Biser Petkov, FNF: The implementation of financial instruments during the past program period led to an increase in the country's GDP by 2.8%

More than BGN 1 billion entered the economy from the Fund of Funds (FNF) during the past program period, thus supporting 3,200 enterprises. This became clear during an official reporting event of the work done by the Fund of Funds (FNF) during the program period 2014-2020. The event took place in the Auditorium of Sofia University. It was attended by the Deputy Rector of the Sofia University Stoyan Shishkov, Yordanka Chobanova - Head of the European Commission (EC) Representation in Bulgaria, Nikolay Genchev, Chairman of the Supervisory Board of FNF, the Chairman of the Board of FNF Biser Petkov, the executive directors and members of the Board of Directors of FNF Victoria Hristova and Pavel Lisev.

"At the Ministry of Innovation and Growth, we managed to create a perfect storm in the entrepreneurial ecosystem in Bulgaria." This was announced by the Deputy Minister of Innovation and Growth Krasimir Yakimov. He pointed out that never before in the history of the management of European funds in Bulgaria has there been such a large resource for business and outlined how the funding and recruitment of resources from the FNF took place during the past program period. "At the end of 2022, with political will and active dialogue with the EC, Bulgaria has managed to negotiate a resource for the Ministry of Innovation and Growth in the total amount of BGN 5 billion. This money is for two programs - for "Competitiveness and innovation in enterprises " with a total budget of BGN 3 billion and the program for "Scientific research and innovation" - with a budget of just over BGN 2 billion," Yakimov said.

"After that, at the beginning of 2023, in record time, BGN 1.3 billion will be directed to the FNF in order for it to manage them, structuring them into debt and equity instruments. For this purpose, two agreements have been concluded between the Fund and the Ministry of Innovation and Growth," explained the Deputy Minister of Innovation.

According to him, later in the summer of 2023, the financial manager concluded an agreement with the governing body of the growth regions program of the Ministry of Regional Development and Public Works, thanks to which he received a mandate to manage and structure the funds for urban and regional development with total budget of over 460 million BGN.

As a result of all this, at the end of 2023, the phased unlocking of resources also begins. Yakimov reported that the first procedure - for the selection of fund managers for the so-called "Entrepreneurship Fund" with a total budget of 100 million euros - enjoys exceptional interest. Over 20 teams applied for three separate positions. The procedure is at a very advanced stage and in the second half of the year the new fund managers will be selected, who in turn will structure the equity funds so that the money reaches the business in the shortest possible time.

Yakimov announced that FNF is actively developing new financial instruments. He expects that in the coming weeks, orders for the selection of financial instruments for the urban development funds, for the circular economy debt instruments will begin to be announced in stages. There will also be opportunities to apply for the Enterprise Innovation Equity Facility, as well as the long-awaited Technology Transfer Fund, which aims to build a solid bridge between science and business.

At the end of his speech, Yakimov called on entrepreneurs to be active in the new program period.

"Through the financial instruments of the European Union, we developed the potential of enterprises, increased employment and helped develop the regions." That's what Yordanka Chobanova said.

"Bulgaria has the potential to manage over BGN 2 billion of EU cohesion funds in this program period, helping to achieve the EU's broad goals - stimulating sustainable growth and an energy efficient transition. Through the EC's commitment and joint cooperation, we can continue to build on what has been achieved," said Yordanka Chobanova.

During the previous program period, the Fund of Funds managed BGN 1 billion of resources under shared management between 15 financial instruments, which reached 3,200 beneficiaries - small and medium-sized enterprises. These companies worked to improve urban infrastructure, in the field of ecology, agriculture, food industry and others. Bulgaria demonstrated and made a commitment to support businesses in the severe covid crisis, and this was crucial support for many of the businesses," she pointed out.

"If the previous program period passed with low and zero interest rates, now we see that interest rates are rising and access to capital is changing," Nikolay Genchev said at the event. "If so far we have managed one billion BGN of public funds, now we will manage twice as much - BGN 2 billion. To the public money are added those from private investors, so the enterprises will receive much more financial resources," said Genchev.

The Fund of Funds Effect

Biser Petkov presented the achieved results and the macroeconomic effects of the implementation of the financial instruments for the 2014-2020 program period.

He highlighted some advantages of providing support through financial instruments. According to him, this support has a stimulating and disciplining effect on its recipients, with an incentive to implement viable projects because the funds are refundable. In the next place, Petkov put the revolving effect that financial instruments have - in this way, they guarantee long-term and sustainability of support. Last but not least, he highlighted the leverage effect, i.e. the attraction, alongside a public resource, of an exceptional volume of private resources that multiply the effect.

Petkov followed the chronology of the development of the FNF within 8 years since its creation in 2015 and the main points in this development.

"An important event, part of our efforts for the past year, is the preparation and signing of agreements with the Managing Authorities for the assignment of the recycled resource," Petkov pointed out.

He said they value feedback from their partners and regularly conduct satisfaction surveys, and are pleased that the results of these surveys are extremely high at 8.3 on a 10-point scale. "We hope that during the current program period we will continue to satisfy the expectations of markets and partners", expressed hope Petkov.

He recalled that FNF received international recognition, which corresponds to the goals of the SC to expand international presence. The fund also makes efforts in terms of increasing operational efficiency and optimizing the cost structure.

"According to the attempt to measure the effect of the FNF, the implementation of financial instruments during the past program period led to an increase in the country's GDP by 2.8 percent. This is the effect measured cumulatively for the period from 2019 to 2023. The conclusion is that, based on the data from this model, we could argue that the implementation of financial instruments during the past program period contributes to a much higher economic growth of Bulgaria", noted Petkov.

He indicated that imports of goods and services grew by 2.5 percent compared to the baseline scenario.

Petkov said that the intervention with financial instruments showed a significant effect on private investments, which for the period from 2019 to the end of 2023 cumulatively increased by 7.6 percent.

The last measured aspect is the activity of the country's active and able-bodied population. The direct effects observed are the creation of new jobs, increasing employment among the working-age population by 5.4 percent. This leads to a reduction in the unemployment rate of 2.6 percent.

According to Victoria Hristova, several financing agreements with governing bodies under national programs for the period 2021-2027 are in the process of preparation and negotiations: Financing agreement under the "Environment" program - BGN 68 million; Strategic plan for the development of agriculture and rural areas - BGN 49 million; "Education" program - BGN 33 million; "Maritime, fisheries and aquaculture" program - BGN 13 million. According to her, the set priorities of the mentioned programs are aimed at promoting the sustainable growth and competitiveness of SMEs, job creation, urban and regional development. Activities related to digitization and digitization, strengthening of research and innovation capacity, introduction of modern technologies will be supported in particular. Significant funds have been earmarked for promoting the transition to a circular and resource-efficient economy, energy efficiency and the reduction of greenhouse gas emissions.

"The planned support will continue to be provided through debt and equity financial instruments in the form of guarantees, shared financing, equity and quasi-equity equity participation," Hristova pointed out.

"In the next financial period, the assets under the management of the Fund will be over BGN 2 billion," said Pavel Lisev. According to him, in the coming years there will be a territorial orientation of the investments, which means that they will be directed to the less developed regions of the country.