs of cross-border and transnational cooperation (within Interreg);

• other sectoral programs.

Among them is also the Instrument for Pre-accession Assistance (IPA), which provides financial and technical assistance to the candidate country to carry out the necessary reforms. This mechanism is a kind of “training” for the candidate country on the further effective use of structural funds as an EU member.

However, for Ukraine, the European Commission has introduced a new comprehensive financial instrument, the Ukraine Facility, which will provide coordinated and predictable support for 2024-2027 in the amount of up to €50 billion. This mechanism will serve as an alternative to the IPA and aims to support Ukraine’s resilience, recovery, and modernization on its path to EU integration. In general, the Ukraine Facility has three components:

• direct budget support in the form of concessional loans (EUR 33 billion) and grants (EUR 5.27 billion). Within this component, EUR 1.05 billion is to be allocated to the needs of the regions;
• stimulating investment attraction (EUR 6.97 billion);

• technical and administrative support (assistance in synchronizing legislation with European standards, strengthening the capacity of authorities at the national, regional, and local levels – EUR 3 billion).

Thus, the EU’s cohesion policy is an important tool for ensuring the even and balanced development of the EU regions. Ukraine’s membership in the EU will open up even more opportunities for financial instruments for the development of territories, which in turn is a challenge related to the ability to attract and effectively use (utilize) funds. Since the implementation of regional policy is impossible without the participation of territorial communities, it is important to pay attention today to the issue of increasing project management capacity at the local and regional levels, developing a sustainable approach to organizing the project management process, and strategic planning skills. After all, the lack of qualified personnel at the community and regional levels, the lack of knowledge and experience in the formation and preparation of project applications can become an obstacle to obtaining EU funds.

Olena Humeniuk, advocacy manager of the RPR Coalition

This publication was prepared by the Reanimation Package of Reforms Coalition with the generous support of the American people through the United States Agency for International Development (USAID) under the Ukraine Responsive and Accountable Politics Program (U-RAP), implemented by the National Democratic Institute (NDI), the International Republican Institute (IRI), and the International Foundation for Electoral Systems (IFES). The opinions expressed in this publication are those of the experts and do not necessarily reflect the views of the United States Agency for International Development (USAID) or the United States Government.